<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED : JUNE 30, 1999
COMMISSION FILE NUMBER: 0-16334
ALLIANCE IMAGING, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0239910
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
1065 NORTH PACIFICENTER DRIVE
SUITE 200
ANAHEIM, CALIFORNIA 92806
(Address of principal executive office)
(714) 688-7100
Registrant's telephone number, including area code
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 ( ) No (X)
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 31, 1999:
Common Stock, $.01 par value, 5,749,549
1
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ALLIANCE IMAGING, INC.
FORM 10-Q
JUNE 30, 1999
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Condensed Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 1999 and December 31, 1998
(Restated - Note 2) 3
Condensed Consolidated Statements of Operations
Three and six months ended June 30, 1999
and 1998 (Restated - Note 2) 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 1999
and 1998 (Restated - Note 2) 5-6
Notes to Condensed Consolidated Financial Statements 7-10
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-19
PART II - OTHER INFORMATION
Item 5 - Other Information 20
SIGNATURES 25
</TABLE>
2
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
----------------- -----------------
<S> <C> <C>
(Unaudited) (Restated-NOTE 2)
ASSETS
Current assets:
Cash and short-term investments $ 7,361 $ 3,083
Accounts receivable, net of allowance for doubtful accounts 53,185 46,468
Deferred income taxes 3,679 3,679
Prepaid expenses 3,136 3,416
Other receivables and other current assets 707 822
----------------- -----------------
Total current assets 68,068 57,468
Equipment, at cost 374,316 321,927
Less-Accumulated depreciation (108,749) (86,659)
----------------- -----------------
265,567 235,268
Goodwill 162,736 170,576
Other intangibles 77,157 75,994
Deferred financing costs 10,525 14,776
Deposits and other assets 8,090 13,850
----------------- -----------------
Total assets $ 592,143 $ 567,932
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,620 $ 5,396
Accrued compensation and related expenses 6,684 7,561
Other accrued liabilities 26,581 22,875
Current portion of long-term debt 17,852 21,231
----------------- -----------------
Total current liabilities 54,737 57,063
Long-term debt, net of current portion 520,124 497,192
Other liabilities 577 713
Deferred income taxes 39,618 39,618
Redeemable preferred stock 17,884 16,673
Common stock 57 57
Additional paid-in deficit (24,447) (24,804)
Accumulated deficit (16,407) (18,580)
----------------- -----------------
Total liabilities and stockholders' equity $ 592,143 $ 567,932
================= =================
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
(Restated- (Restated-
NOTE 2) NOTE 2)
Revenues $ 80,306 $ 62,115 $ 156,047 $ 103,740
Costs and expenses:
Operating expenses, excluding depreciation 36,009 27,957 71,545 46,680
Depreciation expense 11,800 8,322 22,813 14,855
Selling, general and administrative expenses 8,105 6,044 15,956 10,476
Amortization expense, primarily goodwill 3,662 2,661 7,269 4,282
Interest expense, net of interest income 11,795 10,532 23,411 18,864
Transaction related costs 4,015 44 4,434 859
---------- ---------- ---------- ---------
Total costs and expenses 75,386 55,560 145,428 96,016
---------- ---------- ---------- ---------
Income before income taxes and extraordinary loss 4,920 6,555 10,619 7,724
Provision for income taxes 2,143 3,242 4,938 4,112
---------- ---------- ---------- ---------
Income before extraordinary loss 2,777 3,313 5,681 3,612
Extraordinary loss, net of taxes (2,297) - (2,297) (1,312)
---------- ---------- ---------- ---------
Net income 480 3,313 3,384 2,300
Less: Preferred stock dividends and financing fee accretion 615 541 1,211 1,051
---------- ---------- ---------- ---------
Income (loss) applicable to common stock $ (135) $ 2,772 $ 2,173 $ 1,249
========== ========== ========== =========
Earnings per common share:
Income before extraordinary loss $ 0.38 $ 0.49 $ 0.78 $ 0.45
Extraordinary loss, net of taxes (0.40) - (0.40) (0.23)
---------- ---------- ---------- ---------
Net income (loss) per common share $ (0.02) $ 0.49 $ 0.38 $ 0.22
========== ========== ========== =========
Earnings per common share - assuming dilution:
Income before extraordinary loss $ 0.36 $ 0.47 $ 0.75 $ 0.44
Extraordinary loss, net of taxes (0.38) - (0.39) (0.23)
---------- ---------- ---------- ---------
Net income (loss) per common share - assuming dilution $ (0.02) $ 0.47 $ 0.36 $ 0.21
========== ========== ========== =========
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
------------ ------------
<S> <C> <C>
(Restated-NOTE 2)
OPERATING ACTIVITIES:
Net income $ 3,384 $ 2,300
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss 2,297 1,312
Stock option compensation - 100
Depreciation and amortization 30,082 19,137
Amortization of deferred financing costs 1,248 1,278
Deferred taxes - 1,387
Distributions in excess of (undistributed) equity in income of investee (255) (375)
Gain on sale of equipment (111) -
Other - (121)
Changes in operating assets and liabilities:
Accounts receivable, net (6,717) (4,195)
Prepaid expenses 263 561
Other receivables 115 728
Other assets 459 (540)
Accounts payable, accrued compensation and other accrued liabilities 2,864 372
Other liabilities (136) (3,580)
------------ ------------
Net cash provided by operating activities 33,493 18,364
INVESTING ACTIVITIES:
Equipment purchases (54,222) (30,949)
Proceeds from sale of equipment 291 350
Decrease (increase) in deposits on equipment 5,541 (7,232)
Purchase of common stock of Mid American Imaging, Inc. and Dimensions
Medical Group, Inc., net of cash acquired - (10,452)
Purchase of common stock of Mobile Technology Inc., net of cash acquired - (94,147)
Purchase of common stock of Medical Diagnostics, Inc., net of cash acquired - (30,896)
Other - (69)
------------ ------------
Net cash used in investing activities (48,390) (173,395)
FINANCING ACTIVITIES:
Principal payments on long-term debt (9,978) (7,512)
Proceeds from long-term debt - (843)
Principal payments on term loan facility (50,630) (250)
Proceeds from term loan facility 70,000 90,000
Principal payments under revolving loan facility (22,441) (3,400)
Proceeds from revolving loan facility 32,602 71,864
Increase in deferred financing costs (735) -
Proceeds from exercise of employee stock options 357 66
------------ ------------
Net cash provided by financing activities 19,175 149,925
------------ ------------
Net increase (decrease) in cash and short-term investments 4,278 (5,106)
Cash and short-term investments, beginning of period 3,083 12,255
------------ ------------
Cash and short-term investments, end of period $ 7,361 $ 7,149
============ ============
</TABLE>
5
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ALLIANCE IMAGING, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 22,095 $ 17,220
Income taxes paid 1,181 291
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Preferred stock dividend accrued and financing fee accretion $ 1,211 $ 1,051
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
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ALLIANCE IMAGING, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
1. BASIS OF PREPARATION
The accompanying unaudited condensed consolidated financial
statements have been prepared by Alliance Imaging, Inc. (the "Company") in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X of the Securities and Exchange Commission. Accordingly,
they do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
In the opinion of the Company, all adjustments (which, other than the
restatement discussed in Note 2, consist of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the six month period ended June 30, 1999 are not necessarily
indicative of the results that may be expected for the year ending December
31, 1999.
The provision for income taxes for the six month period ended June
30, 1999 is higher than the statutory federal rate primarily as a result of
non-deductible goodwill amortization expense.
The following table sets forth the computation of basic and diluted
earnings per share:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
--------------------------
1999 1998
-------- --------
<S> <C> <C>
(Restated-NOTE 2)
Numerator:
Income before extraordinary loss $ 5,681 $ 3,612
Less: Preferred stock dividends and financing fee accretion 1,211 1,051
-------- --------
Numerator for basic and diluted earnings per share - income
available to common stockholders before extraordinary loss $ 4,470 $ 2,561
======== ========
Denominator:
Denominator for basic earnings per share
--weighted-average shares 5,732 5,705
Effect of dilutive securities:
Employee stock options 222 164
-------- --------
Denominator for diluted earnings per share
--adjusted weighted-average shares 5,954 5,869
======== ========
Basic earnings per share before extraordinary loss $ 0.78 $ 0.45
======== ========
Diluted earnings per share before extraordinary loss $ 0.75 $ 0.44
======== ========
</TABLE>
7
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2. RESTATEMENT
On May 13, 1999, the Company acquired all the outstanding common
stock of Three Rivers Holding Corp.("Three Rivers"), the parent corporation
of SMT Health Services, Inc. ("SMT"), in a stock-for-stock merger (the
"Merger"). The Company exchanged approximately 1,644 shares of common stock
for all the outstanding common shares of Three Rivers. At the time of the
Merger, Three Rivers was wholly owned by affiliates of Apollo Management, L.P.
("Apollo"), which held approximately 82.6% of the Company's outstanding
common stock. Accordingly, the Merger has been accounted for as a
reorganization of entities under common control in a manner similar to a
pooling of interests. As such, the accompanying financial statements and
footnotes have been restated to include the assets, liabilities and
operations of SMT from the date when both entities were under Apollo's
control, which was December 18, 1997. As the operating results of SMT from
December 18, 1997 through December 31, 1997 are not significant as compared
to the operating results of the Company for the year ended December 31, 1997,
the Company has chosen December 31, 1997 to be the effective date for giving
accounting recognition to the combination. In connection with the Merger, the
Company amended and restated its Credit Agreement to add a new $70,000
tranche D term loan facility which was used to fund: repayment of SMT's
existing indebtedness - $62,044; payment on the Company's revolving loan
facility - $6,000; transaction costs charged to expense - $851; deferred
financing costs - $650; and an increase in the Company's cash balance of $455.
Combined and separate results of Alliance and SMT during the periods
preceding the Merger that are included in the accompanying condensed
consolidated statements of operations are as follows:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended Six Months Ended
March 31, 1999 June 30, 1998 June 30, 1998
------------------ ------------------ ----------------
<S> <C> <C> <C>
REVENUES
Alliance $ 64,381 $ 51,243 $ 82,484
SMT 11,939 11,037 21,421
Eliminations (579) (165) (165)
------------------ ------------------ ----------------
Combined $ 75,741 $ 62,115 $ 103,740
================== ================== ================
EXTRAORDINARY LOSS, NET OF TAXES
Alliance $ - $ - $ (1,312)
SMT - - -
------------------ ------------------ ----------------
Combined $ - $ - $ (1,312)
================== ================== ================
NET INCOME
Alliance $ 1,999 $ 2,300 $ 655
SMT 905 1,013 1,645
------------------ ------------------ ----------------
Combined $ 2,904 $ 3,313 $ 2,300
================== ================== ================
</TABLE>
In connection with the new $70,000 tranche D term loan facility, the
Company recorded an extraordinary loss of $2,297 (net of taxes of $1,458)
associated with the write-off of unamortized deferred financing costs of
$1,753 on SMT's existing indebtedness and $2,002 on Alliance's tranche C term
loan facility.
8
<PAGE>
In connection with the SMT merger, the Company established a
severance accrual of $2,095, an office lease termination accrual of $230, and
a fixed asset disposal reserve of $241. All of the preceding amounts were
charged to transaction related costs in May 1999 and were included in other
accrued liabilities as of June 30, 1999.
Three Rivers pays an annual management fee of $250 to Apollo and
expects to continue to receive financial advisory services from Apollo on an
ongoing basis.
3. ACQUISITIONS
On January 2, 1998, Canton Holding Corp., a wholly owned subsidiary
of SMT, acquired all of the outstanding common stock of Mid American Imaging,
Inc. ("MAI") and Dimensions Medical Group, Inc. ("DMG"). The acquisition was
accounted for as a purchase and accordingly, the results of operations of MAI
and DMG have been included in the Company's consolidated financial statements
from the date of acquisition. The purchase price consisted of approximately
$10,400 in cash plus the assumption of approximately $5,100 in financing
arrangements. The acquisition was primarily funded by an $11,500 borrowing on
SMT's revolving loan facility that was also used to refinance approximately
$843 of existing MAI and DMG indebtedness. The goodwill recorded as a result
of this acquisition was approximately $10,000, which is being amortized using
the straight-line method over 20 years.
On March 12, 1998, the Company acquired Mobile Technology Inc.
("MTI"). The purchase price consisted of $58,300 for all of the equity
interests in MTI, plus direct acquisition costs of approximately $2,000. In
connection with the acquisition, the Company also refinanced $37,400 of MTI's
outstanding debt and paid MTI direct transaction costs of $3,500. To finance
these expenditures, the Company increased its existing term loan facility by
$20,000 to provide total availability of $70,000, established a new $50,000
term loan facility and borrowed an aggregate of $90,000 thereunder, for which
the Company incurred debt issuance costs of approximately $2,800. The Company
also borrowed $5,400 under its revolving loan facility and used $8,500 of
cash on hand at MTI to complete the financing requirements. The transaction
has been accounted for as a purchase and, accordingly, the results of
operations of MTI have been included in the Company's consolidated financial
statements from the date of acquisition. The goodwill recorded as a result of
this acquisition was approximately $29,974, which is being amortized on a
straight-line basis over 20 years. Additionally, the Company assigned $67,200
of the purchase price to customer contracts and $2,870 of the purchase price
to assembled work force. The amounts are being amortized on a straight-line
basis over 20 and four years respectively. The allocation of the intangible
assets acquired was based on an independent valuation study.
On May 19, 1998, the Company acquired Medical Diagnostics, Inc.
("MDI"), a subsidiary of U.S. Diagnostic, Inc. The purchase price consisted
of approximately $31,000 plus the assumption of approximately $7,400 in
financing arrangements. The transaction has been accounted for as a purchase
and, accordingly, the results of operations of MDI have been included in the
Company's consolidated financial statements from the date of acquisition. The
goodwill recorded as a result of this acquisition was $17,212, which is being
amortized on a straight-line basis over 20 years. Additionally, the Company
assigned $8,300 of the purchase price to customer contracts and $350 of the
purchase price to assembled work force. The amounts are being amortized on a
straight-line basis over 20 and four years respectively. The allocation of
the intangible assets acquired was based on an independent valuation study.
On August 17, 1998, SMT acquired all of the outstanding common stock
of RIA Management Services, Inc. ("RIA"). The acquisition was accounted for
as a purchase and, accordingly, the results of
9
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operations of RIA have been included in the Company's consolidated financial
statements from the date of acquisition. The purchase price consisted of
approximately $2,100 in cash plus the assumption of approximately $1,100 in
financing arrangements. The acquisition was primarily funded from operating
cash on hand and a $1,000 borrowing on SMT's revolving loan facility. The
goodwill recorded as a result of this acquisition was approximately $2,000,
which is being amortized using the straight-line method over 20 years.
On November 13, 1998, two wholly owned subsidiaries of the Company
acquired all of the outstanding common stock of CuraCare, Inc. and all of the
partnership interests in American Shared-CuraCare (collectively, "American
Shared"). The purchase price consisted of approximately $13,377 plus the
assumption of approximately $12,241 in financing arrangements. In connection
with the acquisition, the Company also refinanced $13,130 of American
Shared's outstanding debt. The transaction has been accounted for as a
purchase and, accordingly, the results of operations of American Shared have
been included in the Company's consolidated financial statements from the
date of acquisition. The goodwill recorded as a result of this acquisition
was approximately $26,446 which is being amortized on a straight-line basis
over 20 years. Additionally, the Company assigned $3,300 of the purchase
price to customer contracts and $690 of the purchase price to assembled work
force which is being amortized on a straight-line basis over ten and four
years respectively. The allocation of the intangible assets acquired was
based on an independent valuation study.
10
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
OVERVIEW
Alliance Imaging, Inc. (the "Company") is a leading nationwide
provider of diagnostic imaging and therapeutic services and the largest
operator of state-of-the-art mobile diagnostic imaging systems and related
outsourced radiology services in the United States. The Company's diagnostic
imaging services include magnetic resonance imaging ("MRI"), computed axial
tomography ("CT"), nuclear medicine single photon emission computed
tomography ("SPECT") camera and ultrasound systems. The Company's therapeutic
services include lithotripsy, brachytherapy and microwave thermotherapy
systems. The Company primarily provides MRI and CT systems and services to
hospitals and other health care providers on a mobile, shared user basis. The
Company also provides dedicated, full-time MRI systems and services as well
as full-service management of imaging operations for selected hospitals. The
Company's MRI services include the provision of high technology imaging
systems, technologists to operate the imaging systems, equipment maintenance
and upgrades, the management of day-to-day operations, educational and
marketing support, patient scheduling, billing and collection services,
managed care contracting and professional liability coverage. The Company's
services enable small to mid-size hospitals to gain access to advanced
diagnostic imaging technology and related value-added services without making
a substantial investment in equipment and personnel. The Company operates a
fleet of 287 MRI systems and services 1,144 customers in 44 states as of June
30, 1999.
The Company's revenues are principally a function of the number of
systems in service, scan volumes and fees per scan. The Company generates
substantially all of its revenues under exclusive one to eight-year contracts
with hospitals and health care providers. The Company's contracts typically
offer tiered pricing with lower fees per scan on incremental scans, allowing
customers to benefit from increased scan volumes and the Company to benefit
from the operating leverage associated with increased scan volumes. The
Company expects modest continuing downward pressure on pricing levels as a
result of cost containment measures in the health care industry. However, in
many cases higher scan volumes justify lower prices on incremental scans.
The principal components of the Company's operating costs include
salaries paid to technologists and drivers, annual system maintenance costs,
insurance and transportation costs. Because a majority of these expenses are
fixed, increased revenues as a result of higher scan volumes significantly
improve the Company's profitability while lower scan volumes result in lower
profitability.
Since the beginning of 1995, the Company has substantially increased
revenues by adding new customers and increasing scan volumes at existing
customer sites. The Company has also substantially increased revenue through
acquisitions. During the same period, the growth rate of the Company's EBITDA
(income before income taxes, plus depreciation, amortization and net interest
expense), excluding expenses associated with the Recapitalization Merger (as
hereinafter defined), has exceeded the growth rate of revenues as a result of
spreading costs (which are primarily fixed) over a larger revenue base and
implementing cost reduction and containment measures.
The Company has historically focused on maximizing cash flow and
return on invested capital nationwide, deploying new and upgraded systems in
high volume markets and redeploying older, less advanced systems with lower
carrying values in lower volume markets. The Company's ongoing
11
<PAGE>
equipment trade-in and upgrade program has substantially improved the
marketability and productivity of its MRI systems. Because the Company owns
significantly all of its MRI systems, it periodically evaluates its older,
less marketable MRI systems to determine if it is more beneficial to continue
to use such systems in lower volume markets which are profitable but produce
less revenue, or to trade in such equipment in connection with new system
purchases. The Company currently maintains one of the most advanced fleets in
the industry.
Revenues from CT services, lithotripsy services, SPECT camera
services, and other imaging services accounted for approximately 6% of the
Company's revenues for the six months ended June 30, 1999.
SIGNIFICANT ACQUISITIONS AND OTHER TRANSACTIONS
On December 18, 1997, after obtaining the approval of stockholders,
the Company completed a series of transactions whereby the Company
experienced an approximate 90% ownership change and became highly leveraged.
These transactions (the "Recapitalization Merger"), which were accounted for
as a leveraged recapitalization, resulted in an affiliate of Apollo
Management, L.P. ("Apollo") obtaining ownership of approximately 83.6% of the
Company's outstanding common stock.
On May 13, 1999, the Company acquired all the outstanding common
stock of Three Rivers Holding Corp. ("Three Rivers"), the parent corporation
of SMT Health Services, Inc. ("SMT"), in a stock-for-stock merger (the
"Merger"). The Company exchanged approximately 1.6 million shares of common
stock for all the outstanding common shares of Three Rivers. At the time of
the Merger, Three Rivers was wholly owned by affiliates of Apollo, which held
approximately 82.6% of the Company's outstanding common stock. Accordingly,
the Merger has been accounted for as a reorganization of entities under
common control in a manner similar to a pooling of interests. As such, the
accompanying financial statements, footnotes, and management's discussion and
analysis of financial condition and results of operations have been restated
to include the assets, liabilities and operations of SMT from the date when
both entities were under Apollo's control, which was December 18, 1997. As
the operating results of SMT from December 18, 1997 through December 31, 1997
are not significant as compared to the operating results of the Company for
the year ended December 31, 1997, the Company has chosen December 31, 1997 to
be the effective date for giving accounting recognition to the combination.
On January 2, 1998, Canton Holding Corp., a wholly owned subsidiary
of SMT, acquired all of the outstanding common stock of Mid American Imaging,
Inc. ("MAI") and Dimensions Medical Group, Inc. ("DMG"). The acquisition was
accounted for as a purchase and accordingly, the results of operations of MAI
and DMG have been included in the Company's consolidated financial statements
from the date of acquisition. The purchase price consisted of approximately
$10.4 million in cash plus the assumption of approximately $5.1 million in
financing arrangements. The acquisition was primarily funded by an $11.5
million borrowing on SMT's revolving loan facility that was also used to
refinance approximately $0.8 million of existing MAI and DMG indebtedness.
The goodwill recorded as a result of this acquisition was approximately $10.0
million, which is being amortized using the straight-line method over 20
years.
On March 12, 1998, the Company acquired Mobile Technology Inc.
("MTI"), which management believes was the second largest provider of mobile
MRI services in the United States, in a transaction accounted for as a
purchase. The Company has included the operations of MTI in its
12
<PAGE>
consolidated financial statements from the date of acquisition. This
acquisition added 68 MRI systems operating in 31 states, 3 CT systems, 9
lithotripsy systems, and 3 brachytherapy systems to the Company's equipment
fleet. The purchase price consisted of $58.3 million for all of the equity
interests in MTI plus direct acquisition costs of approximately $2.0 million.
In connection with the acquisition, the Company also refinanced $37.4 million
of MTI's outstanding debt and paid MTI direct transaction costs of $3.5
million. To finance these expenditures, the Company increased its then
existing term loan facility by $20.0 million to provide total availability of
$70.0 million, established a new $50.0 million term loan facility and
borrowed an aggregate of $90.0 million thereunder, for which the Company
incurred debt issuance costs of approximately $2.8 million. The Company also
borrowed $5.4 million under its revolving loan facility and used $8.5 million
of cash on hand at MTI to complete the financing requirements. The goodwill
recorded as a result of this acquisition was approximately $30.0 million,
which is being amortized on a straight-line basis over 20 years.
Additionally, the Company assigned $67.2 million of the purchase price to
customer contracts and $2.9 million of the purchase price to assembled work
force. The amounts are being amortized on a straight-line basis over 20 and
four years, respectively. The allocation of the intangible assets acquired
was based on an independent valuation study.
On May 19, 1998, the Company acquired Medical Diagnostics, Inc.
("MDI"), a subsidiary of U. S. Diagnostic, Inc. The purchase price consisted
of approximately $31.0 million plus the assumption of approximately $7.4
million in financing arrangements. The Company borrowed $30.0 million under
its revolving loan facility to finance the transaction. The acquisition has
been accounted for as a purchase and, accordingly, the results of operations
of MDI have been included in the Company's consolidated financial statements
from the date of acquisition. The goodwill recorded as a result of this
acquisition was $17.2 million which is being amortized on a straight-line
basis over 20 years. Additionally, the Company assigned $8.3 million of the
purchase price to customer contracts and $0.4 million of the purchase price
to assembled work force. The amounts are being amortized on a straight-line
basis over 20 and four years respectively. The allocation of the intangible
assets acquired was based on an independent valuation study.
On August 17, 1998, SMT acquired all of the outstanding common stock
of RIA Management Services, Inc. ("RIA"). The acquisition was accounted for
as a purchase and, accordingly, the results of operations of RIA have been
included in the Company's consolidated financial statements from the date of
acquisition. The purchase price consisted of approximately $2.1 million in
cash plus the assumption of approximately $1.1 million in financing
arrangements. The acquisition was primarily funded from operating cash on
hand and a $1.0 million borrowing on SMT's revolving loan facility. The
goodwill recorded as a result of this acquisition was approximately $2.0
million, which is being amortized using the straight-line method over 20
years.
On November 13, 1998, two wholly owned subsidiaries of the Company
acquired all of the outstanding common stock of CuraCare, Inc. and all of the
partnership interests in American Shared-CuraCare (collectively, "American
Shared"). The purchase price consisted of approximately $13.4 million in cash
plus the assumption of approximately $12.2 million in financing arrangements.
In connection with the acquisition, the Company also refinanced $13.1 million
of American Shared's outstanding debt. The Company borrowed $30.0 million
under a new tranche C term loan facility to finance the transaction. The
transaction has been accounted for as a purchase and, accordingly, the
results of operations of American Shared have been included in the Company's
consolidated financial statements from the date of acquisition. The goodwill
recorded as a result of this acquisition was
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approximately $26.4 million which is being amortized on a straight-line basis
over 20 years. Additionally, the Company assigned $3.3 million of the
purchase price to customer contracts and $0.7 million of the purchase price
to assembled work force which is being amortized on a straight-line basis
over ten and four years respectively. The allocation of the intangible assets
acquired was based on an independent valuation study.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
- --Revenues for the six months ended June 30, 1999 were $156.0 million, an
increase of $52.3 million, or 50.4%, over 1998, primarily due to the American
Shared, MTI and MDI acquisitions. The remaining increase reflects higher
scan-based MRI revenue, MRI revenue under fixed fee contracts and other
revenue items (including revenue for other modalities). Overall, MRI revenue
increased $48.9 million, as a result of a 52.0% increase in total scan volume
partially offset by a 1.0% decrease in the average revenue realized per MRI
scan. The average daily scan volume per MRI system increased 4.6% to 9.1 from
8.7 in the first six months of 1998. Management attributes the
non-acquisition volume increase to the Company's continuing MRI systems
upgrade program, which has enabled the Company to obtain new, long-term
contracts from both existing and new customers, and to the continuing
positive effect of marketing programs implemented in early 1997. Management
believes the decrease in average revenue realized per scan is primarily the
result of many customers achieving discount price levels in incremental scan
volume. Other revenue increased $3.4 million, or 29.5% partly related to a
$1.2 million increase in lithotripsy revenue associated with the MTI
acquisition, as well as a $0.9 million increase in SPECT camera revenue
associated with the American Shared acquisition. The remainder of the
increase in other revenue was primarily due to an increase in revenue
associated with other modalities.
The Company operated 287 MRI systems at June 30, 1999 compared to
234 MRI systems at June 30, 1998. The increase was primarily a result of the
American Shared acquisition.
Operating expenses, excluding depreciation, totaled $71.5 million in
the first six months of 1999, an increase of $24.8 million, or 53.1%, from
the first six months of 1998. Payroll and related employee expenses increased
$10.7 million, or 53.7%, primarily as a result of the American Shared, MTI
and MDI acquisitions as well as an increase in the number of employees
necessary to support new units in operation and increased scans per unit.
Preventative maintenance and cryogen expense increased $4.8 million, or
56.7%, due to an increase in the number of systems in service and the
expiration of warranties on an increased number of MRI systems. Equipment
rental expense increased $1.5 million, or 29.2%, resulting from a higher
number of leased MRI systems in operation.
Depreciation expense during the first six months of 1999 totaled
$22.8 million, an increase of $7.9 million, or 53.0% from the 1998 level
principally due to a higher amount of depreciable assets associated with
equipment additions and upgrades and equipment acquired through acquisitions.
Amortization expense during the first six months of 1999 increased $3.0
million, or 69.8%, over the first six months of 1998 as a result of the
acquisitions made during 1998.
Selling, general and administrative expenses totaled $16.0 million
in the first six months of 1999, an increase of $5.5 million, or 52.4%, from
the same period in 1998. Payroll and related expenses increased $3.0 million,
or 50.0%, primarily as a result of increased staffing levels necessary to
support the Company's increased level of operations and increased employee
compensation related to increased
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sales commissions. Bad debt expense increased $1.1 million primarily as a
result of the growth in revenues and the application of the Company's more
conservative bad debt reserve policy to the acquired MTI, MDI and American
Shared operations.
The transaction related costs for the first six months of 1999
primarily represent a severance accrual of $2.1 million, legal and
professional services of $0.9 million, an office lease termination accrual of
$0.2 million, and a fixed asset disposal reserve of $0.2 million recorded in
connection with the Merger. The transaction related costs for the first six
months of 1998 primarily represent a special non-recurring bonus paid in
connection with the MTI acquisition.
Interest expense of $23.4 million in the first six months of 1999
was $4.5 million, or 23.8%, higher than the first six months of 1998, as a
result of higher average outstanding debt balances during 1999 as compared to
1998. This increase was primarily related to debt incurred in connection with
the MTI, MDI, and American Shared acquisitions.
An income tax provision of $4.9 million was recorded in the first
six months of 1999. The effective tax rate decreased to 46.5% in 1999 from
53.2% in 1998 primarily as a result of non-deductible goodwill amortization
expense comprising a smaller percentage of book pre-tax income in 1999.
The Company's income before extraordinary loss was $5.7 million in
the first six months of 1999 compared to income before extraordinary loss of
$3.6 million in the first six months of 1998, an increase of $2.1 million,
primarily attributable to the increase in revenues. The Company reported an
extraordinary loss of $2.3 million in the first six months of 1999 on early
extinguishment of debt related to the SMT debt refinancing compared to an
extraordinary loss of $1.3 million in the first six months of 1998 on early
extinguishment of debt related to the MTI debt refinancing. The earnings per
common share calculations reflect preferred dividend requirements and
financing fee accretion of $1.2 million in the first six months of 1999 and
$1.1 million in the first six months of 1998.
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998 --
Revenues for the quarter ended June 30, 1999 were $80.3 million, an increase
of $18.2 million, or 29.3%, over 1998, primarily due to the American Shared
and MDI acquisitions. The remaining increase reflects higher scan-based MRI
revenue, MRI revenue under fixed fee contracts and other revenue items
(including revenue for other modalities). Overall, MRI revenue increased
$17.6 million, as a result of a 30.4% increase in total scan volume partially
offset by a 0.9% decrease in the average revenue realized per MRI scan. The
average daily scan volume per MRI system increased 2.2% to 9.2 from 9.0 in
the second quarter of 1998. Management attributes the non-acquisition volume
increase to the Company's continuing MRI systems upgrade program, which has
enabled the Company to obtain new, long-term contracts from both existing and
new customers, and to the continuing positive effect of marketing programs
implemented in early 1997. Management believes the decrease in average
revenue realized per scan is primarily the result of many customers achieving
discount price levels in incremental scan volume. Other revenue increased
$0.6 million, or 9.2% partly related to a $0.4 million increase in
lithotripsy revenue, as well as a $0.5 million increase in SPECT camera
revenue, offset by a decrease in other revenue primarily due to a decrease in
revenue associated with other modalities.
Operating expenses, excluding depreciation, totaled $36.0 million in
the second quarter of 1999, an increase of $8.0 million, or 28.6%, from the
second quarter of 1998. Payroll and related employee expenses increased $2.9
million, or 23.9%, primarily as a result of the American Shared and MDI
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acquisitions as well as an increase in the number of employees necessary to
support new units in operation and increased scans per unit. Preventative
maintenance and cryogen expense increased $1.9 million, or 38.9%, due to an
increase in the number of systems in service and the expiration of warranties
on an increased number of MRI systems. Equipment rental expense increased
$0.7 million, or 23.4%, resulting from a higher number of leased MRI systems
in operation.
Depreciation expense during the second quarter of 1999 totaled $11.8
million, an increase of $3.5 million, or 42.2% from the 1998 level
principally due to a higher amount of depreciable assets associated with
equipment additions and upgrades and equipment acquired through acquisitions.
Amortization expense during the second quarter of 1999 increased $1.0
million, or 37.0%, over the second quarter of 1998 as a result of the
acquisitions made during 1998.
Selling, general and administrative expenses totaled $8.1 million in
the second quarter of 1999, an increase of $2.1 million, or 35.0%, from the
same period in 1998. Payroll and related expenses increased $1.1 million, or
31.9%, primarily as a result of increased staffing levels necessary to
support the Company's increased level of operations and increased employee
compensation related to increased sales commissions. Bad debt expense
increased $0.2 million primarily as a result of the growth in revenues and
the application of the Company's more conservative bad debt reserve policy to
the acquired MDI and American Shared operations.
The transaction related costs for the first second quarter of 1999
primarily represent a severance accrual of $2.1 million, legal and
professional services of $0.9 million, an office lease termination accrual of
$0.2 million, and a fixed asset disposal reserve of $0.2 million recorded in
connection with the Merger.
Interest expense of $11.8 million in the second quarter of 1999 was
$1.3 million, or 12.4%, higher than the second quarter of 1998, as a result
of higher average outstanding debt balances during 1999 as compared to 1998.
This increase was primarily related to debt incurred in connection with the
MDI and American Shared acquisitions.
An income tax provision of $2.1 million was recorded in the second
quarter of 1999. The effective tax rate decreased to 43.6% in 1999 from 49.5%
in 1998 primarily as a result of non-deductible goodwill amortization expense
comprising a smaller percentage of book pre-tax income in 1999.
The Company's income before extraordinary loss was $2.8 million in
the second quarter of 1999 compared to net income of $3.3 million in the
second quarter of 1998, a decrease of $0.5 million, primarily attributable to
the increase in transaction related costs offset by an increase in revenues.
The Company reported an extraordinary loss of $2.3 million in the second
quarter of 1999 on early extinguishment of debt related to the SMT debt
refinancing. The earnings per common share calculations reflect preferred
dividend requirements and financing fee accretion of $0.6 million in the
second quarter of 1999 and $0.5 million in the second quarter of 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash of $33.5 million and $18.4 million from
operating activities during the first six months of 1999 and 1998,
respectively. Capital expenditures, consisting primarily of new equipment
purchases, totaled $54.2 million and $30.9 million during the six months
ended June 30, 1999 and 1998, respectively. Since January 1, 1999, the
Company has purchased 28 MRI systems,
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including replacement systems. The Company expects to purchase additional
equipment under binding commitments in 1999 and finance such purchases with
the Company's Revolving Loan Facility.
The Company's primary cash needs consist of capital expenditures and
debt service. The Company incurs capital expenditures for the purposes of (i)
providing routine upgrades of its MRI systems; (ii) replacing or making major
upgrades to older, less advanced systems with new state-of-the-art systems;
and (iii) purchasing new systems. The Company expects capital expenditures to
be approximately $87.4 million in 1999, which primarily reflects the
anticipated purchase of 45 new MRI systems, including replacement systems.
The Company's decision to purchase a new system is typically predicated on
obtaining new or extending existing customer contracts, which serve as the
basis of demand for the new system.
As a result of the Recapitalization Merger, the Company issued
$185.0 million of Notes (consisting of $140.0 million Senior Subordinated
Notes due 2005, bearing interest at the rate of 9 5/8% per annum; and $45.0
million Floating Interest Rate Subordinated Term Securities due 2005, bearing
interest at a rate per annum equal to LIBOR plus 4.19%) which are payable
semiannually, and require no principal repayments until maturity. The Company
also entered into a $125.0 million Credit Agreement consisting of a $50.0
million Term Loan Facility and a $75.0 million Revolving Loan Facility, and
carried over approximately $12.7 million of other obligations. Subsequent
amendments to the Credit Agreement are described below.
On March 12, 1998, the Company acquired MTI, another nationwide
provider of diagnostic imaging services. The Company funded the MTI
acquisition with $20.0 million of existing Term Loan availability under
tranche A, $5.4 million of revolver borrowings, a $20.0 million increase to
the Term Loan Facility under tranche A, and a new $50.0 million Term Loan
Facility under tranche B. The Credit Agreement was amended to provide for the
increased Term Facilities.
On May 19, 1998, the Company acquired MDI, a subsidiary of U. S.
Diagnostic, Inc. The Company borrowed $30.0 million under its Revolving Loan
Facility to finance the transaction.
On September 24, 1998, the Company completed a $90.0 million
expansion of its Credit Agreement. The transaction added a new $85.0 million
Term Loan Facility under tranche C and increased the Revolving Loan Facility
to $80.0 million ($46.4 million of which was funded at June 30, 1999). The
increased Loan Facilities provided funds to complete the American Shared
acquisition and also provided funds for future acquisitions and capital
expenditures.
On November 13, 1998, the Company acquired American Shared. The
purchase price consisted of approximately $13.4 million plus the assumption
of approximately $12.2 million in financing arrangements. In connection with
the acquisition, the Company also refinanced $13.1 million of American
Shared's outstanding debt. The Company borrowed $30.0 million under the
tranche C Term Loan Facility to finance the transaction.
On May 13, 1999, the Company acquired all the outstanding common
stock of Three Rivers, the parent corporation of SMT, in a stock-for-stock
merger. The Company exchanged approximately 1.6 million shares of common
stock for all the outstanding common shares of Three Rivers. In connection
with the Merger, the Company amended and restated its Credit Agreement to add
a new $70.0 million tranche D term loan facility which was used to fund:
repayment of SMT's existing
17
<PAGE>
indebtedness - $62.0 million; payment on the Company's revolving loan
facility -$6.0 million; transaction costs charged to expense - $0.9 million;
deferred financing costs - $0.7 million; and an increase in the Company's
cash balance of $0.4 million.
The Company believes that, based on current levels of operations and
anticipated growth, its cash from operations, together with other available
sources of liquidity, including borrowings available under the Revolving Loan
Facility, will be sufficient over the next several years to fund anticipated
capital expenditures and make required payments of principal and interest on
its debt, including payments due on the Notes and obligations under the
Credit Agreement.
The Company's expansion and acquisition strategy may require
substantial capital, and no assurance can be given that the Company will be
able to raise any necessary additional funds through bank financing or the
issuance of equity or debt securities on terms acceptable to the Company, if
at all.
YEAR 2000 COMPLIANCE
The following disclosure is a Year 2000 readiness disclosure
statement pursuant to the Year 2000 Readiness and Disclosure Act. The Company
has implemented a process to address its Year 2000 compliance issues. The
process includes: (i) an inventory and assessment of the compliance of
essential systems and equipment of the Company and of Year 2000 mission
critical suppliers, customers, and other third parties, (ii) the remediation
of non-compliant systems and equipment, and (iii) contingency planning. The
Company has completed its inventory of imaging and therapeutic systems and
has completed approximately 90% of its inventory of information systems. The
Company has identified its mission critical suppliers, customers and other
third parties and has contacted these parties to assess their Year 2000
readiness plans and progress. In some cases, the Company may seek reasonable
assurances with respect to Year 2000 compliance. During 1998, the Company
purchased Year 2000 compliant financial reporting software which has been
successfully implemented. As a result, the Company does not believe that its
financial reporting, wholesale billing, or accounts receivable functions will
be adversely affected by Year 2000 concerns. The cost of this software was
approximately $1.0 million, including installation.
The Company has also been working closely with the original
equipment manufacturers ("OEMs") of its imaging and therapeutic systems to
address Year 2000 concerns. Approximately 98% of the Company's imaging and
therapeutic systems will be made compliant on a timely basis by the OEMs
pursuant to the Company's existing maintenance contracts. The Company cannot
currently estimate the additional costs that will be incurred to address Year
2000 concerns. The Company's analysis of its Year 2000 efforts are ongoing
and its overall plan and cost estimations will continue to evolve as new
information becomes available.
The failure of the Company, its mission critical suppliers,
customers or third parties to be fully Year 2000 compliant for essential
systems and equipment by January 1, 2000 could result in interruptions in
normal business work operations. The Company's potential risks include: (i)
the inability to deliver imaging and therapeutic services, (ii) the delayed
receipt of payments from clients or fiscal intermediaries, (iii) the failure
of security systems, elevators, heating systems and other operational systems
in the Company's offices and (iv) the inability to receive critical equipment
from vendors. Each of these events could have a material adverse effect on
the Company's business, results of operations and financial condition.
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Contingency plans for Year 2000 related issues continue to be
developed and include, but are not limited to, identification of alternate
suppliers, alternate equipment and manual systems. However, any contingency
plan implemented by the Company may not succeed or may not be adequate to
meet the Company's needs without materially affecting the Company's business,
results of operations or financial condition.
FORWARD-LOOKING STATEMENTS
Certain statements contained in Management's Discussion and Analysis
of Financial Condition and Results of Operations, particularly in the section
entitled "Liquidity and Capital Resources" and elsewhere in this quarterly
report on Form 10-Q, are forward-looking statements. Statements in this
quarterly report on Form 10-Q which address activities, events or
developments that the Company expects or anticipates will or may occur in the
future, including such things as results of operations and financial
condition, the consummation of acquisitions and financing transactions and
the effect of such transactions on the Company's business and the Company's
plans and objectives for future operations and expansion are examples of
forward-looking statements. These forward-looking statements are subject to
risks and uncertainties, including those identified as "Risk Factors" in the
Company's Registration Statements on Forms S-2 (No. 333-33817) and S-4 (No.
333-33787). The foregoing should not be construed as an exhaustive list of
all factors which could cause actual results to differ materially from those
expressed in forward-looking statements made by the Company. Actual results
may materially differ from anticipated results described in these statements.
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
On April 22, 1999 the Company's Board of Directors adopted
the Company's 1999 Non-Employee Directors' Stock Option Plan (the "Directors'
Plan"). The Board's action was subsequently ratified by the written consent
of stockholders of a majority of the Company's outstanding common stock
pursuant to Section 228 of the Delaware General Corporation Law.
Pursuant to the Directors' Plan, the Company has reserved
for issuance options to acquire 50,000 shares of its common stock
(representing less than 1% of the Company's outstanding shares of common
stock on a fully diluted basis). Under the Directors' Plan, as of April 22,
1999 the Company granted to each of its non-employee directors options to
acquire 2,000 shares of the Company's common stock. The current non-employee
directors are (i) Robert H. Falk, (ii) Michael S. Gross, (iii) Joshua J.
Harris, (iv) Anthony R. Ignaczak, (v) Robert A. Katz, (vi) Mark D. Klein and
(vii) Michael D. Weiner. In addition, under the Directors' Plan each
non-employee director as of each subsequent April 22 shall be automatically
granted an option under the Plan to purchase an additional 1,000 shares of
the Company's common stock according to the terms of the Director's Plan,
beginning on April 22, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Note Description
3.1 (5) Form of Amended and Restated Certificate of
Incorporation of the Company.
3.2 (9) Certificate of Amendment of Certificate of
Incorporation, dated July 30, 1998.
3.3 (10) Certificate of Designations, Powers, Preferences
and Rights of Series F Preferred Stock, dated
December 18, 1997.
3.4 (9) Certificate of Amendment of Certificate
Designations, Powers, Preferences and Rights of
Series F Preferred Stock, dated July 30, 1998.
3.5 (5) By Laws of the Company, as amended.
4.1 (5) Form of Indenture for the 9 5/8% Senior
Subordinated Notes due 2005 and the Senior
Subordinated Floating Rate Notes due 2005
(including the Forms of Notes as Exhibits A and
B thereto) between the Company and IBJ Schroder
Bank & Trust Company, as trustee.
4.2 (10) First Supplemental Indenture between the
Company, various subsidiaries of the Company and
IBJ Shroder, dated January 30, 1998.
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4.3 (10) Second Supplemental Indenture between the
Company, various subsidiaries of the Company and
IBJ Shroder, dated March 12, 1998.
4.4 (10) Third Supplemental Indenture between the
Company, various subsidiaries of the Company and
IBJ Shroder, dated May 19, 1998.
4.5 (10) Fourth Supplemental Indenture between the
Company, various subsidiaries of the Company and
IBJ Shroder, dated November 13, 1998.
4.6 (12) Fifth Supplemental Indenture between the
Company, various subsidiaries of the Company and
IBJ Whitehall Bank & Trust Company dated May 13,
1999
4.7 (5) Form of Guarantee of the Notes.
10.1 (1) Form of Indemnification Agreement between the
Company and its directors and/or officers.
10.2 (4) Amended and Restated 1991 Stock Option Plan of
the Company, including forms of agreement used
thereunder.
10.3 (8) 1997 Stock Option Plan of the Company, including
form of option agreement used thereunder.
10.4 (13) 1999 Non-Employee Directors' Stock Option Plan,
including form of option agreement used
thereunder.
10.5 (5) Employment Agreement dated as of July 23, 1997
between the Company and Richard N. Zehner.
10.6 (5) Agreement Not to Compete dated as of July 23,
1997 among Newport Investment, LLC, the Company,
Richard N. Zehner and Vincent S. Pino.
10.7 (7) Amendment to Employment Agreement dated as of
July 23, 1997 between the Company and Richard N.
Zehner.
10.8 (10) Amendment to Employment Agreement dated as of
December 31, 1997 between the Company and
Richard N. Zehner.
10.9 (10) Second Amendment to Employment Agreement dated
as of February 5, 1998 between the Company and
Richard N. Zehner.
10.10 (5) Employment Agreement dated as of July 23, 1997
between the Company and Vincent S. Pino.
10.11 (7) Amendment to Employment Agreement dated as of
July 23, 1997 between the Company and Vincent S.
Pino.
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10.12 (10) Amendment to Employment Agreement dated as of
December 31, 1997 between the Company and
Vincent S. Pino.
10.13 (10) Second Amendment to Employment Agreement dated
as of February 5, 1998 between the Company and
Vincent S. Pino.
10.14 (8) Employment Agreement dated as of January 19,
1998 between the Company and Kenneth S. Ord.
10.15 (8) Agreement Not to Compete dated as of January 19,
1998 between the Company and Kenneth S. Ord.
10.16 (2) Employment Agreement dated as of September 9,
1993 between the Company and Terry A. Andrues.
10.17 (2) Employment Agreement dated as of June 6, 1994
between the Company and Cheryl A. Ford.
10.18 (2) Employment Agreement dated as of September 9,
1993 between the Company and Jay A. Mericle.
10.19 (2) Employment Agreement dated as of June 6, 1994
between the Company and Neil M. Cullinan.
10.20 (10) Agreement Not to Compete dated as of April 29,
1998 between the Company and Raymond M. Almieri.
10.21 (10) Employment Agreement dated as of April 29, 1998
between the Company and Raymond M. Almieri.
10.22 (10) Employment Agreement dated as of April 29, 1998
between the Company and Russell D. Phillips, Jr.
10.23 (10) Agreement Not to Compete dated as of April 29,
1998 between the Company and Russell D.
Phillips, Jr.
10.24 (3) Employment Agreement dated as of July 7, 1995
between the Company and Michael W. Grismer.
10.25 (6) Agreement and Plan of Merger dated as of January
13, 1998 relating to the acquisition of Mobile
Technology Inc.
10.26 (8) Securities Purchase Agreement dated as of March
12, 1998 relating to the acquisition of American
Shared-CuraCare and CuraCare, Inc.
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10.27 (8) Stock Purchase Agreement dated as of March 30,
1998 among the Company, US Diagnostic, Inc. and
Medical Diagnostics, Inc.
10.28 (11) Agreement and Plan of Merger dated as of April
14, 1999 among the Company and Three Rivers
Holding Corp.
10.29 (12) Amended and Restated Credit Agreement dated May
13, 1999 among the Company, Various Lending
Institutions, Salomon Brothers Holding Company
Inc. and Bankers Trust Company
10.30 (12) Amendment No. 1 dated May 13, 1999 to the
Registration Rights Agreement dated December 18,
1997 between the Company and Newport Investment
LLC
27.1 (13) Financial Data Schedule.
- ---------------------
(1) Incorporated by reference herein to the indicated exhibits filed in
response to Item 16, "Exhibits" of the Company's Registration Statement
on Form S-1, No. 33-40805, initially filed on May 24, 1991.
(2) Incorporated by reference herein to the indicated exhibit filed in
response to Item 6(a), "Exhibits" of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.
(3) Incorporated by reference herein to Exhibit 10.36 filed in response to
Item 6(a), "Exhibits" of the Company's Quarterly report on Form 10-Q
for the quarter ended June 30, 1995.
(4) Incorporated by reference herein to Exhibits filed with The Company's
Registration Statement on Form S-1, No. 33-40805, initially filed on
May 24, 1991 and The Company's definitive Proxy Statement with respect
to its Annual Meeting of Shareholders held May 16, 1996.
(5) Incorporated by reference to exhibits filed with the Company
Registration Statement on Form S-2, No. 333-33817.
(6) Incorporated by reference to exhibits filed with the Company's Current
Report on Form 8-K dated January 13, 1998.
(7) Incorporated by reference herein to the indicated Exhibit in response
to Item 14(a)(3), "Exhibits" of the Company's Annual report on Form
10-K for the year ended December 31, 1997.
(8) Incorporated by reference to exhibits filed in response to Item 6,
"Exhibits" of the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998.
(9) Incorporated by reference to exhibits filed in response to Item 6,
"Exhibits" of the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1998.
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(10) Incorporated by reference herein to the indicated Exhibit in response
to Item 14(a)(3), "Exhibits" of the Company's Annual Report on Form
10-K for the year ended December 31, 1998.
(11) Incorporated by reference to exhibits filed in response to Item 7,
"Exhibits" of the Company's Form 8-K Current Report dated April 16,
1999.
(12) Incorporated by reference to exhibits filed in response to Item 7,
"Exhibits" of the Company's Form 8-K Current Report dated May 24, 1999.
(13) Filed herewith.
(b) Reports on Form 8-K in the second quarter of 1999:
On April 16, 1999, the Registrant filed a report on Form 8-K
announcing that it had signed a definitive Agreement and Plan of
Merger (the "Merger Agreement") to acquire all of the outstanding
common stock of Three Rivers Holding Corp., parent corporation of
SMT Health Services Inc., in a stock-for-stock merger.
On May 24, 1999, the Registrant filed a report on Form 8-K
announcing that on May 13, 1999 it had consummated the transactions
contemplated by the Merger Agreement pursuant to which the
Registrant acquired all of the outstanding common stock of Three
Rivers Holding Corp., parent corporation of SMT Health Services
Inc., in a stock-for-stock merger.
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SIGNATURES
Pursuant to the requirements 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.
ALLIANCE IMAGING, INC.
August 12, 1999 By: /S/ Richard N. Zehner
------------------------------------------
Richard N. Zehner
Chairman of the Board of Directors and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on August 12, 1999.
Signature Title
--------- -----
/S/ Richard N. Zehner
----------------------------- Chairman of the Board of Directors and
Richard N. Zehner Chief Executive Officer
(Principal Executive Officer)
/S/ Kenneth S. Ord
----------------------------- Executive Vice President and
Kenneth S. Ord Chief Financial Officer
(Principal Financial Officer)
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ALLIANCE IMAGING, INC.
1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of the 1999 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
(the "PLAN") of Alliance Imaging, Inc. (the "COMPANY") is to attract and
retain the services of experienced and knowledgeable non-employee directors
for the benefit of the Company and its stockholders and to provide additional
incentives for such directors to continue to work for the best interests of
the Company and its stockholders through continuing ownership of the
Company's Common Stock, par value $.01 per share (the "COMMON STOCK").
2. DEFINITIONS.
As used in this Plan, the following capitalized terms shall have
the meanings set forth below:
"AFFILIATE" means, with respect to any Person, any other Person
that is controlled by, controlling or under common control with, such Person.
Notwithstanding anything to the contrary contained herein, with respect to
the Company, the term "Affiliate" shall include Newport Investment LLC and
each of its members and each Person in which Newport Investment LLC or such
members hold or have the right to acquire, collectively, more than 25% of the
voting Equity Interests.
"ANNIVERSARY DATE" means (a) with respect to each Person who is a
Participant as of the Effective Date, April 22 of each year, commencing April
22, 2000, and (b) with respect to any other Participant, each anniversary of
the date such Person becomes Participant.
"AVAILABLE SHARES" means 50,000 Shares less the number of Shares
that are issuable upon the exercise of outstanding Options.
"BOARD" means the Board of Directors of the Company.
"CAPITAL STOCK" means any and all shares, interests, participation
or other equivalents (however designated) of corporate stock, including all
Common Stock and preferred stock.
"CHANGE-IN-CONTROL" means the occurrence of one or more of the
following:
(a) a sale to any Person other than an Affiliate of the Company of
all or substantially all of the assets of the Company;
(b) a sale of Capital Stock by the Company (whether by merger or
otherwise), if any such sale is made to a Person other than any Affiliate of
the Company, which Person or Persons, after giving effect to such sale, will
own more than 50% of the outstanding Capital Stock of the Company; or
<PAGE>
(c) a sale by the stockholders of the Company of Capital Stock, if
any such sale is made to a Person other than an Affiliate of the Company,
which Person or Persons, after giving effect to such sale, will own more than
50% of the outstanding Capital Stock of the Company.
"COMMITTEE" has the meaning set forth in Section 3.
"COMMON STOCK" has the meaning set forth in Section 1.
"COMPANY" has the meaning set forth in Section 1.
"EFFECTIVE DATE" means April 22, 1999.
"EQUITY INTEREST" means (a) with respect to a corporation, any and
all Capital Stock or warrants, options or other rights to acquire Capital
Stock (but excluding any debt security which is convertible into, or
exchangeable for, Capital Stock) and (b) with respect to a partnership,
limited liability company or similar Person, any and all units, interests,
rights to purchase, warrants, options or other equivalents of, or other
ownership interests in, any such Person.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"EXPIRATION DATE" has the meaning set forth in Section 7.
"FAIR MARKET VALUE" means:
(a) if the Shares are publicly traded and reported on a closing
price basis, the closing price on the principal national securities exchange,
market or system on which the Shares are traded on the trading day
immediately preceding the date of determination or, if no trades were made on
such day, on the next preceding day on which trades were made, otherwise, the
average of the bid and asked prices for the Shares on the trading day
immediately preceding the date of determination in the over-the-counter
market as reported by Nasdaq or, if not reported by Nasdaq, by an established
quotation service for over-the-counter securities;
(b) or if there is no public trading market for the Shares, the
fair value of such Shares on the date of any determination as reasonably
determined in good faith by the Committee after taking into consideration all
factors which it deems appropriate, including, without limitation, recent
sale and offer prices of Shares in private transactions negotiated at arms'
length.
Notwithstanding anything contained in this Plan to the contrary,
all determinations pursuant to this Section shall be made without regard to
any restriction other than a restriction which, by its terms, will never
lapse.
"NOTICE" has the meaning set forth in Section 9(b).
"OPTION" has the meaning set forth in Section 4(c).
"OPTION AGREEMENT" has the meaning set forth in Section 4(c).
"OPTION PRICE" has the meaning set forth in Section 5(a).
<PAGE>
"OPTIONED SHARES" has the meaning set forth in Section 9(b).
"PARTICIPANT" has the meaning set forth in Section 4(b).
"PERSON" is to be construed in the broadest sense and means and
includes any natural person, company, limited liability company, partnership,
joint venture, corporation, business trust, or unincorporated organization or
any national, federal, state, municipal, local, territorial, foreign or other
government or any department, commission, board, bureau, agency, regulatory
authority or instrumentality thereof, or any court, judicial, administrative
or arbitral body or public or private tribunal.
"PRICING DATE" has the remaining set forth in Section 5(a).
"RECAPITALIZATION" has the meaning set forth in Section 13(a).
"REPURCHASE RIGHT" has the meaning set forth in Section 9(a).
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of Common Stock.
"TRANSFER" means, with respect to any security (including any
Option), a sale, transfer, assignment, encumbrance, pledge or any other
disposition of such security either voluntarily or involuntarily and with or
without consideration (including, without limitation, by way of foreclosure
or other acquisition by any lender with respect to any shares pledged to such
lender by a Participant).
"VESTED OPTION" means an Option which has vested and has become
exercisable in accordance with this Plan, or pursuant to an Option Agreement,
as the case may be.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee of the Board
consisting of members of the Board who are not Participants (the
"Committee"). The Committee shall initially consist of Richard N. Zehner and
Vincent S. Pino. If at any time there are no members of the Committee, then
the Plan shall be administered by the Board. The term "Committee" shall, for
purposes of the Plan shall be deemed to refer to the Board if the Board is
administering the Plan. The Committee shall have the power to construe the
Plan, to determine all questions arising thereunder and to adopt and amend
such rules and regulations for the administration of the Plan as it may deem
desirable.
4. GRANT OF OPTIONS; SHARES SUBJECT TO THIS PLAN.
(a) ELIGIBILITY. Each director of the Company who is not, and has
not been during the immediately preceding 12-month period, an officer or
employee of the Company or any subsidiary of the Company (a "PARTICIPANT")
shall automatically be eligible to participate in the Plan.
(b) GRANT. Each Participant shall be granted the following:
<PAGE>
(i) Subject to Section 4(b)(iv), each Participant as of the
Effective Date of this Plan shall automatically be granted Options to
purchase 2,000 Shares.
(ii) Subject to Section 4(b)(iv), each Person who becomes a
Participant after the Effective Date of this Plan shall automatically be
granted Options to purchase 1,000 Shares on the date upon which such Person
becomes a Participant.
(iii) Subject to Section 4(b)(iv), each Participant as of each
Anniversary Date shall automatically be granted Options to purchase an
additional 1,000 Shares on such Participant's Anniversary Date.
(iv) If on any Anniversary Date or any date on which a Person
becomes a Participant there is an insufficient number of Available Shares
for the grants to be made pursuant to Section 4(b)(ii) and/or (iii), then
each Participant that is entitled to receive a grant of Options on such
date shall receive Options to purchase a number of Shares (other than
fractional shares) equal to a fraction, the numerator of which is the
number of Available Shares and the denominator of which is the number of
Participants entitled to be granted Options on such date.
(c) OPTION AGREEMENTS. Each option to purchase Shares (an
"OPTION") shall be evidenced by a written agreement (an "OPTION AGREEMENT"),
in substantially the form of EXHIBIT A hereto, with such changes thereto as
are consistent with this Plan as the Committee shall deem appropriate. Each
Option Agreement shall be executed by the Company and the Participant.
Notwithstanding any other provision of this Plan to the contrary, the terms
of the Option Agreement evidencing such Option shall control if any conflict
exists between provisions of this Plan and provisions of such Option
Agreement.
(d) DATE OF GRANT. Other than Options granted on the Effective
Date, the date of grant of an Option under this Plan shall be the date as of
which the Committee approves the grant.
(e) NUMBER OF SHARES. Subject to any equitable adjustments for
Recapitalizations pursuant to Section 10 and subject to the vesting
provisions set forth herein, each Option shall be exercisable for the number
of Shares set forth in the applicable Option Agreement. Subject to any
equitable adjustments for Recapitalizations pursuant to Section 10, the
number of Shares subject at any one time to Options granted under this Plan,
and the number of Shares theretofore issued and delivered pursuant to the
exercise of Options granted under this Plan, shall be 50,000 Shares. If and
to the extent that Options granted under this Plan terminate, expire or are
canceled without having been fully exercised, new Options may be granted
under this Plan with respect to the Shares covered by the unexercised portion
of such terminated, expired or canceled Options.
(f) CHARACTER OF SHARES. The Shares issuable upon exercise of
Options granted under this Plan shall be (i) authorized but unissued Shares,
(ii) Shares held in the Company's treasury or (iii) a combination of the
foregoing.
5. OPTION PRICE.
(a) The exercise price (the "OPTION PRICE") for each Share subject
to an Option granted on the Effective Date shall be $22.00 per share (subject
to equitable adjustment for
<PAGE>
Recapitalizations affecting the Common Stock). The Option Price for each
Option granted under this Plan after the Effective Date shall be the Fair
Market Value of the Share covered by such Option on the date on which such
Option is granted or, if not a business day, the immediately preceding
business day (the "PRICING DATE"). The Committee shall determine in good
faith the Fair Market Value for each Share subject to an Option.
(b) Subsequent to the date of grant of any Option, the Committee
may (i) in its sole discretion, establish a new Option Price for such Option
so as to decrease the Option Price of such Option or (ii) with the consent of
the Participant, establish a new Option Price for such Option so as to
increase the Option Price of such Option.
6. EXERCISABILITY AND VESTING OF OPTIONS.
(a) Options granted on the Effective Date shall become Vested
Options as follows:
(i) 200 Options shall be Vested Options upon grant.
(ii) 400 Options shall become Vested Options on each of the
next four Anniversary Dates after the Effective Date.
(iii) 200 Options shall become Vested Options on the
Anniversary Date that is five years after the Effective Date.
(b) Options granted after the Effective Date shall become Vested
Options in equal increments on each of the five successive Anniversary Dates
following the date such Options are granted.
(c) All Options shall become Vested Options immediately prior to a
Change-in-Control if the Participant is a director of the Company immediately
prior to the consummation of such Change-in-Control.
(d) Notwithstanding anything to the contrary contained in this
Plan, each Option shall cease vesting as of the time that a Participant
ceases to serve as a director of the Company for any reason or for no reason
and no Option which is not a Vested Option as of such time shall become a
Vested Option thereafter. All Options that are not Vested Options as of such
time shall automatically terminate and shall become null and void and be of
no further force or effect. The Vested Options held by each Participant who
ceases to serve as a director of the Company shall remain Vested Options,
subject to the provisions of Section 7. All decisions by the Committee with
respect to any calculations pursuant to this Section (absent manifest error)
shall be final and binding on all Participants.
(e) Except as provided in Section 7, the Vested Options of each
Participant shall remain Vested Options, regardless of such Participant's
continued service as a director of the Company.
<PAGE>
7. AUTOMATIC TERMINATION OF OPTION.
Each Option granted under this Plan shall automatically terminate
and shall become null and void and be of no further force or effect upon the
first of the following to occur (the "EXPIRATION DATE"):
(a) the tenth anniversary on which such Option is granted;
(b) if a Participant ceases to be a director of the Company other
than due to death or disability, the sixtieth day following the date of such
termination; and
(c) if a Participant ceases to be a director of the Company due to
the death or disability of the Participant, six months after the date of such
death or disability.
8. REGISTRATION ON FORM S-8.
The Company will file a registration statement on Form S-8 with
respect to options covered by this Plan at such time as it files a Form S-8
with respect to options granted under the Company's 1997 Stock Option Plan
and will cause such Form S-8 to be declared effective by the SEC as promptly
as practicable.
9. PROCEDURE FOR EXERCISE.
(a) PAYMENT. At the time an Option is granted under this Plan,
the Committee shall, in its discretion, specify one or more of the following
forms of payment which may be used by a Participant to exercise such
Participant's Option:
(i) cash or personal or certified check payable to the
Company in an amount equal to the aggregate Option Price of the Shares with
respect to which the Option is being exercised;
(ii) stock certificates (in negotiable form) representing
Shares having a Fair Market Value on the date of exercise equal to the
aggregate Option Price of the Shares with respect to which the Option is
being exercised;
(iii) Vested Options, valued for such purposes at the Fair
Market Value per share of Common Stock on the date of exercise, net of the
Option Price for each such Share; or
(iv) a combination of the methods set forth in clauses (i),
(ii) and (iii) above.
(b) NOTICE. A Participant (or other Person, as provided in
Section 11(c)) may exercise a Vested Option granted under this Plan in whole
or in part (but for the purchase of whole Shares only), as provided in the
Option Agreement evidencing his Option, by delivering a written notice (the
"NOTICE") to the Secretary of the Company. The Notice shall include:
(i) a statement that the Participant elects to exercise the
Vested Option;
(ii) the number of Shares with respect to which the Vested
Option is being exercised (the "OPTIONED SHARES");
(iii) the method of payment for the Optioned Shares (which
method must be available to the Participant under the terms of his Option
Agreement);
(iv) the date upon which the Participant desires to consummate
the purchase (which date must be prior to the termination of such Option);
(v) a copy of any election filed by the Participant pursuant
to Section 83(b) of the Code; and
(vi) such further provisions consistent with this Plan as the
Committee may from time to time require.
The exercise date of a Vested Option shall be the date on which the Company
receives the Notice from the Participant.
(c) ISSUANCE OF CERTIFICATES. The Company shall issue a stock
certificate in the name of the Participant (or such other person exercising
the Option in accordance with the provisions of the Plan) for the Shares
purchased upon exercise of an Option as soon as practicable after receipt of
the Notice and payment of the aggregate Option Price for such Shares. Neither
the Participant nor any person exercising a Vested Option in accordance with
the provisions of the Plan shall have any privileges as a stockholder of the
Company with respect to any Shares of stock subject to an Option granted
under this Plan until the date of issuance of a stock certificate pursuant to
this Section 9(c).
10. ADJUSTMENTS.
(a) CHANGES IN CAPITAL STRUCTURE. If the Common Stock is changed
by reason of a stock split, reverse stock split or stock combination, stock
dividend or distribution, or recapitalization, or converted into or exchanged
for other securities as a result of a merger, consolidation or reorganization
(each such event being a "RECAPITALIZATION"), the Committee shall make such
adjustments in the number and class of shares of stock available under this
Plan as shall be necessary to preserve to a Participant rights substantially
proportionate to his rights existing immediately prior to such transaction or
event (but subject to the limitations and restrictions on such rights),
including, without limitation, a corresponding adjustment changing the number
and class of shares allocated to, and the Option Price of, each Option or
portion thereof outstanding at the time of such change and the number of
shares that vest pursuant to this Plan.
(b) SPECIAL RULES. The following rules shall apply in connection
with Section 10(a) above:
(i) no adjustment shall be made for cash dividends or the
issuance to stockholders of rights to subscribe for additional Shares; and
(ii) any adjustments referred to in Section 10(a) shall be
made by the Committee in its sole and absolute discretion, and shall be
conclusive and binding on all persons holding any Options granted under
this Plan.
<PAGE>
11. RESTRICTIONS ON OPTIONS AND OPTIONED SHARES.
(a) No Options shall be granted under this Plan, and no Shares
shall be issued and delivered upon the exercise of Options granted under this
Plan, unless and until the Company and/or the Participant shall have complied
with all applicable Federal or state registration, listing and/or
qualification requirements and all other requirements of law or of any
regulatory agencies having jurisdiction.
(b) The Committee in its sole and absolute discretion may, as a
condition to the exercise of any Vested Option granted under this Plan,
require a Participant (i) to represent in writing that the Shares received
upon exercise of a Vested Option are being acquired for investment and not
with a view to distribution and (ii) to make such other representations and
warranties as are reasonably deemed appropriate by the Company to satisfy the
requirements of applicable law, including, without limitation, an applicable
private placement exemption of the Securities Act as determined by the
Committee. Stock certificates representing Shares acquired upon the exercise
of Options that have not been registered under the Securities Act shall, if
required by the Committee, bear the following legend and such additional
legends as may be required by the Option Agreement evidencing a particular
Option:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT").
THE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE PLEDGED,
HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OR AN
OPINION OF COUNSEL TO THE ISSUER HEREOF THAT REGISTRATION IS NOT
REQUIRED UNDER SAID ACT."
(c) No Option granted under this Plan may be Transferred by the
Participant, except by will or by the laws of descent and distribution. An
Option may be exercised during the lifetime of the Participant only by the
Participant. If a Participant dies, his Vested Options shall thereafter be
exercisable, during the period specified in Section 7(c) or the applicable
Option Agreement (as the case may be), by his executors or administrators to
the full extent (but only to such extent) to which such Options were
exercisable by the Participant at the time of his death.
(d) Each Share issued upon the exercise of an Option may be freely
Transferred, subject to applicable securities laws.
12. EFFECTIVE DATE; TERMINATION AND AMENDMENT OF PLAN.
(a) This plan shall become effective on the Effective Date.
(b) Unless sooner terminated as herein provided, the Plan shall
terminate ten years from the Effective Date. The Committee may at any time
terminate the Plan or make such modification or amendment thereof as it deems
advisable; PROVIDED, HOWEVER, that the Plan may not be amended more than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act
of 1974, as amended, or the rules thereunder; and PROVIDED FURTHER, HOWEVER,
that, except as
<PAGE>
provided in Section 10, the Committee may not, without the approval of the
stockholders of the Company, increase the maximum aggregate number of shares
for which Options may be granted under the Plan or the number of Shares for
which an Option may be granted to any Participant. Termination or any
modification or amendment of the Plan shall not, without the consent of a
Participant, affect his rights under an Option previously granted to him.
13. WITHHOLDING TAXES.
Whenever Shares are to be delivered to a Participant under this
Plan, the Company shall be entitled to require as a condition of delivery
that the Participant remit or, in appropriate cases, agree to remit when due,
an amount sufficient to satisfy all current or estimated future Federal,
state and local withholding taxes and employment taxes relating thereto.
14. MISCELLANEOUS.
(a) INCONSISTENT PROVISIONS. Each Option granted under this Plan
may contain such other terms and conditions consistent with this Plan as may
be determined by the Committee, in its sole and absolute discretion.
(b) NUMBER AND GENDER. With respect to words used in this Plan,
the singular form shall include the plural form, the masculine gender shall
include the feminine gender, and vice-versa, as the context requires.
(c) CAPTIONS. The use of captions in this Plan is for
convenience. The captions are not intended to provide substantive rights.
(d) GOVERNING LAW. All questions concerning the construction,
interpretation and validity of this Plan and the instruments evidencing the
Options granted hereunder shall be governed by and construed and enforced in
accordance with the domestic laws of the State of Delaware, without giving
effect to any choice or conflict of law provision or rule (whether in the
State of Delaware or any other jurisdiction) that would cause the application
of the laws of any jurisdiction other than the State of Delaware. In
furtherance of the foregoing, the internal law of the State of Delaware will
control the interpretation and construction of this Plan, even if under such
jurisdiction's choice of law or conflict of law analysis, the substantive law
of some other jurisdiction would ordinarily apply.
(e) EXCHANGE ACT COMPLIANCE. The Company will use its
commercially reasonable efforts to cause the exemption from Section 16 of the
Exchange Act afforded by Rule 16b-3 to be available at the time the Company
has a class of equity securities registered under Section 12 of the Exchange
Act.
(f) NO EVIDENCE OF CONTINUED SERVICE ON BOARD. Nothing contained
in this Option Agreement shall confer upon any Participant any right with
respect to the continuation of his service as a director of the Company or
any of its Affiliates or interfere in any way with the right of the
stockholders of the Company or any such Affiliate at any time to terminate
such service or to increase or decrease the board fees of the Participant
from the rate in existence at the time of the grant of an Option, if any.
<PAGE>
NON-EMPLOYEE DIRECTORS' STOCK
OPTION AGREEMENT (this "AGREEMENT")
dated as of the date set forth on the
signature page hereto, between ALLIANCE
IMAGING, INC., a Delaware corporation
(the "COMPANY"), and the participant set
forth on the signature page hereto (the
"PARTICIPANT").
The Company, acting through its Board of Directors (the "BOARD"),
has granted to the Participant, effective as of the date of this Agreement,
an option under the Company's 1999 Non-Employee Directors' Stock Option Plan
(the "PLAN") to purchase up to the number of shares of the Common Stock, par
value $.01 per share, of the Company (the "COMMON STOCK") set forth in the
Plan, on the terms and subject to the conditions set forth in this Agreement
and the Plan.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained in this Agreement, the parties hereto agree as follows:
1. THE PLAN.
The terms and provisions of the Plan are hereby incorporated into
this Agreement as if set forth herein in their entirety. In the event of a
conflict between any provision of this Agreement and the Plan, the provisions
of this Agreement shall control. A copy of the Plan may be obtained from the
Company by the Participant upon request. Capitalized terms used herein and
not otherwise defined shall have the meanings ascribed thereto in the Plan.
2. OPTION; OPTION PRICE.
On the terms and subject to the conditions of this Agreement and
the Plan, the Participant is hereby granted the option (the "OPTION") to
purchase the number of Shares at the Option Price as set forth on the
signature page hereto. Options granted herein are not intended to qualify
for federal income tax purposes as "incentive stock options" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"CODE").
3. VESTING AND EXERCISEABILITY.
The Options granted under this Agreement shall become Vested
Options according to the terms and conditions of Section 6 of the Plan. Such
Options shall be exercised pursuant to the procedure set forth in Section 9
of the Plan.
4. TERM.
The term of each Option (the "OPTION TERM") shall commence on the
date of grant and expire on the tenth anniversary of the date of such grant,
unless the Option
<PAGE>
shall have sooner been terminated in accordance with the terms of the Plan or
this Agreement.
5. RESTRICTION ON TRANSFER.
The Option may not be Transferred (as such term is defined in the
Plan) by the Participant, except by will or by the laws of descent and
distribution. An Option may be exercised during the lifetime of the
Participant only by the Participant. If the Participant dies, his Vested
Options shall thereafter be exercisable only in accordance with the terms and
conditions of Section 11 of the Plan. The Option shall not be subject to
execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of the Option contrary
to the provisions hereof, and the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
6. PARTICIPANT'S CONTINUED SERVICE ON BOARD.
Nothing contained in this Agreement shall confer upon any
Participant any right with respect to the continuation of his service as a
director of the Company or any of its Affiliates or interfere in any way with
the right of the stockholders of the Company or any such Affiliate at any
time to terminate such service or to increase or decrease the board fees of
the Participant from the rate in existence at the time of the grant of an
Option, if any.
7. NOTICES.
All notices, claims, certificates, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given and delivered if personally delivered or if sent by
nationally-recognized overnight courier guaranteeing next day delivery, by
telecopy, or by registered or certified mail, return receipt requested and
postage prepaid, addressed as follows:
(a) if to the Company, to it at:
Alliance Imaging, Inc.
1065 North PacifiCenter Drive, Suite 200
Anaheim, California 92806
Attention: President
Telecopier: (714) 688-3388
Telephone: (714) 688-7100
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
24th Floor
New York, NY 10112
<PAGE>
Attention: John J. Suydam
Telecopier: (212) 728-5950
Telephone: (212) 408-2400; and
(b) if to the Participant, to him at his address set forth in the
Company's records.
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
notice or communication shall be deemed to have been received (i) in the case
of personal delivery, on the date of such delivery (or if such date is not a
business day, on the next business after the date sent), (ii) in the case of
nationally-recognized overnight courier, on the next business day after the
date sent, (iii) in the case of telecopy transmission, when received (or if
not sent on a business day, on the next business day after the date sent),
and (iv) in the case of mailing, on the third business day following that on
which the piece of mail containing such communication is posted.
8. WAIVER OF BREACH.
The waiver by either party of a breach of any provision of this
Agreement must be in writing and shall not operate or be construed as a
waiver of any other or subsequent breach.
9. PARTICIPANT'S UNDERTAKING.
The Participant hereby agrees to take whatever additional actions
and execute whatever additional documents the Company may in its reasonable
judgment deem necessary or advisable in order to carry out or effect one or
more of the obligations or restrictions imposed on the Participant pursuant
to the express provisions of this Agreement and the Plan.
10. MODIFICATION OF RIGHTS.
Anything contained in this Agreement or the Plan to the contrary
notwithstanding, no provision of this Agreement may be modified or amended
without the prior written consent of the Company and the Participant, and no
interpretation, modification, amendment or termination of any provision of
the Plan that would adversely affect the rights of the Participant under or
with respect to the Plan or this Agreement shall be effective as to the
Participant without the Participant's prior written consent.
11. GOVERNING LAW.
All questions concerning the construction, interpretation and
validity of this Agreement shall be governed by and construed and enforced in
accordance with the domestic laws of the State of Delaware, without giving
effect to any choice or conflict of law provision or rule (whether in the
State of Delaware or any other jurisdiction) that
<PAGE>
would cause the application of the laws of any jurisdiction other than the
State of Delaware. In furtherance of the foregoing, the internal law of the
State of Delaware will control the interpretation and construction of this
Agreement, even if under such jurisdiction's choice of law or conflict of law
analysis, the substantive law of some other jurisdiction would ordinarily
apply.
12. COUNTERPARTS.
This Agreement may be executed in one or more counterparts, and
each such counterpart shall be deemed to be an original, but all such
counterparts together shall constitute but one agreement.
13. ENTIRE AGREEMENT.
This Agreement and the Plan (and the other writings referred to
herein) constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof and supersede all prior written or oral
negotiations, commitments, representations and agreements with respect
thereto.
14. SEVERABILITY.
It is the desire and intent of the parties hereto that the
provisions of this Agreement be enforced to the fullest extent permissible
under the laws and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, if any particular provision of this
Agreement shall be adjudicated by a court of competent jurisdiction to be
invalid, prohibited or unenforceable for any reason, such provision, as to
such jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of
this Agreement or affecting the validity or enforceability of such provision
in any other jurisdiction. Notwithstanding the foregoing, if such provision
could be more narrowly drawn so as not to be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be so
narrowly drawn, without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date written below.
ALLIANCE IMAGING, INC.
By:
------------------------------
Name:
Title:
----------------------------------
PARTICIPANT:
DATED:
----------------------------
NUMBER OF SHARES:
-----------------
OPTION PRICE:
---------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
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17,884
0
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