As filed with the Securities and Exchange Commission on November 5, 1996
Registration No. 333-
Securities and Exchange Commission
Washington, D.C. 20549
Form S-1
Registration Statement under the Securities Act of 1933
International Magnetic Imaging, Inc.
(Exact name of registrant as specified in its charter)
Delaware 8099 65-0518181
(State or jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code Number) Identification No.)
2424 N. Federal Highway; Suite 410, Boca Raton, FL 33431 (561) 362-0917
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive officer)
Asher S. Levitsky P.C.
Esanu Katsky Korins & Siger
605 Third Avenue
New York, New York 10158
(212) 953-6000
Fax: (212) 953-6899
(Name, address and telephone
number of agent for service)
Copies to:
Lewis S. Schiller, Chairman of the Board Stuart Neuhauser, Esq.
International Magnetic Imaging, Inc. Bernstein & Wasserman, LLP
2424 N. Federal Highway; Suite 410 950 Third Avenue
Boca Raton, FL 33431 New York, NY 10022
(561) 362-0917 (212) 826-0730
Fax: (561) 347-5352 Fax: (212) 371-4730
Approximate date of commencement of proposed sale to the public: As soon as
practical on or after the effective date of this Registration Statement. If any
securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, check the
following box. [x]
Calculation of Registration Fee
<TABLE>
<CAPTION>
Proposed
Proposed Maximum Amount of
Amount to be Maximum Offering Aggregate Registration
Title of each class of securities to be registered Registered Price Per Unit(1) Offering Price Fee
- -------------------------------------------------- ------------ ----------------- -------------- --------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share(2) 1,150,000 Shs. $5.00 $ 5,750,000.00 $1,982.76
Series A Common Stock Purchase Warrants(2) 1,725,000 Wts. .15 258,750.00 89.22
Common Stock, par value $.01 per share(3),(4) 1,725,000 Shs. 6.00 10,350,000.00 3,568.97
Underwriter's Options(5) to purchase Common Stock 100,000 Optns. .0001 10.00 .01
Common Stock, par value $.01 per share(4),(6) 100,000 Shs. 6.00 600,000.00 206.90
Underwriter's Options(7) to purchase Warrants) 150,000 Optns. .0001 15.00 .01
Series A Common Stock Purchase Warrants(4),(8) 150,000 Wts. .18 27,000.00 9.31
Common Stock, par value $.01 per share(4),(9) 150,000 Shs. 6.00 900,000.00 310.35
Series B Common Stock Purchase Warrants(10) 1,000 Wts. 3.00 3,000,000.00 1,034.48
Common Stock, par value $.01 per share(4),(11) 1,000 Shs. 2.00 2,000,000.00 698.66
---------
$7,900.67(l)
(Footnotes on following page)
</TABLE>
<PAGE>
(Footnotes from preceding page)
(1) Estimated solely for purposes of computation of the registration fee
pursuant to Rule 457.
(2) Includes 150,000 shares of Common Stock and 225,000 Series A Redeemable
Common Stock Purchase Warrants ("Warrants") issuable upon exercise of the
Underwriter's over-allotment option.
(3) Represents shares of Common Stock issuable upon exercise of the Warrants.
(4) Pursuant to Rule 416, there are also being registered such additional
securities as may become issuable pursuant to the anti-dilution
provisions of the Warrants and the Underwriter's Options.
(5) Represents Underwriter's Options to purchase 100,000 shares of Common
Stock.
(6) Represents shares of Common Stock issuable upon exercise of the
Underwriter's Options to purchase Common Stock.
(7) Represents Underwriter's Options to purchase 150,000 Warrants.
(8) Represents Warrants issuable upon exercise of the Underwriter's Options
to purchase Warrants.
(9) Represents shares of Common Stock issuable upon exercise of the Warrants
issuable pursuant to the Underwriter's Options to purchase Warrants.
(10) Represents Series B Common Stock Purchase Warrants ("Series B Warrants")
to be sold by the Selling Security Holder.
See "Selling Security Holder."
(11) Represents shares of Common Stock issuable upon exercise of the Series B
Warrants.
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
International Magnetic Imaging, Inc.
Cross-Reference Sheet Pursuant to Rule 404
Item No. Caption in Prospectus
1. Forepart of the Registration Statement Registration Statement Facing Page,
and Outside Front Cover of Prospectus Prospectus Cover Page
2. Inside Front and Outside Back Cover Inside Cover Page, Back Cover Page
Pages of Prospectus
3. Summary Information, Risk Factors and Prospectus Summary, Risk Factors
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page, Risk Factors,
Underwriting
6. Dilution Dilution
7. Selling Security Holders Cover Page, Inside Cover Page,
Selling Security Holder
8. Plan of Distribution Cover Page, Inside Cover Page,
Selling Security Holder,
Underwriting
9. Description of Securities to be Description of Securities
Registered
10. Interest of Named Experts and Counsel N.A.
11. Information with Respect to the (a)-(c) Prospectus Summary,
Business
Registrant (d) Cover Page
(e) Financial Statements
(f) Prospectus Summary,
International Magnetic
Imaging, Inc.
Selected Financial Data
(g) N.A.
(h) International Magnetic
Imaging, Inc. Management's
Discussion and Analysis of
Financial Condition and
Results of Operations
(i) N.A.
(j)-(k) Management
(l) Principal Stockholders
(m) Certain Transactions
12. Disclosure of Commission Position on N.A.
Indemnification for Securities Act
Liabilities
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED NOVEMBER 5, 1996
International Magnetic Imaging, Inc.
1,000,000 shares of Common Stock, par value $.01 per share
1,500,000 Series A Redeemable Common Stock Purchase Warrants
International Magnetic Imaging, Inc. (the "Company") is offering
1,000,000 shares of Common Stock ("Common Stock") and 1,500,000 Series A
Redeemable Common Stock Purchase Warrants (the "Warrants"). The Common Stock and
the Warrants (collectively, the "Securities") are being offered separately and
not as units and are separately transferrable immediately on issuance. Each
Warrant entitles the holder to purchase one share of Common Stock at $6.00 per
share (subject to adjustment) during the two-year period commencing one year
from the date of this Prospectus. The Warrants are redeemable by the Company
commencing 18 months from the date of this Prospectus, or earlier with the
consent of Monroe Parker Securities, Inc. (the "Underwriter"), for $.10 per
Warrant, on not more than 60 nor less than 30 days' written notice if the
average closing price per share of Common Stock is at least $15.00, subject to
adjustment, for ten consecutive trading days ending not earlier than three days
prior to the date the Warrants are called for redemption. See "Description of
Securities."
Prior to this Offering, there has been no public market for the
Securities. The initial public offering prices of the Common Stock and Warrants
and the exercise price and other terms of the Warrants have been determined
through negotiations between the Company and the Underwriter, and are not
related to the Company's assets, earnings, book value, financial condition or
other recognized criteria of value. Although the Company has applied for the
inclusion of the Common Stock and Warrants in The Nasdaq National Market under
the symbols and , respectively, there can be no assurance that an active trading
market in the Securities will develop or be sustained.
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY
INVESTORS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS," WHICH BEGINS ON PAGE 7, AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
Per Share...... $5.00 $.50 $4.50
Per Warrant.... $ .15 $.015 $ .135
Total(3)....... $5,225,000 $522,500 $4,702,500
================================================================================
(footnotes on page 2)
The Securities are being offered, subject to prior sale, when, as and
if delivered to and accepted by the Underwriter and subject to the approval of
certain legal matters by counsel and certain other conditions. The Underwriter
reserves the right to withdraw, cancel or modify the Offering and to reject any
order in whole or in part. It is expected that delivery of the certificates
representing the Common Stock and Warrants will be made against payment therefor
at the offices of the Underwriter at 2500 Westchester Avenue, Purchase, New York
10577 on , 1996.
Monroe Parker Securities, Inc.
The date of this Prospectus is , 1996
<PAGE>
(footnotes from Cover Page)
(1) Excludes additional compensation to be received by the Underwriter in
the form of (a) a non-accountable expense allowance of 3% of the gross
proceeds of this Offering, for a total of $156,750 ($180,263 if the
Underwriter's over- allotment option is exercised in full), (b) options
(the "Underwriter's Options") to purchase 100,000 shares of Common
Stock and 150,000 Warrants at exercise prices equal to 120% of the
respective initial public offering prices, and (c) a two-year
consulting agreement pursuant to which the Company will pay the
Underwriter a fee of $100,000 at the closing of this Offering. In
addition, the Company has agreed to indemnify the Underwriter against
certain liabilities, including liability under the Securities Act of
1933, as amended (the "Securities Act"). See "Underwriting."
(2) Before deducting estimated expenses of the Offering (including the
Underwriter's non-accountable expense allowance and consulting fee) of
approximately $785,000 which are payable by the Company and relate to
the Offering by the Company and possible sale by a selling security
holder.
(3) The Company has granted to the Underwriter an option exercisable within
45 days after the date of this Prospectus, to purchase up to an
additional 150,000 shares of Common Stock and 225,000 Warrants on the
same terms and conditions as the Securities offered hereby, solely to
cover over-allotments. If the over-allotment option is exercised in
full, the Total Price to Public, Total Underwriting Discounts and
Commissions and Total Proceeds to Company will be $6,008,750, $600,875
and $5,407,875, respectively. See "Underwriting."
This Prospectus, with a different Cover Page, relates to the resale by
SIS Capital Corp. ("SISC") of 1,000,000 Series B Common Stock Purchase Warrants
(the "Series B Warrants"). The Series B Warrants become exercisable on the date
of this Prospectus, but SISC has agreed not to exercise the Series B Warrants or
sell the Series B Warrants or the underlying shares of Common Stock during the
two-year period commencing on the date of this Prospectus without the prior
consent of the Underwriter. See "Selling Security Holder." The sale of such
securities is not part of the underwritten public offering.
The Company will be subject to certain informational requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith
will file reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the regional
offices of the Commission at Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and with such other periodic reports as
the Company may from time to time deem appropriate or as may be required by law.
The Company uses the calendar year as its fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK AND/OR WARRANTS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZATION, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
A SIGNIFICANT NUMBER OF SECURITIES MAY BE SOLD TO CUSTOMERS OF THE
UNDERWRITER. SUCH CUSTOMERS MAY SUBSEQUENTLY ENGAGE IN THE SALE OR PURCHASE OF
THE SECURITIES THROUGH OR WITH THE UNDERWRITER. ALTHOUGH IT HAS NO OBLIGATION TO
DO SO, THE UNDERWRITER MAY BECOME A MARKET MAKER AND OTHERWISE EFFECT
TRANSACTIONS IN THE SECURITIES, AND, IF THE UNDERWRITER PARTICIPATES IN SUCH
MARKET, IT MAY BE A DOMINATING INFLUENCE IN THE TRADING OF THE SECURITIES. THE
PRICES AND THE LIQUIDITY OF THE SECURITIES MAY BE SIGNIFICANTLY AFFECTED BY THE
DEGREE, IF ANY, OF THE PARTICIPATION OF THE UNDERWRITER IN SUCH MARKET, SHOULD A
MARKET DEVELOP.
- 2 -
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION DATED NOVEMBER 5, 1996
International Magnetic Imaging, Inc.
1,000,000 Series B Common Stock Purchase Warrants
The 1,000,000 Series B Common Stock Purchase Warrants ("Series B
Warrants") may be sold by SIS Capital Corp. (the "Selling Security Holder"). The
Series B Warrants have an exercise price of $2.00 per share, expire three years
from the date of this Prospectus and are not redeemable by the Company. The
Selling Security Holder has agreed that, during the two years commencing on the
date of this Prospectus, it will not exercise or sell the Series B Warrants or
the underlying shares of Common Stock without the consent of Monroe Parker
Securities, Inc., the underwriter of the Company's initial public offering (the
"Underwriter"). There is not expected to be any public market for the Series B
Warrants. The Series B Warrants provide that, in the event that they are sold or
otherwise transferred pursuant to an effective registration statement, they
expire 90 days from the date of sale or transfer. As a result, any purchaser of
the Series B Warrants must, within a short period, either exercise the Series B
Warrants or permit them to expire unexercised.
The Company will not receive any proceeds from the sale by the Selling
Security Holder of the Series B Warrants or underlying shares of Common Stock
except to the extent that any Series B Warrants are exercised. The cost of the
registration of the Series B Warrants and the underlying securities for the
Selling Security Holder, estimated at approximately $5,000, is being borne by
the Company.
The Selling Security Holder has advised the Company that any transfer
of the Series B Warrants will be either pursuant to a sale at negotiated prices
or by gift, and, if the Series B Warrants are exercised, any sale of the
underlying shares of Common Stock may be effected from time to time in
transactions (which may include block transactions) by or for the account of the
Selling Security Holder in the over-the-counter market or in negotiated
transactions, a combination of such methods of sale or otherwise. Sales may be
made at fixed prices which may be changed, at market prices or in negotiated
transactions, a combination of such methods of sale or otherwise, and such
securities may be transferred by gift.
The Selling Security Holder may effect such transactions by selling its
securities directly to purchasers, through broker-dealers, including the
Underwriter, acting as agents for the Selling Security Holder or to
broker-dealers, including the Underwriter, who may purchase securities as
principals and thereafter sell the securities from time to time in the
over-the-counter market, in negotiated transactions or otherwise. Such
broker-dealers, if any, may receive compensation in the form of discounts,
concessions or commissions from the Selling Security Holder and/or the
purchasers from whom such broker-dealer may act as agents or to whom they may
sell as principals or otherwise (which compensation as to a particular
broker-dealer may exceed customary commissions).
The Company has informed the Selling Security Holder that the
anti-manipulative rules under the Securities Exchange Act of 1934, Rules 10b-2,
10b-6 and 10b-7, may apply to its sales in the market and has furnished the
Selling Security Holder with a copy of these rules. The Company has also
informed the Selling Security Holder of the need for delivery of copies of this
Prospectus.
This Prospectus, with a different Cover Page, relates to the sale by
the Company pursuant to an underwritten public offering of 1,000,000 shares of
Common Stock and 1,500,000 Series A Redeemable Common Stock Purchase Warrants
(the "Warrants"). See "Underwriting."
AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK
AND IMMEDIATE AND SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY
INVESTORS WHO CAN AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT.
SEE "RISK FACTORS" AND "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1996
<PAGE>
The Company will be subject to certain informational requirements of
the Securities Exchange Act of 1934, as amended, and in accordance therewith
will file reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 or at the regional
offices of the Commission at Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and with such other periodic reports as
the Company may from time to time deem appropriate or as may be required by law.
The Company uses the calendar year as its fiscal year.
IN CONNECTION WITH THE PUBLIC OFFERING BY THE COMPANY OF COMMON STOCK AND
WARRANTS, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE
OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AND/OR WARRANTS AT LEVELS ABOVE
THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZATION, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
- 2 -
<PAGE>
PROSPECTUS SUMMARY
The following discussion summarizes certain information contained in
this Prospectus. It does not purport to be complete and is qualified in its
entirety by reference to more detailed information and financial statements,
including the notes thereto, appearing elsewhere in this Prospectus. All share
and per share information in this Prospectus has been restated to reflect the
recapitalization effective November 1996 pursuant to which the 1,000 outstanding
shares of Common Stock were converted into 9,200,000 shares of Common Stock,
1,000,000 shares of Class A Common Stock, 5,000 shares of Series A Redeemable
Preferred Stock and 5,000 shares of Series B Convertible Redeemable Preferred
Stock.
THE COMPANY
International Magnetic Imaging, Inc. ("IMI" or the "Company") owns and
operates ten medical diagnostic imaging centers (the "Centers"), of which three
are multi-modality Centers and seven are exclusively magnetic resonance imaging
("MRI") Centers. One of the MRI Centers is owned and operated by a joint venture
in which the Company has a 50% interest. The Company also operates a referral
network through which patients are referred to diagnostic imaging centers
throughout the state of Florida, including the Company's Florida Centers.
Medical diagnostic imaging procedures, such as MRI, are used to
diagnose various diseases and physical injuries. The multi-modality Centers use
various imaging procedures, which may include any one or more of MRI, computed
axial tomography ("CT"), mammography, X-ray, fluoroscopy, ultrasound and other
technologies, while the MRI centers only offer MRI.
Since the commercial introduction of MRI in the early 1980's, the use
of MRI has experienced rapid growth due to the technology's ability to provide
anatomical images of high contrast and detail without the use of radiation or
x-ray based technologies. MRI employs high-strength magnetic fields, high
frequency radio waves and high-speed computers to process data. In addition, the
development of pharmaceutical contrast agents, software advancements and new
hardware peripherals continue to expand the clinical applications and throughput
efficiency of MRI technology. The major components of an MRI system are (i) a
large, cylindrical magnet, (ii) radio wave equipment, and (iii) a computer for
data storage and image processing. During an MRI study, a patient lies on a
table which is then placed into the magnet. Although patients have historically
spent 30 to 45 minutes inside the magnet during which time images of multiple
planes are acquired, the newest MRI machines allow patients to spend
significantly less time inside the magnet. Additional time is required for
computer processing of the images.
The Company is a Delaware corporation, organized on March 8, 1994 to
acquire ten Centers which were managed by International Magnetic Imaging, Inc.,
a Florida corporation ("IMI-Florida"). The Company was organized under the name
IMI Acquisition Corp. and its name was changed to International Magnetic
Imaging, Inc. in May 1995. The Company commenced operations on September 30,
1994 with the acquisition of nine of the Centers. The tenth Center was acquired
in January 1995. The Company's executive offices are located at 2424 North
Federal Highway, Suite 410, Boca Raton, Florida 33431, telephone (561) 362-0917.
Each of the Centers was acquired by a separate subsidiary of the Company, except
that each of the seven Centers in Florida, which are operated by limited
partnerships, was acquired by two subsidiaries, one which acquired the general
partnership interest and the other which acquired the limited partnership
interest. References to the Company include the Company, its subsidiaries and
IMI-Florida unless the context indicates otherwise.
The purchase price of the ten Centers, together with certain related
companies, including the stock of IMI-Florida and the assets of J. Sternberg and
S. Schulman M.D. Corp., a Florida corporation ("MD Corp."), which provided the
services of radiologists to the Centers, was $30.6 million, of which $7.0
million was paid in cash, $20.7 million was paid by the issuance of subordinated
notes (the "Subordinated Notes"), and $2.9 million was paid through the issuance
of shares of common stock of Consolidated Technology Group Ltd.
("Consolidated"), the parent of the Company, exclusive of acquisition costs of
$1.3 million. See "Certain Transactions -- Acquisition of the Centers."
As of September 30, 1996, all of the Company's Common Stock was owned
by SIS Capital Corp. ("SISC"), a wholly-owned subsidiary of Consolidated, a
public company. At such date, SISC owned approximately 90.2% of the Common Stock
and Class A Common Stock on a combined basis. The Class A Common Stock is
non-voting stock. At September 30, 1996, the Company owed SISC approximately
$1.6 million. See "Certain Transactions," "Principal Stockholders" and "Selling
Security Holder." Mr. Lewis S. Schiller, chairman of the board and a director of
the Company, is also chairman of the board, chief executive officer and a
director of Consolidated and SISC.
Mr. George W. Mahoney, chief financial officer of the Company, is also
the chief financial officer of Consolidated.
- 3 -
<PAGE>
Mr. Norman J. Hoskin, a director of the Company, is also a director of
Consolidated and of Trans Global Services, Inc. ("Trans Global"), a public
company of which SISC is the principal stockholder. Mr. E. Gerald Kay, a
director of the Company, is also a director of Trans Global and of Netsmart
Technologies, Inc. ("Netsmart"), a public corporation of which SISC owns a
majority of the Common Stock. See "Management -- Directors and Executive
Officers."
Stephen A. Schulman, M.D., president and chief executive officer of the
Company, was president of IMI-Florida prior to the Company's acquisition of the
Centers. At the time of the acquisition of nine of the Centers in September
1994, the Company entered into a five-year employment agreement with Dr.
Schulman pursuant to which he receives annual compensation at the rate of
$350,000 and an annual bonus of not less than $100,000 nor more than $700,000.
See "Management -- Remuneration." In connection with the acquisition of the
Centers, certain of the Company's subsidiaries issued to Dr. Schulman, his wife,
the other two former stockholder-directors of IMI-Florida, to MD Corp. and to
entities in which Dr. Schulman has an equity interest (collectively, the
"Schulman Affiliated Entities") Subordinated Notes in the aggregate principal
amount of $8.7 million, of which Subordinated Notes in the amount of $7.1
million were outstanding at September 30, 1996. The Company's subsidiaries have
not made certain payments under certain of such Subordinated Notes, and the
failure to make such payments gives the holders the right to declare a default.
In addition, Dr. Schulman and the other two former stockholder-directors of
IMI-Florida, have personally guaranteed certain obligations of certain of the
partnerships which operate Centers. The total amount personally guaranteed was
approximately $2.6 million at September 30, 1996. See "Certain Transactions."
THE OFFERING
Securities Offered
by the Company: 1,000,000 shares of Common Stock at $5.00 per share
and 1,500,000 Series A Redeemable Common Stock
Purchase Warrants (the "Warrants") at $.15 per
Warrant. The shares of Common Stock and Warrants
will be sold separately and not as units and will
be separately transferable immediately upon
issuance.
Securities Offered by
Selling Security Holder: This Prospectus, with a different Cover Page,
relates to the resale by SISC, which, in its
capacity as a selling security holder, is referred
to as the "Selling Security Holder," of 1,000,000
Series B Warrants and the underlying shares of
Common Stock. The Series B Warrants become
exercisable on the date of this Prospectus;
however, the Selling Security Holder has agreed
that, during the two years following the date of
this Prospectus, the Series B Warrants may not be
exercised and neither the Series B Warrants nor the
underlying shares of Common Stock may be sold
without the prior consent of the Underwriter. Any
such sales by the Selling Security Holder are not a
part of the underwritten public offering.
The Series B Warrants have an exercise price of
$2.00 per share, expire three years from the date
of this Prospectus and are not redeemable. There is
not expected to be any public market for the Series
B Warrants. The Series B Warrants provide that, in
the event that they are sold or otherwise
transferred pursuant to an effective registration
statement, they expire 90 days from the date of
transfer. As a result, any purchaser of Series B
Warrants must, within a short period, either
exercise the Series B Warrants or permit them to
expire unexercised.
The Selling Security Holder has advised the Company
that any sales of the Series B Warrants will be
made pursuant to a negotiated sale or by gift and,
if the Selling Security Holder exercises any Series
B Warrants, any sale of the Common Stock issuable
upon such exercise will be made on The Nasdaq
National Market at prevailing prices or in
transactions at negotiated prices or a combination
and such Common Stock may be transferred by gift.
Sales of the Series B Warrants or the underlying
shares of Common Stock may be made to the
Underwriter or other registered broker-dealers,
acting as a principal, or through the Underwriter
or other registered broker-dealers as a broker at
any time after the over-allotment option has either
been exercised or expired. See "Selling Security
Holder."
- 4 -
<PAGE>
Description of Warrants: Exercise of Warrants The Warrants are exercisable
commencing one year from the date of this
Prospectus. Subject to redemption by the Company,
the Warrants may be exercised at any time during
the two-year period commencing one year from the
date of this Prospectus at an exercise price of
$6.00 per share, subject to adjustment.
Redemption of Warrants The Warrants are redeemable by the Company
commencing 18 months from the date of this
Prospectus, or earlier with the consent of the
Underwriter, at $.10 per Warrant, on not more than
60 nor less than 30 days written notice, provided
that the average closing bid price of the Common
Stock is at least $15.00 per share, subject to
adjustment, for ten consecutive trading days ending
not earlier than three days prior to the date the
Warrants are called for redemption.
Use of Proceeds: The net proceeds of this Offering will be used to
pay outstanding loans, to purchase equipment and
expand certain MRI Centers into multi-modality
Centers and for working capital and other corporate
purposes. See "Use of Proceeds."
Risk Factors: Purchase of the Securities involves a high degree
of risk and substantial dilution, and should be
considered only by investors who can afford to
sustain a loss of their entire investment. See
"Risk Factors" and "Dilution."
Nasdaq Symbols:
Common Stock
Warrants
Common Stock and Common Stock Purchase Warrants Outstanding:
At the date of this Prospectus:
9,200,000 shares of Common Stock1
1,000,000 Series B Warrants2
As Adjusted(3):
10,200,000 shares of Common Stock1
1,500,000 Warrants
1,000,000 Series B Warrants
(1) Does not include 1,000,000 shares of Common Stock issuable pursuant to
the Series B Warrants, 3,500,000 shares of Common Stock issuable upon
the conversion of outstanding shares of Series B Convertible Redeemable
Preferred Stock ("Series B Preferred Stock") or any shares of Common
Stock issuable upon exercise of the Warrants, the Underwriters'
over-allotment option or Underwriter's Options or the securities
underlying the Underwriter's Options. In addition, 1,000,000 shares of
Class A Common Stock, which is non-voting, are outstanding and an
aggregate of 3,450,000 shares of Class A Common Stock are reserved for
issuance upon exercise of warrants (2,250,000 shares) and options
granted or available for grant pursuant to the Company's 1994 Long Term
Incentive Plan (1,200,000 shares). In addition, warrants to purchase
25,000 shares of Class A Common Stock may be issued to Dr. Schulman in
connection with a proposed exchange of his Subordinated Notes. The
Class A Common Stock automatically converts into shares of Common Stock
under certain conditions. See "Description of Securities -- Capital
Stock."
(2) The Series B Warrants have an exercise price of $2.00 per share. See
"Certain Transactions," "Selling Security Holder," and "Description of
Securities -- Series B Common Stock Purchase Warrants."
(3) Reflects the issuance of the 1,000,000 shares of Common Stock and
1,500,000 Warrants offered hereby.
- 5 -
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except per share amounts)
Statement of Operations Data:
<TABLE>
<CAPTION>
September 30, 1994
Nine Months Ended September 30, Year Ended (Inception)(1) to
1996 1995 December 31, 1995 December 31, 1994
---- ---- ----------------- -----------------
<S> <C> <C> <C> <C>
Revenue $23,776 $20,874 $28,044 $6,557
Net income 2,613 1,865 2,682 449
Net income per share of
Common Stock(2)
Primary .17 .12 .19 .03
Fully diluted (3) (3) .18 (3)
Weighted average number of
shares of Common Stock
outstanding(4)
Primary 14,010 13,977 14,030 13,939
Fully diluted (3) (3) 15,706 (3)
</TABLE>
Balance Sheet Data:
September 30, 1996
As Adjusted(5) Actual December 31, 1995
-------------- ------ -----------------
Working capital (deficiency) $ 6,242 $ 4,501 $( 8,857)
Total assets 46,657 45,066 39,872
Total liabilities 36,228 38,628 36,740
Accumulated earnings 5,745 5,745 3,131
Stockholders' equity(2),(6) 10,429 6,438 3,132
Net tangible book value
(deficiency) per share
of Common Stock(2) (.95) (1.44) (1.65)
- ----------------
(1) Although the Company was organized in March 1994, it did not commence
operations until September 30, 1994, when it acquired nine of the
Centers.
(2) For purposes of net income per share of Common Stock, stockholders'
equity and net tangible book value per share of Common Stock, the
Common Stock and Class A Common Stock are treated as a single class,
and the weighted average number of shares of Common Stock outstanding
includes both the outstanding Common Stock and the Class A Common
Stock.
(3) Fully diluted earnings per share is not included since the per share
amounts are antidilutive.
(4) All shares of Common Stock and Class A Common Stock issued prior to the
date of this Prospectus are treated as outstanding since inception.
(5) As adjusted to reflect the receipt by the Company of the net proceeds
from the sale of the 1,000,000 shares of Common Stock and 1,500,000
Warrants offered hereby, and the use of a portion of the proceeds of
this Offering to pay certain long term debt. See "Use of Proceeds" and
"Capitalization."
(6) Stockholders' equity includes the partners' capital of the
partnerships in which subsidiaries of the Company own the general and
limited partnership interest. The liquidation preferences relating to
the Series A Redeemable Preferred Stock ("Series A Preferred Stock")
and the Series B Preferred Stock, are $5,150 and $100, respectively.
- 6 -
<PAGE>
RISK FACTORS
The purchase of the Securities offered hereby involves a high degree of
risk and should be considered only by investors who can afford to sustain the
loss of their entire investment. In evaluating an investment in the Securities
offered hereby, prospective investors should carefully consider, among other
factors, the following risk factors.
1. No assurance of continued growth. Although the Company's operations
have shown increases in both revenue and net income for the nine months ended
September 30, 1996 as compared with the nine months ended September 30, 1995 and
for the year ended December 31, 1995 as compared with the prior year on a pro
forma basis, there can be no assurance that the Company's growth will continue.
In continuing with the development of its business, the Company will face
increased pressures on its revenue both from competition and from third-party
payors. Although the Company currently operates at a profit, three of its
Centers operate at a loss. No assurance can be given that the factors that
affected these Centers will not affect other Centers. Furthermore, the risk
factors hereinafter described may affect the ability of the Company to operate
profitably, and no assurance can be given that the Company can or will operate
profitably in the future.
Because the Company is a subsidiary of SISC, which is a wholly-owned
subsidiary of Consolidated, it files its Federal income tax returns as part of a
consolidated group with Consolidated. Consolidated has sustained significant
losses through December 31, 1995, and, as a result of such losses, the Company's
taxable income has been offset by Consolidated's losses as well as its tax loss
carryforward. Although the use of Consolidated's tax loss and tax loss carry
forward does not affect the results of the Company's operations, the amount of
the tax savings increases stockholders' equity and cash flow, to the extent of
Consolidated's forgiveness of the obligation created by the Company's use of the
tax loss carryforward. Consolidated has agreed with respect to 1996, to forgive
such obligation. Consolidated will determine on an annual basis the extent, if
any, that it will forgive the Company's obligation arising from the use of such
year's loss or loss carryforward. No assurance can be given that Consolidated
will forgive any such obligations in the future. Furthermore, the Company's
Board of Directors has the authority to cause the conversion of Class A Common
Stock into Common Stock which would reduce Consolidated's percentage ownership
of the Common Stock. The ability of the Company to use Consolidated's tax losses
to offset taxable income is dependent upon Consolidated's continued ownership of
at least 80% of both the voting stock and equity of the Company. Although
Consolidated, through SISC, will own at least 80% of the voting stock and equity
of the Company upon completion of this Offering, no assurance can be given that
the Company will, in the future, be able to reduce its Federal income tax
obligation as a result of Consolidated's tax loss or tax loss carryforward. The
loss of the benefits of utilizing Consolidated's tax loss and tax loss
carryforward could have an adverse effect upon the Company's cash flow. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
2. Capital requirements. At September 30, 1996, the Company had working
capital of $4.5 million, as compared with a working capital deficiency of $8.9
million at December 31, 1995. The increase in working capital reflects the
refinancing of short-term subordinated debt incurred in connection with the
purchase of the Centers with long-term debt from DVI Financial Services, Inc.,
dba DVI Capital ("DVI"), the Company's principal lender. As of September 30,
1996, Stephen A. Schulman, M.D., president and chief executive officer of the
Company, the other two former stockholder-directors of IMI-Florida and the
Schulman Affiliated Entities held Subordinated Notes, which were issued in
connection with the acquisition of the Centers, in the aggregate principal
amount of $7.1 million, and which are due in various installments through 1999.
Of this amount, $1.0 million is due to Dr. Schulman and his wife and $6.1
million is due to the Schulman Affiliated Entities. Certain subsidiaries that
issued the Subordinated Notes have not made certain payments of principal or
interest due on such notes in 1996, as result of which the holders have the
right to declare a default. As of the date of this Prospectus, no default has
been called, but no assurance can be given that some or all of the holders of
such Subordinated Notes will not declare a default. Any payment by the Company
on such Subordinated Notes may result in a default under certain of the
Company's loan agreements with DVI. The Company has entered into a memorandum of
understanding with Dr. Schulman pursuant to which, contemporaneously with the
closing of this Offering, he will exchange certain of his Subordinated Notes for
shares of a new series of preferred stock. See "Certain Transactions."
The Company's business is highly leveraged. At September 30, 1996, the
Company's debt and capital lease obligations were $32.2 million, of which $19.0
million was due to DVI. DVI has a security interest in substantially all of the
Company's assets. A significant portion of the Company's cash flow from
operations has been used to pay debt service, and the Company anticipates that a
significant portion of cash flow from operations will continue to be used for
such purposes. Any decline in revenue or operating income could have a material
adverse effect upon the Company's ability to make the required payments to DVI,
which could result in a default under some or all of the DVI loan agreements.
The Company has recently expanded two of its MRI Centers to
multi-modality Centers and intends to expand up to three additional MRI Centers
following completion of this Offering. To date the Company has financed such
expansion principally through equipment financing.
- 7 -
<PAGE>
The Company believes that the proceeds of this Offering will be
adequate to meet its cash requirements for the twelve months following
completion of this Offering, however, no assurance can be given that the Company
will not require additional funds prior to twelve months from completion of this
Offering, and no assurance can be given as to the availability or terms of any
such financing.
3. Dependence on third-party reimbursement. Almost all of the Company's
revenue is derived from third-party payors. For the nine months ended September
30, 1996 and the year ended December 31, 1995, the Company derived approximately
87% and 91% of its revenue from non-government payors and approximately 13% and
9% from government sponsored healthcare programs, principally Medicare and
Medicaid. The Company's revenue and profitability may be materially adversely
affected by the current trend in the healthcare industry toward cost containment
as government and private third-party payors seek to impose lower reimbursement
and utilization rates and negotiate reduced payment schedules with service
providers. Continuing budgetary constraints at both the Federal and state level
and the rapidly escalating costs of healthcare and reimbursement programs have
led, and may continue to lead, to significant reductions in government and other
third-party reimbursements for certain medical charges and to the negotiation of
reduced contract rates or capitate or other financial risk-shifting payment
systems by third-party payors with service providers. Both the Federal
government and various states are considering imposing limitations on the amount
of funding available for various healthcare services. The Company cannot predict
whether or when any such proposals will be adopted or, if adopted and
implemented, what effect, if any, such proposals would have on the Company.
Changes in the mix of the Company's patients among the non-government payors and
government sponsored healthcare programs, and among different types of
non-government payors and government sponsored healthcare programs, and among
different types of non-government payor sources, could have a material adverse
effect on the Company. Further reductions in payments to physicians or other
changes in reimbursement for healthcare services could have a material adverse
effect on the Company, unless the Company is otherwise able to offset such
payment reductions through cost reductions, increased volume, introduction of
new procedures or otherwise, as to which no assurance can be given. The Company
is negotiating agreements with managed care organizations pursuant to which the
Company will provide MRI and other services; however, such agreements typically
reflect a reduced level of revenue per scan. Although the Company's average net
collection from MRI procedures increased to $710 for the nine months ended
September 30, 1996, the net collections per MRI procedure decreased in prior
periods. The Company's average net collection per MRI procedure decreased from
$763 in 1993, to $726 in 1994 and to $639 for 1995. The increase for the nine
months ended September 30, 1996 reflected an increase in higher paying
procedures as well as a reduction in lower-paying procedures, principally in the
San Juan Center which was not operational during a portion of the period while
the equipment was being upgraded as well as during the period when San Juan was
recovering from the effects of Hurricane Hortense. No assurance can be given
that the average net collections per MRI Procedure will not decrease in the
future. The Company's net collection per multimodality procedure was $95 for
1993, 1994 and 1995 and $82 for the nine months ended September 30, 1996. In
this Prospectus, the information for 1993 reflects the operations of IMI-Florida
and for 1994 reflects the combined operations of IMI-Florida and the Company.
4. Reliance and restrictions on patient referrals. The Company is
highly dependent on referrals from physicians who have no contractual or
economic obligation to refer patients to the Company's facilities. If a
sufficiently large number of physicians at any time stop referring patients to
the Centers, it would have a material adverse effect on the Company's business.
Since the acquisition of the Centers, the percentage of revenue from the former
partners or other equity owners of the Centers had decreased in terms of both
total revenue and number of MRI scans. The percentage of revenue derived from
referrals from such doctors was 38% for 1994 and 24% for 1995 and the nine
months ended September 30, 1996. For the year ended December 31, 1994, 32% of
the scans were performed for patients who were former partners or equity owners
of the Centers. During the fourth quarter of 1994, after the acquisition of nine
of the Centers, the percentage was 29%, which further declined to 24% in 1995
and the nine months ended September 30, 1996.
Commencing in 1995, a portion of the Company's revenue was generated by
physician referrals which were generated by brokers who negotiated a price with
the Company for MRI scans. To the extent that a third party payor paid more than
the Company charges, the broker may have received a portion of such excess.
Effective October 1, 1996, this practice became illegal in Florida. Such scans
accounted for 11% of the Company's revenue for the nine months ended September
30, 1996 and 9% for 1995. Although the Company intends to market its services
directly to physicians and health maintenance organizations, there may be a
decline in revenue from such referring physicians as a result of the change in
such laws. In addition, it is not clear, because of the absence of judicial or
regulatory guidance, that the operations of MRI Net are included within an
exception to the 1996 anti-brokering law. Although the Company believes that the
operations of MRI Net comply with such law, no assurance can be given such
operations will not be held to be in violation of such law.
Federal and state laws generally restrict physicians from referring
their patients to entities, including diagnostic imaging facilities, in which
the physicians have a financial interest. This restriction precludes physicians
from referring Medicare patients to the Company if the physician has prohibited
financial relationships with the Company. Violations of the law may result in
- 8 -
<PAGE>
denial of payments for the service, requirement to refund payment for the
service, assessment of civil monetary penalties and exclusion of the physicians
from the Medicare and Medicaid programs. Such self-referral prohibitions apply
in certain states to additional third-party payors, including private insurance
companies and workers' compensation programs. Further, the Federal anti-kickback
statute prohibits persons or entities from offering or receiving remuneration
for the referral of patients or the inducement of the purchase of a service
covered by Medicare, Medicaid or other state healthcare programs, including
payments for the referral of patients to centers.
Federal and state self-referral and anti-kickback laws may also affect
the Company's ability to structure future acquisitions of physician-owned
businesses, or operate its existing business. In May 1996, the District Court of
Appeal of Florida, Fourth District, held that an arrangement in which a company
marketed the services of a durable medical equipment business to potential
clients and received a percentage of the sales it generated was in violation of
the Anti-kickback Statute. While the Company believes that the operations of MRI
Net are different from those held to be in violation of the Anti-kickback
Statute, a court could reach a contrary conclusion. Further, although these laws
have created new business opportunities if physicians must divest their
financial interests in imaging centers, these laws also may have an adverse
impact on the Company's ability to acquire new imaging centers while maintaining
the former physician-owners as part of the referral base. In the past, Congress
has considered legislation that could expand the self-referral ban from Medicare
and Medicaid to all payors. There can be no assurance that such legislation will
not be adopted or if adopted will not have a material adverse effect on the
Company.
Violations of the anti-kickback and other statutes could result in
significant civil or criminal penalties, which could have a material adverse
effect on the Company. The Company is unaware of any current regulatory
investigations against it and there are no regulatory or judicial proceedings
pending against it or any of its facilities alleging violations of any such
laws. Nevertheless, while the Company endeavors to comply with all laws,
regulations and other legal requirements applicable to its operations, there is
no assurance that applicable statutes and regulations might not be interpreted
by a regulatory or judicial authority in a manner that would adversely affect
the Company.
In an effort to control costs, non-governmental healthcare payors have
implemented cost containment programs which could limit the ability of
physicians to refer patients to the Company's facilities. For example, persons
enrolled in prepaid healthcare plans, such as health maintenance organizations
("HMOs"), often are not free to choose where to obtain imaging services. Rather,
the health plan provides these services directly or contracts with providers at
favorable rates and requires its enrolled members to obtain such services only
from such providers. Some insurance companies and self-insured employers also
limit such services to contracted providers. Such "closed" payment systems are
now common as insurers seek to reduce the rising cost of healthcare. Although
the Company actively seeks and has obtained managed care contracts to provide
imaging services, there can be no assurance that the Company will be able to
compete successfully with larger companies as well as with companies that offer
a broader range of services in marketing to the managed care providers. The
average net collection per procedure has declined for both MRI and
multi-modality procedures.
The Company continues to review all aspects of its operations and
believes that it complies in all material respects with the applicable
provisions of the Federal and state self-referral and anti-kickback statutes.
However, because of the broad and sometimes vague nature of these laws and
regulations, there can be no assurance that an enforcement action will not be
brought against the Company or that the Company will not be found to be in
violation of one or more of these laws or regulations. The Company intends to
monitor developments under Federal and state fraud and abuse laws. As of the
date of this Prospectus, the Company cannot anticipate what impact, if any,
subsequent administrative or judicial interpretation of the these laws may have
on the Company's business, financial condition, cash flow or results of
operations. Further, the laws and regulations in this area are subject to
material change. Consequently, there can be no assurance that the Company will
be in a position to comply with future laws and regulations in this area.
Moreover, the cost associated with compliance, including the cost of any
additional personnel or contracting with other qualified organizations to
provide certain services, may have a material adverse effect on the Company.
5. Governmental regulation, quality assurance and licenses. There are
numerous Federal and state laws that regulate medical diagnostic imaging centers
and require certification by the Federal government and various state and local
instrumentalities. The Company believes that it is in compliance with all
relevant Federal and state laws, rules and regulations. The Company believes
that in the near future, all outpatient medical diagnostic imaging centers will
be required to be accredited, and the Company intends to seek such
accreditation, although no assurance can be given that the Company will obtain
any necessary accreditation. The Centers must meet Federal, and, in some
jurisdictions, state standards for quality, as well as certification
requirements, in order to receive reimbursement. Each of the Company's
facilities has received Federal certification, as well as any required state
certification.
- 9 -
<PAGE>
In some instances, the Company is also subject to licensing and/or
regulation under Federal and/or state laws relating to the handling and disposal
of medical specimens, infectious and hazardous waste and radioactive materials,
as well as to the safety and health of employees. In addition, the Company is
subject to state regulation, such as personnel licensing requirements, which may
include qualifying examinations and continuing education requirements. The
failure of the Company to remain in compliance with applicable laws and
regulations could have a material adverse effect on its business and financial
condition.
6. Potential liability and insurance. The provision of medical services
entails an inherent risk of professional malpractice and other similar claims.
The Company believes that it does not engage in the practice of medicine;
however, the Company or its subsidiaries are defendants in legal actions arising
out of the performance of its imaging services. There can be no assurance that
additional claims, suits or complaints relating to services delivered by the
Company or by a radiologist or medical service provider will not be asserted
against the Company. Damages assessed in connection with, and the cost of
defending, such actions could be substantial. Radiology services are performed
for the Company by independent contractors who are radiologists and other
specialists and who are required, by their agreements with the Company, to
maintain their own malpractice insurance. Although the Company maintains
insurance for such purposes which it believes is adequate both as to risks and
amounts, there can be no assurance that claims asserted against the Company for
professional or other liability will be covered by, or will not exceed the
coverage limits of, such insurance. In addition, the availability and cost of
professional liability insurance has been affected by various factors, many of
which are beyond the control of the Company. The Company currently maintains
liability coverage and requires all of its affiliated physicians to maintain
malpractice and other liability coverage. There can be no assurance that the
Company will be able to maintain insurance in the future at a cost that is
acceptable to the Company or at all. Any claim made against the Company not
fully covered by insurance could have a material adverse effect on the Company.
7. Substantial Competition. The market for imaging services in general
and medical diagnostic imaging services in particular is highly fragmented. Such
services are performed by both hospitals and outpatient diagnostic imaging
centers, such as the Centers, which are not affiliated with any hospital.
Competition varies by market and is generally higher in larger metropolitan
areas where there are likely to be more facilities and more managed care
organizations putting pricing pressure on the market. The Company competes with
both hospitals and independent medical diagnostic imaging centers. Furthermore,
to the extent that another center offers diagnostic imaging services in addition
to MRI service, the Company may be in a competitive disadvantage in marketing to
managed care organizations, physicians and patients. Competition often focuses
on physician referrals at the local market level as well as participation in
managed care organizations. Successful competition for referrals is a result of
many factors, including participation in healthcare plans, quality and
timeliness of test results, type and quality of equipment, the location of the
center, convenience of scheduling and availability of patient appointment times.
Many competitors are larger and are better known in the markets served by the
Company than the Company. Furthermore, to the extent that the Company seeks to
expand through the acquisition of other medical diagnostic imaging centers, the
Company may compete with other, better capitalized companies seeking to make
acquisitions. In addition, the establishment or transfer of ownership in some
jurisdictions may be subject to certificate of need ("CON") laws. In some
states, such laws may hinder the Company's ability to expand, while in others
such laws may affect the ability of potential competitors to enter the market.
Except for Puerto Rico, none of the states in which the Centers are located have
CON laws which affect independent free-standing diagnostic imaging centers. Any
change in CON laws which reduce the restrictions on potential competitors, such
as hospitals, may have a materially adverse effect upon the Company's business
and operations. See "Business -- Competition."
8. Possible obsolescence of equipment. In offering its diagnostic
imaging services to both medical care providers, such as managed care
organizations and physicians, and patients, the Company must be able to offer
procedures and equipment which permit accurate readings by the radiologist and
comfort to the patient. In recent years, medical technology has made significant
advancements and technological developments may render current MRI and other
imaging equipment obsolete. Technological advances may be in the form of
software upgrades to existing equipment as well as new equipment. Any such
obsolescence may result in a reduced usage of the Company's equipment and may
require the Company to make significant expenditures to offer the
state-of-the-art equipment and consolidate its operations in fewer Centers.
Furthermore, the Company has financed the purchase or lease of certain of its
equipment, and the obligations to the lenders and lessors with respect to
certain of its equipment will continue regardless of whether the Company is able
to generate revenue from the equipment.
As new equipment and diagnostic imaging technology is developed, the
Company may purchase equipment or software before the equipment or software has
become generally accepted in the industry. In such event there is no assurance
that the equipment or software will perform in accordance with the
specifications or that it will become generally accepted by the medical
community. The Company is a plaintiff in an arbitration proceeding and in a
lawsuit against two vendors of equipment which the Company claims does not
perform as warranted. The Company has expended substantial money in connection
with the purchase and attempt to use such equipment. Both vendors have denied
the Company's allegation and have claimed that the Company is obligated to pay
the balance of the purchase price. See "Business -- Legal Proceedings."
- 10 -
<PAGE>
9. Conflict of interest; offering to benefit affiliates. In connection
with the acquisition of the ten Centers, SISC, the Company's principal
stockholder, lent the Company approximately $1.3 million, which was used by the
Company to pay expenses relating to the acquisition, and delivered shares of
Consolidated's common stock, which were valued at $2.9 million. The amount of
the loan and the value of the Consolidated common stock were treated as loans to
the Company from SISC. As of September 30, 1996, the Company owed SISC
approximately $1.6 million with respect to such indebtedness.
Certain of the Company's employees, including George W. Mahoney, chief
financial officer of both the Company and Consolidated, perform certain
accounting and related services for SISC and Consolidated, and the portion of
the compensation paid by the Company to such employees which is allocable to
services performed for Consolidated is treated as a reduction of the Company's
indebtedness to SISC. In addition, the Company pays the rent on Consolidated's
Florida office, which is also applied as a reduction of such indebtedness. The
aggregate monthly amount paid on account of such indebtedness is approximately
$54,000. The Company has agreed not to use any of the proceeds of this Offering
to pay any of such indebtedness to SISC; however, if the Underwriter's
over-allotment option is exercised, up to $250,000 of the proceeds from the
over-allotment option will be used to pay a portion of the Company's
indebtedness to SISC.
Dr. Schulman, president and chief executive officer of the Company, was
the president and one of three stockholders of IMI-Florida prior to the
Company's acquisition of the Centers. Dr. Schulman has an employment agreement
with the Company dated October 1, 1994, pursuant to which the Company pays him a
salary at the annual rate of $350,000 and an annual bonus of at least $100,000
for the five-year term of the agreement. Pursuant to an amendment to the
agreement, the Company, in October 1995, made two loans to Dr. Schulman in the
aggregate principal amount of $300,000. Such loans bear interest at 5 1/4% per
annum and mature on December 31, 1998.
In connection with the acquisition of the Centers, certain of the
Company's subsidiaries issued to Dr. Schulman, his wife, the other two former
stockholder-directors of IMI-Florida, and the Schulman Affiliated Entities,
Subordinated Notes in the aggregate principal amount of $8.7 million, of which
notes in the aggregate principal amount of $7.1 million were outstanding on
September 30, 1996. Certain of the subsidiaries that issued these Subordinated
Notes have not made certain payments due on the notes, as result of which the
holders may have the right to declare a default. As of the date of this
Prospectus, no default has been called, but no assurance can be given that some
or all of the holders of such Subordinated Notes will not declare a default. A
default on such Subordinated Notes could result in a default with respect to
other indebtedness, including indebtedness due to DVI. See "Certain
Transactions."
In October 1996, the Company entered into a non-binding Memorandum of
Understanding with Dr. Schulman (the "Schulman Memorandum") pursuant to which,
subject to the execution of definitive agreements, Dr. Schulman agreed to reduce
the outstanding principal amount of the Subordinated Notes payable to him and
his wife, from an aggregate of $2.1 million as of September 30, 1996 to an
aggregate of approximately $1.7 million and exchange such Subordinated Notes for
shares of a newly created series of preferred stock having an annual
non-cumulative dividend of $75,000 and a mandatory redemption price of
approximately $1.7 million. A portion of the reduction in the Subordinated Notes
payable to Dr. Schulman reflects the proposed application of the $300,000 loan
from the Company to Dr. Schulman to reduce the Subordinated Notes payable to
him. See "Certain Transactions -- Proposed Note Exchange with Dr. Schulman."
Dr. Schulman and the two other former IMI-Florida stockholder-directors
are also guarantors of certain promissory notes, capital equipment and real
estate leases and other indebtedness which were owed by IMI-Florida or the
entities operating the Centers prior to the Company's acquisition of the
Centers. Certain of the Company's subsidiaries assumed such loans and
obligations when they acquired the Centers, and the Company has continued to pay
such loans and obligations. A subsidiary of the Company acquired a Center in
Orlando, Florida which was controlled by the former stockholder-directors of
IMI-Florida. In an effort to improve the results of the Center, the Company
formed a joint venture with the owner-operator of another MRI center in Orlando,
Florida in August 1995. The joint venture utilizes the facilities and diagnostic
imaging equipment of the Company's joint venture partner, as a result of which
the facilities and equipment owned by the Company's subsidiary are utilized only
as a backup. Notwithstanding such arrangements, the Company has continued to pay
the obligations to the equipment vendor, lender and landlord for the
subsidiary's equipment and facilities, all of which are personally guaranteed by
Dr. Schulman and the other two former stockholder-directors of IMI-Florida. The
total amount paid through September 30, 1996 on such obligations was $1.1
million, and, if all payments are made on such obligations to the maturity
thereof, the total payments by the Company on such obligation, including those
paid through September 30, 1996, will be approximately $1.4 million. Payments of
such amounts are currently made from distributions the Company receives each
month from its joint venture interest as well as from other revenue of the
Company. As a result, the subsidiary which operated the Orlando Center sustained
a net loss of approximately $620,000 for the nine months ended September 30,
1996 and incurred negative cash flow from such Center of approximately $580,000
for such period. See "Certain Transactions."
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<PAGE>
In connection with the acquisition of one of the Centers, the Company
agreed to indemnify Dr. Schulman and the two other former stockholder-directors
of IMI-Florida for any personal liability they may sustain under their guaranty
of the lease obligation relating to such Center.
10. Dependence on key personnel; employment agreements. The Company's
success is dependent upon the continued services of its executive officers,
particularly Dr. Stephen A. Schulman, the president and chief executive officer
of the Company who is principally responsible for the Company's operations,
including its marketing efforts. The Company has an employment agreement with
Dr. Schulman pursuant to which he receives an annual salary of $350,000 plus an
annual bonus equal to the amount by which the lesser of 10% of pre-tax cash flow
or 10% of pre-tax net income exceeds a base amount; provided that the bonus
shall not be less than $100,000 nor more than $700,000 annually. The base amount
for computing Dr. Schulman's bonus was $337,500 for the contract year ended
September 30, 1996 and $500,000 for the contract year ended September 30, 1997.
In addition, Mr. George W. Mahoney, chief financial officer of the Company and
Consolidated, has an employment agreement with Consolidated for a term
commencing October 1, 1994 and ending December 31, 2002, pursuant to which he
received an annual salary of $177,000 for the contract year ended September 30,
1996, which increases to $189,000 for the contract year ended September 30, 1997
and increases annually thereafter until the seventh year for which the base
salary is $252,000. The agreement also provides for two bonuses to Mr. Mahoney.
One bonus is equal to the greater of 1% of Consolidated's net pre-tax profits or
1% of Consolidated's net cash flow, and the other is equal to the greater of 1%
of the Company's net pre-tax profits or 1% of the Company's net cash flow. Mr.
Mahoney devotes approximately 75% of his time to the business of the Company.
Although the agreement is between Mr. Mahoney and Consolidated, his compensation
is paid by the Company and the Company allocates 25% of his compensation to
Consolidated, which is applied to reduce the Company's indebtedness to SISC.
Pursuant to certain of the Company's loan agreements with DVI, the failure of
Mr. Mahoney to serve as the Company's chief financial officer could result in a
default under such loan agreements and other loan agreements with a
cross-default provision. The loss of services of, or a material reduction in the
time devoted to the Company's business by, Dr. Schulman, Mr. Mahoney and certain
other key employees could adversely affect the business of the Company. See
"Management -- Remuneration."
11. Pending and threatened litigation against the Company. In January
1996, Drs. Ashley Kaye and James Sternberg, two former stockholder-directors of
IMI-Florida and Dr. Sternberg's wife, threatened to commence an action against
two subsidiaries of the Company, Consolidated and Mr. Lewis S. Schiller,
chairman of the board of Consolidated and the Company, for alleged violations of
securities and common law in connection with an asset purchase agreement between
MD Corp. and a subsidiary of the Company which was executed in conjunction with
the acquisition of the Centers and non-payment of the related $3,375,000
Subordinated Notes of two subsidiaries of the Company payable to MD Corp.
Although the Company reflects the principal and interest on such Subordinated
Notes as liabilities on its consolidated balance sheet and no notice of default
has been given, no assurance can be given that an adverse decision in any action
based on such claims will not have a material adverse effect upon the Company.
Vanguard Limited ("Vanguard"), on its own behalf or on behalf of other
persons who may be affiliated with Vanguard, based on a purported agreement
relating to the introduction of Consolidated and the Company to IMI-Florida and
assistance in the negotiation of the acquisition of the Centers, has asserted a
claim against the Company and/or SISC that it has the right, among other things,
to a 10% interest in the Common Stock of the Company, on a fully-diluted basis,
prior to this Offering and prior to the issuance of certain warrants to DVI, for
no cash consideration. In addition, Vanguard has claimed that it is entitled to
a $200,000 fee due at the time of the acquisition of the Centers, consulting
fees of $240,000 per year for five years, reimbursement of nonaccountable
expenses and a 5% interest in any future medical acquisition by the Company. No
assurance can be given that any litigation which may ensue would not seek
damages exceeding the claim described above and, if decided unfavorably to the
Company, would not have a material adverse affect on the Company. If Vanguard
commences an action against the Company and prevails, it would have a material
adverse effect upon the Company, and, furthermore, if it prevails with respect
to its claim for Common Stock, the issuance of such Common Stock could result in
a non-cash charge to earnings for the value of such Common Stock, dilution to
the stockholders, including the stockholders who purchased stock in this
Offering, and a reduction in the net tangible book value per share. In addition,
the Company may not be able to use Consolidated's net loss or tax loss
carryforward to reduce its tax liability if a sufficient number of shares of
Common Stock were issued to Vanguard.
The Company has commenced an arbitration proceeding against a
manufacturer and distributor of teleradiology equipment seeking rescission and
damages arising from claims of fraud and breach of contract. The respondent has
denied the claims and counterclaimed against the Company for the balance of the
purchase price and damages for interference with business relationships. The
amount claimed to be due by the Company is approximately $500,000 and the amount
of the counterclaim is approximately $240,000.
- 12 -
<PAGE>
The Company has commenced an action against the manufacturer of certain
MRI equipment, seeking a refund of the approximately $700,000 paid by the
Company against the purchase price. Prior to the commencement of the action, the
manufacturer rejected the Company's claim and demanded payment of the
outstanding balance of the purchase price of $750,000. See "Business -- Legal
Proceedings."
12. Antitrust laws. Federal and state antitrust laws and regulations
may effect the operation of MRI Net which is a referral network through which
patients are referred to diagnostic imaging centers in Florida. See "Business --
MRI Net." Because the centers to which patients are referred are operated by
independent entities, they may be deemed competitors and, therefore, subject to
a range of Federal and state antitrust laws and regulations which prohibit
anti-competitive conduct, including price fixing, division of the market and
product tying. Violations of Federal and state antitrust laws can result in
substantial penalties and restrictions on MRI Net's business activities.
Although the Company believes that MRI Net's activities do not violate the
Federal or state anti-trust laws, no assurance can be given that a court or
regulatory agency will not make a contrary determination, which could have a
material adverse effect upon the company.
13. Broad discretion as to use of proceeds; potential change in use of
proceeds. Approximately $1.5 million, or 38.7 % of the estimated net proceeds of
this Offering are allocated to working capital and other corporate purposes
including the upgrading of certain Centers. Accordingly, management will have
broad discretion with respect to the expenditure of a substantial portion of the
net proceeds of this Offering. Purchasers of the Securities offered hereby will
be entrusting their funds to the Company's management, upon whose judgment the
investors must depend, with only limited information concerning management's
specific plans or intentions. The Company may use a portion of the proceeds of
this Offering to enter into joint ventures, acquisitions or other arrangements
which the Company believes would further the Company's growth and development
and it may utilize a portion of the proceeds of this Offering for such purpose.
No assurance can be given as that any such transactions will result in
additional revenue or net income for the Company. See "Use of Proceeds" and
"Business -- Potential Acquisitions."
Notwithstanding its plan to develop its business as described in this
Prospectus, future events, including the problems, expenses, difficulties,
complications and delays frequently encountered by businesses, as well as
changes in the economic climate, changes or anticipated changes in government
regulations, new technologies, competition and reimbursement policies or
acquisition or joint venture opportunities may make the reallocation of funds
necessary or desirable. Any such reallocation will be at the discretion of the
Board of Directors. Accordingly, in the event that the Company determines that
it is unable to continue to operate profitably, the Company may engage in other,
unrelated businesses and use a portion of the proceeds of the Offering for such
purpose. However, the Company has no such intention at this time. No assurance
can be given that any such businesses, if engaged in by the Company, can or will
be profitably operated.
14. No public market. Prior to this Offering, there has been no public
trading market for the Securities. Although the Company has applied to have the
Common Stock and Warrants included in The Nasdaq National Market, there can be
no assurance that an active market in any of such securities will develop or, if
such a market develops, that it will be sustained.
15. Arbitrary offering price and terms; effect of separate offering of
Common Stock and Warrants. The price of the Common Stock and Warrants and the
terms of the Warrants offered hereby have been determined by negotiation between
the Company and the Underwriter, and do not necessarily bear any relation to the
results of the Company's operations or its financial condition or any other
criteria of value. Furthermore, the shares of Common Stock and Warrants are
being offered separately and not as units, and the Underwriter has no obligation
to offer shares of Common Stock and Warrants to the same purchasers. If a market
in the Common Stock and Warrants develops the market may place a different
relative value on the shares of Common Stock and Warrants than the Underwriter
and it is possible that even if the combined market price of one share Common
Stock and one Warrant were to increase (as to which no assurance can be given),
the market price of the Common Stock may decrease from the initial public
offering price.
16. Possible delisting from The Nasdaq Stock Market and market
illiquidity. In order for the Common Stock and Warrants to be included in The
Nasdaq National Market, the Company must have had income before income taxes of
at least $750,000 and net income of at least $400,000 in the most recent fiscal
year or in two of the three most recent fiscal years and have, after giving
effect to the completion of this Offering, net tangible assets of at least $4
million. The Company expects that it will meet the listing requirements for The
Nasdaq National Market upon completion of this Offering and that the Company's
Common Stock and Warrants will be initially included in The Nasdaq National
Market. If the Company is unable to satisfy Nasdaq's requirements for continued
listing, the Common Stock and Warrants may be delisted from The Nasdaq National
Market. In such event, it is not likely that the Company would meet the initial
listing criteria for The Nasdaq SmallCap Market and trading, if any, in such
securities would thereafter be conducted in the over-the-counter market in the
so-called "pink sheets" or the Nasdaq's "Electronic Bulletin Board."
Consequently, the liquidity of the Securities could be impaired, not only in the
number of Securities
- 13 -
<PAGE>
which could be bought and sold, but also through delays in the timing of
transactions, reduction in potential security analysts' and news media's
coverage of the Company, and lower prices for the Securities than might
otherwise be attained.
A significant number of the Securities may be sold to customers of the
Underwriter. Such customers may subsequently engage in the sale or purchase of
the Securities through or with the Underwriter. Although it has no obligation to
do so, the Underwriter may become a market maker and otherwise effect
transactions in the Securities of the Company, and, if it participates in such
market, may be a dominating influence in the trading of the Securities. The
prices and the liquidity of the Securities may be significantly affected by the
degree, if any, of the participation of the Underwriter in such market, should a
market develop.
17. Risks of low-priced stocks; penny stock regulations. If the
Securities were delisted from The Nasdaq National Market (See "Risk Factors --
16. Possible delisting of securities from The Nasdaq Stock Market and market
illiquidity") they may become subject to Rule 15g-9 under the 1934 Act, which
imposes additional sales practice requirements on broker-dealers which sell such
securities to persons other than established customers and institutional
accredited investors. For transactions covered by this rule, a broker-dealer
must make a special suitability determination for the purchaser and have
received the purchaser's written consent to the transaction prior to sale.
Consequently, the rule, if applicable, may affect the ability of broker-dealers
to sell the Company's Common Stock and Warrants and may affect the ability of
purchasers in this Offering to sell any of the Common Stock or Warrants acquired
pursuant to this Prospectus in the secondary market.
The Commission's regulations define a "penny stock" to be any equity
security that has a market price (as therein defined) less than $5.00 per share
or with an exercise price of less than $5.00 per share, subject to certain
exceptions. The penny stock restrictions will not apply to the Company's Common
Stock or Warrants if the Common Stock is listed on The Nasdaq Stock Market and
has certain price and volume information provided on a current and continuing
basis or meet certain minimum net tangible assets or average revenue criteria.
There can be no assurance that the Securities will qualify for exemption from
these restrictions. If the Common Stock or Warrants become subject to the rules
on penny stocks, the market liquidity for the Common Stock or Warrants could be
severely adversely affected.
18. Potential adverse effect of redemption of Warrants. Commencing 18
months from the date of this Prospectus, or earlier with the consent of the
Underwriter, the Warrants may be redeemed by the Company at a redemption price
of $.10 per Warrant upon not more than 60 nor less than 30 days' notice if the
average closing price of the Common Stock is at least $15.00 per share, subject
to adjustment, during the ten consecutive trading days ending not earlier than
three days prior to the date the Warrants are called for redemption. Redemption
of the Warrants could force the holders to exercise the Warrants and pay the
exercise price therefor at a time when it may be disadvantageous for the holder
to do so, to sell the Warrants at the then current market price when they might
otherwise wish to hold the Warrants, or to accept the redemption price, which,
at the time the Warrants are called for redemption, is likely to be
substantially less than the market value of the Warrants. The Company will not
call the Warrants for redemption except pursuant to a currently effective
prospectus and registration statement. See "Description of Securities -- Series
A Redeemable Common Stock Purchase Warrants."
19. Current prospectus and state registration required to exercise
Warrants. Holders of the Warrants will only be able to exercise the Warrants if
(a) a current prospectus under the Securities Act relating to the shares of
Common Stock issuable upon exercise of the Warrants is then in effect and (b)
such securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of
Warrants reside. Although the Company has undertaken to use its best efforts to
maintain the effectiveness of a current prospectus covering the Common Stock
underlying the Warrants, and may not call the Warrants for redemption unless
there is a current and effective registration statement covering the issuance of
the Common Stock upon exercise of the Warrants, there can be no assurance that
the Company will be able to do so. Pursuant to Section 10(a)(3) of the
Securities Act, this Prospectus, unless amended or supplemented in accordance
with the rules and regulations of the Commission pursuant to the Securities Act,
may not be used by the Company in connection with the exercise of any Warrants
subsequent to nine months from the date of this Prospectus. Prior to the
expiration of nine months from the date of this Prospectus, it may be necessary
to amend or supplement this Prospectus under certain conditions, in which event
the Warrants could not be exercised prior to the date of the amended Prospectus
or supplement. Unless there is an effective and current registration statement
covering the issuance of the Common Stock upon exercise of the Warrants, the
Company will not accept payment for, or issue Common Stock with respect to, the
exercise of any Warrants, and any payments made by a Warrant holder will be
returned by the Company. The value of the Warrants may be greatly reduced if a
current prospectus covering the Common Stock issuable upon the exercise of the
Warrants is not kept effective or if such securities are not qualified or exempt
from qualification in the states in which the holders of Warrants reside. See
"Description of Securities -- Series A Redeemable Common Stock Purchase
Warrants."
20. No Common Stock dividends anticipated; restrictions on dividend
payments. The Company presently intends to retain future earnings in order to
provide funds for use in the operation and expansion of its business and,
accordingly, does
- 14 -
<PAGE>
not anticipate paying cash dividends on its Common Stock in the foreseeable
future. Furthermore, the Company's loan agreements with DVI prohibit the payment
of dividends without DVI's consent. The Series B Preferred Stock does not
require any dividend payments unless dividends are paid to the holders of the
Common Stock. The holders of the Series A Preferred Stock are entitled to an
annual non-cumulative dividend in the aggregate amount of $50,000 if declared by
the Board of Directors. The Company has entered into the Schulman Memorandum
pursuant to which Dr. Schulman will, subject to the consummation of the
transactions contemplated thereby, exchange certain of his Subordinated Notes
for shares of a newly created series of dividend paying Preferred Stock. See
"Certain Transactions -- Proposed Note Exchange with Dr. Schulman."
21. Dilution. Following completion of this Offering, the pro
forma net tangible book value per share of Common Stock (treating the Common
Stock and the Class A Common Stock as a single class) would be $(.95). A
purchaser of Common Stock in this Offering will experience immediate dilution or
$5.95, or 119% of the initial public offering price of the Common Stock issued
pursuant to this Prospectus. See "Dilution."
22. Shares eligible for future sale. All of the presently issued and
outstanding shares of Common Stock and Preferred Stock are "restricted
securities" as that term is defined under Rule 144 promulgated under the
Securities Act. If a public market develops for the Company's Common Stock, the
Company is unable to predict the effect that sales made under Rule 144 or other
sales may have on the then prevailing market price of the Common Stock. The
9,200,000 presently outstanding shares of Common Stock, all of which are owned
by SISC, will become eligible for sale pursuant to Rule 144 commencing 90 days
after the effective date of the registration statement of which this Prospectus
forms a part. In addition, 3,500,000 shares of Common Stock issuable upon
conversion of the Series B Preferred Stock, at such time as such shares become
convertible, and 1,000,000 shares of Common Stock issuable upon conversion of
the Class A Common Stock, if and when such shares are convertible, will be
deemed acquired at the time of the acquisition of the Series B Preferred Stock
or Class A Common Stock, as the case may be. Substantially all of the Company's
security holders have agreed that they will not sell any shares of Common Stock
owned by them or issued upon conversion or exercise of other securities for
three years from the date of this Prospectus without the prior approval of the
Underwriter. See "Selling Security Holder" for information relating to the
registration and sale by SISC of Series B Warrants to purchase 1,000,000 shares
of Common Stock and/or the underlying shares of Common Stock.
23. Shares of Common Stock issuable pursuant to warrants and Preferred
Stock; registration rights. In addition to the 9,200,000 shares of Common Stock
outstanding, there are outstanding (i) 1,000,000 shares of Class A Common Stock,
(ii) Series B Warrants to purchase 1,000,000 shares of Common Stock which are
owned by the Selling Security Holder, and (iii) warrants to purchase 2,250,000
shares of Class A Common Stock. In addition, 3,500,000 shares of Common Stock
are issuable upon conversion of the Series B Preferred Stock commencing three
years from the date of this Prospectus or such earlier date as the Class A
Common Stock is converted into Common Stock and 1,200,000 shares of Class A
Common Stock are issuable upon the exercise of options or other stock rights
granted pursuant to the Company's 1994 Long Term Incentive Plan, of which
options to purchase 850,000 shares of Class A Common Stock are outstanding.
Although there is no public market for the Class A Common Stock and a market in
such shares may never develop, the Class A Common Stock is included with the
Common Stock in determining earnings per share, and the issuance of such shares
may have an effect upon the market price for the Common Stock. The holders of
certain of the warrants have piggyback registration rights commencing two years
from the date of this Prospectus or earlier with the consent of the Underwriter.
The Company will bear the cost of preparing such registration statements but
will not receive any proceeds from the sale of shares of Common Stock pursuant
thereto other than payment of the exercise price with respect to any warrants
that are exercised. The existence of these registration rights, as well as the
sale of shares of Common Stock pursuant to registration statements which the
Company may be required to prepare, may have a depressive effect on the price of
the Common Stock in the open market. In addition, the existence of such warrants
and options and the registration rights referred to above may adversely affect
the terms on which the Company can obtain additional equity financing. The
holders of warrants are likely to exercise them at a time when the Company would
otherwise be able to obtain capital on terms more favorable than those provided
by the warrants.
24. Forward-looking statements. Prospective investors are cautioned
that the statements in this Prospectus that are not descriptions of historical
facts may be forward looking statements that are subject to risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors, including those identified under "Risk
Factors" and elsewhere in this Prospectus or in documents incorporated by
reference in this Prospectus.
- 15 -
<PAGE>
DILUTION
The net tangible book value of the Company's Common Stock at September
30, 1996 was approximately $(1.44) per share. All share and per share
information included in this Prospectus has been restated to reflect a
recapitalization in November 1996 pursuant to which the 1,000 shares of Common
Stock became and were converted into 9,200,000 shares of Common Stock, 1,000,000
shares of Class A Common Stock, 5,000 shares of Series A Preferred Stock and
5,000 shares of Series B Preferred Stock. Net tangible book value per share of
Common Stock represents the amount of the Company's tangible assets reduced by
the amount of its liabilities and the liquidation preference of the Series A
Preferred Stock and the Series B Preferred Stock divided by the number of
outstanding shares of Common Stock and Class A Common Stock. Without taking into
account any change in the net tangible book value of the Company after September
30, 1996, other than as a result of the sale of the 1,000,000 shares of Common
Stock, at an initial public offering price of $5.00 per share, and 1,500,000
Warrants offered pursuant to this Prospectus, at an initial public offering
price of $.15 per Warrant, after deducting estimated fees and other estimated
expenses of the Offering, the Company's net tangible book value as of September
30, 1996 would have been approximately $(.95) per share. This amount represents
an immediate increase in net tangible book value per share of approximately $.49
to the present stockholders and an immediate dilution (the difference between
the offering price of the shares and the net tangible book value per share after
the Offering) per share of approximately $5.95 to the purchasers of the Common
Stock.
The following table illustrates the dilution of one share of Common
Stock as of September 30, 1996:
Public offering price per share of Common Stock $5.00
Net tangible book value per share at September 30, 1996 $(1.44)
Increase per share attributable to sale of the Securities
offered hereby .49
-----
Pro forma net tangible book value per share after Offering (.95)
------
Dilution to public investors $(5.95)*
=======
- ----------
* If the Underwriter exercises the over-allotment option in full, the pro
forma net tangible book value would be $(.88) per share of Common
Stock, resulting in an increase in the net tangible book value per
share of $.56 and dilution to the public investors of $5.88 per share.
The following table summarizes, as of October 31, 1996, the number of
shares of Common Stock purchased from the Company, the total cash consideration
and the average price per share paid to the Company for such Common Stock, and
the number of shares and consideration to be paid by the public investors for
the 1,000,000 shares of Common Stock offered by this Prospectus.
<TABLE>
<CAPTION>
Total Percent
Shares of Percent Cash of Total Average
Common of Consid- Consid- Price
Stock Total eration eration Per
Purchased Shares Paid Paid Share
<S> <C> <C> <C> <C> <C>
Existing Stockholders 9,200,000 90.2% $ 1,000 0.0% $.00002
=======
Public Investors 1,000,000 9.8 5,000,000 100.0 $5.00
----------- ------ ---------- ----- =====
Total 10,200,000 100.0% $5,001,000 100.0%
========== ====== ========== ======
</TABLE>
The following table summarizes, as of October 31, 1996, the number of
shares of Common Stock and Class A Common Stock, treated as a single class,
purchased from the Company, the total cash consideration and the average price
per share paid to the Company for such Common Stock, and the number of shares
and consideration to be paid by the public investors for the 1,000,000 shares of
Common Stock offered by this Prospectus.
- 16 -
<PAGE>
<TABLE>
<CAPTION>
Total Percent
Percent Cash of Total Average
of Consid- Consid- Price
Shares Total eration eration Per
Purchased Shares Paid Paid Share
<S> <C> <C> <C> <C> <C>
Existing Stockholders 10,200,000 91.1% $ 1,000 0.0% $.00002
=======
Public Investors 1,000,000 8.9 5,000,000 100.0 $5.00
----------- ------ ---------- ------ =====
Total 11,200,000 100.0% $5,001,000 100.0%
========== ====== ========== ======
</TABLE>
USE OF PROCEEDS
The Company intends to utilize the net proceeds from the sale of the
Securities offered hereby, estimated at approximately $3.9 million (assuming the
Underwriter's over-allotment option is not exercised), substantially as follows:
(a) Approximately $2.4 million (61.3 % of the net proceeds) to pay
principal and accrued interest on a portion of the Company's
indebtedness to DVI.(1)
(b) Approximately $1.0 million (25.5%) to purchase equipment and
convert up to three MRI Centers into multi-modality Centers.(2)
(c) The balance of approximately $500,000 million (13.2 %) for
working capital and other corporate purposes.(3)
- ----------
(1) In September 1996, the Company borrowed $4.0 million on a long-term
basis from DVI. The proceeds of these loans were used to pay certain
Subordinated Notes in the principal amount of $4.0 million, which were
due to former limited partners of certain of the Centers acquired by
the Company.
(2) The Company may expand up to three of its Centers from MRI Centers to
multi-modality Centers at which one or more other imaging technologies,
such as CT, X-ray, fluoroscopy, ultrasound and mammography, will be
offered, as well as the possible upgrading of existing MRI equipment at
one or more Centers. In expanding its Centers, the Company may either
seek lease or other financing or use a portion of the proceeds of this
Offering. The extent that the proceeds of this Offering are used for
such purposes will be dependent upon the availability and terms of
financing and the final cost associated with such upgrades which cannot
be determined at this time. In the past, the Company has financed the
purchase of substantially all of its diagnostic imaging equipment;
however, no assurance can be given that such financing will be
available. To the extent that funds allocated to expanding Centers are
not used for such purpose, such proceeds will be allocated to working
capital and other corporate purposes.
(3) Certain claims have been made against the Company. In the event that
a final judgment is rendered against the Company with respect to any
one or more of such claims, a portion of the proceeds allocable to
working capital and other corporate purposes may be used for such
purposes. See "Business -- Legal Proceedings."
In addition to the proposed expansion of up to three MRI Centers, the
Company may seek to acquire additional MRI or multi-modality imaging centers if
such centers are available at prices and on terms determined by the Board of
Directors to be reasonable. The Company does not currently have any agreement,
and is not engaged in negotiations, with respect to any such acquisition.
However, if the Company acquires any additional centers, to the extent that the
purchase price is not financed, a portion of the proceeds of this Offering may
be used for such purposes. See "Business -- Potential Acquisitions."
The foregoing represents the Company's current best estimate of its
proposed use of the estimated net proceeds of this Offering based upon the
present state of its business, operations and plans, current business conditions
and the Company's evaluation of the market for its services. Management will
have broad discretion with respect to the expenditure of a substantial portion
of the net proceeds of this Offering, and conditions may develop which could
cause management to reallocate proceeds from the categories listed above,
including changes in its marketing program and changes in government policy and
insurance reimbursement practices, none of which can be predicted with any
degree of certainty. Furthermore, future events, including unforseen problems,
expenses, difficulties, complications and delays frequently encountered by
businesses, as well as changes in the economic climate, changes or anticipated
changes in government regulations, new technologies, competition, reimbursement
- 17 -
<PAGE>
policies or acquisition or joint venture opportunities, may make the
reallocation of funds necessary or desirable. Any such reallocation will be at
the discretion of the Board of Directors. Furthermore, in the event that the
Company determines that it is unable to continue to operate profitably, the
Company may use the proceeds from this Offering to engage in other related or
unrelated businesses, although it has no such intention at this time. No
assurance can be given that any such businesses, if engaged in by the Company,
can or will be operated profitably.
The Company believes that the net proceeds from this Offering will be
sufficient to satisfy the Company's cash requirements for at least one year
following the date of this Prospectus. However, it is possible that conditions
may arise as a result of which the Company may require additional capital prior
to one year from the date of this Prospectus, and no assurance can be given that
the Company will be able to obtain any or adequate funds when required or that
any funds available to it will be available on reasonable terms. The failure to
obtain necessary funds could have a material adverse effect upon the Company.
Pending the application of the funds as described above, said funds
will be invested in short-term interest-bearing deposits and securities.
- 18 -
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1996, and as adjusted to reflect the sale of the 1,000,000 shares
of Common Stock and 1,500,000 Warrants offered hereby and the use of a portion
of the net proceeds of this Offering to pay a portion of the Company's long-term
debt.
September 30, 1996
Actual As Adjusted
(Dollars in thousands)
Short-term debt:
Current portion of long-term debt(1) $3,343 $ 3,343
Current portion of subordinated debt(2) 918 918
Capital lease obligations -- current maturities(3) 1,210 1,210
Covenant not to compete 267 267
------- -------
$ 5,738 $ 5,738
======= =======
Long-term debt:
Notes payable(1) $12,466 $ 10,366
Revolving loan(1) 4,663 4,663
Subordinated debt(2) 6,656 6,656
Due to affiliate(4) 1,598 1,598
Capital lease obligations -- long-term portion(3) 2,864 2,864
------- ------
28,247 26,147
Stockholders' equity:
Preferred Stock, par value $.01 per share,
6,000,000 shares authorized, of which:
5,000 shares are authorized, issued,
outstanding and designated as Series
A Redeemable Preferred Stock, with certain
redemption rights(5) -- --
5,000 shares are authorized, issued,
outstanding and designated as Series
B Convertible Redeemable Preferred Stock,
with certain redemption rights(6) -- --
Common Stock, par value $.01 per share,
50,000,000 shares authorized, 9,200,000
shares issued and outstanding and 10,200,000
shares outstanding as adjusted(7) 92 102
Class A Common Stock, par value $.01 per share,
6,000,000 shares authorized, 1,000,000 shares
issued and outstanding(8) 10 10
Additional paid-in capital 591 4,572
Accumulated earnings 5,745 5,745
----- -----
Stockholders' equity 6,438 10,429
------- ------
Total capitalization $34,685 $36,576
======= =======
- ---------
(1) See Note 7 of Notes to International Magnetic Imaging, Inc. Combined
Financial Statements.
(2) These notes were incurred in connection with the acquisition of the
Centers. See Notes 2 and 7 of Notes to International Magnetic Imaging,
Inc. Combined Financial Statements.
(3) See Note 6 of Notes to International Magnetic Imaging, Inc. Combined
Financial Statements.
(4) Represents indebtedness to SISC, principally the unpaid balance of
funds loaned to the Company to pay expenses of the acquisition of the
Centers and the value of Consolidated common stock issued in connection
with the acquisition of the Centers. See "Certain Transactions" and
Note 11 of Notes to International Magnetic Imaging, Inc. Combined
Financial Statements.
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<PAGE>
(5) The Series A Preferred Stock has a liquidation preference of $100 in
the aggregate and an aggregate redemption price of $100. The amount
shown reflects the liquidation preference of the Series A Preferred
Stock as of the date of this Prospectus. See "Description of Securities
-- Series A Preferred Stock" for information concerning the rights,
preferences and privileges of the holders of the Series A Preferred
Stock.
(6) The Series B Preferred Stock has a liquidation preference of $5,150 in
the aggregate and an aggregate redemption price of $100. The amount
shown reflects the liquidation preference of the Series B Preferred
Stock as of the date of this Prospectus. See "Description of Securities
-- Series B Preferred Stock" for information concerning the rights,
preferences and privileges of the holders of the Series B Preferred
Stock.
(7) Does not include an aggregate of 4,500,000 shares of Common Stock
reserved as follows: (a) 1,000,000 shares issuable upon exercise of the
Series B Warrants and (b) 3,500,000 shares issuable upon conversion of
the outstanding shares of Series B Preferred Stock. In addition, there
are reserved (i) 1,500,000 shares issuable upon exercise of the
Warrants offered by this Prospectus; (ii) 375,000 shares issuable upon
exercise of the Underwriter's over-allotment option and upon exercise
of Warrants issuable upon exercise of such over-allotment option, (iii)
250,000 shares issuable upon exercise of the Underwriter's Options and
upon exercise of Warrants issuable upon exercise of the Underwriter's
Options and (iv) 1,000,000 shares issuable upon exercise of a warrant
to be issued to DVI under certain circumstances. See "Certain
Transactions," "Description of Securities" and "Underwriting."
(8) Does not include an aggregate of 3,450,000 shares of Class A Common
Stock reserved as follows: (a) 2,250,000 shares issuable upon exercise
of the outstanding warrants and (b) 1,200,000 shares issuable upon the
grant of options, rights or other equity-based incentives provided
pursuant to the Company's 1994 Long-Term Incentive Plan. In addition,
warrants to purchase 25,000 shares of Class A Common Stock may be
issued to Dr. Schulman pursuant to the Schulman Memorandum. See
"Certain Transactions."
(9) Certain of the Centers are operated by limited partnerships of which
separate subsidiaries of the Company own the general and limited
partnership interest. Accumulated earnings includes partners' capital,
which consists of a general partners' capital deficit of $668 and a
limited partners' capital of $1,177.
See "Business -- Property" and Note 6 of Notes to International
Magnetic Imaging, Inc. Combined Financial Statements for information concerning
the Company's long-term lease obligations.
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<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC.
SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
Set forth below is selected financial data with respect to the Company
for the nine months ended September 30, 1996 and 1995, the year ended December
31, 1995 and the period from inception (September 30, 1994) to December 31,
1994. The selected financial data has been derived from the financial statements
which appear elsewhere in this Prospectus. The unaudited financial data for the
interim periods reflect, in the opinion of management, all adjustments (which
include only normal recurring adjustments) necessary to present fairly the data
for such periods. The results of operations for the interim periods are not
necessarily indicative of operating results for the entire year. This data
should be read in conjunction with the financial statements of the Company and
the related notes which are included elsewhere in this Prospectus.
Statement of Operations Data:
September 30,
Nine Months Year Ended 1994 (Inception)
Ended September 30, December (1) to December
1996 1995 31, 1995 30, 1994
------- ------- -------- --------
Revenue $23,776 $20,874 $28,044 $6,557
Net income 2,613 1,865 2,682 449
Net income per share
of Common Stock(2)
Primary .17 .12 .19 .03
Fully diluted (3) (3) .18 (3)
Weighted average number
of shares outstanding(4)
Primary 14,010 13,977 14,030 13,939
Fully diluted (3) (3) 15,706 (3)
- -----------
Balance Sheet Data:
September December December
30, 1996 31, 1995 31, 1994
--------- -------- --------
Working capital (deficiency) $ 4,501 $(8,857) $ 60
Total assets 45,066 39,872 40,911
Total liabilities 38,628 36,740 40,461
Accumulated earnings 5,745 3,131 449
Stockholders' equity(2),(5) 6,438 3,132 450
- ------------
(1) Although the Company was organized in March 1994, it did not commence
operations until September 30, 1994, when it acquired nine Centers.
(2) For purposes of net income per share of Common Stock and stockholders'
equity, the Common Stock and Class A Common Stock are treated as a
single class, and the weighted average number of shares of Common Stock
outstanding includes both the Common Stock and the Class A Common
Stock.
(3) Fully diluted earnings per share is not included since the per share
amounts are anti-dilutive.
(4) All shares of Common Stock and Class A Common Stock issued prior to the
date of this Prospectus are treated as outstanding since inception.
(5) Stockholders' equity includes (a) the partners' capital of the
partnerships in which subsidiaries of the Company own the general and
limited partnership.
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<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Nine Months Ended September 30, 1996 and 1995
Revenue increased $2.9 million, or 13.9% from the nine months ended
September 30, 1995 (the "September 1995 period") to the nine months ended
September 30, 1996 (the "September 1996 period"). As noted in the table below,
the mix of procedures by payor class remained relatively level. The increase in
revenue reflects an increase in scan volume. There was no substantial change in
the reimbursement rates from the September 1995 period to the September 1996
period. The percentage of procedure volume was as follows for the comparable
periods:
Percentage of Procedure Volume
September September
Class of Payor 1996 Period 1995 Period
- -------------- ----------- -----------
MRI procedures (representing 89% and 91%,
respectively, of all revenues for the
September 1996 and 1995 periods)
Managed care 37% 38%
Commercial 17% 17%
Medicare 12% 9%
Workers' compensation (other than pursuant
to contracts with workers' compensation
insurers) 11% 14%
Brokered scan services 11% 9%
Contract workers' compensation 5% 6%
Liability 5% 5%
Other 2% 2%
Multi-modality procedures, other than MRI(1)
(representing 11% and 9%, respectively, of
all revenues for the September 1996 and 1995
periods)
Managed care 84% 85%
Medicare 8% 6%
Commercial 5% 6%
Other 3% 3%
- ---------
(1) Includes CAT scans, nuclear medicine, mammography, fluoroscopy and
X-rays.
The Company's operating expenses for the September 1996 period
increased by $2.2 million, or 12.9%, from $17.0 million for the September 1995
period to $19.2 million for the September 1996 period. The overall increase in
expenses, which was less than the increase in revenue, reflected a number of
factors discussed below.
Radiology fees increased $195,000, or 8.8%, from the September 1995
period to the September 1996 period. Radiology fees are based on cash
collections related to services performed. Cash collections for services were
$20.8 million and $18.6 million, respectively, for the September 1996 and 1995
periods, representing an overall increase of approximately 11.8%. The rates paid
vary from Center to Center and, for the September 1995 period, cash collections
were greater for Centers that pay the radiologists a higher rate than for the
September 1996 period.
Equipment maintenance costs relate primarily to fixed contract payment
schedules and generally do not fluctuate from period to period unless repairs
and maintenance are required that are not covered by the equipment contracts or
new equipment is placed into service or removed from service. During the
comparable periods, the equipment maintenance remained relatively level,
increasing only .5%, since substantially all maintenance costs were incurred
pursuant to fixed maintenance contracts.
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<PAGE>
Patient service costs and expenses consist primarily of film and
contrast agents used in the MRI procedures and utility costs of running the MRI
equipment. During the September 1995 and 1996 periods, such costs increased
$228,000 or 15.5%. Approximately $98,000 of this increase related to an increase
in medical supplies used by a multi-modality Center that performs CAT scans,
nuclear medicine, mammography, fluoroscopy and X-rays, which had a significant
increase in volume. Additionally, in the September 1996 period, one of the
Company's MRI Centers started using upgraded equipment that required a grade of
processing film that was more expensive than in the September 1995 period,
accounting for an increase in costs of approximately $105,000. The remaining
increase is due to the additional procedure volume which inherently requires
more patient service costs which was partially offset by negotiated decreases in
overall per unit film and contrast agent costs.
Salaries and benefits increased $483,000, or 10.9%, from the September
1995 period to the September 1996 period. Of this increase, approximately
$105,000 relates to a bonus paid to the Company's chief financial officer for
services relating to the DVI loans incurred in 1996. Additionally, during the
September 1996 period, the Centers increased their hours of operations in order
to increase volume. These increased hours of operation required additional
personnel in certain Centers and required some overtime in all Centers. The per
employee base salary and benefit costs did not significantly increase.
Professional services, consisting primarily of legal, accounting and
consulting services, remained relatively level, increasing only $41,000, or
6.5%, in the September 1996 period from the September 1995 period. In the
September 1996 period, legal fees decreased approximately $139,000 due to the
fact that during the September 1995 period, the Company incurred additional post
acquisition legal costs that were not incurred in the September 1996 period.
Such decrease was offset by an increase in consulting fees of approximately
$152,000 pursuant to marketing agreements that were entered into subsequent to
September 30, 1995. Accounting and other professional fees increased only
$28,000 in the aggregate.
Other management, general and administrative expenses increased
$655,000, or 22.3% for the comparable periods. During the September 1996 period,
one of the Centers was in the process of relocating to a new facility and, in
connection therewith, it rented, on a short-term basis, MRI equipment at a
rental cost of approximately $441,000 and was paying rent at two locations on a
temporary basis resulting in additional rental expenses of $27,000. Other
significant increases include $71,000 for an administrative fee paid to DVI as a
result of borrowings incurred subsequent to September 30, 1995 and $40,000 for
compensation to temporary employees of MRI Net who replaced permanent employees
whose compensation in the September 1995 period is included under salaries and
benefits.
Provision for bad debts increased $514,000, or 83.7%, from the
September 1995 period to the September 1996 period. Substantially all of this
increase reflects an evaluation of the collectibility of receivables from
third-party liability payors which were generated prior to the September 30,
1994 acquisition of the Centers. Revenue from third-party liability payors
represented only 5% of revenue for the September 1996 and September 1995
periods.
Depreciation and amortization consists of the depreciation of purchased
equipment, buildings, leasehold improvements and capital leases and the
amortization of goodwill, customer lists, restrictive covenants and loan costs.
Depreciation expenses decreased only $40,000, or 1.8%, from the September 1995
period to the September 1996 period, which reflects the addition of equipment in
certain of the Centers, which was offset by a decrease in Centers where
equipment is fully depreciated as of the September 1996 period. Amortization
increased $69,000, or 4.5%, for the comparable period due to an increase in
capitalized loan costs which were incurred at the beginning of 1996 for the
refinancing of certain portions of subordinated debt.
Interest and other income increased $378,000, or 374%, from the
September 1995 period to the September 1996 period. During August 1995, the
Company entered into a joint venture agreement with respect to an MRI Center in
the Orlando, Florida area. Income from the joint venture during the September
1996 and 1995 periods were $225,000 and $42,000, respectively. The September
1996 period also includes a change in an estimate relating to prior period
over-accruals of tangible personal property texts of approximately $140,000 for
the Company's San Juan Center. Other components of interest and other income
were not significant for either period.
Interest expenses for the September 1996 period increased $154,000, or
7.9%. At the beginning of 1996, the Company refinanced certain Subordinated
Notes, which were short-term notes on which the Company paid interest at 7%,
with long-term debt with rates varying from 11% to 12%. The increase in interest
expense from the higher rate was partially offset by reduced principal amount on
which interest was paid.
The Company's current provision for income taxes is comprised of state
and Puerto Rico income taxes. State income taxes for the September 1996 and 1995
periods were $297,000 and $86,000, respectively. Puerto Rico income taxes were
$0 and $61,000 for the September 1996 and 1995 periods, respectively. During the
September 1996 period, the Company utilized $802,000 of a $2.6 million deferred
tax asset to reduce current Federal income tax by $692,000, current state income
tax by
- 23 -
<PAGE>
$75,000 and current Puerto Rico income tax by $35,000. Of the $802,000 that was
utilized, $114,000 relates to the September 1995 period and $57,000 relates to
the three months ended December 31, 1994, representing changes in an estimate.
The Company also has a state net operating loss carryforward at September 30,
1996 of $3.6 million to offset state income taxes of certain Centers in which
losses have accumulated.
During the September 1995 period, no Federal income taxes were incurred
as a result of the use of the Company's available Federal income tax loss
carryforwards, which were fully utilized during the year ended December 31,
1995. In the September 1996 period, the Company accrued Federal income taxes at
the statutory rate for the period. The actual tax liability was offset in full
by the use of Consolidated's tax loss and loss carryforward, since the Company
files its Federal tax return as part of a consolidated tax return with
Consolidated.
Overall profitability increased $749,000, or 40.1%, for the September
1996 period from the September 1995 period, reflecting gains in net revenues in
excess of increased overall costs, including the $171,000 change in estimated
state and Puerto Rico income taxes relating to prior periods. During the
September 1996 period, three of the Centers operated at an aggregate net loss of
$1.5 million while the remaining Centers generated aggregate net income of $4.1
million. During the September 1995 period, five of the Centers operated at net
losses of $1.4 million while the remaining Centers generated aggregate net
income of $3.3 million. In 1996, the Company its greatest revenue in the first
quarter with reduced revenue and gross margin in the second quarters, which is
consistent with the past performance. Management anticipates that the operating
results for the fourth quarter of 1996 will show a moderate increase from the
third quarter.
Years Ended December 31, 1995 and 1994
The results of the Company's operations for the year ended December 31,
1995 are not comparable with the results of operations for the year ended
December 31, 1994 since the operating results for 1994 only include the period
from the date of inception (September 30, 1994) to December 31, 1994. In the
following discussion, 1995 refers to the year ended December 31, 1995, and 1994
refers to the period from inception (September 30, 1994) to December 31, 1994.
Revenue for 1995 amounted to $28.0 million, of which $27.4 million
resulted from performing MRI and other diagnostic modality procedures, $212,000
from management services and $450,000 from other service revenues. Revenues for
1994 amounted to $6.6 million, of which $6.5 million resulted from performing
MRI and other diagnostic modality procedures, $23,000 from management services
and $7,000 from other service revenues. The average revenue per MRI procedure
remained relatively level for both 1995 and 1994 although the average net
collections per procedure declined modestly. The percentage of procedure volume
was as follows for 1995 and 1994:
Percentage of Procedure Volume
Year Ended From Date of Inception
December 31, 1995 (September 30, 1994) to
Payor Type December 31,1994
- ---------- ----------------- ----------------------
MRI Procedures (representing 91% and
92%, respectively, of revenues for
1995 and 1994)
Managed Care 38% 41%
Commercial 17% 18%
Workers' Compensation (other than
pursuant to contracts with
workers' compensation insurers) 14% 15%
Medicare 9% 14%
Brokered Scan Services 9% --
Contract Workers' compensation 6% 5%
Liability 4% 5%
Other 3% 2%
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<PAGE>
Multi-modality procedures, other
than MRI (representing 9% and 8%,
respectively, of revenues for 1995
and 1994):
Managed Care 85% 85%
Medicare 6% 6%
Commercial 6% 6%
Other 3% 3%
- ---------
Radiology fees amounted to $3.0 million and $527,000 for 1995 and 1994,
respectively. Effective December 1994, radiology fees are incurred based on cash
collections related to services performed. During 1995, cash collections for
services were $25.4 million and the aggregate radiology rates were approximately
12% of such collections. During October and November 1994, the radiologists were
employees of a subsidiary of the Company and, accordingly, compensation to
radiologists of approximately $232,000 is included in salaries and benefits for
such period. In December 1994, the radiologists were independent contractors
pursuant to service agreements with the Centers, and radiology fees, which are
based on a percentage of cash collections for services performed, amounted to
$527,000.
During 1995 and 1994, the equipment maintenance costs were $1.2 million
and $360,000, respectively, and as a percent of revenues were 4% and 6%,
respectively, which is consistent with current maintenance cost trends since
significantly all maintenance costs were incurred pursuant to fixed maintenance
contracts.
Patient service costs and expenses during 1995 and 1994 were $1.9
million and $521,000, respectively. Generally, patient service costs will
fluctuate based on fluctuations in scan procedure volumes.
Salaries and benefits for 1995 and 1994 were $5.9 million and $1.7
million, respectively. During 1995, management implemented a cost reduction plan
which included the reduction of overall salary and wage levels which accounted
for the decrease in such costs as a percentage of revenues. The salaries and
benefits for 1994 include $232,000 paid to radiologists based on fixed fee
contracts and the 1995 amounts do not include any such amounts paid to
radiologists as discussed above.
Professional fees were $787,000 and $39,000 for 1995 and 1994,
respectively. During 1995, the Company incurred legal and accounting fees of
approximately $502,000 and $172,000, respectively. A significant portion of the
legal fees related to additional post acquisition services that are not expected
to be incurred in future periods. The accounting fees relate primarily to audit
services performed for 1995. Additionally, during 1995, the Company entered into
marketing agreements and in connection therewith, incurred approximately
$113,000 in consulting costs. Professional fees during the three months ended
December 31, 1994 were not significant.
Other management, general and administrative expenses were $4.0 million
and $947,000, respectively, for 1995 and 1994. During 1995, management
implemented a cost reduction plan which included the centralization of billing
and collections operations and renegotiations with significant vendors which,
during 1995 allowed the Company to maintain other management, general and
administrative expenses relatively level while scan procedure volumes increased.
During 1995 and 1994, the provision for bad debts was $855,000 and
$131,000, respectively, reflecting the difference in revenue for the periods.
During 1995 and 1994, depreciation and amortization expense
collectively were $5.0 million and $1.3 million, respectively, which on an
annualized basis results in no significant fluctuation.
Interest and other income for 1995 and 1994 was $193,000 and $140,000,
respectively. In August 1995, the Company entered into a joint venture agreement
with the owner of another MRI center in Orlando, Florida. The income from such
Center is treated as other income, and, as a result, future periods will reflect
an increase in other income. During 1995, income from the joint venture
approximated $120,000.
Interest expense was $2.6 million and $703,000, respectively, for 1995
and 1994. On an annualized basis, this represents a decrease of approximately 9%
due to principal payments on certain debt.
Loss on sale and disposal of assets for 1995 was $104,000, of which
$79,000 related to the replacement of MRI equipment in one of the Centers and
the remainder related to the write-off of obsolete equipment.
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<PAGE>
Provision for state income taxes for 1995 and 1994 was $209,000 and
$24,000, respectively, representing 7% and 5%, respectively, of income before
taxes. As noted previously, during 1996, the Company recorded a change in
estimate for state income taxes of $57,000 for each of 1994 and 1995. Based on
this change in estimate, it is expected that the effective rate will increase
for periods after 1995.
Overall profitability for 1995 and 1994 was $2.7 million and $449,000,
respectively. During 1995, five of the Centers operated at an aggregate net loss
of $2.0 million while the remaining Centers generated aggregate net income of
$4.6 million. During 1994, four of the Centers operated at an aggregate net loss
of $388,000, while the remaining Centers generated aggregate net income of
$837,000.
Liquidity and Capital Resources
The Company's principal working capital consists of cash and cash
equivalents. Cash and cash equivalents increased $335,000 from $1.4 million at
December 31, 1995 to $1.7 million at September 30, 1996. During the nine months
ended September 30, 1996, the Company's net cash provided by operations was $4.4
million. Sources of funds during the nine months ended September 30, 1996, other
than from operations, includes $15.4 million from debt financings and $139,000
from refunds of deposits previously paid. Uses of cash, other than to fund
operations, includes $14.1 million for repayment of debt, $3.5 million for fixed
asset purchases, $1.0 million for payments on capital lease obligations,
$560,000 for payment of loan costs, $380,000 for net advances to affiliates and
$74,000 for offering costs.
Working capital assets, other than cash, increased by $2.0 million.
Receivables increased by $1.8 million due primarily to increased revenue, and
prepaid expenses and other current assets increased by $241,000 due primarily to
a $300,000 loan that was made to the president and chief executive officer of
the Company.
Working capital liabilities decreased by $11.0 million. Current
portions of debt and capital lease obligations decreased by $11.3 million
primarily as a result of the January and September 1996 refinancings of a
significant portion of Subordinated Notes that were due in 1996. Such financing
consisted of term loans of $6.0 million and an accounts receivable revolving
loan of $6.0 million, of which $5.0 million was utilized by the Company. The
Company used the proceeds of $11.0 million from these loans as follows:
Repayment of Subordinated Notes that were due in September 1996 $9,800,000
Working capital 495,000
Loan costs 300,000
Loan to Company's president and chief executive officer 300,000
Bonus to Company's chief financial officer for loan negotiation 105,000
As a result of the refinancings, approximately $12.4 million of debt
that was currently due was replaced by long-term debt. As of September 30, 1996,
Stephen A. Schulman, M.D., president and chief executive officer of the Company,
the other two former stockholder-directors of IMI-Florida and the Schulman
Affiliated Entities held Subordinated Notes, which were issued in connection
with the acquisition of the Centers, in the aggregate principal amount of $7.1
million, and which are due in various installments through 1999. Certain
subsidiaries that issued the Subordinated Notes have not made certain payments
of principal or interest due on such notes in 1996, as result of which the
holders may have the right to declare a default. Although no default has been
called, no assurance can be given that some or all of the holders of such
Subordinated Notes will not seek to declare a default. The Company and Dr.
Schulman have entered into the Schulman Memorandum which contemplates the
exchange of Subordinated Notes in the aggregate principal amount of
approximately $2.1 million, which are owned by Dr. Schulman or in which he has
an interest, for shares of a new series of Preferred Stock having a redemption
price of approximately $1.7 million.
Other significant changes in current liabilities were as follows:
The nominal change in accounts payable and accrued expenses reflected
(1) a $358,000 paydown of trade accounts payable, (2) increased personal
property, real property and intangible taxes of $70,000 related to the timing of
such tax payments, (3) increased Health Care Cost Containment Board ("HCCCB")
accruals of $91,000 due to increased net patient service revenue net of the
related bad debt expense on which the HCCCB accrual is calculated, (4) $150,000
in increased legal expenses, and (5) $52,000 in increased radiology fees due to
higher cash collections in the September 1996 period on which the fees are
based.
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<PAGE>
Current state income taxes payable increased by $377,000 due to a
$171,000 adjustment for a change in accounting estimate relating to 1995 and
1994 and an increase due to increased pre-tax profits. For the year ending
December 31, 1996, the Company will file a consolidated Federal income tax
return with Consolidated. As a result, although the Company will accrue Federal
income taxes on its Federal taxable income at the statutory rates for 1996, the
Company will have no Federal income tax liability because Consolidated has
agreed to forgive the amount due Consolidated in consideration for the use of
the tax loss or loss carryforward in 1996. As a result, the Company's working
capital and cash flow in 1996 will be increased by the amount of the net Federal
income tax savings.
Other current liabilities decreased $111,000 due to the payment of
amounts due to Consolidated.
Overall, the Company's working capital increased $13.4 million from a
working capital deficit of $8.9 million at December 31, 1995 to positive working
capital of $4.5 million at September 30, 1996.
Impact of Inflation
The Company is subject to normal inflationary trends. Although the
Company seeks to pass on such costs, its ability to do so is affected by
applicable healthcare laws, rules and regulations as well as the payment
policies of insurers and other third-party payors, and, in recent periods, the
Company has seen a decrease in the average net collection per procedure for both
MRI procedures and multi-modality procedures, although the Company has seen an
increase in the average net collections from MRI procedures for the nine months
ended September 30, 1996.
BUSINESS
General
The Company owns and operates ten medical diagnostic imaging Centers,
of which three are multi-modality Centers and seven are exclusively MRI Centers.
One of the MRI Centers is operated by a joint venture in which the Company has a
50% interest. The Company also owns MRI Net, Inc. ("MRI Net"), which operates a
referral network through which patients are referred to diagnostic imaging
centers throughout the state of Florida, including the Company's Florida
Centers..
Medical diagnostic imaging procedures, such as MRI, are used to
diagnose various diseases and physical injuries. The multi-modality Centers use
various imaging procedures, such as MRI, CT, mammography, X-ray, ultrasound,
fluoroscopy and other technologies while the MRI Centers only offer MRI.
MRI systems enhance the diagnosis of disease and medical disorders,
frequently eliminating the need for exploratory surgery and often reducing the
amount and cost of care required to evaluate and treat a patient. Since the
introduction of MRI in the early 1980's, the use of MRI has experienced rapid
growth due to the technology's ability to provide anatomical images of high
contrast and detail. MRI, which does not utilize x-ray or other radiation based
technologies, employs high-strength magnetic fields, high frequency radio waves
and high-speed computers to process data. In addition, the development of
pharmaceutical contrast agents, software advancements and new hardware
peripherals continue to expand the clinical applications and throughput
efficiency of MRI technology.
MRI employs high-strength magnetic fields, high frequency radio waves
and high-speed computers to obtain clear, multi-planar images of the body's
internal tissues without exploratory surgery or biopsy. In addition, MRI is able
to obtain multi-planar slices of the body. These images are then displayed on
film or on the video screen of an MRI system's console in the form of a
multi-planar image of the organ or tissue. This information can be stored on
magnetic media for future access, or "printed" on film for interpretation by a
physician and retention in the patient's files, enabling healthcare
professionals to study the patient's internal conditions in detail. The
superiority of MRI image quality compared to other imaging modalities generally
makes possible a more accurate diagnosis and often reduces the amount and cost
of care needed to evaluate and treat a patient.
The major components of an MRI system are (i) a large, cylindrical
magnet, (ii) radio wave equipment, and (iii) a computer for data storage and
image processing. During an MRI study, a patient lies on a table which is then
placed into the magnet. Although patients have historically spent 30 to 45
minutes inside the magnet during which time images of multiple planes are
acquired, the newest MRI machines allow patients to spend significantly less
time inside the magnet. Additional time is required for computer processing of
the images.
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<PAGE>
Developments in imaging technology are either hardware or software
related. Most recent developments have been software upgrades which permit
greater resolution and accuracy and greater efficiency of operations. However,
there have been improvements in hardware. The Company seeks to offer the most
current and accepted technologies, and, in this connection, it seeks to upgrade
its equipment with selected software upgrades to the extent financially
feasible. The Company also evaluates new hardware and if it determines that the
purchase of the equipment will be advantageous to the Company and financing is
available on acceptable terms, it may either purchase or lease new equipment.
The decision to purchase new MRI equipment is based on the needs of the market
and the advantages of such equipment over existing equipment.
Acquisition of the Centers
On September 30, 1994, the Company, through wholly-owned subsidiaries,
acquired eight MRI Centers, one multi-modality Center, IMI-Florida, which
managed the operations of the Centers, the assets of MD Corp., which provided
the services of radiologists to the Centers, and MRI Net, a corporation that
operates a statewide network of MRI centers in Florida. In January 1995, the
Company, through another wholly-owned subsidiary, acquired an additional MRI
Center, which was affiliated with such Centers.
The purchase price of the ten Centers, together with certain related
companies, was $30.6 million, of which $7.0 million was paid in cash, $20.7
million was paid by the issuance of Subordinated Notes, and $2.9 million was
paid through the issuance of shares of Consolidated's common stock, exclusive of
acquisition costs of $1.3 million. As of September 30, 1996, outstanding
Subordinated Notes in the principal amount of $7.1 million were payable to Dr.
Schulman, his wife, the other two former stockholder-directors of IMI-Florida
and the Schulman Affiliated Entities. See "Certain Transactions."
In connection with the acquisition of the Centers, the Company borrowed
an aggregate of approximately $7.1 million from DVI on a secured, term-loan
basis payable over 60 months. Since the completion of the acquisition of the
Centers, the Company's subsidiaries borrowed additional money from DVI to pay
certain of the Subordinated Notes and to purchase equipment. See "Certain
Transactions -- Agreements with DVI."
In September 1994, contemporaneously with the purchase of nine of the
Centers, the Company entered into a five-year employment agreement with Dr.
Stephen A. Schulman, who was the president of IMI-Florida and became the
president and chief executive officer of the Company. See "Management --
Remuneration."
Outpatient Services and Patient Base
Each Center is a fixed-site, outpatient facility that is designed,
equipped and staffed to provide physicians and healthcare providers with high
quality MRI, and, with respect to the multi-modality Centers, other medical
diagnostic imaging services that historically were available only at hospitals.
The Company schedules patients, prepares all patient billing and is responsible
for the collection of all charges. The Company is also responsible for related
administrative and record-keeping functions. The Company typically staffs its
Centers with technical and administrative support personnel who assist
physicians in obtaining MRI and other diagnostic scans. The Centers are designed
to offer a pleasant environment where patients are not subjected to the
admission complexities and institutional atmosphere of most hospitals.
Many physicians and other healthcare providers who have a need for MRI
and other diagnostic imaging procedures do not have the financial ability or
desire to own their own equipment. As a result, such providers use outpatient
MRI and multi-modality facilities such as the Centers for the following reasons,
among others: (i) ability to receive comprehensive MRI and other medical
diagnostic imaging services, including qualified technicians, equipment
maintenance, insurance and equipment upgrades; (ii) desire to obtain quick
access to MRI and other medical diagnostic imaging services; (iii) lack of
sufficient patient volume to justify the capital cost of purchasing an MRI or
other medical diagnostic imaging equipment; (iv) desire to use MRI or other
medical diagnostic imaging equipment to facilitate caring for their patients;
(v) lack of financial ability to purchase MRI or other medical diagnostic
imaging equipment, and/or (vi) inability to obtain required regulatory approval
to purchase or operate such equipment.
In addition, many healthcare providers with sufficient patient
utilization and resources to justify in-house MRI and other medical diagnostic
imaging equipment ownership prefer to use independent facilities such as the
Centers in order to: (i) obtain the use of such equipment without capital
investment; (ii) eliminate the need to recruit, train and manage qualified
technicians; (iii) retain the flexibility to take advantage of all technological
developments; (iv) avoid future uncertainty as to reimbursement
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policies; (v) provide additional imaging services when patient demand exceeds
in-house capacity, and/or (vi) obtain radiologic and other diagnostic and
technical services.
Set forth below is information relating to the Centers.
Date Service
Center Location Commenced
- ------ -------- ----------
Pine Island Plantation, Florida December 1986
North Miami Beach North Miami Beach, Florida January 1988
Boca Raton(1) Boca Raton, Florida November 1988
Physicians Outpatient
Diagnostic Center(2) Ft. Lauderdale, Florida November 1985
South Dade(3) Miami, Florida December 1989
Oakland Oakland Park, Florida January 1990
San Juan(4) San Juan, Puerto Rico October 1990
Arlington Arlington, Virginia December 1990
Kansas City Overland Park, Kansas October 1991
Orlando(5) Orlando, Florida September 1992
- ----------
(1) The Company expanded the Boca Raton Center to a multi-modality Center
in July 1996. The Center offers MRI and CT imaging services.
(2) Physicians Outpatient Diagnostic Center ("PODC") has been a
multi-modality Center since prior to the Company's acquisition of the
Center. It offers CT, mammography, X-ray, ultrasound and other
modalities.
(3) The Company converted the South Dade Center to a multi-modality Center
and upgraded its MRI equipment in October 1996 at a cost of
approximately $2.5 million. As part of the conversion, the Center was
moved to larger facilities, its MRI equipment was upgraded, and the
Center now offers CT, fluoroscopy and ultrasound services in addition
to MRI.
(4) In September 1996, this Center upgraded its MRI equipment.
(5) The Orlando Center is operated as a joint venture with a non-affiliated
party and is co-managed by the Company and its joint venture partner.
The equipment used in this Center has been provided by the Company's
joint venture partner, and the Company's equipment is used for backup.
Currently, the Company intends to expand up to three other MRI Centers,
including the North Miami Beach Center, following the completion of this
Offering, although it has not made any commitments or plans with respect to such
expansion. See "Use of Proceeds". The Company may expand other MRI equipment
and/or convert other MRI Centers to multi-modality Centers if it determines
there is a need to do so.
Each Center generally has a full-time staff of eight to ten employees,
typically consisting of technicians, file clerks, a marketing representative, a
transcriptionist, one or more receptionists and a center administrator. The
Centers are open at such hours as are appropriate for the local medical
community. Most are open from 7:00 a.m. to 9:00 p.m. each weekday, and many of
the Centers offer extended evening and weekend hours. Each Center is supervised
by a center administrator. The Company is responsible for patient scheduling and
billing the patient (or third party payor) directly. The Company has contracts
with independent board-certified radiologists, some of which have sub-specialty
training in orthopedic and neuroradiology, to interpret the Company's scans and
provide the test results to the referring physician. The Company is not itself
engaged in the practice of medicine.
The Company markets its services through open houses, lectures,
symposia, direct mail and direct physician marketing. Each Center uses one or
more marketing representatives, the Center's administrator and certain
radiologists who interpret the
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Company's scans to market its services to the local medical community, while the
Company's national accounts manager focuses on managed care providers and third
party payors. The Company also utilizes the marketing expertise and abilities of
Dr.
Schulman when required.
Almost all of the Company's revenue is derived from third-party payors.
For the nine months ended September 30, 1996 and the year ended December 31,
1995, the Company derived approximately 87% and 91% of its revenue from
non-government payors and approximately 13% and 9% from government sponsored
healthcare programs, principally Medicare and Medicaid. The Company's revenue
and profitability may be materially adversely affected by the current trend in
the healthcare industry toward cost containment as government and private
third-party payors seek to impose lower reimbursement and utilization rates and
negotiate reduced payment schedules with service providers. Continuing budgetary
constraints at both the Federal and state level and the rapidly escalating costs
of healthcare and reimbursement programs have led, and may continue to lead, to
significant reductions in government and other third-party reimbursements for
certain medical charges and to the negotiation of reduced contract rates or
capitation or other financial risk-shifting payment systems by third-party
payors with service providers. Both the Federal government and various states
are considering imposing limitations on the amount of funding available for
various healthcare services. The Company cannot predict whether or when any such
proposals will be adopted or, if adopted and implemented, what effect, if any,
such proposals would have on the Company. In addition, rates paid by private
third-party payors, including those that provide Medicare supplemental
insurance, are generally higher than Medicare payment rates. Changes in the mix
of the Company's patients among the non-government payors and government
sponsored healthcare programs, and among different types of non-government
payors and government sponsored healthcare programs, and among different types
of non-government payor sources, could have a material adverse effect on the
Company. Further reductions in payments to physicians or other changes in
reimbursement for healthcare services could have a material adverse effect on
the Company, unless the Company is otherwise able to offset such payment
reductions through cost reductions, increased volume, introduction of new
procedures or otherwise, as to which no assurance can be given. The Company has
consummated and is continuing to negotiate agreements with managed care
organizations pursuant to which the Company provides and will provide MRI and
other services; however, such agreements typically reflect a reduced level of
revenue per scan. Although the Company's average net collection from MRI
procedures increased to $710 for the nine months ended September 30, 1996, the
net collections per MRI procedure decreased in prior periods. The Company's
average net collection per MRI procedure decreased from $763 in 1993, to $726 in
1994 to $639 for 1995. The increase for the nine months ended September 30, 1996
reflected an increase in higher paying procedures as well as a reduction in
lower-paying procedures, principally in the San Juan Center which was not
operational during a portion of the period while the equipment was being
upgraded as well as during the period when San Juan was recovering from the
effects of Hurricane Hortense. No assurance can be given that the average net
collections per MRI Procedure will not decrease in the future. The Company's net
collection per multimodality procedure was $95 for 1993, 1994 and 1995 and $82
for the nine months ended September 30, 1996..
The Company is highly dependent on referrals from physicians who have
no contractual or economic obligation to refer patients to the Company's
facilities. Since the acquisition of the Centers, the percentage of revenue from
the former physician-partners and other physician-equity owners of the Centers
has decreased in terms of both total revenue and number of MRI scans. The
percentage of revenue derived from referrals from such physicians was 38% for
1994 and 24% for 1995 and the nine months ended September 30, 1996. In 1994,
1995 and the nine months ended September 30, 1996, the Company performed 13,000,
9,000 and 7,000 procedures, respectively, for patients referred by such
physicians and 21,000, 26,000 and 22,000 from patients referred by other
physicians.
Commencing in 1995, a portion of the Company's revenue was obtained by
physician referrals which were generated by brokers who negotiated a price with
the Company for MRI and other scans. To the extent that a third party paid more
than the Company charged for such scans, the broker received a portion of such
excess. Effective October 1, 1996, this practice became illegal in Florida. Such
scans accounted for 11% of the Company's revenue for the nine months ended
September 30, 1996 and 9% for 1995. Although the Company intends to market its
services directly to physicians and health maintenance organizations, there may
be a decline in revenue from physicians whose scans were obtained through
brokers as a result of the change in the laws.
Agreements with Radiologists
The Company engages independent radiologists and other specialists to
read and interpret the diagnostic imaging scans performed at the Centers. None
of such radiologists or other specialists are employed by the Company.
In December 1994, the Company entered into a five-year agreement (the
"ERN Agreement") with Expert Radiology Network, P.A. ("ERN"), a Florida
corporation owned by an independent radiologist, pursuant to which ERN has been
engaged by the Company to provide, on an exclusive basis, all radiology services
for five of the Company's Florida Centers through
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radiologists and other specialists employed by ERN. ERN has also entered into a
similar exclusive radiology services agreement with the diagnostic imaging
center located in Orlando, Florida in which the Company has a 50% joint venture
interest. ERN also currently provides radiology services to another of the
Company's Florida Centers on a non-exclusive basis pursuant to an oral
engagement. ERN receives a fee for its radiology services in an amount equal to
a percentage, ranging from 10% to 20%, of gross revenues received by the
Centers, together with an annual consulting fee of $30,000 in the case of the
ERN Agreement and $6,000 with respect to the Orlando joint venture center. ERN
has the right to receive a warrant to purchase 100,000 shares of the Common
Stock of Consolidated upon the consummation of this Offering. The Company has
been informed that ERN currently employs five radiologists and other
specialists, to perform such radiology services on behalf of ERN.
In October 1990, the Company entered into a Facilities Use Agreement
with an independent radiologist in Puerto Rico pursuant to which such
radiologist performs all radiology services at the Center in Puerto Rico during
the term of such agreement for which the radiologist receives an annual fee
ranging from 10% to 15% of the gross revenues of the Center, subject to increase
with respect to gross revenues of the Center in excess of $2,000,000. The
agreement provides for the Company's subsidiary which owns the Center to pay the
radiologist $500,000 as liquidated damages if it terminates the agreement
without cause. In September 1994, in connection with the Company's acquisition
of this Center, the agreement was amended and Consolidated issued 125,000 shares
of its common stock to such radiologist.
The Company has also entered into agreements with independent
radiologists with respect to the Centers in Virginia and Kansas. The radiologist
engaged by the Virginia Center receives an annual fee of $275,000 plus 15% of
the Center's gross revenues in excess of $2.4 million. The radiologist engaged
by the Kansas Center receives a fee for each study performed ranging from $75 to
$150, depending on the number of studies read.
Certain of the radiologists engaged by the Company, including Dr.
Steinberg and other radiologists employed by ERN, have been granted options to
purchase the Company's Class A Common Stock.
MRI Net
The Company, through MRI-Net, a wholly-owned subsidiary of the Company,
operates a referral network through which patients are referred to 85 diagnostic
imaging centers throughout the state of Florida, including the Company's Florida
Centers. The Company markets MRI Net to HMOs, indemnity plans, workers
compensation insurers and other third-party payors by making available to them
at contract rates a range of imaging services at centers located throughout the
state. Pursuant to contracts with the third-party payors, the participating
centers provide diagnostic imaging services to persons who are covered by the
contracting third-party payors. The Florida Centers are part of such network.
During the nine months ended September 30, 1996, the centers participating in
the network, including the Florida Centers, serviced a total of approximately
600 patients per month. These patients were referred to the centers through MRI
Net from approximately 40 different third-party payors. The Company receives a
fee of at least $50 from the center performing the services for each patient
which is referred to it by MRI-Net. Revenues from MRI-Net for the nine months
ended September 30, 1996 and the year ended December 31, 1995 constituted less
than 2% of the Company's total revenues for each of such periods.
Government Regulation - Reimbursement
The healthcare industry is highly regulated and is undergoing
significant change as third-party payors, such as Medicare, Medicaid, Blue
Cross/Blue Shield plans and other insurers increase efforts to control the cost,
utilization and delivery of healthcare services. Legislation has been proposed
or enacted at both the Federal and state levels to regulate healthcare delivery
in general and imaging services in particular. In addition, several states,
including those in which the Company operates, have imposed limits on the
reimbursement by Medicaid and Workers Compensation programs for imaging
services. These and similar limits may reduce the income generated by the
Company's operations.
In general, Medicare reimburses radiology imaging services under a
physician fee schedule which covers services provided not only in a physician's
office, but also in freestanding imaging centers. The Company believes that
reductions in reimbursement for Medicare services may be implemented from time
to time, which may lead to reductions in reimbursement rates of other
third-party payors. Congress and the Department of Health and Human Services
("HHS") have taken various actions over the years to reduce reimbursement rates
for radiology services and proposals to reduce rates further are anticipated.
The Company is unable to predict which, if any, proposals will be adopted. Any
reductions in Medicare reimbursement for radiology services could have a
material adverse effect on the Company. In addition, the Company cannot predict
the effect healthcare reforms and
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efforts to control costs may have on its business, and there can be no assurance
that such reforms or efforts will not have a material adverse effect on the
Company's operations.
With respect to diagnostic testing, the "purchased services" limitation
prohibits physicians from billing Medicare, as part of a global bill, a
marked-up amount for diagnostic testing services where the technical component
of such services is purchased from outside vendors. In order to avoid this
restriction, bill Medicare globally for such services and mark-up the technical
component, the physician must own or lease the equipment and employ the
technician. This payment limitation has resulted in fewer physicians' billing
Medicare for radiology and other diagnostic services and a reduction in facility
discounts to physicians.
Government Regulation - General
The Company's business is subject to extensive Federal and state
regulation. Such regulations cover, among other things, certain reporting
requirements, limitations on ownership and other financial relationships between
a provider and its referral sources, approval by the FDA of the safety and
efficacy of pharmaceuticals and medical devices, the confidentiality of medical
records, antitrust laws and environmental regulation regarding the use of
various substances, including radioisotopes, and the disposal of medical waste.
In addition, the requirements that the Company must satisfy to conduct its
businesses vary from state to state and many of the state requirements overlap
with the Federal requirements. The Company believes that its operations comply
with applicable Federal and state regulations in all material respects. However,
changes in the law or new interpretations of existing laws can have a material
effect on permissible activities of the Company, the relative costs associated
with doing business, and the amount of reimbursement for the Company's products
and services paid by government and other third-party payors.
The Company believes that in the near future, all outpatient medical
diagnostic imaging centers will be required to be accredited by certain
accreditation entities. In anticipation of these requirements, the Company is
currently in the process of having all of the Centers accredited by an
accreditation organization, the requirements of which the Company believes will
satisfy any anticipated future requirements that may be imposed. There can be no
assurance, however, that any such accreditation requirements will be imposed or,
if imposed, what the scope of such requirements will be or whether the Company
will obtain any necessary accreditation.
Mammography
Centers performing mammography services (including screening
mammography) must meet Federal, and in some jurisdictions, state standards for
quality as well as certification requirements. Under interim regulations issued
by the Food and Drug Administration (the "FDA"), all mammography facilities are
required to be accredited, to undergo an annual mammography facility physics
survey, to be inspected annually and pay an annual inspection fee, to meet
qualification standards for physicians, mammography technologists and medical
physicists who interpret mammograms, to meet certification requirements for
adequacy, training and experience of personnel, to meet quality standards for
equipment and practices, and to meet various requirements governing record
keeping of patient files. In addition, the FDA has proposed regulations
governing standards for mammography X-ray equipment, medical physicists
standards and minimum quality standards for mammography facilities including
personnel standards and quality control. Sanctions for violating the Mammography
Quality Standards Act of 1992 ("MQSA") are varied, ranging from civil monetary
penalties, suspension or revocation of certificates and injunctive relief.
Moreover, the MQSA requires conformity with these standards to obtain payment
for Medicare services. Although the one Center that offers mammography is
currently accredited by the Mammography Accreditation Program of the American
College of Radiology, and the Company anticipates continuing to meet the
requirements for accreditation for such Center as well as any Centers which
offer mammography, the withdrawal or delay of such accreditation could result in
the revocation of certification, if the FDA so determines.
Permits and Licensure
Certain of the Company's facilities require state licensure and are
also subject to Federal and other state laws and regulations governing imaging
facilities and the staff hired by the Company, such as technicians, to provide
services. The Company believes that it is in compliance with applicable
licensure requirements. The Company further believes that diagnostic testing
will continue to be subject to intense regulation at the Federal and state
levels and cannot predict the scope and effect thereof.
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Anti-kickback Laws
The Company is also subject to Federal and state laws prohibiting
direct or indirect payments for patient referrals and regulating reimbursement
procedures and practices under Medicare, Medicaid and state programs as well as
in relation to private payors.
The Federal Medicare and Medicaid Anti-kickback Statute prohibits the
offer, payment, solicitation or receipt of any remuneration in return for the
referral or arranging for the referral of items or services paid for in whole or
in part under the Medicare and Medicaid programs (the "Anti-kickback Statute").
To date, courts have interpreted the Anti-kickback Statute to apply to a broad
range of financial relationships between providers and referral sources, such as
physicians and other practitioners. Violations of the statute's provisions may
result in civil and criminal penalties, including fines of up to $25,000 and
exclusion from participation in Medicare and state health programs such as
Medicaid and imprisonment for up to five years.
Since July 1991, the U.S. Department of Health and Human Services has
adopted regulations creating "safe harbors" from Federal criminal and civil
penalties under the Anti-kickback Statute by exempting certain types of
ownership interests and other financial arrangements that do not appear to pose
a threat of Medicare and Medicaid program abuse. Although safe harbors have also
been proposed, none of the Company's current activities fir within an applicable
safe harbor that has either been enacted or proposed. Transactions covered by
the Anti-kickback Statute that do not conform to an applicable safe harbor are
not necessarily in violation of the Anti-kickback Statute, but the practice may
be subject to increased regulatory scrutiny and possible prosecution. Several
courts have rendered decisions interpreting the statute. In May 1996, the
District Court of Appeal of Florida, Fourth District held that an arrangement in
which a company marketed the services of a durable medical equipment business to
potential clients and received a percentage of the sales it generated was in
violation of the Anti-kickback Statute. While the Company believes that MRI
Net's operations are different from those in such case, a court could reach a
contrary conclusion. The restrictions of the Anti-kickback Statute may limit the
ability of the Company to enter into joint venture or service agreements with
physicians, may restrict its dealings with any physician from whom it has
purchased an interest in a facility and could, if interpreted broadly, preclude
MRI Net from being paid for its services. Although the Company believes that it
is in compliance with the Anti-kickback Statute, there is no assurance that it
will not be found to have engaged in prohibited activities.
Significant prohibitions against physician referrals were enacted by
Congress in the Omnibus Budget Reconciliation Act of 1993. These prohibitions,
commonly known as "Stark II," amended the prior physician self-referral ban
known as "Stark I," by dramatically enlarging the field of physician-owned or
physician-interested entities to which the referral prohibitions apply. Since
January 1, 1995, Stark II has prohibited, subject to certain exemptions, a
physician or a member of his immediate family from referring Medicare patients
to an entity providing "designated health services" (including, among other
things, radiological imaging services, which are the services provided by the
Company), in which the physician has an ownership or investment interest, or
with which the physician has entered into a compensation arrangement. Certain
exceptions are available under Stark II, including the referral of patients to
providers owned by certain qualifying publicly-traded companies in which a
referring physician owns an investment security. At this time, however, the
ownership of investment securities (including common and preferred stock, bonds,
debentures, notes and other debt instruments) in the Company does not qualify
for the exemption as the Company does not have presently shareholder equity of
at least $75 million. Other exceptions exist under the Stark II which may or may
not be available to the Company for arrangements in which the Company may be
involved. The Company has been advised by its healthcare counsel that there are
no regulations, administrative pronouncements or judicial cases interpreting
Stark II. While the Company believes that it is in compliance with the Stark
legislation, the statute is broad and ambiguous, and interpretive regulations
have not been issued. Future regulations could require the Company to modify the
form of its relationships with physicians under the Stark II. Submission of a
claim that a provider knows or should know is for services for which payment is
prohibited under the Stark II could result in refunds of any amounts billed,
civil money penalties of not more than $15,000 for each such service billed (and
$100,000 for participation in a "circumvention scheme," and possible exclusion
from the Medicare and Medicaid programs.
There are also Federal (and state) civil and criminal statutes imposing
substantial penalties, including civil fines and/or imprisonment, on health care
providers that fraudulently or wrongfully bill governmental or third-party
payors for health care services. The Federal law prohibiting false billings
allows a private person to bring a civil action in the name of the U.S.
government for violations of its provisions. The potential liability under the
Federal False Claims Act can include treble damages plus a fine of $10,000 per
claim. Courts are currently divided as to whether an Anti-kickback Statute
violation may also be a predicate for false claims liability.
On August 21, 1996, the Health Insurance Portability and Accountability
Act of 1996 (the "1996 Health Act") was signed into law. Title II of the 1996
Health Act contains significant provisions relating to healthcare fraud and
abuse. The 1996 Health Act codifies the long-standing implicit exception in
anti-kickback liability for managed care discounts, if the provider, via the
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arrangement, is at "substantial financial risk." In addition, the criminal law
was revised to create a new class of criminal healthcare offenses, standards for
liability were clarified and new initiatives were launched to coordinate efforts
at the Federal and state levels to control fraud and abuse. The 1996 Health Act
also increased the penalties under the Federal False Claims Act and permits the
government to reward sources who provide information that results in a recovery
by the government.
Antitrust
Federal and state antitrust laws and regulations may effect the
operation of MRI Net, which is a referral network through which patients are
referred to diagnostic imaging centers in Florida. See "Business -- MRI Net."
Because the centers to which patients are referred are operated by independent
entities, they may be deemed competitors and, therefore, subject to a range of
Federal and state antitrust laws and regulations which prohibit anti-competitive
conduct, including price fixing, division of the market and product tying.
Violations of Federal and state antitrust laws can result in substantial
penalties and restrictions on MRI Net's business activities. Although the
Company believes that MRI Net's activities do not violate the Federal or state
anti-trust laws, no assurance can be given that a court or regulatory agency
will not make a contrary determination, which could have a material adverse
effect upon the Company.
State Government Regulation
Many states, including the states in which the Company operates, have
adopted statutes and regulations prohibiting payments for patient referrals and
other types of financial arrangements with healthcare providers, which, while
similar in certain respects to the Federal legislation, vary from state to
state. Sanctions for violation of these state restrictions may include loss of
licensure and civil and criminal penalties. Certain states have also begun
requiring healthcare practitioners to disclose to patients any financial
relationship with a provider, including advising patients of the availability of
alternative providers.
In addition, the laws of many states prohibit business corporations
such as the Company from practicing medicine, employing physicians to practice
medicine, or sharing fees with physicians. The Company provides only non-medical
services, and does not exercise control over the practice of medicine by
physicians. However, these laws generally have been subjected to limited
judicial and regulatory interpretation, and therefore, there is no assurance
that upon review, some of the Company's activities would be found not to be in
compliance. In addition many states limit the extent to which providers can
engage in risk contracting. In some states, only certain entities, such as
insurance companies, HMOs or IPAs are permitted to contract for the financial
risk of patient care. In such states, risk contracting in certain cases has been
deemed to be engaging in the business of insurance. The Company believes that it
is not in violation of any restrictions on risk bearing or engaging in the
business of insurance under applicable state laws.
Florida
In April 1992, the State of Florida adopted the Patient Self-Referral
Act of 1992 which prohibits referrals for certain designated health services by
a healthcare provider to a facility (including a diagnostic imaging center), in
which such provider has an ownership interest. In addition, effective October 1,
1996, the State of Florida enacted legislation which prohibits patient
brokering. The law makes it unlawful for any person, including any healthcare
provider or healthcare facility (including a diagnostic imaging center) to: (a)
offer or pay any commission, bonus, rebate, kickback or bribe, or engage in any
split fee arrangement, in any form whatsoever, to induce the referral of
patients or patronage from a healthcare provider or healthcare facility or (b)
solicit or receive any commission, bonus, rebate, kickback or bribe, or engage
in any split fee arrangement, in any form whatsoever, in return for referring
patients or patronage to a healthcare provider or healthcare facility.
Violations of the law may be punishable by fines and imprisonment. There is an
exception in the 1996 anti-brokering statute related to payments to or by a
health care network entity. However, there has been regulatory or judicial
interpretation of the statute clearly applying the exception to network
structures and activities like those of MRI Net, as a result of which it is not
certain that this exception would apply to MRI Net's activities. If MRI Net's
activities are found not to be in compliance with the statute, it would be
subject to fines, imprisonment, and/or a need to restructure its business. The
Company has in the past used the services of "patient brokers," but discontinued
such practice when the anti-brokering statute became effective. The Company
believes that its current procedures otherwise comply with Florida laws
regarding referrals and patient brokering.
Kansas
The State of Kansas prohibits the practice of medicine by
non-physicians and the rebate or division of fees between physicians and
non-physicians. The Company believes that its operations comply with such laws.
Currently, the employees of
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the Kansas Center provide only technical services relating to the MRI scans.
Professional medical services, such as the reading of the MRI studies and
related diagnosis, are separately provided by licensed physicians pursuant to
bona fide independent contractor agreements. There can be no assurance, however,
that state authorities will not determine that these relationships constitute
the unauthorized practice of medicine by the Company. Such determinations could
have a materially adverse effect upon the Company and would prohibit the Kansas
Center from continuing its current procedures for conducting business. In
addition, Kansas has recently adopted laws similar to the Federal
"Anti-kickback" statutes, which prohibit the giving or receiving of
renumerations in exchange for the referral of patients for services for which
payment is made by Kansas Medicaid. However, no Medicaid referrals are accepted
by the Kansas Center from persons who receive any remuneration of any kind from
the Kansas Center, and thus the Company believes it is in compliance with such
laws.
Puerto Rico
The Health Facilities Act of Puerto Rico and the Health Facilities
Regulations promulgated thereunder set forth the provisions which regulate the
establishment and operation of health facilities in the Commonwealth of Puerto
Rico, including among others, diagnostic and treatment centers. No person may
operate or maintain a Health Facility in Puerto Rico without a license granted
pursuant to the provisions of the Health Facilities Act and the Health
Facilities Regulations. A license granted under the Health Facilities Act and
the Health Facilities Regulations is valid for two years unless otherwise
revoked or suspended before said term.
However, the Office of Regulation and Accreditation of the Health
Department of Puerto Rico currently applies the provisions of the Health
Facilities Act and the Health Facilities Regulations to MRI facilities which
operate in conjunction with, or as part of hospitals. Independent MRI
facilities, such as the one operated by the Company, are not presently regulated
under the Health Facilities Act or Health Facilities Regulations.
MRI facilities in Puerto Rico are subject to certificate of need and
convenience ("CON") laws, which currently may serve to limit the competition for
the Company because of the added time and expense of establishing and operating
competing facilities. No major new health facilities can be constructed without
obtaining a CON granted by the Secretary of Health.
In addition, any professional clinical personnel providing services at
the Company's MRI facility must satisfy local license requirements.
The laws and regulations in this area may be subject to material
change. Consequently, there can be no assurance that the Company will be in a
position to comply with future laws and regulations. Moreover, the cost
associated with compliance, including the cost of any additional personnel or
contracting with other qualified organizations to provide certain services, may
have a detrimental effect on the profitability of the Company's operations in
Puerto Rico. Further, even if the Company currently possesses all the licenses
and permits necessary to operate in Puerto Rico, there can be no assurance that
the Company will be able to renew all such licenses and permits.
As of the date of this Prospectus, the Commonwealth of Puerto Rico has
not enacted any laws or regulations prohibiting physicians from referring
patients to MRI facilities in which they have an ownership or financial
interest.
Virginia
Under the Virginia Practitioner Self-Referral Act (the "Virginia
Anti-Referral Law"), unless the practitioner directly provides health services
within the entity and will be personally involved with the provision of care to
the referred patient, a practitioner may not refer a patient for health services
to any entity outside the practitioner's office or group practice if the
practitioner or any of the practitioner's immediate family members is an
investor in such entity. An "investor" is one directly or indirectly possessing
a legal or beneficial ownership interest, including an investment interest,
which is defined as the ownership or holding of an equity or debt security.
Currently, no physician in a position to refer patients to the Virginia Center,
nor any of their immediate family members, is an "investor", as defined in the
Virginia Anti-Referral Law, in the Company or in the entity which owns the
Virginia Center.
A referring physician, or an immediate family member of a referring
physician who purchases Common Stock or Warrants in this Offering or otherwise
purchases such Securities in the public market, may be deemed an "investor" as
defined in the Virginia Anti-Referral Law, in that he or she would have an
indirect ownership interest in the entity which owns the Virginia Center,
because such entity is a wholly-owned subsidiary of the Company. Three possible
exceptions to the prohibition exist for such investors. The first exception
permits a practitioner to refer to an entity which is publicly traded and which
meets certain conditions. Even though the practitioner may be deemed an
"investor" in the entity which owns the Virginia Center, it is unclear
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whether the exception applies, because the publicly traded entity is the
Company, which is the parent of the owner of the Virginia Center, not the owner
of the Virginia Center itself. Assuming that the exception could apply, the
Company, in any event, would be unlikely to meet all of the conditions set forth
in the exception; consequently, this exception would not be available.
The second exception permits the Virginia Board of Health Professions
(the "Board of Health Professions") to grant an exception if it finds that there
is a demonstrated need in the community for the entity, and several other
conditions are met. Once again, there is an issue of whether the exception
applies because the entity in which the investment is made is the Company, not
the owner of the Virginia Center. Assuming the exception could apply, it is
possible for the Company to meet the conditions set forth in this exception. It
is unclear, however, whether the Board of Health Professions would determine
that there is a demonstrated need for the Virginia Center in the community. If
such determination were made by the Board of Health Professions, assuming that
the other conditions are met, this exception could be available to a physician
who purchases, or whose immediate family member purchases, Common Stock or
Warrants in this Offering or otherwise purchases such Securities in the public
market. Under the regulations adopted pursuant to the Virginia Anti-Referral
Law, any such exception granted by the Board of Health Professions would be
valid only for five years, but would be renewable. The Company has not yet
determined whether to seek qualification under the foregoing exception.
A third, more limited, exception applies if the practitioner refers a
patient who is a member of a health maintenance organization to an entity in
which the practitioner is an investor, if the referral is made pursuant to a
contract with the health maintenance organization.
Although the practitioner, and not the entity to which the referral is
made, is the focus of the Virginia Anti-Referral Law, the law also provides that
once a determination of a violation has been made by the Board of Health
Professions, any entity, other than the practitioner, that presents or causes to
be presented a bill for services that the entity knows or has reason to know is
prohibited shall be subject to a penalty of $20,000 per referral or bill.
In addition to the anti-referral law described above, Virginia law
contains a prohibition, similar to the Federal Anti-kickback Statute, that
applies with respect to referrals of Medicaid patients.
The Company continues to review all aspects of its operations and
believes that it complies in all material respects with the applicable
provisions of the Anti-kickback Statute, Stark II and applicable state laws,
although because of the broad and sometimes vague nature of these laws and
regulations, there can be no assurance that an enforcement action will not be
brought against the Company or that the Company will not be found to be in
violation of one or more of these laws or regulations. The Company intends to
monitor developments under Federal and state fraud and abuse laws, including
Stark II. At this time, the Company cannot anticipate what impact, if any,
subsequent administrative or judicial interpretation of these laws may have on
the Company's business, financial condition, cash flow or results of operations.
Further, the laws and regulations in this area are subject to material change.
Consequently, there can be no assurance that the Company will be in a position
to comply with future laws and regulations in this area. Moreover, the cost
associated with compliance, including the cost of any additional personnel or
contracting with other qualified organizations to provide certain services, may
have a material adverse effect on the Company.
Insurance
The Company or its subsidiaries are defendants in legal actions arising
out of the performance of its imaging services. Damages assessed in connection
with, and the cost of defending, any such actions could be substantial. The
Company has obtained and currently maintains liability insurance which it
believes is adequate for its present operations. There can be no assurance that
the Company will be able to continue or, if necessary, increase such coverage or
to do so at an acceptable cost, or that the Company will have other resources
sufficient to satisfy any liability or litigation expense that may result from
any uninsured or underinsured claims. The Company also requires all of its
radiologists to maintain malpractice and other liability coverage.
Potential Acquisitions
The Company was organized to acquire and operate the Centers which,
prior to the acquisition, had been managed by IMI-Florida. The Company may, in
the future, seek to purchase additional medical diagnostic imaging centers,
including MRI and multi-modality centers. However, the Company has no agreements
or understandings and is not engaged in negotiations with respect to the
acquisition of any such additional centers. No assurance can be given that it
can or will be able to acquire any additional centers on reasonable terms or
that any centers which it may acquire will operate profitably.
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Medical diagnostic imaging centers may be acquired from (i)
radiologists who own and operate such centers (ii) physicians who may be
required by law to divest themselves of such centers, and (iii) owners,
including investment partnerships and limited liability companies formed to
operate such centers, that are seeking to leave the imaging business. The
Company may also enter into joint ventures with hospitals or other entities
which desire access to medical diagnostic imaging technologies but lack the
financial or management resources to establish a separate imaging center.
In evaluating the desirability of acquiring any such centers, the
Company will consider a number of factors, including the net income and cash
flow of the center, third-party reimbursement patterns, the condition and age of
the medical diagnostic imaging equipment, the relationships with managed care
organizations and physicians and hospitals in the area, competition, the
demography of the region, the reputation of the center, the nature of the
revenue base and available financing. No assurance can be given as to the
availability or terms of any financing, and, if sufficient financing for such
purpose is not available, a portion of the net proceeds of this Offering may be
used for such acquisitions. See "Use of Proceeds."
Legal Proceedings
In May 1996, the Company commenced an arbitration proceeding before the
American Arbitration Association in Los Angeles, California against Radman, Inc.
("Radman"), a manufacturer of teleradiology systems and equipment, entitled
International Magnetic Imaging, Inc. v. Radman, Inc., alleging fraud and breach
of contract and seeking rescission of a purchase agreement between the Company
and Radman for a teleradiology system as well as an award of money damages in an
amount not less than $485,000, together with interest, attorneys' fees and
costs. Radman has asserted certain counterclaims against the Company in such
proceeding seeking an award of money damages in the sum of at least $236,000,
together with interest, 'exemplary and punitive damages, reasonable attorneys'
fees and other costs of the action. This matter is presently pending. The
Company believes that it has meritorious defenses to Radman's counterclaims.
In December 1994, the Company placed a purchase order with Advanced NMR
Systems, Inc. ("ANMR"), for Instascan MRI equipment upgrade systems for an
aggregate of $1.5 million. Three of the systems have been installed at the
Centers and the remaining two have not yet been installed at the Company's
facilities. By letter dated February 25, 1996, the Company notified ANMR that it
was terminating and rescinding the purchase agreements for such equipment as
well as certain other related agreements between the parties and seeking the
return of the approximate $723,000 previously paid to ANMR as well as money
damages as a result of certain material deficiencies in such equipment. By
letter dated March 22, 1996, ANMR's counsel denied such claimed deficiencies,
disputed the Company's right to terminate such agreements and claimed that the
Company is in breach thereof for, among other things, failing to pay the
approximate $752,000 balance of the purchase price for such equipment. ANMR also
threatened to commence an action against the Company to assert its rights under
such agreements. In October 1996, the Company commenced a state court action
against ANMR in Florida.
In January 1996, Drs. Ashley Kaye and James Sternberg, two of the
former stockholder-directors of IMI-Florida, and Dr. Sternberg's wife,
threatened to commence an action against two subsidiaries of the Company,
Consolidated and Mr. Lewis S. Schiller, chairman of the board of Consolidated
and the Company, for alleged violations of securities and common law in
connection with the execution in 1994 of an asset purchase agreement between MD
Corp. and a subsidiary of the Company and non-payment of the $3,375,000
Subordinated Notes of two subsidiaries of the Company issued to MD Corp. in
connection therewith. Although the Company reflects the principal and interest
on such Subordinated Notes as liabilities on its consolidated balance sheet and
no notice of default has been given, no assurance can be given that an adverse
decision in any action based on such claims will not have a material adverse
effect upon the Company.
Vanguard, on its own behalf or on behalf of other persons who may be
affiliated with Vanguard, based on a purported agreement relating to the
introduction of Consolidated and the Company to IMI-Florida and assistance in
the negotiation of the acquisition of the Centers, has asserted a claim against
the Company and/or SISC that it has the right, among other things, to a 10%
interest in the Common Stock of the Company, on a fully-diluted basis, prior to
this Offering and prior to the issuance of certain warrants to DVI, for no cash
consideration. In addition, Vanguard has claimed that it is entitled to a
$200,000 fee due at the time of the acquisition of the Centers, consulting fees
of $240,000 per year for five years, and reimbursement of nonaccountable
expenses and a 5% interest in any future medical acquisition by the Company. No
assurance can be given that any litigation which may ensue would not seek
damages exceeding the claim described above and, if decided unfavorably to the
Company, would not have a material adverse affect on the Company. If Vanguard
commences an action against the Company and prevails, it would have a material
adverse effect upon the Company, and, furthermore, if it prevails with respect
to its claim for Common Stock, the issuance of such Common Stock could result in
a non-cash charge to earnings for the value of such Common Stock, dilution to
the stockholders, including the stockholders who purchased stock in this
Offering, and a reduction in the net tangible book value
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per share. In addition, the Company may not be able to use Consolidated's net
loss or tax loss carryforward to reduce its tax liability if a sufficient number
of shares of Common Stock were issued to Vanguard.
The Company or its subsidiaries are defendants in routine litigation
arising from the operation of the Centers, which are covered by insurance. See
"Business -- Insurance."
Competition
The health care industry, including the market for medical diagnostic
imaging services in general and MRI services in particular is highly fragmented.
Such services are performed by both hospitals and imaging centers, such as the
Centers, which are not affiliated with any hospital. Competition varies by
market and is generally higher in larger metropolitan areas where there are
likely to be more facilities and more managed care organizations putting pricing
pressure on the market. The Company competes with both hospitals and independent
medical diagnostic imaging centers. Furthermore, to the extent that another
center offers imaging services in addition to MRI, the Company may be in a
competitive disadvantage in marketing to managed care organizations, physicians
and patients. To a lesser extent, the Company competes with mobile MRI service
providers. Because of the cost of equipping and staffing an MRI or
multi-modality center, MRI and other medical diagnostic imaging modalities are
rarely offered by a sole practitioner or by a small group practice or by a large
group practice that does not have a substantial demand for such services.
Competition often focuses on physician referrals at the local market level as
well as participation in managed care organizations. Successful competition for
referrals is a result of many factors, including participation in health care
plans, quality and timeliness of test results, type and quality of equipment,
the location of the center, convenience of scheduling and availability of
patient appointment times. Many competitors are larger and are better known than
the Company in the market in which the Centers are located. The Company believes
that hospitals are its most significant competitors and have certain competitive
advantages, including their established community position, physician loyalty
and convenience for physicians making rounds at the hospitals. The Company
believes that its services are competitive with those offered by others in the
areas serviced by its Centers. Furthermore, to the extent that the Company seeks
to expand through the acquisition of other centers, the Company may compete with
other, better capitalized companies seeking to make acquisitions. There can be
no assurance that the Company will be able to compete effectively in the future.
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In addition, the establishment or transfer of ownership in some
jurisdictions may be subject to CON laws. In some states, such laws may hinder
the Company's ability to expand, while in others such laws may affect the
ability of potential competitors to enter the market. Except for Puerto Rico,
none of the states in which the Centers are located have CON laws which affect
independent free-standing diagnostic imaging centers. Any change in CON laws
which reduce the restrictions on potential competitors, such as hospitals, may
have a materially adverse effect upon the Company's business and operations.
Employees
As of September 30, 1996, the Company had 189 employees, 128 of whom
were involved in Center operations, nine of whom were involved in sales and
marketing, 22 of whom were executive and management employees and 30 of whom
were involved in billing and other administrative activities. None of the
Company's employees are represented by a labor organization, and the Company
believes that its employee relations are good.
Property
The Company's executive and administrative facilities are located in
approximately 8,000 square feet of space at 2424 North Federal Highway, Boca
Raton, Florida, which are leased from a nonaffiliated landlord for a term
expiring in February 2000, at an annual rental of approximately $200,000. The
Pine Island, Boca Raton, San Juan and Kansas City Centers are located in
facilities owned by the Company. The remaining Centers occupy premises which are
leased by the Company at an annual aggregate rental of approximately $750,000,
inclusive of the rent for the Company's executive and administrative facilities.
The leases provide for annual escalations and expire during the period from 1997
to 2000. The Company believes that its present facilities are adequate. To the
extent that the Company moves its MRI or other imaging equipment, the Company
may incur significant expenses in both moving the equipment and adapting the
facility for MRI use.
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<PAGE>
MANAGEMENT
Directors and Executive Officers
The directors and executive officers of the Company are as follows:
Name Age Position
- ---- --- --------
Lewis S. Schiller 66 Chairman of the Board, Principal Executive
Officer and Director
Stephen A. Schulman, M.D. 60 President and Chief Executive Officer
George W. Mahoney 35 Chief Financial Officer
James H. Webb, Jr. 36 Chief Operating Officer
Norman J. Hoskin 61 Director
E. Gerald Kay 57 Director
Mr. Lewis S. Schiller has been chairman of the board, principal
executive officer and a director of the Company since its organization in March
1994. Mr. Schiller is chairman of the board and chief executive officer of
Consolidated and SISC and is chief executive officer and/or chairman of
Consolidated's operating subsidiaries, whose operations include, in addition to
the Company, contract engineering services, three dimensional imaging products,
telecommunications and various manufacturing operations. SISC, a wholly-owned
subsidiary of Consolidated, is the principal stockholder of the Company. Mr.
Schiller has held such positions for more than the past five years. Mr. Schiller
is also chairman of the board, chief executive officer and a director of
Netsmart, a majority-owned publicly held subsidiary of SISC that markets health
information systems and other network based software systems, and Trans Global,
a publicly held contract engineering company, of which SISC holds a majority of
the voting rights. Mr. Schiller devotes only a portion of his time to the
business of the Company. Mr. Schiller is also a director of Fingermatrix, Inc.,
a public company which develops and markets fingerprint identification systems.
Stephen A. Schulman, M.D., a board-certified radiologist, has been
president and chief executive officer of the Company since October 1, 1994. For
19 years prior thereto, Dr. Schulman was director of radiology at Westside
Regional Hospital in Fort Lauderdale, Florida. Prior to his employment with the
Company, he was president and chief executive officer of MD Corp., IMI-Florida
and its affiliates. From 1985 to 1992, with Drs. James Sternberg and Ashley Kay,
Dr. Schulman established the Centers presently owned by the Company. Dr.
Schulman is also president of American Diagnostic Imaging Services of River
North Corp. and American Diagnostic Imaging Services of Arlington Heights Corp.,
two corporations that own and operate two MRI centers in Illinois. Both
corporations are wholly-owned by Dr. Schulman's wife.
Mr. George W. Mahoney has been chief financial officer of the Company
since October 1, 1994. He has also been chief financial officer of Consolidated
since October 1994. For more than three years prior thereto, Mr. Mahoney was
chief financial officer of IMI-Florida and its affiliated entities.
Mr. James H. Webb, Jr. has been chief operating officer of the Company
since October 1, 1994. From July 1992 until September 1994, he was chief
operating officer of IMI-Florida and its affiliated entities. From June 1990
until June 1992, he was regional director of Health Images, Inc., which owned
and operated MRI centers.
Mr. Norman J. Hoskin has been a director of the Company since October
1994. He is chairman of Atlantic Capital Group, a financial advisory services
company, a position he has held for more than the past five years. He is also
chairman of the board and a director of Tapistron International, Inc., a high
tech manufacturer of carpeting, and is a director of Consolidated and Trans
Global. Mr. Hoskin is also a director of Aqua Care Systems, Inc., a water media
filtration and remediation company, and Spintek Gaming, Inc., a manufacturer of
gaming equipment.
Mr. E. Gerald Kay has been a director of the Company since August 1996.
He has been chairman of the board and chief executive officer of Chem
International, Inc., a pharmaceutical manufacturer, Manhattan Drug Co., Inc., a
wholesaler of pharmaceutical products, The Vitamin Factory, Inc., a chain of
retail vitamin stores, and Connaught Press, Inc., a publisher, for more than the
past five years. From 1988 to 1990, he was also president and a director of The
Rexall Group, Inc., a distributor of Rexall brand products. Mr. Kay is also a
director of Netsmart and Trans Global.
Mr. Schiller devotes a significant portion of his time to the business
of Consolidated and its other subsidiaries. He anticipates that he will devote
such amount of his time to the business of the Company as is necessary; however,
Mr. Schiller does
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not expect to devote more than 10% of his time to the business of the Company.
Mr. Mahoney devotes approximately 75% of his time to his services as chief
financial officer of the Company and the balance to his duties as chief
financial officer of Consolidated.
The Company's Certificate of Incorporation includes certain provisions,
permitted under Delaware law, which provide that a director of the Company shall
not be personally liable to the Company or its stockholders for monetary damages
for breach of fiduciary duty as a director except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for any transaction from which
the director derived an improper personal benefit, or (iv) for certain conduct
prohibited by law. The Company's Certificate of Incorporation also contains
broad indemnification provisions. These provisions do not affect the liability
of any director under Federal or applicable state securities' laws.
The Board of Directors does not have any executive, nominating or audit
committees.
Remuneration
Set forth below is information concerning the Company's chief executive
officer and the only other officers of the Company who received or accrued
compensation in excess of $100,000 during the years ended December 31, 1995,
1994 and 1993. Information with respect to Stephen A. Schulman, M.D. and Mr.
George W. Mahoney reflects, for 1994, the combined compensation received by them
from the Company and IMI-Florida, and for 1993, the compensation received by
them from IMI-Florida.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation (Awards)
Name and Principal Position Year Salary Bonus Other Annual Restricted Stock Options, SARs
- --------------------------- ---- -------- ----- Compensation Awards (Dollars) (Number)
------------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Lewis S. Schiller, Chairman 1995 --(1) -- -- -- --
of the Board (since September 1994 --(1) -- -- -- --
30, 1994)
Stephen A. Schulman, M.D. 1995 $362,000 $100,000 $ 43,917(2) -- --
President and Chief Executive 1994 126,500 -- 289,466(2) -- 400,000(3)
Officer 1993 48,000 -- 1,032,692(2) -- --
George W. Mahoney, 1995 $132,011(4) $ 19,236 $ 4,323 -- --
Chief Financial Officer 1994 115,911 40,000 -- -- 250,000(3)
1993 84,033 8,500 -- -- --
</TABLE>
- ---------
(1) Mr. Schiller received no compensation from the Company. Effective
December 31, 1994, Consolidated changed its fiscal year from the twelve
months ended July 31 to the calendar year. During the year ended
December 31, 1995, the period from August 1, 1994 to December 31, 1994,
and for the fiscal years ended July 31, 1994 and 1993, the total
compensation paid or accrued by Consolidated to Mr. Schiller was
$250,000, $94,000, $181,451 and $175,000, respectively.
(2) Other compensation for Dr. Schulman reflects (a) certain insurance and
other benefits, including a $12,000 auto allowance in 1995, (b) $63,000
and $84,000 from MD Corp. in each of 1994 and 1993, respectively, (c)
Dr. Schulman's share of the corporate general partners' share of income
from the partnerships which owned and operated the Centers prior to the
Company's acquisition of the Centers, amounting to $18,000 and $24,000
in 1994 and 1993, respectively, and (d) dividends and distributions
paid to Dr. Schulman from such partnerships of $208,466 and $924,692 in
1994 and 1993, respectively.
(3) In October 1994, the Company granted to Dr. Schulman and Mr. Mahoney
seven-year incentive stock options pursuant to the Company's 1994
Long-Term Incentive Plan, to purchase 400,000 shares and 250,000 shares
of Class A Common Stock, respectively, at an exercise price of $.50 per
share, being the fair market value on the date of grant. Such options
were immediately exercisable as to 200,000 shares and became
exercisable as to the balance on January 1, 1995.
(4) Does not include, with respect to Mr. Mahoney, salary and bonus of
$45,451 and $6,412 for services rendered by Mr. Mahoney to Consolidated
in 1995 and 1994, respectively, which amounts were paid by the Company
and applied to reduce the Company's indebtedness to SISC. Other annual
compensation represents life insurance benefits.
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The annual salary payable by Consolidated to Mr. Schiller pursuant to
his employment agreement with Consolidated was $250,000, subject to a cost of
living increase, prior to September 1, 1996. Effective September 1, 1996, Mr.
Schiller's annual salary from Consolidated was increased to $500,000. The
Company has agreed to pay certain life insurance and other expenses payable to
Mr. Schiller pursuant to his employment agreement with Consolidated. In
addition, Mr. Schiller receives incentive compensation from Consolidated based
on the results of Consolidated's operations and has a right to purchase 10% of
Consolidated's or SISC's equity interest in each of their operating subsidiaries
and investments for 110% of Consolidated's or SISC's cost. Mr. Schiller has
exercised his right to purchase 10% of SISC's equity interest in the Company for
nominal consideration; however, in exercising such right, Mr. Schiller agreed to
accept shares of Class A Common Stock in order that SISC would retain sufficient
ownership of the Company's voting stock following completion of this Offering.
Mr. Schiller also exercised his right to purchase 500 shares of Series B
Preferred Stock. See "Certain Transactions." Mr. Schiller has also exercised his
right with respect to other securities owned by SISC, including securities of
other subsidiaries of SISC.
Stephen A. Schulman, M.D. has an employment agreement with the Company
dated October 1, 1994, pursuant to which the Company pays him an annual salary
of $350,000 for the term of the agreement which expires on September 30, 1999.
The agreement also provides for payment to Dr. Schulman of an annual bonus of
not less than $100,000 nor more than $700,000, equal to 10% of the amount by
which the lesser of 10% of pre-tax cash flow or 10% of pre-tax net income
exceeds a base amount. For the contract years beginning October 1, 1995, 1996,
1997 and 1998, such base amounts are $337,500, $500,000, $600,000 and $700,000,
respectively. Dr. Schulman's employment agreement also provides Dr. Schulman
with a $12,000 annual automobile allowance and provides him with certain life
insurance and other benefits. Pursuant to an amendment to Dr. Schulman's
employment agreement, the Company, in October 1995, made two loans to Dr.
Schulman in the aggregate principal amount of $300,000. Such loans bear interest
at 5 1/4% per annum and mature on December 31, 1998. Pursuant to a proposed
second amendment to Dr. Schulman's employment agreement contemplated by the
Schulman Memorandum, the term of the employment agreement will be extended for a
period of three years, the $300,000 loan and all accrued interest on the loan
will be applied to reduce the outstanding balance of the Subordinated Notes held
by Dr. Schulman and his wife, and Dr. Schulman's base salary for each of the
three years commencing October 1, 1996 will be increased by $45,000. The
proposed amendment will also permit Dr. Schulman to terminate his agreement at
any time for any reason on six months notice. See "Certain Transactions."
Mr. George W. Mahoney, chief financial officer of the Company and
Consolidated, has an employment agreement with Consolidated for a term
commencing October 1, 1994 and ending December 31, 2002, pursuant to which he
received an annual salary of $177,000 for the contract year ended September 30,
1996. Mr. Mahoney's annual salary increases to $189,000 for the current contract
year, which ends on September 30, 1997 and increases annually thereafter until
the seventh year for which his annual salary is $252,000. The agreement also
provides for two bonuses to Mr. Mahoney. One bonus is equal to the greater of 1%
of Consolidated's net pre-tax profits or 1% of Consolidated's net cash flow, and
the other is equal to the greater of 1% of the Company's net pre-tax profits or
1% of the Company's net cash flow. In addition, the Company paid Mr. Mahoney
bonuses of $100,000 and $40,000 in 1996 for services relating to certain of the
Company's loans from DVI pursuant to amendments to his employment agreement. Mr.
Mahoney also receives a $6,000 allowance for an automobile which may be used for
personal as well as business purposes and life insurance of $1,000,000 on which
he may designate the beneficiary. Mr. Mahoney devotes approximately 75% of his
time to the business of the Company. Although Mr. Mahoney and Consolidated are
the parties to his employment agreement, Mr. Mahoney's compensation is paid by
the Company and the Company allocates 25% of his compensation (exclusive of the
bonuses relating to the Company) to Consolidated, which is applied to reduce the
Company's indebtedness to SISC.
Pursuant to certain of the Company's loan agreements with DVI, the
failure of Mr. Mahoney to serve as the Company's chief financial officer could
result in a default under such loan agreements and other loan agreements with a
cross-default provision between the Company and DVI or between Company and any
other lenders. As of the date of this Prospectus the Company does not have any
agreements with other lenders with such cross-default provisions.
Long-Term Incentive Plan
In October 1994, the Company adopted, by action of the Board of
Directors and stockholders, the 1994 Long-Term Incentive Plan (the "Plan"). The
Plan does not have an expiration date. Set forth below is a summary of the Plan,
which summary is qualified in its entirety by reference to the full text of the
Plan, a copy of which is filed as an exhibit to the Registration Statement of
which this Prospectus is a part.
The Plan is authorized to grant options or other equity-based
incentives for 1,200,000 shares of the Class A Common Stock or, at such time as
the Class A Common Stock is converted into Common Stock, shares of Common Stock.
If shares subject to an option under the Plan cease to be subject to such
option, or if shares awarded under the Plan are forfeited or otherwise
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<PAGE>
terminated without a payment being made to the participant in the form of stock,
such shares will again be available for future issuance under the Plan.
Awards under the Plan may be made to key employees, including officers
of and consultants to the Company, its subsidiaries and affiliates, but may not
be granted to any director unless the director is also an employee of or
consultant to the Company or any subsidiaries or affiliates. The Plan imposes no
limit on the number of officers and other key employees to whom awards may be
made.
The Plan is to be administered by a committee of no less than three
disinterested directors to be appointed by the board (the "Committee"). No
member or alternate member of the Committee shall be eligible to receive options
or stock under the Plan (except as to the automatic grant of options to
directors) or under any plan of the Company or any of its affiliates. The
Committee has broad discretion in determining the persons to whom stock options
or other awards are to be granted, the terms and conditions of the award,
including the type of award, the exercise price and term and the restrictions
and forfeiture conditions. If no Committee is appointed, the functions of the
committee shall be performed by the Board of Directors. At present no Committee
has been appointed.
The Committee will have the authority to grant the following types of
awards under the Plan: incentive or non-qualified stock options; stock
appreciation rights; restricted stock; deferred stock; stock purchase rights
and/or other stock-based awards. The Plan is designed to provide the Committee
with broad discretion to grant incentive stock-based rights. The Company granted
seven-year incentive stock options to purchase an aggregate of 765,500 shares of
Class A Common Stock at $.50 per share in October 1994, and incentive stock
options to purchase 84,500 shares of Class A Common Stock at $1.00 per share in
September 1995 (71,500 shares) and June 1996 (13,000 shares). The exercise
prices of the options were the fair market value on the respective dates of
grant. All of the options are presently fully exercisable and have a term of
seven years from the date of grant. The options granted in October 1994 include
options to purchase 400,000 shares, 250,000 shares and 33,000 shares of Class A
Common Stock granted to Stephen A. Schulman, M.D., president and chief executive
officer of the Company, Mr. George W. Mahoney, chief financial officer of the
Company, and James H. Webb, Jr., chief operating officer of the Company,
respectively.
During the year ended December 31, 1995, no options were granted to any
of the officers named in the compensation table under "Management --
Remuneration."
The following table sets forth information concerning the exercise of
options during the year ended December 31, 1995 and the year-end value of
options held by the officers named in the compensation table under "Management
- -- Remuneration."
- 42 -
<PAGE>
<TABLE>
<CAPTION>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Value
Number of
Securities Value of
Underlying Unexercised In-
Unexercised the-Money
Options at Fiscal Options at Fiscal
Year End Year End(1)
Shares Acquired Value Exercisable/ Exercisable/
Name Upon Exercise Realized Unexercisable Unexercisable
---- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Lewis S. Schiller -- -- --(1) --(1)
Stephen A. Schulman, M.D. -- -- 400,000(2)/ $200,000(3)/
-- --
George W. Mahoney -- -- 250,000(2)/ $125,000(3)/
-- --
</TABLE>
- ---------
(1) Mr. Schiller held no options at December 31, 1995, although, at such
date, he held warrants to purchase 100,000 shares of Class A Common
Stock at $2.00 per share.
(2) Represents incentive options to purchase shares of Class A Common Stock
of the Company.
(3) The value of the options at fiscal year end (December 31, 1995) is
based on the fair market value per share of Class A Common Stock of
$1.00 per share.
AGREEMENTS WITH DVI
From the date of acquisition of the Centers to the date hereof, DVI has
been the Company's principal lender, with the exception of certain equipment and
real estate loans.
On September 30, 1994, certain of the Company's subsidiaries which
acquired the Centers entered into a series of loan and security agreements with
DVI, pursuant to which DVI lent the subsidiaries an aggregate of approximately
$7.1 million to enable the subsidiaries to acquire the Centers, IMI-Florida, MD
Corp. and MRI Net. The term of each loan is 60 months, the interest rate is
10.5% per annum, and each loan is self-amortizing during the term. The loans are
prepayable, in whole only and not in part, without premium or penalty, provided
that the loans to all of the subsidiaries are similarly prepaid. As collateral
security for such loans, DVI was granted a first lien and security interest in
all of the then existing assets, tangible and intangible, of the borrowers and
all future property of the borrowers with certain exceptions, as to which DVI
obtained or will obtain a junior lien. All of the outstanding shares of capital
stock of the borrowers have been pledged to DVI as additional collateral
security for the loans. The loan agreements include cross-default and
cross-collateralization provisions, with the effect that the default of one
borrower will constitute a default by all borrowers, and the collateral of each
borrower is effectively pledged as collateral security for the entire loan. The
loan agreements include various covenants, including covenants which restrict
the borrowers' ability to change their business, incur future indebtedness,
encumber DVI's collateral, distribute money or property other than in the
ordinary course of business, guarantee the obligations of others or enter into
business combinations, recapitalize or issue securities, without the consent of
DVI. The loan agreements relating to subsequent loans by DVI have similar
covenants. In connection with these loans, Consolidated issued to DVI a
five-year warrant to purchase 1,000,000 shares of Consolidated's common stock at
$.75 per share. The Company, as parent corporation of the borrowers, guaranteed
the payment of the indebtedness to DVI and the performance by the borrowers of
all other obligations under the loan agreements.
On several occasions since September 30, 1994, some or all of the
Company's subsidiaries have obtained additional financing from DVI principally
for the payment of Subordinated Debt, the purchase of equipment and the
refinancing of short-term equipment debt. The aggregate outstanding principal
amount of such loans was $19.0 million at September 30, 1996. The interest rates
on these additional loans (other than the September 1996 loans described below)
range between 10.5% and 11.875% per annum and these loans become due at various
times during the period from September 30, 1999 to September 30, 2002. All of
such additional loans are collateralized by a first lien and security interest
in all present and future tangible and intangible assets
- 43 -
<PAGE>
of the borrowers, subject to certain exceptions similar to those noted above and
contain cross default and cross collateralization provisions and negative
covenants similar to those noted above. The Company is the guarantor of all of
such loans.
In September 1996, certain of the Company's subsidiaries borrowed an
aggregate of $4.0 million from DVI. The loans, which mature in September 2001,
are payable in monthly installments over the term of the loans. The Company pays
interest currently at 11.5% per annum, additional interest of 10.5% per annum
has been deferred and is payable on the maturity date of the loans, resulting in
an effective annual interest rate of 22.0%. In connection with these loans, SISC
sold to DVI, for $2,500, a warrant to purchase 250,000 shares of Class A Common
Stock at $2.00 per share, and the Company issued to DVI a warrant to purchase
250,000 shares of Class A Common Stock at $5.00 per share. These warrants are
exercisable for the three month period commencing on the earliest to occur of
(a) the prepayment in full of such loans, (b) an event of default under the loan
and security agreements with respect to such loans, or (c) November 1, 2001. In
addition, the Company agreed that in the event the principal of and interest on
such loans has not been paid in full prior to the November 1, 2001 maturity
date, the Company will issue to DVI a warrant to purchase 1,000,000 shares of
the Common Stock at 80% of the market price per share of such Common Stock on
the date of exercise, exercisable from November 1, 2001 until February 1, 2002.
Pursuant to the Company's loan agreements with DVI, the failure of Mr.
George W. Mahoney to serve as chief financial officer of the Company prior to
the payment in full of the DVI loans constitutes an event of default or could
result in an event of default thereunder.
A portion of the net proceeds of this offering will be utilized to
prepay $2.1 million of principal of the September 1996 loans, together with all
accrued interest thereon to the date of prepayment. See "Use of Proceeds."
CERTAIN TRANSACTIONS
Issuance of Securities at Organization
In connection with its organization in September 1994, the Company
issued an aggregate of 9,200,000 shares of Common Stock, 1,000,000 shares of
Class A Common Stock, 5,000 shares of Series A Preferred Stock, 5,000 shares of
Series B Preferred Stock, Series B Warrants to purchase 1,000,000 shares of
Common Stock at $2.00 per share and warrants to purchase 1,250,000 shares of
Class A Common Stock at $2.00 per share.
Pursuant to the employment agreement between Consolidated and Mr. Lewis
S. Schiller, chairman of the board of both the Company and Consolidated, Mr.
Schiller has the right to purchase 10% of SISC's equity position in its
subsidiaries, including the Company, for 110% of SISC's cost. Mr. Schiller has
exercised his right and purchased from SISC an aggregate of 850,000 shares of
Class A Common Stock, 500 shares of Series B Preferred Stock and warrants to
purchase 150,000 shares of Class A Common Stock of the Company at an exercise
price of $2.00 per share, which were issued to Mr. Schiller and his designees.
His designees included DLB, Inc. ("DLB"), which received 250,000 shares and
50,000 warrants in payment of certain of Mr. Schiller's obligations to his wife,
who is the sole stockholder of DLB, and his three adult children, each of whom
received 50,000 shares. In exercising his right under his employment agreement,
Mr. Schiller agreed to accept Class A Common Stock in lieu of Common Stock, and
he did not exercise his right to purchase any shares of Series A Preferred
Stock.
SISC also transferred 50,000 shares of Class A Common Stock and
warrants to purchase 100,000 shares of Class A Common Stock at an exercise price
of $2.00 per share to one individual who is an officer and director of
Consolidated, warrants to purchase an aggregate of 5,000 shares of Class A
Common Stock to two key employees of Consolidated and an aggregate of 100,000
shares of Class A Common Stock and warrants to purchase an aggregate of 250,000
shares of Class A Common Stock to two non-affiliated persons. In connection with
the September 1996 loans from DVI, SISC sold to DVI, for $2,500, a warrant to
purchase 250,000 shares of Class A Common Stock at $2.00 per share. In September
1996, the Company also issued to SISC a warrant to purchase 250,000 shares of
Class A Common Stock at $5.00 per share.
In October 1994, the Company issued seven-year warrants to purchase an
aggregate of 500,000 shares of Class A Common Stock at $2.00 per share SISC
(55,000 shares) to 15 individuals (445,000 shares), including Mr. George W.
Mahoney, chief financial officer of the Company, to whom it issued a warrant to
purchase 100,000 shares, and Messrs. Norman J. Hoskin and E. Gerald Kay,
directors of the Company, to each of whom the Company issued a warrant to
purchase 50,000 shares.
- 44 -
<PAGE>
Acquisition of the Centers
On September 30, 1994, the Company, through wholly-owned subsidiaries,
acquired eight MRI Centers and one multi-modality diagnostic imaging Center,
IMI-Florida, which managed the operations of the Centers, the assets of MD
Corp., which provided the services of radiologists to the Centers, and MRI Net.
In January 1995, the Company acquired an additional MRI Center, which was
affiliated with such Centers.
The purchase price of the ten Centers, together with certain related
companies, was $30.6 million, of which $7.0 million was paid in cash, $20.7
million was paid by the issuance of Subordinated Notes, $2.9 million was paid
through the issuance of shares of Consolidated's common stock, exclusive of
acquisition costs of $1.3 million. Stephen A. Schulman, M.D. was president,
chief executive officer and a principal stockholder of IMI-Florida and MD Corp.
In connection with such acquisition, Dr. Schulman, his wife, the other two
former stockholder-directors of IMI-Florida, MD Corp. and the Schulman
Affiliated Entities received $3.9 million in cash, $8.7 million principal amount
of Subordinated Notes and 3,343,000 shares of Consolidated's common stock, of
which approximately 1.0 million shares of issued to each of Dr. Schulman and the
other two former stockholder-directors of IMI-Florida. The Schulman Affiliated
Entities include the general partners of the seven partnerships which owned and
operated certain of the Centers, the three corporations which owned and operated
other Centers and MRI Net. Dr. Schulman owns a one-third interest in MD Corp.
and the Schulman Affiliated Entities. In addition, he was a limited partner of
certain of such partnerships. Pursuant to the acquisition agreements, additional
shares of Consolidated common stock may be issuable to Dr. Schulman and the
other two former stockholder-directors of IMI Florida.
During 1995 and the first three quarters of 1996, the Company paid in
full Subordinated Notes which it issued to certain partnerships in connection
with the acquisition of the Centers. By virtue of his direct ownership of
certain of the Subordinated Notes, his indirect ownership of certain of the
Subordinated Notes issued to the Schulman Affiliated Entities and his ownership
of limited partnership interests in certain of partnerships, Dr. Schulman
received an aggregate of $588,000 from the proceeds of such Subordinated Note
payments. Additionally, Dr. Schulman may receive additional payments in the
future from the proceeds of any payments that may be made by the Company on
other outstanding Subordinated Notes.
At the closing of the acquisition of the Centers, Subordinated Notes in
an aggregate principal amount of $750,000, which were payable to Dr. Schulman
and the other two former stockholder-directors of IMI-Florida, were assigned by
such persons to an institutional lender in payment of certain obligations to,
and in consideration of the grant of releases and other concessions by, such
lender to Dr. Schulman and such other former stockholder-directors. For the
period October 1, 1994 through September 30, 1996, the Company paid principal
and interest of approximately $312,000 to such lender pursuant to such
Subordinated Notes. As of September 30, 1996, approximately $490,000 was due
under such Subordinated Notes. The Company intends to continue to make the
required payments of principal and interest on such notes through their
respective maturity dates. These Subordinated Notes, which mature through
September 30, 1999, represent a portion of the $20.7 million principal amount of
Subordinated Notes issued in connection with the acquisition of the Centers.
Upon the consummation of the acquisition of the first nine Centers in
September 1994, Dr. Schulman entered into an employment agreement with the
Company. The initial base salary under the agreement of $250,000, was
subsequently increased to $350,000 with a minimum annual bonus of $100,000. See
"Management -- Remuneration" for information relating to additional terms of Dr.
Schulman's employment agreement and certain amendments thereto.
Dr. Schulman and the other two former IMI-Florida stockholder-directors
are guarantors of certain promissory notes, mortgages, capital and operating
leases and other indebtedness which was owed by IMI-Florida or the entities
operating the Centers prior to the Company's acquisition of the Centers. While
the Company's subsidiaries which assumed such loans and obligations when they
acquired the Centers have been paying such loans and obligations, Dr. Schulman
and such individuals remain personally liable with respect to such loans and
obligations and (other than with respect to the Center acquired by the Company
in January 1995) have not been indemnified by the Company with respect thereto.
One of the Centers acquired in 1994 by a subsidiary of the Company is a Center
in Orlando, Florida, which was controlled by the stockholder-directors of
IMI-Florida. In an effort to improve the results of the Center, the Company
formed a joint venture with the owner-operator of another Center in Orlando,
Florida in August 1995. The joint venture utilizes the facilities and diagnostic
imaging equipment of the Company's joint venture partner, as a result of which
the facilities and equipment owned by the Company's subsidiary is utilized only
as a backup. Notwithstanding such arrangements, the Company has continued to pay
obligations to the equipment vendor, lender and landlord for the subsidiary's
equipment and facilities, all of which are personally guaranteed by Dr. Schulman
and the two other former stockholder-directors of IMI-Florida. The total amount
paid by the Company through September 30, 1996 on such obligations was $1.1
million, and, if all payments are made on such obligations, the total payments
by the Company, including those paid through September 30, 1996, will be
approximately $1.4 million. Payments of such amounts are made from distributions
the Company receives each month from its joint venture interest as well as from
other revenue of the Company. As
- 45 -
<PAGE>
a result, the subsidiary which operated the Orlando Center sustained a net loss
of approximately $620,000 for the nine months ended September 30, 1996 and
incurred negative cash flow from such Center of approximately $580 ,000 during
such period.
During 1995 and the first three quarters of 1996, the Company retired
mortgages and other obligations for which Dr. Schulman was personally liable in
the aggregate principal amount of approximately $1.4 million. The Company may,
in the future, retire other indebtedness or obligations of which Dr. Schulman is
a personal guarantor.
Proposed Note Exchange with Dr. Schulman
In connection with the purchase of the Centers, certain subsidiaries of
the Company issued Subordinated Notes in the aggregate principal amounts of $1.0
to each of Drs. Stephen A. Schulman, Ashley Kaye and James Sternberg, who are
the three former stockholder-directors of IMI Florida, and their respective
wives. In addition, the Company issued Subordinated Notes in the aggregate
principal amount of $4.4 million to the Schulman Affiliated Entities.
In October 1996, the Company and Dr. Schulman entered into the Schulman
Memorandum, a non-binding memorandum of understanding pursuant to which, subject
to the execution of definitive agreements, Dr. Schulman agreed to reduce the
outstanding principal amount of the Subordinated Notes payable to him and his
wife, including his interest in the Subordinated Notes issued to the Schulman
Affiliated Entities, from an aggregate of $2.1 million as of September 30, 1996
to an aggregate of approximately $1.7 million (after giving effect to the
proposed cancellation by the Company of Dr. Schulman's $300,000 note
representing the principal amount of two loans made by the Company to Dr.
Schulman in March 1996 pursuant to an amendment to his employment agreement) and
exchange such Subordinated Notes for shares of a proposed new series of
preferred stock having an annual non-cumulative dividend of $75,000, payable in
quarterly installments of $18,750, commencing with the quarter ending March 31,
1997, a liquidation preference of $100 and a redemption price of approximately
$1.7 million. The Company will be required to apply 15% of the net proceeds from
any sale of equity securities by the Company (other than from this Offering),
subsequent to 60 days after the closing of this Offering, to the redemption of
such series of Preferred Stock. Dr. Schulman will also receive a five-year
warrant to purchase 25,000 shares of the Class A Common Stock at $5.00 per
share.
Pursuant to the Schulman Memorandum, the Company and Dr. Schulman are
to enter into a further amendment to his employment agreement providing for,
among other things, (a) the extension of the term thereof for an additional
three years expiring on September 30, 2002, (b) an increase of Dr. Schulman's
annual salary by $45,000 for each year during such three year period, (c) the
grant to Dr. Schulman of the right to terminate his employment agreement,
without cause, upon six months' notice to the Company, (d) a non-competition
covenant by Dr. Schulman, and (e) the grant to Dr. Schulman of the right to
devote a portion of his time to the operations of two MRI centers located in
Illinois which are owned by his wife and to perform consulting services for any
third-party purchaser of such centers.
The Schulman Memorandum also provides that (a) in the event that the
Company enters into an agreement with either of Drs. Kaye or Stermberg pursuant
to which they or either of them receives more favorable terms with respect to
the Subordinated Notes held by them than are provided to Dr. Schulman, Dr.
Schulman will receive such more favorable terms and (b) the Company will,
subject to the consent of the Underwriter, use its best efforts to register
under the Securities Act shares of Class A Common Stock prior to the expiration
of two years plus 120 days from the date the Company receives the proceeds from
this Offering, unless, prior to the expiration of such period, the Class A
Common Stock shall have been converted into Common Stock. See "Description of
Securities -- Capital Stock."
All of the foregoing transactions are subject to and conditioned upon
the execution and delivery of definitive agreements relating to such
transactions and the consummation of this Offering. There can, however, be no
assurance that the Company and Dr. Schulman will conclude any such agreements or
that the final terms of such agreements will not be different from those
disclosed in this Prospectus.
The Schulman Memorandum does not affect the Subordinated Notes payable
to Drs. Kaye and Sternberg or their interest in the Subordinated Notes payable
with respect to the Schulman Affiliated Entities. See "Business -- Legal
Proceedings" in connection with claims made by Drs. Kaye and Sternberg and Dr.
Sternberg's wife against two subsidiaries of the Company, Consolidated and Mr.
Lewis S. Schiller, chairman of the board of the Company and Consolidated.
- 46 -
<PAGE>
Other Related Party Transactions
In connection with the acquisition of the Centers, SISC, the principal
stockholder of the Company, lent approximately $1.3 million to the Company,
which was used to pay acquisition costs, and delivered to certain of the
Schulman Affiliated Entities and the stockholders of IMI-Florida shares of
Consolidated common stock, valued at $2.9 million, representing a portion of the
purchase price of the Centers and IMI-Florida. Such loan and the value of such
Consolidated common stock is treated as a non-interest bearing loan from the
Company to SISC with no stated maturity date. The largest principal amounts
outstanding during the nine months ended September 30, 1996, the year ended
December 31, 1995 and the period from inception (September 30, 1994) to December
31, 1994 were $2.7 million, $3.2 million and $4.2 million, respectively. As of
September 30, 1996, the Company owed SISC approximately $1.6 million.
Certain of the Company's employees, including Mr. George W. Mahoney,
chief financial officer of both the Company and Consolidated, perform certain
accounting and related services for SISC and Consolidated, and the allocable
portion of the compensation paid by the Company to such employees relating to
their services for SISC and Consolidated is treated as a reduction of the
Company's indebtedness to SISC. In addition, the Company pays the rent for
Consolidated's Florida office, and such payment is also applied as a reduction
of such indebtedness. The Company has agreed not to use any of the proceeds of
this Offering to pay any of such indebtedness to SISC; however, if the
over-allotment option is exercised, up to $250,000 of the proceeds from the
over-allotment option will be used to pay a portion of the Company's
indebtedness to SISC.
In 1996, the Company paid to Mr. Mahoney bonuses of $140,000 in
connection with services relating to the Company's financing with DVI. See
"Management - Remuneration." Pursuant to certain of the loan agreements between
the Company and DVI, the failure of Mr. Mahoney to serve as the chief financial
officer of the company could result in a default under the DVI loan agreements.
The Company files its Federal income tax returns as part of a
consolidated group of corporations of which Consolidated is the common parent.
As a result of the Company's inclusion in such consolidated group, the Company
will not incur any Federal income tax liability for 1996. The total Federal
income tax savings for the nine months ended September 30, 1996 was $692,000.
Consolidated has canceled the Company's obligation to it arising from the use of
Consolidated's Federal net operating loss for 1996, which resulted in an
increase in additional paid-in capital. See Note 23 of Notes to International
Magnetic Imaging, Inc. Combined Financial Statements.
- 47 -
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of October 31, 1996 and as adjusted
to give effect to the sale of the 1,000,000 shares of Common Stock and 1,500,000
Warrants offered by this Prospectus, based on information provided by the
persons named below, the number and percentage of shares of outstanding Common
Stock and Common Stock and Class A Common Stock rated as a single class,
beneficially owned by each person known by the Company to own beneficially at
least 5% of the Company's outstanding Common Stock and Common Stock and Class A
Stock as a single class, each director and all directors and officers as a
group:
<TABLE>
<CAPTION>
Percentage of Common
Percentage of Stock and Class A Stock
Common Stock as a single class(3)
Amount and Nature of
Name and Address(1) Beneficial Ownership(2) Outstanding As Adjusted Outstanding As adjusted
- ------------------- ----------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Lewis S. Schiller(4) 10,200,000 shares of 100.0% 91.1% 95.5% 88.2%
160 Broadway Common Stock and
New York, NY 10038 1,350,000 shares of Class
A Common Stock
SIS Capital Corp.(5) 10,200,000 shares of 100.0% 91.1% 91.7% 84.6%
160 Broadway Common Stock and
New York, NY 10038 800,000 shares of Class A
Common Stock
Norman J. Hoskin(6) 50,000 shares of Class A -- -- * *
Common Stock
E. Gerald Kay(7) 50,000 shares of Class A -- -- * *
Common Stock
All directors and officers 10,200,000 shares of 100.0% 91.1% 95.7% 88.9%
as a group (four individuals) Common Stock and
(4), (6), (7), (8), 2,200,000 shares of Class
A Common Stock
</TABLE>
- ----------
* Less than 1%.
(1) Unless otherwise indicated, the address of each beneficial owner is c/o
International Magnetic Imaging, Inc., 2424 North Federal Highway, Boca
Raton, FL 33431.
(2) Unless otherwise indicated, the Company believes that each person named
in the table has the sole voting and sole investment power and has
direct beneficial ownership of the shares. Since the Series B Preferred
Stock is not convertible into Common Stock prior to three years from
the date of this Prospectus unless the Class A Common Stock is
converted into Common Stock, the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock are not included in
computing the percentage ownership of any such person. The 5,000 shares
of Series B Preferred Stock are owned by SISC (4,500 shares) and Mr.
Lewis S. Schiller (500 shares).
(3) The Common Stock and Class A Common Stock are identical except that the
shares of Class A Common Stock have no voting rights. The Class A
Common Stock is automatically converted into Common Stock under certain
conditions as described under "Description of Securities -- Capital
Stock."
(4) Includes 9,200,000 shares of Common Stock owned by SISC, 1,000,000
shares of Common Stock issuable upon exercise of Series B Warrants
owned by SISC, 450,000 shares of Class A Common Stock owned by Mr.
Schiller, 100,000 shares of Class A Common Stock issuable upon exercise
of warrants held by Mr. Schiller, and 800,000 shares of Class A Common
Stock issuable upon exercise of warrants held by SISC. Does not include
3,500,000 shares of Common Stock issuable upon conversion of the Series
B Preferred Stock owned by SISC (3,150,000 shares of Common Stock) and
Mr.
- 48 -
<PAGE>
Schiller (350,000 shares of Common Stock) or 250,000 shares of Class A
Common Stock owned by DLB or 50,000 shares of Class A Common Stock
issuable upon exercise of warrants held by DLB. DLB is owned by Mr.
Schiller's wife, and Mr. Schiller disclaims beneficial interest in DLB
or in any securities owned by DLB..
(5) Includes 9,200,000 shares of Common Stock, 1,000,000 shares of Common
Stock issuable upon exercise of Series B Warrants, and 800,000 shares
of Class A Common Stock issuable upon exercise of warrants owned by
SISC. Does not include 3,150,000 shares of Common Stock issuable upon
conversion of the Series B Preferred Stock owned by SISC.
(6) Represents 50,000 shares of Class A Common Stock issuable upon exercise
of warrants owned by Mr. Hoskin.
(7) Represents 50,000 shares of Class A Common Stock issuable upon exercise
of warrants owned by Mr. Kay.
(8) Includes 400,000 shares of Class A Common Stock issuable upon exercise
of options held by Stephen A. Schulman, M.D., president and chief
executive officer of the Company, and 350,000 shares of Class A Common
Stock issuable upon the exercise of warrants (100,000 shares) and
options (250,000 shares) held by Mr. George W. Mahoney, chief financial
officer of the Company.
SELLING SECURITY HOLDER
The Selling Security Holder, SISC, may sell, from time to time,
1,000,000 Series B Warrants and the 1,000,000 shares of Common Stock issuable
upon exercise of the Series B Warrants pursuant to this Prospectus. The Series B
Warrants are exercisable on the date of this Prospectus. The Selling Security
Holder has agreed that, during the two years following the date of this
Prospectus, it will not exercise the Series B Warrants or sell the Series B
Warrants or the underlying shares of Common Stock without the consent of the
Underwriter, which may be granted at any time. In no event may the Series B
Warrants or the underlying shares of Common Stock be sold prior to the exercise
in full or the expiration of the Underwriter's over-allotment option. There is
not expected to be any public market for the Series B Warrants. The Series B
Warrants provide that, in the event that they are sold or otherwise transferred
pursuant to an effective registration statement, they expire 90 days from the
date of transfer. As a result, any purchaser of Series B Warrants must, within a
short period, either exercise the Series B Warrants or permit them to expire
unexercised. The Series B Warrants have an exercise price of $2.00 per share.
The holders of the Series B Warrants have one demand registration right
commencing one year after the date of this Prospectus. The Series B Warrants
expire three years from the date of this Prospectus and may not be redeemed by
the Company.
In addition to the Series B Warrants to purchase 1,000,000 shares of
Common Stock, SISC also owns warrants to purchase 250,000 shares of Class A
Common Stock at $5.00 per share and 550,000 shares of Class A Common Stock at
$2.00 per share. See "Certain Transactions."
Set forth below is information as to the stock ownership of the Selling
Security Holder as of October 15, 1996:
Amount and Nature Shares
Name and of Beneficial Being Percent of Ownership(1)
Address Ownership Offered Outstanding As Adjusted
------- --------- ------- ----------- -----------
SIS Capital Corp. 10,200,000(2) 1,000,000 91.1% 82.1%(3)
160 Broadway
New York, NY 10038
- ----------
(1) The percentages are based on the outstanding Common Stock at October
31, 1996 after giving effect to the sale of the 1,000,000 shares of
Common Stock offered hereby. The percentage of ownership of the Common
Stock and Class A Common Stock, treated as a single class, would be
84.6% outstanding and 76.9% as adjusted.
(2) Includes 1,000,000 shares of Common Stock issuable upon exercise of the
Series B Warrants owned by SISC and does not include 3,150,000 shares
of Common Stock issuable upon conversion of the Series B Preferred
Stock owned by SISC. Mr. Lewis S. Schiller, chairman of the board of
the Company is the chief executive officer of Consolidated, the parent
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of SISC, and has the right to vote and direct the disposition of the
shares owned by SISC. See "Management" and "Certain Transactions."
(3) If the Underwriter's over-allotment option is exercised in full, SISC's
percentage ownership, as adjusted for the sale of the Series B
Warrants, of the Common Stock and of the Common Stock and the Class A
Common Stock as a single class would be 81.1% and 74.9%, respectively.
The Selling Security Holder has advised the Company that any transfer
of the Series B Warrants will be either pursuant to a sale in transactions at
negotiated prices or by gift and that, if SISC exercises Series B Warrants, the
sale of the underlying shares of Common Stock may be effected from time to time
in transactions (which may include block transactions by or for the account of
the Selling Security Holder) on The Nasdaq National Market System or in
negotiated transactions, a combination of such methods of sale or otherwise.
Sales may be made at fixed prices which may be changed, at market prices or in
negotiated transactions, a combination of such methods of sale or otherwise, and
securities may be transferred by gift.
The Selling Security Holder may effect such transactions by selling
such securities directly to purchasers, through broker-dealers (including the
Underwriter) acting as agents for the Selling Security Holder or to
broker-dealers (including the Underwriter) who may purchase Series B Warrants or
underlying shares of Common Stock as principals and thereafter sell the
securities from time to time in the over-the-counter market, in negotiated
transactions or otherwise. Such broker-dealers (including the Underwriter), if
any, may receive compensation in the form of discounts, concessions or
commissions from the Selling Security Holder and/or the purchasers from whom
such broker-dealer may act as agents or to whom they may sell as principals or
otherwise (which compensation as to a particular broker-dealer may exceed
customary commissions).
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Selling Security Holder's securities
may not simultaneously engage in market-making activities with respect to any
securities of the Company during the applicable "cooling-off" period (at least
two and possibly nine business days) prior to the commencement of such
distribution. Accordingly, in the event the Underwriter is engaged in a
distribution of the Selling Security Holder's securities, it will not be able to
make a market in the Securities during the applicable restrictive period.
However, the Underwriter has not agreed, and is not obligated, to act as a
broker-dealer in the sale of the Selling Security Holder's securities and the
Selling Security Holder may be required, and in the event the Underwriter is a
market-maker, will likely be required, to sell such securities through another
broker-dealer. In addition, the Selling Security Holder will be subject to the
applicable provisions of the Exchange Act and the rules and regulations
thereunder, including without limitation Rules 10b-6 and 10b-7, which provisions
may limit the timing of the purchases and sales of shares of the Company's
securities by the Selling Security Holder.
The Selling Security Holder and broker-dealers, if any, acting in
connection with such sales might be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act and any commission received by
them and any profit on the resale of the securities might be deemed to be
underwriting discount and commissions under the Securities Act.
DESCRIPTION OF SECURITIES
Capital Stock
The Company is authorized to issue 6,000,000 shares of Preferred Stock,
par value $.01 per share, 50,000,000 shares of Common Stock, par value $.01 per
share, and 6,000,000 shares of Class A Common Stock. Holders of Common Stock are
entitled to one vote for each share held of record on all matters submitted to a
vote of stockholders. Holders of Class A Common Stock have no voting rights
except as provided by law.
Each share of Class A Common Stock will automatically become and be
converted into one share of Common Stock upon the first to occur of (a) the
date, as reasonably determined by the Board of Directors, that the Company
ceases to be eligible under the Internal Revenue Code of 1986, as amended, to be
a member of the consolidated group of corporations of which Consolidated is the
common parent, or (b) the date as of which the Board of Directors effects such a
conversion.
The Common Stock and the Class A Common Stock are treated as a single
class and have identical rights except that the holders of the Class A Common
Stock have no voting rights except as required by law. Holders of Common Stock
and Class A Common Stock are entitled to share in such dividends as the Board of
Directors, in its discretion, may declare from funds legally available. In the
event of liquidation, dissolution or winding up, each outstanding share of
Common Stock and Class A Common Stock entitles its holder to participate ratably
in the assets remaining after payment of liabilities. There are presently
9,200,000 shares of Common Stock outstanding, and upon completion of this
Offering, assuming the Underwriters' over-allotment option
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is not exercised, there will be 10,200,000 shares of Common Stock outstanding.
There are presently 1,000,000 shares of Class A Common Stock outstanding.
Stockholders have no preemptive or other rights to subscribe for or
purchase additional shares of any class of stock or of any other securities of
the Company, and there are no conversion, redemption or sinking fund provisions
with regard to the Common Stock or Class A Common Stock. All outstanding shares
of Common Stock are, and those issuable pursuant to this Prospectus or upon
exercise of the Warrants will be, when issued as provided in this Prospectus or
as provided in the Warrant and the Warrant Agreement, validly issued, fully
paid, and nonassessable. Stockholders do not have cumulative voting rights in
the election of directors, with the result that the holders of more than 50% of
the Common Stock voting in the election of directors may elect all of the
directors.
The Company's Board of Directors is authorized to issue, from time to
time and without further stockholder action, up to 6,000,000 shares of preferred
stock in one or more distinct series. The Board of Directors is authorized to
fix the following rights and preferences, among others, for each series: (i) the
rate of dividends and whether such dividends shall be cumulative; (ii) the price
at and the terms and conditions on which shares may be redeemed; (iii) the
amount payable upon shares in the event of a voluntary or involuntary
liquidation or dissolution; (iv) whether or not a sinking fund shall be provided
for the redemption or purchase of shares; (v) the terms and conditions on which
shares may be converted; and (vi) whether, and in what proportion to any other
series or class, a series shall have voting rights other than as required by
law, and, if voting rights are granted, the number of voting rights per share.
Except as set forth in this Prospectus, the Company has no plans, agreements or
understandings with respect to the designation of any series or the issuance of
any shares of Preferred Stock.
There are presently two series of Preferred Stock that are authorized,
the Series A Preferred Stock and the Series B Preferred Stock. The Board of
Directors may create other series of Preferred Stock which are either junior or
senior to or on a parity with the Series A Preferred Stock as to dividends
and/or on any voluntary or mandatory liquidation or dissolution without the
approval of the holders of such series of Preferred Stock. The Series A
Preferred Stock and Series B Preferred Stock are on a parity with each other as
to dividends or upon liquidation, dissolution or winding up
See "Certain Transactions -- Proposed Note Exchange with Dr. Schulman"
in connection with the proposed issuance of shares of a new series of Preferred
Stock to be issued to Stephen A. Schulman, president and chief executive officer
of the Company pursuant to the Schulman Memorandum.
Series A Preferred Stock
The Series A Preferred Stock consists of 5,000 shares, all of which are
issued and outstanding. Holders of shares of Series A Preferred Stock are
entitled to non-cumulative dividends of $10 per share, or an aggregate of
$50,000. The Company has no obligations to declare dividends for any year, but,
in any year, no dividends may be declared with respect to the Common Stock and
Class A Common Stock unless the dividends for such year for the Series A
Preferred Stock have been declared and paid or provided for. Dividends, if
declared, are payable on February 1st of each year to holders of record on the
previous January 15th.
The holders of the Series A Preferred Stock have no voting rights
except as required by law. The Series A Preferred Stock is not convertible into
Common Stock or any other class or series of capital stock. The Series A
Preferred Stock may be redeemed for $20 per share, on not less than ten more
than 60 days' notice at any time after the Class A Common Stock is converted
into Common Stock. At such time as the Series A Preferred Stock may be redeemed,
the Company may redeem the Series A Preferred Stock in whole at any time or in
part from time to time.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, after payment has been made on any security of the
Company, if any, which ranks senior to the Series A Preferred Stock, holders of
shares of Series A Preferred Stock will be entitled to receive from the assets
of the Company an aggregate amount equal to 80% of the company's stockholders'
equity as of the last day of the calendar quarter prior to the date as of which
the determination is being made, provided, that from and after the date of this
Prospectus, the aggregate amount shall be 80% of the Company's stockholder's
equity as of the last day of the quarter immediately preceding the date of this
Prospectus, on a per share basis plus accrued and unpaid dividends to the
payment date, before any payment or distribution is made to holders of shares of
Common Stock, Class A Common Stock or any other series or class of stock
hereafter issued which ranks junior as to liquidation rights to the Series B
Preferred Stock.
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Series B Preferred Stock
The Series B Preferred Stock consists of 5,000 shares, all of which are
issued and outstanding. Holders of shares of Series B Preferred Stock have no
preferential dividend rights. If dividends are declared with respect to the
Common Stock, the holders of the Series B Preferred Stock shall be entitled to
dividends on an as-converted basis, such dividends to be determined as if the
shares of Series B Preferred Stock and shares of Common Stock (including Class A
Common Stock) were a single class. Based on a conversion rate of 700 shares of
Common Stock for each share of Series B Preferred Stock, each share of Series B
Preferred Stock would receive a dividend equal to 700 times the dividend payable
to the holders of the Common Stock.
Each share of Series B Preferred Stock, unless previously redeemed, is
convertible, commencing three years from the date of this Prospectus or on such
earlier date, if any, as the Class A Common Stock is converted into Common
Stock, into 700 shares of Common Stock, or an aggregate of 3,500,000 shares of
Common Stock; provided, however, that if, after completion of this Offering and
prior to the date on which the Series B Preferred Stock would otherwise become
convertible, the Company issues any shares of Common Stock or Class A Common
Stock, including the issuance of any shares of Common Stock upon exercise of the
Warrants or the Underwriter's Option, the Series B Preferred Stock shall become
immediately convertible to the extent that the number of shares of Common Stock
issuable upon such conversion shall be equal to four times the number of shares
of Common Stock and Class A Common Stock so issued; provided, that if such
conversion would result in the conversion of a fractional share of Series B
Preferred Stock, the number of shares of Series B Preferred Stock which may be
immediately converted shall be rounded up to the next higher integral number of
shares. In addition, if the Series B Preferred Stock is called for redemption,
the conversion rights will expire at the close of business on the business day
prior to the redemption date. The conversion rate is subject to adjustment upon
the occurrence of certain events.
The Company has the right to redeem the shares of Series B Preferred
Stock at a redemption price of $20 per share, or an aggregate of $100,000, at
any time after the expiration of three years from the date of this Prospectus or
earlier if the Class A Common Stock is converted into Common Stock. At such time
as the Series B Preferred Stock may be redeemed, it may be redeemed in whole at
any time in part from time to time. Once the Series B Preferred Stock becomes
redeemable, the Company may redeem the Series B Preferred Stock upon at least
30, but not more than 60 days' prior written notice to the registered holders.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the Company, after payment has been made on any security of the
Company, if any, which ranks senior to the Series B Preferred Stock, holders of
shares of Series B Preferred Stock will be entitled to receive from the assets
of the Company $20 per share before payment is made to any class or series of
capital stock which ranks junior to the Series B Preferred Stock on liquidation,
dissolution or winding up. After payment of such preference, no further payment
shall be due to the holders of the Series B Preferred Stock.
Series A Redeemable Common Stock Purchase Warrants
The holder of each Warrant is entitled, upon payment of the exercise
price of $6.00 per share, to purchase one share of Common Stock. Unless
previously redeemed, the Warrants are exercisable during the two-year period
commencing one year from the date of this Prospectus. A holder of the Warrants
(an "Exercising Holder") will only be able to exercise the Warrants if (a) a
current prospectus under the Securities Act relating to the shares of Common
Stock issuable upon exercise of the Warrants is then in effect, and (b) such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the state in which the Exercising Holder resides.
Commencing 18 months from the date of this Prospectus, or earlier with
the consent of the Underwriter, the Warrants are subject to redemption by the
Company, on not more than 60 nor less than 30 days' written notice, at a price
of $.10 per Warrant, if the closing price per share of the Common Stock is at
least $15, subject to adjustment, for at least ten consecutive trading days
ending not earlier than three days prior to the date on which the Warrants are
called for redemption. Holders of Warrants will automatically forfeit their
rights to purchase the shares of Common Stock issuable upon exercise of such
Warrants unless the Warrants are exercised before the close of business on the
business day immediately prior to the date set for redemption. All of the
outstanding Warrants must be redeemed if any are redeemed. A notice of
redemption shall be mailed to each of the registered holders of the Warrants by
first class mail, postage prepaid, within five business days (or such longer
period to which the Underwriter may consent) after the Warrants are called for
redemption, but no earlier than the sixtieth nor later than the thirtieth day
before the date fixed for redemption. The notice of redemption shall specify the
redemption price, the date fixed for redemption, the place where the Warrant
certificates shall be delivered and the redemption price paid, and that the
right to exercise the Warrants shall terminate at 5:00 p.m., New York City time,
on the business day immediately preceding the date fixed for redemption. The
Warrants can only be redeemed if, on the date the Warrants are called for
redemption, there is a current and effective registration statement covering the
issuance of the shares of Common Stock issuable upon exercise of the Warrants.
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The Warrants may be exercised upon surrender of the certificate(s)
therefor on or prior to 5:00 p.m., New York City time, on the expiration date of
the Warrants or, if the Warrants are called for redemption, the day prior to the
redemption date (as explained above) at the offices of the Company's warrant
agent (the "Warrant Agent") with the form of "Election to Purchase" on the
reverse side of the certificate(s) filled out and executed as indicated,
accompanied by payment of the full exercise price for the number of Warrants
being exercised.
The Warrants contain provisions that protect the holders thereof
against dilution by adjustment of the exercise price, and the number of shares
in certain specified events, such as stock dividends, stock splits, mergers,
sale of substantially all of the Company's assets, and for other similar events.
The Company is not required to issue fractional shares of Common Stock,
and in lieu thereof will make a cash payment based upon the current market value
of such fractional shares. A holder of Warrants will not possess any rights as a
stockholder of the Company unless and until the holder exercises the Warrants.
Although the Warrants have a fixed exercise price and a formula for
adjustments in certain events and have a fixed expiration date, it is possible
that in the future the Company may wish to reduce the exercise price or extend
the exercise period of the Warrants. The Company has no plans to reduce such
price or extend the exercise period of the Warrants. Any such change would be
effected pursuant to a post-effective amendment to the registration statement of
which this Prospectus is a part or a new registration statement, and no Warrants
with amended terms may be exercised unless and until such post-effective
amendment or new registration statement has been declared effective by the
Commission.
The Warrants are issued pursuant to a Warrant Agreement among the
Company, the Underwriter and American Stock Transfer & Trust Company, as warrant
agent.
Series B Common Stock Purchase Warrants
As of the date of this Prospectus, there were Series B Warrants to
purchase 1,000,000 shares of Common Stock at $2.00 per share outstanding. See
"Certain Transactions" and "Selling Security Holder" for information with
respect to the issuance and possible sale of such Series B Warrants.
The Series B Warrants are exercisable during the three-year period
commencing on the date of this Prospectus. The holders of the Series B Warrants
have demand and piggy-back registration rights with respect to the Series B
Warrants and the shares of Common Stock issuable upon exercise of the Series B
Warrants. The demand registration rights may not be exercised prior to one year
from the date of this Prospectus. Pursuant to the piggyback registration rights,
the Series B Warrants and underlying shares of Common Stock are included in the
registration statement of which this Prospectus is a part. The Company has no
right to redeem the Series B Warrants. In the event that the Series B Warrants
are transferred pursuant to an effective registration statement, the Series B
Warrants automatically terminate 90 days after the date of transfer, provided
that the registration statement remains current and effective during such
period. In such event, the transferee must either exercise the Series B Warrants
or permit them to expire unexercised.
The Series B Warrants contain provisions that protect the holders
thereof against dilution by adjustment of the exercise price in certain events,
such as stock dividends, stock splits, mergers, sale of substantially all of the
Company's assets, and for other extraordinary events.
The holders of the Series B Warrants have been given the opportunity to
profit from a rise in the market for the shares of the Company's Common Stock at
a nominal cost per share, with a resulting dilution in the interests of
stockholders. The holders of the Series B Warrants can be expected to exercise
them at a time when the Company would, in all likelihood, be able to obtain
equity capital, if then needed, by a new equity offering on terms more favorable
than those provided by the Series B Warrants. Such facts may adversely affect
the terms on which the Company could obtain additional financing.
Other Warrants
Warrants to Purchase Class A Common Stock. As of the date of this
Prospectus, there are outstanding warrants to purchase an aggregate of 2,250,000
shares of Class A Common Stock, of which warrants to 500,000 shares have an
exercise price of $5.00 per share and may be exercised until September 2001, and
warrants to purchase 1,750,000 shares have an exercise price of $2.00 per share
and may be exercised until October 2001. The Company has granted piggyback
registration rights with respect
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to certain of these warrants. In addition, pursuant to the Schulman Memorandum,
the Company is to issue to Stephen A. Schulman, M.D. a five-year warrant to
purchase 25,000 shares of Class A Common Stock at $5.00 per share.
Warrants to Purchase Common Stock. Pursuant to the Company's agreement
with DVI, in the event that the Company does not prepay its September 1996 term
loans to DVI prior to the September 2001 maturity date, the Company has agreed
to issue to DVI a warrant to purchase 1,000,000 shares of Common Stock at an
exercise price equal to 80% of the market price of the Common Stock on the date
of exercise. The Company has granted DVI certain piggyback registration rights
with respect to the shares of Common Stock issuable upon exercise of these
warrants. The warrant, if issued, will be exercisable from November 1, 2001
until February 1, 2002. See "Agreements with DVI."
Dividend Policy
Except for the obligation of the Company to pay dividends with respect
to the series of Preferred Stock to be issued to Dr. Schulman as contemplated by
the Schulman Memorandum, the Company presently intends to retain future
earnings, if any, in order to provide funds for use in the operation and
expansion of its business and accordingly does not anticipate paying cash
dividends on its Common Stock in the foreseeable future. Pursuant to the
Company's loan agreements with DVI, the Company may not pay dividends without
the approval of DVI. See "Description of Securities -- Series B Preferred Stock"
for information concerning dividends payable with respect to the Series B
Preferred Stock and "Certain Transactions -- Proposed Note Exchange with Dr.
Schulman" in connection with dividends payable with respect to a new series of
preferred stock to be issued to Dr.
Schulman as contemplated by the Schulman Memorandum.
Shares Eligible for Future Sale
All of the presently issued and outstanding shares of Common Stock,
Class A Common Stock and Preferred Stock are "restricted securities" as that
term is defined under Rule 144 promulgated under the Securities Act. If a public
market develops for the Company's Common Stock, the Company is unable to predict
the effect that sales made under Rule 144 or other sales may have on the then
prevailing market price of the Common Stock. The 9,200,000 presently outstanding
shares of Common Stock, all of which are owned by SISC, will become eligible for
sale pursuant to Rule 144 commencing 90 days after the effective date of the
registration statement of which this Prospectus forms a part. SISC has agreed
that it will not sell its shares of Common Stock for three years from the date
of this Prospectus without the prior approval of the Underwriter, except that
the restriction is two years with respect to the Series B Warrants and the
underlying shares of Common Stock. See "Selling Security Holder" in connection
with the possible sale of Series B Warrants to purchase 1,000,000 shares of
Common Stock and/or the 1,000,000 shares of Common Stock issuable upon exercise
of such warrants.
Commencing on the date the shares may be sold pursuant to Rule 144, in
any three month period, a holder may sell up to the greater of 1% of the
outstanding Common Stock, which is 102,000 shares based on 10,200,000 shares of
Common Stock outstanding upon completion of the sale of the 1,000,000 shares of
Common Stock offered hereby or the average weekly trading volume.
It is not anticipated that there will be a public market for the Class
A Common Stock. However, in the event that the Class A Common Stock is converted
into Common Stock, the holding period with respect to the shares of Common Stock
issued upon such conversion will include the holding period for the Class A
Common Stock. Similarly, the shares of Common Stock issued upon conversion of
the Series B Preferred Stock will be deemed to have been acquired at the time
the shares of Series B Preferred Stock were acquired by the holder thereof.
Section 203 of the Delaware General Corporation Law
The Company is subject to the provisions of Section 203 of the Delaware
General Corporation Law. That section provides, with certain exceptions, that a
Delaware corporation may not engage in any of a broad range of business
combinations with a person or affiliate or associate of such person who is an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless: (i) the transaction resulting in
a person's becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person becomes
an interested stockholder, (ii) the interested stockholder acquires 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding certain employee stock ownership
plans); or (iii) on or after the date the person becomes an interested
stockholder, the business combination is approved by the corporation's board of
directors
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and by the holders of at least 66 2/3% of the corporation's outstanding voting
stock at an annual or special meeting, excluding shares owned by the interested
stockholder. An "interested stockholder" is defined as any person that is (i)
the owner of 15% or more of the outstanding voting stock of the corporation or
(ii) an affiliate or associate of the corporation and was the owner of 15% or
more of the outstanding voting stock of the corporation at any time within the
three year period immediately prior to the date on which it is sought to be
determined whether such person is an interested stockholder.
These provisions could have the effect of delaying, deferring or
preventing a change of control of the Company. The Company's stockholders, by
adopting an amendment to the certificate of incorporation or by-laws of the
Company, may elect not to be governed by Section 203, effective twelve months
after adoption. Neither the certificate of incorporation nor the by-laws of the
Company currently excludes the Company from the restrictions imposed by Section
203.
Transfer Agent and Warrant Agent
The transfer agent for the Common Stock and Warrant Agent for the
Warrants is American Stock Transfer & Trust Company, 40 Wall Street, New York,
New York 10005.
UNDERWRITING
Monroe Parker Securities, Inc. (the "Underwriter") has agreed, on the
terms and subject to the conditions of the Underwriting Agreement, to purchase
from the Company, and the Company has agreed to sell to the Underwriter,
1,000,000 shares of Common Stock and 1,500,000 Warrants. The Underwriter is
committed to purchase and pay for all of the Securities offered hereby on a
"firm commitment" basis if any are purchased.
The Underwriter has advised the Company that it proposes to offer the
Securities to the public at the respective public offering prices set forth on
the cover page of this Prospectus. The Underwriter may allow to certain dealers,
who are members of the National Association of Securities Dealers, Inc.
("NASD"), concessions not exceeding $. per share of Common Stock and $ per
Warrant, of which not more than $. per share of Common Stock and $ per Warrant,
may be reallowed to other dealers who are members of the NASD. After the initial
public offering, the offering price, the concession and the reallowance may be
changed.
The Company has granted an option to the Underwriter, exercisable
during the 45 day period from the date of this Prospectus, to purchase up to a
maximum of 150,000 additional shares of Common Stock and 225,000 additional
Warrants at the public offering price set forth on the Cover Page of this
Prospectus, less the underwriting discounts, for the sole purpose of covering
over-allotments of the Securities.
The Company has agreed to pay to the Underwriter a non-accountable
expense allowance of 3% of the aggregate public offering price of all Securities
sold (including any Securities sold pursuant to the Underwriter's over-allotment
option).
The Company has also agreed to enter into a two-year consulting
agreement pursuant to which the Company will pay the Underwriter a fee of
$100,000 which is to be paid in full at the closing of this Offering. During the
term of the consulting agreement, the Underwriter will be reimbursed for its
Company-approved out of pocket expenses. The Underwriting Agreement also
provides that the Company will pay the Underwriter a fee in the event the
Company consummates an acquisition, merger or similar transaction with a party
introduced to it by the Underwriter. As of the date of this Prospectus, the
Underwriter has not introduced the Company to any such party.
The holders of substantially all of the outstanding Common Stock and
Class A Common Stock have agreed not to sell publicly any of their securities
without the written consent of the Underwriter for a period of three years from
the date of this Prospectus. See "Selling Security Holder" for information
relating to the restrictions on sales by the Selling Security Holder. The
Company has agreed that, during the two years following the date of this
Prospectus, it will not, without the consent of the Underwriter, issue shares of
Common Stock (other than upon exercise or conversion of outstanding securities,
the Warrants, the Underwriter's Options or pursuant to the Plan).
The Underwriting Agreement provides for reciprocal indemnification
between the Company and the Underwriter against certain liabilities in
connection with the Registration Statement, including liabilities under the
Securities Act.
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In connection with this Offering, the Company has agreed to sell to the
Underwriters, for a purchase price of $25, Underwriter's Options to purchase
from the Company up to 100,000 shares of Common Stock at an exercise price of
$6.00 per share and up to 150,000 Warrants at an exercise price of $.18 per
Warrant. The Warrants issuable upon exercise of the Underwriter's Options are
identical to the Warrants offered hereby. The Underwriter's Options are
exercisable for a four-year period commencing one year from the date this
Prospectus, except that Underwriter's Option to purchase Warrants terminate upon
the expiration or earlier redemption of the Warrants. During the one-year period
commencing on the date of this Prospectus, the Underwriter's Options may not be
sold, transferred, assigned or hypothecated, except to the officers of the
Underwriter or to selling group members or officers or partners or members
thereof, all of which shall be bound by such restrictions. The Underwriter's
Options will contain anti-dilution provisions providing for adjustment under
certain circumstances similar to those applicable to the Warrants. The holders
of the Underwriter's Options have no voting, dividend or other rights as
stockholders of the Company with respect to securities underlying the
Underwriter's Options. The holders of the Underwriter's Options have been given
the opportunity to profit from a rise in the market for the Company's Securities
at a nominal cost, with a resulting dilution in the interests of stockholders.
The holders of the Underwriter's Options can be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain equity
capital, if then needed, by a new equity offering on terms more favorable than
those provided by the Underwriter's Options. Such facts may adversely affect the
terms on which the Company could obtain additional financing. Any profit
received by the Underwriter on the sale of the Underwriter's Options or the
securities issuable upon exercise of the Underwriter's Options may be deemed
additional underwriting compensation.
The Company has agreed during the term of the Underwriter's Options and
for two years thereafter to give advance notice to the holders of the
Underwriter's Options or underlying securities of its intention to file a
registration statement, and, in such case, the holders of the Underwriter's
Options and underlying securities shall have the right to require the Company to
include the underlying securities in such registration statement at the
Company's expense. At the demand of the holders of a majority of the
Underwriter's Options and underlying Common Stock, including Common Stock issued
or issuable upon exercise of the Warrants issuable upon exercise of the
Underwriter's Options, during the term of the Underwriter's Options, the Company
will also be required to file one such registration statement at the Company's
expense. In addition, the Company has agreed to cooperate with the holders of
the Underwriter's Options in filing a second registration at the expense of the
holders of the Underwriter's Options or underlying securities.
The Company has also agreed to pay the Underwriter a Warrant
solicitation fee equal to 5% of the exercise price of the Warrants, a portion of
which may be reallowed to a member of the NASD who solicited or assisted in the
solicitation of the exercise of the Warrants. The Warrant exercise fee shall not
be payable with respect to any Warrant exercised prior to the first anniversary
of the date of this Prospectus and may be paid only if (i) the market price of
the Common Stock on the date the Warrant is exercised is greater than the
exercise price of the Warrant, (ii) the exercise of the Warrant was solicited by
a member of the NASD and such solicitation was acknowledged by the holder, (iii)
the Warrant is not held in a discretionary account, (iv) disclosure of the
compensation arrangements are made, in addition to the disclosure provided in
this Prospectus, in documents provided to holders of Warrants at the time of
exercise, and (v) the solicitation of the Warrant was not made in violation of
Rule 10b-6 of the Commission under the Securities Exchange Act of 1934.
Rule 10b-6 of the Commission pursuant to the Exchange Act may prohibit
the Underwriter from engaging in any market making activities with regard to the
Company's securities for the period from nine business days (or such other
applicable period as Rule 10b-6 may provide) prior to any solicitation by the
Underwriter of the exercise of Warrants until the later of the termination of
such solicitation activity or the termination (by waiver or otherwise) of any
right that the Underwriter may have to receive a fee for the exercise of
Warrants following such solicitation. As a result, the Underwriter may be unable
to provide a market for the Company's securities during certain periods while
the Warrants are exercisable.
Prior to this Offering, there has been no public market for the
Securities of the Company. The public offering price of the Common Stock and
Warrants and the exercise price and other terms of the Warrants have been
arbitrarily determined by negotiation between the Company and the Underwriter
and are not related to the Company's assets, book value, financial condition or
any other recognized criteria of value. In determining such price and terms, the
Company and the Underwriter considered a number of factors, including estimates
of the Company's business potential, the amount of dilution to public investors,
the Company's prospects, and the general condition of the securities markets.
The Underwriter has informed the Company that sales to any account over
which the Underwriter exercises discretionary authority will not exceed 1% of
this Offering.
- 56 -
<PAGE>
LEGAL MATTERS
Esanu Katsky Korins & Siger, 605 Third Avenue, New York, New York
10158, special counsel for the Company, have given their opinion as to the
authorization and valid issuance of the shares of Common Stock and Warrants
offered by this Prospectus. Bernstein & Wasserman, LLP, 950 Third Avenue, New
York, NY 10022, is acting as counsel for the Underwriter in connection with this
Offering.
The following firms have acted only as special healthcare counsel to
the Company in connection with this Prospectus, and the information relating to
government regulations contained under the caption "Business -- Government
Regulation and Reimbursement" and "Risk Factors" has been included in reliance
upon their advice: Proskauer Rose Goetz & Mendelsohn LLP, as to Federal and
Florida law, Piper & Marbury L.L.P., as to Virginia law, Niewald Waldeck &
Brown, as to Kansas law, and Nevares, Sanchez-Alvarez & Gonzalez-Nieto, as to
Puerto Rico law.
EXPERTS
The financial statements of the Company included in this Prospectus
have been audited by Moore Stephens, P.C. independent certified public
accountants, as stated in their report appearing herein are included herein in
reliance on their report given on the authority of that firm as experts in
accounting and auditing. The financial statements of IMI-Florida for September
30, 1994 and for the nine months then ended and for December 31, 1993 and for
the year then ended included in this Prospectus have been audited by Moore
Stephens, P.C., independent certified public accountants, as stated in their
report appearing herein and are included in reliance on their report given on
the authority of that firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
A Registration Statement on Form S-1 relating to the securities offered
hereby has been filed by the Company with the Securities and Exchange
Commission. This Prospectus does not contain all of the information set forth in
such Registration Statement. For further information with respect to the Company
and to the Securities offered hereby, reference is made to such Registration
Statement, including the exhibits thereto. Statements contained in this
Prospectus as to the content of any contract or other document referred to are
not necessarily complete, and in each instance reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference.
- 57 -
<PAGE>
[This page intentionally left blank]
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
Page
International Magnetic Imaging, Inc. And Subsidiaries -----
and Related Partnerships:
Report of Independent Auditors F-3
Combined Balance Sheets F-4
Combined Statements of Operations F-6
Combined Statements of Equity F-7
Combined Statements of Cash Flows F-8
Notes to Combined Financial Statements F-10
International Magnetic Imaging, Inc. [Predecessor]
Report of Independent Auditors F-31
Combined Statements of Operations F-32
Combined Statements of Changes in Equity F-33
Combined Statements of Cash Flows F-34
Notes to Combined Statements of Operations,
Changes in Equity and Cash Flows F-35
F-1
<PAGE>
[This page intentionally left blank]
F-2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors of
International Magnetic Imaging, Inc.
We have audited the accompanying combined balance sheets of
International Magnetic Imaging, Inc. and its subsidiaries and related
partnerships as of December 31, 1995 and 1994, and the related combined
statements of operations, equity, and cash flows for the year ended December 31,
1995 and from date of inception [September 30, 1994] to December 31, 1994. These
combined financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these combined
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the combined financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
combined financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the combined financial statements referred to
above present fairly, in all material respects, the combined financial position
of International Magnetic Imaging, Inc. and its subsidiaries and related
partnerships as of December 31, 1995 and 1994, and the combined results of their
operations and their cash flows for the year ended December 31, 1995 and for the
period from September 30, 1994 to December 31, 1994, in conformity with
generally accepted accounting principles.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
February 16, 1996
F-3
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1 9 9 6 1 9 9 5 1 9 9 4
------- ------- -------
[Unaudited]
<S> <C> <C> <C>
Assets:
Current Assets:
Cash $ 1,746,251 $ 1,411,490 $ 1,471,050
Accounts Receivable - Net 12,284,485 10,506,041 7,928,854
Prepaid Expenses and Other 479,025 237,944 235,072
--------------- --------------- ---------------
Total Current Assets 14,509,761 12,155,475 9,634,976
--------------- --------------- ---------------
Property and Equipment:
Property and Equipment - Net 9,381,395 7,249,676 9,060,302
Equipment Under Capitalized Leases - Net 3,266,820 2,252,329 2,581,618
--------------- --------------- ---------------
Property and Equipment - Net 12,648,215 9,502,005 11,641,920
--------------- --------------- ---------------
Other Assets:
Goodwill - Net 9,865,974 10,277,160 10,928,755
Restrictive Covenants - Net 1,100,861 1,926,512 3,027,380
Customer Lists - Net 4,901,539 5,184,319 5,561,917
Loan Origination Costs - Net 575,114 98,992 46,875
Deposits and Other 588,973 727,946 69,663
Deferred Offering Costs 73,543 -- --
Deferred Tax Asset 801,595 -- --
--------------- --------------- ---------------
Total Other Assets 17,907,599 18,214,929 19,634,590
--------------- --------------- ---------------
Total Assets $ 45,065,575 $ 39,872,409 $ 40,911,486
=============== =============== ===============
</TABLE>
See Notes to Combined Financial Statements.
F-4
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
1 9 9 6 1 9 9 5 1 9 9 4
------- ------- -------
[Unaudited]
<S> <C> <C> <C>
Liabilities and Equity:
Current Liabilities:
Accounts Payable and Other Liabilities $ 2,314,668 $ 2,673,087 $ 1,912,137
Accrued Expenses 1,106,878 814,156 800,158
Accrued Radiology Fees 238,788 187,134 52,508
Current Income Taxes Payable 609,985 232,298 23,643
Current Portion of Notes Payable 3,343,329 2,933,082 2,593,069
Current Portion of Obligations Under Capitalized Leases 1,210,401 1,140,095 995,174
Current Portion of Covenants Not-to-Compete 266,667 266,667 266,667
Current Portion of Subordinated Debt 918,152 12,653,825 2,637,048
Due to Affiliate -- 111,514 294,641
--------------- --------------- ---------------
Total Current Liabilities 10,008,868 21,011,858 9,575,045
--------------- --------------- ---------------
Noncurrent Liabilities:
Long-Term Debt:
Notes Payable 12,465,913 5,909,814 7,756,517
Revolver Loan 4,663,351 -- --
Obligations Under Capitalized Leases 2,864,279 2,057,580 2,518,170
Covenants Not-to-Compete -- 200,000 466,667
Subordinated Debt 6,656,298 5,002,873 17,225,870
Due to Affiliate 1,597,914 2,557,796 2,919,000
Deferred Interest 371,260 -- --
--------------- --------------- ---------------
Total Noncurrent Liabilities 28,619,015 15,728,063 30,886,224
--------------- --------------- ---------------
Total Liabilities 38,627,883 36,739,921 40,461,269
--------------- --------------- ---------------
Commitments and Contingencies -- -- --
--------------- --------------- ---------------
Equity:
General Partners' [Deficiency] (668,486) (324,840) (69,580)
Limited Partners' Equity [Deficiency] 1,177,647 (58,202) (80,089)
Stockholders' Equity 5,928,531 3,515,530 599,886
--------------- --------------- ---------------
Total Equity 6,437,692 3,132,488 450,217
--------------- --------------- ---------------
Total Liabilities and Equity $ 45,065,575 $ 39,872,409 $ 40,911,486
=============== =============== ===============
</TABLE>
See Notes to Combined Financial Statements.
F-5
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From date of
Inception
[September 30,
Nine months ended Year ended 1994] to
September 30, December 31, December 31,
------------- ------------ ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C>
Revenue:
Net Patient Service Revenue $ 22,968,825 $ 20,415,610 $ 27,381,738 $ 6,526,644
Management Fee Income 388,869 141,168 212,211 22,901
Radiology Fee Income -- -- -- 7,791
Other Service Revenue 418,205 317,048 449,773 --
--------------- --------------- --------------- ---------------
Total Revenue 23,775,899 20,873,826 28,043,722 6,557,336
--------------- --------------- --------------- ---------------
Costs and Expenses:
Radiology Fees 2,403,047 2,207,809 2,981,862 526,576
Equipment Maintenance 939,956 935,302 1,223,154 359,842
Patient Service Costs and Expenses 1,697,431 1,469,248 1,934,866 520,839
Salaries and Benefits 4,928,935 4,445,722 5,941,350 1,713,229
Professional Services 664,296 623,493 786,608 39,190
Other Management, General and
Administrative 3,590,885 2,935,520 3,966,117 946,822
Provision for Bad Debts 1,127,500 613,866 855,053 130,637
Depreciation 2,279,496 2,239,840 2,939,841 775,244
Amortization 1,604,198 1,534,946 2,047,681 509,016
--------------- --------------- --------------- ---------------
Total Costs and Expenses 19,235,744 17,005,746 22,676,532 5,521,395
--------------- --------------- --------------- ---------------
Operating Income Before Other
Income and Taxes 4,540,155 3,868,080 5,367,190 1,035,941
--------------- --------------- --------------- ---------------
Other Income [Expense]:
Interest Income and Other 479,011 101,044 192,562 139,727
Interest Expense (2,107,693) (1,953,710) (2,565,215) (702,808)
Loss on Disposal of Assets (953) (3,229) (24,893) --
Loss on Sale of Assets -- -- (78,718) --
--------------- --------------- --------------- ---------------
Total Other [Expense] - Net (1,629,635) (1,855,895) (2,476,264) (563,081)
--------------- --------------- --------------- ---------------
Income Before Income Taxes 2,910,520 2,012,185 2,890,926 472,860
Income Tax Expense 297,219 147,408 208,655 23,643
--------------- --------------- --------------- ---------------
Net Income $ 2,613,301 $ 1,864,777 $ 2,682,271 $ 449,217
=============== =============== =============== ===============
Earnings Per Share:
Primary $ .17 $ .12 $ .19 $ .03
=============== =============== =============== ===============
Fully Diluted $ * $ * $ .18 $ *
=============== =============== =============== ===============
Weighted Average Number of Shares:
Primary 14,010,000 13,976,550 14,030,175 13,938,500
=============== =============== =============== ===============
Fully Diluted * * 15,706,375 *
=============== =============== =============== ===============
</TABLE>
*Fully diluted information is not presented since the effect is anti-dilutive.
See Notes to Combined Financial Statements.
F-6
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED STATEMENTS OF EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Preferred Stock Common Class A Common
6,000,000 Shares Authorized Par Value $.01 Stock 50,000,000 Stock 6,000,000
Series B Convertible Shares Authorized Shares Authorized
Series A Redeemable Redeemable 9,200,000 Shares Issued 1,000,000 Shares Issued
5,000 Shares Issued 5,000 Shares Issued and Outstanding and Outstanding
and Outstanding and Outstanding Par Value $.01 Par Value $.01
--------------- --------------- -------------- -----------------
# of Shares Amount # of Shares Amount # of Shares Amount # of Shares Amount
----------- ------ ----------- ------ ----------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Common Stock 5,000 $ 50 5,000 $ 50 9,200,000 $ 92,000 1,000,000 $ 10,000
Net Income for the period
ended December 31, 1994 -- -- -- -- -- -- -- --
-------- --------- --------- ---------- ---------- ---------- --------- ----------
Balance as of
December 31, 1994 5,000 50 5,000 50 9,200,000 92,000 1,000,000 10,000
Net Income for the year ended
December 31, 1995 -- -- -- -- -- -- -- --
-------- --------- --------- ---------- ---------- ---------- --------- ----------
Balance as of
December 31, 1995 5,000 50 5,000 50 9,200,000 92,000 1,000,000 10,000
Additional Capital
Contribution -- -- -- -- -- -- -- --
Net Income for the nine months
ended September 30, 1996
[Unaudited] -- -- -- -- -- -- -- --
-------- --------- --------- ---------- ---------- ---------- --------- ----------
Balance as of
September 30, 1996
[Unaudited] 5,000 $ 50 5,000 $ 50 9,200,000 $ 92,000 1,000,000 $ 10,000
======== ========= ========= ========== ========== ========== ========= ==========
(continued)
</TABLE>
See Notes to Combined Financial Statements.
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED STATEMENTS OF EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Paid-in Retained Partners' Capital Total
------- -------- ----------------- -----
Capital Earnings General Limited Equity
------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Issuance of Common Stock $(101,100) $ -- $ -- $ -- $ 1,000
Net Income for the period
ended December 31, 1994 -- 598,886 (69,580) (80,089) 449,217
--------- -------- ------- ------- ----------
Balance as of
December 31, 1994 (101,100) 598,886 (69,580) (80,089) 450,217
Net Income for the year
ended December 31, 1995 -- 2,915,644 (255,260) 21,887 2,682,271
--------- --------- -------- ------- ----------
Balance as of
December 31, 1995 (101,100) 3,514,530 (324,840) (58,202) 3,132,488
Additional Capital
Contribution 691,903 -- -- -- 691,903
Net Income for the nine
months ended September
30, 1996 [Unaudited] -- 1,721,098 (343,646) 1,235,849 2,613,301
--------- --------- -------- --------- ----------
Balance as of
September 30, 1996
[Unaudited] $ 590,803 $ 5,235,628 $(668,486) $ 1,177,647 $ 6,437,692
=========== =========== ========= =========== ===========
(concluded)
</TABLE>
See Notes to Combined Financial Statements.
F-7
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From date of
Inception
[September 30,
Nine months ended Year ended 1994] to
September 30, December 31, December 31,
------------- ------------ ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C>
Operating Activities:
Net Income $ 2,613,301 $ 1,864,777 $ 2,682,271 $ 449,217
--------------- --------------- --------------- ---------------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Provision for Bad Debts 1,127,500 613,866 855,053 130,637
Depreciation 2,279,496 2,239,840 2,939,841 775,244
Amortization of Intangible Assets and
Loan Costs 1,604,198 1,534,946 2,047,681 509,016
Loss on Disposal of Equipment 953 3,229 24,893 --
Loss of Sale of Equipment -- -- 78,718 --
Deferred Tax Benefit [Provision] (801,595) -- -- --
Deferred Interest 371,260 -- -- --
Changes in Operating Assets and Liabilities:
Accounts Receivable - Net (2,905,944) (2,946,794) (3,432,240) (680,478)
Prepaid Expenses and Other (241,082) 125,683 (2,870) 114,355
Accounts Payable and Other Liabilities 311,990 603,292 983,603 1,229,744
Accrued Radiology Fees 51,654 169,319 134,626 52,508
--------------- --------------- --------------- ---------------
Total Adjustments 1,798,430 2,343,381 3,629,305 2,131,026
--------------- --------------- --------------- ---------------
Net Cash - Operating Activities -
Forward 4,411,731 4,208,158 6,311,576 2,580,243
--------------- --------------- --------------- ---------------
Investing Activities:
Property and Equipment Additions (3,525,281) (173,862) (226,076) (1,514,620)
Proceeds from Sale of Property and
Equipment -- -- 85,000 --
Cash Received from Companies Acquired -- -- -- 2,349,538
Cash Paid to Companies Acquired -- -- -- (7,100,000)
Net Payments to Affiliate (379,493) (266,843) (440,347) (1,034,144)
Payments for Deposits -- (205,158) (658,283) --
Deposit Refunded 138,972 -- -- --
--------------- --------------- --------------- ---------------
Net Cash - Investing Activities -
Forward $ (3,765,802) $ (645,863) $ (1,239,706) $ (7,299,226)
</TABLE>
See Notes to Combined Financial Statements.
F-8
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
- --------------------------------------------------------------------------------
COMBINED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From date of
Inception
[September 30,
Nine months ended Year ended 1994] to
September 30, December 31, December 31,
------------- ------------ ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
[Unaudited] [Unaudited]
<S> <C> <C> <C> <C>
Net Cash - Operating Activities -
Forwarded $ 4,411,731 $ 4,208,158 $ 6,311,576 $ 2,580,243
--------------- --------------- --------------- ---------------
Net Cash - Investing Activities -
Forwarded (3,765,802) (645,863) (1,239,706) (7,299,226)
--------------- --------------- --------------- ---------------
Financing Activities:
Proceeds from Acquisition Debt -- -- -- 7,100,000
Proceeds from Lending Institutions 15,398,005 974,500 1,210,755 82,376
Payments on Notes Payable and
Long-Term Debt (14,050,556) (3,886,984) (5,190,329) (765,468)
Payments on Capital Lease Obligations (1,024,371) (797,743) (1,078,134) (226,875)
Payments of Loan Costs (560,703) (62,550) (73,722) --
Payments of Offering Costs (73,543) -- -- --
--------------- --------------- --------------- ---------------
Net Cash - Financing Activities (311,168) (3,772,777) (5,131,430) 6,190,033
--------------- --------------- --------------- ---------------
Net Increase [Decrease] in Cash 334,761 (210,482) (59,560) 1,471,050
Cash - Beginning of Periods 1,411,490 1,471,050 1,471,050 --
--------------- --------------- --------------- ---------------
Cash - End of Periods $ 1,746,251 $ 1,260,568 $ 1,411,490 $ 1,471,050
=============== =============== =============== ===============
</TABLE>
See Notes to Combined Financial Statements.
F-9
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[1] Nature of Operations
International Magnetic Imaging, Inc., a Delaware corporation formerly known as
IMI Acquisition Corporation [the "Company"], commenced operations in September
1994 to engage in the acquisition, ownership and operation of outpatient medical
diagnostic centers providing magnetic resonance imaging ["MRI"] services and
other diagnostic modalities. Operations of the centers are conducted through
seven partnerships and five corporations and are located in various states and
the Commonwealth of Puerto Rico.
The Company was organized as a wholly-owned subsidiary of SIS Capital Corp.
["SISC"], which is a wholly-owned subsidiary of Consolidated Technology Group
Ltd., ["Consolidated"], a public Company.
The principal users of the Company's centers are practicing physicians located
in general proximity to the various centers. Each of the centers is managed by
International Magnetic Imaging, Inc., a Florida Corporation ["IMI - Florida"].
Basis of Presentation - The combined financial statements include the accounts
of the Company and its wholly-owned subsidiaries and related partnerships.
Intercompany balances have been eliminated in combination.
Operating Centers:
Pine Island Magnetic Resonance Imaging Center, Ltd.
Magnetic Resonance Institute of North Miami Beach, Ltd.
Magnetic Resonance Institute of Boca Raton, Ltd.
Magnetic Resonance Institute of South Dade, Ltd.
Oakland Magnetic Resonance Institute, Ltd.
Physician's Outpatient Diagnostic Center, Ltd.
IMI Acquisition of Puerto Rico Corporation
IMI Acquisition of Arlington Corp.
IMI Acquisition of Kansas Corp.
Magnetic Resonance Institute of Orlando, Ltd.
Management Company:
IMI - Florida
Radiology Company:
MD Acquisition Corp.
[2] Summary of Significant Accounting Policies
The accounting and reporting policies of International Magnetic Imaging, Inc.
and Subsidiaries and Related Partnerships [hereinafter collectively referred to
as "IMI" or the "Company"] conform to generally accepted accounting principles.
The following summarizes the more significant of these policies.
F-10
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #2
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[2] Summary of Significant Accounting Policies [Continued]
Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased. At
December 31, 1995 and 1994, the Company had no cash equivalents.
Joint Venture - On August 7, 1995, the Company entered into a joint venture
agreement with Kaley Imaging, Inc. ["Kaley"]. The Company and Kaley have
determined that they will mutually benefit from a consolidation of their
respective operations. The Company owns 50% of the joint venture and accounts
for its investment on the equity method. At December 31, 1995, the Company has
recognized $120,450 of income from this arrangement.
Allowance for Doubtful Accounts - Patient accounts are reserved for when, in
management's opinion, the collectibility of a portion of, or the entire
outstanding balance, is doubtful.
Property and Equipment and Depreciation - Property and equipment are stated at
cost less accumulated depreciation. Depreciation is computed on a straight-line
basis over the estimated useful lives of the related assets. Leasehold
improvements are stated at cost less accumulated amortization. Such improvements
are amortized over the shorter of the term of the lease or the useful life of
the improvement. Medical equipment financed under capital leases is recorded in
property and equipment at the lower of the present value of the minimum lease
payments or the fair value of the assets at the inception of the lease.
Amortization of assets held under capital leases is included in depreciation
expense and is computed using the straight-line method.
Property and equipment are depreciated over the following estimated useful
lives:
Years
-----
Buildings and Improvements 25
Leasehold Improvements 10 - 25
Medical Equipment 6
Furniture and Equipment 5 - 7
Expenditures for maintenance, repairs, and replacement of minor items are
charged to earnings as incurred. Major additions and improvements which extend
the useful life or improve the operating performance of the related asset are
capitalized. Upon disposition, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in
operations for the period. Depreciation expense for the periods December 31,
1995 and 1994 is $2,939,841 and $775,244, respectively. The equipment used by
the Company is technologically sophisticated and subject to accelerated
obsolescence in the event of significant technological change.
Intangible Assets - Intangible assets consist of goodwill, customer lists, and
covenants not-to-compete arising from business acquisitions. Goodwill, which
represents the excess of the purchase price over the estimated fair value of the
net assets acquired via the business acquisitions, is being amortized over the
period of expected benefit of 20 years. Customer lists are amortized over the
period of expected benefit, which is 15 years. The covenants not-to-compete are
being amortized over their contractual lives, which is 3 years. Intangible
assets are being amortized on a straight-line basis.
F-11
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #3
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[2] Summary of Significant Accounting Policies [Continued]
Intangible Assets [Continued] - Accumulated amortization of intangible assets
resulting from business acquisitions was $2,535,092 and $509,016 at December 31,
1995 and 1994, respectively. Amortization expense relating to business
acquisitions for the year ended December 31, 1995 and three months ended
December 31, 1994 was $2,026,076 and $509,016, respectively.
Management of the Company has developed a policy to evaluate the period of
goodwill amortization to determine whether later events and circumstances
warrant revised estimates of useful lives. Management on a quarterly basis
evaluates the carrying value of goodwill by comparing the carrying value to the
value of projected discounted net cash flows from related operations. Impairment
will be recognized if the carrying value of goodwill is greater than the
projected discounted net cash flows from related operations. Management has
determined that projected discounted net cash flows exceed the carrying value of
goodwill at December 31, 1995. It is at least reasonably possible that
management's estimate of projected discounted net cash flows will change in the
near term.
Loan Origination Costs - Loan origination costs of $46,875 and $73,722 were
incurred in connection with financing relating to the business acquisitions and
capital expenditures for the years ended December 31, 1995 and 1994,
respectively. The costs will be amortized over the terms of the related
financing agreements, using the straight-line method which approximates the
interest method. Amortization expense of loan origination costs relating to
business acquisitions and capital expenditures at December 31, 1995 and 1994 was
$21,605 and $-0-, respectively. Amortization of such costs began in January of
1995.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
Actual results could differ from those estimates.
Net Patient Service Revenue - Net patient service revenue is reported at the
estimated net realizable amounts from patients and third-party payors for
services rendered, including provisions for estimated contractual adjustments
under reimbursement agreements with third-party payors. The Company has
historically not provided any significant amount of charity care. For the
periods ended December 31, 1995 and 1994, contractual adjustments amounted to
approximately $22,000,000 and $4,000,000, respectively.
Income Taxes - The Company prepares its combined financial statements on the
accrual basis of accounting. Provision has been made for federal income taxes
for the center operating in the Commonwealth of Puerto Rico and state income
taxes for the corporate general and limited partners of the partnership
entities. Although federal income tax returns for the management company,
radiology company, the corporate general and limited partners of the partnership
entities, and the three operating MRI centers organized for tax purposes as "C"
corporations are filed on a consolidated basis with those of the parent company,
Consolidated, the combined subsidiaries of Consolidated have calculated their
tax provision on the "separate return basis." Any tax benefit received by the
utilization of Consolidated's federal tax net operating losses has been properly
recorded as a liability to Consolidated and then subsequently forgiven,
resulting in an addition to paid-in capital in accordance with Accounting
Principles Bulletin No. 26.
F-12
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #4
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[2] Summary of Significant Accounting Policies [Continued]
Acquisitions - On September 30, 1994, the Company acquired IMI - Florida and its
affiliated entities in a business combination accounted for as a purchase. The
principal operations of IMI - Florida are in the establishment and operation of
outpatient diagnostic centers providing MRI services and other diagnostic
modalities. The results of operations of the acquired entities are included in
the accompanying combined financial statements since the date of acquisition.
The total cost of the acquisition was $31,871,702, which exceeded the fair value
of net assets of the acquired entities by $11,068,852. The excess purchase
price, or goodwill, is being amortized by the straight-line method over 20
years.
The other intangibles, specifically restrictive covenants and customer lists,
are being amortized by the straight-line method over 3 years and 15 years,
respectively.
The following summarizes the purchase price allocated to acquired assets at fair
value.
Cash $ 6,960,000
Subordinated Debt 19,862,915
Stock 2,920,000
Notes [Covenants] 800,000
Acquisition Costs 1,328,787
---------------
Purchase Cost $ 31,871,702
------------- ===============
Allocated to:
Cash $ 2,349,548
Other Assets 421,281
Covenants-Not-to-Compete 3,302,597
Property, Plant and Equipment 10,902,543
Accounts Receivable 7,379,015
Managed Care Contracts - Customer Lists 5,655,619
Liabilities Assumed (9,207,753)
Goodwill 11,068,852
---------------
Total $ 31,871,702
----- ===============
The cash portion of the purchase price was simultaneously financed through a
major asset-based lender.
Earnings Per Share - Earnings per share is computed based on the weighted
average number of shares outstanding for each period presented using the
modified treasury stock method. Common stock equivalents are included in the
calculation when they are dilutive. Certain options and warrants, issued at or
below the Initial Public Offering price within one year of the filing of the
Registration Statement, are included in the computation of earnings per share
for all periods presented. In November 1996, the Company effected a
recapitalization pursuant to which 1,000 shares of Common Stock outstanding on
such date became and were converted into 9,200,000 shares of Common Stock,
1,000,000 shares of Class A Common Stock, 5,000 shares of Series A Redeemable
Preferred Stock and 5,000 shares of Series B Convertible Redeemable Preferred
Stock. In computing earnings per share, shares of Common Stock and Class A
Common Stock are treated as a single class. All share and per share information
in these financial statements gives effect, retroactively, to such transactions.
Dividends on preferred stock, if and when declared, are included in the
calculation of earnings per share.
F-13
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #5
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[3] Accounts Receivable
Accounts receivable, net of contractual allowances, are summarized as follows:
December 31,
1995 1994
Personal Injury Litigation $ 5,423,870 $ 4,794,648
Managed Care 2,031,822 1,552,414
Commercial Insurance 1,812,313 1,574,168
Workers' Compensation 958,427 1,079,673
Medicare/Medicaid 559,026 568,624
Private Pay 784,121 700,191
Other 1,426,843 10,162
---------------- ---------------
Totals 12,996,422 10,279,880
Less: Allowance for Doubtful Accounts (2,490,381) (2,351,026)
---------------- ---------------
Accounts Receivable - Net $ 10,506,041 $ 7,928,854
------------------------- ================ ===============
Accounts receivable pledged as collateral for borrowings at December 31, 1995
and 1994 was $9,969,500 and $6,821,971, respectively. On a combined basis the
Company does not have a significant concentration of receivables from any one
non-governmental managed care provider. The Company does not require collateral
from its customers.
Contractual allowances amounted to approximately $2,000,000 and $1,000,000 for
the years ended December 31, 1995 and 1994, respectively.
The changes in the allowance for doubtful accounts are summarized as follows:
December 31,
1995 1994
Beginning Balance $ 2,351,026 $ 2,394,794
Provision for Doubtful Accounts 855,053 130,637
Recoveries 255,862 94,848
Charge-offs (971,560) (269,253)
---------------- ---------------
Ending Balance $ 2,490,381 $ 2,351,026
-------------- ================ ===============
F-14
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #6
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[4] Other Receivable
In connection with the acquisition of one of the Florida centers, certain
liabilities that existed at the closing date [September 30, 1994] were paid by
Physician's Outpatient Diagnostic Center, Ltd. In accordance with the purchase
agreement, Physician's Outpatient Diagnostic Center, Ltd. is entitled to
reimbursement for the payment of these liabilities, which amount to $146,462 as
of December 31, 1994. Cash collections on accounts receivable that existed prior
to the closing date are being used to reduce this receivable. As of December 31,
1995, this receivable has been collected.
[5] Property and Equipment
Property and equipment as of December 31 are summarized as follows:
December 31,
Property Class 1995 1994
-------------- ------- -------
Land $ 663,830 $ 663,830
Buildings and Improvements 3,242,346 3,233,627
Leasehold Improvements 1,170,377 1,151,516
Medical Equipment 14,590,268 15,918,545
Furniture and Equipment 2,071,906 2,118,092
---------------- ---------------
Subtotal 21,738,727 23,085,610
Less: Accumulated Depreciation (14,489,051) (14,025,308)
---------------- ---------------
Property and Equipment - Net $ 7,249,676 $ 9,060,302
---------------------------- ================ ===============
Property and equipment pledged as collateral for borrowings had a net book value
of $7,249,676 and $8,759,812 as of December 31, 1995 and 1994, respectively.
[6] Leases
The Company leases real estate for certain of its MRI centers and its
administrative offices under noncancellable operating leases expiring during the
next fifteen years. The real estate leases contain clauses which permit
adjustments of lease payments based upon changes in the "Consumer Price Index,"
options to renew the leases for periods up to an additional fifteen years and
additional payments for a proportionate share of real estate taxes and common
area operating expenses.
Several of the MRI centers lease the magnetic resonance imaging equipment under
noncancellable capital leases, the last of which expires in 2000.
F-15
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #7
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[6] Leases [Continued]
For certain of those leases, a balloon payment representing the buy-out of the
leased equipment is due at the end of the lease term. A summary of leased
property under capitalized leases is as follows:
December 31,
Property Class 1995 1994
-------------- ------- -------
Medical Equipment:
San Juan $ 1,508,390 $ 1,508,390
Greater Kansas City 2,556,284 2,010,384
Orlando 1,625,664 1,625,664
IMI 350,151 222,860
P.O.D.C. 333,143 243,869
---------------- ---------------
Subtotal 6,373,632 5,611,167
Less: Accumulated Amortization (4,121,303) (3,029,549)
---------------- ---------------
Equipment Under Capitalized Leases - Net $ 2,252,329 $ 2,581,618
---------------------------------------- ================ ===============
Amortization expense of equipment under capitalized leases is included in
depreciation expense.
As of December 31, 1995, the future minimum lease payments under capitalized
leases and noncancellable operating leases are:
Capital Operating
Fiscal Years Leases Leases
1996 $ 1,384,644 $ 593,146
1997 1,015,244 598,593
1998 876,359 602,082
1999 330,542 598,690
2000 70,418 241,578
Thereafter -- 69,992
--------------- ----------------
Total Minimum Lease Payments $ 3,677,207 $ 2,704,081
===============
Less Amount Representing Interest (479,532)
---------------
Present Value of Net Minimum Capitalized Lease Payments 3,197,675
Less: Current Portion of Obligations Under Capital Leases (1,140,095)
----------------
Non-Current Portion of Obligations Under Capitalized Leases $ 2,057,580
----------------------------------------------------------- ===============
Total rental expense for the years ended December 31, 1995 and 1994 was $628,366
and $129,690, respectively.
F-16
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #8
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[7] Long-Term Debt
The Company maintains term loans and other notes payable which are secured by
accounts receivable and property and equipment. Loan agreements contain various
covenants, including restrictions on any mergers, consolidations, sales of
assets or issuances of stock, as well as restrictions on payments to the parent
Company or any subsidiary or affiliate and to the payment of dividends, unless
authorized by the lender. Subordinated notes payable issued in connection with
the acquisitions are unsecured. Long-term debt at December 31, 1995 and 1994
consists of the following:
Long-term debt consists of the following:
December 31,
1995 1994
Operating Term Loan:
Note payable in monthly installments of $20,000,
plus interest at 1.5% above the prime rate; final
payment due November 1995. $ -- $ 220,000
Equipment and Leasehold Improvement Debt:
Note payable in monthly installments of $26,416,
plus interest at 1% above the prime rate; final
payment due December 1995. -- 317,000
Note payable in monthly installments of $13,666,
which includes interest at 7.75%; final payment
due July 1996. 93,478 243,471
Note payable in monthly installments of $16,241;
which includes interest at a rate of 9.5%; final
payment due September 1996. 147,008 318,958
Note payable in monthly installments of $12,830,
which includes interest at a rate of 9.5%; final
payment due September 1998. 371,338 484,150
Note payable in monthly installments of $6,488,
which includes interest at 11.5% final payment
due May 2000 260,763 --
Note payable in monthly installments of $6,488,
which includes interest at 11.5%, final payment
due May 2000 260,763 --
Note payable in monthly installments of $7,962,
which includes interest at 11.5%, final payment
due May 2000. 319,989 --
---------- -----------
Total Equipment and Leasehold Improvement
Debt - Forward 1,453,339 1,583,579
---------- -----------
Building Debt:
Mortgage note payable in monthly installments
of $9,256, plus interest at 1% above the prime
rate; balloon payment due September 1996. 971,834 1,082,900
Mortgage note payable in monthly installments
of $8,333, plus interest at 1% above the prime
rate; balloon payment due February 1999. 516,667 616,667
-------------- --------------
Totals - Forward $ 1,488,501 $ 1,699,567
F-17
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #9
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[7] Long-Term Debt [Continued]
December 31,
1995 1994
Total Equipment and Leasehold Improvement
Debt - Forwarded $ 1,453,339 $ 1,583,579
-------------- --------------
Building Debt [Continued]:
Totals - Forwarded 1,488,501 1,699,567
Mortgage note payable in monthly installments
of $2,942, which includes interest at 9.75%,
balloon payment due November 2000 222,701 --
Mortgage note payable in monthly installments
of $1,184, plus interest at 1.25% above the
prime rate; balloon payment due November 1995. -- 240,266
-------------- --------------
Total Building Debt - Forward 1,711,202 1,939,833
-------------- --------------
Subordinated Debt:
Note payable in quarterly installments of
$110,401, plus interest at 7%; balloon
payment due September 1996. 3,238,396 3,680,000
Note payable in quarterly installments of
$78,537, plus interest at 7%; balloon
payment due September 1996. 2,303,765 2,617,915
Note payable in quarterly installments of
$92,400, plus interest at 7%; balloon
payment due September 1996. 2,710,403 3,080,003
Note payable in quarterly installments of
$28,800, plus interest at 7%; balloon
payment due September 1996. 844,800 960,000
Note payable in quarterly installments of
$20,700, plus interest at 7%; balloon
payment due September 1996. 607,200 690,000
Note payable in quarterly installments of
$17,100, plus interest at 7%; balloon
payment due September 1996. 501,600 570,000
Note payable in quarterly installments of
$29,400, plus interest at 7%; balloon
payment due September 1996. 862,400 980,000
Note payable in quarterly installments of
$11,400, plus interest at 7%; balloon
payment due September 1997. 334,400 380,000
-------------- --------------
Totals - Forward $ 11,402,964 $ 12,957,918
F-18
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #10
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[7] Long-Term Debt [Continued]
December 31,
1995 1994
Total Equipment and Leasehold Improvement
Debt - Forwarded $ 1,453,339 $ 1,583,579
--------------- ---------------
Total Building Debt - Forwarded 1,711,202 1,939,833
--------------- ---------------
Subordinated Debt [Continued]:
Totals - Forwarded 11,402,964 12,957,918
Note payable in quarterly installments of
$14,400, plus interest at 7%; balloon
payment due September 1997. 422,400 480,000
Note payable in quarterly installments of
$91,500, plus interest at 7%; balloon
payment due September 1997. 2,860,976 3,050,000
Note payable in quarterly installments of
$195,925, which includes interest at 4%;
balloon payment due September 1999. 2,970,358 3,375,000
--------------- ---------------
Total Subordinated Debt - Forward 17,656,698 19,862,918
--------------- ---------------
Other Debt:
Note payable in monthly installments of
$29,124, which includes interest at
10.5%; final payment due September 1999. 1,079,498 1,302,742
Note payable in monthly installments of
$25,922, which includes interest at 10.5%;
final payment due September 1999. 960,793 1,159,488
Note payable in monthly installments of
$8,684, which includes interest at 10.5%;
final payment due September 1999. 321,858 388,419
Note payable in monthly installments of
$10,768, which includes interest at 10.5%;
final payment due September 1999. 399,135 481,677
Note payable in monthly installments of
$21,129, which includes interest at 10.5%;
final payment due September 1999. 783,134 945,089
Note payable in monthly installments of
$18,807, which includes interest at 10.5%;
final payment due September 1999. 697,093 841,254
--------------- ---------------
Totals - Forward $ 4,241,511 $ 5,118,669
F-19
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #11
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[7] Long-Term Debt [Continued]
December 31,
1995 1994
Total Equipment and Leasehold Improvement
Debt - Forwarded $ 1,453,339 $ 1,583,579
--------------- ---------------
Total Building Debt - Forwarded 1,711,202 1,939,833
--------------- ---------------
Total Subordinated Debt - Forwarded 17,656,698 19,862,918
--------------- ---------------
Other Debt [Continued]:
Totals - Forwarded 4,241,511 5,118,669
Note payable in monthly installments of
$10,854, which includes interest at 10.5%;
final payment due September 1999. 402,322 485,524
Note payable in monthly installments of
$27,319, which includes interest at 10.5%;
final payment due September 1999. 1,012,574 1,221,981
Note payable in monthly installments of
$1,000, which includes interest at 12%;
final payment due December 1996 10,368 --
Note payable in monthly installments of
$2,000, which includes interest at 12%;
final payment due August 1996 11,580 --
--------------- ---------------
Total Other Debt 5,678,355 6,826,174
--------------- ---------------
Total Debt 26,499,594 30,212,504
Less Current Portion (15,586,907) (5,230,117)
--------------- ---------------
Totals $ 10,912,687 $ 24,982,387
------ =============== ===============
The prime rate at December 31, 1995
and 1994 was 8.5%.
Maturities of long-term debt are as follows:
Years ending
December 31,
1996 $ 15,586,907
1997 5,559,357
1998 2,773,824
1999 2,354,547
2000 224,959
Thereafter --
---------------
Total $ 26,499,594
----- ===============
Cash paid for interest for the periods ended December 31, 1995 and 1994 amounted
to $2,175,631 and $709,140, respectively.
F-20
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #12
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[8] Covenants Not-to-Compete
In connection with the acquisition of the imaging centers, the Company entered
into two three-year non-competition agreements with two of the previous owners
of the acquired entities. Pursuant to such agreements, the Company is
contractually obligated to pay such individuals an aggregate of $800,000. The
monthly payments under these agreements are $22,222 with the final payment due
in September 1997. The balance due pursuant to such agreements as of December
31, 1995 and 1994 is $466,667 and $733,334, respectively. Annual maturities of
these obligations are as follows:
Years ending
December 31, Amount
1996 $ 266,667
1997 200,000
--------------
Total $ 466,667
----- ==============
[9] Capital Stock
The Company is authorized to issue 6,000,000 shares of Preferred Stock, par
value $.01 per share, 50,000,000 shares of Common Stock, par value $.01 per
share, and 6,000,000 shares of Class A Common Stock, par value $.01 per share.
Holders of Common Stock are entitled to one vote for each share held of record
on all matters submitted to a vote of stockholders. Holders of Class A Common
Stock have no voting rights except as provided by law.
Common Stock - There are 9,200,000 shares of Common Stock and 1,000,000 shares
of Class A Common Stock outstanding.
Each share of Class A Common Stock will automatically become and be converted
into one share of Common Stock upon the first to occur of (a) the date, as
reasonably determined by the Board of Directors, that the Company ceases to be
eligible under the Internal Revenue Code of 1986, as amended, to be a member of
the consolidated group of corporations of which Consolidated is the common
parent, or (b) the date as of which the Board of Directors effects such a
conversion.
The Common Stock and the Class A Common Stock are treated as a single class and
have identical rights except that the holders of the Class A Common Stock have
no voting rights except as required by law. Holders of Common Stock and Class A
Common Stock are entitled to share in such dividends as the Board of Directors,
in its discretion, may declare from funds legally available. In the event of
liquidation, dissolution or winding up, each outstanding share of Common Stock
and Class A Common Stock entitles its holders to participate ratably in the
assets remaining after payment of liabilities.
Series A Preferred Stock - The Series A Preferred Stock consists of 5,000
shares, all of which are issued and outstanding. Holders of shares of Series A
Preferred Stock are entitled to non-cumulative dividends of $10 per share, or an
aggregate of $50,000. The Company has no obligation to declare dividends for any
year, but, in any year, no dividends may be declared with respect to the Common
Stock and Class A Common Stock unless the dividends for such year for the Series
A Preferred Stock have been declared and paid or provided for. Dividends, if
declared, are payable on February 1st of each year to holders of record on the
previous January 15th.
The holders of the Series A Preferred Stock have no voting rights except as
required by law. The Series A Preferred Stock is not convertible into Common
Stock or any other class or series of capital stock. The Series A Preferred
Stock may be redeemed for $20 per share, on not less than ten or more than 60
days' notice at any time after the Class A Common Stock is converted into Common
Stock. At such time as the Series A Preferred Stock may be redeemed, the Company
may redeem the Series A Preferred Stock in whole at any time or in part from
time to time.
F-21
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #13
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[9] Capital Stock
Series A Preferred Stock [Continued] - In the event of any voluntary
liquidation, dissolution or winding up of the Company, after payment has been
made on any security of the Company, if any, which ranks senior to the Series A
Preferred Stock, holders of shares of Series A Preferred Stock will be entitled
to receive from the assets of the Company an aggregate amount equal to 80% of
the Company's stockholders' equity, including partners' capital, as of the last
day of the calendar quarter prior to the date as of which the determination is
being made, provided, that from and after the effective date of the Registration
Statement relating to the Company's Initial Public Offering, the aggregate
amount shall be 80% of the Company's stockholder's equity, including partners'
capital, as of the last day of the quarter immediately preceding such effective
date, on a per share basis plus accrued and unpaid dividends to the payment
date, before any payment or distribution is made to holders of shares of Common
Stock, Class A Common Stock or any other series or class of stock hereafter
issued which ranks junior as to liquidation rights to the Series A Preferred
Stock.
Series B Preferred Stock - The Series B Preferred Stock consists of 5,000
shares, all of which are issued and outstanding. Holders of shares of Series B
Preferred Stock have no preferential dividend rights. If dividends are declared
with respect to the Common Stock, the holders of the Series B Preferred Stock
shall be entitled to dividends on an as-converted basis, such dividends to be
determined as if the shares of Series B Preferred Stock and shares of Common
Stock [including Class A Common Stock] were a single class. Based on a
conversion rate of 700 shares of Common Stock for each share of Series B
Preferred Stock, each share of Series B Preferred Stock would receive a dividend
equal to 700 times the dividend payable to the holders of the Common Stock.
Each share of Series B Preferred Stock, unless previously redeemed, is
convertible, commencing three years from the effective date of the Registration
Statement relating to the Company's Initial Public Offering or on such earlier
date, if any, as the Class A Common Stock is converted into Common Stock, into
700 shares of Common Stock, or an aggregate of 3,500,000 shares of Common Stock;
provided, however, that if, after completion of the Company's Initial Public
Offering and prior to the date on which the Series B Preferred Stock would
otherwise become convertible, the Company issues any shares of Common Stock or
Class A Common Stock, including the issuance of any shares of Common Stock upon
exercise of warrants or options, the Series B Preferred Stock shall be
convertible to the extent that the number of shares of Common Stock issuable
upon such conversion shall be equal to four times the number of shares of Common
Stock and Class A Common Stock so issued; provided, that if such conversion
would result in the conversion of a fractional share of Series B Preferred
Stock, the Series B Preferred Stock may be converted as to the next higher
integral number of shares. In addition, if the Series B Preferred Stock is
called for redemption, the conversion rights will expire at the close of
business on the business day prior to the redemption date. The conversion rate
is subject to adjustment upon the occurrence of certain events.
The Company has the right to redeem the shares of Series B Preferred Stock at a
redemption price of $20 per share, or an aggregate of $100,000, at any time
after the expiration of three years from the effective date of the Registration
Statement relating to the Company's initial public offering, or earlier if the
Class A Common Stock is converted into Common Stock. The Series B Preferred
Stock may be redeemed in whole or in part. Once the Series B Preferred Stock
becomes redeemable, the Company may redeem the Series B Preferred Stock upon at
least 30, but not more than 60 days' prior written notice to the registered
holders.
F-22
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #14
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[10] Stockholders' Equity - General Partners
The general and limited partner corporate entities included in the combined
financial statements at December 31, 1995, totaling $509,161 in net equity, are
as follows:
IMI Acquisition of Pine Island Corporation
IMI Acquisition of North Miami Beach Corporation
IMI Acquisition of Boca Raton Corporation
IMI Acquisition of South Dade Corporation
IMI Acquisition of Oakland Park Corporation
IMI Acquisition of Orlando Corporation
P.O.D.C. Acquisition Corporation
Limited Partners:
IMI Ltd. Partner Acquisition of Pine Island, Inc.
IMI Ltd. Partner Acquisition of North Miami Beach, Inc.
IMI Ltd. Partner Acquisition of Boca Raton, Inc.
IMI Ltd. Partner Acquisition of South Dade, Inc.
IMI Ltd. Partner Acquisition of Oakland Park, Inc.
IMI Ltd. Partner Acquisition of Orlando, Inc.
P.O.D.C. Ltd. Partner Acquisition Corporation
[11] Related Party Transactions
Issuance of Securities at Organization - In connection with its organization in
September and October 1994, the Company issued an aggregate of 9,200,000 shares
of Common Stock, 1,000,000 shares of Class A Common Stock, 5,000 shares of
Series A Preferred Stock, 5,000 shares of Series B Preferred Stock, Series B
Warrants to purchase 1,000,000 shares of Common Stock at $2.00 per share and
warrants to purchase 1,250,000 shares of Class A Common Stock at $2.00 per share
[See Note 23].
In October 1994, the Company issued seven-year warrants to purchase an aggregate
of 500,000 shares of Class A Common Stock at $2.00 per share to SISC and 15
individuals, including the chief financial officer of the Company, to whom it
issued a warrant to purchase 100,000 shares, and two directors of the Company,
to each of whom the Company issued a warrant to purchase 50,000 shares.
Due to Affiliate - In connection with the acquisitions of the centers, SISC lent
approximately $1.3 million to the Company, which was used to pay acquisition
costs, and delivered shares of Consolidated common stock, valued at $2.9
million, representing a portion of the purchase price. Such loan and the value
of such Consolidated common stock is treated as a non-interest bearing loan from
the Company to SISC with no stated maturity date. The balance as of December 31,
1995 and 1994 amounted to $2,669,310 and $3,213,641, respectively.
Notes Payable to Officer - Approximately $969,000 and $1,067,000 at December 31,
1995 and 1994, respectively, of the subordinated notes payable issued in
connection with the acquisitions is payable to an officer of the Company. The
officer was a stockholder in the predecessor entities.
F-23
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #15
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[12] Income Taxes
Under SFAS No. 109, "Accounting for Income Taxes," deferred income taxes reflect
the net tax effects of (a) temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes, and (b) operating loss carryforwards. The tax effects of
significant items composing the Company's net deferred tax liability as of
December 31, 1995 and December 31, 1994 are as follows:
<TABLE>
<CAPTION>
December 31,
1 9 9 5 1 9 9 4
<S> <C> <C>
Deferred Tax Liabilities:
Book Basis of Assets in Excess of Tax Basis $ 4,420,514 $ 5,105,947
-------------- ---------------
Deferred Tax Assets:
Allowance for Doubtful Accounts not Currently Deductible 937,130 884,691
Difference Between Book and Tax Depreciation 4,526,214 4,705,811
Difference Between Book and Tax Amortization 256,791 48,380
-------------- ---------------
Totals 5,720,135 5,638,882
-------------- ---------------
Valuation Allowance 1,299,621 532,935
-------------- ---------------
Net Deferred Tax Liability $ -- $ --
-------------------------- ============== ===============
</TABLE>
The Company's deferred tax asset valuation allowance was $1,299,621 and $532,935
as of December 31, 1995 and 1994, respectively. The increase in the valuation
allowance of $766,686 for the year ended December 31, 1995 is comprised of the
following:
Difference Between Book and Tax Depreciation $ (179,597)
Difference Between Book and Tax Amortization 208,411
Book Basis of Assets in Excess of Tax Basis of Assets 685,433
Allowance for Doubtful Accounts not Currently Deductible 52,439
----------------
Total $ 766,686
----- ================
The current and deferred income tax components of the provision [benefit] for
income taxes consist of the following:
Years ended Three months ended
December 31, December 31,
1 9 9 5 1 9 9 4
------- -------
Current:
Puerto Rico $ 82,964 $ 4,968
State 125,691 18,675
----------------- ---------------
Totals 208,655 23,643
Deferred -- --
----------------- ---------------
Totals $ 208,655 $ 23,643
------ ================= ===============
F-24
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #16
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[12] Income Taxes [Continued]
The provision for income taxes varies from the amount computed by applying the
statutory rate for the reasons below:
Three
Years ended months ended
December 31, December 31,
1 9 9 5 1 9 9 4
Provision Based on Statutory Rates 35.0% 35.0%
Benefit of Graduated Rates (1.0) (1.0)
Puerto Rico Taxes [Net of Federal Benefit] 2.9 1.1
States Taxes [Net of Federal Benefit] 4.3 4.1
Valuation Allowance (34.0) (34.0)
--------- ---------
Totals 7.2% 5.2%
------ ========= =========
The Company's provision for income taxes is comprised of state and Puerto Rico
income taxes for the 12 months ended December 31, 1995 and the three months
ended December 31, 1994, respectively. The Company has a valuation allowance as
a result of filing a consolidated federal income tax return and the taxable
income is offset by losses generated by the parent corporation and other
subsidiaries included in the consolidated group.
[13] Commitments
Professional Liability Insurance - Each of the operating entities carries
professional malpractice and general liability insurance. The independent
radiology entities that provide the radiology services are covered by their own
medical malpractice insurance. The Company has procedures in place to monitor
coverage and incidents of significance.
Employment Agreements - In October 1994, the Company entered into a five-year
employment agreement with the President/Chief Executive Officer which runs
through September 1999. The agreement provides for an annual base salary of
$350,000 and a bonus, not less than $100,000 and not greater than $700,000,
calculated on a percentage of the lesser of pre-tax cash flow or pre-tax net
income.
The Chief Financial Officer ["CFO"] of the Company, who is also the CFO of
Consolidated, has an employment agreement with Consolidated for a term
commencing October 1, 1994 and ending December 31, 2002, pursuant to which he
received an annual salary of $177,000 for the contract year ended September 30,
1996 with increases annually thereafter until the seventh year for which his
annual salary is $252,000. The agreement provides for two bonuses, one of which
is equal to the greater of 1% of Consolidated's net pre-tax profits or 1% of
Consolidated's net cash flow, and the other of which is equal to the greater of
1% of the Company's net pre-tax profits or 1% of the Company's net cash flow.
Although the CFO and Consolidated are the parties to his employment agreement,
the CFO's compensation is paid by the Company and the Company allocates 25% of
his compensation [exclusive of the bonuses relating to the Company] to
Consolidated, which is applied to reduce the Company's indebtedness to SISC.
Radiologist Agreements - The Company engages radiologists and other specialists
to read and interpret the diagnostic imaging scans performed at the centers. The
Company has entered into agreements at several of its centers for these
services. Terms and fees vary on a contract by contract basis. Fees are
generally based on a percentage of collected gross revenues. One contract has
annual fees of $275,000 plus a percentage of the center's annual gross revenues
in excess of $2.4 million through March 2000 and another includes an annual
consulting fee of $30,000 through December 1999.
F-25
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #17
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[14] Employee Benefit Plans
On July 1, 1995, the Company adopted a Qualified Retirement Plan under the
Internal Revenue Code. The Plan requires employees to complete one year of
service and attain the age of 21. Employer contributions are discretionary and
determined on an annual basis. Employer contributions to the plan totaled
$41,120 for the year ended December 31, 1995.
The Plan will match employee contributions dollar for dollar with maximum
limitations as follows:
1995 $ 500
1996 750
1997 1,000
1998 1,250
1999 1,500
2000 1,750
2001 2,000
[15] Long-Term Incentive Plan
In October 1994, the Company adopted, by action of the Board of Directors and
stockholders, the 1994 Long-Term Incentive Plan [the "Plan"]. The Plan does not
have an expiration date.
The Plan is authorized to grant options or other equity-based incentives for
1,200,000 shares of the Class A Common Stock or, at such time as the Class A
Common Stock is converted into Common Stock, shares of Common Stock. If shares
subject to an option under the Plan cease to be subject to such option, or if
shares awarded under the Plan are forfeited or otherwise terminated without a
payment being made to the participant in the form of stock, such shares will
again be available for future issuance under the Plan.
Awards under the Plan may be made to key employees, including officers of and
consultants to the Company, its subsidiaries and affiliates, but may not be
granted to any director unless the director is also an employee of or consultant
to the Company or any subsidiaries or affiliates. The Plan imposes no limit on
the number of officers and other key employees to whom awards may be made.
The following types of awards can be granted under the Plan: incentive or
non-qualified stock options; stock appreciation rights; restricted stock;
deferred stock, stock purchase rights and/or other stock-based awards. The
Company granted seven-year incentive stock options to purchase an aggregate of
765,500 shares of Class A Common Stock at $.50 per share in October 1994, and
incentive stock options to purchase 84,500 shares of Class A Common Stock at
$1.00 per share in September 1995 [71,500 shares] and June 1996 [13,000 shares].
The exercise price of the options were the fair market value on the respective
dates of grant. All of the options are presently fully exercisable and have a
term of seven years from the date of grant.
[16] Litigation
The Company is subject to lawsuits arising in the course of ordinary business.
Management after review and consultation with counsel, believes it has
meritorious defenses and considers that any potential outcome from these matters
would not materially affect the financial position and statement of operations
of the Company. Nevertheless, due to uncertainties in the legal process, it is
at least reasonably possible that management's view of the outcome will change
in the near term.
F-26
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #18
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[17] Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of
credit risk are cash and cash equivalents and accounts receivable arising from
its normal business activities. The Company routinely assesses the financial
strength of it customers and based upon factors surrounding the credit risk of
its customers establishes an allowance for uncollectible accounts and, as a
consequence, believes that its accounts receivable credit risk exposure beyond
such allowances is limited [See Note 3]. The Company places its cash and cash
equivalents with high quality financial institutions. The amount on deposit in
any one institution that exceeds federally insured limits is subject to credit
risk. The Company had cash balances in excess of federally insured limits of
approximately $602,000 and $747,000 as of December 31, 1995 and 1994,
respectively.
The Company derives over approximately 71% of its net patient service revenues
from operations in the State of Florida.
The Company's operating facilities grant credit without collateral to its
patients, most of whom are residents of the operating facilities respective area
and are insured under third-party payor agreements. The mix of accounts
receivable net of contractual allowances from third-party payors and patients
are as follows:
December 31,
1 9 9 5 1 9 9 4
Personal Injury Litigation 42% 47%
Managed Care 16% 15%
Commercial Insurance 14% 15%
Workers' Compensation 7% 10%
Medicare/Medicaid 4% 6%
Private Pay 6% 7%
Other 11% --%
--------- ---------
100% 100%
========= =========
[18] Fair Value of Financial Instruments
Effective December 31, 1995, the Company adopted Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of Financial
Instruments", which requires disclosing fair value to the extent practicable for
financial instruments which are recognized or unrecognized in the balance sheet.
The fair value of the financial instruments disclosed herein is not necessarily
representative of the amount that could be realized or settled, nor does the
fair value amount consider the tax consequences of realization or settlement.
Carrying Amount Fair Value
Notes Payable - Long-Term $ 5,909,814 $ 5,726,391
Subordinated Debt - Long-Term 5,002,873 4,311,924
-------------- --------------
Totals $ 10,912,687 $ 10,038,315
------ ============== ==============
F-27
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #19
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[18] Fair Value of Financial Instruments [Continued]
In assessing the fair value of these financial instruments, the Company used a
variety of methods and assumptions, which were based on estimates of market
conditions and risks existing at that time. For certain instruments, including
cash, accounts receivables, accounts payables and short-term debt, it was
assumed that the carrying amount approximated fair value for the majority of
these instruments because of their short maturities. The fair value of long-term
debt is estimated based on discounting expected future cash flows at the rates
currently offered to the Company for debt of the same or similar remaining
maturities. Due to the non-interest bearing nature and unspecified payment
terms, it was not practicable to estimate the fair value of the debt due to
affiliate and covenants not-to-compete, however, the use of discounted cash flow
techniques to estimate fair value could result in an estimated fair value
substantially lower than the carrying amount.
[19] Supplemental Disclosures of Cash Flow Information
Cash paid for interest and taxes amounted to $2,175,631 and $53,764 in 1995 and
$709,140 and $-0- in 1994.
During 1995, the Company entered in various capital lease agreements for
equipment at a cost of $762,465.
During December 1994, the Company entered into an agreement to purchase five
system upgrades for existing MRI centers. The cost of these totaled $1,475,000.
Cash paid for interest and taxes amounted to $2,394,747 and $48,029 for the nine
months ended September 30, 1996 and $2,148,042 and $-0- for the nine months
ended September 30, 1995.
During the nine months ended September 30, 1996 and 1995, the Company acquired
equipment under capitalized leases in the amounts of $3,970,727 and $785,124.
[20] Reclassification -Certain items have been reclassified to conform with the
current year's presentation.
[21] Subsequent Events
On February 7, 1996, the Company loaned $300,000 to an officer of the Company.
The loan is due to the Company in 1998. Interest only is payable annually from
inception at a rate of 5-1/2%.
F-28
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #20
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[21] Subsequent Events [Continued]
In January 1996, the Company obtained financing from DVI Financial Services,
Inc. and an affiliate thereof ["DVI"] consisting of a term loan of $2,000,000
and a revolving loan of $6,000,000. The majority of the proceeds were used to
pay current subordinated debt. In addition, other current subordinated debt was
reclassified to long-term per the loan agreements. The pro forma effect of this
financing on the December 31, 1995 balance sheet is as follows:
Assets:
Current Assets $ 12,713,421
Property and Equipment - Net 9,502,005
Other Assets 18,759,496
---------------
Total Assets $ 40,974,922
------------ ===============
Liabilities:
Current Liabilities 12,649,113
Non-Current Liabilities 25,311,634
Total Liabilities 37,960,747
Equity 3,014,175
Total Liabilities and Equity $ 40,974,922
---------------------------- ===============
[22] Unaudited Interim Statements
The financial statements for the nine months ended September 30, 1996 and 1995
are unaudited, however, in the opinion of management all adjustments [consisting
of normal recurring adjustments] necessary to a fair presentation of the
financial statements for these interim periods have been made. The results for
interim periods are not necessary indicative of the results to be obtained for a
full fiscal year.
[23] Subsequent Events [Unaudited]
In September 1996, certain of the Company's subsidiaries borrowed an aggregate
of $4.0 million from DVI. The loans, which mature in September 2001, are payable
in monthly installments over the term of the loans. The Company pays interest
currently at 11.5% per annum, additional interest of 10.5% per annum has been
deferred and is payable on the maturity date of the loans, resulting in an
effective annual interest rate of 22.0%. In connection with these loans, SISC
sold to DVI, for $2,500, a warrant to purchase 250,000 shares of Class A Common
Stock at $2.00 per share, and the Company issued to DVI a warrant to purchase
250,000 shares of Class A Common Stock at $5.00 per share. These warrants are
exercisable for the three month period commencing on the earliest to occur of
(a) the prepayment in full of such loans, (b) an event of default under the loan
and security agreements with respect to such loans, or (c) November 1, 2001. In
addition, the Company agreed that in the event the principal of and interest on
such loans has not been paid in full prior to the November 1, 2001 maturity
date, the Company will issue to DVI a warrant to purchase 1,000,000 shares of
the Common Stock at 80% of the market price per share of such Common Stock on
the date of exercise, exercisable from November 1, 2001 until February 1, 2002.
In September 1996, the Company issued warrants to purchase 250,000 shares of
Class A Common Stock at $5.00 per share to SISC.
In September 1996, the Company signed a letter of intent for an Initial Public
Offering of the sale of its common stock.
F-29
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
NOTES TO COMBINED FINANCIAL STATEMENTS, Sheet #21
[Information as of and for the nine months ended
September 30, 1996 and 1995 are Unaudited]
- --------------------------------------------------------------------------------
[23] Subsequent Events [Unaudited] [Continued]
In October 1996, the Company entered into a non-binding Memorandum of
Understanding with its President/Chief Executive Officer ["CEO"] pursuant to
which, subject to the execution of definitive agreements and the completion of
an Initial Public Offering of the Company's common stock, the CEO agreed to
reduce the outstanding principal amount of the Subordinated Notes payable to him
and his wife, from an aggregate of $2.1 million as of September 30, 1996 to an
aggregate of approximately $1.7 million and exchange such Subordinated Notes for
shares of a newly created series of preferred stock having an annual
non-cumulative dividend of $75,000 and a mandatory redemption price of
approximately $1.7 million. A portion of the reduction in the Subordinated Notes
payable to the CEO reflects the proposed application of the $300,000 loan from
the Company to him to reduce the Subordinated Notes payable to him.
Although the Company files its federal income tax returns as part of a
consolidated group of corporations of which Consolidated is the common parent,
it has calculated its tax provision on the "separate return basis." The current
tax benefit of $692,000 received by the utilization of the Parent Company's tax
net operating losses for the nine months ended September 30, 1996 has been
properly recorded as a liability to the Parent and then subsequently forgiven,
resulting in an increase to additional paid-in capital in accordance with
Accounting Principles Bulletin No. 26.
The actual tax provision of $297,219 for the nine months ended September 30,
1996 represents state income taxes and Commonwealth of Puerto Rico income taxes
only. The provision for federal income taxes was completely eliminated by the
applicable deferred tax asset arising from the temporary differences caused by
the depreciation, amortization and bad debt expense recorded for book purposes
versus tax purposes. Such expense pertaining to goodwill, customer lists
[managed care contracts] and covenants-not-to-compete amortization and bad debt
reserve which was recorded for financial reporting purposes exceeded the expense
recorded for tax purposes by approximately $3,356,000 thereby creating the
deferred tax asset.
. . . . . . . . .
F-30
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
International Magnetic Imaging, Inc. [Predecessor]
We have audited the accompanying combined statement of
operations, changes in equity, and cash flows of International Magnetic Imaging,
Inc. [Predecessor] and its affiliates for the year ended December 31, 1993, and
the nine months ended September 30, 1994. These combined statement of
operations, changes in equity, and cash flows are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined statement of operations, changes in equity, and cash flows based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the combined statements of
operations, changes in equity, and cash flows are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the combined statements of operations, changes in equity, and
cash flows. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of combined statements of operations, changes in equity, and cash
flows. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined statements of operations, changes
in equity, and cash flows referred to above present fairly, in all material
respects, combined results of operations and cash flows of International
Magnetic Imaging, Inc. [Predecessor] and its affiliates for the year ended
December 31, 1993 and the nine months ended September 30, 1994, in conformity
with generally accepted accounting principles.
MORTENSON AND ASSOCIATES, P. C.
Certified Public Accountants.
Cranford, New Jersey
April 22, 1994
F-31
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
- --------------------------------------------------------------------------------
COMBINED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
Nine months ended Year ended
September 30, December 31,
1 9 9 4 1 9 9 3
------- -------
Revenue:
Net Patient Service Revenue $ 21,161,740 $ 26,572,387
--------------- ---------------
Expenses:
Radiology Fees 487,365 401,506
Equipment Maintenance 920,394 1,364,450
Patient Service Costs and Expenses 1,401,912 1,422,021
Salaries and Benefits 6,059,210 9,333,088
Professional Services 1,390,211 329,733
Other Management, General and
Administrative 3,099,641 4,996,206
Provision for Bad Debts 966,018 849,620
Depreciation and Amortization 2,459,742 3,545,116
--------------- ---------------
Total Expenses 16,784,493 22,241,740
--------------- ---------------
Operating Income Before Other Income
[Expense] 4,377,247 4,330,647
Other Income [Expense]:
Loss on Disposal of Assets (523,718) (194,172)
Interest Income and Other 437,684 456,174
Interest Expense (610,435) (1,076,249)
--------------- ---------------
Net Income - Historical 3,680,778 3,516,400
Charge in Lieu of Income Taxes 1,472,311 1,406,560
--------------- ---------------
Pro Forma Net Income $ 2,208,467 $ 2,109,840
=============== ===============
See Notes to Combined Statement of Operations,
Changes in Equity, and Cash Flows.
F-32
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
- --------------------------------------------------------------------------------
COMBINED STATEMENTS OF CHANGES IN EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Partners' Capital Notes Total
Stock Capital Earnings General Limited Receivable Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balances - December 31, 1992 $ 8,770 $ 4,768,336 $ 369,480 $ (1,071,122) $ 7,846,566 $ (919,000) $ 11,003,030
Issuance of Common Stock -- (22,000) -- -- -- -- (22,000)
Partners' Capital Contributions -- -- -- -- 20,000 -- 20,000
Additional Capital Contributed -- 1,383,728 -- -- 10,000 23,000 1,416,728
Partners' Capital Withdrawals -- -- -- (6,431) (114,080) -- (120,511)
Partners' Distributions -- -- -- (115,263) (2,558,509) -- (2,673,772)
Offering Costs -- (185,019) -- -- 42 -- (184,977)
Dividends Paid -- -- (1,864,827) -- -- -- (1,864,827)
Net Income -- -- 1,701,911 (312,475) 2,126,964 -- 3,516,400
------- ----------- ---------- ------------ ----------- ---------- ------------
Balances - December 31, 1993 8,770 5,945,045 206,564 (1,505,291) 7,330,983 (896,000) 11,090,071
Partners' Distributions -- -- -- (137,850) (2,745,379) -- (2,883,229)
Dividends Paid -- -- (1,247,890) -- -- -- (1,247,890)
Net Income -- -- 1,633,385 48,275 1,999,118 -- 3,680,778
------- ----------- ---------- ------------ ----------- ---------- ------------
Balances - September 30, 1994
[Unaudited] $ 8,770 $ 5,945,045 $ 592,059 $ (1,594,866) $ 6,584,722 $ (896,000) $ 10,639,730
======= =========== ========== ============ =========== ========== ============
</TABLE>
See Notes to Combined Statement of Operations,
Changes in Equity, and Cash Flows.
F-33
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
- --------------------------------------------------------------------------------
COMBINED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nine months ended Year ended
September 30, December 31,
1 9 9 4 1 9 9 3
------- -------
<S> <C> <C>
Operating Activities:
Net Income $ 3,680,778 $ 3,516,400
Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities:
Provision for Bad Debts 966,018 849,620
Depreciation and Amortization 2,459,742 3,545,116
Loss on Disposal of Property and Equipment 523,718 194,172
Changes in Operating Assets and Liabilities:
Restricted Cash (983,000) --
Accounts Receivable - Net (2,571,920) (180,989)
Radiology Fees Receivable -- 662,625
Prepaid Expenses and Other 2,704,197 (608,053)
Accounts Payable and Other Liabilities (522,558) (806,501)
--------------- ---------------
Net Cash - Operating Activities 6,256,975 7,172,390
--------------- ---------------
Investing Activities:
Property and Equipment Additions - Net (466,429) (995,010)
Proceeds from Sale of Equipment 469,103 --
--------------- ---------------
Net Cash - Investing Activities 2,674 (995,010)
--------------- ---------------
Financing Activities:
Stock Redemption -- (22,000)
Shareholders' Dividends (1,247,890) (1,864,827)
Partners' Capital Contributions -- 1,633,650
Partners' Distributions (2,883,229) (2,673,772)
Partners' Capital Withdrawals -- (120,511)
Offering Costs -- (184,977)
Proceeds from Notes Payable and Long-Term Net -- 1,282,013
Net Repayments on Lines of Credit -- (700,000)
Payments on Notes Payable and Long-Term Net (877,366) (2,660,591)
Payments on Capital Lease Obligations (654,452) (780,449)
--------------- ---------------
Net Cash - Financing Activities (5,662,937) (6,091,464)
--------------- ---------------
Net Increase in Cash and Cash Equivalents 596,712 85,916
Cash and Cash Equivalents - Beginning of Years 1,752,826 1,666,910
--------------- ---------------
Cash and Cash Equivalents - End of Years $ 2,349,538 $ 1,752,826
=============== ===============
</TABLE>
See Notes to Combined Statement of Operations,
Changes in Equity, and Cash Flows.
F-34
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY,
AND CASH FLOWS
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies
The accounting and reporting policies of International Magnetic Imaging, Inc.
["IMI"] and its affiliates conform to generally accepted accounting principles.
The following summarizes the more significant of these policies.
Operations - The principal operations of International Magnetic Imaging, Inc.
and Affiliates [hereinafter collectively referred to as the "Company"] are in
the establishment and operation of outpatient diagnostic centers providing
magnetic resonance imaging ["MRI"] services. Operations of the centers are
conducted through nine limited partnerships and one corporation and are located
in various states and the U.S.
Commonwealth of Puerto Rico.
The general partner of each of the limited partnerships are corporate entities
incorporated in the state the limited partnership conducts operations. The
principal users of the Company's magnetic resonance imaging services are
practicing physicians, a number of which are limited partners, located in
general proximity to the various centers. Each of the centers are managed by a
management company, IMI, whose principal shareholders are related to the general
partner of the limited partnership through common ownership.
The Florida legislature has enacted the "Patient Self-Referral Act" [the "Act"]
which provides that after October 1, 1994, a physician cannot refer patients to
an entity which provides diagnostic imaging services in which the physician has
an investment interest, as defined in the Act [See Note 12].
Basis of Presentation - The combined statements of operations, changes in
equity, and cash flows include the accounts of the following affiliated
entities. The year the MRI centers commenced operations is shown
parenthetically.
Operating Centers:
Physicians Outpatient Diagnostic Center, Ltd. [1985] ["PODC"]
Pine Island Magnetic Resonance Imaging Center, Ltd. [1986] ["Pine Island"]
Magnetic Resonance Institute of North Miami Beach, Ltd. [1988] [" N. Miami"]
Magnetic Resonance Institute of Boca Raton, Ltd. [1988] ["Boca Raton"]
Magnetic Resonance Institute of South Dade, Ltd. [1989] ["South Dade"]
Oakland Magnetic Resonance Institute, Ltd. [1990] ["Oakland Park"]
San Juan M.R.I., Inc. [1990] ["San Juan"]
Magnetic Resonance Institute of Arlington, L.P. [1990] ["Arlington"]
Magnetic Resonance Institute of Greater Kansas City, L.P. [1991]
["Kansas City"]
Magnetic Resonance Institute of Orlando, Ltd. [1992] ["Orlando"]
General Partners:
P.O.D.C., Inc.
S.A.S.G.P., Inc.
Askay, Inc.
Magnetic Resonance Institute of Boca Raton, Inc.
Magnetic Resonance Institute of South Dade, Inc.
Oakland Magnetic Resonance Institute, Inc.
Magnetic Resonance Institute of Arlington, Inc.
Magnetic Resonance Institute of Greater Kansas City, Inc.
Magnetic Resonance Institute of Orlando, Inc.
Management Companies:
International Magnetic Imaging, Inc. ["IMI"]
F-35
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY,
AND CASH FLOWS, Sheet #2
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies [Continued]
Radiology Company:
J. Sternberg and S. Schulman, M.D. Corp.
The accounts of IMI and its affiliates are combined because of the common
ownership interests in the management company, operating MRI entities, and the
general partners that exercise operating control over such entities. All
significant intercompany balances and transactions are eliminated in
combination. The corporate general partners account for their respective
investments in the limited partnerships using the equity method.
The financial statements, for all periods presented, have been prepared in
accordance with the American Institute of Certified Public Accountants' audit
and accounting guide "Audits of Providers of Health Care Services."
Cash and Cash Equivalents - The Company considers all investments purchased with
a maturity of three months or less to be cash equivalents.
Allowance for Doubtful Accounts - Patient accounts are reserved for when, in
management's opinion, the collectibility of a portion of, or the entire
outstanding balance, is doubtful.
Property and Equipment - Property and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on a straight-line basis over
the estimated useful lives of the related assets. Leasehold improvements are
stated at cost less accumulated amortization. Such improvements are amortized
over the shorter of the term of the lease or the useful life of the improvement.
Medical Equipment financed under capital leases is recorded in property and
equipment at cost at the inception of the lease. Amortization of assets held
under capital leases is included in depreciation expense and computed using the
straight-line method.
Property and equipment are depreciated over the following estimated useful
lives:
Years
Buildings and Improvements 25
Leasehold Improvements 10 - 25
Medical Equipment 6
Furniture and Equipment 5 - 7
Expenditures for maintenance, repairs, and replacement of minor items are
charged to earnings as incurred. Major additions and improvements which extend
the useful life or improve the operating performance of the related asset are
capitalized. Upon disposition, the cost and related accumulated depreciation are
removed from the accounts and any resulting gain or loss is reflected in
operations for the period.
Intangible Assets:
Organization Costs - Expenses incurred in connection with the formation of each
of the entities have been capitalized and are being amortized over a period of
five years using the straight-line method. Accumulated amortization of such
costs at December 31, 1993 is $90,962.
F-36
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY,
AND CASH FLOWS, Sheet #3
- --------------------------------------------------------------------------------
[1] Summary of Significant Accounting Policies [Continued]
Deferred Financing Costs - Deferred financing costs are being amortized
using the straight-line method, which approximates the interest method, over the
term of the related financing agreement. Accumulated amortization of such costs
at December 31, 1993 is $75,640.
Income Taxes - The Company prepares its combined financial statements on the
accrual basis of accounting. No provision has been made for Federal and State
income taxes for the partnership entities as the individual general and limited
partners are responsible for such taxes on their respective share of earnings.
Likewise, the general partner corporate entities and the management companies
have elected "S corporation" status under the Internal Revenue Code and the
taxation of the earnings thereof is the responsibility of the individual
shareholders. As of December 31, 1993, the Company's sole magnetic resonance
institute organized for tax purposes as a "C" corporation, San Juan MRI, Inc.
["San Juan"] has available, for its operations only, approximately $1,041,000 of
income tax loss carryforwards to offset future taxable income of which $681,000,
$256,000 and $104,000 expires in 1997, 1998 and 1999, respectively. At December
31, 1993 , San Juan has net operating loss carryforwards for financial reporting
purposes of approximately $1,312,000.
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Statement No. 109, "Accounting for Income Taxes." The
statement is effective for the fiscal year 1993. The implementation of such
statement has not had a material impact on the Company's financial position.
Net Patient Service Revenue - Net patient service revenue is reported at the
estimated net realizable amounts from patients, third-party payors, and others
for services rendered, including provisions for estimated contractual
adjustments under reimbursement agreements with third-party payors. The Company
has historically not provided any significant amount of charity care.
[2] Property and Equipment
Depreciation expense for the year ended December 31, 1993 and the nine months
ended September 30, 1994 is $3,501,284 and $2,374,931, respectively.
[3] Leases
The Company leases real estate for certain of its MRI centers and its
administrative offices under noncancellable operating leases expiring during the
next fifteen years. The real estate leases contain clauses which permit
adjustments of lease payments based upon changes in the "Consumer Price Index",
options to renew the leases for periods up to an additional fifteen years and
additional payments for a proportionate share of real estate taxes and common
area operating expenses.
Several of the MRI centers lease the magnetic resonance imaging equipment under
noncancellable capital leases, the last of which expires in 1999. In January
1993, the Company restructured certain capital lease agreements. The
restructuring extends the term of the leases and, for certain of those leases,
includes a balloon payment representing the buy-out of the leased equipment at
the end of the lease term.
F-37
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY,
AND CASH FLOWS, Sheet #4
- --------------------------------------------------------------------------------
[3] Leases [Continued]
As of December 31, 1993, the future minimum lease payments under capital leases
and noncancellable operating leases are:
Capital Operating
Leases Leases
Fiscal Years
1994 $ 1,323,054 $ 352,308
1995 1,294,373 205,426
1996 1,162,019 139,317
1997 877,975 140,380
1998 668,248 141,472
Thereafter 175,294 264,768
--------------- ---------------
Total Minimum Lease Payments 5,500,963 $ 1,243,671
===============
Less Amount Representing Interest (1,188,668)
Present Value of Net Minimum
Capital Lease Payments $ 4,312,295
---------------------- ===============
Total rental expense for the year ended December 31, 1993 and the nine months
ended September 30, 1994 is $591,207 and $562,003, respectively.
[4] Long Term Debt
Maturities of long-term debt as of December 31, 1993 are as follows:
Years ended
December 31, Amount
1994 $ 3,138,325
1995 1,388,631
1996 326,399
1997 124,399
---------------
Total $ 4,977,754
----- ===============
Interest paid is $538,842, during the year ended December 31, 1993 and $585,781
during the nine months ended September 30, 1994.
[5] Debentures
San Juan has issued debentures in the principal amount of $4,000 each, which
bear interest at the rate of 10%, of which $560,000 are due July 1, 1995 and
$88,000 are due on July 1, 1997. The debentures are subject to prepayment, in
whole or in part, at any time. As long as the debenture principal and accrued
interest thereon is outstanding, San Juan cannot pay dividends to its
shareholders or management fees to IMI. At December 31, 1993, debentures in the
amount of $648,000, were outstanding. Management fees accrued to IMI was
$1,905,602, at December 31, 1993.
F-38
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY, AND
CASH FLOWS, Sheet #5
- --------------------------------------------------------------------------------
[6] Shareholders' Equity - General Partners
The number of common shares authorized, issued and outstanding, and the amount
of issued and outstanding common stock of the general partner corporate entities
included in the combined financial statements at December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
Additional
Par Shares Issued and Common Paid-in
Value Authorized Outstanding Stock Capital
<S> <C> <C> <C> <C> <C>
S.A.S.G.P., Inc. $ 1.00 500 300 $ 300 $ 134,200
Askay, Inc. $ 1.00 7,500 300 $ 300 $ 164,000
MRI of Boca Raton, Inc. $ 1.00 7,500 300 $ 300 $ 165,200
MRI of South Dade, Inc. $ 1.00 7,500 300 $ 300 $ 111,000
Oakland MRI, Inc. $ 1.00 7,500 300 $ 300 $ 81,000
MRI of Arlington, Inc. $ 1.00 7,500 300 $ 0 $ 85,000
MRI of Greater Kansas City, Inc. $ 1.00 7,500 300 $ 300 $ 110,000
MRI of Orlando, Inc. $ 1.00 7,500 300 $ 300 $ 76,000
</TABLE>
[7] Related Party Transactions
San Juan Loans - IMI and a related radiology company, not included in the
combined financial statements, provided $750,000 revolving lines of credit to
San Juan. Borrowings under the lines of credit are unsecured and bear interest
at a rate of 9.5% at December 31, 1993. In October 1990, the proceeds of the
notes were assigned by the creditor entities to the principal shareholders of
IMI and the radiology company and treated as dividend distributions. The amount
attributable to IMI was $216,000. Borrowings under the lines of credit are
payable in full at December 31, 1994. At December 31, 1993, borrowings amounted
to $174,124.
Interest paid on the notes during 1993 to the principal shareholders is $30,276.
Interior Design Fees - Interior design services and the purchase of furniture,
fixtures, and certain leasehold improvements for the Company are performed by an
entity owned by the spouse of one of the Company's principal shareholders.
Aggregate payments for the design services and reimbursements for purchases of
furniture and equipment during the year ended December 31, 1993 was $2,568.
F-39
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY,
AND CASH FLOWS, Sheet #6
- --------------------------------------------------------------------------------
[8] Supplemental Noncash Investing and Financing Information
Capital lease obligations of $222,860 in 1993 were incurred when the Company
entered into leases for new medical equipment.
[9] Commitments
Professional Liability Insurance - Each of the operating entities carries
professional malpractice and general liability insurance. The radiology entities
that provide the radiology services are covered by their own medical malpractice
insurance. The Company has procedures in place to monitor coverage and incidents
of significance.
[10] Employee Benefit Plan
During 1993, the Company began sponsoring the International Magnetic Imaging,
Inc. 401(K) Savings Plan. Employees become eligible for participation after
completion of 1,000 hours of eligible service during the first twelve months of
employment or in any later plan year. Participants may elect to contribute from
1% to 15% of their compensation, as defined. The Company may choose to make a
matching contribution to the plan for each participant who has elected to make
tax deferred contributions for the plan year. The Company's matching
contribution percentage will be decided each year by the Company, not to exceed
$1,000. For 1993, the Company decided to match 100% of the employees
contribution, up to the maximum amount allowable under the plan. This amounted
to $73,523 for 1993.
[11] Restructure
[A] In April of 1994 the Company restructured certain capital lease agreements
to extend the terms of such leases. The net present value of the future minimum
lease payments under the restructured agreement had no change, however, the net
increase or [decrease] in the future minimum lease payments under these capital
leases is as follows:
Fiscal Increase
Years [Decrease]
1994 $ (156,478)
1995 (27,532)
1996 (27,532)
1997 81,755
1998 307,002
--------------
Total Net Increase in Minimum Lease Payments 177,215
Less Increase in Amount Representing Imputed Interest (177,215)
Increased Net Present Value of Capital Lease Payments $ --
----------------------------------------------------- ==============
F-40
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. [PREDECESSOR] AND AFFILIATED ENTITIES
NOTES TO COMBINED STATEMENTS OF OPERATIONS, CHANGES IN EQUITY,
AND CASH FLOWS, Sheet #7
- --------------------------------------------------------------------------------
[11] Restructure [Continued]
[B] Additionally, in February and April 1994, the Company renegotiated and
refinanced certain promissory notes such that the interest rates and terms were
increased. The renegotiation and refinancing resulted in a $259,575 charge to
earnings and a $514,719 decrease in cash. The net increase (decrease) in the
annual maturities of debt is as follows:
Fiscal Increase
Years (Decrease)
1994 $ (176,955)
1995 7,320
1996 144,751
1997 111,905
1998 211,031
Thereafter 216,667
--------------
Net Increase $ 514,719
------------ ==============
[C] Furthermore, during the first two quarters of 1994, the Company disposed of
certain fixed assets which were no longer in operational use. The net cost of
the assets disposed was $508,248 resulting in a charge to earnings of $508,248.
[12] Sale of Business
In May 1994, an agreement was reached between IMI Acquisition Corporation
[Buyer], a wholly owned subsidiary of Consolidated Technology Group, Ltd.
["Consolidated"] and the shareholders of International Magnetic Imaging, Inc.
[Seller] in which buyer intends to acquire, own and operate all of the centers
within this combined group. The selling price for the Centers, together with IMI
and MD Corp., is approximately $27 million of which $6 million is payable in
cash and $21 million in the acquiring subsidiary's 7% subordinated installment
notes ["Notes"], and Consolidated is issuing shares of its Common Stock. The
Notes to be issued in connection with acquisition of the Centers mature
primarily in September 1996, with Notes in the principal amount of $860,000
maturing in September 1997. The Notes to be issued to acquire IMI and the assets
of MD Corp. mature in September 1997 and September 1999, respectively.
. . . . . . . . .
F-41
<PAGE>
No dealer, salesperson or any other person
has been authorized to give any information
or to make any representations other than
those contained in this Prospectus in
connection with the offer made by this
Prospectus, and, if given or made, such
information or representations must not be 1,000,000 Shares of
relied on as having been authorized by the Common Stock
Company or by the Underwriters. This 1,500,000 Series A
Prospectus does not constitute an offer to Redeemable Common Stock
sell or a solicitation of an offer to buy any Purchase Warrants
securities offered hereby to any person in
any jurisdiction in which such offer or
solicitation was not authorized or in which
the person making such offer or solicitation
is not qualified to do so or to anyone to International Magnetic
whom it is unlawful to make such offer or Imaging, Inc.
solicitation. Neither the delivery of this
Prospectus nor any sale made hereunder shall,
under any circumstances, create any
implication that there has been no change in
the circumstances of the Company of the facts
herein set forth since the date of this
Prospectus.
TABLE OF CONTENTS
Page
----
Prospectus Summary... .....................3
Risk Factors...............................7
Dilution...................................16
Use of Proceeds............................17
Capitalization.............................19
Selected Financial Data ...................21
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................22
Business...................................27 PROSPECTUS
Management.................................39
Agreements with DVI........................43
Certain Transactions.......................44
Principal Stockholders.....................48
Selling Security Holder....................49
Description of Securities..................50
Underwriting...............................55
Legal Matters..............................57
Experts....................................57
Additional Information ....................57
Index to Commbined Financial Statements...F-1
Monroe Parker Securities, Inc.
Until__________, 1996 (25 days after the date
of this Prospectus) all dealers effecting
transactions in the registered securities,
whether or not participating in the
distribution, may be required to deliver a
Prospectus. This is in addition to the
obligation of dealers to deliver a Prospectus
when acting as underwriters and with respect
to their unsold allotments or subscriptions. ,1996
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
SEC registration fee $ 7,900.67
NASD registration fee 2,788.58
Nasdaq listing fee 10,000.00
Printing and engraving *
Accountants' fees and expenses *
Legal fees *
Transfer agent's and warrant agent's fees and expenses *
Blue Sky fees and expenses *
Underwriter's non-accountable expense allowance 156,750.00
Underwriter's consulting agreement 100,000.00
Miscellaneous . *
----------
Total $785,000.00**
- ---------
* To be supplied by amendment.
** Estimated
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law and Article EIGHTH
of the Company's Restated Certificate of Incorporation (Exhibit 3.1) provide for
indemnification of directors and officers of the Company under certain
circumstances.
Reference is made to Paragraphs 6 and 7 of the Underwriting Agreement
(Exhibit 1.1) with respect to indemnification of the Company and the
Underwriter. In addition, the Series B Warrants (Exhibit 10.7) and the
subscription agreement relating to the January 1996 Interim Notes (Exhibit
10.12) also include indemnification provisions.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, offices or controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Securities
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
Item 15. Recent Sales of Unregistered Securities
Set forth below is information concerning the issuance by the
Registrant of its securities since its organization in August 1994. All
securities issued are restricted securities and the certificates bear
restrictive legend.
(a) On September 30, 1994, the Registrant issued to SIS Capital Corp.
("SISC") 9,200,000 shares of Common Stock, 1,000,000 shares of Class A Common
Stock, 5,000 shares of Series A Redeemable Preferred Stock and 5,000 shares of
Series B Convertible Redeemable Preferred Stock ("Series B Preferred Stock").
(b) The issuances referred to in Paragraph (a) of this Item 15 reflect
the recapitalization effective November , 1996, pursuant to which the 1,000
shares of Common Stock outstanding on such date became and were converted into
9,200,000 shares of Common Stock, 1,000,000 shares of Class A Common Stock,
5,000 shares of Series A Reedeemable Preferred Stock and 5,000 shares of Series
B Preferred Stock.
(c) Also in connection with the organization of the Company, in
September 1994, the Company issued to SISC for nominal consideration Series B
Common Stock Purchase warrants to purchase 1,000,000 shares of Common Stock at
$2.00 per share, 1,250,000 shares of Class A Common Stock at $2.00 per share.
II-1
<PAGE>
(d) In October 1994, the Company issued, for nominal consideration,
warrants to purchase an aggregate of 500,000 shares of Class A Common Stock at
$2.00 per share to the following persons, all of whom were employed or engaged
by the Company.
Name Warrants
- ---- --------
SIS Capital Corp. 55,000
George W. Mahoney 100,000
Norman J. Hoskin 50,000
E. Gerald Kay 50,000
Robert L. Blessey 50,000
Emillio Torres, M.D. 27,500
Charles Fitzpatrick 22,500
Lee Wingeier 22,500
Brian Wade 22,500
Gary Feldsberg, M.D. 16,000
Cary Hoffman, M.D. 16,000
Brian Murphy, M.D. 16,000
Stanley Rosensweig, M.D. 16,000
Fred Steinberg, M.D. 16,000
Lewis Friloux, M.D. 11,000
Mary McNaughton, M.D. 9,000
--------
500,000
(e) In September 1996, in connection with loans from DVI Financial
Services, Inc. d/b/a DVI Capital ("DVI"), the Company issued to DVI a warrant to
purchase 250,000 shares of Class A Common Stock at an exercise price of $5.00
per share. In September 1996, the Company issued to SISC a warrant to purchase
250,000 shares of Class A Common Stock at $5.00 per share. In connection with
the DVI loans, SISC sold to DVI a warrant to purchase 250,000 shares of Class A
Common Stock at $2.00 per share. See Paragraph (a) of this Item 15.
The issuances described in this Item 15 are exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
as transactions not involving a public offering, except that the issuance of
securities pursuant to the recapitalization described in Paragraph (b) is exempt
from such registration requirements pursuant to Section 3(a)(9) of the
Securities Act. No underwriting was involved in connection with any of such
issuances and no fees or commissions were paid.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
1.1 Form of Underwriting Agreement.
1.2 Form of Underwriter's Purchase Option.
1.3 Form of Selected Dealer Agreement.
1.4 Form of Consulting Agreement between the Registrant and the
Underwriter.
2.1(1) General Partnership Interest Purchase Agreement dated July 19,
1994 by and between IMI Acquisition of Boca Raton Corporation
and Magnetic Resonance Institute of Boca Raton, Inc.
II-2
<PAGE>
2.2(1) Escrow Agreement dated July 19, 1994 by and among IMI
Acquisition of Boca Raton Corporation, Magnetic Resonance
Institute of Boca Raton, Inc. and Capital Bank.
2.3(1) Subscription Agreement dated July , 1994 by and between IMI
Ltd. Partner Acq. of Boca Raton, Inc. and Magnetic Resonance
Institute of Boca Raton, Inc.
2.4(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq of Boca Raton, Inc., Magnetic Resonance Institute
of Boca Raton, Ltd., and Capital Bank.
2.5(2) Modification and Extension of Promissory Note/Mortgage of
Magnetic Resonance Institute of Boca Raton, Ltd. to DVI.
2.6(1) General Partnership Interest Purchase Agreement by and between
IMI Acquisition of North Miami Beach Corporation and Askay,
Inc.
2.7(1) Escrow Agreement dated July 19, 1994 by and between IMI
Acquisition of No Miami Beach Corporation, Askay, Inc., and
Capital Bank.
2.8(1) Subscription Agreement dated July 19, 1994 by and between IMI
Ltd. Partner Acq. of North Miami Beach, Inc. and Askay, Inc.
2.9(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq. of North Miami Beach Inc., Magnetic Resonance
Institute of North Miami Beach Ltd., and Capital Bank.
2.10(1) General Partnership Interest Purchase Agreement dated July 19,
1994 by and between IMI Acquisition of South Dade Corporation
and Magnetic Resonance Institute of South Dade, Inc.
2.11(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq. of South Dade, Magnetic Resonance
Institute of South Dade, Ltd. and Capital Bank.
2.12(1) Subscription Agreement dated July 19, 1994 by and between IMI
Ltd. Partner Acq. of South Dade, Inc. and Magnetic Resonance
Institute of South Dade, Inc.
2.13(1) General Partnership Interest Purchase Agreement dated July 19,
1994 by and between IMI Acquisition of Orlando Corporation and
Magnetic Resonance Institute of Orlando, Inc.
2.14(1) Escrow Agreement dated July 19, 1994 by and among IMI
Acquisition of Orlando Corporation, Magnetic Resonance
Institute of Orlando, Inc. and Capital Bank.
2.15(1) Subscription Agreement dated July 19, 1994 by and between IMI
Ltd. Partner Acq. of Orlando, Inc. and Magnetic Resonance
Institute of Orlando, Inc.
2.16(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq. of Orlando, Inc., Magnetic Resonance
Institute of Orlando, Ltd. and Capital Bank.
2.17(1) General Partnership Interest Purchase Agreement dated July 19,
1994 by and between IMI Acquisition of Oakland Park
Corporation and Oakland Magnetic Resonance Institute, Inc.
2.18(1) Subscription Agreement dated July 19, 1994 by and between IMI
Ltd. Partner Acq. of Oakland Park, Inc. and Oakland Magnetic
Resonance Institute, Inc.
2.19(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq. of Oakland Park, Inc., Oakland Magnetic Resonance
Institute, Inc. and Capital Bank.
2.20(1) General Partnership Interest Purchase Agreement dated July 19,
1994 by and between IMI Acquisition of Pine Island Corporation
and S.A.S.G.P., Inc.
2.21(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq. of Pine Island, Inc., S.A.S.G.P., Inc. and
Capital Bank.
2.22(1) Subscription Agreement dated July 19, 1994 by and between IMI
Ltd. Partner Acq. of Pine Island, Inc. and S.A.S.G.P., Inc.
2.23(1) Escrow Agreement dated July 19, 1994 by and among IMI Ltd.
Partner Acq. of Pine Island, Inc., Pine Island Magnetic
Resonance Imaging Center, Ltd. and Capital Bank.
2.24(2) Mortgage and Security Agreement of Pine Island Magnetic
Resonance Imaging Center, Ltd. To DVI.
2.25(1) Stock Purchase Agreement dated July 19, 1994 by and between MD
Ltd. Partner Acq. Corporation and Stephen A. Schulman, MD and
Stephanie S. Schulman, James H. Sternberg, MD and Marsha
Sternberg, Ashley Kaye, MD and International Magnetic Imaging,
Inc.
2.26(1) Asset Purchase Agreement dated as of July 19, 1994 by and
between MD Acquisition Corporation, J. Sternberg and S.
Schulman M.D. Corp.
2.27(1) Asset Purchase Agreement dated as of August 29, 1994, by and
between IMI Acquisition of Kansas Corporation and Magnetic
Resonance Institute of Greater Kansas City, L.P.
2.28(2) Mortgage and Security Agreement of Magnetic Resonance Institute
of Greater Kansas City, L.P. to DVI.
2.29(1) Asset Purchase Agreement dated as of August 29, 1994, by and
between IMI Acquisition of Puerto Rico Incorporated, as
assignee of DCP Acquisition Corp., and San Juan MRI, Inc.
2.30(1) General Partnership Interest Purchase Agreement dated as of
August 29, 1994 by and between PODC Acquisition Corporation and
P.O.D.C., Inc., A.F.-B.P.O.D.C., Inc., G.S.L.P.O.D.C., Inc. and
J.M.S.P.O.D.C., Inc.
2.31(1) Subscription Agreement dated as of August 29, 1994 by and
between PODC Ltd. Partner Acq. Corporation and Physicians
Outpatient Diagnostic Center, Ltd.
II-3
<PAGE>
2.32(1) Asset Purchase Agreement dated as of October 20, 1994, by and
between IMI Acquisition of Arlington Corp. and Magnetic
Resonance Institute of Arlington, L.P. Amendment dated April
13, 1994 to the Purchase Agreement.
3.1 Restated Certificate of Incorporation.
3.2 Certificate of designation with respect to the Series A
Preferred Stock and Series B Preferred Stock.
3.3 By-Laws
4.1 Form of Warrant Agreement among the Registrant and American
Stock Transfer & Trust Company, as Warrant Agent, to which the
form of Series A Redeemable Common Stock Purchase Warrant is
included as an exhibit.
5.1(2) Opinion of Esanu Katsky Korins & Siger.
10.1(1) Loan and Security Agreement dated as of September 30, 1994, by
and between IMI Acquisition of Boca Raton Corporation, IMI
Limited Partner Acquisition of Boca Raton, Inc., as Borrowers,
IMI Acquisition Corporation, as Guarantor and DVI, as Lender.
[Substantially identical Loan and Security Agreements among
other subsidiaries, IMI Acquisition Corporation and DVI were
executed, but are not filed as exhibits.]
10.2(1) Secured promissory notes dated as of September 30, 1994 to DVI.
10.3(1) Unconditional continuing guaranties dated as of September 30,
1994, between DVI and IMI Acquisition Corporation.
10.4(1) Security agreements (pledge) dated as of September 30, 1994,
between IMI Acquisition Corporation, as Guarantor and
DVI, as Lender. [Substantially idnetical guaranties among IMI
Acquisition Corporation and DVI, dated as of September 30,
1994, but are not filed as exhibits]
10.5(1) Common Stock Purchase Warrant issued by Consolidated Technology
Group Ltd. to DVI.
10.6 Loan and Security Agreement dated as of April 3, 1995, by and
between Magnetic Resonance Institute of Arlington, Ltd., as
Borrower, IMI Acquisition Corporation, as Guarantor, and DVI,
as Lender. [Substantially identical Loan and Security
Agreements among other subsidiaries, as Borrowers, IMI
Acquisition Corporation, as Guarantor, and DVI, as Lender, were
executed as of April 3, 1995, but are not filed as exhibits.]
10.7 Secured promissory notes dated as of April 3, 1995 to DVI.
10.8 Unconditional continuing guaranty dated as of April 3, 1995
between DVI and IMI Acquisition Corporation. [Substantially
identical guaranties between the same parties were executed as
of April 3, 1995, but are not filed as exhibits.]
10.9 Loan and Security Agreement dated as of December 29, 1995, by
and between Magnetic Resonance Institute of Boca Raton, Ltd.,
Magnetic Resonance Institute of South Dade, Ltd., Pine Island
Magnetic Resonance Imaging Center, Ltd., and Physicians'
Outpatient Diagnostic Center, Ltd., as Borrowers, and
International Magnetic Imaging, Inc., IMI Acquisition of
Arlington Corp., IMI Acquisition of Puerto Rico Corporation,
IMI Acquisition of Kansas Corporation, Magnetic Resonance
Institute of North Miami Beach, Ltd., and MD Acquisition
Corporation, as Guarantors, and DVI Business Credit Corporation
("DVIBCC"), as Lender. [Substantially identical Loan and
Security Agreements among the same parties with the Borrowers,
here, in the place of the Guarantors and the Guarantors, here,
with the exception of International Magnetic Imaging, Inc., in
the place of the Borrowers, and DVIBCC, as Lender, were
executed as of December 29, 1995, but are not filed as
exhibits.]
10.10 Secured promissory notes dated as of December 29, 1995 to
DVIBCC.
10.11 Unconditional continuing guaranties dated as of December 29,
1995 between DVIBCC and International Magnetic Imaging, Inc.
10.12 Secured unconditional continuing guaranties dated as of
December 29, 1995 between DVIBCC and IMI Acquisition of
Arlington Corp., IMI Acquisition of Kansas Corporation, IMI
Acquisition of Puerto Rico Corporation, Magnetic Resonance
Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd. and MD Acquisition Corporation; and
DVIBCC and International Magnetic Imaging, Inc., Magnetic
Resonance Institute of Boca Raton, Ltd., Magnetic Resonance
Institute of South Dade, Ltd., Pine Island Magnetic Resonance
Imaging Center, Ltd. and Physicians' Outpatient Diagnostic
Center, Ltd.
10.13 Loan and Security Agreement dated as of January 24, 1996, by
and between IMI Acquisition of Arlington Corp., IMI Acquisition
of Puerto Rico Corporation, IMI Acquisition of Kansas
Corporation, Magnetic Resonance Institute of North Miami Beach,
Ltd., Oakland Magnetic Resonance Institute, Ltd., MD
Acquisition Corporation, Magnetic Resonance Institute of Boca
Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and
Physicians' Outpatient Diagnostic Center, Ltd., as Borrowers,
International Magnetic Imaging, Inc., as Guarantor and DVI, as
Lender.
10.14 Secured promissory note dated as of January 24, 1996 to DVI.
10.15(2) Unconditional continuing guaranty dated as of January 24, 1996
between DVI and International Magnetic Imaging, Inc.
10.16(2) Loan and Security Agreement dated as of January 25, 1996, by
and between Magnetic Resonance Institute of North Miami Beach,
Ltd., as Borrower, International Magnetic Imaging, Inc., as
Guarantor, and DVI, as Lender.
10.17(2) Secured promissory note dated as of January 25, 1996 to DVI.
10.18(2) Unconditional continuing guaranty dated as of January 25, 1996
between DVI and International Magnetic Imaging, Inc.
10.19(2) Loan and Security Agreement dated as of July 29, 1996, by and
between Magnetic Resonance Institute of South Dade, Ltd., as
Borrower, International Magnetic Imaging, Inc., as Guarantor,
and DVI, as Lender.
II-4
<PAGE>
10.20(2) Secured promissory note dated as of July 29, 1996 to DVI.
10.21 Unconditional continuing guaranty dated as of July 29, 1996
between DVI and International Magnetic Imaging, Inc.
10.22 Loan and Security Agreement dated as of September 11, 1996, by
and between IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of
Kansas Corporation, Magnetic Resonance Institute of North
Miami Beach, Ltd., Oakland Magnetic Resonance Institute, Ltd.,
MD Acquisition Corporation, Magnetic Resonance Institute of
Boca Raton, Ltd., Magnetic Resonance Institute of South Dade,
Ltd., Pine Island Magnetic Resonance Imaging Center, Ltd.,
Physicians' Outpatient Diagnostic Center, Ltd., as Borrowers,
International Magnetic Imaging, Inc., as Guarantor, and DVI, as
Lender. [Substantially identical Loan and Security Agreements
among the same parties were executed as of September 11, 1996,
but are not filed as exhibits.]
10.23 Secured promissory notes dated as of September 11, 1996 to DVI.
10.24(2) Unconditional continuing guaranty dated as of September 11,
1996 between DVI and International Magnetic Imaging, Inc.
[Substantially identical guaranties between the same parties
were executed as of September 11, 1995, but are not filed as
exhibits.]
10.25(2) Common Stock Purchase Warrant issued to DVI.
10.26 Employment agreement dated as of October 1, 1994, between the
Registrant and Dr. Stephen A. Schulman, as amended.
10.27 Memorandum of understanding dated October 16, 1996, between the
Registrant and Dr. Stephen A. Schulman.
10.28(2) Employment agreement dated March 21, 1995, between the
Registrant and George W. Mahoney, as amended.
10.29(2) Agreement dated September 30, 1994, between the Registrant and
Dr. James H. Sternberg.
10.30(2) Agreement dated September 30, 1994, between the Registrant and
Dr. Ashley Kaye.
10.31(2) Agreement dated December 5, 1994, between the Registrant and
Expert Radiology Network, P.A.
10.32(2) Facility Use Agreement dated October 15, 1990, between San Juan
MRI, Inc. and Emilio Torres Reyes, M.D., as amended.
10.33(2) Agreement dated April 1, 1995, between IMI Acquisition of
Arlington Corp. and Louis Friloux, M.D.
10.34(2) Letter agreement dated August 3, 1994, between the Registrant
and Diagnostic Imaging North, as amended.
10.35 Registrant's 1994 Long-term incentive plan.
10.36 Series B Common Stock Purchase Warrant.
11.1 Computation of income per share.
24.1 Consent of Moore Stephens, P.C. (See Page II-6).
24.2(1) Consent of Esanu Katsky Korins & Siger (included in Exhibit
5.1).
24.3 Consent of Proskauer Rose Goetz & Mendelsohn LLP (See Page
II-7).
24.4 Consent of Piper & Marbury L.L.P. (See Page II-8).
24.5 Consent of Niewald Waldeck & Brown (See Page II-9).
24.6 Consent of Nevares, Sanchez-Alvarez & Gonzalez-Nieto (See Page
II-10).
25.1 Powers of attorney (included on Signature Page).
27.1 Financial data schedule.
(1) Filed as an exhibit to the Form 8-K Current Report by Consolidated
Technology Group Ltd., SEC File No. 0-4186, having a date of report of
July 19, 1994.
(2) To be filed by amendment.
(b) Financial Statement Schedules
None
Item 17. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the registration
statement;
II-5
<PAGE>
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) For determining liability under the Securities Act, to treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) To remove from the registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in such
names as required by the underwriters to permit prompt delivery to each
purchaser.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or controlling persons of
the registrant, pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that, in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(6) For determining any liability under the Securities Act, to treat
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the issuer under Rule 424(b)(1), or (4) or 497(h) under the
Securities Act as part of this registration statement as of the time the
Commission declared it effective.
(7) For determining any liability under the Securities Act, to treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York on this the 4th day of November 1996
INTERNATIONAL MAGNETIC IMAGING, INC.
By: Lewis S. Schiller
Lewis S. Schiller
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated. Each person
whose signature appears below hereby authorizes Lewis S. Schiller and George W.
Mahoney or either of them acting in the absence of the others, as his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution for him and in his name, place and stead, in any and all
capacities to sign any and all amendments (including post-effective amendments)
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission.
Signature Title Date
Lewis S. Schiller Chairman of the Board,
- ----------------- and Director November 4, 1996
Lewis S. Schiller (Principal Executive
Officer)
Stephen A. Schulman President and Chief
- ------------------- Executive Officer November 4, 1996
Stephen A. Schulman, M.D.
George W. Mahoney Chief Financial and
- ----------------- Accounting Officer November 4, 1996
George W. Mahoney
Norman J. Hoskin Director November 4, 1996
- -----------------
Norman J. Hoskin
E. Gerald Kay Director November 4, 1996
- -------------
E. Gerald Kay
II-7
<PAGE>
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use in this Registration Statement on Form S-1 of our
report dated February, 16, 1996, accompanying the financial statements of
International Magnetic Imaging, Inc. and our report dated April 22, 1994,
accompanying the financial statements of International Magnetic Imaging, Inc.
[Predecessor], and to the use of our name and the statements with respect to us
as appearing under the heading "Experts" in the Prospectus. Effective July 1,
1996, Mortenson and Associates, P.C. changed its name to Moore Stephens, P.C.
MOORE STEPHENS, P.C.
Cranford, New Jersey
November 5, 1996
II-8
<PAGE>
CONSENT OF COUNSEL
We consent to the reference to our firm under the caption "Legal Matters" in
this Registration Statement on Form S-1 filed by International Magnetic Imaging,
Inc.
PROSKAUER ROSE GOETZ & MENDELSOHN LLP
New York, New York
November 4, 1996
II-9
<PAGE>
CONSENT OF COUNSEL
We consent to the reference to our firm as special healthcare counsel with
respect to Virginia law under the caption "Legal Matters" in this Registration
Statement on Form S-1 filed by International Magnetic Imaging, Inc.
PIPER & MARBURY L.L.P.
Washington, D.C.
November 4, 1996
II-10
<PAGE>
CONSENT OF COUNSEL
We consent to the reference to our firm under the caption "Legal
Matters" in this Registration Statement on Form S-1 filed by International
Magnetic Imaging, Inc.
NIEWALD WALDECK & BROWN
Kansas City, Missouri
November 4, 1996
II-11
<PAGE>
CONSENT OF COUNSEL
We consent to the reference to our firm under the caption "Legal
Matters" in this Registration Statement on Form S-1 filed by International
Magnetic Imaging, Inc.
NEVARES, SANCHEZ-ALVAREZ & GONZALEZ-NIETO
San Juan, Puerto Rico
November 4, 1996
II-12
<PAGE>
Exhibit 1.1
1,000,000 Shares of Common Stock, par value $.01 per share
and
1,500,000 Warrants for Common Stock
International Magnetic Imaging, Inc.
UNDERWRITING AGREEMENT
New York, New York
_________ __, 1996
Monroe Parker Securities, Inc.
2500 Westchester Avenue
Purchase, New York 10577
International Magnetic Imaging, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to you (the "Underwriter"), an aggregate
of 1,000,000 shares of Common Stock, par value $.01 per share ("Common Stock"),
and 1,500,000 Class A Redeemable Purchase Warrants for Common Stock
(""Warrants"). The Common Stock and Warrants may be collectively referred to
hereinafter as the "Securities". Each Warrant entitles the registered holder
thereof to purchase one (1) share of Common Stock at an exercise price of $6.00
per share for a period of twenty four (24) months, commencing ________ __, 1997
(twelve (12) months from the Effective Date) through ________ __, 199__. The
Warrants are subject to redemption by the Company at any time after ________ __,
199__ (eighteen (18) months from the Effective Date) or such earlier date with
the consent of the Underwriter, at $.10 per warrant, if the closing bid price
per share of Common Stock has equaled or exceeded $15.00 per share for any 10
consecutive business days ending within 3 days of the written notice of
redemption. In addition, the Company proposes to grant to the Underwriter the
option referred to in Section 2(b) to purchase all or any part of an aggregate
of 150,000 additional shares of Common Stock and 225,000 additional Warrants.
You have advised the Company that you desire to purchase the
Securities. The Company confirms the agreements made by it with respect to the
purchase of the Securities by the Underwriter as follows:
1
<PAGE>
1. Representations and Warranties of the Company. The Company
represents and warrants to, and agrees with you that:
(a) A registration statement (File No. 333-_____) on Form SB-2
relating to the public offering of the Securities, including a form of
prospectus subject to completion, copies of which have heretofore been delivered
to you, has been prepared in conformity with the requirements of the Securities
Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "Commission")
thereunder, and has been filed with the Commission under the Act and one or more
amendments to such registration statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission either
(i) if such registration statement, as it may have been amended, has been
declared by the Commission to be effective under the Act, a prospectus in the
form most recently included in an amendment to such registration statement (or,
if no such amendment shall have been filed in such registration statement), with
such changes or insertions as are required by Rule 430A under the Act or
permitted by Rule 424(b) under the Act and as have been provided to and approved
by you prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the Commission
to be effective under the Act, an amendment to such registration statement,
including a form of prospectus, a copy of which amendment has been furnished to
and approved by you prior to the execution of this Agreement. As used in this
Agreement, the term "Company" means International Magnetic Imaging, Inc. and/or
each of its subsidiaries ("Subsidiaries"); the term "Registration Statement"
means such registration statement, as amended at the time when it was or is
declared effective, including all financial schedules and exhibits thereto and
including any information omitted therefrom pursuant to Rule 430A under the Act
and included in the Prospectus (as hereinafter defined); the term "Preliminary
Prospectus" means each prospectus subject to completion filed with such
registration statement or any amendment thereto (including the prospectus
subject to completion, if any, included in the Registration Statement or any
amendment thereto at the time it was or is declared effective); and the term
"Prospectus" means the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act, or, if no prospectus is required to be filed pursuant
to said Rule 424(b), such term means the prospectus included in the Registration
Statement; except that if such registration statement or prospectus is amended
or such prospectus is supplemented, after the effective date of such
registration statement and prior to the Option Closing Date (as hereinafter
defined), the terms "Registration Statement" and "Prospectus" shall include such
registration statement and prospectus as so amended, and the term "Prospectus"
shall include the prospectus as so supplemented, or both, as the case may be.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. At the time the Registration
Statement becomes effective and at all times subsequent thereto up to and on the
First Closing Date (as hereinafter defined) or the Option Closing Date, as the
case may be, (i) the Registration Statement and Prospectus will in all
2
<PAGE>
respects conform to the requirements of the Act and the Rules and Regulations;
and (ii) neither the Registration Statement nor the Prospectus will include any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make statements therein not misleading;
provided, however, that the Company makes no representations, warranties or
agreements as to information contained in or omitted from the Registration
Statement or Prospectus in reliance upon, and in conformity with, written
information furnished to the Company by or on behalf of the Underwriter
specifically for use in the preparation thereof. It is understood that the
statements set forth in the Prospectus with respect to stabilization, under the
heading "Underwriting", the Risk Factor entitled "Underwriter's Limited
Underwriting Experience" and the identity of counsel to the Underwriter under
the heading "Legal Matters" constitute for purposes of this Section and Section
6(b) the only information furnished in writing by or on behalf of the
Underwriter for inclusion in the Registration Statement and Prospectus, as the
case may be.
(c) The Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of incorporation with full corporate
power and authority to own their properties and conduct their business as
described in the Prospectus and are duly qualified or licensed to do business as
foreign corporations and are in good standing in each other jurisdiction in
which the nature of their business or the character or location of their
properties require such qualification, except where the failure to so qualify
will not materially adversely affect the Company's or Subsidiaries' business,
properties or financial condition.
(d) The authorized, issued and outstanding capital stock of
the Company and its Subsidiaries, including the predecessors of the Company, is
as set forth the Company's financial statements contained in the Registration
Statement; the shares of issued and outstanding capital stock of the Company and
its Subsidiaries set forth therein have been duly authorized, validly issued and
are fully paid and nonassessable; except as set forth in the Prospectus, no
options, warrants, or other rights to purchase, agreements or other obligations
to issue, or agreements or other rights to convert any obligation into, any
shares of capital stock of the Company or its Subsidiaries have been granted or
entered into by the Company or its Subsidiaries; and the capital stock conforms
to all statements relating thereto contained in the Registration Statement and
Prospectus.
(e) The shares of Common Stock, when paid for, issued and
delivered pursuant to this Agreement, will have been duly authorized, issued and
delivered and will constitute valid and legally binding obligations of the
Company enforceable in accordance with their terms, except as enforceability may
be limited by bankruptcy, insolvency or other laws affecting the right of
creditors generally or by general equitable principles, and entitled to the
rights and preferences provided by the Certificate of Incorporation, which will
be in the form filed as an exhibit to the
3
<PAGE>
Registration Statement. The terms of the Common Stock conform to the
description thereof in the Registration Statement and Prospectus.
The Warrants, when paid for, issued and delivered pursuant to
this Agreement, will have been duly authorized, issued and delivered and will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or other laws affecting the right of creditors generally
or by general equitable principles, and entitled to the benefits provided by the
warrant agreement pursuant to which such Warrants are to be issued (the "Warrant
Agreement"), which will be substantially in the form filed as an exhibit to the
Registration Statement. The shares of Common Stock issuable upon exercise of the
Warrants have been reserved for issuance upon the exercise of the Warrants and
when issued in accordance with the terms of the Warrants and Warrant Agreement,
will be duly and validly authorized validly issued, fully paid and
non-assessable and free of preemptive rights. The Warrant Agreement has been
duly authorized and, when executed and delivered pursuant to this Agreement,
assuming due authorization, execution and delivery by the transfer agent, will
have been duly executed and delivered and will constitute the valid and legally
binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other laws
affecting the rights of creditors generally or by general equitable principles.
The Warrants and Warrant Agreement conform to the respective descriptions
thereof in the Registration Statement and Prospectus.
The Purchase Option (as defined in the Registration
Statement), when paid for, issued and delivered pursuant to this Agreement will
constitute valid and legally binding obligations of the Company enforceable in
accordance with their terms and entitled to the benefits provided by the
Purchase Option, except as enforceability may be limited by bankruptcy,
insolvency or other laws affecting the rights of creditors generally or by
general equitable principles. The Securities issuable upon exercise of the
Purchase Option (and the shares of Common Stock issuable upon exercise of the
Warrants) when issued and paid for in accordance with this Agreement, the
Purchase Option and the Warrant Agreement, will be duly authorized, validly
issued, fully paid and non-assessable and free of preemptive rights.
(f) This Agreement has been duly and validly authorized,
executed and delivered by the Company. The Company has full power and authority
to authorize, issue and sell the Securities to be sold by it hereunder on the
terms and conditions set forth herein, and no consent, approval, authorization
or other order of any governmental authority is required in connection with such
authorization, execution and delivery or in connection with the authorization,
issuance and sale of the Securities or the Purchase Option, except such as may
be required under the Act or state securities laws.
4
<PAGE>
(g) Except as described in the Prospectus, or which would not
have a material adverse effect on the condition (financial or otherwise),
business prospects, net worth or properties of the Company and the Subsidiaries
taken as a whole (a "Material Adverse Effect"), the Company and its Subsidiaries
are not in violation, breach or default of or under, and consummation of the
transactions herein contemplated and the fulfillment of the terms of this
Agreement will not conflict with, or result in a breach or violation of, any of
the terms or provisions of, or constitute a default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any of the
property or assets of the Company or its Subsidiaries pursuant to the terms of
any material indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or its Subsidiaries is a party or
by which the Company or its Subsidiaries may be bound or to which any of the
property or assets of the Company or its Subsidiaries is subject, nor will such
action result in any violation of the provisions of the certificate of
incorporation or the by-laws of the Company or its Subsidiaries, as amended, or
any statute or any order, rule or regulation applicable to the Company or its
Subsidiaries of any court or of any regulatory authority or other governmental
body having jurisdiction over the Company or its Subsidiaries.
(h) Subject to the qualifications stated in the Prospectus,
the Company and its Subsidiaries have good and marketable title to all
properties and assets described in the Prospectus as owned by them, free and
clear of all liens, charges, encumbrances or restrictions, except such as are
not materially significant or important in relation to their business; all of
the material leases and subleases under which the Company or its Subsidiaries is
the lessor or sublessor of properties or assets or under which the Company and
its Subsidiaries holds properties or assets as lessee or sublessee as described
in the Prospectus are in full force and effect, and, except as described in the
Prospectus, the Company and its Subsidiaries are not in default in any material
respect with respect to any of the terms or provisions of any of such leases or
subleases, and, to the best knowledge of the Company, no claim has been asserted
by anyone adverse to rights of the Company or its Subsidiaries as lessor,
sublessor, lessee or sublessee under any of the leases or subleases mentioned
above, or affecting or questioning the right of the Company or its Subsidiaries
to continued possession of the leased or subleased premises or assets under any
such lease or sublease except as described or referred to in the Prospectus; and
the Company and its Subsidiaries own or lease all such properties described in
the Prospectus as are necessary to their operations as now conducted and, except
as otherwise stated in the Prospectus, as proposed to be conducted as set forth
in the Prospectus.
(i) Moore Stephens, P.C., which has given its report on
certain financial statements filed with the Commission as a part of the
Registration Statement, is with respect to the Company, independent public
accountants as required by the Act and the Rules and Regulations.
5
<PAGE>
(j) The financial statements, and schedules together with
related notes, set forth in the Prospectus or the Registration Statement present
fairly the financial position and results of operations and changes in cash flow
position of the Company and its Subsidiaries on the basis stated in the
Registration Statement, at the respective dates and for the respective periods
to which they apply. Said statements and schedules and related notes have been
prepared in accordance with generally accepted accounting principles applied on
a basis which is consistent during the periods involved except as disclosed in
the Prospectus and Registration Statement.
(k) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus and except as otherwise
disclosed or contemplated therein, the Company and its Subsidiaries have not
incurred any liabilities or obligations, direct or contingent, not in the
ordinary course of business, or entered into any transaction not in the ordinary
course of business, which would have a Material Adverse Effect, and there has
not been any change in the capital stock of, or any incurrence of short-term or
long-term debt by, the Company or its Subsidiaries or any issuance of options,
warrants or other rights to purchase the capital stock of the Company or its
Subsidiaries or any material adverse change or any development involving, so far
as the Company or its Subsidiaries can now reasonably foresee a prospective
adverse change in the condition (financial or otherwise), net worth, results of
operations, business, key personnel or properties of it which would have a
Material Adverse Effect.
(l) Except as set forth in the Prospectus, there is not now
pending or, to the knowledge of the Company, threatened, any action, suit or
proceeding to which the Company or its Subsidiaries is a party before or by any
court or governmental agency or body, which might result in any material adverse
change in the financial condition, business prospects, net worth, or properties
of the Company or its Subsidiaries, nor are there any actions, suits or
proceedings related to environmental matters or related to discrimination on the
basis of age, sex, religion or race; and no labor disputes involving the
employees of the Company or its Subsidiaries exist or to the knowledge of the
Company, are threatened which might be expected to have a Material Adverse
Effect.
(m) Except as disclosed in the Prospectus, the Company and its
Subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns required to be filed as of the date hereof and have paid
all taxes shown as due thereon; and there is no tax deficiency which has been,
or to the knowledge of the Company, may be asserted against the Company or its
Subsidiaries.
(n) Except as disclosed in the Registration Statement or
Prospectus, the Company and its Subsidiaries have sufficient licenses, permits
and other governmental authorizations currently necessary for the conduct of
their business or the ownership of their
6
<PAGE>
properties as described in the Prospectus and each of the Company and the
Subsidiaries is in all material respects complying therewith and owns or
possesses adequate rights to use all material patents, patent applications,
trademarks, service marks, trade-names, trademark registrations, service mark
registrations, copyrights and licenses necessary for the conduct of such
businesses and have not received any notice of conflict with the asserted rights
of others in respect thereof. To the best knowledge of the Company, none of the
activities or business of the Company and its Subsidiaries are in violation of,
or cause the Company or its Subsidiaries to violate, any law, rule, regulation
or order of the United States, any state, county or locality, or of any agency
or body of the United States or of any state, county or locality, the violation
of which would have a Material Adverse Effect.
(o) The Company and its Subsidiaries have not, directly or
indirectly, at any time (i) made any contributions to any candidate for
political office, or failed to disclose fully any such contribution in violation
of law or (ii) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments or contributions required or allowed by applicable
law. The Company's and Subsidiaries' internal accounting controls and procedures
are sufficient to cause the Company and its Subsidiaries to comply in all
material respects with the Foreign Corrupt Practices Act of 1977, as amended.
(p) On the Closing Dates (hereinafter defined) all transfer or
other taxes, (including franchise, capital stock or other tax, other than income
taxes, imposed by any jurisdiction) if any, which are required to be paid in
connection with the sale and transfer of the Securities to the Underwriter
hereunder will have been fully paid or provided for by the Company and all laws
imposing such taxes will have been complied with in all material respects.
(q) All contracts and other documents of the Company which
are, under the Rules and Regulations, required to be filed as exhibits to the
Registration Statement have been so filed.
(r) Except as disclosed in the Registration Statement, the
Company has no Subsidiaries.
(s) Except as disclosed in the Registration Statement, the
Company has not entered into any agreement pursuant to which any person is
entitled either directly or indirectly to compensation from the Company for
services as a finder in connection with the proposed public offering.
7
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(t) Except as previously disclosed in writing by the Company
to the Underwriter or as disclosed in the Registration Statement, no officer,
director or stockholder of the Company has any National Association of
Securities Dealers, Inc. ("NASD") affiliation.
(u) No other firm, corporation or person has any rights to
underwrite an offering of any of the Company's securities.
2. Purchase, Delivery and Sale of the Securities.
(a) Subject to the terms and conditions of this Agreement, and
upon the basis of the representations, warranties, and agreements herein
contained, the Company agrees to issue and sell to the Underwriter and the
Underwriter agrees to buy from the Company at $4.50 per share of Common Stock
and $.135 per Warrant, at the place and time hereinafter specified, 1,000,000
shares of Common Stock and 1,500,000 Warrants (the "First Securities").
Delivery of the First Securities against payment therefor
shall take place at the offices of Bernstein & Wasserman, LLP, 950 Third Avenue,
New York, New York 10022 (or at such other place as may be designated by
agreement between the Underwriter and the Company) at 10:00 a.m., New York time,
on _____ __, 1996, or at such later time and date as the Underwriter may
designate in writing to the Company at least two business days prior to such
purchase, but not later than _____ __, 1996 such time and date of payment and
delivery for the First Securities being herein called the "First Closing Date."
(b) In addition, subject to the terms and conditions of this
Agreement, and upon the basis of the representations, warranties and agreements
herein contained, the Company hereby grants an option to the Underwriter (the
"Over-Allotment Option") to purchase all or any part of an aggregate of an
additional 150,000 shares of Common Stock and 225,000 Warrants to cover over
allotments at the same price per share of Common Stock and per Warrant as the
Underwriter shall pay for the First Securities being sold pursuant to the
provisions of subsection (a) of this Section 2 (such additional Securities being
referred to herein as the "Option Securities"). This option may be exercised
within 45 days after the effective date of the Registration Statement upon
written notice by the Underwriter to the Company advising as to the amount of
Option Securities as to which the option is being exercised, the names and
denominations in which the certificates for such Option Securities are to be
registered and the time and date when such certificates are to be delivered.
Such time and date shall be determined by the Underwriter but shall not be
earlier than four nor later than ten full business days after the exercise of
said option (but in no event more than 60 days after the First Closing Date),
nor in any event prior to the First Closing Date, and such time and date is
referred to herein as the "Option Closing Date." Delivery of the Option
Securities against payment therefor shall take place at the offices of Bernstein
& Wasserman, LLP, 950 Third Avenue, New York, NY 10022 (or at such other place
as may be
8
<PAGE>
designated by agreement between the Underwriter and the Company). The option
granted hereunder may be exercised only to cover over-allotments in the sale by
the Underwriter of the First Securities referred to in subsection (a) above. No
Option Securities shall be delivered unless all of the First Securities shall
have been delivered to the Underwriter as provided herein.
(c) The Company will make the certificates for the Securities
to be purchased by the Underwriter hereunder available to you for checking at
least two full business days prior to the First Closing Date or the Option
Closing Date (which are collectively referred to herein as the "Closing Dates").
The certificates shall be in such names and denominations as you may request, at
least three full business days prior to the Closing Dates. Delivery of the
certificates at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriter.
Definitive certificates in negotiable form for the Securities
to be purchased by the Underwriter hereunder will be delivered by the Company to
you for the account of the Underwriter against payment of the respective
purchase prices by the Underwriter, by wire transfer or certified or bank
cashier's checks in New York Clearing House funds, payable to the order of the
Company.
In addition, in the event the Underwriter exercises the option
to purchase from the Company all or any portion of the Option Securities
pursuant to the provisions of subsection (b) above, payment for such Securities
shall be made to or upon the order of the Company by wire transfer or certified
or bank cashier's checks payable in New York Clearing House funds at the offices
of Bernstein & Wasserman, LLP, 950 Third Avenue, New York, NY 10022, at the time
and date of delivery of such Securities as required by the provisions of
subsection (b) above, against receipt of the certificates for such Securities by
you for your account registered in such names and in such denominations as you
may reasonably request.
It is understood that the Underwriter proposes to offer the
Securities to be purchased hereunder to the public upon the terms and conditions
set forth in the Registration Statement, after the Registration Statement
becomes effective.
3. Covenants of the Company. The Company covenants and agrees with
the Underwriter that:
(a) The Company will use its best efforts to cause the
Registration Statement to become effective. If required, the Company will file
the Prospectus and any amendment or supplement thereto with the Commission in
the manner and within the time period required by Rule 424(b) under the Act.
Upon notification from the Commission that the Registration Statement has become
effective, the Company will so advise you and will not at any time, whether
9
<PAGE>
before or after the effective date, file any amendment to the Registration
Statement or supplement to the Prospectus of which you shall not previously have
been advised and furnished with a copy or to which you or your counsel shall
have reasonably objected in writing or which is not in compliance with the Act
and the Rules and Regulations. At any time prior to the later of (A) the
completion by the Underwriter of the distribution of the Securities contemplated
hereby (but in no event more than nine months after the date on which the
Registration Statement shall have become or been declared effective) and (B) 25
days after the date on which the Registration Statement shall have become or
been declared effective, the Company will prepare and file with the Commission,
promptly upon your request, any amendments or supplements to the Registration
Statement or Prospectus which, in the opinion of counsel to the Company and the
Underwriter, may be reasonably necessary or advisable in connection with the
distribution of the Securities.
As soon as the Company is advised thereof, the Company will
advise you, and provide you copies of any written advice, of the receipt of any
comments of the Commission, of the effectiveness of any post-effective amendment
to the Registration Statement, of the filing of any supplement to the Prospectus
or any amended Prospectus, of any request made by the Commission for an
amendment of the Registration Statement or for supplementing of the Prospectus
or for additional information with respect thereto, of the issuance by the
Commission or any state or regulatory body of any stop order or other order or
threat thereof suspending the effectiveness of the Registration Statement or any
order preventing or suspending the use of any preliminary prospectus, or of the
suspension of the qualification of the Securities for offering in any
jurisdiction, or of the institution of any proceedings for any of such purposes,
and will use its best efforts to prevent the issuance of any such order, and, if
issued, to obtain as soon as possible the lifting thereof.
The Company has caused to be delivered to you copies of each
Preliminary Prospectus, and the Company has consented and hereby consents to the
use of such copies for the purposes permitted by the Act. The Company authorizes
the Underwriter and dealers to use the Prospectus in connection with the sale of
the Securities for such period as in the opinion of counsel to the Underwriter
and the Company the use thereof is required to comply with the applicable
provisions of the Act and the Rules and Regulations. In case of the happening,
at any time within such period as a Prospectus is required under the Act to be
delivered in connection with sales by the Underwriter or dealer of any event of
which the Company has knowledge and which materially affects the Company or the
securities of the Company, or which in the opinion of counsel for the Company
and counsel for the Underwriter should be set forth in an amendment of the
Registration Statement or a supplement to the Prospectus in order to make the
statements therein not then misleading, in light of the circumstances existing
at the time the Prospectus is required to be delivered to a purchaser of the
Securities or in case it shall be necessary to amend or supplement the
Prospectus to comply with law or with the Rules and Regulations, the Company
will notify you promptly and forthwith prepare and furnish to you copies of such
amended
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<PAGE>
Prospectus or of such supplement to be attached to the Prospectus, in such
quantities as you may reasonably request, in order that the Prospectus, as so
amended or supplemented, will not contain any untrue statement of a material
fact or omit to state any material facts necessary in order to make the
statements in the Prospectus, in the light of the circumstances under which they
are made, not misleading. The preparation and furnishing of any such amendment
or supplement to the Registration Statement or amended Prospectus or supplement
to be attached to the Prospectus shall be without expense to the Underwriter,
except that in case the Representative is required, in connection with the sale
of the Securities to deliver a Prospectus nine months or more after the
effective date of the Registration Statement, the Company will upon request of
and at the expense of the Underwriter, amend or supplement the Registration
Statement and Prospectus and furnish the Underwriter with reasonable quantities
of prospectuses complying with Section 10(a)(3) of the Act.
The Company will comply with the Act, the Rules and
Regulations and the Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations thereunder in connection with the offering and issuance of
the Securities.
(b) The Company will furnish such information as may be
required and to otherwise cooperate and use its best efforts to qualify or
register the Securities for sale under the securities or "blue sky" laws of such
jurisdictions as you may designate and will make such applications and furnish
such information as may be required for that purpose and to comply with such
laws, provided the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or to execute a general consent of service
of process in any jurisdiction in any action other than one arising out of the
offering or sale of the Securities. The Company will, from time to time, prepare
and file such statements and reports as are or may be required to continue such
qualification in effect for so long a period as the counsel to the Company and
the Underwriter deem reasonably necessary.
(c) If the sale of the Securities provided for herein is not
consummated as a result of the Company not performing its obligations hereunder
in all material respects, the Company shall pay all costs and expenses incurred
by it which are incident to the performance of the Company's obligations
hereunder, including but not limited to, all of the expenses itemized in Section
8, including the accountable expenses of the Underwriter, up to $150,000
(including the reasonable fees and expenses of counsel to the Underwriter).
(d) The Company will use its best efforts to (i) cause a
registration statement under the Exchange Act to be declared effective
concurrently with the completion of this offering and will notify you in writing
immediately upon the effectiveness of such registration statement, and (ii) to
obtain and keep current a listing in the Standard & Poors or Moody's OTC
Industrial Manual.
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<PAGE>
(e) For so long as the Company is a reporting company under
either Section 12(g) or 15(d) of the Exchange Act, the Company, at its expense,
will furnish to its stockholders an annual report (including financial
statements audited by independent public accountants), in reasonable detail and
at its expense, will furnish to you during the period ending five (5) years from
the date hereof, (i) as soon as practicable after the end of each fiscal year,
but no earlier than the filing of such information with the Commission a balance
sheet of the Company and any of its Subsidiaries as at the end of such fiscal
year, together with statements of income, surplus and cash flow of the Company
and any Subsidiaries for such fiscal year, all in reasonable detail and
accompanied by a copy of the certificate or report thereon of independent
accountants; (ii) as soon as practicable after the end of each of the first
three fiscal quarters of each fiscal year, but no earlier than the filing of
such information with the Commission, consolidated summary financial information
of the Company for such quarter in reasonable detail; (iii) as soon as they are
publicly available, a copy of all reports (financial or other) mailed to
security holders; (iv) as soon as they are available, a copy of all
non-confidential reports and financial statements furnished to or filed with the
Commission or any securities exchange or automated quotation system on which any
class of securities of the Company is listed; and (v) such other information as
you may from time to time reasonably request.
(f) In the event the Company has an active subsidiary or
Subsidiaries, such financial statements referred to in subsection (e) above will
be on a consolidated basis to the extent the accounts of the Company and its
subsidiary or Subsidiaries are consolidated in reports furnished to its
stockholders generally.
(g) The Company will deliver to you at or before the First
Closing Date two signed copies of the Registration Statement including all
financial statements and exhibits filed therewith, and of all amendments
thereto, and will deliver to the Underwriter such number of conformed copies of
the Registration Statement, including such financial statements but without
exhibits, and of all amendments thereto, as the Underwriter may reasonably
request. The Company will deliver to or upon your order, from time to time until
the effective date of the Registration Statement, as many copies of any
Preliminary Prospectus filed with the Commission prior to the effective date of
the Registration Statement as you may reasonably request. The Company will
deliver to the Underwriter on the effective date of the Registration Statement
and thereafter for so long as a Prospectus is required to be delivered under the
Act, from time to time, as many copies of the Prospectus, in final form, or as
thereafter amended or supplemented, as the Underwriter may from time to time
reasonably request.
(h) The Company will make generally available to its security
holders and to the registered holders of its Warrants and deliver to you as soon
as it is practicable to do so but in no event later than 90 days after the end
of twelve months after its current fiscal quarter, an earnings statement (which
need not be audited) covering a period of at least twelve consecutive
12
<PAGE>
months beginning after the effective date of the Registration Statement, which
shall satisfy the requirements of Section 11(a) of the Act.
(i) The Company will apply the net proceeds from the sale of
the Securities substantially for the purposes set forth under "Use of Proceeds"
in the Prospectus.
(j) The Company will promptly prepare and file with the
Commission any amendments or supplements to the Registration Statement,
Preliminary Prospectus or Prospectus and take any other action, which in the
opinion of counsel to the Underwriter and counsel to the Company, may be
reasonably necessary or advisable in connection with the distribution of the
Securities, and will use its best efforts to cause the same to become effective
as promptly as possible.
(k) The Company will reserve and keep available the maximum
number of its authorized but unissued securities which are issuable upon
exercise of the Purchase Option outstanding from time to time.
(l) (1) For a period of thirty six (36) months from the First
Closing Date, no officer, director or shareholder of any securities prior to the
offering will, directly or indirectly, offer, sell (including any short sale),
grant any option for the sale of, acquire any option to dispose of, or otherwise
dispose of any shares of Common Stock without the prior written consent of the
Underwriter, other than as set forth in the Registration Statement. In order to
enforce this covenant, the Company shall impose stop-transfer instructions with
respect to the securities owned by every shareholder prior to the offering until
the end of such period (subject to any exceptions to such limitation on
transferability set forth in the Registration Statement). If necessary to comply
with any applicable Blue-sky Law, the shares held by such shareholders will be
escrowed with counsel for the Company or otherwise as required.
(2) Except for the issuance of shares of capital stock by
the Company in connection with a dividend, recapitalization, reorganization or
similar transactions or as result of the exercise of warrants or options
disclosed in or issued or granted pursuant to plans disclosed in the
Registration Statement, the Company shall not, for a period of thirty six (36)
months following the First Closing Date, directly or indirectly, offer, sell,
issue or transfer any shares of its capital stock, or any security exchangeable
or exercisable for, or convertible into, shares of the capital stock or register
any of its capital stock (under any form of registration statement including
Form S-8), without the prior written consent of the Underwriter. Options granted
pursuant to plans must be exercisable at the fair market value on the date of
grant.
(m) Upon completion of this offering, the Company will make
all filings required, including registration under the Exchange Act, to obtain
the listing of the Common
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<PAGE>
Stock and the Warrants in the NASDAQ National Market system, and will use its
best efforts to effect and maintain such listing for at least five years from
the date of this Agreement.
(n) Except for the transactions contemplated by this Agreement
and as disclosed in the Prospectus, the Company represents that it has not taken
and agrees that it will not take, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected to cause or
result in the stabilization or manipulation of the price of any of the
Securities.
(o) On the First Closing Date and simultaneously with the
delivery of the Securities, the Company shall execute and deliver to you the
Purchase Option. The Purchase Option will be substantially in the form filed as
an Exhibit to the Registration Statement.
(p)(1) On the First Closing Date, the Company will have in
force key person life insurance on the lives of ________and _________ in an
amount of not less than $___________, payable to the Company, and will use its
best efforts to maintain such insurance during the three year period commencing
with the First Closing Date.
(2) On the First Closing Date, the Company will have
employment agreements with its executive officers in form satisfactory to the
Underwriter. The Company will not increase or authorize an increase in the
compensation of any of the executive officers without the express approval of
the Compensation Committee or the entire Board of Directors for a period of two
(2) years from the Effective Date. The Compensation Committee shall be comprised
of two (2) delegates of the Company and one (1) from the Underwriter.
(q) So long as any Warrants are outstanding and the exercise
price of the Warrants is less than the market price of the Common Stock, the
Company shall use its best efforts to cause post-effective amendments to the
Registration Statement to become effective in compliance with the Act and
without any lapse of time between the effectiveness of any such post-effective
amendments and cause a copy of each Prospectus, as then amended, to be delivered
to each holder of record of a Warrant and to furnish to the Underwriter as many
copies of each such Prospectus as such Underwriter or dealer may reasonably
request. The Company shall not call for redemption of any of the Warrants unless
a registration statement covering the securities underlying the Warrants has
been declared effective by the Commission and remains current at least until the
date fixed for redemption.
(r) For a period of five (5) years following the Effective
Date, the Company will maintain registration with the Commission pursuant to
Section 12(g) of the Exchange Act and will provide to the Underwriter copies of
all filings made with the Commission pursuant to the Exchange Act. In the event
that the Company fails to maintain registration with the Commission
14
<PAGE>
pursuant to Section 12(g) during such five year period, the Company will provide
reasonable access to an independent accountant designated by the Underwriter, to
all books, records and other documents or statements that reflect the Company's
financial status at least once each quarter, at the Company's expense.
(s) The Company agrees to pay the Underwriter a warrant
solicitation fee of 5.0% of the exercise price of any of the Warrants exercised
beginning one (1) year after the Effective Date (not including warrants
exercised by the Underwriter) if (a) the market price of the Company's Common
Stock on the date the Warrant is exercised is greater than the exercise price of
the Warrant, (b) the exercise of the Warrant was solicited by the Underwriter
and the holder of the warrant designates the Underwriter in writing as having
solicited such Warrant, (c) the Warrant is not held in a discretionary account,
(d) disclosure of the compensation arrangement is made upon the sale and
exercise of the Warrants, (e) soliciting the exercise is not in violation of
Rule 10b-6 under the Securities Exchange Act of 1934, and (f) solicitation of
the exercise is in compliance with the NASD Notice to Members 81-38 (September
22, 1981).
(t) For a period of two years from the Effective Date, at the
request of the Underwriter, the Company shall provide promptly, at the expense
of the Company, copies of the Company's daily transfer sheets furnished to it by
its transfer agent and copies of the securities position listings provided to it
by the Depository Trust Company.
(u) The Company hereby agrees that:
(i) The Company will pay a finder's fee to the
Underwriter, equal to five percent (5%) of the first $3,000,000 of the
consideration involved in any transaction, 4% of the next $3,000,000 of
consideration involved in the transaction, 3% of the next $2,000,000, 2% of the
next $2,000,000 and 1% of the excess, if any, for future consummated
transactions, if any, introduced by the Underwriter (including mergers,
acquisitions, joint ventures, and any other business for the Company introduced
by the Underwriter) consummated by the Company (an "Introduced Consummated
Transaction"), in which the Underwriter introduced the other party to the
Company during a period ending five years following the First Closing Date; and
(ii) That any such finder's fee due hereunder will be
paid in cash or other consideration that is acceptable to the Underwriter, at
the closing of the particular Introduced Consummated Transaction for which the
finder's fee is due.
(v) Upon the first Closing Date and simultaneously with the
delivery of the Securities, the Company shall execute and deliver to the
Underwriter, a two year financial consulting agreement in the form attached as
an Exhibit to the Registration Statement which shall
15
<PAGE>
require the Company to pay the Underwriter $100,000 on the First Closing Date
(the "Financial Consulting Agreement").
(w) For a period of five (5) years following the Effective
Date the Company, at its expense, shall cause its regularly engaged independent
certified public accountants to review (but not audit) the Company's financial
statements for each of the first three (3) fiscal quarters prior to the
announcement of quarterly financial information, the filing of the Company's
10-Q quarterly report and the mailing of quarterly financial information to
stockholders, provided that the Company shall not be required to file a report
of such accountants relating to such review with the Commission. The Company
will retain its present legal counsel and independent certified public
accountants for at least one year from the Closing Date.
(x) For a period of two (2) years from the Effective Date, the
Company will recommend and use its best efforts to elect a designee of the
Underwriter, as a member of its Board of Directors. Such designee shall receive
no more or less compensation than is paid to other non-management directors of
the Company and shall be entitled to (i) receive reimbursement for all
reasonable costs incurred in attending such meetings, including but not limited
to, food, lodging and transportation; and (ii) serve on the Compensation
Committee of the Board of Directors so long as such director would qualify as
disinterested or for the purpose of election of section 162 (m) of the Internal
Revenue Code of 1986, as amended. To the extent permitted by law, the Company
will agree to indemnify the Underwriter and its designee for the actions of such
designee as a director of the Company. The Company will use its best efforts to
obtain liability insurance not to exceed $50,000 per year in premiums affording
coverage for the acts of its officers and directors, and to include the designee
of the Underwriter as an insured under such policy. The Underwriter shall
alternatively have the right to send another representative from the Underwriter
to observe each meeting of the Board of Directors. The Company agrees to give
the Underwriter written notice of each such meeting and to provide the
Underwriter with an agenda and minutes of the meeting no later than it gives
such notice and provides such items to the other directors. Any designee or
representative of the Underwriter who has not been elected or appointed to the
Board of Directors, but who shall be attending a meeting thereof, shall be
required to execute a confidentiality agreement satisfactory to the Company.
4. Conditions of Underwriter's Obligation. The obligations of the
Underwriter to purchase and pay for the Securities which it has agreed to
purchase hereunder, are subject to the accuracy (as of the date hereof, and as
of the Closing Dates) of and compliance with the representations and warranties
of the Company herein, to the performance by the Company of its obligations
hereunder, and to the following conditions:
(a) The Registration Statement shall have become effective and
you shall have received notice thereof not later than 10:00 A.M., New York time,
on the day following the date
16
<PAGE>
of this Agreement, or at such later time or on such later date as to which you
may agree in writing; on or prior to the Closing Dates no stop order suspending
the effectiveness of the Registration Statement shall have been issued and no
proceedings for that or a similar purpose shall have been instituted or shall be
pending or, to your knowledge or to the knowledge of the Company, shall be
contemplated by the Commission; any request on the part of the Commission for
additional information shall have been complied with to the satisfaction of the
Commission; and no stop order shall be in effect denying or suspending
effectiveness of such qualification nor shall any stop order proceedings with
respect thereto be instituted or pending or threatened. If required, the
Prospectus shall have been filed with the Commission in the manner and within
the time period required by Rule 424(b) under the Act.
(b) At the First Closing Date, you shall have received the
opinion, dated as of the First Closing Date, of Esanu, Katsky, Korins & Siger,
counsel for the Company, in form and substance satisfactory to counsel for the
Underwriter, to the effect that:
(i) the Company and its Subsidiaries have been duly
incorporated and are validly existing as corporations in good standing under the
laws of their respective jurisdictions of organization, with all requisite
corporate power and authority to own their properties and conduct their business
as described in the Registration Statement and Prospectus and are duly qualified
or licensed to do business as foreign corporations and are in good standing in
each other jurisdiction in which the ownership or leasing of their properties or
conduct of their business requires such qualification except where the failure
to qualify or be licensed will not have a Material Adverse Effect;
(ii) the authorized capitalization of the Company as
of ________ __, 1996 is as set forth in the Registration Statement; the
Securities as set forth in the Registration Statement have been duly authorized
and upon payment of consideration therefor, will be validly issued, fully paid
and non-assessable and conform in all material respects to the description
thereof contained in the Prospectus; to such counsel's knowledge the outstanding
shares of capital stock of the Company and its Subsidiaries have not been issued
in violation of the preemptive rights of any shareholder and to such counsel's
knowledge the shareholders of the Company do not have any preemptive rights or
other rights to subscribe for or to purchase, nor are there any restrictions
upon the voting or transfer of any of the capital stock except as provided in
the Prospectus or as required by law. The Securities, the Purchase Option and
the Warrant Agreement conform in all material respects to the respective
descriptions thereof contained in the Prospectus; the shares of Common Stock,
and the shares of Common Stock issuable upon exercise of Warrants, the Purchase
Option, and the Warrant Agreement will have been duly authorized and, when
issued and delivered in accordance with their respective terms, will be duly and
validly issued, fully paid, non-assessable, free of preemptive rights to the
best of their knowledge; to the best of their knowledge, all prior sales by the
Company of the Company's securities, have been
17
<PAGE>
made in compliance with or under an exemption from registration under the Act
and applicable state securities laws; a sufficient number of shares of Common
Stock has been reserved for issuance upon exercise of the Warrants and Common
Stock has been reserved for issuance upon exercise of the Warrants contained in
the Purchase Option and to the best of such counsel's knowledge, neither the
filing of the Registration Statement nor the offering or sale of the Securities
as contemplated by this Agreement gives rise to any registration rights other
than those which have been waived or satisfied for or relating to the
registration of any shares of Common Stock;
(iii) this Agreement, the Purchase Option, and the
Warrant Agreement have been duly and validly authorized, executed and delivered
by the Company;
(iv) the certificates evidencing the Securities as
described in the Registration Statement comply in all material respects with the
descriptions set forth therein, and comply with the Delaware General Corporation
Law, as in effect on the date hereof; each Warrant will be exercisable for one
share of the Common Stock of the Company, respectively, and at the prices
provided for in the Warrant Agreement;
(v) except as otherwise disclosed in the Registration
Statement, such counsel knows of no pending or threatened legal or governmental
proceedings to which the Company or its Subsidiaries are a party which would
materially adversely affect the business, property, financial condition or
operations of the Company or its Subsidiaries; or which question the validity of
the Securities, this Agreement, the Warrant Agreement or the Purchase Option, or
of any action taken or to be taken by the Company pursuant to this Agreement,
the Warrant Agreement or the Purchase Option; to such counsel's knowledge there
are no governmental proceedings or regulations required to be described or
referred to in the Registration Statement which are not so described or referred
to;
(vi) the execution and delivery of this Agreement,
the Purchase Option or the Warrant Agreement and the incurrence of the
obligations herein and therein set forth and the consummation of the
transactions herein or therein contemplated, will not result in a breach or
violation of, or constitute a default under the certificate of incorporation or
by-laws of the Company or its Subsidiaries, or to the best knowledge of counsel
after due inquiry, in the performance or observance of any material obligations,
agreement, covenant or condition contained in any bond, debenture, note or other
evidence of indebtedness or in any material contract, indenture, mortgage, loan
agreement, lease, joint venture or other agreement or instrument to which the
Company or its Subsidiaries is a party or by which they or any of their
properties is bound or in violation of any order, rule, regulation, writ,
injunction, or decree of any government, governmental instrumentality or court,
domestic or foreign the result of which would have a Material Adverse Effect;
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(vii) the Registration Statement has become effective
under the Act, and to the best of such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for that purpose have been instituted or are pending before, or
threatened by, the Commission; the Registration Statement and the Prospectus
(except for the financial statements and other financial data contained therein,
or omitted therefrom, as to which such counsel need express no opinion) as of
the Effective Date comply as to form in all material respects with the
applicable requirements of the Act and the Rules and Regulations;
(viii) in the course of preparation of the
Registration Statement and the Prospectus such counsel has participated in
conferences with the President of the Company with respect to the Registration
Statement and Prospectus and such discussions did not disclose to such counsel
any information which gives such counsel reason to believe that the Registration
Statement or any amendment thereto at the time it became effective contained any
untrue statement of a material fact required to be stated therein or omitted to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading or that the Prospectus or any supplement
thereto contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make statements therein, in light of the
circumstances under which they were made, not misleading (except, in the case of
both the Registration Statement and any amendment thereto and the Prospectus and
any supplement thereto, for the financial statements, notes thereto and other
financial information (including without limitation, the pro forma financial
information) and schedules contained therein, as to which such counsel need
express no opinion);
(ix) all descriptions in the Registration Statement
and the Prospectus, and any amendment or supplement thereto, of contracts and
other agreements to which the Company or its Subsidiaries is a party are
accurate and fairly present in all material respects the information required to
be shown, and such counsel is familiar with all contracts and other agreements
referred to in the Registration Statement and the Prospectus and any such
amendment or supplement or filed as exhibits to the Registration Statement, and
such counsel does not know of any contracts or agreements to which the Company
or its Subsidiaries is a party of a character required to be summarized or
described therein or to be filed as exhibits thereto which are not so
summarized, described or filed;
(x) no authorization, approval, consent, or license
of any governmental or regulatory authority or agency is necessary in connection
with the authorization, issuance, transfer, sale or delivery of the Securities
by the Company, in connection with the execution, delivery and performance of
this Agreement by the Company or in connection with the taking of any action
contemplated herein, or the issuance of the Purchase Option or the Securities
underlying the Purchase Option, other than registrations or qualifications of
the Securities under applicable state or foreign securities or Blue Sky laws and
registration under the Act; and
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(xi) the shares of Common Stock and the Warrants have
been duly authorized for quotation on the NASDAQ National Market System
("NASDAQ").
Such opinion shall also cover such matters incident to the
transactions contemplated hereby as the Underwriter or counsel for the
Underwriter shall reasonably request. In rendering such opinion, such counsel
may rely upon certificates of any officer of the Company or public officials as
to matters of fact; and may rely as to all matters of law other than the law of
the United States or of the State of New York or Delaware upon opinions of
counsel satisfactory to you, in which case the opinion shall state that they
have no reason to believe that you and they are not entitled to so rely.
(c) Intentionally Omitted.
(d) All corporate proceedings and other legal matters relating
to this Agreement, the Registration Statement, the Prospectus and other related
matters shall be satisfactory to or approved by Bernstein & Wasserman, LLP,
counsel to the Underwriter.
(e) You shall have received a letter prior to the Effective
Date and again on and as of the First Closing Date from Moore Stephens, P.C.,
independent public accountants for the Company, substantially in the form
reasonably acceptable to you, providing you with such "cold comfort" as you may
reasonably require.
(f) At the Closing Dates, (i) the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects with the same effect as if made on and as of the
Closing Dates taking into account for the Option Closing Dates the effect of the
transactions contemplated hereby and the Company or its Subsidiaries shall have
performed all of its obligations hereunder and satisfied all the conditions on
its part to be satisfied at or prior to such Closing Date; (ii) the Registration
Statement and the Prospectus and any amendments or supplements thereto shall
contain all statements which are required to be stated therein in accordance
with the Act and the Rules and Regulations, and shall in all material respects
conform to the requirements thereof, and neither the Registration Statement nor
the Prospectus nor any amendment or supplement thereto shall contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading; (iii)
there shall have been, since the respective dates as of which information is
given, no material adverse change, or to the Company or its Subsidiaries's
knowledge, any development involving a prospective material adverse change, in
the business, properties, condition (financial or otherwise), results of
operations, capital stock, long-term or short-term debt or general affairs of
the Company or its Subsidiaries from that set forth in the Registration
Statement and the Prospectus, except changes which the Registration Statement
and Prospectus indicate might occur after the effective date of the Registration
Statement, and the
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Company or its Subsidiaries shall not have incurred any material liabilities or
entered into any material agreement not in the ordinary course of business other
than as referred to in the Registration Statement and Prospectus; (iv) except as
set forth in the Prospectus, no action, suit or proceeding at law or in equity
shall be pending or threatened against the Company or its Subsidiaries which
would be required to be set forth in the Registration Statement, and no
proceedings shall be pending or threatened against the Company or its
Subsidiaries before or by any commission, board or administrative agency in the
United States or elsewhere, wherein an unfavorable decision, ruling or finding
would materially and adversely affect the business, property, condition
(financial or otherwise), results of operations or general affairs of the
Company or its Subsidiaries, and (v) you shall have received, at the First
Closing Date, a certificate signed by each of the President and the principal
operating officer of the Company or its Subsidiaries, dated as of the First
Closing Date, evidencing compliance with the provisions of this subsection (f).
(g) Upon exercise of the Over-Allotment Option provided for in
Section 2(b) hereof, the obligations of the Underwriter to purchase and pay for
the Option Securities referred to therein will be subject (as of the date hereof
and as of the Option Closing Date) to the following additional conditions:
(i) The Registration Statement shall remain effective
at the Option Closing Date, and no stop order suspending the effectiveness
thereof shall have been issued and no proceedings for that purpose shall have
been instituted or shall be pending, or, to your knowledge or the knowledge of
the Company, shall be contemplated by the Commission, and any reasonable request
on the part of the Commission for additional information shall have been
complied with to the satisfaction of the Commission.
(ii) At the Option Closing Date there shall have been
delivered to you the signed opinion of, Esanu, Katsky, Korins & Siger counsel to
the Company, dated as of the Option Closing Date, in form and substance
reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the
Underwriter, which opinion shall be substantially the same in scope and
substance as the opinion furnished to you at the First Closing Date pursuant to
Sections 4(b) hereof, except that such opinion, where appropriate, shall cover
the Option Securities.
(iii) At the Option Closing Date there shall have be
delivered to you a certificate of the President and the principal operating
officer of the Company, dated the Option Closing Date, in form and substance
reasonably satisfactory to Bernstein & Wasserman, LLP, counsel to the
Underwriter, substantially the same in scope and substance as the certificate
furnished to you at the First Closing Date pursuant to Section 4(f) hereof.
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(iv) At the Option Closing Date there shall have been
delivered to you a letter in form and substance satisfactory to you from Moore
Stephens, P.C., dated the Option Closing Date and addressed to the Underwriter
confirming the information in their letter referred to in Section 4(e) hereof
and stating that nothing has come to their attention during the period from the
ending date of their review referred to in said letter to a date not more than
five business days prior to the Option Closing Date, which would require any
change in said letter if it were required to be dated the Option Closing Date.
(v) All proceedings taken at or prior to the Option
Closing Date in connection with the sale and issuance of the Option Securities
shall be reasonably satisfactory in form and substance to you, and you and
Bernstein & Wasserman, LLP, counsel to the Underwriter, shall have been
furnished with all such documents, certificates, and opinions as you may
reasonably request in connection with this transaction in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Company or its compliance with any of the covenants or
conditions contained herein.
(h) No action shall have been taken by the Commission or the
NASD the effect of which would make it improper, at any time prior to the
Closing Date, for members of the NASD to execute transactions (as principal or
agent) in the Securities and no proceedings for the taking of such action shall
have been instituted or shall be pending, or, to the knowledge of the
Underwriter or the Company, shall be contemplated by the Commission or the NASD.
The Company and the Underwriter represent that at the date hereof each has no
knowledge that any such action is in fact contemplated against it by the
Commission or the NASD.
(i) If any of the conditions herein provided for in this
Section shall not have been fulfilled in all material respects as of the date
indicated, this Agreement and all obligations of the Underwriter under this
Agreement may be canceled at, or at any time prior to, each Closing Date by the
Underwriter notifying the Company of such cancellation in writing or by telegram
at or prior to the applicable Closing Date. Any such cancellation shall be
without liability of the Underwriter to the Company.
5. Conditions of the Obligations of the Company, The obligation of
the Company to sell and deliver the Securities is subject to the following
conditions:
(a) The Registration Statement shall have become effective not
later than 10:00 A.M. New York time, on the day following the date of this
Agreement, or on such later date as the Company and the Underwriter may agree in
writing.
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(b) At the Closing Dates, no stop orders suspending the
effectiveness of the Registration Statement shall have been issued under the Act
or any proceedings therefor initiated or threatened by the Commission.
If the conditions to the obligations of the Company provided
for in this Section have been fulfilled on the First Closing Date but are not
fulfilled after the First Closing Date and prior to the Option Closing Date,
then only the obligation of the Company to sell and deliver the Securities on
exercise of the Over-Allotment Option provided for in Section 2(b) hereof shall
be affected.
6. Indemnification.
(a) The Company agrees (i) to indemnify and hold harmless the
Underwriter and each person, if any, who controls the Underwriter within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act against
any losses, claims, damages or liabilities, joint or several (which shall, for
all purposes of this Agreement, include, but not be limited to, all reasonable
costs of defense and investigation and all reasonable attorneys' fees), to which
such Underwriter or such controlling person may become subject, under the Act or
otherwise, and (ii) to reimburse, as incurred, the Underwriter and such
controlling persons for any legal or other expenses reasonably incurred in
connection with investigating, defending against or appearing as a third party
witness in connection with any losses, claims, damages or liabilities; insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
relating to (i) and (ii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, (B) any blue sky application or other document executed by
the Company specifically for that purpose containing written information
specifically furnished by the Company and filed in any state or other
jurisdiction in order to qualify any or all of the Securities under the
securities laws thereof (any such application, document or information being
hereinafter called a "Blue Sky Application"), or arise out of or are based upon
the omission or alleged omission to state in the Registration Statement, any
Preliminary Prospectus, Prospectus, or any amendment or supplement thereto, or
in any Blue Sky Application, a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however, that
the Company will not be required to indemnify the Underwriter and any
controlling person or be liable in any such case to the extent, but only to the
extent, that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written information
furnished to the Company by or on behalf of the Underwriter specifically for use
in the preparation of the Registration Statement or any such amendment or
supplement thereof or any such Blue Sky Application or any such preliminary
Prospectus or the Prospectus or any such amendment or supplement thereto,
provided, further that the indemnity with respect to any
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Preliminary Prospectus shall not be applicable on account of any losses, claims,
damages, liabilities or litigation arising from the sale of Securities to any
person if a copy of the Prospectus was not delivered to such person at or prior
to the written confirmation of the sale to such person. This indemnity will be
in addition to any liability which the Company may otherwise have.
(b) The Underwriter will indemnify and hold harmless the
Company, each of its directors, each nominee (if any) for director named in the
Prospectus, each of its officers who have signed the Registration Statement and
each person, if any, who controls the Company within the meaning of the Act,
against any losses, claims, damages or liabilities (which shall, for all
purposes of this Agreement, include, but not be limited to, all costs of defense
and investigation and reasonable attorneys' fees) to which the Company or any
such director, nominee, officer or controlling person may become subject under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or any Blue Sky Application in reliance upon and in
conformity with written information furnished to the Company by the Underwriter
specifically for use in the preparation thereof and for any violation by the
Underwriter in the sale of such Securities of any applicable state or federal
law or any rule, regulation or instruction thereunder relating to violations
based on unauthorized statements by Underwriter or its representative; provided
that such violation is not based upon any violation of such law, rule or
regulation or instruction by the party claiming indemnification or inaccurate or
misleading information furnished by the Company or its representatives,
including information furnished to the Underwriter as contemplated herein. This
indemnity agreement will be in addition to any liability which the Underwriter
may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section, notify in writing the indemnifying party of the commencement
thereof; but the omission so to notify the indemnifying party will not relieve
it from any liability which it may have to any indemnified party otherwise than
under this Section. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, subject to the provisions herein stated, with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying
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party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified party
under this Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall have the right to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense of the
action with counsel reasonably satisfactory to the indemnified party; provided
that the reasonable fees and expenses of such counsel shall be at the expense of
the indemnifying party if (i) the employment of such counsel has been
specifically authorized in writing by the indemnifying party or (ii) the named
parties to any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and in the reasonable judgment of
the counsel to the indemnified party, it is advisable for the indemnified party
to be represented by separate counsel (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of such
indemnified party, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for the indemnified party,
which firm shall be designated in writing by the indemnified party). No
settlement of any action against an indemnified party shall be made without the
consent of the indemnified party, which shall not be unreasonably withheld in
light of all factors of importance to such indemnified party. If it is
ultimately determined that indemnification is not permitted, then an indemnified
party will return all monies advanced to the indemnifying party.
7. Contribution.
In order to provide for just and equitable contribution under
the Act in any case in which the indemnification provided in Section 6 hereof is
requested but it is judicially determined (by the entry of a final judgment or
decree by a court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification may not be
enforced in such case, notwithstanding the fact that the express provisions of
Section 6 provide for indemnification in such case, then the Company and each
person who controls the Company, in the aggregate, and the Underwriter shall
contribute to the aggregate losses, claims, damages or liabilities to which they
may be subject (which shall, for all purposes of this Agreement, include, but
not be limited to, all reasonable costs of defense and investigation and all
reasonable attorneys' fees) (after contribution from others) in such proportions
that the Underwriter is responsible in the aggregate for that portion of such
losses, claims, damages or liabilities represented by the percentage that the
underwriting discount for each of the Securities appearing on the cover page of
the Prospectus bears to the public offering price appearing thereon and the
Company shall be responsible for the remaining portion; provided, however, that
if such
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allocation is not permitted by applicable law then allocated in such proportion
as is appropriate to reflect relative benefits but also the relative fault of
the Company and the Underwriter and controlling persons, in the aggregate, in
connection with the statements or omissions which resulted in such damages and
other relevant equitable considerations shall also be considered. The relative
fault shall be determined by reference to, among other things, whether in the
case of an untrue statement of a material fact or the omission to state a
material fact, such statement or omission relates to information supplied by the
Company or the Underwriter and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Underwriter agree that it would not be just and
equitable if the respective obligations of the Company and the Underwriter to
contribute pursuant to this Section 7 were to be determined by pro rata or per
capita allocation of the aggregate damages or by any other method of allocation
that does not take account of the equitable considerations referred to in this
Section 7. No person guilty of a fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who is not guilty of such fraudulent misrepresentation. As used in this
paragraph, the word "Company" includes any officer, director, or person who
controls the Company within the meaning of Section 15 of the Act. If the full
amount of the contribution specified in this paragraph is not permitted by law,
then the Underwriter and each person who controls the Underwriter shall be
entitled to contribution from the Company, its officers, directors and
controlling persons, and the Company, its officers, directors and controlling
persons shall be entitled to contribution from the Underwriter to the full
extent permitted by law. The foregoing contribution agreement shall in no way
affect the contribution liabilities of any persons having liability under
Section 11 of the Act other than the Company and the Underwriter. No
contribution shall be requested with regard to the settlement of any matter from
any party who did not consent to the settlement; provided, however, that such
consent shall not be unreasonably withheld in light of all factors of importance
to such party.
8. Costs and Expenses.
(a) Whether or not this Agreement becomes effective or the
sale of the Securities to the Underwriter is consummated, the Company will pay
all costs and expenses incident to the performance of this Agreement by the
Company including, but not limited to, the fees and expenses of counsel to the
Company and of the Company's accountants; the costs and expenses incident to the
preparation, printing, filing and distribution under the Act of the Registration
Statement (including the financial statements therein and all amendments and
exhibits thereto), Preliminary Prospectus and the Prospectus, as amended or
supplemented, the fee of the NASD in connection with the filing required by the
NASD relating to the offering of the Securities contemplated hereby; all
expenses, including reasonable fees and disbursements of counsel to the
Underwriter, in connection with the qualification of the Securities under the
state securities or blue sky laws which the Underwriter shall designate; the
cost of printing and
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furnishing to the Underwriter copies of the Registration Statement, each
Preliminary Prospectus, the Prospectus, this Agreement, and the Blue Sky
Memorandum, any fees relating to the listing of the Common Stock and Warrants on
NASDAQ or any other securities exchange, the cost of printing the certificates
representing the Securities; fees for bound volumes and prospectus memorabilia
and the fees of the transfer agent and warrant agent. The Company shall pay any
and all taxes (including any transfer, franchise, capital stock or other tax
imposed by any jurisdiction) on sales to the Underwriter hereunder. The Company
will also pay all costs and expenses incident to the furnishing of any amended
Prospectus or of any supplement to be attached to the Prospectus as called for
in Section 3(a) of this Agreement except as otherwise set forth in said Section.
(b) In addition to the foregoing expenses, the Company shall
at the First Closing Date pay to the Underwriter a non-accountable expense
allowance of $156,750. In the event the overallotment option is exercised, the
Company shall pay to the Underwriter at the Option Closing Date an additional
amount in the aggregate equal to 3% of the gross proceeds received upon exercise
of the overallotment option. In the event the transactions contemplated hereby
are not consummated by reason of any action by the Underwriter (except if such
prevention is based upon a breach by the Company of any covenant, representation
or warranty contained herein or because any other condition to the Underwriter's
obligations hereunder required to be fulfilled by the Company is not fulfilled)
the Company shall not be liable for any expenses of the Underwriter, including
the Underwriter's legal fees. In the event the transactions contemplated hereby
are not consummated by reason of the Company being unable to perform its
obligations hereunder in all material respects, the Company shall be liable for
the actual accountable out-of-pocket expenses of the Underwriter, including
reasonable legal fees, not to exceed in the aggregate $150,000.
(c) Except as disclosed in the Registration Statement, no
person is entitled either directly or indirectly to compensation from the
Company, from the Underwriter or from any other person for services as a finder
in connection with the proposed offering, and the Company agrees to indemnify
and hold harmless the Underwriter, against any losses, claims, damages or
liabilities, joint or several (which shall, for all purposes of this Agreement,
include, but not be limited to, all costs of defense and investigation and all
reasonable attorneys' fees), to which the Underwriter or person may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon the claim of any person (other
than an employee of the party claiming indemnity) or entity that he or it is
entitled to a finder's fee in connection with the proposed offering by reason of
such person's or entity's influence or prior contact with the indemnifying
party.
9. Effective Date.
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The Agreement shall become effective upon its execution except
that you may, at your option, delay its effectiveness until 11:00 A.M., New York
time on the first full business day following the effective date of the
Registration Statement, or at such earlier time on such business day after the
effective date of the Registration Statement as you in your discretion shall
first commence the public offering of the Securities. The time of the initial
public offering shall mean the time of release by you of the first newspaper
advertisement with respect to the Securities, or the time when the Securities
are first generally offered by you to dealers by letter or telegram, whichever
shall first occur. This Agreement may be terminated by you at any time before it
becomes effective as provided above, except that Sections 3(c), 6, 7, 8, 12, 13,
14 and 15 shall remain in effect notwithstanding such termination.
10. Termination.
(a) After this Agreement becomes effective, this Agreement,
except for Sections 3(c), 6, 7, 8, 12, 13, 14 and 15 hereof, may be terminated
at any time prior to the First Closing Date, by you if in your judgment (i) the
Company has sustained a material loss, whether or not insured, by reason of
fire, earthquake, flood, accident or other calamity, or from any labor dispute
or court or government action, order or decree, (ii) trading in securities on
the New York Stock Exchange or the American Stock Exchange having been suspended
or limited, (iii) material governmental restrictions have been imposed on
trading in securities generally (not in force and effect on the date hereof),
(iv) a banking moratorium has been declared by federal or New York state
authorities, (v) an outbreak of major international hostilities involving the
United States or other substantial national or international calamity has
occurred, (vi) a pending or threatened legal or governmental proceeding or
action relating generally to the Company's business, or a notification has been
received by the Company of the threat of any such proceeding or action, which
would materially adversely affect the Company; (vii) except as contemplated by
the Prospectus, the Company is merged or consolidated into or acquired by
another company or group or there exists a binding legal commitment for the
foregoing or any other material change of ownership or control occurs; (viii)
the passage by the Congress of the United States or by any state legislative
body of similar impact, of any act or measure, or the adoption of any orders,
rules or regulations by any governmental body or any authoritative accounting
institute or board, or any governmental executive, which is reasonably believed
likely by the Underwriter to have a material adverse impact on the business,
financial condition or financial statements of the Company; (ix) any material
adverse change in the financial or securities markets beyond normal market
fluctuations having occurred since the date of this Agreement, or (x) any
material adverse change having occurred, since the respective dates of which
information is given in the Registration Statement and Prospectus, in the
earnings, business prospects or general condition of the Company, financial or
otherwise, whether or not arising in the ordinary course of business.
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(b) If you elect to prevent this Agreement from becoming
effective or to terminate this Agreement as provided in this Section 10, the
Company shall be promptly notified by you, by telephone or telegram, confirmed
by letter.
11. Purchase Option.
At or before the First Closing Date, the Company will sell the
Underwriter or its designees for a consideration of $10, and upon the terms and
conditions set forth in the form of Purchase Option annexed as an exhibit to the
Registration Statement, a Purchase Option to purchase an aggregate of 100,000
shares of Common Stock and 150,000 Warrants. In the event of conflict in the
terms of this Agreement and the Purchase Option with respect to language
relating to the Purchase Option, the language of the Purchase Option shall
control.
12. Representations and Warranties of the Underwriter.
The Underwriter represents and warrants to the Company that it
is registered as a broker-dealer in all jurisdictions in which it is offering
the Securities and that it will comply with all applicable state or federal laws
relating to the sale of the Securities, including but not limited to, violations
based on unauthorized statements by the Underwriter or its representatives.
13. Representations, Warranties and Agreements to Survive Delivery.
The respective indemnities, agreements, representations,
warranties and other statements of the Company and the Underwriter and the
undertakings set forth in or made pursuant to this Agreement will remain in full
force and effect until three years from the date of this Agreement, regardless
of any investigation made by or on behalf of the Underwriter, the Company or any
of its officers or directors or any controlling person and will survive delivery
of and payment of the Securities and the termination of this Agreement.
14. Notice.
Any communications specifically required hereunder to be in
writing, if sent to the Representative, will be mailed, delivered or telecopied
and confirmed to them at Monroe Parker Securities, Inc., 2500 Westchester
Avenue, Purchase, New York 10577, with a copy sent to Bernstein & Wasserman,
LLP, 950 Third Avenue, New York, New York 10022, Attention: Steven F. Wasserman,
or if sent to the Company, will be mailed, delivered or telecopied and confirmed
to it at 160 Broadway, Suite 901, New York, NY 10038 with a copy sent to Esanu,
Katsky, Korins & Siger, 605 Third Avenue, New York, NY 10158-0038. Notice shall
be deemed to have been duly given if mailed or transmitted by any standard form
of telecommunication.
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15. Parties in Interest.
The Agreement herein set forth is made solely for the benefit
of the Underwriter, the Company, any person controlling the Company or the
Underwriter, and directors of the Company, nominees for directors (if any) named
in the Prospectus, its officers who have signed the Registration Statement, and
their respective executors, administrators, successors, assigns and no other
person shall acquire or have any right under or by virtue of this Agreement. The
term "successors and assigns" shall not include any purchaser, as such
purchaser, from the Underwriter of the Securities.
16. Applicable Law.
This Agreement will be governed by, and construed in
accordance with, of the laws of the State of New York applicable to agreements
made and to be entirely performed within New York.
17. Counterparts.
This agreement may be executed in one or more counterparts
each of which shall be deemed to constitute an original and shall become
effective when one or more counterparts have been signed by each of the parties
hereto and delivered to the other parties (including by fax, followed by
original copies by overnight mail).
18. Entire Agreement; Amendments.
This Agreement constitutes the entire agreement of the parties
hereto and supersedes all prior written or oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may not
be amended except in writing, signed by the Underwriter and the Company.
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If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return this agreement, whereupon it will become a binding
agreement between the Company and the Underwriter in accordance with its terms.
Very truly yours,
INTERNATIONAL MAGNETIC IMAGING, INC.
By:_______________________________
Name: Lewis S. Schiller
Title: Chairman
The foregoing Underwriting Agreement is hereby confirmed and
accepted as of the date first above written.
MONROE PARKER SECURITIES, INC.
By:_______________________________
Name: Stephen J. Drescher
Title: Director Corporate Finance
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Exhibit 1.2
Option to Purchase
100,000 Shares of Common Stock
and
150,000 Warrants
INTERNATIONAL MAGNETIC IMAGING, INC.
PURCHASE OPTION
Dated: ________ __, 1996
THIS CERTIFIES that Monroe Parker Securities, Inc., 2500 Westchester
Avenue, Purchase, NY 10577 (hereinafter sometimes referred to as the "Holder"),
is entitled to purchase from INTERNATIONAL MAGNETIC IMAGING, INC. (hereinafter
referred to as the "Company"), at the prices and during the periods as
hereinafter specified, up to 100,000 shares of Common Stock, par value $.01 per
share ("Common Stock"), and 150,000 Class A Redeemable Common Stock Purchase
Warrants ("Warrants"). Each Warrant entitles the registered holder thereof to
purchase one (1) share of Common Stock at an exercise price of $6.00 per share.
The Warrants (hereinafter, the "Warrants") are exercisable for a twenty four
(24) month period, commencing ________ __, 1997 (twelve (12) months from the
Effective Date). Hereinafter, the shares of Common Stock and Warrants shall be
referred to as an "Option Securities" or "Securities."
The Securities have been registered under a Registration Statement on
Form SB-2 (File No. 333-_____) declared effective by the Securities and Exchange
Commission on ________ __, 1996 (the "Registration Statement"). This Option (the
"Option") to purchase 100,000 shares of Common Stock and 150,000 Warrants was
originally issued pursuant to an underwriting agreement between the Company and
Monroe Parker Securities, Inc. as underwriter (the "Underwriter"), in connection
with a public offering of 1,000,000 shares of Common Stock and 1,500,000
Warrants (collectively, the "Public Securities") through the Underwriter, in
consideration of $10.00 received for the Option.
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<PAGE>
Except as specifically otherwise provided herein, the Common Stock and
the Warrants issued pursuant to this Option shall bear the same terms and
conditions as described under the caption "Description of Securities" in the
Registration Statement, and the Warrants shall be governed by the terms of the
Warrant Agreement dated as of ________ __, 1996, executed in connection with
such public offering (the "Warrant Agreement"), except that the holder shall
have registration rights under the Securities Act of 1933, as amended (the
"Act"), for the Option, the Common Stock and the Warrants included in the
Option, and the shares of Common Stock underlying the Warrants, as more fully
described in paragraph 6 of this Option. In the event of any reduction of the
exercise price of the Warrants included in the Public Securities, the same
changes to the Warrants included in the Option and the components thereof shall
be simultaneously effected.
1. The rights represented by this Option shall be exercised at the
prices, subject to adjustment in accordance with paragraph 8 of this Option, and
during the periods as follows:
(a) Between ________ __, 1997 (one (1) year from the Effective
Date) and ________ __, 2001, inclusive, the Holder shall have the option to
purchase Common Stock and Warrants hereunder at prices of $6.00 and $.18,
respectively (subject to adjustment pursuant to paragraph 8 hereof) (the
"Exercise Price").
(b) After ________ __, 2001, the Holder shall have no
right to purchase any Option Securities hereunder.
2. The rights represented by this Option may be exercised at
any time within the period above specified, in whole or in part, by
(i) the surrender of this Option (with the purchase form at the end
hereof properly executed) at the principal executive office of the
Company (or such other office or agency of the Company as it may
designate by notice in writing to the Holder at the address of the
Holder appearing on the books of the Company); (ii) payment to the
Company of the Exercise Price then in effect for the number of
Option Securities specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any; and (iii)
delivery to the Company of a duly executed agreement signed by the
person(s) designated in the purchase form to the effect that such
person(s) agree(s) to be bound by the provisions of paragraph 6 and
subparagraphs (b), (c) and (d) of paragraph 7 hereof. This Option
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<PAGE>
shall be deemed to have been exercised, in whole or in part to the extent
specified, immediately prior to the close of business on the date this Option is
surrendered and payment is made in accordance with the foregoing provisions of
this paragraph 2, and the person or persons in whose name or names the
certificates for shares of Common Stock and Warrants shall be issuable upon such
exercise shall become the holder or holders of record of such Common Stock and
Warrants at that time and date. The Common Stock and Warrants and the
certificates for the Common Stock and Warrants so purchased shall be delivered
to the Holder within a reasonable time, not exceeding ten (10) days, after the
rights represented by this Option shall have been so exercised.
3. This Option shall not be transferred, sold, assigned, or
hypothecated for a period of one (1) year from the Effective Date, except that
it may be transferred to successors of the Holder, and may be assigned in whole
or in part to any person who is an officer of the Holder or selling group member
of the offering during such period. Any transfer after one (1) year must be
accompanied with an immediate exercise of the Option. Any such assignment shall
be effected by the Holder (i) executing the form of assignment at the end hereof
and (ii) surrendering this Option for cancellation at the office or agency of
the Company referred to in paragraph 2 hereof, accompanied by a certificate
(signed by an officer of the Holder if the Holder is a corporation), stating
that each transferee is a permitted transferee under this paragraph 3 hereof;
whereupon the Company shall issue, in the name or names specified by the Holder
(including the Holder) a new Option or Options of like tenor and representing in
the aggregate rights to purchase the same number of Option Securities as are
purchasable hereunder.
4. The Company covenants and agrees that all shares of Common Stock
which may be issued as part of the Option Securities purchased hereunder and the
Common Stock which may be issued upon exercise of the Warrants will, upon
issuance, be duly and validly issued, fully paid and nonassessable. The Company
further covenants and agrees that during the periods within which this Option
may be exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
this Option and that it will have authorized and reserved a sufficient number of
shares of Common Stock for issuance upon exercise of the Warrants included in
the Option Securities.
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<PAGE>
5. This Option shall not entitle the Holder to any voting,
dividend, or other rights as a stockholder of the Company.
6. (a) During the period set forth in paragraph l(a) hereof, the
Company shall advise the Holder or its transferee, whether the Holder holds the
Option or has exercised the Option and holds Option Securities or any of the
securities underlying the Option Securities, by written notice at least 30 days
prior to the filing of any post-effective amendment to the Registration
Statement or of any new registration statement or post-effective amendment
thereto under the Act covering any securities of the Company, for its own
account or for the account of others (other than a registration statement on
Form S-4 or S-8 or any successor forms thereto), and will for a period of five
years from the effective date of the Registration Statement, upon the request of
the Holder, include in any such post-effective amendment or registration
statement, such information as may be required to permit a public offering of
the Option, all or any of the Common Stock, or Warrants included in the
Securities or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may request in order to facilitate the public sale or
other disposition of the Registrable Securities, use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates provided that the Company shall not be required to
qualify as a foreign corporation or a dealer in securities or execute a general
consent to service of process in any jurisdiction in any action and do any and
all other acts and things which may be reasonably necessary or desirable to
enable such Holder to consummate the public sale or other disposition of the
Registrable Securities, and furnish indemnification in the manner provided in
paragraph 7 hereof. The Holder shall furnish information and indemnification as
set forth in paragraph 7 except that the maximum amount which may be recovered
from the Holder shall be limited to the amount of proceeds received by the
Holder from the sale of the Registrable Securities. The Company shall use its
best efforts to cause the managing underwriter or underwriters of a proposed
underwritten offering to permit the holders of Registrable Securities requested
to be included in the registration to include such securities in such
underwritten offering on the same terms and conditions as any similar securities
of the Company included therein. Notwithstanding the foregoing, if the managing
underwriter or
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<PAGE>
underwriters of such offering advises the holders of Registrable Securities that
the total amount of securities which they intend to include in such offering is
such as to materially and adversely affect the success of such offering, then
the amount of securities to be offered for the accounts of holders of
Registrable Securities shall be eliminated, reduced, or limited to the extent
necessary to reduce the total amount of securities to be included in such
offering to the amount, if any, recommended by such managing underwriter or
underwriters (any such reduction or limitation in the total amount of
Registrable Securities to be included in such offering to be borne by the
holders of Registrable Securities proposed to be included therein pro rata). The
Holder will pay its own legal fees and expenses and any underwriting discounts
and commissions on the securities sold by such Holder and shall not be
responsible for any other expenses of such registration.
(b) If any 50% holder (as defined below) shall give notice to
the Company at any time during the period set forth in paragraph l(a) hereof to
the effect that such holder desires to register under the Act this Option or any
of the underlying securities contained in the Option Securities underlying the
Option under such circumstances that a public distribution (within the meaning
of the Act) of any such securities will be involved then the Company will
promptly, but no later than 60 days after receipt of such notice, file a
post-effective amendment to the current Registration Statement or a new
registration statement pursuant to the Act, to the end that the Option and/or
any of the Securities underlying the Option Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective for a
period of 120 days (including the taking of such steps as are reasonably
necessary to obtain the removal of any stop order); provided that such holder
shall furnish the Company with appropriate information in connection therewith
as the Company may reasonably request in writing. The 50% holder (which for
purposes hereof shall mean any direct or indirect transferee of such holder)
may, at its option, request the filing of a post-effective amendment to the
current Registration Statement or a new registration statement under the Act
with respect to the Registrable Securities on only two occasions during the term
of this Option. The Holder may at its option request the registration of the
Option and/or any of the Securities underlying the Option in a registration
statement made by the Company as contemplated by
5
<PAGE>
Section 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Securities issuable upon exercise of the Option and
even though the Holder has not given notice of exercise of the Option. The 50%
holder may, at its option, request such post-effective amendment or new
registration statement during the described period with respect to the Option or
separately as to the Common Stock and/or Warrants included in the Option and/or
the Common Stock issuable upon the exercise of the Warrants, and such
registration rights may be exercised by the 50% holder prior to or subsequent to
the exercise of the Option. Within ten business days after receiving any such
notice pursuant to this subsection (b) of paragraph 6, the Company shall give
notice to the other holders of the Options, advising that the Company is
proceeding with such post-effective amendment or registration statement and
offering to include therein the securities underlying the Options of the other
holders. Each holder electing to include its Registrable Securities in any such
offering shall provide written notice to the Company within twenty (20) days
after receipt of notice from the Company. The failure to provide such notice to
the Company shall be deemed conclusive evidence of such holder's election not to
include its Registrable Securities in such offering. Each holder electing to
include its Registrable Securities shall furnish the Company with such
appropriate information (relating to the intentions of such holders) in
connection therewith as the Company shall reasonably request in writing. All
costs and expenses of only one such post-effective amendment or new registration
statement shall be borne by the Company, except that the holders shall bear the
fees of their own counsel and any underwriting discounts or commissions
applicable to any of the securities sold by them.
The Company shall be entitled to postpone the filing
of any registration statement pursuant to this Section 6(b) otherwise required
to be prepared and filed by it if (i) the Company is engaged in a material
acquisition, reorganization, or divestiture, (ii) the Company is currently
engaged in a self-tender or exchange offer and the filing of a registration
statement would cause a violation of Rule 10b-6 under the Securities Exchange
Act of 1934, (iii) the Company is engaged in an underwritten offering and the
managing underwriter has advised the Company in writing that such a registration
statement would have a material adverse effect on the consummation of such
offering or (iv) the Company is subject to an underwriter's lock-up as a result
of an underwritten
6
<PAGE>
public offering and such underwriter has refused in writing, the Company's
request to waive such lock-up. In the event of such postponement, the Company
shall be required to file the registration statement pursuant to this Section
6(b), within 60 days of the consummation of the event requiring such
postponement.
The Company will use its best efforts to maintain
such registration statement or post-effective amendment current under the Act
for a period of at least six months (and for up to an additional three months if
requested by the Holder) from the effective date thereof. The Company shall
supply prospectuses, and such other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of the
Registrable Securities, use its best efforts to register and qualify any of the
Registrable Securities for sale in such states as such holder designates,
provided that the Company shall not be required to qualify as a foreign
corporation or a dealer in securities or execute a general consent to service of
process in any jurisdiction in any action and furnish indemnification in the
manner provided in paragraph 7 hereof.
(c) The term "50% holder" as used in this paragraph 6 shall
mean the holder of at least 50% of the Common Stock and the Warrants underlying
the Option (considered in the aggregate) and shall include any owner or
combination of owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock held by such owner or owners as
well as the number of shares then issuable upon exercise of the Warrants.
7. (a) Whenever pursuant to paragraph 6 a registration statement
relating to the Option or any shares or warrants issued or issuable upon the
exercise of any Options, is filed under the Act, amended or supplemented, the
Company will indemnify and hold harmless each holder of the securities covered
by such registration statement, amendment, or supplement (such holder being
hereinafter called the "Distributing Holder"), and each person, if any, who
controls (within the meaning of the Act) the Distributing Holder, and each
underwriter (within the meaning of the Act) of such securities and each person,
if any, who controls (within the meaning of the Act) any such underwriter,
against any losses, claims, damages, or liabilities, joint or several, to which
the Distributing Holder, any such controlling person or any such
7
<PAGE>
underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Distributing Holder
and each such controlling person and underwriter for any legal or other expenses
reasonably incurred by the Distributing Holder or such controlling person or
underwriter in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage, or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus, or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder or any other Distributing Holder, for use in the
preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless
the Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, each person,
if any, who controls the Company (within the meaning of the Act) against any
losses, claims, damages, or liabilities, joint and several, to which the Company
or any such director, officer, or controlling person may become subject, under
the Act or otherwise, insofar as such losses, claims, damages, or liabilities
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in said registration statement, said preliminary
prospectus, said final prospectus, or said amendment or supplement, or arise out
of or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in said registration statement, said preliminary prospectus,
said final prospectus, or said amendment or supplement in reliance upon and in
conformity with written information furnished by such
8
<PAGE>
Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer, or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action.
(c) Promptly after receipt by an indemnified party under this
paragraph 7 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying
party, give the indemnifying party notice of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability which it may have to any indemnified party otherwise than under this
paragraph 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
paragraph 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of this Option shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, the Exercise Price in
effect at the time of the record date for such dividend or distribution or of
the effective date of such subdivision, combination or reclassification shall be
adjusted so that it shall equal the price determined by multiplying the Exercise
Price by a fraction, the
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<PAGE>
denominator of which shall be the number of shares of Common Stock outstanding
after giving effect to such action, and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
Notwithstanding anything to the contrary contained in the Warrant Agreement, in
the event an adjustment to the Exercise Price is effected pursuant to this
Subsection (a) (and a corresponding adjustment to the number of Option
Securities is made pursuant to Subsection (d) below), the exercise price of the
Warrants shall be adjusted so that it shall equal the price determined by
multiplying the exercise price of the Warrants by a fraction, the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after giving effect to such action and the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such action.
In such event, there shall be no adjustment to the number of shares of Common
Stock or other securities issuable upon exercise of the Warrants. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In case the Company shall fix a record date for the
issuance of rights or warrants to all holders of its Common Stock entitling them
to subscribe for or purchase shares of Common Stock (or securities convertible
into Common Stock) at a price (the "Subscription Price") (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in Subsection (e) below) on the record date mentioned below, the
Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the number of shares then comprising the Option
Securities by the product of the Exercise Price in effect immediately prior to
the date of such issuance multiplied by a fraction, the numerator of which shall
be the sum of the number of shares of Common Stock outstanding on the record
date mentioned below and the number of additional shares of Common Stock which
the aggregate offering price of the total number of shares of Common Stock so
offered (or the aggregate conversion price of the convertible securities so
offered) would purchase at such current market price per share of the Common
Stock, and the denominator of which shall be the sum of the number of shares of
Common Stock outstanding on such record date and the number of additional shares
of Common Stock offered for subscription or purchase (or into which the
convertible securities so offered are convertible). Such adjustment shall be
made successively whenever such rights or warrants are issued and shall become
effective
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<PAGE>
immediately after the record date for the determination of shareholders entitled
to receive such rights or warrants; and to the extent that shares of Common
Stock are not delivered (or securities convertible into Common Stock are not
delivered) after the expiration of such rights or warrants the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(c) In case the Company shall hereafter distribute to the
holders of its Common Stock evidence of its indebtedness or assets (excluding
cash dividends or distributions and dividends or distributions referred to in
Subsection (a) above) or subscription rights or warrants (excluding those
referred to in Subsection (b) above), then in each such case the Exercise Price
in effect thereafter shall be determined by multiplying the number of shares
then comprising the Option Securities by the product of the Exercise Price in
effect immediately prior thereto multiplied by a fraction, the numerator of
which shall be the total number of shares of Common Stock outstanding multiplied
by the current market price per share of Common Stock (as defined in Subsection
(e) below), less the fair market value (as determined by the Company's Board of
Directors) of said assets or evidences of indebtedness so distributed or of such
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such current market price per
share of Common Stock. Such adjustment shall be made successively whenever such
a record date is fixed. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(d) Whenever the Exercise Price payable upon exercise of this
Option is adjusted pursuant to Subsections (a), (b) or (c) above, the number of
Option Securities purchasable upon exercise of this Option shall simultaneously
be adjusted by multiplying the number of Option Securities initially issuable
upon exercise of this Option by the Exercise Price in effect on the date hereof
and dividing the product so obtained by the Exercise Price, as adjusted.
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<PAGE>
(e) For the purpose of any computation under Subsections (b)
or (c) above, the current market price per share of Common Stock at any date
shall be deemed to be the average of the daily closing prices for 20 consecutive
business days before such date. The closing price for each day shall be the last
sale price regular way or, in case no such reported sale takes place on such
day, the average of the last reported bid and asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(f) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least fifteen
cents ($0.15) in such price; provided, however, that any adjustments which by
reason of this Subsection (f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment required to be made
hereunder. All calculations under this Section 8 shall be made to the nearest
cent or to the nearest one-hundredth of a share, as the case may be. Anything in
this Section 8 to the contrary notwithstanding, the Company shall be entitled,
but shall not be required, to make such changes in the Exercise Price, in
addition to those required by this Section 8, as it shall determine, in its sole
discretion, to be advisable in order that any dividend or distribution in shares
of Common Stock, or any subdivision, reclassification or combination of Common
Stock, hereafter made by the Company shall not result in any Federal Income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Warrants issuable upon exercise of this Option).
(g) Whenever the Exercise Price is adjusted, as herein
provided, the Company shall promptly, but no later than 10 days after any
request for such an adjustment by the Holder, cause a notice setting forth the
adjusted Exercise Price and adjusted number of Option Securities issuable upon
exercise of this Option and, if requested, information describing the
transactions giving rise to such adjustments, to be mailed to the Holder, at the
address set forth herein, and shall cause a certified copy thereof to be mailed
to its transfer agent, if any. The Company may retain
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<PAGE>
a firm of independent certified public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) to make
any computation required by this Section 8, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an
adjustment made pursuant to Subsection (a) above, the Holder thereafter shall
become entitled to receive any shares of the Company, other than Common Stock,
thereafter the number of such other shares so receivable upon exercise of this
Option shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Subsections (a) to (g), inclusive above.
9. This Agreement shall be governed by and in accordance
with the laws of the State of New York.
IN WITNESS WHEREOF, International Magnetic Imaging, Inc., has caused
this Option to be signed by its duly authorized officers under its corporate
seal, and this Option to be dated ________ __, 1996.
INTERNATIONAL MAGNETIC IMAGING, INC.
By: ______________________________
Lewis S. Schiller
Chairman
(Corporate Seal)
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PURCHASE FORM
(To be signed only upon exercise of option)
THE UNDERSIGNED, the holder of the foregoing Option, hereby irrevocably
elects to exercise the purchase rights represented by such Option for, and to
purchase thereunder,
____ Shares of Common Stock, $.01 per value per share, of International Magnetic
Imaging, Inc. and _____ Warrants and herewith makes payment of $______________
therefor, and requests that the Warrants and certificates for shares of Common
Stock be issued in the name(s) of, and delivered to _________________________
whose address(es) is (are)
_____________________________________________________________________________.
Dated:
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TRANSFER FORM
(To be signed only upon transfer of the Option)
For value received, the undersigned hereby sells, assigns, and
transfers unto _________________________________ the right to purchase
Securities, consisting of Common Stock and Warrants of International Magnetic
Imaging, Inc., in the numbers set forth below represented by the foregoing
Option to the extent of _____ shares of Common Stock and ____ Warrants, and
appoints _________________________________ attorney to transfer such rights on
the books of International Magnetic Imaging, Inc., with full power of
substitution in the premises.
Dated:
By: ______________________________
Address:
__________________________________
__________________________________
__________________________________
In the presence of:
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Exhibit 1.3
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. NO
OFFER TO BUY THE SECURITIES CAN BE ACCEPTED AND NO PART OF THE PURCHASE PRICE
CAN BE RECEIVED UNTIL THE REGISTRATION STATEMENT HAS BECOME EFFECTIVE, AND ANY
SUCH OFFER MAY BE WITHDRAWN OR REVOKED, WITHOUT OBLIGATION OR COMMITMENT OF ANY
KIND, AT ANY TIME PRIOR TO NOTICE OF ITS ACCEPTANCE GIVEN AFTER THE EFFECTIVE
DATE.
INTERNATIONAL MAGNETIC IMAGING, INC.
1,000,000 SHARES OF COMMON STOCK, $.01 PAR VALUE
AND
1,500,000 CLASS A REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
SELECTED DEALERS AGREEMENT
_______ __, 1996
Dear Sirs:
1. Monroe Parker Securities, Inc. (the "Underwriter"), has agreed to
offer on a firm commitment basis, subject to the terms and conditions and
execution of the Underwriting Agreement, 1,000,000 shares of Common Stock, $.01
par value per share ("Common Stock") of International Magnetic Imaging, Inc.
(the "Company") and 1,500,000 Class A Redeemable Common Stock Purchase Warrants
("Warrants"), (hereinafter, collectively referred to as the "Securities";
including any shares of Common Stock and Warrants offered pursuant to an
over-allotment option, the "Firm Securities"). Each Warrant is exercisable to
purchase one (1) share of Common Stock. The Firm Securities are more
particularly described in the enclosed Preliminary Prospectus, additional copies
of which, as well as the Prospectus (after the effective date), will be supplied
in reasonable quantities upon request.
2. The Underwriter is soliciting offers to buy Securities, upon the
terms and conditions hereof, from Selected Dealers, who are to act as
principals, including you, who are (i) registered with the Securities and
Exchange Commission (the "Commission") as broker-dealers under the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and members in good standing
with the National Association of Securities Dealers, Inc. (the "NASD"), or (ii)
dealers of institutions with their principal place of business located outside
the United States, its territories and possessions and not registered under the
1934 Act who agree to make no sales within the
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United States, its territories and possessions or to persons who are nationals
thereof or residents therein and, in making sales, to comply with the NASD's
interpretation with respect to free-riding and withholding. The Securities are
to be offered to the public at a price of $5.00 per share of Common Stock and
$.15 per Warrant. Selected Dealers will be allowed a concession of not less than
__% of the aggregate offering price. You will be notified of the precise amount
of such concession prior to the effective date (the "Effective Date") of the
registration statement covering the Securities (the "Registration Statement").
The offer is solicited subject to the issuance and delivery of the Securities
and their acceptance by the Underwriter, to the approval of legal matters by
counsel and to the terms and conditions as herein set forth.
3. Your offer to purchase may be revoked in whole or in part without
obligation or commitment of any kind by you any time prior to acceptance and no
offer may be accepted by us and no sale can be made until after the Registration
Statement has become effective with the Commission. Subject to the foregoing,
upon execution by you of the Offer to Purchase below and the return of same to
us, you shall be deemed to have offered to purchase the number of Securities set
forth in your offer on the basis set forth in paragraph 2 above. Any oral notice
by us of acceptance of your offer shall be immediately followed by written or
telegraphic confirmation preceded or accompanied by a copy of the Prospectus. If
a contractual commitment arises hereunder, all the terms of this Selected
Dealers Agreement shall be applicable. We may also make available to you an
allotment to purchase Securities, but such allotment shall be subject to
modification or termination upon notice from us any time prior to an exchange of
confirmations reflecting completed transactions. All references hereafter in
this Agreement to the purchase and sale of the Securities assume and are
applicable only if contractual commitments to purchase are completed in
accordance with the foregoing.
4. You agree that in re-offering the Securities, if your offer is
accepted after the Effective Date, you will make a bona fide public distribution
of same. You will advise us upon request of the Securities purchased by you
remaining unsold, and we shall have the right to repurchase such Securities upon
demand at the public offering price less the concession as set forth in
paragraph 2 above. Any of the Securities purchased by you pursuant to this
Agreement are to be re-offered by you to the public at the public offering
price, subject to the terms hereof and shall not be offered or sold by you below
the public offering price before the termination of this Agreement.
5. Payment for Securities which you purchase hereunder shall be made by
you on such date as we may determine by certified or bank cashier's check
payable in New York Clearinghouse funds to Monroe Parker Securities, Inc.
Certificates for the Securities shall be delivered as soon as practicable at the
offices of Monroe Parker Securities, Inc., 2500 Westchester Avenue, Purchase,
New York 10577. Unless specifically authorized by us, payment by you may not be
deferred until delivery of certificates to you.
6. A Registration Statement covering the offering has been filed with
the Commission with respect to the Securities. You will be promptly advised
when the Registration Statement
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becomes effective. Each Selected Dealer in selling the Securities pursuant
hereto agrees (which agreement shall also be for the benefit of the Company)
that it will comply with the applicable requirements of the Securities Act of
1933, as amended, and of the 1934 Act and any applicable rules and regulations
issued under said Acts. No person is authorized by the Company or by the
Underwriter to give any information or to make any representations other than
those contained in the Prospectus in connection with the sale of the Securities.
Nothing contained herein shall render the Selected Dealers a member of the
underwriting group or partners with the Underwriter or with one another.
7. You will be informed by us as to the states in which we have been
advised by counsel the Securities have been qualified for sale or are exempt
under the respective securities or blue sky laws of such states, but we have not
assumed and will not assume any obligation or responsibility as to the right of
any Selected Dealer to sell Securities in any state.
8. The Underwriter shall have full authority to take such action as it
may deem advisable in respect of all matters pertaining to the offering or
arising thereunder. The Underwriter shall not be under any liability to you,
except such as may be incurred under the Securities Act of 1933, as amended, and
the rules and regulations thereunder, except for lack of good faith and except
for obligations assumed by us in this Agreement, and no obligation on our part
shall be implied or inferred herefrom.
9. Selected Dealers will be governed by the conditions herein set forth
until this Agreement is terminated. This Agreement will terminate when the
offering is completed. Nothing herein contained shall be deemed a commitment on
our part to sell you any Securities; such contractual commitment can only be
made in accordance with the provisions of paragraph 3 hereof.
10. You represent that you are a member in good standing of the NASD
(Association") and registered as a broker-dealer or are not eligible for
membership under Section I of the ByLaws of the NASD who agrees to make no sales
within the United States, its territories or possessions or to persons who are
nationals thereof or residents therein and, in making sales, to comply with the
NASD's interpretation with respect to free-riding and withholding. Your
attention is called to the following: (a) Rules 2730, 2740, 2420 and 2750 of the
NASD Conduct Rule of the Association and the interpretations of said Section
promulgated by the Board of Governors of such Association including the
interpretation with respect to "Free-Riding and Withholding"; (b) Section 10(b)
of the 1934 Act and Rules 10b-6 and 10b-10 of the general rules and regulations
promulgated under said Act; (c) Securities Act Release #3907; (d) Securities Act
Release #4150; and (e) Securities Act Release #4968 requiring the distribution
of a Preliminary Prospectus to all persons reasonably expected to be purchasers
of Securities from you at least 48 hours prior to the time you expect to mail
confirmations. You, if a member of the Association, by signing this Agreement,
acknowledge that you are familiar with the cited law, rules and releases, and
agree that you will not directly and/or indirectly violate any provisions of
applicable law in connection with your participation in the distribution of the
Securities.
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11. In addition to compliance with the provisions of paragraph 10
hereof, you will not, until advised by us in writing or by wire that the entire
offering has been distributed and closed, bid for or purchase Securities or its
component securities in the open market or otherwise make a market in such
Securities or otherwise attempt to induce others to purchase such Securities in
the open market. Nothing contained in this paragraph 11 shall, however, preclude
you from acting as agent in the execution of unsolicited orders of customers in
transactions effectuated for them through a market maker.
12. You understand that the Underwriter may in connection with the
offering engage in stabilizing transactions. If the Underwriter contracts for or
purchases in the open market in connection with such stabilization any
Securities sold to you hereunder and not effectively placed by you, the
Underwriter may charge you the Selected Dealer's concession originally allowed
you on the Securities so purchased, and you agree to pay such amount to the
Underwriter on demand.
13. By submitting an Offer to Purchase you confirm that your net
capital is such that you may, in accordance with Rule 15c3-1 adopted under the
1934 Act, agree to purchase the number of Securities you may become obligated to
purchase under the provisions of this Agreement.
14. You agree that (i) you shall not recommend to a customer the
purchase of Firm Securities unless you shall have reasonable grounds to believe
that the recommendation is suitable for such customer on the basis of
information furnished by such customer concerning the customer's investment
objectives, financial situation and needs, and any other information known to
you, (ii) in connection with all such determinations, you shall maintain in your
files the basis for such determination, and (iii) you shall not execute any
transaction in Firm Securities in a discretionary account without the prior
specific written approval of the customer.
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15. You represent that neither you nor any of your affiliates or
associates owns any Common Stock of the Company.
16. All communications from you should be directed to the Underwriter
at 2500 Westchester Avenue, Purchase, New York 10577. All communications from us
to you shall be directed to the address to which this letter is mailed.
Very truly yours,
MONROE PARKER SECURITIES, INC.
By:___________________________
Name:
Title:
ACCEPTED AND AGREED TO AS OF THE ______
DAY OF ____________, 1996
[Name of Dealer]
By: ____________________________
Name:
Title:
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TO: Monroe Parker Securities, Inc.
2500 Westchester Avenue
Purchase, New York 10577
We hereby subscribe for Shares of Common Stock, $.01 par value per
share, of International Magnetic Imaging, Inc. and ______ Class A Redeemable
Common Stock Purchase Warrants in accordance with the terms and conditions
stated in the foregoing letter. We hereby acknowledge receipt of the Prospectus
referred to in the first paragraph thereof relating to said Securities. We
further state that in purchasing said Securities we have relied upon said
Prospectus and upon no other statement whatsoever, whether written or oral. We
confirm that we are a dealer actually engaged in the investment banking or
securities business and that we are either (i) a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD") or (ii) a dealer
with its principal place of business located outside the United States, its
territories and its possessions and not registered as a broker or dealer under
the Securities Exchange Act of 1934, as amended, who hereby agrees not to make
any sales within the United States, its territories or its possessions or to
persons who are nationals thereof or residents therein. We hereby agree to
comply with the provisions of Rule 2740 of the NASD Conduct Rules, and if we are
a foreign dealer and not a member of the NASD, we also agree to comply with the
NASD's interpretation with respect to free-riding and withholding, and to
comply, as though we were a member of the NASD, with the provisions of Rules
2730 and 2750 of the NASD Conduct Rules.
Name of
Dealer:_____________________________
By: ________________________________
Address:_____________________________
_____________________________
Dated: ______________, 1996
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Exhibit 1.4
FINANCIAL CONSULTING AGREEMENT
Agreement made this ___ day of _____, 1996 by and between
Monroe Parker Securities, Inc.("Consultant") and International
Magnetic Imaging, Inc. (the "Company").
WHEREAS, the Company desires to obtain Consultant's consulting
services in connection with the Company's business and financial affairs, and
Consultant is willing to render such services as hereinafter more fully set
forth.
NOW, THEREFORE, the parties hereby agree as follows:
1. The Company hereby engages and retains Consultant and
Consultant hereby agrees to use its best efforts, to render to the Company the
consulting services hereinafter described for a period of two years commencing
as of, and conditioned upon, the closing of the underwriting contemplated in the
Registration Statement on Form SB-2, No. 333-_____, declared effective by the
Securities and Exchange Commission on ________ __, 1996.
2. Consultant's services hereunder shall consist of
consultations with the Company concerning investment banking and other financial
matters to be determined by the Company.
3. The Company agrees that Consultant shall not be precluded
during the term of this Agreement from providing other consulting services or
engaging in any other business activities whether or not such consulting
services or business activities are pursued for gain, profit or other pecuniary
advantage and whether or not such consulting activities are in director or
indirect competition with the business activities of the Company.
4. The Company agrees to pay to Consultant for its services
hereunder the sum of Four Thousand One Hundred Sixty Six Dollars and Sixty Six
Cents ($4,166.66) per month for each of the two years of the term of this
Agreement. The Company agrees that the entire sum due to Consultant hereunder,
One Hundred Thousand Dollars($100,000), shall be paid in full on the date
hereof.
5. Consultant shall be entitled to reimbursement by the
Company of such reasonable out-of-pocket expenses as Consultant may
incur in performing services under this Agreement.
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6. All final decisions with respect to consultations or
services rendered by Consultant pursuant to this Agreement shall be those of the
Company, and there shall be no liability on the part of the Consultant in
respect thereof. This Agreement and the Underwriting Agreement dated ________
__, 1996 contain the entire agreement of the parties hereto with respect to the
subject matter hereof, and there are no representations or warranties other than
as shall be herein or therein set forth. No waiver or modification hereof shall
be valid unless in writing. No waiver of any term, provision or condition of
this Agreement, in any one or more instance, shall constitute a waiver of any
other provision thereof, whether or not similar, nor shall such waiver
constitute a continuing waiver.
7. This Agreement shall be governed, construed and enforced in
accordance with the laws of the State of New York, without regard to the
principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have caused the
agreement to be signed as of the day and year first above written.
INTERNATIONAL MAGNETIC IMAGING, INC.
By:____________________________
Name:
Title:
MONROE PARKER SECURITIES, INC.
By:___________________________
Name: Stephen J. Drescher
Title: Director
Corporate Finance
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Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
INTERNATIONAL MAGNETIC IMAGING, INC.
International Magnetic Imaging, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify:
1. The Certificate of Incorporation of the Corporation was filed with
the Secretary of State on March 8, 1994. The Corporation was incorporated under
the name IMI Acquisition Corp. The name of the Corporation was changed to
International Magnetic Imaging, Inc. by a certificate of amendment to the
Certificate of Incorporation, which was filed with the Secretary of State on May
23, 1995.
2. The Certificate of Incorporation of the Corporation is hereby
amended and restated to read as follows:
ARTICLE FIRST: The name of the Corporation is International Magnetic
Imaging, Inc.
ARTICLE SECOND: The address of the registered office of the Corporation
in the State of Delaware is 1013 Centre Road, Wilmington, New Castle County,
Delaware 19805. The name of the Corporation's registered agent at such address
is Corporate Agents, Inc.
ARTICLE THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under the General
Corporation Law of Delaware.
ARTICLE FOURTH:
(a) The total number of shares of capital stock which this
Corporation is authorized to issue is sixty two million (62,000,000) shares, of
which:
(i) 6,000,000 shares shall be designated as Preferred Stock,
and shall have a par value of $.01 per share;
(ii) 50,000,000 shares shall be designated as Common Stock,
and shall have a par value of $.01 per share; and
(iii) 6,000,000 shares shall be designated as Class A Common
Stock, and shall have a par value of $.01 per share.
(b) (i) The Common Stock and the Class A Common Stock shall be
treated as a single class of stock with identical rights per share as to
dividends and upon liquidation, dissolution or winding up; provided, however,
that, except as otherwise provided by law or except to the extent that voting
rights may be granted to the holders of any series of Preferred Stock pursuant
to Paragraph (c) of this Article FOURTH, the entire voting right shall be held
by the holders of the Common Stock and the holders of the Class A Common Stock
shall have no voting rights.
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(ii) In case the Corporation shall, after the date this
Restated Certificate of Incorporation is filed (the "Filing Date"), (A) pay a
dividend or make a distribution on its shares of Common Stock in shares of
Common Stock, (B) subdivide, split or reclassify its outstanding Common Stock
into a greater number of shares, or (C) effect a reverse split or otherwise
combine or reclassify its outstanding Common Stock into a smaller number of
shares, all of the foregoing being collectively referred to as
"recapitalizations," and each as a "recapitalization," the Corporation shall
effect a recapitalization with respect to the Class A Common Stock which is
identical in all respects to the recapitalization affecting the Common Stock
except that such recapitalization shall relate to the Class A Common Stock. Such
recapitalization shall be made successively whenever any recapitalization in the
Common Stock shall occur.
(iii) Each share of the Class A Common Stock shall
automatically, and without any action on the part of the holder thereof, become
and be converted into one share of the Common Stock of the Corporation upon the
first to occur of (a) the date, as reasonably determined by the Board of
Directors, that the Corporation ceases to be eligible under the Internal Revenue
Code of 1986, as amended, to be a member of the consolidated group of
corporations of which Consolidated Technology Group Ltd. is the common parent,
or (b) the date as of which the Board of Directors effects such a conversion.
(c) The Board of Directors is expressly authorized at any time, and
from time to time, to provide for the issuance of shares of Preferred Stock in
one or more series, with such voting powers, full or limited, or without voting
powers and with such designations, preferences and relative, participating,
optional or other special rights, qualifications, limitations or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions
providing for the issue thereof adopted by the Board of Directors and as are not
stated and expressed in this Certificate of Incorporation, or any amendment
thereto, including (but without limiting the generality of the foregoing) the
following:
(i) the designation of such series;
(ii) the dividend rate of such series, the conditions and
dates upon which such dividends shall be payable, the preference or relation
which such dividends shall bear to the dividends payable on any other class or
classes or of any other series of capital stock, whether such dividends shall be
cumulative or noncumulative, and whether such dividends may be paid in shares of
any class or series of capital stock or other securities of the Corporation;
(iii) whether the shares of such series shall be subject to
redemption by the Corporation, and, if made subject to such redemption, the
times, prices and other terms and conditions of such redemption;
(iv) the terms and amount of any sinking fund provided for
the purchase or redemption of the shares of such series;
(v) whether or not the shares of such series shall be
convertible into or exchangeable for shares of any other class or classes or
series of capital stock or other securities of the Corporation, and, if
provision be made for conversion or exchange, the times, prices, rates,
adjustment and other terms and conditions of such conversion or exchange;
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(vi) the extent, if any, to which the holders of the shares
of such series shall be entitled to vote, as a class or otherwise, with respect
to the election of the directors or otherwise, and the number of votes to which
the holder of each share of such series shall be entitled;
(vii) the restrictions, if any, on the issue or reissue of
any additional shares or series of Preferred Stock; and
(viii) the rights of the holders of the shares of such series
upon the dissolution of, or upon the distribution of assets of, the Corporation.
(d) No holder of any stock of the Corporation of any class or series
now or hereafter authorized, shall, as such holder, be entitled as of right to
purchase or subscribe for any shares of stock of the Corporation of any class or
any series now or hereafter authorized, or any securities convertible into or
exchangeable for any such shares, or any warrants, options, rights or other
instruments evidencing rights to subscribe for, or purchase, any such shares,
whether such shares, securities, warrants, options, rights or other instruments
be unissued or issued and thereafter acquired by the Corporation.
ARTICLE FIFTH: Election of directors need not be by ballot unless the
By-laws of the Corporation shall so provide.
ARTICLE SIXTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
ARTICLE SEVENTH:
(a) Each person who was or is made a party or is threatened to
be made a party to or is involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (hereinafter, a "proceeding"),
by reason of the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
Paragraph (b) of this Article SEVENTH, the Corporation shall indemnify any such
person seeking
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indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the Corporation. The right to indemnification conferred in
this Article SEVENTH shall be a contract right and shall include the right to be
paid by the Corporation the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director of officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Article SEVENTH or otherwise. The Corporation may, by action of its Board
of Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
(b) If a claim under Paragraph (a) of this Article SEVENTH is
not paid in full by the Corporation within thirty (30) days after a written
claim has been received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It shall be a
defense to any such action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standards of
conduct which make it permissible under the Delaware General Corporation Law for
the Corporation to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the Corporation. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel or
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel or stockholders)
that the claimant has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the claimant has not met the
applicable standard or conduct.
(c) The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Article SEVENTH shall not be exclusive of any other right which any
person may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
ARTICLE EIGHTH: Any action required to be taken at any annual or
special meeting of stockholders of the Corporation, or any action which may be
taken at any annual or special meeting of such stockholders, may be taken
without a meeting, without prior notice and without a vote if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less
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than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted. Nothing in this Article EIGHTH shall be construed in any
manner as a waiver or limitation of the provisions of any By-law or stockholders
agreement which requires the approval of the holders of all of the issued and
outstanding shares of Common Stock or the approval of the holders of a specified
percentage of the issued and outstanding shares of Common Stock which is greater
than a majority in order for the Corporation to take specified action.
ARTICLE NINTH:
(a) In furtherance and not in limitation of the powers
conferred upon the Board of Directors by law, the Board of Directors shall have
power to make, adopt, alter, amend or repeal from time to time By-laws of the
Corporation, subject to the right of the stockholders entitled to vote with
respect thereto to alter and repeal By-laws made by the Board of Directors and
subject to the provisions of any By-law or stockholder agreement limiting the
right of the Board of Directors to make certain modifications to the By-laws.
(b) This Restated Certificate of Incorporation has been duly
adopted in accordance with the provisions of Sections 242 and 228 of the General
Corporation Law of Delaware.
(c) Upon the filing of this Restated Certificate of
Incorporation, each share of the outstanding Common Stock of the Corporation
shall automatically, and without any action on the part of the holder thereof,
become and be converted into (i) 9,200 shares of Common Stock and (ii) 1,000
shares of Class A Common Stock, and (iii) upon and subject to the filing with
the Secretary of State of a Certificate of Designation setting forth the rights,
preferences and privileges of the holders of the Series A Redeemable Preferred
Stock ("Series A Preferred Stock") and the Series B Convertible Redeemable
Preferred Stock ("Series B Preferred Stock") of the Corporation, five shares of
Series A Preferred Stock and five shares of Series B Preferred Stock.
(d) The capital of the Corporation will not be reduced under
or by reason of any amendment herein certified.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its chairman and attested by its assistant secretary this th day of
October, 1996.
Attest: Lewis S. Schiller, Chairman
Grazyna B. Wnuk, Assistant Secretary
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Exhibit 3.2
CERTIFICATE OF DESIGNATION
OF
INTERNATIONAL MAGNETIC IMAGING, INC.
Series A Redeemable Preferred Stock and
Series B Convertible Redeemable Preferred Stock
Pursuant to Section 151(g) of the Delaware General Corporation Law,
International Magnetic Imaging, Inc., a Delaware corporation (the
"Corporation"), does hereby certify as follows:
1. The following resolution was duly adopted by the Board of
Directors of the Corporation on October 31, 1996:
RESOLVED, that pursuant to Article FOURTH of the Restated
Certificate of Incorporation of this Corporation, there be created two
series of the Preferred Stock, par value $.01 per share ("Preferred
Stock"), of this Corporation, as follows: (a) a series of Preferred
Stock consisting of five thousand (5,000) shares, to be designated as
the Series A Redeemable Preferred Stock ("Series A Preferred Stock"),
the holders of such shares to have the rights, preferences and
privileges set forth in the Statement of Designation attached as
Exhibit A to this Resolution, and (b) a series of Preferred Stock
consisting of five thousand (5,000) shares, to be designated as the
Series B Convertible Redeemable Preferred Stock ("Series B Preferred
Stock"), the holders of such shares to have the rights, preferences and
privileges set forth in the Statement of Designation attached as
Exhibit B to this Resolution; and be it further
RESOLVED, that the officers of this Corporation be, and they
hereby are, authorized and empowered to execute and file with the
Secretary of State of the State of Delaware, a certificate of
designation setting forth the rights, preferences and privileges of the
holders of the Series A Preferred Stock and Series B Preferred Stock.
2. Set forth as an Exhibit to this Certificate of Designation is a true
and correct copy of Exhibits A and B to the resolution duly adopted by the Board
of Directors of the Corporation on October 31, 1996, setting forth the rights,
preferences and privileges of the holders of the Series A Preferred Stock and
Series B Preferred Stock, respectively.
IN WITNESS WHEREOF, International Magnetic Imaging, Inc. has caused
this certificate to be signed by the chairman of the board and attested by its
secretary this 1st day of November, 1996.
By:
ATTEST: Lewis S. Schiller, Chairman of the Board
Grazyna B. Wnuk, Assistant Secretary
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Exhibit A
STATEMENT OF DESIGNATION
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series A Redeemable
Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of
five thousand (5,000) shares of preferred stock, par value $.01 per share
("Preferred Stock"), created by the Board of Directors of the Corporation
pursuant to the authority granted to it by the certificate of incorporation of
the Corporation is "Series A Redeemable Preferred Stock," which is hereinafter
referred to as the "Series A Preferred Stock." In the event that the Corporation
does not issue the maximum number of shares of Series A Preferred Stock or in
the event that the Corporation shall acquire (whether by purchase, redemption or
otherwise) and cancel any shares of Series A Preferred Stock, the Corporation
may, from time to time, by resolution of the Board of Directors, reduce the
number of shares of Series A Preferred Stock authorized, provided, that no such
reduction shall reduce the number of authorized shares to a number which is less
than the number of shares of Series A Preferred Stock then issued or reserved
for issuance. The number of shares by which the Series A Preferred Stock is
reduced shall have the status of authorized but unissued shares of Preferred
Stock, without designation as to series until such stock is once more designated
as part of a particular series by the Corporation's Board of Directors. The
Series A Preferred Stock shall be on a parity with the Series B Convertible
Redeemable Preferred Stock as to dividends and upon liquidation, dissolution and
winding up.
2. Dividend Rights.
(a) The holders of the Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds of this Corporation legally available therefor, cash dividends at an
annual rate of ten and 00/100 dollars ($10.00) per share, subject to the
provisions of Paragraph 2(c) of this Statement of Designation. Dividends shall
be payable in annual installments. Such installments shall be paid on the
dividend payment dates, as hereinafter defined. Dividend payment dates shall be
February 1 of each year, with the first dividend payment date being February 1,
1998. Dividends shall be payable on the dividend payment dates to holders of
Series A Preferred Stock of record on the 15th day of the preceding January.
Each annual period ending on a dividend payment date is referred to as a
"dividend period." Dividends on the Series A Preferred Stock are non-cumulative,
and no holder shall be entitled to any dividends for any dividend period unless
such dividends shall have been declared by the Board of Directors prior to the
dividend payment date.
(b) No dividends shall be deemed to "accrue" on any share of
Series A Preferred Stock at any dividend payment date unless such dividend shall
have been declared by the Board of Directors prior to such dividend payment
date.
(c) As long as any shares of Series A Preferred Stock are
outstanding, no dividends (other than a dividend consisting of shares of any
series or class of capital stock ranking junior to Series A Preferred Stock as
to both dividends and payments in the event of voluntary or involuntary
dissolution, liquidation or winding up), shall be declared or paid or set aside
for payment and no other distribution shall be declared or made upon any such
junior series or class of capital stock ranking junior to Series A Preferred
Stock as to both
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dividends and payments in the event of voluntary or involuntary dissolution,
liquidation or winding up, and no such junior series or class of capital stock
or any series of Preferred Stock on a parity with Series A Preferred Stock as to
both dividends and payments in the event of voluntary and involuntary
dissolution, liquidation or winding up shall be redeemed, purchased or otherwise
acquired for any consideration by the Corporation or by any subsidiary (which
shall mean any corporation or entity, the majority of voting power to elect
directors of which is held directly or indirectly by the Corporation), except by
conversion into or exchange for any such junior series or class of capital
stock; unless, in each case, (i) the dividends on the Series A Preferred Stock
for the dividend period during which the record date for such other series or
class of capital stock occurs shall have been declared by the Board of Directors
and paid or payment shall have been provided for or (ii) the holders of a
majority of the shares of Series A Preferred Stock then outstanding shall
consent thereto. If dividends are declared with respect to the Series A
Preferred stock and such declared dividends are not paid in full upon the shares
of Series A Preferred Stock and any other series of Preferred Stock ranking on a
parity as to dividends with the Series A Preferred Stock, all dividends declared
upon shares of Series A Preferred Stock and such other series of Preferred Stock
shall be declared pro rata so that the amount of dividends declared per share on
the Series A Preferred Stock shall in all cases bear to each other the same
ratio that the accrued dividends per share on the shares of Series A Preferred
Stock and such other series of Preferred Stock bear to each other. Holders of
shares of Series A Preferred Stock shall not be entitled to dividends thereon,
whether payable in cash, property or stock, in excess of the full cumulative
dividends thereon, as provided in this Statement of Designation. No dividend on
Series A Preferred Stock shall be declared or paid or set apart for payment with
respect to any dividend payment date unless full dividends, including
accumulated dividends, if any, on any series or class of capital stock ranking,
as to dividends, prior to Series A Preferred Stock which are to have been paid
on or prior to such dividend payment date have been or contemporaneously are
declared and paid or declared and a sum sufficient for payment thereof has been
set aside for all dividend periods for such series or class terminating on or
prior to such dividend payment date.
3. Voting Rights.
(a) Except as otherwise provided by law, holders of Series A
Preferred Stock shall not be entitled to any voting rights.
(b) The Corporation is not restricted from creating other
series of Preferred Stock which may be senior or junior to or on a parity with
the Series A Preferred Stock as to dividends and or on the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation without
the consent of the holders of the Series A Preferred Stock.
4. Redemption.
(a) The Corporation may, at any time commencing on the date
that the Class A Common Stock, par value $.01 per share, of the Corporation is
converted into Common Stock, par value $.01 per share (the "Common Stock") of
the Corporation, redeem the Series A Preferred Stock in whole at any time or in
part from time to time upon not less than ten (10) nor more than sixty (60)
days' prior written notice at the redemption price per share of twenty and
00/100 dollars ($20.00). The Corporation is not required to provide for the
redemption of any shares of Series A Preferred Stock through the operation of a
sinking fund.
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(b) The date on which the Corporation is to redeem any Series
A Preferred Stock pursuant to Paragraph 4(a) is referred to as the "Redemption
Date" with respect to the shares of Series A Preferred Stock being redeemed.
From and after the close of business on the business day immediately preceding
the Redemption Date, any shares of Series A Preferred Stock as to which the
Corporation shall have exercised its right of redemption shall cease to have any
voting, dividend or other rights, and the holder of such shares shall only have
the right to receive payment of the redemption price; provided, however, that
this Paragraph 4(b) shall not apply if the Corporation shall default in the
payment of the redemption price.
(c) In the event that the Corporation redeems only a portion
of the Series A Preferred Stock, the Corporation shall redeem such shares in a
manner which approximates a pro rata redemption of the holders of the Series A
Preferred Stock, and in making such redemption, the Corporation may fully redeem
holders of Series A Preferred Stock whose holdings are insubstantial relative to
the number of Series A Preferred Stock being redeemed.
(d) If any dividends shall have been declared by the Board of
Directors on Series A Preferred Stock and are in arrears, no purchase or
redemption shall be made of any stock ranking junior to or on a parity with
Series A Preferred Stock as to dividends or upon liquidation, dissolution or
winding up (other than a purchase or redemption made by issuance for delivery of
such junior stock); provided, however, that any monies theretofore deposited in
any sinking fund with respect to any series of Preferred Stock of the
Corporation in compliance with the provisions of such sinking fund thereafter
may be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund regardless of whether at the time
of such application the full amount of all dividends that have been declared
upon shares of Series A Preferred Stock shall have been paid or set aside for
payment; and provided, further, that the foregoing shall not prevent the
purchase of shares of Preferred Stock ranking on a parity with Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding up
pursuant to a purchase or exchange offer made on the same terms to the holders
of all the outstanding Preferred Stock so ranking on a parity with Series A
Preferred Stock as to dividends and upon liquidation, dissolution or winding up.
(e) Any shares of Series A Preferred Stock which shall at any
time have been redeemed shall, after such redemption, have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series until such stock is once more designated as part of a particular series
by the Corporation's Board of Directors.
5. Liquidation Rights.
(a) (i) In the event of the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, holders of the
Series A Preferred Stock shall be entitled to receive out of the assets of the
Corporation an amount per share equal to one five-thousandth (1/5,000) of eighty
percent (80%) of the Corporation's Applicable Stockholders' Equity, as hereafter
defined, plus declared and unpaid dividends before any payment or distribution
upon dissolution, liquidation or winding up shall be made on any series or class
of capital stock ranking junior to Series A Preferred Stock as to such payment
or distribution, and after all such payments or distributions have been made on
any series or class of capital stock ranking senior to the Series A Preferred
Stock as to such payment or distribution. Applicable Stockholders' Equity shall
mean the Corporation's consolidated stockholders' equity, determined in
accordance with generally accepted accounting principles as of the last day of
the calendar quarter prior to the date as of which the determination is being
made, provided that in determining such stockholders' equity the Corporation's
equity interest in any partnerships owned by the Corporation and its
subsidiaries shall be included as part of stockholders' equity; and
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provided, further, that, from and after the effective date of the registration
statement relating to the initial public offering by the Corporation of its
securities pursuant to the Securities Act of 1993, as amended (the "Public
Offering Date"), Applicable Stockholder's Equity shall be the stockholders'
equity, determined as provided in this Paragraph 5(a)(i), as of the last day of
the quarter immediately preceding the Public Offering Date.
(ii) After payment in full of the preference set
forth in Paragraph 5(a)(i) of this Statement of Designation, the holders of the
Series A Preferred Stock shall have no further rights on liquidation,
dissolution or winding up.
(b) The sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of the property and assets of the Corporation shall be deemed a voluntary
dissolution, liquidation or winding up of the Corporation for purposes of this
Paragraph 5, except that the merger or consolidation of the Corporation into any
other corporation or the sale by the Corporation of all or substantially all of
its assets shall not be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Paragraph 5 if either (i) the
holders of all shares of Series A Preferred Stock outstanding upon the
effectiveness of such merger or consolidation shall have the right, upon such
effectiveness, to receive for each share of Series A Preferred Stock held by
them upon such effectiveness, one share of preferred stock of the resulting or
surviving corporation or purchaser or the parent of any such corporation, which
shares shall have, to the extent practicable, dividend and voting rights and
rights upon dissolution, liquidation or winding up reasonably equivalent to
those of such share of Series A Preferred Stock or (ii) the merger,
consolidation or sale or other transaction was approved by the holders of a
majority of the shares of Series A Preferred Stock then outstanding either at a
meeting of such stockholders or by a written consent in lieu of a meeting. Any
merger in which the Corporation shall be the surviving corporation shall not be
deemed a dissolution, liquidation or winding up of the Corporation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of Series A Preferred Stock upon
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Paragraph 5(a)(i) of this Statement of
Designation, no such distribution shall be made on account of any shares of any
other class or series of capital stock of the Corporation ranking on a parity
with the shares of Series A Preferred Stock upon such dissolution, liquidation
or winding up unless proportionate distributive amounts shall be paid on account
of the shares of Series A Preferred Stock, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
(d) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Series A Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders all amounts to which such holders are entitled
pursuant to Paragraph 5(a)(i) of this Statement of Designation before any
payment shall be made to the holders of any class of capital stock of the
Corporation ranking junior upon liquidation to Series A Preferred Stock.
6. Rank of Series. For purposes of this Statement of
Designation, any stock of any series or class of the Corporation shall be deemed
to rank:
(a) prior to the shares of Series A Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be, if
the holders of such class or classes shall be entitled to the
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receipt of dividends or of amounts distributable upon dissolution, liquidation
or winding up of the Corporation, as the case may be, in preference or priority
to the holders of shares of Series A Preferred Stock;
(b) on a parity with shares of Series A Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series A Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series A Preferred Stock;
(c) junior to shares of Series A Preferred Stock as to
dividends or upon liquidation, dissolution or winding up, as the case may be, if
such class shall be Common Stock or if the holders of shares of Series A
Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
7. No Preemptive Rights. No holder of the Series A Preferred Stock
shall, as such holder, be entitled as of right to purchase or subscribe for any
shares of stock of the Corporation of any class or any series now or hereafter
authorized or any securities convertible into or exchangeable for any shares, or
any warrants, options, rights or other instruments evidencing rights to
subscribe for or purchase any such shares, whether such shares, securities,
warrants, options, rights or other instruments be unissued or issued and
thereafter acquired by the Corporation.
8. Transfer Agent and Registrar. The Corporation may appoint a
transfer agent and registrar for the issuance, transfer and conversion of the
Series A Preferred Stock and for the payment of dividends to the holders of the
Series A Preferred Stock.
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Exhibit B
STATEMENT OF DESIGNATION
The designation of, the number of shares constituting, and the rights,
preferences, privileges and restrictions relating to, the Series B Convertible
Redeemable Preferred Stock are as follows:
1. Designation and Number of Shares. The designation of this series of
five thousand (5,000) shares of preferred stock, par value $.01 per share
("Preferred Stock"), created by the Board of Directors of the Corporation
pursuant to the authority granted to it by the certificate of incorporation of
the Corporation is "Series B Convertible Redeemable Preferred Stock," which is
hereinafter referred to as the "Series B Preferred Stock." In the event that the
Corporation does not issue the maximum number of shares of Series B Preferred
Stock or in the event of the conversion of shares of Series B Preferred Stock
into this Corporation's common stock, par value $.01 per share ("Common Stock"),
pursuant to Paragraph 4 of this Certification of Designation, or in the event
that the Corporation shall acquire (whether by purchase, redemption or
otherwise) and cancel any shares of Series B Preferred Stock, the Corporation
may, from time to time, by resolution of the Board of Directors, reduce the
number of shares of Series B Preferred Stock authorized, provided, that no such
reduction shall reduce the number of authorized shares to a number which is less
than the number of shares of Series B Preferred Stock then issued or reserved
for issuance. The number of shares by which the Series B Preferred Stock is
reduced shall have the status of authorized but unissued shares of Preferred
Stock, without designation as to series until such stock is once more designated
as part of a particular series by the Corporation's Board of Directors. The
Series B Preferred Stock shall be on a parity with the Series A Redeemable
Preferred Stock as to dividends and upon liquidation, dissolution and winding
up.
2. Dividend Rights.
(a) If cash dividends are declared with respect to the Common
Stock, par value $.01 per share ("Common Stock") of the Corporation, each holder
of shares of Series B Preferred Stock shall have the right to receive, at the
time and in the manner such dividends are paid to the holders of the Common
Stock, dividends in an amount equal to the amount such holder would receive if
such holder held the number of shares of Common Stock issuable upon conversion
of the Series B Preferred Stock held on the record date for determining such
dividend on the Common Stock, based on the Conversion Rate, as hereinafter
defined, in effect on such record date, but without regard to whether the shares
of Series B Preferred Stock are then convertible into Common Stock, as if the
shares of Series B Preferred Stock and Common Stock of the Corporation were a
single class. References to Common Stock in this Paragraph 2, but not elsewhere
in this Statement of Designation, shall include any class of capital stock,
including the Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), of the Corporation the holders of which are entitled to the same
dividends per share as the Common Stock.
(b) Any dividend, distribution, stock split or other
recapitalization or event described in Paragraph 4(e) of this Statement of
Designation shall not be deemed a dividend for purposes of Paragraph 1(a) of
this Statement of Designation. Any dividend or distribution which is part of the
liquidation, dissolution or winding up shall be governed by the provisions of
Paragraph 6 of this Statement of Designation and not by this Paragraph 1.
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3. Voting Rights.
(a) Except as otherwise required by law and the rights of any
holders of any series of Preferred Stock hereafter created by the Board of
Directors pursuant to the Certificate of Incorporation of this Corporation, and
subject to the earlier redemption of the Series B Preferred Stock, the holders
of shares of Series B Preferred Stock shall vote together with the Common Stock,
as if the Common Stock and the Series B Preferred Stock were a single class;
provided, that in all matters the holders of the Series B Preferred Stock shall
have the right to cast such number of votes per share of Series B Preferred
Stock as are equal to the number of shares of Common Stock issuable upon
conversion of the Series B Preferred Stock based on the Conversion Rate per
share in effect on the record date for determining holders of Common Stock
entitled to vote, but without regard to whether the shares of Series B Preferred
Stock are then convertible into Common Stock.
(b) In addition to the voting rights set forth in Paragraph
3(a) of this Statement of Designation, the holders of the Series B Preferred
Stock shall have the right, voting as a single class, to elect (i) one director
if the number of directors is five or fewer directors, (ii) two directors if the
number of directors is of six or seven, and (iii) three directors if the number
of directors is more than seven. For purposes of this Paragraph 3, the number of
directors shall be the number of directors which constitutes the entire board
determined in the manner provided for in the by-laws of the Corporation,
regardless of whether the number of directors actually serving is less that the
number that constitutes the entire board.
(c) In the event that, pursuant to applicable law or Paragraph
3(b) of this Statement of Designation, the holders of the Series B Preferred
Stock are required to vote as a single class, separate and apart from the Common
Stock, each holder of Series B Preferred Stock shall be entitled to one vote per
share of Series B Preferred Stock on such matters.
(d) The Corporation is not restricted from creating other
series of Preferred Stock which may be senior or junior to or on a parity with
the Series B Preferred Stock as to dividends and/or on the voluntary or
involuntary dissolution, liquidation or winding up of the Corporation without
the consent of the holders of the Series B Preferred Stock.
4. Conversation into Common Stock.
(a) (i) Commencing on the third anniversary of the effective
date of the registration statement relating to the initial public offering by
the Corporation of its securities pursuant to the Securities Act of 1933, as
amended (the "Public Offering Date"), or upon such earlier date as the Class A
Common Stock is converted into Common Stock of this Corporation as provided in
this Corporation's Restated Certificate of Incorporation, and subject to earlier
redemption, each holder of the Series B Preferred Stock will have the right to
convert any or all of its shares of Series B Preferred Stock into shares of
Common Stock at the conversion rate hereinafter defined (the "Conversion Rate").
(ii) Notwithstanding the provisions of Paragraph 4(a)(i)
of this Statement of Designation, if the Corporation shall issue any shares of
Common Stock or Class A Common Stock after the Public Offering Date but before
the date on which shares of Series B Preferred Stock may be converted pursuant
to Paragraph 4(a)(i) of this Statement of Designation, the holders of Series B
Preferred Stock, as a class, shall immediately be entitled to convert at the
Conversion Rate in effect on the date of such issuance an aggregate number of
shares of Series B Preferred Stock as is determined by dividing (A) four (4)
times the number of shares of
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Common Stock or Class A Common Stock so issued by (B) the Conversion Rate. No
fractional shares of Series B Preferred Stock may be converted. If the number of
shares of Series B Preferred Stock which may be converted pursuant to this
Paragraph 4(a)(ii) includes a fractional share of Series B Preferred Stock, the
number of shares of Series B Preferred Stock that may be immediately converted
shall be rounded up to the next higher whole number of shares of Series B
Preferred Stock. If the shares of Series B Preferred Stock are held by more than
one holder, the number of shares of Series B Preferred Stock which may be
converted by each such holder shall be such percentage of the number of shares
of Series B Preferred Stock which may be immediately converted pursuant to this
Paragraph 4(a)(ii) as equals either (x) such holder's percentage of the
outstanding shares of Series B Preferred Stock or (y) such other percentage as
may be jointly determined by all such stockholders. In determining the number of
shares of Series B Preferred stock which may be converted by a holder of Series
B Preferred Stock pursuant to this Paragraph 4(a)(ii), if any fractional share
of Series B Preferred Stock which is held by such holder is more than one-half
share, the number of shares of Series B Preferred Stock which such holder may
immediately convert shall be rounded up to the next higher whole number of
shares of Series B Preferred Stock, and if any fractional share of Series B
Preferred Stock is less than or equal to one-half share of Series B Preferred
Stock, such fractional share shall be disregard and the number of shares which
may be immediately converted shall be rounded down to the next lower whole
number of shares by eliminating the fractional share.
(b) The Conversion Rate shall mean the number of shares of
Common Stock issuable upon conversion of one (1) share of Series B Preferred
Stock. The Conversion Rate shall be seven hundred (700) shares of Common Stock,
subject to adjustment as provided in Paragraph 4(e) of this Statement of
Designation.
(c) Conversion of the Series B Preferred Stock shall be
effected by surrender of the certificate representing the shares of Series B
Preferred Stock being converted to the transfer agent for the Series B Preferred
Stock, or, if none shall have been appointed, to the Corporation, together with
the form of notice of election to convert as may be provided from time to time
by the Corporation.
(d) Shares of Series B Preferred Stock shall be deemed to have
been converted immediately prior to the close of business on the day of the
surrender for conversion of the certificate therefor, together with the form of
notice of election provided by the Corporation duly signed by the holder
thereof, and the person or persons entitled to receive shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Common Stock as of such time. As promptly as
practicable on or after the conversion date, the Corporation or its transfer
agent shall issue and shall deliver a certificate or certificates for the number
of full shares of Common Stock issuable upon such conversion, together with a
cash payment in lieu of any fraction of any share, as hereinafter provided, to
the person or persons entitled to receive the same.
(e) The Conversion Rate shall be subject to adjustment as
follows:
(i) In case the Corporation shall after the date the
Certificate of Designation, of which this Statement of Designation is an
exhibit, is filed (the "Filing Date"), (A) pay a dividend or make a distribution
on its shares of Common Stock in shares of Common Stock, (B) subdivide, split or
reclassify its outstanding Common Stock into a greater number of shares, (C)
effect a reverse split or otherwise combine or reclassify its outstanding Common
Stock into a smaller number of shares, or (D) issue any shares by
reclassification of its shares of Common Stock, the Conversion Rate in effect at
the time of the record date for such dividend or distribution or of the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of the shares of Series B Preferred
Stock converted after such date
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shall be entitled to receive the aggregate number and kind of shares which, if
such shares had been converted immediately prior to such time, he would have
owned upon such conversion and been entitled to receive upon such dividend,
subdivision, combination or reclassification. Such adjustment shall be made
successively whenever any event listed in this Paragraph 4(e)(i) shall occur.
(ii) No increase or decrease in the Conversion Rate shall
be required unless such adjustment would require an increase or decrease of at
least one percent (1%); provided, however, that any adjustments which by reason
of this Paragraph 4(e)(ii) are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Paragraph 4(e) shall be made to the nearest one-hundredth (1/100) of a share.
(iii) The Corporation may retain a firm of independent
public accountants of recognized standing selected by the Board of Directors
(who may be the regular accountants employed by the Corporation) to make any
computation required by this Paragraph 4(e), and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(iv) In the event that at any time, as a result of an
adjustment made pursuant to this Paragraph 4(e), the holder of shares of Series
B Preferred Stock thereafter shall become entitled to receive any shares of the
Corporation, other than Common Stock, thereafter the number of such other shares
so receivable upon conversion of shares of Series B Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common Stock
contained in this Paragraph 4.
(v) In addition to the adjustments provided for in this
Paragraph 4(e), the Corporation may modify the Conversion Rate in a manner which
will increase the number of shares of Common Stock issuable upon conversion of
the Series B Preferred Stock if the Corporation believes that such adjustment is
necessary or desirable in order to avoid adverse Federal income tax consequences
to the holders of the Common Stock.
(f) Whenever the Conversion Rate shall be adjusted as required
by the provisions of Paragraph 4(e) of this Statement of Designation, the
Corporation shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Conversion Rate, setting forth in
reasonable detail the facts requiring such adjustment. Each such officer's
certificate shall be made available at all reasonable times for inspection by
any holder of shares of Series B Preferred Stock, and the Corporation shall,
forthwith after each such adjustment, mail a copy of such certificate by first
class mail to the holders of Series B Preferred Stock at such holders' addresses
set forth in the Corporation's books and records.
(g) In case:
(i) the Corporation shall pay any dividend or make any
distribution upon Common Stock (other than a regular cash dividend payable out
of retained earnings or cash supplies); or
(ii) the Corporation shall offer to the holders of Common
Stock for subscription or purchase by them any share of any class or any other
rights, or
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(iii) any reclassification of the capital stock of the
Corporation, consolidation or merger of the Corporation with or into another
corporation, sale, lease or transfer of all or substantially all of the property
and assets of the Corporation to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Corporation shall be
effected; then in any such case, the Corporation shall cause to be mailed by
first class mail to the record holders of Series B Preferred Stock at least ten
(10) days prior to the date specified in (A) and (B) below, as the case may be,
a notice containing a brief description of the proposed action and stating the
date on which (A) a record is to be taken for the purpose of such dividend,
distribution or rights, or (B) such reclassification, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(h) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock of the Corporation, or in
case of any consolidation or merger of the Corporation into another corporation
(other than a merger with a subsidiary in which merger the Corporation is the
continuing corporation and which does not result in any reclassification,
capital reorganization or other change of outstanding shares of Common Stock or
the class issuable upon conversion of Series B Preferred Stock) or in case of
any sale, lease or conveyance to another corporation of the property of the
Corporation as an entirety, the Corporation shall, as a condition precedent to
such transaction, cause effective provisions to be made so that the holder of
the Series B Preferred Stock shall have the right thereafter by converting the
Series B Preferred Stock, to receive the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, capital
reorganization and other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock which might have been received
upon conversion of the Series B Preferred Stock immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance. Any such
provision shall include provision for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Statement of Designation. The foregoing provisions of this Paragraph 4(h) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(i) No fractional shares or script representing fractional
shares shall be issued upon the conversion of shares of Series B Preferred
Stock. If, upon conversion of any shares of Series B Preferred Stock as an
entirety, the holder would, except for the provisions of this Paragraph 4(i), be
entitled to receive a fractional share of Common Stock, then an amount equal to
such fractional share multiplied by the fair market value per share of the
Corporation's Common Stock on the last business day prior to the date of
conversion shall be distributed to the holder. The fair market value per share
shall mean the closing price (or average of the closing high bid and low asked
prices if there is no sale on such date) on the Nasdaq Stock Market or the New
York or American Stock Exchange, if the Common Stock is admitted to trading or
listed on such market or stock exchange, or if not so listed or admitted to
trading, the average of the reported highest bid and lowest asked prices as
reported by Nasdaq or the National Quotation Bureau, Inc. or similar reporting
service selected by the Board of Directors, or if no such prices are available,
the current market value shall be determined in good faith by the Board of
Directors.
(j) The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but unissued
Common Stock the full number of shares of Common Stock then issuable upon the
conversion of all shares of Series B Preferred Stock then outstanding.
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(k) The Common Stock issuable upon conversion of the Series B
Preferred Stock shall, when so issued, be duly and validly authorized and
issued, fully paid and nonassessable.
5. Redemption.
(a) The Corporation may, at any time commencing on the date
that the Series B Preferred Stock becomes convertible pursuant to Paragraph
4(a)(i) of this Statement of Designation, redeem the Series B Preferred Stock in
whole at any time or in part from time to time upon not less than thirty (30)
nor more than sixty (60) days' prior written notice at the redemption price per
share of twenty and 00/100 dollars ($20.00). The Corporation is not required to
provide for the redemption of any shares of Series B Preferred Stock through the
operation of a sinking fund.
(b) The date on which the Corporation is to redeem any Series
B Preferred Stock pursuant to Paragraph 5(a) is referred to as the "Redemption
Date" with respect to the shares of Series B Preferred Stock being redeemed.
From and after the close of business on the business day immediately preceding
the Redemption Date, any shares of Series B Preferred Stock as to which the
Corporation shall have exercised its right of redemption shall cease to have any
voting, dividend, conversion or other rights, and the holder of such shares
shall only have the right to receive payment of the redemption price; provided,
however, that this Paragraph 5(b) shall not apply if the Corporation shall
default in the payment of the redemption price.
(c) In the event that the Corporation redeems only a portion
of the Series B Preferred Stock, the Corporation shall redeem such shares in a
manner which approximates a pro rata redemption of the holders of the Series B
Preferred Stock, and in making such redemption, the Corporation may fully redeem
holders of Series B Preferred Stock whose holdings are insubstantial relative to
the number of Series B Preferred Stock being redeemed.
(d) If any dividends shall have been declared by the Board of
Directors on Series B Preferred Stock and are in arrears, no purchase or
redemption shall be made of any stock ranking junior to or on a parity with
Series B Preferred Stock as to dividends or upon liquidation, dissolution or
winding up (other than a purchase or redemption made by issuance for delivery of
such junior stock); provided, however, that any monies theretofore deposited in
any sinking fund with respect to any series of Preferred Stock of the
Corporation in compliance with the provisions of such sinking fund thereafter
may be applied to the purchase or redemption of such Preferred Stock in
accordance with the terms of such sinking fund regardless of whether at the time
of such application the full amount of all dividends that have been declared
upon shares of Series B Preferred Stock shall have been paid or set aside for
payment; and provided, further, that the foregoing shall not prevent the
purchase of shares of Preferred Stock ranking on a parity with Series B
Preferred Stock as to dividends and upon liquidation, dissolution or winding up
pursuant to a purchase or exchange offer made on the same terms to the holders
of all the outstanding Preferred Stock so ranking on a parity with Series B
Preferred Stock as to dividends and upon liquidation, dissolution or winding up.
(e) Any shares of Series B Preferred Stock which shall at any
time have been redeemed shall, after such redemption, have the status of
authorized but unissued shares of Preferred Stock, without designation as to
series until such stock is once more designated as part of a particular series
by the Corporation's Board of Directors.
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6. Liquidation Rights.
(a) (i) In the event of the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, holders of the
Series B Preferred Stock shall be entitled to receive twenty and 00/100 dollars
($20.00) per share, plus declared and unpaid dividends, before any payment or
distribution upon dissolution, liquidation or winding up shall be made on any
series or class of capital stock ranking junior to Series B Preferred Stock as
to such payment or distribution, and after all such payments or distributions
have been made on any series or class of capital stock ranking senior to the
Series B Preferred Stock as to such payment or distribution.
(ii) After payment of the preference set forth in
Paragraph 6(a)(i) of this Statement of Designation, the holders of the Series B
Preferred Stock shall have no further rights on liquidation, dissolution or
winding up.
(b) The sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of the property and assets of the Corporation shall be deemed a voluntary
dissolution, liquidation or winding up of the Corporation for purposes of this
Paragraph 6, except that the merger or consolidation of the Corporation into any
other corporation or the sale by the Corporation of all or substantially all of
its assets shall not be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Paragraph 6 if either (i) the
holders of all shares of Series B Preferred Stock outstanding upon the
effectiveness of such merger or consolidation shall have the right, upon such
effectiveness, to receive for each share of Series B Preferred Stock held by
them upon such effectiveness, one share of preferred stock of the resulting or
surviving corporation or purchaser or the parent of any such corporation, which
shares shall have, to the extent practicable, dividend and voting rights and
rights upon dissolution, liquidation or winding up reasonably equivalent to
those of such share of Series B Preferred Stock, (ii) each holder of the shares
of Series B Preferred Stock shall be entitled to receive upon the effectiveness
of such merger or consolidation in exchange for such holder's shares of Series B
Preferred Stock the number of shares of stock or other securities or property
receivable upon such merger or consolidation, as the case may be, as such holder
would have received had it converted its Series B Preferred Stock into Common
Stock immediately prior to such merger or consolidation, or (iii) the merger,
consolidation or sale or other transaction was approved by the holders of a
majority of the shares of Series B Preferred Stock then outstanding either at a
meeting of such stockholders or by a written consent in lieu of a meeting. Any
merger in which the Corporation shall be the surviving corporation shall not be
deemed a dissolution, liquidation or winding up of the Corporation. The
provisions of this Paragraph 6(b) shall not be construed to limit the
obligations of the Corporation pursuant to Paragraph 4(h) of this Statement of
Designation.
(c) In the event the assets of the Corporation available for
distribution to the holders of shares of Series B Preferred Stock upon
dissolution, liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Paragraph 6(a)(i) of this Statement of
Designation, no such distribution shall be made on account of any shares of any
other class or series of capital stock of the Corporation ranking on a parity
with the shares of Series B Preferred Stock upon such dissolution, liquidation
or winding up unless proportionate distributive amounts shall be paid on account
of the shares of Series B Preferred Stock, ratably, in proportion to the full
distributable amounts for which holders of all such parity shares are
respectively entitled upon such dissolution, liquidation or winding up.
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(d) Upon the dissolution, liquidation or winding up of the
Corporation, the holders of shares of Series B Preferred Stock then outstanding
shall be entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders all amounts to which such holders are entitled
pursuant to Paragraph 6(a)(i) of this Statement of Designation before any
payment shall be made to the holders of any class of capital stock of the
Corporation ranking junior upon liquidation to Series B Preferred Stock.
7. Rank of Series. For purposes of this Statement of
Designation, any stock of any series or class of the Corporation shall be deemed
to rank:
(a) prior to the shares of Series B Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be, if
the holders of such class or classes shall be entitled to the receipt of
dividends or of amounts distributable upon dissolution, liquidation or winding
up of the Corporation, as the case may be, in preference or priority to the
holders of shares of Series B Preferred Stock;
(b) on a parity with shares of Series B Preferred Stock, as to
dividends or upon liquidation, dissolution or winding up, as the case may be,
whether or not the dividend rates, dividend payment dates or redemption or
liquidation prices per share or sinking fund provisions, if any, be different
from those of Series B Preferred Stock, if the holders of such stock shall be
entitled to the receipt of dividends or of amounts distributable upon
dissolution, liquidation or winding up of the Corporation, as the case may be,
in proportion to their respective dividend rates or liquidation prices, without
preference or priority, one over the other, as between the holders of such stock
and the holders of shares of Series B Preferred Stock;
(c) junior to shares of Series B Preferred Stock as to
dividends or upon liquidation, dissolution or winding up, as the case may be, if
such class shall be Common Stock or if the holders of shares of Series B
Preferred Stock shall be entitled to receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the Corporation, as
the case may be, in preference or priority to the holders of shares of such
class or classes.
8. No Preemptive Rights. No holder of the Series B Preferred Stock
shall, as such holder, be entitled as of right to purchase or subscribe for any
shares of stock of the Corporation of any class or any series now or hereafter
authorized or any securities convertible into or exchangeable for any shares, or
any warrants, options, rights or other instruments evidencing rights to
subscribe for or purchase any such shares, whether such shares, securities,
warrants, options, rights or other instruments be unissued or issued and
thereafter acquired by the Corporation.
9. Transfer Agent and Registrar. The Corporation may appoint a
transfer agent and registrar for the issuance, transfer and conversion of the
Series B Preferred Stock and for the payment of dividends to the holders of the
Series B Preferred Stock.
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Exhibit 3.3
BY-LAWS
OF
INTERNATIONAL MAGNETIC IMAGING, INC.
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of International
Magnetic Imaging, Inc. (the "Corporation") in the State of Delaware, shall be in
the city of Wilmington, county of New Castle, Delaware.
SECTION 2. Other Offices. The Corporation may also have offices at
other places either within or without the State of Delaware.
ARTICLE II
Meetings of Stockholders
SECTION 1. Annual Meetings. The annual meeting of the stockholders of
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held on such
date and at such place and hour as shall be designated by the Board of Directors
(the "Board") in the notice thereof.
SECTION 2. Special Meetings. A special meeting of the stockholders for
any purpose or purposes may be called at any time by the Board, the Chief
Executive Officer, the Chairman of the Board, the President, a majority of the
Directors then in office or by holders of 10% or more of all shares of stock
entitled to vote at such meeting, and such meeting shall be held on such date
and at such place and hour as shall be designated in the notice thereof.
SECTION 3. Notice of Meetings. Except as otherwise expressly required
by these By-laws or by law, notice of each meeting of the stockholders shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder of record entitled to notice of, or to vote at, such meeting by
delivering a typewritten or printed notice thereof to such stockholder
personally or by depositing such notice in the United States mail, postage
prepaid, directed to such stockholder at his address as it appears on the stock
records of the Corporation or by transmitting notice thereof to him at such
address by telegraph, cable or other form of recorded communication. Every such
notice shall state the place, date and hour of the meeting and, in the case of a
special meeting, the purpose or purposes for which the meeting is called. Except
as otherwise expressly required by law, no publication of any notice of a
meeting of the stockholders shall be required. Notice of any adjourned meeting
of the stockholders shall not be required to be given if the time and place
thereof are announced at the meeting at which the adjournment is taken, the
adjourned meeting is held within 30 days thereafter and a new record date for
the adjourned meeting is not thereafter fixed.
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<PAGE>
SECTION 4. Quorum and Manner of Acting. Except as otherwise expressly
required by law, if stockholders holding of record a majority of the shares of
stock of the Corporation entitled to be voted shall be present in person or by
proxy, a quorum for the transaction of business at any meeting of the
stockholders shall exist. In the absence of a quorum at any such meeting or any
adjournment or adjournments thereof, a majority in voting interest of those
present in person or by proxy and entitled to vote thereat, or, in the absence
therefrom of all the stockholders, any officer entitled to preside at, or to act
as secretary of, such meeting, may adjourn such meeting from time to time until
stockholders holding the amount of stock requisite for a quorum shall be present
in person or by proxy. At any such adjourned meeting at which a quorum is
present, any business may be transacted which might have been transacted at the
meeting as originally called. The absence from any meeting in person or by proxy
of stockholders holding the number of shares of stock of the Corporation
required by law, by the Certificate of Incorporation or by these By-laws for
action upon any given matter shall not prevent action at such meeting upon any
other matter or matters which may properly come before the meeting if there
shall be present thereat in person or by proxy stockholders holding the number
of shares of stock of the Corporation required in respect of such other matter
or matters.
SECTION 5. Organization of Meetings. At each meeting of the
stockholders, one of the following shall act as chairman of the meeting and
preside thereat, in the following order of precedence:
the Chairman of the Board;
the President;
any other officer of the Corporation designated by the Board to so act and
preside;
any other officer of the Corporation designated by a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat; or
a stockholder of record of the Corporation designated by a majority in
voting interest of the stockholders present in person or by proxy and entitled
to vote thereat.
The Secretary of the Corporation or, if he shall be absent from or
presiding over the meeting in accordance with the provisions of this Section,
the person (who shall be an Assistant Secretary of the Corporation, if an
Assistant Secretary shall be present thereat) whom the chairman of the meeting
shall appoint, shall act as secretary of the meeting and keep the minutes
thereof.
SECTION 6. Order of Business. The order of business at each meeting of
the stockholders shall be determined by the chairman of the meeting, but such
order of business may be changed by the vote of a majority in voting interest of
those present in person or by proxy at such meeting and entitled to vote
thereat.
SECTION 7. Voting.
(a) Except as otherwise provided in the Certificate of
Incorporation, including any certificate of designation setting forth the
rights, preferences and privileges of the holders of any series of Preferred
Stock of the Corporation, each stockholder shall, at each meeting of the
stockholders, be entitled
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to one vote in person or by proxy for each share of Common Stock of the
Corporation on the matter in question held by him and registered in his name on
the stock record of the Corporation on the date fixed pursuant to these By-laws
as the record date for the determination of stockholders who shall be entitled
to receive notice of and to vote at such meeting; or, if no record date shall
have been so fixed, then at the close of business on the day next preceding the
day on which notice of the meeting shall be given or, if notice of the meeting
shall be waived, at the close of business on the day next preceding the day on
which the meeting shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors of such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Any vote of stock of the Corporation may be held at any meeting of the
stockholders by the person entitled to vote the same in person or by proxy
appointed by an instrument in writing delivered to the Secretary or an Assistant
Secretary of the Corporation or the secretary of the meeting; provided, however,
that no proxy shall be voted or acted upon after three years from its date
unless such proxy provides for a longer period. The attendance at any meeting of
a stockholder who may theretofore have given a proxy shall not have the effect
of revoking the same unless he shall in writing so notify the secretary of the
meeting prior to the voting of the proxy. At all meetings of the stockholders,
all matters, except as otherwise provided in the Certificate of Incorporation,
in these By-laws or by law, shall be decided by the vote of a majority in voting
interest of the stockholders present in person or by proxy and entitled to vote
thereat, a quorum being present. Unless required by law or so directed by the
chairman of the meeting, the vote at any meeting of the stockholders on any
question need not be by ballot. On a vote by ballot, each ballot shall be signed
by the stockholder voting, or by his proxy if there be such proxy, and shall
state the number of shares voted.
SECTION 8. Consent in Lieu of Meeting. Any action required to be taken
at any annual or special meeting of stockholders of the Corporation, or any
action which may be taken at any annual or special meeting of such stockholders,
may be taken without a meeting, without prior notice and without a vote if a
consent in writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted.
SECTION 9. List of Stockholders. It shall be the duty of the Secretary
or other officer of the Corporation who shall have charge of the stock record,
either directly or through another officer of the Corporation or through a
transfer agent or transfer clerk appointed by the Board, to prepare and make, at
least l0 days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote thereat, arranged in alphabetical order, and
showing the address of each stockholder and the number of shares registered in
the name of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least l0 days prior to the meeting, either at the place
where the meeting is to be held or at such other place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting. Such list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any stockholder
who is present. The stock record shall be the only evidence as to who are the
stockholders entitled to examine the stock record, such list or the books of the
Corporation or to vote in person or by proxy at any meeting of the stockholders.
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SECTION 10. Inspectors. Either the Board or, in the absence of a
designation of inspectors by the Board, the chairman of the meeting may, in its
or his discretion, appoint two or more inspectors, who need not be stockholders,
who shall receive and take charge of ballots and proxies and decide all
questions relating to the qualification of those asserting the right to vote and
the validity of ballots and proxies. In the event of the failure or refusal to
serve of any inspector designated by the Board, the chairman of the meeting
shall appoint an inspector to act in place of each such inspector designated by
the Board. In the absence of a designation of inspectors by the Board and the
chairman of the meeting, the secretary of the meeting shall perform the duties
which would otherwise have been performed by the inspectors.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The property, business, affairs and
policies of the Corporation shall be managed by or under the direction of the
Board.
SECTION 2. Number and Term of Office. The number of directors which
shall constitute the whole Board shall be one or more persons, as such number
shall be fixed from time to time by a vote of a majority of the whole Board. The
term "whole Board" as used in these By-laws shall mean the number of positions
on the Board regardless of the number of directors then in office. Each of the
directors of the Corporation shall hold office until the annual meeting after
his election and until his successor shall be elected and shall qualify or until
his earlier death or resignation or removal in the manner hereinafter provided.
SECTION 3. Election. At each annual meeting of the stockholders for the
election of directors at which a quorum is present, subject to the rights of the
holders of any series of Preferred Stock of the Corporation, the persons
receiving the greatest number of votes, up to the number of directors to be
elected, shall be the directors. Directors need not be stockholders of the
Corporation or residents of the State of Delaware.
SECTION 4. Meetings.
(a) Annual Meetings. As soon as practicable after each annual
election of directors, the Board shall meet for the purpose of organization, the
election of officers and the transaction of other business.
(b) Regular Meetings. Regular meetings of the Board or any
committee thereof shall be held as the Board or such committee shall from time
to time determine.
(c) Special Meetings. Special meetings of the Board, at which
any and all business may be transacted, shall be held whenever called by the
President or by a written call signed by any two or more directors and filed
with the Secretary.
(d) Notice of Meetings. No notice of regular meetings of the
Board or of any committee thereof or of any adjourned meeting thereof need be
given. The Secretary shall give notice to each director of each special meeting
of the Board or adjournment thereof, including the time and place thereof. Such
notice shall be given not less than two (2) days before the date of the meeting
to each director by delivering
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a typewritten notice thereof to such director personally or by depositing such
notice in the United States mail, postage prepaid by Express Mail or first class
mail, or by messenger service or overnight delivery service which guarantees
next day delivery, directed to such director at his residence or usual business
address or by transmitting notice thereof to him by telecopier or other form of
recorded communication, including recorded telephonic notice, provided, however,
that if notice of the meeting shall be given by first class mail, such notice
shall be given not less than five (5) days prior to the date of the meeting.
Notice of any meeting of the Board or any committee thereof shall not be
required to be given to any director who shall attend such meeting. Any meeting
of the Board or any committee thereof shall be a legal meeting without any
notice thereof having been given if all the directors then in office shall be
present thereat. The purposes of a meeting of the Board or any committee thereof
need not be specified in the notice thereof.
(e) Time and Place of Meetings. Regular meetings of the Board
or any committee thereof shall be held at such time or times and place or places
as the Board or the committee may from time to time determine. Each special
meeting of the Board or any committee thereof shall be held at such time and
place as the caller or callers thereof may determine. In the absence of such a
determination, each meeting of the Board or any committee thereof shall be held
at such time and place as shall be designated in the notices or waiver of
notices thereof.
(f) Quorum and Manner of Acting. Except as otherwise expressly
required by these By-laws or by law, a majority of the directors then in office
and a majority of the members of any committee shall be present in person at any
meeting thereof in order to constitute a quorum for the transaction of business
at such meeting, and the vote of a majority of the directors present at any such
meeting at which a quorum is present shall be necessary for the passage of any
resolution or for an act to be the act of the Board or such committee. In the
absence of a quorum, a majority of the directors present thereat may adjourn
such meeting from time to time until a quorum shall be present thereat. Notice
of any adjourned meeting need not be given.
(g) Organization of Meetings. At each meeting of the Board,
one of the following shall act as chairman of the meeting and preside thereat,
in the following order of precedence:
(i) the Chairman of the Board;
(ii) the Vice Chairman, or, if there be more than
one Vice Chairman, the Vice Chairman in order determined by the Board of
Directors;
(iii) the President, if a director; or
(iv) any director chosen by a majority of the
directors present thereat.
(h) Minutes. The Secretary or such other person present whom
the chairman of the meeting shall appoint, shall act as secretary of such
meeting and keep the minutes thereof. The order of business at each meeting of
the Board shall be determined by the chairman of such meeting.
(i) Consent in Lieu of Meeting. Any action required or
permitted to be taken at any meeting of the Board or any committee thereof may
be taken without a meeting if all members of the Board
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<PAGE>
or committee, as the case may be, consent thereto in a writing or writings, and
such writing or writings are filed with the minutes of the proceedings of the
Board or committee.
(j) Action by Communications Equipment. The directors may
participate in a meeting of the Board or any committee thereof by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and such participation
shall constitute presence in person at such meeting.
SECTION 5. Compensation. Each director, in consideration of his serving
as such, shall be entitled to receive from the Corporation such amount per annum
and such fees for attendance at meetings of the Board or of any committee, or
both, as the Board shall from time to time determine. The Board may likewise
provide that the Corporation shall reimburse each director or member of a
committee for any expenses incurred by him on account of his attendance at any
such meeting. Nothing contained in this Section 5 shall be construed to preclude
any director from serving the Corporation in any other capacity and receiving
compensation therefor or to require the Board to provide for compensation to
directors.
SECTION 6. Resignation, Removal and Vacancies.
(a) Any director may resign at any time by giving written
notice of his resignation to the Board or the President of the Corporation. Any
such resignation shall take effect at the time specified therein or when
delivered to the Board or the President, as the Board shall determine. Except as
aforesaid, the acceptance of such resignation shall not be necessary to make it
effective.
(b) Any director may be removed at any time for cause or
without cause by vote of the holders of record of a majority in voting interest
of shares then entitled to vote at an election of directors at a duly
constituted meeting of stockholders. The vacancy in the Board caused by any such
removal may be filled by the stockholders at such meeting or, if not so filled,
then by the Board as provided in the next paragraph of these By-laws. Any
director may also be removed at any time for cause by vote of a majority of the
whole Board.
(c) In case of any vacancy on the Board or in case of any
newly created directorship, a majority of the directors of the Corporation then
in office, though less than a quorum, or the sole remaining director may elect a
director to fill the vacancy or the newly created directorship for the unexpired
portion of the term being filled. The director elected to fill such vacancy
shall hold office for the unexpired term in respect of which such vacancy
occurred.
SECTION 7. Committees. The Board from time to time may appoint from
among its members an executive committee and one or more other committees, each
of which shall have one or more members as the Board shall determine. Each
committee shall have and may exercise such powers as the Board may delegate, to
the extent permitted by law. The Board shall have power to change the members of
any committee at any time, to fill vacancies and to discharge any such
committee, either with or without cause, at any time.
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ARTICLE IV
Officers
SECTION 1. Election and Appointment and Term of Office.
(a) The officers of the Corporation may be a Chairman of the
Board or Co-Chairmen, one or more Vice Chairmen, a President, such number, if
any, of other Vice Presidents (including Executive or Senior Vice Presidents) as
the Board may from time to time determine, a Secretary and a Treasurer and such
officers as the Board may from time to time determine. The Chairman of the
Executive Committee may, if the Board of Directors so determines, be an officer
of the Corporation. Each such officer shall be elected by the Board at its
annual meeting or such other time as the Board shall determine, and shall serve
at the discretion of the Board. Two or more offices may be held by the same
person except that the same person shall not be both President and Secretary.
The Board may elect or appoint (and may authorize the President to appoint) such
other officers (including one or more Assistant Secretaries and Assistant
Treasurers) as it deems necessary who shall have such authority and shall
perform such duties as the Board or the President may from time to time
prescribe. The Board of Directors may, but shall not be required to, designate
one or more officers who shall hold the position(s) of, and perform the duties
of, the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer and the Chief Accounting Officer.
(b) If additional officers are elected or appointed during the
year, each shall hold office until the next annual meeting of the Board at which
officers are regularly elected or appointed and until his successor is elected
or appointed and qualified or until his earlier death or resignation or removal
in the manner hereinafter provided.
SECTION 2. Duties and Functions.
(a) Chairman. The Chairman of the Board, if elected, shall
preside over meetings of the Board of Directors and shall perform such other
duties as are expressly delegated to the Chairman of the Board by the Board. The
Chairman of the Executive Committee shall shall be a member of the Executive
Committee and shall preside at meetings of the Executive Committee and shall
have such other duties as are expressly delegated to him by the Board.
(b) Vice Chairman. The Vice Chairman shall preside over
meetings of the Board of Directors in the absence of the Chairman of the Board
and shall perform such other duties as are expressly delegated to the Vice
Chairman. If more than one Vice Chairman shall be elected, the Board of
Directors shall designate the order in which they preside over meetings of the
Board of Directors in the absence of the Chairman of the Board.
(c) Chief Executive Officer. The Chief Executive Officer, if
elected, shall be responsible for supervising the management of the business and
affairs of the Corporation, subject to the directions and limitations imposed by
the Board of Directors, these By-laws and the Certificate of Incorporation of
this Corporation. All other officers shall report and be accountable to the
Chief Executive Officer, except as otherwise provided in these By-laws or as
otherwise determined by the Board of Directors. The Chief Executive Officer need
not be the principal executive officer of the Corporation.
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(d) Chief Operating Officer. The Chief Operating Officer, if
elected, shall be responsible for supervising the day to day operations of the
business and affairs of the Corporation, subject to the directions and
limitations imposed by the Board, the Chief Executive Officer and these By-laws,
and shall report to the Chief Executive Officer or to the Board of Directors, as
the Board of Directors shall determine. All other officers involved with the
operations of the Corporation shall, to the extent the Board of Directors shall
determine, report and be accountable to the Chief Operating Officer.
(e) Chief Financial Officer. The Chief Financial Officer, if
elected, shall be responsible for supervising the Corporation's overall
financial planning and financial controls and shall be responsible for the
maintenance of the Corporation's books and records, subject to the directions
and limitations imposed by the Board, the Chief Executive Officer and these
By-laws. All other officers involved with the financial and accounting functions
of the Corporation shall report and be accountable to the Chief Financial
Officer, and the Chief Financial Officer shall report to the Chief Executive
Officer or the Board of Directors, as the Board of Directors shall determine.
(f) Chief Accounting Officer. The Chief Accounting Officer, if
elected, shall keep true and full accounts of all assets, liabilities, receipts
and disbursements and other transactions of the Corporation and shall cause
regular audits of the books and records of the Corporation to be made, and shall
have charge, supervision and control of the accounting affairs of the
Corporation, subject to the directions and limitations imposed by the Board, the
Chief Executive Officer, the Chief Financial Officer and these By-laws.
(g) President. The President shall be responsible for
implementing the policies adopted by the Board and shall report to the Board.
The President shall also have the powers and duties delegated to him by these
By-laws and such other powers and duties as the Board may from time to time
determine.
(h) Vice Presidents. Each Vice President shall have such
powers and duties as shall be prescribed by the Board.
(i) Secretary. The Secretary shall keep the records of all
meetings of the stockholders, the Board and all other committees, if any, in one
or more books kept for that purpose. He shall give or cause to be given due
notice of all meetings in accordance with these By-laws and as required by law.
He shall be custodian of the seal of the Corporation and of all contracts,
deeds, documents and other corporate papers, records (except accounting records)
and indicia of title to properties owned by the Corporation as shall not be
committed to the custody of another officer by the Board, or by the President.
He shall affix or cause to be affixed the seal of the Corporation to instruments
requiring the same when the same have been signed on behalf of the Corporation
by a duly authorized officer. He shall perform all duties and have all powers
incident to the office of Secretary and shall perform such other duties as shall
be assigned to him by the Board or the President. The Secretary may be assisted
by one or more Assistant Secretaries.
(j) Treasurer. The Treasurer shall have charge and custody of
all moneys, stocks, bonds, notes and other securities owned or held by the
Corporation, except those held elsewhere at the direction of the Chief Executive
Officer or the Board. He shall perform all duties and have all powers incident
to the office of Treasurer and shall perform such other duties as shall be
assigned to him by the Board, the Chief Executive Officer and the Chief
Financial Officer. The Treasurer may be assisted by one or more Assistant
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Treasurers, and the Treasurer shall report to the Chief Financial Officer or to
such other officer as may be designated by the Board or to the Board of
Directors, as the Board of Directors shall determine.
SECTION 3. Resignation, Removal and Vacancies.
(a) Any officer may resign at any time by giving written
notice of his resignation to the Board or the President. Any such resignation
shall take effect at the time specified therein or when delivered to the Board,
as the Board shall determine. Except as aforesaid, the acceptance of such
resignation shall not be necessary to make it effective.
(b) Any officer, agent or employee elected or appointed by the
Board may be removed, with or without cause, at any time by the Board. Any
officer, agent or employee appointed by an officer may be removed, with or
without cause, at any time by the Board or such officer. Any removal pursuant to
Section 2 or 3 of this Article IV shall not affect any rights which a terminated
employee shall have under any employment agreement between such person and the
Corporation which has been approved by the Board of Directors and has been
executed by an officer authorized by the Board to execute such agreement.
(c) A vacancy in any office may be filled for the unexpired
portion of the term in the same manner as provided in these By-laws for election
or appointment to such office.
ARTICLE V
Waiver of Notices; Place of Meetings
SECTION 1. Waiver of Notices. Whenever notice is required to be given
by the Certificate of Incorporation, by these By-laws or by law, a waiver
thereof in writing, signed by the person entitled to such notice or by an
attorney thereunto authorized, shall be deemed equivalent to notice, whether
given before or after the time specified therein and, in the case of a waiver of
notice of a meeting, whether or not such waiver specifies the purpose of or
business to be transacted at such meeting. Attendance of a person at a meeting
shall constitute a waiver of notice of such meeting, except where the person
attends the meeting for the express purpose of objecting, at the beginning of
the meeting, to the transaction of any business because the meeting is not
lawfully called or convened.
SECTION 2. Place of Meetings. Any meeting of the stockholders, the
Board or any committee of the Board may be held within or outside the State of
Delaware.
ARTICLE VI
Execution and Delivery of Documents; Deposits; Proxies;
Books and Records
SECTION 1. Execution and Delivery of Documents; Delegation. The Board
shall designate the officers, employees and agents of the Corporation who shall
have power to execute and deliver deeds, contracts, mortgages, bonds,
debentures, checks, drafts and other orders for the payment of money and other
documents for and in the name of the Corporation and may authorize such
officers, employees and agents to delegate such power (including authority to
redelegate) by written instrument to other officers, employees
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or agents of the Corporation. Such delegation may be by resolution or otherwise,
and the authority granted shall be general or confined to specific matters, all
as the Board may determine.
SECTION 2. Deposits. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
or otherwise as the Board, the President, or any other officer of the
Corporation to whom power in that respect shall have been delegated by the Board
or these By-laws shall select.
SECTION 3. Proxies in Respect of Stock or Other Securities of Other
Corporations. The Chief Executive Officer, the Chairman of the Board, the
President or any other officer of the Corporation designated by the Board shall
have the authority from time to time to appoint an agent or agents of the
Corporation to exercise in the name and on behalf of the Corporation the powers
and rights which the Corporation may have as the holder of stock or other
securities in any other corporation, to vote or consent in respect of such stock
or securities and to execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal or otherwise, such written
proxies, powers of attorney or other instruments as he may deem necessary or
proper in order that the Corporation may exercise such powers and rights. Any
such officer may instruct any person or persons appointed as aforesaid as to the
manner of exercising such powers and rights.
SECTION 4. Books and Records. The books and records of the Corporation
may be kept at such places within or without the State of Delaware as the Board
may from time to time determine.
ARTICLE VII
Certificates; Stock Record; Transfer and Registration;
New Certificates; Record Date; etc.
SECTION 1. Certificates for Stock.
(a) Every owner of stock of the Corporation shall be entitled
to have a certificate certifying the number of shares owned by him in the
Corporation and designating the class of stock to which such shares belong,
which shall otherwise be in such form as the Board shall prescribe. Each such
certificate shall be signed by, or in the name of the Corporation by, the Chief
Executive Officer, the Chairman of the Board, the President or a Vice President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation. Any or all of such signatures may be facsimiles.
(b) In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may nevertheless be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue. Every certificate surrendered to the Corporation for exchange or
transfer shall be cancelled and a new certificate or certificates shall not be
issued in exchange for any existing certificate until such existing certificate
shall have been so cancelled, except in cases provided for in Section 4 of this
Article.
SECTION 3. Stock Record. A stock record in one or more counterparts
shall be kept of the name of the person, firm or corporation owning the stock
represented by each certificate for stock of the
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Corporation issued, the number of shares represented by each such certificate,
the date thereof and, in the case of cancellation, the date of cancellation.
Except as otherwise expressly required by law, the person in whose name shares
of stock stand on the stock record of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation.
SECTION 4. Transfer and Registration of Stock.
(a) Transfer. The transfer of stock and certificates of stock
which represent the stock of the Corporation shall be governed by the Uniform
Commercial Code, as in effect in Delaware and as amended from time to time.
(b) Registration. Registration of transfers of shares of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary of the Corporation, on the surrender
of the certificate or certificates for such shares properly endorsed or
accompanied by a stock power duly executed.
SECTION 5. New Certificates.
(a) Lost, Stolen or Destroyed Certificates. Where a stock
certificate has been lost, apparently destroyed or wrongfully taken, the
issuance of a new stock certificate or the claims based on such certificate
shall be governed by the Uniform Commercial Code, as in effect in Delaware and
amended from time to time.
(b) Multilated Certificates. Where the holder of any
certificate for stock of the Corporation notifies the Corporation of the
mutilation of such certificate within a reasonable time after he has notice of
it, the Corporation will issue a new certificate for stock in exchange for such
mutilated certificate theretofore issued by it.
(c) Bond. The Board may, in its discretion, require the owner
of the lost, stolen, destroyed or mutilated certificate to give the Corporation
a bond in such sum, limited or unlimited, in such form and with such surety or
sureties sufficient to indemnify the Corporation against any claim that may be
made against it on account of the loss, theft, destruction or mutilation of any
such certificate or the issuance of any such new certificate.
SECTION 6. Regulations. The Board may make such rules and regulations
as it may deem expedient, not inconsistent with these By-laws, concerning the
issue, transfer and registration of certificates for stock of the Corporation.
The Board may appoint or authorize any officer or officers to appoint one or
more transfer clerks or one or more transfer agents and one or more registrars
and may require all certificates for stock to bear the signature or signatures
of any of them.
SECTION 7. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board
may fix, in advance, a record date, which shall not be more than 60 nor less
than
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l0 days before the date of such meeting, nor more than 60 days prior to any
other action. A determination of stockholders entitled to notice of or to vote
at a meeting of the stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board may fix a new record date for the adjourned
meeting.
ARTICLE VIII
Seal
The Board shall provide a corporate seal which shall bear the full name
of the Corporation and the year and state of its incorporation.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall be determined by
resolution of the Board of Directors.
ARTICLE X
Amendments
These By-laws may be amended, altered or repealed by the vote of a
majority of the whole Board; provided, however, that the holders of a majority
of the outstanding stock of the Corporation entitled to vote in respect thereof,
may, by their vote given at an annual meeting or at any special meeting, amend
or repeal any By-law made by the Board.
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Exhibit 4.1
WARRANT AGREEMENT
AGREEMENT, dated as of this day of , 1996, by and between International
Magnetic Imaging, Inc., a Delaware corporation (the "Company") and American
Stock Transfer & Trust Company, as Warrant Agent (the "Warrant Agent").
WITNESSETH:
WHEREAS, in connection with a public offering of 1,000,000 shares of
Common Stock and 1,500,000 Series A Redeemable Common Stock Purchase Warrants
(the "Warrants"), pursuant to an underwriting agreement (the "Underwriting
Agreement") dated as of [ ], 1996, between the Company and Monroe Parker
Securities, Inc. ("Monroe Parker" or the "Underwriter"), the Company may issue
up to one million seven hundred twenty five thousand (1,725,000) Warrants; and
WHEREAS, in connection with the issuance, pursuant to the Underwriting
Agreement, to Monroe Parker or its designees of an option (the "Underwriter's
Option"), the Company may issue up to one hundred fifty thousand (150,000)
Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, as
hereinafter defined, the issuance of certificates representing the Warrants, the
exercise of the Warrants, and the rights of the holders thereof;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth and for the purpose of defining the terms and
provisions of the Warrants and the certificates representing the Warrants and
the respective rights and obligations thereunder of the Company, the holders of
certificates representing the Warrants and the Warrant Agent, the parties hereto
agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the following meanings, unless the context shall otherwise require:
(a) "Corporate Office" shall mean the office of the Warrant Agent
(or its successor) at which at any particular time its principal business shall
be administered, which office is located at the date of this Agreement at 40
Wall Street, 46th floor, New York, New York 10005.
(b) "Effective Date" shall mean the date that the Registration
Statement is declared effective by the Securities and Exchange Commission (the
"Commission").
(c) "Exercise Date" shall mean, as to any Warrant, the date on
which the Warrant Agent shall have received both (a) the Warrant Certificate
representing such Warrant, with the exercise form thereon duly executed by the
Registered Holder thereof or his attorney duly authorized in writing,
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and (b) payment in cash, or by official bank or certified check made payable to
the Company, of an amount in lawful money of the United States of America equal
to the Purchase Price; provided, however, that, subject to Paragraph 4(a) of
this Agreement, if payment shall be made by personal or corporate check, the
exercise of the Warrant shall not be effective until the Warrant Agent shall be
satisfied that the check shall have cleared; provided, further, that if such
payment is made prior to the Warrant Expiration Date or the expiration of a
period during which a reduced Purchase Price is in effect pursuant to Paragraph
9(f) of this Agreement and the check shall not have cleared until after the
Warrant Expiration Date or such other date, then the Warrant shall be deemed to
have been exercised immediately prior to 5:00 P.M. New York City time on the
Warrant Expiration Date.
(d) "Purchase Price" shall mean the purchase price per share to be
paid upon exercise of each Warrant in accordance with the terms hereof, which
price shall be six dollars ($6.00) per share with respect to the Warrants,
subject to adjustment from time to time pursuant to the provisions of Paragraph
9 of this Agreement.
(e) "Redemption Price" shall mean the price at which the Company
may, at its option, redeem the Warrants, in accordance with the terms of this
Agreement, which price shall be ten cents ($.10) per Warrant. The Redemption
Price shall not be subject to adjustment pursuant to this Agreement. (f)
"Registration Statement" shall mean the Company's registration statement on Form
S-1, File No. [333- ], which was declared effective by the Commission on [ ],
1996. (g) "Registered Holder" shall mean, as to any Warrant and as of any
particular date, the person in whose name the certificate representing the
Warrant shall be registered on that date on the books maintained by the Warrant
Agent pursuant to Paragraph 6 of this Agreement. (h) "Transfer Agent" shall mean
American Stock Transfer & Trust Company, as the Company's transfer agent, or its
authorized successor, as such. (i) "Warrant Certificate" shall mean the
certificates (attached hereto as Exhibit A); (j) "Warrant Expiration Date" shall
mean 5:00 P.M. New York City time on the first to occur of (i) [ ], 1999, or
(ii) the business day immediately preceding the Redemption Date, as defined in
Paragraph 8(c) of this Agreement; provided, that if such date shall in the State
of New York be a holiday or a day on which banks are authorized or required to
close, the Warrant Expiration Date shall be the next day which is not such a
date. Upon notice to all warrant holders the Company shall have the right to
extend the Warrant Expiration Date. (k) "Warrant Shares" shall mean the shares
of Common Stock issuable upon exercise of the Warrants. (l) "Warrants" shall
mean the Warrants.
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2. Warrants and Issuance of Warrants Certificates.
(a) Each Warrant initially shall entitle the Registered Holder of
the Warrant Certificate representing such Warrant to purchase one (1) share of
Common Stock upon the exercise thereof, in accordance with the terms of this
Agreement, subject to modification and adjustment as provided in Paragraph 9 of
this Agreement.
(b) Upon execution of this Agreement, Warrant Certificates
representing the number of Warrants initially issuable pursuant to the
Underwriting Agreement shall be executed by the Company and delivered to the
Warrant Agent. Upon written order of the Company signed by its President or
Chairman or a Vice President and by its Secretary or an Assistant Secretary or
its Treasurer or an Assistant Treasurer, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent.
(c) From time to time, up to the Warrant Expiration Date, the
Transfer Agent shall countersign and deliver stock certificates in required
whole number denominations representing the shares of Common Stock issuable upon
the exercise of Warrants in accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the
Warrant Agent shall countersign and deliver Warrant Certificates in required
whole number denominations to the persons entitled thereto in connection with
any transfer or exchange permitted under this Agreement; provided that no
Warrant Certificates shall be issued except (i) those initially issued hereunder
or otherwise issuable pursuant to the Underwriting Agreement, including those
issuable in exchange for certain outstanding warrants, (ii) those issued on or
after the date of this Agreement, upon the exercise of fewer than all Warrants
represented by any Warrant Certificate, to evidence any unexercised Warrants
held by the exercising Registered Holder, (iii) those issued upon any transfer
or exchange pursuant to Paragraph 6 of this Agreement; (iv) those issued in
replacement of lost, stolen, destroyed or mutilated Warrant Certificates
pursuant to Paragraph 7 of this Agreement; (v) those issued pursuant to the
Underwriter's Option, and (vi) at the option of the Company, in such form as may
be approved by the Board of Directors, to reflect any adjustment or change in
the Purchase Price or the number of shares of Common Stock purchasable upon
exercise of the Warrants made pursuant to Paragraph 9 of this Agreement. In
addition, at the discretion of the Company, the Company may authorize the
issuance of additional Warrants, which shall be subject to the provisions of
this Agreement.
3. Form and Execution of Warrant Certificates.
(a) The Warrant Certificates for the Warrants shall be
substantially in the form annexed as Exhibit A to this Agreement, (the
provisions of which are hereby incorporated herein) and may have such letters,
numbers or other marks of identification or designation and such legends,
summaries or
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endorsements printed, lithographed or engraved thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Warrants may be listed, or to conform to usage or to the requirements of
Paragraph 2(b) of this Agreement. The Warrant Certificates shall be dated the
date of issuance thereof (whether upon initial issuance, transfer or exchange in
lieu of mutilated, lost, stolen, or destroyed Warrant Certificates) and issued
in registered form. Warrant Certificates shall be numbered serially with the
letter WA or other letters acceptable to the Company and the Warrant Agent.
(b) Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, President or any Vice President and by its
Secretary or an Assistant Secretary, by manual signatures or by facsimile
signatures printed thereon, and shall have imprinted thereon a facsimile of the
Company's seal. Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be an officer of the Company or to hold the
particular office referenced in the Warrant Certificate before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Warrant Agent, issued and delivered with the same force
and effect as though the person who signed the Warrant Certificates had not
ceased to be an officer of the Company or to hold such office. After
countersignature by the Warrant Agent, Warrant Certificates shall be delivered
by the Warrant Agent to the Registered Holder without further action by the
Company, except as otherwise provided by Paragraph 4(a) of this Agreement.
4. Exercise.
(a) Each Warrant may be exercised by the Registered Holder thereof
at any time during the two year period commencing one year from the Effective
Date, but not after the Warrant Expiration Date, upon the terms and subject to
the conditions set forth herein and in the Warrant Certificate. A Warrant shall
be deemed to have been exercised immediately prior to the close of business on
the Exercise Date and the person entitled to receive the securities deliverable
upon such exercise shall be treated for all purposes as the holder of those
securities upon the exercise of the Warrant as of the close of business on the
Exercise Date. As soon as practicable on or after the Exercise Date, the Warrant
Agent shall deposit the proceeds received from the exercise of a Warrant and
shall notify the Company in writing of the exercise of the Warrant. Promptly
following, and in any event within five (5) days after the date of such notice
from the Warrant Agent, the Warrant Agent, on behalf of the Company, shall cause
to be issued and delivered by the Transfer Agent, to the person or persons
entitled to receive the
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same, a certificate or certificates for the securities deliverable upon such
exercise, (plus a certificate for any remaining unexercised Warrants of the
Registered Holder) unless prior to the date of issuance of such certificates the
Company shall instruct the Warrant Agent to refrain from causing such issuance
of certificates pending clearance of checks received in payment of the Purchase
Price pursuant to such Warrants. Notwithstanding the foregoing, in the case of
payment made in the form of a check drawn on an account of the Representative or
such other investment banks and brokerage houses as the Company shall approve in
writing to the Warrant Agent, by the Representative or such other investment
bank or brokerage house, certificates shall immediately be issued without prior
notice to the Company or any delay. Upon the exercise of any Warrant and
clearance of the funds received, the Warrant Agent shall promptly remit the
payment received for the Warrant (the "Warrant Proceeds") to the Company or as
the Company may direct in writing, subject to the provisions of Paragraphs 4(b)
and 4(c) of this Agreement.
(b) If, at the Exercise Date in respect of the exercise of any
Warrant after one year from the Effective Date, (i) the market price of the
Company's Common Stock is greater than the Purchase Price then in effect, (ii)
the exercise of the Warrant was solicited by a member of the National
Association of Securities Dealers, Inc. ("NASD"), (iii) the Warrant was not held
in a discretionary account, (iv) disclosure of compensation arrangements was
made both at the time of the original offering and at the time of exercise of
the Warrant was not in violation of Rule 10b-6 (as such rule or any successor
rule may be in effect as of such time of exercise) promulgated under the
Securities Exchange Act of 1934, then the Warrant Agent, simultaneously with the
distribution of the Warrant Proceeds to the Company shall, on behalf of the
Company, pay from the Warrant Proceeds, a fee of five percent (5%) (the "Monroe
Parker's Fee") of the Purchase Price to Monroe Parker (a portion of which may be
reallowed by Monroe Parker to the dealer who solicited the exercise, which may
also be Monroe Parker). In the event Monroe Parker's Fee is not paid within ten
(10) days of the date on which the Company receives Warrant Proceeds, then
Monroe Parker's Fee shall begin accruing interest at an annual rate of prime
plus four (4)%, payable by the Company to Monroe Parker at the time the Company
pays Monroe Parker's Fee. Within five (5) business days after exercise, the
Warrant Agent shall send to Monroe Parker a copy of the reverse side of each
Warrant exercised. Monroe Parker shall reimburse the Warrant Agent, upon
request, for its reasonable expenses relating to compliance with this Paragraph
4(b). In addition, Monroe Parker and the Company may, at any time during
business hours, examine the records of the Warrant Agent, including its ledger
of original Warrant Certificates returned to the Warrant Agent upon exercise of
Warrants. The provisions of this Paragraph 4(b) may not be modified, amended or
deleted without the prior written consent of the Representative.
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(c) In order to enforce the provisions of Paragraph 4(b) of this
Agreement, the Warrant Agent is hereby expressly authorized to withhold payment
to the Company of the Warrant Proceeds unless and until the Company establishes
an escrow account for the purpose of depositing the entire amount of Monroe
Parker's Fee, which amount will be deducted from the net Warrant Proceeds to be
paid to the Company. The funds placed in the escrow account may not be released
to the Company without a written agreement from Monroe Parker that the required
Monroe Parker's Fee has been received by Monroe Parker.
5. Reservation of Shares; Listing; Payment of Taxes.
(a) The Company covenants that it will at all times reserve and
keep available out of its authorized Common Stock, solely for the purpose of
issue upon exercise of Warrants, such number of shares of Common Stock as shall
then be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all Warrant Shares shall, at the time of delivery in accordance
with this Agreement, be duly and validly issued, fully paid, nonassessable and
free from all taxes, liens and charges with respect to the issue thereof (other
than those which the Company shall promptly pay or discharge), and that upon
issuance such shares shall be listed on each national securities exchange or
eligible for inclusion in each automated quotation system, if any, on which the
other shares of outstanding Common Stock of the Company are then listed or
eligible for inclusion.
(b) The Company covenants that if any securities to be reserved for
the purpose of exercise of Warrants hereunder require registration with, or
approval of, any governmental authority under any Federal securities law before
such securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use reasonable efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws. With respect to any such securities, however, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered Holder in
any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes
and other governmental charges that may be imposed with respect to the issuance
of Warrants, or the issuance, or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other than the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
Agent the amount of transfer taxes or charges incident thereto, if any.
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(d) The Warrant Agent is hereby irrevocably authorized to
requisition the Company's Transfer Agent from time to time for certificates
representing shares of Common Stock issuable upon exercise of the Warrants, and
the Company will authorize the Transfer Agent to comply with all such proper
requisitions. The Company will file with the Warrant Agent a statement setting
forth the name and address of the Transfer Agent of the Company for shares of
Common Stock issuable upon exercise of the Warrants.
6. Exchange and Registration of Transfer.
(a) Warrant Certificates may be exchanged for other Warrant
Certificates representing an equal aggregate number of Warrants of the same
class or may be transferred in whole or in part. Warrant Certificates to be
exchanged shall be surrendered to the Warrant Agent at its Corporate Office, and
upon satisfaction of the terms and provisions of this Agreement, the Company
shall execute and the Warrant Agent shall countersign, issue and deliver in
exchange therefor the Warrant Certificate or Certificates which the Registered
Holder making the exchange shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which,
subject to such reasonable regulations as it may prescribe, it shall register
Warrant Certificates and the transfer thereof in accordance with its regular
practice. Upon due presentment for registration of transfer of any Warrant
Certificate at such office, the Company shall execute and the Warrant Agent
shall issue and deliver to the transferee or transferees a new Warrant
Certificate or Certificates representing an equal aggregate number of Warrants.
(c) With respect to all Warrant Certificates presented for
registration or transfer, or for exchange or exercise, the subscription form on
the reverse thereof shall be duly endorsed, or be accompanied by a written
instrument or instruments of transfer and subscription, in form satisfactory to
the Company and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A reasonable service charge may be imposed by the Warrant
Agent for any exchange or registration of transfer of Warrant Certificates. In
addition, the Company may require payment by such holder of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any exchanges, registration or transfer of Warrant Certificates.
(e) All Warrant Certificates surrendered for exercise or for
exchange in case of mutilated Warrant Certificates shall be promptly canceled by
the Warrant Agent and thereafter retained by the Warrant Agent until termination
of this Agreement or resignation as Warrant Agent, or, with the prior written
consent of the Underwriter, disposed of or destroyed, at the direction of the
Company.
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(f) Prior to due presentment for registration of transfer
thereof, the Company and the Warrant Agent may deem and treat the Registered
Holder of any Warrant Certificate as the absolute owner thereof and of each
Warrant represented thereby (notwithstanding any notations of ownership or
writing thereon made by anyone other than a duly authorized officer of the
Company or the Warrant Agent) for all purposes and shall not be affected by any
notice to the contrary.
(g) Notwithstanding any other provisions of this Agreement, no
Warrants issued upon exercise of the Underwriter's Option and no shares of
Common Stock issuable upon exercise of such Warrants may be sold, transferred,
assigned or hypothecated for a period of one year from the Effective Date except
to the officers of the Underwriters or to selling group members or officers or
partners thereof, all of whom shall be bound by such restrictions. Until the
expiration of such one-year period, Warrant certificates and stock certificates
shall be marked with a legend referring to such restriction.
7. Loss or Mutilation. Upon receipt by the Company and the Warrant
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction or mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to them, and (in the case of
mutilation) upon surrender and cancellation thereof, the Company shall execute
and the Warrant Agent shall (in the absence of notice to the Company and/or
Warrant Agent that the Warrant Certificate has been acquired by a bona fide
purchaser) countersign and deliver to the Registered Holder in lieu thereof a
new Warrant Certificate of like tenor representing an equal aggregate number of
Warrants. Applicants for a substitute Warrant Certificate shall comply with such
other reasonable regulations and pay such other reasonable charges as the
Warrant Agent may prescribe.
8. Redemption.
(a) Commencing eighteen (18) months from the Effective Date or
earlier with the consent of Monroe Parker, the Company shall have the right, on
not less than thirty (30) nor more than sixty (60) days notice given prior to
the Redemption Date, as hereinafter defined, at any time to redeem the then
outstanding Warrants at the Redemption Price of ten cents ($.10) per Warrant,
provided the Market Price of the Common Stock shall equal or exceed the "Target
Price." The "Target Price" shall mean two hundred and fifty percent (250%) of
the Purchase Price. Market Price for the purpose of this Paragraph 8 shall mean,
if the Common Stock is listed on the NASDAQ System or the New York or American
Stock Exchange, the average last reported sales price (or, if no sale is
reported on any such trading day, the closing bid price) on the principal market
for the Common Stock or, if the Common Stock is not so listed or traded, the
average of the last reported high bid and low asked prices of the Common Stock,
during the ten (10) days ending within three (3) days of the date the Warrants
are called for redemption. Notice of redemption shall be mailed by first class
mail, postage prepaid, not later than
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five (5) business days (or such longer period to which Monroe Parker may
consent) after the date the Warrants are called for redemption. All Warrants
must be redeemed if any Warrants are redeemed.
(b) If the conditions set forth in Paragraph 8(a) of this Agreement
are met, and the Company desires to exercise its right to redeem the Warrants,
it shall request Monroe Parker or the Warrant Agent to mail the notice of
redemption referred to in said Paragraph 8(a) to each of the Registered Holders
of the Warrants to be redeemed, first class, postage prepaid, not earlier than
the sixtieth (60th) day nor later than the thirtieth (30th) day before the date
fixed for redemption, at their last addresses as shall appear on the records
maintained pursuant to Paragraph 6(b) of this Agreement. Any notice mailed in
the manner provided herein shall be conclusively presumed to have been duly
given whether or not the Registered Holder receives such notice. The Warrant
Agent agrees to mail such notice if requested by the Company or the Underwriter.
(c) The notice of redemption shall specify (i) the Redemption
Price, (ii) the date fixed for redemption, (iii) the place where the Warrant
Certificates shall be delivered and the redemption price to be paid, and (iv)
that the right to exercise the Warrants shall terminate at 5:00 p.m. (New York
City time) on the business day immediately preceding the date fixed for
redemption. The date fixed for the redemption of the Warrants shall be the
Redemption Date. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity of the proceedings for such redemption
except as to a Registered Holder (A) to whom notice was not mailed or (B) whose
notice was defective. An affidavit of the Warrant Agent or of the Secretary or
an Assistant Secretary of the Representative or the Company that notice of
redemption has been mailed shall, in the absence of fraud, be prima facie
evidence of the facts stated therein.
(d) Any right to exercise a Warrant, and any right of the holders
of the Underwriter's Option to receive Warrants upon exercise of the
Underwriter's Option, shall terminate at 5:00 p.m. (New York City time) on the
business day immediately preceding the Redemption Date. After such time, Holders
of the Warrants shall have no further rights except to receive, upon surrender
of the Warrant, the Redemption Price without interest, subject to the provisions
of applicable laws relating to the treatment of abandoned property. In the event
that the Warrants or the Warrant Shares shall not be subject to a current and
effective registration statement under the Securities Act of 1933, as amended,
at any time subsequent to the date the Warrants are called for redemption, the
notice of redemption shall not be effective and shall be deemed for all purposes
not to have been given. Nothing in the preceding sentence shall be construed to
prohibit or restrict the Company from thereafter calling the Warrants for
redemption in the manner provided for, and subject to the provisions of, this
Paragraph 8.
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(e) From and after the Redemption Date with respect to the
Warrants, the Company shall, at the place specified in the notice of redemption,
upon presentation and surrender to the Company by or on behalf of the Registered
Holder thereof of one or more Warrant Certificates evidencing Warrants to be
redeemed, deliver or cause to be delivered to or upon the written order of such
Holder a sum in cash equal to the Redemption Price of each such Warrant. From
and after the Redemption Date and upon the deposit or setting aside by the
Company of a sum sufficient to redeem all the Warrants called for redemption,
such Warrants shall expire and become void and all rights hereunder and under
the Warrant Certificates, except the right to receive payment of the Redemption
Price, shall cease.
(f) Notwithstanding any other provision of this Agreement, the
Company shall not call the Warrants for redemption unless there is, at the time
the Warrants are called for redemption, a current and effective registration
statement or a post-effective amendment to the registration statement covering
the issuance of the shares of Common Stock issuable upon exercise of the
Warrants.
(g) In the event that the Underwriter's Option is exercised at a
time subsequent to the redemption of the Warrants but prior to the Warrant
Expiration Date, as defined in Paragraph 1(i)(i) of this Agreement, then,
notwithstanding any other provisions of this Agreement, the Warrants issued upon
such exercise may be redeemed by the Company at any time after issuance.
9. Adjustment of Exercise Price and Number of Securities Issuable upon
Exercise of
Warrants.
(a) In case the Company shall, at any time or from time to time
after the date of this Agreement, pay a dividend or make a distribution on its
shares of Common Stock in shares of Common Stock, subdivide or reclassify its
outstanding Common Stock into a greater number of shares, or combine or
reclassify its outstanding Common Stock into a smaller number of shares or
otherwise effect a reverse split, the Purchase Price in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the holder of any Warrant exercised after such date shall be
entitled to receive the aggregate number and kind of shares which, if such
Warrant had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed in this Paragraph 9(a) shall occur.
(b) In case the Company shall, at any time or from time to time
after the date of this Agreement, issue rights or warrants to all holders of its
Common Stock entitling them to subscribe for or purchase shares of Common Stock
(or securities convertible into Common Stock) at a price (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in
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Paragraph 9(e) of this Agreement) on the record date mentioned below, the
Purchase Price shall be adjusted so that the same shall equal the price
determined by multiplying the Purchase Price in effect immediately prior to the
date of such issuance by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding on the record date mentioned below plus
the number of additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such current market price per share of the Common Stock, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock offered for
subscription or purchase (or into which the convertible securities so offered
are convertible). Such adjustment shall be made successively whenever such
rights or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants; and to the extent that shares of Common Stock are not
delivered (or securities convertible into Common Stock are not delivered) after
the expiration of such rights or warrants, the Purchase Price shall be
readjusted to the Purchase Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made upon the
basis of delivery of only the number of shares of Common Stock (or securities
convertible into Common Stock) actually delivered.
(c) In case the Company shall, at any time or from time to time
after the date hereof, distribute to all holders of Common Stock evidences of
its indebtedness or assets (excluding cash dividends or distributions paid out
of current earnings and dividends or distributions referred to in Paragraph 9(a)
of this Agreement) or subscription rights or warrants (excluding those referred
to in Paragraph 9(b) of this Agreement), then in each such case the Purchase
Price in effect thereafter shall be determined by multiplying the Purchase Price
in effect immediately prior thereto by a fraction, of which the numerator shall
be the total number of shares of Common Stock outstanding multiplied by the
current market price per share of Common Stock (as defined in Paragraph 9(e) of
this Agreement), less the fair market value (as determined by the Company's
Board of Directors) of said assets or evidences of indebtedness so distributed
or of such rights or warrants, and of which the denominator shall be the total
number of shares or Common Stock outstanding multiplied by such current market
price per share of Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of stockholders entitled to receive such
distribution.
(d) Whenever the Purchase Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraphs 9(a), (b) or (c) of this Agreement,
the number of shares of Common Stock
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purchasable upon exercise of each Warrant shall simultaneously be adjusted by
multiplying the number of shares issuable upon exercise of each Warrant in
effect on the date thereof by the Purchase Price in effect on the date thereof
and dividing the product so obtained by the Purchase Price, as adjusted.
(e) For the purpose of any computation pursuant to Paragraphs 9(b)
and (c) of this Agreement, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily closing prices for
thirty (30) consecutive business days commencing forty-five (45) business days
before such date. The closing price for each day shall be the reported last sale
price regular way or, in case no such reported sale takes place on such day, the
average of the last reported high bid and low asked prices regular way, in
either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, if the Common Stock is admitted to
trading or listing on the New York or American Stock Exchange or on The Nasdaq
Stock Market if included in such system or if not listed or admitted to trading
on such exchange or system, the average of the highest bid and lowest asked
prices as reported by Nasdaq, or the National Quotation Bureau, Inc. or another
similar organization if Nasdaq is no longer reporting such information, or if
not so available, the fair market price as determined by the Board of Directors
of the Company.
(f) No adjustment in the Purchase Price shall be required unless
such adjustment would require an increase or decrease of at least five
cents ($0.05) in such price; provided, however, that any adjustments which by
reason of this Paragraph 9(f) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Paragraph 9 shall be made to the nearest cent or to the nearest
one-tenth of a share, as the case may be. Anything in this Paragraph 9 to the
contrary notwithstanding, the Company may, upon notice to the record holders of
the Warrants, in its sole discretion, reduce the Purchase Price of the Warrants,
and, if such reduction is not otherwise required by this Paragraph 9, such
reduction (i) will not, unless the Board of Directors otherwise determines,
result in any change in the number or class of shares of Common Stock issuable
upon exercise of such Warrants, and (ii) may be of limited duration, in which
event the reduction in Purchase Price shall not apply to any Warrants exercised
after the expiration of the time during which the reduced Purchase Price is in
effect.
(g) The Company may retain a firm of independent public
accountants (who may be the regular accountants employed by the Company) of
recognized standing selected by the Board of Directors of the Company to make
any computation required by this Paragraph 9, and a certificate signed by such
firm shall be conclusive evidence of the correctness of such adjustment.
(h) In the event that at any time, as a result of an adjustment
made pursuant to Paragraph 9(a) of this Agreement, the holder of any Warrant
thereafter shall become entitled to receive
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any shares of the Company, other than Common Stock, thereafter the number of
such other shares so receivable upon exercise of any Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Paragraphs 9(a) to (f), inclusive, of this Agreement.
(i) The Company may elect, upon any adjustment of the Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu of the
adjustment in the number of shares of Common Stock purchasable upon the exercise
of each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record and each Warrant issuable upon exercise of the
Underwriter's Option prior to such adjustment of the number of Warrants shall
become that number of Warrants or an Underwriter's Option to purchase that
number of Warrants (calculated to the nearest tenth) determined by multiplying
the number one by a fraction, the numerator of which shall be the Purchase Price
in effect immediately prior to such adjustment and the denominator of which
shall be the Purchase Price in effect immediately after such adjustment. Upon
each adjustment of the number of Warrants pursuant to this Paragraph 9, the
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Paragraph 10 of this Agreement, the number
of additional Warrants to which such Holder shall be entitled as a result of
such adjustment or, at the option of the Company, cause to be distributed to
such Holder in substitution and replacement for the Warrant Certificates held by
him prior to the date of adjustment (and upon surrender thereof, if required by
the Company) new Warrant Certificates evidencing the number of Warrants to which
such Holder shall be entitled after such adjustment. With respect to the
Representative's Option, the Company shall give the registered holders of the
Representative's Option notice as to the number of Warrants issuable in respect
of such Representative's Option reflecting such adjustment. Any Warrants or
notice to registered holders of Representative's Option may be mailed by the
Warrant Agent or by first class mail, postage prepaid.
(j) In case of any reclassification, capital reorganization or
other change of outstanding shares of Common Stock, or in case of any
consolidation or merger of the Company with or into another corporation (other
than a consolidation or merger in which the Company is the continuing
corporation and which does not result in any reclassification, capital
reorganization or other change of outstanding shares of Common Stock), or in
case of any sale or conveyance to another corporation of the property of the
Company as, or substantially as, an entirety (other than a sale/leaseback,
mortgage or other financing transaction), the Company shall cause effective
provision to be made so that each holder of a Warrant then outstanding shall
have the right thereafter, by exercising such Warrant, to purchase the kind
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and number of shares of stock or other securities or property (including cash)
receivable upon such reclassification, capital reorganization or other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock that might have been purchased upon exercise of such Warrant
immediately prior to such reclassification, capital reorganization or other
change, consolidation, merger, sale or conveyance. Any such provisions shall
include provision for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Paragraph 9. The Company
shall not effect any such consolidation, merger or sale unless, prior to or
simultaneously with the consummation thereof, the successor (if other than the
Company) resulting from such consolidation or merger or the corporation
purchasing assets or other appropriate corporation or entity shall assume, by
written instrument executed and delivered to the Warrant Agent, the obligation
to deliver to the holder of each Warrant such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations under this Agreement. The
foregoing provisions shall similarly apply to successive reclassifications,
capital reorganizations and other changes of outstanding shares of Common Stock
and to successive consolidations, mergers, sales or conveyances. In the event
that, as a result of any merger, consolidation or similar transaction, all of
the holders of Common Stock receive and are entitled to receive no consideration
other than cash in respect of their shares of Common Stock, then, at the
effective time of the transaction, the rights to purchase Common Stock pursuant
to the Warrants shall terminate, and the holders of the Warrants shall,
notwithstanding any other provisions of this Agreement or the Warrants, receive
in respect of each Warrant to purchase one (1) share of Common Stock, upon
presentation of the Warrant Certificate, the amount by which the consideration
per share of Common Stock payable to the holders of Common Stock at such
effective time exceeds the Purchase Price in effect on such effective date,
without giving effect to the transaction. In the event that, subsequent to the
effective time, additional cash or other consideration is payable to the holders
of Common Stock of record as of the effective time, the same consideration shall
be payable to the holders of the Warrants to the extent that the total cash then
received by the holders of Common Stock exceeds the Purchase Price in effect at
such effective date, without giving effect to the transaction, with the same
effect as if the Warrants had been exercised on and as of such effective time.
In the event of any merger, consolidation, sale or lease of substantially all of
the Company's assets or reorganization whereby the Company is not the surviving
corporation, in lieu of the foregoing provisions of this Paragraph 9(j), the
Company may provide in the agreement relating to the transaction that each
Warrant shall become, be converted into or be exchanged for, such securities of
the surviving or acquiring corporation or other entity as has a value equal to
the value of the Warrants, the value of the Warrants
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and securities being issued in exchange therefor to be determined by the
Company's Board of Directors, such determination to be final, binding and
conclusive on the Company and the holders of the Warrants.
(k) Irrespective of any adjustments or changes in the Purchase
Price or the number of shares of Common Stock purchasable upon exercise of the
Warrants, the Warrant Certificates theretofore and thereafter issued shall,
unless the Company shall exercise its option to issue new Warrant Certificates
pursuant to Paragraphs 2(e) and 9(i) of this Agreement, continue to express the
Purchase Price per share, the number of shares purchasable thereunder and the
Redemption Price therefor as to the Purchase Price per share, and the number of
shares purchasable and the Redemption Price therefore were expressed in the
Warrant Certificates when the same were originally issued.
(l) After any adjustment of the Purchase Price pursuant to this
Paragraph 9, the Company will promptly prepare a certificate signed by the
Chairman, President, Vice President or Treasurer, of the Company setting forth:
(i) the Purchase Price as so adjusted, (ii) the number of shares of Common Stock
purchasable upon exercise of each Warrant after such adjustment, and, if the
Company shall have elected to adjust the number of Warrants, the number of
Warrants to which the registered holder of each Warrant shall then be entitled,
and (iii) a brief statement of the facts accounting for such adjustment. The
Company will promptly file such certificate with the Warrant Agent and cause a
brief summary thereof to be sent by first class mail to the Representative and
to each registered holder of Warrants at his last address as it shall appear on
the registry books of the Warrant Agent. No failure to mail such notice nor any
defect therein or in the mailing thereof shall affect the validity thereof. The
affidavit of an officer of the Warrant Agent or the Secretary or an Assistant
Secretary of the Company that such notice has been mailed shall, in the absence
of fraud, constitute prima facie evidence of the facts stated therein.
(m) As used in this Paragraph 9, the term "Common Stock" shall
mean and include the Company's Common Stock authorized on the Effective Date and
shall also include any capital stock of any class of the Company thereafter
authorized which shall not be limited to a fixed sum or percentage in respect of
the rights of the holders thereof to participate in dividends and in the
distribution of assets upon the voluntary liquidation, dissolution or winding up
of the Company; provided, however, that the shares issuable upon exercise of the
Warrants shall include only shares of such class designated in the Company's
Certificate of Incorporation as Common Stock on the Effective Date or, in the
case of any reclassification, change, consolidation, merger, sale or conveyance
of the character referred to in Paragraph 9(j) of this Agreement, the stock,
securities or property provided for in such section or, in the case of any
reclassification or change in the outstanding shares of Common Stock issuable
upon exercise of the Warrants as a result of a subdivision or combination or
consisting of a change in par value, or from
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par value to no par value, or from no par value to par value, such shares of
Common Stock as so reclassified or changed.
(n) Any determination as to whether an adjustment in the Purchase
Price in effect hereunder is required pursuant to this Paragraph 9, or as to the
amount of any such adjustment, if required, shall be binding upon the holders of
the warrants and the Company if made in good faith by the Board of Directors of
the Company.
(o) In lieu of an adjustment pursuant to Paragraph 9(b) of this
Agreement, if the Company shall grant to the holders of Common Stock, as such,
rights or warrants to subscribe for or to purchase Common Stock or securities
convertible into or exchangeable for or carrying a right or warrant to purchase
Common Stock, the Company may concurrently therewith grant to each Registered
Holder as of the record date for such transaction of the Warrants then
outstanding, the rights or warrants to which each Registered Holder would have
been entitled if, on the record date used to determine the stockholders entitled
to the rights or warrants being granted by the Company, the Registered Holder
were the holder of record of the number of whole shares of Common Stock then
issuable upon exercise of his Warrants. If the Company exercises such right no
adjustment which otherwise might be called for pursuant to said Paragraph 9(b)
shall be made.
10. Fractional Warrants and Fractional Shares. If the number of
shares of Common Stock purchasable upon the exercise of each Warrant is adjusted
pursuant to Paragraph 9 of this Agreement, the Company nevertheless shall not be
required to issue fractions of shares, upon exercise of the Warrants or
otherwise, or to distribute certificates that evidence fractional shares. With
respect to any fraction of a share called for upon any exercise hereof, the
Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(a) If the Common Stock is listed on the New York or American
Stock Exchange or admitted to unlisted trading privileges on such exchange or
listed for trading on the Nasdaq Stock Market, the current value shall be the
reported last sale price of the Common Stock on such exchange or system on the
last business day prior to the date of exercise of this Warrant, or if no such
sale is made on such day, the average closing bid and asked prices for such day
on such exchange or system; or
(b) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the last reported bid price
reported by the National Quotation Bureau, Inc. on the last business day prior
to the date of the exercise of this Warrant; or
(c) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid prices are not so reported, the current value shall
be an amount determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
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11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained in this
Agreement be construed to confer upon the holder of Warrants, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action (whether upon
any recapitalization, issue or reclassification of stock, change of par value or
change of stock to no par value, consolidation, merger or conveyance or
otherwise), or to receive notice of meetings, or to receive dividends or
subscription rights, until such Holder shall have exercised such Warrants and
been issued shares of Common Stock in accordance with the provisions hereof.
12. Rights of Action. All rights of action with respect to this
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his Warrants for the purchase
of shares of Common Stock in the manner provide in the Warrant Certificate and
this Agreement.
13. Agreement of Warrant Holders. Every holder of a Warrant, by his
acceptance of the Warrants, consents and agrees with the Company, the Warrant
Agent and every other holder of a Warrant that:
(a) The warrants are transferable only on the registry books of the
Warrant Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Paragraph 6 of this Agreement.
14. Cancellation of Warrant Certificates. If the Company shall
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same shall thereupon be delivered to the Warrant
Agent and canceled by it and retired.
- 17 -
<PAGE>
15. Concerning the Warrant Agent.
(a) The Warrant Agent acts hereunder as agent and in a ministerial
capacity for the Company, and its duties shall be determined solely by the
provisions of this Agreement. The Warrant Agent shall not, by issuing and
delivering Warrant certificates or by any other act hereunder be deemed to make
any representations as to the validity, value or authorization of the Warrant
Certificates or the Warrants represented thereby or of any securities or other
property delivered upon exercise of any Warrant or whether any stock issued upon
exercise of any Warrant is fully paid and nonassessable.
(b) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of Warrant Certificates to make or cause to be made
any adjustment of the Purchase Price or the Redemption Price provided in this
Agreement, or to determine whether any fact exists which may require any such
adjustments, or with respect to the nature or extent of any such adjustment,
when made, or with respect to the method employed in making the same. It shall
not (i) be liable for any recital or statement of facts contained herein or for
any action taken, suffered or omitted by it in reliance on any Warrant
Certificate or other document or instrument believed by it in good faith to be
genuine and to have been signed or presented by the proper party or parties,
(ii) be responsible for any failure on the part of the Company to comply with
any of its covenants and obligations contained in this Agreement or in any
Warrant Certificate, or (iii) be liable for any act or omission in connection
with this Agreement except for its own negligence or wilful misconduct.
(c) The Warrant Agent may at any time consult with counsel
satisfactory to it (who may be counsel for the Company) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
(d) Any notice, statement, instrument, request, direction, order or
demand of the Company shall be sufficiently evidenced by an instrument signed by
the Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, unless other evidence in respect thereof is specifically
prescribed in this Agreement. The Warrant Agent shall not be liable for any
action taken, suffered or omitted by it in accordance with such notice,
statement, instruction, request, direction, order or demand believed by it to be
genuine.
(e) The Company agrees to pay the Warrant Agent reasonable
compensation for its services hereunder and to reimburse it for its reasonable
expenses hereunder; it further agrees to indemnify the Warrant Agent and save it
harmless against any and all costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution of its duties and powers hereunder
except losses, expenses and liabilities arising as a result of the Warrant
Agent's negligence or wilful misconduct.
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<PAGE>
(f) The Warrant Agent may resign its duties and be discharged from
all further duties and liabilities hereunder (except liabilities arising as a
result of the Warrant Agent's own negligence or wilful misconduct), after giving
thirty (30) days' prior written notice to the Company. At least fifteen (15)
days prior to the date such resignation is to become effective, the Warrant
Agent shall cause a copy of such notice of resignation to be mailed to the
Registered Holder of each Warrant Certificate at the Company's expense. Upon
such resignation, or any inability of the Warrant Agent to act as such under
this Agreement, the Company shall appoint a new warrant agent in writing. If the
Company shall fail to make such appointment within a period of fifteen (15) days
after it has been notified in writing of such resignation by the resigning
Warrant Agent, then the Registered Holder of any Warrant Certificate may apply
to any court of competent jurisdiction for the appointment of a new warrant
agent. Any new warrant agent, whether appointed by the Company or by such a
court, shall be a bank or trust company having a capital and surplus, as shown
by its last published report to its stockholders, of not less than $10,000,000
or a stock transfer company. After acceptance in writing of such appointment by
the new warrant agent is received by the Company, such new warrant agent shall
be vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason, it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning Warrant Agent. Not later
than the effective date of any such appointment the Company shall file notice
thereof with the resigning Warrant Agent and shall forthwith cause a copy of
such notice to be mailed to the Registered Holder of each Warrant Certificate.
(g) Any corporation into which the Warrant Agent or any new warrant
agent may be converted or merged or any corporation resulting from any
consolidation to which the Warrant Agent or any new warrant agent shall be a
party or any corporation succeeding to the trust business of the Warrant Agent
shall be a successor warrant agent under this Agreement without any further act,
provided that such corporation is eligible for appointment as successor to the
Warrant Agent under the provisions of the preceding paragraph. Any such
successor warrant agent shall promptly cause notice of its succession as warrant
agent to be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
(h) The Warrant Agent, its subsidiaries and affiliates, and any of
its or their officers or directors, may buy and hold or sell Warrants or other
securities of the Company and otherwise deal with the Company in the same manner
and to the same extent and with like effects as though it were not Warrant
Agent. Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
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<PAGE>
16. Modification of Agreement. The Warrant Agent and the Company may,
by supplemental agreement, make any changes or corrections in this Agreement (i)
that they shall deem appropriate to cure any ambiguity or to correct any
defective or inconsistent provision or manifest mistake or error herein
contained; or (ii) that they may deem necessary or desirable and which shall not
adversely affect the interests of the holders of Warrant Certificates; provided,
however, that this Agreement shall not otherwise be modified, supplemented or
altered in any respect except with the consent in writing of the Registered
Holders of Warrant Certificates representing not less than fifty percent (50%)
of the Warrants then outstanding; and provided, further, that no change in the
number or nature of the securities purchasable upon the exercise of any Warrant,
or the Purchase Price therefor, or the acceleration of the Warrant Expiration
Date, shall be made without the consent in writing of the Registered Holder of
the Warrant Certificate representing such Warrant, other than such changes as
are specifically prescribed by this Agreement as originally executed or are made
in compliance with applicable law; and provided, further, that Paragraphs 4(b)
and 4(c) may not be modified or amended without the consent of Monroe Parker.
17. Notices. All notices provided for in this Agreement shall be in
writing signed by the party giving such notice, and, unless otherwise expressly
provided in this Agreement, delivered personally or sent by overnight courier or
messenger against receipt thereof or sent by registered or certified mail (air
mail if overseas), return receipt requested, or by facsimile transmission or
similar means of communication. Notices sent by facsimile transmission or
similar means of communication shall be confirmed by acknowledged receipt or by
registered or certified mail, return receipt requested. Notices shall be deemed
to have been received on the date of personal delivery or telecopy or, if sent
by certified or registered mail, return receipt requested, shall be deemed to be
delivered on the third business day after the date of mailing. Notices shall be
sent to the Registered Holders at their respective addresses on the Warrant
Agent's warrant register, to the Company at 2424 North Federal Highway, Suite
410, Boca Raton, Florida, telecopier (561) 347-5352, Attention: Mr. Lewis S.
Schiller, Chairman of the Board, and Mr. George W. Mahoney, Chief Financial
Officer, to the Warrant Agent at its Corporate Office, telecopier (718)
236-2641. Either party may, by like notice, change the address, person or
telecopier number to which notice should be given.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York applicable to agreements
entered and to be performed wholly within such State.
19. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time
- 20 -
<PAGE>
to time of Warrant Certificates. Nothing in this Agreement is intended or shall
be construed to confer upon any other person any right, remedy or claim, in
equity or at law, or to impose upon any other person any duty, liability or
obligation.
20. Termination. This Agreement shall terminate at the close of
business on the Expiration Date of all the Warrants or such earlier date upon
which all Warrants have been exercised, except that the Warrant Agent shall
account to the Company for cash held by it, and the provisions of Paragraph 15
of this Agreement shall survive any such termination.
21. Counterparts. This Agreement may be executed in several
counterparts, which taken together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
INTERNATIONAL MAGNETIC IMAGING, INC
By:________________________
Lewis S. Schiller, CEO
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:________________________
, Authorized Officer
MONROE PARKER SECURITIES, INC.
By:________________________
, Authorized Officer
- 21 -
<PAGE>
EXHIBIT A
[FORM OF FACE OF WARRANT CERTIFICATE]
No. WA ______ Warrants
Void after , 1999 or earlier upon redemption.
INTERNATIONAL MAGNETIC IMAGING, INC
SERIES A REDEEMABLE COMMON STOCK PURCHASE WARRANT
This certifies that FOR VALUE RECEIVED _______________________________
or registered assigns (the "Registered Holder") is the owner of the number of
Series A Redeemable Common Stock Purchase Warrants ("Warrants") specified above.
Each Warrant initially entitles the Registered Holder to purchase, subject to
the terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one (1) fully paid and nonassessable share of Common
Stock, par value $.01 per share ("Common Stock"), of International Magnetic
Imaging, Inc., a Delaware corporation (the "Company"), at any time prior to the
Expiration Date (as hereinafter defined), upon the Subscription Form on the
reverse hereof duly executed, at the corporate office of American Stock Transfer
& Trust Company, as Warrant Agent, or its successor (the "Warrant Agent"),
accompanied by payment of $6.00, subject to adjustment as provided in the
Warrant Agreement (as hereinafter defined) (the "Purchase Price") in lawful
money of the United States of America in cash or by official bank or certified
check made payable to the order of the Company.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated as of , 1996, by
and between the Company and the Warrant Agent.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificates or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 P.M. (New York City time) on
_________, 1999 or earlier upon redemption as hereinafter provided. If such date
shall in the State of New York be a holiday or a day on which the banks are
authorized or required to close, then the Expiration Date shall mean 5:00 P.M.
(New York City time) the next following day which in the State of New York is
not a holiday or a day on which banks are authorized or required to close. Under
certain circumstances as provided in the Warrant Agreement, the period during
which the Warrant may be exercised may be extended.
The Company shall not be obligated to deliver any securities pursuant
to the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by
the Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon payment by the Registered Holder of any tax or
other governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificate representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
- 22 -
<PAGE>
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Commencing, , 1996 or earlier as provided in the Warrant
Agreement, this Warrant may be redeemed at the option of the Company, at a
redemption price of $.10 per Warrant at any time, provided the Market Price (as
defined in the Warrant Agreement) for the Common Stock issuable upon exercise of
such Warrant shall equal or exceed 250% of the Purchase Price. Notice of
redemption shall be given not later than the thirtieth (30th) day nor earlier
than the sixtieth (60th) day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after 5:00 P.M. (New York City time)
on the business day immediately preceding the date fixed for redemption, the
Registered Holder shall have no rights with respect to this Warrant except to
receive the $.10 per Warrant upon surrender of this Certificate. This Warrant
may only be called for redemption if, on the date the Warrant is called for
redemption, the issuance of the shares of Common Stock upon exercise of this
Warrant, is subject to a current and effective registration statement.
Prior to due presentment for registration of transfer hereof, the
Company and the Warrant Agent may deem and treat the Registered Holder as the
absolute owner hereof and of each Warrant represented hereby (notwithstanding
any notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of 5% of the Purchase Price upon
certain conditions as specified in the Warrant Agreement upon the exercise of
this Warrant.
This Warrant Certificate shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements
executed and to be performed wholly within such State.
This Warrant Certificate is not valid unless countersigned by the
Warrant Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed, manually or in facsimile by two of its officers thereunto duly
authorized and a facsimile of its corporate seal to be imprinted hereon.
INTERNATIONAL MAGNETIC IMAGING, INC
Dated:_____________ By:_____________________________
Lewis S. Schiller, Chairman
By:_____________________________
[Seal]
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY
as Warrant Agent
By:_________________________
Authorized Officer
- 23 -
<PAGE>
[FORM OF REVERSE OF WARRANT CERTIFICATE]
TRANSFER FEE: $4.00 PER CERTIFICATE ISSUED
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
_____ Warrants represented by this Warrant Certificate, and to purchase the
securities issuable upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________
_______________________________________
_______________________________________
_______________________________________
[please print or type name and address]
and be delivered to
_______________________________________
_______________________________________
_______________________________________
[please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc. If
not solicited by an NASD member, please write "unsolicited" in the space below.
Unless otherwise indicated by listing the name of another NASD member firm, it
will be assumed that the exercise was solicited by Monroe Parker Securities,
Inc.
__________________________________________
(Name of NASD Member if other than
Monroe Parker Securities, Inc.)
Dated:____________ x_________________________________
_________________________________
_________________________________
Address
______________________________
Taxpayer Identification Number
_______________________________
Signature Medallion Guaranteed:
______________________________
- 24 -
<PAGE>
ASSIGNMENT
To Be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED,____________________ hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
_______________________________________
_______________________________________
_______________________________________
_______________________________________
[please print or type name and address]
______ of the Warrants represented by this Warrant Certificate, and hereby
irrevocably constitutes and appoints __________________________________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated:____________ x________________________________
Signature Medallion Guaranteed
________________________________
THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO THE
NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE
GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF THE
AMERICAN STOCK EXCHANGE, NEW YORK STOCK EXCHANGE, PACIFIC STOCK EXCHANGE OR
MIDWEST STOCK EXCHANGE.
- 25 -
<PAGE>
Exhibit 10.6
LOAN AND SECURITY AGREEMENT
between
IMI ACQUISITION OF ARLINGTON CORP.
Borrower,
IMI ACQUISITION CORPORATION
Guarantor
and
DVI FINANCIAL SERVICES INC. DBA DVI CAPITAL
Lender
Dated as of April 3, 1995
<PAGE>
TABLE OF CONTENTS
Page
Section 1 DEFINITIONS................................................... 1
Section 1.1. Specific Definitions.............................. 1
Section 1.2. Generally Accepted Accounting Principles
and Uniform Commercial Code............................. 5
Section 1.3. Construction...................................... 5
Section 2 LOAN.......................................................... 5
Section 2.1. The Loan.......................................... 5
Section 2.2. Term and Repayment of Loan........................ 6
Section 2.3. Prepayment........................................ 6
Section 2.4. Conditions to the Closing......................... 6
Section 3 SECURITY INTEREST............................................. 7
Section 3.1. Grant of Security Interest........................ 7
Section 4 SPECIFIC REPRESENTATIONS...................................... 8
Section 4.1. Name of Borrower.................................. 8
Section 4.2. Mergers and Consolidations........................ 8
Section 4.3. Purchase of Assets................................ 8
Section 4.4. Change of Name or Identity........................ 8
Section 4.5. Corporate Structure............................... 8
Section 5 PROVISIONS CONCERNING COLLATERAL.............................. 9
Section 5.1. Title............................................. 9
Section 5.2. No Warranties..................................... 9
Section 5.3. Further Assurances................................ 9
Section 5.4. Additional Collateral............................. 10
Section 5.5. Lender's Duty of Care............................. 10
Section 5.6. Borrower's Contracts.............................. 10
Section 5.7. Reinstatement of Liens............................ 10
Section 5.8. Lender Expenses................................... 10
Section 5.9. Inspection of Collateral and Records.............. 11
Section 5.10. Deposit Accounts.................................. 11
Section 5.11. Waivers........................................... 11
Section 6 REPRESENTATIONS AND WARRANTIES................................ 12
Section 6.1. Status .......................................... 12
Section 6.2. Authorization..................................... 12
Section 6.3. No Breach......................................... 12
Section 6.4. Taxes............................................. 12
Section 6.5. Deferred Compensation Plans....................... 13
Section 6.6. Litigation and Proceedings........................ 13
Section 6.7. Business.......................................... 13
Section 6.8. Laws and Agreements............................... 13
Section 6.9. Financial Condition............................... 13
Section 6.10. Environmental Laws................................ 13
Section 6.11. Insurance......................................... 14
Section 6.12. Ownership of Property............................. 14
Section 6.13. Leases............................................ 14
Section 6.14. Health Care Laws.................................. 14
i
<PAGE>
Section 6.15. Cumulative Representations........................ 15
Section 7 COVENANTS..................................................... 15
Section 7.1. Encumbrance of Assets............................. 15
Section 7.2. Business; Covenant regarding
George Mahoney............................ 15
Section 7.3. Condition and Repair.............................. 15
Section 7.4. Insurance......................................... 15
Section 7.5. Taxes............................................. 16
Section 7.6. Accounting System................................. 16
Section 7.7. Financial Statements.............................. 16
Section 7.8. Further Information............................... 17
Section 7.9. ERISA Covenants................................... 17
Section 7.10. Environmental Covenants........................... 17
Section 7.11. Restrictions on Merger, Consolidation,
Sale of Assets, Issuance of Stock, etc.................. 17
Section 7.12. Restrictions on Distributions..................... 18
Section 7.13. Restrictions on Indebtedness...................... 18
Section 7.14. Restrictions on Guaranties........................ 18
Section 7.15. Health Care Covenants............................. 18
Section 8 EVENTS OF DEFAULT............................................. 18
Section 9 REMEDIES...................................................... 21
Section 9.1. Specific Remedies................................. 21
Section 9.2. Power of Attorney................................. 22
Section 9.3. Expenses Secured.................................. 23
Section 9.4. Equitable Relief.................................. 23
Section 9.5. Remedies Are Cumulative........................... 23
Section 10 INDEMNITY
Section 10.1. General Indemnity................................. 24
Section 10.2. Specific Environmental Indemnity.................. 24
Section 11 MISCELLANEOUS................................................ 24
Section 11.1. Delay and Waiver.................................. 24
Section 11.2. Complete Agreement................................ 24
Section 11.3. Severability; Headings............................ 25
Section 11.4. Binding Effect.................................... 25
Section 11.5. Notices........................................... 25
Section 11.6. Governing Law..................................... 26
Section 11.7. Jurisdiction...................................... 26
Section 11.8. Waiver of Trial by Jury........................... 26
SCHEDULES
1.1 LIENS
3.1 GRANT OF SECURITY INTEREST
4.2 MERGERS AND CONSOLIDATIONS
4.3 PURCHASE OF ASSETS OUTSIDE ORDINARY COURSE OF BUSINESS
6.6 LITIGATION AND PROCEEDINGS
6.11 INSURANCE
6.12 OWNERSHIP OF PROPERTY
ii
<PAGE>
6.13 LEASES
7.12 PERMITTED DISTRIBUTION
iii
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
March , 1995, by and between DVI Financial Services Inc. dba DVI Capital, a
Delaware corporation ("Lender"), IMI Acquisition Corporation, a Delaware
corporation ("Guarantor") and IMI Acquisition of Arlington Corp., a Virginia
corporation ("Borrower")
Section
DEFINITIONS
Section Specific Definitions. The following
definitions shall apply:
"Advance(s)" shall mean an advance of loan proceeds
constituting all or a part of the Loan.
"Borrower's Books" shall mean all of Borrower's
books and records including but not limited to: minute books; ledgers; records
indicating, summarizing or evidencing Borrower's assets, liabilities and the
Accounts; all information relating to Borrower's business operations or
financial condition; and all computer programs, disk or tape files, printouts,
runs and other computer-prepared information and the equipment containing such
information; provided, however, that confidential patient records shall not be
included therein, except to the extent otherwise provided by law.
"Closing Date" shall mean the date of the first
Advance of the Loan.
"Collateral" shall have the meaning specified in
Section 3.1 hereof.
"Distribution" shall mean (i) the declaration of
payment of any profit, dividend, share or distribution on or in respect of any
interest in Borrower; (ii) the purchase or other retirement of any such interest
in Borrower; (iii) any loan or advance to the holder of any interest in Borrower
or to the holder of any Indebtedness; (iv) any other payment to the holder of
any interest in Borrower or to the holder of any Indebtedness; and (v) any
payment of principal of or interest on or with respect to any purchase or other
retirement of any Indebtedness of Borrower which, by its terms, is subordinated
to the payment of the Note; provided, however, that the term "Distribution"
shall not include any payments made by Borrower in the ordinary course of its
business, including without limitation, salaries and other compensation
payments, or payments for rent or other services rendered or for goods sold
which are furnished and invoiced in the ordinary course of business and in
accordance with the terms of this Agreement.
1
<PAGE>
"Environmental Laws" shall mean all federal, state,
local and foreign laws relating to pollution or protection of the environment,
including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, toxic or
hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants, chemicals or
industrial, toxic or hazardous substances or wastes, and any and all
regulations, codes, plans, orders, decrees, judgments, injunctions, notices, or
demand letters issued, entered, promulgated, or approved thereunder.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended, and all references to sections thereof shall
include such sections and any predecessor provisions thereto, including any
rules or regulations issued in connection therewith.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) that together with Borrower would be deemed a
"contributing sponsor" to a single employee plan within the meaning of Section
4001 of ERISA.
"Event of Default" shall have the meaning specified
in Section 8 hereof.
"Governmental Authority" shall mean any governmental
or political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality thereof, or any court, tribunal, grand
jury or arbitrator, in any case whether foreign or domestic.
"Guaranty" shall mean the Unconditional Continuing
Guaranty executed by Guarantor unconditionally guaranteeing Borrower's
Obligations under this Agreement.
"Health Care Laws" shall mean all federal, state and
local laws relating to health care providers and health care services,
including, but not limited to, Section 1877(a) of the Social Security Act as
amended by the Omnibus Budget Reconciliation Act of 1993, 42 U.S.C. ss. 1395
(nn).
"Indebtedness" of a Person shall mean (i) all items
(except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with generally accepted accounting principles,
would be included in determining total liabilities as shown on the liability
side of the balance sheet of such Person as at the date as of which Indebtedness
is to be determined, including any lease which, in accordance with generally
accepted accounting principles would constitute indebtedness; (ii) all
indebtedness secured by any mortgage, pledge, security, lien or conditional sale
or other title retention agreement to which any
2
<PAGE>
property or asset owned or held by such Person is subject, whether or not the
indebtedness secured thereby shall have been assumed; and (iii) all indebtedness
of others which such Person has directly or indirectly guaranteed, endorsed
(otherwise then for the collection or deposit in the ordinary course of
business), discounted or sold with recourse or agreed (contingently or
otherwise) to purchase or repurchase or otherwise acquire, or in respect of
which such Person has agreed to supply or advance funds (whether by way of loan,
stock or equity purchase, capital contribution or otherwise) or otherwise to
become directly or indirectly liable.
"Lender Expenses" shall mean (i) all costs or
expenses (including, without limitation, taxes and insurance premiums) required
to be paid by Borrower under this Agreement or under any of the other Security
Documents that are paid or advanced by Lender; (ii) filing, recording,
publication and search fees paid or incurred by Lender in connection with
Lender's transactions with Borrower; (iii) costs and expenses incurred by Lender
to correct any default or enforce any provision of the Security Documents or in
gaining possession of, maintaining, handling, preserving, storing, shipping,
selling, and preparing for sale and/or advertising to sell the Collateral,
whether or not a sale is consummated; (iv) costs and expenses of suit incurred
by Lender in enforcing or defending the Loan Documents or any portion thereof;
and (v) Lender's attorney fees and expenses incurred (before or after execution
of this Agreement) in advising Lender with respect to, or in structuring,
drafting, reviewing, negotiating, amending, terminating, enforcing, defending,
or otherwise concerning, the Security Documents or any portion thereof,
irrespective of whether suit is brought.
"Lien" shall mean any security interest, mortgage,
pledge, assignment, lien or other encumbrance of any kind, including any
interest of a vendor under a conditional sale contract or consignment and any
interest of a lessor under a capital lease.
"Loan" shall mean each loan or any other loan or
loans made by Lender to Borrower pursuant to this Agreement.
"Loan Documents" shall mean (i) this Agreement;
(ii) the Note; (iii) the Security Documents; (iv) any other agreements or
documents hereafter delivered to secure repayment of the Loan; and (v) any other
certificates, documents or instruments delivered by Borrower to Lender pursuant
to the terms of this Agreement.
"Note" shall mean the Secured Promissory Note
executed by Borrower pursuant to the terms of this Agreement.
"Obligation(s)" shall mean (i) the due and punctual
payment of all amounts due or to become due under the Note; (ii)
the performance of all obligations of Borrower under this
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Agreement, the Note, and all other Security Documents; (iii) all extensions,
renewals, modifications, amendments, and refinancings of any of the foregoing;
(iv) all Lender Expenses; (v) all loans, advances, indebtedness, and other
obligations owed by Borrower to Lender of every description whether now existing
or hereafter arising (including those owed by Borrower to others and acquired by
Lender by purchase, assignment, or otherwise) and whether direct or indirect,
primary or as guarantor or surety, absolute or contingent, liquidated or
unliquidated, matured or unmatured, whether or not secured by additional
collateral; and (vi) all loans, advances, indebtedness, and other obligations
owed by Guarantor to Lender of every description whether now existing or
hereafter arising (including those owed by Guarantor to others and acquired by
Lender by purchase, assignment or otherwise) and whether direct or indirect,
primary or as guarantor or surety, absolute or contingent, liquidated or
unliquidated, matured or unmatured, whether or not secured by additional
collateral.
"Permitted Liens" shall mean (i) Liens for property
taxes and assessments or governmental charges or levies and Liens securing
claims or demands of mechanics and materialmen, provided that payment thereof is
not yet due or is being contested as permitted in this Agreement; (ii) Liens of
or resulting from any judgment or award, the time for the appeal or petition for
rehearing of which has not expired, or in respect of which Borrower is in good
faith prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review has been secured;
(iii) Liens and priority claims incidental to the conduct of business or the
ownership of properties and assets (including warehouse's and attorney's Liens
and statutory landlord's Liens); deposits, pledges or Liens to secure the
performance of bids, tenders, or trade contracts, or to secure statutory
obligations; and surety or appeal bonds or other Liens of like general nature
incurred in the ordinary course of business and not in connection with the
borrowing of money; provided that in each case the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate actions
or proceedings; and further provided that any such warehouse's or statutory
landlord's Liens have been subordinated to the Liens of Lender in a manner
satisfactory to Lender; and (iv) Liens existing on the date of this Agreement
that secure indebtedness outstanding on such date and that are disclosed on
Schedule 1.1 hereto;
"Person" shall mean an individual, corporation,
partnership, limited liability company, trust, unincorporated association, joint
venture, joint-stock company, government (including political subdivisions),
Governmental Authority or any other entity.
"Proceeds" shall mean all proceeds and products of
Collateral and all additions and accessions to, replacements of, insurance or
condemnation proceeds of, and documents covering Collateral; all property
received wholly or partly in trade or
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exchange for Collateral; all claims against third parties arising out of damage,
destruction, or decrease in value of the Collateral; all leases of Collateral;
and all rents, revenues, issues, profits, and proceeds arising from the sale,
lease, license, encumbrance, collection or any other temporary or permanent
disposition of the Collateral or any interest therein.
"Security Document(s)" shall mean the Guaranty, the
Security Agreement and any agreement or instrument entered into between Borrower
and Lender or executed by Borrower or Guarantor and delivered to Lender in
connection with this Agreement.
"Unmatured Default" shall mean any event or
condition that, with notice, passage of time, or a determination by Lender or
any combination of the foregoing would constitute an Event of Default.
Section Generally Accepted Accounting Principles and Uniform
Commercial Code. All financial terms used in this Agreement other than those
defined in this Section, have the meanings accorded to them under generally
accepted accounting principles. All other terms used in this Agreement, other
than those defined in this Section, have the meanings accorded to them in the
Uniform Commercial Code.
Section Construction.
Unless the context of this Agreement clearly
requires otherwise, the plural includes the singular, the singular includes the
plural, the part includes the whole, "including" is not limiting, and "or" has
the inclusive meaning of the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder," and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement.
Neither this Agreement nor any uncertainty or
ambiguity herein shall be construed or resolved against Lender or Borrower,
whether under any rule of construction or otherwise. On the contrary, this
Agreement has been reviewed by each of the parties and its counsel and shall be
construed and interpreted according to the ordinary meaning of the words used so
as to accomplish the purposes and intentions of all parties hereto fairly.
Section
LOAN
Section The Loan. Subject to the terms and conditions and
relying on the representations and warranties set forth herein, Lender agrees to
advance to Borrower and Borrower agrees to borrow from Lender, a senior secured
term loan in the amount of Three Hundred and Sixty-Two Thousand Dollars
($362,000)
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which shall be evidenced by a Note. The proceeds of the Loan shall be used for
the purchase by Borrower of the Collateral, and to fund the closing costs
incurred in connection with the transactions contemplated in this Agreement.
Section Term and Repayment of Loan. The "Term" of the Loan
shall be sixty (60) months and shall be payable in sixty (60) consecutive
monthly installments of Seven Thousand Nine Hundred Sixty-Two Dollars ($7,962)
on the same day of each calendar month commencing on the Commencement Date set
forth in the Note. All payments of principal and interest shall be paid in full
without setoff, deduction or counterclaim.
Section Prepayment. The Loan shall not be subject to
prepayment or redemption in whole or in part prior to the expiration of the
Term, except as follows: Provided no Event of Default exists, at any time, (or
any occurrence which would constitute an Event of Default with the giving of
notice or lapse of time or both), and provided that all previous payments or
obligations under this Agreement have been made promptly and in accordance with
the terms of this Agreement, the full, but not part of, the unpaid balance of
the Obligations under this Agreement may be prepaid by Borrower at any time
after the twelfth (12th) month of the Term provided, in addition to the
prepayment amount Borrower pays contemporaneously with the prepayment amount, to
the Lender a prepayment premium equal to two (2) years of interest on the
prepayment amount calculated at an interest rate of eleven and one-half percent
(11 1/2%) per annum.
Section Conditions to the Closing. The obligation of Lender to
make an Advance on the Closing Date is subject to Lender's determination that
Borrower has satisfied the following conditions on the Closing Date:
The representations and warranties set forth in this
Agreement and in the other Loan Documents shall be true and correct on and as of
the date hereof and shall be true and correct in all material respects as of the
Closing Date and Borrower shall have performed all obligations which were to
have been performed by it hereunder prior to Closing Date.
Borrower shall have executed and delivered to Lender
(or shall cause to be executed and delivered to Lender by the
appropriate Persons) the following:
this Agreement;
the Note;
the Security Documents, together with any other
documents required or contemplated by the terms thereof;
evidence satisfactory to Lender that each of
Borrower and Guarantor is a corporation, each of which is duly
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formed, validly existing and in good standing in the state in which
it was formed and is authorized to do business;
certificates of insurance that evidence the
insurance coverage and policy provisions required by this Agreement
and in the Loan Documents and Security Documents;
pay-off letters, UCC Termination Statements,
and Mortgage and Lien Releases as required to grant Lender a first priority
security interest other than Permitted Liens in Collateral pledged as security
for repayment of the Loan;
certified copies of resolutions of the Board of
Directors of each of Borrower and Guarantor authorizing the execution and
delivery of Loan Documents to be executed by Borrower and Guarantor;
copies of the Articles of Incorporation of each
of Borrower and Guarantor certified by the Secretary of State;
copies of the Bylaws of each of Borrower and
Guarantor certified by an officer thereof;
the written opinion of counsel to Borrower and
Guarantor issued on the Closing Date and satisfactory to Lender in
scope and substance;
a certificate from an officer of Borrower
indicating that the representations and warranties contained herein are true and
correct as of the Closing Date.
Borrower shall have paid closing fees to Lender
including Lender's legal fees incurred by Lender for the negotiation and
preparation of the Loan Documents.
Neither an Event of Default nor an Unmatured Default
shall have occurred and be continuing.
Borrower shall not have suffered a material or
adverse change in its business, operations or financial condition from that
reflected in the financial statement of Borrower dated December 31, 1994.
Lender shall have received such additional
supporting documents, certificates and assurances as Lender shall reasonably
request which shall be satisfactory to Lender in form and substance.
Section
SECURITY INTEREST
Section Grant of Security Interest. In order to
secure prompt payment and performance of all Obligations, Borrower
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hereby grants to Lender a continuing first-priority pledge and security interest
in the property of Borrower described below and on Schedule 3.1 (the
"Collateral"), whether now owned or existing or hereafter acquired or arising
and regardless of where located subject only to Permitted Liens. This security
interest in the Collateral shall attach to all Collateral without further act on
the part of Lender or Borrower. Regardless of the manner of affixation, the
Collateral shall remain the personal property and not become part of the real
estate. Borrower agrees to keep the Collateral at the location(s) set forth in
Schedule 3.1, and will notify Lender promptly, in writing, of any change in the
location of the Collateral within such state, but will not remove the Collateral
from such state without the prior written consent of Lender.
The Collateral shall consist of the following subject in each
case only to Permitted Liens together with such third-party consents, lien
waivers and estoppel certificates as Lender shall reasonably require:
All of Borrower's equipment and machinery listed on Schedule
3.1 and all machine tools, motors, tools, parts, attachments, accessories,
accessions, replacements, upgrades, substitutions, additions and improvements
related thereto, wherever located, and the Proceeds of any of the foregoing,
including cash and non-cash Proceeds.
Section
SPECIFIC REPRESENTATIONS
Section Name of Borrower. The exact corporate
name of Borrower is IMI Acquisition of Arlington Corp. Borrower was
formed under the laws of the State of Virginia. The following are
all previous legal names of Borrower: None. Borrower uses the
following trade names: None. The following are all other trade
names used by Borrower in the past: None.
Section Mergers and Consolidations. Except as
disclosed on Schedule 4.2, no entity has merged into Borrower or
been consolidated with Borrower.
Section Purchase of Assets. Except as disclosed on Schedule
4.3 no entity has sold substantially all of its assets to Borrower or sold
assets to Borrower outside the ordinary course of such seller's business at any
time in the past.
Section Change of Name or Identity. Borrower shall not change
its name, business structure, or identity or use any new trade name without
prior notification Lender or merge into or consolidate with any other entity.
Section Corporate Structure. Guarantor is the
holder of one hundred percent (100%) of the common stock of IMI
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Acquisition of Arlington Corp. Such common stock is the sole
authorized class of stock in each of the foregoing entities.
Section
PROVISIONS CONCERNING COLLATERAL
Section Title. Borrower has good and marketable title to the
Collateral, and the Liens granted to Lender pursuant to this Agreement will be,
upon the filing of the required UCC Financing Statements, fully perfected first
priority Liens and any other agreement, financing statement or notice necessary
to provide notice to third parties of the existence of such Liens, in and to the
Collateral with priority over the rights of every person in the Collateral is
free, clear, and unencumbered by any Liens in favor of any person other than
Lender except for Permitted Liens.
Section No Warranties. This Agreement is solely a financing
agreement. Borrower acknowledges that with respect to the appropriate
Collateral: the Collateral has or will have been selected and acquired solely by
Borrower for Borrower's purposes; Lender is not the manufacturer, dealer, vendor
or supplier of the Collateral; the Collateral is of a size, design, capacity,
description and manufacturer selected by Borrower; Borrower is satisfied that
the Collateral is suitable and fit for its purposes; and LENDER HAS NOT MADE AND
DOES NOT MAKE ANY WARRANTY OR REPRESENTATION WHATSOEVER, EITHER EXPRESS OR
IMPLIED, AS TO THE FITNESS, CONDITION, MERCHANTABILITY, DESIGN OR OPERATION OF
THE COLLATERAL, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE VALUE OF THE
COLLATERAL, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE COLLATERAL OR
WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER.
Section Further Assurances. Borrower shall execute and deliver
to Lender, concurrent with Borrower's execution of this Agreement and at any
time or times hereafter at the request of Lender, all financing statements,
continuation financing statements, security agreements, chattel mortgages,
assignments, endorsements of certificates of title, applications for titles,
affidavits, reports, notices, schedules of accounts, letters of authority, and
all other documents Lender may reasonably request, in form satisfactory to
Lender, to perfect and maintain perfected Lender's Liens in the Collateral and
in order to consummate fully all of the transactions contemplated under the
Security Documents. Borrower hereby irrevocably makes, constitutes, and appoints
Lender (and any of Lender's officers, employees, or agents designated by Lender)
as Borrower's true and lawful attorney with power to sign the name of Borrower
on any of the above-described documents or on any other similar documents that
need to be executed, recorded, and/or filed in order to perfect or continue
perfected Lender's Liens in the Collateral. The appointment of Lender as
Borrower's attorney is irrevocable as long as any Obligations are outstanding.
Any person dealing with Lender shall be entitled to rely
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conclusively on any written or oral statement of Lender that this power of
attorney is in effect.
Section Additional Collateral. If the Collateral declines in
value substantially, Borrower shall grant a security interest to Lender in
additional assets satisfactory to Lender having a value at least equal to the
decline in value of the existing Collateral.
Section Lender's Duty of Care. Lender shall have no duty of
care with respect to the Collateral except that Lender shall exercise reasonable
care with respect to the Collateral in Lender's custody. Lender shall be deemed
to have exercised reasonable care if such property is accorded treatment
substantially equal to that which Lender accords its own property or if Lender
takes such action with respect to the Collateral as the Borrower shall request
or agree to in writing provided that no failure to comply with any such request
nor any omission to do any such act requested by the Borrower shall be deemed a
failure to exercise reasonable care. Lender's failure to take steps to preserve
rights against any parties or property shall not be deemed to be failure to
exercise reasonable care with respect to the Collateral in Lender's custody. All
risk, loss, damage, or destruction of the Collateral shall be borne by Borrower.
Section Borrower's Contracts. Borrower shall remain liable to
perform its Obligations under any contracts and agreements included in the
Collateral to the same extent as though this Agreement had not been entered into
and Lender shall not have any obligation or liability under such contracts and
agreements by reason of this Agreement or otherwise.
Section Reinstatement of Liens. If, at any time after payment
in full by Borrower of all Obligations and termination of Lender's Liens, any
payments on Obligations previously made by Borrower or any other person must be
disgorged by Lender for any reason whatsoever (including, without limitation,
the insolvency, bankruptcy, or reorganization of Borrower or such other person),
this Agreement and Lender's Liens granted hereunder shall be reinstated as to
all disgorged payments as though such payments had not been made, and Borrower
shall sign and deliver to Lender all documents and things necessary to perfect
all terminated Liens.
Section Lender Expenses. If Borrower fails to pay any moneys
(whether taxes, assessments, insurance premiums, or otherwise) due to third
persons or entities, fails to make any deposits or furnish any required proof of
payment or deposit, or fails to discharge any Lien prohibited hereby, all as
required under the terms of this Agreement, then Lender may, to the extent that
it determines that such failure by Borrower could have a material adverse effect
on Lender's interests in the Collateral, in its discretion and without prior
notice to Borrower, make payment of the same or any part thereof. Any amounts
paid or deposited by
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Lender shall constitute Lender Expenses, shall become part of the Obligations,
shall bear interest at the rate of eighteen percent (18%) per annum, and shall
be secured by the Collateral. Any payments made by Lender shall not constitute
(a) an agreement by Lender to make similar payments in the future or (b) a
waiver by Lender of any Event of Default under this Agreement. Lender need not
inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance, or Lien, and the receipt of the usual official notice for
the payment of moneys to a governmental entity shall be conclusive evidence that
the same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender
for all sums expended by Lender that constitute Lender Expenses, and Borrower
hereby authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
Section Inspection of Collateral and Records. During
Borrower's usual business hours, Lender may inspect and examine the Collateral
and check and test the same as to quality, quantity, value, and condition and
Borrower agrees to reimburse Lender for its costs and expenses in so doing.
Lender shall also have the right at any time or times hereafter, during
Borrower's usual business hours or during the usual business hours of any third
party having control over the records of Borrower, to inspect and verify
Borrower's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral and Borrower's financial condition and to
copy and make extracts therefrom. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to this Agreement and agrees that Lender may directly contact any such
accounting firm or service bureau in order to obtain such information.
Section Deposit Accounts. In order to perfect Lender's
security interest in Borrower's deposit accounts maintained at any financial
institutions at which Borrower maintains deposit accounts now or in the future,
Borrower agrees to execute a form of notification to such financial
institution(s) in order to notify them of Lender's Lien in such deposit
accounts.
Section Waivers. Except as specifically provided for herein,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guaranties at any time held by Lender on which Borrower may in any way be
liable.
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Section
REPRESENTATIONS AND WARRANTIES
As of the date hereof Guarantor and Borrower each hereby
warrants and represents to Lender the following:
Section Status. Each of Borrower and Guarantor is a
corporation validly existing and in good standing under the laws of the state of
its incorporation existing and in good standing under the laws of the state of
its formation; and each of Borrower and Guarantor is qualified and licensed to
do business and is in good standing in any state in which the conduct of its
business or its ownership of property requires that it be so qualified or
licensed, and has the power and authority (corporate, partnership and otherwise)
to execute and carry out the terms of the Loan Documents to which it is a party,
to own its assets and to carry on its business as currently conducted.
Section Authorization. The execution, delivery, and
performance by each Borrower and Guarantor of this Agreement and each Loan
Document have been duly authorized by all necessary corporate action. Borrower
and Guarantor have duly executed and delivered this Agreement and each Security
Document to which they are a party, and each of them constitutes a valid and
binding obligation of Borrower or Guarantor, as applicable, enforceable
according to its terms except as limited by equitable principles and by
bankruptcy, insolvency, or similar laws affecting the rights of creditors
generally.
Section No Breach. The execution, delivery, and performance by
Borrower and Guarantor of this Agreement and each Loan Document to which they
are a party (a) will not contravene any law or any governmental rule or order
binding on Collateral; (b) will not violate any provision of the agreement of
limited partnership, articles of incorporation or bylaws of Borrower or
Guarantor; (c) will not violate any agreement or instrument by which Borrower or
Guarantor, as applicable, is bound; (d) do not require any notice to or consent
by any governmental body; and (e) will not result in the creation of a Lien on
any assets of Borrower except the Lien to Lender granted herein.
Section Taxes. All assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or assessed
against Borrower or any of its property have been paid in full before
delinquency or before the expiration of any extension period; and Borrower has
made due and timely payment or deposit of all federal, state, and local taxes,
assessments, or contributions required of it by law, except only for items that
Borrower is currently contesting diligently and in good faith and that have been
fully disclosed in writing to Lender.
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Section Deferred Compensation Plans. Borrower and each ERISA
Affiliate have made all required contributions to all deferred compensation
plans to which such person is required to contribute, and neither Borrower nor
any ERISA Affiliate has any liability for any unfunded benefits of any
single-employer or multi-employer plans. Neither Borrower nor any ERISA
Affiliate is or at any time has been a sponsor of, provided, or maintained for
any employees any defined benefit plan.
Section Litigation and Proceedings. Except as set forth on
Schedule 6.6 attached hereto, there are no outstanding judgments against
Borrower or any of its assets and there are no actions or proceedings pending by
or against Borrower before any court or administrative agency. Borrower has no
knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which Borrower is
the plaintiff and except as set forth in Schedule 6.6 hereto.
Section Business. Borrower has all franchises, authorizations,
patents, trademarks, copyrights and other rights necessary to advantageously
conduct its business. They are all in full force and effect and are not in known
conflict with the rights of others. Borrower is not a party to or subject to any
agreement or restriction that is so unusual or burdensome that it might have a
material adverse effect on Borrower's business, properties or prospects.
Section Laws and Agreements. Borrower is in compliance with
all material agreements applicable to it, including obligations to contribute to
any employee benefit plan or pension plan regulated by ERISA. Borrower is in
material compliance with all laws applicable to it.
Section Financial Condition. All financial statements and
information relating to Borrower and Guarantor that have been or may hereafter
be delivered by Borrower to Lender are accurate and complete and have been
prepared in accordance with generally accepted accounting principles
consistently applied. Borrower has no material obligations or liabilities of any
kind not disclosed in that financial information, and there has been no material
adverse change in the financial condition of Borrower or Guarantor since the
date of the most recent financial statements submitted to Lender.
Section Environmental Laws.
Borrower has obtained all permits, licenses, and
other authorizations that are required under Environmental Laws and Borrower is
in compliance in all material respects with all terms and conditions of the
required permits, licenses, and authorizations, and is also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards,
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prohibitions, requirements, obligations, schedules, and timetables
contained in the Environmental Laws.
Borrower is not aware of, and has not received
notice of, any past, present, or future events, conditions, circumstances,
activities, practices, incidents, actions, or plans that may interfere with or
prevent compliance or continued compliance in any material respect with
Environmental Laws, or may give rise to any material common-law or legal
liability, or otherwise form the basis of any material claim, action, demand,
suit, proceeding, hearing, study, or investigation, based on or related to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport, or handling or the emission, discharge, release or threatened release
into the environment, of any pollutant, contaminant, chemical, or industrial,
toxic or hazardous substance or waste.
There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigation, or proceeding pending or threatened against Borrower,
relating in any way to Environmental Laws.
Section Insurance. Schedule 6.11 sets forth a complete and
accurate list of all policies of fire, liability, product liability, workers'
compensation, health, business interruption and other forms of insurance
currently in effect with respect to Borrower's business, true copies of which
will be delivered to Lender upon request. All such policies are valid,
outstanding and enforceable policies and, to the best knowledge of Borrower,
each will remain in full force and effect at least through the respective dates
set forth on Schedule 6.11.
Section Ownership of Property. Except as set forth Schedule
6.12 hereto, Borrower has good and marketable title to all of its properties and
assets, free and clear of all liens, security interests and encumbrances, except
liens to secure repayment of the Loan and Permitted Liens. Borrower has the
exclusive right to use all such assets.
Section Leases. Schedule 6.13 hereto contains a complete and
accurate list of all leases pursuant to which Borrower leases real or personal
property. Each such lease is valid, binding and enforceable against Borrower in
accordance with its terms, and is in full force and effect; there are no
existing defaults by Borrower thereunder, and Borrower has no knowledge of any
Event of Default or any Unmatured Default.
Section Health Care Laws.
Borrower has obtained all permits, licenses and
other authorizations that are required under Health Care Laws and Borrower is in
compliance in all material respects with all terms and conditions of the
required permits, licenses and
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authorizations, and is also in compliance in all material respects with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the Health Care
Laws.
Borrower is not aware of, and has not received
notice of, any past, present or future events, conditions, circumstances,
activities, practices, incidents, actions or plans that may interfere with or
prevent compliance or continued compliance in any material respect with Health
Care Laws.
There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice or demand letter, notice of
violation, investigation or proceeding pending or threatened against Borrower,
relating in any way to Health Care Laws.
Section Cumulative Representations. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements that
Borrower shall give, or cause to be given, to Lender, either now or hereafter.
Section
COVENANTS
Section Encumbrance of Assets. Borrower shall not create,
incur, assume, or permit to exist any Lien on any Collateral now owned or
hereafter acquired by Borrower, except for Liens to Lender and Permitted Liens.
Section Business; Covenant regarding George Mahoney. Borrower
shall engage primarily in business of the same general character as that now
conducted by it and shall not make any investment in any other entity through
the direct or indirect holding of securities or otherwise. It is hereby agreed
by Borrower and Guarantor that the discharge by Consolidated Technology Group
Inc. of George Mahoney as its Chief Financial Officer, other than for cause, at
any time prior to the payment in full of the Obligations covered by this
Agreement, will constitute an Event of Default under this Agreement.
Section Condition and Repair. Borrower shall maintain in good
repair and working order all properties used in its business and from time to
time shall make all appropriate repairs and replacements thereof.
Section Insurance. Borrower shall maintain, with financially
sound and reputable insurers, insurance with respect to its properties and
business against loss or damage of the kinds and in the amounts customarily
insured against by entities of established reputation engaged in the same or
similar businesses. Each such policy shall name Lender as an additional insured
and,
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where applicable, as loss payee under a lender loss payable endorsement
satisfactory to Lender and shall provide for thirty (30) days' written notice to
Lender before such policy is altered or canceled.
Section Taxes. Borrower shall pay all taxes, assessments and
other governmental charges imposed upon it or any of its assets or in respect of
any of its franchises, business, income, or profits before any penalty or
interest accrues thereon, and all claims (including, without limitation, claims
for labor, services, materials, and supplies) for sums that have become due and
payable and that by law have or might become a Lien or charge upon any of its
assets, provided that (unless any material item or property would be lost,
forfeited, or materially impaired as a result thereof) no such charge or claim
need by paid if it is being contested in good faith by appropriate proceedings
promptly initiated and diligently conducted, if Lender is notified in advance of
such contest, and if Borrower establishes any reserve or other appropriate
provision required by generally accepted accounting principles and deposits with
Lender cash or an acceptable bond in an amount equal to twice the amount of such
charge or claim. Borrower shall make timely payment or deposit of all FICA
payments and withholding taxes required of it by applicable laws and will, upon
request, furnish Lender with proof satisfactory to Lender indicating that
Borrower has made such payments or deposits.
Section Accounting System. Borrower at all times hereafter
shall maintain a standard and modern system of accounting in accordance with
generally accepted accounting principles consistently applied, with ledger and
account cards or computer tapes, disks, printouts, and records that contain
information pertaining to the Collateral that may from time to time be requested
by Lender. Borrower shall not modify or change its method of accounting or enter
into any agreement hereafter with any third-party accounting firm or service
bureau for the preparation and/or storage of Borrower's accounting records
without said accounting firm's or service bureau's agreeing to provide to Lender
information regarding the Collateral and Borrower's financial condition.
Section Financial Statements. Borrower shall submit quarterly
financial statements with respect to Borrower to Lender as soon as available,
and in any event within forty-five (45) days of the end of each fiscal quarter.
Additionally, Borrower will submit audited, combined or consolidated financial
statements of IMI Acquisition Corp. which will include Borrower to Lender as
soon as available, and in any event within ninety (90) days of the end of each
fiscal year. With all financial statements, Borrower will also deliver a
certificate of its chief financial officer attesting that no Event of Default or
Unmatured Default under the Agreement has occurred and is continuing.
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<PAGE>
Section Further Information. Borrower shall promptly supply
Lender with such other information concerning its affairs as Lender may
reasonably request from time to time hereafter and shall promptly notify Lender
of any material adverse change in Borrower's financial condition and any
condition or event that constitutes a breach of or event that constitutes an
Event of Default under this Agreement.
Section ERISA Covenants. Borrower shall, and shall cause each
ERISA Affiliate to, comply with all applicable provisions of ERISA and all other
laws applicable to any deferred compensation plans with which Borrower or any
ERISA Affiliate is associated, and shall promptly notify Lender of the
occurrence of any event that could result in any material liability of Borrower
to any person whatsoever with respect to any such plan.
Section Environmental Covenants.
Borrower shall comply in all respects with, and will
obtain all permits required by, all Environmental Laws.
Borrower shall promptly furnish to Lender a copy of
any communication from the U.S. Environmental Protection Agency or any other
governmental authority concerning any possible violation of, or the filing of a
lien pursuant to, any Environmental Laws or any occurrence of which Borrower
would be required to notify any governmental authority with jurisdiction over
Environmental Laws.
Section Restrictions on Merger, Consolidation, Sale of Assets,
Issuance of Stock, etc. Unless authorized by Lender, Borrower shall not:
Merge or consolidate with any Person.
Sell, lease or otherwise dispose of its assets in
any transaction or series of related transactions (other than sales leases or
other dispositions in the ordinary course of business).
Liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction.
Acquire any interest in any business (whether by
purchase of assets, purchase of stock, merger or otherwise).
Become subject to any agreement or instrument which
by its terms would restrict Borrower's right or ability to perform any of its
obligations to Lender pursuant to the terms of the Loan Documents.
Authorize or issue any additional partnership or
equity interest.
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Section Restrictions on Distributions. Unless authorized by
Lender, Borrower shall not make any Distributions to any Person including any
parent, subsidiary or affiliate of Borrower; provided, however, Borrower may
make Distributions pursuant to the terms of the agreements listed on Schedule
7.12. so long as the terms of such agreements have not been amended without the
consent of Lender.
Section Restrictions on Indebtedness. Unless authorized by
Lender, Borrower shall not create, incur, assume or otherwise become or remain
liable with respect to any Indebtedness except the following:
Indebtedness in respect of the Note and current
liabilities (other than for money borrowed) incurred in the
ordinary course of business.
Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and
supplies.
Indebtedness in respect of replacement or
refinancing of existing Indebtedness, provided the amount of such Indebtedness
does not exceed the amount of the existing Indebtedness, the repayment schedule
for such Indebtedness is equal to the repayment schedule for the existing
Indebtedness and Lender gives its prior written consent, which shall not be
unreasonably withheld if the specified conditions have been met.
Section Restrictions on Guaranties. Unless authorized by
Lender, Borrower shall not become or remain liable under any guaranty of any
obligation of any other Person.
Section Health Care Covenants.
Borrower shall comply in all respects with, and will
obtain all permits required by, all Health Care Laws.
Borrower shall promptly furnish to Lender a copy of
any communication from any governmental authority concerning any possible
violation of any Health Care Laws or any occurrence of which Borrower would be
required to notify any governmental authority with jurisdiction over Health Care
Laws.
Section
EVENTS OF DEFAULT
An Event of Default shall be deemed to exist if any of the
following events shall have occurred and be continuing:
Borrower fails to make any payment of principal or
interest or any other payment on the Note or any other Obligation
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<PAGE>
when due and payable, by acceleration or otherwise, and such failure shall
continue for five (5) days after the payment is due;
Borrower fails to observe or perform any covenant,
condition or agreement to be observed or performed pursuant to the terms hereof
or any Loan Document to which it is a party and such failure is not cured as
soon as reasonably practicable and in any event within thirty (30) days after
written notice thereof by Lender; provided, however, that if such failure can
not be cured within such thirty (30) day period, Borrower shall not be in
default if the cure is commenced within such thirty (30) day period and
thereafter such cure is diligently pursued to completion;
Borrower fails to keep its assets insured as
required herein, or material uninsured damage to or loss, theft, or
destruction of the Collateral occurs;
A court enters a decree or order for relief in
respect of Borrower in an involuntary case under any applicable bankruptcy,
insolvency, or other similar law then in effect, or appoints a receiver,
liquidator, assignee, custodian, trustee, or sequestrator (or other similar
official) of Borrower or for any substantial part of its property, or orders the
windup or liquidation of Borrower's affairs; or a petition initiating an
involuntary case under any such bankruptcy, insolvency, or similar law is filed
against Borrower and is pending for sixty (60) days without dismissal;
Borrower commences a voluntary case under any
applicable bankruptcy, insolvency, or other similar law then in effect, makes
any general assignment for the benefit of creditors, fails generally to pay its
debts as such debts become due, or takes corporate action in furtherance of any
of the foregoing;
Final judgment for the payment of money on any claim
in excess of $10,000 is rendered against Borrower and remains undischarged for
ten (10) days during which execution is not effectively stayed;
Guarantor revokes or attempts to revoke its guaranty
of any of the Obligations, or becomes the subject of an insolvency proceeding of
the type described in clauses (d) or (e) above with respect to Borrower or fails
to observe or perform any covenant, condition or agreement to be performed under
any Loan Document to which it is a party;
Borrower makes any payment on account of
Indebtedness that has been subordinated to any Obligations, other than payments
specifically permitted by the terms of such subordination;
Any person holding indebtedness that has been
subordinated to any Obligations dies or becomes the subject of an
insolvency proceeding resulting in the termination of the
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<PAGE>
subordination arrangement or terminates the subordination
arrangement or asserts that it is terminated;
Any Collateral or any part thereof is sold, agreed
to be sold, conveyed or allocated by operation of law or otherwise;
Borrower defaults under the terms of any
Indebtedness or lease involving total payment obligations of Borrower in excess
of $10,000 and such default is not cured within the time period permitted
pursuant to the terms and conditions of such Indebtedness or lease, or an event
occurs that gives any creditor or lessor the right to accelerate the maturity of
any such indebtedness or lease payments;
Demand is made for payment of any Indebtedness in
excess of $10,000 that was not originally payable upon demand when incurred but
the terms of which were later changed to provide for payment upon demand;
Borrower is enjoined, restrained or in any way
prevented by court order from continuing to conduct all or any
material part of its business affairs;
A judgment or other claim in excess of $10,000
becomes a Lien upon any or all of Borrower's assets, other than a
Permitted Lien;
A notice of Lien, levy, or assessment in excess of
$10,000 is filed of record with respect to any or all of Borrower's assets by
the United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or other governmental agency; or
any tax or debt owing at any time hereafter to any one or more of such entities
becomes a Lien upon any or all of Borrower's assets and the same is not paid on
the payment date thereof, except to the extent such tax or debt is being
contested by Borrower as permitted in Section 8.4;
There is a material impairment of the value of the
Collateral or priority of Lender's Liens on the Collateral;
Any or all of Borrower's assets are attached,
seized, or subjected to a writ or distress warrant, or are levied
upon, or come into the possession of, any judicial officer;
Lender believes in good faith that the prospect of
payment or performance of the Obligations by Borrower has been
impaired; or
Any representation or warranty made in writing to
Lender by any officer of Borrower in connection with the transaction
contemplated in this Agreement is incorrect when made.
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<PAGE>
Guarantor shall be in default with respect to any of
its Obligation(s) to Lender or an Event of Default or an Unmatured Default
occurs under any other Loan Agreement.
If the aggregate dollar value of all judgments,
defaults, demands, claims and notices of Liens under clauses (f), (k), (l), (n)
and (o) hereof exceeds $25,000.
Section
REMEDIES
Section Specific Remedies. Upon the occurrence of
any Event of Default:
Lender may declare all Obligations to be due and
payable immediately, whereupon they shall immediately become due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived by Borrower.
Lender may set off against the Obligations all
Collateral, balances, credits, deposits, accounts, or moneys of Borrower then or
thereafter held with Lender, including amounts represented by certificates of
deposit.
Lender may enter any premises of Borrower, with or
without judicial process, and take possession of the Collateral; provided
however, that Lender may only exercise such remedy if it may do so without a
breach of the peace. Lender may remove the Collateral and may remove and/or copy
all records pertaining thereto, and/or Lender may remain on such premises and
use the premises for the purpose of collecting, preparing and disposing of the
Collateral, without any liability for rent or occupancy charges. Borrower shall,
upon request of Lender, assemble the Collateral and any records pertaining
thereto and make them available at a place designated by Lender that is
reasonably convenient to both parties.
Lender may dispose of the Collateral in its
then-existing condition or, at its election, may take such measures as it deems
necessary or advisable to improve, process, finish, operate, demonstrate, and
prepare for sale the Collateral, and may store, ship, reclaim, recover, protect,
advertise for sale or lease, and insure the Collateral. Lender may use and
operate equipment of Borrower in order to process or finish inventory included
in the Collateral. If any Collateral consists of documents, Lender may proceed
either as to the documents or as to the goods represented thereby.
Lender may pay, purchase, contest, or compromise any
encumbrance, charge, or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
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<PAGE>
Lender may (i) endorse Borrower's name on all
checks, notes, drafts, money orders, or other forms of payment of or security
for any Collateral; and (ii) notify the postal authorities in Borrower's name to
change the address for delivery of Borrower's mail to an address designated by
Lender, receive and open all mail addressed to Borrower, copy all mail, return
all mail relating to the Collateral, and hold all other mail available for
pickup by Borrower.
Lender may sell the Collateral at public or private
sale and is not required to repossess the Collateral before selling it. Any
requirement of reasonable notice of any disposition of the Collateral shall be
satisfied if such notice is sent to Borrower, ten (10) days prior to such
disposition or by any of the methods provided in Section 11.5 hereof. Borrower
shall be credited with the net proceeds of such sale only when they are actually
received by Lender, and Borrower shall continue to be liable for any deficiency
remaining after the Collateral is sold or collected.
If the sale is to be a public sale, Lender shall
also give notice of the time and place by publishing a notice one time at least
five (5) days before the date of the sale in a newspaper of general circulation
in the county in which the sale is to be held.
To the maximum extent permitted by applicable law,
Lender may be the purchaser of any or all of the Collateral at any public sale
and shall be entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of the Collateral sold at
any public sale, to use and apply all or any part of the Obligations as a credit
on account of the purchase price of any Collateral payable by Lender at such
sale.
Section Power of Attorney. Borrower hereby appoints Lender
(and any of Lender's officers, employees, or agents designated by Lender) as
Borrower's attorney, with power whether before or after the occurrence of an
Event of Default: (a) to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts, or other forms of payment or security that
may come into Lender's possession; (b) to notify the post office authorities to
change the address for delivery of Borrower's mail to an address designated by
Lender, to receive and open all mail addressed to Borrower, and to retain all
mail relating to the Collateral and forward all other mail to Borrower; (c) to
do all things necessary to carry out this Agreement; and (d) Lender agrees not
to exercise the power granted in clauses (a) and (b) above prior to the
occurrence of an Event of Default but such limitation does not limit the
effectiveness of such power of attorney at any time. The appointment of Lender
as Borrower's attorney and each and every one of Lender's rights and powers,
being coupled with an interest, are irrevocable as long as any Obligations are
outstanding. Any person dealing with Lender shall be entitled to rely
conclusively on any written or oral statement of Lender that this power of
attorney is in effect. Lender may also use Borrower's stationery in connection
22
<PAGE>
with exercising its rights and remedies and performing the Obligations of
Borrower.
Section Expenses Secured. All expenses, including attorney
fees, incurred by Lender in the exercise of its rights and remedies provided in
this Agreement, in any other Loan Document, or by law shall be payable by
Borrower to Lender, shall be part of the Obligations, and shall be secured by
the Collateral.
Section Equitable Relief. Borrower recognizes that in the
event Borrower fails to perform, observe, or discharge any of its Obligations or
liabilities under this Agreement, no remedy of law will provide adequate relief
to Lender, and Borrower agrees that Lender shall be entitled to temporary and
permanent injunctive relief in any such case without the necessity of proving
actual damages.
Section Remedies Are Cumulative. No remedy set forth herein is
exclusive of any other available remedy or remedies, but each is cumulative and
in addition to every other right or remedy given under this Agreement or under
any other agreement between Lender and Borrower or Guarantor or now or hereafter
existing at law or in equity or by statute. Lender may pursue its rights and
remedies concurrently or in any sequence, and no exercise of one right or remedy
shall be deemed to be an election. No delay by Lender shall constitute a waiver,
election, or acquiescence by it. Borrower on its behalf waives any rights to
require Lender to (i) proceed against Guarantor under any other Loan Agreement
or any other party; or (ii) proceed against or exhaust any security held from
Guarantor under any other Loan Agreement. Lender may at any time and from time
to time, without notice to, or consent of, Borrower, and without affecting or
impairing the obligation of Borrower hereunder do any of the following: (i)
renew or extend any Obligations of Guarantor under any other Loan Agreement, or
of any other party at any time directly or contingently liable for payment of
any of said Obligations; (ii) accept partial payments of said Obligations to
Guarantor under any other Loan Agreement; (iii) settle, release (by operation of
law or otherwise), compound, compromise, collect or liquidate any of said
Obligations of Guarantor under any other Loan Agreement and the security
therefor in any manner; (iv) consent to the transfer or sale of any security or
bid and purchase at any sale of any security of Guarantor under any other Loan
Agreement. Borrower expressly agrees that the validity of this Agreement and the
Obligations of Borrower shall not be terminated, affected or impaired by reason
of the waiving, delaying, exercising or non-exercising, of any of Lender's
rights against Guarantor under any other Loan Agreement or as a result of the
substitution, release, repossession, sale, disposition or destruction of any
Collateral securing any Obligations of Guarantor under any other Loan Agreement.
Lender shall not be released or discharged, either in whole or in part, by
Lender's failure or delay to perfect or continue the perfection of any security
interest in any Collateral which secures the Obligations of Guarantor under any
other Loan
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<PAGE>
Agreement, or to protect the property covered by such security interest.
Section
INDEMNITY
Section General Indemnity. Borrower shall protect, indemnify
and defend and save harmless Lender and its directors, officers, agents, and
employees from and against any and all loss, cost, liability (including
negligence, tort and strict liability), expense, damage, suits, or demands
(including fees and disbursements of counsel), and expenses, on account of any
suit or proceeding before any Governmental Authority which arises from the
transactions contemplated in this Agreement or otherwise arising in connection
with or relating to the Loan and any security therefor, unless such suit, claim
or damages are caused by the negligence or intentional malfeasance of Lender or
its directors, officers, agents, or employees. Upon receiving knowledge of any
suit, claim or demand asserted by a third-party that Lender believes is covered
by this indemnity, Lender shall give Borrower timely notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel acceptable to Lender. Lender may, at its option, also require Borrower
to so defend the matter. This obligation on the part of Borrower shall survive
the termination of this Agreement and the repayment of the Note.
Section Specific Environmental Indemnity. Borrower hereby
agrees unconditionally to indemnify, defend and hold harmless Lender, its
directors, officers, employees and agents against any loss, liability, damage,
or expense or claim arising under any Environmental Laws having jurisdiction
over the property or assets of Borrower or any portion thereof or its use.
Section
MISCELLANEOUS
Section Delay and Waiver. No delay or omission to exercise any
right shall impair any such right or be a waiver thereof, but any such right may
be exercised from time to time and as often as may be deemed expedient. A waiver
on one occasion shall be limited to that particular occasion.
Section Complete Agreement. This Agreement and the Schedules
annexed hereto are the complete agreement of the parties hereto and supersede
all previous understandings relating to the subject matter hereof. This
Agreement may be amended only by an instrument in writing that explicitly states
that it amends this Agreement and is signed by the party against whom
enforcement of the amendment is sought. This Agreement may be executed in
counterparts, each of which will be an original and all of which will constitute
a single agreement.
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<PAGE>
Section Severability; Headings. If any part of this Agreement
or the application thereof to any person or circumstance is held invalid, the
remainder of this Agreement shall not be affected thereby. The section headings
herein are included for convenience only and shall not be deemed to be a part of
this Agreement.
Section Binding Effect. This Agreement shall be binding upon
and inure to the benefit of the respective legal representatives, successors,
and assigns of the parties hereto; however, Borrower may not assign any of its
rights or delegate any of its Obligations hereunder. Lender (and any subsequent
assignee) may transfer and assign this Agreement and deliver the Collateral to
the assignee, who shall thereupon have all of the rights of Lender; and Lender
(or such subsequent assignee who in turn assigns as aforesaid) shall then be
relieved and discharged of any responsibility or liability with respect to this
Agreement and said Collateral.
Section Notices. Any notices under or pursuant to this
Agreement shall be deemed duly sent when delivered in hand or when mailed by
registered or certified mail, return receipt requested, or when delivered by
courier or when transmitted by telex, telecopy, or similar electronic medium to
the following addresses:
To Borrower: IMI Acquisition of
Arlington Corp.
2424 North Federal Highway
Boca Raton, Florida 33431
Attention: George Mahoney
Chief Financial Officer
Telephone: 407-362-0917
Telecopier: 407-362-8224
Copies to: Robert L. Blessey
51 Lyon Ridge Road
Katonah, New York 10536
Telephone: 914-232-8926
Telecopier: 914-232-0647
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<PAGE>
To Lender: DVI Financial Services Inc.
dba DVI Capital
One Park Plaza, Suite 800
Irvine, California 92714
Attention: Anthony Turek
Senior Vice President
Telephone: (714) 474 5800
Telecopier: (714) 474 5899
Copies to: Jeffrey J. Wong, Esq.
Cooper, White & Cooper
201 California Street, 17th Floor
San Francisco, CA 94111
Telephone: (415) 433-1900
Telecopier: (415) 433-5530
Either party may change such address(es) as by sending notice of the
change to the other party; such change of address(es) shall be effective only
upon actual receipt of the notice by the other party.
Section Governing Law. ALL ACTS AND TRANSACTIONS
HEREUNDER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO
SHALL BE GOVERNED, CONSTRUED, AND INTERPRETED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF CALIFORNIA.
Section Jurisdiction. Borrower agrees that the state and
federal courts in Orange County, California or any other court in which Lender
initiates proceedings have exclusive jurisdiction over all matters arising out
of this Agreement and that service of process in any such proceeding shall be
effective if mailed to Borrower at its address and in the manner described in
the Notices section of this Agreement. Borrower waives any right it may have to
assert the defense of forum non conveniens or to object to such venue and hereby
consents to any court-ordered relief.
Section Waiver of Trial by Jury. LENDER,
GUARANTOR AND BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS
ARISING OUT OF THIS AGREEMENT OR ANY OF THE SECURITY DOCUMENTS OR THE CONDUCT OF
THE RELATIONSHIP BETWEEN LENDER, GUARANTOR AND BORROWER.
IN WITNESS WHEREOF, Borrower, Guarantor and the Lender have executed
this Agreement by their duly authorized officers as of the
date first above written.
26
<PAGE>
IMI ACQUISITION OF DVI FINANCIAL SERVICES INC.
ARLINGTON CORP., Borrower DBA DVI CAPITAL, Lender
By: By:
Name: Lewis S. Schiller Alan J. Velotta
Title: President Group Managing Director
IMI ACQUISITION CORPORATION, Guarantor
By:
George W. Mahoney
Chief Financial Officer
27
<PAGE>
Schedule 1.1
LIENS
[List Permitted Liens.]
<PAGE>
Schedule 3.1
GRANT OF SECURITY INTEREST
[Location and identification of collateral.]
<PAGE>
Schedule 4.2
MERGERS AND CONSOLIDATIONS
[Disclose mergers and consolidations.]
<PAGE>
Schedule 4.3
PURCHASES OF ASSETS
OUTSIDE ORDINARY COURSE OF BUSINESS
[Disclose purchases of assets outside ordinary course of business.]
<PAGE>
Schedule 6.6
LITIGATION AND PROCEEDINGS
[List outstanding judgments against Borrower or any of its assets, actions or
proceedings pending by or against Borrower, other threatened or imminent actions
against Borrower and governmental investigations.]
<PAGE>
Schedule 6.11
INSURANCE
[List insurance policies.]
<PAGE>
Schedule 6.12
OWNERSHIP OF PROPERTY
[List property in which Borrower does not have clear title.]
<PAGE>
Schedule 6.13
LEASES
[List Leases.]
<PAGE>
Schedule 7.12
PERMITTED DISTRIBUTION
[List Agreements under which consulting, radiology and restrictive
covenant payment will be made.]
The Subordination Agreement among Lender, Borrower and the previous limited
partners of the Partnership.
Payments and fees for consulting, radiology and other medical services rendered
in the ordinary course of business.
<PAGE>
Exhibit 10.7
SECURED PROMISSORY NOTE
Due April 30, 2000
FOR VALUE RECEIVED, the undersigned Pine Island Magnetic
Resonance Imaging Center, Ltd. ("Maker") hereby promises to pay to DVI Financial
Services Inc. dba DVI Capital or its assignee (the "Holder), or order, principal
in the sum of Two Hundred and Ninety-Five Thousand Dollars ($295,000), together
with accrued interest thereon as hereinafter provided. Principal and interest
shall be payable in sixty (60) equal monthly installments of Six Thousand Four
Hundred Eighty-Eight Dollars ($6,488) each, commencing on the 1st day of May,
1995 ("Commencement Date") and on the 1st day of each succeeding month, with all
unpaid principal and interest due and payable in full on April 30, 2000.
If any part of the principal or interest of this Note is not
paid when due, it shall thereafter bear interest at a rate equal to the "Prime
Rate" announced by Westminster National Bank (which is not necessarily the best
rate charged to its customers) plus four percent (4%) from and as of the date of
delinquency until paid. If the specified interest rate shall at any time exceed
the maximum allowed by law, then the applicable interest rate shall be reduced
to the maximum allowed by law.
This Note shall not be subject to prepayment or redemption
in whole or part, except provided that Maker is not in default under this Note
or any other instrument or agreements with Holder (or any occurrence that would
constitute an Event of Default with the giving of notice or lapse of time or
both), and provided that all previous payments of principal and interest due
under this Note have been made promptly and in accordance with the terms of this
Note, the full, but not a part of, the unpaid balance of principal and interest
under this Note may be prepaid by Maker at any time after the twelfth (12th)
month provided, in addition to the prepayment amount, Maker pays,
contemporaneously with the prepayment amount, to Holder a prepayment premium
equal to two (2) years of interest on the prepayment amount calculated at an
interest rate of eleven and one-half percent (11 1/2%) per annum.
Principal and interest shall be payable to Holder at DVI
Capital, One Park Plaza, Suite 800, Irvine, California 92714 or such other place
as the Holder may, from time to time in
writing, designate.
This Note is made pursuant to, and secured by, a Loan and
Security Agreement dated as of the date hereof between Holder as Lender, IMI
Acquisition Corporation, Guarantor, and Maker as Borrower (the "Agreement").
This Note is also secured by any Security Documents referred to in the
Agreement. The Agreement and the Security Documents create a lien on and
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<PAGE>
security interest in, the personal property described therein ("Collateral").
The Agreement and the Security Documents shall hereinafter be collectively
referred to as the "Loan and Security Documents" and are hereby incorporated by
reference in and made a part of this Note.
The occurrence of any Event of Default under the Agreement
shall, at the election of the Holder, make the entire unpaid balance of the
principal amount of this Note and accrued interest immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
Failure of the Holder to exercise the acceleration option of
paragraph 6 of this Note on the occurrence of any of the events enumerated
therein shall not constitute waiver of the right to exercise such option on the
subsequent occurrence of any of the events enumerated therein.
Principal and interest shall be payable in lawful money of
the United States of America which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment. Maker waives presentment,
demand for payment, notice of nonpayment, protest, and notice of protest, and
all other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability.
Maker agrees that Holder may, without notice to Maker and without affecting the
liability of Maker, accept additional or substitute security for this Note, or
release any security or any party liable for this Note, or extend or renew this
Note.
If Maker shall fail to make any payment of interest or
principal, including the payment due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages shall be immediately due and payable. Maker
recognizes that default by Maker in making the payments herein agreed to be paid
when due will result in the Holder incurring additional expenses, in loss to the
Holder of the use of the money due and in frustration to the Holder in meeting
its other commitments. Maker agrees that, if for any reason Maker fails to pay
any amount due under this Note when due, the Holder shall be entitled to damages
for the detriment caused thereby, but that it is extremely difficult and
impractical to ascertain the extent of such damages. Maker therefore agrees that
a sum equal to ten cents ($.10) for each one dollar ($1.00) of each payment
which is not received within five (5) days after the date it is due and payable
is a
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reasonable estimate of the said damages to the Holder, which sum
Maker agrees to pay on demand.
If action be instituted on this Note (including without
limitation, any proceedings for collection hereof in any bankruptcy or probate
matter or case), or if proceedings are commenced on or under any of the Loan and
Security Documents, Maker promises to pay the Holder all costs of collection and
enforcement including, without limitation, attorneys' fees.
Any and all notices or other communications or payments
required or permitted to be given hereunder shall be effective when received or
refused if given or rendered in writing, in the manner provided in the
Agreement.
This Note shall inure to the benefit of the Holder's
successors and assigns. References to the "Holder" shall be deemed to refer to
the holder(s) of this Note at the time such reference becomes relevant.
If any term, provision, covenant, or condition of this Note
is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the rest of this Note shall remain in full force and effect to
the greatest extent permitted by law and shall in no other way be affected,
impaired or invalidated.
Nothing contained herein or in the Loan and Security
Documents shall be deemed to prevent recourse to and the enforcement against
Maker and the Collateral of all liabilities, obligations and undertakings
contained herein and in the Loan and Security Documents.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS
OF THE STATE OF CALIFORNIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF CALIFORNIA.
DATED: April 3, 1995
MAKER: PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD.
By: IMI Acquisition of Pine Island
Corporation, General Partner
By:
Name: Lewis S. Schiller
Title: President
(SEAL)
ATTEST:
3
<PAGE>
SECURED PROMISSORY NOTE
Due April 30, 2000
1. FOR VALUE RECEIVED, the undersigned IMI Acquisition of
Arlington Corp. ("Maker") hereby promises to pay to DVI Financial Services Inc.
dba DVI Capital or its assignee (the "Holder), or order, principal in the sum of
Three Hundred and Sixty-Two Thousand Dollars ($362,000), together with accrued
interest thereon as hereinafter provided. Principal and interest shall be
payable in sixty (60) equal monthly installments of Seven Thousand Nine Hundred
Sixty-Two Dollars ($7,962) each, commencing on the 1st day of May, 1995
("Commencement Date") and on the 1st day of each succeeding month, with all
unpaid principal and interest due and payable in full on April 30, 2000.
2. If any part of the principal or interest of this Note is
not paid when due, it shall thereafter bear interest at a rate equal to the
"Prime Rate" announced by Westminster National Bank (which is not necessarily
the best rate charged to its customers) plus four percent (4%) from and as of
the date of delinquency until paid. If the specified interest rate shall at any
time exceed the maximum allowed by law, then the applicable interest rate shall
be reduced to the maximum allowed by law.
3. This Note shall not be subject to prepayment or redemption
in whole or part, except provided that Maker is not in default under this Note
or any other instrument or agreements with Holder (or any occurrence that would
constitute an Event of Default with the giving of notice or lapse of time or
both), and provided that all previous payments of principal and interest due
under this Note have been made promptly and in accordance with the terms of this
Note, the full, but not a part of, the unpaid balance of principal and interest
under this Note may be prepaid by Maker at any time after the twelfth (12th)
month provided, in addition to the prepayment amount, Maker pays,
contemporaneously with the prepayment amount, to Holder a prepayment premium
equal to two (2) years of interest on the prepayment amount calculated at an
interest rate of eleven and one-half percent (11 1/2%) per annum.
4. Principal and interest shall be payable to Holder at DVI
Capital, One Park Plaza, Suite 800, Irvine, California 92714 or such other place
as the Holder may, from time to time in
writing, designate.
5. This Note is made pursuant to, and secured by, a Loan and
Security Agreement dated as of the date hereof between Holder as Lender, IMI
Acquisition Corporation, Guarantor, and Maker as Borrower (the "Agreement").
This Note is also secured by any Security Documents referred to in the
Agreement. The Agreement and the Security Documents create a lien on and
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security interest in, the personal property described therein ("Collateral").
The Agreement and the Security Documents shall hereinafter be collectively
referred to as the "Loan and Security Documents" and are hereby incorporated by
reference in and made a part of this Note.
6. The occurrence of any Event of Default under the Agreement
shall, at the election of the Holder, make the entire unpaid balance of the
principal amount of this Note and accrued interest immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
7. Failure of the Holder to exercise the acceleration option
of paragraph 6 of this Note on the occurrence of any of the events enumerated
therein shall not constitute waiver of the right to exercise such option on the
subsequent occurrence of any of the events enumerated therein.
8. Principal and interest shall be payable in lawful money of
the United States of America which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment. Maker waives presentment,
demand for payment, notice of nonpayment, protest, and notice of protest, and
all other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability.
Maker agrees that Holder may, without notice to Maker and without affecting the
liability of Maker, accept additional or substitute security for this Note, or
release any security or any party liable for this Note, or extend or renew this
Note.
9. If Maker shall fail to make any payment of interest or
principal, including the payment due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages shall be immediately due and payable. Maker
recognizes that default by Maker in making the payments herein agreed to be paid
when due will result in the Holder incurring additional expenses, in loss to the
Holder of the use of the money due and in frustration to the Holder in meeting
its other commitments. Maker agrees that, if for any reason Maker fails to pay
any amount due under this Note when due, the Holder shall be entitled to damages
for the detriment caused thereby, but that it is extremely difficult and
impractical to ascertain the extent of such damages. Maker therefore agrees that
a sum equal to ten cents ($.10) for each one dollar ($1.00) of each payment
which is not received within five (5) days after the date it is due and payable
is a
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<PAGE>
reasonable estimate of the said damages to the Holder, which sum
Maker agrees to pay on demand.
10. If action be instituted on this Note (including without
limitation, any proceedings for collection hereof in any bankruptcy or probate
matter or case), or if proceedings are commenced on or under any of the Loan and
Security Documents, Maker promises to pay the Holder all costs of collection and
enforcement including, without limitation, attorneys' fees.
11. Any and all notices or other communications or payments
required or permitted to be given hereunder shall be effective when received or
refused if given or rendered in writing, in the manner provided in the
Agreement.
12. This Note shall inure to the benefit of the Holder's
successors and assigns. References to the "Holder" shall be deemed to refer to
the holder(s) of this Note at the time such reference becomes relevant.
13. If any term, provision, covenant, or condition of this
Note is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the rest of this Note shall remain in full force and effect to
the greatest extent permitted by law and shall in no other way be affected,
impaired or invalidated.
14. Nothing contained herein or in the Loan and Security
Documents shall be deemed to prevent recourse to and the enforcement against
Maker and the Collateral of all liabilities, obligations and undertakings
contained herein and in the Loan and Security Documents.
15. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF CALIFORNIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION
OF THE STATE AND/OR FEDERAL COURTS IN THE STATE OF CALIFORNIA.
DATED: April 3, 1995
MAKER: IMI Acquisition of Arlington Corp.
By:
Name: Lewis S. Schiller
Title: President
(SEAL)
ATTEST:
3
<PAGE>
Exhibit 10.8
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement)
This UNCONDITIONAL CONTINUING GUARANTY ("Guaranty") is made and entered into as
of April 3, 1995, for the benefit of DVI Financial Services Inc. dba DVI Capital
("Lender") whose principal place of business is located at One Park Plaza, Suite
800, Irvine, California 92714 by IMI Acquisition Corporation, ("Guarantor")
whose address is 2424 North Federal Highway, Boca Raton, Florida 33431.
Guaranty. In order to induce Lender, and in consideration thereof, to
enter into that certain Loan and Security Agreement dated March , 1995
("Agreement") with IMI Acquisition of Arlington Corp. ("Borrower") and any
future agreements with Borrower, Guarantor unconditionally, absolutely, and
irrevocably guarantees and promises to Lender to pay, perform and discharge, any
and all present and future indebtedness, liabilities and obligations
(collectively "Obligations") of Borrower to Lender, including but not limited to
the repayment to Lender of all sums presently due and owing and of all sums that
shall in the future become due and owing from Borrower, whether arising under
the Agreement or otherwise. The Obligations of Borrower include, but are not
limited to, Borrower acting on behalf of itself or any estate created by the
commencement of a case under Title 11 of the United States Code or any successor
statute thereto (the "Bankruptcy Code") or any other insolvency, bankruptcy,
reorganization or liquidation proceeding, or by any trustee under the Bankruptcy
Code, liquidator, sequestrator or receiver of Borrower or Borrower's property or
similar person duly-appointed pursuant to any law generally governing any
insolvency, bankruptcy, reorganization, liquidation, receivership or like
proceeding.
Obligations. Borrower's Obligations include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (a) direct or indirect; (b) fixed
or contingent; (c) primary or as guarantor or surety; (d) liquidated or
unliquidated; (e) matured or unmatured; (f) acquired by pledge, assignment,
security interest or purchase; (g) secured or unsecured; (h) primary or
secondary; (i) joint, several or joint and several; (j) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; and (k) all of Lender's expenses, included but not limited to (i)
all costs or expenses, including without limitation taxes and insurance
premiums, required to be paid by Borrower under the Agreement that are paid or
advanced by Lender, (ii) filing, recording, publication, and search fees paid or
incurred by Lender in connection with Lender's transactions with Borrower, (iii)
costs
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and expenses incurred by Lender to correct any default or enforce any provision
of the Agreement, or in gaining possession of, maintaining, handling,
preserving, storing, shipping, selling, preparing for sale, and or advertising
to sell any security for the Obligations, whether or not a sale is consummated,
(iv) costs and expenses of suit incurred by Lender and enforcing or defending
the Agreement or any portion thereof, and (v) Lender's reasonable attorney's
fees and expenses incurred in advising, structuring, drafting, reviewing,
negotiating, amending, terminating, enforcing, defending, or concerning the
Agreement or any portion thereof irrespective of whether suit is brought, and
includes, Borrower's prompt, full and faithful performance, observance and
discharge of each and every term, condition, agreement, representation,
warranty, undertaking, and provision to be performed by Borrower under the
Agreement.
Attorneys' Fees. If Lender incurs attorneys' fees in the enforcement
of this Guaranty, Guarantor agrees to pay Lender the reasonable costs and
expenses of said enforcement, including attorneys' fees. The term "attorneys'
fees" means the full cost of legal services performed in connection with the
matters involved, calculated on the basis of the actual fees of the attorneys
performing those services, and is not limited to "reasonable attorneys' fees" as
defined in any statute or rule of any court in which an action hereunder may be
brought.
Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from time
to time, without notice to, or the consent of, Guarantor, and without affecting
or impairing the obligation of Guarantor hereunder, do any of the following: (i)
renew or extend any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any of said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
release (by operation of law or otherwise), compound, compromise, collect or
liquidate any of said Obligations and the security therefor in any manner; (iv)
consent to the transfer or sale of security, or (v) bid and purchase at any sale
of any security.
(b) Primary Obligation Defenses. Guarantor waives any rights to
require Lender to (i) Proceed against Borrower or any other party; (ii) proceed
against or exhaust any security held from Borrower; or (iii) pursue any other
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower other than payment in full of the
Obligations, including without limitation any defense based on or arising out of
any disability of Borrower, or the unenforceability of the Obligations or any
part thereof from any cause, or the cessation from any cause of the liability of
Borrower.
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<PAGE>
(c) Commercially Reasonable Sale and Anti- deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from California Code of Civil Procedure ss.ss. 580a,
580d or 726, or comparable provisions of the laws of any other state, and all
suretyship defenses it would otherwise have under California law or under the
laws of any other state.
(d) Disclosure Defenses. Guarantor expressly waives all set-offs
and counterclaims and waives all notices, protests and demands including, but
not limited to, notice of default in payment or in the performance or observance
of any of the terms, provisions, covenants or conditions contained in any
agreement between Lender and Borrower.
(e) Borrower's Defenses On Underlying Obligations. Guarantor
expressly agrees that the validity of this Guaranty and the obligations of
Guarantor shall not be terminated, affected or impaired by reason of the
waiving, delaying, exercising or nonexercising, of any of Lender's rights
against Borrower pursuant to the Agreement against Guarantor by reason of this
Guaranty or as a result of the substitution, release, repossession, sale,
disposition or destruction of any collateral securing the Obligations.
(f) Impairment of Collateral Defenses. Guarantor shall not be
released or discharged, either in whole or in part, by Lender's failure or delay
to perfect or continue the perfection of any security interest in any property
which secures the Obligations of Borrower or Guarantor to Lender, or to protect
the property covered by such security interest.
(g) Guarantor's Right To Revoke. Guarantor expressly waives the
right to revoke or terminate this continuing Guaranty, including any statutory
right of revocation under California Civil Code ss.2815, or comparable
provisions of the laws of any other state
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<PAGE>
Financial Condition of Borrower. Guarantor assumes all responsibility
for being and keeping informed of Borrower's financial condition and assets and
of all other circumstances bearing upon the risk of nonpayment of the
Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder, and agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
Guarantor Not Entitled To Subrogation. No payment by Guarantor
hereunder shall entitle Guarantor, by subrogation, indemnity, reimbursement,
contribution, or otherwise, to any payment by Borrower or to any subrogation,
indemnity, reimbursement, or contribution out of the property of Borrower.
Recovery of Preferences. If a claim is made upon Lender at any time
for repayment or recovery of any amount(s) or other value received by Lender,
from any source, in payment of or on account of any of the Obligations of
Borrower guaranteed hereunder and Lender repays or otherwise becomes liable for
all or any part of such claim by reason of (a) any judgment, decree or order of
any court or administrative body having competent jurisdiction, or (b) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any
agreements evidencing any of the Obligations of Borrower.
Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and upon the occurrence
thereof and at Lender's election without notice or demand, Guarantor's
obligations hereunder shall become due, payable, and enforceable against
Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an event of default under and as defined in
the Agreement;
(b) The commencement of any bankruptcy, insolvency, receivership,
or similar proceeding by or against Guarantor or Borrower;
(c) The attempt by Guarantor or Borrower to effect an assignment
for the benefit of creditors or a composition with creditors;
(d) The insolvency of either Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material respect, when
made, of any representations or warranties made by Guarantor, Borrower, or any
other matter or;
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(g) The breach by Guarantor of any covenant of this Guaranty or
any other agreement between Lender and Guarantor.
Binding On Successors and Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors, and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, but not limited to, any party to whom Lender may assign
the Agreement or any Schedules or any other agreements, and Guarantor hereby
waives notice of any such assignment. All of Lender's rights are cumulative and
not alternative.
Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto with respect to the subject matter hereof and no other oral or
written agreement with respect thereto exists. This Guaranty may not be amended
or modified except by a writing signed by Lender and Guarantor. This Guaranty is
a valid and subsisting legal instrument and no provision which may be deemed
unenforceable shall in any way invalidate any other provision or provisions, all
of which shall remain in full force and effect. No invalidity, irregularity or
unenforceability of all or any part of the Obligations guaranteed nor any other
circumstance which might be a legal defense of a guarantor shall affect, impair,
or be a defense to this Guaranty. If more than one Guarantor has signed this
Guaranty, each Guarantor shall be jointly and severally liable to Lender
hereunder and when permitted by the context, the singular includes the plural.
Each of the persons who has signed this or any other Guaranty has
unconditionally delivered it to Lender, and the failure to sign this or any
other Guaranty by any other person shall not discharge the liability of any
signer. The unconditional liability of the signer applies whether the signer is
jointly and severally liable for the entire amount of the debt, or for only a
pro-rata portion.
Choice of Law and Forum. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE AND
GUARANTOR AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS IN THE STATE OF CALIFORNIA.
IMI ACQUISITION CORPORATION, GUARANTOR
By
George W. Mahoney
Chief Financial Officer
5
<PAGE>
Exhibit 10.9
LOAN AND SECURITY AGREEMENT
between
MAGNETIC RESONANCE INSTITUTE OF BOCA RATON, LTD.,
MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD.,
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD.,
PHYSICIANS' OUTPATIENT DIAGNOSTIC CENTER, LTD.,
Borrowers
INTERNATIONAL MAGNETIC IMAGING, INC.,
IMI ACQUISITION OF ARLINGTON CORP.,
IMI ACQUISITION OF PUERTO RICO CORPORATION,
IMI ACQUISITION OF KANSAS CORPORATION,
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD.,
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD.,
MD ACQUISITION CORPORATION,
Guarantors
and
DVI BUSINESS CREDIT CORPORATION
Lender
Dated as of December 29, 1995
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS.............................................................. 1
Section 1.1. Specific Definitions.............................. 1
Section 1.2. Generally Accepted Accounting Principles
and Uniform Commercial Code....................... 7
Section 1.3. Construction...................................... 7
SECTION 2
LOAN..................................................................... 7
Section 2.1. The Loan.......................................... 7
Section 2.2. Revolving Nature of the Loan...................... 8
Section 2.3. Automatic Advances................................ 8
Section 2.4. Borrowing Base Report............................. 8
Section 2.5. Loan Repayment Via Lockbox/Servicer Account....... 8
Section 2.7. Lender's Fees..................................... 9
Section 2.8. Interest on the Loan.............................. 10
Section 2.9. Conditions to the Closing......................... 10
SECTION 3
SECURITY INTEREST........ ...................................... 11
Section 3.1. Grant of Security Interest........................ 11
SECTION 4
SPECIFIC REPRESENTATIONS................................................. 12
Section 4.1. Name of Borrower.................................. 12
Section 4.2. Mergers and Consolidations........................ 12
Section 4.3. Purchase of Assets................................ 12
Section 4.4. Change of Name or Identity........................ 12
SECTION 5
PROVISIONS CONCERNING ACCOUNTS........................................... 12
Section 5.1. Office and Records of Borrower.................... 12
Section 5.2. Representations................................... 13
Section 5.3. Returns and Repossessions......................... 13
Section 5.4. Aging Reports..................................... 13
Section 5.5. Schedules of Accounts............................. 13
Section 5.6. Lender's Rights................................... 13
Section 5.7. Disclaimer of Liability........................... 14
Section 5.8. Post Default Rights............................... 14
Section 5.9. Accounts Owed by Federal Government............... 14
Section 5.10. Business Activity Reports......................... 14
Section 5.11. Waiver by Account Debtors......................... 14
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SECTION 6
PROVISIONS CONCERNING GENERAL TANGIBLES.................................. 15
Section 6.1. Contracts......................................... 15
SECTION 7
OTHER PROVISIONS CONCERNING COLLATERAL................................... 15
Section 7.1. Title............................................. 15
Section 7.2. Further Assurances................................ 15
Section 7.3. Lender's Duty of Care............................. 16
Section 7.4. Borrower's Contracts.............................. 16
Section 7.5. Reinstatement of Liens............................ 16
Section 7.6. Lender Expenses................................... 16
Section 7.7. Inspection of Records............................. 17
Section 7.8. Notice to Payor Accounts and Deposit
Accounts.......................................... 17
Section 7.9. Waivers........................................... 17
SECTION 8
REPRESENTATIONS AND WARRANTIES........................................... 18
Section 8.1. Legal Status...................................... 18
Section 8.2. Authorization..................................... 18
Section 8.3. No Breach......................................... 18
Section 8.4. Taxes............................................. 18
Section 8.5. Deferred Compensation Plans....................... 19
Section 8.6. Litigation and Proceedings........................ 19
Section 8.7. Business.......................................... 19
Section 8.8. Laws and Agreements............................... 19
Section 8.9. Financial Condition............................... 19
Section 8.10. Health Care Laws.................................. 19
Section 8.11. Cumulative Representations........................ 20
SECTION 9
COVENANTS................................................................ 20
Section 9.1. Encumbrance of Collateral......................... 20
Section 9.2. Business.......................................... 20
Section 9.3. Condition and Repair.............................. 20
Section 9.4. Taxes............................................. 20
Section 9.5. Accounting System................................. 21
Section 9.6. Financial Statements.............................. 21
Section 9.7. Further Information............................... 21
Section 9.8. ERISA Covenants................................... 21
Section 9.9. Restrictions on Merger, Consolidation,
Sale of Assets, Issuance of Stock, etc............ 21
Section 9.10. Health Care Covenants............................ 22
Section 9.11. Restrictions on Distributions..................... 22
Section 9.12. Restrictions on Indebtedness...................... 22
Section 9.13. Restrictions on Guaranties........................ 23
Section 9.14. Deferral of Indebtedness.......................... 23
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SECTION 10
EVENTS OF DEFAULT........................................................ 23
SECTION 11
REMEDIES................................................................. 26
Section 11.1. Specific Remedies................................ 26
Section 11.2. Power of Attorney................................ 28
Section 11.3. Expenses Secured................................. 28
Section 11.4. Equitable Relief................................. 28
Section 11.5. Remedies Are Cumulative.......................... 29
SECTION 12
INDEMNITY................................................................ 29
Section 12.1. General Indemnity................................ 29
SECTION 13
MISCELLANEOUS............................................................ 30
Section 13.1. Delay and Waiver................................. 30
Section 13.2. Complete Agreement............................... 30
Section 13.3. Severability; Headings........................... 30
Section 13.4. Binding Effect................................... 30
Section 13.5. Notices.......................................... 30
Section 13.6. Governing Law.................................... 32
Section 13.7. Jurisdiction..................................... 32
Section 13.8. Waiver of Trial by Jury.......................... 32
Section 13.9. Consent.......................................... 32
Schedule 1.1 PERMITTED LIENS
Schedule 1.1(ab) NET COLLECTIBLE VALUE
Schedule 6.1 CONTRACTS
Schedule 8.6 LITIGATION AND PROCEEDINGS
Schedule 9.11 PERMITTED DISTRIBUTIONS
EXHIBIT A FORM OF COMPLIANCE CERTIFICATE
iii
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
December 29, 1995, by and between DVI Business Credit Corporation, a Delaware
corporation ("Lender"), International Magnetic Imaging, Inc., a Delaware
corporation, IMI Acquisition of Arlington Corp., a Virginia corporation, IMI
Acquisition of Puerto Rico Corporation, a Puerto Rican corporation, IMI
Acquisition of Kansas Corporation, a Kansas corporation, Magnetic Resonance
Institute of North Miami Beach, Ltd., a Florida limited partnership, Oakland
Magnetic Resonance Institute, Ltd., a Florida limited partnership, MD
Acquisition Corporation, a Florida corporation, and each of them, jointly and
severally, (collectively and individually referred to as "Guarantor"), and
Magnetic Resonance Institute of Boca Raton, Ltd., a Florida limited partnership
("MRI/Boca Raton"), Magnetic Resonance Institute of South Dade, Ltd., a Florida
limited partnership ("MRI/South Dade"), Pine Island Magnetic Resonance Imaging
Center, Ltd., a Florida limited partnership ("Pine Island MRI") and Physicians'
OutPatient Diagnostic Center, Ltd., a Florida limited partnership ("PODC")
(MRI/Boca Raton, MRI/South Dade, Pine Island MRI and PODC, and each of them,
jointly and severally, collectively and individually referred to as "Borrower").
SECTION 1
DEFINITIONS
Section 1.1. Specific Definitions. The following
definitions shall apply:
(a) "Accounts" shall mean all accounts, contract rights,
instruments, documents, general intangibles, chattel paper and obligations in
any form owing to Borrower arising out of the sale or lease of goods or the
rendition of services by Borrower, whether or not earned by performance; all
credit insurance, guaranties, letters of credit, advices of credit and other
security for any of the above; all merchandise returned to or reclaimed by
Borrower; and Borrower's Books relating to any of the foregoing.
(b) "Account Debtors" shall mean Borrower's customers and all
other persons who are obligated or indebted to Borrower in any manner, whether
directly or indirectly, primarily or secondarily, contingently or otherwise,
with respect to Accounts or General Intangibles.
(c) "Advance(s)" shall mean an advance of loan proceeds
constituting all or a part of the Loan.
(d) "Advance Rate" shall mean eighty percent (80%).
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(e) "Base Rate" shall mean the prime rate of interest
announced publicly by Bank of America, NT&SA in San Francisco, California, from
time to time as its base rate.
(f) "Borrower Affiliate(s)" shall mean IMI Acquisition of
Kansas Corporation, a Kansas corporation, IMI Acquisition of Puerto Rico
Corporation, a Puerto Rican corporation, Oakland Magnetic Resonance Institute,
Ltd., a Florida limited partnership; IMI Acquisition of Arlington Corp., a
Virginia corporation, and Magnetic Resonance Institute of North Miami Beach,
Ltd., a Florida limited partnership, and each of them.
(g) "Borrowing Base" shall mean, on the date of determination
thereof, an amount equal to the Net Collectible Value multiplied by the Advance
Rate. The Borrowing Base will be calculated on a weekly basis by adding weekly
billings to, and deducting weekly collections and adjustments, if any, from, the
prior period's Eligible A/R. This sum will then be multiplied first by the NCV
and then by the Advance Rate to determine the weekly Borrowing Base.
(h) "Borrowing Base Report" shall mean Borrower's written
report provided from time to time, as required by Lender, and shall include
information as requested by Lender, including, but not limited to, Eligible A/R,
month-to-date billings, month-to-date deposits, month-to-date
adjustments/write-offs, Borrowing Base and NCV calculations.
(i) "Borrower's Books" shall mean all of Borrower's books and
records including but not limited to: minute books, ledgers; records indicating,
summarizing or evidencing Borrower's assets, liabilities and the Accounts; all
information relating to Borrower's business operations or financial condition;
and all computer programs, disk or tape files, printouts, runs and other
computer-prepared information and the equipment containing such information;
provided, however, that confidential patient records shall not be included
therein, except to the extent otherwise permitted by law.
(j) "Closing Date" shall mean the date of the first
Advance of the Loan.
(k) "Collateral" shall have the meaning specified in
Section 3 hereof.
(l) "Commitment" shall mean Three Million Dollars
($3,000,000), or such greater amount as Lender agrees to in writing.
(m) "Compliance Certificate" shall mean the certificate in the
form of Exhibit A which shall accompany each final month-end Borrowing Base
Report.
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(n) "Contribution Agreement" shall mean that certain
Contribution Agreement dated as of December 29, 1995 entered into among each and
all of the Borrowers.
(o) "Distribution" shall mean (i) the declaration or payment
of any profit, dividend, share or distribution on or in respect of any interest
in Borrower; (ii) the purchase or other retirement of any such interest in
Borrower; (iii) any loan or advance to the holder of any interest in Borrower or
to the holder of any indebtedness; (iv) any other payment to the holder of any
interest in Borrower or to the holder of any Indebtedness; and (v) any payment
of principal of or interest on or with respect to any purchase or other
retirement of any Indebtedness of Borrower which, by its terms, is subordinated
to the payment of the Note; provided, however, that the term "Distribution"
shall not include any salaries, or payments for rent or other services rendered
or for goods purchased which are furnished and invoiced in the ordinary course
of business and in accordance with the terms of this Agreement.
(p) "Eligible A/R" shall mean all Medicare, Medicaid,
Commercial Insurance, State of Florida Contracted Workers' Compensation,
Institutional, Champus, Authorized Workers' Compensation, and HMO/PPO Accounts
which have been due and payable for one hundred fifty (150) or fewer days from
the first date of service and Liability Accounts which have been due and payable
for three hundred sixty-five (365) or fewer days from the first date of service;
provided, however, Liability Accounts shall not exceed thirty-five percent (35%)
of the Borrowing Base.
(q) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and all references to sections thereof shall include such
sections and any predecessor provisions thereto, including any rules or
regulations issued in connection therewith.
(r) "ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) that together with Borrower would be deemed a
"contributing sponsor" to a single employee plan within the meaning of Section
4001 of ERISA.
(s) "Event of Default" shall have the meaning specified
in Section 10 hereof.
(t) "Governmental Authority" shall mean any governmental or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality thereof, or any court, tribunal, grand
jury or arbitrator, in any case whether foreign or domestic.
(u) "Guaranty" shall mean the Unconditional Continuing
Guaranty executed by Guarantor unconditionally guaranteeing
Borrower's Obligations under this Agreement.
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(v) "Health Care Laws" shall mean all federal, state and local
laws specifically relating to health care services and the providers of such
services, including, but not limited to, Section 1877(a) of the Social Security
Act as amended by the Omnibus Budget Reconciliation Act of 1993, 42 USC ss.
1395nn.
(w) "Indebtedness" of a Borrower shall mean (i) all items
(except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with generally accepted accounting principles,
would be included in determining total liabilities as shown on the liability
side of the balance sheet of Borrower as of the date as of which Indebtedness is
to be determined, including any lease which, in accordance with generally
accepted accounting principles, would constitute indebtedness; (ii) all
indebtedness secured by any mortgage, pledge, security, lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Borrower is subject, whether or not the indebtedness secured thereby
shall have been assumed; and (iii) all indebtedness of others which Borrower has
directly or indirectly guaranteed, endorsed (otherwise than for the collection
or deposit in the ordinary course of business), discounted or sold with recourse
or agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which Borrower has agreed to supply or advance funds
(whether by way of loan, stock or equity purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable.
(x) "Initial Term" shall mean a period of three (3) years from
the effective date of this Agreement.
(y) "Lender Expenses" shall mean (i) all costs or expenses
(including, without limitation, taxes and insurance premiums) required to be
paid by Borrower under this Agreement or under any of the other Loan Documents
that are paid or advanced by Lender; (ii) filing, recording, publication and
search fees paid or incurred by Lender in connection with Lender's transactions
with Borrower; (iii) costs and expenses incurred by Lender to correct any
default or enforce any provision of the Loan Documents or in gaining possession
of, maintaining, handling, preserving, storing, shipping, selling, and preparing
for sale or advertising to sell the Collateral, whether or not a sale is
consummated; (iv) costs and expenses of suit incurred by Lender in enforcing or
defending the Loan Documents or any portion thereof; and (v) Lender's reasonable
attorney fees and expenses incurred (before or after execution of this
Agreement) in advising Lender with respect to, or in structuring, drafting,
reviewing, negotiating, amending, terminating, enforcing, defending or otherwise
concerning, the Security Documents or any portion thereof, irrespective of
whether suit is brought.
(z) "Lien" shall mean any security interest, mortgage, pledge,
assignment, lien or other encumbrance of any kind, including any interest of a
vendor under a conditional sale
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contract or consignment and any interest of a lessor under a
capital lease.
(aa) "Loan(s)" shall mean each loan or any other loan or loans
made by Lender to Borrower pursuant to this Agreement.
(ab) "Loan Documents" shall mean (i) this Agreement; (ii) the
Note; (iii) the Security Documents; (iv) any other agreements or documents
hereafter delivered to secure repayment of the Loan; (v) the LockBox Agreement
and (vi) any other certificates, documents or instruments delivered by Borrower
to Lender pursuant to the terms of this Agreement.
(ac) "Lockbox Agreement" shall mean that certain LockBox
Agreement between Capital Bank or any other lockbox servicer ("servicer") chosen
by Lender and Borrower and the letter of instruction with respect thereto among
Lender, Borrower and Servicer.
(ad) "Net Collectible Value" or "NCV" shall mean for each
Account for each Borrower, the percentage amount set forth under the column
headed "NCV%" in Schedule 1.1(ab) opposite each Account identified in the column
headed "Payor," multiplied by each Borrower's Eligible A/R as set forth in the
column headed "Total Eligible" opposite each Account. The NCV percentage may
change from time to time in Lender's sole and absolute discretion, written
notification of which shall be given to Borrower by Lender.
(ae) "Note" shall mean the Secured Promissory Note executed by
Borrower pursuant to the terms of this Agreement.
(af) "Obligation(s)" shall mean (i) the due and punctual
payment of all amounts due or to become due under the Note; (ii) the performance
of all obligations of Borrower under this Agreement, the Note and all other Loan
Documents; (iii) all extensions, renewals, modifications, amendments and
refinancings of any of the foregoing; (iv) all Lender Expenses; and (v) all
loans, advances, indebtedness, and other obligations owed by Borrower or a
Borrower Affiliate to Lender of every description whether now existing or
hereafter arising (including those owed by Borrower or a Borrower Affiliate to
others and acquired by Lender by purchase, assignment, or otherwise) and whether
direct or indirect, primary or as guarantor or surety, absolute or contingent,
liquidated or unliquidated, matured or unmatured, whether or not secured by
additional collateral.
(ag) "Permitted Liens" shall mean (i) Liens for property taxes
and assessments or governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, provided that payment thereof is not yet
due or is being contested as permitted in this Agreement; (ii) Liens of or
resulting from any judgment or award, the time for the appeal or petition for
rehearing of which has not expired, or in respect of which Borrower is in good
faith prosecuting an appeal or proceeding for a review
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and in respect of which a stay of execution pending such appeal or proceeding
for review has been secured; (iii) Liens and priority claims incidental to the
conduct of business or the ownership of properties and assets (including
warehouse's and attorney's Liens and statutory landlord's Liens); deposits,
pledges or Liens to secure the performance of bids, tenders or trade contracts,
or to secure statutory obligations; and surety or appeal bonds or other Liens of
like general nature incurred in the ordinary course of business and not in
connection with the borrowing of money; provided that in each case the
obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings; and further provided that any such
warehouse's or statutory landlord's Liens have been subordinated to the Liens of
Lender in a manner satisfactory to Lender; (iv) Liens in favor of DVI Financial
Services Inc. d/b/a DVI Capital; and (v) Liens existing on the date of this
Agreement that secure indebtedness outstanding on such date and that are
disclosed on Schedule 1.1 hereto;
(ah) "Person" shall mean an individual, corporation,
partnership, limited liability company, limited liability partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), Governmental Authority or any other entity.
(ai) "Proceeds" shall mean all proceeds and products of
Collateral and all additions and accessions to, replacements of, insurance or
condemnation proceeds of, and documents covering Collateral; all property
received wholly or partly in trade or exchange for Collateral; all claims
against third parties arising out of damage, destruction or decrease in value of
the Collateral; all leases of Collateral; and all rents, revenues, issues,
profits, and proceeds arising from the sale, lease, license, encumbrance,
collection or any other temporary or permanent disposition of the Collateral or
any interest therein.
(aj) "Recent Cash Flow" shall mean, on the date of
determination thereof, Borrower's total cash collections with respect to the
Accounts during the preceding ninety (90) day period.
(ak) "Security Document(s)" shall mean the Guaranty, and any
agreement or instrument entered into between Borrower and Lender or executed by
Borrower or Guarantor and delivered to Lender in connection with this Agreement.
(al) "Termination Date" shall mean the last day of the
thirty-sixth (36th) month following the effective date of this Agreement,
subject to extension as provided in Section 2.6 hereof.
(am) "Unmatured Default" shall mean any event or condition
that, with notice, passage of time, or a determination by Lender or any
combination of the foregoing would constitute an Event of Default.
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Section 1.2. Generally Accepted Accounting Principles and
Uniform Commercial Code. All financial terms used in this Agreement, other than
those defined in this Section 1, have the meanings accorded to them under
generally accepted accounting principles. All other terms used in this
Agreement, other than those defined in this Section, have the meanings accorded
to them in the Uniform Commercial Code.
Section 1.3. Construction.
(a) Unless the context of this Agreement clearly requires
otherwise, the plural includes the singular, the singular includes the plural,
the part includes the whole, "including" is not limiting, and "or" has the
inclusive meaning of the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder" and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Lender or Borrower, whether under
any rule of construction or otherwise. On the contrary, this Agreement has been
reviewed by each of the parties and their counsel and shall be construed and
interpreted according to the ordinary meaning of the words used so as to
accomplish the purposes and intentions of all parties hereto fairly.
SECTION 2
LOAN
Section 2.1. The Loan. Subject to the terms and conditions and
relying on the representations and warranties set forth herein, Lender agrees to
advance to Borrower from time to time and Borrower agrees to borrow from Lender,
revolving loans in an amount not to exceed the least of (i) the Commitment, (ii)
the Borrowing Base, or (iii) the Recent Cash Flow, which Loans shall be
evidenced by a Note. The proceeds of the Loan, net of payment therefrom for
Borrower's counsel fees and all fees, costs and expenses incurred by Borrower in
connection with the Loan, shall be used by Borrower to pay off such of the
subordinated notes of Borrower held by the former limited partners of Borrower
as determined by Borrower. Borrower agrees that Lender is making the Advances
and/or Loans and other financial accommodations to Borrower from time to time,
in Lender's sole discretion and in such amounts as may be mutually agreed upon.
Lender shall periodically review Borrower's actual billings, collections and
adjustments relating to the Accounts, as well as Borrower's payor profile. To
the extent Borrower's collections and adjustments relative to Borrower's billing
and/or payor profile materially changes, Lender, by written notice to Borrower,
may, in its sole discretion, adjust the NCV percentage(s). In the event Lender
should for any reason
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honor requests for Advances in excess of the Advance Rate, such "over advances"
shall be made solely at Lender's discretion upon such terms and conditions as
Lender shall determine and shall be payable upon demand.
Section 2.2. Revolving Nature of the Loan. The Loan may be
repaid or prepaid pursuant to Sections 2.5 or 2.6 and shall be mandatorily
prepaid pursuant to Section 2.6 by the Borrower. Subject to the provisions of
this Agreement, any amounts repaid may be reborrowed, up to the amounts
available under Section 2.1 or at the time of such Borrowing, until prepaid the
business day immediately preceding the Termination Date. Lender's commitments to
make Advances shall expire, and the amount of Loan then outstanding shall mature
and be repaid by Borrower, without further action on the part of Lender, on the
Termination Date.
Section 2.3. Automatic Advances. Provided No Event of Default
or Unmatured Default has occurred and is continuing, Lender shall, at its
option, automatically make the Advances to Borrower under Section 2.1 above, and
pay over to Borrower any receipts in the deposit accounts established pursuant
to the Lockbox Agreement pursuant to the provisions of Section 2.5, without the
necessity of Borrower having to make a written or oral request therefor.
Section 2.4. Borrowing Base Report. Each month, until the
Termination Date hereof, no later than the fifteenth (15th) day of each month,
Borrower shall submit to Lender (i) a month-end Borrowing Base Report in form
satisfactory to Lender, (ii) an Accounts aging report as of the last day of the
preceding month, and (iii) a summary of any charges, collections and adjustments
relating to the Accounts for the preceding month. On a weekly basis, Borrower
shall submit to Lender, by disk or tape or other form acceptable to Lender, an
updated Borrowing Base Report reflecting any additional weekly billings,
write-offs and deposits and any other information relating to the Accounts.
Borrower shall be responsible for all expenses incurred to convert the requested
information to an acceptable form.
Section 2.5. Loan Repayment Via Lockbox/Servicer Account. Upon
the execution hereof, Borrower shall become a party to the Lockbox Agreement
which provides for the receipt and processing of Account payments. Borrower
shall irrevocably direct: (i) all non-government payors to remit payment to the
servicer's post office box in Lender's name and control, and (ii) all government
payors to remit payment to a second post office box of such servicer in
Borrower's name. Prior to funding and upon receipt of the lockbox post office
box number(s), Borrower shall provide Lender re-direct letters (in a form
satisfactory to Lender) to all of Borrower's non-government payors on Borrower's
letterhead, including envelopes for Lender to process and mail (Lender will add
postage which shall be charged to Borrower). The Lockbox Agreement provides for
the servicer to deposit daily all receipts of the post office boxes into deposit
accounts, with non-government payor receipts paid into an account subject to
Lender's
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control and, government payor receipts paid into an account in Borrower's name;
such accounts shall be (i) at a financial institution acceptable to Lender, and
(ii) governed by terms and conditions acceptable to Lender. Deposits (net of
fees) shall be credited to the Loan balance including Advances, interest, fees,
all applicable charges and other payments, if applicable, within 24 hours and
all receipts (net of such servicer's fees) remaining after such credit will be
paid to Borrower on a daily basis, subject to the provisions of Section 2.3.
Borrower shall bear all charges for establishing and maintaining the post office
box accounts and all bank charges and wire transfer fees for such deposit
accounts. If Borrower does not cure, within thirty (30) days of written notice
thereof, any Event of Default under the Loan and Security Agreements between
Borrower's general and limited partners and DVI Financial Services Inc. d/b/a
DVI Capital dated as of September 30, 1994, Borrower agrees that all payments
due on any Obligations (as defined in said Loan and Security Agreements) shall
be deducted by Lender from the deposit accounts. Lender shall deduct from the
deposit accounts all sums Borrower owes to it hereunder, including fees,
interest, reimbursements and principal payments. Any Obligations not paid by
such deduction shall be satisfied by direct payment to Lender at 500 Hyde Park,
Doylestown, Pennsylvania 18901. Any amounts hereunder not paid as agreed shall
be assessed a late payment penalty of five percent (5%).
Section 2.6. Prepayment. Provided that no Event of Default or
any Unmatured Event of Default exists, Borrower may terminate this Agreement at
any time, provided that it pays to Lender an amount equal to fifty percent (50%)
of the unearned interest Lender would have received from the date of such
payment through the Initial Term, assuming for such purpose that the Loan for
any such period would equal the Commitment and that the interest rate thereon
shall be fixed as of the date of prepayment at a rate equal to the Base Rate
plus three and one-half percent (3 1/2%). This Agreement shall be renewed for
consecutive one (1) year terms unless this Agreement is terminated by written
notice by Lender or Borrower no later than thirty (30) days before the
expiration of any term. All of Lender's obligations, responsibilities and duties
shall cease upon the date of termination or expiration of this Agreement, except
for its obligation to remit excess receipts from the lockbox deposit accounts in
accordance with the terms of this Agreement.
. Section 2.7. Lender's Fees. Upon the execution of this Agreement, Borrower
shall pay to Lender a Loan origination fee of Sixty Thousand Dollars ($60,000)
less the Twelve Thousand Dollars ($12,000) previously paid by Borrower to
Lender. Borrower shall pay Lender an unutilized Loan fee in an amount equal to
one-half of one percent (0.5%) of an amount equal to the Commitment, less the
average outstanding balance of the Loan calculated on a monthly basis. Borrower
also shall pay Lender a maintenance fee of Four Thousand One Hundred and
Twenty-Five Dollars ($4,125) which includes daily handling of this Loan,
weekly/monthly tracking of
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the Borrowing Base and quarterly on-site due diligence. The unutilized Loan fee
and maintenance fee shall be payable monthly, in arrears, on the first (1st) day
of each month for the preceding month. Lender's fees will be deducted when due,
directly from receipts from accounts receivable deposited in accordance with
Section 2.5.
Section 2.8. Interest on the Loan. All Advances shall bear
interest on the unpaid principal amount thereof from the date made until paid in
full at a fluctuating rate equal to the Base Rate plus 3.5 percent per annum
payable monthly, in arrears, on the first (1st) day of each month for the
preceding month. The outstanding principal balance of all other Obligations
shall bear interest from the date such Obligations are due until paid in full at
a fluctuating rate equal to the Base Rate plus three and one-half percent (3
1/2%) per annum. Interest accrued but not paid pursuant to Section 2.6 shall be
treated as an Advance if not otherwise paid within five (5) days of the end of
the month in which it accrues.
Section 2.9. Conditions to the Closing. The obligation of
Lender to make an Advance under this Agreement is subject to Lender's
determination that Borrower as of the date of the Advance has satisfied the
following conditions:
(a) The representations and warranties set forth in this
Agreement and in the other Loan Documents shall be true and correct on and as of
the date hereof and shall be true and correct in all material respects as of the
date of the Advance and Borrower shall have performed all obligations which were
to have been performed by it hereunder.
(b) Borrower shall have executed and delivered to Lender
(or shall cause to be executed and delivered to Lender by the
appropriate Persons) the following:
(i) this Agreement;
(ii) the Note;
(iii) the Guaranty;
(iv) the Lockbox Agreement;
(v) the Contribution Agreement
(vi) evidence satisfactory to Lender that each of
Borrower and Guarantor is duly formed, validly existing and in good standing in
the state in which it was formed and is authorized to do business in each state
in which its failure to obtain such authorization would materially adversely
affect its ability to repay the Loan;
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(vii) pay-off letters, UCC Termination Statements,
and Lien Releases as required to grant Lender a first priority security interest
other than Permitted Liens in Collateral pledged as security for repayment of
the Loan;
(viii) certified copies of resolutions of the Board
of Directors of each corporate Borrower and Guarantor or partnership
authorizations of each partnership Borrower, as appropriate, authorizing the
execution and delivery of Loan Documents to be executed by Borrower and
Guarantor;
(ix) copies of the Articles of Incorporation of each
corporate Borrower and Guarantor certified by the Secretary of State;
(x) copies of the Bylaws of each corporate Borrower
and Guarantor certified by an officer thereof; copies of Partnership Agreements
and Certificates of limited partnership of each partnership Borrower certified
by the General Partner of each such Borrower.
(xi) the written opinion of counsel to Borrower
issued on the Closing Date and satisfactory to Lender in scope and substance;
(xii) a certificate from an officer of Borrower
indicating that the representations and warranties contained herein are true and
correct as of the Closing Date.
(xiii) a solvency Certificate from Borrower.
(xiv) an Affidavit of Out-of-State Closing from
Borrower.
(c) Borrower shall have paid closing fees to Lender including
due diligence fees, transportation costs, credit reports' fees, filing fees and
Lender's reasonable legal fees incurred by Lender for the negotiation and
preparation of the Loan Documents.
(d) Neither an Event of Default nor an Unmatured Default shall
have occurred and be continuing.
(e) Borrower shall not have suffered a material or adverse
change in its business, operations or financial condition from that reflected in
the financial statements delivered to Lender or otherwise.
SECTION 3
SECURITY INTEREST
Section 3.1. Grant of Security Interest. In order to
secure prompt payment and performance of all Obligations, Borrower
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hereby grants to Lender a continuing first-priority pledge and security interest
in the following property of Borrower (the "Collateral"), whether now owned or
existing or hereafter acquired or arising and regardless of where located
subject only to Permitted Liens. This security interest in the Collateral shall
attach to all Collateral without further act on the part of Lender or Borrower.
The Collateral shall consist of all of Borrower's presently
existing and hereafter arising Accounts and all cash and non-cash Proceeds
thereof subject only to Permitted Liens, together with third-party consents,
lien waivers and estoppel certificates as Lender shall reasonably require.
SECTION 4
SPECIFIC REPRESENTATIONS
Section 4.1. Name of Borrower. The exact names of each
Borrower are: Magnetic Resonance Institute of Boca Raton, Ltd., Magnetic
Resonance Institute of South Dade, Ltd., Pine Island Magnetic Resonance Imaging
Center, Ltd., and Physicians OutPatient Diagnostic Center, Ltd., respectively.
The partnerships were formed as limited partnerships under the laws of the State
of Florida. The following are all previous legal names of Borrower: None.
Borrower uses the following trade names: None. The following are all other trade
names used by Borrower in the past: None.
Section 4.2. Mergers and Consolidations. No entity has
merged into Borrower or been consolidated with Borrower.
Section 4.3. Purchase of Assets. No entity has sold
substantially all of its assets to Borrower or sold assets to Borrower outside
the ordinary course of such seller's business at any time in the past.
Section 4.4. Change of Name or Identity. Borrower shall not
change its name, business structure, or identity or use any new trade name
without prior notification to Lender or merge into or consolidate with any other
entity.
SECTION 5
PROVISIONS CONCERNING ACCOUNTS
Section 5.1. Office and Records of Borrower. Each
Borrower's principal office is located at: 2424 North Federal Highway, Boca
Raton, Florida 33431.
Borrower maintains substantially all of its computerized records with respect to
Accounts at that address with hard copies of such
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records at the address of each Borrower. Borrower has not at any time within the
past four (4) months maintained its principal office or its records with respect
to its Accounts at any other location and shall not do so hereafter except with
the prior written consent of Lender.
Section 5.2. Representations. Borrower represents and warrants
that each Account at the time of its assignment to Lender (a) will be owned
solely by Borrower; (b) will be for a liquidated amount maturing as stated in
Borrower's Books; (c) will be a bona fide existing obligation created by the
rendition of services to Account Debtors or their insured by Borrower in the
ordinary course of their business; and (d) will not be subject to any known
deduction, offset, counterclaim, return privilege, or other condition, except as
reflected on Borrower's Books. Borrower shall neither redate any invoices nor
reissue new invoices in full or partial satisfaction of old invoices, without
Lender's consent. Allowances, if any, as between Borrower and its customers will
be on the same basis and in accordance with the usual customary practices of
Borrower as they exist on the date of this Agreement.
Section 5.3. Returns and Repossessions. Borrower shall notify
Lender within five (5) business days of the occurrence of all material claims
asserted by Account Debtors.
Section 5.4. Aging Reports. Borrower shall, from time to time
hereafter but not less often than monthly execute and deliver to Lender no later
than the tenth (10th) day of each month during the term of this Agreement a
detailed aging of Accounts by payor class and total.
Section 5.5. Schedules of Accounts. From time to time,
Borrower shall provide Lender with schedules describing in the aggregate all
Accounts created or acquired by Borrower; provided, however, that Borrower's
failure to execute and deliver such schedules or assignments shall not affect or
limit Lender's security interests and other rights in and to the Accounts.
Together with each schedule, Borrower shall, if requested by Lender, furnish
Lender with copies of Borrower's invoices, explanation of benefits ("EOB")
forms, service contracts and any other applicable Account documents, and
Borrower warrants the genuineness thereof.
Section 5.6. Lender's Rights. Any officer, employee or
authorized agent of Lender shall have the right, at any time or times hereafter
during business hours, in the name of Lender or its nominee (including
Borrower), to verify the validity, amount or any other matter relating to any
Accounts by mail, telephone or otherwise; and all reasonable costs thereof shall
be payable by Borrower to Lender. Lender, or its designee may at any time after
an Event of Default by Borrower hereunder, notify Account Debtors that Accounts
have been assigned to Lender or of Lender's security interest therein and after
an Event of Default by Borrower
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hereunder collect the same directly and charge all reasonable collection costs
and expenses to Borrower's account.
Section 5.7. Disclaimer of Liability. Lender shall not be
liable to Borrower or any third person for the correctness, validity or
genuineness of any instruments or documents of Borrower or Guarantor released or
endorsed to Borrower by Lender (which shall automatically be deemed to be
without recourse to Lender in any event) or for the existence, character,
quantity, quality, condition, value or delivery of any goods purporting to be
represented by any such documents; and Lender, by accepting a Lien on the
Collateral or by releasing any Collateral to Borrower, shall not be deemed to
have assumed any obligation or liability to any supplier or creditor of Borrower
or to any other third party. Borrower agrees to indemnify and defend Lender and
hold it harmless in respect to any claim or proceeding arising out of any matter
referred to in this Section 5.7.
Section 5.8. Post Default Rights. If an Event of Default has
occurred and is continuing hereunder, no discount, credit or allowance shall be
granted or permitted by Borrower to any Account Debtor without Lender's consent.
Lender may, after any Event of Default by Borrower, settle or adjust disputes
and claims directly with Account Debtors for amounts and upon terms that Lender
considers advisable, and in such cases, Lender will credit Borrower's account
with only the net amounts received by Lender in payment of such disputed
Accounts, after deducting all Lender Expenses incurred in connection therewith.
Section 5.9. Accounts Owed by Federal Government. If any
Accounts shall arise out of a contract with the United States of America or any
department, agency, subdivision or instrumentality thereof, Borrower shall
promptly notify Lender thereof in writing and take all other action requested by
Lender to protect Lender's Lien on such Accounts under the provisions of all
applicable federal laws on assignment of claims and as permitted by the terms of
any such contract.
Section 5.10. Business Activity Reports. Borrower has filed
and shall file all legally required notices and reports of its business
activities with the appropriate taxing authorities and the appropriate
governmental authority of each other jurisdiction in which Borrower is legally
required to file such a notice or report.
Section 5.11. Waiver by Account Debtors. Borrower shall use
its best efforts to provide, as a term of its agreements with all Account
Debtors on Accounts hereafter arising, that the Account Debtor waive and agree
not to assert, as against an assignee of the Account, any defenses or
counterclaims that the Account Debtor could assert against Borrower, including
the defense of failure to perform the relevant services. Borrower shall include
such a provision in its printed terms and conditions of service, or equivalent
documents.
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SECTION 6
PROVISIONS CONCERNING GENERAL TANGIBLES
Section 6.1. Contracts.
(a) Schedule 6.1. is a true and complete list of all material
service contracts and agreements to which Borrower is a party.
(b) Borrower shall not amend, modify or supplement any
contract or agreement included in the Collateral or waive any provision thereof
without Lender's consent which shall not be unreasonably withheld.
(c) Borrower shall remain liable to perform all of its duties
and obligations under any contracts and agreements included in the Collateral to
the same extent as if this Agreement had not been executed; and Lender shall not
have any obligation or liability under such contracts and agreements by reason
of this Agreement or otherwise.
SECTION 7
OTHER PROVISIONS CONCERNING COLLATERAL
Section 7.1. Title. Borrower has good and marketable title to
the Collateral, and the Liens granted to Lender pursuant to this Agreement are
fully perfected first-priority Liens, subject only to the Permitted Liens and to
the proper filing of any financing statement or notice requested by Lender
necessary to provide notice to third parties of the existence of such Liens, in
and to the Collateral with priority over the rights of every person in the
Collateral and is free, clear, and unencumbered by any Liens in favor of any
person other than Lender except for Permitted Liens.
Section 7.2. Further Assurances. Borrower shall execute and
deliver to Lender, concurrent with Borrower's execution of this Agreement and at
any time or times hereafter at the request of Lender, all financing statements,
continuation financing statements, security agreements, chattel mortgages,
assignments, endorsements of certificates of title, applications for titles,
affidavits, reports, notices, schedules of accounts, letters of authority, and
all other documents Lender may reasonably request, in form satisfactory to
Lender, to perfect and maintain perfected Lender's Liens in the Collateral and
in order to consummate fully all of the transactions contemplated under the
Security Documents. Borrower hereby irrevocably makes, constitutes, and appoints
Lender (and any of Lender's officers, employees, or authorized agents designated
by Lender) as Borrower's true and lawful attorney with
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power to sign the name of Borrower on any of the above-described documents or on
any other similar documents that need to be executed, recorded, and/or filed in
order to perfect or continue perfected Lender's Liens in the Collateral. The
appointment of Lender as Borrower's attorney is irrevocable as long as any
Obligations are outstanding. Any person dealing with Lender shall be entitled to
rely conclusively on any written or oral statement of Lender that this power of
attorney is in effect. Lender will provide Borrower with copies of any documents
signed by Lender on Borrower's behalf pursuant to this Section.
Section 7.3. Lender's Duty of Care. Lender shall have no duty
of care with respect to the Collateral except that Lender shall exercise
reasonable care with respect to the Collateral in Lender's custody. Lender shall
be deemed to have exercised reasonable care if such property is accorded
treatment substantially equal to that which Lender accords its own property or
if Lender takes such action with respect to the Collateral as the Borrower shall
request or agree to in writing provided that no failure to comply with any such
request nor any omission to do any such act requested by the Borrower shall be
deemed a failure to exercise reasonable care. Lender's failure to take steps to
preserve rights against any parties or property shall not be deemed to be a
failure to exercise reasonable care with respect to the Collateral in Lender's
custody. All risk, loss, damage or destruction of the Collateral not directly
caused by Lender or its officers or agents shall be borne by Borrower.
Section 7.4. Borrower's Contracts. Borrower shall remain
liable to perform its Obligations under any contracts and agreements included in
the Collateral to the same extent as though this Agreement had not been entered
into and Lender shall not have any obligation or liability under such contracts
and agreements by reason of this Agreement or otherwise.
Section 7.5. Reinstatement of Liens. If, at any time after
payment in full by Borrower of all Obligations and termination of Lender's
Liens, any payments on Obligations previously made by Borrower or any other
Person must be disgorged by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, or reorganization of Borrower or such
other Person), this Agreement and Lender's Liens granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and Borrower shall sign and deliver to Lender all documents and things
necessary to perfect all reinstated Liens.
Section 7.6. Lender Expenses. If Borrower fails to pay any
moneys (whether taxes, assessments, insurance premiums or otherwise) due to
third persons or entities, fails to make any deposits or furnish any required
proof of payment or deposit or fails to discharge any Lien not permitted hereby,
all as required under the terms of this Agreement, then Lender may, to the
extent that it determines that such failure by Borrower could have a
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material adverse effect on Lender's interests in the Collateral, in its
discretion and without prior notice to Borrower, make payment of the same or any
part thereof. Any amounts paid or deposited by Lender shall constitute Lender
Expenses, shall become part of the Obligations, shall bear interest at the rate
of eighteen percent (18%) per annum, and shall be secured by the Collateral. Any
payments made by Lender shall not constitute (a) an agreement by Lender to make
similar payments in the future or (b) a waiver by Lender of any Event of Default
under this Agreement. Lender need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance or Lien, and the receipt
of the usual official notice for the payment of moneys to a governmental entity
shall be conclusive evidence that the same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender
for all sums expended by Lender that constitute Lender Expenses, and Borrower
hereby authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
Section 7.7. Inspection of Records. During usual business
hours, and, upon reasonable advance notice, Lender shall have the right, at its
expense, to inspect and verify Borrower's Books in order to verify the amount or
condition of, or any other matter relating to, the Collateral and Borrower's
financial condition and to copy and make extracts therefrom. Borrower waives the
right to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information requested
by Lender pursuant to this Agreement and agrees that Lender may directly contact
any such accounting firm or service bureau in order to obtain such information.
Notwithstanding the foregoing, Lender shall be bound by any applicable law, rule
or regulation concerning the use of patient information and records.
Section 7.8. Notice to Payor Accounts and Deposit Accounts. In
order to perfect Lender's security interest in Payor Accounts and Borrower's
deposit accounts maintained at any financial institutions at which Borrower
maintains deposit accounts now or in the future, Borrower agrees to execute a
form of notification to such financial institution(s) and Payor Accounts in
order to notify them of Lender's Lien in such deposit accounts and Payor
Accounts which require notice to perfect Lender's lien.
Section 7.9. Waivers. Except as specifically provided for
herein, Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable.
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SECTION 8
REPRESENTATIONS AND WARRANTIES
As of the date hereof Guarantor and Borrower each hereby
warrants and represents to Lender the following:
Section 8.1. Legal Status. Each of Borrower and Guarantor is a
corporation or partnership, as appropriate, validly existing and in good
standing under the laws of the state of its incorporation or formation; and each
Borrower and Guarantor is qualified and licensed to do business and is in good
standing in any state in which the conduct of its business or its ownership of
property requires that it be so qualified or licensed, and has the power and
authority (corporate, partnership and otherwise) to execute and carry out the
terms of the Loan Documents to which it is a party, to own its assets and to
carry on its business as currently conducted.
Section 8.2. Authorization. The execution, delivery, and
performance by each Borrower and Guarantor of this Agreement and each Loan
Document have been duly authorized by all necessary corporate or partnership
action as appropriate. Each of Borrower and Guarantor have duly executed and
delivered this Agreement and each Loan Document to which they are a party, and
each of them constitutes a valid and binding obligation of each of Borrower or
Guarantor, as applicable, enforceable according to its terms except as limited
by equitable principles and by bankruptcy, insolvency, or similar laws affecting
the rights of creditors generally.
Section 8.3. No Breach. The execution, delivery, and
performance by Borrower and Guarantor of this Agreement and each Loan Document
to which they are a party (a) will not contravene any law or any governmental
rule or order binding on the Collateral; (b) will not violate any provision of
the articles of incorporation or bylaws or partnership agreements, as
appropriate, of Borrower or Guarantor; (c) will not violate any agreement or
instrument by which Borrower or Guarantor, as applicable, is bound; (d) do not
require any notice to or consent by any governmental body; and (e) will not
result in the creation of a Lien on any assets of Borrower except the Lien to
Lender granted herein.
Section 8.4. Taxes. All assessments and taxes, whether real,
personal or otherwise, due or payable by or imposed, levied or assessed against
Borrower or any of its property have been paid in full before delinquency or
before the expiration of any extension period; and Borrower has made due and
timely payment or deposit of all federal, state, and local taxes, assessments,
or contributions required of it by law, except only for items that Borrower is
currently contesting diligently and in good faith and that have been fully
disclosed in writing to Lender.
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Section 8.5. Deferred Compensation Plans. Borrower and each
ERISA Affiliate have made all required contributions to all deferred
compensation and defined benefit plans to which such person is required to
contribute, and neither Borrower nor any ERISA Affiliate has any liability for
any unfunded benefits of any single-employer or multi-employer plans.
Section 8.6. Litigation and Proceedings. Except as set forth
on Schedule 8.6 attached hereto, there are no outstanding judgments against
Borrower or any of their assets and there are no actions or proceedings pending
by or against Borrower before any court or administrative agency. Borrower has
no knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which Borrower is
the plaintiff and except as set forth in Schedule 8.6 hereto.
Section 8.7. Business. Borrower has all franchises,
authorizations, patents, trademarks, copyrights and other rights necessary to
advantageously conduct its business. They are all in full force and effect and
are not in known conflict with the rights of others. Borrower is not a party to
or subject to any agreement or restriction that is so unusual or burdensome that
it might have a material adverse effect on Borrower's business, properties or
prospects.
Section 8.8. Laws and Agreements. Borrower is in compliance
with all material agreements applicable to it, including obligations to
contribute to any employee benefit plan or pension plan regulated by ERISA.
Borrower is, to the best of its knowledge, in material compliance with all laws
applicable to it.
Section 8.9. Financial Condition. All financial statements and
information relating to Borrower that have been or may hereafter be delivered by
Borrower to Lender are accurate and complete and have been prepared in
accordance with generally accepted accounting principles consistently applied.
Borrower has no material obligations or liabilities of any kind not disclosed in
that financial information, and there has been no material adverse change in the
financial condition of Borrower since the date of the most recent financial
statements submitted to Lender.
Section 8.10. Health Care Laws.
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Health Care Laws and Borrower is in
compliance in all material respects with all terms and conditions of the
required permits, licenses and authorizations, and are also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Health Care Laws.
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(b) Borrower or any Borrower Affiliate is not aware of, and
has not received notice of, any past, present or future events, conditions,
circumstances, activities, practices, incidents, actions or plans that may
interfere with or prevent compliance or continued compliance in any material
respect with Health Care Laws.
(c) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or threatened against Borrower, relating in
any way to Health Care Laws.
Section 8.11. Cumulative Representations. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements that
Borrower shall give, or cause to be given, to Lender, either now or hereafter.
SECTION 9
COVENANTS
Section 9.1. Encumbrance of Collateral. Borrower shall not
create, incur, assume, or permit to exist any Lien on any Collateral now owned
or hereafter acquired by Borrower, except for Liens to Lender and Permitted
Liens.
Section 9.2. Business. Borrower shall engage primarily in
business of the same general character as that now conducted by Borrower and
shall not make any investment in any other entity through the direct or indirect
holding of securities or otherwise.
Section 9.3. Condition and Repair. Borrower shall maintain in
good repair and working order all properties used in its business and from time
to time shall make all appropriate repairs and replacements thereof.
Section 9.4. Taxes. Borrower shall pay all taxes, assessments
and other governmental charges imposed upon it or any of its assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or might become a Lien or charge upon any
of its assets, provided that (unless any material item or property would be
lost, forfeited or materially impaired as a result thereof) no such charge or
claim need by paid if it is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, if Lender is notified
in advance of such contest, and if Borrower establishes any reserve or other
appropriate provision required by generally accepted accounting principles and
deposits with Lender cash or an acceptable bond in an amount equal to twice the
amount of such
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charge or claim. Borrower shall make timely payment or deposit of all FICA
payments and withholding taxes required of it by applicable laws and will, upon
request, furnish Lender with proof satisfactory to Lender indicating that
Borrower has made such payments or deposits.
Section 9.5. Accounting System. Borrower at all times
hereafter shall maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles consistently applied,
with ledger and account cards or computer tapes, disks, printouts and records
that contain information pertaining to the Collateral that may from time to time
be requested by Lender. Borrower shall not modify or change its method of
accounting or enter into any agreement hereafter with any third-party accounting
firm or service bureau for the preparation and/or storage of Borrower's
accounting records without said accounting firm's or service bureau's agreeing
to provide to Lender information regarding the Collateral and Borrower's
financial condition.
Section 9.6. Financial Statements. Borrower shall submit
monthly financial statements with respect to Borrower to Lender as soon as
available, and in any event within forty-five (45) days of the end of each month
or fiscal quarter, as applicable. Additionally, Borrower will submit audited
financial statements with respect to Borrower to Lender as soon as available,
and in any event within ninety (90) days of the end of each fiscal year. With
all financial statements, Borrower will also deliver a certificate of its chief
financial officer attesting that no Event of Default or Unmatured Default under
the Agreement has occurred and is continuing.
Section 9.7. Further Information. Borrower shall promptly
supply Lender with such other information concerning its affairs as Lender may
reasonably request from time to time hereafter and shall promptly notify Lender
of any material adverse change in Borrower's financial condition and any
condition or event that constitutes a breach of or event that constitutes an
Event of Default under this Agreement.
Section 9.8. ERISA Covenants. Borrower shall comply, and shall
cause each ERISA Affiliate to comply with all applicable provisions of ERISA and
all other laws applicable to any deferred compensation plans with which Borrower
or any ERISA Affiliate is associated, and shall promptly notify Lender of the
occurrence of any event that could result in any material liability of Borrower
to any person whatsoever with respect to any such plan.
Section 9.9. Restrictions on Merger, Consolidation, Sale
of Assets, Issuance of Stock, etc. Unless authorized by Lender,
Borrower shall not:
(a) Merge or consolidate with any Person.
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(b) Sell, lease or otherwise dispose of its assets in any
transaction or series of related transactions (other than sales in the ordinary
course of business).
(c) Liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction.
(d) Acquire any interest in any business (whether by purchase
of assets, purchase of stock, merger or otherwise).
(e) Become subject to any agreement or instrument which by its
terms would restrict Borrower's right or ability to perform any of its
obligations to Lender pursuant to the terms of the Loan Documents.
(f) Authorize or issue any additional stock or equity
interest.
Section 9.10. Health Care Covenants.
(a) Borrower shall comply in all respects with, and will
obtain all permits required by all Health Care Laws.
(b) Borrower shall promptly furnish to Lender a copy of any
communication from any governmental authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower would be required to
notify any governmental authority with jurisdiction over Health Care Laws.
Section 9.11. Restrictions on Distributions. Unless authorized
by Lender, neither Borrower nor Guarantor shall make any Distributions to any
Person including any parent, subsidiary or affiliate of Borrower until the
Obligations are fully satisfied; provided, however, Borrower and Guarantor may
make Distributions pursuant to the terms of the agreements listed on Schedule
9.11. so long as the terms of such agreements are not hereafter amended without
the consent of Lender.
Section 9.12. Restrictions on Indebtedness. Unless authorized
by Lender, neither Borrower nor Guarantor shall hereafter create, incur, assume
or otherwise become or remain liable with respect to any Indebtedness except the
following:
(a) Indebtedness in respect of the Note and current liability
(other than for money borrowed) incurred in the ordinary course of business.
(b) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials, equipment and
supplies.
(c) Indebtedness in respect of replacement or refinancing of
existing Indebtedness, provided the amount of such Indebtedness does not exceed
the amount of the existing
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Indebtedness, the repayment schedule for such Indebtedness is equal to the
repayment schedule for the existing Indebtedness and Lender gives its prior
written consent, which shall not be unreasonably withheld if the specified
conditions have been met.
Section 9.13. Restrictions on Guaranties. Unless authorized by Lender,
neither Borrower nor Guarantor shall hereafter become or remain liable under any
guaranty of any obligation of any other person, except for any guaranty of any
obligation to Lender or its affiliates.
Section 9.14. Deferral of Indebtedness. Prior to the payment in full by
Borrower of the Obligations under this Agreement and the payment in full of all
indebtedness of any Borrower Affiliate or Guarantor or any affiliate of
Guarantor to Lender and Lender's affiliates, whether existing prior to, as of,
or after the date of this Agreement, neither Borrower nor any affiliate of
Borrower shall make any payments, directly or indirectly, on or otherwise in
connection with, any subordinated notes held by any former general partner of
Borrower or Guarantor, and shall cause the following makers of the following
subordinated notes to defer making any further payments, directly or indirectly,
on, or otherwise in connection with, such notes:
Maker Payee Original
Principal Amount
MD Acquisition J. Sternberg and S. $3,375,000
Corporation Schulman, M.D. Corp.
MD Ltd. Partner Acq. Stephen A. and $ 481,767
Corporation Stephanie S. Shulman
MD Ltd. Partner Acq. Stephanie S. $ 501,431
Corporation Schulman
MD Ltd. Partner Acq. James H. and Marsha $ 481,768
Corporation Sternberg
MD Ltd. Partner Acq. Marsha Sternberg $ 501,431
Corporation
MD Ltd. Partner Acq. Ashley Kaye $ 983,198
Corporation
SECTION 10
EVENTS OF DEFAULT
An Event of Default shall be deemed to exist if after the date
of this Agreement any of the following events shall have occurred and be
continuing:
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(a) Borrower or any Borrower Affiliate fails to make any
payment of principal or interest or any other payment on the Note or any other
Obligation when due and payable, by acceleration or otherwise, and such failure
shall continue for ten (10) business days after the payment is due;
(b) Borrower or any Borrower Affiliate fails to observe or
perform any covenant, condition or agreement to be observed or performed
pursuant to the terms hereof or any Loan Document to which it is a party or any
loan document between any Borrower Affiliate and Lender, and such failure is not
cured as soon as reasonably practicable and in any event within thirty (30) days
after written notice thereof by Lender; provided, however, that if such failure
can not be cured within such thirty (30) day period, Borrower shall not be in
default if the cure is commenced within such thirty (30) day period and
thereafter such cure is diligently pursued to completion;
(c) A court enters a decree or order for relief in respect of
Borrower or any Borrower Affiliate in an involuntary case under any applicable
bankruptcy, insolvency, or other similar law then in effect, or appoints a
receiver, liquidator, assignee, custodian, trustee, or sequestrator (or other
similar official) of Borrower or any Borrower Affiliate or for any substantial
part of its property, or orders the windup or liquidation of Borrower's or any
Borrower Affiliate's affairs; or a petition initiating an involuntary case under
any such bankruptcy, insolvency, or similar law is filed against Borrower or any
Borrower Affiliate and is pending for sixty (60) days without dismissal, stay,
bond or other security acceptable to Lender;
(d) Borrower or any Borrower Affiliate commences a voluntary
case under any applicable bankruptcy, insolvency or other similar law then in
effect, makes any general assignment for the benefit of creditors, fails
generally to pay its debts as such debts become due, or takes corporate action
in furtherance of any of the foregoing;
(e) Final judgment for the payment of money on any claim in
excess of $10,000 is rendered against Borrower or any Borrower Affiliate and
remains undischarged for twenty (20) days during which execution is not
effectively stayed;
(f) Guarantor revokes or attempts to revoke its guaranty of
any of the Obligations, or becomes the subject of an insolvency proceeding of
the type described in clauses (c) or (d) above with respect to Borrower or any
Borrower Affiliate or fails to observe or perform any covenant, condition or
agreement to be performed under any Loan Document to which it is a party;
(g) Borrower or any Borrower Affiliate makes any payment on
account of Indebtedness that has been subordinated to any Obligations, other
than payments specifically permitted by the terms of such subordination;
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(h) Any Person holding Indebtedness that has been subordinated
to any Obligations dies or becomes the subject of an insolvency proceeding
resulting in the termination of the subordination arrangement relating to such
Indebtedness or terminates the subordination arrangement or asserts that it is
terminated.
(i) Any Collateral or any part thereof is sold, agreed
to be sold, conveyed or allocated by operation of law or otherwise;
(j) Borrower or any Borrower Affiliate defaults under the
terms of any Indebtedness or lease involving total payment obligations of
Borrower in excess of $10,000 and such default is not cured within the time
period permitted pursuant to the terms and conditions of such Indebtedness or
lease, or an event occurs that gives any creditor or lessor the right to
accelerate the maturity of any such indebtedness or lease payments;
(k) Demand is made for payment of any Indebtedness of Borrower
or Borrower Affiliate in excess of $10,000 that was not originally payable upon
demand when incurred but the terms of which were later changed to provide for
payment upon demand;
(l) Borrower or any Borrower Affiliate is enjoined,
restrained or in any way prevented by court order from continuing
to conduct all or any material part of its business affairs;
(m) A judgment or other claim in excess of $10,000
becomes a Lien upon any or all of Borrower's or any Borrower
Affiliate's assets, other than a Permitted Lien;
(n) A notice of Lien, levy or assessment in excess of $10,000
is filed of record with respect to any or all of Borrower's or any Borrower
Affiliate's assets by the United States Government, or any department, agency,
or instrumentality thereof, or by any state, county, municipal or other
governmental agency; or any tax or debt owing at any time hereafter to any one
or more of such entities becomes a Lien upon any or all of Borrower's or any
Borrower Affiliate's assets and the same is not paid on the payment date
thereof, except to the extent such tax or debt is being contested by Borrower or
any Borrower Affiliate as permitted in Section 8.4;
(o) There is a material impairment of the value of the
Collateral or priority of Lender's Liens on the Collateral;
(p) Any or all of Borrower's or any Borrower Affiliate's
assets are seized, subjected to a distress warrant, levied upon or
come into the possession of any judicial officer;
(q) Lender believes in good faith that the prospect of
payment or performance of the Obligations by Borrower has been
impaired;
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(r) Any representation or warranty made in writing to Lender
by any officer of Borrower or any Borrower Affiliate in connection with the
transaction contemplated in this Agreement is incorrect when made;
(s) Guarantor shall be in default with respect to any of its
Obligations to Lender and such default is not cured within the time provided
pursuant to the terms and conditions of such Obligation;
(t) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (e), (j), (k), (m) and (n)
hereof exceeds $25,000.
(u) Borrower fails to direct all receipts of Account payments
into the Lockbox Servicer's post office boxes as provided under the Lockbox
Agreement required by Section 2.5 hereof or causes any such receipts to be
redirected to an account or post office box other than such Servicer's post
office boxes or deposit accounts.
SECTION 11
REMEDIES
Section 11.1. Specific Remedies. Upon the occurrence of
any Event of Default:
(a) Lender may cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under any of the other Loan
Documents, or under any other agreement between Borrower and Lender.
(b) Lender may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, further demand, protest or other notice of any kind, all of which
are hereby expressly waived by Borrower, all defaulted Obligations shall bear
interest at the rate of eighteen percent (18%) per annum.
(c) Lender may set off against the Obligations all Collateral,
balances, credits, deposits, accounts, or moneys of Borrower then or thereafter
held with Lender, including amounts represented by certificates of deposit.
(d) Lender may enter any premises of Borrower, with or without
judicial process, and take possession of the Collateral; provided however, that
Lender may only exercise such remedy if it may do so without a breach of the
peace. Lender may remove the Collateral and may remove and/or copy all records
pertaining thereto, and/or Lender may remain on such premises and use the
premises for the purpose of collecting, preparing and disposing of the
Collateral, without any liability for rent or occupancy
26
<PAGE>
charges. Borrower shall, upon request of Lender, assemble the Collateral and any
records pertaining thereto and make them available at a place designated by
Lender that is reasonably convenient to both parties.
(e) Lender may dispose of the Collateral in its then-existing
condition or, at its election, may take such measures as it deems necessary or
advisable to improve, process, finish, operate, demonstrate and prepare for sale
the Collateral, and may store, ship, reclaim, recover, protect, advertise for
sale or lease and insure the Collateral. Lender may use and operate equipment of
Borrower in order to process or finish inventory included in the Collateral. If
any Collateral consists of documents, Lender may proceed either as to the
documents or as to the goods represented thereby.
(f) Lender may pay, purchase, contest or compromise any
encumbrance, charge or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
(g) Lender may (i) notify Account Debtors to make payment on
Accounts directly to Lender; (ii) settle, adjust, compromise, extend or renew
Accounts, whether before or after legal proceedings to collect such Accounts
have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar
documents against any Account Debtor; (iv) prepare and file any notice,
assignment, satisfaction, or release of Lien, UCC termination statement or any
similar document; (v) sell or assign Accounts, individually or in bulk, upon
such terms, for such amounts, and at such time or times as Lender deems
advisable; (vi) complete the performance required of Borrower under any contract
or agreement to which Borrower is a party and out of which Accounts arise or may
arise; and (vii) obtain a mandatory injunction to the remedies provided for in
this Agreement. Lender may use and operate Borrower's equipment for all such
purposes.
(h) Lender may (i) endorse Borrower's name on all checks,
notes, drafts, money orders or other forms of payment of or security for
Accounts or other Collateral; (ii) sign Borrower's name on drafts drawn on
Account Debtors or issuers of letters of credit; and (iii) notify the postal
authorities in Borrower's name to change the address for delivery of Borrower's
mail to an address designated by Lender, receive and open all mail addressed to
Borrower, copy all mail, return all mail relating to Collateral, and hold all
other mail available for pickup by Borrower.
(i) Lender may sell the Collateral at public or private sale
and is not required to repossess Collateral before selling it. Any requirement
of reasonable notice of any disposition of the Collateral shall be satisfied if
such notice is sent to Borrower, ten (10) days prior to such disposition or by
any of the methods provided in Section 13.5 hereof. Borrower shall be credited
with the net proceeds of such sale only when they are actually received
27
<PAGE>
by Lender, and Borrower shall continue to be liable for any deficiency remaining
after the Collateral is sold or collected.
(j) If the sale is to be a public sale, Lender shall also give
notice of the time and place by publishing a notice one time at least five (5)
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held.
(k) To the maximum extent permitted by applicable law, Lender
may be the purchaser of any or all of the Collateral at any public sale and
shall be entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Collateral sold at any
public sale, to use and apply all or any part of the Obligations as a credit on
account of the purchase price of any Collateral payable by Lender at such sale.
Section 11.2. Power of Attorney. Borrower hereby appoints
Lender (and any of Lender's officers, employees, or agents designated by Lender)
as Borrower's attorney, with power whether before or after the occurrence of an
Event of Default: (a) to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into Lender's possession; (b) to sign Borrower's name on drafts against
Account Debtors, on schedules and assignments of Accounts, on verifications of
Accounts, and on notices to Account Debtors; (c) to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender, to receive and open all mail addressed to Borrower and to
retain all mail relating to the Collateral and forward all other mail to
Borrower; (d) to send requests for verification of Accounts; and (e) to do all
things necessary to carry out this Agreement. The appointment of Lender as
Borrower's attorney and each and every one of Lender's rights and powers, being
coupled with an interest, are irrevocable as long as any Obligations are
outstanding. Lender agrees not to exercise the power granted in clauses (a), (b)
and (c) above prior to the occurrence of an Event of Default, but such
limitation does not limit the effectiveness of such power of attorney at any
time. Any person dealing with Lender shall be entitled to rely conclusively on
any written or oral statement of Lender that this power of attorney is in
effect. Lender may also use Borrower's stationery in connection with exercising
its rights and remedies and performing the Obligations of Borrower.
Section 11.3. Expenses Secured. All expenses, including
attorney fees, incurred by Lender in the exercise of its rights and remedies
provided in this Agreement, in any other Loan Document, or by law shall be
payable by Borrower to Lender, shall be part of the Obligations, and shall be
secured by the Collateral.
Section 11.4. Equitable Relief. Borrower recognizes
that in the event Borrower fails to perform, observe, or discharge
any of its Obligations or liabilities under this Agreement, no
remedy of law will provide adequate relief to Lender, and Borrower
28
<PAGE>
agrees that Lender shall be entitled to temporary and permanent injunctive
relief in any such case without the necessity of proving actual damages.
Section 11.5. Remedies Are Cumulative. No remedy set forth
herein is exclusive of any other available remedy or remedies, but each is
cumulative and in addition to every other right or remedy given under this
Agreement or under any other agreement between Lender and Borrower or Guarantor
or now or hereafter existing at law or in equity or by statute. Lender may
pursue its rights and remedies concurrently or in any sequence, and no exercise
of one right or remedy shall be deemed to be an election. No delay by Lender
shall constitute a waiver, election or acquiescence by it. Borrower on its
behalf waives any rights to require Lender to (i) proceed against any other
Borrower, Guarantor or any other party; or (ii) proceed against or exhaust any
security held from any other Borrower or Guarantor. Lender may at any time and
from time to time, without notice to, or consent of, Borrower, and without
affecting or impairing the obligation of Borrower hereunder do any of the
following: (i) renew or extend any Obligations of any Borrower or Guarantor, or
of any other party at any time directly or contingently liable for payment of
any of said Obligations; (ii) accept partial payments of said Obligations to any
Borrower or Guarantor; (iii) settle, release (by operation of law or otherwise),
compound, compromise, collect or liquidate any of said Obligations of any
Borrower or Guarantor and the security therefor in any manner; (iv) consent to
the transfer or sale of any security or bid and purchase at any sale of any
security of any Borrower or Guarantor. Borrower expressly agrees that the
validity of this Agreement and the Obligations of Borrower shall not be
terminated, affected or impaired by reason of the waiving, delaying, exercising
or non-exercising, of any of Lender's rights against any Borrower or Guarantor
or as a result of the substitution, release, repossession, sale, disposition or
destruction of any Collateral securing any Obligations of Borrower or Guarantor.
Lender shall not be released or discharged, either in whole or in part, by
Lender's failure or delay to perfect or continue the perfection of any security
interest in any Collateral which secures the Obligations of any Borrower or
Guarantor or to protect the property covered by such security interest.
SECTION 12
INDEMNITY
Section 12.1. General Indemnity. Borrower shall protect,
indemnify and defend and save harmless Lender and its directors, officers,
agents and employees from and against any and all loss, cost, liability
(including negligence, tort and strict liability), expense, damage, suits or
demands (including fees and disbursements of counsel), and expenses, on account
of any suit or proceeding before any Governmental Authority which arises from
the transactions contemplated in this Agreement or otherwise arising in
29
<PAGE>
connection with or relating to the Loan and any security therefor, unless such
suit, claim or damages are caused by the negligence or intentional malfeasance
of Lender or its directors, officer, agents or employees. Upon receiving
knowledge of any suit, claim or demand asserted by a third-party that Lender
believes is covered by this indemnity, Lender shall give Borrower timely notice
of the matter and an opportunity to defend it, at Borrower's sole cost and
expense, with legal counsel acceptable to Lender. Lender may, at its option,
also require Borrower to so defend the matter. This obligation on the part of
Borrower shall survive the termination of this Agreement and the repayment of
the Note.
SECTION 13
MISCELLANEOUS
Section 13.1. Delay and Waiver. No delay or omission to
exercise any right shall impair any such right or be a waiver thereof, but any
such right may be exercised from time to time and as often as may be deemed
expedient. A waiver on one occasion shall be limited to that particular
occasion.
Section 13.2. Complete Agreement. This Agreement and the
Exhibits and Schedules hereto are the complete agreement of the parties hereto
and supersede all previous understandings relating to the subject matter hereof.
This Agreement may be amended only by an instrument in writing that explicitly
states that it amends this Agreement and is signed by the party against whom
enforcement of the amendment is sought. This Agreement may be executed in
counterparts, each of which will be an original and all of which will constitute
a single agreement.
Section 13.3. Severability; Headings. If any part of this
Agreement or the application thereof to any person or circumstance is held
invalid, the remainder of this Agreement shall not be affected thereby. The
section headings herein are included for convenience only and shall not be
deemed to be a part of this Agreement.
Section 13.4. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the respective legal representatives,
successors and assigns of the parties hereto; however, Borrower may not assign
any of its rights or delegate any of its Obligations hereunder. Lender (and any
subsequent assignee) may transfer and assign this Agreement and deliver the
Collateral to the assignee, who shall thereupon have all of the rights and
obligations of Lender; and Lender (or such subsequent assignee who in turn
assigns as aforesaid) shall then be relieved and discharged of any
responsibility or liability with respect to this Agreement and said Collateral.
Section 13.5. Notices. Any notices under or pursuant to
this Agreement shall be deemed duly sent when delivered in hand or
30
<PAGE>
when mailed by registered or certified mail, return receipt requested, or when
delivered by courier or when transmitted by telex, facsimile, or similar
electronic medium to the following addresses:
To Borrower: MRI/Boca Raton
MRI/South Dade
Pine Island MRI
PODC
c/o International Magnetic Imaging, Inc.
2424 North Federal Highway
Boca Raton, Florida 33431
Attention: George Mahoney
Chief Financial Officer
Telephone: (407) 362-0917
Facsimile: (407) 347-5352
Copies to: Robert L. Blessey, Esq.
Attorney at Law
51 Lyon Ridge Road
Katonah, New York 10536
Telephone: (914) 232-6842
Facsimile: (914) 232-0647
To Lender: DVI Business Credit Corporation
500 Hyde Park
Doylestown, Pennsylvania 18901
Attention: Melvin C. Breaux
Vice President
Telephone: (215) 345-6600
Facsimile: (215) 230-8108
Copies to: Jeffrey J. Wong, Esq.
Cooper, White & Cooper
201 California Street, 17th Floor
San Francisco, CA 94111
Telephone: (415) 433-1900
Facsimile: (415) 433-5530
Either party may change such address by sending notice of the change to
the other party; such change of address shall be effective only upon actual
receipt of the notice by the other party.
31
<PAGE>
Section 13.6. Governing Law. ALL ACTS AND TRANSACTIONS
HEREUNDER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO
SHALL BE GOVERNED, CONSTRUED, AND INTERPRETED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF PENNSYLVANIA.
Section 13.7. Jurisdiction. Borrower agrees that the state and
federal courts in Orange County, California or any other court in which Lender
initiates proceedings have exclusive jurisdiction over all matters arising out
of this Agreement and that service of process in any such proceeding shall be
effective if mailed to Borrower at its address described in the Notices section
of this Agreement. Borrower waives any right it may have to assert the defense
of forum non conveniens or to object to such venue and hereby consents to any
court-ordered relief.
Section 13.8. Waiver of Trial by Jury. LENDER,
GUARANTOR AND BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF
ANY MATTERS ARISING OUT OF THIS AGREEMENT OR ANY OF THE SECURITY
DOCUMENTS OR THE CONDUCT OF THE RELATIONSHIP BETWEEN LENDER,
GUARANTOR AND BORROWER.
Section 13.9. Consent. By its execution hereof, DVI Financial
Services Inc. d/b/a DVI Capital ("DVI"), hereby acknowledges and consents that
the Lien created under this Agreement shall be a Permitted Lien under the
existing Loan and Security Agreement between DVI and the general and limited
partner of Borrower.
[SIGNATURE BLOCKS ON FOLLOWING PAGES]
32
<PAGE>
LOAN AND SECURITY AGREEMENT
[SIGNATURE BLOCKS]
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have executed this
Agreement by their duly authorized officers as of the date first above written.
MAGNETIC RESONANCE INSTITUTE DVI BUSINESS CREDIT CORPORATION,
OF BOCA RATON, LTD., Borrower Lender
By: IMI ACQUISITION OF BOCA
RATON CORPORATION,
ITS GENERAL PARTNER
By: By:
Name: Lewis S. Schiller Name: Melvin C. Breaux
Title: President Title: Vice President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD., Borrower
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD., Borrower
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS OUTPATIENT DIAGNOSTIC
CENTER, LTD., Borrower
By: PODC ACQUISITION CORPORATION,
ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
33
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC., Guarantor
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF ARLINGTON CORP., Guarantor
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO CORPORATION, Guarantor
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS CORPORATION, Guarantor
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., Guarantor
By: IMI ACQUISITION OF NORTH MIAMI BEACH, CORPORATION
ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD., Guarantor
By: IMI ACQUISITION OF OAKLAND PARK CORPORATION,
ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION, Guarantor
By:
Name: Lewis S. Schiller
Title: President
34
<PAGE>
AGREED TO AS TO SECTION 9.14 HEREOF
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
AGREED TO AS TO SECTION 9.14 HEREOF
MD LTD. PARTNER ACQ. CORPORATION
By:
Name: Lewis S. Schiller
Title: President
AGREED TO AS TO SECTION 13.9 HEREOF
DVI FINANCIAL SERVICES INC. d/b/a DVI CAPITAL
By:
Name: Melvin C. Breaux
Title: Vice President
35
<PAGE>
MAGNETIC RESONANCE INSTITUTE OF BOCA RATON, LTD.
Schedule 1.1 - PERMITTED LIENS
1. SunBank/South Florida
Real property mortgage (land, building and improvements) September 30,
1994 Due September 30, 2004 $971,822 principal Monthly payment of
$9,258 plus interest at prime plus 1.00%
2. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$1,012,577 principal
Monthly payment of $27,319 which includes interest at 10.50%
3. DVI Capital Company
Personal property
April 4, 1995
Due April 4, 2000
$264,714 principal
Monthly payment of $6,488 which includes interest at 11.50%
<PAGE>
MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE LTD.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$321,858 principal
Monthly payment of $8,684 which includes interest at 10.50%
<PAGE>
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD.
Schedule 1.1 - PERMITTED LIENS
1. Capital Bank
Real property mortgage (land, building and improvements) October 20,
1995 Due October 18, 2000 $222,701 principal Monthly payment of $2,942
which includes interest 9.75%
2. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$1,079,497 principal
Monthly payment of $29,124 which includes interest at 10.50%
3. DVI Capital Company
Personal property
April 4, 1995
Due April 4, 2000
$264,714 principal
Monthly payment of $6,488 which includes interest at 11.50%
<PAGE>
PHYSICIANS OUTPATIENT DIAGNOSTIC CENTER, LTD.
Schedule 1.1 - PERMITTED LIENS
1. General Electric
Equipment capital lease
May 1, 1995
April 2, 1997 is end of least term
$1 buyout
$22,909 principal
Monthly payment of $1,546 which includes interest at 11%
2. General Electric
Equipment capital lease
June 1, 1995
May 1, 1997 is end of least term
$1 buyout
$40,284 principal
Monthly payment of $2,542 which includes interest at 9.5%
<PAGE>
INTERNATIONAL MAGNETIC IMAGING INC.
Schedule 1.1 - PERMITTED LIENS
1. Capital Bank
Personal property
February 1, 1994
Due July 1, 1996
$93,200 principal
Monthly payments of $13,666 plus interest at 7.5%
2. United States Leasing International, Inc.
December 1, 1993
November 30, 1998 is end of lease term
Options at lease end -
1) Renew for additional year
2) Return the equipment
3) Purchase the equipment greater of the then FMV or
10% of the original cost
$139,709 principal
Monthly payments of $4,448 which includes interest at 10%
3. Republic Leasing
May 5, 1995
April 5, 1999 is end of lease term
Put at lease end - $7,996
$68,016 principal
Monthly payments of $2,140 which includes interest at 17.25%
4. Bell South Financial
February 7, 1995
January 7, 1997 is end of lease term
$1 buyout
$27,071 principal
Monthly payments of $2,264 which includes interest at 14.5%
<PAGE>
IMI ACQUISITION OF ARLINGTON CORP.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$783,133 principal
Monthly payment of $21,129 which includes interest at 10.50%
3. DVI Capital Company
Personal property
April 4, 1995
Due April 4, 2000
$324,837 principal
Monthly payment of $7,962 which includes interest at 11.50%
<PAGE>
IMI ACQUISITION OF PUERTO RICO CORPORATION
Schedule 1.1 - PERMITTED LIENS
1. Banco Santander
Real property mortgage (land, building and improvements) February 7,
1994 Due February 7, 1999 $516,673 principal Monthly payment of $8,333
plus interest at prime + 1 Balloon payment
2. General Electric
Equipment Capital Lease
September 1, 1990
September 1, 1996 is end of lease term
Options at end of lease -
1) Lease renewal for 1 or 2 years
2) Fair market value purchase
3) Return equipment
$278,469 principal
Monthly payment of $32,350 which includes interest at 10.80%
<PAGE>
IMI ACQUISITION OF KANSAS CORPORATION
Schedule 1.1 - PERMITTED LIENS
1. General Electric
Equipment Conditional Sales Type Lease January 25, 1993 January 25,
1999 is end of lease term Put at lease end - $175,294 $1,083,922
principal
Monthly payment of $30,890 which includes interest at 10.50%
2.. General Electric
Leasehold improvement loan
January 1, 1993
Due April 1, 1997
$147,008 principal
Monthly payment of $16,241 which includes interest at 9.5%
3. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$697,093 principal
Monthly payment of $18,807 which includes interest at 10.50%
4. General Electric
Equipment capital lease
July 1, 1995
June 1, 2000 is end of lease term
$1 buyout
$499,117 principal
Monthly payment of $11, 736 which includes interest at 11.375%
<PAGE>
IMI RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$960,792 principal
Monthly payment of $25,922 which includes interest at 10.50%
<PAGE>
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$399,136 principal
Monthly payment of $10,768 which includes interest at 10.50%
<PAGE>
MD ACQUISITION CORPORATION
SCHEDULE 1.1 - PERMITTED LIENS
NONE
<PAGE>
Schedule 1.1(ab)
NET COLLECTIBLE VALUE
<PAGE>
Schedule 6.1
CONTRACTS
<PAGE>
Schedule 8.6
LITIGATION AND PROCEEDINGS
<PAGE>
Schedule 9.11
PERMITTED DISTRIBUTIONS
Payments and fees for consulting management, radiology and other medical,
financial and administrative services rendered in the ordinary course of
business.
Agreements:
Redemption Agreement and Subordinated Promissory Notes of Borrower to its former
limited partners.
Employment Agreements between International Magnetic Imaging, Inc.
(formerly IMI Acquisition Corp.) ("IMI") and Messrs. Schulman and
Mahoney, as amended through the date hereof.
Radiology Agreement between IMI and Expert Radiology Network, P.A., as amended
through the date hereof.
Restrictive Covenant Agreements between IMI and Drs. Sternberg and
Kaye.
Agreements between IMI and Advanced NMR Systems, Inc.
<PAGE>
Exhibit 10.10
SECURED PROMISSORY Note
Due December 28, 1998
1. FOR VALUE RECEIVED, the undersigned Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians Outpatient
Diagnostic Center Ltd., and each of them, jointly and severally, (collectively
and individually referred to as "Maker") hereby promises to pay to DVI Business
Credit Corporation or its assignee (the "Holder"), or order, principal in the
sum of Three Million Dollars ($3,000,000), or such amount thereof that may be
from time to time advanced hereunder, pursuant to the terms of that certain Loan
and Security Agreement dated as of the date hereof among Holder as Lender, Maker
as Borrower, and the Guarantors listed therein (the "Agreement"), with interest
on the unpaid principal balance from time to time outstanding until paid at the
fluctuating prime rate of interest announced publicly by Bank of America, NT&SA
in San Francisco, California, from time to time as its base rate plus three and
one-half percent (3.5%) per annum, computed on the basis of a 360 day year and
actual days elapsed, until paid. Interest shall be payable monthly on the unpaid
principal amount of this Note in arrears, on the first (1st) day of the month
for the preceding month in accordance with the terms of the Agreement, with all
unpaid principal and interest due and payable in full on the Termination Date.
All capitalized terms not defined herein shall have the meanings ascribed to
them in the Agreement, the terms of which are incorporated herein by reference
thereto.
2. If any part of the interest due on this Note is not paid
when due, it shall be added to the principal amount of this Note and thereafter
bear interest at the rate provided above. If the specified interest rate shall
at any time exceed the maximum allowed by law, then the applicable interest rate
shall be reduced to the maximum allowed by law. This Note shall be subject to
prepayment in accordance with the provisions of Sections 2.5 and 2.6 of the
Agreement.
3. Principal and interest shall be payable to Holder in
accordance with the provisions of the Lockbox Agreement provided for in the
Agreement or at DVI Business Credit Corporation, 500 Hyde Park, Doylestown,
Pennsylvania 18901, or such other place as the Holder may, from time to time in
writing,
designate.
4. This Note is made pursuant to, and secured by, the
Agreement. This Note is also secured by any Security Documents
1
<PAGE>
referred to in the Agreement. The Agreement and the Security Documents create a
lien on and security interest in, the personal property described therein
("Collateral"). The Agreement and the Security Documents shall hereinafter be
collectively referred to as the "Loan and Security Documents" and are hereby
incorporated by reference in and made a part of this Note.
5. The occurrence of any Event of Default under the Agreement
shall, at the election of the Holder, make the entire unpaid balance of the
principal amount of this Note and accrued interest immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option
of paragraph 6 of this Note on the occurrence of any of the events enumerated
therein shall not constitute waiver of the right to exercise such option on the
subsequent occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of
the United States of America which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment. If any payment of
principal or interest under this Note becomes due on a Saturday, Sunday or legal
or banking holiday, such payment will be due on the next succeeding business
day. Maker waives presentment, demand for payment, notice of nonpayment,
protest, and notice of protest, and all other notices and demands in connection
with the delivery, acceptance, performance, default, or enforcement of this
Note, except as specifically provided in the Agreement. Maker consents to any
and all assignments of this Note, extensions of time, renewals, and waivers that
may be made or granted by the Holder. Maker expressly agrees that such
assignments, extensions of time, renewals, or waivers shall not affect Maker's
liability hereunder. Maker agrees that Holder may, without notice to Maker and
without affecting the liability of Maker, accept additional or substitute
security for this Note, or release any security or any party liable for this
Note, or extend or renew this Note.
8. If Maker shall fail to make any payment of interest or
principal, including the payment due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages shall be immediately due and payable. Maker
recognizes that default by Maker in making the payments herein agreed to be paid
when due will result in the Holder incurring additional expenses, in loss to the
Holder of the use of the money due and in frustration to the Holder in meeting
its other commitments. Maker agrees that, if for any reason Maker fails to pay
any amount due under this Note when due, the Holder shall be entitled to damages
for the
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detriment caused thereby, but that it is extremely difficult and impractical to
ascertain the extent of such damages. Maker therefore agrees that a sum equal to
ten cents ($.10) for each one dollar ($1.00) of each payment which is not
received within five (5) days after the date it is due and payable is a
reasonable estimate of the said damages to the Holder, which sum Maker agrees to
pay on demand.
9. If action be instituted on this Note (including without
limitation, any proceedings for collection hereof in any bankruptcy or probate
matter or case), or if proceedings are commenced on or under any of the Loan and
Security Documents, Maker promises to pay the Holder all costs of collection and
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount of the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments
required or permitted to be given hereunder shall be effective when received or
refused if given or rendered in writing, in the manner provided in the
Agreement.
11. This Note shall inure to the benefit of and be binding
upon the Holder's successors and assigns. References to the "Holder" shall be
deemed to refer to the holder(s) of this Note at the time such reference becomes
relevant.
12. If any term, provision, covenant, or condition of this
Note is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the rest of this Note shall remain in full force and effect to
the greatest extent permitted by law and shall in no other way be affected,
impaired or invalidated.
13. Nothing contained herein or in the Loan and Security
Documents shall be deemed to prevent recourse to and the enforcement against
Maker and the Collateral of all liabilities, obligations and undertakings
contained herein and in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION
OF THE STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
[SIGNATURE BLOCKS ON FOLLOWING PAGE]
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SECURED PROMISSORY NOTE
Due December 28, 1998
DATED: December 29, 1995
MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., Maker
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, ITS
GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD., Maker
By: IMI ACQUISITION OF SOUTH
DADE CORPORATION, ITS
GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD., Maker
By: IMI ACQUISITION OF PINE
ISLAND CORPORATION, ITS
GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS OUTPATIENT DIAGNOSTIC
CENTER, LTD., Maker
By: PODC ACQUISITION
CORPORATION, ITS GENERAL
PARTNER
By:
Name: Lewis S. Schiller
Title: President
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<PAGE>
SECURED PROMISSORY Note
Due December 28, 1998
1. FOR VALUE RECEIVED, the undersigned IMI ACQUISITION OF
ARLINGTON CORP., IMI ACQUISITION OF PUERTO RICO CORPORATION, IMI ACQUISITION OF
KANSAS CORPORATION, MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD.,
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD., and MD ACQUISITION CORPORATION, and
each of them, jointly and severally, (collectively and individually referred to
as "Maker") hereby promises to pay to DVI Business Credit Corporation or its
assignee (the "Holder"), or order, principal in the sum of Three Million Dollars
($3,000,000), or such amount thereof that may be from time to time advanced
hereunder, pursuant to the terms of that certain Loan and Security Agreement
dated as of the date hereof among Holder as Lender, Maker as Borrower, and the
Guarantors listed therein (the "Agreement"), with interest on the unpaid
principal balance from time to time outstanding until paid at the fluctuating
prime rate of interest announced publicly by Bank of America, NT&SA in San
Francisco, California, from time to time as its base rate plus three and
one-half percent (3.5%) per annum, computed on the basis of a 360 day year and
actual days elapsed, until paid. Interest shall be payable monthly on the unpaid
principal amount of this Note in arrears, on the first (1st) day of the month
for the preceding month in accordance with the terms of the Agreement, with all
unpaid principal and interest due and payable in full on the Termination Date.
All capitalized terms not defined herein shall have the meanings ascribed to
them in the Agreement, the terms of which are incorporated herein by reference
thereto.
2. If any part of the interest due on this Note is not paid
when due, it shall be added to the principal amount of this Note and thereafter
bear interest at the rate provided above. If the specified interest rate shall
at any time exceed the maximum allowed by law, then the applicable interest rate
shall be reduced to the maximum allowed by law. This Note shall be subject to
prepayment in accordance with the provisions of Sections 2.5 and 2.6 of the
Agreement.
3. Principal and interest shall be payable to Holder in
accordance with the provisions of the Lockbox Agreement provided for in the
Agreement or at DVI Business Credit Corporation, 500 Hyde Park, Doylestown,
Pennsylvania 18901, or such other place as the Holder may, from time to time in
writing,
designate.
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4. This Note is made pursuant to, and secured by, the
Agreement. This Note is also secured by any Security Documents referred to in
the Agreement. The Agreement and the Security Documents create a lien on and
security interest in, the personal property described therein ("Collateral").
The Agreement and the Security Documents shall hereinafter be collectively
referred to as the "Loan and Security Documents" and are hereby incorporated by
reference in and made a part of this Note.
5. The occurrence of any Event of Default under the Agreement
shall, at the election of the Holder, make the entire unpaid balance of the
principal amount of this Note and accrued interest immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option
of paragraph 6 of this Note on the occurrence of any of the events enumerated
therein shall not constitute waiver of the right to exercise such option on the
subsequent occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of
the United States of America which shall be legal tender in payment of all debts
and dues, public and private, at the time of payment. If any payment of
principal or interest under this Note becomes due on a Saturday, Sunday or legal
or banking holiday, such payment will be due on the next succeeding business
day. Maker waives presentment, demand for payment, notice of nonpayment,
protest, and notice of protest, and all other notices and demands in connection
with the delivery, acceptance, performance, default, or enforcement of this
Note, except as specifically provided in the Agreement. Maker consents to any
and all assignments of this Note, extensions of time, renewals, and waivers that
may be made or granted by the Holder. Maker expressly agrees that such
assignments, extensions of time, renewals, or waivers shall not affect Maker's
liability hereunder. Maker agrees that Holder may, without notice to Maker and
without affecting the liability of Maker, accept additional or substitute
security for this Note, or release any security or any party liable for this
Note, or extend or renew this Note.
8. If Maker shall fail to make any payment of interest or
principal, including the payment due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages shall be immediately due and payable. Maker
recognizes that default by Maker in making the payments herein agreed to be paid
when due will result in the Holder incurring additional expenses, in loss to the
Holder of the use of the money due and in frustration to the Holder in meeting
its other commitments. Maker agrees that,
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<PAGE>
if for any reason Maker fails to pay any amount due under this Note when due,
the Holder shall be entitled to damages for the detriment caused thereby, but
that it is extremely difficult and impractical to ascertain the extent of such
damages. Maker therefore agrees that a sum equal to ten cents ($.10) for each
one dollar ($1.00) of each payment which is not received within five (5) days
after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without
limitation, any proceedings for collection hereof in any bankruptcy or probate
matter or case), or if proceedings are commenced on or under any of the Loan and
Security Documents, Maker promises to pay the Holder all costs of collection and
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount of the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments
required or permitted to be given hereunder shall be effective when received or
refused if given or rendered in writing, in the manner provided in the
Agreement.
11. This Note shall inure to the benefit of and be binding
upon the Holder's successors and assigns. References to the "Holder" shall be
deemed to refer to the holder(s) of this Note at the time such reference becomes
relevant.
12. If any term, provision, covenant, or condition of this
Note is held by a court of competent jurisdiction to be invalid, void, or
unenforceable, the rest of this Note shall remain in full force and effect to
the greatest extent permitted by law and shall in no other way be affected,
impaired or invalidated.
13. Nothing contained herein or in the Loan and Security
Documents shall be deemed to prevent recourse to and the enforcement against
Maker and the Collateral of all liabilities, obligations and undertakings
contained herein and in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE
LAWS OF THE STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION
OF THE STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
[SIGNATURE BLOCKS ON FOLLOWING PAGE]
3
<PAGE>
SECURED PROMISSORY NOTE
Due December 28, 1998
DATED: December 29, 1995
IMI ACQUISITION OF ARLINGTON CORP., Maker
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO CORPORATION, Maker
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS CORPORATION, Maker
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., Make
By: IMI ACQUISITION OF NORTH MIAMI BEACH, CORPORATION
ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD., Maker
By: IMI ACQUISITION OF OAKLAND PARK CORPORATION,
ITS GENERAL PARTNER
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION, Maker
By:
Name: Lewis S. Schiller
Title: President
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<PAGE>
Exhibit 10.11
PARENT GUARANTY - GROUP 1 LOAN
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of December 29, 1995, by and between DVI Business Credit
("Lender"), with an office at 500 Hyde Park, Doylestown, Pennsylvania 18901, and
International Magnetic Imaging, Inc. ("Guarantor") whose address is 2424 North
Federal Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement dated as of December 29,
1995 ("Agreement"), with Magnetic Resonance Institute of Boca Raton Ltd.,
Magnetic Resonance Institute of South Dade, Ltd., Pine Island Magnetic Resonance
Imaging Center, Ltd., and Physicians Outpatient Diagnostic Center, Ltd.,
collectively and individually referred to as "Borrower", and any future
agreements with Borrower. Guarantor unconditionally, absolutely and irrevocably
guarantees and promises to Lender to pay, perform and discharge, any and all
present and future indebtedness, liabilities and obligations (collectively, the
"Obligations") of Borrower to Lender, including, but not limited to, the
repayment to Lender of all sums presently due and owing, and all sums that shall
in the future become due and owing, from Borrower to Lender whether arising
under the Agreement or otherwise. The Obligations of Borrower include, but are
not limited to, Borrower acting on behalf of itself or any estate created by the
commencement of a case under Title 11 of the United States Code or any successor
statute thereto (the "Bankruptcy Code") or any other insolvency, bankruptcy,
reorganization or liquidation proceeding, or by any trustee under the Bankruptcy
Code, liquidator, sequestrator or receive of Borrower or Borrower's property or
similar person duly appointed pursuant to any law generally governing any
insolvency, bankruptcy, reorganization, liquidation, receivership or like
proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or expenses, including without limitation taxes and insurance
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premiums, required to be paid by Borrower under the Agreement that are to be
paid or advanced by Lender, (B) filing, recording, publication and search fees
paid or incurred by Lender in connection with Lender's transactions with
Borrower, (C) costs and expenses incurred by Lender to correct any default or
enforce any provision of the Agreement, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, and/or advertising to sell any security for, the Obligations (whether or
not a sale is consummated), (D) costs and expenses of suit incurred by Lender in
enforcing or defending the Agreement or any portion thereof and (E) Lender's
reasonable attorney's fees and expenses incurred in advising, structuring,
drafting, reviewing, negotiating, amending, terminating, enforcing, defending or
concerning the Agreement or any portion thereof, irrespective of whether suit is
brought, and (b) includes Borrower's prompt, full and faithful performance,
observance and discharge of each and every term, condition, agreement,
representation, warranty, undertaking and provision to be performed by Borrower
under the Agreement. Guarantor's liability under this Guaranty may be larger in
amount and more burdensome than the Obligations of Borrower under the Agreement
and Guarantor hereby waives any defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice or the consent of Guarantor, and without affecting
or impairing the liability of Guarantor hereunder, do any of the following: (i)
renew, modify, or extend (including extensions beyond the original term) any
Obligations of Borrower, of its customers, of any co-guarantors (whether
hereunder or under a separate instrument) or of any other party at any time
directly or contingently liable for the payment of any said Obligations; (ii)
accept partial payments of said Obligations; (iii) settle, discharge, release
(by operation of law or otherwise), compound, compromise, collect or liquidate
any of said Obligations and the security therefor in any manner; (iv) consent to
the transfer or sale of security, or (v) bid and purchase at any sale of any
security; or (vi) change the terms of the Obligations, including increases or
decreases in payments or any interest rate adjustments.
(b) Primary Obligation Defenses. Guarantor waives any
rights to require Lender to (i) proceed against Borrower or any other guarantor
or party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
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<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c). Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to any of the Agreement or against Guarantor by reason of this Guaranty or as a
result of the substitution, release, repossession, sale, disposition or
destruction of any collateral or of the items leased or to be leased to
Borrower. Guarantor shall not be released or discharged, either in whole or in
part, by Lender's failure or delay (a) to perfect or continue the perfection of
any security interest in any property which secures the Obligations of Borrower
or Guarantor to Lender or (b) to protect the property covered by such security
interest.
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<PAGE>
(f) Guarantor's Right To Revoke. Guarantor expressly
waives the right to revoke or terminate this Guaranty, including any statutory
right of revocation under the laws of any state.
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lessor repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
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<PAGE>
(a) The occurrence of an Event of Default under and as
defined in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter or;
(g) The breach by Guarantor of any covenant of this
Guaranty or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists. This Guaranty may
not be amended or modified except by a writing signed by Lender and Guarantor.
This Guaranty is a valid and subsisting legal instrument and no provision which
may be deemed unenforceable shall in any way invalidate any other provision or
provisions, all of which shall remain in full force and effect. No invalidity,
irregularity or unenforceability of all or any part of the Obligations nor any
other circumstance which might be a legal defense of a guarantor shall affect,
impair or be a defense to this Guaranty. If more than one Guarantor has signed
this Guaranty, each Guarantor shall be jointly and severally liable to Lender
hereunder and when permitted by the context, the singular includes the plural.
Each of the persons who has signed this or any other Guaranty has
unconditionally delivered it to Lender, and the failure to sign this or any
other Guaranty by any other person shall not discharge the liability of any
signer. The unconditional liability of the signer applies whether the signer is
jointly and severally liable for the entire amount of the debt, or for only a
pro-rata portion. Guarantor shall remain liable under this Guaranty even if any
co-guarantor is released or discharged for any reason.
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11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
PENNSYLVANIA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
GUARANTOR AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR
FEDERAL COURTS ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR HEREBY WAIVES
THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS GUARANTY OR THE
CONDUCT OF THE RELATIONSHIP BETWEEN LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By___________________
[Type Name]
Its__________________
[Title]
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<PAGE>
PARENT GUARANTY - GROUP 2 LOAN
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of December 29, 1995, by and between DVI Business Credit
("Lender"), with an office at 500 Hyde Park, Doylestown, Pennsylvania 18901, and
International Magnetic Imaging, Inc. ("Guarantor") whose address is 2424 North
Federal Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement dated as of December __,
1995 ("Agreement"), with IMI Acquisition of Arlington Corp., IMI Acquisition of
Puerto Rico Corporation, IMI Acquisition of Kansas Corporation, Magnetic
Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic Resonance
Institute, Ltd., MD Acquisition Corporation, collectively and individually
referred to as "Borrower", and any future agreements with Borrower. Guarantor
unconditionally, absolutely and irrevocably guarantees and promises to Lender to
pay, perform and discharge, any and all present and future indebtedness,
liabilities and obligations (collectively, the "Obligations") of Borrower to
Lender, including, but not limited to, the repayment to Lender of all sums
presently due and owing, and all sums that shall in the future become due and
owing, from Borrower to Lender whether arising under the Agreement or otherwise.
The Obligations of Borrower include, but are not limited to, Borrower acting on
behalf of itself or any estate created by the commencement of a case under Title
11 of the United States Code or any successor statute thereto (the "Bankruptcy
Code") or any other insolvency, bankruptcy, reorganization or liquidation
proceeding, or by any trustee under the Bankruptcy Code, liquidator,
sequestrator or receive of Borrower or Borrower's property or similar person
duly appointed pursuant to any law generally governing any insolvency,
bankruptcy, reorganization, liquidation, receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without
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limitation (A) all costs or expenses, including without limitation taxes and
insurance premiums, required to be paid by Borrower under the Agreement that are
to be paid or advanced by Lender, (B) filing, recording, publication and search
fees paid or incurred by Lender in connection with Lender's transactions with
Borrower, (C) costs and expenses incurred by Lender to correct any default or
enforce any provision of the Agreement, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, and/or advertising to sell any security for, the Obligations (whether or
not a sale is consummated), (D) costs and expenses of suit incurred by Lender in
enforcing or defending the Agreement or any portion thereof and (E) Lender's
reasonable attorney's fees and expenses incurred in advising, structuring,
drafting, reviewing, negotiating, amending, terminating, enforcing, defending or
concerning the Agreement or any portion thereof, irrespective of whether suit is
brought, and (b) includes Borrower's prompt, full and faithful performance,
observance and discharge of each and every term, condition, agreement,
representation, warranty, undertaking and provision to be performed by Borrower
under the Agreement. Guarantor's liability under this Guaranty may be larger in
amount and more burdensome than the Obligations of Borrower under the Agreement
and Guarantor hereby waives any defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice or the consent of Guarantor, and without affecting
or impairing the liability of Guarantor hereunder, do any of the following: (i)
renew, modify, or extend (including extensions beyond the original term) any
Obligations of Borrower, of its customers, of any co-guarantors (whether
hereunder or under a separate instrument) or of any other party at any time
directly or contingently liable for the payment of any said Obligations; (ii)
accept partial payments of said Obligations; (iii) settle, discharge, release
(by operation of law or otherwise), compound, compromise, collect or liquidate
any of said Obligations and the security therefor in any manner; (iv) consent to
the transfer or sale of security, or (v) bid and purchase at any sale of any
security; or (vi) change the terms of the Obligations, including increases or
decreases in payments or any interest rate adjustments.
(b) Primary Obligation Defenses. Guarantor waives any
rights to require Lender to (i) proceed against Borrower or any other guarantor
or party; (ii) proceed against
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or exhaust any security held from Borrower or any other guarantor; or (iii)
pursue any other remedy in Lender's power whatsoever. Guarantor waives any
defense based on or arising out of any defense of Borrower, whether such defense
arises by operation of law, bankruptcy of Borrower or otherwise, including
without limitation, any defense based on or arising out of any disability of
Borrower or the unenforceability of the Obligations or any part thereof from any
cause, or the cessation from any cause or the liability of Borrower. Guarantor
waives any defense based on any applicable statute of limitations or statute of
frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c). Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to any of the Agreement or against Guarantor by reason of this Guaranty or as a
result of the substitution, release, repossession, sale, disposition or
destruction of any collateral or of the items leased or to be leased to
Borrower. Guarantor shall not be released or discharged, either in whole or in
part, by Lender's failure or delay (a) to perfect or continue the perfection of
any security interest in any property which secures the Obligations of Borrower
or Guarantor to Lender or (b) to protect the property covered by such security
interest.
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(f) Guarantor's Right To Revoke. Guarantor expressly
waives the right to revoke or terminate this Guaranty, including any statutory
right of revocation under the laws of any state.
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lessor repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
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(a) The occurrence of an Event of Default under and as
defined in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter or;
(g) The breach by Guarantor of any covenant of this
Guaranty or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists. This Guaranty may
not be amended or modified except by a writing signed by Lender and Guarantor.
This Guaranty is a valid and subsisting legal instrument and no provision which
may be deemed unenforceable shall in any way invalidate any other provision or
provisions, all of which shall remain in full force and effect. No invalidity,
irregularity or unenforceability of all or any part of the Obligations nor any
other circumstance which might be a legal defense of a guarantor shall affect,
impair or be a defense to this Guaranty. If more than one Guarantor has signed
this Guaranty, each Guarantor shall be jointly and severally liable to Lender
hereunder and when permitted by the context, the singular includes the plural.
Each of the persons who has signed this or any other Guaranty has
unconditionally delivered it to Lender, and the failure to sign this or any
other Guaranty by any other person shall not discharge the liability of any
signer. The unconditional liability of the signer applies whether the signer is
jointly and severally liable for the entire amount of the debt, or for only a
pro-rata portion. Guarantor shall remain liable under this Guaranty even if any
co-guarantor is released or discharged for any reason.
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11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
PENNSYLVANIA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
GUARANTOR AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR
FEDERAL COURTS ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR HEREBY WAIVES
THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS GUARANTY OR THE
CONDUCT OF THE RELATIONSHIP BETWEEN LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
[Type Name]
Its
[Title]
6
<PAGE>
Exhibit 10.12
LOAN AND SECURITY AGREEMENT
between
IMI ACQUISITION OF ARLINGTON CORP.,
IMI ACQUISITION OF PUERTO RICO CORPORATION,
IMI ACQUISITION OF KANSAS CORPORATION,
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD.,
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD.,
MD ACQUISITION CORPORATION,
MAGNETIC RESONANCE INSTITUTE OF BOCA RATON, LTD.,
MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD.,
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD.,
PHYSICIANS' OUTPATIENT DIAGNOSTIC CENTER, LTD.,
Borrowers
INTERNATIONAL MAGNETIC IMAGING, INC.
Guarantor
and
DVI FINANCIAL SERVICES, INC. dba DVI CAPITAL
Lender
Dated as of January 24, 1996
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1
DEFINITIONS............................................................... 1
Section 1.1. Specific Definitions............................... 1
Section 1.2. Generally Accepted Accounting Principles
and Uniform Commercial Code....................... 5
Section 1.3. Construction....................................... 5
SECTION 2
LOAN...................................................................... 6
Section 2.1. The Loan........................................... 6
Section 2.2. Term and Repayment of Loans........................ 6
Section 2.4. Conditions to the Closing.......................... 6
SECTION 3
SECURITY INTEREST......................................................... 8
Section 3.1. Grant of Security Interest......................... 8
SECTION 4
SPECIFIC REPRESENTATIONS.................................................. 9
Section 4.1. Name of Borrower................................... 9
Section 4.2. Mergers and Consolidations......................... 9
Section 4.3. Purchase of Assets................................. 9
Section 4.4. Change of Name or Identity......................... 9
SECTION 5
PROVISIONS CONCERNING GENERAL TANGIBLES................................... 9
Section 5.1. Contracts.......................................... 9
SECTION 6
OTHER PROVISIONS CONCERNING COLLATERAL.................................... 10
Section 6.1. Title.............................................. 10
Section 6.2. No Warranties...................................... 10
Section 6.3. Further Assurances................................. 10
Section 6.4. Additional Collateral.............................. 11
Section 6.5. Lender's Duty of Care.............................. 11
Section 6.6. Borrower's Contracts............................... 11
Section 6.7. Reinstatement of Liens............................. 11
Section 6.8. Lender Expenses.................................... 11
Section 6.9. Inspection of Collateral and Records............... 12
Section 6.10. Waivers............................................ 12
SECTION 7
REPRESENTATIONS AND WARRANTIES............................................ 13
Section 7.1. Legal Status....................................... 13
Section 7.2. Authorization...................................... 13
Section 7.3. No Breach.......................................... 13
Section 7.4. Taxes.............................................. 13
Section 7.5. Deferred Compensation Plans........................ 13
Section 7.6. Litigation and Proceedings......................... 14
Section 7.7. Business........................................... 14
Section 7.8. Laws and Agreements................................ 14
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Section 7.9. Financial Condition................................ 14
Section 7.10. Health Care Laws................................... 14
Section 7.11. Insurance.......................................... 15
Section 7.12. Cumulative Representations......................... 15
SECTION 8
COVENANTS................................................................. 15
Section 8.1. Encumbrance of Collateral.......................... 15
Section 8.2. Business........................................... 15
Section 8.3. Condition and Repair............................... 15
Section 8.4. Taxes.............................................. 15
Section 8.5. Accounting System.................................. 16
Section 8.6. Financial Statements............................... 16
Section 8.7. Further Information................................ 16
Section 8.8. ERISA Covenants.................................... 16
Section 8.9. Restrictions on Merger, Consolidation,
Sale of Assets, Issuance of Stock, etc............ 17
Section 8.10. Health Care Covenants.............................. 17
Section 8.11. Restrictions on Distributions...................... 17
Section 8.12. Restrictions on Indebtedness....................... 17
Section 8.13. Restrictions on Guaranties......................... 18
Section 8.14. Deferral of Indebtedness........................... 18
SECTION 9
EVENTS OF DEFAULT......................................................... 19
SECTION 10
REMEDIES.................................................................. 21
Section 10.1. Specific Remedies................................. 21
Section 10.2. Power of Attorney................................. 23
Section 10.3. Expenses Secured.................................. 23
Section 10.4. Equitable Relief.................................. 23
Section 10.5. Remedies Are Cumulative........................... 23
SECTION 11
INDEMNITY................................................................. 24
Section 11.1. General Indemnity................................. 24
SECTION 12
MISCELLANEOUS............................................................. 25
Section 12.1. Delay and Waiver.................................. 25
Section 12.2. Complete Agreement................................ 25
Section 12.3. Severability; Headings............................ 25
Section 12.4. Binding Effect.................................... 25
Section 12.5. Notices........................................... 25
Section 12.6. Governing Law..................................... 26
Section 12.7. Jurisdiction...................................... 26
Section 12.8. Waiver of Trial by Jury........................... 26
Section 12.9. Consent........................................... 27
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Schedule 1.1 PERMITTED LIENS
Schedule 5.1 CONTRACTS
Schedule 7.6 LITIGATION AND PROCEEDINGS
Schedule 7.11 INSURANCE
Schedule 8.11 PERMITTED DISTRIBUTIONS
iii
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is entered into as of
January 24, 1996, by and between DVI Financial Services, Inc. dba DVI Capital, a
Delaware corporation ("Lender"), IMI Acquisition of Arlington Corp., a Virginia
corporation, IMI Acquisition of Puerto Rico Corporation, a Puerto Rican
corporation, IMI Acquisition of Kansas Corporation, a Kansas corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., a Florida limited
partnership, Oakland Magnetic Resonance Institute, Ltd., a Florida limited
partnership, MD Acquisition Corporation, a Florida corporation, Magnetic
Resonance Institute of Boca Raton, Ltd., a Florida limited partnership, Magnetic
Resonance Institute of South Dade, Ltd., a Florida limited partnership, Pine
Island Magnetic Resonance Imaging Center, Ltd., a Florida limited partnership
and Physicians' OutPatient Diagnostic Center, Ltd., a Florida limited
partnership, and each of them, jointly and severally, (collectively and
individually referred to as "Borrower") and International Magnetic Imaging,
Inc., a Delaware corporation ("Guarantor").
SECTION 1
DEFINITIONS
Section 1.1. Specific Definitions. The following
definitions shall apply:
(a) "Accounts" shall mean all accounts, contract rights,
instruments, documents, general intangibles, chattel paper and obligations in
any form owing to Borrower arising out of the sale or lease of goods or the
rendition of services by Borrower, whether or not earned by performance; all
credit insurance, guaranties, letters of credit, advices of credit and other
security for any of the above; all merchandise returned to or reclaimed by
Borrower; and Borrower's Books relating to any of the foregoing.
(b) "Account Debtors" shall mean Borrower's customers and all
other persons who are obligated or indebted to Borrower in any manner, whether
directly or indirectly, primarily or secondarily, contingently or otherwise,
with respect to Accounts or General Intangibles.
(c) "Advance(s)" shall mean an advance of loan proceeds
constituting all or a part of the Loan.
(d) "Base Rate" shall mean the prime rate of interest
announced publicly by Bank of America, NT&SA in San Francisco, California, from
time to time as its base rate.
(e) "Borrower's Books" shall mean all of Borrower's books and
records including but not limited to: minute books, ledgers; records indicating,
summarizing or evidencing Borrower's
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assets, liabilities and the Accounts; all information relating to Borrower's
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs and other computer-prepared information and the
equipment containing such information; provided, however, that confidential
patient records shall not be included therein, except to the extent otherwise
permitted by law.
(f) "Closing Date" shall mean the date of the first Advance of
the Loan.
(g) "Collateral" shall have the meaning specified in Section 3
hereof.
(h) "Contribution Agreement" shall mean that certain
Contribution Agreement dated as of the date hereof entered into among each and
all of the Borrowers.
(i) "Distribution" shall mean (i) the declaration or payment
of any profit, dividend, share or distribution on or in respect of any interest
in Borrower; (ii) the purchase or other retirement of any such interest in
Borrower; (iii) any loan or advance to the holder of any interest in Borrower or
to the holder of any indebtedness; (iv) any other payment to the holder of any
interest in Borrower or to the holder of any Indebtedness; and (v) any payment
of principal of or interest on or with respect to any purchase or other
retirement of any Indebtedness of Borrower which, by its terms, is subordinated
to the payment of the Note; provided, however, that the term "Distribution"
shall not include any salaries, or payments for rent or other services rendered
or for goods purchased which are furnished and invoiced in the ordinary course
of business and in accordance with the terms of this Agreement.
(j) "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended, and all references to sections thereof shall include such
sections and any predecessor provisions thereto, including any rules or
regulations issued in connection therewith.
(k) "ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) that together with Borrower would be deemed a
"contributing sponsor" to a single employee plan within the meaning of Section
4001 of ERISA.
(l) "Event of Default" shall have the meaning specified in
Section 9 hereof.
(m) "Governmental Authority" shall mean any governmental or
political subdivision or any agency, authority, bureau, central bank,
commission, department or instrumentality thereof, or any court, tribunal, grand
jury or arbitrator, in any case whether foreign or domestic.
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(n) "Guaranty" shall mean the Unconditional Continuing
Guaranty executed by Guarantor unconditionally guaranteeing
Borrower's Obligations under this Agreement.
(o) "Health Care Laws" shall mean all federal, state and local
laws specifically relating to health care services and the providers of such
services, including, but not limited to, Section 1877(a) of the Social Security
Act as amended by the Omnibus Budget Reconciliation Act of 1993, 42 USC ss.
1395nn.
(p) "Indebtedness" of a Borrower shall mean (i) all items
(except items of capital stock, capital or paid-in surplus or of retained
earnings) which, in accordance with generally accepted accounting principles,
would be included in determining total liabilities as shown on the liability
side of the balance sheet of Borrower as of the date as of which Indebtedness is
to be determined, including any lease which, in accordance with generally
accepted accounting principles, would constitute indebtedness; (ii) all
indebtedness secured by any mortgage, pledge, security, lien or conditional sale
or other title retention agreement to which any property or asset owned or held
by such Borrower is subject, whether or not the indebtedness secured thereby
shall have been assumed; and (iii) all indebtedness of others which Borrower has
directly or indirectly guaranteed, endorsed (otherwise than for the collection
or deposit in the ordinary course of business), discounted or sold with recourse
or agreed (contingently or otherwise) to purchase or repurchase or otherwise
acquire, or in respect of which Borrower has agreed to supply or advance funds
(whether by way of loan, stock or equity purchase, capital contribution or
otherwise) or otherwise to become directly or indirectly liable.
(q) "Lender Expenses" shall mean (i) all costs or expenses
(including, without limitation, taxes and insurance premiums) required to be
paid by Borrower under this Agreement or under any of the other Loan Documents
that are paid or advanced by Lender; (ii) filing, recording, publication and
search fees paid or incurred by Lender in connection with Lender's transactions
with Borrower; (iii) costs and expenses incurred by Lender to correct any
default or enforce any provision of the Loan Documents or in gaining possession
of, maintaining, handling, preserving, storing, shipping, selling, and preparing
for sale or advertising to sell the Collateral, whether or not a sale is
consummated; (iv) costs and expenses of suit incurred by Lender in enforcing or
defending the Loan Documents or any portion thereof; and (v) Lender's reasonable
attorney fees and expenses incurred (before or after execution of this
Agreement) in advising Lender with respect to, or in structuring, drafting,
reviewing, negotiating, amending, terminating, enforcing, defending or otherwise
concerning, the Security Documents or any portion thereof, irrespective of
whether suit is brought.
(r) "Lien" shall mean any security interest, mortgage, pledge,
assignment, lien or other encumbrance of any kind,
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including any interest of a vendor under a conditional sale contract or
consignment and any interest of a lessor under a capital lease.
(s) "Loan(s)" shall mean each loan or any other loan or loans
made by Lender to Borrower pursuant to this Agreement.
(t) "Loan Documents" shall mean (i) this Agreement; (ii) the
Note; (iii) the Security Documents; (iv) any other agreements or documents
hereafter delivered to secure repayment of the Loan; and (v) any other
certificates, documents or instruments delivered by Borrower to Lender pursuant
to the terms of this Agreement.
(u) "Note" shall mean the Secured Promissory Note executed by
Borrower pursuant to the terms of this Agreement.
(v) "Obligation(s)" shall mean (i) the due and punctual
payment of all amounts due or to become due under the Note; (ii) the performance
of all obligations of Borrower under this Agreement, the Note and all other Loan
Documents; (iii) all extensions, renewals, modifications, amendments and
refinancings of any of the foregoing; (iv) all Lender Expenses; and (v) all
loans, advances, indebtedness, and other obligations owed by Borrower or a
Borrower Affiliate to Lender of every description whether now existing or
hereafter arising (including those owed by Borrower or a Borrower Affiliate to
others and acquired by Lender by purchase, assignment, or otherwise) and whether
direct or indirect, primary or as guarantor or surety, absolute or contingent,
liquidated or unliquidated, matured or unmatured, whether or not secured by
additional collateral.
(w) "Permitted Liens" shall mean (i) Liens for property taxes
and assessments or governmental charges or levies and Liens securing claims or
demands of mechanics and materialmen, provided that payment thereof is not yet
due or is being contested as permitted in this Agreement; (ii) Liens of or
resulting from any judgment or award, the time for the appeal or petition for
rehearing of which has not expired, or in respect of which Borrower is in good
faith prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review has been secured;
(iii) Liens and priority claims incidental to the conduct of business or the
ownership of properties and assets (including warehouse's and attorney's Liens
and statutory landlord's Liens); deposits, pledges or Liens to secure the
performance of bids, tenders or trade contracts, or to secure statutory
obligations; and surety or appeal bonds or other Liens of like general nature
incurred in the ordinary course of business and not in connection with the
borrowing of money; provided that in each case the obligation secured is not
overdue or, if overdue, is being contested in good faith by appropriate actions
or proceedings; and further provided that any such warehouse's or statutory
landlord's Liens have been subordinated to the Liens of Lender in a manner
satisfactory to Lender; (iv) Liens
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in favor of DVI Financial Services Inc. d/b/a DVI Capital and DVI
Business Credit Corp. or their affiliates; and (v) Liens existing
on the date of this Agreement that secure indebtedness outstanding
on such date and that are disclosed on Schedule 1.1 hereto;
(x) "Person" shall mean an individual, corporation,
partnership, limited liability company, limited liability partnership, trust,
unincorporated association, joint venture, joint-stock company, government
(including political subdivisions), Governmental Authority or any other entity.
(y) "Proceeds" shall mean all proceeds and products of
Collateral and all additions and accessions to, replacements of, insurance or
condemnation proceeds of, and documents covering Collateral; all property
received wholly or partly in trade or exchange for Collateral; all claims
against third parties arising out of damage, destruction or decrease in value of
the Collateral; all leases of Collateral; and all rents, revenues, issues,
profits, and proceeds arising from the sale, lease, license, encumbrance,
collection or any other temporary or permanent disposition of the Collateral or
any interest therein.
(z) "Security Document(s)" shall mean the Guaranty, and any
agreement or instrument entered into between Borrower and Lender or executed by
Borrower or Guarantor and delivered to Lender in connection with this Agreement.
(aa) "Unmatured Default" shall mean any event or condition
that, with notice, passage of time, or a determination by Lender or any
combination of the foregoing would constitute an Event of Default.
Section 1.2. Generally Accepted Accounting Principles and
Uniform Commercial Code. All financial terms used in this Agreement, other than
those defined in this Section 1, have the meanings accorded to them under
generally accepted accounting principles. All other terms used in this
Agreement, other than those defined in this Section, have the meanings accorded
to them in the Uniform Commercial Code.
Section 1.3. Construction.
(a) Unless the context of this Agreement clearly requires
otherwise, the plural includes the singular, the singular includes the plural,
the part includes the whole, "including" is not limiting, and "or" has the
inclusive meaning of the phrase "and/or." The words "hereof," "herein,"
"hereby," "hereunder" and other similar terms in this Agreement refer to this
Agreement as a whole and not exclusively to any particular provision of this
Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Lender or Borrower, whether under
any rule of construction or otherwise. On
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the contrary, this Agreement has been reviewed by each of the parties and their
counsel and shall be construed and interpreted according to the ordinary meaning
of the words used so as to accomplish the purposes and intentions of all parties
hereto fairly.
SECTION 2
LOAN
Section 2.1. The Loan. Subject to the terms and conditions and
relying on the representations and warranties set forth herein, Lender agrees to
advance to Borrower and Borrower agrees to borrow from Lender, a secured term
loan in the amount of Two Million Dollars ($2,000,000) which Loan shall be
evidenced by the Note. The proceeds of the Loan, net of payment therefrom for
Borrower's counsel fees and all fees, costs and expenses incurred by Borrower in
connection with the Loan, shall be used by Borrower to pay off such of the
subordinated notes of Borrower held by the former limited partners of Borrower
as determined by Borrower.
Section 2.2. Term and Repayment of Loans. The "Term" of each
Loan shall be sixty (60) months and the Loan shall be payable in (i) a single
payment on February 1, 1996 of interest accrued at the rate of 11.04% per annum
from the date of the initial Advance to January 31, 1996, (ii) in twelve (12)
consecutive monthly installments of Twenty-six Thousand Dollars ($26,000), and
forty-eight (48) consecutive monthly installments of Forty-nine Thousand Two
Hundred Fifty Dollars ($49,250) on the first day of each calendar month
thereafter. All payments of principal and interest shall be paid in full without
setoff, deduction or counterclaim.
Section 2.3. Prepayment. Provided that no Event of Default or
any Unmatured Default exists, Borrower may terminate this Agreement at any time
by paying Lender all amounts then due and payable under the Agreement plus an
amount equal to fifty percent (50%) of the unearned interest, at the rate of
11.04% per annum, Lender would have received from the date of such payment
through the final scheduled installment payment date.
Section 2.4. Conditions to the Closing. The obligation of
Lender to make an Advance under this Agreement is subject to Lender's
determination that Borrower as of the date of the Advance has satisfied the
following conditions:
(a) The representations and warranties set forth in this
Agreement and in the other Loan Documents shall be true and correct on and as of
the date hereof and shall be true and correct in all material respects as of the
date of the Advance and Borrower shall have performed all obligations which were
to have been performed by it hereunder.
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(b) Borrower shall have executed and delivered to Lender
(or shall cause to be executed and delivered to Lender by the
appropriate Persons) the following:
(i) this Agreement;
(ii) the Note;
(iii) the Guaranty;
(iv) UCC-1 Financing Statements;
(v) the Contribution Agreement
(vi) evidence satisfactory to Lender that each
Borrower and Guarantor is duly formed, validly existing and in good standing in
the state in which it was formed and is authorized to do business in each state
in which its failure to obtain such authorization would materially adversely
affect its ability to repay the Loan;
(vii) pay-off letters, UCC Termination Statements,
and Lien Releases as required to grant Lender a first priority security interest
other than Permitted Liens in Collateral pledged as security for repayment of
the Loan;
(viii) certified copies of resolutions of the Board
of Directors of each corporate Borrower and Guarantor or partnership
authorizations of each partnership Borrower, as appropriate, authorizing the
execution and delivery of Loan Documents to be executed by Borrower and
Guarantor;
(ix) copies of the Articles of Incorporation of
each corporate Borrower and Guarantor certified by the Secretary of State;
(x) copies of the Bylaws of each corporate
Borrower and Guarantor certified by an officer thereof; copies of Partnership
Agreements and Certificates of limited partnership of each partnership Borrower
certified by the General Partner of each such Borrower.
(xi) the written opinion of counsel to Borrower
issued on the Closing Date and satisfactory to Lender in scope and
substance;
(xii) a certificate from an officer of Borrower
indicating that the representations and warranties contained herein are true and
correct as of the Closing Date.
(xiii) a solvency Certificate from Borrower.
(xiv) an Affidavit of Out-of-State Closing from
Borrower.
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(c) Borrower shall have paid closing fees to Lender including
due diligence fees, transportation costs, credit reports' fees, filing fees and
Lender's reasonable legal fees incurred by Lender for the negotiation and
preparation of the Loan Documents.
(d) Neither an Event of Default nor an Unmatured Default shall
have occurred and be continuing.
(e) Borrower shall not have suffered a material or adverse
change in its business, operations or financial condition from that reflected in
the financial statements delivered to Lender or otherwise.
SECTION 3
SECURITY INTEREST
Section 3.1. Grant of Security Interest. In order to secure
prompt payment and performance of all Obligations, Borrower hereby grants to
Lender a continuing first-priority pledge and security interest in the following
property of Borrower (the "Collateral"), whether now owned or existing or
hereafter acquired or arising and regardless of where located subject only to
Permitted Liens. This security interest in the Collateral shall attach to all
Collateral without further act on the part of Lender or Borrower.
The Collateral shall consist of the following subject in each
case only to Permitted Liens together with such third-party consents, lien
waivers and estoppel certificates as Lender shall reasonably require:
(a) all of Borrower's presently existing and hereafter
acquired general intangibles and other personal property (including, without
limitation, any and all choses or things in action, goodwill, patents, trade
names, trademarks, blueprints, drawings, purchase orders, computer programs,
computer discs, computer tapes, literature, reports, catalogues, deposit
accounts and tax refunds) other than goods and Accounts, as well as all of
Borrower's Books relating to any of the foregoing, and the Proceeds of any of
the foregoing, including cash and non-cash Proceeds;
(b) all of Borrower's presently existing and hereafter
acquired inventory including, without limitation, goods held for sale or lease
are to be furnished under a contract of service and all of Borrower's present
and future raw materials, work in process, finished goods, and packing and
shipping materials, wherever located, and any documents of title representing
any of the above, and the Proceeds of any of the foregoing, including cash and
non-cash Proceeds; and
(c) all of Borrower's presently existing and hereafter
acquired equipment, machinery, machine tools, motors, furniture,
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furnishings, fixtures, motor vehicles, tools, parts, dyes, jigs, goods and all
attachments, accessories, accessions, replacements, upgrades, substitutions,
additions and improvements thereto, wherever located, and the Proceeds of any of
the foregoing, including cash and non-cash Proceeds.
SECTION 4
SPECIFIC REPRESENTATIONS
Section 4.1. Name of Borrower. The exact names of each
Borrower are: IMI Acquisition of Arlington Corp., IMI Acquisition
of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland
Magnetic Resonance Institute, Ltd., MD Acquisition Corporation,
Magnetic Resonance Institute of Boca Raton, Ltd., Magnetic
Resonance Institute of South Dade, Ltd., Pine Island Magnetic
Resonance Imaging Center, Ltd., Physicians' Outpatient Diagnostic
Center, Ltd., respectively. The partnership Borrowers were formed
as limited partnerships under the laws of the State of Florida.
The following are all previous legal names of Borrower: None.
Borrower uses the following trade names: None. The following are
all other trade names used by Borrower in the past: None.
Section 4.2. Mergers and Consolidations. No entity has
merged into Borrower or been consolidated with Borrower.
Section 4.3. Purchase of Assets. No entity has sold
substantially all of its assets to Borrower or sold assets to Borrower outside
the ordinary course of such seller's business at any time in the past.
Section 4.4. Change of Name or Identity. Borrower shall not
change its name, business structure, or identity or use any new trade name
without prior notification to Lender or merge into or consolidate with any other
entity.
SECTION 5
PROVISIONS CONCERNING GENERAL TANGIBLES
Section 5.1. Contracts.
(a) Schedule 5.1. is a true and complete list of all material
service contracts and agreements to which Borrower is a party.
(b) Borrower shall not amend, modify or supplement any
contract or agreement included in the Collateral or waive any provision thereof
without Lender's consent which shall not be unreasonably withheld.
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(c) Borrower shall remain liable to perform all of its duties
and obligations under any contracts and agreements included in the Collateral to
the same extent as if this Agreement had not been executed; and Lender shall not
have any obligation or liability under such contracts and agreements by reason
of this Agreement or otherwise.
SECTION 6
OTHER PROVISIONS CONCERNING COLLATERAL
Section 6.1. Title. Borrower has good and marketable title to
the Collateral, and the Liens granted to Lender pursuant to this Agreement are
fully perfected first-priority Liens, subject only to the Permitted Liens and to
the proper filing of any financing statement or notice necessary to provide
notice to third parties of the existence of such Liens, in and to the Collateral
with priority over the rights of every person in the Collateral and is free,
clear, and unencumbered by any Liens in favor of any person other than Lender
except for Permitted Liens.
Section 6.2. No Warranties. This Agreement is solely a
financing agreement. Borrower acknowledges that with respect to the appropriate
Collateral: the Collateral has or will have been selected and acquired solely by
Borrower for Borrower's purposes; Lender is not the manufacturer, dealer, vendor
or supplier of the Collateral; the Collateral is of a size, design, capacity,
description and manufacture selected by Borrower; Borrower is satisfied that the
Collateral is suitable and fit for its purposes; and LENDER HAS NOT MADE AND
DOES NOT MAKE ANY WARRANTY OR REPRESENTATION WHATSOEVER, EITHER EXPRESS OR
IMPLIED, AS TO THE FITNESS, CONDITION, MERCHANTABILITY, DESIGN OR OPERATION OF
THE COLLATERAL, ITS FITNESS FOR ANY PARTICULAR PURPOSE, THE VALUE OF THE
COLLATERAL, THE QUALITY OR CAPACITY OF THE MATERIALS IN THE COLLATERAL OR
WORKMANSHIP IN THE COLLATERAL, NOR ANY OTHER REPRESENTATION OR WARRANTY
WHATSOEVER.
Section 6.3. Further Assurances. Borrower shall execute and
deliver to Lender, concurrent with Borrower's execution of this Agreement and at
any time or times hereafter at the request of Lender, all financing statements,
continuation financing statements, security agreements, chattel mortgages,
assignments, endorsements of certificates of title, applications for titles,
affidavits, reports, notices, schedules of accounts, letters of authority, and
all other documents Lender may reasonably request, in form satisfactory to
Lender, to perfect and maintain perfected Lender's Liens in the Collateral and
in order to consummate fully all of the transactions contemplated under the
Security Documents. Borrower hereby irrevocably makes, constitutes, and appoints
Lender (and any of Lender's officers, employees, or authorized agents designated
by Lender) as Borrower's true and lawful attorney with power to sign the name of
Borrower on any of the above-described documents or on any other similar
documents that need to be
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executed, recorded, and/or filed in order to perfect or continue perfected
Lender's Liens in the Collateral. The appointment of Lender as Borrower's
attorney is irrevocable as long as any Obligations are outstanding. Any person
dealing with Lender shall be entitled to rely conclusively on any written or
oral statement of Lender that this power of attorney is in effect. Lender will
provide Borrower with copies of any documents signed by Lender on Borrower's
behalf pursuant to this Section.
Section 6.4. Additional Collateral. If the Collateral declines
in value substantially, Borrower shall grant a security interest to Lender in
additional assets satisfactory to Lender having a value at least equal to the
decline in value of the existing Collateral.
Section 6.5. Lender's Duty of Care. Lender shall have no duty
of care with respect to the Collateral except that Lender shall exercise
reasonable care with respect to the Collateral in Lender's custody. Lender shall
be deemed to have exercised reasonable care if such property is accorded
treatment substantially equal to that which Lender accords its own property or
if Lender takes such action with respect to the Collateral as the Borrower shall
request or agree to in writing provided that no failure to comply with any such
request nor any omission to do any such act requested by the Borrower shall be
deemed a failure to exercise reasonable care. Lender's failure to take steps to
preserve rights against any parties or property shall not be deemed to be a
failure to exercise reasonable care with respect to the Collateral in Lender's
custody. All risk, loss, damage or destruction of the Collateral not directly
caused by Lender or its officers or agents shall be borne by Borrower.
Section 6.6. Borrower's Contracts. Borrower shall remain
liable to perform its Obligations under any contracts and agreements included in
the Collateral to the same extent as though this Agreement had not been entered
into and Lender shall not have any obligation or liability under such contracts
and agreements by reason of this Agreement or otherwise.
Section 6.7. Reinstatement of Liens. If, at any time after
payment in full by Borrower of all Obligations and termination of Lender's
Liens, any payments on Obligations previously made by Borrower or any other
Person must be disgorged by Lender for any reason whatsoever (including, without
limitation, the insolvency, bankruptcy, or reorganization of Borrower or such
other Person), this Agreement and Lender's Liens granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and Borrower shall sign and deliver to Lender all documents and things
necessary to perfect all reinstated Liens.
Section 6.8. Lender Expenses. If Borrower fails to pay
any moneys (whether taxes, assessments, insurance premiums or
otherwise) due to third persons or entities, fails to make any
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deposits or furnish any required proof of payment or deposit or fails to
discharge any Lien not permitted hereby, all as required under the terms of this
Agreement, then Lender may, to the extent that it determines that such failure
by Borrower could have a material adverse effect on Lender's interests in the
Collateral, in its discretion and without prior notice to Borrower, make payment
of the same or any part thereof. Any amounts paid or deposited by Lender shall
constitute Lender Expenses, shall become part of the Obligations, shall bear
interest at the rate of eighteen percent (18%) per annum, and shall be secured
by the Collateral. Any payments made by Lender shall not constitute (a) an
agreement by Lender to make similar payments in the future or (b) a waiver by
Lender of any Event of Default under this Agreement. Lender need not inquire as
to, or contest the validity of, any such expense, tax, security interest,
encumbrance or Lien, and the receipt of the usual official notice for the
payment of moneys to a governmental entity shall be conclusive evidence that the
same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender
for all sums expended by Lender that constitute Lender Expenses, and Borrower
hereby authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
Section 6.9. Inspection of Collateral and Records. During
usual business hours, and, upon reasonable advance notice, Lender shall have the
right, at its expense, to inspect and examine the Collateral and check and test
the same as to quality, quantity, value and condition and inspect and verify
Borrower's Books in order to verify the amount or condition of, or any other
matter relating to, the Collateral and Borrower's financial condition and to
copy and make extracts therefrom. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to this Agreement and agrees that Lender may directly contact any such
accounting firm or service bureau in order to obtain such information.
Notwithstanding the foregoing, Lender shall be bound by any applicable law, rule
or regulation concerning the use of patient information and records.
Section 6.10. Waivers. Except as specifically provided for
herein, Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper and guaranties
at any time held by Lender on which Borrower may in any way be liable.
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SECTION 7
REPRESENTATIONS AND WARRANTIES
As of the date hereof Guarantor and Borrower each hereby
warrants and represents to Lender the following:
Section 7.1. Legal Status. Each of Borrower and Guarantor is a
corporation or partnership, as appropriate, validly existing and in good
standing under the laws of the state of its incorporation or formation; and each
Borrower and Guarantor is qualified and licensed to do business and is in good
standing in any state in which the conduct of its business or its ownership of
property requires that it be so qualified or licensed, and has the power and
authority (corporate, partnership and otherwise) to execute and carry out the
terms of the Loan Documents to which it is a party, to own its assets and to
carry on its business as currently conducted.
Section 7.2. Authorization. The execution, delivery, and
performance by each Borrower and Guarantor of this Agreement and each Loan
Document have been duly authorized by all necessary corporate or partnership
action as appropriate. Each of Borrower and Guarantor have duly executed and
delivered this Agreement and each Loan Document to which they are a party, and
each of them constitutes a valid and binding obligation of each of Borrower or
Guarantor, as applicable, enforceable according to its terms except as limited
by equitable principles and by bankruptcy, insolvency, or similar laws affecting
the rights of creditors generally.
Section 7.3. No Breach. The execution, delivery, and
performance by Borrower and Guarantor of this Agreement and each Loan Document
to which they are a party (a) will not contravene any law or any governmental
rule or order binding on the Collateral; (b) will not violate any provision of
the articles of incorporation or bylaws or partnership agreements, as
appropriate, of Borrower or Guarantor; (c) will not violate any agreement or
instrument by which Borrower or Guarantor, as applicable, is bound; (d) do not
require any notice to or consent by any governmental body; and (e) will not
result in the creation of a Lien on any assets of Borrower except the Lien to
Lender granted herein.
Section 7.4. Taxes. All assessments and taxes, whether real,
personal or otherwise, due or payable by or imposed, levied or assessed against
Borrower or any of its property have been paid in full before delinquency or
before the expiration of any extension period; and Borrower has made due and
timely payment or deposit of all federal, state, and local taxes, assessments,
or contributions required of it by law, except only for items that Borrower is
currently contesting diligently and in good faith and that have been fully
disclosed in writing to Lender.
Section 7.5. Deferred Compensation Plans. Borrower and
each ERISA Affiliate have made all required contributions to all
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deferred compensation and defined benefit plans to which such person is required
to contribute, and neither Borrower nor any ERISA Affiliate has any liability
for any unfunded benefits of any single-employer or multi-employer plans.
Section 7.6. Litigation and Proceedings. Except as set forth
on Schedule 7.6 attached hereto, there are no outstanding judgments against
Borrower or any of their assets and there are no actions or proceedings pending
by or against Borrower before any court or administrative agency. Borrower has
no knowledge or belief of any pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or prosecutions
involving Borrower, except for ongoing collection matters in which Borrower is
the plaintiff and except as set forth in Schedule 7.6 hereto.
Section 7.7. Business. Borrower has all franchises,
authorizations, patents, trademarks, copyrights and other rights necessary to
advantageously conduct its business. They are all in full force and effect and
are not in known conflict with the rights of others. Borrower is not a party to
or subject to any agreement or restriction that is so unusual or burdensome that
it might have a material adverse effect on Borrower's business, properties or
prospects.
Section 7.8. Laws and Agreements. Borrower is in compliance
with all material agreements applicable to it, including obligations to
contribute to any employee benefit plan or pension plan regulated by ERISA.
Borrower is, to the best of its knowledge, in material compliance with all laws
applicable to it.
Section 7.9. Financial Condition. All financial statements and
information relating to Borrower that have been or may hereafter be delivered by
Borrower to Lender are accurate and complete and have been prepared in
accordance with generally accepted accounting principles consistently applied.
Borrower has no material obligations or liabilities of any kind not disclosed in
that financial information, and there has been no material adverse change in the
financial condition of Borrower since the date of the most recent financial
statements submitted to Lender.
Section 7.10. Health Care Laws.
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Health Care Laws and Borrower is in
compliance in all material respects with all terms and conditions of the
required permits, licenses and authorizations, and are also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in the Health Care Laws.
(b) Borrower is not aware of, and has not received notice of,
any past, present or future events, conditions,
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circumstances, activities, practices, incidents, actions or plans that may
interfere with or prevent compliance or continued compliance in any material
respect with Health Care Laws.
(c) There is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or threatened against Borrower, relating in
any way to Health Care Laws.
Section 7.11. Insurance. Schedule 7.11 sets forth a complete
and accurate list of all policies of fire, liability, product liability,
workers' compensation, health, business interruption and other forms of
insurance currently in effect with respect to Borrower's and the Partnership's
business, true copies of which have heretofore been delivered to Lender. All
such policies are valid, outstanding and enforceable policies and, to the best
knowledge of Borrower, each will remain in full force and effect at least
through the respective dates set forth on Schedule 7.11.
Section 7.12. Cumulative Representations. The warranties,
representations and agreements set forth herein shall be cumulative and in
addition to any and all other warranties, representations and agreements that
Borrower shall give, or cause to be given, to Lender, either now or hereafter.
SECTION 8
COVENANTS
Section 8.1. Encumbrance of Collateral. Borrower shall not
create, incur, assume, or permit to exist any Lien on any Collateral now owned
or hereafter acquired by Borrower, except for Liens to Lender and Permitted
Liens.
Section 8.2. Business. Borrower shall engage primarily in
business of the same general character as that now conducted by Borrower and
shall not make any investment in any other entity through the direct or indirect
holding of securities or otherwise.
Section 8.3. Condition and Repair. Borrower shall maintain in
good repair and working order all properties used in its business and from time
to time shall make all appropriate repairs and replacements thereof.
Section 8.4. Taxes. Borrower shall pay all taxes, assessments
and other governmental charges imposed upon it or any of its assets or in
respect of any of its franchises, business, income or profits before any penalty
or interest accrues thereon, and all claims (including, without limitation,
claims for labor, services, materials and supplies) for sums that have become
due and payable and that by law have or might become a Lien or charge upon
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any of its assets, provided that (unless any material item or property would be
lost, forfeited or materially impaired as a result thereof) no such charge or
claim need by paid if it is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, if Lender is notified
in advance of such contest, and if Borrower establishes any reserve or other
appropriate provision required by generally accepted accounting principles and
deposits with Lender cash or an acceptable bond in an amount equal to twice the
amount of such charge or claim. Borrower shall make timely payment or deposit of
all FICA payments and withholding taxes required of it by applicable laws and
will, upon request, furnish Lender with proof satisfactory to Lender indicating
that Borrower has made such payments or deposits.
Section 8.5. Accounting System. Borrower at all times
hereafter shall maintain a standard and modern system of accounting in
accordance with generally accepted accounting principles consistently applied,
with ledger and account cards or computer tapes, disks, printouts and records
that contain information pertaining to the Collateral that may from time to time
be requested by Lender. Borrower shall not modify or change its method of
accounting or enter into any agreement hereafter with any third-party accounting
firm or service bureau for the preparation and/or storage of Borrower's
accounting records without said accounting firm's or service bureau's agreeing
to provide to Lender information regarding the Collateral and Borrower's
financial condition.
Section 8.6. Financial Statements. Borrower shall submit
monthly financial statements with respect to Borrower to Lender as soon as
available, and in any event within forty-five (45) days of the end of each month
or fiscal quarter, as applicable. Additionally, Borrower will submit audited
financial statements with respect to Borrower to Lender as soon as available,
and in any event within ninety (90) days of the end of each fiscal year. With
all financial statements, Borrower will also deliver a certificate of its chief
financial officer attesting that no Event of Default or Unmatured Default under
the Agreement has occurred and is continuing.
Section 8.7. Further Information. Borrower shall promptly
supply Lender with such other information concerning its affairs as Lender may
reasonably request from time to time hereafter and shall promptly notify Lender
of any material adverse change in Borrower's financial condition and any
condition or event that constitutes a breach of or event that constitutes an
Event of Default under this Agreement.
Section 8.8. ERISA Covenants. Borrower shall comply, and shall
cause each ERISA Affiliate to comply with all applicable provisions of ERISA and
all other laws applicable to any deferred compensation plans with which Borrower
or any ERISA Affiliate is associated, and shall promptly notify Lender of the
occurrence of
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any event that could result in any material liability of Borrower to any person
whatsoever with respect to any such plan.
Section 8.9. Restrictions on Merger, Consolidation, Sale
of Assets, Issuance of Stock, etc. Unless authorized by Lender,
Borrower shall not:
(a) Merge or consolidate with any Person.
(b) Sell, lease or otherwise dispose of its assets in any
transaction or series of related transactions (other than sales in the ordinary
course of business).
(c) Liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction.
(d) Acquire any interest in any business (whether by purchase
of assets, purchase of stock, merger or otherwise).
(e) Become subject to any agreement or instrument which by its
terms would restrict Borrower's right or ability to perform any of its
obligations to Lender pursuant to the terms of the Loan Documents.
(f) Authorize or issue any additional stock or equity
interest.
Section 8.10. Health Care Covenants.
(a) Borrower shall comply in all respects with, and will
obtain all permits required by all Health Care Laws.
(b) Borrower shall promptly furnish to Lender a copy of any
communication from any governmental authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower would be required to
notify any governmental authority with jurisdiction over Health Care Laws.
Section 8.11. Restrictions on Distributions. Unless authorized
by Lender, neither Borrower nor Guarantor shall make any Distributions to any
Person including any parent, subsidiary or affiliate of Borrower until the
Obligations are fully satisfied; provided, however, Borrower and Guarantor may
make Distributions pursuant to the terms of the agreements listed on Schedule
8.11 so long as the terms of such agreements are not hereafter amended without
the consent of Lender.
Section 8.12. Restrictions on Indebtedness. Unless authorized
by Lender, neither Borrower nor Guarantor shall hereafter create, incur, assume
or otherwise become or remain liable with respect to any Indebtedness except the
following:
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(a) Indebtedness in respect of the Note and current
liabilities (other than for money borrowed) incurred in the ordinary course of
business.
(b) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials, equipment and
supplies.
(c) Indebtedness in respect of replacement or refinancing of
existing Indebtedness, provided the amount of such Indebtedness does not exceed
the amount of the existing Indebtedness, the repayment schedule for such
Indebtedness is equal to the repayment schedule for the existing Indebtedness
and Lender gives its prior written consent, which shall not be unreasonably
withheld if the specified conditions have been met.
Section 8.13. Restrictions on Guaranties. Unless authorized by Lender,
neither Borrower nor Guarantor shall hereafter become or remain liable under any
guaranty of any obligation of any other person, except for any guaranty of any
obligation to Lender or its affiliates.
Section 8.14. Deferral of Indebtedness. Prior to the payment in full by
Borrower of the Obligations under this Agreement and the payment in full of all
indebtedness of any affiliate of Borrower or Guarantor or any affiliate of
Guarantor to Lender and Lender's affiliates, whether existing prior to, as of,
or after the date of this Agreement, neither Borrower nor any affiliate of
Borrower shall make any payments, directly or indirectly, on or otherwise in
connection with, any subordinated notes held by any former general partner of
Borrower or Guarantor, and shall cause the following makers of the following
subordinated notes to defer making any further payments, directly or indirectly,
on, or otherwise in connection with, such notes:
Maker Payee Original
Principal Amount
MD Acquisition J. Sternberg and S. $3,375,000
Corporation Schulman, M.D. Corp.
MD Ltd. Partner Acq. Stephen A. and $ 481,767
Corporation Stephanie S.
Schulman
MD Ltd. Partner Acq. Stephanie S. $ 501,431
Corporation Schulman
MD Ltd. Partner Acq. James H. and Marsha $ 481,768
Corporation Sternberg
MD Ltd. Partner Acq. Marsha Sternberg $ 501,431
Corporation
18
<PAGE>
MD Ltd. Partner Acq. Ashley Kaye $ 983,198
Corporation
SECTION 9
EVENTS OF DEFAULT
An Event of Default shall be deemed to exist if after the date
of this Agreement any of the following events shall have occurred and be
continuing:
(a) Borrower fails to make any payment of principal or
interest or any other payment on the Note or any other Obligation when due and
payable, by acceleration or otherwise, and such failure shall continue for five
(5) days after the payment is due;
(b) Borrower fails to observe or perform any covenant,
condition or agreement to be observed or performed pursuant to the terms hereof
or any Loan Document to which it is a party, and such failure is not cured as
soon as reasonably practicable and in any event within thirty (30) days after
written notice thereof by Lender; provided, however, that if such failure can
not be cured within such thirty (30) day period, Borrower shall not be in
default if the cure is commenced within such thirty (30) day period and
thereafter such cure is diligently pursued to completion;
(c) Borrower fails to keep its assets insured as required
herein, or material uninsured damage to or loss, theft, or destruction of the
Collateral occurs;
(d) A court enters a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency, or
other similar law then in effect, or appoints a receiver, liquidator, assignee,
custodian, trustee, or sequestrator (or other similar official) of Borrower or
for any substantial part of its property, or orders the windup or liquidation of
Borrower's affairs; or a petition initiating an involuntary case under any such
bankruptcy, insolvency, or similar law is filed against Borrower and is pending
for sixty (60) days without dismissal, stay, bond or other security acceptable
to Lender;
(e) Borrower commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law then in effect, makes any general
assignment for the benefit of creditors, fails generally to pay its debts as
such debts become due, or takes corporate action in furtherance of any of the
foregoing;
(f) Final judgment for the payment of money on any claim in
excess of $10,000 is rendered against Borrower and remains undischarged for
twenty (20) days during which execution is not effectively stayed;
19
<PAGE>
(g) Guarantor revokes or attempts to revoke its guaranty of
any of the Obligations, or becomes the subject of an insolvency proceeding of
the type described in clauses (c) or (d) above with respect to Borrower or fails
to observe or perform any covenant, condition or agreement to be performed under
any Loan Document to which it is a party;
(h) Borrower makes any payment on account of Indebtedness that
has been subordinated to any Obligations, other than payments specifically
permitted by the terms of such subordination;
(i) Any Person holding Indebtedness that has been subordinated
to any Obligations dies or becomes the subject of an insolvency proceeding
resulting in the termination of the subordination arrangement relating to such
Indebtedness or terminates the subordination arrangement or asserts that it is
terminated.
(j) Any Collateral or any part thereof is sold, agreed to be
sold, conveyed or allocated by operation of law or otherwise;
(k) Borrower defaults under the terms of any Indebtedness or
lease involving total payment obligations of Borrower in excess of $10,000 and
such default is not cured within the time period permitted pursuant to the terms
and conditions of such Indebtedness or lease, or an event occurs that gives any
creditor or lessor the right to accelerate the maturity of any such indebtedness
or lease payments;
(l) Demand is made for payment of any Indebtedness of Borrower
in excess of $10,000 that was not originally payable upon demand when incurred
but the terms of which were later changed to provide for payment upon demand;
(m) Borrower is enjoined, restrained or in any way prevented
by court order from continuing to conduct all or any material part of its
business affairs;
(n) A judgment or other claim in excess of $10,000 becomes a
Lien upon any or all of Borrower's assets, other than a Permitted Lien;
(o) A notice of Lien, levy or assessment in excess of $10,000
is filed of record with respect to any or all of Borrower's assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal or other governmental agency; or any tax or debt
owing at any time hereafter to any one or more of such entities becomes a Lien
upon any or all of Borrower's assets and the same is not paid on the payment
date thereof, except to the extent such tax or debt is being contested by
Borrower as permitted in Section 7.4;
20
<PAGE>
(p) There is a material impairment of the value of the
Collateral or priority of Lender's Liens on the Collateral;
(q) Any or all of Borrower's assets are seized, subjected to a
distress warrant, levied upon or come into the possession of any judicial
officer;
(r) Lender believes in good faith that the prospect of
payment or performance of the Obligations by Borrower has been impaired;
(s) Any representation or warranty made in writing to Lender
by any officer of Borrower in connection with the transaction contemplated in
this Agreement is incorrect when made;
(t) Guarantor shall be in default with respect to any of its
Obligations to Lender and such default is not cured within the time provided
pursuant to the terms and conditions of such Obligation;
(u) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (f), (k), (l), (n) and (o)
hereof exceeds $25,000; or
(v) The discharge by Consolidated Technology Group Ltd. or
Guarantor of George Mahoney as its Chief Financial Officer, at any time prior to
the payment in full of the Obligations covered by this Agreement.
SECTION 10
REMEDIES
Section 10.1. Specific Remedies. Upon the occurrence of
any Event of Default:
(a) Lender may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, further demand, protest or other notice of any kind, all of which
are hereby expressly waived by Borrower, all defaulted Obligations shall bear
interest at the rate of eighteen percent (18%) per annum.
(b) Lender may set off against the Obligations all Collateral,
balances, credits, deposits, accounts, or moneys of Borrower then or thereafter
held with Lender, including amounts represented by certificates of deposit.
(c) Lender may enter any premises of Borrower, with or without
judicial process, and take possession of the Collateral; provided however, that
Lender may only exercise such remedy if it may do so without a breach of the
peace. Lender may remove the Collateral and may remove and/or copy all records
pertaining
21
<PAGE>
thereto, and/or Lender may remain on such premises and use the premises for the
purpose of collecting, preparing and disposing of the Collateral, without any
liability for rent or occupancy charges. Borrower shall, upon request of Lender,
assemble the Collateral and any records pertaining thereto and make them
available at a place designated by Lender that is reasonably convenient to both
parties.
(d) Lender may dispose of the Collateral in its then-existing
condition or, at its election, may take such measures as it deems necessary or
advisable to improve, process, finish, operate, demonstrate and prepare for sale
the Collateral, and may store, ship, reclaim, recover, protect, advertise for
sale or lease and insure the Collateral. Lender may use and operate equipment of
Borrower in order to process or finish inventory included in the Collateral. If
any Collateral consists of documents, Lender may proceed either as to the
documents or as to the goods represented thereby.
(e) Lender may pay, purchase, contest or compromise any
encumbrance, charge or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
(f) Lender may (i) endorse Borrower's name on all checks,
notes, drafts, money orders or other forms of payment of or security for the
Collateral; (ii) sign Borrower's name on drafts drawn on issuers of letters of
credit; and (iii) notify the postal authorities in Borrower's name to change the
address for delivery of Borrower's mail to an address designated by Lender,
receive and open all mail addressed to Borrower, copy all mail, return all mail
relating to Collateral, and hold all other mail available for pickup by
Borrower.
(g) Lender may sell the Collateral at public or private sale
and is not required to repossess Collateral before selling it. Any requirement
of reasonable notice of any disposition of the Collateral shall be satisfied if
such notice is sent to Borrower, ten (10) days prior to such disposition or by
any of the methods provided in Section 12.5 hereof. Borrower shall be credited
with the net proceeds of such sale only when they are actually received by
Lender, and Borrower shall continue to be liable for any deficiency remaining
after the Collateral is sold or collected.
(h) If the sale is to be a public sale, Lender shall also give
notice of the time and place by publishing a notice one time at least five (5)
days before the date of the sale in a newspaper of general circulation in the
county in which the sale is to be held.
(i) To the maximum extent permitted by applicable law, Lender
may be the purchaser of any or all of the Collateral at any public sale and
shall be entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any
22
<PAGE>
portion of the Collateral sold at any public sale, to use and apply all or any
part of the Obligations as a credit on account of the purchase price of any
Collateral payable by Lender at such sale.
Section 10.2. Power of Attorney. Borrower hereby appoints
Lender (and any of Lender's officers, employees, or agents designated by Lender)
as Borrower's attorney, with power whether before or after the occurrence of an
Event of Default: (a) to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security relating
to the Collateral that may come into Lender's possession; (b) to notify the post
office authorities to change the address for delivery of Borrower's mail to an
address designated by Lender, to receive and open all mail addressed to Borrower
and to retain all mail relating to the Collateral and forward all other mail to
Borrower; (c) to send requests for verification of Accounts; and (d) to do all
things necessary to carry out this Agreement. The appointment of Lender as
Borrower's attorney and each and every one of Lender's rights and powers, being
coupled with an interest, are irrevocable as long as any Obligations are
outstanding. Lender agrees not to exercise the power granted in clauses (a) and
(b) above prior to the occurrence of an Event of Default, but such limitation
does not limit the effectiveness of such power of attorney at any time. Any
person dealing with Lender shall be entitled to rely conclusively on any written
or oral statement of Lender that this power of attorney is in effect. Lender may
also use Borrower's stationery in connection with exercising its rights and
remedies and performing the Obligations of Borrower.
Section 10.3. Expenses Secured. All expenses, including
attorney fees, incurred by Lender in the exercise of its rights and remedies
provided in this Agreement, in any other Loan Document, or by law shall be
payable by Borrower to Lender, shall be part of the Obligations, and shall be
secured by the Collateral.
Section 10.4. Equitable Relief. Borrower recognizes that in
the event Borrower fails to perform, observe, or discharge any of its
Obligations or liabilities under this Agreement, no remedy of law will provide
adequate relief to Lender, and Borrower agrees that Lender shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.
Section 10.5. Remedies Are Cumulative. No remedy set forth
herein is exclusive of any other available remedy or remedies, but each is
cumulative and in addition to every other right or remedy given under this
Agreement or under any other agreement between Lender and Borrower or Guarantor
or now or hereafter existing at law or in equity or by statute. Lender may
pursue its rights and remedies concurrently or in any sequence, and no exercise
of one right or remedy shall be deemed to be an election. No delay by Lender
shall constitute a waiver, election or acquiescence by it. Borrower on its
behalf waives any rights to require Lender to (i) proceed against any other
Borrower, Guarantor
23
<PAGE>
or any other party; or (ii) proceed against or exhaust any security held from
any other Borrower or Guarantor. Lender may at any time and from time to time,
without notice to, or consent of, Borrower, and without affecting or impairing
the obligation of Borrower hereunder do any of the following: (i) renew or
extend any Obligations of any Borrower or Guarantor, or of any other party at
any time directly or contingently liable for payment of any of said Obligations;
(ii) accept partial payments of said Obligations to any Borrower or Guarantor;
(iii) settle, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations of any Borrower or Guarantor and
the security therefor in any manner; (iv) consent to the transfer or sale of any
security or bid and purchase at any sale of any security of any Borrower or
Guarantor. Borrower expressly agrees that the validity of this Agreement and the
Obligations of Borrower shall not be terminated, affected or impaired by reason
of the waiving, delaying, exercising or non-exercising, of any of Lender's
rights against any Borrower or Guarantor or as a result of the substitution,
release, repossession, sale, disposition or destruction of any Collateral
securing any Obligations of Borrower or Guarantor. Lender shall not be released
or discharged, either in whole or in part, by Lender's failure or delay to
perfect or continue the perfection of any security interest in any Collateral
which secures the Obligations of any Borrower or Guarantor or to protect the
property covered by such security interest.
SECTION 11
INDEMNITY
Section 11.1. General Indemnity. Borrower shall protect,
indemnify and defend and save harmless Lender and its directors, officers,
agents and employees from and against any and all loss, cost, liability
(including negligence, tort and strict liability), expense, damage, suits or
demands (including fees and disbursements of counsel), and expenses, on account
of any suit or proceeding before any Governmental Authority which arises from
the transactions contemplated in this Agreement or otherwise arising in
connection with or relating to the Loan and any security therefor, unless such
suit, claim or damages are caused by the negligence or intentional malfeasance
of Lender or its directors, officer, agents or employees. Upon receiving
knowledge of any suit, claim or demand asserted by a third-party that Lender
believes is covered by this indemnity, Lender shall give Borrower timely notice
of the matter and an opportunity to defend it, at Borrower's sole cost and
expense, with legal counsel acceptable to Lender. Lender may, at its option,
also require Borrower to so defend the matter. This obligation on the part of
Borrower shall survive the termination of this Agreement and the repayment of
the Note.
24
<PAGE>
SECTION 12
MISCELLANEOUS
Section 12.1. Delay and Waiver. No delay or omission to
exercise any right shall impair any such right or be a waiver thereof, but any
such right may be exercised from time to time and as often as may be deemed
expedient. A waiver on one occasion shall be limited to that particular
occasion.
Section 12.2. Complete Agreement. This Agreement and the
Exhibits and Schedules hereto are the complete agreement of the parties hereto
and supersede all previous understandings relating to the subject matter hereof.
This Agreement may be amended only by an instrument in writing that explicitly
states that it amends this Agreement and is signed by the party against whom
enforcement of the amendment is sought. This Agreement may be executed in
counterparts, each of which will be an original and all of which will constitute
a single agreement.
Section 12.3. Severability; Headings. If any part of this
Agreement or the application thereof to any person or circumstance is held
invalid, the remainder of this Agreement shall not be affected thereby. The
section headings herein are included for convenience only and shall not be
deemed to be a part of this Agreement.
Section 12.4. Binding Effect. This Agreement shall be binding
upon and inure to the benefit of the respective legal representatives,
successors and assigns of the parties hereto; however, Borrower may not assign
any of its rights or delegate any of its Obligations hereunder. Lender (and any
subsequent assignee) may transfer and assign this Agreement and deliver the
Collateral to the assignee, who shall thereupon have all of the rights and
obligations of Lender; and Lender (or such subsequent assignee who in turn
assigns as aforesaid) shall then be relieved and discharged of any
responsibility or liability with respect to this Agreement and said Collateral.
Section 12.5. Notices. Any notices under or pursuant to this
Agreement shall be deemed duly sent when delivered in hand or when mailed by
registered or certified mail, return receipt requested, or when delivered by
courier or when transmitted by telex, facsimile, or similar electronic medium to
the following addresses:
To Borrower: c/o International Magnetic Imaging, Inc.
2424 North Federal Highway
Boca Raton, Florida 33431
Attention: George Mahoney
Chief Financial Officer
Telephone: (407) 362-0917
Facsimile: (407) 347-5352
25
<PAGE>
Copies to: Robert L. Blessey, Esq.
Attorney at Law
51 Lyon Ridge Road
Katonah, New York 10536
Telephone: (914) 232-6842
Facsimile: (914) 232-0647
To Lender: DVI Financial Services, Inc.
dba DVI Capital
4041 MacArthur Ave., Suite 401
Newport Beach, CA 92660
Attention: Anthony Turek
Senior Vice President
Telephone: (714) 414-6100
Facsimile: (714) 414-6199
Copies to: Jeffrey J. Wong, Esq.
Cooper, White & Cooper
201 California Street, 17th Floor
San Francisco, CA 94111
Telephone: (415) 433-1900
Facsimile: (415) 433-5530
Either party may change such address by sending notice of the change to
the other party; such change of address shall be effective only upon actual
receipt of the notice by the other party.
Section 12.6. Governing Law. ALL ACTS AND TRANSACTIONS
HEREUNDER AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO HALL
BE GOVERNED, CONSTRUED, AND INTERPRETED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF PENNSYLVANIA.
Section 12.7. Jurisdiction. Borrower agrees that the state and
federal courts in Orange County, California or any other court in which Lender
initiates proceedings have exclusive jurisdiction over all matters arising out
of this Agreement and that service of process in any such proceeding shall be
effective if mailed to Borrower at its address described in the Notices section
of this Agreement. Borrower waives any right it may have to assert the defense
of forum non conveniens or to object to such venue and hereby consents to any
court-ordered relief.
Section 12.8. Waiver of Trial by Jury. LENDER,
GUARANTOR AND BORROWER HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF
ANY MATTERS ARISING OUT OF THIS AGREEMENT OR ANY OF THE SECURITY
DOCUMENTS OR THE CONDUCT OF THE RELATIONSHIP BETWEEN LENDER,
GUARANTOR AND BORROWER.
26
<PAGE>
Section 12.9. Consent. By its execution hereof, DVI Business
Credit Corporation ("DVI"), hereby acknowledges and consents that the Lien
created under this Agreement shall be a Permitted Lien under the existing Loan
and Security Agreements between DVI and the Borrowers.
[SIGNATURE BLOCKS ON FOLLOWING PAGES]
27
<PAGE>
LOAN AND SECURITY AGREEMENT
[SIGNATURE BLOCKS]
IN WITNESS WHEREOF, Borrower, Guarantor and Lender have executed this
Agreement by their duly authorized officers as of the date first above written.
DVI FINANCIAL SERVICES, INC., dba
DVI CAPITAL, Lender
By:
Name: Alan J. Velotta
Title: Group Managing Director
IMI ACQUISITION OF ARLINGTON
CORP., Borrower
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION, Borrower
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION, Borrower
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD., Borrower
By: IMI ACQUISITION OF NORTH
MIAMI BEACH, CORPORATION
its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., Borrower
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general
partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION,
Borrower
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD., Borrower
By: IMI ACQUISITION OF BOCA
BATON CORPORATION, its general
partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD., Borrower
By: IMI ACQUISITION OF SOUTH
DADE CORPORATION, its general
partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD., Borrower
By: IMI ACQUISITION OF PINE
ISLAND CORPORATION, its general
partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS OUTPATIENT DIAGNOSTIC
CENTER, LTD., Borrower
By: PODC ACQUISITION
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
INTERNATIONAL MAGNETIC IMAGING,
INC., Guarantor
By:
Name: Lewis S. Schiller
Title: President
AGREED TO AS TO SECTION 8.14
HEREOF
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
AGREED TO AS TO SECTION 8.14
HEREOF
MD LTD. PARTNER ACQ. CORPORATION
By:
Name: Lewis S. Schiller
Title: President
AGREED TO AS TO SECTION 12.9
HEREOF
DVI BUSINESS CREDIT CORPORATION
By:
Name: Melvin C. Breaux
Title: Vice President
28
<PAGE>
MAGNETIC RESONANCE INSTITUTE OF BOCA RATON, LTD.
Schedule 1.1 - PERMITTED LIENS
1. SunBank/South Florida
Real property mortgage (land, building and improvements) September 30,
1994 Due September 30, 2004 $971,822 principal Monthly payment of
$9,258 plus interest at prime plus 1.00%
2. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$1,012,577 principal
Monthly payment of $27,319 which includes interest at 10.50%
3. DVI Capital Company
Personal property
April 4, 1995
Due April 4, 2000
$264,714 principal
Monthly payment of $6,488 which includes interest at 11.50%
<PAGE>
MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE LTD.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$321,858 principal
Monthly payment of $8,684 which includes interest at 10.50%
<PAGE>
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD.
Schedule 1.1 - PERMITTED LIENS
1. Capital Bank
Real property mortgage (land, building and improvements) October 20,
1995 Due October 18, 2000 $222,701 principal Monthly payment of $2,942
which includes interest 9.75%
2. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$1,079,497 principal
Monthly payment of $29,124 which includes interest at 10.50%
3. DVI Capital Company
Personal property
April 4, 1995
Due April 4, 2000
$264,714 principal
Monthly payment of $6,488 which includes interest at 11.50%
<PAGE>
PHYSICIANS OUTPATIENT DIAGNOSTIC CENTER, LTD.
Schedule 1.1 - PERMITTED LIENS
1. General Electric
Equipment capital lease
May 1, 1995
April 2, 1997 is end of least term
$1 buyout
$22,909 principal
Monthly payment of $1,546 which includes interest at 11%
2. General Electric
Equipment capital lease
June 1, 1995
May 1, 1997 is end of least term
$1 buyout
$40,284 principal
Monthly payment of $2,542 which includes interest at 9.5%
<PAGE>
IMI ACQUISITION OF ARLINGTON CORP.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$783,133 principal
Monthly payment of $21,129 which includes interest at 10.50%
3. DVI Capital Company
Personal property
April 4, 1995
Due April 4, 2000
$324,837 principal
Monthly payment of $7,962 which includes interest at 11.50%
<PAGE>
IMI ACQUISITION OF PUERTO RICO CORPORATION
Schedule 1.1 - PERMITTED LIENS
1. Banco Santander
Real property mortgage (land, building and improvements) February 7,
1994 Due February 7, 1999 $516,673 principal Monthly payment of $8,333
plus interest at prime + 1 Balloon payment
2. General Electric
Equipment Capital Lease
September 1, 1990
September 1, 1996 is end of lease term
Options at end of lease -
1) Lease renewal for 1 or 2 years
2) Fair market value purchase
3) Return equipment
$278,469 principal
Monthly payment of $32,350 which includes interest at 10.80%
<PAGE>
IMI ACQUISITION OF KANSAS CORPORATION
Schedule 1.1 - PERMITTED LIENS
1. General Electric
Equipment Conditional Sales Type Lease January 25, 1993 January 25,
1999 is end of lease term Put at lease end - $175,294 $1,083,922
principal
Monthly payment of $30,890 which includes interest at 10.50%
2.. General Electric
Leasehold improvement loan
January 1, 1993
Due April 1, 1997
$147,008 principal
Monthly payment of $16,241 which includes interest at 9.5%
3. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$697,093 principal
Monthly payment of $18,807 which includes interest at 10.50%
4. General Electric
Equipment capital lease
July 1, 1995
June 1, 2000 is end of lease term
$1 buyout
$499,117 principal
Monthly payment of $11, 736 which includes interest at 11.375%
<PAGE>
IMI RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$960,792 principal
Monthly payment of $25,922 which includes interest at 10.50%
<PAGE>
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD.
Schedule 1.1 - PERMITTED LIENS
1. DVI Capital Company
Personal property
September 30, 1994
Due September 30, 1999
$399,136 principal
Monthly payment of $10,768 which includes interest at 10.50%
<PAGE>
MD ACQUISITION CORPORATION
SCHEDULE 1.1 - PERMITTED LIENS
NONE
<PAGE>
Schedule 5.1
CONTRACTS
<PAGE>
Schedule 7.6
LITIGATION AND PROCEEDINGS
IMI ACQUISITION OF ARLINGTON CORP.
Maryann Nicksolat v. M.R.I. of Arlington, L.P. - Discrimination
complaint filed with the Equal Employment Opportunity Commission
by a former employee of Borrower. Companion case filed with the
Arlington County Human Rights Commission was dismissed in June
1994.
Gonzalez v. Abrams, Landau Ltd. - Declaratory, judgment/
interpleader action filed by patient of Borrower seeking
allocation of $9,120 judgment proceeds received by plaintiff in
which Borrower has an interest.
IMI ACQUISITION OF PUERTO RICO CORPORATION
Recent claim by unidentified patient for injuries sustained by falling oxygen
tank.
IMI ACQUISITION OF KANSAS CORPORATION
None
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD.
Trimmer v. 4th Gulfstream Apts.
This is an interpleader case.
OAKLAND MAGNETIC RESONANCE INSTITUTE, LTD.
Bruce A. Hofmann v. Bruce Hofman, D.C. & State Farm W/C
This is a Workers Compensation matter involving Dr. Bruce Hofman,
a chiropractor, a former limited partner of the Borrower.
Hansy Acloque
Workers Compensation Claim - lower back injury on 3/29/90. Employee is now
pursuing settlement with ITT Hartford (workers compensation carrier) for medical
expenses and wage loss.
Luis Mejia
Workers Compensation Claim - car accident - lower back injury on 9/22/93. This
former employee was a courier and is now pursuing settlement of medical expenses
and wage loss.
Patricia Sweeney
Patient Incident: Patient had the wrong body part scanned on
April 14, 1994.
Patrick Stafford
Patient Incident: Upon returning to the Center for a second scan
on October 15, 1993, patient claimed he was dropped while being
<PAGE>
placed into the ambulance after completing his first scan on September 21, 1993.
No one at the Center was a witness, and no incident report can be located. The
Borrower has not been contacted by either the patient or the ambulance company
regarding a claim.
MD ACQUISITION CORPORATION
Threatened action by Drs. Ashley Kaye and James Sternberg as
controlling stockholders of S. Schulman and J. Sternberg MD Corp.
('MD Corp.') against MD Acquisition Corp. for fraud in the
inducement in connection with the execution of the Asset Purchase
Agreement between MD Corp. and MD Acquisition Corp. and non-
payment of the $3,375,000 Subordinated Promissory Note of MD
Acquisition Corporation to MD Corp. (as well as the non-payment
of subordinated promissory notes of MD Ltd. Partner Acq.
Corporation payable to Drs. Kaye and Sternberg and/or their
spouses).
<PAGE>
Schedule 7.11
INSURANCE
<PAGE>
Schedule 8.11
PERMITTED DISTRIBUTIONS
Payments and fees for consulting management, radiology and other medical,
financial and administrative services rendered in the ordinary course of
business.
Agreements:
Redemption Agreement and Subordinated Promissory Notes of Borrower to its former
limited partners.
Employment Agreements between International Magnetic Imaging,
Inc. (formerly IMI Acquisition Corp.) ("IMI") and Messrs.
Schulman and Mahoney, as amended through the date hereof.
Radiology Agreement between IMI and Expert Radiology Network, P.A., as amended
through the date hereof.
Restrictive Covenant Agreements between IMI and Drs. Sternberg
and Kaye.
Agreements between IMI and Advanced NMR Systems, Inc.
<PAGE>
Exhibit 10.13
SECURED PROMISSORY NOTE
Due February 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI
ACQUISITION OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION,
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC
RESONANCE INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE
INSTITUTE OF BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD.,
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS OUTPATIENT
DIAGNOSTIC CENTER, LTD., and each of them, jointly and severally, (collectively
and individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Two Million Dollars ($2,000,000), and interest thereon
at the rate of 11.04% per annum pursuant to the terms of that certain Loan and
Security Agreement dated as of the date hereof among Holder as Lender, Maker as
Borrower, and International Magnetic Imaging, Inc. as Guarantor (the
"Agreement"), in (i) a single payment on February 1, 1996 of interest accrued at
the rate of 11.04% per annum from the date of the initial Advance to January 31,
1996, and (ii) in twelve (12) consecutive monthly installments of Twenty-six
Thousand Dollars ($26,000), and forty-eight (48) consecutive monthly
installments of Forty-nine Thousand Two Hundred Fifty Dollars ($49,250) on the
first day of each calendar month thereafter. All capitalized terms not defined
herein shall have the meanings ascribed to them in the Agreement, the terms of
which are incorporated herein by reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This
Note is also secured by any Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated by reference in and made a
part of this Note.
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest immediately due and payable without
notice of default, presentment or
<PAGE>
demand for payment, protest or notice of nonpayment or dishonor, or other
notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of
paragraph 5 of this Note on the occurrence of any of the events enumerated
therein shall not constitute waiver of the right to exercise such option on the
subsequent occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the
United States of America which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal,
including the payment due upon maturity, when the same is due and payable and
such failure shall continue for five (5) days after nonpayment, a late charge by
way of damages to the extent provided in this paragraph shall be immediately due
and payable. Maker recognizes that default by Maker in making the payments
herein agreed to be paid when due will result in the Holder incurring additional
expenses, in loss to the Holder of the use of the money due and in frustration
to the Holder in meeting its other commitments. Maker agrees that, if for any
reason Maker fails to pay any amount due under this Note when due, the Holder
shall be entitled to damages for the detriment caused thereby, but that it is
extremely difficult and impractical to ascertain the extent of such damages.
Maker therefore agrees that a sum equal to ten cents ($.10) for each one dollar
($1.00) of each payment which is not received within five (5) days after the
date it is due and payable is a reasonable estimate of the said damages to the
Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation,
any proceedings for collection hereof in any bankruptcy or probate matter or
case), or if proceedings are commenced on or under any of the Loan and Security
Documents, Maker promises to pay the Holder all costs of collection and
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount of the rate of eighteen percent (18%) per
annum.
<PAGE>
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents
shall be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER
THE LAWS OF THE STATE OF PENNSYLVANIA AND MAKER AGREES TO
SUBMIT TO THE JURISDICTION OF THE STATE AND/OR FEDERAL COURTS IN
THE STATE OF PENNSYLVANIA.
DATED: January 24, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
<PAGE>
Exhibit 10.14
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of January 24, 1996, by and between DVI Financial Services, Inc.
dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite 401,
Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor") whose address is 2424 North Federal Highway, Suite 410, Boca
Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement dated as of the date
hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI Acquisition
of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation, Magnetic
Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic Resonance
Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance Institute of
Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd., Pine Island
Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient Diagnostic
Center, Ltd., collectively and individually referred to as "Borrower", and any
future agreements with Borrower. Guarantor unconditionally, absolutely and
irrevocably guarantees and promises to Lender to pay, perform and discharge, any
and all present and future indebtedness, liabilities and obligations
(collectively, the "Obligations") of Borrower to Lender, including, but not
limited to, the repayment to Lender of all sums presently due and owing, and all
sums that shall in the future become due and owing, from Borrower to Lender
whether arising under the Agreement or otherwise. The Obligations of Borrower
include, but are not limited to, Borrower acting on behalf of itself or any
estate created by the commencement of a case under Title 11 of the United States
Code or any successor statute thereto (the "Bankruptcy Code") or any other
insolvency, bankruptcy, reorganization or liquidation proceeding, or by any
trustee under the Bankruptcy Code, liquidator, sequestrator or receive of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or expenses, including without limitation taxes and insurance
1
<PAGE>
premiums, required to be paid by Borrower under the Agreement that are to be
paid or advanced by Lender, (B) filing, recording, publication and search fees
paid or incurred by Lender in connection with Lender's transactions with
Borrower, (C) costs and expenses incurred by Lender to correct any default or
enforce any provision of the Agreement, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, and/or advertising to sell any security for, the Obligations (whether or
not a sale is consummated), (D) costs and expenses of suit incurred by Lender in
enforcing or defending the Agreement or any portion thereof and (E) Lender's
reasonable attorney's fees and expenses incurred in advising, structuring,
drafting, reviewing, negotiating, amending, terminating, enforcing, defending or
concerning the Agreement or any portion thereof, irrespective of whether suit is
brought, and (b) includes Borrower's prompt, full and faithful performance,
observance and discharge of each and every term, condition, agreement,
representation, warranty, undertaking and provision to be performed by Borrower
under the Agreement. Guarantor's liability under this Guaranty may be larger in
amount and more burdensome than the Obligations of Borrower under the Agreement
and Guarantor hereby waives any defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice or the consent of Guarantor, and without affecting
or impairing the liability of Guarantor hereunder, do any of the following: (i)
renew, modify, or extend (including extensions beyond the original term) any
Obligations of Borrower, of its customers, of any co-guarantors (whether
hereunder or under a separate instrument) or of any other party at any time
directly or contingently liable for the payment of any said Obligations; (ii)
accept partial payments of said Obligations; (iii) settle, discharge, release
(by operation of law or otherwise), compound, compromise, collect or liquidate
any of said Obligations and the security therefor in any manner; (iv) consent to
the transfer or sale of security, or (v) bid and purchase at any sale of any
security; or (vi) change the terms of the Obligations, including increases or
decreases in payments or any interest rate adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c). Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to any of the Agreement or against Guarantor by reason of this Guaranty or as a
result of the substitution, release, repossession, sale, disposition or
destruction of any collateral or of the items leased or to be leased to
Borrower. Guarantor shall not be released or discharged, either in whole or in
part, by Lender's failure or delay (a) to perfect or continue the perfection of
any security interest in any property which secures the Obligations of Borrower
or Guarantor to Lender or (b) to protect the property covered by such security
interest.
3
<PAGE>
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lessor repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
4
<PAGE>
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter or;
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists. This Guaranty may
not be amended or modified except by a writing signed by Lender and Guarantor.
This Guaranty is a valid and subsisting legal instrument and no provision which
may be deemed unenforceable shall in any way invalidate any other provision or
provisions, all of which shall remain in full force and effect. No invalidity,
irregularity or unenforceability of all or any part of the Obligations nor any
other circumstance which might be a legal defense of a guarantor shall affect,
impair or be a defense to this Guaranty. If more than one Guarantor has signed
this Guaranty, each Guarantor shall be jointly and severally liable to Lender
hereunder and when permitted by the context, the singular includes the plural.
Each of the persons who has signed this or any other Guaranty has
unconditionally delivered it to Lender, and the failure to sign this or any
other Guaranty by any other person shall not discharge the liability of any
signer. The unconditional liability of the signer applies whether the signer is
jointly and severally liable for the entire amount of the debt, or for only a
pro-rata portion. Guarantor shall remain liable under this Guaranty even if any
co-guarantor is released or discharged for any reason.
5
<PAGE>
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL RESPECTS BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
PENNSYLVANIA, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
GUARANTOR AGREES TO SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR
FEDERAL COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR HEREBY
WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS GUARANTY OR
THE CONDUCT OF THE RELATIONSHIP BETWEEN LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
Chairman of the Board
6
<PAGE>
Exhibit 10.21
SECURED PROMISSORY NOTE NO. 1
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI
ACQUISITION OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION,
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC
RESONANCE INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE
INSTITUTE OF BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD.,
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT
DIAGNOSTIC CENTER, LTD., and each of them, jointly and severally, (collectively
and individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 1 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This
Note is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of
paragraph 5 of this Note on the occurrence of any of the events enumerated
therein shall not constitute a waiver of the right to exercise such option on
the subsequent occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the
United States of America which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal
under this Note, including the payments due upon maturity, when the same is due
and payable and such failure shall continue for five (5) days after nonpayment,
a late charge by way of damages to the extent provided in this paragraph shall
be immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation,
any proceedings for collection hereof in any bankruptcy or probate matter or
case), or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents
shall be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 2
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 2 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 3
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 3 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 4
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 4 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 5
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 5 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 6
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Five Hundred Thousand Dollars ($500,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 6 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Ten Thousand Nine Hundred Ninety-Eight and 00/100
Dollars ($10,998) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
Exhibit 10.22
SECURED PROMISSORY NOTE NO. 1
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI
ACQUISITION OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION,
MAGNETIC RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC
RESONANCE INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE
INSTITUTE OF BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD.,
PINE ISLAND MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT
DIAGNOSTIC CENTER, LTD., and each of them, jointly and severally, (collectively
and individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 1 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to
prepayment or accelerations, of interest accrued on the unpaid principal balance
at the rate of 10.50% per annum, compounded annually, from the date of the
initial Advance to the day preceding such payment. All capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Agreement, the terms of which are incorporated herein by reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This
Note is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of
paragraph 5 of this Note on the occurrence of any of the events enumerated
therein shall not constitute a waiver of the right to exercise such option on
the subsequent occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the
United States of America which shall be legal tender in payment of all debts and
dues, public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal
under this Note, including the payments due upon maturity, when the same is due
and payable and such failure shall continue for five (5) days after nonpayment,
a late charge by way of damages to the extent provided in this paragraph shall
be immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation,
any proceedings for collection hereof in any bankruptcy or probate matter or
case), or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held
by a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents
shall be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 2
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 2 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 3
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 3 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 4
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 4 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 5
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Seven Hundred Thousand Dollars ($700,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 5 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Fifteen Thousand Three Hundred Ninety-Five and 00/100
Dollars ($15,395) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
1
<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
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<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
SECURED PROMISSORY NOTE NO. 6
Due November 1, 2001
1. FOR VALUE RECEIVED, IMI ACQUISITION OF ARLINGTON CORP., IMI ACQUISITION
OF PUERTO RICO CORPORATION, IMI ACQUISITION OF KANSAS CORPORATION, MAGNETIC
RESONANCE INSTITUTE OF NORTH MIAMI BEACH, LTD., OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD., MD ACQUISITION CORPORATION, MAGNETIC RESONANCE INSTITUTE OF
BOCA RATON, LTD., MAGNETIC RESONANCE INSTITUTE OF SOUTH DADE, LTD., PINE ISLAND
MAGNETIC RESONANCE IMAGING CENTER, LTD., AND PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD., and each of them, jointly and severally, (collectively and
individually referred to as "Maker") hereby promises to pay to DVI Financial
Services, Inc dba DVI Capital or its assignee (the "Holder"), or order,
principal in the sum of Five Hundred Thousand Dollars ($500,000), and interest
thereon at the rate of 22.00% per annum pursuant to the terms of that certain
Loan and Security Agreement No. 6 dated as of September 11, 1996 among Holder as
Lender, Maker as Borrower, and International Magnetic Imaging, Inc. as Guarantor
(the "Agreement"), in (i) a single payment on November 1, 1996 of interest
accrued on the unpaid principal balance at the rate of 11.50% per annum from the
date of the initial Advance to October 31, 1996, (ii) in sixty (60) consecutive
monthly installments of Ten Thousand Nine Hundred Ninety-Eight and 00/100
Dollars ($10,998) on the first day of each calendar month thereafter, and (iii)
in a single payment on November 1, 2001, or such earlier date as this Note is
paid in full due to prepayment or accelerations, of interest accrued on the
unpaid principal balance at the rate of 10.50% per annum, compounded annually,
from the date of the initial Advance to the day preceding such payment. All
capitalized terms used but not defined herein shall have the meanings ascribed
to them in the Agreement, the terms of which are incorporated herein by
reference thereto.
2. If the specified interest rate shall at any time exceed the maximum
allowed by law, then the applicable interest rate shall be reduced to the
maximum allowed by law. This Note shall be subject to prepayment in accordance
with the provisions of Sections 2.3 of the Agreement.
3. Principal and interest shall be payable to Holder at DVI Financial
Services, Inc. dba DVI Capital, 500 Hyde Park, Doylestown, Pennsylvania 18901,
or such other place as the Holder may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by, the Agreement. This Note
is also secured by the Security Documents referred to in the Agreement. The
Agreement and the Security Documents create a lien on and security interest in,
the personal property described therein ("Collateral"). The Agreement and the
Security Documents shall hereinafter be collectively referred to as the "Loan
and Security Documents" and are hereby incorporated herein by reference thereto
and made a part of this Note.
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<PAGE>
5. The occurrence of any Event of Default under the Agreement shall, at
the election of the Holder, make the entire unpaid balance of the principal
amount of this Note and accrued interest thereon immediately due and payable
without notice of default, presentment or demand for payment, protest or notice
of nonpayment or dishonor, or other notices or demands of any kind or character.
6. Failure of the Holder to exercise the acceleration option of paragraph
5 of this Note on the occurrence of any of the events enumerated therein shall
not constitute a waiver of the right to exercise such option on the subsequent
occurrence of any of the events enumerated therein.
7. Principal and interest shall be payable in lawful money of the United
States of America which shall be legal tender in payment of all debts and dues,
public and private, at the time of payment. If any payment of principal or
interest under this Note becomes due on a Saturday, Sunday or legal or banking
holiday, such payment will be due on the next succeeding business day. Maker
waives presentment, demand for payment, notice of nonpayment, protest, and
notice of protest, and all other notices and demands in connection with the
delivery, acceptance, performance, default, or enforcement of this Note, except
as specifically provided in the Agreement. Maker consents to any and all
assignments of this Note, extensions of time, renewals, and waivers that may be
made or granted by the Holder. Maker expressly agrees that such assignments,
extensions of time, renewals, or waivers shall not affect Maker's liability
hereunder. Maker agrees that Holder may, without notice to Maker and without
affecting the liability of Maker, accept additional or substitute security for
this Note, or release any security or any party liable for this Note, or extend
or renew this Note.
8. If Maker shall fail to make any payment of interest or principal under
this Note, including the payments due upon maturity, when the same is due and
payable and such failure shall continue for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this paragraph shall be
immediately due and payable. Maker recognizes that default by Maker in making
the payments herein agreed to be paid when due will result in the Holder
incurring additional expenses, in loss to the Holder of the use of the money due
and in frustration to the Holder in meeting its other commitments. Maker agrees
that, if for any reason Maker fails to pay any amount due under this Note when
due, the Holder shall be entitled to damages for the detriment caused thereby,
but that it is extremely difficult and impractical to ascertain the extent of
such damages. Maker therefore agrees that a sum equal to five cents ($.05) for
each one dollar ($1.00) of each payment which is not received within five (5)
days after the date it is due and payable is a reasonable estimate of the said
damages to the Holder, which sum Maker agrees to pay on demand.
9. If action be instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and
2
<PAGE>
enforcement including, without limitation, reasonable attorneys' fees plus
interest on any defaulted amount at the rate of eighteen percent (18%) per
annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder shall be effective when received or refused if
given or rendered in writing, in the manner provided in the Agreement.
11. This Note shall inure to the benefit of and be binding upon the
Holder's successors and assigns. References to the "Holder" shall be deemed to
refer to the holder(s) of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note shall remain in full force and effect to the greatest extent
permitted by law and shall in no other way be affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents shall
be deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF THE
STATE OF PENNSYLVANIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE
STATE AND/OR FEDERAL COURTS IN THE STATE OF PENNSYLVANIA.
DATED: September 11, 1996
IMI ACQUISITION OF ARLINGTON CORP.
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF PUERTO RICO
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
IMI ACQUISITION OF KANSAS
CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
NORTH MIAMI BEACH, LTD.
By: IMI ACQUISITION OF NORTH MIAMI
BEACH CORPORATION its general partner
By:
Name: Lewis S. Schiller
Title: President
OAKLAND MAGNETIC RESONANCE
INSTITUTE, LTD.
By: IMI ACQUISITION OF OAKLAND
PARK CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MD ACQUISITION CORPORATION
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE
OF BOCA RATON, LTD.,
By: IMI ACQUISITION OF BOCA
RATON CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
MAGNETIC RESONANCE INSTITUTE OF
SOUTH DADE, LTD.
By: IMI ACQUISITION OF SOUTH DADE
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PINE ISLAND MAGNETIC RESONANCE
IMAGING CENTER, LTD.
By: IMI ACQUISITION OF PINE ISLAND
CORPORATION, its general partner
By:
Name: Lewis S. Schiller
Title: President
PHYSICIANS' OUTPATIENT DIAGNOSTIC
CENTER, LTD.
By: PODC ACQUISITION CORPORATION,
its general partner
By:
Name: Lewis S. Schiller
Title: President
3
<PAGE>
Exhibit 10.23
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement No. 1)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of September 11, 1996, by and between DVI Financial Services,
Inc. dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite
401, Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor"), a Delaware corporation whose address is 2424 North Federal
Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement No. 1 dated as of the
date hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient
Diagnostic Center, Ltd., collectively and individually referred to as
"Borrower", and any future agreements with Borrower. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to Lender to pay, perform and
discharge, any and all present and future indebtedness, liabilities and
obligations (collectively, the "Obligations") of Borrower to Lender, including,
but not limited to, the repayment to Lender of all sums presently due and owing,
and all sums that shall in the future become due and owing, from Borrower to
Lender whether arising under the Agreement or otherwise. The Obligations of
Borrower include, but are not limited to, Borrower acting on behalf of itself or
any estate created by the commencement of a case under Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
other insolvency, bankruptcy, reorganization or liquidation proceeding, or by
any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or
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<PAGE>
expenses, including without limitation taxes and insurance premiums, required to
be paid by Borrower under the Agreement that are to be paid or advanced by
Lender, (B) filing, recording, publication and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower, (C) costs and
expenses incurred by Lender to correct any default or enforce any provision of
the Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, and/or advertising to sell any
security for, the Obligations (whether or not a sale is consummated), (D) costs
and expenses of suit incurred by Lender in enforcing or defending the Agreement
or any portion thereof and (E) Lender's reasonable attorney's fees and expenses
incurred in advising, structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or concerning the Agreement or any portion
thereof, irrespective of whether suit is brought, and (b) includes Borrower's
prompt, full and faithful performance, observance and discharge of each and
every term, condition, agreement, representation, warranty, undertaking and
provision to be performed by Borrower under the Agreement. Guarantor's liability
under this Guaranty may be larger in amount and more burdensome than the
Obligations of Borrower under the Agreement and Guarantor hereby waives any
defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice to or the consent of Guarantor, and without
affecting or impairing the liability of Guarantor hereunder, do any of the
following: (i) renew, modify, or extend (including extensions beyond the
original term) any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
discharge, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations and the security therefor in any
manner; (iv) consent to the transfer or sale of security, or (v) bid and
purchase at any sale of any security; or (vi) change the terms of the
Obligations, including increases or decreases in payments or any interest rate
adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to the Agreement or against Guarantor by reason of this Guaranty or as a result
of the substitution, release, repossession, sale, disposition or destruction of
any collateral or of the items leased or to be leased to Borrower. Guarantor
shall not be released or discharged, either in whole or in part, by Lender's
failure or delay (a) to perfect or continue the perfection of any security
interest in any property which secures the Obligations of Borrower or Guarantor
to Lender or (b) to protect the property covered by such security interest.
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
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<PAGE>
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lender repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
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<PAGE>
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter; or
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists with respect to the
subject matter hereof. This Guaranty may not be amended or modified except by a
writing signed by Lender and Guarantor. This Guaranty is a valid and subsisting
legal instrument and no provision which may be deemed unenforceable shall in any
way invalidate any other provision or provisions, all of which shall remain in
full force and effect. No invalidity, irregularity or unenforceability of all or
any part of the Obligations nor any other circumstance which might be a legal
defense of a guarantor shall affect, impair or be a defense to this Guaranty. If
more than one Guarantor has signed this Guaranty, each Guarantor shall be
jointly and severally liable to Lender hereunder and when permitted by the
context, the singular includes the plural. Each of the persons who has signed
this or any other Guaranty has unconditionally delivered it to Lender on behalf
of Guarantor, and the failure to sign this or any other Guaranty by any other
person shall not discharge the liability of Guarantor. The unconditional
liability of Guarantor applies whether the signer is jointly and severally
liable for the entire amount of the debt, or for only a pro-rata portion.
Guarantor shall remain liable under this Guaranty even if any co-guarantor is
released or discharged for any reason.
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF PENNSYLVANIA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. GUARANTOR AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR
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HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
President
6
<PAGE>
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement No. 2)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of September 11, 1996, by and between DVI Financial Services,
Inc. dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite
401, Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor"), a Delaware corporation whose address is 2424 North Federal
Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement No. 2 dated as of the
date hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient
Diagnostic Center, Ltd., collectively and individually referred to as
"Borrower", and any future agreements with Borrower. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to Lender to pay, perform and
discharge, any and all present and future indebtedness, liabilities and
obligations (collectively, the "Obligations") of Borrower to Lender, including,
but not limited to, the repayment to Lender of all sums presently due and owing,
and all sums that shall in the future become due and owing, from Borrower to
Lender whether arising under the Agreement or otherwise. The Obligations of
Borrower include, but are not limited to, Borrower acting on behalf of itself or
any estate created by the commencement of a case under Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
other insolvency, bankruptcy, reorganization or liquidation proceeding, or by
any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or
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expenses, including without limitation taxes and insurance premiums, required to
be paid by Borrower under the Agreement that are to be paid or advanced by
Lender, (B) filing, recording, publication and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower, (C) costs and
expenses incurred by Lender to correct any default or enforce any provision of
the Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, and/or advertising to sell any
security for, the Obligations (whether or not a sale is consummated), (D) costs
and expenses of suit incurred by Lender in enforcing or defending the Agreement
or any portion thereof and (E) Lender's reasonable attorney's fees and expenses
incurred in advising, structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or concerning the Agreement or any portion
thereof, irrespective of whether suit is brought, and (b) includes Borrower's
prompt, full and faithful performance, observance and discharge of each and
every term, condition, agreement, representation, warranty, undertaking and
provision to be performed by Borrower under the Agreement. Guarantor's liability
under this Guaranty may be larger in amount and more burdensome than the
Obligations of Borrower under the Agreement and Guarantor hereby waives any
defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice to or the consent of Guarantor, and without
affecting or impairing the liability of Guarantor hereunder, do any of the
following: (i) renew, modify, or extend (including extensions beyond the
original term) any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
discharge, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations and the security therefor in any
manner; (iv) consent to the transfer or sale of security, or (v) bid and
purchase at any sale of any security; or (vi) change the terms of the
Obligations, including increases or decreases in payments or any interest rate
adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to the Agreement or against Guarantor by reason of this Guaranty or as a result
of the substitution, release, repossession, sale, disposition or destruction of
any collateral or of the items leased or to be leased to Borrower. Guarantor
shall not be released or discharged, either in whole or in part, by Lender's
failure or delay (a) to perfect or continue the perfection of any security
interest in any property which secures the Obligations of Borrower or Guarantor
to Lender or (b) to protect the property covered by such security interest.
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
3
<PAGE>
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lender repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
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<PAGE>
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter; or
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists with respect to the
subject matter hereof. This Guaranty may not be amended or modified except by a
writing signed by Lender and Guarantor. This Guaranty is a valid and subsisting
legal instrument and no provision which may be deemed unenforceable shall in any
way invalidate any other provision or provisions, all of which shall remain in
full force and effect. No invalidity, irregularity or unenforceability of all or
any part of the Obligations nor any other circumstance which might be a legal
defense of a guarantor shall affect, impair or be a defense to this Guaranty. If
more than one Guarantor has signed this Guaranty, each Guarantor shall be
jointly and severally liable to Lender hereunder and when permitted by the
context, the singular includes the plural. Each of the persons who has signed
this or any other Guaranty has unconditionally delivered it to Lender on behalf
of Guarantor, and the failure to sign this or any other Guaranty by any other
person shall not discharge the liability of Guarantor. The unconditional
liability of Guarantor applies whether the signer is jointly and severally
liable for the entire amount of the debt, or for only a pro-rata portion.
Guarantor shall remain liable under this Guaranty even if any co-guarantor is
released or discharged for any reason.
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF PENNSYLVANIA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. GUARANTOR AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR
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<PAGE>
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
President
6
<PAGE>
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement No. 3)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of September 11, 1996, by and between DVI Financial Services,
Inc. dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite
401, Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor"), a Delaware corporation whose address is 2424 North Federal
Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement No. 3 dated as of the
date hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient
Diagnostic Center, Ltd., collectively and individually referred to as
"Borrower", and any future agreements with Borrower. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to Lender to pay, perform and
discharge, any and all present and future indebtedness, liabilities and
obligations (collectively, the "Obligations") of Borrower to Lender, including,
but not limited to, the repayment to Lender of all sums presently due and owing,
and all sums that shall in the future become due and owing, from Borrower to
Lender whether arising under the Agreement or otherwise. The Obligations of
Borrower include, but are not limited to, Borrower acting on behalf of itself or
any estate created by the commencement of a case under Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
other insolvency, bankruptcy, reorganization or liquidation proceeding, or by
any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or
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expenses, including without limitation taxes and insurance premiums, required to
be paid by Borrower under the Agreement that are to be paid or advanced by
Lender, (B) filing, recording, publication and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower, (C) costs and
expenses incurred by Lender to correct any default or enforce any provision of
the Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, and/or advertising to sell any
security for, the Obligations (whether or not a sale is consummated), (D) costs
and expenses of suit incurred by Lender in enforcing or defending the Agreement
or any portion thereof and (E) Lender's reasonable attorney's fees and expenses
incurred in advising, structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or concerning the Agreement or any portion
thereof, irrespective of whether suit is brought, and (b) includes Borrower's
prompt, full and faithful performance, observance and discharge of each and
every term, condition, agreement, representation, warranty, undertaking and
provision to be performed by Borrower under the Agreement. Guarantor's liability
under this Guaranty may be larger in amount and more burdensome than the
Obligations of Borrower under the Agreement and Guarantor hereby waives any
defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice to or the consent of Guarantor, and without
affecting or impairing the liability of Guarantor hereunder, do any of the
following: (i) renew, modify, or extend (including extensions beyond the
original term) any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
discharge, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations and the security therefor in any
manner; (iv) consent to the transfer or sale of security, or (v) bid and
purchase at any sale of any security; or (vi) change the terms of the
Obligations, including increases or decreases in payments or any interest rate
adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to the Agreement or against Guarantor by reason of this Guaranty or as a result
of the substitution, release, repossession, sale, disposition or destruction of
any collateral or of the items leased or to be leased to Borrower. Guarantor
shall not be released or discharged, either in whole or in part, by Lender's
failure or delay (a) to perfect or continue the perfection of any security
interest in any property which secures the Obligations of Borrower or Guarantor
to Lender or (b) to protect the property covered by such security interest.
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
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5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lender repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
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<PAGE>
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter; or
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists with respect to the
subject matter hereof. This Guaranty may not be amended or modified except by a
writing signed by Lender and Guarantor. This Guaranty is a valid and subsisting
legal instrument and no provision which may be deemed unenforceable shall in any
way invalidate any other provision or provisions, all of which shall remain in
full force and effect. No invalidity, irregularity or unenforceability of all or
any part of the Obligations nor any other circumstance which might be a legal
defense of a guarantor shall affect, impair or be a defense to this Guaranty. If
more than one Guarantor has signed this Guaranty, each Guarantor shall be
jointly and severally liable to Lender hereunder and when permitted by the
context, the singular includes the plural. Each of the persons who has signed
this or any other Guaranty has unconditionally delivered it to Lender on behalf
of Guarantor, and the failure to sign this or any other Guaranty by any other
person shall not discharge the liability of Guarantor. The unconditional
liability of Guarantor applies whether the signer is jointly and severally
liable for the entire amount of the debt, or for only a pro-rata portion.
Guarantor shall remain liable under this Guaranty even if any co-guarantor is
released or discharged for any reason.
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF PENNSYLVANIA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. GUARANTOR AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR
5
<PAGE>
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
President
6
<PAGE>
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement No. 4)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of September 11, 1996, by and between DVI Financial Services,
Inc. dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite
401, Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor"), a Delaware corporation whose address is 2424 North Federal
Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement No. 4 dated as of the
date hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient
Diagnostic Center, Ltd., collectively and individually referred to as
"Borrower", and any future agreements with Borrower. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to Lender to pay, perform and
discharge, any and all present and future indebtedness, liabilities and
obligations (collectively, the "Obligations") of Borrower to Lender, including,
but not limited to, the repayment to Lender of all sums presently due and owing,
and all sums that shall in the future become due and owing, from Borrower to
Lender whether arising under the Agreement or otherwise. The Obligations of
Borrower include, but are not limited to, Borrower acting on behalf of itself or
any estate created by the commencement of a case under Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
other insolvency, bankruptcy, reorganization or liquidation proceeding, or by
any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or
1
<PAGE>
expenses, including without limitation taxes and insurance premiums, required to
be paid by Borrower under the Agreement that are to be paid or advanced by
Lender, (B) filing, recording, publication and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower, (C) costs and
expenses incurred by Lender to correct any default or enforce any provision of
the Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, and/or advertising to sell any
security for, the Obligations (whether or not a sale is consummated), (D) costs
and expenses of suit incurred by Lender in enforcing or defending the Agreement
or any portion thereof and (E) Lender's reasonable attorney's fees and expenses
incurred in advising, structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or concerning the Agreement or any portion
thereof, irrespective of whether suit is brought, and (b) includes Borrower's
prompt, full and faithful performance, observance and discharge of each and
every term, condition, agreement, representation, warranty, undertaking and
provision to be performed by Borrower under the Agreement. Guarantor's liability
under this Guaranty may be larger in amount and more burdensome than the
Obligations of Borrower under the Agreement and Guarantor hereby waives any
defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice to or the consent of Guarantor, and without
affecting or impairing the liability of Guarantor hereunder, do any of the
following: (i) renew, modify, or extend (including extensions beyond the
original term) any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
discharge, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations and the security therefor in any
manner; (iv) consent to the transfer or sale of security, or (v) bid and
purchase at any sale of any security; or (vi) change the terms of the
Obligations, including increases or decreases in payments or any interest rate
adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to the Agreement or against Guarantor by reason of this Guaranty or as a result
of the substitution, release, repossession, sale, disposition or destruction of
any collateral or of the items leased or to be leased to Borrower. Guarantor
shall not be released or discharged, either in whole or in part, by Lender's
failure or delay (a) to perfect or continue the perfection of any security
interest in any property which secures the Obligations of Borrower or Guarantor
to Lender or (b) to protect the property covered by such security interest.
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
3
<PAGE>
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lender repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
4
<PAGE>
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter; or
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists with respect to the
subject matter hereof. This Guaranty may not be amended or modified except by a
writing signed by Lender and Guarantor. This Guaranty is a valid and subsisting
legal instrument and no provision which may be deemed unenforceable shall in any
way invalidate any other provision or provisions, all of which shall remain in
full force and effect. No invalidity, irregularity or unenforceability of all or
any part of the Obligations nor any other circumstance which might be a legal
defense of a guarantor shall affect, impair or be a defense to this Guaranty. If
more than one Guarantor has signed this Guaranty, each Guarantor shall be
jointly and severally liable to Lender hereunder and when permitted by the
context, the singular includes the plural. Each of the persons who has signed
this or any other Guaranty has unconditionally delivered it to Lender on behalf
of Guarantor, and the failure to sign this or any other Guaranty by any other
person shall not discharge the liability of Guarantor. The unconditional
liability of Guarantor applies whether the signer is jointly and severally
liable for the entire amount of the debt, or for only a pro-rata portion.
Guarantor shall remain liable under this Guaranty even if any co-guarantor is
released or discharged for any reason.
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF PENNSYLVANIA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. GUARANTOR AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR
5
<PAGE>
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
President
6
<PAGE>
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement No. 5)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of September 11, 1996, by and between DVI Financial Services,
Inc. dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite
401, Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor"), a Delaware corporation whose address is 2424 North Federal
Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement No. 5 dated as of the
date hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient
Diagnostic Center, Ltd., collectively and individually referred to as
"Borrower", and any future agreements with Borrower. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to Lender to pay, perform and
discharge, any and all present and future indebtedness, liabilities and
obligations (collectively, the "Obligations") of Borrower to Lender, including,
but not limited to, the repayment to Lender of all sums presently due and owing,
and all sums that shall in the future become due and owing, from Borrower to
Lender whether arising under the Agreement or otherwise. The Obligations of
Borrower include, but are not limited to, Borrower acting on behalf of itself or
any estate created by the commencement of a case under Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
other insolvency, bankruptcy, reorganization or liquidation proceeding, or by
any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or
1
<PAGE>
expenses, including without limitation taxes and insurance premiums, required to
be paid by Borrower under the Agreement that are to be paid or advanced by
Lender, (B) filing, recording, publication and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower, (C) costs and
expenses incurred by Lender to correct any default or enforce any provision of
the Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, and/or advertising to sell any
security for, the Obligations (whether or not a sale is consummated), (D) costs
and expenses of suit incurred by Lender in enforcing or defending the Agreement
or any portion thereof and (E) Lender's reasonable attorney's fees and expenses
incurred in advising, structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or concerning the Agreement or any portion
thereof, irrespective of whether suit is brought, and (b) includes Borrower's
prompt, full and faithful performance, observance and discharge of each and
every term, condition, agreement, representation, warranty, undertaking and
provision to be performed by Borrower under the Agreement. Guarantor's liability
under this Guaranty may be larger in amount and more burdensome than the
Obligations of Borrower under the Agreement and Guarantor hereby waives any
defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice to or the consent of Guarantor, and without
affecting or impairing the liability of Guarantor hereunder, do any of the
following: (i) renew, modify, or extend (including extensions beyond the
original term) any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
discharge, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations and the security therefor in any
manner; (iv) consent to the transfer or sale of security, or (v) bid and
purchase at any sale of any security; or (vi) change the terms of the
Obligations, including increases or decreases in payments or any interest rate
adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to the Agreement or against Guarantor by reason of this Guaranty or as a result
of the substitution, release, repossession, sale, disposition or destruction of
any collateral or of the items leased or to be leased to Borrower. Guarantor
shall not be released or discharged, either in whole or in part, by Lender's
failure or delay (a) to perfect or continue the perfection of any security
interest in any property which secures the Obligations of Borrower or Guarantor
to Lender or (b) to protect the property covered by such security interest.
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
3
<PAGE>
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lender repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
4
<PAGE>
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter; or
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists with respect to the
subject matter hereof. This Guaranty may not be amended or modified except by a
writing signed by Lender and Guarantor. This Guaranty is a valid and subsisting
legal instrument and no provision which may be deemed unenforceable shall in any
way invalidate any other provision or provisions, all of which shall remain in
full force and effect. No invalidity, irregularity or unenforceability of all or
any part of the Obligations nor any other circumstance which might be a legal
defense of a guarantor shall affect, impair or be a defense to this Guaranty. If
more than one Guarantor has signed this Guaranty, each Guarantor shall be
jointly and severally liable to Lender hereunder and when permitted by the
context, the singular includes the plural. Each of the persons who has signed
this or any other Guaranty has unconditionally delivered it to Lender on behalf
of Guarantor, and the failure to sign this or any other Guaranty by any other
person shall not discharge the liability of Guarantor. The unconditional
liability of Guarantor applies whether the signer is jointly and severally
liable for the entire amount of the debt, or for only a pro-rata portion.
Guarantor shall remain liable under this Guaranty even if any co-guarantor is
released or discharged for any reason.
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF PENNSYLVANIA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. GUARANTOR AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR
5
<PAGE>
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
President
6
<PAGE>
UNCONDITIONAL CONTINUING GUARANTY
(Loan Agreement No. 6)
THIS UNCONDITIONAL CONTINUING GUARANTY (this "Guaranty") is made and
entered into as of September 11, 1996, by and between DVI Financial Services,
Inc. dba DVI Capital ("Lender"), with an office at 4041 MacArthur Avenue, Suite
401, Newport Beach, California 92660, and International Magnetic Imaging, Inc.
("Guarantor"), a Delaware corporation whose address is 2424 North Federal
Highway, Suite 410, Boca Raton, Florida 33431.
1. Guaranty. In order to induce Lender, and in consideration thereof,
to enter into that certain Loan and Security Agreement No. 6 dated as of the
date hereof ("Agreement"), with IMI Acquisition of Arlington Corp., IMI
Acquisition of Puerto Rico Corporation, IMI Acquisition of Kansas Corporation,
Magnetic Resonance Institute of North Miami Beach, Ltd., Oakland Magnetic
Resonance Institute, Ltd., MD Acquisition Corporation, Magnetic Resonance
Institute of Boca Raton, Ltd., Magnetic Resonance Institute of South Dade, Ltd.,
Pine Island Magnetic Resonance Imaging Center, Ltd., and Physicians' Outpatient
Diagnostic Center, Ltd., collectively and individually referred to as
"Borrower", and any future agreements with Borrower. Guarantor unconditionally,
absolutely and irrevocably guarantees and promises to Lender to pay, perform and
discharge, any and all present and future indebtedness, liabilities and
obligations (collectively, the "Obligations") of Borrower to Lender, including,
but not limited to, the repayment to Lender of all sums presently due and owing,
and all sums that shall in the future become due and owing, from Borrower to
Lender whether arising under the Agreement or otherwise. The Obligations of
Borrower include, but are not limited to, Borrower acting on behalf of itself or
any estate created by the commencement of a case under Title 11 of the United
States Code or any successor statute thereto (the "Bankruptcy Code") or any
other insolvency, bankruptcy, reorganization or liquidation proceeding, or by
any trustee under the Bankruptcy Code, liquidator, sequestrator or receiver of
Borrower or Borrower's property or similar person duly appointed pursuant to any
law generally governing any insolvency, bankruptcy, reorganization, liquidation,
receivership or like proceeding.
2. Obligations. The Obligations (a) include any and all loans,
advances, indebtedness, and other obligations owed by Borrower to Lender of
every description, whether now existing or hereafter arising (including those
owed by Borrower to others and acquired by Lender by purchase, assignment or
otherwise) and include Obligations that are: (i) direct or indirect; (ii) fixed
or contingent; (iii) primary or as guarantor or surety; (iv) liquidated or
unliquidated; (v) matured or unmatured; (vi) acquired by pledge, assignment,
security interest or purchase; (vii) secured or unsecured; (viii) primary or
secondary; (ix) joint, several or joint and several; (x) represented by letters
of credit now or hereafter issued by Lender for the benefit of or at the request
of Borrower; (xi) interest, late charges, default interest and any interest that
would have accrued but for the commencement of a case under the Bankruptcy Code;
and (xii) all of Lender's expenses, included, without limitation (A) all costs
or
1
<PAGE>
expenses, including without limitation taxes and insurance premiums, required to
be paid by Borrower under the Agreement that are to be paid or advanced by
Lender, (B) filing, recording, publication and search fees paid or incurred by
Lender in connection with Lender's transactions with Borrower, (C) costs and
expenses incurred by Lender to correct any default or enforce any provision of
the Agreement, or in gaining possession of, maintaining, handling, preserving,
storing, shipping, selling, preparing for sale, and/or advertising to sell any
security for, the Obligations (whether or not a sale is consummated), (D) costs
and expenses of suit incurred by Lender in enforcing or defending the Agreement
or any portion thereof and (E) Lender's reasonable attorney's fees and expenses
incurred in advising, structuring, drafting, reviewing, negotiating, amending,
terminating, enforcing, defending or concerning the Agreement or any portion
thereof, irrespective of whether suit is brought, and (b) includes Borrower's
prompt, full and faithful performance, observance and discharge of each and
every term, condition, agreement, representation, warranty, undertaking and
provision to be performed by Borrower under the Agreement. Guarantor's liability
under this Guaranty may be larger in amount and more burdensome than the
Obligations of Borrower under the Agreement and Guarantor hereby waives any
defenses to the contrary.
3. Attorney's Fees. If Lender incurs attorney's fees relating to any
actions or claims arising out of this Guaranty, Guarantor agrees to pay Lender
such attorney's fees plus all reasonable costs and expenses of prosecuting
and/or defending any such actions or claims. The term "attorney's fees" means
the full cost of legal services performed in connection with the matters
involved, calculated on the basis of the actual fees of the attorneys performing
those services, and is not limited to "reasonable attorney's fees" as defined in
any statute or rule of any court in which an action hereunder may be brought.
Guarantor agrees to pay Lender's attorney's fees relating to any action, suit,
counterclaim, post-judgment motions, bankruptcy litigation, appeal, arbitration
or mediation.
4. Waivers.
(a) Scope of Risk Defenses. Lender may at any time and from
time to time, without notice to or the consent of Guarantor, and without
affecting or impairing the liability of Guarantor hereunder, do any of the
following: (i) renew, modify, or extend (including extensions beyond the
original term) any Obligations of Borrower, of its customers, of any
co-guarantors (whether hereunder or under a separate instrument) or of any other
party at any time directly or contingently liable for the payment of any said
Obligations; (ii) accept partial payments of said Obligations; (iii) settle,
discharge, release (by operation of law or otherwise), compound, compromise,
collect or liquidate any of said Obligations and the security therefor in any
manner; (iv) consent to the transfer or sale of security, or (v) bid and
purchase at any sale of any security; or (vi) change the terms of the
Obligations, including increases or decreases in payments or any interest rate
adjustments.
(b) Primary Obligation Defenses. Guarantor waives any rights
to require Lender to (i) proceed against Borrower or any other guarantor or
party; (ii) proceed against or exhaust any security held from Borrower or any
other guarantor; or (iii) pursue any other
2
<PAGE>
remedy in Lender's power whatsoever. Guarantor waives any defense based on or
arising out of any defense of Borrower, whether such defense arises by operation
of law, bankruptcy of Borrower or otherwise, including without limitation, any
defense based on or arising out of any disability of Borrower or the
unenforceability of the Obligations or any part thereof from any cause, or the
cessation from any cause or the liability of Borrower. Guarantor waives any
defense based on any applicable statute of limitations or statute of frauds.
(c) Commercially Reasonable Sale and Anti-Deficiency Laws.
Lender may, at Lender's election, foreclose on any security held by Lender by
one or more judicial or nonjudicial sales, whether or not every aspect of any
such sale is commercially reasonable, or exercise any other right or remedy
Lender may have against Borrower, or any security, without affecting or
impairing in any way the liability of Guarantor except to the extent the
Obligations have been paid. Guarantor waives any defense arising out of any such
election by Lender, even though such election operates to impair or extinguish
any right of reimbursement or subrogation or other right or remedy of Lender
against Borrower or any security. In the absence of agreeing to the waivers
contained in this subsection 4(c), Guarantor may have the right of subrogation
or reimbursement against Borrower. For example, if Lender elects to foreclose,
by nonjudicial sale, any deeds of trust securing any indebtedness of Borrower to
Lender, causing Guarantor to lose any such rights or create defenses to
enforcement of this Guaranty, Guarantor gives up any such potential defenses by
agreeing to these waivers. Guarantor also expressly waives any defense or
benefit that may be derived from any "one form of action" rule or
anti-deficiency statute and all suretyship defenses it would otherwise have
under the laws of any state.
(d) Disclosure Defenses. Guarantor expressly waives all
set-offs and counterclaims and waives all notices, protests and demands
including, without limitation, notice of default in the payment of rents or in
the performance or in the observance of any of the terms, provisions, covenants
or conditions contained in any agreement between Lender and Borrower.
(e) Impairment of Collateral Defense. Guarantor expressly
agrees that the validity of this Guaranty and the obligations of Guarantor shall
not be terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising of any of Lender's rights against Borrower pursuant
to the Agreement or against Guarantor by reason of this Guaranty or as a result
of the substitution, release, repossession, sale, disposition or destruction of
any collateral or of the items leased or to be leased to Borrower. Guarantor
shall not be released or discharged, either in whole or in part, by Lender's
failure or delay (a) to perfect or continue the perfection of any security
interest in any property which secures the Obligations of Borrower or Guarantor
to Lender or (b) to protect the property covered by such security interest.
(f) Guarantor's Right To Revoke. Guarantor expressly waives
the right to revoke or terminate this Guaranty, including any statutory right of
revocation under the laws of any state.
3
<PAGE>
5. Financial Condition of Borrower. Guarantor (a) assumes all
responsibility for being and keeping informed of Borrower's financial condition
and assets and of all other circumstances bearing upon the risk of nonpayment of
the Obligations and the nature, scope and extent of the risks which Guarantor
assumes and incurs hereunder and (b) agrees that Lender shall have no duty to
advise Guarantor of information known to it regarding such circumstances or
risks.
6. Guarantor Not Entitled To Subrogation Until Lender Paid In Full;
Subordination. No payment by Guarantor hereunder shall entitle Guarantor, by
subrogation, indemnity, reimbursement, contribution or otherwise, to any payment
by Borrower or to any subrogation, indemnity, reimbursement or contribution out
of the property of Borrower until all Obligations to Lender have been paid in
full. Any and all present and future debts and obligations of Borrower to
Guarantor are hereby postponed in favor of and subordinated to the full payment
and performance of all present and future Obligations of Borrower to Lender.
Upon the liquidation, bankruptcy or distribution of any of Borrower's assets,
Guarantor shall assign to Lender all of Guarantor's claims on account of such
indebtedness so that Lender shall receive all dividends and payments on such
indebtedness until payment in full of the Obligations. This Section 6 shall
constitute such an assignment if Guarantor fails to execute and deliver such an
assignment.
7. Recovery of Preferences. If (a) a claim is made upon Lender at any
time for repayment or recovery of any amount(s) or other value received by
Lender, from any source, in payment of or on account of any of the Obligations
guaranteed hereunder and Lender repays or otherwise becomes liable for all or
any part of such claim by reason of (i) any judgment, decree or order of any
court or administrative body having competent jurisdiction or (ii) any
settlement or compromise of any such claim, Guarantor shall remain liable to
Lender hereunder for the amount so repaid or for which Lender is otherwise
liable to the same extent as if such amount(s) had never been received by
Lender, notwithstanding any termination hereof or the termination of any leases
or other agreements evidencing any of the Obligations. Guarantor shall be liable
for the full amount of attorney's fees, costs and interest which Lender pays or
incurs in connection with defending any preference or fraudulent transfer claim.
8. Events Of Default. The occurrence of any one of the following events
shall constitute an event of default under this Guaranty and, upon the
occurrence thereof and at Lender's election without notice or demand.
Guarantor's obligations hereunder shall become due, payable and enforceable
against Guarantor, whether or not the Obligations are then due and payable:
(a) The occurrence of an Event of Default under and as defined
in the Agreement;
(b) The commencement of any bankruptcy, insolvency,
receivership or similar proceeding by or against Guarantor or Borrower;
4
<PAGE>
(c) The attempt by Guarantor or Borrower to effect an
assignment for the benefit of creditors or a composition with creditors;
(d) The insolvency of Guarantor or Borrower;
(e) The death or dissolution of Guarantor;
(f) The inaccuracy or incompleteness in any material or
respect, when made, of (a) any representations or warranties made by Guarantor,
Borrower or (b) any other matter; or
(g) The breach by Guarantor of any covenant of this Guaranty
or any other agreement between Lender and Guarantor.
9. Binding On Successors And Assigns. This Guaranty shall bind
Guarantor's respective heirs, administrators, personal representatives,
successors and assigns, and shall inure to the benefit of Lender's successors
and assigns, including, without limitation, any party to whom Lender may assign
the Agreement or any other agreement; and Guarantor hereby waives notice of any
such assignment. All of Lender's rights are cumulative and not alternative.
10. Miscellaneous. This Guaranty contains the entire agreement of the
parties hereto and no other oral or written agreement exists with respect to the
subject matter hereof. This Guaranty may not be amended or modified except by a
writing signed by Lender and Guarantor. This Guaranty is a valid and subsisting
legal instrument and no provision which may be deemed unenforceable shall in any
way invalidate any other provision or provisions, all of which shall remain in
full force and effect. No invalidity, irregularity or unenforceability of all or
any part of the Obligations nor any other circumstance which might be a legal
defense of a guarantor shall affect, impair or be a defense to this Guaranty. If
more than one Guarantor has signed this Guaranty, each Guarantor shall be
jointly and severally liable to Lender hereunder and when permitted by the
context, the singular includes the plural. Each of the persons who has signed
this or any other Guaranty has unconditionally delivered it to Lender on behalf
of Guarantor, and the failure to sign this or any other Guaranty by any other
person shall not discharge the liability of Guarantor. The unconditional
liability of Guarantor applies whether the signer is jointly and severally
liable for the entire amount of the debt, or for only a pro-rata portion.
Guarantor shall remain liable under this Guaranty even if any co-guarantor is
released or discharged for any reason.
11. CHOICE OF LAW AND FORUM. THIS GUARANTY SHALL IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF PENNSYLVANIA, INCLUDING ALL MATTERS OF
CONSTRUCTION, VALIDITY AND PERFORMANCE. GUARANTOR AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE STATE AND/OR FEDERAL
COURTS OF ORANGE COUNTY IN THE STATE OF CALIFORNIA. GUARANTOR
5
<PAGE>
HEREBY WAIVES THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING
OUT OF THIS GUARANTY OR THE CONDUCT OF THE RELATIONSHIP BETWEEN
LENDER AND GUARANTOR.
INTERNATIONAL MAGNETIC IMAGING, INC.
By
Lewis S. Schiller
President
6
<PAGE>
Exhibit 10.26
IMI Acquisition Corp. (the Company) will retain the services of
Stephen Schulman (the Executive) as President and Chief Executive
Officer.
This agreement, effective the first day of October, l994, between IMI
Acquisition Corp., a New York corporation with its principal offices and place
of business at l60 Broadway, New York, New York l0038 and Stephen Schulman.
Whereas the Company desires to retain the employment of the Executive as the
President and Chief Executive Officer of the Company, and he is willing to
perform the services hereafter described upon the terms and conditions
hereinafter set forth.
Now, therefore, it is agreed between the Company and the Executive
that;
l.0 TERM:
The Company hereby retains the employment of the Executive for the
period of October l, l994, through September 30, l999.
2.0 DUTIES
2.1 The Executive shall have the title of President and Chief
Executive Officer.
<PAGE>
2.2 The Executive shall have and exercise such duties, responsibilities,
privileges, powers, and authority as are established by statute, as are
set forth in the Company's by-laws and corporate minutes and as may be
assigned to him by the Chairman; provided that such duties are
reasonably content with the Executive's education, experience, and
background.
2.3 The Executive agrees to devote full time, attention, skill and efforts
to the business conducted by the Company. These duties shall be
performed wherever his services are required.
2.4 The Executive shall report to the Board of Directors of the
Company.
3.0 COMPENSATION:
In consideration for the Executive entering into and executing this
agreement, the following compensation shall be in affect plus such
additional increases in salary, compensation, or benefits as the
Chairman may direct:
3.1(a) A minimum compensation of $350,000 (effective upon acquisition of IMI
and affiliated entities) per year. Compensation shall be paid in equal
weekly installments.
<PAGE>
3.1(b) In addition to the base salary and "cost of living annual increases"
set forth herein, the Executive shall be entitled a bonus, with a cap
of $700,000; equal to the lesser of
1) 10% of pre-tax cash flow less a credit of $200,000 (a)
or
2) l0% of pre-tax net income less a credit of $200,000 (a)
Net income before taxes and pre-tax cash flow are to be determined in
accordance with standard accounting principles as calculated by the
Company's independent public accountants.
(a) Amounts will adjust to the following
Contract Year Amount
------------- --------
Year 2 $337,500
Year 3 $500,000
Year 4 $600,000
Year 5 $700,000
3.2 HOWEVER:
If:
(1) Executive is discharged from employment for any reason
malfeasance or other willful misconduct or,
<PAGE>
(2) is unable to work by reason of disability if in excess of l80
days; or in the event the Executive is removed from his
current position in the Company but remains as an employee,
the Company or an affiliated company will continue his
compensation for the term of this agreement at the rate as
provided above, inclusive of all bonuses and incentives.
3.3 REIMBURSEMENT OF EXPENSES:
The Company shall reimburse the Executive for all actual expenses,
including but not limited to travel, and other miscellaneous expenses
reasonably incurred in promoting the business of the Company and in
performing his duties as described herein.
3.4 VACATION:
The Executive shall be entitled to eight weeks of vacation time with
full pay in accordance with the Company's policies.
3.5 The Executive shall be provided with a monthly car allowance of $l000
plus reimbursement for insurance, gas, service and maintenance costs.
4.0 BENEFITS:
<PAGE>
4.1 Nothing contained in this agreement shall be construed to impair or
limit the Executive's rights to participate in all employee benefit
plans of the Company of every nature and he shall, in fact, be entitled
to participate in and be a member of all such benefit plans in
proportion to his total compensation hereunder. "Benefit plans" shall
include:
Group life insurance
Hospitalization
Medical and major medical (family) Dental insurance (family) Stock
option(s) Stock purchase or bonus plans Retirement programs Profit
sharing arrangements and
incentive compensation plans
Vision care
Disability Insurance
4.2 SPECIAL LIFE INSURANCE:
The Company shall maintain at its expense a life insurance policy upon
the life of the Executive in the face amount of $l,000,000 minimum
payable to such beneficiary as the Executive shall designate from time
to time, in writing, to the Company and in the absence of such
designation to his
<PAGE>
estate. Such insurance shall not be part of such group insurance as the
Company maintains for the benefit of salaried employees generally of
the rank and status of the Executive. All interest and cash value of
said policy shall be the property of the Company. Additionally, the
Company will provide Key Man Insurance in the amount of $2,500,000.
5.0 TERMINATION AND SEVERANCE:
5.1 Nothing herein is intended to prohibit the Company from terminating
this agreement for serious misconduct on the part of the Executive,
provided, that in the event that the Executive's employment is
terminated rightfully by the Company, nevertheless the Executive shall
be entitled to receive such benefits under the Company's employee
benefit plans, in which he is a participant, as are provided by these
terms thereof applicable to the termination of participants generally.
The Company agrees to provide the Executive life insurance and the
Executive and his family under the Company's health insurance program.
Such coverage shall remain in effect for eighteen months from
termination or resignation of employment or the death of the Executive.
<PAGE>
5.2 If the Executive shall become totally and permanently (as said term is
defined in the group long term disability insurance carried by the
Company), the Company may not terminate this agreement on account of
such disability unless and until the waiting period (for payment of
benefits) prescribed in such (or similar substituted) insurance then in
force shall have expired during the continuance of such disability.
5.3 If during the term of this agreement the Chairman employs a person
other than the Executive to the positions currently held by the
Executive at the Company, or the Executive is wrongfully removed
without cause, the Executive shall have the right to retire from
full-service from the Company and its subsidiaries and to render only
such consulting and advisory services as the Company may request. Any
such services and the conditions under which they shall be performed
shall be fully in keeping with the position or positions the Executive
held under this agreement. The Executive shall continue to be entitled
to receive the compensation provided for in this agreement.
5.4 Termination at will. The Chairman may not terminate the
Executive's employment by the Company at any time without just
cause.
<PAGE>
5.5 Any dispute or difference of opinion between the Executive and the
Company as to the latter's right to terminate this agreement shall be
submitted to and determined by arbitration in accordance with the
provisions of Section 7.4 hereof set forth herein. The Company shall
notify the Executive of said actions in writing and provide at least 30
days to remedy such failures.
5.6 Non Curable Termination for Cause: Executive's employment with the
Company may be terminated "immediately" for cause if the Executive is
determined to (l) repeatedly have acted dishonestly or engaged in
deliberate misconduct; (2) repeatedly breached a fiduciary trust for
the purpose of gaining personal profit; (3) repeatedly neglected to
perform customary duties of his position after 30 days due written
notice of said omission from the Chairman of the Company; and (4)
convicted of a felony.
5.7 Curable Termination: It is understood the Executive serves at the
pleasure of the duly elected Chairman of the Company, serious
misconduct will include among other courses of conduct, failure to
execute or implement policy.
In the event of termination, the Board is required to give l0 day's
notice in writing to the Executive, the notice must be
<PAGE>
by certified or registered mail, mailed to the Executive's last known
address and the same notice by ordinary mail or courier to the
Executive's principal office at the Company. The Executive must cure
the defect outlined in said notice within the ten-day notice period.
The cure by the Executive must be outlined in writing. Said cure notice
must be delivered by certified or registered mail, addressed to the
Chairman with a copy mailed by regular mail to counsel for the Company.
6.0 NOTICE OF CHANGE(S) AND/OR REVISION(S) Any notice, request or other
communication required or permitted pursuant to this agreement shall be
in writing and shall be deemed dully given when received by the party
to whom it shall be given or three days after being mailed by
certified, registered, or express mail, postage prepaid, addressed as
follows:
If to the Company:
Chairman
IMI Acquisition Corp.
l60 Broadway
New York, New York l0038
<PAGE>
If to the Executive:
Stephen Schulman
50l South Ocean Boulevard
Boca Raton, Florida 33432
Any party may change the address to which communications are to be
mailed given notice of such change on the manner provided above.
7.0 SPECIAL TERMS AND CONDITIONS
7.l The Chairman of the Company reserves the right to increase the
compensations and benefits specified in this contract at any time
hereafter and no such increase(s) or adjustment(s) shall operate as a
cancellation of this contract (agreement) but merely as an amendment
hereto.
7.2 REORGANIZATION
If the Company shall at any time be merged, consolidated, or if
substantially all assets of the Company are transferred to another
corporation or entity, the provisions of this agreement shall survive
any such transaction and shall be binding upon the corporation
resulting from such merger or consolidation.
<PAGE>
7.3 Nothing herein contained shall in any manner modify, imperil or affect
existing or future rights or interests of the Executive to receive any
employee benefits to which he would otherwise be entitled or as a
participant in the present or any future incentive, profit-sharing or
bonus plan of the Company providing for this participation, or in any
present or future stock option plan of the Company, to the extent of
such plans are applicable generally to salaried employees, it being
understood and agreed that the rights and interests of the Executive to
any employee benefits or as a participant or beneficiary in or under
any or all said plans, respectively, shall not be adversely affected
hereby.
7.4 ARBITRATION:
Any controversy or claim arising under this agreement shall be settled
by binding arbitration in accordance with Rules of the American
Arbitration Association then in effect, such arbitration shall be held
in Palm Beach County. This shall be exclusive remedy for the violation
of either party of the terms of this agreement. The controversy or
claim shall be submitted to three arbitrators, one of whom shall be
chosen by the Company, one of whom shall be chosen by the Executive and
the third of whom shall be chosen by the two so selected. The party
desiring arbitration shall give written notice to the
<PAGE>
other party of its desire to arbitrate the particular matter in
question, naming the arbitrator selected. If the other party shall fail
within a period of l5 days after such notice shall have been given to
reply in writing naming the arbitrator selected by it, then the party
not in fault may appoint an arbitrator to fill the place remaining
vacant. The decision of any two of the arbitrators shall be final and
binding upon the parties hereto and shall be delivered in writing,
signed in triplicate by the concurring arbitrators to each of the
parties hereto. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof.
8.0 MISCELLANEOUS
8.1 This agreement shall become effective October l, l994.
8.2 The heading or captions of sections or paragraphs are used for
convenience of reference merely an shall be ignored in the construction
or interpretation hereof.
8.3 As used herein, terms such as "herein", "hereof", "hereto", and similar
language shall be constructed to refer to this entire instrument as not
merely the paragraph or sentence in which they appear, unless so
limited by express language.
<PAGE>
8.4 Neither this agreement nor any of his rights hereunder may be assigned
by the Executive without the written consent of the Company unless
specifically identified in this agreement.
8.5 In consideration of the premises and other mutual considerations, the
receipt and sufficiency of which are hereby acknowledged, it is
mutually agreed as follows:
l. Without the consent of the Company, the Executive will
not terminate his employment by the Company without 60
days prior notice to the Company.
2. In view of the fact that the Executive's work for the Company
will bring him into close contact with many confidential
affairs of the Company not readily available to the public,
and plans for future development, the Executive agrees:
a) To keep secret and retain in strict confidence all
confidential matters of the Company, including,
without limiting the generality of the foregoing,
trade "know how" secrets, investor lists, policies,
operational methods, technical processes, research
projects, and other business affairs of the Company
during his employment.
<PAGE>
b) To deliver promptly to the Company on termination
of his employment all memoranda, notes, records,
reports, manuals, drawing, blueprints, and other
documents (and all copies thereof) relating to the
confidential nature of the Company's business,
which he may then possess or have under his
control.
c) Furthermore, the Executive shall not form a
business in competition with the Company for the
specified term of this agreement under any
circumstances whatsoever. This provision may be
enforced by judicial injunction.
9.0 In the event of a suit or claim against the Executive arising out of
his corporate duties, the Company will provide and pay for legal
counsel approved by the Executive, and hold the Executive harmless and
indemnify the Executive for any and all costs, fees, suits, judgments,
and settlements arising therein.
1.0 LITIGATION COSTS:
In the event of any dispute between the parties to this agreement or
outside parties in an attempt to set aside this agreement or with
respect to any provision of this agreement
<PAGE>
then all costs of this dispute will be borne by IMI
Acquisition Corp.
In the event of a failure by IMI Acquisition Corp. to honor this
provision in the event of a termination by account of proper
jurisdiction in favor of the employee, in addition to enforcement of
the provisions of this contract the employee will be entitled to
additional punitive damages equal to two times each provision it is
found that IMI Acquisition Corp. breached
In witness whereof, this agreement has been duly executed by the Executive and
by the Company by its Chairman therewith duly authorized as of the day and year
first above written.
IMI Acquisition Corp.
By:______________________
Lewis S. Schiller
Chairman
By:______________________
Stephen Schulman
President and
Chief Executive Officer
<PAGE>
AMENDMENT NO. 1
AMENDMENT made as of the 26th day of December, 1995 to the
Employment Agreement between IMI ACQUISITION CORP. (the "Company"), and STEPHEN
A. SCHULMAN (the "Executive") effective October 1, 1994 (the "Employment
Agreement").
W I T N E S S E T H :
WHEREAS, Executive has requested the right to borrow funds
from the Company for purposes of making payments to the Internal Revenue Service
(the "IRS") under an existing payment plan between Executive and the IRS; and
WHEREAS, the Company is willing to lend such funds to the
Executive in order to ensure his continued ability to perform his services under
the Employment Agreement without impediment from IRS claims, all on and subject
to the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby unconditionally acknowledged, the parties hereto do hereby
agree as follows:
1. Definitions. All capitalized terms which are used but not
defined herein shall have the meanings ascribed to them in the Employment
Agreement, the terms of which are incorporated herein by reference thereto.
References to the "Company" shall be to International Magnetic Imaging, Inc., a
Delaware corporation formerly known as "IMI Acquisition Corp." at the time of
execution of the Employment Agreement.
2. Loans. An additional paragraph is hereby added to
Section 4 of the Employment Agreement to read as follows:
"4.3. Loans.
(a) The Company hereby agrees to loan to the
Executive the sum of $300,000, the proceeds of which shall be paid by two
separate checks made payable to the Internal Revenue Service, one in the amount
of $247,254.95 and the other in the amount of $52,745.05 (the "Loans"). The
Loans shall bear interest at the rate of 5-1/2% per annum and shall be repayable
on December 31, 1998. Interest shall be accrued and paid on December 31, 1996,
December 31, 1997 and December 31, 1998 and all principal shall be paid on
December 31, 1998. The principal and all accrued interest on the Loans shall be
mandatorily prepayable, without penalty, from any and all sums received by the
Executive from payments of principal and/or interest received
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by the payees of the promissory notes set forth on Exhibit "A" hereto.
Notwithstanding any provision of this Agreement to the contrary, Executive may,
on December 31, 1998, assign, transfer and convey to the Company, in payment of
all principal due and payable to the Company under the Loans on such date (the
"Outstanding Balance"), all right, title and interest of Executive in and to
such portion of the Interests (hereinafter defined) as shall be equal to the
Outstanding Balance. For these purposes, the Interests shall be valued on the
basis of the amount of the Executive's interest in the then outstanding
principal amount of all promissory notes of the Company and/or its affiliated
entities payable to the payees set forth on Exhibit "B" hereto, provided that
all of such assigned, transferred and conveyed Interests are free and clear of
all liens, claims and encumbrances and the form of the instrument of such
assignment, transfer and conveyance is satisfactory to the Company.
(b) The Loans shall be evidenced by two
promissory notes in the principal amounts and bearing interest at the rate set
forth above, each to be in form and substance satisfactory to the Company and
each to be executed and delivered to the Company upon the Company's request.
(c) As collateral security for Executive's
obligation to repay the Loans to the Company, Executive hereby assigns to, and
grants the Company a first priority security interest in, all right, title and
interest of Executive in and to all interests held by Executive (whether in his
name, his spouse's name, in joint name, or in corporate name) in any general
partner of any partnership and in any capital stock of any corporation which was
acquired by the Company and its affiliates on September 30, 1994, and in the
notes of MD Ltd. Partner Acquisition Corporation, each of which is identified on
Exhibit "B" hereto (the "Interests"). The Company has agreed to provide the
Loans on the basis of Executive's representations and warranties that the
Interests are owned by him free and clear of all liens, claims and encumbrances.
The assignment to and security interest in the Interests shall include, without
limitation, an assignment to the Company of all sums received for, on, or
otherwise in connection with, the Interests, or any of them, including, without
limitation, any payments made by any source on or in connection therewith
(including, without limitation, any payments paid or payable on any promissory
note relating to any of such Interests). In the event of any default by
Executive of his obligations under this Paragraph 4.3, the Company shall have
all of the rights and remedies of a secured party under the Uniform Commercial
Code of the State of Florida with respect to the Interests.
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<PAGE>
(d) In the event of any action or proceeding
by the Company to enforce the Executive's obligation under this Paragraph 4.3,
the Company shall be entitled to reimbursement of its reasonable costs incurred
in connection therewith including its reasonable counsel fees and expenses
relating thereto, notwithstanding any contrary provision of this Agreement.
3. Further Assurances. The Executive hereby agrees that, at any time
and from time to time after the date hereof, upon the reasonable request of the
Company, he shall do, execute, acknowledge and deliver, or cause to be done,
executed, acknowledged and delivered, such further acts, deeds, assignments,
transfers, conveyances, and assurances as may be reasonably required by the
Company to more effectively consummate this Amendment and the transactions
contemplated hereby or to confirm or otherwise effectuate the provisions of this
Amendment, including, without limitation, the execution of any and all documents
requested by the Company to record and/or perfect the security interest granted
to the Company under Paragraph 2 of this Amendment.
4. No Other Amendment. Except as provided herein, all of the other
terms and conditions of the Employment Agreement shall be unaffected by this
Amendment, all of which shall remain binding and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
WITNESS: INTERNATIONAL MAGNETIC IMAGING, INC.
By:_____________________________
Lewis S. Schiller
Chairman of the Board
WITNESS:
-----------------------------
Stephen A. Schulman
-----------------------------
Stephanie Schulman, solely as to
those provisions relating to the
mandatory prepayment of, and
collateral security for, the Loans
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<PAGE>
Exhibit 10.27
MEMORANDUM OF UNDERSTANDING
Set forth below are the principal terms of a proposed debt
exchange and amendment to the Employment Agreement between Dr. S.
Schulman and IMI:
1. Dr. Schulman owns and/or has an interest in nine Subordinated
Promissory Notes of IMI and/or its affiliates (exclusive of certain Subordinated
Promissory notes assigned to G.E. Medical). Two of such notes are held by Dr.
Schulman jointly with his wife and individually by his wife. Five of such notes
are held by five separate corporate general partners of the Partnership-Sellers
and two of which are held by MD Corp., in which Dr. Schulman has a 1/3 interest
as a 1/3 stockholder of each of such corporations. For purposes of this
Memorandum of Understanding, the aforementioned two Notes held by Dr. Schulman
will be referred to herein as the "Schulman Notes" and the seven new
Subordinated Promissory Notes proposed to be issued to Dr. Schulman as a result
of his 1/3 ownership interest in such corporations will be referred to herein as
the "Corporate Notes".
2. Dr. Schulman will enter into an agreement with each of SASGP, Askay,
Inc., MRI of Boca Raton, Inc., MRI of Orlando, Inc., and MRI of Kansas City,
Inc. and MD Corp. pursuant to which each of such corporations will assign to Dr.
Schulman (or his designee) a 1/3 interest in the Subordinated Promissory Notes
held by each of such corporations (as well as an assignment of his 1/3 interest
in all shares of Consolidated Common Stock owned by such corporation and all
other Subordinated Promissory Notes of IMI issued to such corporations which
have been assigned to GE Medical Systems). This agreement will provide that,
upon and subject to the consummation of IMI's initial public offering ("IPO"),
each of such corporations will consent to the issuance of new Subordinated
Promissory Notes from IMI's affiliates to Dr. Schulman (and/or his designee) in
respective principal amounts representing his 1/3 interest in the notes held by
such corporations (as well as the issuance to Dr. Schulman of his 1/3 interest
in such shares of Common Stock of Consolidated and in the aforementioned
Subordinated Promissory Notes assigned to GE Medical Systems) and IMI's
affiliates will reissue to each of such corporations new Subordinated Promissory
Notes for the net principal amount due to such corporations under the former
Subordinated Promissory Notes (and reissue and deliver 2/3 of such shares of
Consolidated Common Stock and arrange to have new Subordinated Notes in a
principal amount equal to 2/3 of the aforementioned notes assigned to GE Medical
Systems to Dr.
Schulman and such corporations).
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3. IMI will reduce the principal amount of the Schulman Notes by an
amount equal to the principal and all accrued interest under the $300,000
promissory note of Dr. Schulman to IMI which was issued to IMI pursuant to the
recent amendment to Dr. Schulman's Employment Agreement, which note will,
therefore, be deemed fully paid.
4. At and subject to the Closing of IMI's IPO, Dr. Schulman will
exchange all of the Schulman Notes and the Corporate Notes for 50 shares of
IMI's Series B Redeemable Preferred Stock (the "Preferred Stock"). The Preferred
Stock will have a liquidation value of $100, a redemption value of $1,666,666,
an annual non-cumulative dividend of $75,000 payable quarterly in equal
installments of $18,750 (the first installment of which will be with respect to
the calendar quarter ended March 31, 1997) and will be mandatorily redeemable
from 15% of the net proceeds received by IMI from all public offerings of its
equity securities (other than the IPO) and from 15% of any exercise of IMI's IPO
Warrants, to the extent such warrant exercise proceeds are received subsequent
to 60 days from the closing of the IPO. The $75,000 annual non-cumulative
dividend will be reduced proportionately to the extent of all redemptions of the
Preferred Stock.
5. Upon and subject to the closing of IMI's IPO, Dr. Schulman will
receive warrants to purchase 25,000 shares of the Class A Common Stock of IMI
(the "Warrants"). The Warrants will have a term of five years and will be
exercisable at a price equal to the public offering price of the Common Stock in
IMI's IPO (currently, $5 per share).
6. Dr. Schulman will receive options to purchase 400,000
shares of the Class A Common Stock exercisable at $.50 per share
for a term of ____ years (the "Options").
7. The shares of Class A Common Stock reserved for issuance pursuant to
the Warrants and the Options will be convertible into Common Stock if, at any
time during the term thereof, IMI no longer utilizes Consolidated's net
operating loss or IMI's Board of Directors determines to convert the Class A
Common Stock into Common Stock. IMI will, subject to the consent of its
Underwriter in the IPO, use its best efforts to register shares of its Class A
Common Stock no later than 120 days following the end of the second year after
the consummation of the IPO (the "Outside Date"), provided that there has been
no prior conversion of the Class A Common Stock into Common Stock.
8. In consideration of IMI's agreement to indemnify Dr.
Schulman against any claims that may be made against him by Drs.
Sternberg or Kaye (or parties claiming through them) with respect
to the matters covered by his Affidavit relating to the draft
Complaint of Drs. Sternberg and Kaye against IMI, Dr. Schulman
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<PAGE>
will execute and deliver such Affidavit, together with a Release with respect to
all claims in connection with such Complaint, promptly after the date hereof.
9. Upon and subject to the Closing of IMI's IPO, Dr.
Schulman will enter into an Amended and Restated Employment
Agreement, such Agreement to include the following:
(a) The format of the Agreement will be substantially
similar to the employment agreement executed by Dr. Schulman at
the September 1994 acquisition closing.
(b) Extension of the term for three additional years.
(c) An increase in Dr. Schulman's annual salary by $45,000 in
each of the three extended years of the term of the Agreement, together with a
cost of living increase in each year, to be calculated utilizing 1996 as a base
year.
(d) Restrictive covenant - 10 mile radius of any IMI Center
during the term and for two years after the expiration or termination of the
Agreement (unless terminated as a result of IMI's breach).
(e) Dr. Schulman to have the right to terminate the Agreement,
without cause, upon six months notice.
(f) Agreement to include customary termination provisions.
(g) Agreement will allow Dr. Schulman to perform consulting
services in connection with his wife's Chicago MRI Centers.
10. If IMI enters into any agreement with Dr. Sternberg or Dr. Kaye
after the date hereof pursuant to which either of such individuals receives more
favorable terms in connection with any exchange of the Subordinated Notes held
by them for any capital stock of IMI, including any issuance of warrants or
options relating thereto, IMI will automatically provide any such more favorable
terms to the transaction with Dr. Schulman which is the subject of this
Memorandum of Understanding.
11. IMI will pay all of Dr. Schulman's legal and accounting (tax
advice) fees with respect to the matters covered by this Memorandum of
Understanding, subject to a maximum amount to be agreed upon between IMI and Dr.
Schulman's advisors.
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<PAGE>
The foregoing sets forth the principal terms of the aforementioned
proposed debt exchange and amended Employment Agreement between Dr. Schulman and
IMI, however, neither Dr. Schulman nor IMI shall have any rights or obligations
with respect thereto, any and all of such rights and obligations being subject
to and conditioned upon the execution and delivery of definitive agreements
between Dr. Schulman and IMI with respect to such matters.
INTERNATIONAL MAGNETIC IMAGING, INC.
By:_________________________________
George W. Mahoney
Chief Financial Officer
------------------------------------
Stephen A. Schulman
Dated: October 16, 1996
4
<PAGE>
Exhibit 10.35
INTERNATIONAL MAGNETIC IMAGING, INC.
1994 Long Term Incentive Plan (as in effect on October 31, 1996)
1. Purpose; Definitions.
The purpose of the International Magnetic Imaging, Inc. 1994 Long Term
Incentive Plan (the "Plan") is to enable International Magnetic Imaging, Inc.
(the "Company") to attract, retain and reward key employees of the Company and
its Subsidiaries and Affiliates, and others who provide services to the Company
and its Subsidiaries and Affiliates, and strengthen the mutuality of interests
between such key employees and such other persons and the Company's
stockholders, by offering such key employees and such other persons incentives
and/or other equity interests or equity-based incentives in the Company, as well
as performance-based incentives payable in cash.
For purposes of the Plan, the following terms shall be defined as set forth
below:
(a) "Affiliate" means any corporation, partnership, joint venture or other
entity, other than the Company and its Subsidiaries, that is designated by the
Board as a participating employer under the Plan, provided that the Company
directly or indirectly owns at least 20% of the combined voting power of all
classes of stock of such entity or at least 20% of the ownership interests in
such entity.
(b) "Board" means the Board of Directors of the Company.
(c) "Book Value" means, as of any given date, on a per share basis (i) the
stockholders' equity in the Company as of the last day of the immediately
preceding fiscal year as reflected in the Company's consolidated balance sheet,
subject to such adjustments as the Committee shall specify at or after grant,
divided by (ii) the number of then outstanding shares of Stock as of such
year-end date, as adjusted by the Committee for subsequent events.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
(e) "Commission" means the Securities and Exchange Commission or any
successor thereto.
(f) "Committee" means the Committee referred to in Section 2 of the Plan.
If at any time no Committee shall be in office, then the functions of the
Committee specified in the Plan shall be exercised by the Board.
(g) "Company" means International Magnetic Imaging, Inc., a Delaware
corporation, or any successor corporation.
(h) "Deferred Stock" means an award made pursuant to Section 8 of the Plan
of the right to receive Stock at the end of a specified deferral period.
(i) "Disability" means disability as determined under procedures
established by the Committee for purposes of this Plan.
(j) "Disinterested Person" shall have the meaning set forth in Rule
16b-3(d)(3) as promulgated by the Commission under the Exchange Act, or any
successor definition adopted by the Commission.
(k) "Early Retirement" means retirement, with the express consent for
purposes of this Plan of the Company at or before the time of such retirement,
from active employment with the Company and any Subsidiary or Affiliate pursuant
to the early retirement provisions of the applicable pension plan of such
entity.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended,
from time to time, and any successor thereto.
(m) "Fair Market Value" means, as of any given date, the market price of
the Stock as determined by or in accordance with the policies established by the
Committee in good faith; provided, that, in the case of an Incentive Stock
Option, the Fair Market Value shall be determined in accordance with the Code
and the Treasury regulations under the Code.
(n) "Incentive Stock Option" means any Stock Option intended to be and
designated as an "Incentive Stock Option" within the meaning of Section 422A of
the Code.
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<PAGE>
(o) "Non-Management Director" means a director of the Company who is not
otherwise employed or engaged as a consultant by the Company or any Subsidiary
or Affiliate, provided, however, that any person who is employed by Consolidated
Technology Group Ltd. or any of its subsidiaries and is an officer of the
Company but does not receive compensation from the Company shall be deemed a
Non-Management Director.
(p) "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.
(q) "Normal Retirement" means retirement from active employment with the
Company and any Subsidiary or Affiliate on or after age 65.
(r) "Other Stock-Based Award" means an award under Section 10 of the Plan
that is valued in whole or in part by reference to, or is otherwise based on,
Stock.
(s) "Plan" means this International Magnetic Imaging, Inc. 1994 Long Term
Incentive Plan, as hereinafter amended from time to time.
(t) "Restricted Stock" means an award of shares of Stock that is subject to
restrictions under Section 7 of the Plan.
(u) "Retirement" means Normal Retirement or Early Retirement.
(v) "Stock" means the Class A Common Stock, par value $.01 per share, of
the Company or any class of common stock into which such common stock may
hereafter be converted or for which such common stock may be exchanged pursuant
to the Company's certificate of incorporation or as part of a recapitalization,
reorganization or similar transaction.
(w) "Stock Appreciation Right" means the right pursuant to an award granted
under Section 6 of the Plan to surrender to the Company all (or a portion) of a
Stock Option in exchange for an amount equal to the difference between (i) the
Fair Market Value, as of the date such award or Stock Option (or such portion
thereof) is surrendered, of the shares of Stock covered by such Stock Option (or
such portion thereof), subject, where applicable, to the pricing provisions in
Paragraph 6(b)(ii) of the Plan and (ii) the aggregate exercise price of such
Stock Option or base price with respect to such award (or the portion thereof
which is surrendered).
(x) "Stock Option" or "Option" means any option to purchase shares of Stock
(including Restricted Stock and Deferred Stock, if the Committee so determines)
granted pursuant to Section 5 of the Plan.
(y) "Stock Purchase Right" means the right to purchase Stock pursuant to
Section 9 of the Plan.
(z) "Subsidiary" means any corporation or other business association,
including a partnership (other than the Company) in an unbroken chain of
corporations or other business associations beginning with the Company if each
of the corporations or other business associations (other than the last
corporation in the unbroken chain) owns equity interests (including stock or
partnership interests) possessing 50% or more of the total combined voting power
of all classes of equity in one of the other corporations or other business
associations in the chain.
In addition, the terms "Change in Control," Potential Change in Control"
and "Change in Control Price" shall have meanings set forth, respectively, in
Paragraphs 11(b), (c) and (d) of the Plan and the term "Cause" shall have the
meaning set forth in Paragraph 5(b)(viii) of the Plan.
2. Administration.
(a) The Plan shall be administered by a Committee of not less than two
Disinterested Persons, who shall be appointed by the Board and who shall serve
at the pleasure of the Board. If and to the extent that no Committee exists
which has the authority to so administer the Plan, the functions of the
Committee specified in the Plan shall be exercised by the Board. Notwithstanding
the foregoing, in the event that the Company is not subject to the Exchange Act
or in the event that the administration of the Plan by a Committee of
Disinterested Persons is not required in order for the Plan to meet the test of
Rule 16b-3 of the Commission under the Exchange Act, or any subsequent rule,
then the Committee need not be composed of Disinterested Persons. As long as
said Rule 16b-3 requires, as a condition to the officers and directors obtaining
the benefit of such rule, that the Committee be composed of Disinterested
Persons, each member or alternate member of the Committee shall not be entitled
to any grants under the Plan (except grants pursuant to Paragraph 4(b) of the
Plan) or under any other plans of
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<PAGE>
the Corporation or its affiliates, except to the extent that participation in a
plan would not cause such person to cease being a Disinterested Person for
purposes of said Rule 16b-3.
(b) The Committee shall have full authority to grant, pursuant to the terms
of the Plan, to officers and other persons eligible under Section 4 of the Plan:
Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock,
Stock Purchase Rights and/or Other Stock-Based Awards. In particular, the
Committee shall have the authority:
(i) to select the officers and other eligible persons to whom Stock
Options, Stock Appreciation Rights, Restricted Stock, Deferred Stock, Stock
Purchase Rights and/or Other Stock-Based Awards may from time to time be granted
pursuant to the Plan;
(ii) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights, Restricted Stock,
Deferred Stock, Stock Purchase Rights and/or Other Stock-Based Awards, or any
combination thereof, are to be granted pursuant to the Plan, to one or more
eligible persons;
(iii) to determine the number of shares to be covered by each such
award granted pursuant to the Plan;
(iv) to determine the terms and conditions, not inconsistent with the
terms of the Plan, of any award granted under the Plan, including, but not
limited to, the share price or exercise price and any restriction or limitation,
or any vesting, acceleration or waiver of forfeiture restrictions regarding any
Stock Option or other award and/or the shares of Stock relating thereto, based
in each case on such factors as the Committee shall, in its sole discretion,
determine;
(v) to determine whether, to what extent and under what circumstances
a Stock Option may be settled in cash, Restricted Stock and/or Deferred Stock
under Paragraph 5(b)(x) or (xi) of the Plan, as applicable, instead of Stock;
(vi) to determine whether, to what extent and under what circumstances
Option grants and/or other awards under the Plan and/or other cash awards made
by the Company are to be made, and operate, on a tandem basis with other awards
under the Plan and/or cash awards made outside of the Plan in a manner whereby
the exercise of one award precludes, in whole or in part, the exercise of
another award, or on an additive basis;
(vii) to determine whether, to what extent and under what
circumstances Stock and other amounts payable with respect to an award under
this Plan shall be deferred either automatically or at the election of the
participant, including any provision for any determination or method of
determination of the amount (if any) deemed be earned on any deferred amount
during any deferral period;
(viii) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Stock purchased by exercising such Rights; and
(ix) to determine an aggregate number of awards and the type of awards
to be granted to eligible persons employed or engaged by the Company and/or any
specific Subsidiary, Affiliate or division and grant to management the authority
to grant such awards, provided that no awards to any person subject to the
reporting and short-swing profit provisions of Section 16 of the Exchange Act
may be granted awards except by the Committee.
(c) The Committee shall have the authority to adopt, alter and repeal such
rules, guidelines and practices governing the Plan as it shall, from time to
time, deem advisable; to interpret the terms and provisions of the Plan and any
award issued under the Plan and any agreements relating thereto, and otherwise
to supervise the administration of the Plan.
(d) All decisions made by the Committee pursuant to the provisions of the
Plan shall be made in the Committee's sole discretion and shall be final and
binding on all persons, including the Company and Plan participants.
3. Stock Subject to Plan.
(a) The total number of shares of Stock reserved and available for
distribution under the Plan shall be one million two hundred thousand
(1,200,000) shares of Class A Common Stock; provided, that at such time as the
Class A Common Stock shall be converted into shares of the Company's common
stock, par value $.10 per share ("Common Stock"), the Stock issuable pursuant to
this plan shall be shares of Common Stock. In the event that awards are granted
in tandem such that the exercise of one award precludes the exercise of another
award then, for the purpose of determining the number of shares of Stock as to
which awards shall have been granted, the maximum number of shares of Stock
issuable pursuant to such tandem awards shall be used. The number and class of
shares provided for in this Paragraph 3(a) and in the definition of Stock
reflects a proposed
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<PAGE>
recapitalization pursuant to which (i) the certificate of incorporation is
amended to provide for the Class A Common Stock and (ii) the one thousand
(1,000) outstanding shares of Common Stock are converted into not less than nine
million two hundred thousand (9,200,000) shares of Common Stock and one million
(1,000,000) shares of Class A Common Stock.
(b) Subject to Paragraph 6(b)(v) of the Plan, if any shares of Stock that
have been optioned cease to be subject to a Stock Option, or if any such
shares of Stock that are subject to any Restricted Stock or Deferred Stock
award, Stock Purchase Right or Other Stock-Based Award granted under the Plan
are forfeited or any such award otherwise terminates without a payment being
made to the participant in the form of Stock, such shares shall again be
available for distribution in connection with future awards under the Plan.
(c) In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, stock distribution, reverse
split, combination of shares or other change in corporate structure affecting
the Stock, such substitution or adjustment shall be made in the aggregate number
of shares reserved for issuance under the Plan, in the base number of shares, in
the number and option price of shares subject to outstanding Options granted
under the Plan, in the number and purchase price of shares subject to
outstanding Stock Purchase Rights under the Plan, and in the number of shares
subject to other outstanding awards granted under the Plan as may be determined
to be appropriate by the Committee, in its sole discretion, provided that the
number of shares subject to any award shall always be a whole number. Such
adjusted option price shall also be used to determine the amount payable by the
Company upon the exercise of any Stock Appreciation Right associated with any
Stock Option; provided, however, that, with respect to a reverse split of the
Common Stock approved by the Board of Directors, subject to stockholder
approval, in April 1996, the number of shares subject to options to be issued to
Non-Management Directors pursuant to Paragraph 4(b) of this Plan subsequent to
the effective date of such reverse split shall not be affected by the reverse
split.
4. Eligibility.
(a) Officers and other key employees and directors of the Company and its
Subsidiaries and Affiliates (but excluding, except as to Paragraph 4(b) of
this Plan, members of the Committee and any person who serves only as a
director) who are responsible for or contribute to the management, growth and/or
profitability of the business of the Company and/or its Subsidiaries and
Affiliates are eligible to be granted awards under the Plan.
5. Stock Options.
(a) Administration. Stock Options may be granted alone, in addition to or
in tandem with other awards granted under the Plan and/or cash awards made
outside of the Plan. Any Stock Option granted under the Plan shall be in such
form as the Committee may from time to time approve. Stock Options granted under
the Plan may be of two types: (i) Incentive Stock Options and (ii) Non-Qualified
Stock Options. The Committee shall have the authority to grant to any optionee
Incentive Stock Options, Non-Qualified Stock Options, or both types of Stock
Options (in each case with or without Stock Appreciation Rights).
(b) Option Grants. Options granted under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the terms of the Plan, as the Committee, in
its sole discretion, shall deem desirable:
(i) Option Price. The option price per share of Stock purchasable
under a Stock Option shall be determined by the Committee at the time of grant.
(ii) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than twelve (12) years
after the date the Option is granted.
(iii) Exercisability. Stock Options shall be exercisable at such time
or times and subject to such terms and conditions as shall be determined by the
Committee at or after grant. If the Committee provides, in its sole discretion,
that any Stock Option is exercisable only in installments, the Committee may
waive such installment exercise provisions at any time at or after grant in
whole or in part, based on such factors as the Committee shall, in its sole
discretion, determine;
(iv) Method of Exercise.
(A) Subject to whatever installment exercise provisions apply
under Paragraph 5(b)(iii) of the Plan, Stock Options may be exercised in whole
or in part at any time during the option period, by giving written notice of
exercise to the Company specifying the number of shares to be purchased. Such
notice shall be accompanied by payment in full of the
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purchase price, either by check, note or such other instrument, securities or
property as the Committee may accept. As and to the extent determined by the
Committee, in its sole discretion, at or after grant, payments in full or in
part may also be made in the form of Stock already owned by the optionee or, in
the case of the exercise of a Non-Qualified Stock Option, Restricted Stock or
Deferred Stock subject to an award hereunder (based, in each case, on the Fair
Market Value of the Stock on the date the option is exercised, as determined by
the Committee).
(B) If payment of the option exercise price of a Non-Qualified
Stock Option is made in whole or in part in the form of Restricted Stock or
Deferred Stock, the Stock issuable upon such exercise (and any replacement
shares relating thereto) shall remain (or be) restricted or deferred, as the
case may be, in accordance with the original terms of the Restricted Stock award
or Deferred Stock award in question, and any additional Stock received upon the
exercise shall be subject to the same forfeiture restrictions or deferral
limitations, unless otherwise determined by the Committee, in its sole
discretion, at or after grant.
(C) No shares of Stock shall be issued until full
payment therefor has been received by the Company.
In the event of any exercise by note or other instrument, the shares of Stock
shall not be issued until such note or other instrument shall have been paid in
full, and the exercising optionee shall have no rights as a stockholder until
such payment is made.
(D) Subject to Paragraph 5(b)(iv)(C) of the Plan, an
optionee shall generally have the rights to dividends or other rights of a
stockholder with respect to shares subject to the Option when the optionee has
given written notice of exercise, has paid in full for such shares, and, if
requested, has given the representation described in Paragraph 14(a) of the
Plan.
(v) Non-Transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution, and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee.
(vi) Termination by Death. Subject to Paragraph 5(b)(ix) of
the Plan with respect to Incentive Stock Options, if an optionee's employment by
the Company and any Subsidiary or Affiliate terminates by reason of death, any
Stock Option held by such optionee may thereafter be exercised, to the extent
such option was exercisable at the time of death or on such accelerated basis as
the Committee may determine at or after grant (or as may be determined in
accordance with procedures established by the Committee), by the legal
representative of the estate or by the legatee of the optionee under the will of
the optionee, for a period of one year (or such other period as the Committee
may specify at grant) from the date of such death or until the expiration of the
stated term of such Stock Option, whichever period is the shorter.
(vii) Termination by Reason of Disability or Retirement.
Subject to Paragraph 5(b)(ix) of the Plan with respect to Incentive Stock
Options, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates by reason of a Disability or Normal or Early Retirement,
any Stock Option held by such optionee may thereafter be exercised by the
optionee, to the extent it was exercisable at the time of termination or on such
accelerated basis as the Committee may determine at or after grant (or as may be
determined in accordance with procedures established by the Committee), for a
period of one year (or such other period as the Committee may specify at grant)
from the date of such termination of employment or until the expiration of the
stated term of such Stock Option, whichever period is the shorter; provided,
however, that, if the optionee dies within such one-year period (or such other
period as the Committee shall specify at grant), any unexercised Stock Option
held by such optionee shall thereafter be exercisable to the extent to which it
was exercisable at the time of death for a period of one year from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of termination of employment by
reason of Disability or Normal or Early Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422A of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(viii) Other Termination. Unless otherwise determined by the
Committee (or pursuant to procedures established by the Committee) at or after
grant, if an optionee's employment by the Company and any Subsidiary or
Affiliate terminates for any reason other than death, Disability or Normal or
Early Retirement, the Stock Option shall thereupon terminate; provided, however,
that if the optionee is involuntarily terminated by the Company or any
Subsidiary or Affiliate without Cause, including a termination resulting from
the Subsidiary, Affiliate or division in which the optionee is employed or
engaged, ceasing, for any reason, to be a Subsidiary, Affiliate or division of
the Company, such Stock Option may be exercised, to the extent otherwise
exercisable on the date of termination, for a period of three months (or seven
months in the case of a person subject to the reporting and short-swing profit
provisions of Section 16 of the Exchange Act) from the date of such termination
or until the expiration of the stated term of such Stock Option, whichever is
shorter. For purposes of this Plan, "Cause" means a felony conviction of a
participant or the failure of a participant to contest prosecution for a felony,
or a participant's willful misconduct or dishonesty.
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(ix) Incentive Stock Options.
(A) Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422A of the Code, or, without the consent of the optionee(s) affected,
to disqualify any Incentive Stock Option under such Section 422A.
(B) To the extent required for "incentive stock
option" status under Section 422A(b)(7) of the Code (taking into account
applicable Treasury regulations and pronouncements), the Plan shall be deemed to
provide that the aggregate Fair Market Value (determined as of the time of
grant) of the Stock with respect to which Incentive Stock Options are
exercisable for the first time by the optionee during any calendar year under
the Plan and/or any other stock option plan of the Company or any Subsidiary or
parent corporation (within the meaning of Section 425 of the Code) after 1986
shall not exceed $100,000. If Section 422A is hereafter amended to delete the
requirement now in Section 422A(b)(7) that the plan text expressly provide for
the $100,000 limitation set forth in Section 422A(b)(7), then this Paragraph
5(b)(ix)(B) shall no longer be operative and the Committee may accelerate the
dates on which the incentive stock option may be exercised.
(C) To the extent permitted under Section 422A of
the Code or the applicable regulations thereunder or any applicable Internal
Revenue Service pronouncement:
(I) If (x) a participant's employment is
terminated by reason of death, Disability or Retirement and (y) the portion of
any Incentive Stock Option that is otherwise exercisable during the
post-termination period specified under Paragraphs 5(b)(vi) and (vii) of the
Plan, applied without regard to the $100,000 limitation contained in Section
422A(b)(7) of the Code, is greater than the portion of such option that is
immediately exercisable as an "incentive stock option" during such
post-termination period under Section 422A, such excess shall be treated as a
Non-Qualified Stock Option; and
(II) if the exercise of an Incentive Stock
Option is accelerated by reason of a Change in Control, any portion of such
option that is not exercisable as an Incentive Stock Option by reason of the
$100,000 limitation contained in Section 422A(b)(7) of the Code shall be treated
as a Non-Qualified Stock Option.
(x) Buyout Provisions. The Committee may at any time offer to
buy out for a payment in cash, Stock, Deferred Stock or Restricted Stock an
option previously granted, based on such terms and conditions as the Committee
shall establish and communicate to the optionee at the time that such offer is
made.
(xi) Settlement Provisions. If the option agreement so
provides at grant or is amended after grant and prior to exercise to so provide
(with the optionee's consent), the Committee may require that all or part of the
shares to be issued with respect to the spread value of an exercised Option take
the form of Deferred or Restricted Stock which shall be valued on the date of
exercise on the basis of the Fair Market Value (as determined by the Committee)
of such Deferred or Restricted Stock determined without regard to the deferral
limitations and/or forfeiture restrictions involved.
6. Stock Appreciation Rights.
(a) Grant and Exercise.
(i) Stock Appreciation Rights may be granted in conjunction
with all or part of any Stock Option granted under the Plan. In the case of a
Non-Qualified Stock Option, such rights may be granted either at or after the
time of the grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of the grant of such Stock
Option.
(ii) A Stock Appreciation Right or applicable portion thereof
granted with respect to a given Stock Option shall terminate and no longer be
exercisable upon the termination or exercise of the related Stock Option,
subject to such provisions as the Committee may specify at grant where a Stock
Appreciation Right is granted with respect to less than the full number of
shares covered by a related Stock Option.
(iii) A Stock Appreciation Right may be exercised by an
optionee, subject to Paragraph 6(b) of the Plan, in accordance with the
procedures established by the Committee for such purpose. Upon such exercise,
the optionee shall be entitled to receive an amount determined in the manner
prescribed in said Paragraph 6(b). Stock Options relating to exercised Stock
Appreciation Rights shall no longer be exercisable to the extent that the
related Stock Appreciation Rights have been exercised.
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(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions, not inconsistent with the provisions of the Plan, as
shall be determined from time to time by the Committee, including the following:
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which they relate
shall be exercisable in accordance with the provisions of this Section 6 and
Section 5 of the Plan; provided, however, that any Stock Appreciation Right
granted to an optionee subject to Section 16(b) of the Exchange Act subsequent
to the grant of the related Stock Option shall not be exercisable during the
first six months of its term, except that this special limitation shall not
apply in the event of death or Disability of the optionee prior to the
expiration of the six-month period. The exercise of Stock Appreciation Rights
held by optionees who are subject to Section 16(b) of the Exchange Act shall
comply with Rule 16b-3 thereunder to the extent applicable.
(ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash and/or shares of Stock
equal in value to the excess of the Fair Market Value of one share of Stock over
the option price per share specified in the related Stock Option multiplied by
the number of shares in respect of which the Stock Appreciation Right shall have
been exercised, with the Committee having the right to determine the form of
payment. When payment is to be made in shares of Stock, the number of shares to
be paid shall be calculated on the basis of the Fair Market Value of the shares
on the date of exercise. When payment is to be made in cash, such amount shall
be based upon the Fair Market Value of the Stock on the date of exercise,
determined in accordance with any provisions of said Rule 16b-3 during the
applicable period referred to in Rule 16b-3(e).
(iii) Stock Appreciation Rights shall be transferable only
when and to the extent that the underlying Stock Option would be transferable
under Paragraph 5(b)(v) of the Plan.
(iv) Upon the exercise of a Stock Appreciation Right, the
Stock Option or part thereof to which such Stock Appreciation Right is related
shall be deemed to have been exercised only to the extent of the number of
shares issued under the Stock Appreciation Right at the time of exercise based
on the value of the Stock Appreciation Right at such time.
(v) In its sole discretion, the Committee may grant Stock
Appreciation Rights that become exercisable only in the event of a Change in
Control and/or a Potential Change in Control, subject to such terms and
conditions as the Committee may specify at grant; provided that any such Stock
Appreciation Rights shall be settled solely in cash.
(vi) The Committee, in its sole discretion, may also provide
that, in the event of a Change in Control and/or a Potential Change in Control,
the amount to be paid upon the exercise of a Stock Appreciation Right shall be
based on the Change in Control Price, subject to such terms and conditions as
the Committee may specify at grant.
7. Restricted Stock.
(a) Administration. Shares of Restricted Stock may be issued either
alone, in addition to or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. The Committee shall determine the
eligible persons to whom, and the time or times at which, grants of Restricted
Stock will be made, the number of shares to be awarded, the price (if any) to be
paid by the recipient of Restricted Stock, subject to Paragraph 7(b) of the
Plan, the time or times within which such awards may be subject to forfeiture,
and all other terms and conditions of the awards. The Committee may condition
the grant of Restricted Stock upon the attainment of specified performance goals
or such other factors as the Committee may, in its sole discretion, determine.
The provisions of Restricted Stock awards need not be the same with respect to
each recipient.
(b) Awards and Certificates.
(i) The prospective recipient of a Restricted Stock award
shall not have any rights with respect to such award unless and until such
recipient has executed an agreement evidencing the award and has delivered a
fully executed copy thereof to the Company, and has otherwise complied with the
applicable terms and conditions of such award.
(ii) The purchase price for shares of Restricted Stock may be
equal to or less than their par value and may be zero.
(iii) Awards of Restricted Stock must be accepted within a
period of 60 days (or such shorter period as the Committee may specify at grant)
after the award date, by executing a Restricted Stock Award Agreement and paying
the price, if any, required under Paragraph 7(b)(ii).
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(iv) Each participant receiving a Restricted Stock award shall
be issued a stock certificate in respect of such shares of Restricted Stock.
Such certificate shall be registered in the name of such participant, and shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award.
(v) The Committee shall require that (A) the stock
certificates evidencing shares of Restricted Stock be held in the custody of the
Company until the restrictions thereon shall have lapsed, and (B) as a condition
of any Restricted Stock award, the participant shall have delivered a stock
power, endorsed in blank, relating to the Restricted Stock covered by such
award.
(c) Restrictions and Conditions. The shares of Restricted Stock
awarded pursuant to this Section 7 shall be subject to the following
restrictions and conditions:
(i) Subject to the provisions of this Plan and the award
agreement, during a period set by the Committee commencing with the date of such
award (the "Restriction Period"), the participant shall not be permitted to
sell, transfer, pledge or assign shares of Restricted Stock awarded under the
Plan. Within these limits, the Committee, in its sole discretion, may provide
for the lapse of such restrictions in installments and may accelerate or waive
such restrictions in whole or in part, based on service, performance and/or such
other factors or criteria as the Committee may determine, in its sole
discretion.
(ii) Except as provided in this paragraph 7(c)(ii) and
Paragraph 7(c)(i) of the Plan, the participant shall have, with respect to the
shares of Restricted Stock, all of the rights of a stockholder of the Company,
including the right to vote the shares and the right to receive any regular cash
dividends paid out of current earnings. The Committee, in its sole discretion,
as determined at the time of award, may permit or require the payment of cash
dividends to be deferred and, if the Committee so determines, reinvested,
subject to Paragraph 14(e) of the Plan, in additional Restricted Stock to the
extent shares are available under Section 3 of the Plan, or otherwise
reinvested. Stock dividends, splits and distributions issued with respect to
Restricted Stock shall be treated as additional shares of Restricted Stock that
are subject to the same restrictions and other terms and conditions that apply
to the shares with respect to which such dividends are issued, and the Committee
may require the participant to deliver an additional stock power covering the
shares issuable pursuant to such stock dividend, split or distribution. Any
other dividends or property distributed with regard to Restricted Stock, other
than regular dividends payable and paid out of current earnings, shall be held
by the Company subject to the same restrictions as the Restricted Stock.
(iii) Subject to the applicable provisions of the award
agreement and this Section 7, upon termination of a participant's employment
with the Company and any Subsidiary or Affiliate for any reason during the
Restriction Period, all shares still subject to restriction will vest, or be
forfeited, in accordance with the terms and conditions established by the
Committee at or after grant.
(iv) If and when the Restriction Period expires without a
prior forfeiture of the Restricted Stock subject to such Restriction Period,
certificates for an appropriate number of unrestricted shares, and other
property held by the Company with respect to such Restricted Shares, shall be
delivered to the participant promptly.
(d) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a Restricted Stock award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
8. Deferred Stock.
(a) Administration. Deferred Stock may be awarded either alone, in
addition to or in tandem with other awards granted under the Plan and/or cash
awards made outside of the Plan. The Committee shall determine the eligible
persons to whom and the time or times at which Deferred Stock shall be awarded,
the number of shares of Deferred Stock to be awarded to any person, the duration
of the period (the "Deferral Period") during which, and the conditions under
which, receipt of the Stock will be deferred, and the other terms and conditions
of the award in addition to those set forth in Paragraph 8(b). The Committee may
condition the grant of Deferred Stock upon the attainment of specified
performance goals or such other factors or criteria as the Committee shall, in
its sole discretion, determine. The provisions of Deferred Stock awards need not
be the same with respect to each recipient.
(b) Terms and Conditions. The shares of Deferred Stock awarded
pursuant to this Section 8 shall be subject to the following terms and
conditions:
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(i) Subject to the provisions of this Plan and the award
agreement referred to in Paragraph 8(b)(vi) of the Plan, Deferred Stock awards
may not be sold, assigned, transferred, pledged or otherwise encumbered during
the Deferral Period. At the expiration of the Deferral Period (or the Elective
Deferral Period referred to in Paragraph 8(b)(v) of the Plan, where applicable),
share certificates representing the shares covered by the Deferred Stock award
shall be delivered to the participant or his legal representative.
(ii) Unless otherwise determined by the Committee at grant,
amounts equal to any dividends declared during the Deferral Period with respect
to the number of shares covered by a Deferred Stock award will be paid to the
participant currently, or deferred and deemed to be reinvested in additional
Deferred Stock, or otherwise reinvested, all as determined at or after the time
of the award by the Committee, in its sole discretion.
(iii) Subject to the provisions of the award agreement and
this Section 8, upon termination of a participant's employment with the Company
and any Subsidiary or Affiliate for any reason during the Deferral Period for a
given award, the Deferred Stock in question will vest, or be forfeited, in
accordance with the terms and conditions established by the Committee at or
after grant.
(iv) Based on service, performance and/or such other factors
or criteria as the Committee may determine, the Committee may, at or after
grant, accelerate the vesting of all or any part of any Deferred Stock award
and/or waive the deferral limitations for all or any part of such award.
(v) A participant may elect to further defer receipt of an
award (or an installment of an award) for a specified period or until a
specified event (the "Elective Deferral Period"), subject in each case to the
Committee's approval and to such terms as are determined by the Committee, all
in its sole discretion. Subject to any exceptions adopted by the Committee, such
election must generally be made at least twelve months prior to completion of
the Deferral Period for such Deferred Stock award (or such installment).
(vi) Each award shall be confirmed by, and subject to the
terms of, a Deferred Stock agreement executed by the Company and the
participant.
(c) Minimum Value Provisions. In order to better ensure that award
payments actually reflect the performance of the Company and service of the
participant, the Committee may provide, in its sole discretion, for a tandem
Stock Option or performance-based or other award designed to guarantee a minimum
value, payable in cash or Stock to the recipient of a deferred stock award,
subject to such performance, future service, deferral and other terms and
conditions as may be specified by the Committee.
9. Stock Purchase Rights.
(a) Awards and Administration. The Committee may grant eligible
participants Stock Purchase Rights which shall enable such participants to
purchase Stock (including Deferred Stock and Restricted Stock):
(i) at its Fair Market Value on the date of grant;
(ii) at a percentage of such Fair Market Value on such date,
such percentage to be determined by the Committee in its sole discretion;
(iii) at an amount equal to Book Value on such date; or
(iv) at an amount equal to the par value of such Stock on
such date.
The Committee shall also impose such deferral, forfeiture and/or other
terms and conditions as it shall determine, in its sole discretion, on such
Stock Purchase Rights or the exercise thereof. The terms of Stock Purchase
Rights awards need not be the same with respect to each participant. Each Stock
Purchase Right award shall be confirmed by, and be subject to the terms of, a
Stock Purchase Rights Agreement.
(b) Exercisability. Stock Purchase Rights shall generally be
exercisable for such period after grant as is determined by the Committee not to
exceed sixty (60) days. However, the Committee may provide, in its sole
discretion, that the Stock Purchase Rights of persons potentially subject to
Section 16(b) of the Exchange Act shall not become exercisable until six months
and one day after the grant date, and shall then be exercisable for ten trading
days at the purchase price specified by the Committee in accordance with
Paragraph 9(a) of the Plan.
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10. Other Stock-Based Awards.
(a) Administration.
(i) Other awards of Stock and other awards that are valued in
whole or in part by reference to, or are otherwise based on, Stock ("Other
Stock-Based Awards"), including, without limitation, performance shares,
convertible preferred stock (to the extent a series of preferred stock has been
or may be created by, or in accordance with a procedure set forth in, the
Company's certificate of incorporation), convertible debentures, warrants,
exchangeable securities and Stock awards or options valued by reference to Fair
Market Value, Book Value or performance of the Company or any Subsidiary,
Affiliate or division, may be granted either alone or in addition to or in
tandem with Stock Options, Stock Appreciation Rights, Restricted Stock, Deferred
Stock or Stock Purchase Rights granted under the Plan and/or cash awards made
outside of the Plan.
(ii) Subject to the provisions of the Plan, the Committee
shall have authority to determine the persons to whom and the time or times at
which such award shall be made, the number of shares of Stock to be awarded
pursuant to such awards, and all other conditions of the awards. The Committee
may also provide for the grant of Stock upon the completion of a specified
performance period. The provisions of Other Stock-Based Awards need not be the
same with respect to each recipient.
(b) Terms and Conditions. Other Stock-Based Awards made pursuant to
this Section 10 shall be subject to the following terms and conditions:
(i) Subject to the provisions of this Plan and the award
agreement referred to in Paragraph 10(b)(v) of the Plan, shares of Stock subject
to awards made under this Section 10 may not be sold, assigned, transferred,
pledged or otherwise encumbered prior to the date on which the shares are
issued, or, if later, the date on which any applicable restriction, performance
or deferral period lapses.
(ii) Subject to the provisions of this Plan and the award
agreement and unless otherwise determined by the Committee at grant, the
recipient of an award under this Section 10 shall be entitled to receive,
currently or on a deferred basis, interest or dividends or interest or dividend
equivalents with respect to the number of shares covered by the award, as
determined at the time of the award by the Committee, in its sole discretion,
and the Committee may provide that such amounts (if any) shall be deemed to have
been reinvested in additional Stock or otherwise reinvested.
(iii) Any award under Section 10 and any Stock covered by any
such award shall vest or be forfeited to the extent so provided in the award
agreement, as determined by the Committee, in its sole discretion.
(iv) In the event of the participant's Retirement, Disability
or death, or in cases of special circumstances, the Committee may, in its sole
discretion, waive in whole or in part any or all of the remaining limitations
(if any) imposed with respect to any or all of an award pursuant to this Section
10.
(v) Each award under this Section 10 shall be confirmed by,
and subject to the terms of, an agreement or other instrument by the Company and
by the participant.
(vi) Stock (including securities convertible into Stock)
issued on a bonus basis under this Section 10 may be issued for no cash
consideration.
11. Change in Control Provisions.
(a) Impact of Event. In the event of a "Change in Control," as defined
in Paragraph 11(b) of the Plan, or a "Potential Change in Control," as defined
in Paragraph 11(c) of the Plan, but, with respect to a Potential Change of
Control, only if and to the extent so determined by the Committee or the Board
at or after grant (subject to any right of approval expressly reserved by the
Committee or the Board at the time of such determination), the following
acceleration and valuation provisions shall apply:
(i) Any Stock Appreciation Rights outstanding for at least six
months and any Stock Options awarded under the Plan not previously exercisable
and vested shall become fully exercisable and vested.
(ii) The restrictions and deferral limitations applicable to
any Restricted Stock, Deferred Stock, Stock Purchase rights and Other
Stock-Based Awards, in each case to the extent not already vested under the
Plan, shall lapse and such shares and awards shall be deemed fully vested.
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(iii) The value of all outstanding Stock Options, Stock
Appreciation Rights, Restricted Stock, Deferred Stock, Stock Purchase Rights and
Other Stock-Based Awards, in each case to the extent vested, shall unless
otherwise determined by the Committee in its sole discretion at or after grant
but prior to any Change in Control, be purchased by the Company ("cashout") in a
manner determined by the Committee, in its sole discretion, on the basis of the
"Change in Control Price" as defined in Paragraph 11(d) of the Plan as of the
date such Change in Control or such Potential Change in Control is determined to
have occurred or such other date as the Committee may determine prior to the
Change in Control.
(b) Definition of "Change in Control". For purposes of Paragraph
11(a) of the Plan, a "Change in Control" means the happening of any of the
following:
(i) When any "person" (as defined in Section 3(a)(9) of the
Exchange Act and as used in Sections 13(d) and 14(d) of the Exchange Act,
including a "group" as defined in Section 13(d) of the Exchange Act, but
excluding the Company and any Subsidiary and any employee benefit plan sponsored
or maintained by the Company or any Subsidiary and any trustee of such plan
acting as trustee) directly or indirectly becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act, as amended from time to time), of
securities of the Company representing twenty percent or more of the combined
voting power of the Company's then outstanding securities;
(ii) When, during any period of twenty-four consecutive months
during the existence of the Plan, the individuals who, at the beginning of such
period, constitute the Board (the "Incumbent Directors") cease for any reason
other than death, Disability or Retirement to constitute at least a majority
thereof, provided, however, that a director who was not a director at the
beginning of such 24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of, or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or by prior
operation of this Paragraph 11(b)(ii); or
(iii) The occurrence of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other than the Company
or a Subsidiary through purchase of assets, or by merger, or otherwise.
(c) Definition of Potential Change in Control. For purposes of
Paragraph 11(a) of the Plan, a "Potential Change in Control" means the happening
of any one of the following:
(i) The approval by stockholders of an agreement by the
Company, the consummation of which would result in a Change in Control of the
Company as defined in Section 11(b) of the Plan; or
(ii) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the Company or a
Subsidiary or any Company employee benefit plan or any trustee of such plan
acting as such trustee) of securities of the Company representing five percent
or more of the combined voting power of the Company's outstanding securities and
the adoption by the Board of Directors of a resolution to the effect that a
Potential Change in Control of the Company has occurred for purposes of this
Plan.
(d) Change in Control Price. For purposes of this Section 11, "Change
in Control Price" means the highest price per share paid in any transaction
reported on the principal stock exchange on which the Stock is traded or the
average of the highest bid and asked prices as reported by NASDAQ, or paid or
offered in any bona fide transaction related to a potential or actual Change in
Control of the Company at any time during the sixty-day period immediately
preceding the occurrence of the Change in Control (or, where applicable, the
occurrence of the Potential Change in Control event), in each case as determined
by the Committee except that, in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, such price shall be
based only on transactions reported for the date on which the optionee exercises
such Stock Appreciation Rights or, where applicable, the date on which a cashout
occurs under Paragraph 11(a)(iii).
12. Amendments and Termination.
(a) The Board may amend, alter, or discontinue the Plan, but no
amendment, alteration, or discontinuation shall be made which would impair the
rights of an optionee or participant under a Stock Option, Stock Appreciation
Right (or Limited Stock Appreciation Right), Restricted or Deferred Stock award,
Stock Purchase Right or Other Stock-Based Award theretofore granted, without the
optionee's or participant's consent, and no amendment will be made without
approval of the stockholders if such amendment requires stockholder approval
under state law or if stockholder approval is necessary in order that the Plan
comply with Rule 16b-3 of the Commission under the Exchange Act or any
substitute or successor rule or if stockholder approval is necessary in order to
enable the grant pursuant to the Plan of options or other awards intended to
confer tax benefits upon the recipients thereof.
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(b) The Committee may amend the terms of any Stock Option or other
award theretofore granted, prospectively or retroactively, but no such amendment
shall impair the rights or any holder without the holder's consent. The
Committee may also substitute new Stock Options for previously granted Stock
Options (on a one for one or other basis), including previously granted Stock
Options having higher option exercise prices.
(c) Subject to the provisions of Paragraphs 12(a) and (b) of the Plan,
the Board shall have broad authority to amend the Plan to take into account
changes in applicable securities and tax laws and accounting rules, as well as
other developments, and, in particular, without limiting in any way the
generality of the foregoing, to eliminate any provisions which are not required
to included as a result of any amendment to Rule 16b-3 of the Commission
pursuant to the Exchange Act.
13. Unfunded Status of Plan.
The Plan is intended to constitute an "unfunded" plan for incentive and
deferred compensation. With respect to any payments not yet made to a
participant or optionee by the Company, nothing contained in this Plan shall
give any such participant or optionee any rights that are greater than those of
a general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Stock or payments in lieu of or with respect
to awards under this Plan; provided, however, that, unless the Committee
otherwise determines with the consent of the affected participant, the existence
of such trusts or other arrangements shall be consistent with the "unfunded"
status of the Plan.
14. General Provisions.
(a) The Committee may require each person purchasing shares pursuant to
a Stock Option or other award under the Plan to represent to and agree with the
Company in writing that the optionee or participant is acquiring the shares
without a view to distribution thereof. The certificates for such shares may
include any legend which the Committee deems appropriate to reflect any
restrictions on transfer. All certificates or shares of Stock or other
securities delivered under the Plan shall be subject to such stock-transfer
orders and other restrictions as the Committee may deem advisable under the
rules, regulations, and other requirements of the Commission, any stock exchange
upon which the Stock is then listed, and any applicable Federal or state
securities law, and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
(b) Nothing contained in this Plan shall prevent the Board from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required; and such arrangements may be either
generally applicable or applicable only in specific cases.
(c) Neither the adoption of the Plan nor the grant of any award
pursuant to the Plan shall confer upon any employee of the Company or any
Subsidiary or Affiliate any right to continued employment with the Company or a
Subsidiary or Affiliate, as the case may be, nor shall it interfere in any way
with the right of the Company or a Subsidiary or Affiliate to terminate the
employment of any of its employees at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Committee regarding the
payment of, any Federal, state, or local taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations may be settled with Stock, including Stock
that is part of the award that gives rise to the withholding requirement. The
obligations of the Company under the Plan shall be conditional on such payment
or arrangements and the Company and its Subsidiaries or Affiliates shall, to the
extent permitted by law, have the right to deduct any such taxes from any
payment of any kind otherwise due to the participant.
(e) The actual or deemed reinvestment of dividends or dividend
equivalents in additional Restricted Stock (or in Deferred Stock or other types
of Plan awards) at the time of any dividend payment shall only be permissible if
sufficient shares of Stock are available under Section 3 of this Plan for such
reinvestment (taking into account then outstanding Stock Options, Stock Purchase
Rights and other Plan awards).
15. Effective Date of Plan.
The Plan shall be effective as of the date the Plan is approved by the
Board, subject to the approval of the Plan by a majority of the votes cast by
the holders of the Company's Common Stock at the next annual or special meeting
of stockholders.
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Any grants made under the Plan prior to such approval shall be effective when
made (unless otherwise specified by the Committee at the time of grant), but
shall be conditioned on, and subject to, such approval of the Plan by such
stockholders.
16. Term of Plan.
Stock Option, Stock Appreciation Right, Restricted Stock award,
Deferred Stock award, Stock Purchase Right or Other Stock-Based Award may be
granted pursuant to the Plan, until this Plan shall be terminated, but awards
granted prior to such termination may extend beyond that date. Notwithstanding
the foregoing, no Incentive Stock Option may be granted after the tenth (10th)
anniversary of the date this Plan was approved by the Board, although Incentive
Stock Options granted prior to such date may extend beyond such date.
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Exhibit 10.36
Warrant to Purchase
** **
Shares of Common Stock
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND NEITHER
THIS WARRANT NOR SUCH SHARES MAY BE SOLD, ENCUMBERED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENT, AND, IF AN EXEMPTION SHALL BE
APPLICABLE, THE HOLDER SHALL HAVE DELIVERED AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
Void after 5:00 P.M. New York City time
three years after the Effective Date, as defined
in the Warrant (Subject to earlier termination pursuant
to Paragraph (j)(5) of this Warrant
SERIES B COMMON STOCK PURCHASE WARRANT
OF
INTERNATIONAL MAGNETIC IMAGING, INC.
This is to certify that, FOR VALUE RECEIVED,
or assigns ("Holder"), is entitled to purchase, subject to the provisions of
this Warrant, from International Magnetic Imaging, Inc., a Delaware corporation
(the "Company"), at an exercise price per share of two and 00/100 dollars
($2.00), subject to adjustment as provided in this Warrant, ( , )
shares of common stock, par value $.01 per share ("Common Stock"), of the
Company at any time during the three (3) year period (the "Exercise Period")
commencing on the effective date of the registration statement relating to the
Company's initial public offering of securities (the "Effective Date") to 5:00
P.M., New York City time, on the day before the third (3rd) anniversary of the
Effective Date; provided, however, that if such date is a day on which banking
institutions in the State of New York are authorized by law to close, then on
the next succeeding day which shall not be such a day, subject to earlier
termination as provided in Paragraph (j)(5) of this Warrant. The number of
shares of Common Stock to be received upon the exercise of this Warrant and the
price to be paid for a share of Common Stock may also be adjusted from time to
time as hereinafter set forth. The shares of Common Stock deliverable upon such
exercise, and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant Shares," and the exercise price for the purchase of a share of
Common Stock pursuant to this Warrant in effect at any time and as adjusted from
time to time is hereinafter sometimes referred to as the "Exercise Price."
Reference in the Warrant to the "Series B Warrants" shall mean any or all of the
Series B Common Stock Purchase Warrants issued by the Company, regardless of
whether the Exercise Price of such Series B Warrants is the same as the Exercise
Price of this Warrant. The number of shares of Common Stock issuable upon
exercise of this Warrant reflects a proposed recapitalization pursuant to which
the one thousand (1,000) shares of Common Stock issued and outstanding as of the
date the Series B Warrants were first issued is converted into not less than
nine million two hundred thousand (9,200,000) shares of Common Stock and such
additional securities as may be determined by the Board of Directors and
stockholders of the Company. Such date is referred to in this Warrant as the
Recapitalization Date.
(a) EXERCISE OF WARRANT. This Warrant may be exercised in whole at any
time or in part from time to time during the Exercise Period by presentation and
surrender hereof to the Company at its principal office, or at the office of its
stock transfer agent, if any, with the Purchase Form annexed hereto duly
executed and accompanied by payment of the Exercise Price for the number of
shares of Common Stock specified in such form. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation,
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execute and deliver a new Warrant evidencing the rights of the Holder hereof to
purchase the balance of the shares of Common Stock purchasable hereunder. Upon
receipt by the Company of this Warrant at its office, or by the stock transfer
agent of the Company at its office, in proper form for exercise, the Holder
shall be deemed to be the holder of record of the shares of Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books of
the Company shall then be closed or that certificates representing such shares
of Common Stock shall not then be actually delivered to the Holder.
(b) RESERVATION OF SHARES. The Company hereby agrees that at all times
there shall be reserved for issuance and/or delivery upon exercise of this
Warrant such number of shares of Common Stock as shall be required for issuance
and delivery upon exercise of this Warrant and that it shall not, without the
prior approval of the holders of a majority of the Warrants then outstanding,
increase the par value of the Common Stock.
(c) FRACTIONAL SHARES. No fractional shares or script representing
fractional shares shall be issued upon the exercise of this Warrant. With
respect to any fraction of a share called for upon any exercise of this Warrant,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the current market value of such fractional share, determined as
follows:
(1) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such exchange or listed
for trading on the Nasdaq Stock Market or other automated quotation system which
provides information as to the last sale price, the current value shall be the
reported last sale price of one share of Common Stock on such exchange or system
on the last business day prior to the date of exercise of this Warrant, or if no
such sale is made on such day, the current value shall be the average of the
closing bid and asked prices for such day on such exchange or system; or
(2) If the Common Stock is not so listed or admitted to
unlisted trading privileges, the current value shall be the mean of the reported
last bid and asked prices of one share of Common Stock as reported by Nasdaq,
the National Quotation Bureau, Inc. or other similar reporting service, on the
last business day prior to the date of the exercise of this Warrant; or
(3) If the Common Stock is not so listed or admitted to
unlisted trading privileges and bid and asked prices are not so reported, the
current value of one share of Common Stock shall be an amount, not less than
book value, determined in such reasonable manner as may be prescribed by the
Board of Directors of the Company.
(d) EXCHANGE, TRANSFER, ASSIGNMENT OR LOSS OF WARRANT. This
Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company or at the office of its stock
transfer agent, if any, for other Warrants of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Common Stock purchasable hereunder. Subject to the provisions of Paragraph (k)
of this Warrant, upon surrender of this Warrant to the Company or at the office
of its stock transfer agent, if any, with the Assignment Form annexed hereto
duly executed and funds sufficient to pay any transfer tax, the Company shall,
without charge, execute and deliver a new Warrant in the name of the assignee
named in such instrument of assignment and this Warrant shall promptly be
canceled. This Warrant may be divided or combined with other Warrants which
carry the same rights upon presentation hereof at the office of the Company or
at the office of its stock transfer agent, if any, together with a written
notice specifying the names and denominations in which new Warrants are to be
issued and signed by the Holder hereof. The term "Warrant" as used herein
includes any Warrants into which this Warrant may be divided or exchanged. Upon
receipt by the Company of evidence satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor. Any such new Warrant executed and delivered shall
constitute an additional contractual obligation on the part of the Company,
whether or not this Warrant so lost, stolen, destroyed, or mutilated shall be at
any time enforceable by anyone.
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<PAGE>
(e) RIGHTS OF THE HOLDER. The Holder shall not, by virtue of this
Warrant, be entitled to any rights of a stockholder in the Company, either at
law or equity, and the rights of the Holder are limited to those expressed in
the Warrant and are not enforceable against the Company except to the extent set
forth herein.
(f) ANTI-DILUTION PROVISIONS. The Exercise Price in effect at any time
and the number and kind of securities purchasable upon exercise of each Warrant
shall be subject to adjustment as follows:
(1) In case the Company shall, subsequent to the
Recapitalization Date, (A) pay a dividend or make a distribution on its shares
of Common Stock in shares of Common Stock (B) subdivide or reclassify its
outstanding Common Stock into a greater number of shares, or (C) combine or
reclassify its outstanding Common Stock into a smaller number of shares or
otherwise effect a reverse split, the Exercise Price in effect at the time of
the record date for such dividend or distribution or of the effective date of
such subdivision, combination or reclassification shall be proportionately
adjusted so that the Holder of this Warrant exercised after such date shall be
entitled to receive the aggregate number and kind of shares which, if this
Warrant had been exercised immediately prior to such time, he would have owned
upon such exercise and been entitled to receive upon such dividend, subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed in this Paragraph (f)(1) shall occur.
(2) In case the Company shall, subsequent to the
Recapitalization Date, issue rights or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common Stock (or
securities convertible into Common Stock) at a price (or having a conversion
price per share) less than the current market price of the Common Stock (as
defined in Paragraph (f)(5) of this Warrant) on the record date mentioned below,
the Exercise Price shall be adjusted so that the same shall equal the price
determined by multiplying the Exercise Price in effect immediately prior to the
date of such issuance by a fraction, of which the numerator shall be the number
of shares of Common Stock outstanding on the record date mentioned below plus
the number of additional shares of Common Stock which the aggregate offering
price of the total number of shares of Common Stock so offered (or the aggregate
conversion price of the convertible securities so offered) would purchase at
such current market price per share of the Common Stock, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock offered for
subscription or purchased (or into which the convertible securities so offered
are convertible). Such adjustment shall be made successively whenever such
rights or warrants are issued and shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
rights or warrants; and to the extent that shares of Common Stock or securities
convertible into Common Stock are not delivered after the expiration of such
rights or warrants, the Exercise Price shall be readjusted to the Exercise Price
which would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares of Common Stock (or securities convertible into Common Stock) actually
delivered.
(3) In case the Company shall, subsequent to the
Recapitalization Date, distribute to all holders of Common Stock evidences of
its indebtedness or assets (excluding cash dividends or distributions paid out
of current earnings and dividends or distributions referred to in Paragraph
(f)(1) of this Warrant or subscription rights or warrants (excluding those
referred to in Paragraph (f)(2) of this Warrant), then in each such case the
Exercise Price in effect thereafter shall be determined by multiplying the
Exercise Price in effect immediately prior thereto by a fraction, of which the
numerator shall be the total number of shares of Common Stock outstanding
multiplied by the current market price per share of Common Stock (as defined in
Paragraph (f)(5) of this Warrant), less the fair market value (as determined by
the Company's Board of Directors) of said assets or evidences of indebtedness so
distributed or of such rights or warrants, and of which the denominator shall be
the total number of shares of Common Stock outstanding multiplied by such
current market price per share of Common Stock. Such adjustment shall be made
successively whenever such a record date is fixed. Such adjustment shall be made
whenever any such distribution is made and shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such distribution.
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(4) Whenever the Exercise Price payable upon exercise of each
Warrant is adjusted pursuant to Paragraphs (f)(1), (2) or (3) of this Warrant,
the number of shares of Common Stock purchasable upon exercise of each Warrant
shall simultaneously be adjusted by multiplying the number of shares of Common
Stock issuable upon exercise of each Warrant in effect on the date thereof by
the Exercise Price in effect on the date thereof and dividing the product so
obtained by the Exercise Price, as adjusted. In no event shall the Exercise
Price per share be less than the par value per share, and, if any adjustment
made pursuant to Paragraph (f)(1), (2) or (3) would result in an exercise price
of less than the par value per share, then, in such event, the Exercise Price
per share shall be the par value per share.
(5) For the purpose of any computation under Paragraphs (f)(2)
and (3) of this Warrant, the current market price per share of Common Stock at
any date shall be deemed to be the average of the daily closing prices for 30
consecutive business days commencing 45 business days before such date. The
closing price for each day shall be the reported last sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported last bid and asked prices regular way, in either case on the principal
national securities exchange on which the Common Stock is admitted to trading or
listed or on the Nasdaq Stock Market, or if not listed or admitted to trading on
such exchange or such System, the average of the reported highest bid and
reported lowest asked prices as reported by Nasdaq, the National Quotation
Bureau, Inc. or other similar organization if NASDAQ is no longer reporting such
information, or if not so available, the fair market price as determined by the
Board of Directors.
(6) No adjustment in the Exercise Price shall be required
unless such adjustment would require an increase or decrease of at least ten
cents ($0.10) in such price; provided, however, that any adjustments which by
reason of this Paragraph (f)(6) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations
under this Paragraph (f) shall be made to the nearest cent or to the nearest
one-hundredth of a share, as the case may be. Anything in this Paragraph (f) to
the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Paragraph (f), as it in its discretion shall determine to be
advisable in order that any dividend or distribution in shares of Common Stock,
subdivision, reclassification or combination of Common Stock, issuance of
warrants to purchase Common Stock or distribution of evidences of indebtedness
or other assets (excluding cash dividends) referred to hereinabove in this
Paragraph (f) hereafter made by the Company to the holders of its Common Stock
shall not result in any tax to the holders of its Common Stock or securities
convertible into Common Stock.
(7) The Company may retain a firm of independent public
accountants of recognized standing selected by the Board of Directors (who may
be the regular accountants employed by the Company) to make any computation
required by this Paragraph (f), and a certificate signed by such firm shall be
conclusive evidence of the correctness of such adjustment.
(8) In the event that at any time, as a result of an
adjustment made pursuant to Paragraph (f)(1) of this Warrant, the Holder of any
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Paragraphs (f)(1) to
(6), inclusive, of this Warrant.
(9) Irrespective of any adjustments in the Exercise Price or
the number or kind of shares purchasable upon exercise of Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in this and similar Warrants initially
issued by the Company.
(10) In the event that at any time, as a result of an
adjustment made pursuant to Paragraph (f)(1) of this Warrant, the Holder of any
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of any Warrant
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<PAGE>
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the Common
Stock contained in Paragraphs (f)(1) to (8), inclusive, of this Warrant.
(g) OFFICER'S CERTIFICATE. Whenever the Exercise Price shall be
adjusted as required by the provisions of Paragraph (f) of this Warrant, the
Company shall forthwith file in the custody of its Secretary or an Assistant
Secretary at its principal office and with its stock transfer agent, if any, an
officer's certificate showing the adjusted Exercise Price and the adjusted
number of shares of Common Stock issuable upon exercise of each Warrant,
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment, including a statement of the number of additional
shares of Common Stock, if any, and such other facts as shall be necessary to
show the reason for and the manner of computing such adjustment. Each such
officer's certificate shall be made available at all reasonable times for
inspection by the Holder or any holder of a Warrant executed and delivered
pursuant to Paragraph (a) and the Company shall, forthwith after each such
adjustment, mail, by certified mail, a copy of such certificate to the Holder or
any such holder at such holder's address set forth in the Company's Warrant
Register.
(h) NOTICES TO WARRANT HOLDERS. So long as this Warrant shall be
outstanding, (1) if the Company shall pay any dividend or make any distribution
upon Common Stock (other than a regular cash dividend payable out of retained
earnings) or (2) if the Company shall offer to the holders of Common Stock for
subscription or purchase by them any share of any class or any other rights or
(3) if any capital reorganization of the Company, reclassification of the
capital stock of the Company, consolidation or merger of the Company with or
into another corporation, sale, lease or transfer of all or substantially all of
the property and assets of the Company to another corporation, or voluntary or
involuntary dissolution, liquidation or winding up of the Company shall be
effected, then in any such case, the Company shall cause to be mailed by
certified mail to the Holder, at least fifteen days prior to the date specified
in clauses (i) and (ii), as the case may be, of this Paragraph (h) a notice
containing a brief description of the proposed action and stating the date on
which (i) a record is to be taken for the purpose of such dividend, distribution
or rights, or (ii) such reclassification, reorganization, consolidation, merger,
conveyance, lease, dissolution, liquidation or winding up is to take place and
the date, if any is to be fixed, as of which the holders of Common Stock or
other securities shall receive cash or other property deliverable upon such
reclassification, reorganization, consolidation, merger, conveyance,
dissolution, liquidation or winding up.
(i) RECLASSIFICATION, REORGANIZATION OR MERGER. In case of any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the Company, or in case of any consolidation or merger of the
Company with or into another corporation (other than a merger with a subsidiary
in which merger the Company is the continuing corporation and which does not
result in any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the class issuable upon exercise of this
Warrant) or in case of any sale, lease or conveyance to another corporation of
the property of the Company as an entirety, the Company shall, as a condition
precedent to such transaction, cause effective provisions to be made so that the
Holder shall have the right thereafter by exercising this Warrant, to purchase
the kind and amount of shares of stock and other securities and property
receivable upon such reclassification, capital reorganization and other change,
consolidation, merger, sale or conveyance by a holder of the number of shares of
Common Stock which might have been purchased upon exercise of this Warrant
immediately prior to such reclassification, change, consolidation, merger, sale
or conveyance. Any such provision shall include provision for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Warrant. The foregoing provisions of this Paragraph (i) shall
similarly apply to successive reclassifications, capital reorganizations and
changes of shares of Common Stock and to successive consolidations, mergers,
sales or conveyances. In the event that in connection with any such capital
reorganization or reclassification, consolidation, merger, sale or conveyance,
additional shares of Common Stock shall be issued in exchange, conversion,
substitution or payment, in whole in part, for a security of the Company other
than Common Stock, any such issue shall be treated as an issue of Common Stock
covered by the provisions of Paragraph (f) of this Warrant.
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(j) REGISTRATION UNDER THE SECURITIES ACT OF l933.
(1) (A) At any time during the period commencing on the
Recapitalization Date and ending on two years after the expiration of the
Exercise Period, the Company shall advise the holders of any Series B Warrants
or the Warrant Shares (each such person being referred to herein as a "holder")
by written notice at least one (1) week prior to the filing of any registration
statement under the Act covering securities of the Company and will upon the
request of any such holder include in any such registration statement such
information as may be required to permit a public offering of the Warrant
Shares; provided, however, that the Company shall not be required to include
such Warrant Shares in a registration statement relating solely to an offering
by the Company of securities for its own account if the managing underwriter for
such offering shall have advised the Company that the inclusion of such Warrant
Shares in the registration statement relating to such offering will have a
material adverse effect upon the ability of the Company to sell securities for
its own account unless the holder agrees to a holdoff as hereinafter provided,
and provided further that the holders are not treated less favorably than others
having piggyback registration rights. The Company shall keep such registration
statement current for a period of nine (9) months from the effective date of
such registration statement or until such earlier date as all of the registered
Warrant Shares shall have been sold. In connection with such registration, if
requested by the managing underwriter as a condition to the inclusion of the
Warrant Shares in the registration statement, the holders shall agree to holdoff
from selling the shares for such period (the "lock-up period") as the managing
underwriter shall request, in which event the Company will keep the registration
statement effective for nine (9) months after the expiration of the lock-up
period.
(B) If the majority holder, as hereinafter defined,
shall give notice to the Company at any time during the period commencing one
(1) years from the Effective Date (or earlier with the consent of the
underwriter for the Company's initial public offering and any other offering
during such one- year period) and ending two (2) years after the last day of the
Exercise Period to the effect that such holder contemplates the sale of the
Warrant Shares under such circumstances that a public offering distribution
(within the meaning of the Act) of the Warrant Shares will be involved, then the
Company shall, within forty-five (45) days after receipt of such notice, file a
registration statement pursuant to the Act, to the end that the Warrant Shares
may be sold under said Act as promptly as practicable thereafter, and the
Company will use its best efforts to cause such registration to become
effective; provided that such holder shall furnish the Company with appropriate
information (relating to the intentions of such holder) in connection therewith
as the Company shall reasonably request in writing. The Company shall keep such
registration statement current for such time, not to exceed the greater of nine
(9) months or such longer period as the registration statement may be used
without requiring audited financial statements covering a period subsequent to
that for which audited financial statements are otherwise required, as the
majority holder may request. Upon receipt of notice the Company shall promptly
give notice to the holder holders of Series B Warrants and shall, at the request
of such holders, including their Warrant Shares in the same manner as if they
had given the notice pursuant to this Paragraph (j)(1)(B). The holders of the
Series B Warrants shall be entitled to only one (1) demand registration right
pursuant to this Paragraph (j)(1)(B).
(2) The following provision of this Paragraph (j) shall also
be applicable:
(A) The Company shall bear the entire cost and
expense of any registration of securities initiated by it under Paragraph
(j)(1)(A) of this Warrant or filed pursuant to Paragraph (j)(1)(B) of this
Warrant. Any holder whose Warrant Shares are included in any such registration
statement pursuant to this Paragraph (j) shall, however, bear the fees of his
own counsel and accountants and any transfer taxes or underwriting discounts or
commissions applicable to the Warrant Shares sold by him pursuant thereto.
(B) The Company shall indemnify and hold harmless
each such holder and each underwriter, within the meaning of the Act, who may
purchase from or sell for any such holder any Warrant Shares from and against
any and all losses, claims, damages and liabilities (including fees and expenses
of counsel, which counsel may, if the holders request, be separate from counsel
for the Company) caused by any untrue statement or
- 6 -
<PAGE>
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Paragraph (j) or any application or other filing
under any state securities law caused by any omission or alleged omissions to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading to which such holder or any such
underwriter or any of them may become subject under the Act, the Securities
Exchange Act of 1934, as amended, or other Federal or state statutory law or
regulation, at common law or otherwise, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or alleged untrue
statement or omission or alleged omission based upon information furnished to
the Company by any such holder or underwriter expressly for use therein, which
indemnification shall include each person, if any, who controls any such
underwriter within the meaning of such Act; provided, however, that any such
holder or underwriter shall at the same time indemnify the Company, its
directors, each officer signing the related registration statement, each person,
if any, who controls the Company within the meaning of such Act and each other
holder, from and against any and all losses, claims, damages and liabilities
caused by any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or any prospectus required to be filed
or furnished by reason of this Paragraph (j) or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, insofar as such
losses, claims, damages or liabilities are caused by any untrue statement or
alleged untrue statement or omission based upon information furnished to the
Company by any such holder or underwriter expressly for use therein.
(C) Neither the giving of any notice by any holder
nor the making of any request for prospectuses shall impose any upon any holder
making such request any obligation to sell any Warrant Shares or exercise any
Warrants.
(D) In connection with any registration statement
filed pursuant to this Paragraph (j), the Company shall supply prospectuses and
qualify the Warrant Shares for sale in such states as the Warrant holders may
reasonably designates, provided, that the Company shall not be required to
qualify or register the Warrant Shares in any jurisdiction where such
qualification or registration would require the Company to submit generally to
the jurisdiction of such state.
(E) As a condition to the inclusion of the Warrant
Shares of the holder of this Warrant, such holder shall furnish the information
and indemnification as set forth in Paragraph (j)(2)(B) of this Warrant.
(3) The term "majority holder" shall mean the holders of at
least a majority of the shares of Common Stock for which the Series B Warrants
(considered in the aggregate) are exercisable and shall include any owner or
combination of owners of such securities, which ownership shall be calculated by
determining the number of shares of Common Stock held by such owner or owners
resulting from the exercise of any Series B Warrant after giving effect to any
stock dividend, split, reverse split or other recapitalization and the number of
shares of Common Stock issuable upon exercise of any unexercised Series B
Warrants.
(4) The Company's agreements with respect to Warrants or
Warrant Shares in this Paragraph (j) shall continue in effect regardless of the
exercise and surrender of this Warrant.
(5) In connection with any registration described in this
Paragraph (j), the holder may request inclusion of this Warrant in such
registration statement; provided, however, that the Company shall not be
required to maintain any public market in the Warrants and, if both this Warrant
is included in such registration statement and this Warrant is transferred at a
time subsequent to the effective date of such registration statement when such
registration statement is current, this Warrant shall expire and cease to be
exercisable at 5:00 P.M. New York City time on the ninetieth (90th) day after
transfer of the Warrant or, if such ninetieth (90th) day shall be a day on which
banking institutions in the State of New York are authorized by law to close,
then on the next succeeding day which shall not be such a day. In the event that
any registration statement referred to in the preceding sentence shall cease
- 7 -
<PAGE>
to be current and effective at any time during the ninety (90) day period
referred to in such sentence, then, notwithstanding the preceding sentence, the
exercisability of this Warrant shall not be affected by the transfer of this
Warrant.
(k) TRANSFER TO COMPLY WITH THE SECURITIES ACT OF 1933. This Warrant or
the Warrant Shares or any other security issued or issuable upon exercise of
this Warrant may not be sold or otherwise disposed of except as follows:
(1) To a person who, in the opinion of counsel for the
Company, is a person to whom this Warrant or Warrant Shares may legally be
transferred without registration and without the delivery of a current
prospectus under the Act with respect thereto and then only against receipt of
an agreement of such person to comply with the provisions of this Paragraph (k)
with respect to any resale or other disposition of such securities which
agreement shall be satisfactory in form and substance to the Company and its
counsel; or
(2) to any person upon delivery of a prospectus then meeting
the requirements of the Act relating to such securities and the offering thereof
for such sale or disposition.
Dated as of ,
INTERNATIONAL MAGNETIC IMAGING, INC.
ATTEST:
By:
Lewis S. Schiller
Chairman of the Board
By:
, Secretary
- 8 -
<PAGE>
PURCHASE FORM
Dated: , 19
The undersigned hereby irrevocably elects to exercise the within Warrant to
the extent of purchasing shares of Common Stock and hereby makes payment of $ in
payment of the actual exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name____________________________________________________
(Please typewrite or print in block letters)
Signature_______________________________________________
Social Security or Employer Identification No.__________
ASSIGNMENT FORM
FOR VALUE RECEIVED,
hereby sells, assigns and transfer unto
Name____________________________________________________
(Please typewrite or print in block letters)
Address_________________________________________________
_________________________________________________
Social Security or Employer Identification No.__________
The right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint attorney to transfer the same on the books of the Company
with full power of substitution.
Dated:__________, 19__
Signature__________________________
Signature Medallion Guaranteed:
- 9 -
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
EXHIBIT 11.1
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period from Inception
[September 30, 1994]
Nine months ended Year ended to
September 30, December 31, December 31,
------------- ------------ ------------
1 9 9 6 1 9 9 5 1 9 9 5 1 9 9 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Income Adjusted for Primary
Calculation $ 2,614,806 $ 1,864,777 $ 2,682,271 $ 450,564
=============== ============== =============== ==============
Net Income Adjusted for Fully
Diluted Calculation $ 2,722,527 $ 1,970,786 $ 2,824,689 $ 492,353
=============== ============== =============== ==============
Primary Shares Outstanding 14,010,000 13,976,550 14,030,175 13,938,500
=============== ============== =============== ==============
Fully Diluted Shares Outstanding 15,760,000 15,688,500 15,706,375 15,688,500
=============== ============== =============== ==============
Earnings Per Share:
Primary - Note 1 $ .17 $ .12 $ .19 $ .03
=============== ============== =============== ==============
Fully Diluted - Note 2 $ .17 $ .13 $ .18 $ 03
=============== ============== =============== ==============
</TABLE>
Note 1: Computed by dividing net income by the weighted average number of shares
of Common Stock (9,200,000) and Class A Common Stock (1,000,000) treated as a
single class for all periods presented and adjusting such amounts by items (i)
through (vi) below.
(i) Assumes common stock warrants, issued in October 1994, to purchase an
aggregate of 1,000,000 shares of Common Stock were exercised at the
beginning of 1994 and that all proceeds were used to purchase treasury
stock at $5.00 per common share.
(ii) Assumes that 765,500 incentive stock options to purchase Class A Common
Stock, issued in October 1994, were exercised at the beginning of 1994
and that all proceeds were used to purchase treasury stock at $1.00 per
share for the periods ended September 30, 1996 and 1995 and December 31,
1995 and $.50 per share for the period ended December 31, 1994.
(iii) Assumes that 13,000 incentive stock options to purchase Class A Common
Stock, issued in June 1996 were exercised at the beginning of 1994 and
that all proceeds were used to purchase treasury stock at $1.00 per share
for the periods ended September 30, 1996 and 1995 and December 31, 1995
and $.50 per share for the period ended December 31, 1994.
(iv) Assumes common stock warrants, issued in September 1996, to purchase an
aggregate of 500,000 shares of Class A Common Stock were exercised at the
beginning of 1994 and that all proceeds were used to purchase treasury
stock at $1.00 per share for the periods ended September 30, 1996 and
1995 and December 31, 1995 and $.50 per share for the period ended
December 31, 1994.
(v) Assumes that the following convertible preferred shares were converted to
common stock as follows:
Shares of
Preferred Stock Conversion Rate Common Shares
Series B Preferred 5,000 700 3,500,000
(vi) Assumes for the nine months ended September 30, 1996 and the year ended
December 31, 1995, that incentive stock options to purchase 71,500 shares
of Class A Common Stock, which were granted in September 1995, were
exercised on October 1, 1995 and that all proceeds were used to purchase
treasury stock at $1.00 per share.
<PAGE>
INTERNATIONAL MAGNETIC IMAGING, INC. AND SUBSIDIARIES AND RELATED PARTNERSHIPS
EXHIBIT 11.1 [CONTINUED]
- --------------------------------------------------------------------------------
Note 2: Computed by dividing net income by the weighted average number of shares
of Common Stock (9,200,000) and Class A Common Stock (1,000,000) treated as a
single class for all periods presented and adjusting such amounts by items (i)
through (vii) below.
(i) Assumes common stock warrants, issued in October 1994, to purchase an
aggregate of 1,000,000 shares of Common Stock were exercised at the
beginning of 1994 and that all proceeds were used to purchase treasury
stock at $5.00 per common share.
(ii) Assumes common stock warrants, issued in October 1994, to purchase an
aggregate of 1,750,000 shares of Class A Common Stock were exercised at
the beginning of 1994 and that all proceeds were used to purchase
treasury stock at $1.00 per share for the periods ended September 30,
1996 and 1995 and December 31, 1995 and $.50 per share for the period
ended December 31, 1994.
(iii) Assumes that 765,500 incentive stock options to purchase Class A Common
Stock, issued in October 1994, were exercised at the beginning of 1994
and that all proceeds were used to purchase treasury stock at $1.00 per
share for the periods ended September 30, 1996 and 1995 and December 31,
1995 and $.50 per share for the period ended December 31, 1994.
(iv) Assumes that 13,000 incentive stock options to purchase Class A Common
Stock, issued in June 1996 were exercised at the beginning of 1994 and
that all proceeds were used to purchase treasury stock at $1.00 per share
for the periods ended September 30, 1996 and 1995 and December 31, 1995
and $.50 per share for the period ended December 31, 1994.
(v) Assumes common stock warrants, issued in September 1996, to purchase an
aggregate of 500,000 shares of Class A Common Stock were exercised at the
beginning of 1994 and that all proceeds were used to purchase treasury
stock at $1.00 per share for the periods ended September 30, 1996 and
1995 and December 31, 1995 and $.50 per share for the period ended
December 31, 1994.
(vi) Assumes that the following convertible preferred shares were converted to
common stock as follows:
Shares of
Preferred Stock Conversion Rate Common Shares
Series B Preferred 5,000 700 3,500,000
(vii) Assumes for the nine months ended September 30, 1996 and the year ended
December 31, 1995, that incentive stock options to purchase 71,500 shares
of Class A Common Stock, which were granted in September 1995, were
exercised on October 1, 1995 and that all proceeds were used to purchase
treasury stock at $1.00 per share.
<PAGE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMBINED BALANCE SHEET AND THE COMBINED STATEMENT OF OPERATIONS FILED
AS PART OF THE REGISTRATION STATEMENT ON FORM S-1 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH REGISTRATION STATEMENT ON FORM S-1.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,746,251
<SECURITIES> 0
<RECEIVABLES> 14,552,694
<ALLOWANCES> 2,268,209
<INVENTORY> 0
<CURRENT-ASSETS> 14,509,761
<PP&E> 33,502,200
<DEPRECIATION> 20,853,985
<TOTAL-ASSETS> 45,065,575
<CURRENT-LIABILITIES> 10,008,868
<BONDS> 0
<COMMON> 102,000
0
100
<OTHER-SE> 6,335,592
<TOTAL-LIABILITY-AND-EQUITY> 45,065,575
<SALES> 0
<TOTAL-REVENUES> 23,775,899
<CGS> 0
<TOTAL-COSTS> 18,108,244
<OTHER-EXPENSES> 953
<LOSS-PROVISION> 1,127,500
<INTEREST-EXPENSE> 2,107,693
<INCOME-PRETAX> 2,910,520
<INCOME-TAX> 297,219
<INCOME-CONTINUING> 2,613,301
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,613,301
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
