<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) For the fiscal year ended December
31, 1995, or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required) - For the transition period
from ________ to ________
Commission File Number 0-12787
MEDICAL IMAGING CENTERS OF AMERICA, INC.
(Exact name of Registrant as specified in its charter)
California 95-3643045
(State of Incorporation) (I.R.S. Employer Identification No.)
9444 Farnham Street, Suite 100, San Diego, California 92123
(Address of principal executive offices) (Zip Code)
(619) 560-0110
(Registrant s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant s knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The approximate aggregate market value of the voting stock held by
nonaffiliates of the Registrant as of March 19, 1996 (based on the closing
price as reported on the OTC Bulletin Board on that date): $24,366,123.
As of March 19, 1996 the Registrant had outstanding 2,671,724 shares
of Common Stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE
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MEDICAL IMAGING CENTERS OF AMERICA, INC.
FOR FISCAL YEAR ENDED DECEMBER 31, 1995
FORM 10-K ANNUAL REPORT
INDEX
<TABLE>
<CAPTION>
PART I Page
- ------ ----
<S> <C> <C> <C>
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Shareholders 9
PART II
- -------
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters 10
Item 6. Selected Financial Data 10
Item 7. Management's Discussion and Analysis of Financial Condition 11
and Results of Operations
Item 8. Financial Statements and Supplementary Data 14
Item 9. Changes in and Disagreements with Accountants on Accounting 14
and Financial Disclosure
PART III
- --------
Item 10. Directors and Executive Officers of the Registrant 15
Item 11. Executive Compensation 17
Item 12. Security Ownership of Certain Beneficial Owners and Management 20
Item 13. Certain Relationships and Related Transactions 21
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, Reports on Form 8-K 22
</TABLE>
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PART I
Item 1. Business
Medical Imaging Centers of America, Inc. ("MICA" or the "Company") is
a California corporation organized in July 1981 which provides outpatient
services and medical equipment rentals to physicians, managed care providers
and hospitals. These services include magnetic resonance imaging ("MRI"),
computed tomography ("CT"), nuclear medicine and ultrasound. The Company's
operations include diagnostic medical centers ("DMCs"), diagnostic equipment
rentals, fee-for-service agreements (fixed and mobile), and management,
marketing and related support services.
MICA's strategy is to expand the range and extent of the diagnostic
imaging services provided to its customers.
MEDICAL DIAGNOSTIC IMAGING INDUSTRY
Medical diagnostic imaging systems facilitate the diagnosis of disease
and disorders at an early stage, often minimizing the amount and cost of care
needed to stabilize or cure the patient and frequently obviating the need for
invasive diagnostic procedures, such as exploratory surgery. Diagnostic imaging
systems are based on the ability of energy waves to penetrate human tissue and
generate images of the body which can be displayed either on film or on a video
monitor. Imaging systems have evolved from conventional X-ray to the advanced
technologies of MRI, CT, nuclear medicine and ultrasound. The use of these
technologies has grown significantly in the United States during the last
several years due to increasing acceptance by physicians of the value of
diagnostic imaging technologies in the early diagnosis of disease, the
expanding applications of MRI and ultrasound (partially because they do not
involve X-ray radiation) and the growing patient base attributable to an aging
population.
Due to capital restrictions, hospitals utilize third parties, such as
MICA, to provide these technologies and related services. To remain viable in a
highly competitive industry, hospitals seek to offer diagnostic imaging
equipment and services to retain and expand their referring physician base.
RANGE OF SERVICES
The needs of a particular hospital or physician group ("Customer")
determine the extent of the following services, which MICA can deliver either
through a full service DMC or on a fee-for-service basis.
MANAGEMENT. Each DMC is staffed by administrative and technical
personnel who provide day-to-day management of operations including staffing,
billing and collection, purchasing of medical supplies and film and supervision
of maintenance and quality control.
EQUIPMENT AND RELATED SERVICES. Drawing upon its operating experience
and relationships with leading equipment manufacturers, MICA consults with each
Customer to identify the equipment best suited to meet the Customer s needs on
a cost-effective basis. The appropriate equipment is acquired through purchase
or lease by MICA. In addition, MICA assists the Customer in complying with
licensing and other regulatory requirements related to the siting of the
equipment. In conjunction with the installation of the equipment, MICA
typically enters into maintenance agreements with equipment manufacturers or
other third parties to service the newly installed equipment.
TECHNICAL AND SUPPORT STAFFING. MICA provides training and educational
programs for its own technologists as well as the Customer s technologists. At
a DMC, support personnel (receptionist, transcriptionists, couriers and
technical aids) are also provided by MICA.
MARKETING. MICA provides its Customers with marketing services,
including the design of a marketing program to educate the referral base as to
the diagnostic imaging services available at the facility. MICA provides
expanded marketing services to patient referral sources, including HMOs and
other health plans.
DIAGNOSTIC MEDICAL CENTERS. DMCs provide diagnostic imaging services
in an outpatient environment. In addition to the equipment, MICA also provides
the management of all technical and support staff; marketing services; patient
scheduling, billing and collection services; and management information
systems. Staffing for a DMC typically requires six to twenty non-physician
personnel.
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The typical arrangement for a DMC is a limited partnership (with MICA
as the managing general partner) which provides for a sharing of earnings
between MICA and its partners. In addition, MICA receives management fees of
4-10% of collected revenues. The Company carefully selects its DMC partners
and generally requires exclusive contracts. MICA funds net operating losses of
the DMCs.
Set forth below is a table of MICA's DMCs with a listing of respective
opening dates and services provided at each location. In 1992, the Company also
established a freestanding radiation therapy center as a joint venture with a
Florida Columbia/HCA hospital.
<TABLE>
<CAPTION>
Services by Technology
---------------------------------------------------------
Opening Nuclear
DMC Location Date MRI CT Ultrasound Medicine Other(1)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long Beach, CA 12/84 x x x x x
Bakersfield, CA 5/85 x x x -- x
Kansas City, MO 5/85 x -- -- -- --
Portland, OR 12/85 x x x -- x
Huntington Beach, CA 12/85 x x x x x
Orlando, FL 6/87 x x x x x
Newport Beach, CA 9/87 x x x x x
Gainesville, FL 3/90 x x -- -- --
Renton, WA 3/90 x -- -- -- --
Bradenton, FL 5/90 x x -- -- --
Phoenix, AZ(3) 8/91 x x x -- --
Westlake Village, CA 10/91 x -- -- -- --
Ft. Myers, FL 3/92 x -- -- -- --
Milford, DE 3/92 x -- -- -- --
Laguna Niguel, CA 6/92 x -- -- -- --
Chalmette, LA 6/92 x -- -- -- --
Santa Maria, CA 8/92 x -- -- -- --
Downey, CA 7/94 x -- -- -- --
Deltona, FL(2) 4/95 x -- -- -- x
-------------------------------------------------------------------------------------------------
</TABLE>
(1) Other services consist principally of mammography and X-ray.
(2) DMC sold or closed in 1995.
(3) MICA provides only management services to this DMC.
FEE-FOR-SERVICE. Under a typical fee-for-service arrangement, MICA
furnishes the Customer with appropriate equipment and bills the Customer for
the number of patient procedures performed each month. Under certain
fee-for-service arrangements, the Customer agrees to a monthly guaranteed
minimum payment. The Company contracts to provide services for a term ranging
from one month to three years. Based upon the Customer s service
requirements, MICA installs or makes equipment available. A mobile unit is
totally self-contained and typically provides services to a number of
Customers. During 1995, the Company provided diagnostic imaging services to
approximately 120 Customers in 20 states under fee-for-service arrangements.
In July of 1995, the Company'sold its ultrasound/nuclear medicine business
which accounted for 72 Customers in 11 states under fee-for-service
arrangements. Of the 120 customers serviced in 1995, 51 Customers received
service on site and the remaining Customers received service by one of the
Company's mobile units.
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MEDICAL SERVICES REVENUE MIX
The following table summarizes the Company's medical services revenues on a
percentage basis by type of arrangement for each of the three years in the
period ended December 31, 1995.
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
DMC 61% 51% 45%
Fee-for-Service
Fixed 27% 34% 31%
Mobile 12% 15% 24%
</TABLE>
TECHNOLOGY SOURCES
MICA obtains its diagnostic imaging equipment from various
manufacturers including The General Electric Company and Hitachi Medical
Systems America, Inc. Costs to acquire various new equipment are as follows:
<TABLE>
<CAPTION>
Equipment Price Range
---------------------------------------------------------------------
<S> <C>
MRI $ 700,000 to $ 1,500,000
CT $ 150,000 to $ 650,000
Nuclear Medicine $ 125,000 to $ 350,000
Ultrasound $ 80,000 to $ 250,000
</TABLE>
Installation and maintenance costs on the equipment can be
substantial, particularly with respect to MRI units. Installation costs can
range from $75,000 to $200,000 for an MRI unit depending on the particular
installation. Maintenance costs for an MRI unit can be as high as $150,000 per
year. MICA typically enters into agreements with equipment manufacturers or
other third party service organizations for equipment maintenance.
Equipment is financed by MICA (with terms ranging from five to seven
years) with lenders and lessors, with the equipment pledged as security for the
debt.
RISK FACTORS AND CERTAIN CAUTIONARY STATEMENTS
The Company's business is subject to a number of risks, some of which
are beyond the Company's control. Such risks in some cases have affected the
Company's results, and in the future could cause the Company's actual results
for the first quarter of 1996, and beyond, to differ materially from those
expressed in any forward-looking statements made by, or on behalf of, the
Company. The following discussion highlights some of these risks:
OBSOLESCENCE. MICA attempts to select equipment that will remain
commercially viable for the duration of its financing term. Technology,
however, as it relates to MRI and CT has advanced rapidly over the past several
years and all of the Company's equipment is subject to the risk of obsolescence
and deterioration of fair market value. The Company routinely reviews its
equipment portfolio to determine that its carrying value is the lower of cost
or net realizable value.
CREDIT RISK. MICA typically bills the patient for both the charges of
the radiologist and the charges for the technical services of the DMC. By
undertaking the responsibility for patient billing and collection activities,
MICA assumes the credit risk presented by the patient base, as well as the risk
of payment delays attendant to reimbursement through governmental programs or
third party payors. The Company estimates that 63% of the DMC's payors are
insurance companies, HMO/PPOs or self-paying patients.
EQUIPMENT UTILIZATION. Under fee-for-service contracts that do not
require minimum payments, MICA assumes the risk that revenues generated through
utilization of its equipment will be sufficient to meet MICA's financial
obligations to lenders and lessors. The Company attempts to finance its
acquisition of equipment and match the amortization period of such financial
obligation to the term of the Customer s contract. However, the amortization
period for specific equipment may extend beyond the term of the related
contract, requiring MICA to fund any resulting negative cash flow in the event
that it cannot redeploy the equipment.
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<PAGE> 6
GOVERNMENT REGULATION. The Omnibus Budget Reconciliation Act of 1993
("OBRA 93"), sometimes referred to as "Stark II," includes federal legislation
on physician self-referrals regarding Medicare/Medicaid patients. The new
legislation, which became effective January 1, 1995, prohibits physician
referrals to non-hospital health facilities in which the referring physician
has a "financial interest."
On January 1, 1995, the Physician Ownership and Referral Act of 1993
("PORA") became effective in the state of California. PORA prohibits a
physician from referring patients for covered services including diagnostic
imaging if the physician (or his or her immediate family) has a "financial
interest" in an entity that receives the referral in the state of California.
MICA currently is in the process of acquiring the partnership units owned by a
limited number of physicians who refer patients to MICA's DMCs. It is not
anticipated that such acquisitions will require significant capital. MICA is
unable to predict at this time what impact PORA will have upon the demand for
its equipment and services.
Florida's Patient Self-Referral Act of 1992 might also affect MICA's business.
Part of the Act imposes a fee schedule on all providers of diagnostic imaging
services and radiation therapy services which limits fees to no more than 115%
of the Medicare limiting charge for non-participating physicians for such
services (the "Fee Cap"), including technical and professional components. The
statute specifically excludes hospitals and physician group practices from the
Fee Cap. The Company's four imaging centers in Florida, as currently operated,
would be subject to the Fee Cap and would be severely impacted if the Fee Cap
ever became effective. In July 1992, however, the United States District Court
for the Northern District of Florida granted a permanent injunction, finding
the statute violative of the equal protection clause of the United States
Constitution and the Florida Constitution. The state filed a notice of appeal
from this judgment. On February 15, 1994, the United States Court of Appeals
for the Eleventh Circuit reversed the decision of the lower court. The Company
has filed a petition for rehearing with the Eleventh Circuit. In a later
proceeding, the Company joined with other plaintiffs and plaintiff-intervenors
in a separate effort to defeat the Fee Cap provision. In February 1995, a
Florida court issued an order granting final summary judgment that the Fee Caps
were unconstitutional for providers of diagnostic imaging services. The state
court's ruling was upheld on appeal. As a result of the state court's decision,
MICA is not subject to the Fee Caps. Although MICA and two Florida courts have
held that the Fee Caps violate the Florida Constitution, there can be no
assurances that their decisions will not be reversed, that the Fee Caps will
ultimately be found to be unconstitutional or that the Fee Caps will not be
reinstated retroactively to the initial effective date.
MICA's business also is affected by Certificate-of-Need ("CON")
programs implemented in a number of states and by existing governmental
regulations regarding expenditures for medical technology by hospitals. CON
programs vary considerably from state to state. CON agencies primarily control
the distribution and physical allocation of technological equipment among
healthcare institutions, frequently determining which institutions may acquire
new technologies. Such determinations are based on broad concepts of "need,"
using various criteria and weighing the relative need demonstrated by competing
CON applicants to ensure the equitable allocation of new technology among
hospitals. To date, the CON laws and regulations and state rate commissions
have not had a material effect on MICA's business, although there is no
assurance that the laws and regulations will not change or that rate
commissions will not take actions that may adversely affect MICA's business.
MICA's operations are subject to a variety of governmental and
regulatory requirements. For example, the storage, use and disposal of
radioactive materials in nuclear medicine is subject to regulation by Federal
and State governmental authorities, including the United States Food and Drug
Administration, the Department of Health and Human Services, the Health Care
Finance Administration ("HCFA"), and the Nuclear Regulatory Commission ("NRC").
Additionally, MICA personnel must be licensed to operate certain equipment, and
the physicians practicing at its DMCs must have a Medicare/Medicaid provider
number to receive government reimbursement. MICA believes it is in compliance
with applicable laws and regulations.
MEDICAL REIMBURSEMENT PROGRAMS. A substantial portion of the Company's
revenue is attributable to payments made by government-sponsored healthcare
programs and other third party payors. From time to time the Federal government
has proposed limiting reimbursement for imaging services. Any change in
reimbursement regulations, or the enactment of legislation that would have the
effect of placing material limitations on the amount of reimbursement for
imaging services, could adversely affect the operations of MICA.
In November 1991, HCFA issued regulations which implemented a
resource-based relative value scale ("RBRVS") payment system effective for
services furnished by physicians or incident to physician services on or after
January 1, 1992. The RBRVS fee schedule was fully effective in January 1995.
For radiology, the change in fee schedules has resulted in substantially lower
reimbursement for services provided to Medicare-eligible patients. Because
MICA's
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fees for services to Medicare-eligible patients are subject to the fee schedule
for radiology procedures, this change has resulted in lower reimbursement for
services provided by MICA to Medicare-eligible patients. MICA is unable to
predict at this time what impact these regulations will have upon demand for
its equipment and services.
The Medicare/Medicaid Anti-Fraud and Abuse Statute (the "Anti-Kickback
Statute") prohibits certain actions or practices deemed by Congress to be
fraudulent or abusive in nature. Provisions of the Anti-Kickback Statute,
known generally as the "Safe Harbor Regulations," provide that compliance with
an applicable Safe Harbor would immunize that arrangement from criminal
prosecution or exclusion from the Medicare and Medicaid programs. To the extent
that a particular MICA arrangement complies with an applicable Safe Harbor,
MICA is guaranteed immunity from criminal prosecution or exclusion from the
Medicare and Medicaid programs based upon its participation in the arrangement.
Although some of MICA's arrangements may not comply with all criteria contained
in an applicable Safe Harbor, and therefore such arrangements would not be
entitled to Safe Harbor immunity, MICA believes that its business structure and
practices do not violate the Anti-Kickback Statute.
Healthcare reimbursement programs are not uniformly prompt in making
required payments. Extensive payment delays are not uncommon, and MICA's future
cash flows could be adversely impacted while awaiting payment. MICA has limited
ability to cause more timely reimbursement practices by governmental agencies
and programs. Additionally, there can be no assurance that subsequent laws,
subsequent changes in present laws or interpretations of laws will not
adversely affect the Company's operations.
HEALTHCARE REFORM. The public has recently focused significant
attention on reforming the healthcare system in the United States. Within the
past two years, a broad range of healthcare reform measures have been
introduced in Congress and in certain state legislatures. Legislative interest
recently has also focused on the role of HMOs in the provision of healthcare
and the effect of managed care reimbursement mechanisms on healthcare service
utilization and quality of service. It is not clear at this time what
proposals, if any, will be adopted or, if adopted what effect, if any, such
proposals would have on the Company's business. There can be no assurance that
any proposals adopted would be coordinated at the federal or state level, and
therefore the Company, as a national participant in the healthcare industry, is
subject to varying state regulatory environments. Certain proposals, such as
cutbacks in the Medicare and Medicaid programs, containment of healthcare costs
that could include a freeze on prices charged by physicians, hospitals or other
healthcare providers, and greater state flexibility in the administration of
Medicaid, could adversely affect the Company. There can be no assurance that
currently proposed or future healthcare programs, laws, regulations or policies
will not have a material adverse effect on the Company's operating results.
COMPETITION. The healthcare industry in general, and the market for
medical diagnostic imaging services in particular, are highly competitive. MICA
s DMCs and its fee-for-service operations compete for patients with hospitals,
managed care groups and other DMCs. The Company also competes with equipment
manufacturers, leasing companies, physician groups and other providers of
medical diagnostic imaging services. Many of these competitors have
substantially greater resources than MICA. MICA competes based on its
reputation for the dependability and quality of its services.
INSURANCE. MICA carries workers compensation insurance, comprehensive
and general liability coverage, fire and allied perils coverage. MICA maintains
professional liability and general liability insurance for all owned facilities
in the single limit amount of $10 million. There can be no assurance that
potential claims will not exceed this amount. MICA also requires that physicians
practicing at the DMCs carry medical malpractice insurance to cover their
individual practices. The physicians are personally responsible for the costs of
the insurance.
EMPLOYEES
At December 31, 1995, MICA had 248 full-time employees including 224
employees at DMC and fee-for-service locations and 24 employees at the
corporate office. Under Section 401(k) of the Internal Revenue Code the
Company instituted a tax deferred retirement plan, whereby the Company will
match 50% of an employee's deferred salary up to a maximum of 6% of gross pay,
for a maximum matching contribution of 3%. MICA has stock option plans for
officers, directors, key employees and consultants of the Company. Grants of
options under such plans are subject to approval of the Compensation/Stock
Option Committee of the Board of Directors.
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Item 2. Properties
The Company's executive offices are located at 9444 Farnham Street,
Suite 100, San Diego, California 92123. The Company occupies approximately
11,900 square feet of space pursuant to a two year lease extension which
expires March 31, 1996.
Item 3. Legal Proceedings
On January 10, 1996, the Company commenced litigation in the United
States District Court for the Southern District of California (the "Court")
against Steel Partners II, L.P., ("Steel") and certain of its affiliates
(together with Steel, the "Steel Defendants") alleging that the Steel
Defendants violated certain federal securities laws and state tort laws in
connection with their acquisition of Common Stock and their proxy solicitation.
The Company's complaint alleged, among other matters, that the Steel Defendants
violated Section 13(d) of the Securities Exchange Act of 1934 by, among other
things, filing false and misleading Schedules 13D that failed to disclose the
Steel Defendants' true ownership of Common Stock and their true intent to
attempt to take control of the Company. The complaint also alleged that the
Steel Defendants tortiously interfered with the Company's economic relations
with a lender of the Company by, among other things, claiming to have enough
control of the Company to have instructed the Company to stop making payments
to its lenders.
The complaint sought, among other things, to have the Court
preliminarily and permanently enjoin the Steel Defendants' proxy solicitation
and their acquisition and voting of shares of Common Stock, and damages for the
Steel Defendants' tortious interference with the Company's economic relations.
The complaint further sought to have the Court require the Steel Defendants to
publicly disclose their beneficial ownership of 20% or more of the Common Stock
and declare that the Steel Defendants have thereby become an "Acquiring Person"
for purposes of the Company's Shareholder Rights Plan (the "Rights Plan"),
enabling all of the Company's shareholders other than the Steel Defendants to
purchase shares of Common Stock at bargain prices, under certain circumstances.
On January 19, 1996, a federal magistrate denied the Company's
application for expedited discovery and granted the Steel Defendants'
application for a stay of discovery. On February 7, 1996, the Court upheld the
federal magistrate's ruling, scheduled a hearing on the Steel Defendants'
motion to dismiss the Company's complaint, which was filed on January 17, 1996,
for February 14, 1996 and scheduled a hearing on the Company's motion for a
preliminary injunction for February 23, 1996. On February 14, 1996, the Court
denied the Steel Defendants' motion to dismiss, thereby lifting the stay on
discovery. Also on February 14, 1996, a federal magistrate granted the
Company's application for expedited discovery.
On February 15, 1996, Steel commenced litigation in the United States
District Court for the Southern District of California against the Company
alleging that the Rights Plan violates California law because, among other
things, it discriminates among the Company's shareholders under certain
circumstances. Steel's complaint sought, among other things, to have the Court
enjoin the Company from permitting the separation or distribution of any rights
pursuant to the Rights Plan and declare the Rights Plan invalid.
On February 23, 1996, Judge Rudi Brewster of the United States
District Court for the Southern District of California issued a preliminary
injunction based on his finding that the Company had demonstrated that there
was sufficient evidence to show probable success on the merits of the Company's
claim that Steel had violated the requirements of Section 13(d) of the
Securities Exchange Act of 1934 by failing to disclose its unidentified foreign
investor. Judge Brewster also found sufficient evidence to show probable
success on the merits of the Company's claim that brokerage customers of Jack
Howard, an affiliate of Steel, were members of a "group" which included Steel.
On March 19, 1996, the Company and certain of its affiliates, on the
one hand, and Steel and certain of its affiliates, on the other hand, entered
into an Agreement of Compromise and Settlement (the "Settlement Agreement").
The Settlement Agreement calls for the dismissal of all pending litigation
between Steel and the Company and provides for mutual releases between the
Company and its affiliates and Steel and its affiliates. The Settlement
Agreement also provides that the February 26, 1996 Special Meeting of
Shareholders will be adjourned without any final report from the Inspector of
Elections, leaving the current Board of Directors in place.
Pursuant to the Settlement Agreement, the Company is required to
initiate a process to sell or merge the Company (the "Auction Process"). The
Company's financial advisor, Batchelder & Partners, Inc., will advise the
Company in connection with the sale or merger process. If the process does not
result in an announcement by the Company of a sale or merger transaction by
June 19, 1996, a definitive agreement for a sale or merger transaction by
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July 19, 1996, or the consummation of a sale or merger transaction by November
19, 1996, the current members of the Company's Board of Directors will resign
from their positions and be replaced by designees of Steel.
The Settlement Agreement calls for the company to amend the severance
agreement of the Company's chief executive officer and chief financial officer
to provide that the Company's failure to meet such deadlines shall constitute
an "involuntary termination" for purposes of their respective severance
packages. In the meantime, Steel has agreed that it will not, and will cause
its affiliates not to, acquire or offer to acquire, directly or indirectly, by
purchase or otherwise, beneficial ownership of any of the Company's securities
during the Auction Process.
The Settlement Agreement also requires the Company to redeem all
outstanding Rights issued pursuant to the Company's shareholder rights plan and
prohibits the Company from enacting a new shareholder rights plan without the
prior written consent of Steel.
Simultaneous with its entering into the settlement, the Company
entered into a Standstill Agreement with Arrowhead Holdings Corporation, a
Delaware corporation ("Arrowhead"), containing substantially the same terms as
the Settlement Agreement (the "Arrowhead Agreement"). The Arrowhead Agreement,
like the Settlement Agreement, provides that the Company'shall begin an auction
process for the sale or merger of the Company and shall redeem all outstanding
Rights granted pursuant to the shareholder rights plan. The Arrowhead
Agreement also contains mutual release provisions and prohibits Arrowhead from
acquiring beneficial ownership of the Company's securities.
Pursuant to the Settlement Agreement, the Company has agreed to
reimburse Steel for expenses up to $425,000 incurred by Steel in connection
with its solicitation of proxies for the February 26, 1996 Special Meeting of
Shareholders. No amounts have been reflected in the financial statements as of
December 31, 1995 with regard to expenses reimbursed to Steel.
MICA is also a party to litigation arising in the normal course of its
business. MICA does not believe the results of such litigation, even if
determined adversely to MICA, would have a material effect on its financial
position.
Item 4. Submission of Matters to a Vote of Shareholders
None.
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PART II
Item 5. Market for Registrant's Common Equity and Related
Shareholder Matters
MICA has not paid and does not presently intend to pay cash dividends
on its Common Stock. Future dividends on the Common Stock will depend on
business and financial conditions, earnings and other factors and are subject
to declaration by MICA's Board of Directors at its discretion. Payment of
dividends is also restricted by the terms of the Company's 1989 convertible
subordinated debentures (see Note 9 to the consolidated financial statements).
At March 19, 1996, MICA had approximately 3,000 beneficial owners of
the Common Stock. Effective June 23, 1994, MICA's Common Stock was delisted
for non-compliance with the capital requirements of the National Association of
Securities Dealers, Inc. and is no longer included for quotation on the Nasdaq
Stock Market's National Market (the "Nasdaq National Market"). The Common
Stock is traded on the OTC Bulletin Board under the symbol "MIGA".
The following table sets forth, for the periods indicated, the high
and low bid prices of the Common Stock, as reported by the Nasdaq National
Market and the OTC Bulletin Board, respectively, for the last two years.
Information in this table has been adjusted to reflect the one-for-five reverse
stock split effected in October 1995. These quotations represent prices
between dealers and do not include retail markups, markdowns, commissions or
other adjustments, and may not represent actual transactions.
<TABLE>
<CAPTION>
1995 1994
Common Stock Common Stock
---------------------- ----------------------
Quarter High Low High Low
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1st $5.00 $3.13 $4.38 $2.19
2nd 8.13 4.22 3.75 1.88
3rd 9.06 6.25 5.00 1.85
4th 8.25 5.94 5.00 3.44
</TABLE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------------------------------
(In thousands, except per share information) 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SELECTED OPERATING DATA:
Total revenues $ 46,537 $ 57,306 $ 68,797 $ 84,558 $ 88,079
Medical services revenues $ 43,192 $ 55,440 $ 65,786 $ 74,258 $ 73,926
Income (loss) before extraordinary gain $ 5,656 $ (1,810) $(29,613) $ (20,342) $(10,449)
Extraordinary gain $ -- $ 1,316 $ -- $ -- $ --
Net income (loss) $ 5,656 $ (494) $(29,613) $ (20,342) $(10,449)
Net income (loss) per share(1)
Primary
Income (loss) before extraordinary gain $ 2.19 $ (.75) $ (12.54) $ (8.62) $ (4.51)
Extraordinary gain $ -- $ .55 $ -- $ -- $ --
Net income (loss) $ 2.19 $ (.20) $ (12.54) $ (8.62) $ (4.51)
Fully diluted earnings per share $ 1.96 $ (.20) $ (12.54) $ (8.62) $ (4.51)
Weighted average primary shares outstanding 2,585 2,426 2,361 2,360 2,316
Weighted average fully diluted shares outstanding 3,219 2,426 2,361 2,360 2,316
SELECTED BALANCE SHEET DATA:
Cash $ 10,732 $ 8,524 $ 8,182 $ 4,862 $ 7,328
Working capital (deficit) $ 337 $ (1,728) $ 3,421 $ (673) $ 9,046
Total assets $ 39,648 $ 53,469 $ 65,697 $ 108,928 $125,567
Convertible debentures $ 5,400 $ 8,200 $ 11,000 $ 11,000 $ 11,000
Long-term debt and capital lease obligations $ 11,182 $ 25,206 $ 35,509 $ 45,120 $ 43,706
Shareholders' equity (net capital deficiency) $ 3,013 $ (2,861) $ (2,370) $ 27,243 $ 46,715
</TABLE>
(1) The Company effected a one-for-five reverse stock split for shareholders of
record on October 16, 1995. All per share data has been restated for all
periods presented to give effect to the reverse stock split.
10
<PAGE> 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
GENERAL OPERATING TRENDS AND OUTLOOK
Medical services revenues declined during 1995 primarily due to the
Company's termination of unprofitable fee-for-service contracts and sales of
underperforming assets used in the fee-for-service business. In view of the
historical unprofitability and uncertainty regarding its fee-for-service
business, the Company plans to sell equipment as related hospital contracts
expire. As such, the Company believes that revenues from its fee-for-service
business, which accounted for 39% of 1995 medical services revenues, will
continue to decline. Revenues earned by the Company's DMCs in 1995 were
negatively affected by declining reimbursement which is the direct result of
cost containment efforts at the state and federal level as well as efforts by
insurer and payor groups to reduce healthcare costs. MICA expects the decline
in reimbursement trends to continue in the future. The Company's strategy is
to offset the decline in reimbursement by securing managed care contracts and
developing strategic alliances with hospitals and other healthcare providers to
increase the utilization of its diagnostic imaging services. By positioning
itself to take greater advantage of managed care contracts, thereby increasing
the utilization of its services, management believes that it can maintain its
DMC revenues. Although there can be no assurances, the Company believes that
declining reimbursement trends can be offset with increased utilization so that
such trends will not have a significant negative impact on the Company's
operating results or its liquidity in the future.
Management believes that the actions taken in 1995 to terminate
unprofitable contracts, sell underperforming assets and renegotiate various
maintenance and lease agreements have positioned the Company to continue to
operate given the current reimbursement dynamics of the diagnostic imaging
industry. Management believes that its cash on hand at yearend and cashflow
from future operations will be sufficient to meet the Company's obligations as
they come due.
Although the Company cannot accurately anticipate the effect of
inflation on its operations, it does not believe that inflation has had, or is
likely in the foreseeable future to have, a material impact on its net sales or
results of operations.
The foregoing statements include forward looking statements that
involve a number of risks and uncertainties. Among the factors that could
cause actual results to differ materially are those discussed in Item 1 above
under the caption "Risk Factors and Certain Cautionary Statements."
RESULTS OF OPERATIONS
1995 COMPARED TO 1994
REVENUES FROM MEDICAL SERVICES. Revenues from its DMCs declined $2 million
from $28.3 million in 1994 to $26.3 million in 1995 primarily due to declining
trends in both reimbursement and utilization. Revenues from its
fee-for-service business declined $10.2 million from $27.1 million in 1994 to
$16.9 million in 1995 primarily due to the Company's sale of underperforming
assets and termination of certain unprofitable leases and contracts used in its
fee-for-service business and the Company's sale of its Chicago- based
ultrasound and nuclear medicine division (the "Division") in July 1995 which
accounted for $2.5 million of the decline. As noted above, a number of factors
exist that could have an impact on the Company's future revenues, including
declining prices and an oversupply in the diagnostic equipment market,
declining trends in reimbursement and competition in the healthcare industry.
REVENUES FROM EQUIPMENT AND MEDICAL SUITE SALES. Revenues from equipment and
medical suite sales increased from $1.9 million in 1994 to $3.3 million in
1995. The increase in sales is due to the quantity and type of equipment and
medical suites sold and will vary accordingly. The Company intends to sell
equipment and its remaining inventory of medical suites in the future, but such
sales are subject to market conditions and there can be no assurances that such
sales will or will not occur.
COSTS OF MEDICAL SERVICES. Costs of medical services from its DMCs decreased
from $18.2 million (33% of medical services revenues) in 1994 to $16.7 million
(39% of medical services revenues) in 1995. Costs of medical services from its
fee-for-service business decreased from $15.5 million (28% of medical services
revenues) in 1994 to $8.7 million (20% of medical services revenues) in 1995
due to termination of leases and contracts, sales of fee-for-service equipment,
the Company's sale of a Division in July 1995 which accounted for $1.5 million
of the decrease in costs and actions taken by the Company to reduce spending.
11
<PAGE> 12
COSTS OF EQUIPMENT AND MEDICAL SUITE SALES. Costs of equipment and medical
suite sales increased from $1.7 million in 1994 to $2.8 million in 1995. The
increase in costs is directly related to the quantity and type of equipment and
medical suites sold and will vary accordingly.
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and
administrative expenses decreased from $5.6 million (10% of medical services
revenues) in 1994 to $2.8 million (6% of medical services revenues) in 1995.
The decrease in costs resulted from reductions in administrative and other
consulting personnel and other spending reductions, including severance paid in
the fourth quarter of 1994.
PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful accounts decreased
from $1.3 million (2% of medical services revenues) in 1994 to $1.1 million (2%
of medical services revenues) in 1995 primarily due to a decrease in revenues
and management's evaluation of accounts receivable.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased from
$12.6 million in 1994 to $10 million in 1995. This decrease was primarily due
to the sale of underperforming assets and termination of certain unprofitable
leases used in the fee-for-service business. The Company's sale of its
Division in July 1995 accounted for $500,000 of the decrease in expense.
INTEREST EXPENSE AND INCOME. Interest expense decreased from $5.3 million in
1994 to $3.6 million in 1995. The decrease in interest expense resulted from
the sale of underperforming assets and termination of certain unprofitable
leases used in the fee-for-service business, offset by a $450,000 charge to
interest expense for the forfeiture of a warrant issued by the Company to a
third party to purchase 300,000 shares of the Company's common stock. Interest
income increased from $400,000 in 1994 to $500,000 in 1995.
GAIN OF SALE OF ASSETS. On July 31, 1995, the Company'sold the assets
(exclusive of accounts receivable) of its ultrasound and nuclear medicine
division based in Chicago, Illinois to Diagnostic Health Services, Inc. for
cash of $3.7 million and the assumption of certain liabilities for a total sale
price of $5 million. The sale of assets consisted primarily of equipment and
resulted in a net gain of $3.5 million to the Company.
MINORITY INTEREST IN NET INCOME/LOSS OF CONSOLIDATED PARTNERSHIPS. Minority
interest in the consolidated partnerships decreased from a $100,000 minority
interest in net income in 1994 to a $200,000 minority interest in net loss in
1995. This decrease was primarily due to lower volume at two of the
consolidated DMCs.
INCOME TAXES. At December 31, 1995, the Company had net operating loss
carryforwards of approximately $21.8 million for Federal income tax purposes.
The Company provided Federal and state taxes of $180,000 in 1995.
1994 COMPARED TO 1993
REVENUES FROM MEDICAL SERVICES. Revenues from its DMCs declined $1.5 million
from $29.8 million in 1993 to $28.3 million in 1994 primarily due to declining
trends in both reimbursement and utilization. Revenues from its
fee-for-service business declined $8.9 million from $36 million in 1993 to
$27.1 million in 1994 primarily due to the Company's sale of underperforming
assets and termination of certain unprofitable leases and contracts. As noted
above, a number of factors exist that could have an impact on the Company's
future revenues, including declining prices and an oversupply in the diagnostic
equipment market, declining trends in reimbursement and competition in the
healthcare industry.
REVENUES FROM EQUIPMENT AND MEDICAL SUITE SALES. Revenues from equipment and
medical suite sales decreased from $3 million in 1993 to $1.9 million in 1994.
The decrease in sales is due to the quantity and type of equipment and medical
suites sold and will vary accordingly. The Company intends to sell equipment
and its remaining inventory of medical suites in the future, but such sales are
subject to market conditions and there can be no assurances that such sales
will or will not occur.
12
<PAGE> 13
COSTS OF MEDICAL SERVICES. Costs of medical services from its DMCs decreased
from $21.1 million (32% of medical services revenues) in 1993 to $18.2 million
(33% of medical services revenues) in 1994. Costs of medical services from its
fee-for-service business decreased from $21.7 million (33% of medical services
revenues) in 1993 to $15.5 million (28% of medical services revenues) in 1994
due to termination of leases and contracts, sales of fee-for-service equipment
and actions taken by the Company to reduce spending.
COSTS OF EQUIPMENT AND MEDICAL SUITE SALES. Costs of equipment and medical
suite sales decreased from $2.7 million in 1993 to $1.7 million in 1994. The
decrease in costs is directly related to the quantity and type of equipment and
medical suites sold and will vary accordingly.
MARKETING, GENERAL AND ADMINISTRATIVE EXPENSES. Marketing, general and
administrative expenses decreased from $7.9 million (12% of medical services
revenues) in 1993 to $5.6 million (10% of medical services revenues) in 1994.
The decrease in costs resulted from reductions in administrative and marketing
personnel and other spending reductions, offset by severance incurred in the
fourth quarter of 1994 of $894,000 relating to the resignation of the Company's
former Chief Executive Officer.
PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful accounts decreased
from $2.6 million (4% of medical services revenues) in 1993 to $1.3 million (2%
of medical services revenues) in 1994 due to a decrease in revenues and
management's evaluation of accounts receivable.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased from
$13.9 million in 1993 to $12.6 million in 1994. This decrease was primarily
due to the 1993 fourth quarter non-cash charge to write off goodwill related to
prior years acquisitions and the sale of underperforming assets and
termination of certain unprofitable leases used in the fee-for-service
business.
INTEREST EXPENSE AND INCOME. Interest expense decreased from $6.5 million in
1993 to $5.3 million in 1994. The decrease in interest expense resulted from
the sale of underperforming assets and termination of certain unprofitable
leases used in the fee-for-service business. Interest income decreased from
$700,000 in 1993 to $400,000 in 1994.
SPECIAL CHARGE. Operating results in 1993 included a non-cash charge of
approximately $21.5 million to write off goodwill associated with prior years
acquisitions and a non-cash charge of $2 million to increase reserves
established to reflect uncertainty regarding the realization of certain other
assets. There were no special charges recorded in 1994.
MINORITY INTEREST IN NET INCOME/LOSS OF CONSOLIDATED PARTNERSHIPS. Minority
interest in the consolidated partnerships increased from a $200,000 minority
interest in net loss in 1993 to a $100,000 minority interest in net income in
1994 due to improved performance of certain DMCs with significant minority
ownership.
INCOME TAXES. At December 31, 1994, the Company had net operating loss
carryforwards of approximately $30.9 million for Federal income tax purposes.
The Company provided no income tax expense in 1994.
EXTRAORDINARY GAIN. The Company financed an equipment acquisition for one of
its managed DMCs. The operations of the DMC were unsuccessful and foreclosure
proceedings were initiated by the lender. In mitigation of damages, the
underlying lender arranged for the sale of the unit which resulted in the
forgiveness of MICA's indebtedness. In the third quarter of 1994, the Company
recorded a non-cash gain of $1.3 million resulting from the forgiveness of debt
related to certain MRI equipment.
13
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
At year end, the Company's cash and cash equivalents totaled $10.7
million, which is an increase of $2.2 million over 1994. In addition, the
Company's working capital improved to $337,000 as compared to a working capital
deficit of $1.7 million in 1994. Cash flows from operations of $15.4 million
and proceeds from the sale of Division assets of $3.7 million were offset by
payments against long-term debt of $15.9 million and capital expenditures of
$1.3 million.
In January 1996 the Company repaid a $3.1 million promissory note. The
Company paid $1,425,000 cash and applied $912,000 in proceeds received from the
exercise of a warrant attached to the note to purchase 160,000 shares of MICA's
Common Stock as payment in full to retire the note. In connection with this
transaction the Company issued an additional warrant to purchase 60,000 shares
of the Company's Common Stock at an exercise price of $8.50 per share which
expires on December 31, 1998. The Company recorded a gain of $517,000 from the
settlement of this obligation in January 1996 which was net of the $200,000
value assigned to the warrant.
Management believes that the actions taken in 1995 to terminate
unprofitable contracts, sell underperforming assets and renegotiate various
maintenance and lease agreements have positioned the Company to continue to
operate given the current reimbursement dynamics of the diagnostic imaging
industry. Management believes that its cash on hand at yearend and cashflow
from future operations will be sufficient to meet the Company's obligations as
they come due.
Under the terms of the Company's convertible debenture agreement, the
Company must offer to prepay all of the outstanding debentures ($8.2 million
at December 31, 1995) in the event of a change in control. In the event of a
"change in control," in which the Company were required to prepay all of the
debentures, the Company could be required to use all of its current cash
balances to repay the obligation (see Note 2 to the consolidated financial
statements).
On March 19, 1996, the Company and Steel Partners II, L.P. ("Steel")
entered into an Agreement of Compromise and Settlement (the "Settlement
Agreement") (see Note 2 to the consolidated financial statements). Total
expenditures related to the Settlement Agreement and related proxy
solicitation, including the fees and expenses of the Company's attorneys,
financial advisors, public relations firm and proxy solicitors, excluding
salaries and wages of its officers and employees and including the amounts
reimbursed to Steel, will be approximately $1,325,000, and will be recorded as
a charge to operations in the first quarter of 1996. No amounts have been
reflected in the financial statements as of December 31, 1995 with regard to
the Company's Settlement Agreement and proxy solicitation.
The Company's ability to meet its current obligations is dependent on
its ability to maintain revenues from existing contracts while reducing costs.
In addition, a number of factors exist that could have an impact on the Company
s future revenues: (i) changes in healthcare legislation which has limited
reimbursement and prohibited referrals from physician investors; (ii)
healthcare initiatives which could reduce reimbursement to the Company; (iii)
competition in the healthcare industry; and (iv) declining prices and an
oversupply in the diagnostic equipment market.
During 1993, the Company recognized significant special charges
related to its write-off of goodwill and the establishment of reserves for
uncollectible accounts and certain assets carried on the books at greater than
their net realizable value. These charges were substantially non-cash and
therefore did not have a significant impact on the Company's liquidity (see
Note 14 to the consolidated financial statements).
Item 8. Financial Statements and Supplementary Data
The Consolidated Financial Statements and supplementary data of the
Company required by this item are set forth at the pages indicated in Item 14
(a) (1).
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None.
14
<PAGE> 15
PART III
Item 10. Directors and Executive Officers of the Registrant
The Board of Directors. Directors serve for a term of one year and
until their successors are duly elected and qualified. The Company's Bylaws
currently provide for a Board of not less than five members nor more than nine
members, with the exact number of directors fixed from time to time by the
Board. The Board has fixed the number of directors at five with one Board
position currently vacant. During the fiscal year ended December 31, 1995, the
Company's Board of Directors held eight meetings. Each director attended at
least 75% of all Board meetings during such periods as he was a Board member.
Set forth below are the directors of the Company.
<TABLE>
<CAPTION>
Year First
Elected
Name Age Position To Serve
- ---------------------- --- ---------------------------- ----------
<S> <C> <C> <C>
Robert S. Muehlberg 41 Chairman of the Board, 1994
President, Chief Executive
Officer and Director
Denise L. Sunseri 37 Vice President, Chief 1995
Financial Officer, Secretary
and Director
Keith R. Burnett, M.D. 43 Director 1993
Robert G. Ricci, D.O. 61 Director 1995
</TABLE>
Robert S. Muehlberg, 41, a Director since 1994, has been Chief
Executive Officer and Chairman of the Board of Directors of the Company'since
February 1995, and also holds the position of President/Chief Operating
Officer. Mr. Muehlberg has also held the positions of Executive Vice
President, Senior Vice President and Vice President, Operations since joining
the Company in February 1985. Prior to joining the Company, Mr. Muehlberg was
Operations Manager at International Imaging, Inc., a provider of mobile and
free-standing diagnostic imaging centers, from 1983 to 1985, and Area Manager
for AMI/DSI, a provider of mobile diagnostic imaging services, from 1980 to
1983. Mr. Muehlberg holds a Bachelor s degree in Health Science from the
University of Missouri and a Master s degree in Business Administration from
Nova Southeastern University. Mr. Muehlberg is currently a member of the
International Forum for Corporate Directors, an organization dedicated to
responsible corporate governance.
Denise L. Sunseri, 37, a Director since 1995, has been Chief Financial
Officer and Secretary of the Company'since June 1993. She served as Vice
President and Corporate Controller from December 1991 to June 1993 and joined
the Company as Director of Financial Reporting in 1989. Prior to joining the
Company, Ms. Sunseri held various positions between 1981 and 1989 in the
Auditing and Financial Services division of the accounting firm of Arthur
Andersen & Co. Ms. Sunseri is a CPA and holds a Bachelor s degree in Business
Administration from the University of Portland. Ms. Sunseri is currently a
member of the International Forum for Corporate Directors, an organization
dedicated to responsible corporate governance.
Keith R. Burnett, M.D., 43, a Director since 1993, has been the
Medical Director of four of the Company's medical centers: Long Beach Medical
Imaging Clinic since 1985; Medical Imaging Center of Huntington Beach since
1988; Laguna Niguel MRI Center since 1992; and Downey MRI Center since 1994.
He also has been Medical Director
15
<PAGE> 16
of Medical Imaging Services, a California network of imaging services, since
1992. Dr. Burnett has been an Assistant Clinical Professor of Radiology at the
University of California at Irvine since 1985 and a consultant in Nuclear
Medicine, Veterans Medical Center since 1988. He is Chairman of the Examination
Committee of the Registry of Magnetic Resonance Technologists (RMRIT) and a
member of the Advisory Council on MRI and Chiropractic Research at the Los
Angeles College of Chiropractic. Dr. Burnett received his Bachelor of Arts
degree in Human Biology from Stanford University in 1974 and his Doctor of
Medicine degree from Creighton University in 1978. Dr. Burnett is board
certified in Radiology and Nuclear Medicine and a Diplomate of the American
Board of Radiology.
Robert G. Ricci, D.O., 61, a Director since 1995, has been Director of
Medical Affairs and Education at Park Lane Medical Center, Kansas City,
Missouri, since 1992. He was President of Medical Imaging, Inc., Kansas City,
Missouri, a radiology practice, from 1974 through November 1, 1995. Dr. Ricci
currently serves on the Board of Directors for the following private companies:
Park Lane Medical Center, Preferred Health Professionals and Health Midwest.
He served as Program Chairman of the Missouri Association of Osteopathic
Physicians, as well as Program Chairman of the American Osteopathic College of
Radiology, in 1995. Dr. Ricci attended Temple University in Philadelphia and
received his Doctor of Osteopathy from the University of Health Sciences of
Osteopathic Medicine in 1968. Dr. Ricci is board certified in Radiology and is
a Fellow of the American Osteopathic College of Radiology.
Resignation of Director. On January 11, 1996, E. Keene Wolcott
resigned from the Board of Directors of the Company citing his opposition to
recently filed litigation against Steel and the timing of the commencement of
such litigation, as well as Mr. Wolcott's opposition to poison pills. See
"Legal Proceedings" for a description of the litigation against Steel. On
January 12, 1996, the Company responded to Mr. Wolcott's resignation citing the
unanimous support among each of the Company's other directors, financial
advisors and legal counsel regarding the commencement of such litigation. Both
letters were subsequently filed by the Company with the SEC on January 16, 1996
as attachments to a Report on Form 8-K.
Executive Officers. The executive officers of the Company, together
with the year in which they were appointed to their current positions, are set
forth below.
<TABLE>
<CAPTION>
Name Age Position Year
- -------------------- --- -------------------------------- ----
<S> <C> <C> <C>
Robert S. Muehlberg 41 Chairman of the Board, President 1995
and Chief Executive Officer
Denise L. Sunseri 37 Vice President, Chief Financial 1993
Officer and Secretary
</TABLE>
Information concerning Mr. Muehlberg and Ms. Sunseri is set forth
above under "The Board of Directors."
Director and Officer Security Reports. Section 16(a) of the
Securities Exchange Act of 1934 requires the Company's directors and officers
and persons who own more than ten percent of the Company's Common Stock to file
reports of ownership and changes in ownership with the SEC. These reporting
persons are also required to furnish the Company with copies of all reports they
file. Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during its 1995 fiscal
year all filing requirements applicable to its officers, directors and greater
than ten percent shareholders were complied with.
16
<PAGE> 17
Item 11. Executive Compensation
Summary Compensation Table. The following table provides information
on compensation paid by the Company to the Company's Chief Executive Officer
and the Company's only other executive officer who served the Company during
1995 for services provided for the three fiscal years ended December 31, 1995.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation All Other
Name and Principal Position Year Salary ($) Bonus ($) Options (#) Compensation ($)
- --------------------------- ---- ---------- --------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Robert S. Muehlberg 1995 167,200 50,000 45,000 5,207(1)
Chairman of the Board, 1994 148,450 25,000 40,000 5,612(1)
President and Chief 1993 148,628 20,000 12,000 6,255(1)
Executive Officer
Denise L. Sunseri 1995 142,200 50,000 45,000 4,271(2)
Vice President, Chief 1994 142,200 25,000 20,000 5,882(2)
Financial Officer and Secretary 1993 135,385 15,000 12,000 5,498(2)
- ------------------
</TABLE>
(1) The amounts disclosed in this column include payments under the
Company's medical reimbursement policy of $483 for 1995, $1,036 for
1994 and $2,474 for 1993; the Company's matching 401(k) employer
contribution of $3,527 for 1995, $3,469 for 1994 and $2,752 for 1993;
and $1,197 for 1995, $1,107 for 1994 and $1,029 for 1993 in premiums
for a personal long-term disability policy.
(2) The amounts disclosed in this column include payments under the
Company's medical reimbursement policy of $520 for 1995, $1,699 for
1994 and $1,706 for 1993; the Company's matching 401(k) employer
contribution of $2,849 for 1995, $3,344 for 1994 and $3,008 for 1993;
and $902 for 1995, $839 for 1994 and $784 for 1993 in premiums for a
personal long-term disability policy.
Option Grants in Last Fiscal Year.
The following table provides information on option grants in fiscal
1995 to the executive officers named in the Summary Compensation Table:
<TABLE>
<CAPTION>
Potential Realizable
Percent of Value at Assumed
Number of Total Annual Rates of
Securities Options Stock Price
Underlying Granted to Appreciation for
Options Employees Exercise Option Term(1)
Granted in Fiscal Price Expiration --------------------
Name (#) Year(%) ($) Date 5% ($) 10% ($)
- ------------------- ---------- ---------- -------- ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Muehlberg 25,000(2) 21 7.81 12/13/00 53,975 119,225
20,000(3) 16 7.81 12/13/00 43,180 95,380
Denise L. Sunseri 25,000(2) 21 7.81 12/13/00 53,975 119,225
20,000(3) 16 7.81 12/13/00 43,180 95,380
- ------------------
</TABLE>
(1) Potential realizable value is based on an assumption that the price of
the Common Stock appreciates above the exercise price at the annual
rate shown (compounded annually) from the date of grant until the end
of the five-year option term. These numbers are calculated based on
the requirements promulgated by the Securities and Exchange Commission
and do not reflect the Company's estimate of future stock price
growth.
(2) Options were granted December 15, 1995 and are immediately
exercisable.
(3) Options were granted December 15, 1995 and were exercisable upon the
Company meeting certain 1996 performance goals. On March 15, 1996 the
Compensation Committee determined that in order to provide incentive
during the Auction Process these options would be excerciseable
immediately (see Note 2 to the consolidated financial statements).
17
<PAGE> 18
Option Exercises and Fiscal Yearend Values. None of the named
executive officers exercised any stock options during fiscal 1995. The
following table provides information on the value of such executive officers'
unexercised options at December 31, 1995.
<TABLE>
<CAPTION>
Number of Securities Underlying Value of Unexercised
Unexercised Options In-the-Money Options
Shares at Fiscal Year-End at Fiscal Year-End
Acquired Value ------------------------------- ----------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- -------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Robert S. Muehlberg - - 61,333 45,667 $145,592 $149,848
Denise L. Sunseri - - 52,333 30,667 $116,092 $ 61,348
</TABLE>
EXECUTIVE OFFICER AGREEMENTS. As an incentive for their continued
efforts on behalf of the Company, the Company has entered into employment
contracts with the Company's chief executive officer and chief financial
officer which provide that they will be paid the equivalent of one year's
salary and employee benefits in the event that their employment by the Company
is involuntarily terminated or if there is a change in control of the Company
and they should elect not to remain employed after such change in control. A
change in control, as defined in such employment contracts, means (i) the
entering into by the Company or its shareholders of an agreement to dispose of,
by sale, exchange, merger, reorganization, dissolution or liquidation, either
80% or more of the assets of the Company or a portion of the outstanding
Common Stock such that one person or group beneficially owns 25% or more of
the outstanding Common Stock, (ii) the issuance by the Company to one person
or group sufficient shares of Common Stock to increase such person's or group's
ownership to 25% or more of the outstanding Common Stock, or (iii) a change in
the composition of the Board of Directors such that the individuals who
constituted the Board as of the date of the employment contracts (the
"Incumbent Board") or individuals who become members of the Board of Directors
subsequent to the date of the employment contracts and whose nominations to
the Board are approved by a vote of at least a majority of those members of
the Board of Directors who were members of the Incumbent Board (or whose
nominations were approved by the Incumbent Board) cease to constitute at least
a majority of the Board. The Company and the Company's chief executive officer
and chief financial officer amended and restated the employment contracts in
January 1996 to include clause (iii) above in the definition of "change in
control." Pursuant to the terms of the Settlement Agreement, the Company and
the Company's chief executive officer and chief financial officer amended the
employment contracts on March 19, 1996 to provide that the Company's inability
to meet the deadlines set forth in the Settlement Agreement with respect to a
sale or merger transaction shall constitute an "involuntary termination" under
the employment contracts. For a more detailed description of the Settlement
Agreement, see "Legal Proceedings."
TAX DEFERRED RETIREMENT PLAN. The Company instituted a tax deferred
retirement plan (the "TDRP") under Section 401(k) of the Internal Revenue Code
for the benefit of all domestic employees in October 1989. Under the TDRP, an
employee may defer up to 10% of pre-tax earnings, subject to a maximum deferral
established each year, and contribute it to a trusteed plan. The Company will
match 50% of an employee's contribution to a maximum of 6% of gross pay. All
regular employees working over 1,000 hours per year who have completed six
months employment are eligible to enroll during the months of March, June,
September and December. The Company's matching benefits vest over a five year
period. Benefits under the TDRP are payable on retirement, hardship, death of
the employee or termination of employment. Approximately 245 employees,
including officers, are eligible to participate in the TDRP, and 179 are
presently enrolled. During 1995, the Company contributed $118,339 to match
employee contributions, including $6,376 for all named executive officers as a
group.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. During
fiscal 1995, the Compensation/Stock Option Committee of the Company's Board of
Directors initially consisted of Messrs. Burnett (Chairman), Wolcott and Robert
A. Prosek, who did not stand for reelection at the Annual Meeting of
Shareholders in August 1995. In July 1995 and for the remainder of the fiscal
year, the Committee was changed to consist of Messrs. Burnett (Chairman),
Wolcott and Ricci.
18
<PAGE> 19
Dr. Keith R. Burnett, a director of the Company, is a principal and
officer of Magnetic Imaging Medical Group ("MIMG"), which provides radiology
and other medical services for the Company's Diagnostic Medical Centers located
in Long Beach, Huntington Beach, Laguna Niguel and Downey, California. MIMG is
a Co-General Partner of the center in Long Beach. Dr. Burnett serves as the
Medical Director for the facilities in Huntington Beach and Laguna Niguel. The
Management, Licensing and Facilities Agreements between the respective Centers
and MIMG ("Agreements") provide that MICA will receive for services rendered:
77.5% of the revenues collected at Long Beach Medical Imaging Clinic, 80% of
the revenues collected at Medical Imaging Center of Huntington Beach and Laguna
Niguel MRI Center, and 82% at Downey MRI Center. Pursuant to the Agreements,
the balance of the amounts collected is retained by MIMG as their fee. In
1995, the Company's share of revenues collected from the four centers was
$1,669,000, $1,748,000, $783,000 and $834,000, respectively; MIMG's share of
the revenues collected was $452,000, $413,000, $169,000 and $208,000,
respectively (see "Certain Relationships and Related Transactions" and Note 16
to the consolidated financial statements).
DIRECTORS COMPENSATION. Directors, except those who are also officers
of the Company, are granted warrants at the discretion of the Company's
Compensation/Stock Option Committee for their services as directors, are paid
$3,000 for each meeting attended and are reimbursed for out-of-pocket expenses
of attending meetings. Messrs. Burnett and Ricci received 37,000 and 32,000
warrants, respectively, for such services over the course of their tenures as
directors. The Chairpersons of the Compensation/Stock Option Committee and
Audit Committee receive an additional $2,000 and $4,000 per year, respectively.
19
<PAGE> 20
Item 12. Security Ownership of Certain Beneficial Owners and
Management
As of March 19, 1996, the following shareholders are the only
shareholders who are known by the Company to be beneficial owners of more than
five percent (5%) of the Company's voting securities.
<TABLE>
<CAPTION>
Amount and
Nature of
Name and Address Beneficial Percentage of
of Beneficial Owner Ownership(1) Common Stock
------------------- ------------ -------------
<S> <C> <C>
Steel Partners 527,682(2) 19.8%
750 Lexington Avenue, 27th Floor
New York, NY 10022
Metropolitan Life Insurance Co. 372,727(3) 12.2%(3)
One Madison Avenue
New York, NY 10010
General Electric Company 220,000(4) 8.1%(4)
20825 Swenson, Suite 100
Waukesha, WI 53186
</TABLE>
- --------------------
(1) For purposes of this table, a person is deemed to have "beneficial
ownership" of any security that such person has the right to acquire
within 60 days after March 19, 1996.
(2) The information in the table is taken from a joint filing with the SEC
on Schedule 13D (Amendment No. 15) made by Steel, Steel Partners
Services, Ltd., a New York corporation ("Steel Services"), Warren G.
Lichtenstein and Lawrence Butler as of March 19, 1996 reporting
beneficial ownership. The amount includes 422,658 shares of Common
Stock beneficially owned by Steel and 105,024 shares of Common Stock
beneficially owned by Steel Services. Steel Services acquired the
105,024 shares beneficially owned by it for the account of Quota Fund
N.V., a Netherlands Antilles investment corporation ("Quota"). Quota
granted investment discretion to Soros Fund Management ("SFM"), which
in turn granted investment discretion to Steel Services. SFM is a
sole proprietorship of which George Soros is the sole proprietor. In
Amendment 15, both Mr. Lichtenstein and Mr. Butler state that they
beneficially own 527,682 shares of the Company's Common Stock, the
total number of shares held by Steel and Steel Services combined.
(3) Metropolitan Life Insurance Company holds $5.6 million in principal
amount of the Company's Convertible Debentures due April 1999. Such
Debentures bear interest at the rate of 6% per annum and are
convertible at any time into one share of Common Stock for each $15.00
of principal amount of Debenture. The amount and percentage of Common
Stock in the table represents beneficial ownership as if the
Debentures had been converted to Common Stock.
(4) On January 16, 1996, General Electric Company exercised previously
outstanding warrants to purchase 160,000 shares of Common Stock at
$5.70 per share in connection with the repayment by the Company of
certain outstanding loans. The amount and percentage in the table
includes presently exercisable warrants to purchase 60,000 shares of
Common Stock at $8.50 per share (see Note 3 to the consolidated
financial statements).
20
<PAGE> 21
Set forth below are names and beneficial shareholdings, as of March
19, 1996 of (i) the Directors of the Company, (ii) each executive officer named
in the Summary Compensation Table appearing herein, and (iii) all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Beneficial Common
Name Ownership (1) Stock
---- ------------- ----------
<S> <C> <C>
Robert S. Muehlberg 108,333(2) 4%
Denise L. Sunseri 97,333(3) 4%
Keith R. Burnett, M.D. 37,654(4) 1%
Robert G. Ricci, D.O. 32,000(5) 1%
All Executive Officers and Directors as a Group (4 persons) 275,320(6) 10%
</TABLE>
--------------------
(1) For purposes of this table, a person is deemed to have
"beneficial ownership" of any security that such person has
the right to acquire within 60 days after March 19, 1996.
(2) Includes presently exercisable options to purchase 101,333
shares of Common Stock at $2.35 to $21.90 per share, issued
for service as an officer and employee.
(3) Includes presently exercisable options to purchase 76,000
shares of Common Stock at $3.13 to $21.90 per share, issued
for service as an officer and employee.
(4) Includes presently exercisable warrants to purchase 37,000
shares of Common Stock at $4.05 to $7.81 per share, issued for
service as a director.
(5) Includes presently exercisable warrants to purchase 32,000
shares of Common Stock at $7.50 to $7.81 per share, issued for
service as a director.
(6) Includes presently exercisable options and warrants to
purchase 246,333 shares of Common Stock at various prices, as
described in the footnotes above.
CHANGE IN CONTROL. The Settlement Agreement provides that if the
Company is unable to meet certain deadlines in connection with a sale or merger
transaction, the individuals who are members of the Board of Directors will
resign and will cause such members to be replaced with designees of Steel, or,
if requested by Steel, the Company will promptly call the annual meeting of
shareholders for the purpose of electing the Board of Directors of the Company.
See "Legal Proceedings" for a more detailed description of the Settlement
Agreement.
Item 13. Certain Relationships and Related Transactions
Dr. Keith R. Burnett, a director of the Company, is a principal and
officer of Magnetic Imaging Medical Group ("MIMG"), which provides radiology
and other medical services for the Company's Diagnostic Medical Centers located
in Long Beach, Huntington Beach, Laguna Niguel and Downey, California. MIMG is
a Co-General Partner of the center in Long Beach. Dr. Burnett serves as the
Medical Director for the facilities in Huntington Beach and Laguna Niguel. The
Management, Licensing and Facilities Agreements between the respective Centers
and MIMG ("Agreements") provide that MICA will receive for services rendered:
77.5% of the revenues collected at Long Beach Medical Imaging Clinic, 80% of
the revenues collected at Medical Imaging Center of Huntington Beach and Laguna
Niguel MRI Center, and 82% at Downey MRI Center. Pursuant to the Agreements,
the balance of the amounts collected is retained by MIMG as their fee. In
1995, the Company's share of revenues collected from the four centers was
$1,669,000, $1,748,000, $783,000 and $834,000, respectively; MIMG's share of
the revenues collected was $452,000, $413,000, $169,000 and $208,000,
respectively.
21
<PAGE> 22
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K
(a) (1) Financial Statements.
The consolidated financial statements required by this item are
submitted as part of this Annual Report in a separate section beginning on
Page F-1 of this report.
<TABLE>
<CAPTION>
Consolidated Financial Statements of Medical Imaging Centers of America, Inc. Page
------------------------------------------------------------------------------------------------
<S> <C>
Report of Ernst & Young LLP, Independent Auditors F-1
Consolidated Balance Sheets at December 31, 1995 and 1994 F-2
Consolidated Statements of Operations for the three years ended December 31, 1995 F-3
Consolidated Statements of Shareholders Equity (Net Capital Deficiency)
for the three years ended December 31, 1995 F-4
Consolidated Statements of Cash Flows for the three years ended December 31, 1995 F-5
Notes to Consolidated Financial Statements F-7
</TABLE>
(a) (2) Financial Statement Schedules.
The following financial statement schedules of Registrant are filed
with this report:
Schedule VIII - Valuation and Qualifying Accounts
F-16
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrant during the
fourth quarter of the fiscal year ended December 31, 1995.
(c) Exhibits.
The exhibits listed on the accompanying Index to Exhibits are filed as
part of this Annual Report.
22
<PAGE> 23
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Sequentially
Numbered
Number Description Page
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3.1 I Restated Articles of Incorporation
3.2 Bylaws as Amended
4.1 II Trust Indenture, Debenture due April 1999
4.2 II Debenture due April 1999
4.3 IV Rights Agreement dated October 2, 1991
4.4 First Amendment to Rights Agreement dated January 23, 1996
4.5 Second Amendment to Rights Agreement dated March 1, 1996
4.6 Third Amendment to Rights Agreement dated March 7, 1996
4.7 Fourth Amendment to Rights Agreement dated March 11, 1996
4.8 V Amendments to Trust Indenture dated April 1993 and February 1994
10.1 III 1985 Employee Incentive Stock Option Plan
10.2 1994 Incentive Stock Option Plan
10.3 V General Electric Loan Restructuring Agreement dated May 14, 1993
10.4 General Electric Agreement and Amendment dated January 16, 1996
10.5 VI Severance Agreement with Antone J. Lazos dated February 9, 1995
10.6 Employment Agreement with Robert S. Muehlberg dated January 30, 1996 as Amended
10.7 Employment Agreement with Denise L. Sunseri dated January 30, 1996 as Amended
10.8 Management, Licensing and Facilities Agreement
for Company's Huntington Beach Medical Imaging Center as Amended
10.9 Management, Licensing and Facilities Agreement
for Company's Laguna Niguel Medical Center as Amended
10.10 Management, Licensing and Facilities Agreement
for Company's Long Beach Medical Imaging Center as Amended
10.11 Management, Licensing and Facilities Agreement
for Company's Downey MRI Center as Amended
10.12 Agreement of Compromise and Settlement dated March 19, 1996
10.13 Standstill Agreement dated March 19, 1996
11.1 Earnings Per Share Computation
17.1 VII Letter from E. Keene Wolcott to the Company dated January 11, 1996
17.2 VII Letter from the Company to E. Keene Wolcott dated January 12, 1996
21 Subsidiaries List
23 Consent of Ernst & Young LLP, Independent Auditors
27 Financial Data Schedule
</TABLE>
23
<PAGE> 24
INDEX TO EXHIBITS, continued
I Indicates the exhibit is incorporated by reference
from Registrant's Form S-1 Registration
Statement (Reg. No. 33-15160) filed June 18,
1987.
II Indicates the exhibit is incorporated by reference
from Registrant's Form 8-K Report dated May
10, 1989.
III Indicates the exhibit is incorporated by reference
from Registrant's Form S-8 Registration
Statement (Reg. No. 33-29917) filed on July
12, 1989.
IV Indicates the exhibit is incorporated by reference
from Registrant's Form 8-A Registration
Statement dated October 15, 1991.
V Indicates the exhibit is incorporated by reference
from Registrant's Form 10-K Report for the
year ended December 31, 1993.
VI Indicates the exhibit is incorporated by reference
from Registrant's Form 10-K Report for the
year ended December 31, 1994.
VII Indicates the exhibit is incorporated by reference
from Registrant's current Report on Form 8-K
filed January 16, 1996.
The financial statements listed in the accompanying Index to Financial
Statements are filed as a part of this Form 10-K.
24
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 27, 1996
MEDICAL IMAGING CENTERS OF AMERICA, INC.
By: /s/ Robert S. Muehlberg
-------------------------------------------
Robert S. Muehlberg, Chairman of the Board,
President and Chief Executive Officer
25
<PAGE> 26
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C> <C>
By: /s/ Robert S. Muehlberg Chairman of the Board of Directors, March 27, 1996
----------------------- President and Chief Executive
Robert S. Muehlberg Officer (Principal Executive
Officer)
By: /s/ Denise L. Sunseri Vice President, Chief March 27, 1996
--------------------- Financial Officer,
Denise L. Sunseri Secretary (Principal
Financial and Accounting
Officer) and Director
By: /s/ Keith R. Burnett, M.D. Director March 27, 1996
--------------------------
Keith R. Burnett, M.D.
By: /s/ Robert G. Ricci, D.O. Director March 27, 1996
---------------------------
Robert G. Ricci, D.O.
</TABLE>
26
<PAGE> 27
Report of Ernst and Young LLP, Independent Auditors
The Board of Directors and Shareholders
Medical Imaging Centers of America, Inc.
We have audited the accompanying consolidated balance sheets of Medical Imaging
Centers of America, Inc. as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity (net capital
deficiency) and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Medical Imaging
Centers of America, Inc. at December 31, 1995 and 1994, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
San Diego, California
February 2, 1996, except for Note 2
as to which the date is March 19, 1996
F-1
<PAGE> 28
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
(in thousands except share information) 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents (includes restricted cash of
$422 in 1995 and $655 in 1994) $ 10,732 $ 8,524
Trade and notes receivable, net 7,711 9,524
Prepaid expenses and other current assets 725 1,550
--------------------------
Total current assets 19,168 19,598
Equipment and leasehold improvements, net 16,274 29,216
Equipment held for sale, net 800 400
Investment in and advances to unconsolidated entities, net 1,489 2,069
Intangible assets, net 1,087 1,269
Other assets 830 917
--------------------------
$ 39,648 $ 53,469
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY):
Current liabilities:
Current portion long-term debt and capital lease obligations $ 11,161 $ 11,541
Current portion convertible subordinated debt 2,800 2,800
Accounts payable 1,107 2,062
Accrued compensation 697 1,493
Other accrued liabilities 3,066 3,430
--------------------------
Total current liabilities 18,831 21,326
Long-term debt and capital lease obligations 11,182 25,206
Minority interest in consolidated partnerships 1,222 1,598
Convertible subordinated debt 5,400 8,200
Commitments
Shareholders' equity (net capital deficiency):
Preferred stock, no par value, 5,000,000 shares authorized;
Series B preferred shares, no par value, 300,000 shares
authorized, no shares issued or outstanding --- ---
Common stock, no par value, 30,000,000 shares authorized;
2,479,460 and 2,426,645 shares issued and outstanding
at December 31, 1995 and 1994, respectively 54,691 54,473
Accumulated deficit (51,678) (57,334)
--------------------------
Total Shareholders' equity (net capital deficiency) 3,013 (2,861)
--------------------------
$ 39,648 $ 53,469
==========================
</TABLE>
See accompanying notes.
F-2
<PAGE> 29
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
(in thousands except per share information) 1995 1994 1993
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES:
Medical services $43,192 $55,440 $ 65,786
Equipment and medical suite sales 3,345 1,866 3,011
------- ------- --------
Total revenues 46,537 57,306 68,797
COSTS AND EXPENSES:
Costs of medical services 25,387 33,693 42,786
Costs of equipment and medical suite sales 2,846 1,749 2,664
Marketing, general and administrative 2,773 5,550 7,872
Provision for doubtful accounts 1,059 1,343 2,643
Depreciation and amortization of equipment
and leasehold improvements 9,471 12,221 12,672
Amortization of intangibles and deferred costs 490 366 1,190
Equity in net income of unconsolidated entities (674) (708) (531)
Interest expense 3,557 5,258 6,459
Interest income (534) (454) (657)
Special charge -- -- 23,490
Gain on sale of assets (3,460) -- --
------- ------- --------
Total costs and expenses 40,915 59,018 98,588
------- ------- --------
Income (loss) before minority interest,
income taxes and extraordinary gain 5,622 (1,712) (29,791)
Minority interest in net (income) loss of
consolidated partnerships 214 (98) 178
------- ------- --------
Income (loss) before income taxes and extraordinary gain 5,836 (1,810) (29,613)
Income tax provision 180 -- --
------- ------- --------
Income (loss) before extraordinary gain 5,656 (1,810) (29,613)
Extraordinary gain -- 1,316 --
------- ------- --------
Net income (loss) $ 5,656 $ (494) $(29,613)
======= ======= ========
PRIMARY EARNINGS PER SHARE:
Income (loss) before extraordinary gain $ 2.19 $ (.75) $ (12.54)
Extraordinary gain $ -- $ .55 $ --
------- ------- --------
Net income (loss) $ 2.19 $ (.20) $ (12.54)
======= ======= ========
FULLY DILUTED EARNINGS PER SHARE:
Net income (loss) $ 1.96 $ (.20) $ (12.54)
======= ======= ========
SHARES USED IN PER SHARE AMOUNTS:
Primary 2,585 2,426 2,361
======= ======= ========
Fully Diluted 3,219 2,426 2,361
======= ======= ========
</TABLE>
See accompanying notes.
F-3
<PAGE> 30
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
<TABLE>
<CAPTION>
Common Shares
------------------------------------------
Issued and Outstanding Issuable
---------------------- ----------------- Accumulated
(in thousands except per share information) Shares Amount Shares Amount Deficit
--------- -------- ------ ------ -----------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 2,361,085 $ 53,670 64,894 $ 800 $(27,227)
1993
Net loss -- -- -- -- (29,613)
--------- -------- ------ ----- --------
Balance at December 31, 1993 2,361,085 53,670 64,894 800 (56,840)
1994
Stock options exercised 666 3 -- -- --
Litigation settlement -
common shares issued 64,894 800 (64,894) (800) --
Net loss -- -- -- -- (494)
--------- -------- ------ ----- --------
Balance at December 31, 1994 2,426,645 54,473 -- -- $(57,334)
1995
Stock options exercised 53,000 219 -- -- --
Cash paid for fractional shares resulting
from one-for-five reverse stock split (185) (1) -- -- --
Net income -- -- -- -- 5,656
--------- -------- ------ ----- --------
Balance at December 31, 1995 2,479,460 $ 54,691 -- $ -- $(51,678)
========= ======== ====== ===== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 31
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
(in thousands) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 5,656 $ (494) $(29,613)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 9,961 12,587 13,862
Amortization of deferred financing costs 97 135 135
Provision for doubtful accounts 1,059 1,343 2,643
Equity in net income of unconsolidated entities, net of distributions -- (430) (260)
Minority interest in net income (loss) of consolidated partnerships (214) 98 (178)
Net value of equipment sold 2,826 1,404 4,700
Gain on sale of Division assets (3,460) -- --
Extraordinary gain -- (1,316) --
Special charge -- -- 23,490
Change in assets and liabilities:
Decrease (increase) in trade receivables 1,081 1,937 (1,210)
Decrease in prepaid expenses and other current assets 823 346 1,125
Decrease in accounts payable and other accrued liabilities (1,623) (634) (2,180)
Decrease in accrued compensation (796) (61) (913)
Decrease in other -- -- 494
-------- -------- --------
Net cash provided by operating activities 15,410 14,915 12,095
INVESTING ACTIVITIES:
Proceeds from sale of Division assets 3,746 -- --
Capital expenditures (1,282) (3,065) (3,286)
Decrease in notes receivable -- 200 114
Decrease in investment in and advances to
unconsolidated entities, net 475 368 197
Acquisitions, net of cash (312) (657) --
Proceeds from the sale of long-term investments -- -- 2,750
Other, net (1) 80 387
-------- -------- --------
Net cash provided by (used in) investing activities 2,626 (3,074) 162
FINANCING ACTIVITIES:
Principal payments on long-term debt and capital lease obligations (15,901) (11,904) (15,510)
Proceeds from the issuance of long-term debt -- 1,123 7,089
Distribution to minority interests (151) (590) (459)
Other, net 224 (128) (57)
-------- -------- --------
Net cash used in financing activities (15,828) (11,499) (8,937)
-------- -------- --------
Net increase in cash and cash equivalents 2,208 342 3,320
Cash and cash equivalents at beginning of year 8,524 8,182 4,862
-------- -------- --------
Cash and cash equivalents at end of year $ 10,732 $ 8,524 $ 8,182
======== ======== ========
</TABLE>
See accompanying notes.
F-5
<PAGE> 32
MEDICAL IMAGING CENTERS OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
(in thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SUPPLEMENTAL CASH FLOW DATA:
Interest paid $3,488 $5,123 $5,918
====== ====== ======
Income taxes paid $ 180 $ 67 $ 88
====== ====== ======
SUPPLEMENTAL NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Additions to capital lease obligations $1,274 $8,545 $7,481
====== ====== ======
Retirement of debt and termination of capital lease
obligations in exchange for equipment $1,570 $7,075 $7,655
====== ====== ======
Assignment of debt related to sale of Division assets $1,047 $ -- $ --
====== ====== ======
Acquisitions:
Fair value of assets acquired, other than cash $ 11 $ 266 $ --
Excess of purchase price over fair value 301 875 --
Notes assumed -- (484) --
------ ------ ------
Acquisitions, net of cash $ 312 $ 657 $ --
====== ====== ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 33
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Medical Imaging Centers of America, Inc.
("MICA" or the "Company") is a California corporation which provides medical
diagnostic imaging services to physicians, managed care providers and hospitals
nationwide. These services are provided to patients under DMC arrangements and
to hospitals primarily under fee-for-service arrangements which account for
approximately 61% and 39%, respectively, of medical services revenues.
PRINCIPLES OF CONSOLIDATION - The accompanying financial statements
consolidate the accounts of the Company, its wholly-owned subsidiaries, and
certain majority controlled Diagnostic Medical Centers ("DMCs"). Investments in
DMCs for which the Company does not have a controlling majority ownership are
accounted for using the equity method. All significant intercompany accounts
and transactions have been eliminated in consolidation.
REVENUES - Revenue is recognized when services are provided through
DMCs, fee-for-service arrangements with hospitals and management agreements
with unconsolidated and managed DMCs.
CASH AND CASH EQUIVALENTS - The Company considers cash equivalents to
be those instruments with original maturities of three months or less. At
December 31, 1995 and 1994, cash restricted for use in DMC operations was
$422,000 and $655,000, respectively.
NET INCOME (LOSS) PER SHARE - Net income (loss) per common share is
computed on the basis of the weighted average number of common shares
outstanding and common share equivalents and convertible debentures if
dilutive. The Company effected a one-for-five reverse stock split for
shareholders of record on October 16, 1995. All per share data has been
restated for all periods presented to give effect to the reverse stock split.
The Company's Common Stock trades on the OTC Bulletin Board under the new
symbol "MIGA".
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 disclosures 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.
RECLASSIFICATIONS - Certain amounts in the 1994 and 1993 financial
statements have been reclassified to conform with the 1995 presentation.
OTHER - See Notes 6, 7 and 11 for accounting policies related to
depreciation, amortization and income taxes.
2. SETTLEMENT AGREEMENT
On January 2, 1996, Steel Partners II, L.P. ("Steel"), which as of
March 19, 1996 owned 19.8% of the Company's outstanding common stock, filed
proxy materials with the Securities and Exchange Commission to replace the
current Board of Directors with its own representatives. The Company held a
special meeting of shareholders on February 26, 1996. On March 19, 1996, the
Company and Steel entered into an Agreement of Compromise and Settlement (the
"Settlement Agreement"). The Settlement Agreement calls for the dismissal of
all pending litigation and provides for mutual releases. The Settlement
Agreement also provides that the February 26, 1996 Special Meeting of
Shareholders will be adjourned without any final report from the Inspector of
Elections, leaving the current Board of Directors in place.
Pursuant to the Settlement Agreement, the Company is required to
initiate a process to sell or merge the Company ("Auction Process"). If the
process does not result in an announcement of a sale or merger transaction by
June 19, 1996, a definitive agreement for a sale or merger transaction by July
19, 1996, or the consummation of a sale or merger transaction by November 19,
1996, the current members of the Company's Board of Directors will resign from
their positions and be replaced by designees of Steel.
The Settlement Agreement calls for the company to amend the severance
agreements of the Company's chief executive officer and chief financial officer
to provide that the Company's failure to meet such deadlines shall constitute
an "involuntary termination" for purposes of their respective severance
packages.
F-7
<PAGE> 34
Steel has agreed that it will not acquire beneficial ownership of any
of the Company's securities during the Auction Process.
The Settlement Agreement also requires the Company to redeem all
outstanding Rights issued pursuant to the Company's shareholder rights plan and
prohibits the Company from enacting a new shareholder rights plan without the
prior written consent of Steel (see Note 12).
Simultaneous with its entering into the settlement, the Company
entered into a Standstill Agreement with Arrowhead Holdings Corporation, a
Delaware corporation ("Arrowhead"), containing substantially the same terms as
the Settlement Agreement with Steel.
The Company estimates that the total expenditures for such
solicitation, including the fees and expenses of the Company's attorneys,
financial advisors, public relations firm and proxy solicitors, excluding
salaries and wages of its officers and employees and including the amounts
reimbursed to Steel, will be approximately $1,325,000, and will be recorded as
a charge to operations in the first quarter of 1996. No amounts have been
reflected in the financial statements as of December 31, 1995 with regard to
the Company's Settlement Agreement and proxy solicitation.
3. OPERATIONS
The Company had cash and cash equivalents of $10.7 million and working
capital of $337,000 as of December 31, 1995. Although there can be no
assurances, management believes that its cash on hand at year end and cashflow
from future operations will be sufficient to meet its obligations as they come
due.
The successful operation of the Company is dependent on the effects of
certain trends and legislation affecting the healthcare industry. The Omnibus
Budget Reconciliation Act of 1993 ("Stark II") limits referrals by physicians
of Medicare/Medicaid patients to other providers in which the physician has an
ownership interest. The Company has a limited number of limited partnership
units of consolidated partnerships owned by referring physicians. The Company
is in the process of acquiring these units and does not anticipate such
acquisitions will require a material amount of the Company's capital. Certain
states have also enacted legislation which similarly limits patient referrals,
limits the fees which a patient can be charged or requires state approval for
the expansion of healthcare facilities. The Company believes that the effects
on its operations as a result of these legislative actions will not be
material. In addition to state and federal governments, the public has
recently focused significant attention on reforming the healthcare system in
the United States. Within the past two years, a broad range of healthcare
reform measures have been introduced in Congress and in certain state
legislatures. Certain proposals, such as cutbacks in the Medicare and Medicaid
programs, containment of healthcare costs that could include a freeze on prices
charged by physicians, hospitals or other healthcare providers, and greater
state flexibility in the administration of Medicaid, could adversely affect the
Company. There can be no assurance that currently proposed or future
healthcare programs, regulations or policies will not have a material adverse
effect on the Company's operating results.
On January 16, 1996 the Company entered into an agreement with a
creditor to pay off a promissory note. The Company paid $1,425,000 cash and
applied $912,000 in proceeds due from the exercise of a warrant to purchase
160,000 shares of MICA's Common Stock as payment in full to retire the note.
In connection with this transaction the Company issued an additional warrant to
purchase 60,000 shares of the Company's Common Stock at an exercise price of
$8.50 per share which expires on December 31, 1998. At the date of grant, the
Company allocated $200,000 to the cost of the warrant which was determined to
be its fair value. The Company recorded a gain of $517,000 from the settlement
of this obligation in January 1996.
F-8
<PAGE> 35
4. RECEIVABLES
Long-term receivables, which include DMC trade receivables which are
not expected to be collected within one year, are included in Other assets on
the accompanying consolidated balance sheets. The Company's trade receivables
are primarily from hospitals and third party payor groups operating throughout
the United States.
<TABLE>
<CAPTION>
December 31,
--------------------
(in thousands) 1995 1994
----------------------------------------------------------------------
<S> <C> <C>
Trade accounts receivable less allowance of
$4,503 in 1995 and $6,046 in 1994 $ 8,431 $10,284
Less current trade and receivables (7,711) (9,524)
------- -------
Long-term receivables $ 720 $ 760
======= =======
</TABLE>
5. INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED ENTITIES
The Company has investments in certain DMCs which are accounted for
using the equity method. Unaudited summarized combined financial information
for the unconsolidated DMCs is as follows:
BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------
(in thousands) 1995 1994
----------------------------------------------------------------------
<S> <C> <C>
Current assets $4,387 $ 5,288
Equipment and leasehold improvements, net 3,909 5,432
Other assets 118 126
------ -------
$8,414 $10,846
====== =======
Current liabilities $2,879 $ 2,388
Advances from MICA 2,008 2,285
Long-term debt and capital lease obligations 2,198 4,020
Partners' equity 1,329 2,153
------ -------
$8,414 $10,846
====== =======
</TABLE>
The Company's share of partners equity in unconsolidated DMCs is
$903,000 and $1,393,000 at December 31, 1995 and 1994, respectively. The Company
has recorded valuation allowances at December 31, 1995 and 1994 of $1,788,000
against its advances to unconsolidated entities of $2,375,000 and $2,464,000,
respectively.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
(in thousands) 1995 1994 1993
-----------------------------------------------------------------------
<S> <C> <C> <C>
Revenues $10,431 $11,279 $10,986
Costs and expenses 7,550 8,587 8,657
------- ------- -------
Net income $ 2,881 $ 2,692 $ 2,329
======= ======= =======
</TABLE>
The Company's revenues include $629,000, $744,000 and $737,000 for the
years ended 1995, 1994 and 1993 respectively from management fees from the
unconsolidated DMCs.
The Company has guaranteed $3,899,000 in capital lease and debt
obligations of its unconsolidated DMCs with terms through 2000.
F-9
<PAGE> 36
6. EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Equipment and leasehold improvements are carried at the lower of cost
or net realizable value and are summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------
(in thousands) 1995 1994
-----------------------------------------------------------------------
<S> <C> <C>
Equipment and furniture, net of valuation reserve
of $5,206 in 1995 and $6,684 in 1994 $ 38,865 $59,683
Leasehold improvements 2,577 3,207
-------- -------
$ 41,442 $62,890
Accumulated depreciation and amortization (25,168) (33,674)
-------- -------
$ 16,274 $29,216
======== =======
</TABLE>
Depreciation and amortization are calculated on a straight-line basis
over the estimated useful life of the asset or over the lease term, if shorter.
Lease terms are generally five to seven years for equipment and furniture and
fifteen years for leasehold improvements. Equipment includes assets financed
through capital leases of $19,040,000 and $27,965,000 with accumulated
amortization of $7,949,000 and $10,825,000 at December 31, 1995 and 1994,
respectively. The Company periodically reviews its equipment portfolio to
determine that its carrying value is the lower of cost or net realizable value.
Management intends to sell certain equipment used during the year in
the Company's on-going business operations. Accordingly, this equipment has
been classified as equipment held for sale at its estimated realizable value at
December 31, 1995 and 1994.
7. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------
(in thousands) 1995 1994
-----------------------------------------------------------------------------
<S> <C> <C>
Excess of purchase price over net assets acquired, less
accumulated amortization of $466 in 1995 and $142 in 1994 $ 824 $ 742
Deferred costs, less accumulated amortization
of $1,179 in 1995 and $1,464 in 1994 263 527
------ ------
$1,087 $1,269
====== ======
</TABLE>
During 1995, the Company acquired certain assets of one imaging center
and additional limited partner units in certain of its DMCs for $312,000 in
cash. Of the total purchase price, $301,000 was allocated to goodwill and is
being amortized using the straight-line method over the estimated useful life
of the assets which is five years. The Company's results of operations were
not materially affected as a result of these acquisitions.
During 1994, the Company acquired certain assets of two imaging
centers and additional limited partner units in certain of its DMCs for
$657,000 in cash and $484,000 in promissory notes. Of the total purchase
price, $875,000 was allocated to goodwill and is being amortized using the
straight-line method over the estimated useful life of the assets which is
three years. The Company's results of operations were not materially affected
as a result of these acquisitions.
The Company periodically reviews goodwill to assess recoverability
based upon projected undiscounted cash flows to be received from operating
income. If such cash flows are less than the carrying value of goodwill the
difference is charged to expense.
Deferred costs primarily include debt financing costs incurred in
connection with the issuance of debentures which have been deferred and are
being amortized on a weighted average basis over the term of the indebtedness.
F-10
<PAGE> 37
8. DEBT
Long-term debt for equipment financing consists of the following:
<TABLE>
<CAPTION>
December 31,
---------------
(in thousands) 1995 1994
---------------------------------------------------------------------------------------------
<S> <C> <C>
Capital lease obligations - weighted average interest rate of
approximately 9%; due at various dates through 2000 $11,937 $18,580
Equipment installment loans payable - weighted average interest rate of
approximately 7%; due at various dates through 2000 10,406 17,567
Note payable to a bank - effective interest rate of 10.5%;
final payment made on October 23, 1995 -- 600
------- -------
22,343 36,747
Less current maturities (11,161) (11,541)
------- -------
$11,182 $25,206
======= =======
</TABLE>
Maturities on notes payable and long-term debt over the next five
years are as follows:
<TABLE>
<CAPTION>
(in thousands)
Years Ending December 31,
-----------------------------------------------------------------------
<S> <C>
1996 $ 7,210
1997 1,774
1998 886
1999 481
2000 55
-------
$10,406
=======
</TABLE>
The Company finances certain equipment under capital leases. These
capital leases generally have terms of five to seven years. Future minimum
payments under capital leases are as follows:
<TABLE>
<CAPTION>
(in thousands)
Years Ending December 31,
-----------------------------------------------------------------------
<S> <C>
1996 $ 4,787
1997 3,767
1998 3,059
1999 1,925
2000 78
-------
Total minimum lease payments 13,616
Amounts representing interest (1,679)
-------
Present value of future minimum lease payments 11,937
Less amounts due in one year (3,951)
-------
Long-term capital lease obligations $ 7,986
=======
</TABLE>
F-11
<PAGE> 38
9. CONVERTIBLE SUBORDINATED DEBT
Convertible subordinated debentures are due in 1999 with interest
payable semi-annually at 6%. The debentures are convertible into MICA Common
Stock at $15 per share and may be redeemed by the Company if the closing bid
price of the Company's Common Stock on any 20 consecutive trading days has been
at least $22.50 per share. The Company is required to redeem the debentures on
April 30 as follows: 1996 - $2,800,000; and 1997 - $2,600,000. The final
payment of $2,800,000 is due April 30, 1999. The indenture relating to this
financing contains restrictions on the payment of cash dividends based upon an
accumulative net income test with certain adjustments. The indenture also has
limitations on the reacquisition of shares and requires a Minimum Consolidated
Shareholders Equity. In addition, the Company is obligated to offer to prepay
the Debentures in the event of a "change in control" of the Company. "Change
in control" is defined to include the acquisition by any person or group of
persons of the power to elect, appoint or cause the election of at least a
majority of the members of the Board of Directors. In light of the favorable
interest rate the Company currently is paying on the Debentures and the fact
that the conversion price is significantly above the current market price of
the Company's Common Stock, management believes that most, if not all, of the
holders of the Debentures would elect prepayment of their Debentures in the
event of a change in control (see Note 2). At December 31, 1995, the Company
is in compliance with all debt covenants. In February of 1994, the convertible
subordinated debenture holders agreed to exclude the 1993 non-cash charge of
approximately $21,500,000 related to goodwill from the definition of Minimum
Shareholders Equity. In return, the Company agreed to an increase in the
Minimum Shareholders Equity covenant from $5,190,000 to $10,000,000.
10. COMMITMENTS
The Company leases its facilities and certain equipment under
operating lease agreements with terms ranging from three to twenty years.
Certain facility lease agreements provide for rent increases based on the
increases in the Consumer Price Index and operating costs. Also, the Company
has the option to renew certain facility leases for additional terms varying
from five to ten years.
The Company's consolidated DMCs have entered into multi-year equipment
maintenance agreements. Future minimum payments under operating leases and
equipment maintenance agreements are as follows:
<TABLE>
<CAPTION>
(in thousands)
Years Ending December 31,
-----------------------------------------------------------------------
<S> <C>
1996 $ 5,031
1997 3,750
1998 3,166
1999 2,392
2000 1,340
Later years 574
-------
Total minimum payments $16,253
=======
</TABLE>
Rent expense under operating leases totaled $5,362,000, $8,263,000 and
$11,509,000 for the years ended December 31, 1995, 1994 and 1993, respectively,
and is included in Costs of medical services in the Company's consolidated
statements of operations.
F-12
<PAGE> 39
11. INCOME TAXES
The Company accounts for income taxes using FAS Statement No. 109,
Accounting for Income Taxes. Statement 109 is an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, Statement 109 generally considers all expected future events
other than enactments of changes in the tax law or rates.
At December 31, 1995, the Company had Federal net operating loss
carryforwards of approximately $21,837,000 for income tax purposes that expire
in 2008. The Company has investment tax credit carryforwards of approximately
$418,000 which begin to expire in 1999. In addition, the Company has a Federal
alternative minimum tax credit carryforward of approximately $166,000 which has
no expiration date. In accordance with the Internal Revenue Code, the Company
s use of its net operating loss carryforwards could be limited in the event of
certain cumulative changes in the Company's stock ownership. For financial
reporting purposes, a valuation allowance of approximately $11,761,000 has been
recognized to offset the deferred tax assets.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets are
as follows:
<TABLE>
<CAPTION>
December 31,
---------------------
(in thousands) 1995 1994
-----------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 7,643 $ 10,655
Valuation reserves 4,386 5,160
Other 3,830 4,308
-------- --------
Total deferred tax assets 15,859 20,123
Valuation allowance for deferred tax assets (11,761) (14,156)
-------- --------
Net deferred tax assets 4,098 5,967
-------- --------
Deferred tax liabilities:
Tax over financial reporting depreciation 4,098 5,967
-------- --------
Total deferred tax liabilities 4,098 5,967
-------- --------
Net deferred tax liabilities $ -- $ --
======== ========
</TABLE>
For the year ended 1995, MICA provided $120,000 in Federal tax related
to alternative minimum tax and $60,000 related to state income tax. No income
taxes were provided in 1994 or 1993.
The reconciliation of income tax computed at the U.S. federal
statutory tax rates to the income tax provision is as follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
----------------------------------------------------------------------
<S> <C> <C> <C>
Federal statutory tax (benefit) rate 34.0% (34.0%) (34.0%)
Limitation of benefit on net operating loss -- 32.3 16.6
Benefit of loss carryforwards (32.1) -- --
Non-deductible amortization expense -- -- 17.4
State tax, net of federal income taxes 1.0 -- --
Other .2 1.7 --
----- ----- -----
Effective tax rate 3.1% --% --%
===== ===== =====
</TABLE>
F-13
<PAGE> 40
12. SHAREHOLDERS EQUITY
COMMON STOCK - At December 31, 1995, the Company had reserved
1,113,001 shares of Common Stock for issuance in connection with the exercise
of outstanding stock options and warrants and the conversion of debentures.
In March 1993, the United States District Court for the Southern
District of California approved a settlement of a class action lawsuit brought
in 1991 against the Company and certain former officers. The settlement
provided for the Company to issue 64,894 shares (after giving effect to the
one-for-five reverse stock split which occurred in 1995) of its Common Stock at
an agreed upon value of $800,000 and for the insurers of the individual
defendants to pay $2,650,000. On January 3, 1994, the Company issued 64,894
shares related to the litigation settlement.
PREFERRED STOCK-SERIES B - In October 1991, the Company's Board of
Directors authorized 300,000 shares of Series B Preferred Stock without par
value in connection with the Company's entering into a Rights Agreement. Each
share of Series B Preferred Stock entitled the holder thereof to 100 votes on
all matters submitted to a vote of the shareholders. Such shares of Series B
Preferred Stock were to be issued pursuant to the Rights Agreement at a ratio
of one one-hundredths of a share per Right upon the occurrence of certain event
and upon the Right holder's payment of an exercise price.
On March 19, 1996, the Board of Directors ordered the redemption of
all outstanding Rights so that no holder of Rights could exercise such Rights
and no shares of Series B Preferred Stock could be issued in connection with
the Rights Agreement. For a more detailed description of the Rights Agreement
and the Board of Directors' actions in connection therewith, see "Preferred
Stock Purchase Rights."
WARRANTS - The Company issues warrants primarily to directors,
underwriters and consultants for various services. Warrants are generally
granted at prices equal to the fair market value of the shares on the date of
grant. At year end 315,500 warrants were exercisable. In August 1995 a third
party forfeited a warrant to purchase 300,000 shares of the Company's Common
Stock pursuant to an agreement by the Company to pay $450,000. Warrant
activity during 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
Number Price
of Shares Per Share
---------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1992 78,200 $13.75 - $68.15
Granted 487,500 2.50 - 5.70
Forfeited (16,200) 48.75 - 68.15
------- ----------------
Outstanding at December 31, 1993 549,500 2.50 - 21.90
Granted 7,000 2.81
Forfeited (41,000) 13.75 - 21.90
------- ----------------
Outstanding at December 31, 1994 515,500 2.50 - 18.75
Granted 107,000 4.05 - 7.81
Forfeited (307,000) 5.70 - 18.75
------- ----------------
Outstanding at December 31, 1995 315,500 $2.50 - $18.75
======= ================
</TABLE>
PREFERRED STOCK PURCHASE RIGHTS
In October 1991, the Company's Board of Directors declared a dividend
distribution of one preferred share purchase right (a "Right") for each share of
Company Common Stock ("Common Share") outstanding at the close of business on
October 18, 1991 (the "Record Date"). Each Right entitled the registered holder
to purchase from the Company one one-hundredth of a share of Series B Preferred
Stock, no par value, at a purchase price of thirty-five dollars ($35.00) per one
one-hundredth of a Preferred Share, subject to adjustment. The Board of
Directors also authorized and directed the issuance of one Right with respect to
each Common Share that should become outstanding between the Record Date and the
earliest of the Distribution Date (as defined below), the date the Rights are
redeemed and the date the Rights expire.
F-14
<PAGE> 41
The Rights Agreement pursuant to which Rights were issued provided
that Rights would not be exercisable until such time as the Company issued
separate Right Certificates to the holders of Rights on a "Distribution Date,"
a date ten days after a public announcement that the dilutive provisions of the
Rights Agreement had been triggered. The Rights Agreement further provided
that the Board of Directors could redeem the Rights in whole, but not in part,
at a price of $.01 per Right and that the holder of Rights would have no rights
as a shareholder of the Company until he exercised such Rights.
On January 10, 1996, the Company's Board of Directors approved certain
amendments to the Rights Plan to provide greater flexibility for the Company
and to take into consideration a one-for-five reverse stock split effected by
the Company in October 1995. The Rights Agreement, as amended by the First
Amendment to Rights Agreement, made the determination of whether the dilutive
provisions of the Rights Agreement had been triggered dependent on a public
announcement by the Company or by a shareholder that the shareholder's
beneficial ownership of Common Stock has risen above 20% of the total issued
and outstanding shares of Common Stock. In contrast, the original Rights
Agreement made such determination automatic upon a shareholder reaching the 20%
threshold. By making the triggering of the rights dependent on a public
announcement, the Company eliminated the possibility that it might face a
situation in which the rights would be activated and the Board would not have
an opportunity to redeem the rights. The amendments approved by the Board of
Directors also changed the redemption price from $.01 to $.05 to reflect the
one-for-five reverse stock split in October of 1995.
On March 1, 1996, the Company announced, based on a report from a
Special Committee of the Board of Directors, that a group of shareholders which
included Steel Partners II, L.P. and Steel Partners Associates had acquired in
excess of 20% of the outstanding Common Stock of the Company and that the
dilutive provisions of Rights Agreement had been triggered. The Company also
announced that it had approved a Second Amendment to the Rights Agreement which
shortened from ten days to seven days the period during which the Board of
Directors could redeem the Rights following the public announcement that a
shareholder or a group of shareholders had triggered the dilutive provisions of
the Rights Agreement. The Company also reduced from ten days to seven days the
period between the public announcement of the triggering of the dilution
provisions and the Distribution Date.
On March 7, 1996, the Board of Directors approved a Third Amendment to
the Rights Agreement which extended until March 12, 1996 at 11:59 p.m. Pacific
Standard Time the period during which the Company could redeem the Rights and
following which the Company could distribute separate Right Certificates. The
Company extended the Distribution Date and the time for redemption of the
Rights once again to March 19, 1996 at 11:59 p.m. PST by way of a Fourth
Amendment to the Rights Agreement dated as of March 11, 1996.
On March 19, 1996, the Company announced that its Board of Directors
had ordered the redemption of all outstanding Rights as part of the Agreement
of Compromise and Settlement between the Company and certain of its affiliates,
on the one hand, and Steel Partners II, L.P. and certain of its affiliates, on
the other hand (the "Settlement Agreement") (see Note 2 for a description of
the Settlement Agreement). The Company set March 29, 1996 as the record date
for determining the holders of rights entitled to payment of the $.05 per share
Redemption Price and April 8, 1996 as the date for payment of the Redemption
Price. The Company anticipates that it will be required to pay $134,000 in the
aggregate to holders of Rights in order to effect the redemption of all
outstanding Rights.
13. RETIREMENT PLAN AND STOCK OPTIONS
RETIREMENT PLAN - Under Section 401(k) of the Internal Revenue Code
the Company instituted a tax deferred retirement plan (the "TDRP") for the
benefit of all employees meeting certain minimum eligibility requirements.
Under the TDRP, an employee may defer up to 10% of pre-tax earnings, subject to
certain limitations, and contribute it to a trusteed plan. The Company will
match 50% of an employee s deferred salary up to a maximum of 6% of gross pay.
The Company's matching contributions vest over a five-year period. For the
years ended December 31, 1995, 1994 and 1993, the Company contributed $118,000,
$101,000 and $135,000, respectively, to match employee contributions.
F-15
<PAGE> 42
STOCK OPTIONS - The Company has been authorized to issue 489,000
shares of Common Stock to certain key employees under its Stock Option Plan
adopted in 1985 and 1994. Options are granted at prices equal to the fair
market value of the shares at the date of grant and are usually exercisable in
cumulative annual increments each year, commencing one year after the date of
grant. Activity under the Company's stock option plans during 1995 and 1994
are summarized as follows:
<TABLE>
<CAPTION>
Number Price
of Shares Per Share
---------------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1992 137,867 $13.75 - $21.90
Granted 122,800 3.13 - 4.40
Forfeited (105,967) 3.13 - 21.90
------- ----------------
Outstanding at December 31, 1993 154,700 3.13 - 21.90
Granted 160,800 2.35 - 3.60
Exercised (666) 3.13
Forfeited (98,134) 2.35 - 21.90
------- ----------------
Outstanding at December 31, 1994 216,700 2.35 - 21.90
Granted 121,800 7.81
Exercised (53,000) 2.35 - 3.44
Forfeited (34,666) 2.35 - 21.90
------- ----------------
Outstanding at December 31, 1995 250,834 $2.35 - $21.90
======= ================
</TABLE>
Options exercisable at December 31, 1995 totaled 146,694 and shares
available for future grant at year end totaled 71,052.
14. SPECIAL CHARGES
Operating results in 1993 include a non-cash charge of approximately
$21,500,000 to write off goodwill associated with prior years acquisitions and
a non-cash charge of $2,000,000 to increase reserves established to reflect
uncertainty regarding the realization of certain other assets.
15. EXTRAORDINARY GAIN
The Company financed an equipment acquisition for one of its managed
DMCs. The operations of the DMC were unsuccessful and foreclosure proceedings
were initiated by the lender. In mitigation of damages, the underlying lender
arranged for the sale of the unit which resulted in the forgiveness of MICA's
indebtedness. In 1994, the Company recorded a non-cash extraordinary gain of
$1.3 million resulting from the forgiveness of debt related to certain MRI
equipment.
16. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Dr. Keith R. Burnett, a director of the Company, is a principal and
officer of Magnetic Imaging Medical Group ("MIMG"), which provides radiology
and other medical services for the Company's Diagnostic Medical Centers located
in Long Beach, Huntington Beach, Laguna Niguel and Downey, California. MIMG is
a Co-General Partner of the center in Long Beach. Dr. Burnett serves as the
Medical Director for the facilities in Huntington Beach and Laguna Niguel. The
Management, Licensing and Facilities Agreements between the respective Centers
and MIMG ("Agreements") provide that MICA will receive for services rendered:
77.5% of the revenues collected at Long Beach Medical Imaging
F-16
<PAGE> 43
Clinic, 80% of the revenues collected at Medical Imaging Center of Huntington
Beach and Laguna Niguel MRI Center, and 82% at Downey MRI Center. Pursuant to
the Agreements, the balance of the amounts collected is retained by MIMG as its
fee. In 1995, the Company's share of revenues collected from the four centers
was $1,669,000, $1,748,000, $783,000 and $834,000, respectively; MIMG's share
of the revenues collected was $452,000, $413,000, $169,000 and $208,000,
respectively.
17. NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. ("SFAS") 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of", effective for fiscal years beginning after December 15, 1995. SFAS 121
requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. SFAS 121 also addresses the accounting for long-lived assets
that are expected to be disposed of. The Company does not believe, based on
current circumstances, the effect of adoption of SFAS 121 will be material.
In October 1995, the Financial Accounting Standards Board issued SFAS
123, "Accounting for Stock-Based Compensation", effective for fiscal years
beginning after December 15, 1995. SFAS 123 establishes the fair value based
method of accounting for stock-based compensation arrangements, under which
compensation cost is determined using the fair value of the stock option at the
grant date and the number of options vested, and is recognized over the periods
in which the related services are rendered. If the Company were to retain its
current intrinsic value based method, as allowed by SFAS 123, it will be
required to disclose the pro forma effect of adopting the fair value based
method. To date, the Company has not made a decision to adopt the fair value
based method.
F-17
<PAGE> 44
MEDICAL IMAGING CENTERS OF AMERICA, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
-------ADDITIONS-------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
(in thousands) OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED 12/31/95:
Reserve for bad debts $6,046 $1,059 $ -- $2,602 $4,503
====== ====== ==== ====== ======
Reserve for advances
to unconsolidated centers $1,788 $ -- $ -- $ -- $1,788
====== ====== ==== ====== ======
Amortization of intangibles:
Excess of purchase price over
net assets acquired $ 142 $ 324 $ -- $ -- $ 466
====== ====== ==== ====== ======
Amortization of deferred costs:
Debt financing costs $ 858 $ -- $ 97 $ -- $ 955
Pre-opening and
organization costs 382 152 -- 534 --
Indirect lease origination
costs 224 14 -- 14 224
------ ------ ---- ------ ------
Total $1,464 $ 166 $ 97 $ 548 $1,179
====== ====== ==== ====== ======
============================================================================================
YEAR ENDED 12/31/94:
Reserve for bad debts $6,883 $1,243 $ -- $2,080 $6,046
====== ====== ==== ====== ======
Reserve for advances to
unconsolidated centers $1,688 $ 100(1) $ -- $ -- $1,788
====== ====== ==== ====== ======
Amortization of intangibles:
Excess of purchase price over
net assets acquired $ 0 $ 142 $ -- $ -- $ 142
====== ====== ==== ====== ======
Amortization of deferred costs:
Debt financing costs $ 723 $ -- $135 $ -- $ 858
Pre-opening and
organization costs 267 192 -- 77 382
Indirect lease origination
costs 197 32 -- 5 224
------ ------ ---- ------ ------
Total $1,187 $ 224 $135 $ 82 $1,464
====== ====== ==== ====== ======
============================================================================================
</TABLE>
(1) Represents increase in reserve for advances to unconsolidated centers.
F-18
<PAGE> 45
MEDICAL IMAGING CENTERS OF AMERICA, INC.
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
-------ADDITIONS-------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END
(in thousands) OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED 12/31/93:
Reserve for bad debts $5,465 $2,643 $ 0 $1,225 $6,883
====== ====== ====== ====== ======
Reserve for contract costs in
excess of related revenues $ 735 $ -- $ -- $ 735(1) $ 0
====== ====== ====== ====== ======
Reserve for advances
to unconsolidated centers $ 900 $ -- $ 788 (2) $ -- $1,688
====== ====== ====== ====== ======
Amortization of intangibles:
Excess of purchase price over
net assets acquired $1,756 $ 521 ( $2,267)(3) $ 10 $ 0
Covenants not to compete,
contracts acquired and rights to
provide MRI equipment 574 246 ( 820)(3) -- 0
------ ------ ------ ------ ------
Total $2,330 $ 767 ( $3,087) $ 10 $ 0
====== ====== ====== ====== ======
Amortization of deferred costs:
Debt financing costs $ 588 $ -- $ 135 $ -- $ 723
Pre-opening and
organization costs 203 266 -- 202 267
Indirect lease origination
costs 228 157 -- 188 197
------ ------ ------ ------ ------
Total $1,019 $ 423 $ 135 $ 390 $1,187
====== ====== ====== ====== ======
=================================================================================================
</TABLE>
(1) Represents reserves written off due to contracts expiring during 1993.
(2) Represents reclass of general reserve to reserve for advances to
unconsolidated centers.
(3) Represents write-off of goodwill.
F-19
<PAGE> 1
EXHIBIT 3.2
TABLE OF CONTENTS
OF THE
AMENDED BYLAWS OF
MEDICAL IMAGING CENTERS OF AMERICA, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Principal Executive Offices . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Other Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . 1
Section 1. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. Annual Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 3. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 4. Adjourned Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 5. Notice and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Section 6. Validation of Meetings Held Without
Proper Call or Notice . . . . . . . . . . . . . . . . . . . . . . 3
Section 7. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 8. Action Without a Meeting . . . . . . . . . . . . . . . . . . . . . . 4
Section 9. Elections of Directors . . . . . . . . . . . . . . . . . . . . . . . 5
Section 10. Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 11. Inspectors of Election . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE III DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 1. Powers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 2. Number and Qualifications
of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 3. Election and Term of Office . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5. Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6. Telephonic Meetings . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7. Organization Meeting . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8. Other Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . 9
Section 9. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 10. Notice of Directors' Meetings . . . . . . . . . . . . . . . . . . . . 9
Section 11. Quorum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 12. Voting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 13. Validation of Meetings Held Without
Proper Call or Notice . . . . . . . . . . . . . . . . . . . . . 10
Section 14. Adjournment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 15. Unanimous Written Consent to
Actions Taken . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 16. Fees and Compensation . . . . . . . . . . . . . . . . . . . . . . . 10
Section 17. Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
-i-
<PAGE> 2
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE IV OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 1. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2. Election . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 3. Subordinate Officers . . . . . . . . . . . . . . . . . . . . . . . 11
Section 4. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 5. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 6. Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 7. Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . 12
Section 8. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 9. Vice-Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 10. Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 11. Chief Financial Officer . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 1. Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2. Director Inspection of Corporate
Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3. Shareholder Inspection of
Corporate Records . . . . . . . . . . . . . . . . . . . . . . . 14
Section 4. Annual and Financial Reports . . . . . . . . . . . . . . . . . . . 15
Section 5. Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 6. Representation of Shares of
Other Corporations . . . . . . . . . . . . . . . . . . . . . . 17
Section 7. Registrars and Transfer Agents . . . . . . . . . . . . . . . . . . 17
Section 8. Subchapter S Election . . . . . . . . . . . . . . . . . . . . . . . 17
Section 9. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 10. Checks, Drafts and Other Instruments . . . . . . . . . . . . . . . 17
Section 11. Execution of Contracts and Instruments . . . . . . . . . . . . . . 17
Section 12. Construction and Definitions . . . . . . . . . . . . . . . . . . . 18
Section 13. Indemnification and Liability Insurance . . . . . . . . . . . . . . 18
ARTICLE VI RESTRICTIONS ON TRANSFER OF SHARES . . . . . . . . . . . . . . . . 18
Section 1. Options to Purchase . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2. Nonmonetary Consideration . . . . . . . . . . . . . . . . . . . . . 19
Section 3. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 4. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VII AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 1. Power of Shareholders . . . . . . . . . . . . . . . . . . . . . . . 21
Section 2. Power of Directors . . . . . . . . . . . . . . . . . . . . . . . . 21
CERTIFICATE OF INCORPORATOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
-ii-
<PAGE> 3
BYLAWS FOR THE REGULATION, EXCEPT AS
OTHERWISE PROVIDED BY STATUTE OR
ITS ARTICLES OF INCORPORATION,
OF
MEDICAL IMAGING CENTERS OF AMERICA, INC.
ARTICLE I
OFFICES
Section 1. Principal Executive Offices. The principal executive
office of the Corporation is hereby fixed and located at 4217 Lomo Del Sur, La
Mesa, California 92041. The Board of Directors is hereby granted full power
and authority to change said principal executive office from one location to
another. Any such change of location may be noted on the Bylaws by the
Secretary opposite this section or this section may be amended to state the new
location.
Section 2. Other Offices. Other offices of the Corporation may
be established by the Board of Directors at any place or places where the
Corporation is qualified to do business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 1. Place of Meetings. All meetings of shareholders shall
be held at the principal executive office of the Corporation, at the place
specified in the notice or at any other place within or without the State of
California designated either by the Board of Directors or by the written consent
of all persons entitled to vote thereat and not present at the meeting, given
either before or after the meeting and filed with the Secretary of the
Corporation.
Section 2. Annual Meetings. The annual meetings of shareholders
shall be held on the third Friday of October of each year at 10:00 a.m. of said
day; provided, however, that should said day fall on a legal holiday then any
such annual meeting of shareholders shall be held at the same time and place on
the next full business day thereafter ensuing. At annual meetings of
shareholders, Directors shall be elected, reports of the affairs of the
Corporation shall be considered, and any other business may be transacted which
is within the powers of the shareholders.
1
<PAGE> 4
Section 3. Special Meetings. Special meetings of shareholders
may be called for the purposes of taking any action permitted by shareholders
under the California General Corporations Law and the Articles of Incorporation
at any time by the Chairman of the Board or the President, or by the Board of
Directors, or by one (1) or more shareholders holding not less than ten percent
(10%) of the shares entitled to vote at the meeting. Upon request in writing
that a special meeting of shareholders be called for any proper purpose,
directed to the Chairman of the Board, President, vice-president or Secretary
by any person or persons (other than the Board) entitled to call a special
meeting of the shareholders, the officer shall cause notice to be given to
shareholders entitled to vote at the meeting as set forth in Article II,
Section 5 hereinbelow. In the event such notice has not been given within
twenty (20) days after receipt of the request, the person or persons entitled
to call the meeting may give the notice. No business other than that described
in the notice of the meeting may be transacted at a special meeting of
shareholders.
Section 4. Adjourned Meetings. Any meeting of shareholders,
whether or not a quorum is present or has been established, may be adjourned
from time to time by the vote of a majority of the shares the holders of which
are either present in person or represented by proxy. When any meeting of
shareholders is adjourned for forty-five (45) days or more, or a new record
date for the adjourned meeting is fixed, notice of the adjourned meeting shall
be given as in the case of an original meeting as specified in Article II,
Section 5 hereof. If a meeting of shareholders is adjourned for a total of
less than forty-five (45) days, notice of the time and place of the adjourned
meeting or the business to be transacted need not be given in the event the
time and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting.
Section 5. Notice and Waiver. Written notice of every meeting
of shareholders shall be given to each shareholder entitled to vote at such
meeting, either personally or by mail, telegram or other means of written
communication, charges pre-paid, addressed to such shareholder at his address
appearing on the books of the Corporation or given by him to the Corporation
for the purpose of notice. In the event any notice or report addressed to a
shareholder at the address of such shareholder appearing on the books of the
Corporation is returned to the Corporation by United States Postal Service
marked to indicate that the United States Postal Service is unable to deliver
the notice or report to the shareholder at such address, all future notices or
reports shall be deemed to have been fully given without further mailing if the
same shall be available for the shareholder upon written demand of the
shareholder at the principal executive office of the Corporation for a period
of one (1) year from the date of the giving of the notice or report to any
other shareholder. If no address appears on the books of the Corporation and a
shareholder gives no address, notices shall be deemed to have been given to
such shareholder if sent by mail, telegram or other means of written
communication addressed to the place where the principal executive office of
the Corporation is located, or if published at least once in a newspaper of
general circulation in the County in which the principal executive office of
the Corporation is located.
2
<PAGE> 5
All notices shall be personally delivered, deposited in the
mail, or sent by other means of written communication to each shareholder
entitled thereto not less than ten (10) nor more than sixty (60) days before
such meeting. An affidavit of mailing of any such notice in accordance with
the foregoing provisions, executed by the Secretary, assistant secretary or any
transfer agent of the Corporation shall be prima facie evidence of the giving
of the notice.
Except in special cases where other express provision is made
by statute, notice of meetings shall contain the following information:
(a) The place, the date, and the hour of the meeting;
(b) The general nature of the business to be transacted
or proposed, if any, including but not limited to actions with respect to the
approval of (i) a contract or other transaction with an interested Director,
(ii) the amendment of the Articles of Incorporation, (iii) a merger, exchange
or sale of assets reorganization as defined by section 181 of the California
General Corporations Law, (iv) the voluntary dissolution of the Corporation, or
(v) a distribution and dissolution other than in accordance with the rights of
outstanding preferred shares, if any;
(c) If Directors are to be elected, the names of nominees
intended at the time of the notice to be presented by management for election,
if any; and
(d) In the case of an annual meeting, those matters which
the Board of Directors at the time of the mailing of the notice intends to
present for action by the shareholders.
Section 6. Validation of Meetings Held Without Proper Call or
Notice. The transactions of any meeting of shareholders, however called and
noticed, and wherever held, shall be valid as though had at a meeting duly held
after regular call and notice, if a quorum is present either in person or by
proxy, and if either before or after the meeting, each of the persons entitled
to vote and not present in person or by proxy, or who though present has at the
beginning of the meeting objected to the transaction of any business because
the meeting was not lawfully called or convened or has objected to the
consideration of particular matters of business required to have been included
in the notice of the meeting but not so included, signs a written waiver of
notice, a consent to the holding of such meeting, or an approval of the minutes
thereof. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Section 7. Quorum. The presence in person or by proxy of the
holders of majority of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business. Shareholders present at a
duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding a withdrawal of enough shareholders
to leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
3
<PAGE> 6
Section 8. Action Without a Meeting. Except with respect
to the election of Directors as hereinafter provided, any action which may be
taken at a meeting of the shareholders may be taken without a meeting and
without prior notice except as hereinafter set forth, if a consent or consents
in writing, setting forth the action so taken, is signed by the holders of
shares having not less than the minimum number of votes that would be necessary
to authorize such action at a meeting at which all shareholders entitled to
vote thereon were present and voted. In the event the consents of all
shareholders entitled to vote have not been solicited in writing, notices shall
be given in the manner as provided in Section 5 of Article II of these Bylaws
as follows:
(a) At least ten (10) days before consummation of the action
authorized by shareholder approval, notice shall be given of shareholder
approval of (i) a contract or other transaction with an interested Director,
(ii) indemnification of an agent of the Corporation, (iii) a merger, exchange
or sale of assets reorganization as defined in section 181 of the California
General Corporations Law, or (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, if any; and
(b) Promptly with respect to any other corporate action
approved by shareholders without a meeting by less than unanimous written
consent, to those shareholders entitled to vote who have not consented in
writing.
In the event the Board of Directors has not fixed a record
date as provided in Section 1 of Article V of these Bylaws, for the
determination of shareholders entitled to give such written consent, the record
date for determining shareholders entitled to give consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the Board adopts the resolution relating thereto, or the sixtieth (60th)
day prior to the date of such action, whichever is later, and in the event no
prior action by the Board has been taken the day on which the first written
consent is given. All such written consents shall be filed with the Secretary
of the Corporation.
Any shareholder giving a written consent, or the shareholder's
proxyholders or a transferee of the shares or personal representative of the
shareholder of their respective proxyholders, may revoke the consent by a
writing received by the Corporation prior to the time that written consents of
the number of shares required to authorize the proposed action have been filed
with the Secretary of the Corporation, but may not do so thereafter. Such
revocation is effective upon its receipt by the Secretary of the Corporation.
Directors may be elected without a meeting by unanimous
written consent of the persons who would be entitled to vote for the election
of Directors; provided that in the event a vacancy on the Board of Directors
exists and has not been filled by the Directors, a Director may be elected at
any time without prior notice by the written consent of persons holding a
majority of the outstanding shares entitled to vote for the election of
Directors.
4
<PAGE> 7
Section 9. Elections of Directors. In any election of
Directors, the candidates receiving the highest number of votes of the shares
entitled to be voted for them up to the number of Directors to be elected by
such shares are elected. Elections for Directors need not be by ballot unless
a shareholder demands election by ballot at the meeting and before the voting
begins.
Every shareholder entitled to vote at any election of
Directors may cumulate such shareholder's votes and give one (1) candidate a
number of votes equal to the number of Directors to be elected multiplied by
the number of votes to which the shareholder's shares are entitled, or
distribute the shareholder's votes on the same principle among as many
candidates as the shareholder thinks fit, provided however, that no shareholder
shall be entitled to cumulate votes unless the name of each such candidate has
been placed in nomination prior to the voting and a shareholder has given
notice at the meeting prior to the voting of such shareholder's intention to
cumulate such shareholder's votes.
Section 10. Proxies. Every person entitled to vote shares shall
have the right to do so in person or by one (1) or more agents authorized by a
written proxy executed by such person or his duly authorized agent and filed
with the Secretary of the Corporation. Any proxy executed is not revoked and
continues in full force and effect until (i) a writing stating that the Proxy
is revoked or a duly executed proxy bearing a later date is filed with the
Secretary of the Corporation prior to the vote pursuant thereto, (ii) the
person executing the proxy attends the meeting and votes in person, or (iii)
written notice of the death or incapacity of the maker of such proxy is
received by the Corporation before the vote pursuant thereto is counted;
provided that no proxy shall be valid after the expiration of eleven (11)
months from the date of its execution, unless the person executing it specifies
therein the length of time for which such proxy is to continue in force.
Section 11. Inspectors of Election. In advance of any meeting of
shareholders the Board may appoint inspectors of election to act at the meeting
and any adjournment thereof. If inspectors of election are not so appointed, or
if any person so appointed fails to appear or refuses to act, the chairman of
any meeting of shareholders may, and on the request of any shareholder or a
shareholder's proxy shall, appoint inspectors of election (or persons to
replace those who so fail or refuse) at the meeting. The number of inspectors
shall either be one (1) or three (3). If appointed at a meeting on the request
of one (1) or more shareholders or proxies, the majority of shares represented
in person or by proxy shall determine whether one (1) or three (3) inspectors
are to be appointed.
The inspectors of election shall determine the number of
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum and the authenticity, validity and
effectiveness of proxies, receive votes, ballots or consents, hear and
determine all challenges and questions in any way arising in connection with
the right to vote, count and tabulate all votes or consents, determine when the
polls shall close, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. In the
determination of the validity and effect of proxies, the dates contained on the
forms of proxy shall presumptively determine the order of execution, regardless
of the postmark dates on the envelopes in which they are mailed.
5
<PAGE> 8
The inspectors of election shall perform their duties
impartially, in good faith, to the best of their ability and as expeditiously
as is practical. If there are three (3) inspectors of election, the decision,
act or certificate of a majority is effective in all respects as the decision,
act, or certificate of all. Any report or certificate made by the inspectors of
election is prima facie evidence of the facts stated therein.
ARTICLE III
DIRECTORS
Section 1. Powers. Subject to the limitations of the Articles of
Incorporation and of the California General Corporations Law as to action to be
authorized or approved by the shareholders, the business and affairs of the
Corporation shall be managed and all the corporate powers shall be exercised by
or under the direction of the Board of Directors. The Board of Directors may
delegate the management of the day-to-day operation of the business of the
Corporation to a management company or other person or persons provided that
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised under the ultimate direction of the Board of
Directors. Without prejudice to such general powers, but subject to the same
limitations, the Directors shall have the following powers;
First: To select and remove all the officers, agents and
employees of the Corporation; prescribe such powers and duties for them as may
not be inconsistent with law, with the Articles of Incorporation or these
Bylaws; fix their compensation; and require from them security for faithful
service.
Second: To conduct, manage and control the affairs and
business of the Corporation, and to make such rules and regulations therefor
not inconsistent with law, or the Articles of Incorporation or these Bylaws, as
they may deem best.
Third: To change the principal executive office and the
principal office for the transaction of business of the Corporation from one
location to another as provided in Article I, Section 1 hereof; to fix and
locate from time to time one (1) or more subsidiary offices of the Corporation
within or without the State of California as provided in Article I, Section 2
hereof; to designate any place within or without the state for the holding of
any meeting or meetings of shareholders; to adopt, make and use the corporate
seal and to prescribe the forms of certificates of shares; and to alter the
form of such seal and certificates from time to time as in their judgment they
deem best, provided such seal and such certificates shall at all times comply
with the provisions of law.
Fourth: To authorize issuance of shares of the Corporation
from time to time upon such terms as may be lawful in consideration of money
paid, labor done, services actually rendered to the Corporation or for its
benefit or in its formation or reorganization, debts or
6
<PAGE> 9
securities canceled, and tangible or intangible property actually received
either by the Corporation or any one of its wholly owned subsidiaries, if any,
or as a share dividend or upon a stock split, reverse stock split,
reclassification, conversion or exchange of shares for shares of another class
or series of shares, but not in consideration of promissory notes of the
purchaser (unless adequately secured by collateral other than the shares
acquired or pursuant to a stock purchase plan or agreement or stock option plan
or agreement authorized by section 408 of the California General Corporations
Law) or future services.
Fifth: To borrow money and incur indebtedness for the
purposes of the Corporation, and to cause to be executed and delivered therefor
in the corporate name promissory notes, bonds, debentures, deeds of trust,
mortgages, pledges, hypothecations or other evidences of debt and securities
therefor.
Sixth: By resolution adopted by a majority of the authorized
number of Directors, to designate an executive committee and other committees,
each consisting of two (2) or more directors, to serve at the pleasure of the
Board. Unless the Board of Directors shall otherwise prescribe the manner of
proceedings of any such committee, meetings of such committee (other than the
executive committee whose proceedings shall be governed by Section 17 of this
Article III of these Bylaws) may be regularly scheduled in advance and may be
called at any time by any two (2) members thereof; otherwise, the provisions of
these Bylaws with respect to notice and conduct of the meetings of the Board
shall govern. Any such committee, to the extent provided in a resolution of
the Board, shall have all the authority of the Board, except with respect to:
(i) The approval of any action for which the
California General Corporations Law or the Articles of Incorporation also
require shareholder approval;
(ii) The filling of vacancies on the Board of
Directors or on any committee;
(iii) The fixing of compensation of the Directors
for serving on the Board or on any committee;
(iv) The adoption, amendment or repeal of Bylaws;
(v) The amendment or repeal of any resolution of
the Board which by its express terms is not so amendable or repealable;
(vi) The declaration of a dividend, or the
authorization or ratification of the repurchase or redemption of shares, except
at a rate or in a periodic amount or within a price range determined by the
Board of Directors; and
(vii) The appointment of other committees of the
Board or the members thereof.
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Section 2. Number and Qualifications of Directors. The
authorized number of Directors shall be four (4) until changed by amendment of
the Articles of Incorporation or by a Bylaw amending this section duly adopted
by the vote or written consent of holders of the majority of the outstanding
shares entitled to vote; provided that a proposal to reduce the authorized
number of Directors below five (5) cannot be adopted if the votes cast against
its adoption at a meeting, or the shares not consenting in the case of action
by written consent, are equal to more than sixteen and two-thirds percent (16
2/3%) of the outstanding shares entitled to vote. Directors need not be
shareholders of the Corporation.
Section 3. Election and Term of Office. The Directors shall be
elected at each annual meeting, but if any such annual meeting is not held or
the Directors are not elected thereat, the Directors may be elected at any
special meeting of shareholders held for that purpose. All Directors shall
hold office until the next annual meeting of shareholders and until their
respective successors have been elected and qualified, subject to the
California General Corporations Law and the provisions of these Bylaws with
respect to vacancies on the Board of Directors.
Section 4. Vacancies. A vacancy in the Board of Directors shall
be deemed to exist in the event of the death, resignation or removal of any
Director, an increase of the authorized number of Directors, or the failure of
the shareholders at any annual or special meeting of shareholders at which any
Director or Directors are to be elected to elect the full authorized number of
Directors to be voted for at that meeting. The Board of Directors may declare
vacant the office of a Director who has been declared of unsound mind by an
order of court or convicted of a felony.
A vacancy or vacancies in the Board of Directors, except for a
vacancy created by the removal of a Director, may be filled by a majority of
the remaining Directors, though less than a quorum, or by a sole remaining
Director, and each Director so elected shall hold office until his successor is
elected in an annual or special meeting of shareholders called for that
purpose. A vacancy in the Board of Directors created by the removal of a
Director may be filled only by the vote of the majority of the shares entitled
to vote represented at a duly held meeting at which a quorum is present, or by
the written consent of the holders of the majority of the outstanding shares.
The shareholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors. Any such election by written
consent shall require the consent of holders of a majority of the outstanding
shares entitled to vote.
Any Director may resign effective upon giving written notice
to the Chairman of the Board, the President, the Secretary or the Board of
Directors of the Corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the resignation is effective at a future
time, a successor may be elected to take office when the resignation becomes
effective. No reduction of the authorized number of Directors shall have the
effect of removing any Director prior to the expiration of his term of office.
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Section 5. Place of Meetings. All meetings of the Board of
Directors shall be held at any place within or without California which has
been designated in the notice of the meeting, or if not stated in the notice or
if there is no notice, at any place designated from time to time by resolution
of the Board or by written consent of all members of the Board. In the absence
of such designation, meetings shall be held at the principal executive office
of the Corporation.
Section 6. Telephonic Meetings. The members of the Board may
participate in a meeting through use of conference telephone or similar
communications equipment, so long as all members participating in the meeting
can hear one another. Participation in a meeting as permitted in the preceding
sentence constitutes presence in person at such meeting.
Section 7. Organization Meeting. Immediately following each
annual meeting of shareholders, the Board of Directors shall hold a regular
meeting at the place of the annual meeting of shareholders or at such other
place as shall be fixed by the Board of Directors, for the purpose of
organization, election of officers, and the transaction of other business.
Section 8. Other Regular Meetings. Other regular meetings of
the Board of Directors shall be held without call at 10:30 a.m. on the third
Friday of January, April and July. Provided however, should any said day fall
on a legal holiday, then the meeting shall be held at the same time on the next
day thereafter ensuing which is a full business day.
Section 9. Special Meetings. Special meetings of the Board of
Directors for any purpose or purposes may be called at any time by the Chairman
of the Board, the President, any vice-president, the Secretary or any two (2)
Directors.
Section 10. Notice of Directors' Meetings. Call and notice of
the annual organization meeting and other regular meetings of the Board of
Directors are hereby dispensed with. Notice of the time and place of special
meetings shall be personally delivered to each Director or communicated to each
Director by telephone, telegraph or mail, charges prepaid, addressed to him at
his address as is shown upon the records of the Corporation, or if it is not so
shown on such records or is not readily ascertainable, at the place at which
the meetings of Directors are regularly held. In the case notice is mailed, it
shall be deposited in the United States mail at least ninety-six (96) hours
prior to the time of the holding of the meeting. In the event notice is
communicated by telegraph, it shall be delivered to the telegraph company at
least forty-eight (48) hours prior to the time of the holding of the meeting.
In the event notice is delivered personally or communicated by telephone, it
shall be so delivered or communicated at least forty-eight (48) hours prior to
the time of the holding of the meeting.
A notice need not specify the purpose of any regular or
special meeting of the Board of Directors. Whenever any Director has been
absent from any meeting of the Board of Directors for which notice has not been
dispensed with, an entry in the minutes to the effect that notice has been duly
given shall be conclusive and incontrovertible evidence that due notice of such
meeting was given to such Director.
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Section 11. Quorum. The presence at a meeting of the Board of
Directors of a majority of the members of the Board of Directors shall
constitute a quorum for the transaction of business; provided that such quorum
shall at no time be less than one- third (1/3) of the authorized number of
Directors. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of enough Directors to leave
less than a quorum, provided that any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 12. Voting. Every act or decision done or made by a
majority of the Directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a
greater number, or the same number after disqualifying one (1) or more
Directors from voting, is required by law, by the Articles of incorporation or
by these Bylaws.
Section 13. Validation of Meetings Held Without Proper Call or
Notice. The transactions of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be valid as though had at a meeting
duly held after regular call and notice, if a quorum is initially present, and
if, either before or after the meeting, each of the Directors not present or
who though present has prior to the meeting or at its commencement protested
the lack of proper notice to him signs a written waiver of notice, a consent to
holding of such meeting or an approval of the minutes thereof. All such
waivers, consents and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 14. Adjournment. A majority of the Directors present,
whether or not a quorum is present, may adjourn any Directors' meeting to meet
again at another time or place. In the event a meeting of the Board of
Directors is adjourned for more than twenty-four (24) hours, notice of any
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to the Directors who were not present at the time of the
adjournment. Otherwise, notice of the time and place of holding an adjourned
meeting need not be given to absent Directors if the time and place is fixed
and announced at the meeting so adjourned.
Section 15. Unanimous Written Consent to Actions Taken. Any
action required or permitted to be taken by the Board of Directors may be taken
without a meeting if all the members of the Board of Directors shall
individually or collectively consent in writing to such action. Such consent or
consents shall be filed with the minutes of the proceedings of the Board of
Directors and shall have the same force and effect as a unanimous vote of the
Directors.
Section 16. Fees and Compensation. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement for expenses as may be fixed or determined by resolution of the
Board of Directors. Nothing herein shall be considered to preclude any
Director from serving the Corporation in any other capacity, including as an
officer, agent, employee or otherwise, and receiving compensation therefor.
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Section 17. Executive Committee. In the event the Board of
Directors shall appoint an executive committee and shall not provide otherwise,
regular meetings of the executive committee shall be held at such times as are
determined by the Board or by such committee as appointed, and notice of such
regular meetings is hereby dispensed with. Meetings of the executive committee
shall be held at the place designated in the notice of the meeting, or if not
stated in the notice or if there is no notice, at any place which has been
designated from time to time by resolution of the executive committee or by
written consent of all the members thereof, or in the absence of such
designation, at the principal executive office of the Corporation. Special
meetings of the executive committee may be called by the Chairman of the Board,
the President, any vice-president who is a member of the executive committee,
or any two (2) members thereof, upon written notice to the members of the
executive committee of the time and place of such special meeting given in the
manner and within the time provided for giving of notice to members of the
Board of Directors of the time and place of special meetings thereof. Minutes
shall be recorded of each meeting of the executive committee and kept in the
book of minutes of the Corporation. Vacancies in the membership of the
executive committee may be filled only by the Board of Directors. Only members
of the Board of Directors shall serve as members of the executive committee. A
majority of the authorized number of members of the executive committee shall
constitute a quorum for the transaction of business. The provisions of this
Article III of these Bylaws also apply to the executive committee and action by
the executive committee, mutatis mutandis. The Board of Directors may
designate one (1) or more Directors as alternate members of the executive
committee, who may replace and act in the stead of any absent members at any
meeting of such committee.
ARTICLE IV
OFFICERS
Section 1. Officers. The officers of the Corporation shall be a
President, a Secretary and a Chief Financial Officer (who may be called the
Treasurer). The Corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board, one (1) or more vice-presidents, one (1) or
more assistant secretaries, one (1) or more assistant financial officers, and
such other officers as may be appointed in accordance with the provisions of
Section 3 of this Article IV. Any number of offices may be held by the same
person.
Section 2. Election. The officers of the Corporation, except
such officers as may be appointed in accordance with the provisions of Section
3 of this Article IV, shall be chosen by the Board of Directors, and each shall
hold his office until he shall resign or shall be removed by the Board of
Directors or otherwise disqualified to serve, or his successor shall be elected
and qualified.
Section 3. Subordinate Officers. The Board of Directors may
appoint, and may empower the Chairman of the Board or the President to appoint,
such other officers as the
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business of the Corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as the appointing
authority may designate, subject to any limitations imposed by resolution of
the Board of Directors.
Section 4. Removal. Any officer may be removed, either with or
without cause, by the Board of Directors, at any regular or special meeting
thereof or, except in case of an officer chosen by the Board of Directors, by
any officer upon whom such power of removal may be conferred by the Board of
Directors (subject, in each case, to the rights, if any, of an officer under
any contract of employment).
Section 5. Resignation. Any officer may resign at any time by
giving written notice to the Board of Directors or to the President or to the
Secretary of the Corporation, without prejudice however to the rights, if any,
of the Corporation under any contract to which such officer is a party. Any
such resignation shall take effect at the date of the receipt of such notice or
at any later time specified therein; and, unless otherwise specified therein,
the acceptance of such resignation shall not be necessary to make it effective.
Section 6. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification or any other cause shall be filled in
the manner prescribed in these Bylaws for regular appointments to such office.
Section 7. Chairman of the Board. The Chairman of the Board, if
there shall be such an officer, shall, if present, preside at all meetings of
the Board of Directors and shareholders and exercise and perform such other
powers and duties as may be from time to time assigned to him by the Board of
Directors or prescribed by these Bylaws.
Section 8. President. Subject to such powers, if any, as may be
given by the Board of Directors to the Chairman of the Board, if there be such
an officer, the President shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
Corporation. In the absence of the Chairman of the Board, or if there be none,
he shall preside at all meetings of the shareholders and the Board of
Directors. He shall have the general powers and duties of management usually
vested in the office of President of a corporation, and shall have such other
powers and duties as may be prescribed by the Board of Directors or these
Bylaws.
Section 9. Vice-Presidents. In the absence or disability of the
President, the vice-presidents, if there be any, in order of their rank as fixed
by the Board of Directors or, if not ranked, the vice-president designated by
the Board of Directors, shall perform all the duties of the President, and when
so acting shall have all the powers of, and be subject to all the restrictions
upon, the President. The vice-presidents shall have such other powers and
perform such other duties as from time to time may be prescribed for them
respectively by the Board of Directors or these Bylaws.
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Section 10. Secretary. The Secretary shall record or cause to be
recorded, and shall keep or cause to be kept, at the principal executive office
of the Corporation and such other place or places as the Board of Directors may
order, a book of minutes of actions taken at all meetings of Directors,
committees and shareholders, with the time and place of holding, whether
regular or special, and, if special, how authorized, the notice thereof given,
the names of those present at Directors' and committee meetings, the number of
shares present or represented at shareholders' meetings, and the proceedings
thereof.
The Secretary shall keep, or cause to be kept, at the
principal executive office or at the office of the Corporation's transfer
agent, a share register, or a duplicate share register, showing the names of
the shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for cancellation.
The Secretary shall give, or cause to be given, notice of all
the meetings of the shareholders and the Board of Directors required by these
Bylaws or by law to be given, and he shall keep the seal of the Corporation in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these Bylaws.
The Secretary shall keep at the principal executive office,
and if the Corporation's principal executive office is not in California, at
the Corporation's principal business office in California, the original or a
copy of these Bylaws as amended to date.
Section 11. Chief Financial Officer. The Chief Financial Officer
(who may be called the Treasurer) shall keep and maintain, or cause to be kept
and maintained, adequate and correct accounts of the properties and business
transactions of the Corporation, including accounts of its assets, liabilities,
receipts, disbursements, income, losses, changes in financial position, capital
stock, retained earnings and shares.
The Chief Financial Officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He shall disburse
the funds of the Corporation as may be ordered by the Board of Directors, shall
render to the President and the Directors, whenever they request it, an account
of all of his transactions as Chief Financial Officer and of the financial
condition of the Corporation, and shall have such other powers and perform such
other duties as may be prescribed by the Board of Directors or these Bylaws.
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ARTICLE V
MISCELLANEOUS
Section 1. Record Date. The Board of Directors may fix a time
in the future as a record date for the determination of the shareholders
entitled to notice of and to vote at any meeting of shareholders, give consent
to corporate action in writing without a meeting, receive any report, receive
any dividend or other distribution or any allotment of rights, or exercise
rights in respect to any change, conversion or exchange of shares. The record
date so fixed shall not be more than sixty (60) days nor less than ten (10)
days prior to the date of any meeting, nor more than sixty (60) days prior to
any other event for the purposes of which it is fixed. In the event the Board
of Directors does not fix a record date, the record date for determining
shareholders entitled to notice of or to vote at a meeting of shareholders
shall be the close of business on the business day next preceding the day on
which notice is given, or if notice is waived, at the close of business on the
business day next preceding the day on which the meeting is held; the record
date for determining shareholders entitled to give consent to corporate action
in writing without a meeting, when no prior action by the Board of Directors
has been taken, shall be the day on which the first written consent is given;
and the record date for determining shareholders for any other purpose shall be
the close of business on the day on which the Board adopts the resolution
relating thereto, or the sixtieth (60th) day prior to the date of such other
action, whichever is later. Only shareholders of record on the record date are
entitled to notice of and to vote at any such meeting, give consent without a
meeting, receive any report, receive a dividend, distribution or allotment of
rights, or exercise the rights, as the case may be, notwithstanding any
transfer of shares on the books of the Corporation after the record date,
except as otherwise provided in the Articles of Incorporation or these Bylaws.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting unless
the Board of Directors fixes a new record date for the adjourned meeting. In
the event such a meeting is adjourned for more than forty-five (45) days from
the date set for the original meeting, the Board of Directors shall fix a new
record date.
Section 2. Director Inspection of Corporate Records. Every
Director shall have the absolute right at any reasonable time to inspect all
books of account, records and documents of every kind and to inspect the
physical properties of the Corporation and all of its subsidiaries, both
domestic and foreign. Inspection by a Director may be made in person or by
agent or attorney, and the right of inspection includes the right to copy and
make extracts.
Section 3. Shareholder Inspection of Corporate Records. The
accounting books and records and minutes of proceedings of the shareholders and
the Board of Directors and committees of the Board of this Corporation and all
of its subsidiaries shall be open to inspection upon the written demand on the
Corporation of any shareholder or holder of a voting trust certificate at any
reasonable time during usual business hours for a purpose reasonably related to
such holder's interest as a shareholder or as a holder of such voting trust
certificate. Inspection by shareholder or a holder of a voting trust
certificate may be made in person or by an agent or attorney and the right of
inspection includes the right to copy and make extracts.
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A shareholder or shareholders who hold at least five percent
(5%) in the aggregate of the outstanding voting shares of the Corporation, or
hold at least one percent (1%) of such voting shares and have filed a Schedule
14B with the United States Securities and Exchange Commission relating to the
election of Directors of the Corporation shall have the right, exercisable in
person or by agent or attorney, to inspect and copy the record of shareholders'
names and addresses and shareholdings, as of the most recent record date for
which it has been compiled or as of a date specified by the shareholder
subsequent to the date of demand. The list shall be made available on or
before the later of five (5) business days after the demand is received or the
date specified therein as the date as of which the list is to be compiled.
Every shareholder shall have the absolute right to inspect at
all reasonable times during office hours the original or a copy of these Bylaws
as amended to date, at the Corporation's principal executive office, or if its
principal executive office is not in California, then at its principal business
office in California. In the event the principal executive office of the
Corporation is outside California and the Corporation has no principal business
office in California, it shall upon the written request of any shareholder
furnish to such shareholder a copy of the Bylaws as amended to date.
Section 4. Annual and Financial Reports. The requirement for
the sending of an annual report to the shareholders, except upon proper request
as set forth below, is hereby expressly waived.
A shareholder or shareholders holding in the aggregate at
least five percent (5%) of the outstanding shares of any class of the
Corporation may make a written request to the Corporation for an income
statement of the Corporation for the three (3) month, six (6) month, or nine
(9) month period of the current fiscal year ended not less than thirty (30)
days prior to the date of the request and a balance sheet of the Corporation as
of the end of such period, and in addition, an annual report for the last
fiscal year. The annual report shall contain a balance sheet as of the end of
such fiscal year and an income statement and statement of changes in financial
condition for such fiscal year. The income statement, balance sheet, and the
annual report, shall be delivered to the person making the request within
thirty (30) days thereafter. In addition, the Corporation shall upon the
written request of any shareholder mail to the shareholder a copy of the last
annual, semiannual or quarterly income statement which it has prepared and a
balance sheet as of the end of the period. The annual report, quarterly income
statement and balance sheets and other financial statements referred to in this
section shall be accompanied by the report thereon, if any, of any independent
accountants engaged by the Corporation or the certificate of the Chief
Financial Officer or any other officer authorized by the Board of Directors
that such financial statements were prepared without audit from the books and
records of the Corporation. A copy of any of such statement and reports shall
be kept on file in the principal executive office of the Corporation for twelve
(12) months and they shall be exhibited at all reasonable times to any
shareholder demanding an examination of them or a copy shall be mailed to such
shareholder.
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Section 5. Share Certificates. Every holder of shares in the
Corporation shall be entitled to have a certificate signed in the name of the
Corporation by the Chairman or Vice-Chairman of the Board or the President or
any vice-president and by the Chief Financial Officer or any assistant
financial officer or the Secretary or any assistant secretary, certifying the
number of shares and the class or series of shares owned by the shareholder.
Any of the signatures on the certificate may be a facsimile, provided that in
such event at least one (1) signature, including that of any of the
aforementioned officers or the Corporation's registrar or transfer agent, if
any, shall be manually signed. In the event 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, the certificate may be issued by the
Corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
There shall appear on certificates for shares of the
Corporation the following facts if, and to the extent, applicable:
(a) The shares are subject to restrictions upon transfer,
including those imposed by the California Corporate Securities Law of 1968, the
federal securities laws, any agreement between the Corporation and the issuee
thereof, the Articles of Incorporation, these Bylaws or otherwise;
(b) The shares are assessable;
(c) The shares are not fully paid and the total amount of the
consideration to be paid therefor and the amount theretofore paid thereon;
(d) The shares are subject to a close corporation voting
agreement;
(e) The shares are subject to restrictions upon voting rights
contractually imposed by the Corporation;
(f) The shares are redeemable;
(g) The shares are convertible and the period for conversion;
(h) The Corporation has elected to be taxed pursuant to the
provisions of Subchapter S of the Internal Revenue Code of 1954, as amended;
and
(i) The shares are classified or a class of the shares has
two (2) or more series, and a statement setting forth the office or agency of
the Corporation from which shareholders may obtain, upon request and without
charge, a copy of a statement of the rights, preferences, privileges and
restrictions granted to or imposed upon each class or series of shares
authorized to be issued and upon the holders thereof.
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No new certificate for shares shall be issued in lieu of an
old certificate unless the latter is surrendered and canceled at the same time;
provided, however, that the Board of Directors may authorize the issuance of a
new share certificate in the place of any certificate theretofore issued by the
Corporation and alleged to be lost, stolen or destroyed in the event that: (i)
the request for the issuance of the new certificate is made within a reasonable
time after the holder of the old certificate has notice of its loss,
destruction or theft and prior to the receipt of notice by the Corporation that
the old certificate has been acquired by a bona fide purchaser or holder in due
course; and (ii) the holder of the old certificate files a sufficient indemnity
bond with or provides other adequate security to the Corporation and satisfies
any other reasonable requirements imposed by the Board. In the event of the
issuance of a new certificate, the rights and liabilities of the Corporation
and the holders of the old and new certificates shall be governed by the
provisions of sections 8104 and 8405 of the California Commercial Code.
Section 6. Representation of Shares of Other Corporations. The
Chairman of the Board, the President or any vice- president, or the Chief
Financial Officer, or any assistant financial officer, and the Secretary or any
assistant secretary of this Corporation are authorized to vote, represent and
exercise on behalf of this Corporation all rights incident to any and all
shares of any other corporation or corporations standing in the name of the
Corporation. The authority herein granted to said officers to vote or
represent on behalf of this Corporation any and all shares held by this
Corporation in any other corporation or corporations may be exercised either by
such officers in person or by any other person authorized to do so by proxy or
power of attorney duly executed by any of said officers.
Section 7. Registrars and Transfer Agents. The Board of
Directors may appoint one (1) or more registrars of transfers, which shall be
incorporated banks or trust companies, either domestic or foreign, and one (1)
or more transfer agents or transfer clerks, who shall be appointed at such
times and places as the Board of Directors shall determine.
Section 8. Subchapter S Election. If this Corporation has
elected to be taxed pursuant to the provisions of Subchapter S of the Internal
Revenue Code of 1954 as amended, then the Corporation, any shareholder and any
person to whom any of its shares are transferred shall not do any act or take
any course of conduct which shall have the effect of terminating such election
without the prior vote of at least sixty-six and two-thirds percent (66 2/3%)
of the outstanding shares of the Corporation or the written consent of the
persons entitled to vote such shares.
Section 9. Fiscal Year. The fiscal year of the Corporation
shall be determined by the Board of Directors, and having been so determined,
is subject to change from time to time as the Board of Directors shall
determine.
Section 10. Checks, Drafts and Other Instruments. All checks,
drafts, or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the Corporation, shall be
signed or endorsed by such person or persons and in such manner as from time to
time shall be determined by resolution of the Board of Directors.
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Section 11. Execution of Contracts and Instruments. The Board of
Directors, except as these Bylaws may otherwise provide, may authorize one (1)
or more officers or agents of the Corporation to enter into any contract or
execute any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances. Any
instrument may also be executed on behalf of and in the name of the Corporation
by the Chairman of the Board, the President, or any vice- president, and the
Secretary or any assistant secretary, Chief Financial Officer or any assistant
financial officer.
Section 12. Construction and Definitions. Unless the context
otherwise requires, the general provisions, rules or construction and
definitions contained in the California General Corporations Law shall govern
the construction of these Bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural and the plural number includes the singular, and the
term "person" includes a corporation, partnership in trust, as well as a
natural person.
Section 13. Indemnification and Liability Insurance. This
Corporation shall indemnify any person who was or is a party or is threatened
to be made a party to any proceeding by reason of the fact that such person is
or was an agent of this Corporation, against expenses, judgments, fines,
settlements and other amounts incurred in connection with such proceeding to
the fullest extent permitted by the provisions of California and federal law.
Expenses incurred by any agent of this Corporation in
defending any proceeding may be advanced by this Corporation prior to the final
disposition of such proceeding upon receipt of an undertaking by or on behalf
of the agent to repay such amount unless it shall be determined ultimately that
the agent is entitled to be indemnified.
The Board of Directors may authorize the purchase and
maintenance of insurance on behalf of any agent of the corporation against any
liability asserted against or incurred by the agent in such capacity or arising
out of the agent's status as such whether or not this Corporation would have
the power to indemnify the agent against such liability under the provisions of
California and federal law.
ARTICLE VI
RESTRICTION ON TRANSFER OF SHARES
Section 1. Options to Purchase. The shares of this Corporation
shall be issued and held upon the condition that before there can be a valid
sale or transfer of any of said shares or any interest therein, the holder of
the shares to be sold or transferred shall give notice to the Secretary of this
Corporation of his intention to sell or transfer such shares. Said notice
shall specify the number of shares to be sold or transferred, the purchase
consideration and the price per share, the terms upon which such holder intends
to make such sale or transfer, and the name of the intended purchaser or
18
<PAGE> 21
transferee. The Board of Directors shall have ten (10) days from the date of
receipt of such notice by the Secretary within which to exercise an option to
purchase such shares for the Corporation at the same price and upon the same
terms as set forth in said notice. The right of this Corporation to exercise
such option and to purchase such shares is subject to the restrictions
governing the right of a corporation to purchase its own shares contained in
Chapter 5 of the California General Corporations Law, and such other pertinent
governmental restrictions as may from time to time be effective.
If any such shares shall not be purchased by the Corporation,
the Secretary shall notify all of the shareholders of record by mail of said
proposed sale or transfer. Said notice to shareholders shall contain the same
information concerning the proposed sale or transfer as received by the
Corporation, and the Secretary shall mail said notice to the shareholders
immediately upon receipt by him of notification from the Board of Directors
that the Corporation will not purchase any or all of said shares, and in no
event later than ten (10) days after receipt by the Secretary of the notice of
intended sale or transfer. Within twenty (20) days after the date of mailing
of said notice to the shareholders, any shareholder desiring to acquire any or
all of the shares referred to in said notice shall deliver to the Secretary a
written offer to purchase said shares or a specified number thereof at the same
price per share and upon the same terms stated in the above-mentioned notice
filed with the Secretary.
If the total number of shares specified in such offers by
shareholders equals but does not exceed the number of shares referred to in
said notice and not purchased by this Corporation, then the offering
shareholders shall be entitled to purchase the shares pursuant to their
respective offers. If the total number of shares specified in said offers
exceeds the number of shares referred to in said notice and not purchased by
the Corporation, each offering shareholder shall be entitled to purchase such
proportion of the shares available for purchase as the number of shares of the
Corporation which he holds bears to the total number of shares held by all of
such shareholders offering to purchase shares. If the total number of shares
specified in such offers to purchase is less than the number of shares referred
to in said notice and not purchased by the Corporation, the offering
shareholders shall not be entitled to purchase any shares, and the exercise of
any option to purchase, or election to purchase any shares by the Corporation
shall be void and without force and effect. The seller or transferor in such
case may sell or transfer said shares subject to the provisions and
restrictions provided for below.
Any shares mentioned in such a notice of intention to transfer
and not purchased by the Corporation or the shareholders, may be sold or
transferred at any time within six (6) months from the date of such notice to
the person and at the price and terms specified therein. Such purchaser or
transferee shall receive and hold said shares subject to all of the provisions
and restrictions herein contained.
Section 2. Nonmonetary Consideration. Notwithstanding anything
in Section 1 of this Article VI to the contrary, in the event that part or all
of the purchase consideration specified in the notice to the Secretary of the
Corporation is other than money, such notice shall also specify the fair market
value in monetary terms of such other consideration; and the Corporation and
the
19
<PAGE> 22
shareholders shall have the right to exercise their respective options to
purchase said shares by delivery of a written offer specifying a per share
purchase price equal to the total of the money consideration and the fair
market value of the consideration other than money specified in said notice.
With regard to the terms of the offer of the Corporation or a shareholder, the
fair market value of consideration other than money shall be paid in cash. As
used in this section, "consideration other than money" shall not mean the
proposed purchaser's promissory note or other evidence of indebtedness.
In the event the Corporation or any shareholder, as the case
may be, objects to the amount specified in the notice as the fair market value
of consideration other than money, they may give within ten (10) days of the
receipt of such notice written notice to the Secretary of its or his intention
to submit the matter to an appraiser for a determination. Pending such
determination, the time for exercising options to purchase shall be stayed.
Within fifteen (15) days from the date of delivery of such notice of submission
to an appraiser, the objector and the holder of the shares to be sold shall
select a mutually satisfactory single neutral appraiser. In the event the
parties are unable to make such a selection, then either party may at any time
thereafter apply to the Superior Court of the State of California in and for
the County of San Diego (pursuant to a petition to compel arbitration) for the
appointment of a single neutral appraiser in accordance with the California
Code of Civil Procedure.
The appraiser shall determine the fair market value of the
consideration other than money. The decision of the appraiser shall be final
and binding upon the objector and the holder of the shares to be sold. As soon
as the purchase price has been determined, the appraiser shall give written
notice thereof to the parties and to the Secretary. All expenses of appraisal
and proceedings to appoint an appraiser shall be borne equally by the parties
who exercise their option to purchase shares (who shall share such expenses
between themselves in proportion to the number of shares of each elects to
purchase), on the one hand, and the holder of shares to be sold on the other,
unless the Corporation and every shareholder thereafter fail to exercise their
respective options, in which case the objector shall bear all such expenses.
Section 3. Waiver. The provisions of Sections 1 and 2 of this
Article VI and the options and rights therein granted may be waived in writing
by the corporation or by any shareholder with respect to any proposed sale or
transfer of shares. In the event any such waiver is given, the provisions of
this Article as to each of the waiving parties shall not be applicable to the
proposed sale or transfer of shares with respect to which such waivers shall
have been executed, but shall be applicable to any other shares or transfer of
shares.
Section 4. Termination. The provisions of this Article VI with
respect to the transfer of shares shall be applicable until the earliest date
on which the Corporation has ten (10) or more shareholders of record, and
thereupon, shall automatically cease to be of any further force or effect. For
purposes of this Section 4 of Article VI, shares held by husband and wife,
whether or not jointly, shall be considered to be held by one (1) person.
20
<PAGE> 23
ARTICLE VII
AMENDMENTS
Section 1. Power of Shareholders. New Bylaws may be adopted or
these Bylaws may be amended or repealed by the affirmative vote of a majority
of the shares entitled to vote or by the written consent of shareholders
entitled to vote such shares, except as otherwise provided by law or by the
Articles of Incorporation; provided however, that Article VI and this Article
VII may be amended or repealed only upon the affirmative vote of the shares
entitled to vote at least eighty percent (80%) of the shares entitled to vote
or the written consent of shareholders entitled to vote such shares, and
Section 8 of Article V may be amended or repealed only upon the affirmative
vote of at least sixty-six and two-thirds percent (66 2/3%) of the shares
entitled to vote or the written consent of shareholders entitled to vote such
shares.
Section 2. Power of Directors. Subject to the right of
shareholders as provided in Section 1 of this Article VII to adopt, amend or
repeal Bylaws, the Board of Directors may adopt new Bylaws or amend or repeal
these Bylaws other than Section 8 of Article V, Article VI and this Article
VII; provided however, that the Board of Directors may not adopt, amend or
repeal a Bylaw changing the authorized number of Directors except for the
purpose of fixing the exact number of Directors within the limits specified in
Section 2 of Article III of these Bylaws if said section provides for a
variable number of Directors.
21
<PAGE> 24
CERTIFICATE OF INCORPORATOR
The undersigned does hereby certify that:
1. I am the Incorporator of INTRAMED, INC.
; and
2. The foregoing Bylaws constitute the Bylaws of the
Corporation as duly adopted by me this day.
DATED: July 24, 1981
/s/ Thomas C. Ackerman
--------------------------------
Thomas C. Ackerman
Incorporator
22
<PAGE> 25
AMENDMENT OF BYLAWS
Set forth below is an amendment to the Bylaws of Medical
Imaging Centers of America, Inc. duly and validly approved by the shareholders
of this corporation as of May 21, 1984.
Section 2. Number and Qualification of Directors.
(a) The number of Directors of the
Corporation shall not be less than five (5) nor more than nine
(9) until changed by amendment of the Articles of
Incorporation or by a Bylaw amending this section, duly
adopted by the vote or written consent of holders of a
majority of the outstanding shares entitled to vote; provided
that a proposal to reduce the authorized minimum number of
Directors below five (5) cannot be adopted if the votes cast
against its adoption at a meeting or the shares not consenting
in the case of action by written consent, are equal to more
than sixteen and two-thirds percent (16 2/3%) of the
outstanding shares entitled to vote. The exact number of
Directors shall be fixed from time to time, within the limits
specified in the Articles of Incorporation or in this section,
by a Bylaw or amendment thereof, duly adopted by shareholders
or by the Board of Directors; and
(b) Subject to the foregoing provisions for
changing the number of Directors, the exact number of
Directors of this Corporation shall be five (5).
/s/ Thomas C. Ackerman
--------------------------------------
Thomas C. Ackerman, Secretary
23
<PAGE> 26
AMENDMENT OF BYLAWS
Set forth below is an amendment to the Bylaws of Medical Imaging
Centers of America, Inc. duly and validly approved by the directors of this
corporation as of May 24, 1995.
Article II, Section 2. Annual Meetings.
The Annual Meeting of Shareholders shall be held each year on
a date and at a time designated by the Board of Directors. At each Annual
Meeting, directors shall be elected and any other proper business may be
transacted.
Article III, Section 8. Other Regular Meetings.
Other regular meetings of the Board of Directors shall be held
without call at times to be fixed by the Board of Directors from time to time.
Such regular meetings may be held without notice.
Article III, Section 10. Notice of Directors' Meetings.
Amended to provide that communication by fax shall constitute
delivery of notice by telephone.
/s/ Denise L. Sunseri
-----------------------------------
Denise L. Sunseri, Secretary
24
<PAGE> 1
EXHIBIT 4.4
FIRST AMENDMENT TO
RIGHTS AGREEMENT
This First Amendment to Rights Agreement (this "Amendment") is
made and entered into as of the 23rd day of January, 1996, by and between
MEDICAL IMAGING CENTERS OF AMERICA, INC., a California corporation (the
"Company"), and HARRIS TRUST COMPANY OF CALIFORNIA (the "Rights Agent").
RECITALS
A. Whereas, the Company and Union Bank entered into a
Rights Agreement (the "Rights Agreement") dated as of October 2, 1991; and
B. Whereas, Harris Trust Company of California has replaced
Union Bank as Rights Agent under the Rights Agreement; and
C. Whereas, Section 27 of the Rights Agreement provides
that, subject to certain conditions not applicable here, the Company may
supplement or amend any provision of the Rights Agreement without the approval
of any holders of Right Certificates representing shares of Common Stock; and
D. Whereas, in October 1995, the Company effected a
one-for-five reserve stock split (the "Reverse Stock Split") which had certain
effects on the Rights Agreement; and
E. Whereas, based on the advice of counsel to the
Company, the Board of Directors of the Company believes that certain changes to
the Rights Agreement, which among other things, provide greater flexibility for
the Company under the Rights Agreement and take into consideration the Reverse
Stock Split, are desirable and in the best interests of the Company and its
shareholders and has authorized certain amendments to the Rights Agreement in
the manner set forth herein;
AGREEMENT
NOW THEREFORE, the Company and the Rights Agent hereby agree
as follows:
1. Amendments. The Rights Agreement is hereby amended
as set forth below.
(a) The first paragraph of Section 11(a)(ii) of
the Rights Agreement is hereby amended to read in its entirety as follows:
"(ii) In the event any Person shall become
an Acquiring Person proper provision shall be made so that
each holder of a Right shall thereafter have a right to
receive, upon exercise thereof at a price equal to the then
current Purchase Price multiplied by the number of one
one-hundredths of a Preferred Share for which a Right is then
exercisable, in accordance with the terms of this Agreement,
such number of Common Shares of the Company as shall equal the
result obtained by (x) multiplying
1
<PAGE> 2
the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right is then
exercisable and dividing that product by (y) 50% of the then
current per share market price of the Company's Common Shares
(determined pursuant to Section 11(d) hereof) on the date such
Person became an Acquiring Person (the "Adjustment Shares")."
(b) Section 11(a)(iii) of the Rights Agreement
is hereby amended to read in its entirety as follows:
"(iii) In the event that there shall not be
sufficient Common Shares issued but not outstanding or
authorized but unissued to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii), the
Company shall take all such action as may be necessary to
authorize additional Common Shares for issuance upon exercise
of the Rights; provided, however, that if the Company
determines that it is unable to cause the authorization of a
sufficient number of additional Common Shares, then, in the
event the Rights become exercisable, the Company, with respect
to each Right and to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on
the date hereof to which it is a party, shall: (A) determine
the excess of (1) the value of the Adjustment Shares issuable
upon the exercise of a Right (the "Current Value"), over (2)
the Purchase Price (such excess, the "Spread") and (B) with
respect to each Right, make adequate provision to substitute
for the Adjustment Shares, upon payment of the applicable
Purchase Price, (1) cash, (2) a reduction in the Purchase
Price, (3) Common Shares or other equity securities of the
Company (including, without limitation, shares, or units of
shares, of preferred stock which the Board of Directors of the
Company has deemed to have the same value as Common Shares)
(each such share of preferred stock constituting a "Common
Stock Equivalent")), (4) debt securities of the Company, (5)
other assets or (6) any combination of the foregoing having an
aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board of Directors
of the Company based upon the advice of a nationally
recognized investment banking firm selected by the Board of
Directors of the Company; provided, however, that if the
Company shall not have made adequate provision to deliver
value pursuant to clause (B) above within thirty (30) days
following the first occurrence of the event described in
Section 11(a)(ii) above, then the Company shall be obligated
to deliver, upon the surrender for exercise of a Right and
without requiring payment of the Purchase Price, Common Shares
(to the extent available) and then, if necessary, cash, which
in the aggregate are equal to the Spread. If the Board of
Directors of the Company shall determine in good faith that it
is unlikely that sufficient additional Common Shares could be
authorized for issuance upon exercise in full of the Rights,
the thirty (30) day period set forth above may be extended and
re-extended to the extent necessary, but not more than ninety
(90) days following the first occurrence of the event listed
in Section 11(a)(ii) above, in order that the Company may seek
stockholder approval for the authorization of such additional
shares
2
<PAGE> 3
(such period as may be extended, the "Substitution Period").
To the extent that the Company determines that some action
need be taken pursuant to the first and/or second sentences of
this Section 11(a)(iii), the Company (x) shall provide that
such action shall apply uniformly to all outstanding Rights,
and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such
first sentence and to determine the value thereof. In the
event of any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has
been temporarily suspended as well as a public announcement at
such time as the suspension is no longer in effect. For
purposes of this Section 11(a)(iii), the value of a Common
Share shall be the current per share market price (as
determined pursuant to Section 11(d)) on the date of the first
occurrence of the event listed in Section 11(a)(ii) above and
the value of any Common Stock Equivalent shall be deemed to
have the same value as the Common Shares on such date.
(c) Section 23(b) of the Rights Agreement is
hereby amended to read in its entirety as follows:
"(b) The Board of Directors of the Company may, at
its option, at any time prior to, or within ten (10) days
after a Shares Acquisition Date, redeem all but not less than
all of the then outstanding Rights at a redemption price of
$.05 per Right (after giving effect to the Reverse Stock
Split), appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights by the
Board of Directors may be made effective at such time on such
basis and with such conditions as the Board of Directors in
its sole discretion may establish."
(d) Section 24 of the Rights Agreement is hereby
amended to read in its entirety as follows:
"Section 24. Exchange
(a) The Board of Directors of the Company may, at its
option, at any time after any Person becomes an Acquiring
Person, exchange all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have
become void pursuant to the provisions of Section 11(a)(ii)
hereof) for Preferred Shares or Common Shares, at the option
of the Board of Directors of the Company, at an exchange ratio
of five one-hundredths of a Preferred Share or one Common
Share per Right (after giving effect to the Reverse Stock
Split), appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date
hereof (such exchange ratio being hereinafter referred to as
the "Exchange Ratio").
(b) Immediately upon the action of the Board of
Directors of the Company ordering the exchange of any Rights
pursuant to subsection (a) of
3
<PAGE> 4
this Section 24 and without any further action and without any
notice, the right to exercise such Rights shall terminate and
the only right thereafter of a holder of such Rights shall be
to receive that number of Preferred Shares or Common Shares,
at the option of the Board of Directors of the Company, equal
to the number of such Rights held by such holder multiplied by
the Exchange Ratio. The Company shall promptly give public
notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not
affect the validity of such exchange. The Company promptly
shall mail a notice of any such exchange to all of the holders
of such Rights at their last addresses as they appear upon the
registry books of the Rights Agent. Any notice which is mailed
in the manner herein provided shall be deemed given, whether
or not the holder receives the notice. Each such notice of
exchange will state the method by which the exchange of the
Preferred Shares or Common Shares for Rights will be effected
and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be
effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of
Section 11(a)(ii) hereof) held by each holder of Rights.
(c) In the event that there shall not be sufficient
Preferred Shares or Common Shares issued but not outstanding
or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company
shall take all such action as may be necessary to authorize
additional Preferred Shares or Common Shares for issuance upon
exchange of the Rights.
(d) The Company shall not be required to issue
fractions of Preferred Shares or Common Shares or to
distribute certificates which evidence fractional Preferred
Shares or Common Shares. In lieu of such fractional Preferred
Shares or Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to
which such fractional Preferred Shares or Common Shares would
otherwise be issuable an amount in cash equal to the same
fraction of the current market value of a whole Preferred
Share or Common Share. For the purposes of this subsection
(e), the current market value of a whole Preferred Share or
Common Share shall be the closing price of a Preferred Share
or Common Share (as determined pursuant to the second sentence
of Section 11(d)(i) hereof) for the Trading Day immediately
after the public announcement by the Company that an exchange
is to be effected pursuant to this Section 24."
2. No Other Changes. Except as specifically set forth
herein, no change to the Rights Purchase Agreement is intended by the parties
hereto. Except as modified hereby, the parties to the Rights Agreement hereby
reaffirm in all respects all of the covenants, agreements, terms and conditions
set forth in the Rights Agreement, which are incorporated in full herein by
reference, and all terms, conditions and provisions thereof shall remain in full
force and effect, except as amended hereby.
4
<PAGE> 5
3. Miscellaneous. The headings and titles of this
Amendment are for convenience only and do not constitute a part hereof. This
Amendment shall be governed by and construed in accordance with the laws of the
State of California. This may be executed in any number of counterparts, any one
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
THE COMPANY:
MEDICAL IMAGING CENTERS OF AMERICA, INC.,
a California corporation
By: /s/ Robert S. Muehlberg
------------------------------------------
Name: Robert S. Muehlberg
Its: President and Chief Executive
Officer
THE RIGHTS AGENT:
HARRIS TRUST COMPANY OF CALIFORNIA
By: /s/ Michael Goedecke
------------------------------------------
Name: Michael Goedecke
Its: Vice President
5
<PAGE> 1
EXHIBIT 4.5
SECOND AMENDMENT TO
RIGHTS AGREEMENT
This Second Amendment to Rights Agreement (this "Amendment")
is made and entered into as of the 1st day of March, 1996, by and between
MEDICAL IMAGING CENTERS OF AMERICA, INC., a California corporation (the
"Company"), and HARRIS TRUST COMPANY OF CALIFORNIA (the "Rights Agent").
RECITALS
A. Whereas, the Company and Union Bank entered into a
Rights Agreement (the "Rights Agreement") dated as of October 2, 1991; and
B. Whereas, Harris Trust Company of California has replaced
Union Bank as Rights Agent under the Rights Agreement; and
C. Whereas, the Company and Harris Trust Company of
California previously entered into a First Amendment to Rights Agreement dated
as of January 23, 1996; and
D. Whereas, Section 27 of the Rights Agreement provides
that, subject to certain conditions not applicable here, the Company may
supplement or amend any provision of the Rights Agreement without the approval
of any holders of Right Certificates representing shares of Common Stock; and
E. Whereas, based on the advice of counsel to the
Company, the Board of Directors of the Company believes that certain amendments
to the Rights Agreement, as provided herein, are desirable and in the best
interests of the Company and its shareholders and has authorized certain
amendments to the Rights Agreement in the manner set forth herein.
AGREEMENT
NOW THEREFORE, the Company and the Rights Agent hereby agree
as follows:
1. Amendments. The Rights Agreement is hereby amended
as set forth below.
(a) The first sentence of Section 3(a) of the Rights
Agreement is hereby amended to read in its entirety as follows:
"(a) Until the earlier of (i) the seventh day after
the Shares Acquisition Date or (ii) the seventh day after the
date of the commencement of, or of the first public
announcement of the intention of any Person (other than the
Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company or any
entity holding Common Shares for or pursuant to the terms of
any such plan) to commence, a tender or exchange offer the
consummation of which would result in any Person becoming the
Beneficial Owner of Common Shares of the Company aggregating
30% or more of the then outstanding
1
<PAGE> 2
Common Shares of the Company (including such date which is
after the date of this Agreement and prior to the issuance of
the Rights; the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of Section 3(b) hereof) by the
certificates for Common Shares registered in the name of the
holders thereof (which certificates shall also be deemed to be
Right Certificates) and not by separate Right Certificates,
and (y) the right to receive Right Certificates will be
transferrable only in connection with the transfer of Common
Shares."
(b) Section 23(b) of the Rights Agreement is
hereby amended to read in its entirety as follows:
"(b) The Board of Directors of the Company may, at
its option, at any time prior to, or within seven (7) days
after a Shares Acquisition Date, redeem all but not less than
all of the then outstanding Rights at a redemption price of
$.05 per Right (after giving effect to the Reverse Stock
Split), appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights by the
Board of Directors may be made effective at such time on such
basis and with such conditions as the Board of Directors in
its sole discretion may establish. Anything contained in this
Rights Agreement to the contrary notwithstanding, the Rights
shall not be exercisable following a transaction or event
described in Section 11(a)(ii) prior to the expiration of the
Company's right of redemption hereunder."
2. No Other Changes. Except as specifically set forth
herein, no change to the Rights Purchase Agreement is intended by the parties
hereto. Except as modified hereby, the parties to the Rights Agreement hereby
reaffirm in all respects all of the covenants, agreements, terms and conditions
set forth in the Rights Agreement, which are incorporated in full herein by
reference, and all terms, conditions and provisions thereof shall remain in full
force and effect, except as amended hereby.
3. Miscellaneous. The headings and titles of this
Amendment are for convenience only and do not constitute a part hereof. This
Amendment shall be governed by and construed in accordance with the laws of the
State of California. This may be executed in any number of counterparts, any one
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
THE COMPANY:
MEDICAL IMAGING CENTERS OF AMERICA, INC.,
a California corporation
By: /s/ Robert S. Muehlberg
-----------------------------------------
Name: Robert S. Muehlberg
Its: President and Chief Executive
Officer
THE RIGHTS AGENT:
HARRIS TRUST COMPANY OF CALIFORNIA
By: /s/ Armando Ramos
-----------------------------------------
Name: Armando Ramos
Its: Vice President
3
<PAGE> 1
EXHIBIT 4.6
THIRD AMENDMENT TO
RIGHTS AGREEMENT
This Third Amendment to Rights Agreement (this "Amendment") is
made and entered into as of the 7th day of March, 1996, by and between MEDICAL
IMAGING CENTERS OF AMERICA, INC., a California corporation (the "Company"), and
HARRIS TRUST COMPANY OF CALIFORNIA (the "Rights Agent").
RECITALS
A. Whereas, the Company and Union Bank entered into a
Rights Agreement (the "Rights Agreement") dated as of October 2, 1991; and
B. Whereas, Harris Trust Company of California has replaced
Union Bank as Rights Agent under the Rights Agreement; and
C. Whereas, the Company and Harris Trust Company of
California previously entered into a First Amendment to Rights Agreement dated
as of January 23, 1996; and
D. Whereas, the Company and Harris Trust Company of
California previously entered into a Second Amendment to Rights Agreement dated
as of March 1, 1996; and
E. Whereas, Section 27 of the Rights Agreement provides
that, subject to certain conditions not applicable here, the Company may
supplement or amend any provision of the Rights Agreement without the approval
of any holders of Right Certificates representing shares of Common Stock; and
F. Whereas, based on the advice of counsel to the
Company, the Board of Directors of the Company believes that certain amendments
to the Rights Agreement, as provided herein, are desirable and in the best
interests of the Company and its shareholders and has authorized certain
amendments to the Rights Agreement in the manner set forth herein.
AGREEMENT
NOW THEREFORE, the Company and the Rights Agent hereby agree
as follows:
1. Amendments. The Rights Agreement is hereby amended
as set forth below.
(a) The first sentence of Section 3(a) of the Rights
Agreement is hereby amended to read in its entirety as follows:
"(a) Until Tuesday, March 12, 1996 at 11:59 p.m.
Pacific Standard Time (the "Distribution Date"), (i) the
Rights will be evidenced (subject to the provisions of Section
3(b) hereof) by the certificates for Common Shares registered
in the name of the holders thereof (which certificates shall
also be deemed to be Right Certificates) and not by separate
Right Certificates, and (ii) the right to receive Right
1
<PAGE> 2
Certificates will be transferrable only in connection with the
transfer of Common Shares."
(b) Section 23(b) of the Rights Agreement is
hereby amended to read in its entirety as follows:
"(b) The Board of Directors of the Company may, at
its option, at any time prior to Tuesday, March 12, 1996 at
11:59 p.m. Pacific Standard Time redeem all but not less than
all of the then outstanding Rights at a redemption price of
$.05 per Right (after giving effect to the Reverse Stock
Split), appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights by the
Board of Directors may be made effective at such time on such
basis and with such conditions as the Board of Directors in
its sole discretion may establish. Anything contained in this
Rights Agreement to the contrary notwithstanding, the Rights
shall not be exercisable following a transaction or event
described in Section 11(a)(ii) prior to the expiration of the
Company's right of redemption hereunder."
2. No Other Changes. Except as specifically set forth
herein, no change to the Rights Purchase Agreement is intended by the parties
hereto. Except as modified hereby, the parties to the Rights Agreement hereby
reaffirm in all respects all of the covenants, agreements, terms and conditions
set forth in the Rights Agreement, which are incorporated in full herein by
reference, and all terms, conditions and provisions thereof shall remain in full
force and effect, except as amended hereby.
3. Miscellaneous. The headings and titles of this
Amendment are for convenience only and do not constitute a part hereof. This
Amendment shall be governed by and construed in accordance with the laws of the
State of California. This may be executed in any number of counterparts, any one
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
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<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
THE COMPANY:
MEDICAL IMAGING CENTERS OF AMERICA, INC.,
a California corporation
By: /s/ Robert S. Muehlberg
-----------------------------------------
Name: Robert S. Muehlberg
Its: President and Chief Executive
Officer
THE RIGHTS AGENT:
HARRIS TRUST COMPANY OF CALIFORNIA
By: /s/ Michael Goedecke
-----------------------------------------
Name: Michael Goedecke
Its: Assistant Vice President
3
<PAGE> 1
EXHIBIT 4.7
FOURTH AMENDMENT TO
RIGHTS AGREEMENT
This Fourth Amendment to Rights Agreement (this "Amendment")
is made and entered into as of the 11th day of March, 1996, by and between
MEDICAL IMAGING CENTERS OF AMERICA, INC., a California corporation (the
"Company"), and HARRIS TRUST COMPANY OF CALIFORNIA (the "Rights Agent").
RECITALS
A. Whereas, the Company and Union Bank entered into a
Rights Agreement (the "Rights Agreement") dated as of October 2, 1991; and
B. Whereas, Harris Trust Company of California has replaced
Union Bank as Rights Agent under the Rights Agreement; and
C. Whereas, the Company and Harris Trust Company of
California previously entered into a First Amendment to Rights Agreement dated
as of January 23, 1996; and
D. Whereas, the Company and Harris Trust Company of
California previously entered into a Second Amendment to Rights Agreement dated
as of March 1, 1996; and
E. Whereas, the Company and Harris Trust Company of
California previously entered into a Third Amendment to Rights Agreement dated
as of March 7, 1996; and
F. Whereas, Section 27 of the Rights Agreement provides
that, subject to certain conditions not applicable here, the Company may
supplement or amend any provision of the Rights Agreement without the approval
of any holders of Right Certificates representing shares of Common Stock; and
G. Whereas, based on the advice of counsel to the
Company, the Board of Directors of the Company believes that certain amendments
to the Rights Agreement, as provided herein, are desirable and in the best
interests of the Company and its shareholders and has authorized certain
amendments to the Rights Agreement in the manner set forth herein.
AGREEMENT
NOW THEREFORE, the Company and the Rights Agent hereby agree
as follows:
1. Amendments. The Rights Agreement is hereby amended
as set forth below.
(a) The first sentence of Section 3(a) of the Rights
Agreement is hereby amended to read in its entirety as follows:
"(a) Until Tuesday, March 19, 1996 at 11:59 p.m.
Pacific Standard Time (the "Distribution Date"), (i) the
Rights will be evidenced (subject to the provisions
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<PAGE> 2
of Section 3(b) hereof) by the certificates for Common Shares
registered in the name of the holders thereof (which
certificates shall also be deemed to be Right Certificates)
and not by separate Right Certificates, and (ii) the right to
receive Right Certificates will be transferrable only in
connection with the transfer of Common Shares."
(b) Section 23(b) of the Rights Agreement is
hereby amended to read in its entirety as follows:
"(b) The Board of Directors of the Company may, at
its option, at any time prior to Tuesday, March 19, 1996 at
11:59 p.m. Pacific Standard Time redeem all but not less than
all of the then outstanding Rights at a redemption price of
$.05 per Right (after giving effect to the Reverse Stock
Split), appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as
the "Redemption Price"). The redemption of the Rights by the
Board of Directors may be made effective at such time on such
basis and with such conditions as the Board of Directors in
its sole discretion may establish. Anything contained in this
Rights Agreement to the contrary notwithstanding, the Rights
shall not be exercisable following a transaction or event
described in Section 11(a)(ii) prior to the expiration of the
Company's right of redemption hereunder."
2. No Other Changes. Except as specifically set forth
herein, no change to the Rights Purchase Agreement is intended by the parties
hereto. Except as modified hereby, the parties to the Rights Agreement hereby
reaffirm in all respects all of the covenants, agreements, terms and conditions
set forth in the Rights Agreement, which are incorporated in full herein by
reference, and all terms, conditions and provisions thereof shall remain in full
force and effect, except as amended hereby.
3. Miscellaneous. The headings and titles of this
Amendment are for convenience only and do not constitute a part hereof. This
Amendment shall be governed by and construed in accordance with the laws of the
State of California. This may be executed in any number of counterparts, any one
of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
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<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment
as of the day and year first above written.
THE COMPANY:
MEDICAL IMAGING CENTERS OF AMERICA, INC.,
a California corporation
By: /s/ Robert S. Muehlberg
-----------------------------------------
Name: Robert S. Muehlberg
Its: President and Chief Executive
Officer
THE RIGHTS AGENT:
HARRIS TRUST COMPANY OF CALIFORNIA
By: /s/ Michael Goedecke
-----------------------------------------
Name: Michael Goedecke
Its: Assistant Vice President
3
<PAGE> 1
EXHIBIT 10.2
MEDICAL IMAGING CENTERS OF AMERICA, INC.
1994 STOCK OPTION PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1994 Stock Option Plan ("Plan") is intended to promote
the interests of Medical Imaging Centers of America, Inc., a California
corporation (the "Corporation"), by providing (i) key employees (including
officers) of the Corporation (or its parent or subsidiary corporations) who are
responsible for the management, growth and financial success of the Corporation
(or its parent or subsidiary corporations), and (ii) consultants and other
independent contractors who provide valuable services to the Corporation (or
its parent or subsidiary corporations) with the opportunity to acquire a
proprietary or increase their proprietary interest in the Corporation as an
incentive for them to remain in the service of the Corporation (or its parent
or subsidiary corporations).
II. GENERAL
A. The Plan shall become effective as of January 1, 1994
(the "Effective Date").
B. This Plan shall serve as the successor to the
Corporation's 1983 Employee Stock Option Plan, its 1984 Employee Stock Option
Plan (Nonqualified), and its 1985 Employee Incentive Stock Option Plan
(together, the "Predecessor Plans"), and no further option grants or share
issuances shall be made under the Predecessor Plans from and after the
Effective Date. Each outstanding option under the Predecessor Plans
immediately prior to the Effective Date are hereby incorporated into this Plan
and shall accordingly be treated as outstanding options or share issuance under
this Plan. However, each such option or share issuance shall continue to be
governed solely by the terms and conditions of the instrument evidencing such
grant or issuance, and, except as otherwise expressly provided herein, no
provision of this Plan shall affect or otherwise modify the rights or
obligations of the holders of such incorporated options or shares with respect
to their acquisition of shares of the Corporation's common stock or otherwise
modify the rights or obligations of the holders of such options or shares.
C. For purposes of this Plan, the following provisions
shall be applicable in determining the parent and subsidiary corporations of
the Corporation:
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT of the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
<PAGE> 2
D. Neither the grant of options nor the issuance of any
shares pursuant to this Plan shall in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
E. The holder of an option grant under this Plan shall
have none of the rights of a shareholder with respect to any shares subject to
such option until such individual shall have exercised the option, paid the
exercise price for the purchased shares and been issued a stock certificate for
such shares.
III. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by a committee
("Committee") of two (2) or more non-employee Board members who assume full
responsibility for the administration of the Plan (the "Plan Administrator").
Members of the Committee shall serve for such period of time as the Board may
determine and shall be subject to removal by the Board at any time.
B. The Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or stock issuance.
IV. OPTION GRANTS
A. The persons eligible to receive option grants
pursuant to the Plan ("Optionee") are as follows:
(i) officers and other key employees of the
Corporation (or its parent or subsidiary corporations) who
render services which contribute to the management, growth and
financial success of the Corporation (or its parent or
subsidiary corporations);
(ii) those consultants or other independent
contractors who provide valuable services to the Corporation
(or its parent or subsidiary corporations).
Non-employee members of the Board shall not be eligible to
participate in the Plan or in any other stock option, stock purchase, stock
bonus or other stock plan of the Corporation (or its parent or subsidiary
corporations).
B. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants, the number
of shares to be covered by each such grant, whether the granted option is to be
an incentive stock option ("Incentive Option") which satisfies the requirements
of Section 422A of the Internal Revenue Code or a non-statutory option not
intended to meet such requirements, the time or times at which and the
circumstances under which each granted option is to become exercisable and the
maximum term for which the option may remain outstanding.
C. Notwithstanding any other provision of this Plan, no
individual shall be granted options to acquire more than one million
(1,000,000) shares of stock hereunder.
V. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be
available for issuance under the Plan and shall be drawn from either the
Corporation's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the
open market. The maximum number of shares of the Plan which may be issued over
the term of the Plan shall not exceed 900,000 newly authorized shares
hereunder,
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<PAGE> 3
plus the shares remaining available for issuance under the Predecessor Plans
which, as of December 31, 1993, was 773,500 shares reserved for issuance under
existing options and 204,625 additional shares. The number of shares which may
be issued pursuant to the Plan shall be subject to adjustment from time to time
in accordance with the provisions of this Section VI.
B. Should one or more outstanding options under this
Plan (including outstanding options under the Predecessor Plans incorporated
into this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section III of Article Two of the Plan), then the shares subject
to the portion of each option not so exercised shall be available for
subsequent option grant or share issuance under this Plan. In addition, should
the exercise price of an outstanding option under the Plan be paid with shares
of Common Stock or should shares of Common Stock otherwise issuable under the
Plan be withheld by the Corporation in satisfaction of the withholding taxes
incurred in connection with the exercise of an outstanding option under the
Plan, then the number of shares of Common Stock available for issuance under
the Plan shall be reduced by the gross number of shares for which the option is
exercised.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or
other change affecting the outstanding Common Stock, or any class of Common
Stock as a class, without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the number and/or class of shares
issuable under the Plan, (ii) the number and/or class of shares and price per
share in effect under each outstanding option under this Plan (including
outstanding options incorporated into this Plan from the Predecessor Plans).
Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
D. Common Stock issuable under the Plan may be subject
to such restrictions on transfer or such other restrictions as may be
determined by the Plan Administrator.
ARTICLE TWO
OPTION GRANTS
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to Employees of the Corporation or its parent
or subsidiary corporations pursuant to this Article Two shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not Employees of the Corporation or its parent or subsidiary
corporations may only be granted non-statutory options. Each granted option
shall be evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. OPTION PRICE.
(i) In General. The option price per share shall be
fixed by the Plan Administrator. In no event, however, shall the price for any
share be less than one hundred percent (100%) of the fair market value of that
share on the date of the option grant.
(ii) 10% Shareholder. If any individual to whom an option
is granted is the owner of stock (as determined under Section 424(d) of the
Internal Revenue Code) possessing 10% or more of the total combined voting
power of all classes of stock of the Corporation or any one of its parent or
subsidiary corporations, then the option price
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<PAGE> 4
per share shall not be less than one hundred and ten percent (110%) of the fair
market value per share of Common Stock on the grant date.
(iii) How Payable. The option price shall become immediately
due upon exercise of the option and shall be payable in one of the following
alternative forms specified below:
- full payment in cash or check drawn to the
Corporation's order;
- full payment in shares of Common Stock held
for at least six (6) months and valued at fair market value on
the Exercise Date (as such term is defined below);
- full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at
fair market value on the Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall
provide irrevocable written instructions to a designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover
the aggregate option price payable for the purchased shares
plus all applicable Federal and State income and employment
taxes required to be withheld by the Corporation in connection
with such purchase and (II) shall provide written directives
to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale transaction.
For purposes of this subparagraph (iii), the Exercise Date
shall be the date on which written notice of the option exercise is delivered
to the Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
B. TERM AND EXERCISE OF OPTIONS. Each option granted
under this Article Two shall have such term as may be fixed by the Plan
Administrator, be exercisable at such time or times and during such period, and
on such conditions, as is determined by the Plan Administrator and set forth in
the stock option agreement evidencing the grant. No such option, however,
shall have a maximum term in excess of ten (10) years from the grant date and
no option granted to a 10% shareholder shall have a maximum term in excess of
five (5) years from the grant date. During the lifetime of the Optionee, the
option shall be exercisable only by the Optionee and shall not be assignable or
transferable by the Optionee otherwise than by will or by the laws of descent
and distribution following the Optionee's death.
C. TERMINATION OF SERVICE.
(i) Except to the extent otherwise provided pursuant to
Section IV of this Article Two, the following provisions shall govern the
exercise period applicable to any outstanding options under this Article Two
which are held by the Optionee at the time of his or her cessation of Service
or death.
- Should an Optionee's Service terminate for
any reason (including death or permanent disability as defined
in Section 22(e)(3) of the Internal Revenue Code) while the
holder of one or more outstanding options under the Plan, then
none of those options shall (except to the extent otherwise
provided pursuant to Section IV of this Article Two) remain
exercisable beyond the later of (i) the limited post-Service
period designated by the Plan Administrator at the time of the
option grant and set forth in the option agreement; or (ii)
(A) ninety (90) days from the date of termination if
termination was caused by other than the death or disability
(as defined in Section 22(e)(3) of the Internal Revenue Code)
of such Optionee or (B) twelve (12) months from the date of
termination if termination was caused by death or disability
of Optionee.
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<PAGE> 5
- Any option granted to an Optionee under this
Article Two and exercisable in whole or in part on the date of
the Optionee's death may be subsequently exercised, by the
personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant
to the Optionee's will or in accordance with the laws of
descent and distribution, provided and only if such exercise
occurs prior to the earlier of (i) the first anniversary of
the date of the Optionee's death or (ii) the specified
expiration date of the option term. Upon the occurrence of
the earlier event, the option shall terminate and cease to be
exercisable.
- Under no circumstances, however, shall any
such option be exercisable after the specified expiration date
of the option term.
- During the limited post-Service period of
exercisability, the option may not be exercised for more than
the number of shares for which the option is exercisable on
the date the Optionee's Service terminates. Upon the
expiration of such limited exercise period or (if earlier)
upon the expiration of the option term, the option shall
terminate and cease to be exercisable.
(ii) The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding, to permit one or more options held by the
Optionee under this Article Two to be exercised, during the limited period of
exercisability provided under subparagraph (i) above, not only with respect to
the number of shares for which each such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option would
otherwise have become exercisable had such cessation of Service not occurred.
(iii) For purposes of the foregoing provisions of this Section
I.C of Article Two (and for all other purposes under the Plan):
- The Optionee shall (except to the extent
otherwise specifically provided in the applicable option or
issuance agreement) be deemed to remain in the Service of the
Corporation for so long as such individual renders services on
a periodic basis to the Corporation (or any parent or
subsidiary corporation) in the capacity of an Employee, a
non-employee member of the Board or an independent consultant
or advisor.
- The Optionee shall be considered to be an
Employee for so long as he or she remains in the employ of the
Corporation or one or more parent or subsidiary corporations,
subject to the control and direction of the employer entity
not only as to the work to be performed but also as to the
manner and method of performance.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Corporation. Options
which are specifically designated as "non-statutory" options when issued under
the Plan shall not be subject to such terms and conditions.
A. OPTION PRICE. The option price per share of any
share of Common Stock subject to an Incentive Option shall in no event be less
than one hundred percent (100%) of the fair market value of such share of
Common Stock on the grant date.
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<PAGE> 6
B. DOLLAR LIMITATION. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee after December 31, 1986
under this Plan (or any other option plan of the Corporation or its parent or
subsidiary corporations) may for the first time become exercisable as incentive
stock options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two or more such options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
of such options as Incentive Options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted.
C. Except as modified by the preceding provisions of
this Section II, all the provisions of the Plan shall apply to all Incentive
Options granted hereunder.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under this Article Two
covering the same or different numbers of shares of Common Stock but having an
option price for each share which is not less than one hundred percent (100%)
of the fair market value of such share on the new grant date.
IV. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two
is to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
ARTICLE THREE
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. Each outstanding option which is assumed in
connection with a Corporate Transaction or is otherwise to continue in effect
following a Corporate Transaction (as defined below) shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would be issuable, in consummation of
such Corporate Transaction, to an actual holder of the same number of shares of
Common Stock as are subject to such option immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the option price
payable per share, provided the aggregate option price payable for such
securities shall remain the same. Appropriate adjustments shall also be made
to the class and number of securities available for issuance under the Plan
following the consummation of such Corporate Transaction.
B. In the event of any Corporate Transaction (as defined
below) the exercisability of each option grant at the time outstanding under
this Plan which is not continued under paragraph A hereof shall automatically
accelerate so that each such option shall, immediately prior to the specified
effective date for the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares. Upon
the consummation of the Corporate Transaction, all
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<PAGE> 7
option grants under this Plan shall terminate and cease to be outstanding. The
Plan Administrator may, in its discretion, extend the provisions of this
Paragraph B to options outstanding under the Predecessor Plans.
C. A Corporate Transaction means:
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a
transaction the principal purpose of which is to change the
State of the Corporation's incorporation,
(ii) the sale, transfer or disposition of all or
substantially all of the assets of the Corporation in
liquidation or dissolution of the Corporation, or
(iii) any reverse merger in which the Corporation
is the surviving entity but in which the holders of securities
possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities (as
measured immediately prior to such merger) transfer ownership
of those securities to person or persons not otherwise part of
the transferor group.
D. Except as otherwise provided by the Plan
Administrator in agreements governing the grant of options, in connection with
any Change in Control of the Corporation, the exercisability of each option
grant at the time outstanding under this Plan shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for the Change in Control, become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares. Similarly, all unvested
shares issued under the Plan shall automatically vest immediately prior to the
effective date of the Change in Control. For purposes of this Article Three, a
Change in Control shall be deemed to occur in the event:
(i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls,
is controlled by, or is under common control with, the Corporation)
directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding
securities pursuant to a tender or exchange offer made directly to the
Corporation's shareholders which the Board does not recommend such
shareholders to accept; or
(ii) there is a change in the composition of the
Board over a period of twenty-four (24) consecutive months or less such that a
majority of the Board members (rounded up to the next whole number) cease, by
reason of one or more proxy contests for the election of Board members, to be
comprised of individuals who either (A) have been Board members continuously
since the beginning of such period or (B) have been elected or nominated for
election as Board members during such period by at least a majority of the
Board members described in clause (A) who were still in office at the time such
election or nomination was approved by the Board.
The provisions of this Paragraph D shall apply to option grants and/or
stock issuances under the Predecessor Plans only to the extent expressly
extended thereto by the Plan Administrator.
II. DEFINITIONS OF FAIR MARKET VALUE
The fair market value of a share of Common Stock shall be
determined in accordance with the following provisions:
- If shares of the Class of Common Stock to be
valued are not at the time listed or admitted to trading on
any national stock exchange but is traded on the NASDAQ
National Market System, the fair market value shall be the
closing selling price per share of a share of that class on
the
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<PAGE> 8
date in question, as such price is reported by the National
Association of Securities Dealers through the NASDAQ National
Market System or any successor system. If there is no
reported closing selling price for the series on the date in
question, then the closing selling price on the last preceding
date for which such quotation exists shall be determinative of
fair market value.
- If shares of the class of common stock to be
valued are at the time listed or admitted to trading on any
national stock exchange, then the fair market value of a share
of that class shall be the closing selling price per share on
the date in question on the stock exchange determined by the
Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite
tape of transactions on such exchange. If there is no
reported sale of a share of the class on such exchange on the
date in question, then the fair market value shall be the
closing selling price on the exchange on the last preceding
date for which such quotation exists.
- If shares of the series of common stock to be
valued at the time are neither listed nor admitted to trading
on any stock exchange nor traded on the NASDAQ National Market
System, then the fair market value shall be determined by the
Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate, which may
include independent professional appraisals, in a manner
consistent with the provisions of Section 260.140.50 of the
Rules of the California Corporations Commissioner.
III. TAX WITHHOLDING
A. The Company's obligation to deliver shares or cash
upon the exercise of stock options granted under the Plan shall be subject to
the satisfaction of all applicable Federal, State and local income and
employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and
upon such terms and conditions as it may deem appropriate (including the
applicable safe-harbor provisions of SEC Rule 16b-3) provide any or all holders
of outstanding option grants under the Plan with the election to have the
Company withhold, from the shares of Common Stock otherwise issuable upon the
exercise of such options, a portion of such shares with an aggregate fair
market value equal to the designated percentage (up to 100% as specified by the
optionee) of the Federal and State income taxes ("Taxes") incurred in
connection with the acquisition of such shares. In lieu of such direct
withholding, one or more option holders may also be granted the right to
deliver shares of Common Stock to the Company in satisfaction of such Taxes.
The withheld or delivered shares shall be valued at the Fair Market Value on
the applicable determination date for such Taxes or such other date required by
the applicable safe-harbor provisions of SEC Rule 16b-3.
IV. AMENDMENT OF THE PLAN AND AWARDS
A. Except as herein provided, the Board has complete and
exclusive power and authority to amend or modify the Plan (or any component
thereof) in any or all respects whatsoever. No amendment or modification may
adversely affect the rights and obligations of an Optionee with respect to
options at the time outstanding under the Plan, nor adversely affect the rights
of any Participant with respect to Common Stock issued under the Plan prior to
such action, unless the Optionee consents to such amendment. In addition, the
Board may not, without the approval of the Corporation's shareholders, amend
the Plan to (i) materially increase the maximum number of shares issuable under
the Plan (except for permissible adjustments under Article One, Section V) or
(ii) materially modify the eligibility requirements for participation in the
Plan or materially increase the benefits accruing to Optionees or Participants
under the Plan.
8
<PAGE> 9
B. Options to purchase shares of Common Stock may be
granted under the Plan in excess of the number of shares then available for
issuance under the Plan, provided shareholder approval is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan within twelve (12) months after the date the first such excess option
grants are made.
V. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Company's Predecessor
Plans, shall become effective as of the Effective Date, and no further option
grants shall be made under the Predecessor Plans from and after such Effective
Date. If shareholder approval of this Plan is not obtained within twelve
months after the Effective Date, then each option granted under this Plan shall
terminate without ever becoming exercisable for the option shares and all
shares issued hereunder shall be repurchased by the Corporation at the purchase
price paid, together with interest (at the applicable Short Term Federal Rate).
However, in the event such shareholder approval is not obtained, the
Predecessor Plans shall continue in effect in accordance with the terms and
provisions last approved by the Corporation's shareholders, and all outstanding
options under the Predecessor Plans shall remain in full force and effect in
accordance with the instruments evidencing such options and issuances.
B. Each outstanding option issued under the Predecessor
Plans immediately prior to the Effective Date of this Plan are hereby
incorporated into this Plan and shall accordingly be treated as an outstanding
option or share issuance under this Plan. However, each such option or share
issuance shall continue to be governed solely by the terms and conditions of
the instrument evidencing such grant or issuance, and except as otherwise
expressly provided in this Plan, no provision of this Plan shall affect or
otherwise modify the rights or obligations of the holders of such options or
shares with respect to their acquisition of shares of Common Stock, or
otherwise modify the rights or obligations of the holders of such options or
shares.
C. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the Effective Date and for all
non-statutory options outstanding under the Option Plan and incorporated into
this Plan. The Plan Administrator may also allow such procedure to be utilized
in connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or Predecessor Plans.
D. The Plan shall terminate upon the earlier of (i) the
tenth anniversary of the Effective Date or (ii) the date on which all shares
available for issuance under the Plan shall have been issued or cancelled
pursuant to the exercise, surrender or cash-out of the options granted under
the Plan. If the date of termination is determined under clause (i) above,
then all option grants outstanding on such date shall thereafter continue to
have force and effect in accordance with the provisions of the instruments
evidencing such grants.
VI. USE OF PROCEEDS
Cash proceeds received by the Company from the sale of shares
under the Plan shall be used for general corporate purposes.
VII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option under the Plan, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it,
and the Common Stock issued pursuant to it.
9
<PAGE> 10
B. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until there shall have been
compliance with all applicable requirements of Federal and State securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of
the same class is then listed.
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the
right to remain in the employ or service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services of
such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
IX. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets
under the Plan may not be assigned, encumbered or otherwise transferred by any
Optionee or Participant.
B. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
10
<PAGE> 1
EXHIBIT 10.4
AGREEMENT AND AMENDMENT
THIS AGREEMENT AND AMENDMENT (the "Agreement") is entered into as of
January 16, 1996, between MEDICAL IMAGING CENTERS OF AMERICA, INC., a California
corporation ("MICA"), MICA IMAGING, INC., an Illinois corporation, MICA CAL I
INC., a California corporation, MICA CAL II INC., a California corporation, MICA
CAL III INC., a California corporation, MICA CAL IV INC., a California
corporation, MICA CAL VII INC., a California corporation, MICA CAL X, INC., a
California corporation, MICA FLO I INC., a California corporation, MICA OR I
INC., a California corporation, MICA PACIFIC, INC., a California corporation,
and AFFILIATED IMAGING NETWORK, INC., a California corporation (collectively,
the "MICA Subsidiaries" and referred to herein, together with MICA, as the "MICA
Obligors"), and GENERAL ELECTRIC COMPANY, a New York corporation acting through
GE Medical Systems ("GE Medical").
WHEREAS, GE Medical and MICA are parties to an Agreement, dated May 14,
1993 (the "Credit Agreement"), relating to, among other things, GE's provision
of equipment and services to MICA and the MICA Subsidiaries and pursuant to
which MICA executed and delivered to GE Medical a promissory note in the
principal amount of $7,442,616.38 (the "MICA Promissory Note"); and
WHEREAS, GE Medical and the MICA Obligors are parties to a Security
Agreement, dated as of May 27, 1993, pursuant to which the MICA Obligors have
granted to GE Medical certain liens and security interests; and
WHEREAS, the principal amount currently outstanding under the MICA
Promissory Note is approximately $2,700,000; and
WHEREAS, GE Medical owns a Common Stock Purchase Warrant (the
"Warrant") currently exercisable to purchase 160,000 shares of Common Stock of
MICA ("Common Shares") at a price set forth in the Warrant; and
WHEREAS, MICA has proposed to GE Medical that GE Medical accept as
payment in full of the amounts currently outstanding under the MICA Promissory
Note (1) a cash payment by MICA to GE Medical of $1,425,000 and (2) application
by MICA of $912,000 of the principal amount outstanding under the MICA
Promissory Note to the exercise price payable by GE Medical in connection with
the exercise by GE Medical of its right to purchase 160,000 Common Shares under
the Warrant; and
WHEREAS, MICA has proposed that it issue to GE Medical, in connection
with such transaction, a Common Stock Purchase Warrant to purchase 60,000 Common
Shares; and
WHEREAS, GE Medical has agreed to such proposal of MICA on the terms
and conditions set forth herein;
<PAGE> 2
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. MICA Promissory Note. (a)(i) MICA hereby agrees that, no later than
three business days after the date of this Agreement, MICA shall make a cash
payment to GE Medical in the amount of $1,425,000 by wire transfer of
immediately available funds to an account designated by GE Medical. MICA hereby
authorizes GE Medical to initiate a debit entry for such payment from MICA's
account in lieu of such wire transfer payment.
(ii) MICA agrees that, no later than three business
days after the date of this Agreement, it will issue to GE Medical 160,000
Common Shares in connection with the exercise by GE Medical of the Warrant. Such
Common Shares will be duly and validly issued and fully paid and nonassessable
and not subject to preemptive rights.
(b) GE Medical hereby agrees that its receipt from MICA of the
cash payment of $1,425,000 referred to in paragraph (a)(i) of this Section 1 and
160,000 Common Shares issued by MICA under the Warrant shall constitute payment
in full of all unpaid principal and accrued and unpaid interest under the MICA
Promissory Note. GE Medical agrees that, as soon as practicable after such
receipt, it shall cancel the Promissory Note held thereby and return such
Promissory Note to MICA.
2. Amendment of Existing Credit Documentation.
(a)(i) Credit Agreement Amendment. GE Medical and MICA agree
that the Credit Agreement is, effective as of the date hereof, hereby amended by
deleting from Section 1.36 thereof the phrase "under or in connection with the
Note" and substituting therefor the phrase ", including, without limitation, all
Liabilities of MICA or any Subsidiary to GE arising in connection with equipment
leases and services provided by GE to MICA or any such Subsidiary,".
(ii) Security Agreement Amendment. GE Medical and
each of the MICA Obligors agree that the Security Agreement is, effective as of
the date hereof, amended by deleting from Section 7(a) thereof the phrase "under
the Promissory Note" and substituting therefor the phrase ", including, without
limitation, all Obligations of MICA or any Subsidiary to GE arising in
connection with equipment leases and services provided by GE to MICA or any such
Subsidiary,".
(b)(i) On and after the date hereof, each reference in either
of the Credit Agreement or the Security Agreement to "this Agreement," "hereto"
or "hereof," or words of like import, and each reference in the Security
Agreement to the Credit Agreement and each reference in the Credit Agreement to
the Security Agreement, shall mean and be a reference to the Credit Agreement or
the Security Agreement, as the case may be, as amended hereby.
(ii) Except as specifically amended hereby, the
Credit Agreement and the Security Agreement shall remain in full force and
effect and are hereby ratified and confirmed.
2
<PAGE> 3
3. Additional Warrant. MICA hereby agrees that, no later than three
business days after the date of this Agreement, MICA shall issue and deliver to
GE Medical a Common Stock Purchase Warrant (the "Additional Warrant"), in the
form attached hereto as Exhibit A, to purchase 60,000 fully paid and
nonassessable Common Shares, at an exercise price of $8.50 per Common Share,
which exercise price shall be adjusted as set forth in the Additional Warrant.
The Additional Warrant shall be executed on behalf of MICA by the president or
any executive officer of MICA under its corporate seal.
4. Representations and Warranties of MICA. (a) MICA hereby represents
and warrants to GE Medical that each of MICA Medical Technology Services, Inc.,
MICA CAL XI Inc., MICA KAN I Inc., MICA KAN II Inc., MICA OK I Inc. and MICA TX
I, Inc. (collectively, the "Dissolved MICA Subsidiaries") was a wholly-owned
subsidiary of MICA as of the execution and delivery thereby of the Security
Agreement as of May 27, 1993.
(b) MICA hereby represents and warrants to GE Medical that (i)
each of the Dissolved MICA Subsidiaries has been dissolved in accordance with
the laws of the State of Delaware or the State of California, as the case may
be, (ii) none of the Dissolved Subsidiaries is currently in existence and (iii)
at the time of the dissolution of each of the Dissolved MICA Subsidiaries, such
Dissolved MICA Subsidiary transferred all of its right, title and interest in
the Collateral (as such term is defined in the Security Agreement) held thereby
to MICA or one of the other MICA Subsidiaries.
5. Counterparts. This Agreement may be executed in
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
6. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California.
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed and delivered as of the date first written above.
GENERAL ELECTRIC COMPANY,
acting through
GE Medical Systems
By: /s/ R.S. Berger
----------------------------------
Title: Manager, Financial Services
MEDICAL IMAGING CENTERS
OF AMERICA, INC.
By: /s/ Robert S. Muehlberg
----------------------------------
Title: President and CEO
MICA IMAGING, INC.
By: /s/ Denise L. Sunseri
----------------------------------
Title: Vice President and CFO
MICA CAL I INC.
By: /s/ Robert S. Muehlberg
----------------------------------
Title: President and CEO
MICA CAL II INC.
By: /s/ Robert S. Muehlberg
----------------------------------
Title: President and CEO
MICA CAL III INC.
By: /s/ Robert S. Muehlberg
----------------------------------
Title: President and CEO
4
<PAGE> 5
MICA CAL IV INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
MICA CAL VII INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
MICA CAL X, INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
MICA FLO I INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
MICA OR I INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
MICA PACIFIC, INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
AFFILIATED IMAGING
NETWORK, INC.
By: /s/ Robert S. Muehlberg
-------------------------------
Title: President and CEO
5
<PAGE> 6
EXHIBIT A
MEDICAL IMAGING CENTERS OF AMERICA, INC.
COMMON STOCK PURCHASE WARRANT
JANUARY 16, 1996
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS.................................................................................... 1
2. EXERCISE OF WARRANT............................................................................ 5
2.1 Manner of Exercise............................................................... 5
2.2 Payment of Taxes................................................................. 5
2.3 Fractional Shares................................................................ 6
2.4 Continued Validity............................................................... 6
3. TRANSFER, DIVISION AND COMBINATION............................................................. 6
3.1 Transfer......................................................................... 6
3.2 Division and Combination......................................................... 7
3.3 Expenses......................................................................... 7
3.4 Maintenance of Books............................................................. 7
4. ADJUSTMENTS.................................................................................... 7
4.1 Stock Dividends, Subdivisions, Combinations and Reclassifications................ 7
4.2 Other Provisions Applicable to Adjustments under this Section.................... 8
(a) When Adjustments to Be Made....................................... 8
(b) When Adjustment Not Required...................................... 8
5. NOTICES TO WARRANT HOLDERS..................................................................... 9
5.1 Notice of Adjustments............................................................ 9
5.2 Notice of Certain Corporate Action............................................... 9
6. NO IMPAIRMENT.................................................................................. 9
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION
WITH OR APPROVAL OF ANY GOVERNMENTAL AUTHORITY................................................. 10
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS............................................. 10
9. RESTRICTIONS ON TRANSFERABILITY................................................................ 11
9.1 Restrictive Legend............................................................... 11
</TABLE>
i
<PAGE> 8
<TABLE>
<S> <C>
9.2 Notice of Proposed Transfers..................................................................... 12
9.3 Required Registration............................................................................ 13
(a) Suspension of Registration........................................................ 13
(b) Hold-Back Agreements.............................................................. 14
(i) Restrictions on Public Sale By Holder of Registrable Securities.............. 14
(ii) Restrictions on Sale of Equity Securities by the Company and
Others.............................................................. 14
9.4 Incidental Registration.......................................................................... 15
9.5 Registration Procedures.......................................................................... 16
9.6 Expenses; Limitations on Registration............................................................ 20
9.7 Indemnification.................................................................................. 20
9.8 Termination of Restrictions...................................................................... 22
9.9 Listing on Securities Exchange................................................................... 23
9.10 Certain Limitations on Registration Rights....................................................... 23
9.11 Selection of Managing Underwriters............................................................... 24
10. SUPPLYING INFORMATION.......................................................................................... 24
11. LOSS OR MUTILATION............................................................................................. 24
12. OFFICE OF THE COMPANY.......................................................................................... 24
13. FINANCIAL AND BUSINESS INFORMATION............................................................................. 24
13.1 Information...................................................................................... 24
13.2 Annual Information............................................................................... 25
13.3 Filings.......................................................................................... 25
14. APPRAISAL...................................................................................................... 26
15. LIMITATION OF LIABILITY........................................................................................ 26
16. MISCELLANEOUS.................................................................................................. 26
16.1 Nonwaiver and Expenses........................................................................... 26
16.2 Notice Generally................................................................................. 26
16.3 Indemnification.................................................................................. 27
16.4 Remedies......................................................................................... 28
16.5 Successors and Assigns........................................................................... 28
16.6 Amendment........................................................................................ 28
16.7 Severability..................................................................................... 28
</TABLE>
ii
<PAGE> 9
<TABLE>
<S> <C>
16.8 Headings..................................................................... 28
16.9 Governing Law; Service of Process............................................ 28
16.10 MUTUAL WAIVER OF JURY TRIAL.......................................................... 29
</TABLE>
EXHIBIT A - SUBSCRIPTION FORM
EXHIBIT B - ASSIGNMENT FORM
iii
<PAGE> 10
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES FOR WHICH IT CAN
BE EXERCISED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR STATE LAW, THE
RULES AND REGULATIONS THEREUNDER OR THE TRANSFER RESTRICTIONS OF THIS WARRANT.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
COMMON STOCK PURCHASE WARRANT
60,000 Shares, Subject to Adjustment
January 16, 1996
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, a New York
corporation acting through GE Medical Systems, or registered assigns, is
entitled, at any time on and after the Exercise Date (as such term is
hereinafter defined) and on or prior to the Expiration Date (as such term is
hereinafter defined), to purchase from MEDICAL IMAGING CENTERS OF AMERICA, INC.,
a California corporation (the "Company"), 60,000 shares of Common Stock (as such
term is hereinafter defined), subject to adjustment as provided herein, of the
Company at a purchase price of $8.50 per share of Common Stock (subject to
adjustment as provided herein), all on the terms and conditions and pursuant to
the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below.
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company following the date of this Warrant.
"Appraised Value" shall mean, in respect of any share of Common Stock
on any date herein specified, the fair market value of such share of Common
Stock (determined without giving effect to the discount for (i) a minority
interest or (ii) any lack of liquidity of the Common Stock or to the fact that
the Company may have no class of equity registered under the Exchange Act) as of
the last day of the most recent fiscal month to end within 60 days prior to such
date specified, based on the value of the Company as a whole, as determined by a
member or members of the NASD selected in accordance with the definition below
of "Current Market Price" on the basis of a sale between a willing seller and
buyer, neither acting under any compulsion, divided by the number of Fully
Diluted Outstanding shares of Common Stock.
<PAGE> 11
"Book Value" shall mean, in respect of any share of Common Stock on any
date herein specified, the consolidated book value of the Company applicable to
Common Stock as of the last day of any month immediately preceding such date,
divided by the number of Fully Diluted Outstanding shares of Common Stock as
determined in accordance with GAAP by a firm of independent certified public
accountants of recognized national standing selected by the Company and
reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or a
day on which banks are required or permitted to be closed in the States of New
York or California.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include capital
stock of the Company of any other class (regardless of how denominated) issued
to the holders of shares of Common Stock upon any reclassification thereof which
is not preferred as to dividends or assets over any other class of stock of the
Company and which is not subject to redemption.
"Convertible Securities" shall mean evidences of indebtedness, options,
warrants or other rights to receive shares of stock or other securities which
are convertible into or exchangeable, with or without payment of additional
consideration in cash or property, for Common Stock, either immediately or upon
the occurrence of a specified date or a specified event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the highest of (a) the Book Value per share
of Common Stock at such date, and (b) the Appraised Value per share of Common
Stock as at such date, or if there shall then be a public market for the Common
Stock, the highest of (x) the Book Value per share of Common Stock at such date,
and (y) the average of the daily market prices for 30 consecutive Business Days
commencing 45 days before such date. The daily market price for each such day
shall be (i) if the Common Stock is listed or admitted to trading on a stock
exchange in the United States (including Nasdaq), the last sale price on such
day on the principal stock exchange on which such Common Stock is then listed or
admitted to trading, or (ii) if no sale takes place on such day on any such
exchange, the average of the last reported closing bid and asked prices on such
day as officially quoted on any such exchange.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common Stock
may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
2
<PAGE> 12
"Exercise Date" shall mean the date hereof.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean December 31, 1998.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all shares
of Common Stock issuable in respect of this Warrant and all other options,
warrants, Convertible Securities or other rights to purchase or receive Common
Stock outstanding on such date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"GE Medical" shall mean General Electric Company, a New York
corporation acting through GE Medical Systems.
"Holder" shall mean the Person or Persons in whose name the Warrant set
forth herein is registered on the books of the Company maintained for such
purpose. In the event more than one Person is so registered, "Holder" for
purposes of consent, demand or other action allowed or required to be taken
hereunder by the Holders of this Warrant, the word "Holder" shall refer to a
simple majority in interest of such Persons.
"NASD" shall mean the National Association of Securities Dealers, Inc.,
or any successor corporation thereto.
"Outstanding" shall mean, when used with reference to Common Stock, at
any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held exclusively by
or for the account solely of the Company or any wholly-owned subsidiary thereof
(collectively, "Subsidiary-Held Shares"), and shall include all shares issuable
in respect of any certificates representing fractional interests in shares of
Common Stock. Subsidiary-Held Shares shall remain Subsidiary-Held Shares even if
held in pledge as security unless and until such shares are foreclosed upon and
record, beneficial or equitable ownership transferred.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether federal,
state, county, city, municipal or otherwise, including, without limitation, any
instrumentality, division, agency, body or department thereof).
"Preferred Stock" shall mean any class of the Company's stock having
rights, preferences or privileges senior or prior in right to any other class.
3
<PAGE> 13
"Restricted Common Stock" shall mean shares of Common Stock which are,
or which upon their issuance on the exercise of this Warrant would be, evidenced
by a certificate bearing the restrictive legend set forth in Section 9.1(a).
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean, with respect to any Person, any corporation of
which an aggregate of more than 50 percent of the outstanding stock having
ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, stock of any other class or
classes of such corporation shall have or might have voting power by reason of
the happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one or more Subsidiaries of such
Person.
"Subsidiary-Held Shares" shall have the meaning set forth above in the
definition of "Outstanding."
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, this Warrant. All
Warrants shall at all times be identical as to terms and conditions and date,
except as to the percentage of Fully Diluted Outstanding Shares of Common Stock
for which they may be exercised. Collectively, all unexercised Warrants shall be
exercisable for the exact same number of shares as this Warrant would be
exercisable in the event any such Transfer or division had not occurred.
Exercise of any warrant shall not trigger any of the adjustments contemplated by
Section 4 of this Warrant.
"Warrant Price" shall mean an amount equal to (i) the number of shares
of Common Stock being purchased upon exercise of this Warrant pursuant to
Section 2.1, multiplied by (ii) the Current Warrant Price as of the date of such
exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. From and after the Exercise Date and until 5:00
p.m., California time, on the Expiration Date, the Holder may exercise the
Warrant on Business Days, for all or any portion of 60,000 shares (subject to
adjustment as provided hereunder) of Common Stock then purchasable hereunder.
4
<PAGE> 14
In order to exercise this Warrant, in whole or in part, Holder shall
deliver to the Company at its principal office at 9444 Farnham Street, Suite
100, San Diego, California 92123 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price in the manner specified
below, and (iii) this Warrant. Such notice shall be substantially in the form of
the subscription form appearing at the end of this Warrant as Exhibit A, duly
executed by Holder or its agent or attorney. Upon receipt thereof, the Company
shall, as promptly as practicable, and in any event within five Business Days
thereafter, execute or cause to be executed and deliver or cause to be delivered
to Holder a certificate or certificates representing the aggregate number of
full shares of Outstanding shares of Common Stock issuable upon such exercise.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as such Holder shall request in
the notice and shall be registered in the name of Holder or, subject to Section
9, such other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the notice, together with the payment as set
forth below, and this Warrant are received by the Company as described above and
all taxes required to be paid by Holder, if any, pursuant to Section 2.2 prior
to the issuance of such shares have been paid or agreed to be paid when finally
determined.
Payment of the Warrant Price shall be made at the option of the Holder
by certified or official bank check, or by cancellation of indebtedness, if any,
owed by the Company to such Holder.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable. The Company shall pay all expenses in connection
with, and all taxes and other governmental charges that may be imposed with
respect to, the issue or delivery thereof, unless such tax or charge is imposed
by law upon Holder, in which case such taxes or charges shall be paid by Holder.
The Company shall not be required, however, to pay any tax or other charge
imposed in connection with any transfer involved in the issuance of any
certificate for shares of Common Stock issuable upon exercise of this Warrant in
any name other than that of Holder, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the satisfaction of the
Company that no such tax or other charge is due.
2.3 Fractional Shares. The Company shall not issue a fractional share
of Common Stock upon exercise of this Warrant. A fractional share otherwise
issuable shall be rounded up to the nearest whole share.
2.4 Continued Validity. A holder of shares of Common Stock issued upon
the exercise of this Warrant (other than a holder who acquires such shares after
the same have been publicly sold pursuant to a Registration Statement under the
Securities Act or sold pursuant to Rule 144
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thereunder), shall continue to be entitled with respect to such shares to all
rights to which it would have been entitled as Holder under Sections 9, 10, 13,
and 16 of this Warrant. The Company shall, at the time of each exercise of this
Warrant upon the request of the holder of the shares of Common Stock issued upon
such exercise hereof, acknowledge in writing, in form reasonably satisfactory to
such holder, its continuing obligation to afford to such holder all such rights;
provided, however, that if such holder shall fail to make any such request, such
failure shall not affect the continuing obligation of the Company to afford to
such holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. This Warrant shall be nontransferable other than to a
division, subsidiary or affiliate of GE Medical except by merger of the Holder
with another entity or otherwise as contemplated in Section 9 hereof or by
operation of law. Subject to compliance with Section 9, transfer of this Warrant
and all rights hereunder, in whole or in part, shall be registered on the books
of the Company to be maintained for such purpose, upon surrender of this Warrant
at the principal office of the Company referred to in Section 2.1 or the office
or agency designated by the Company pursuant to Section 12, together with a
written assignment of this Warrant substantially in the form of Exhibit B hereto
duly executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to Section 9, execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination specified in such instrument of assignment, and shall
issue to the assignor a new Warrant evidencing the portion of this Warrant not
so assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new Holder
for the purchase of shares of Common Stock without having a new Warrant issued.
If requested by the Company, a new Holder shall acknowledge in writing, in form
reasonably satisfactory to the Company, such Holder's continuing obligations
under Section 9 of this Warrant.
3.2 Division and Combination. Subject to Section 9, this Warrant may be
divided or combined with other Warrants upon presentation hereof at the
aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be issued,
signed by Holder or its agent or attorney. Subject to compliance with Section
3.1 and with Section 9, as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants under this
Section 3.
3.4 Maintenance of Books. The Company shall maintain, at its aforesaid
office or agency, books for the registration, and the registration of transfer,
of this Warrant.
4. ADJUSTMENTS
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The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant shall be subject to adjustment from time to time as set forth in
this Section 4. The Company shall give each Holder notice of any event described
below which requires an adjustment pursuant to this Section 4 at the time of
such event.
4.1 Stock Dividends, Subdivisions, Combinations and Reclassifications.
If at any time the Company shall with respect to its Common Stock or Convertible
Securities:
(a) pay a dividend or make distribution of Additional Shares
of Common Stock or Convertible Securities other than convertible
indebtedness or convertible Preferred Stock (in which event such
Additional Shares of Common Stock issuable upon exchange or conversion
shall be deemed distributed),
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock,
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or
(d) reclassify its Common Stock (other than a change in par
value, or from par value to no par value) into shares of Common Stock
and shares of any other class of stock; and, if the Outstanding shares
of Common Stock shall be changed into a larger or smaller number of
shares of Common Stock as a part of such reclassification, such change
shall be deemed a subdivision or combination, as the case may be, of
the Outstanding shares of Common Stock within the meaning of this
Section 4.1.,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable after the occurrence of any such event shall be equal to (A) the
maximum number of shares of Common Stock underlying this Warrant prior to the
occurrence of any such event, multiplied by (B) the number of Fully Diluted
Outstanding shares of Common Stock after any such event, divided by the number
of Fully Diluted Outstanding shares of Common Stock prior to any such event, and
(ii) the Current Warrant Price shall be adjusted to equal the Current Warrant
Price multiplied (A) by the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to the adjustment divided by (B) the
number of shares for which this Warrant is exercisable immediately after such
adjustment. Any increased number of shares of Common Stock subject to this
Warrant resulting from application of the foregoing shall be allocated ratably
among all shares of Common Stock subject to this Warrant prior to each such
event and the shares (including the newly allocated shares) not subject to
clause (i) of Section 2.1 shall remain subject to the conditions precedent to
exercise described in clause (ii) of Section 2.1.
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4.2 Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which this Warrant is exercisable provided
for in this Section 4:
(a) When Adjustments to Be Made. The adjustments
required by this Section 4 shall be made whenever and as often as
any specified event requiring an adjustment shall occur. For the
purpose of any adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its
occurrence.
(b) When Adjustment Not Required. If the Company
shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend or distribution
or subscription or purchase rights and shall, thereafter and
before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution,
subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any
such adjustment previously made in respect thereof shall be
rescinded and annulled.
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5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of this Warrant, shall
be adjusted pursuant to Section 4, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated, specifying the number of shares of
Common Stock for which this Warrant is exercisable, and any change in the
purchase price or prices thereof, after giving effect to such adjustment or
change. The Company shall promptly cause a signed copy of such certificate to be
delivered to each Holder in accordance with Section 16.2. The Company shall keep
at its office or agency designated pursuant to Section 12 copies of all such
certificates and cause the same to be available for inspection at said office
during normal business hours by any Holder or any prospective purchaser of a
Warrant designated by a Holder thereof.
5.2 Notice of Certain Corporate Action. The Holder shall be entitled to
the same rights to receive notice of corporate action as any holder of Common
Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such actions as may be necessary or appropriate to protect the rights of Holder
against impairment. Without limiting the generality of the foregoing, the
Company will (a) not increase the par value, if any, of any shares of Common
Stock receivable upon the exercise of this Warrant above the amount payable
therefor upon such exercise immediately prior to such increase in par value, (b)
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form satisfactory
to Holder, the continuing validity of this Warrant and the obligations of the
Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY
From and after the date hereof, the Company shall at all times reserve
and keep available for issuance upon the exercise of Warrants such number of its
authorized but unissued shares of
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Common Stock as will be sufficient to permit the exercise in full of all
outstanding Warrants. All shares of Common Stock which shall be so issuable,
when issued upon exercise of any Warrant and payment therefor in accordance with
the terms of such Warrant, shall be duly and validly issued and fully paid and
nonassessable, and not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be reasonably necessary in order that the Company may
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in the
Current Warrant Price, the Company shall obtain all such authorizations or
exemptions thereof, or consents thereto, as may be reasonably necessary from any
public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance upon
exercise of warrants require registration or qualification with any governmental
authority under any federal or state law (otherwise than as provided in Section
9) before such shares may be so issued, the Company will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be
duly registered or qualified; provided that the provisions of Section 9 shall
govern with respect to Company's obligation to effect the registration of its
securities under the Securities Act.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of Section 4
refers to the taking of a record of such holders, the Company will in each such
case take such a record and will take such record as of the close of business on
a Business Day. The Company will not at any time, except upon dissolution,
liquidation or winding up of the Company, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise or
transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
This Warrant shall not be transferable except to a division, subsidiary
or affiliate of GE Medical or by merger of the Holder with another entity or
otherwise by operation of law. Furthermore, this Warrant and the Warrant Stock
shall not be transferred, hypothecated or assigned before satisfaction of the
conditions specified in this Section 9, which conditions are intended to ensure
compliance with the provisions of the Securities Act and state law, with respect
to the Transfer of this Warrant or any Warrant Stock. Holder, by acceptance of
this Warrant, agrees to be bound by the provisions of this Section 9.
Furthermore, Holder, by acceptance of this Warrant and by acceptance and
delivery of the Subscription Form in the form of Exhibit A hereto, represents
and warrants to the Company for its reliance in connection with issuing this
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Warrant and the Warrant Stock, respectively, that (i) Holder is acquiring the
Warrant, and if applicable, the Warrant Stock for Holder's own account for
investment and not for sale or other disposition thereof; (ii) Holder
understands that such securities are not registered under the Securities Act and
must be held indefinitely unless subsequently registered under the Securities
Act or unless an exemption from such registration is available; (iii) Holder, by
reason of its business and financial experience has the capacity to protect its
own interests in connection with purchase and transfer of such securities and is
able to bear the economic risk thereof; and (iv) the Company has made available
to Holder all documents and information regarding an investment in such
securities requested by or on behalf of Holder, including but not limited to all
publicly available information on file with the Commission.
9.1 Restrictive Legend.
(a) Except as otherwise provided in this Section 9, each
certificate for Warrant Stock initially issued upon the exercise of
this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended,
and are subject to the conditions specified in a certain
Common Stock Purchase Warrant dated as of January 16,
1996, originally issued by Medical Imaging Centers of
America, Inc. No transfer of the shares represented by
this certificate shall be valid or effective until such
conditions and any requirements of state law have been
fulfilled. A copy of the form of such Warrant is on file
with the Secretary of Medical Imaging Centers of America,
Inc. The holder of this certificate, by acceptance of this
certificate, agrees to be bound by the provisions of such
Warrant.
(b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
This Warrant and its underlying securities have not been
registered under the Securities Act of 1933, as amended,
and may not be transferred in violation of such Act or
state law, the rules and regulations thereunder or the
provisions of this Warrant.
9.2 Notice of Proposed Transfers.
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(a) Prior to any Transfer or attempted Transfer of any
Warrants or any shares of Warrant Stock, the holder of such Warrants or
Warrant Stock shall give 10 days prior written notice (a "Transfer
Notice") to the Company of such holder's intention to effect such
Transfer, describing the manner and circumstances of the proposed
Transfer, and shall obtain and deliver to the Company an opinion in
form and substance reasonably satisfactory to the Company (addressed to
the Company and upon which the Company may rely) from counsel to such
holder who shall be reasonably satisfactory to the Company, that the
proposed Transfer of such Warrants or such Warrant Stock may be
effected without registration under the Securities Act and any
applicable state securities laws. After receipt of the Transfer Notice
and opinion, the Company shall, within five days thereof, so notify the
holder of such Warrants or Warrant Stock and such holder shall
thereupon be entitled to Transfer such Warrants or such Warrant Stock,
in accordance with the terms of the Transfer Notice. Each certificate,
if any, evidencing such shares of Warrant Stock issued upon such
Transfer shall bear the restrictive legend set forth in Section 9.1(a),
and each Warrant issued upon such Transfer shall bear the restrictive
legend set forth in Section 9.1(b), unless in the opinion of such
counsel such legend is not required in order to ensure compliance with
the Securities Act and any applicable state securities laws. The holder
of the Warrants or the Warrant Stock, as the case may be, giving the
Transfer Notice shall not be entitled to transfer and shall not
transfer such Warrants or such Warrant Stock until (i) the Company
receives a written statement of investment intent and sophistication
from the proposed transferee of such Warrants or Warrant Stock in
substance substantially similar to the final sentence of the first
paragraph of Section 9 and (ii) such holder receives notice from the
Company under this Section 9.2.
(b) The Holders of Warrants and Warrant Stock shall have the
right to request registration of such Warrant Stock pursuant to
Sections 9.3 and 9.4.
9.3 Required Registration. The rights ("Required Registration") of
holders of Warrants or Warrant Stock under this Section 9.3 shall expire on the
Expiration Date. After receipt of a written request from holders of Warrants or
Warrant Stock representing at least an aggregate of 50 percent of the total of
(i) all shares of Warrant Stock then subject to issuance upon exercise of all
Warrants or (ii) all shares of Warrant Stock then Outstanding having an
aggregate Current Market Price in excess of $400,000, requesting that the
Company effect the registration of Warrant Stock issuable upon the exercise of
such holder's Warrants or of any of such holder's Warrant Stock under the
Securities Act and specifying the intended method or methods of disposition
thereof, the Company shall promptly notify all holders of Warrants and Warrant
Stock in writing of the receipt of such request and each such holder, in lieu of
exercising its rights under Section 9.4, may elect (by written notice specifying
the intended method or methods of disposition of Warrant Stock sent to the
Company within 10 Business Days from the date of such holder's receipt of the
aforementioned Company's notice) to have such holder's shares of Warrant Stock
included in such registration thereof pursuant to this Section 9.3. Thereupon
the Company shall, as expeditiously as is possible, use its best efforts to
effect the registration under the Securities Act of all shares of Warrant Stock
which the Company has been so requested to register by such holders for sale,
all to the extent required to permit the disposition (in accordance with the
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<PAGE> 22
intended method or methods thereof, as aforesaid) of the Warrant Stock so
registered; provided, however, that the Company shall not be required to effect
more than one registration of any Warrant Stock pursuant to this Section 9.3. No
holder of any other warrant, Convertible Securities or other right to purchase
shares of Common Stock shall receive or be entitled to receive registration
rights that are more favorable than the registration rights available to the
Holder pursuant to the terms of this Section 9.
(a) Suspension of Registration.
If the Company has been requested to effect a Required
Registration, whether or not a Registration Statement with respect
thereto has been filed or has become effective, and furnishes to the
Holder requesting such registration a copy of a resolution of the Board
of Directors of the Company certified by the Secretary of the Company
stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company and its stockholders for
such Registration Statement (i) to be filed on or before the date such
filing would otherwise be required hereunder, (ii) to become effective
or (iii) to remain effective as long as such Registration Statement
would otherwise be required to remain effective, the Company shall have
the right to defer such filing or effectiveness or to suspend such
effectiveness for a period of not more than 120 days; provided,
however, that during such time the Company may not file a Registration
Statement for securities to be issued and sold for its own account or
that of anyone other than the Holder or Holders requesting such
Required Registration; and provided, further, that if effectiveness of
a Registration Statement is suspended pursuant to this provision, the
period of such suspension shall be added to the end of the period that
such Registration Statement would otherwise be required to be effective
hereunder so that the aggregate number of days that such Registration
Statement is required to remain effective hereunder shall remain
unchanged.
(b) Hold-Back Agreements.
(i) Restrictions on Public Sale By Holder of Registrable
Securities. Each Holder whose registrable securities are covered by a
Registration Statement filed pursuant to this Warrant agrees, if
requested by the managing underwriters in an underwritten offering, not
to effect any public sale or distribution of securities of the Company
of the same class as the securities included in such Registration
Statement, including a sale pursuant to Rule 144 under the Securities
Act (except as part of such underwritten registration), during the
10-day period prior to, and during the 90-day period beginning on, the
closing date of each underwritten offering made pursuant to such
Registration Statement, to the extent timely notified in writing by the
Company or the managing underwriters; provided, however, that the
foregoing provisions shall not apply to any Holder if such Holder is
prevented by applicable statute or regulation from entering any such
agreement.
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(ii) Restrictions on Sale of Equity Securities by the Company
and Others. The Company agrees (1) not to effect any public or private
offer, sale or distribution of its equity securities, including a sale
pursuant to Regulation D under the Securities Act during the 10-day
period prior to, and during the 90-day period beginning with, the
effectiveness of a Registration Statement filed under this Warrant to
the extent timely notified in writing by a holder of registrable
securities or the managing underwriters (except as part of such
registration, if permitted, or pursuant to registrations on Forms S-4
or S-8 or any successor form to such Forms or the issuance of Common
Stock pursuant to warrants or employee stock options outstanding on the
date hereof) and (2) to use its best efforts to cause each holder of
its privately placed equity securities purchased from the Company at
any time on or after the date of this Agreement to agree not to effect
any public sale or distribution of any such securities during such
period, including a sale pursuant to Rule 144 under the Securities Act
(except as part of such registration, if permitted).
9.4 Incidental Registration.
(a) The rights of holders of Warrants or Warrant Stock under this
Section 9.4 shall expire on the Expiration Date. If the Company at any time
proposes to file on its behalf or on behalf of any of its security holders ("the
demanding security holders") a Registration Statement under the Securities Act
on any form (other than a Registration Statement required under section 9.3 or a
Registration Statement on Form S-4 or S-8 or any successor form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to employees of the Company pursuant to any employee benefit
plan or to existing holders of the Company's debt or equity securities in any
exchange or rights offering) for the general registration of securities to be
sold for cash with respect to its Common Stock or any other class of equity
security (as defined in Section 3(a)(11) of the Exchange Act) of the Company, it
will give written notice to all holders of Warrants or Warrant Stock at least 30
days before the initial filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of disposition of
the securities proposed to be registered by the Company. The notice shall offer
to include in such filing the aggregate number of shares of Warrant Stock, and
the number of shares of Common Stock for which this Warrant is exercisable, as
such holders may request. Nothing herein shall preclude the Company from
discontinuing the registration of its securities being effected on its behalf or
on behalf of the demanding security holders at any time prior to the effective
date of the registration relating thereto.
(b) Each holder of any such Warrants or any such Warrant Stock desiring
to have Warrant Stock registered under this Section 9.4 shall advise the Company
in writing within 30 days after the date of receipt of such offer from the
Company, setting forth the amount of such Warrant Stock for which registration
is requested. The Company shall thereupon include in such filing the number of
shares of Warrant Stock for which registration is so requested and shall use its
best efforts to effect registration under the
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Securities Act of such shares; provided, however, that if the managing
underwriter of a proposed public offering shall advise the Company in
writing that, in its opinion, the distribution of the shares of Common
Stock into which the Warrants are exercisable and the Warrant Stock
requested to be included in the registration concurrently with the
securities being registered by the Company or such demanding security
holder would materially and adversely affect the distribution of such
securities by the Company or such demanding security holder, then all
demanding security holders (other than any selling security holder who
requested such registration and the Company (unless such Registration
Statement was filed at the request of a demanding security holder))
shall reduce the amount of securities each intended to distribute
through such offering on a pro rata basis. Except as otherwise provided
in Section 9.6 hereof, all expenses of such registration shall be borne
by the Company.
9.5 Registration Procedures. If the Company is required by the
provisions of this Section 9 to use its best efforts to effect the registration
of any of its securities under the Securities Act, the Company will, as
expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to
cause such Registration Statement to become and remain effective for a
period of time required for the disposition of such securities by the
holders thereof;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration
Statement effective and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all securities
covered by such Registration Statement until the earlier of such time
as all of such securities have been disposed of in a public offering or
the expiration of 180 days;
(c) furnish to any selling security holders such number of
copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such selling security
holders may reasonably request;
(d) use its best efforts to register or qualify the securities
covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions within the United States and Puerto
Rico as each Holder of such securities shall reasonably request in
light of such Holder's intended plan of distribution (provided,
however, that the Company shall not be obligated to qualify as a
foreign corporation to do business under the laws of any jurisdiction
in which it is not then qualified or to file any general consent to
service of process or subject itself to taxation in any such
jurisdiction), and do such other reasonable acts and things as may be
required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration
Statement;
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(e) if requested by a majority (in amount of underlying and
outstanding shares ) of the Holders of Warrants or Warrant Stock being
included in such registration, use its best efforts to obtain from
either a nationally recognized underwriter or investment banker or an
underwriter or investment banker reasonably acceptable to such Holders
a firm commitment (pursuant to an underwriting agreement in customary
form) to underwrite the public offering of the securities covered by
such Registration Statement;
(f) furnish, at the request of any holder requesting
registration of Warrant Stock pursuant to Section 9.3, on the date that
such shares of Warrant Stock are delivered to the underwriters for sale
pursuant to such registration or, if such Warrant Stock is not being
sold through underwriters, on the date that the Registration Statement
with respect to such shares of Warrant Stock becomes effective (1) a
copy of an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holders making such
request, stating that such Registration Statement has become effective
under the Securities Act and that (i) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (ii) the Registration
Statement, the related prospectus and each amendment or supplement
thereto comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except that such counsel need
express no opinion as to financial statements and data contained
therein), (iii) the descriptions in the Registration Statement or the
prospectus, or any amendment or supplement thereto, of all legal
matters and contracts and other legal documents or instruments are
accurate and fairly present the information required to be shown and
(iv) such counsel does not know of any legal or governmental
proceedings, pending or contemplated, required to be described in the
Registration Statement or prospectus, or any amendment or supplement
thereto, which are not described as required, nor of any contracts or
documents or instruments of a character required to be described in the
Registration Statement or prospectus, or any amendment or supplement
thereto, or to be filed as exhibits to the Registration Statement which
are not described and filed or incorporated by reference as required,
and such counsel shall also confirm that nothing has come to his
attention to lead him to believe that either the Registration Statement
or the prospectus, or any amendment or supplement thereto (other than
financial material and data as to which such counsel need make no
statement), contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which
made, not misleading and (2) a letter dated such date, from the
independent certified public accountants of the Company, addressed to
the underwriters, if any, and to the holder making such request and, if
such accountants refuse to deliver such letter to such holder, then to
the Company stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements and other
financial data of the Company included in the Registration Statement or
the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting
requirements of
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the Securities Act. Such opinion of counsel shall additionally
cover such other legal matters with respect to the registration in
respect of which such opinion is being given as the holders holding a
majority of the Warrant Stock so registered may reasonably request.
Such letter from the independent certified public accountants shall
additionally cover such other financial matters (including information
as to the period ending not more than five Business Days prior to the
date of such letter) with respect to the registration in respect of
which such letter is being given as the holders holding a majority of
the Warrant Stock being so registered may reasonably request;
(g) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the securities covered by the Registration Statement;
(h) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, but not
later than 18 months after the effective date of the Registration
Statement, an earnings statement covering the period of at least 12
months beginning with the first full month after the effective date of
such Registration Statement, which earnings statements shall satisfy
the provisions of Section 11(a) of the Securities Act; and
(i) notify each selling Holder of such registrable securities,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the
securities covered by the Registration Statement, such prospectus will
not contain an 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 and promptly make available to each
selling Holder any such supplement or amendment.
It shall be a condition precedent to the obligation of the Company to take any
action pursuant to this Section 9 in respect of the securities which are to be
registered at the request of any holder of Warrants or Warrant Stock that such
holder shall furnish to the Company such information regarding the securities
held by such holder and the intended method of disposition thereof as the
Company shall reasonably request and as shall be required in connection with the
action taken by the Company. Each selling Holder agrees that, upon receipt of
any notice from the Company of the happening of any event of the kind described
in Section 9.5(i) hereof, such selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the Registration Statement
until such selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 9.5(i) hereof, and, if so directed by the
Company such selling Holder will deliver to the Company all copies, other than
permanent file copies then in such selling Holder's possession, of the most
recent prospectus covering the securities covered by Registration Statement at
the time of receipt of such notice. If the Company shall give such notice, the
Company shall extend the period during which such Registration Statement shall
be maintained
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<PAGE> 27
effective by the number of days during the period from and including the date of
the giving of notice pursuant to Section 9.5(i) hereof to the date when the
Company shall make available to the selling Holders of the securities covered by
such Registration Statement a prospectus supplemented or amended to conform with
the requirements of Section 9.5(i) hereof.
9.6 Expenses; Limitations on Registration. All expenses incurred in
complying with Section 9, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the NASD, printing
expenses, fees and disbursements of counsel for the Company, the reasonable fees
and expenses of one counsel for the selling security holders (selected by those
holding a majority of the shares being registered), expenses of any special
audits incident to or required by any such registration and expenses of
complying with the securities or blue sky laws of any jurisdictions pursuant to
Section 9.5(d)), shall be paid by the Company, except that the Company shall not
be liable for any fees, discounts or commissions to any underwriter or any fees
or disbursements of counsel for any underwriter in respect of the securities
sold by such holder of Warrant Stock.
9.7 Indemnification.
(a) In the event of any registration of any of the Warrant
Stock under the Securities Act pursuant to this Section 9, the Company
shall indemnify and hold harmless the holder of such Warrant Stock,
such holder's directors and officers and each other Person (including
each underwriter) who participated in the offering of such Warrant
Stock and each other Person, if any, who controls such holder or such
participating Person within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or participating Person or
controlling Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement
under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein or any
amendment or supplement thereto or (ii) any alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse such
Holder or such director, officer or participating Person or controlling
Person for any legal or any other expenses reasonably incurred by such
holder or such director, officer or participating Person or controlling
Person in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company
shall 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 any alleged
untrue statement or alleged omission made in such Registration
Statement, preliminary prospectus, prospectus or amendment or
supplement in reliance upon and in conformity with written information
furnished to the Company by such holder specifically for use therein.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such holder or such director,
18
<PAGE> 28
officer or participating Person or controlling Person and shall
survive the transfer of such securities by such holder.
(b) (i) Each holder of any Warrant Stock, by acceptance
thereof, agrees to indemnify and hold harmless the Company, its
directors and officers and each other Person, if any, who controls the
Company within the meaning of the Securities Act against any losses,
claims, damages or liabilities, joint or several, to which the Company
or any such director or officer or any such Person may become subject
under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon information in writing provided
to the Company by such Holder of such Warrant Stock, which information
is contained, on the effective date thereof, in any Registration
Statement under which securities were registered under the Securities
Act at the request of such holder, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto;
provided, however, that such Holder's obligation under this Section
9.7(b) to indemnify and hold harmless the Company shall in no event
exceed the damage attributable solely to the inclusion of such written
information in such Registration Statement, preliminary prospectus,
final prospectus, or amendment or supplement suffered by the Person or
Persons whose claims gave rise to such losses, claims, damages or
liabilities.
(ii) The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar
securities industry professionals participating in the distribution, to
the same extent as provided above with respect to information furnished
in writing by persons specifically for inclusion in any prospectus or
Registration Statement.
(c) (i) If the indemnification provided for in this Section 9
from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party under this Section 9 as a
result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any
19
<PAGE> 29
legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
(ii) The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section
9.7(c) were determined by pro rata allocation or by any other
method of allocation which does not take account the
equitable considerations referred to in paragraph (i) of this
Section 9.7(c). No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent
misrepresentation.
9.8 Termination of Restrictions. Notwithstanding the provisions of this
Section 9, the restrictions imposed by this Section 9 upon the transferability
after the Exercise Date of the Warrants and the Warrant Stock and the legend
requirements of Section 9.1 shall terminate as to any particular Warrant or
share of Warrant Stock (i) when and so long as such security shall have been
effectively registered under the Securities Act and disposed of pursuant thereto
or (ii) when the Company shall have received an opinion of counsel reasonably
satisfactory to it that such legend is not required in order to ensure
compliance with the Securities Act. Whenever after the Exercise Date the
restrictions imposed by Section 9 shall terminate as to this Warrant, as
hereinabove provided, the Holder hereof shall be entitled to receive from the
Company, at the expense of the Company, a new Warrant bearing the following
legend in place of the restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE
WITHIN WARRANT CONTAINED IN SECTION 9 HEREOF
TERMINATED ON ____________,_____, AND ARE OF NO
FURTHER FORCE AND EFFECT."
All Warrants thereafter issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants entitled to bear
such legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any share of Warrant
Stock, as hereinabove provided, the holder thereof shall be entitled to receive
from the Company, at the Company's expense, a new certificate representing such
Warrant Stock not bearing the restrictive legend set forth in Section 9.1(a).
9.9 Listing on Securities Exchange. If and so long as the Company shall
list any shares of Common Stock on any securities exchange (including Nasdaq),
it will, at its expense, list thereon, maintain and, when necessary, increase
such listing of, all shares of Common Stock issued or, to the extent permissible
under the applicable securities exchange rules, issuable upon the exercise of
this Warrant so long as any shares of Common Stock shall be so listed during any
such Exercise Period.
9.10 Certain Limitations on Registration Rights. Notwithstanding the
other provisions of Section 9:
20
<PAGE> 30
(i) the Company shall not be obligated to register
the Warrant Stock of any Holder if (x) in the opinion of
counsel to the Company reasonably satisfactory to the Holder
and its counsel (or, if the Holder has engaged an investment
banking firm, to such investment banking firm and its
counsel), the sale or other disposition of such Holder's
Warrant Stock, in the manner proposed by such Holder (or by
such investment banking firm), may be effected without
registering such Warrant Stock under the Securities Act, and
(y) the failure of the Company to register such Warrant Stock
will not result in a reduction in the net proceeds to be
received by such Holder in connection with such sale or other
disposition; and
(ii) the Company shall not be obligated to register
the Warrant Stock of any Holder pursuant to Section 9.3, if
the Company has had a registration statement, under which such
Holder had a right to have its Warrant Stock included pursuant
to Sections 9.3 or 9.4, declared effective within one year
prior to the date of the request pursuant to Section 9.3;
provided, however, that if any Holder elected to have shares
of its Warrant Stock included under such registration
statement but some or all of such shares were excluded
pursuant to the provisions of Section 9.3 or Section 9.4, then
such one-year period shall be reduced to six months.
9.11 Selection of Managing Underwriters. The managing underwriter or
underwriters for any offering of Warrant Stock to be registered pursuant to
Section 9.3 shall be selected by the Company and shall be reasonably acceptable
to the Holders of a majority of the shares being so registered (other than any
shares being registered pursuant to Section 9.4).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
holder of Warrant Stock in supplying such information as may be reasonably
necessary for such Holder to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Warrant
or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement of GE Medical shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof, the
Company will execute and deliver in lieu hereof a new Warrant of like tenor to
such Holder; provided, in the case of mutilation, no indemnity shall be required
if this Warrant in identifiable form is surrendered to the Company for
cancellation.
21
<PAGE> 31
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which shall initially be the principal executive
offices of the Company) where the Warrants may be presented for exercise,
registration of transfer, division or combination as provided in this Warrant.
The Company shall notify Holder in writing prior to any change of the address of
the office at which the Warrants may be presented.
13. FINANCIAL AND BUSINESS INFORMATION
13.1 Information. Except during any period when the Company is a Public
Company (as hereinafter defined), it will deliver to each Holder, as soon as
practicable after the end of each month, and in any event within 30 days
thereafter, and after the end of each quarter and in any event within 45 days
thereafter, one copy of an unaudited consolidated balance sheet, statement of
income and statement of cash flow of the Company and its Subsidiaries for such
period setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal years. Such financial statements
shall be prepared by the Company in accordance with GAAP and shall be
accompanied by the certification of the Company's chief executive officer or
chief financial officer that such financial statements are complete and correct
and present fairly the consolidated financial position, results of operations
and cash flow of the Company and its Subsidiaries as at the end of such period
and for such year-to-date period, as the case may be.
For purposes of this Section 13, the term "Public Company"
shall mean a company (i) that is subject to the reporting requirements of
Section 15(d) of the Exchange Act, or (ii) any of whose securities are
registered pursuant to Section 12(b) or 12(g) of the Exchange Act.
13.2 Annual Information. Except during any period when the Company is a
Public Company, it will deliver to each Holder as soon as practicable after the
end of each fiscal year of the Company, and in any event within 90 days
thereafter, one copy of:
(i) an audited consolidated balance sheet of the
Company and its Subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income and
retained earnings and cash flow of the Company and its
Subsidiaries for such year;
setting forth in each case in comparative form the figures for the corresponding
periods in the previous fiscal year; all prepared in accordance with GAAP, and
which audited financial statements shall be accompanied by (i) an opinion
thereon of the independent certified public accountants regularly retained by
the Company, or any other firm of independent certified public accountants of
recognized national standing selected by the Company and (ii) a report of such
independent certified public accountants confirming, or describing the agreed
upon procedures applied to the Company's schedules computing, any adjustment,
made pursuant to Section 4
22
<PAGE> 32
during such year. Such report shall include a description of any errors
determined by the accountants in the Company's schedules.
13.3 Filings. The Company will file on or before the required date all
required regular or periodic reports (pursuant to the Exchange Act) with the
Commission and will deliver to Holder promptly upon their becoming available one
copy of each report, notice or proxy statement sent by the Company to its
stockholders generally, and of each regular or periodic report (pursuant to the
Exchange Act) and any Registration Statement, prospectus or written
communication (other than transmittal letters) pursuant to the Securities Act,
filed by the Company with (i) the Commission or (ii) any securities exchange on
which shares of Common Stock are listed (provided, however, that the Company may
request filing extensions pursuant to Rule 12b-25 under the Securities and
Exchange Act of 1934, as amended).
14. APPRAISAL
The determination of the Appraised Value per share of Common Stock
shall be made by an investment banking firm of nationally recognized standing
selected by the Company and acceptable to the Holder. If the investment banking
firm selected by the Company is not acceptable to the Holder and the Company and
the Holder cannot agree on a mutually acceptable investment banking firm, then
the Holder and the Company shall each choose one such investment banking firm
and the respective chosen firms shall agree on another investment banking firm
which shall make the determination. The Company shall retain, at its sole cost,
such investment banking firm as may be necessary for the determination of
Appraised Value required by the terms of this Warrant.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no enumeration herein of the rights or
privileges of Holder hereof, shall give rise to any liability of such Holder for
the purchase price of any Common Stock or as a stockholder of the Company,
whether such liability is asserted by the Company or by creditors of the
Company.
16. MISCELLANEOUS
16.1 Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Company shall operate
as a waiver of such right or otherwise prejudice the Company's rights, powers or
remedies. No course of dealing or any delay or failure to exercise any right
hereunder on the part of the Holder shall operate as a waiver of such right or
otherwise prejudice the Holder's rights, powers or remedies. If the Company
fails to make, when due, any payments provided for hereunder, or fails to comply
with any other provision of this Warrant, the Company shall pay to the Holder
such amounts as shall be sufficient to cover any costs and expenses including,
but not limited to, reasonable attorneys' fees, including
23
<PAGE> 33
those of appellate proceedings, incurred by the Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.
16.2 Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant shall be sufficiently given or made if in writing
and either delivered (i) in person with receipt acknowledged, (ii) by facsimile
transmission, with receipt electronically confirmed during normal business hours
of recipient, and that is confirmed by sending, no later than one (1) Business
Day following such transmission, a copy of such facsimile, by registered or
certified mail, return receipt requested, postage prepaid, or (iii) by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address or facsimile transmission number appearing on the books
of the Company maintained for such purpose.
(b) If to the Company at
Medical Imaging Centers of America, Inc.
9444 Farnham Street, Suite 100
San Diego, California 92123
(619) 560-0046
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval declaration, delivery or other communication hereunder shall
be deemed to have been duly given or served on the date on which personally
delivered, with receipt acknowledged or sent by facsimile with receipt
electronically confirmed during normal business hours of recipient, or three
Business Days after the same shall have been deposited in the United States
mail. Failure or delay in delivering copies of any notice, demand, request,
approval, declaration, delivery or other communication to the person designated
above to receive a copy shall in no way adversely affect the effectiveness of
such notice, demand, request, approval, declaration, delivery or other
communication.
16.3 Indemnification. In addition to the indemnities provided in
Section 9.7 (as to the subject matter of which the indemnifications, including
limitations, therein, shall control), the Company agrees to indemnify and hold
harmless the Holder, its officers, directors, employees, agents and attorneys
from and against any liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, claims, costs, attorneys' fees, expenses and
disbursements of any kind which may be imposed upon, incurred by or asserted
against Holder relating to or arising out of (i) Holder's exercise of this
Warrant or ownership of any shares of Warrant Stock issued in connection
therewith or (ii) any litigation to which the Holder is made a party in its
capacity as a stockholder or warrant holder of the Company; provided, however,
that the Company will not be liable hereunder to the extent that any
liabilities, obligations, losses, damages, penalties,
24
<PAGE> 34
actions, judgments, suits, claims, costs, attorneys' fees, expenses or
disbursements are found in a final nonappealable judgment by a court to have
resulted from either (i) the Holder's gross negligence or willful misconduct or
(ii) actions or omissions taken or not taken by the Holder in any capacity other
than as a stockholder or warrant holder of the Company.
16.4 Remedies. Each holder of Warrant and Warrant Stock, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under Section 9
of this Warrant. The Company agrees that monetary damages would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of Section 9 of this Warrant and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
16.5 Successors and Assigns. Subject to the provisions of Sections 3.1
and 9, this Warrant and the rights evidenced hereby shall inure to the benefit
of and be binding upon the successors of the Company and the successors and
assigns of Holder. The provisions of this Warrant are intended to be for the
benefit of all Holders from time to time of this Warrant, and shall be
enforceable by any such Holder.
16.6 Amendment. This Warrant and all other Warrants may be modified or
amended or the provisions hereof waived with the written consent of the Company
and the Holder, provided that no such Warrant may be modified or amended to
reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased upon
exercise of such Warrant (before giving effect to any adjustment as provided
therein) without the prior written consent of the Holder thereof.
16.7 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
16.8 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
16.9 Governing Law; Service of Process. In all respects, including all
matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed and enforced
in accordance with, the laws of the state of the Company's incorporation
applicable to contracts made and performed in such state, without regard to the
principles thereof regarding conflict of laws, and any applicable laws of the
United States of America. Service of process on the Company or Holder in any
action arising out of or relating to this Agreement shall be effective if mailed
to such party in accordance with the procedures and requirements set forth in
Section 16.2.
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<PAGE> 35
16.10 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY
RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE COMPANY AND HOLDER HEREOF
WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES),
THE COMPANY AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE
APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE
BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY AND HOLDER
HEREOF WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
By:
------------------------
Title:
Attest:
- ------------------------
Title:
26
<PAGE> 36
EXHIBIT A
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of the attached Warrant irrevocably
exercises such Warrant for the purchase of __________________________ shares of
Common Stock of Medical Imaging Centers of America, Inc. and herewith makes
payment therefor, all at the price and on the terms and conditions specified in
such Warrant and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to __________________________
whose address is __________________________ and, if such shares of Common Stock
shall not include all of the shares of Common Stock issuable as provided in such
Warrant, that a new Warrant of like tenor and date for the balance of the shares
of Common Stock issuable hereunder be delivered to the undersigned.
--------------------------------
Name of Registered Owner)
--------------------------------
(Signature of Registered Owner)
--------------------------------
(Street Address)
--------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the attached Warrant in
every particular, without alteration or enlargement or any
change whatsoever.
<PAGE> 37
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under such Warrant, with respect to the number of
shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint________________________
attorney-in-fact to register such transfer on the books of Medical Imaging
Centers of America, Inc. maintained for the purpose, with full power of
substitution in the premises.
Dated:______________ Print Name: ______________
Signature: ______________
Witness: ______________
NOTICE: The signature on this assignment must correspond
with the name as written upon the face of the
attached Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.6
January 30, 1996
Robert S. Muehlberg
10385 Eagle Lake Drive
San Diego, CA 92029
Dear Mr. Muehlberg:
As you are aware, the Compensation/Stock Option Committee of the Board
of Directors of Medical Imaging Centers of America, Inc. (the "Company") granted
you a severance package on May 25, 1994 which includes one year of salary and
benefits upon involuntary termination of your employment with the Company. The
Company and you desire to restate the terms of such package and to include
therein an amendment with respect to the definition of "change in control". Now,
therefore, in consideration of the foregoing and the mutual covenants and
agreements herein contained, the Company and you hereby agree as follows:
In the event of the involuntary termination of your employment with the
Company, at any time, the Company irrevocably agrees to provide you with the
following benefits:
1. You will be paid in a lump sum, within 30 days after your
termination, an amount equal to one (1) times the sum of your
then existing annual salary, car allowance and prior year's
bonus. In addition, during the 12-month period following your
last day of actual service with the Company, you will be
provided all benefit programs, or reasonable equivalents
thereof, which are offered by the Company at the time of
termination and in which you and your dependents are then
enrolled. These benefits will be fully governed by the
insurance contracts or benefit plans in force at the time of
termination. During the 12-month period referred to above,
pension benefits will continue to accrue and you will be fully
vested in such benefits, but no further vacation pay shall be
accrued and you will not be entitled to reimbursement for
business expenses incurred during such period. The lump sum
payment referred to above shall be in addition to, and not a
substitution for, any accrued and unpaid salary, vacation,
pension, retirement benefits, unreimbursed expenses or other
payments to which you may be otherwise entitled or which may
have been accrued to you under any other programs in which you
have been previously enrolled as an employee of the Company.
In addition, all stock options you hold for Company capital
stock shall fully vest as of your last day of active service.
<PAGE> 2
Robert S. Muehlberg
January 30, 1996
Page 2
2. Subject to paragraph 3 below, the phrase "involuntary
termination" as used in this letter shall include, but not be
limited to, any termination of your employment by the Company
for any reason, and any termination of your employment by you
due to the following circumstances:
a) a reduction in your salary or Company paid benefits;
b) a reduction of your eligibility for any Company
bonus, incentive compensation, stock option plans or
other benefit programs;
c) a substantial change in your title, position or
authority within the Company;
d) a change of your principal place of employment from
San Diego, California; or
e) a change in control due to (1) the Company or its
shareholders entering into an agreement to dispose
of, whether by sale, exchange, merger, consolidation,
reorganization, dissolution or liquidation (A) not
less than 80% of the assets of the Company or (B) a
portion of the outstanding common stock such that one
person or "group" (as defined by the Securities and
Exchange Commission) owns, of record or beneficially,
not less than 25% of the outstanding common stock; or
(2) the Company issues and sells to one person or
"group" (as defined by the Securities and Exchange
Commission) such number of shares of common stock
that said person or group owns, of record or
beneficially, not less than 25% of the common stock
outstanding after such issuance; or (3) a change in
the composition of the Board of Directors of the
Company (the "Board") such that the individuals who,
as of the date of this agreement, constitute the
Board (such Board shall be hereinafter referred to as
the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board;
provided, however, for purposes of this paragraph
2(e), that any individual who becomes a member of the
Board subsequent to the date of this Agreement whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of those individuals who are members of the
Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this
provision) shall be considered as though such
individual were a member of the Incumbent Board; but,
provided further, that any such individual whose
initial assumption of office occurs as a result of
either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the
<PAGE> 3
Robert S. Muehlberg
January 30, 1996
Page 3
Securities Exchange Act of 1934) or other actual or
threatened solicitation of proxies or consents by or
on behalf of a person or "group" (as defined by the
Securities and Exchange Commission) other than the
Board shall not be so considered as a member of the
Incumbent Board.
3. The benefits set forth in this letter will not be payable or
will cease to be paid to you:
a) in the case of any of the events giving rise to
involuntary termination of the type referred to in
paragraph 2 above, unless you tender your resignation
in writing from all positions you then hold in the
Company and its subsidiaries and affiliates as a
director, officer or member of any board or committee
within 30 days after the occurrence of the events as
described in paragraph 2, sections a) through d) and
within 180 days after the occurrence of the event
described in paragraph 2, section e); and
b) in the case of any termination by the Company, such
termination is due to your having committed fraud or
having disclosed confidential information that would
be seriously detrimental to the Company, or your
having committed a similar corrupt act that would be
seriously detrimental to the Company.
4. This agreement shall bind and inure to the benefit of the
successors, heirs, assigns and personal representatives of
each of you and the Company, and may not be assigned by the
Company, in whole or in part, without your prior written
consent. This agreement supercedes any other understandings or
agreements between the parties hereto regarding the subject
matter hereof. In the event of a dispute concerning this
agreement, the prevailing party shall be entitled to be
awarded reasonable expenses, including attorney's fees.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
a California corporation
By: /s/ Denise L. Sunseri
-------------------------------------------------
Name: Denise L. Sunseri
Its: Vice President and Chief Financial Officer
/s/ Robert S. Muehlberg
------------------------------------------------------
Robert S. Muehlberg
<PAGE> 4
FIRST AMENDMENT TO
SEVERANCE AGREEMENT
This First Amendment to Severance Agreement (this "Amendment") is made
and entered into as of the 19th day of March, 1996, by and between MEDICAL
IMAGING CENTERS OF AMERICA, INC., a California corporation (the "Company"), and
Robert S. Muehlberg.
The Company and Mr. Muehlberg hereby agree to amend that certain letter
agreement between the Company and Mr. Muehlberg concerning the Company's
obligations in the event of Mr. Muehlberg's involuntary termination, dated as of
January 30, 1996 (the "Severance Agreement"), in the manner set forth below:
1. Amendments.
(a) Paragraph 2 of the Severance Agreement is hereby amended by
adding the following clause f):
"f) the termination of the Auction Period (as such term is defined in
Section 1 of the Agreement of Compromise and Settlement dated as of March 19,
1996 by and among Medical Imaging Centers of America, Inc. ("MICA"), Keith R.
Burnett, Robert S. Muehlberg, Denise L. Sunseri and Robert G. Ricci, on the one
hand, and Warren G. Lichtenstein, Lawrence Butler, Jack L. Howard, Steel
Partners II, L.P., Steel Partners, L.L.C., and Steel Partners Services, Ltd., on
the other hand) without the consummation of an Auction Transaction (as such term
is defined in Section 1 of the Agreement of Compromise and Settlement) prior to
the end of the Auction Period."
(b) Paragraph 3(a) of the Severance Agreement is hereby amended by
amending and restating the last line of Paragraph 3(a) as follows:
"occurrence of any of the events described in paragraph 2, sections e)
and f); and"
2. No Other Changes. Except as specifically set forth herein, no change
to the Severance Agreement is intended by the parties hereto. Except as modified
hereby, the parties to the Severance Agreement hereby reaffirm in all respects
all of the covenants, agreements, terms and conditions set forth in the
Severance Agreement, which are incorporated in full herein by reference, and all
terms, conditions and provisions thereof shall remain in full force and effect,
except as amended hereby.
3. Miscellaneous. The headings and titles of this Amendment are for
convenience only and do not constitute a part hereof. This Amendment shall be
governed by and construed in accordance with the laws of the State of
California. This Amendment may be executed in any number of counterparts, any
one of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
a California corporation
By: /s/ Robert S. Muehlberg
---------------------------------------------
Name: Robert S. Muehlberg
Its: President and Chief Executive Officer
/s/ Denise L. Sunseri
-------------------------------------------------
2
<PAGE> 1
EXHIBIT 10.7
January 30, 1996
Denise L. Sunseri
12354 Mona Lisa Street
San Diego, CA 92130
Dear Ms. Sunseri:
As you are aware, the Compensation/Stock Option Committee of the Board
of Directors of Medical Imaging Centers of America, Inc. (the "Company") granted
you a severance package on May 25, 1994 which includes one year of salary and
benefits upon involuntary termination of your employment with the Company. The
Company and you desire to restate the terms of such package and to include
therein an amendment with respect to the definition of "change in control". Now,
therefore, in consideration of the foregoing and the mutual covenants and
agreements herein contained, the Company and you hereby agree as follows:
In the event of the involuntary termination of your employment with the
Company, at any time, the Company irrevocably agrees to provide you with the
following benefits:
1. You will be paid in a lump sum, within 30 days after your
termination, an amount equal to one (1) times the sum of your
then existing annual salary, car allowance and prior year's
bonus. In addition, during the 12-month period following your
last day of actual service with the Company, you will be
provided all benefit programs, or reasonable equivalents
thereof, which are offered by the Company at the time of
termination and in which you and your dependents are then
enrolled. These benefits will be fully governed by the
insurance contracts or benefit plans in force at the time of
termination. During the 12-month period referred to above,
pension benefits will continue to accrue and you will be fully
vested in such benefits, but no further vacation pay shall be
accrued and you will not be entitled to reimbursement for
business expenses incurred during such period. The lump sum
payment referred to above shall be in addition to, and not a
substitution for, any accrued and unpaid salary, vacation,
pension, retirement benefits, unreimbursed expenses or other
payments to which you may be otherwise entitled or which may
have been accrued to you under any other programs in which you
have been previously enrolled as an employee of the Company.
In addition, all stock options you hold for Company capital
stock shall fully vest as of your last day of active service.
<PAGE> 2
Denise L. Sunseri
January 30, 1996
Page 2
2. Subject to paragraph 3 below, the phrase "involuntary
termination" as used in this letter shall include, but not be
limited to, any termination of your employment by the Company
for any reason, and any termination of your employment by you
due to the following circumstances:
a) a reduction in your salary or Company paid benefits;
b) a reduction of your eligibility for any Company
bonus, incentive compensation, stock option plans or
other benefit programs;
c) a substantial change in your title, position or
authority within the Company;
d) a change of your principal place of employment from
San Diego, California; or
e) a change in control due to (1) the Company or its
shareholders entering into an agreement to dispose
of, whether by sale, exchange, merger, consolidation,
reorganization, dissolution or liquidation (A) not
less than 80% of the assets of the Company or (B) a
portion of the outstanding common stock such that one
person or "group" (as defined by the Securities and
Exchange Commission) owns, of record or beneficially,
not less than 25% of the outstanding common stock; or
(2) the Company issues and sells to one person or
"group" (as defined by the Securities and Exchange
Commission) such number of shares of common stock
that said person or group owns, of record or
beneficially, not less than 25% of the common stock
outstanding after such issuance; or (3) a change in
the composition of the Board of Directors of the
Company (the "Board") such that the individuals who,
as of the date of this agreement, constitute the
Board (such Board shall be hereinafter referred to as
the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board;
provided, however, for purposes of this paragraph
2(e), that any individual who becomes a member of the
Board subsequent to the date of this Agreement whose
election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a
majority of those individuals who are members of the
Board and who were also members of the Incumbent
Board (or deemed to be such pursuant to this
provision) shall be considered as though such
individual were a member of the Incumbent Board; but,
provided further, that any such individual whose
initial assumption of office occurs as a result of
either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the
<PAGE> 3
Denise L. Sunseri
January 30, 1996
Page 3
Securities Exchange Act of 1934) or other actual or
threatened solicitation of proxies or consents by or
on behalf of a person or "group" (as defined by the
Securities and Exchange Commission) other than the
Board shall not be so considered as a member of the
Incumbent Board.
3. The benefits set forth in this letter will not be payable or
will cease to be paid to you:
a) in the case of any of the events giving rise to
involuntary termination of the type referred to in
paragraph 2 above, unless you tender your resignation
in writing from all positions you then hold in the
Company and its subsidiaries and affiliates as a
director, officer or member of any board or committee
within 30 days after the occurrence of the events as
described in paragraph 2, sections a) through d) and
within 180 days after the occurrence of the event
described in paragraph 2, section e); and
b) in the case of any termination by the Company, such
termination is due to your having committed fraud or
having disclosed confidential information that would
be seriously detrimental to the Company, or your
having committed a similar corrupt act that would be
seriously detrimental to the Company.
4. This agreement shall bind and inure to the benefit of the
successors, heirs, assigns and personal representatives of
each of you and the Company, and may not be assigned by the
Company, in whole or in part, without your prior written
consent. This agreement supercedes any other understandings or
agreements between the parties hereto regarding the subject
matter hereof. In the event of a dispute concerning this
agreement, the prevailing party shall be entitled to be
awarded reasonable expenses, including attorney's fees.
IN WITNESS WHEREOF, the parties have executed this agreement as of the
day and year first above written.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
a California corporation
By: /s/ Robert S. Muehlberg
-----------------------------------------------
Name: Robert S. Muehlberg
Its: President and Chief Executive Officer
/s/ Denise L. Sunseri
-----------------------------------------------------
Denise L. Sunseri
<PAGE> 4
FIRST AMENDMENT TO
SEVERANCE AGREEMENT
This First Amendment to Severance Agreement (this "Amendment") is made
and entered into as of the 19th day of March, 1996, by and between MEDICAL
IMAGING CENTERS OF AMERICA, INC., a California corporation (the "Company"), and
Denise L. Sunseri.
The Company and Ms. Sunseri hereby agree to amend that certain letter
agreement between the Company and Ms. Sunseri concerning the Company's
obligations in the event of Ms. Sunseri's involuntary termination, dated as of
January 30, 1996 (the "Severance Agreement"), in the manner set forth below:
1. Amendments.
(a) Paragraph 2 of the Severance Agreement is hereby amended by adding
the following clause f):
"f) the termination of the Auction Period (as such term is defined in
Section 1 of the Agreement of Compromise and Settlement dated as of March 19,
1996 by and among Medical Imaging Centers of America, Inc. ("MICA"), Keith R.
Burnett, Robert S. Muehlberg, Denise L. Sunseri and Robert G. Ricci, on the one
hand, and Warren G. Lichtenstein, Lawrence Butler, Jack L. Howard, Steel
Partners II, L.P., Steel Partners, L.L.C., and Steel Partners Services, Ltd., on
the other hand) without the consummation of an Auction Transaction (as such term
is defined in Section 1 of the Agreement of Compromise and Settlement) prior to
the end of the Auction Period."
(b) Paragraph 3(a) of the Severance Agreement is hereby amended by
amending and restating the last line of Paragraph 3(a) as follows:
"occurrence of any of the events described in paragraph 2, sections e)
and f); and"
2. No Other Changes. Except as specifically set forth herein, no change
to the Severance Agreement is intended by the parties hereto. Except as modified
hereby, the parties to the Severance Agreement hereby reaffirm in all respects
all of the covenants, agreements, terms and conditions set forth in the
Severance Agreement, which are incorporated in full herein by reference, and all
terms, conditions and provisions thereof shall remain in full force and effect,
except as amended hereby.
3. Miscellaneous. The headings and titles of this Amendment are for
convenience only and do not constitute a part hereof. This Amendment shall be
governed by and construed in accordance with the laws of the State of
California. This Amendment may be executed in any number of counterparts, any
one of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
day and year first above written.
MEDICAL IMAGING CENTERS OF AMERICA, INC.
a California corporation
By: /s/ Denise L. Sunseri
---------------------------------------------------
Name: Denise L. Sunseri
Its: Vice President and Chief Financial Officer
/s/ Robert S. Muehlberg
-------------------------------------------------------
<PAGE> 1
EXHIBIT 10.8
MANAGEMENT, LICENSING
AND FACILITIES AGREEMENT
This Agreement is made effective as of March 14, 1988 by and between
MICA CAL IV, INC. a California corporation (hereinafter referred to as
"Corporation"), and Magnetic Imaging Medical Group (hereinafter referred to as
"Physician Group").
RECITALS
A. Corporation, after careful study, has concluded that there is a need
in Huntington Beach for a medical center specializing in performing a variety of
medical imaging and diagnostic services by experienced physicians at reasonable
cost.
B. Corporation has a comprehensive system for establishing and
providing financial and related management to such a medical center which makes
available to qualified physicians a fully staffed facility, equipment, supplies,
management, capital, marketing services, and systems necessary to provide a
large volume of medical imaging and diagnostic services to patients at
reasonable cost. These services will be obtained from Medical Imaging Centers of
America, Inc. ("MICA").
C. Corporation desires to make its system available to physicians who
are capable of offering high quality services to the public at a competitive
cost. To that end, Corporation has committed substantial resources, and has
incurred substantial expenses and future obligations to develop the medical
imaging center located at 7677 Center Avenue, Huntington Beach, California 92647
(hereinafter referred to as the "Center").
D. Physician Group desires to contract with Corporation for use of
Corporation's management services and system of delivering medical imaging and
diagnostic care, a sublease for the Center, and a license for use of any
appropriate trade names and marks which Corporation may own or own rights to
license.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Duties of Parties
1.1 Management Services of Corporation. Corporation shall provide the
following services:
1
<PAGE> 2
a. General Administrative Services. Overall supervision and management
of the Center, including supervision over the services and personnel described
below.
b. Personnel. Provision to the Center of all non-physician personnel
needed to operate and support the Center, such as nurses, technicians,
receptionists, secretarial, clerical, purchasing and marketing personnel. No
chief technologist shall be employed or terminated by the Corporation without
the consent of Physician Group, which consent shall not be unreasonably
withheld.
c. Training. Training of all non-physician personnel at the Center.
d. Fiscal Services. Fiscal services including accounting, auditing,
bookkeeping, budgeting, patient billings and record keeping, accounts
receivable, accounts payable processing, and electronic data processing.
e. Patient Records. Ownership and maintenance of patient medical
records and archives, record retrieval and record monitoring to assist Physician
Group with utilization and quality assurance reviews.
f. Physician Recruiting. Assistance to Physician Group in recruiting
and screening prospective physician-contractors, and physician-employees.
Physician Group shall make the final selections.
g. Quality Control. Assistance to Physician Group in the development of
appropriate quality control programs and protocols, including development of
performance and utilization standards, sampling techniques for case review, and
preparation of appropriately documented studies.
h. Administrative Services for Physician Group. Provision of general
administrative services to Physician Group in connection with its business
affairs relating to the Center, which shall include maintenance of Physician
Group's books and records and accounting services, billing, and such other
administrative services as Physician Group may from time to time require with
respect to the operation of the Center.
i. Management Reports. Preparation of management reports to assist
Physician Group in evaluating the performance and productivity of the Center and
of other doctors employed by or contracted with Physician Group at the Center.
j. Marketing. Marketing of the medical imaging and diagnostic services
offered at the Center by Physician Group pursuant to a marketing plan to be
jointly developed and shall be subject to approval by Physician Group.
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<PAGE> 3
k. Equipment and Supplies. Provision of all equipment, furnishings, and
supplies reasonably necessary for the efficient operation of the Center.
l. Janitorial and Maintenance Service. Janitorial, grounds and
maintenance services for the Center and its equipment and furnishings.
1.2 Administrative Services of Physician Group. Physician Group shall
cooperate with the Corporation and use its best efforts to assure the continuing
success of the Center. These efforts shall include, by way of example and not
limitation: (1) promotion of services provided by the Center with particular
emphasis on direct contact with referring physicians and other health care
providers including office visits, seminars and advisory boards to apprise such
individuals and groups of the nature and availability of services offered at the
Center, (2) provision of technical advice and assistance with respect to the
acquisition, installation and maintenance of equipment, (3) participation in
planning for the Center, (4) the development of policies and standards for
operation. Physician Group shall also provide such administrative services at
the Center as shall be necessary to assure that medical services are provided
efficiently and commensurate with a high standard of care for the medical
community in Huntington Beach. In doing so, Physician Group shall consult with
Corporation concerning non-physician staffing requirements, needed equipment and
supplies, preparation of a suitable budget, the need for ancillary support, such
as laboratory services, so as to optimize the smooth and efficient functioning
of the Center. Physician Group shall analyze the efficiency of the Center and
monitor and evaluate the Center personnel, both physician and non-physician
personnel. Physician Group shall provide its evaluations and recommendations to
Corporation. Any such recommendations and evaluations shall be rendered on a
confidential basis and may include specific designation of non-medical personnel
considered unacceptable by Physician Group.
1.3 Notification of Payer Disputes. Physician Group agrees to notify
Corporation of any complaints arising under any agreement between Physician
Group and a third-party payer for services provided at the Center, and Physician
Group shall immediately notify Corporation of any notice of termination of any
agreement with a third-party payer. Physician Group shall consult with the
Corporation and cooperate to resolve such problems as may arise under
third-party payer agreements. Physician Group shall also consult with
Corporation prior to terminating any third-party payer agreement.
ARTICLE II
Licensing Agreement
2.1 License of Trade Names and Marks. In consideration of the payment
provided for herein and the agreement of Physician Group to perform all of the
terms, covenants and conditions contained in this Agreement and the sublease for
the Center pursuant hereto, Corporation agrees to license to Physician Group the
nonexclusive right to use, subject to all legal restrictions upon
3
<PAGE> 4
physician advertising, such trade names and marks as MICA may license to the
Corporation, or as Corporation may from time to time adopt for use in connection
with its business, or the business of the Center but only in respect to business
of Physician Group conducted (1) at the Center while Physician Group's sublease
is in effect, (2) while this Agreement is in effect, and (3) if the Corporation
has not declared a default and Physician Group is in compliance with all of the
terms, covenants and conditions contained in this Agreement, and the sublease
for the Center.
2.2 Use of Trade Names and Marks. The exact manner of use of trade
names and marks licensed to Physician Group shall be subject to the prior
written consent of Corporation. Physician Group shall not use said names or
marks in publicly disseminated materials without such consent.
2.3 Nonexclusive Right. The license granted to Physician Group in
Section 2.1 hereof is nonexclusive.
2.4 Tern of License. The license granted herein shall terminate when
Physician Group's sublease expires or terminates, and shall terminate when this
Agreement expires or terminates.
2.5 Use of Trade Names and Marks After Term. Upon termination of this
license, Physician Group shall immediately discontinue the use of any trade
names and marks licensed to Physician Group hereunder in every respect, shall
execute all documents necessary to satisfy third- parties, including government
agencies regulating corporations and the practice of medicine that Physician
Group has no continuing interest in the trade names or marks of Corporation or
of MICA, and Physician Group shall not make any reference on their letterhead or
in other materials to their former affiliation with Corporation, or any
affiliation with MICA.
2.6 Protecting Goodwill. As further consideration for the opportunity
to sublease the Center and conduct the practice of medicine from the Center and
for the use of such trade names and marks, Physician Group agrees it will take
all necessary steps to preserve and protect the reputation and goodwill
associated with the Center and said names and marks including, without
limitation, the following:
a. Assigned Physicians. Physician Group shall contract only
with well-qualified licensed medical doctors who are experienced and Board
certified in medical imaging and diagnostic care provided at the Center, and the
assignment and continued service of an employed or contract medical doctor to
work at the Center shall be subject to the approval of Corporation, which shall
not be unreasonably withheld.
b. Compliance With Law. Physician Group and its
physician-contractors and physician-employees shall comply with all laws,
regulations, ethical and professional standards applicable to the practice of
medicine.
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<PAGE> 5
c. Monitoring of Services. Physician Group shall rigorously
monitor utilization and quality of services provided at the Center and shall
take all steps necessary to remedy any and all deficiencies in the efficiency or
the quality of medical care provided.
d. Time Commitment. Corporation shall, after consultation with
Physician Group, establish reasonable business hours for the operation of the
Center. Physician Group shall engage a sufficient number of physician-employees
or physician-contractors to meet the demand and potential demand for medical
imaging and diagnostic services at the Center, and to assure the efficient
operation of the Center during its established business hours. It is understood
that a physician shall be present when procedures are performed for patients.
Throughout the term of this Agreement, Physician Group shall exercise its
highest skills and best efforts to cause the practice at the Center to grow in
volume and profitability. To the latter end, except for undertaking bona fide
charity cases on a basis customary for physicians in the Huntington Beach area,
without written consent of the Corporation, Physician Group shall only use the
Center for performance of medical services which are compensable by the payment
of professional fees established under Section 6.3, or as approved by the
Corporation.
ARTICLE III
Sublease of Center
Concurrently with executing this Agreement, the parties are entering
into a sublease for the Center of even date, which is incorporated by this
reference as if fully set forth herein.
ARTICLE IV
Relationship of Parties
4.1 Practice of Medicine. A fundamental understanding between the
parties is that Corporation shall not participate in any manner in the medical
services rendered by Physician Group in the conduct of its medical practice at
the Center. Corporation may make recommendations, but shall have no control,
over matters affecting Physician Group's medical practice, including without
limitation the following: furnishing physicians, supervising medical services,
or any and all other matters affecting the practice of medicine. All patients
treated by Physician Group shall be deemed to be the patients of Physician
Group. Physician Group shall not represent in any direct or indirect manner to
the public or any third-party that Corporation has participated, is
participating, or will participate in the practice of medicine in any manner.
4.2 Relationship of Parties. This Agreement does not constitute either
party the agent, legal representative or employee for any purpose whatsoever of
the other party, and neither party is granted any right or authority to assume
or create any obligation for or on behalf of, or in the
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<PAGE> 6
name of, or in any way to bind the other party. Each party agrees not to incur
or contract for any debt or obligation on behalf of the other party, or commit
any act, make any representation or advertise in any manner which may adversely
affect any right of the other party, or be detrimental to its good name and
reputation.
ARTICLE V
Proprietary Interest and Rights of Corporation and MICA
5.1 Proprietary Interest of Corporation and MICA. Physician Group
recognizes the proprietary interest of Corporation and MICA in the Corporation
and MICA business system for operating a medical imaging and diagnostic center,
including all policies, procedures, operating manuals, forms, customer lists,
contracts, and other information regarding such system. Physician Group
acknowledges and agrees that such information constitutes trade secrets of
corporation and MICA. Physician Group hereby waives any and all right, title and
interest in and to such trade secrets and agrees to return all copies of such
trade secrets and information related thereto, at its expense, upon termination
of the Agreement.
5.2 Confidentiality. Physician Group acknowledges and agrees that
Corporation and MICA are entitled to prevent its competitors from obtaining and
utilizing its trade secrets. Physician Group agrees to hold the trade secrets of
Corporation and MICA in strictest confidence and not to disclose them or allow
them to be disclosed directly or indirectly to any person or entity other than
persons engaged by Physician Group for use in the course of their employment at
the Center, without the prior written consent of Corporation and MICA. Physician
Group acknowledges its confidential relationship to Corporation and the
confidentiality of its relationship with Corporation and of any information
relating to the services and business methods of Corporation or MICA which it
may obtain during the term of this Agreement. Physician Group shall not, either
during the term of this Agreement, or at any time after the expiration or sooner
termination of this Agreement, disclose to anyone other than persons employed at
the Center who use the information in the course of their employment any
confidential or proprietary information or trade secret of Corporation obtained
by it. Physician Group also agrees to place under legal obligation to treat such
information as strictly confidential any persons to whom said information is
disclosed for the purpose of performance.
5.3 Successor Medical Group. Upon termination of this Agreement, or the
sublease of the Center for any reason, whichever first occurs, Corporation shall
have the immediate right, in its sole discretion, to designate a professional
corporation, partnership or sole proprietor as successor to Physician Group at
the Center. If such professional corporation, partnership or sole proprietor is
composed solely of duly licensed physicians, they shall be entitled to retain
and utilize all existing customer lists and patient records at the Center.
Corporation agrees that all records transferred to Physician Group's successor
shall be maintained as long as required by law regulating retention of medical
records, and copies of said records shall be made available to
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<PAGE> 7
Physician Group at its expense, if required for the purpose of defending any
malpractice claim against Physician Group, or for the purpose of providing
medical care. The rights of the parties under this section shall survive
termination of this Agreement.
ARTICLE VI
Compensation
6.1 Inducement to Enter Agreement. As partial consideration, and as an
inducement to Physician Group for entering this Agreement, Corporation shall be
responsible for any losses related to the operation of the Center which do not
arise from wrongful or negligent acts or omissions of Physician Group.
6.2 Corporation's Risk. Corporation has incurred substantial expenses
and future obligations to establish the Center, the system for the delivery of
medical imaging and diagnostic services, including fees for consultants and
other professionals, salaries for responsible staff, interest expenses, lease
obligations, and costs of equipping the Center. Corporation has also assumed
substantial obligations associated with the continuing operation of the Center.
Although there is uncertainty about the profitability of the Center during the
initial years of operation, Corporation is assuming responsibility for losses as
provided in Section 6.1. The parties therefore recognize and agree that in order
for Corporation to receive a fair and reasonable return for its expenses and
risks, a fair return for lease of premises, services, and the use of its trade
names and marks hereunder, as well as to permit the necessary accumulation of
capital to establish and maintain a first rate and fully equipped Center, a goal
the parties hereto agree to be desirable, the total payments to Corporation
should increase in future years.
6.3 Professional Fees. Physician Group, shall in consultation with
Corporation, establish a schedule of fees and charges for medical services at
the Center.
6.4 Billing and Collections. Billings to patients for all services
rendered at the Center shall be in the name of Physician Group. Corporation, or
its delegate, shall serve as billing and collection agent for Physician Group,
and shall be diligent and timely in the performance of billing and collection
services. However, Corporation does not guarantee collection and shall not be
responsible for any loss to Physician Group as a result of inability to collect
fees and charges.
6.5 Intention of the Parties. It is the intention of the parties hereto
that from the revenues of the Center Physician Group shall be fairly and
reasonably compensated for its professional services and those of the physicians
engaged by it, and Corporation shall be fairly and reasonably compensated for
the sublease of the Center, the licensing of trade names and marks, the
provision of services by it pursuant to this Agreement, and for the expenses,
obligations, and risks assumed by it in connection with the establishment and
operation of the Center and the operation of the Corporation system.
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<PAGE> 8
6.6 Fair and Reasonable Compensation of Physician Group. The parties
hereto agree Physician Group will be fairly and reasonably compensated for its
services and those of the physicians it engages by retaining in the aggregate
twenty percent (20%) of the revenues actually collected for each medical imaging
diagnostic or other medical procedure ("medical services") performed by
Physician Group at the Center. For purposes of this Agreement, aggregate
revenues collected shall mean all collected receipts for medical imaging,
diagnostic and other medical procedures performed at the Center, including
charges for use of equipment, supplies, facilities and Center personnel in
connection with performance of medical services.
6.7 Fair and Reasonable Compensation to Corporation. Any revenues or
receipts in excess of those retained by Physician Group as provided in Section
6.6 hereof shall be paid to Corporation as compensation for the sublease of the
Center, provision of services under this Agreement, the licensing of trade names
and marks to Physician Group, and for its expenses, obligations, and risks in
connection with the establishment of the Center, and the operation of the
Corporation system. Said compensation includes the total rent to Corporation for
the Center subleased by Physician Group.
6.8 Remittance. All monies which Physician Group is entitled to retain
pursuant to Section 6.1 and all monies which Corporation is entitled to receive
pursuant to Section 6.7 shall be accounted for and disbursed weekly.
ARTICLE VII
Term and Termination
7.1 Term. Subject to paragraphs 7.2 and 7.3 below, this Agreement shall
become effective on the date first above written and shall continue for a period
of five years unless sooner terminated in accordance with this Agreement.
7.2 Termination by the Corporation. This Agreement may be terminated by
Corporation upon thirty (30) days' prior written notice to Physician Group upon
occurrence of the following:
7.2.1 The Prime Lease pursuant to which Corporation is leasing
the Center is terminated as a result of the acts or omissions of Physician Group
or any other reason.
7.2.2 Physician Group, or any shareholder, director or
physician-employee of Physician Group or any professional corporation to which
this Agreement may be assigned, engages in any criminal act in the nature of
conversion, embezzlement or theft relative to the business conducted pursuant to
this Agreement; Physician Group will maintain adequate physician- employee
dishonesty insurance.
8
<PAGE> 9
7.2.3 Physician Group or any professional corporation to which
this agreement may be assigned is liquidated or dissolved, or files a petition
seeking protection under any state or federal insolvency or similar law
affecting the rights of creditors generally, or a similar filing is made against
the Physician Group, or a receiver is appointed for all or substantially all of
the Physician Group's assets, unless said filing is dismissed within thirty (30)
days.
7.2.4 Breach by Physician Group of any of its obligations
under this Agreement, which breach continues for a period of thirty (30) days
following written notice of the breach, or otherwise by mutual agreement.
7.2.5 Conduct by Physician Group, its employees or agents
which is disruptive of operations of the Center, which interferes with the
performance of the Corporation's duties under this Agreement, provided such
conduct continues or reoccurs more than thirty (30) days following written
notice to Physician Group of such breach.
7.2.6 Conduct by Physician Group, its employees or agents
imposing, or which may impose, civil or criminal liabilities (other than
liability for medical malpractice) on Corporation.
7.2.7 Failure of Physician Group during any four (4) month
period commencing more than eighteen (18) months after the commencement of
operations at the Center to perform a sufficient number of diagnostic procedures
to enable it to generate a profit based on generally accepted principles of
accounting used by the Center. In accordance with the Agreement, Corporation
expenses incurred with respect to the Center, for said four month period as they
become due include, without limitation, the expense of equipment leases,
facility leases, salaries, maintenance contracts, supplies, management fees
(excluding bonuses or other incentive management fees), and other expenses and
overheads, unless such failure results from equipment or mechanical failures
beyond the control of Physician Group.
7.3 Termination By Physician Group. This Agreement may be terminated by
Physician Group upon thirty (30) days' written notice to the Corporation upon
the occurrence of the following:
7.3.1 The Prime Lease pursuant to which Corporation is leasing
the Center is terminated as the result of acts or omissions of Corporation or
for any other reason other than acts or omissions of Physician Group, its
employees or agents.
7.3.2 Corporation or any of the officers of the Corporation
engage in any criminal act in the nature of conversion, embezzlement or theft
relative to the payments due to the Physician Group under this Agreement.
Corporation will maintain adequate Employee dishonesty insurance.
9
<PAGE> 10
7.3.3 The Corporation is liquidated or dissolved, or files a
petition seeking protection under any state or federal insolvency or similar law
affecting the rights of creditors generally, or a similar filing is made against
the Corporation, or a receiver is appointed for all or substantially all of the
Corporation's assets, unless such filing is dismissed within thirty (30) days.
7.3.4 Corporation fails to perform its material duties as set
forth herein for more than thirty (30) days following the giving of written
notice of the breach, or otherwise by mutual agreement.
7.4 Rights Upon Termination. The termination of this Agreement shall
not release or discharge either party from any obligation, debt or liability
which shall have previously accrued and remains to be performed upon the date of
termination, or which by its terms is to be performed after the date of
termination. Upon termination, the parties shall each be entitled to
compensation in accordance with the terms of this Agreement, for services
rendered through the date of termination, but such compensation shall be limited
to monies with respect to the period prior to termination which are collected
within one hundred and twenty (120) days after the date of termination. Any
monies collected thereafter shall be the property of the Corporation.
ARTICLE VIII
General Provisions
8.1 Insurance. Physician Group shall obtain and maintain professional
liability insurance and coverages on all medical doctors providing medical
services to patients at the Center, with reasonable limits to be agreed upon.
Corporation shall obtain and maintain professional liability insurance on all
nonprofessional staff, with reasonable limits to be agreed upon.
8.2 Assignment. The rights conferred upon Physician Group hereunder may
not be transferred or assigned without the prior written consent of Corporation
and any assignment in violation of this section shall be void. However,
Physician Group may form a professional medical corporation of which it is the
principal shareholder and transfer this Agreement to said professional
corporation, provided performance of this Agreement is guaranteed by all
shareholders of such corporation. It is understood and agreed that Corporation
and its successors shall have the right to assign this Agreement.
8.3 Third-Party Beneficiary. MICA shall be a third-party beneficiary of
the provisions of this Agreement pertaining to it.
8.4 Governing Law. This Agreement shall be governed by the laws of the
State of California.
10
<PAGE> 11
8.5 Article and Section Headings. The article and section headings in
this Agreement are inserted solely for convenience of reference and are not a
part of and are not intended to govern, limit, or aid in the construction of any
term or provision hereof.
8.6 Attorneys' Fee. Should any party employ an attorney for the purpose
of enforcing this Agreement, or any judgment based thereon, in any court,
including bankruptcy courts and courts of appeal, or arbitration proceedings,
the prevailing party shall be entitled to receive its attorneys' fees and costs,
whether taxable or not.
8.7 Waiver. The waiver of any covenant, condition or duty hereunder by
either party shall not prevent that party from later insisting upon full future
performance of the same.
8.8 Amendment. No amendment in the terms of this Agreement shall be
binding on either party unless in writing and executed by the duly authorized
representatives of each party.
8.9 Notice. Any communication under this Agreement shall be given in
writing and shall be delivered in person or by prepaid certified or registered
mail to each party at such address as either party shall furnish to the other in
writing. Notice shall be deemed given when personally delivered, or if given by
mail, then two days after deposit in the United States mail, postage prepaid.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
8.11 Entire Agreement. This Agreement and the sublease referenced
herein constitute the entire agreement between the parties in connection with
the subject matter hereof and shall supersede all prior agreements, whether oral
or in writing, whether explicit or implicit, which have been entered into prior
to the execution hereof.
11
<PAGE> 12
8.12 Notwithstanding any term in this Agreement and the sublease
agreement, the Corporation, in an effort to utilize all available capacity of
the Center's imaging equipment on a time available basis may sublet the use of
the Center's equipment to other physicians, paying the PHYSICIANS a 5% medical
supervisory fee. The Corporation will consult with the PHYSICIANS regarding
sublease of renter equipment and the PHYSICIANS will cooperate in this effort.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
MICA CAL IV, INC.
By: /s/ Nathan Kaufman
----------------------
PHYSICIAN GROUP
By: /s/ Joel Levine, M.D.
----------------------
12
<PAGE> 13
EXTENSION OF AND FIRST AMENDMENT TO
MANAGEMENT, LICENSING AND FACILITIES AGREEMENT
This Extension of and First Amendment to Management, Licensing and
Facilities Agreement is made and entered into this 29th day of May, 1992, by and
between MICA CAL IV, INC., a California corporation (the "Corporation") and
Magnetic Imaging Medical Group (herein after referred to as "Physician Group").
RECITALS
WHEREAS, Corporation and Physician Group entered into a Management,
Licensing and Facilities Agreement ("Agreement") on and effective March 14,
1988, as well as a Sublease entered into and effective the same date; and,
WHEREAS, under its terms, the Agreement expires March 14, 1993 and the
Sublease terminates when the Agreement terminates; and,
WHEREAS, the parties' relationship under the Agreement and Sublease has
been mutually beneficial, such that each party desires to extend the Agreement,
and, as a result of such extension, the Sublease as well; and,
WHEREAS, the parties also desire to amend the Agreement in connection
with such extension;
NOW THEREFORE, in consideration of their mutual covenants and promises
and other good and valuable consideration, receipt of which each party hereby
acknowledges, Corporation and Physician Group agree:
1. The term of the Agreement shall be extended for an additional term
of five (5) years, commencing March 14, 1993 and ending March 14, 1998, the
Agreement to remain in effect during such additional term unless sooner
terminated in accordance with the Agreement.
2. The Agreement is hereby amended by deleting Section 7.2.7 of the
Agreement in its entirety.
3. This Extension of and First Amendment to Management, Licensing and
Facilities Agreement shall be effective March 14, 1993.
<PAGE> 14
IN WITNESS WHEREOF, Corporation and Physician Group have executed this
Extension of and First Amendment to Management, Licensing and Facilities
Agreement as of the date first above written.
MICA CAL IV, INC.
By: /s/ Robert S. Muehlberg
----------------------------------------
Magnetic Imaging Medical Group (MIMG)
By: /s/ Joel Levine, M.D.
----------------------------------------
<PAGE> 15
AMENDMENT
AMENDMENT TO the Management, Licensing and Facilities Agreements
entered into by and between predecessors to MAGNETIC IMAGING MEDICAL GROUP,
INC., a California professional corporation (hereinafter referred to as
"Physician Group" and MEDICAL IMAGING CENTERS OF AMERICA, INC., a California
corporation ("MICA") which wholly-owned subsidiaries are MICA CAL I, Inc., a
California corporation ("M-I") and the managing general partner of Long Beach
Medical Imaging Center, Ltd., a California limited partnership ("Long Beach"),
MICA CAL II, INC., a California corporation ("M-III") and MICA CAL IV, INC., a
California corporation ("M-IV").
R E C I T A L S
A. On March 28, 1984, Long Beach entered into a Management, Licensing
and Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto as Exhibit A (the "A
Agreement").
B. On March 14, 1988, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. This Agreement
was extended on May 29, 1992. A true and correct copy of that Agreement as
extended is attached hereto as Exhibit B (the "B Agreement").
C. On February 3, 1992, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit C (the
"C Agreement").
D. On July 1, 1994, M-III entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit D (the
"D Agreement").
E. The A Agreement is an agreement which has a term which does not
terminate except on the occurrence of certain events while the B, C, and D
Agreements have terms which end on different dates in 1997 and 1998. MICA wished
to place limits on the term of the A Agreement and the Physician Group is
willing to permit such limits and both parties wish each of the Agreements to be
coterminous. All of the parties wish to provide for certainty and continuity of
service in their relationship as well as revise certain of the compensation
provisions and clarify certain other matters.
NOW THEREFORE, in consideration of their mutual covenants and promises
and for other good and valuable consideration, receipt of which each party
acknowledges, the parties agree as follows:
<PAGE> 16
1. Term.
The term as set forth in each of the Agreements (Section 7.1
of Exhibits A, B, C and D) is hereby revised to read as follows:
7.1 Term. The term hereunder shall commence January 1, 1996
and shall continue for five (5) years. Provided that Physician Group is not in
material default pursuant to this Agreement then and in that event Physician
Group shall have the right to extend the term of this Agreement for two (2)
consecutive five (5) year terms so long as it shall give written notice to the
other party no less than sixty (60) days prior to the end of a term hereunder.
If a party believes a material default has occurred it shall promptly give
written notice to the other party specifying the nature of the material default
and providing a recommended method of cure. The notified party shall have ninety
(90) days to correct the material default either in accordance with the
suggested methodology or by an alternate equally effective methodology. The
failure to provide notice within thirty (30) days of an event giving rise to a
material default shall be deemed a waiver of such default. Notwithstanding
anything to the contrary set forth in this Agreement, it is understood and
agreed that this Agreement is attached to the assets of the Center. To the
extent the Center or its assets are sold, assigned or otherwise transferred,
this Agreement must be transferred and accepted in full by the acquirer as a
condition of such acquisition, assignment or transfer.
2. Compensation.
(a) The Compensation as set forth at Section 6.6 in each of
those Agreement attached as Exhibits A and B is hereby revised to read as
follows:
6.6 Compensation of Physician Group. The parties
hereto agree Physician Group will be fairly and reasonably compensated for its
services by retaining in the aggregate Twenty percent (20%) of the first Two
Hundred Thousand Dollars ($200,000) of revenues each month actually collected
for each medical imaging diagnostic or other medical procedure ("medical
services") performed by Physician Group at the Center with Physician Group
receiving Eighteen percent (18%) of such revenues in excess of Two Hundred
Thousand Dollars ($200,000) actually collected each month. For purposes of this
Agreement aggregate revenues collected shall mean all collected receipts for
medical imaging, diagnostic and other medical procedures performed at the
Center, including charges for use of equipment, facilities and Center personnel
in connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month.
(b) The compensation as set forth in Section 6.6 in each of
Exhibits C and D is hereby revised to read as follows:
<PAGE> 17
6.6 Compensation of Physician Group. The parties hereto agree
Physician Group will be fairly and reasonably compensated for its services by
retaining in the aggregate Twenty percent (20%) of the first One Hundred
Thousand Dollars ($100,000) of revenues each month actually collected for each
medical imaging diagnostic or other medical procedure ("medical services")
performed by Physician Group at the Center with Physician Group receiving
Eighteen percent (18%) of such revenues in excess of One Hundred Thousand
Dollars ($100,000) actually collected each month. For purposes of this Agreement
aggregate revenues collected shall mean all collected receipts for medical
imaging, diagnostic and other medical procedures performed at the Center,
including charges for use of equipment, facilities and Center personnel in
connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month in recognition of their supervisorial responsibilities.
3. Statement of Revenues. A new Section 6.10 shall be added to Exhibit
A and a new Section 6.9 to Exhibits B, C and D which provides as follows:
6.9[10] Statement of Revenues. Partnership [Corporation] shall
furnish to Physician Group a statement of revenues generated by Physician Group
upon or as to which a fee to be paid to Physician Group hereunder is calculated
at the end of every month. This statement shall be submitted to Physician Group
on the tenth (10th) day of each month reflecting the previous month's revenue
from services rendered by Physician Group. Each statement shall be signed and
certified to be correct by Partnership [Corporation] or its authorized
representative. Partnership [Corporation] shall keep in the Center premises full
and accurate books of account, records, cash receipts, and other pertinent data
showing its revenues. Such books of account, records, cash receipts and other
pertinent data shall be kept for a period of two (2) years. Physician Group
shall be entitled during the term and within two (2) years after expiration or
termination of this Agreement to inspect and examine all of Partnership's
[Corporation's] books of account, records, cash receipts, and other pertinent
data relative only to the revenues involving the Center, so that Physician Group
can ascertain Center's revenues. Partnership [Corporation] shall cooperate fully
with Physician Group in making the inspection. Physician Group shall also be
entitled once during each year of the Agreement and once after expiration or
termination to an examination of Center's books of account, records, cash
receipts and other pertinent data to determine Center's revenues by a certified
public accountant to be designated by Physician Group, and who will be paid
solely by Physician Group, unless such review shall disclose an understatement
by Center of two percent (2%) or more in which case all expenses of such
examination will be paid by Partnership [Corporation].
4. Reference. It is hereby agreed between the parties hereto that
wherever the term "Physicians" or "Physician Group" appears in Exhibits A, B, C
and D it shall be deemed to mean "Magnetic Imaging Medical Group, Inc., a
California professional corporation.
<PAGE> 18
5. Indemnification. MICA and Long Beach, jointly and severally, agree
to indemnify and hold Physician Group together with its predecessors, harmless
against any and all liabilities which it might incur in connection with its
service as a General Partner of Long Beach. Physician Group shall promptly
notify MICA of the existence of any claim, demand or other matter involving
liabilities to third parties to which MICA's indemnification obligations would
apply and shall give MICA a reasonable opportunity to defend the same at its own
expense and with counsel of its own selection. If MICA, within a reasonable time
after notice, fails to defend, Physician Group shall have the right, but not the
obligation, to undertake the defense of and to compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf of MICA.
[INTENTIONALLY LEFT BLANK]
<PAGE> 19
6. Incorporation. Except as specifically revised herein, Exhibits A, B,
C and D are incorporated herein in full and restated as revised.
Executed this 31st day of January, 1996 at Long Beach, California.
MAGNETIC IMAGING MEDICAL
GROUP, INC.
By /s/ Joel Levine, M.D.
----------------------------
Its CFO
----------------------------
MEDICAL IMAGING CENTERS OF
AMERICA, INC.
By /s/ Robert S. Muehlberg
----------------------------
Its President and CEO
----------------------------
LONG BEACH MEDICAL IMAGING
CENTERS, LTD.
By MICA CAL I, INC.
Its Managing General Partner
By /s/ Robert S. Muehlberg
----------------------------
Its President
----------------------------
MICA CAL III, INC.
By /s/ Robert S. Muehlberg
----------------------------
Its President
----------------------------
MICA CAL IV, INC.
By /s/ Robert S. Muehlberg
----------------------------
Its President
----------------------------
<PAGE> 1
EXHIBIT 10.9
MANAGEMENT, LICENSING
AND FACILITIES AGREEMENT
This Agreement is made effective as of February 3, 1992 by and between
MICA CAL IV, INC., a California corporation (hereinafter referred to as
"Corporation"), and Magnetic Imaging Medical Group (hereinafter referred to as
"Physician Group").
RECITALS
A. Corporation, after careful study, has concluded that there is a need
in Laguna Niguel, California for a medical center specializing in performing a
variety of medical imaging and diagnostic services by experienced physicians at
reasonable cost.
B. Corporation has a comprehensive system for establishing and
providing financial and related management to such a medical center which makes
available to qualified physician groups a fully staffed facility, equipment,
supplies, management, capital, marketing services, and system necessary to
provide a large volume of medical imaging and diagnostic services to patients at
reasonable cost. These services will be obtained from Medical Imaging Centers of
America, Inc. ("MICA").
C. Corporation desires to make its system available to physician groups
who are capable of offering high quality services to the public at a competitive
cost. To that end, Corporation has committed substantial resources, and has
incurred substantial expenses and future obligations to develop the medical
imaging center located at The Center at Rancho Niguel, 25500 Rancho Niguel Road,
Suite 140, Laguna Niguel, California 92677.
D. Physician Group desires to contract with Corporation for use of
Corporation's management services and system of delivering medical imaging and
diagnostic care, a sublease for the Center, and a license for use of any
appropriate trade names and marks which corporation may own or own rights to
license.
AGREEMENT
NOW, THEREFORE, the parties agree as follows;
ARTICLE I
Duties of Parties
1.1 Management Services of Corporation. Corporation shall provide the
following services:
1
<PAGE> 2
a. General Administrative Services. Overall supervision and management
of the Center, including supervision over the services and personnel described
below.
b. Personnel. Provision to the Center of all non-physician group
personnel needed to operate and support the Center, such as technologists,
receptionists, secretarial, clerical, purchasing and marketing personnel. No
Center Manager shall be employed or terminated by the Corporation without the
consent of Physician Group, which consent shall not be unreasonably withheld.
c. Training. Training of all non-physician group personnel at the
Center.
d. Fiscal Services. Fiscal services for the Center including
accounting, auditing, bookkeeping, budgeting, patient billings and record
keeping, accounts receivable, accounts payable processing, and electronic data
processing.
e. Patient Records. Ownership and maintenance of patient medical
records and archives for patients seen at the Center, record retrieval and
record monitoring to assist Physician Group with utilization and quality
assurance reviews.
f. Quality Control. Assistance to Physician Group in the development of
appropriate quality control programs and protocols, including development of
performance and utilization standards, sampling techniques for case review, and
preparation of appropriately documented studies.
g. Administrative Services for Physician Group. Provision of general
administrative services to Physician Group in connection with its business
affairs relating to the Center, which shall include billing and accounting
services with respect to income collected and disbursements made by Corporation,
and such other administrative services as may from time to time be necessary for
the business of the Center.
h. Management Reports. Preparation of management reports to assist
Physician Group in evaluating the performance and productivity of the Center and
of other doctors employed by or contracted with Physician Group at the Center.
i. Marketing. Marketing of the medical imaging and diagnostic services
offered at the Center by Physician Group pursuant to a marketing plan to be
jointly developed.
j. Equipment and Supplies. Provision of all equipment, furnishings, and
supplies reasonably necessary for the efficient operation of the Center.
k. Janitorial and Maintenance Service. Janitorial, grounds and
maintenance services for the Center and its equipment and furnishings.
2
<PAGE> 3
1.2 Administrative Services of Physician Group. Physician Group shall
cooperate with the Corporation and use its best efforts to assure the continuing
success of the Center. These efforts shall include, by way of example and not
limitation: (1) promotion of services provided by the Center including
professional contact with other health care providers to apprise such
individuals and groups of the nature and availability of services offered at the
Center, (2) provision of technical advice and assistance with respect to the
acquisition, installation and maintenance of equipment, (3) participation in
planning for the Center, (4) the development of policies and standards for
operation. Physician Group shall also provide such administrative services at
the Center as shall be necessary to assure that medical services are provided
efficiently and commensurate with a high standard of care for the medical
community in Laguna Niguel, California. In doing so, Physician Group shall
consult with Corporation concerning non-physician group staffing requirements,
needed equipment and supplies, preparation of a suitable budget, the need for
ancillary support, so as to optimize the smooth and efficient functioning of the
Center. Physician Group shall analyze the efficiency of the Center and monitor
and evaluate the Center personnel, both physician group and non-physician group
personnel. Physician Group shall provide their evaluations and recommendation to
Corporation. Any such recommendations and evaluations shall be rendered on a
confidential basis and may include specific designation of non-medical personnel
considered unacceptable by Physician Group.
1.3 Notification of Payer Disputes. Physician Group agrees to notify
Corporation of any complaints arising under any agreement between Physician
Group and a third-party payer for services provided at the Center, and Physician
Group shall immediately notify Corporation of any notice of termination of any
agreement with a third-party payer. Physician Group shall consult with the
Corporation and cooperate to resolve such problems as may arise under
third-party payer agreements. Physician Group shall also consult with
Corporation prior to terminating any third-party payer agreement.
ARTICLE II
Licensing Agreement
2.1 License of Trade Names and Marks. In consideration of the payment
provided for herein and the agreement of Physician Group to perform all of the
terms, covenants and conditions contained in this Agreement and the sublease for
the Center pursuant hereto, Corporation agrees to license to Physician Group the
nonexclusive right to use, subject to all legal restrictions upon physician
group advertising, such trade names and marks as MICA may license to the
Corporation, or as Corporation may from time to time adopt for use in connection
with its business, or the business of the Center but only in respect to business
of Physician Group conducted (1) at the Center while Physician Group's sublease
is in effect, (2) while this Agreement is in effect, and (3) if the Corporation
has not declared a default and Physician Group is in compliance with all of the
terms, covenants and conditions contained in this Agreement, and the sublease
for the Center.
3
<PAGE> 4
2.2 Use of Trade Names and Marks. The exact manner of use of trade
names and marks licensed to Physician Group shall be subject to the prior
written consent of Corporation. Physician Group shall not use said names or
marks in publicly disseminated materials without such consent.
2.3 Nonexclusive Right. The license granted to Physician Group in
Section 2.1 hereof is nonexclusive.
2.4 Term of License. The license granted herein shall terminate when
Physician Group's sublease expires or terminates, and shall terminate when this
Agreement expires or terminates.
2.5 Use of Trade Names and Marks After Term. Upon termination of this
license, Physician Group shall immediately discontinue the use of any trade
names and marks licensed to Physician Group hereunder in every respect, shall
execute all documents necessary to satisfy third- parties, including government
agencies regulating corporations and the practice of medicine that Physician
Group has no continuing interest in the trade names or marks of Corporation or
of MICA, and Physician Group shall not make any reference on Physician Group's
letterhead or in other materials to their former affiliation with Corporation,
or any affiliation with MICA.
2.6 Protecting Goodwill. As further consideration for the opportunity
to sublease the Center and conduct the practice of medicine from the Center and
for the use of such trade names and marks, Physician Group agrees it will take
all necessary steps to preserve and protect the reputation and goodwill
associated with the Center and said names and marks including, without
limitation, the following:
a. Assigned Physician Group. Physician Group shall contract
only with well- qualified licensed medical doctors who are experienced in
medical imaging and diagnostic care provided at the Center, and the assignment
and continued service of an employed or contract medical doctor to work at the
Center shall be subject to the approval of Corporation, which shall not be
unreasonably withheld.
b. Compliance With Law. Physician Group and their physician
group- contractors and physician group-employees shall comply with all laws,
regulations, ethical and professional standards applicable to the practice of
medicine.
c. Monitoring of Services. Physician Group shall rigorously
monitor utilization and quality of services provided at the Center and shall
take all steps necessary to remedy any and all deficiencies in the efficiency or
the quality of medical care provided.
d. Time Commitment. Corporation shall, after consultation with
Physician Group, establish reasonable business hours for the operation of the
Center. Physician Group shall engage a sufficient number of physician
group-employees or physician group-contractors to meet
4
<PAGE> 5
the demand and potential demand for medical imaging and diagnostic services at
the Center, and to assure the efficient operation of the Center during its
established business hours. Throughout the term of this Agreement, Physician
Group shall exercise its highest skills and best efforts to cause the practice
at the Center to grow in volume and profitability. To the latter end, except for
undertaking bona fide charity cases on a basis customary for physician groups in
the Laguna Niguel area, without written consent of the Corporation, Physician
Group shall only use the Center for performance of medical services which are
compensable by the payment of professional fees established under Section 6.3,
or as approved by the Corporation.
ARTICLE III
Sublease of Center
Concurrently with executing this Agreement, the parties are
entering into a sublease for the Center of even date, which is incorporated by
this reference as if fully set forth herein.
ARTICLE IV
Relationship of Parties
4.1 Practice of Medicine. A fundamental understanding between
the parties is that Corporation shall not participate in any manner in the
medical services rendered by Physician Group in the conduct of its medical
practice at the Center. Corporation may make recommendations, but shall have no
control, over matters affecting Physician Group's medical practice, including
without limitation the following: furnishing physician groups, supervising
medical services, or any and all other matters affecting the practice of
medicine. All patients treated by Physician Group shall be deemed to be the
patients of Physician Group. Physician Group shall not represent in any direct
or indirect manner to the public or any third party that Corporation has
participated, is participating, or will participate in the practice of medicine
in any manner.
4.2 Relationship of Parties. This Agreement does not
constitute either party the agent, legal representative or employee for any
purpose whatsoever of the other party, and neither party is granted any right or
authority to assume or create any obligation for or on behalf of, or in the name
of, or in any way to bind the other party. Each party agrees not to incur or
contract for any debt or obligation on behalf of the other party, or commit any
act, make any representation or advertise in any manner which may adversely
affect any right of the other party, or be detrimental to its good name and
reputation.
5
<PAGE> 6
ARTICLE V
Proprietary Interest and Rights of Corporation and MICA
5.1 Proprietary Interest of Corporation and MICA. Physician
Group recognizes the proprietary interest of Corporation and MICA in the
Corporation and MICA business system for operating a medical imaging and
diagnostic center, including all policies, procedures, operating manuals, forms,
customer lists, contracts, and other information regarding such system.
Physician Group acknowledges and agrees that such information constitutes trade
secrets of Corporation and MICA. Physician Group hereby waives any and all
right, title and interest in and to such trade secrets and agrees to return all
copies of such trade secrets and information related thereto, at its expense,
upon termination of this Agreement.
5.2 Confidentiality. Physician Group acknowledges and agrees
that Corporation and MICA are entitled to prevent its competitors from obtaining
and utilizing its trade secrets. Physician Group agrees to hold the trade
secrets of Corporation and MICA in strictest confidence and not to disclose them
or allow them to be disclosed directly or indirectly to any person or entity
other than persons engaged by Physician Group for use in the course of their
Employment at the Center, without the prior written consent of Corporation and
MICA. Physician Group acknowledges its confidential relationship to Corporation
and of any information relating to the services and business methods of
Corporation or MICA which it may obtain during the term of this Agreement.
Physician Group shall not, either during the term of this Agreement, or at any
time after the expiration or sooner termination of this Agreement, disclose to
anyone other than persons employed at the Center who use the information in the
course of their employment any confidential or proprietary information or trade
secret of Corporation obtained by it. Physician Group also agrees to place under
legal obligation to treat such information as strictly confidential any persons
to whom said information is disclosed for the purpose of performance.
5.3 Successor Medical Group. Upon termination of this
Agreement, or the sublease of the Center for any reason, other than acts or
omissions of Corporation, whichever first occurs, Corporation shall have the
immediate right, in its sole discretion, to designate a professional
corporation, corporation or sole proprietor as successor to Physician Group at
the Center. If such professional corporation, corporation or sole proprietor is
composed solely of duly licensed physician groups, they shall be entitled to
retain and utilize all existing customer lists and patient records at the
Center. Corporation agrees that all records transferred to Physician Group's
successor shall be maintained as long as required by law regulating retention of
medical records, and copies of said records shall be made available to Physician
Group at their expense, if required for the purpose of defending any malpractice
claim against Physician Group, or for the purpose of providing medical care. The
rights of the parties under this Section shall survive termination of this
Agreement.
6
<PAGE> 7
ARTICLE VI
Compensation
6.1 Inducement to Enter Agreement. As partial consideration,
and as an inducement to Physician Group for entering this Agreement, Corporation
shall be responsible for any losses related to the operation of the Center which
do not arise from wrongful or negligent acts or omissions of Physician Group.
6.2 Corporation's Risk. Corporation has incurred substantial
expenses and future obligations to establish the Center, the system for the
delivery of medical imaging and diagnostic services, including fees for
consultants and other professionals, salaries for responsible staff, interest
expenses, lease obligations, and costs of equipping the Center. Corporation has
also assumed substantial obligations associated with the continuing operation of
the Center. Although there is uncertainty about the profitability of the Center
during the initial years of operation, Corporation is assuming responsibility
for losses as provided in Section 6.1. The parties therefore recognize and agree
that in order for Corporation to receive a fair and reasonable return for its
expenses and risks, a fair return for lease of premises, services, and the use
of its trade names and marks hereunder, as well as to permit the necessary
accumulation of capital to establish and maintain a first rate and fully
equipped Center, a goal the parties hereto agree to be desirable, the total
payments to Corporation should increase in future years.
6.3 Professional Fees. Physician Group shall, in consultation
with Corporation, establish a schedule of fees and charges for medical services
at the Center. This schedule shall not be revised or modified without approval
and notice to Corporation.
6.4 Billing and Collections. Billings to patients for all
services rendered at the Center shall be in the name of Physician Group.
Corporation, or its delegate, shall serve as billing and collection agent for
Physician Group, and shall be diligent and timely in the performance of billing
and collection services. However, Corporation does not guarantee collection and
shall not be responsible for any loss to Physician Group as a result of
inability to collect fees and charges. Collections shall be held in an account
established by Corporation until distributed, and Corporation is authorized to
withdraw from said accounts disbursements due and owing to it for services under
the Agreement.
6.5 Intention of the Parties. It is the intention of the
parties hereto that from the revenues of the Center Physician Group shall be
fairly and reasonably compensated for its professional services and those of the
physician groups engaged by it, and Corporation shall be fairly and reasonably
compensated for the sublease of the Center, the licensing of trade names and
marks, the provision of services by it pursuant to this Agreement, and for the
expenses, obligations, and risks assumed by it in connection with the
establishment and operation of the Center and the operation of the Corporation
system.
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<PAGE> 8
6.6 Fair and Reasonable Compensation of Physician Group. The
parties hereto agree Physician Group will be fairly and reasonably compensated
for its services and those of the physicians it engages by retaining in the
aggregate twenty percent (20%) of the revenues actually collected for each
medical imaging diagnostic or other medical procedure ("medical services")
performed by Physician Group at the Center. For purposes of this Agreement,
aggregate revenues collected shall mean all collected receipts for medical
imaging, diagnostic and other medical procedures performed at the Center,
including charges for use of equipment, supplies, facilities and Center
personnel in connection with performance of medical services.
6.7 Fair and Reasonable Compensation to Corporation. Any
revenues or receipts in excess of those retained by Physician Group as provided
in Section 6.6 hereof shall be paid to Corporation as compensation for the
sublease of the Center, provision of services under this Agreement, the
licensing of trade names and marks to Physician Group, and for its expenses,
obligations, and risks in connection with the establishment of the Center, and
the operation of the Corporation system. Said compensation includes rent to
Corporation for the Center subleased by Physician Group.
6.8 Remittance. All monies which physician groups are entitled
pursuant to Section 6.6 and all monies which Corporation is entitled to receive
pursuant to Section 6.7 shall be accounted for and disbursed biweekly.
ARTICLE VII
Term and Termination
7.1 Term. Subject to paragraphs 7.2 and 7.3 below, this
Agreement shall become effective on the date first above written and shall
continue for a period of five (5) years unless sooner terminated in accordance
with this Agreement.
7.2 Termination by the Corporation. This Agreement may be
terminated by Corporation upon thirty (30) days' prior written notice to
Physician Group upon occurrence of the following:
7.2.1 The Prime Lease pursuant to which Corporation
is leasing the Center is terminated as a result of the acts or omissions of
Physician Group or any reason.
7.2.2 Physician Group, or any shareholder, director
or physician group employee of Physician Group engages in any criminal act in
the nature of conversion, embezzlement or theft relative to the business
conducted pursuant to this Agreement; Physician Group will maintain adequate
physician group-employee dishonesty insurance.
8
<PAGE> 9
7.2.3 Physician Group, or either of them, is
liquidated or dissolved, or files a petition seeking protection under any state
or federal insolvency or similar law affecting the rights of creditors
generally, or a similar filing is made against the Physician Group, or a
receiver is appointed for all or substantially all of the Physician Group's
assets, unless said filing is dismissed within thirty (30) days.
7.2.4 Breach by Physician Group of any of their
obligations under this Agreement, which breach continues for a period of thirty
(30) days following written notice of the breach, or otherwise by mutual
agreement.
7.2.5 Conduct by Physician Group, their employees or
agents which is disruptive of operations of the Center, which interferes with
the performance of the Corporation's duties under this Agreement, provided such
conduct continues or reoccurs more than fifteen (15) days following written
notice to Physician Group of such breach.
7.2.6 Conduct by Physician Group, its employees or
agents imposing, or which may impose, civil or criminal liabilities (other than
liability for medical malpractice) on Corporation.
7.3 Termination By Physician Group. This Agreement may be
terminated by Physician Group upon thirty (30) days' written notice to the
Corporation upon the occurrence of the following:
7.3.1 The Prime Lease pursuant to which Corporation
is leasing the Center is terminated as the result of acts or omissions of
Corporation or for any other reason other than acts or omissions of Physician
Group, its employees or agents.
7.3.2 Corporation or any of the officers of the
Corporation, engage in any criminal act in the nature of conversion,
embezzlement or theft relative to the payments due to the Physician Group under
this Agreement. Corporation will maintain adequate employee dishonesty
insurance.
7.3.3 The Corporation is liquidated or dissolved, or
files a petition seeking protection under any state or federal insolvency or
similar law affecting the rights of creditors generally, or a similar filing is
made against the Corporation, or a receiver is appointed for all or
substantially all of the Corporation's assets, unless such filing is dismissed
within thirty (30) days.
7.3.4 Corporation fails to perform its material
duties as set forth herein for more than thirty (30) days following the giving
of written notice of the breach, or otherwise by mutual agreement.
7.4 Rights Upon Termination. The termination of this Agreement
shall not release or discharge either party from any obligation, debt or
liability which shall have previously accrued
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<PAGE> 10
and remains to be performed upon the date of termination, or which by its terms
is to be performed after the date of termination. Upon termination, the parties
shall each be entitled to compensation in accordance with the terms of this
Agreement, for services rendered through the date of termination, but such
compensation shall be limited to monies with respect to the period prior to
termination which are collected within one hundred and twenty (120) days after
the date of termination. Any monies collected thereafter shall be the property
of the Corporation.
ARTICLE VIII
General Provisions
8.1 Insurance. Physician Group shall obtain and maintain professional
liability insurance and coverages on all medical doctors providing medical
services to patients at the Center, with reasonable limits to be agreed upon.
Corporation shall obtain and maintain professional liability insurance on all
nonprofessional staff, with reasonable limits to be agreed upon.
8.2 Assignment. The rights conferred upon Physician Group hereunder may
not be transferred or assigned without the prior written consent of Corporation
and any assignment in violation of this section shall be void. However, each
Physician Group may form a professional medical corporation of which he is the
principal shareholder and transfer this Agreement to said professional
corporation, provided performance of this Agreement is guaranteed by all
shareholders of such corporation. It is understood and agreed that Corporation
and its successors shall have the right to assign this Agreement.
8.3 Third-Party Beneficiary. MICA shall be a third-party beneficiary of
the provisions of this Agreement pertaining to it.
8.4 Governing Law. This Agreement shall be governed by the laws of the
State of California.
8.5 Article and Section Headings. The article and section headings in
this Agreement are inserted solely for convenience of reference and are not a
part of and are not intended to govern, limit, or aid in the construction of any
term or provision hereof.
8.6 Attorneys' Fee. Should any party employ an attorney for the purpose
of enforcing this Agreement, or any judgment based thereon, in any court,
including bankruptcy courts and courts of appeal, or arbitration proceedings,
the prevailing party shall be entitled to receive its attorneys' fees and costs,
whether taxable or not.
8.7 Waiver. The waiver of any covenant, condition or duty hereunder by
either party shall not prevent that party from later insisting upon full future
performance of the same.
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<PAGE> 11
8.8 Amendment. No amendment in the terms of this Agreement shall be
binding on either party unless in writing and executed by the duly authorized
representatives of each party.
8.9 Notice. Any communication under this Agreement shall be given in
writing and shall be delivered in person or by prepaid certified or registered
mail to each party at such address as either party shall furnish to the other in
writing. Notice shall be deemed given when personally delivered, or if given by
mail, then two days after deposit in the United States mail, postage prepaid.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
8.11 Entire Agreement This Agreement and the sublease referenced herein
constitute the entire agreement between the parties in connection with the
subject matter hereof and shall supersede all prior agreements, whether oral or
in writing, whether explicit or implicit, which have been entered into prior to
the execution hereof.
8.12 Notwithstanding any term in this Agreement and the sublease
agreement, the Corporation, in an effort to utilize all available capacity of
the Centers imaging equipment on a time available basis may sublet the use of
the Center's equipment to other physician groups, paying the Physician Group a
5% medical supervisory fee. The Corporation will consult with the Physician
Group regarding sublease of renter equipment and the Physician Group will
cooperate in this effort.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICA CAL IV, INC.
By: /s/ ROBERTS MUEHLBERG
---------------------
PHYSICIAN GROUP
By: /s/ JOEL LEVINE, MD
---------------------
11
<PAGE> 12
AMENDMENT
AMENDMENT TO the Management, Licensing and Facilities Agreements
entered into by and between predecessors to MAGNETIC IMAGING MEDICAL GROUP,
INC., a California professional corporation (hereinafter referred to as
"Physician Group" and MEDICAL IMAGING CENTERS OF AMERICA, INC., a California
corporation ("MICA") which wholly-owned subsidiaries are MICA CAL I, Inc., a
California corporation ("M-I") and the managing general partner of Long Beach
Medical Imaging Center, Ltd., a California limited partnership ("Long Beach"),
MICA CAL II, INC., a California corporation ("M-III") and MICA CAL IV, INC., a
California corporation ("M-IV").
R E C I T A L S
A. On March 28, 1984, Long Beach entered into a Management, Licensing
and Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto as Exhibit A (the "A
Agreement").
B. On March 14, 1988, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. This Agreement
was extended on May 29, 1992. A true and correct copy of that Agreement as
extended is attached hereto as Exhibit B (the "B Agreement").
C. On February 3, 1992, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit C (the
"C Agreement").
D. On July 1, 1994, M-III entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit D (the
"D Agreement").
E. The A Agreement is an agreement which has a term which does not
terminate except on the occurrence of certain events while the B, C, and D
Agreements have terms which end on different dates in 1997 and 1998. MICA wished
to place limits on the term of the A Agreement and the Physician Group is
willing to permit such limits and both parties wish each ot eh Agreements to be
coterminous. All of the parties wish to provide for certainty and continuity of
service in their relationship as well as revise certain of the compensation
provisions and clarify certain other matters.
NOW THEREFORE, in consideration of their mutual covenants and promises
and for other good and valuable consideration, receipt of which each party
acknowledges, the parties agree as follows:
<PAGE> 13
1. Term.
The term as set forth in each of the Agreements (Section 7.1
of Exhibits A, B, C and D) is hereby revised to read as follows:
7.1 Term. The term hereunder shall commence January 1, 1996
and shall continue for five (5) years. Provided that Physician Group is not in
material default pursuant to this Agreement then and in that event Physician
Group shall have the right to extend the term of this Agreement for two (2)
consecutive five (5) year terms so long as it shall give written notice to the
other party no less than sixty (60) days prior to the end of a term hereunder.
If a party believes a material default has occurred it shall promptly give
written notice to the other party specifying the nature of the material default
and providing a recommended method of cure. The notified party shall have ninety
(90) days to correct the material default either in accordance with the
suggested methodology or by an alternate equally effective methodology. The
failure to provide notice within thirty (30) days of an event giving rise to a
material default shall be deemed a waiver of such default. Notwithstanding
anything to the contrary set forth in this Agreement, it is understood and
agreed that this Agreement is attached to the assets of the Center. To the
extent the Center or its assets are sold, assigned or otherwise transferred,
this Agreement must be transferred and accepted in full by the acquirer as a
condition of such acquisition, assignment or transfer.
2. Compensation.
(a) The Compensation as set forth at Section 6.6 in each of
those Agreement attached as Exhibits A and B is hereby revised to read as
follows:
6.6 Compensation of Physician Group. The parties
hereto agree Physician Group will be fairly and reasonably compensated for its
services by retaining in the aggregate Twenty percent (20%) of the first Two
Hundred Thousand Dollars ($200,000) of revenues each month actually collected
for each medical imaging diagnostic or other medical procedure ("medical
services") performed by Physician Group at the Center with Physician Group
receiving Eighteen percent (18%) of such revenues in excess of Two Hundred
Thousand Dollars ($200,000) actually collected each month. For purposes of this
Agreement aggregate revenues collected shall mean all collected receipts for
medical imaging, diagnostic and other medical procedures performed at the
Center, including charges for use of equipment, facilities and Center personnel
in connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month.
(b) The compensation as set forth in Section 6.6 in each of
Exhibits C and D is hereby revised to read as follows:
<PAGE> 14
6.6 Compensation of Physician Group. The parties hereto agree
Physician Group will be fairly and reasonably compensated for its services by
retaining in the aggregate Twenty percent (20%) of the first One Hundred
Thousand Dollars ($100,000) of revenues each month actually collected for each
medical imaging diagnostic or other medical procedure ("medical services")
performed by Physician Group at the Center with Physician Group receiving
Eighteen percent (18%) of such revenues in excess of One Hundred Thousand
Dollars ($100,000) actually collected each month. For purposes of this Agreement
aggregate revenues collected shall mean all collected receipts for medical
imaging, diagnostic and other medical procedures performed at the Center,
including charges for use of equipment, facilities and Center personnel in
connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month in recognition of their supervisorial responsibilities.
3. Statement of Revenues. A new Section 6.10 shall be added to Exhibit
A and a new Section 6.9 to Exhibits B, C and D which provides as follows:
6.9[10] Statement of Revenues. Partnership [Corporation] shall
furnish to Physician Group a statement of revenues generated by Physician Group
upon or as to which a fee to be paid to Physician Group hereunder is calculated
at the end of every month. This statement shall be submitted to Physician Group
on the tenth (10th) day of each month reflecting the previous month's revenue
from services rendered by Physician Group. Each statement shall be signed and
certified to be correct by Partnership [Corporation] or its authorized
representative. Partnership [Corporation] shall keep in the Center premises full
and accurate books of account, records, cash receipts, and other pertinent data
showing its revenues. Such books of account, records, cash receipts and other
pertinent data shall be kept for a period of two (2) years. Physician Group
shall be entitled during the term and within two (2) years after expiration or
termination of this Agreement to inspect and examine all of Partnership's
[Corporation's] books of account, records, cash receipts, and other pertinent
data relative only to the revenues involving the Center, so that Physician Group
can ascertain Center's revenues. Partnership [Corporation] shall cooperate fully
with Physician Group in making the inspection. Physician Group shall also be
entitled once during each year of the Agreement and once after expiration or
termination to an examination of Center's books of account, records, cash
receipts and other pertinent data to determine Center's revenues by a certified
public accountant to be designated by Physician Group, and who will be paid
solely by Physician Group, unless such review shall disclose an understatement
by Center of two percent (2%) or more in which case all expenses of such
examination will be paid by Partnership [Corporation].
4. Reference. It is hereby agreed between the parties hereto that
wherever the term "Physicians" or "Physician Group" appears in Exhibits A, B, C
and D it shall be deemed to mean "Magnetic Imaging Medical Group, Inc., a
California professional corporation.
<PAGE> 15
5. Indemnification. MICA and Long Beach, jointly and severally, agree
to indemnify and hold Physician Group together with its predecessors, harmless
against any and all liabilities which it might incur in connection with its
service as a General Partner of Long Beach. Physician Group shall promptly
notify MICA of the existence of any claim, demand or other matter involving
liabilities to third parties to which MICA's indemnification obligations would
apply and shall give MICA a reasonable opportunity to defend the same at its own
expense and with counsel of its own selection. If MICA, within a reasonable time
after notice, fails to defend, Physician Group shall have the right, but not the
obligation, to undertake the defense of and to compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf of MICA.
[INTENTIONALLY LEFT BLANK]
<PAGE> 16
6. Incorporation. Except as specifically revised herein, Exhibits A, B,
C and D are incorporated herein in full and restated as revised.
Executed this 31st day of January, 1996 at Long Beach, California.
MAGNETIC IMAGING MEDICAL
GROUP, INC.
By /s/ Joel Levine, M.D.
-----------------------------
Its CFO
-----------------------------
MEDICAL IMAGING CENTERS OF
AMERICA, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President and CEO
-----------------------------
LONG BEACH MEDICAL IMAGING
CENTERS, LTD.
By MICA CAL I, INC.
Its Managing General Partner
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
MICA CAL III, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
MICA CAL IV, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
<PAGE> 1
EXHIBIT 10.10
MANAGEMENT, LICENSING
AND FACILITIES AGREEMENT
This Agreement is made effective as of March 28, 1984 by and between
LONG BEACH MEDICAL IMAGING CENTER, LTD., a California limited partnership
(hereinafter referred to as "PARTNERSHIP"), and LANCE SIEGER, M.D., JOEL B.
LEVINE, M.D. and KEITH R. BURNETT, M.D. (herein after referred to as
"Physicians").
RECITALS
A. PARTNERSHIP, after careful study, has concluded that there is a need
in Long Beach/Lakewood, California region for a medical center specializing in
performing a variety of medical imaging and diagnostic services by experienced
physicians at reasonable cost.
B. PARTNERSHIP has a comprehensive system for establishing and
providing financial and related management to such a medical center which makes
available to qualified physicians the facilities, equipment, supplies,
management, capital, staffing support, marketing services, and systems necessary
to provide a large volume of medical imaging and diagnostic services to patients
at reasonable cost, which PARTNERSHIP has obtained through arrangements with
Medical Imaging Centers of America, Inc. ("MICA"), an affiliate of PARTNERSHIP.
C. PARTNERSHIP desires to make its system available to physicians who
are capable of offering high quality services to the public at a competitive
cost. To that end, PARTNERSHIP has committed substantial resources, and has
incurred substantial expenses and future obligations to develop the Center
located in the greater Long Beach area, California (hereinafter referred to as
the "Center"). The exact location of the Center has not yet been determined, and
once a site has been selected the precise address will be set forth in a
separate memorandum which will be attached hereto and incorporated herein by
reference.
D. Physicians desire to contract with PARTNERSHIP for use of
PARTNERSHIP's management services and system of delivering medical imaging and
diagnostic care, a sublease for the Center, and a license for use of any
appropriate trade names and marks which PARTNERSHIP may own or own rights to
license.
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<PAGE> 2
AGREEMENT
NOW THEREFORE, the parties agree as follows:
ARTICLE I
Duties of Parties
1.1 Management Services of PARTNERSHIP. PARTNERSHIP shall provide to
Physicians the following services:
a. General Administrative Services. Overall supervision and
management of the Center which does not constitute the practice of medicine,
including supervision over the services and personnel described below.
b. Personnel. Provision of all non-physician personnel needed
to operate and support the Center, such as nurses, technicians, receptionists,
secretarial, clerical, purchasing and marketing personnel.
c. Training. Training of all non-physician personnel at the
Center.
d. Fiscal Services. Fiscal services including accounting,
auditing, bookkeeping, budgeting, patient billings and record keeping, accounts
receivable, accounts payable processing, and electronic data processing.
e. Patient Records. Ownership and maintenance of patient
medical records and archives, record retrieval and record monitoring to assist
Physicians with utilization and quality assurance reviews.
f. Physician Recruiting. Assistance to Physicians in
recruiting and screening prospective physician-contractors, and
physician-employees.
g. Quality Control. Assistance to Physicians in the
development of appropriate quality control programs and protocols, including
development of performance and utilization standards, sampling techniques for
case review, and preparation of appropriately documented studies.
h. Administrative Services for Physicians. Provision of
general administrative services to Physicians in connection with their business
affairs relating to the Center, which shall include maintenance of Physicians'
books and records and accounting services, billing, and such other
administrative services as Physicians may from time to time require with respect
to the operation of the Center.
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<PAGE> 3
i. Management Reports. Preparation of management reports to
assist Physicians in evaluating the performance and productivity of the Center
and of other doctors employed by or contracted with Physicians at the Center.
j. Marketing. Marketing of the medical imaging and diagnostic
services offered at the Center by Physicians pursuant to a marketing plan to be
jointly developed and approved by Physicians.
k. Equipment and Supplies. Provision of all equipment,
furnishings, and supplies reasonably necessary for the efficient operation of
the Center.
l. Janitorial and Maintenance Service. Janitorial, grounds and
maintenance services for the Center and its equipment and furnishings.
1.2 Administrative Services of Physicians. Physicians shall provide
such administrative services at the Center as shall be necessary to assure that
medical services are provided efficiently and commensurate with a high standard
of care for the Long Beach/Lakewood medical community. In doing so, Physicians
shall consult with PARTNERSHIP concerning non-physician staffing requirements,
needed equipment and supplies, preparation of a suitable budget, the need for
ancillary support, such as laboratory services, so as to optimize the smooth and
efficient functioning of the Center. Physicians shall analyze the efficiency of
the Center and monitor and evaluate the Center personnel, both physician and
non-physician personnel. Physicians shall provide their evaluations and
recommendations to PARTNERSHIP. Any such recommendations and evaluations shall
be rendered on a confidential basis and may include specific designation of
non-medical personnel considered unacceptable by Physicians.
ARTICLE II
Licensing Agreement
2.1 License of Trade Names and Marks. In consideration of the payment
provided for herein and the agreement of Physicians to perform all of the terms,
covenants and conditions contained in this Agreement and the sublease for the
Center pursuant hereto, PARTNERSHIP agrees to license to Physicians the
nonexclusive right to use, subject to all legal restrictions upon physician
advertising, such trade names and marks as PARTNERSHIP may from time to time
adopt for use in connection with its business, the business of MICA, or the
business of the Center but only in respect to business of Physicians conducted
(1) at the Center while Physicians' sublease is in effect, (2) this Agreement is
in full force and effect, and (3) Physicians are in compliance with all of the
terms, covenants and conditions contained in this Agreement, and the sublease
for the Center.
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<PAGE> 4
2.2 Use of Trade Names and Marks. The exact manner of use of trade
names and marks licensed to Physicians shall be subject to the prior written
consent of PARTNERSHIP. Physicians shall not use said names or marks in publicly
disseminated materials without such consent.
2.3 Nonexclusive Right. The license granted to Physicians in Section
2.1 hereof is nonexclusive.
2.4 Term of License. The license granted herein shall terminate when
Physicians sublease expires or terminates, and shall terminate in all respects
when this Agreement expires or terminates.
2.5 Use of Trade Names and Marks After Term. Upon termination of this
license, Physicians shall immediately discontinue the use of any trade names and
marks licensed to Physicians hereunder in every respect, shall execute all
documents necessary to satisfy the Secretary of State and the Board of Medical
Quality Assurance for the State of California that they have no continuing
interest in the trade names or marks of PARTNERSHIP or of MICA, and Physicians
shall not make any reference on their letterhead or in other materials to their
former affiliation with PARTNERSHIP or to MICA.
2.6 Protecting Goodwill. As further consideration for the opportunity
to sublease the Center and conduct the practice of medicine from the Center and
for the use of such trade names and marks, Physicians agree they will take all
necessary steps to preserve and protect the reputation and goodwill associated
with the Center and said names and marks including, without limitation, the
following:
a. Assigned Physicians. Physicians shall contract only with
well-qualified licensed medical doctors who are experienced in medical imaging
and diagnostic care at the Center, and the assignment of an employed or contract
medical doctor to work at the Center shall be subject to the reasonable approval
of PARTNERSHIP.
b. Compliance With Law. Physicians and their
physician-contractors and physician-employees shall comply with all laws,
regulations, ethical and professional standards applicable to the practice of
medicine.
c. Monitoring of Services. Physicians shall rigorously monitor
utilization and quality of services provided at the Center and shall take all
steps necessary to remedy any and all deficiencies in the efficiency or the
quality of medical care provided.
d. Time Commitment. PARTNERSHIP shall, after consultation with
Physicians, establish reasonable business hours for the operation of the Center.
Physicians shall engage a sufficient number of physician-employees or
physician-contractors to meet the demand and potential demand for medical
imaging and diagnostic services at the Center, and to assure the
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<PAGE> 5
efficient operation of the Center during its established business hours.
Throughout the term of this Agreement, Physicians shall exercise their highest
skills and best efforts to cause the practice at the Center to grow in volume
and profitability. To the latter end, except for undertaking bona fide charity
cases on a basis customary for physicians in the Long Beach/Lakewood area,
without written consent of the PARTNERSHIP, Physicians shall only use the Center
for performance of medical services which are compensable by the payment of
professional fees established under Section 6.3, and activities which directly
support that performance.
ARTICLE III
Sublease of Center
Concurrently with executing this Agreement, the parties are entering
into a sublease of the Center, which is incorporated by this reference as if
fully set forth herein.
ARTICLE IV
Relationship of Parties
4.1 Practice of Medicine. A fundamental understanding between the
parties is that PARTNERSHIP shall not participate in any manner in the medical
services rendered by Physicians in the conduct of their medical practice at the
Center. PARTNERSHIP may make recommendations, but shall have no control, over
matters affecting Physicians' medical practice, including without limitation the
following: furnishing physicians, supervising medical services, or any and all
other matters affecting the practice of medicine. All patients treated by
Physicians shall be deemed to be the patients of Physicians. Physicians shall
not represent in any direct or indirect manner to the public or any third party
that PARTNERSHIP has participated, is participating, or will participate in the
practice of medicine in any manner.
4.2 Relationship of Parties. This Agreement does not constitute either
party the agent, legal representative or employee for any purpose whatsoever of
the other party, and neither party is granted any right or authority to assume
or create any obligation for or on behalf of, or in the name of, or in any way
to bind the other party. Each party agrees not to incur or contract for any debt
or obligation on behalf of the other party, or commit any act, make any
representation or advertise in any manner which may adversely affect any right
of the other party, or be detrimental to its good name and reputation. In the
performance of their services under this Agreement, the Physicians shall act in
the capacity of owners of the medical practice at the Center. PARTNERSHIP in its
performance under this Agreement shall act in the capacity of an independent
contractor to Physicians.
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<PAGE> 6
ARTICLE V
Proprietary Interest and Rights of PARTNERSHIP and MICA
5.1 Proprietary Interests of PARTNERSHIP and MICA. Physicians (and each
of them) recognize the proprietary interest of PARTNERSHIP and MICA in the
PARTNERSHIP and MICA business system for operating a medical imaging and
diagnostic center, including all policies, procedures, operating manuals, forms,
customer lists, contracts, and other information regarding such system.
Physicians (and each of them) acknowledge and agree that such information
constitutes trade secrets of PARTNERSHIP and MICA. Physicians (and each of them)
hereby waive any and all right, title and interest in and to such trade secrets
and agree to return all copies of such trade secrets and information related
thereto, at its expense, upon termination of the Agreement.
5.2 Confidentiality. Physicians (and each of them) acknowledge and
agree that each of PARTNERSHIP and MICA is entitled to prevent its competitors
from obtaining and utilizing its trade secrets. Physicians (and each of them)
agree to hold the trade secrets of PARTNERSHIP and MICA in strictest confidence
and not to disclose them or allow them to be disclosed directly or indirectly to
any person or entity other than persons engaged by Physicians for use in the
course of their employment at the Center, without the prior written consent of
PARTNERSHIP and MICA. Physicians (and each of them) acknowledge their fiduciary
obligations to PARTNERSHIP and MICA and the confidentiality of their
relationship with PARTNERSHIP and MICA and of any information relating to the
services and business methods of PARTNERSHIP and MICA which they may obtain
during the term of this Agreement. Physicians (and each of them) shall not,
either during the term of this Agreement, or at any time after the expiration or
sooner termination of this Agreement, disclose to anyone other than persons
employed at the Center who use the information in the course of their employment
any confidential or proprietary information or trade secret of PARTNERSHIP or
MICA obtained by them. Physicians (and each of them) also agree to place any
persons to whom said information is disclosed for the purpose of performance
under legal obligation to treat such information as strictly confidential.
5.3 Successor Medical Group. Upon termination of this Agreement, or the
sublease of the Center, whichever first occurs, PARTNERSHIP shall have the
immediate right, in its sole discretion, to designate a professional
corporation, partnership or sole proprietor as successor to Physicians at the
Center. If such professional corporation, partnership or sole proprietor is
composed solely of duly licensed physicians, or other licensed health care
professionals, they shall be entitled to retain and utilize all existing
customer lists and patient records at the Center. PARTNERSHIP agrees that all
records transferred to Physicians' successor shall be maintained as long as
required by law regulating retention of medical records, and copies of said
records shall be made available to Physicians at their expense, if required for
the purpose of defending any malpractice claim against Physicians or any of
them.
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<PAGE> 7
ARTICLE VI
Compensation
6.1 Inducement to Enter Agreement. As partial consideration, and as an
inducement to Physicians for entering this Agreement, PARTNERSHIP shall be
responsible for any losses related to the operation of the Center which do not
arise from wrongful or negligent acts or omissions of Physicians or any of them.
6.2 PARTNERSHIP's Risk. PARTNERSHIP has incurred substantial expenses
and future obligations to establish the Center, the system for the delivery of
medical imaging and diagnostic services, including fees for consultants and
other professionals, salaries for responsible staff, interest expenses, lease
obligations, and costs of equipping the Center. PARTNERSHIP has also assumed
substantial obligations associated with the continuing operation of the Center.
Although there is uncertainty about the profitability of the Center during the
initial years of operation, PARTNERSHIP is assuming responsibility for losses as
provided in Section 6.1. The parties therefore recognize and agree that in order
for PARTNERSHIP to receive a fair and reasonable return for its expenses and
risks, a fair return for lease of premises, services, and the use of its trade
names and marks hereunder, as well as to permit the necessary accumulation of
capital to establish and maintain a first rate and fully equipped Center, a goal
the parties hereto agree to be desirable, the total payments to PARTNERSHIP
should increase in future years.
6.3 Professional Fees. Physicians shall, in consultation with
PARTNERSHIP, establish a schedule of fees and charges for medical services at
the Center.
6.4 Billing and Collections. Billings to patients for all services
rendered at the Center shall be in the name of Physicians. PARTNERSHIP, or its
delegate, shall serve as billing and collection agent for Physicians, and shall
be diligent and timely in the performance of billing and collection services.
However, PARTNERSHIP does not guarantee collection and shall not be responsible
for any loss to Physicians as a result of inability to collect fees and charges.
6.5 Intention of the Parties. It is the intention of the parties hereto
that from the revenues of the Center Physicians shall be fairly and reasonably
compensated for their professional services and those of the physicians engaged
by them, and PARTNERSHIP shall be fairly and reasonably compensated for the
sublease of the Center, the licensing of trade names and marks, the provision of
services by it pursuant to this Agreement, and for the expenses, obligations,
and risks assumed by it in connection with the establishment and operation of
the Center and the operation of the PARTNERSHIP system.
6.6 Fair and Reasonable Compensation of Physicians. The parties hereto
agree Physicians will be fairly and reasonably compensated for their services
and those of the physicians it engages by retaining in the aggregate twenty-five
percent (25%) of the amount of money actually collected ("collected receipts")
by the Center for each medical imaging diagnostic or other
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<PAGE> 8
medical procedure ("medical services") performed at the Center. All collected
receipts for anything directly associated with the services of Physicians,
related to the Center, including charges for use of equipment, supplies,
facilities and assisting personnel shall be deemed to be for medical services
for purposes of this Agreement.
6.7 Fair and Reasonable Compensation to PARTNERSHIP. Any revenues or
receipts in excess of those retained by Physicians as provided in Section 6.6
hereof shall be paid to PARTNERSHIP as compensation for the sublease of the
Center, provision of services under this Agreement, the licensing of trade names
and marks to Physicians and for its expenses, obligations, and risks in
connection with the establishment of the Center, and the operation of the
PARTNERSHIP system. Said compensation includes rent to PARTNERSHIP for the
Center subleased by Physicians.
6.8 Remittance. All monies which Physicians are entitled to retain
pursuant to Section 6.1 and all monies which PARTNERSHIP is entitled to receive
pursuant to Section 6.7 shall be accounted for and disbursed monthly.
6.9. Advance. Beginning on the first day of the first calendar month
following the date on which the Center becomes fully operational (which the
parties shall fix by written agreement) and on the 1st day of each of the next
five calendar months (provided this Agreement has not otherwise been terminated)
PARTNERSHIP will pay to each of Joel and Keith as an advance against
compensation, which they are entitled to retain under Section 6.6 the sum of
$6,667.00. In any month when compensation to that individual exceeds $6,667.00,
the excess shall be paid to PARTNERSHIP until such time as all advances to said
individual have been repaid in full.
ARTICLE VII
Term and Termination
7.1 Term. This Agreement became effective on the date first above
written and shall continue for a period of at least six months thereafter, and
indefinitely thereafter until terminated.
7.2 Termination. Either party may terminate this Agreement, with or
without cause, within the six-month period referred to in Section 7.1 by giving
the other party written notice of termination. This Agreement may be terminated
at any time by either party in the event of a material breach by the other party
to this Agreement, which is not cured by the breaching party within 60 days
after written notice of the breach has been given to the breaching party.
7.3 Rights Upon Termination. The termination of this Agreement shall
not release or discharge either party from any obligation, debt or liability
which shall have previously accrued and remain to be performed upon the date of
termination, or which by its terms is to be performed after the date of
termination.
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<PAGE> 9
ARTICLE VIII
General Provisions
8.1 Indemnification. Each party shall indemnify, hold harmless and
defend the other party from any liability, loss, claims, lawsuits, damages,
injury, cost, expense or other detriment arising out of or incident to the
performance under this Agreement by such indemnifying party, its employees,
independent contractors, and agents, including, without limitation, all
consequential damages and attorneys' fees. Physicians shall obtain and maintain
professional liability insurance and coverages on all medical doctors, naming
PARTNERSHIP as an additional insured, with reasonable limits to be agreed upon.
PARTNERSHIP shall obtain and maintain professional liability insurance on all
nonprofessional staff, naming Physicians as additional insured, with reasonable
limits to be agreed upon.
8.2 Assignment. The rights conferred upon Physicians hereunder may not
be transferred or assigned without the prior written consent of PARTNERSHIP and
any assignment in violation of this section shall be void.
8.3 Governing Law. This Agreement shall be governed by the laws of the
State of California.
8.4 Article and Section Headings. The article and section heading in
this Agreement are inserted solely for convenience of reference and are not a
part of and are not intended to govern, limit or aid in the construction of any
term or provision hereof.
8.5 Attorneys' Fees. Should any party employ an attorney for the
purpose of enforcing this Agreement, or any judgment based thereon, in any
court, including bankruptcy courts and courts of appeal, or arbitration
proceedings, the prevailing party shall be entitled to receive its attorneys'
fees and costs, whether taxable or not.
8.6 Waiver. The waiver of any covenant, condition or duty hereunder by
either party shall not prevent that party from later insisting upon full
performance of the same.
8.7 Amendment. No amendment in the terms of this Agreement shall be
binding on either party unless in writing and executed by the duly authorized
representatives of each party.
8.8 Notice. Any communication under this Agreement shall be given in
writing and shall be delivered in person or by prepaid certified or registered
mail to each party at such address as either party shall furnish to the other in
writing. Notice shall be deemed given when personally delivered, or if given by
mail, then two days after deposit in the United States mail, postage prepaid.
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<PAGE> 10
8.9 Entire Agreement. This Agreement and the sublease referenced herein
constitute the entire agreement between the parties in connection with the
subject matter hereof and shall supersede all prior agreements, whether oral or
in writing, whether explicit or implicit, which have been entered into prior to
the execution hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement at
San Clemente, California as of the date first above written.
LONG BEACH MEDICAL IMAGING CENTER,
LTD.
By: MICA-CAL-I, INC.
By: /s/ Antone J. Lazos
----------------------
President
PHYSICIANS:
/s/ Joel B. Levine, M.D.
-----------------------------
JOEL B. LEVINE, M.D.
/s/ Lance Sieger, M.D.
-----------------------------
LANCE SIEGER, M.D.
/s/ Keith R. Burnett, M.D.
-----------------------------
KEITH R. BURNETT, M.D.
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<PAGE> 11
AMENDMENT
AMENDMENT TO the Management, Licensing and Facilities Agreements
entered into by and between predecessors to MAGNETIC IMAGING MEDICAL GROUP,
INC., a California professional corporation (hereinafter referred to as
"Physician Group" and MEDICAL IMAGING CENTERS OF AMERICA, INC., a California
corporation ("MICA") which wholly-owned subsidiaries are MICA CAL I, Inc., a
California corporation ("M-I") and the managing general partner of Long Beach
Medical Imaging Center, Ltd., a California limited partnership ("Long Beach"),
MICA CAL II, INC., a California corporation ("M-III") and MICA CAL IV, INC>, a
California corporation ("M-IV").
R E C I T A L S
A. On March 28, 1984, Long Beach entered into a Management, Licensing
and Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto as Exhibit A (the "A
Agreement").
B. On March 14, 1988, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. This Agreement
was extended on May 29, 1992. A true and correct copy of that Agreement as
extended is attached hereto as Exhibit B (the "B Agreement").
C. On February 3, 1992, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit C (the
"C Agreement").
D. On July 1, 1994, M-III entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit D (the
"D Agreement").
E. The A Agreement is an agreement which has a term which does not
terminate except on the occurrence of certain events while the B, C, and D
Agreements have terms which end on different dates in 1997 and 1998. MICA wished
to place limits on the term of the A Agreement and the Physician Group is
willing to permit such limits and both parties wish each ot eh Agreements to be
coterminous. All of the parties wish to provide for certainty and continuity of
service in their relationship as well as revise certain of the compensation
provisions and clarify certain other matters.
NOW THEREFORE, in consideration of their mutual covenants and promises
and for other good and valuable consideration, receipt of which each party
acknowledges, the parties agree as follows:
<PAGE> 12
1. Term.
The term as set forth in each of the Agreements (Section 7.1
of Exhibits A, B, C and D) is hereby revised to read as follows:
7.1 Term. The term hereunder shall commence January 1, 1996
and shall continue for five (5) years. Provided that Physician Group is not in
material default pursuant to this Agreement then and in that event Physician
Group shall have the right to extend the term of this Agreement for two (2)
consecutive five (5) year terms so long as it shall give written notice to the
other party no less than sixty (60) days prior to the end of a term hereunder.
If a party believes a material default has occurred it shall promptly give
written notice to the other party specifying the nature of the material default
and providing a recommended method of cure. The notified party shall have ninety
(90) days to correct the material default either in accordance with the
suggested methodology or by an alternate equally effective methodology. The
failure to provide notice within thirty (30) days of an event giving rise to a
material default shall be deemed a waiver of such default. Notwithstanding
anything to the contrary set forth in this Agreement, it is understood and
agreed that this Agreement is attached to the assets of the Center. To the
extent the Center or its assets are sold, assigned or otherwise transferred,
this Agreement must be transferred and accepted in full by the acquirer as a
condition of such acquisition, assignment or transfer.
2. Compensation.
(a) The Compensation as set forth at Section 6.6 in each of
those Agreement attached as Exhibits A and B is hereby revised to read as
follows:
6.6 Compensation of Physician Group. The parties
hereto agree Physician Group will be fairly and reasonably compensated for its
services by retaining in the aggregate Twenty percent (20%) of the first Two
Hundred Thousand Dollars ($200,000) of revenues each month actually collected
for each medical imaging diagnostic or other medical procedure ("medical
services") performed by Physician Group at the Center with Physician Group
receiving Eighteen percent (18%) of such revenues in excess of Two Hundred
Thousand Dollars ($200,000) actually collected each month. For purposes of this
Agreement aggregate revenues collected shall mean all collected receipts for
medical imaging, diagnostic and other medical procedures performed at the
Center, including charges for use of equipment, facilities and Center personnel
in connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month.
(b) The compensation as set forth in Section 6.6 in each of
Exhibits C and D is hereby revised to read as follows:
<PAGE> 13
6.6 Compensation of Physician Group. The parties hereto agree
Physician Group will be fairly and reasonably compensated for its services by
retaining in the aggregate Twenty percent (20%) of the first One Hundred
Thousand Dollars ($100,000) of revenues each month actually collected for each
medical imaging diagnostic or other medical procedure ("medical services")
performed by Physician Group at the Center with Physician Group receiving
Eighteen percent (18%) of such revenues in excess of One Hundred Thousand
Dollars ($100,000) actually collected each month. For purposes of this Agreement
aggregate revenues collected shall mean all collected receipts for medical
imaging, diagnostic and other medical procedures performed at the Center,
including charges for use of equipment, facilities and Center personnel in
connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month in recognition of their supervisorial responsibilities.
3. Statement of Revenues. A new Section 6.10 shall be added to Exhibit
A and a new Section 6.9 to Exhibits B, C and D which provides as follows:
6.9[10] Statement of Revenues. Partnership [Corporation] shall
furnish to Physician Group a statement of revenues generated by Physician Group
upon or as to which a fee to be paid to Physician Group hereunder is calculated
at the end of every month. This statement shall be submitted to Physician Group
on the tenth (10th) day of each month reflecting the previous month's revenue
from services rendered by Physician Group. Each statement shall be signed and
certified to be correct by Partnership [Corporation] or its authorized
representative. Partnership [Corporation] shall keep in the Center premises full
and accurate books of account, records, cash receipts, and other pertinent data
showing its revenues. Such books of account, records, cash receipts and other
pertinent data shall be kept for a period of two (2) years. Physician Group
shall be entitled during the term and within two (2) years after expiration or
termination of this Agreement to inspect and examine all of Partnership's
[Corporation's] books of account, records, cash receipts, and other pertinent
data relative only to the revenues involving the Center, so that Physician Group
can ascertain Center's revenues. Partnership [Corporation] shall cooperate fully
with Physician Group in making the inspection. Physician Group shall also be
entitled once during each year of the Agreement and once after expiration or
termination to an examination of Center's books of account, records, cash
receipts and other pertinent data to determine Center's revenues by a certified
public accountant to be designated by Physician Group, and who will be paid
solely by Physician Group, unless such review shall disclose an understatement
by Center of two percent (2%) or more in which case all expenses of such
examination will be paid by Partnership [Corporation].
4. Reference. It is hereby agreed between the parties hereto that
wherever the term "Physicians" or "Physician Group" appears in Exhibits A, B, C
and D it shall be deemed to mean "Magnetic Imaging Medical Group, Inc., a
California professional corporation.
<PAGE> 14
5. Indemnification. MICA and Long Beach, jointly and severally, agree
to indemnify and hold Physician Group together with its predecessors, harmless
against any and all liabilities which it might incur in connection with its
service as a General Partner of Long Beach. Physician Group shall promptly
notify MICA of the existence of any claim, demand or other matter involving
liabilities to third parties to which MICA's indemnification obligations would
apply and shall give MICA a reasonable opportunity to defend the same at its own
expense and with counsel of its own selection. If MICA, within a reasonable time
after notice, fails to defend, Physician Group shall have the right, but not the
obligation, to undertake the defense of and to compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf of MICA.
[INTENTIONALLY LEFT BLANK]
<PAGE> 15
6. Incorporation. Except as specifically revised herein, Exhibits A, B,
C and D are incorporated herein in full and restated as revised.
Executed this 31st day of January, 1996 at Long Beach, California.
MAGNETIC IMAGING MEDICAL
GROUP, INC.
By /s/ Joel Levine, M.D.
-----------------------------
Its CFO
-----------------------------
MEDICAL IMAGING CENTERS OF
AMERICA, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President and CEO
-----------------------------
LONG BEACH MEDICAL IMAGING
CENTERS, LTD.
By MICA CAL I, INC.
Its Managing General Partner
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
MICA CAL III, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
MICA CAL IV, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
<PAGE> 1
EXHIBIT 10.11
MANAGEMENT, LICENSING
AND FACILITIES AGREEMENT
This Agreement is made effective as of July 1, 1994 by and between MICA
CAL III, Inc., a California corporation (hereinafter referred to as
"Corporation"), and MIMG, Inc., (hereinafter referred to a "Physician Group").
RECITALS
A. Corporation, after careful study, has concluded that there is a need
in Downey for a medical center specializing in performing a variety of medical
imaging and diagnostic services by experienced physicians at reasonable cost.
B. Corporation has a comprehensive system for establishing and
providing financial and related management to such a medical center which makes
available to qualified physicians a fully staffed facility, equipment, supplies,
management, capital, marketing services, and systems necessary to provide a
large volume of medical imaging and diagnostic services to patients at a
reasonable cost. These services will be obtained from Medical Imaging Centers of
America, Inc. ("MICA").
C. Corporation desires to make its system available to physicians who
are capable of offering high quality services to the public at a competitive
cost. To that end, Corporation has committed substantial resources, and has
incurred substantial expenses and future obligations to develop the medical
imaging center located at 8515 East Florence Avenue, Suite 100, Downey,
California 90240 (hereinafter referred to as the "Center").
D. Physician Group desires to contract with Corporation for use of
Corporation's management services and system of delivering medical imaging and
diagnostic care, a sublease for the Center, and a license for use of any
appropriate trade names and marks which Corporation may own or own rights to
license.
AGREEMENT
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
Duties of Parties
1.1 Management Services of Corporation. Corporation shall provide the
following services:
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<PAGE> 2
(a) General Administrative Services. Overall supervision and
management of the Center, including supervision over the services and personnel
described below.
(b) Personnel. Provision to the Center of all non-physician
personnel needed to operate and support the Center, such as nurses, technicians,
receptionists, secretarial, clerical, purchasing and marketing personnel. No
chief technologist shall be employed or terminated by the Corporation without
the consent of Physician Group, which consent shall not be unreasonably
withheld.
(c) Training. Training of all non-physician personnel at the
Center.
(d) Fiscal Services. Fiscal services including accounting,
auditing, bookkeeping, budgeting, patient billings and record keeping, accounts
receivable, accounts payable processing, and electronic data processing.
(e) Patient Records. Ownership and maintenance of patient
medical records and archives, record retrieval and record monitoring to assist
Physician Group with utilization and quality assurance reviews.
(f) Physician Recruiting. Assistance to Physician Group in
recruiting and screening prospective physician-contractors, and
physician-employees. Physician Group shall make the final selections.
(g) Quality Control. Assistance to Physician Group in the
development of appropriate quality control programs and protocols, including
development of performance and utilization standards, sampling techniques for
case review, and preparation of appropriately documented studies.
(h) Administrative Services for Physician Group. Provision of
general administrative services to Physician Group in connection with its
business affairs relating to the Center, which shall include maintenance of
Physician Group's books and records and accounting services, billing, and such
other administrative services as Physician Group may from time to time require
with respect to the operation of the Center.
(i) Management Reports. Preparation of management reports to
assist Physician Group in evaluating the performance and productivity of the
Center and of other doctors employed by or contracted with Physician Group at
the Center.
(j) Marketing. Marketing of the medical imaging and diagnostic
services offered at the Center by Physician Group pursuant to a marketing plan
to be jointly developed and shall be subject to approval by Physician Group.
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<PAGE> 3
(k) Equipment and Supplies. Provision of all equipment,
furnishings, and supplies reasonably necessary for the efficient operation of
the Center.
(l) Janitorial and Maintenance Service. Janitorial, grounds
and maintenance services for the Center and its equipment and furnishings.
1.2 Administrative Services of Physician Group. Physician Group shall
cooperate with the Corporation and use its best efforts to assure the continuing
success of the Center. These efforts shall include, by way of example and not
limitation: (1) promotion of services provided by the Center with particular
emphasis on direct contact with referring physicians and other health care
providers including office visits, seminars and advisory boards to apprise such
individuals and groups of the nature and availability of services offered at the
Center, (2) provision of technical advice and assistance with respect to the
acquisition, installation and maintenance of equipment, (3) participation in
planning of the Center, (4) the development of policies and standards for
operation. Physician Group shall also provide such administrative services at
the Center as shall be necessary to assure that medical services are provided
efficiently and commensurate with a high standard of care for the medical
community in Downey. In doing so, Physician Group shall consult with Corporation
concerning non-physician staffing requirements, needed equipment and supplies,
preparation of a suitable budget, the need for ancillary support, such as
laboratory services, so as to optimize the smooth and efficient functioning of
the Center. Physician Group shall analyze the efficiency of the Center and
monitor and evaluate the Center personnel, both physician and non-physician
personnel. Physician Group shall provide its evaluations and recommendations to
Corporation. Any such recommendations shall be rendered on a confidential basis
and may include specific designation of non-medical personnel considered
unacceptable by Physician Group.
1.3 Notification of Payer Disputes. Physician Group agrees to notify
Corporation of any complains arising under any agreement between Physician Group
and a third-party payer for services provided at the Center, and Physician Group
shall immediately notify Corporation of any notice of termination of any
agreement with a third-party payer. Physician Group shall consult with the
Corporation and cooperate to resolve such problems as may arise under
third-party payer agreements. Physician Group shall also consult with
Corporation prior to terminating any third-party payer agreement.
ARTICLE II
Licensing Agreement
2.1 License of Trade Names and Marks. In consideration of the payment
provided for herein and the agreement of Physician Group to perform all of the
terms, covenants and conditions contained in this Agreement and the sublease for
the Center pursuant hereto, Corporation agrees to license to Physician Group the
nonexclusive right to use, subject to all legal restrictions upon physician
advertising, such trade names and marks as MICA may license to the
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Corporation, or as Corporation may from time to time adopt for use in connection
with its business, or the business of the Center but only in respect to business
of Physician Group conducted (1) at the Center while Physician Group's sublease
is in effect, (2) while this Agreement is in effect, and (3) if the Corporation
has not declared a default and Physician Group is in compliance with all of the
terms, covenants and conditions contained in this Agreement, and the sublease
for the Center.
2.2 Use of Trade Names and Marks. The exact manner of use of trade
names and marks licensed to Physician Group shall be subject to the prior
written consent of Corporation. Physician Group shall no use said names or marks
in publicly disseminated materials without such consent.
2.3 Nonexclusive Right. The license granted to Physician Group in
Section 2.1 hereof is nonexclusive.
2.4 Term of License. The license granted herein shall terminate when
Physician Group's sublease expires or terminates, and shall terminate when this
Agreement expires or terminates.
2.5 Use of Trade Names and Marks After Term. Upon termination of this
license, Physician Group shall immediately discontinue the use of any trade
names and marks licensed to Physician Group hereunder in every respect, shall
execute all documents necessary to satisfy third-parties, including government
agencies regulating corporations and the practice of medicine that Physician
Group has no continuing interest in the trade names or marks of Corporation or
of MICA, and Physician Group shall not make any reference on their letterhead or
in other materials to their former affiliation with Corporation, or any
affiliation with MICA.
2.6 Protecting Goodwill. As further consideration for the opportunity
to sublease the Center and conduct the practice of medicine from the Center and
for the use of such trade names and marks, Physician Group agrees it will take
all necessary steps to preserve and protect the reputation and goodwill
associated with the Center and said names and marks including, without
limitation, the following:
(a) Assigned Physicians. Physician Group shall contract only
with well- qualified licensed medical doctors who are experienced and Board
certified in medical imaging and diagnostic care provided at the Center, and the
assignment and continued service of an employed or contract medical doctor to
work at the Center shall be subject to the approval of Corporation, which shall
not be unreasonably withheld.
(b) Compliance with Law. Physician Group and its physician-
contractors and physician-employees shall comply with all laws, regulations,
ethical and professional standards applicable to the practice of medicine.
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(c) Monitoring of Services. Physician Group shall rigorously
monitor utilization and quality of services provided at the Center and shall
take all steps necessary to remedy any and all deficiencies in the efficiency or
the quality of medical care provided.
(d) Time Commitment. Corporation shall, after consultation
with Physician Group, establish reasonable business hours for the operation of
the Center. Physician Group shall engage a sufficient number of
physician-employees or physician-contractors to meed the demand and potential
demand for medical imaging and diagnostic services at the Center, and to assure
the efficient operation of the Center during its established business hours. It
is understood that a physician shall be present when procedures are performed
for patients. Throughout the term of this Agreement, Physician Group shall
exercise its highest skills and best efforts to cause the practice at the Center
to grow in volume and profitability. To the latter end, except for undertaking
bona fide charity cases on a basis customary for physicians in the Downey area,
without written consent of the Corporation, Physician Group shall only use the
Center for performance of medical services which are compensable by the payment
of professional fees established under Section 6.3, or as approved by the
Corporation.
ARTICLE III
Sublease of Center
Concurrently with executing this Agreement, the parties are entering
into a sublease for the Center of even date, which is incorporated by this
reference as if fully set forth herein.
ARTICLE IV
Relationship of Parties
4.1 Practice of Medicine. A fundamental understanding between the
parties is that Corporation shall not participate in any manner in the medical
services rendered by Physician Group in the conduct of its medical practice at
the Center. Corporation may make recommendations, but shall have no control,
over matters affecting Physician Group's medical practice, including without
limitation the following: furnishing physicians, supervising medical services,
or any and all other matters affecting the practice of medicine. All patients
treated by Physician Group shall be deemed to be the patients of Physician
Group. Physician Group shall not represent any direct or indirect manner to the
public or any third-party that Corporation has participated, is participating,
or will participate in the practice of medicine in any manner.
4.2 Relationship or Parties. This Agreement does not constitute either
party the agent, legal representative or employee for any purpose whatsoever of
the other party, and neither party is granted any right or authority to assume
or create any obligation for or on behalf of, or
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<PAGE> 6
in the name of, or in any way to bind the other party. Each party agrees not to
incur or contract for any debt or obligation on behalf of the other party, or
commit any act, make any representation or advertise in any manner which may
adversely affect any right of the other party, or be detrimental to its good
name and reputation.
ARTICLE V
Proprietary Interest and Rights of Corporation and MICA
5.1 Proprietary Interest of Corporation and MICA. Physician Group
recognized the proprietary interest of Corporation and MICA in the Corporation
and MICA business system for operating and medical imaging and diagnostic
center, including all policies, procedures, operating manuals, forms, customer
lists, contracts, and other information regarding such system. Physician Group
acknowledges and agrees that such information constitutes trade secrets of
Corporation and MICA. Physician Group hereby waives any and all right, title and
interest in and to such trade secrets and agrees to return all copies of such
trade secrets and information related thereto, at its expense, upon termination
of the Agreement.
5.2 Confidentiality. Physician Group acknowledges and agrees that
Corporation and MICA are entitled to prevent its competitors from obtaining and
utilizing its trade secrets. Physician Group agrees to hold the trade secrets of
Corporation and MICA in strictest confidence and not to disclose them or allow
them to be disclosed directly or indirectly to any person or entity other than
persons engaged by Physician Group for use in the course of their employment at
the Center, without the prior written consent of Corporation and MICA. Physician
Group acknowledges its confidential relationship to Corporation and the
confidentiality of its relationship with Corporation and any information
relating to the services and business methods of Corporation or MICA which it
may obtain during the term of this Agreement. Physician Group shall not, either
during the term of this Agreement, or at any time after the expiration of sooner
termination of this Agreement, disclose to anyone other than persons employed at
the Center who use the information in the course of their employment any
confidential or proprietary information or trade secret of Corporation obtained
by it. Physician Group agrees to place under legal obligation to treat such
information as strictly confidential any persons to who said information is
disclosed for the purpose of performance.
5.3 Successor Medical Group. Upon termination of this Agreement, or the
sublease of the Center for any reason, whichever first occurs, Corporation shall
have the immediate right, in its sole discretion, to designate a professional
corporation, partnership or sole proprietor as successor to Physician Group at
the Center. If such professional corporation, partnership or sole proprietor is
composed solely of duly licensed physicians, they shall be entitled to retain
and utilize all existing customer lists and patient records at the Center.
Corporation agrees that all records transferred to Physician Group's successor
shall be maintained as long as required by law regulating retention of medical
records, and copies of said records shall be made
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<PAGE> 7
available to Physician Group at its expense, if required for the purpose of
defending any malpractice claim against Physician Group, or for the purpose of
providing medical care. The rights of the parties under this Section shall
survive termination of this Agreement.
ARTICLE VI
Compensation
6.1 Inducement to Enter Agreement. As partial consideration, and as an
inducement to Physician Group for entering this Agreement, Corporation shall be
responsible for any losses related to the operation of the Center which do not
arise from wrongful or negligent acts or omissions of Physician Group..
6.2 Corporation's Risk. Corporation has incurred substantial expenses
and future obligations to establish the Center, the system for the delivery of
medical imaging and diagnostic services, including fees for consultants and
other professionals, salaries for responsible staff, interest expenses, lease
obligations, and costs of equipping the Center. Corporation has also assumed
substantial obligations associated with the continuing operation of the Center.
Although there is uncertainty about the profitability of the Center during the
initial years of operation, Corporation is assuming responsibility for losses as
provided in Section 6.1. The parties therefore recognize and agree that in order
for Corporation to receive a fair and reasonable return for its expenses and
risks, a fair return for lease of premises, services, and the use of its trade
names and marks hereunder, as well as to permit the necessary accumulation of
capital to establish and maintain a first rate and fully equipped Center, a goal
the parties hereto agree to be desirable, the total payments to Corporation
should increase in future years.
6.3 Professional Fees. Physician Group, shall in consultation with
Corporation, establish a schedule of fees and charges for medical services at
the Center.
6.4 Billing and Collections. Billings to patients for all services
rendered at the Center shall be in the name of Physician Group. Corporation, or
its delegate, shall serve as billing and collection agent for Physician Group,
and shall be diligent and timely in the performance of billing and collection
services. However, Corporation does not guarantee collection and shall not be
responsible for any loss to Physician Group as a result of inability to collect
fees and charges.
6.5 Intention of the Parties. It is the intention of the parties hereto
that from the revenues of the Center Physician Group shall be fairly and
reasonably compensated for its professional services and those of the physicians
engaged by it, and Corporation shall be fairly and reasonably compensated for
the sublease of the Center, the licensing of trade names and marks, the
provision of services by it pursuant to this Agreement, and for the expenses,
obligations, and risks assumed by it in connection with the establishment and
operation of the Center and the operation of the Corporation system.
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<PAGE> 8
6.6 Fair and Reasonable Compensation of Physician Group. The parties
hereto agree Physician Group will be fairly and reasonably compensated for its
services and those of the physicians it engages by retaining in the aggregate
eighteen percent (18%) of the revenues actually collected for each medical
imaging diagnostic or other medical procedure ("medical services") performed by
Physician Group at the Center. For purposes of this Agreement, aggregate
revenues collected shall mean all collected receipts for medical imaging,
diagnostic and other medical procedures performed at the Center, including
charges for use of equipment, supplies, facilities and Center personnel in
connection with performance of medical services.
6.7 Fair and Reasonable Compensation to Corporation. Any revenues or
receipts in excess of those retained by Physician Group as provided in Section
6.6 hereof shall be paid to Corporation as compensation for the sublease of the
Center, provision of services under this Agreement, the licensing of trade names
and marks to Physician Group, and for its expenses, obligations, and risks in
connection with the establishment of the Center, and the operation of the
Corporation system. Said compensation includes the total rent to Corporation for
the Center subleased by Physician Group.
6.8 Remittance. All monies which Physician Group is entitle to retain
pursuant to Section 6.1 and all monies which Corporation is entitled to receive
pursuant to Section 6.7 shall be accounted for and disbursed weekly.
ARTICLE VII
Term and Termination
7.1 Term. Subject to paragraphs 7.2 and 7.3 below, this Agreement shall
become effective on the date first above written and shall continue for a period
of three (3) years unless sooner terminated in accordance with this Agreement.
7.2 Termination by the Corporation. This Agreement may be terminated by
Corporation upon thirty (30) days' prior written notice to Physician Group upon
occurrence of the following:
7.2.1 The Prime Lease pursuant to which Corporation is leasing
the Center is terminated as a result of the acts or omissions of Physician Group
or any other reason.
7.2.2 Physician Group, or any shareholder, director or
physician-employee of Physician Group or any professional corporation to which
this Agreement may be assigned, engages in any criminal act in the nature of
conversation, embezzlement or theft relative to the business conducted pursuant
to this Agreement; Physician Group will maintain adequate physician-employee
dishonesty insurance.
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7.2.3 Physician Group or any professional corporation to which
this Agreement may be assigned, is liquidated or dissolved, or files a petition
seeking protection under any state or federal insolvency or similar law
affecting the rights of creditors generally, or a similar filing is made against
the Physician Group, or a receiver is appointed for all or substantially all of
the Physician Group's assets, unless said filing is dismissed within thirty (30)
days.
7.2.4 Breach by Physician Group of any of its obligations
under this Agreement, which breach continues for a period of thirty (30) days
following written notice of the breach, or otherwise by mutual consent.
7.2.5 Conduct by Physician Group, its employees or agents
which is disruptive of operations of the Center, which interferes with the
performance of the Corporation's duties under this Agreement, provided such
conduct continues or reoccurs more than thirty (30) days following written
notice to Physician Group of such breach.
7.2.6 Conduct by Physician Group, its employees or agents
imposing, or which may impose, civil or criminal liabilities (other than
liability for medical malpractice) on Corporation.
7.3 Termination by Physician Group. This Agreement may be terminated by
Physician Group upon thirty (30) days' written notice to the Corporation upon
the occurrence of the following:
7.3.1 The Prime Lease pursuant to which Corporation is leasing
the Center is terminated as the result of acts or omissions of Corporation or
for any other reason other than acts or omissions of Physician Group, its
employees or agents.
7.3.2 Corporation or any of the officers of the Corporation
engage in any criminal act in the nature of conversation, embezzlement or theft
relative to the payments due to the Physician Group under this Agreement.
Corporation will maintain adequate employee dishonesty insurance.
7.3.3 The Corporation is liquidated or dissolved, or files a
petition seeking protection under any state or federal insolvency or similar law
affecting the rights of creditors generally, or a similar filing is made against
the Corporation, or a receiver is appointed for all or substantially all of the
Corporation's assets, unless such filing is dismissed within thirty (30) days.
7.3.4 Corporation fails to perform its material duties as set
forth herein for more than thirty (30) days following the giving of written
notice of the breach, or otherwise by mutual agreement.
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7.4 Rights Upon Termination. The termination of this Agreement
shall not release or discharge either party from any obligation, debt or
liability which shall have previously accrued and remain to be performed upon
the date of termination. Upon termination, the parties shall each be entitled to
compensation in accordance with the terms of this Agreement, for services
rendered through the date of termination, but such compensation shall be limited
to monies with respect to the period prior to termination which are collected
within one hundred and eighty (180) days after the date of termination. Any
monies collected thereafter shall be the property of the Corporation.
ARTICLE VIII
General Provisions
8.1 Insurance. Physician Group shall obtain and maintain professional
liability insurance and coverages on all medical doctors providing medical
services to patients at the Center, with reasonable limits to be agreed upon.
Corporation shall obtain and maintain professional liability insurance on all
nonprofessional staff, with reasonable limits to be agreed upon.
8.2 Assignment. The rights conferred upon Physician Group hereunder may
not be transferred or assigned without the prior written consent of Corporation
and any assignment in violation of this section shall be void. However,
Physician Group may form a professional medical corporation of which it is the
principal shareholder and transfer this Agreement to said professional
corporation, provided performance of this Agreement is guaranteed by all
shareholders of such corporation. It is understood and agreed that Corporation
and its successors shall have the right to assign this Agreement, provided that
the terms of the professional Physician Group's agreement are not changed.
8.3 Third-Party Beneficiary. MICA shall be a third-party beneficiary of
the provisions of this Agreement pertaining to it.
8.4 Governing Law. This Agreement shall be governed by the laws of the
State of California.
8.5 Article and Section Headings. The article and section headings in
this Agreement are inserted solely for convenience of reference and are not a
part of and are not intended to govern, limit, or aid in the construction of any
term or provision hereof.
8.6 Attorney's Fee. Should any party employ an attorney for the purpose
of enforcing this Agreement, or any judgement based thereon, in any court,
including bankruptcy courts and courts of appeal, or arbitration proceedings,
the prevailing party shall be entitled to receive its attorneys' fees and costs,
whether taxable or not.
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8.7 Waiver. The waiver of any covenant, condition or duty hereunder by
either party shall not prevent that party from later insisting upon full future
performance of the same.
8.8 Amendment. No amendment in the terms of this Agreement shall be
binding on either party unless in writing and executed by the duly authorized
representatives of each party.
8.9 Notice. Any communication under this Agreement shall be given in
writing and shall be delivered in person or by prepaid certified mail to each
party at such address as either party shall furnish to the other in writing.
Notice shall be deemed given when personally delivered, or if given by mail,
then two days after deposit in the United States mail, postage prepaid.
8.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
8.11 Entire Agreement. This Agreement and the sublease referenced
herein constitute the entire agreement between the parties in connection with
the subject matter hereof and shall supersede all prior agreements, whether oral
or in writing, whether explicit or implicit, which have been entered into prior
to the execution hereof.
8.12 Notwithstanding any term in this Agreement and the sublease
agreement, the Corporation, in an effort to utilize all available capacity of
the Center's imaging equipment on a time available basis may sublet the use of
the Center's equipment to other physicians, paying the Physician Group a 5%
medical supervisory fee. The Corporation will consult with the Physician Group
regarding sublease of renter equipment and the Physician Group will cooperate in
this effort.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
MICA CAL III, INC.
By: /s/ Robert S. Muehlberg
--------------------------
PHYSICIAN GROUP - MIMG, INC.
By: /s/ Joel Levine, M.D.
--------------------------
CFO, MIMG, Inc.
11
<PAGE> 12
AMENDMENT
AMENDMENT TO the Management, Licensing and Facilities Agreements
entered into by and between predecessors to MAGNETIC IMAGING MEDICAL GROUP,
INC., a California professional corporation (hereinafter referred to as
"Physician Group" and MEDICAL IMAGING CENTERS OF AMERICA, INC., a California
corporation ("MICA") which wholly-owned subsidiaries are MICA CAL I, Inc., a
California corporation ("M-I") and the managing general partner of Long Beach
Medical Imaging Center, Ltd., a California limited partnership ("Long Beach"),
MICA CAL II, INC., a California corporation ("M-III") and MICA CAL IV, INC., a
California corporation ("M-IV").
R E C I T A L S
A. On March 28, 1984, Long Beach entered into a Management, Licensing
and Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto as Exhibit A (the "A
Agreement").
B. On March 14, 1988, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. This Agreement
was extended on May 29, 1992. A true and correct copy of that Agreement as
extended is attached hereto as Exhibit B (the "B Agreement").
C. On February 3, 1992, M-IV entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit C (the
"C Agreement").
D. On July 1, 1994, M-III entered into a Management, Licensing and
Facilities Agreement with the predecessor to the Physician Group. A true and
correct copy of that Agreement is attached hereto and marked as Exhibit D (the
"D Agreement").
E. The A Agreement is an agreement which has a term which does not
terminate except on the occurrence of certain events while the B, C, and D
Agreements have terms which end on different dates in 1997 and 1998. MICA wished
to place limits on the term of the A Agreement and the Physician Group is
willing to permit such limits and both parties wish each ot eh Agreements to be
coterminous. All of the parties wish to provide for certainty and continuity of
service in their relationship as well as revise certain of the compensation
provisions and clarify certain other matters.
NOW THEREFORE, in consideration of their mutual covenants and promises
and for other good and valuable consideration, receipt of which each party
acknowledges, the parties agree as follows:
<PAGE> 13
1. Term.
The term as set forth in each of the Agreements (Section 7.1 of
Exhibits A, B, C and D) is hereby revised to read as follows:
7.1 Term. The term hereunder shall commence January 1, 1996 and shall
continue for five (5) years. Provided that Physician Group is not in material
default pursuant to this Agreement then and in that event Physician Group shall
have the right to extend the term of this Agreement for two (2) consecutive five
(5) year terms so long as it shall give written notice to the other party no
less than sixty (60) days prior to the end of a term hereunder. If a party
believes a material default has occurred it shall promptly give written notice
to the other party specifying the nature of the material default and providing a
recommended method of cure. The notified party shall have ninety (90) days to
correct the material default either in accordance with the suggested methodology
or by an alternate equally effective methodology. The failure to provide notice
within thirty (30) days of an event giving rise to a material default shall be
deemed a waiver of such default. Notwithstanding anything to the contrary set
forth in this Agreement, it is understood and agreed that this Agreement is
attached to the assets of the Center. To the extent the Center or its assets are
sold, assigned or otherwise transferred, this Agreement must be transferred and
accepted in full by the acquirer as a condition of such acquisition, assignment
or transfer.
2. Compensation.
(a) The Compensation as set forth at Section 6.6 in each of those
Agreement attached as Exhibits A and B is hereby revised to read as follows:
6.6 Compensation of Physician Group. The parties hereto agree
Physician Group will be fairly and reasonably compensated for its services by
retaining in the aggregate Twenty percent (20%) of the first Two Hundred
Thousand Dollars ($200,000) of revenues each month actually collected for each
medical imaging diagnostic or other medical procedure ("medical services")
performed by Physician Group at the Center with Physician Group receiving
Eighteen percent (18%) of such revenues in excess of Two Hundred Thousand
Dollars ($200,000) actually collected each month. For purposes of this Agreement
aggregate revenues collected shall mean all collected receipts for medical
imaging, diagnostic and other medical procedures performed at the Center,
including charges for use of equipment, facilities and Center personnel in
connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month.
(b) The compensation as set forth in Section 6.6 in each of Exhibits C
and D is hereby revised to read as follows:
<PAGE> 14
6.6 Compensation of Physician Group. The parties hereto agree
Physician Group will be fairly and reasonably compensated for its services by
retaining in the aggregate Twenty percent (20%) of the first One Hundred
Thousand Dollars ($100,000) of revenues each month actually collected for each
medical imaging diagnostic or other medical procedure ("medical services")
performed by Physician Group at the Center with Physician Group receiving
Eighteen percent (18%) of such revenues in excess of One Hundred Thousand
Dollars ($100,000) actually collected each month. For purposes of this Agreement
aggregate revenues collected shall mean all collected receipts for medical
imaging, diagnostic and other medical procedures performed at the Center,
including charges for use of equipment, facilities and Center personnel in
connection with performance of medical services (the aggregate of the
"Professional" and "Technical" components). Notwithstanding the foregoing, in
those instances in which Technical only services are performed at the Center, or
in which injections are provided, Physician Group shall receive an amount equal
to Ten percent (10%) of the revenues actually collected for such services each
month in recognition of their supervisorial responsibilities.
3. Statement of Revenues. A new Section 6.10 shall be added to Exhibit
A and a new Section 6.9 to Exhibits B, C and D which provides as follows:
6.9[10] Statement of Revenues. Partnership [Corporation] shall
furnish to Physician Group a statement of revenues generated by Physician Group
upon or as to which a fee to be paid to Physician Group hereunder is calculated
at the end of every month. This statement shall be submitted to Physician Group
on the tenth (10th) day of each month reflecting the previous month's revenue
from services rendered by Physician Group. Each statement shall be signed and
certified to be correct by Partnership [Corporation] or its authorized
representative. Partnership [Corporation] shall keep in the Center premises full
and accurate books of account, records, cash receipts, and other pertinent data
showing its revenues. Such books of account, records, cash receipts and other
pertinent data shall be kept for a period of two (2) years. Physician Group
shall be entitled during the term and within two (2) years after expiration or
termination of this Agreement to inspect and examine all of Partnership's
[Corporation's] books of account, records, cash receipts, and other pertinent
data relative only to the revenues involving the Center, so that Physician Group
can ascertain Center's revenues. Partnership [Corporation] shall cooperate fully
with Physician Group in making the inspection. Physician Group shall also be
entitled once during each year of the Agreement and once after expiration or
termination to an examination of Center's books of account, records, cash
receipts and other pertinent data to determine Center's revenues by a certified
public accountant to be designated by Physician Group, and who will be paid
solely by Physician Group, unless such review shall disclose an understatement
by Center of two percent (2%) or more in which case all expenses of such
examination will be paid by Partnership [Corporation].
4. Reference. It is hereby agreed between the parties hereto that
wherever the term "Physicians" or "Physician Group" appears in Exhibits A, B, C
and D it shall be deemed to mean "Magnetic Imaging Medical Group, Inc., a
California professional corporation.
<PAGE> 15
5. Indemnification. MICA and Long Beach, jointly and severally, agree
to indemnify and hold Physician Group together with its predecessors, harmless
against any and all liabilities which it might incur in connection with its
service as a General Partner of Long Beach. Physician Group shall promptly
notify MICA of the existence of any claim, demand or other matter involving
liabilities to third parties to which MICA's indemnification obligations would
apply and shall give MICA a reasonable opportunity to defend the same at its own
expense and with counsel of its own selection. If MICA, within a reasonable time
after notice, fails to defend, Physician Group shall have the right, but not the
obligation, to undertake the defense of and to compromise or settle (exercising
reasonable business judgment) the claim or other matter on behalf of MICA.
[INTENTIONALLY LEFT BLANK]
<PAGE> 16
6. Incorporation. Except as specifically revised herein, Exhibits A, B,
C and D are incorporated herein in full and restated as revised.
Executed this 31st day of January, 1996 at Long Beach, California.
MAGNETIC IMAGING MEDICAL
GROUP, INC.
By /s/ Joel Levine, M.D.
-----------------------------
Its CFO
-----------------------------
MEDICAL IMAGING CENTERS OF
AMERICA, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President and CEO
-----------------------------
LONG BEACH MEDICAL IMAGING
CENTERS, LTD.
By MICA CAL I, INC.
Its Managing General Partner
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
MICA CAL III, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
MICA CAL IV, INC.
By /s/ Robert S. Muehlberg
-----------------------------
Its President
-----------------------------
<PAGE> 1
EXHIBIT 10.12
AGREEMENT OF COMPROMISE AND SETTLEMENT
This AGREEMENT OF COMPROMISE AND SETTLEMENT dated as of March 19, 1996
(this "Settlement Agreement") is entered into by and among Medical Imaging
Centers of America, Inc., a California corporation ("MICA"), Keith R. Burnett,
Robert S. Muehlberg, Denise L. Sunseri and Robert G. Ricci, on the one hand, and
Warren G. Lichtenstein, Lawrence Butler, Jack L. Howard, Steel Partners II,
L.P., a Delaware limited partnership ("Steel"), Steel Partners, L.L.C., a
Delaware limited liability company, and Steel Partners Services, Ltd., a New
York corporation (collectively, the "Steel Parties"), on the other hand. MICA
and the Steel Parties are sometimes collectively referred to herein as the
"Parties."
WHEREAS, the Parties understand that the results of the election
conducted at the February 26, 1996 Special Meeting of shareholders will be
subject to immediate challenge by the Party that did not prevail and might never
be accepted as valid by such Party;
WHEREAS, contemporaneously with the execution of this Agreement, MICA
is entering into a Standstill Agreement with Arrowhead; and
WHEREAS, MICA has determined that the agreements set forth herein are
in the best interests of MICA and its shareholders.
FOR AND IN CONSIDERATION of the mutual covenants contained herein, the
parties, intending to be legally bound hereby, agree as follows:
1. Certain Defined Terms. As used in this Settlement Agreement, the
following terms (whether or not capitalized) shall have the following meanings:
"Action" means Medical Imaging Centers of America, Inc. v.
Lichtenstein, et al., Case No. 96-0039B (AJB) filed in the United States
District Court for the Southern District of California.
"Auction Period" means the period commencing with the date hereof and
ending with the earlier to occur of (i) in the event that MICA has not made a
public announcement stating that an agreement has been reached with respect to
an Auction Transaction prior to June 19, 1996 (the third monthly anniversary of
the date hereof), the close of business on such date, (the date of such public
announcement shall be referred to herein as the "Announcement Date"), (ii) in
the event a definitive agreement (the "Definitive Agreement") relating to an
Auction Transaction is not entered into prior to the earlier to occur of (A) 30
days after the Announcement Date and (B) July 19, 1996 (the fourth monthly
anniversary of the date hereof) (the earlier of such dates, the "Definitive
<PAGE> 2
Agreement Date"), the close of business on the Definitive Agreement Date, (iii)
in the event an Auction Transaction is not consummated prior to the close of
business on the Consummation Date, the close of business on the Consummation
Date and (iv) the effective date, if any, of the resignation of Mr. Robert S.
Muehlberg from the Board or as an employee or officer of MICA.
"Auction Process" means the auction process described in Section 5 of
this Settlement Agreement.
"Auction Transaction" means a Sale Transaction recommended by the Board
pursuant to the Auction Process.
"Arrowhead" means Arrowhead Holdings Corporation, a Delaware
corporation.
"Board" means the Board of Directors of MICA.
"Common Stock" means the common stock, no par value, of MICA.
"Consummation Date" means November 19, 1996 (the eighth monthly
anniversary of the date hereof), provided that if on such date, the parties to
an Auction Transaction are working in good faith to complete an Auction
Transaction but are unable to do so as a result of any undue delay resulting
from any governmental regulatory process which is required as a condition to
consummate the Auction Transaction, the Consummation Date shall be extended
until the ninth monthly anniversary of the date hereof.
"Effective Date" means March 19, 1996.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Advisor" means Batchelder & Partners, Inc.
"MICA Securities" means any securities issued by MICA or any of its
direct or indirect subsidiaries, including the Common Stock and any other debt
or equity securities of MICA or any of its direct or indirect subsidiaries that
are outstanding as of the date hereof or may hereafter be issued.
"Person" means any individual, corporation, association, general or
limited partnership, limited liability company, limited liability partnership,
joint venture, trust, estate, other entity or organization or group.
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<PAGE> 3
"Rights Plan Action" means Steel Partners II, L.P. v. Medical Imaging
Centers of America, Inc., Case No. 96-0274B (AJB), filed in the United States
District Court for the Southern District of California.
"Sale Transaction" means any transaction, whether by tender offer,
merger or otherwise, and whether for cash or securities of the other party to
the Sale Transaction, pursuant to which MICA will be sold, merged or combined
with another entity if as a result thereof the shareholders of MICA immediately
prior to such transaction would, after the consummation of the Sale Transaction,
own less than 50% of the equity of the merged or combined entity on a fully
diluted basis, or any comparable or similar type transaction which would not
constitute an "ownership change" with the meaning of Section 382 of the Internal
Revenue Code of 1986, as amended.
"Schedule 13D" means the Schedule 13D filed with the SEC on or about
March 18, 1995 by the Steel Parties, as amended through Amendment No. 14.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Solicitation Action" means any of the following: (i) giving notice
pursuant to MICA's By-Laws of an intention to nominate directors, or cause the
taking of any other action by MICA, at a meeting of shareholders or by consent;
(ii) filing with the SEC any proxy or consent solicitation materials (whether
preliminary, definitive or as described in Rule 14a-11 or 14a-12 under the
Exchange Act) with respect to such meeting or consent; (iii) mailing or
otherwise disseminating to shareholders any such solicitation materials; (iv)
otherwise engaging in a solicitation of proxies or consents with respect to such
meeting or consent; (v) nominating at such meeting candidates for election as
directors; (vi) engaging in or taking any of the other actions set forth in
Section 6(c) hereof; or (vii) casting votes or ballots at such meeting or by
consent pursuant to proxies or consents so solicited (but the term "Solicitation
Action" shall not include the casting of votes or ballots by the Steel Parties
with respect to shares of Common Stock beneficially owned by them so long as the
Steel Parties have not engaged in or taken any of the actions specified in
clauses (i) through (vi) above).
"Standstill Period" means the period commencing with the date hereof
and ending with the later to occur of (i) the end of the Auction Period and (ii)
the date on which the current members of the Board resign from their position as
members of the Board pursuant to section 5(e) of this Settlement Agreement and
are replaced with designees of the Steel Parties.
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<PAGE> 4
"Transaction" means any business combination involving MICA, including
without limitation an acquisition, merger, spin-off, spin-out, consolidation,
tender offer, share exchange or exchange offer.
"Voting Securities" means any capital stock of MICA having the right to
vote in the election of directors, plus convertible securities, options,
warrants or rights that may be converted, exchanged or exercised to acquire such
stock; and excludes preferred stock having no voting rights in the election of
directors other than a normal and customary right to elect a specified number of
directors in the event of a default in the payment of interest.
The terms "participant," "proxy" and "solicitation" shall be used as
defined in Regulation 14A under the Exchange Act (whether or not the pertinent
securities are subject to Regulation 14A). The terms "beneficial ownership" and
"group" shall be used as defined in Regulation 13D-G under the Exchange Act. The
terms "affiliate" and "associate" shall be used as defined in Rule 12b-2 under
the Exchange Act.
2. Representations and Warranties of the Steel Parties . Each Steel
Party severally and not jointly, represents and warrants to MICA as follows:
(a) Such Steel Party has the requisite legal power and authority to
execute, deliver and carry out this Settlement Agreement and has taken all
necessary legal action to authorize the execution, delivery and performance of
this Settlement Agreement and the transactions contemplated hereby.
(b) This Settlement Agreement has been duly and validly authorized,
executed and delivered by such Steel Party and constitutes its valid and binding
obligation, enforceable against such Steel Party in accordance with its terms.
(c) Neither such Steel Party nor any of its affiliates beneficially
owns, or has any direct, indirect or contingent pecuniary interest in, any MICA
Securities other than as disclosed in the Schedule 13D.
(d) Neither such Steel Party nor any of its affiliates is a member of
any group with respect to MICA Securities and there are no other persons who are
part of such a group with it or any of its affiliates except (i) as disclosed in
the Schedule 13D, (ii) MICA has alleged in the Action (that the Steel Parties
and certain other persons and entities are part of such a group, which
allegations are denied by the Steel Parties) and (iii) to the extent the Steel
Parties may be a group with Arrowhead.
3. Representations and Warranties of MICA . MICA represents and
warrants to the Steel Parties as follows:
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<PAGE> 5
(a) MICA is duly organized and validly existing and in good standing
under the laws of the State of California, has the requisite corporate power and
authority to execute, deliver and carry out this Settlement Agreement and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Settlement Agreement and the transactions contemplated
hereby.
(b) This Settlement Agreement has been duly and validly authorized,
executed and delivered by MICA and constitutes its valid and binding obligation,
enforceable against MICA in accordance with its terms.
(c) Except with respect to the issuance and/or exercise of stock
options pursuant to existing stock option plans and/or outstanding options and
an amendment to the By-laws of MICA in the form attached hereto as Exhibit E,
neither the employment agreement of each of Robert Muehlberg and Denise Sunseri,
the By-laws of the Company, the number or terms of the options or shares granted
to the employees of the Company or the members of the Board, nor the number of
outstanding shares of Common Stock, have in any material way been amended,
altered or increased, as the case may be, since the last public disclosure of
such terms, provisions or number of outstanding options or shares of Common
Stock.
(d) MICA is not, and will not be, required pursuant to its agreement
with the Financial Advisor to utilize the services of the Financial Advisor
after the replacement of the Board pursuant to Section 5(e) and, to pay any fees
to the Financial Advisor with respect to transactions entered into subsequent to
the replacement of the Board pursuant to Section 5(e).
4. Treatment of the Election . The Parties agree that the February 26,
1996 Special Meeting of Shareholders will be adjourned without MICA's receiving
a final report from the Inspector of Election certifying the results of voting
by shareholders on proposals by the Steel Parties to remove the current
directors of MICA and replace them with nominees designated by the Steel Parties
and without any further actions at such meeting.
5. Auction Process and Procedures; Board Transition . (a) Each of the
parties hereto agree that, as soon as practicable after the date hereof, MICA
will announce the initiation of, and initiate, an auction process (the "Auction
Process") for the purpose of engaging in an Auction Transaction with the goal of
obtaining maximum value for the shareholders of MICA, as determined in good
faith by the Board after receiving a customary fairness opinion from the
Financial Advisor. MICA will keep the Steel Parties fully informed as to the
status of the Auction Process and will consider in good faith any suggestions of
the Steel Parties in connection with the Auction Process; provided, however,
that MICA shall not be required to disclose information to the Steel Parties
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<PAGE> 6
regarding the Auction Process to the extent, in the reasonable opinion of legal
counsel to the Board, the disclosure of such information to the Steel Parties
would compromise the integrity of the Auction Process. The Steel Parties will be
invited to participate as a bidder in the Auction Process, including as part of
a group with Arrowhead, on the same terms and conditions, including, terms and
conditions relating to due diligence and discussions and contacts with financing
sources, permitted for other bidders, and, except as specified in paragraph (d)
of this Section 5, the Steel Parties shall not, and shall cause their affiliates
and associates not to, interfere with the Auction Process.
(b) MICA agrees, that except with respect to conducting the Auction
Process, the consummation of an Auction Transaction pursuant to the Auction
Process and actions directly in furtherance of the Auction Process and the
consummation of an Auction Transaction, during the Standstill Period, the
business and operations of MICA will be run in the ordinary course of business
consistent with past practice and, without the prior written consent of Steel,
MICA will not:
(i) amend its Articles of Incorporation or By-Laws;
(ii) other than pursuant to the terms of presently outstanding
options, rights, warrants or convertible securities in accordance with
their respective terms and pursuant to any existing option plans, in
accordance with past practice, issue, pledge or sell, or authorize the
issuance, pledge or sale of additional shares of capital stock or other
securities of any class or series, including, without limitation,
securities exchangeable for or convertible into capital stock of any
class or series, or any calls, commitments, rights, warrants or options
to acquire any securities or capital stock;
(iii) split, combine, subdivide, reclassify or redeem,
purchase or otherwise acquire, or propose to redeem or purchase or
otherwise acquire, directly and indirectly, any shares of its capital
stock, or any of its other securities or declare and pay any dividends
on its capital stock;
(iv) except as specified in Section 7(b), increase the
compensation or benefits payable or to become payable to its directors,
officers or employees, or pay any benefit not required by any existing
plan or arrangement or grant any severance or termination pay to
(except pursuant to existing agreements or policies), or enter into or
amend any employment, consulting or severance or other agreement with,
any director, officer or other employee of MICA's;
(v) acquire, sell, lease or dispose of any assets which are
material to MICA, or enter into any commitment to do any of the
foregoing or enter into any material commitment or transaction;
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(vi) except with respect to the purchase of the general
partnership interest in the Long Beach imaging center, acquire or agree
to acquire by merging or consolidating with, or by purchasing a
substantial portion of the stock or assets of, or by any other manner,
any business or any corporation, partnership, joint venture,
association or other business organization or division thereof;
(vii) appoint any new director to the Board, unless such
director agrees to be bound by the terms of this Settlement Agreement;
and
(viii) authorize or agree in writing or otherwise to take any
of the foregoing actions.
(c) Other than an Auction Transaction in the form of a tender offer for
100% of all outstanding Common Stock, the consummation of any Auction
Transaction will be subject to the Auction Transaction being duly approved by
the shareholders of MICA at a special meeting called for the purpose of
submitting the proposed Auction Transaction to a vote of the shareholders of
MICA (the "Shareholder Vote").
(d) The provisions of Section 6 of this Settlement Agreement,
including, without limitation, Section 6(c), shall be applicable to the
Shareholder Vote; provided, however; that this Agreement shall not limit the
manner in which the Steel Parties may vote with respect to the Shareholder Vote
and if requested by Steel, Steel shall be entitled to include in the proxy
distributed by MICA to its shareholders in connection with the Shareholder Vote,
a statement of reasonable length specifying its opinion on the merits of the
Auction Transaction;
(e) In the event an Auction Transaction is not consummated on or prior
to the end of the Auction Period, then, in the event that on the last day of the
Auction Period the Steel Parties are the beneficial owner of at least 263,841
shares of Common Stock, (i) subject to the satisfaction of the requirements
under Rule 14f-1 of the Exchange Act, which MICA and the Steel Parties will use
all reasonable efforts to satisfy as soon as practicable, the Persons who are
members of the Board at such time will resign and will cause such members to be
replaced with designees of the Steel Parties (resulting in the Board being
composed solely of designees of the Steel Parties) and (ii) if requested by the
Steel Parties, MICA will promptly call the annual meeting of shareholders, to be
scheduled as soon as practicable but in no case later than 45 days after the end
of the Auction Period, for the purpose of electing the Board of Directors of
MICA.
(f) The Steel Parties will support and take all reasonable efforts in
good faith to cooperate with MICA and the Board in connection with the Auction
Process, and the Steel Parties acknowledge their respective intent to vote in
favor of an Auction Transaction, provided such Auction Transaction, in the sole
judgment of the Steel Parties,
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maximizes shareholder value. In addition, if during the Auction Period any Steel
Party is contacted by any person concerning the Auction Process, the applicable
Steel Party will promptly inform the Board of such contact and, unless otherwise
instructed by the Board, refer any such person to the Board.
6. Restrictions on Purchase and Sale of MICA Securities and Certain
Other Actions . Each of the Steel Parties agrees that it will not, and it will
cause its respective affiliates not to, except as expressly permitted by this
Settlement Agreement, including, without limitation, as specified in Section 5
of this Settlement Agreement, without the prior written consent of MICA, for a
period commencing on the date hereof and ending at the close of business of the
last day of the Auction Period:
(a) (i) acquire, offer to acquire, directly or indirectly, by purchase
or otherwise, beneficial ownership of MICA Securities (or any direct or indirect
rights, options or warrants for any MICA Securities) or (ii) encourage any
Person to acquire, or advise any Person with respect to the acquisition or
proposed acquisition of MICA Securities; provided, however; that this clause
(ii) shall not prohibit Jack Howard from acting in his capacity as a broker and
executing transactions initiated by current or future customers with respect to
MICA Securities so long as Jack Howard does not solicit or otherwise advise the
applicable customer with respect to such trade;
(b) knowingly sell or otherwise convey in a transaction other than an
open market transaction (either singly or collectively) MICA Securities to a
single Person or group which owns more than 5% of the then currently outstanding
MICA Securities or, as a result of such sale will own more than 5% of MICA's
then currently outstanding Securities;
(c) solicit, or encourage any other Person to solicit, or advise any
Person with respect to the solicitation of, proxies or consents with respect to
any MICA Securities, or become a participant or otherwise engage in any
solicitation of proxies or consents (A) with respect to any matter submitted or
to be submitted to the vote of the holders of any MICA Securities at any annual
or special meeting or by written consent, including, without limitation, with
respect to the election of directors of MICA in opposition to the nominees
recommended by the Board or otherwise for the purpose of acquiring control of
the Board or management of MICA, or (B) for the purpose of calling a special
meeting of MICA's shareholders or the holders of any MICA Securities; or advise
or seek to advise any Person with respect to the voting of any MICA Securities;
or submit, or encourage any other Person to submit, or advise or assist any
Person with respect to the submission of, any nominations or proposals to MICA
or to the holders of MICA Securities for consideration by its shareholders or
the holders of any MICA Securities at any annual or special meeting of such
holders or in any action to be taken by written consent pursuant to MICA's
articles of incorporation or bylaws, Rule 14a-8 under
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<PAGE> 9
the Exchange Act, the provisions of any document governing the terms of any such
MICA Securities or governing the rights of the holders thereof, or otherwise;
engage in any Solicitation Action; or otherwise take any action to request a
special meeting of the holders of any MICA Securities;
(d) deposit any MICA Securities in a voting trust or subject them to a
voting agreement or other agreement or arrangement of similar effect or
otherwise join or form a partnership, limited partnership, syndicate or other
group (except insofar as a group consisting solely of Steel Parties and
Arrowhead is alleged to exist by MICA at the date hereof) for the purpose of
acquiring, holding, voting or disposing of any MICA Securities;
(e) engage in, or offer, agree or propose to engage in, any
Transaction; or arrange, or in any way participate, directly or indirectly, in
any financing for any Transaction or for the purchase by any person of any MICA
Securities or any assets of MICA;
(f) otherwise act alone or in concert with others to seek
representation on the Board or to acquire control of MICA or any of its
securities or assets;
(g) request any amendment of any of the terms of this Settlement
Agreement (other than a request to discuss its position with participants in the
Auction Process);
(h) institute, prosecute or pursue against MICA (or any of its
officers, directors, representatives, trustees, employees, attorneys, advisors,
agents, affiliates or associates) (a) any claim with respect to any action
hereafter duly approved by the Board or (b) any claim on behalf of a class of
holders of MICA's Securities;
(i) publicly oppose any duly authorized Board action or recommendation;
and
(j) assist or advise, or enter into any agreement or arrangement to
assist or advise any other person in taking any action referenced in any of
paragraphs (a) through (i) above.
7. Redemption of Rights; Amendments to Certain Severance Packages .
(a) Effective as of the Effective Date, MICA shall redeem all
outstanding rights issued pursuant to the Rights Agreement dated as of October
2, 1991, between MICA and Harris Trust Company of California, as amended (with
the record date for such redemption on the close of business on the date ten
days after the public
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announcement of such redemption) and, until the end of the Standstill Period,
shall not adopt a new shareholder rights plan without the prior written consent
of Steel.
(b) MICA shall promptly amend the severance packages of Mr. Robert S.
Muehlberg and Ms. Denise L. Sunseri to provide that the termination of the
Auction Period without the consummation of an Auction Transaction shall
constitute an "involuntary termination" for the purpose of their respective
severance packages.
8. Reimbursement of Expenses . Simultaneously with the execution of
this Settlement Agreement, MICA shall reimburse the Steel Parties, by wire
transfer to an account specified by the Steel Parties in writing to MICA, for
the expenses incurred by the Steel Parties in connection with their solicitation
of proxies for the February 26, 1996 Special Meeting of Shareholders of MICA,
for which invoices have been provided to MICA, up to the amount of $425,000.
9. Press Release . Upon the effectiveness of this Agreement, MICA shall
issue a press release in the form of Exhibit A hereto. No Party to this
Settlement Agreement nor any of their respective affiliates, associates or
representatives shall issue any other press release or other publicly available
document concerning this Settlement Agreement that is inconsistent with, or is
otherwise contrary to, the statements in such press release. None of the Parties
shall publicly make any negative statements regarding any other Party, the Board
or the Auction Process.
10. Mutual Releases . For and in consideration of the agreements
contained herein, the Parties hereto release one another as follows:
(a) Steel Parties . Each of the Steel Parties, on behalf of itself and
of all its affiliates, successors and assigns ("related parties"), hereby
releases, acquits and forever discharges Dr. Burnett, Dr. Ricci, Mr. Muehlberg,
Ms. Sunseri and MICA, together with its present and former affiliates, officers,
directors, employees, agents, advisors, attorneys, successors and assigns, of
and from any and all claims, causes of action (whether at law or equity),
demands, expenses and damages which such Steel Party or its related parties may
have had, or may now have, or may hereafter have (whether through operation of
law, assignment or subrogation), from the beginning of time to the Effective
Date, real or suspected, known or unknown, actual or contingent, direct or
derivative, including, but not limited to, any such claims, causes of action,
demands, expenses and damages relating to or arising out of the Action or the
Rights Plan Action or any of the matters claimed, asserted or alleged, or that
could have been claimed, asserted or alleged, in the Action or the Rights Plan
Action, excepting only any action, cause of action or suit arising by virtue of
the breach of this Settlement Agreement.
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(b) MICA. MICA, on behalf of itself and all of its affiliates,
successors and assigns ("related parties"), hereby releases, acquits and forever
discharges the Steel Parties, together with their respective present and former
affiliates, officers, directors, employees, agents, attorneys, successors and
assigns, of and from any and all claims, causes of action (whether at law or
equity), demands, expenses and damages which MICA may have had, or may now have,
or may hereafter have (whether through operation of law, assignment or
subrogation), from the beginning of time to the Effective Date, real or
suspected, known or unknown, actual or contingent, direct or derivative,
including but not limited to (i) any such claims, causes of action, demands,
expenses and damages relating to or arising out of the Action or the Rights Plan
Action, (ii) any claim that the Steel Parties have, as of the date hereof,
violated, or are in violation of, the federal securities laws based upon any
alleged non-disclosure concerning the Steel Parties' relationship with a foreign
investment fund or alleged relationship with any existing customer(s) of Jack L.
Howard or Cowles Sabol & Co. or (iii) or any of the matters claimed, asserted or
alleged, or that could have been claimed, asserted or alleged, in the Action or
the Rights Plan Action, excepting only any action, cause of action or suit
arising by virtue of the breach of this Settlement Agreement.
With respect to each of the releases set forth above, each person or
entity granting or receiving such a release (i) agrees that such releases do not
preclude any Party hereto from seeking to enforce any undertaking or promise
contained in this Settlement Agreement or from seeking redress for the breach of
any representation or warranty contained in this Settlement Agreement; (ii)
agrees not to challenge, and shall use its best efforts to cause each of its
affiliates, associates and representatives not to challenge, the validity of any
provisions of this Settlement Agreement; and (iii) expressly waives all rights
and benefits each may have under and by virtue of the terms of Section 1542 of
the California Civil Code, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which if known by him must have materially affected
his settlement with the debtor.
Except as may be otherwise required by law, the Steel Parties will not encourage
or cooperate with plaintiffs in any derivative, class action or shareholder
litigation related to MICA or its directors with respect to any claim released
hereunder. Except as may be otherwise required by law, MICA will not encourage
or cooperate with plaintiffs in any pending or subsequently initiated
derivative, class action or shareholder litigation related to MICA to which any
of the Steel Parties is a party, with respect to any claims released hereunder.
In the event that any part of this Settlement Agreement is temporarily,
preliminarily or permanently enjoined or restrained by a court of competent
jurisdiction, the Parties hereto shall use their reasonable best efforts to
cause any such injunction or
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restraining order to be vacated or dissolved or otherwise declared or determined
to be of no further force or effect.
11. Dismissal . Promptly following the execution of this Settlement
Agreement, a stipulation of dismissal of the Action with prejudice as to all
parties to the Action, in the form attached hereto as Exhibit B, and a
stipulation of dismissal of the Rights Plan Action with prejudice as to all
parties to the Rights Plan Action, in the form attached hereto as Exhibit C,
shall be executed and filed with the United States District Court for the
Southern District of California.
12. Miscellaneous.
(a) No Admission of Liability or Wrongdoing . This Settlement Agreement
and any proceedings taken hereunder are not and shall not in any way be
construed as or deemed to be evidence of (i) any admission or concession on the
part of any Party of the merits or lack of merits of any claim or counterclaim
asserted in the Action or the Rights Plan Action, or (ii) any admission or
concession on the part of any Party of any liability or wrongdoing whatsoever,
which liability and wrongdoing are hereby expressly denied and disclaimed by
each of the Parties.
(b) No Duress, Etc. The Parties agree that this Settlement Agreement is
entered into without duress, in good faith and for sufficient consideration, and
that it is fair, just and reasonable to all Parties.
(c) Full Knowledge, Independent Advice, Etc. This Settlement Agreement
is entered into with full knowledge of any and all rights which the Parties may
have by reason of the pending litigation. All Parties have received or have had
made available to them all financial and other information they or their counsel
considered necessary to make an informed judgment concerning the Settlement
Agreement. Each Party has received independent legal advice, has conducted such
investigation as he or his counsel thought appropriate, and has consulted with
such other independent advisors as each of them and their counsel deemed
appropriate, regarding the Action and the Rights Plan Action, this Settlement
Agreement and their rights and asserted rights in connection therewith. None of
the Parties is relying upon any representations or statements made by any other
Party, or such other Party's employees, agents, representatives or attorneys,
regarding this Settlement Agreement or its preparation except to the extent such
representations are expressly set forth herein.
(d) Reasonable Efforts . All Parties hereto agree to exercise all
reasonable efforts and to take all reasonable steps necessary to effectuate the
settlement set forth in this Settlement Agreement, including, without
limitation, the provisions herein
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relating to the adjournment of the February 26, 1996 Special Meeting without any
final action to remove the current members of the Board being taken.
(e) Successors . This Settlement Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective heirs,
successors and assigns, and upon any corporation or other entity into or with
which any Party hereto may merge, combine or consolidate (provided that the
Party is the survivor in such merger, combination or consolidation).
(f) Governing Law . This Settlement Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without reference to the conflict of laws principles thereof.
(g) Amendment and Waiver . No waiver or amendment of any other
provision hereof shall be effective as against any Party unless such Party
agrees to such amendment or waiver in writing.
(h) Authority . Each person executing this Settlement Agreement
represents that he or it has read and fully understands this Settlement
Agreement and that he or it has the authority to execute this Settlement
Agreement in his individual capacity or in the capacity identified on the
signature page below.
(i) Notices . All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
addresses set forth on Exhibit D (or at such other address for a party as shall
be specified in a notice given in accordance with this paragraph). Each such
notice, request, claim, demand or other communication shall be effective (i) if
given by telecopy transmission, when such transmission to the telecopy number
specified in Exhibit D has been made and the appropriate electronic confirmation
that the entire communication has been received by the recipient equipment has
been received by the sender or (ii) if given by any other means, when actually
received at the address specified in this paragraph; provided, in each case,
that a notice given other than during normal business hours or on a day other
than on a business day at the place of receipt shall not be effective until the
opening of business on the next business day at the place of receipt.
(j) Specific Performance . Each of the Parties acknowledges and agrees
that irreparable harm would occur if any provision of this Settlement Agreement
were not performed in accordance with the terms thereof, or were otherwise
breached, and that such harm could not be remedied by an award of money damages.
Accordingly, the
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Parties hereto agree that any non-breaching party shall be entitled to an
injunction to prevent breaches of this Settlement Agreement and to enforce
specifically the terms and provisions hereof. More specifically, each of the
Parties hereto hereby agrees that any action or proceeding brought under or to
enforce any provision of this Settlement Agreement shall be commenced
exclusively in the United States District Court for the Southern District of
California and each Party hereto hereby consents to the personal jurisdiction of
and venue in such United States District Court.
(k) Counterparts . This Settlement Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(l) Effectiveness . This Settlement Agreement shall become effective on
the Effective Date.
(m) Severability . If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
(n) Construction . The headings used herein are for reference only and
shall not affect the construction of this Settlement Agreement.
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IN WITNESS WHEREOF, the Parties hereto have caused this Settlement
Agreement to be executed as of the date first above written.
Medical Imaging Centers of America, Inc.
By: /s/Robert S. Muehlberg
---------------------------------------
Name: Robert S. Muehlberg
Its: Chairman, Chief Executive Officer
and President
/s/Keith R. Burnett, M.D.
------------------------------------------
Keith R. Burnett, M.D.
/s/Robert S. Muehlberg
------------------------------------------
Robert S. Muehlberg
/s/Denise L. Sunseri
------------------------------------------
Denise L. Sunseri
<PAGE> 16
/s/Robert G. Ricci, D.O.
---------------------------
Robert G. Ricci, D.O.
/s/Warren G. Lichtenstein
---------------------------
Warren G. Lichtenstein
/s/Lawrence Butler
---------------------------
Lawrence Butler
/s/Jack L. Howard
---------------------------
Jack L. Howard
Steel Partners II, L.P.
By:/s/Warren G.Lichtenstein
------------------------
Name:
Its:
<PAGE> 17
Steel Partners, L.L.C.
By: /s/Warren G. Lichtenstein
--------------------------
Name:
Its:
Steel Partners Services, Ltd.
By: /s/Warren G. Lichtenstein
--------------------------
Name:
Its:
<PAGE> 1
EXHIBIT 10.13
STANDSTILL AGREEMENT
This STANDSTILL AGREEMENT dated as of March 19, 1996 (this "Standstill
Agreement") is entered into by and among Medical Imaging Centers of America,
Inc., a California corporation ("MICA"), Keith R. Burnett, Robert S. Muehlberg,
Denise L. Sunseri and Robert G. Ricci, on the one hand, and Arrowhead Holdings
Corporation, a Delaware corporation ("Arrowhead"), on the other hand.
WHEREAS, MICA, Steel Partners II, L.P., a Delaware limited partnership
("Steel") and certain other persons are party to that certain Agreement of
Compromise and Settlement dated as of the date hereof (the "Settlement
Agreement");
WHEREAS, the Settlement Agreement contemplates that contemporaneously
with the execution of the Settlement Agreement, the parties hereto will execute
this Standstill Agreement.
FOR AND IN CONSIDERATION of the mutual covenants contained herein, the
parties, intending to be legally bound hereby, agree as follows:
1. Certain Defined Terms . As used in this Standstill Agreement, the
following terms (whether or not capitalized) shall have the following meanings:
"Action" means Medical Imaging Centers of America, Inc. v.
Lichtenstein, et al., Case No. 96-0039B (AJB) filed in the United States
District Court for the Southern District of California.
"Auction Period" means the period commencing with the date hereof and
ending with the earlier to occur of (i) in the event that MICA has not made a
public announcement stating that an agreement has been reached with respect to
an Auction Transaction prior to June 19, 1996 (the third monthly anniversary of
the date hereof), the close of business on such date, (the date of such public
announcement shall be referred to herein as the "Announcement Date"), (ii) in
the event a definitive agreement (the "Definitive Agreement") relating to an
Auction Transaction is not entered into prior to the earlier to occur of (A) 30
days after the Announcement Date and (B) July 19, 1996 (the fourth monthly
anniversary of the date hereof) (the earlier of such dates, the "Definitive
Agreement Date"), the close of business on the Definitive Agreement Date, (iii)
in the event an Auction Transaction is not consummated prior to the close of
business on the Consummation Date, the close of business on the Consummation
Date and (iv) the effective date, if any, of the resignation of Mr. Robert S.
Muehlberg from the Board or as an employee or officer of MICA.
1
<PAGE> 2
"Auction Process" means the auction process described in Section 5 of
the Settlement Agreement.
"Auction Transaction" means a Sale Transaction recommended by the Board
pursuant to the Auction Process.
"Board" means the Board of Directors of MICA.
"Common Stock" means the common stock, no par value, of MICA.
"Consummation Date" means November 19, 1996 (the eighth monthly
anniversary of the date hereof), provided that if on such date, the parties to
an Auction Transaction are working in good faith to complete an Auction
Transaction but are unable to do so as a result of any undue delay resulting
from any governmental regulatory process which is required as a condition to
consummate the Auction Transaction, the Consummation Date shall be extended
until the ninth monthly anniversary of the date hereof.
"Effective Date" means March 19, 1996.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Financial Advisor" means Batchelder & Partners, Inc.
"MICA Securities" means any securities issued by MICA or any of its
direct or indirect subsidiaries, including the Common Stock and any other debt
or equity securities of MICA or any of its direct or indirect subsidiaries that
are outstanding as of the date hereof or may hereafter be issued.
"Parties" mean MICA and Arrowhead.
"Person" means any individual, corporation, association, general or
limited partnership, limited liability company, limited liability partnership,
joint venture, trust, estate, other entity or organization or group.
"Sale Transaction" means any transaction, whether by tender offer,
merger or otherwise, and whether for cash or securities of the other party to
the Sale Transaction, pursuant to which MICA will be sold, merged or combined
with another entity if as a result thereof the shareholders of MICA immediately
prior to such transaction would own less than 50% of the voting equity on a
fully diluted basis of the merged or combined entity immediately after the
consummation of the Sale Transaction or any comparable or similar type
transaction which would not constitute an "ownership change" within the meaning
of Section 382 of the Internal Revenue Code of 1986, as amended.
2
<PAGE> 3
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Solicitation Action" means any of the following: (i) giving notice
pursuant to MICA's By-Laws of an intention to nominate directors, or cause the
taking of any other action by MICA, at a meeting of shareholders or by consent;
(ii) filing with the SEC any proxy or consent solicitation materials (whether
preliminary, definitive or as described in Rule 14a-11 or 14a-12 under the
Exchange Act) with respect to such meeting or consent; (iii) mailing or
otherwise disseminating to shareholders any such solicitation materials; (iv)
otherwise engaging in a solicitation of proxies or consents with respect to such
meeting or consent; (v) nominating at such meeting candidates for election as
directors; (vi) engaging in or taking any of the other actions set forth in
Section 4(c) hereof; or (vii) casting votes or ballots at such meeting or by
consent pursuant to proxies or consents so solicited (but the term "Solicitation
Action" shall not include the casting of votes or ballots by the Arrowhead with
respect to shares of Common Stock beneficially owned by it so long as Arrowhead
has not engaged in or taken any of the actions specified in clauses (i) through
(vi) above).
"Transaction" means any business combination involving MICA, including
without limitation an acquisition, merger, spin-off, spin-out, consolidation,
tender offer, share exchange or exchange offer.
"Voting Securities" means any capital stock of MICA having the right to
vote in the election of directors, plus convertible securities, options,
warrants or rights that may be converted, exchanged or exercised to acquire such
stock; and excludes preferred stock having no voting rights in the election of
directors other than a normal and customary right to elect a specified number of
directors in the event of a default in the payment of interest.
The terms "participant," "proxy" and "solicitation" shall be used as
defined in Regulation 14A under the Exchange Act (whether or not the pertinent
securities are subject to Regulation 14A). The terms "beneficial ownership" and
"group" shall be used as defined in Regulation 13D-G under the Exchange Act. The
terms "affiliate" and "associate" shall be used as defined in Rule 12b-2 under
the Exchange Act.
2. Representations and Warranties of Arrowhead . Arrowhead represents
and warrants to MICA as follows:
(a) It has the requisite legal power and authority to execute, deliver
and carry out this Standstill Agreement and has taken all necessary legal action
to
3
<PAGE> 4
authorize the execution, delivery and performance of this Standstill Agreement
and the transactions contemplated hereby.
(b) This Standstill Agreement has been duly and validly authorized,
executed and delivered by it and constitutes its valid and binding obligation,
enforceable against it in accordance with its terms.
(c) Neither Arrowhead nor any of its affiliates beneficially owns, or
has any direct, indirect or contingent pecuniary interest in, any MICA
Securities other than as disclosed in Schedule 1 hereto.
(d) Neither Arrowhead nor any of its affiliates is a member of any
group with respect to MICA Securities and there are no other persons who are
part of such a group with it or any of its affiliates, except as MICA has
alleged in the Action and, to the extent Arrowhead may be part of a group with
Steel and its affiliates.
3. Representations and Warranties of MICA . MICA represents and
warrants to Arrowhead as follows:
(a) MICA is duly organized and validly existing and in good standing
under the laws of the State of California, has the requisite corporate power and
authority to execute, deliver and carry out this Standstill Agreement and has
taken all necessary corporate action to authorize the execution, delivery and
performance of this Standstill Agreement and the transactions contemplated
hereby.
(b) This Standstill Agreement has been duly and validly authorized,
executed and delivered by MICA and constitutes its valid and binding obligation,
enforceable against MICA in accordance with its terms.
4. Restrictions on Purchase and Sale of MICA Securities and Certain
Other Actions . Arrowhead agrees that it will not, and it will cause its
respective affiliates not to, except as specified in Section 7(n) and pursuant
to the Auction Process, without the prior written consent of MICA, for a period
commencing on the date hereof and ending at the close of business of the last
day of the Auction Period:
(a) (i) acquire, offer to acquire, directly or indirectly, by purchase
or otherwise, beneficial ownership of MICA Securities (or any direct or indirect
rights, options or warrants for any MICA Securities) or (ii) encourage any
Person to acquire, or advise any Person with respect to the acquisition or
proposed acquisition of MICA Securities;
(b) knowingly sell or otherwise convey in a transaction other than an
open market transaction (either singly or collectively) MICA Securities to a
single
4
<PAGE> 5
Person or group which owns more than 5% of the then currently outstanding MICA
Securities or, as a result of such sale will own more than 5% of MICA's then
currently outstanding Securities;
(c) solicit, or encourage any other Person to solicit, or advise any
Person with respect to the solicitation of, proxies or consents with respect to
any MICA Securities, or become a participant or otherwise engage in any
solicitation of proxies or consents (A) with respect to any matter submitted or
to be submitted to the vote of the holders of any MICA Securities at any annual
or special meeting or by written consent, including, without limitation, with
respect to the election of directors of MICA in opposition to the nominees
recommended by the Board or otherwise for the purpose of acquiring control of
the Board or management of MICA, or (B) for the purpose of calling a special
meeting of MICA's shareholders or the holders of any MICA Securities; or advise
or seek to advise any Person with respect to the voting of any MICA Securities;
or submit, or encourage any other Person to submit, or advise or assist any
Person with respect to the submission of, any nominations or proposals to MICA
or to the holders of MICA Securities for consideration by its shareholders or
the holders of any MICA Securities at any annual or special meeting of such
holders or in any action to be taken by written consent pursuant to MICA's
articles of incorporation or bylaws, Rule 14a-8 under the Exchange Act, the
provisions of any document governing the terms of any such MICA Securities or
governing the rights of the holders thereof, or otherwise; engage in any
Solicitation Action; or otherwise take any action to request a special meeting
of the holders of any MICA Securities;
(d) deposit any MICA Securities in a voting trust or subject them to a
voting agreement or other agreement or arrangement of similar effect or
otherwise join or form a partnership, limited partnership, syndicate or other
group (except insofar as a group consisting solely of Steel and Arrowhead is
alleged to exist by MICA at the date hereof) for the purpose of acquiring,
holding, voting or disposing of any MICA Securities;
(e) engage in, or offer, agree or propose to engage in, any
Transaction; or arrange, or in any way participate, directly or indirectly, in
any financing for any Transaction or for the purchase by any person of any MICA
Securities or any assets of MICA;
(f) otherwise act alone or in concert with others to seek
representation on the Board or to acquire control of MICA or any of its
securities or assets;
(g) request any amendment or waiver of any of the terms of this
Standstill Agreement (other than a request to discuss its position with
participants in the Auction Process);
5
<PAGE> 6
(h) institute, prosecute or pursue against MICA (or any of its
officers, directors, representatives, trustees, employees, attorneys, advisors,
agents, affiliates or associates) (a) any claim with respect to any action
hereafter duly approved by the Board or (b) any claim on behalf of a class of
holders of MICA's Securities;
(i) publicly oppose any duly authorized Board action or recommendation;
and
(j) assist or advise, or enter into any agreement or arrangement to
assist or advise any other person in taking any action referenced in any of
paragraphs (a) through (i) above.
Nothing contained in this Section 4 shall prohibit Arrowhead from
casting votes or ballots with respect to shares of Common Stock beneficially
owned by it so long as Arrowhead has not engaged in or taken any of the actions
specified in clauses (a) through (j) above.
5. Redemption of Rights; Amendments to Certain Severance Packages .
Effective as of the Effective Date, MICA shall redeem all outstanding rights
issued pursuant to the Rights Agreement dated as of October 2, 1991, between
MICA and Union Bank, as amended (with a record date for such redemption on the
close of business on the date ten days after the public announcement of such
redemption).
6. Mutual Releases . For and in consideration of the agreements
contained herein, the Parties hereto release one another as follows:
(a) Arrowhead . Arrowhead, on behalf of itself and of all its
affiliates, successors and assigns ("related parties"), hereby releases, acquits
and forever discharges MICA, together with its present and former affiliates,
officers, directors, employees, agents, advisors, attorneys, successors and
assigns, of and from any and all claims, causes of action (whether at law or
equity), demands, expenses and damages which Arrowhead or its related parties
may have had, or may now have, or may hereafter have (whether through operation
of law, assignment or subrogation), from the beginning of time to the Effective
Date, real or suspected, known or unknown, actual or contingent, direct or
derivative, excepting only any action, cause of action or suit arising by virtue
of the breach of this Standstill Agreement.
(b) MICA . MICA, on behalf of itself and all of its affiliates,
successors and assigns ("related parties"), hereby releases, acquits and forever
discharges Arrowhead, together with its present and former affiliates, officers,
directors, employees, agents, attorneys, successors and assigns, of and from any
and all claims, causes of action (whether at law or equity), demands, expenses
and damages which MICA may have had, or may now have, or may hereafter have
(whether through
6
<PAGE> 7
operation of law, assignment or subrogation), from the beginning of time to the
Effective Date, real or suspected, known or unknown, actual or contingent,
direct or derivative, excepting only any action, cause of action or suit arising
by virtue of the breach of this Standstill Agreement.
With respect to each of the releases set forth above, each person or entity
granting or receiving such a release (i) agrees that such releases do not
preclude any Party hereto from seeking to enforce any undertaking or promise
contained in this Standstill Agreement or from seeking redress for the breach of
any representation or warranty contained in this Standstill Agreement; (ii)
agrees not to challenge, and shall use its best efforts to cause each of its
affiliates, associates and representatives not to challenge, the validity of any
provisions of this Standstill Agreement; and (iii) expressly waives all rights
and benefits each may have under and by virtue of the terms of Section 1542 of
the California Civil Code, which provides as follows:
A general release does not extend to claims which
the creditor does not know or suspect to exist in
his favor at the time of executing the release,
which if known by him must have materially affected
his settlement with the debtor.
Except as may be otherwise required by law, Arrowhead will not encourage or
cooperate with plaintiffs in any derivative, class action or shareholder
litigation related to MICA or its directors with respect to any claim released
hereunder. Except as may be otherwise required by law, MICA will not encourage
or cooperate with plaintiffs in any pending or subsequently initiated
derivative, class action or shareholder litigation related to MICA to which
Arrowhead is a party, with respect to any claim released hereunder. In the event
that any part of this Standstill Agreement is temporarily, preliminarily or
permanently enjoined or restrained by a court of competent jurisdiction, the
Parties hereto shall use their reasonable best efforts to cause any such
injunction or restraining order to be vacated or dissolved or otherwise declared
or determined to be of no further force or effect.
7. Miscellaneous.
(a) No Admission of Liability or Wrongdoing . This Standstill Agreement
and any proceedings taken hereunder are not and shall not in any way be
construed as or deemed to be evidence of any admission or concession on the part
of any Party of any liability or wrongdoing whatsoever, which liability and
wrongdoing are hereby expressly denied and disclaimed by each of the Parties.
7
<PAGE> 8
(b) No Duress, Etc. The Parties agree that this Standstill Agreement is
entered into without duress, in good faith and for sufficient consideration, and
that it is fair, just and reasonable to all Parties.
(c) Full Knowledge, Independent Advice, Etc. This Standstill Agreement
is entered into with full knowledge of any and all rights which the Parties may
have by reason of the pending litigation. All Parties have received or have had
made available to them all financial and other information they or their counsel
considered necessary to make an informed judgment concerning this Standstill
Agreement. Each Party has received independent legal advice, has conducted such
investigation as he or his counsel thought appropriate, and has consulted with
such other independent advisors as each of them and their counsel deemed
appropriate, regarding this Standstill Agreement and their rights and asserted
rights in connection therewith. None of the Parties is relying upon any
representations or statements made by any other Party, or such other Party's
employees, agents, representatives or attorneys, regarding this Standstill
Agreement or its preparation except to the extent such representations are
expressly set forth herein.
(d) Successors . This Standstill Agreement shall be binding upon and
inure to the benefit of the Parties hereto and their respective heirs,
successors and assigns, and upon any corporation or other entity into or with
which any Party hereto may merge, combine or consolidate (provided that the
Party is the survivor in such merger, combination or consolidation).
(e) Governing Law . This Standstill Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of California,
without reference to the conflict of laws principles thereof.
(f) Amendment and Waiver . No waiver or amendment of any other
provision hereof shall be effective as against any Party unless such Party
agrees to such amendment or waiver in writing.
(g) Authority . Each person executing this Standstill Agreement
represents that he or it has read and fully understands this Standstill
Agreement and that he or it has the authority to execute this Standstill
Agreement in his individual capacity or in the capacity identified on the
signature page below.
(h) Notices . All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
addresses set forth on Exhibit A (or at
8
<PAGE> 9
such other address for a party as shall be specified in a notice given in
accordance with this paragraph). Each such notice, request, claim, demand or
other communication shall be effective (i) if given by telecopy transmission,
when such transmission to the telecopy number specified in Schedule 7(h) hereto
has been made and the appropriate electronic confirmation that the entire
communication has been received by the recipient equipment has been received by
the sender or (ii) if given by any other means, when actually received at the
address specified in this paragraph; provided, in each case, that a notice given
other than during normal business hours or on a day other than on a business day
at the place of receipt shall not be effective until the opening of business on
the next business day at the place of receipt.
(i) Specific Performance . Each of the Parties acknowledges and agrees
that irreparable harm would occur if any provision of this Standstill Agreement
were not performed in accordance with the terms thereof, or were otherwise
breached, and that such harm could not be remedied by an award of money damages.
Accordingly, the Parties hereto agree that any non-breaching party shall be
entitled to an injunction to prevent breaches of this Standstill Agreement and
to enforce specifically the terms and provisions hereof. More specifically, each
of the Parties hereto hereby agrees that any action or proceeding brought under
or to enforce any provision of this Standstill Agreement shall be commenced
exclusively in the United States District Court for the Southern District of
California and each Party hereto hereby consents to the personal jurisdiction of
and venue in such United States District Court and agrees further that service
of process or notice in any such action or proceeding shall be effective if
given in the manner set forth in Section 7(h) hereof.
(j) Counterparts . This Standstill Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(k) Effectiveness . This Standstill Agreement shall become effective on
the Effective Date.
(l) Severability . If one or more provisions of this Standstill
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Standstill
Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
(m) Construction . The headings used herein are for reference only and
shall not affect the construction of this Standstill Agreement.
9
<PAGE> 10
(n) Auction Process . Arrowhead will be invited to participate as a
bidder in the Auction Process, including as part of a group with Steel,on the
same terms and conditions, including, terms and conditions relating to due
diligence and discussions and contacts with financing sources, permitted for
other bidders and, Arrowhead shall not, and shall cause its affiliates and
associates not to, interfere with the Auction Process.
(o) Arrowhead and its affiliates shall not have any liability to MICA
and its affiliates pursuant to this Standstill Agreement, the Settlement
Agreement or otherwise, for actions or omissions of Steel prior to or subsequent
to the execution of this Standstill Agreement (so long as Arrowhead does not
violate the terms of this Standstill Agreement); provided, however, that nothing
contained herein shall constitute an admission by Arrowhead that Arrowhead has
any liability for actions of Steel and its affiliates.
10
<PAGE> 11
IN WITNESS WHEREOF, the Parties hereto have caused this Standstill
Agreement to be executed as of the date first above written.
Medical Imaging Centers of America, Inc.
By: /s/Robert S. Muehlberg
---------------------------------------
Name: Robert S. Muehlberg
Its: Chairman, Chief Executive Officer
and President
Arrowhead Holdings Corporation
By: /s/James Beneson, Jr.
---------------------------------------
Name:
Its:
/s/Keith R. Burnett
-------------------------------------------
Keith R. Burnett
/s/Robert S. Muehlberg
-------------------------------------------
Robert S. Muehlberg
<PAGE> 12
/s/Denise L. Sunseri
-------------------------------------------
Denise Sunseri
/s/Robert G. Ricci
-------------------------------------------
Robert G. Ricci
<PAGE> 13
Schedule 1
Beneficial Ownership of MICA Securities
Arrowhead and its affiliates are the beneficial owners of 130,680 shares of
Common Stock.
<PAGE> 14
Schedule 7(h)
Notice Information
If to: Medical Imaging Centers of America, Inc.,
to:
Medical Imaging Centers of America, Inc.
9444 Farnham Street, Suite 100
San Diego, CA 92123
Attn: Chief Executive Officer
Telephone: (619) 560-0110
Telecopy: (619) 560-4575
with copies to:
Latham & Watkins
701 "B" Street, Suite 2100
San Diego, CA 92101-8197
Attn: Scott Wolfe, Esq.
Telephone: (619) 236-1234
Telecopy: (619) 696-7419
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attn: Paul M. Reinstein, Esq.
Telephone: (212) 859-8156
Telecopy: (212) 859-4000
If to: Arrowhead Holdings Corporation
to:
Arrowhead Holdings Corporation
8221 Brecksville Road
Brecksville, OH 44141
Attn: John Curci
Telephone:
Telecopy:
<PAGE> 15
with a copy to:
Klehr, Harrison, Harvey, Branzburg & Ellers
1401 Walnut Street
Philadelphia, PA 19102
Attn: Mort Branzburg, Esq.
Telephone: (215) 569-3007
Telecopy: (215) 568-6603
<PAGE> 1
MEDICAL IMAGING CENTERS OF AMERICA, INC. Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
(in thousands except per share information) 1995 1994 1993
- ------------------------------------------- ---- ---- ----
(B) (B)
<S> <C> <C> <C>
Net income (loss) for computation of primary earnings per share $5,656 ($ 494) ($29,613)
Fully diluted:
Adjustment for interest and amortization for the conversion of debentures 646 -- --
------ ------ -------
Net income (loss) for computation of fully diluted earnings per share $6,302 ($ 494) ($29,613)
====== ====== =======
- --------------------------------------------------------------------------------------------------------
Average shares:
Common shares 2,451 2,426 2,361
Stock option and warrant equivalent shares (A) 134 -- --
------ ------ -------
Average shares for computation of primary earnings per share 2,585 2,426 2,361
Fully diluted:
Stock option and warrant equivalent shares - difference from primary (A) 25 -- --
Conversion of debentures 608 -- --
------ ------ -------
Average shares for computation of fully diluted earnings per share 3,219 2,426 2,361
====== ====== =======
- --------------------------------------------------------------------------------------------------------
Net income (loss) per share:
Primary $ 2.19 ($ 0.20) ($ 12.54)
====== ====== =======
Fully diluted $ 1.96 ($ 0.20) ($ 12.54)
====== ====== =======
- --------------------------------------------------------------------------------------------------------
</TABLE>
(A) The treasury stock method was used to calculate the common stock equivalent
number of shares from options and warrants.
(B) Adjustments for interest and amortization, option and warrant equivalent
shares and additional shares from the conversion of debentures issued in
1989 are not included in the calculation for the years ended December 1994
and 1993 as their effect would be antidilutive.
<PAGE> 1
Exhibit 21
Subsidiaries List
<TABLE>
<CAPTION>
Percent
Name State of Incorporation Ownership
- ---- ---------------------- ---------
<S> <C> <C>
MICA CAL I, INC. California 100
MICA CAL II, INC. California 100
MICA CAL III, INC. California 100
MICA CAL IV, INC. California 100
MICA CAL VII, INC. California 100
MICA CAL X, INC. California 100
MICA FLO I, INC. California 100
MICA OR I, INC. Oregon 100
MICA PACIFIC, INC. California 100
MICA IMAGING, INC. Illinois 100
AFFILIATED MEDICAL IMAGING California 100
NETWORK, INC.
</TABLE>
<PAGE> 1
Exhibit 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Forms S-8) pertaining to the 1983 Employee Stock Option Plan, the
1984 Employee Stock Option Plan, the 1985 Employee Stock Option Plan and the
1994 Employee Stock Option Plan of Medical Imaging Centers of America, Inc. of
our report date February 2, 1996, except for Note 2, as to which the date is
March 19, 1996, with respect to the consolidated financial statements of
Medical Imaging Centers of America, Inc. included in its Annual Report (Form
10-K) for the year ended December 31, 1995.
ERNST & YOUNG LLP
San Diego, California
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 10,732
<SECURITIES> 0
<RECEIVABLES> 12,214
<ALLOWANCES> 4,503
<INVENTORY> 0
<CURRENT-ASSETS> 19,168
<PP&E> 47,105
<DEPRECIATION> 30,031
<TOTAL-ASSETS> 39,648
<CURRENT-LIABILITIES> 18,831
<BONDS> 16,582
0
0
<COMMON> 54,691
<OTHER-SE> (51,678)
<TOTAL-LIABILITY-AND-EQUITY> 39,648
<SALES> 3,345
<TOTAL-REVENUES> 46,537
<CGS> 2,846
<TOTAL-COSTS> 28,233
<OTHER-EXPENSES> 9,961
<LOSS-PROVISION> 1,059
<INTEREST-EXPENSE> 3,557
<INCOME-PRETAX> 5,622
<INCOME-TAX> 180
<INCOME-CONTINUING> 5,656
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,656
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 1.96
</TABLE>
