SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-KSB
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended MAY 31, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from............. to ...............
Commission File No. 0-16964
CANCER TREATMENT HOLDINGS, INC.
----------------------------------------------------
(Name of small business issuer in its charter)
Nevada 87-0410907
- ------------------------------- -------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
4491 South State Road Seven, Suite 200, Fort Lauderdale, Florida 33314
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code (954) 321-9555
----------------------------------
Securities registered pursuant to Section 12(b) of the Exchange Act:
American Stock Exchange
Common Stock, $.003 Par Value Emerging Company Marketplace
- ----------------------------- ------------------------------------------
(Title of Each Class) (Name of Each Exchange on which Registered)
Securities Registered pursuant to Section 12(g) of the Exchange Act: None
----
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. (X)
Issuer's revenues for the fiscal year ended May 31, 1996 were $11,865,000.
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average high and low sales price of such stock, as of August
16, 1996, was $6,672,952. As of such date, the average high and low sales price
was $2.00.
The number of shares outstanding of the Issuer's common stock, par value $.003
per share, as of August 16, 1996, was 3,336,476.
Transitional Small Business Disclosure Format (check one) Yes No X
--- ---
Documents incorporated by reference: Part of form 10-KSB to which incorporated:
1. Selected pages from the Issuer's Part III (Items 9, 10, 11 and 12)
Proxy Statement for its 1995
Annual Meeting of Shareholders
Certain exhibits listed in Part III of this Annual Report on Form 10-KSB are
incorporated by reference from the Registrant's Registration Statement on Form
S-18 and from the Registrant's Annual Reports on Form 10-K for the 1990, 1992,
1993 and 1995 fiscal years.
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
Form 10-KSB ANNUAL REPORT - 1996
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business 3
Item 2. Description of Property 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote
of Security Holders 10
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 11
Item 6. Management's Discussion and Analysis or
Plan of Operation 12
Item 7. Financial Statements 16
Item 8. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure 37
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act 37
Item 10. Executive Compensation 37
Item 11. Security Ownership of Certain Beneficial
Owners and Management 37
Item 12. Certain Relationships and Related Transactions 37
Item 13. Exhibits and Reports on Form 8-K 37
SIGNATURES 40-41
2
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
General Development of Business
-------------------------------
Cancer Treatment Holdings, Inc. ("CTH"), a Nevada corporation,
through its subsidiaries (collectively, the "Company"), is primarily engaged in
(i) establishing and administering centers for the ambulatory treatment of
cancer using a variety of modalities, including radiation therapy, home infusion
and bone marrow transplantation, and (ii) providing home health and nursing
services.
In radiation therapy, the Company provides management/consulting
as well as billing and collection services for seven facilities. The Company has
an ownership interest in two of these facilities. During fiscal 1995, the
Company sold its equity interests in four-free-standing facilities (located in
Tampa, Coral Springs and Boca Raton, Florida, and Macon, Georgia), but retained
long-term management and/or billing contracts in all of them. During fiscal
1997, the Company will continue its efforts to establish additional radiation
therapy centers affiliated with community hospitals.
In home health and nursing services, the Company owns and
operates Leader Health Care Center, Inc. ("Leader"). Leader owns 100% of the
equity interest each of Southern Cross Home Health, Inc. ("Southern Cross") and
Med Tech Services of South Florida, Inc. ("Med Tech"). Leader, Southern Cross
and Med Tech are providers of home health and nursing services in Southeastern
Florida. Leader is also engaged in home infusion therapy and physical
rehabilitation.
In addition, the Company perceives an opportunity in the field of
transferring high-technology cancer care from teaching institutions to quality
community hospitals. The Company's first project in this area consists in
developing bone marrow transplant centers. The Company has formed a
medical/scientific advisory board ("MSAB") consisting of five renowned academic
experts in oncology and bone marrow transplants who select the appropriate
treatment protocols and patient eligibility standards, supervise medical and
industry guidelines, data collection and quality assurance. The first bone
marrow transplant center has begun operation in the latter part of fiscal 1996.
Such centers will perform autologous peripheral bone marrow transplants,
typically in conjunction with high-dose chemotherapy. This procedure is widely
accepted within the medical community as an aggressive and successful method of
treating certain types and stages of cancer and it involves harvesting "stem
cells" which are embedded in the bone marrow. The stem cells are harvested
through the blood stream and not by puncturing the bones of the pelvis. The
Company anticipates that additional bone marrow transplant centers will be
opened in fiscal 1997.
Radiation Therapy Services
--------------------------
Radiation therapy is most often used in the treatment of cancer.
An individual with cancer will typically experience a multi-step process in the
course of the diagnosis and treatment of his illness. First, the patient's
primary physician will diagnose the disease and refer the patient to a radiation
oncologist or medical oncologist. Second, the oncologist will confirm the
diagnosis through additional testing and then prescribe treatment. A patient may
utilize the services of a radiation therapist of his choice at any point in the
process but most typically chooses the physicians and facilities recommended by
his primary doctor and oncologist. Finally, the patient is treated for the
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disease. Treatment may include a combination of surgery, chemotherapy and
radiation therapy. Assuming optimum patient care, about 60% of patients with
cancer require radiation therapy at some time during the course of the disease.
In addition, some patients will require extension of their treatments due to
recurrence or metastatic disease.
Traditionally, medical services such as radiation therapy were
provided by general acute care hospitals. There is a trend, however, toward more
specialized providers of medical services in free-standing, non-hospital based
facilities. To the extent that the free-standing radiation therapy centers are
not burdened with the overhead and expenses of a complete health care facility,
they may be able to offer their services at lower costs than those incurred by
hospitals.
Physicians are often reluctant to utilize medical services that
are not affiliated with the local medical community. Historically, the Company
had developed the centers through partnerships with referring physicians serving
as partners. Due to recent changes in federal laws and regulations relating to
physician referral, the development of future centers will be structured through
wholly-owned subsidiaries of the Company or through partnerships primarily with
hospitals or unaffiliated investors.
During fiscal 1995, the Company, in response to the change in
federal regulations, sold its equity interest in four facilities (located in
Coral Springs, Florida, Boca Raton, Florida, Tampa, Florida and Macon, Georgia).
(For details see below under "Regulations of Physician Ownership" and
"Management's Discussion and Analysis or Plan of Operation.") During fiscal
1997, the Company will continue its efforts to establish additional radiation
therapy centers in Logan, West Virginia, and Lakewood, New Jersey. The Company
expects these centers to be operational during fiscal 1997, subject to certain
conditions. In addition, the Company has secured a certificate-of-need to
establish a radiation center in Martinsburg, West Virginia which is expected to
commence operations in fiscal 1998.
In May 1996, the Company sold all of its interest in a radiation
therapy center under development in Yonkers, New York. The Company will receive
$300,000 in cash as a reimbursement for expenses incurred associated with the
development of the facility. Such amount is due in equal monthly installments
over a one year period beginning seven months after the facility opens (which is
estimated in December 1996).
As part of the transaction, the Company also entered into a
three-year non-competition agreement, a five-year consulting agreement, a
turn-key license agreement and an option agreement allowing the buyer to
participate as an equity owner in future transactions of a similar nature. Such
amounts are payable beginning 18 months after the center opens and are limited,
on a monthly basis, to a percentage of the fees collected by the center.
Home Infusion and Nursing Services
----------------------------------
The Company, through Leader and its subsidiaries Southern Cross
and Med Tech (all of which are located in Southeast Florida), is specifically
licensed to provide home health and home nursing services to patients suffering
from various illnesses, including, without being limited to, the treatment of
cancer by home infusion of chemotherapy. Of particular importance is a
certificate-of-need which enables Med Tech to render home health services to
Medicare patients in Broward County.
The business of home health and nursing-care has grown in recent
years in response to the continued increase in home care costs. As the cost of
health care continues to rise, health care payors find home care an economically
favorable alternative to more costly hospital based care. In addition, many
patients prefer to be treated in the privacy of their homes.
The Company provides a variety of nursing services to patients in
the home setting. The Company employs or contracts with registered nurses,
high-tech nurses, home health aides, physical, occupational and speech
therapists, and medical social workers. Services provided include, without being
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limited to, wound care, intravenous administration, and pediatric care. The
principal therapies provided by the Company are home intravenous chemotherapy,
home intravenous antibiotic therapy, enteral therapies and total parenteral
nutrition.
During fiscal 1996, Med Tech obtained an additional
certificate-of-need allowing it to render home health services to Medicare
patients in Florida District 9 including the counties of Palm Beach, Martin, St.
Lucie, Indian River and Okeechobee. Operations in this area began in July 1996.
Billing/Collection and Management Services
------------------------------------------
The Company provides billing/collection and management services
for seven radiation centers in Florida, Mississippi and Georgia. Fees for
billing/collection services are based on a percentage of the net collections of
each center. Fees for management services vary for each center managed.
The most significant agreements the Company currently has relate
to the radiation centers sold in fiscal 1995. Under these agreements, the
Company expects to receive $25,000 - 30,000 per month in billing/collection
fees and will receive $348,000 annually in management fees over the next four
years and $150,000 annually in the subsequent four years.
Bone Marrow Transplant Centers
------------------------------
The Company perceives an area of business growth and expansion in
the field of developing bone marrow transplant centers. The Company has set up
its first such center in Memorial Regional Hospital in Hollywood, Florida and
expects to open additional centers in fiscal 1997. These centers will perform
peripheral bone marrow transplants, typically in conjunction with high-dose
chemotherapy. This procedure is widely accepted within the medical community as
an aggressive and successful method of treating certain types and stages of
cancer. It involves harvesting "stem cells," which are embedded in the bone
marrow and are precursor cells for various blood cells such as red cells, white
cells, and platelets. The stem cells are harvested through the blood stream, not
by puncturing the bones of the pelvis.
Government Regulation and Recent Developments
---------------------------------------------
The establishment and operation of the centers are subject to
federal and state law. These laws may include statutes and regulations governing
state Certificate of Need ("CON") programs, the licensure of health care
facilities, services and equipment, and physician investments and compensation
arrangements in health care entities to which they refer patients. The Company
believes that its plan for the establishment and operation of centers
substantially complies with applicable laws and regulations, but the Company has
not sought an interpretative ruling or opinion from any applicable regulatory
agency, and in some cases, such a process for obtaining a ruling or advisory
opinion is not available. There can be no assurance that subsequent adoption of
laws, interpretations and application of existing laws, promulgation of
additional regulations or enforcement actions in state or federal administrative
and judicial forums will not restrict or otherwise adversely affect the
Company's business. The Company believes that all the centers the Company
currently owns and/or operates comply with the applicable federal and state laws
and regulations.
Certificate of Need
-------------------
CON programs most often control and regulate the construction of
health care facilities and the acquisition of health care facilities and the
expensive medical equipment. Although such programs vary from state to state,
generally an entity must obtain a CON before constructing a health care facility
or acquiring major medical equipment. Normally, a grant of a CON is based on
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various criteria relating to need, giving consideration to the extent to which
facilities, equipment or services are available to a specified geographical area
and the population of such area. The Company's present centers are either exempt
from the requirement of obtaining a CON or have been granted a CON in that
particular state or location. The Company has been granted a CON for the
anticipated radiation therapy center in Logan, West Virginia and another one for
a radiation therapy center in Martinsburg, West Virginia. In New Jersey, the
other state where the Company plans to establish a radiation therapy center, the
Company has satisfied the CON requirements through utilizing grandfather clauses
and by functioning as a subcontractor to a medical practice. The Company's
Medicare certified home health agency, is subject to Florida CON requirements,
which were satisfied either by purchasing an already certified agency or by
obtaining a new CON.
Licensure
---------
The Agencies are subject to certain federal and state licensure
and certification requirements and regulations. Each of the therapies offered by
the Agencies and Leader, except enteral nutrition, are prescription-based and,
accordingly, each must employ or contract with pharmacists and registered nurses
who are duly licensed by the State of Florida. State pharmacy license laws and
regulations generally impose standards relating to physical layout, cleanliness,
inventory controls and record keeping and require that each pharmacy be operated
under the supervision of a licensed pharmacist. In addition, the pharmacies are
required to be registered with appropriate state authorities under laws relating
to distribution of any controlled substances. The home health agencies, which
provide nursing services and nutritional counseling, are licensed and must
comply with standards established by the State of Florida.
Regulation of Physician Ownership
---------------------------------
Increasing federal and state regulatory attention is being
directed toward arrangements whereby physicians are compensated, directly or
indirectly, for referring patients for health care goods or services. Currently,
physicians who refer patients to the Company are subject to the Medicare and
Medicaid Anti-Kickback provisions of the Social Security Act (the
"Medicare/Medicaid Statute") which prohibit the offer or solicitation, payment
or receipt, in cash or in kind, of any remuneration in return for the referral
of Medicare or Medicaid patients or the ordering of services for which Medicare
or Medicaid payments may be made. The Medicare/Medicaid Statute is extremely
broad and carries both criminal and civil penalties for violations.
In 1989, Congress also passed a bill entitled "Physician
Ownership of and Referrals to Health Care Entities" (the "Stark Law"). The Stark
Law prohibits physician referrals to any clinical laboratory in which a
physician has an ownership interest, with very limited exceptions. In 1994, the
Stark Law was expanded to prohibit physician referrals to entities that provide
designated health services in which a physician has a financial relationship
("Stark II"). Designated health services include therapy services.
In order to comply with Stark II the Company, in fiscal 1995, sold
two of its centers (Tampa, Florida and Macon, Georgia) but continues to render
management and billing/collecting services. At a third location (West Palm
Beach, Florida), the Company and a community hospital bought out referring
physicians and became joint general partners.
6
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Finally, the Florida Patient Self-Referral Act of 1992 imposed a
restriction ("Fee Cap") on fees for radiation therapy services which would have
adversely affected the profitability of the Company. This Fee Cap provision was
enjoined by the United States District Court of the Northern District of Florida
and the Circuit Court of Leon County in Tallahassee, Florida. The provision was
later declared unconstitutional by the State Court and recently was repealed by
the State of Florida.
Reimbursements
--------------
Third-party payment of patient fees through private health
insurance and government programs, such as Medicare, are a material source of
payment to the centers for services provided to patients. Changes in medical
insurance reimbursement policies or laws could result either in a decrease of
overall allowable fees or in an increase in the portion of the fees to be paid
by the patients which, in turn, could reduce the number of patients at the
centers and/or reduce the collectible portion of the patient's treatment fee.
Competition
-----------
The health care industry, including the segments of cancer
treatment, home infusion and home nursing, is very competitive. In cancer
treatment, the Company faces substantial competition from local hospitals, other
free-standing treatment facilities, private physicians and publicly and
privately owned companies for patients. Primary care physicians often refer
patients to facilities or companies which employ the physicians as employees or
to a hospital with which the physicians have staff privileges. In home health,
the Company competes against approximately thirty other certified home health
agencies in each of Florida District 9 (Counties of Palm Beach, Martin, St.
Lucie, Okeechobee and Indian River) and District 10 (Broward County). Many of
these offer the exact same type of services as the Company's home health
operation. In addition, the Company competes against hospitals which have their
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own home health operations. It is possible that in the future the CON
requirements may change which would enable many more home health agencies to
provide the services the Company currently provides. Should this happen, it
could have a material adverse impact on the operations of the home health
business.
Marketing
---------
In cancer treatment, the Company provides radiation therapy
services and home health services. These services are marketed primarily to
insurance companies, health maintenance organizations and physicians. The
Company believes that its success in this area is based on providing quality
care at a lower cost than competing hospitals and other facilities.
Employees
---------
As of May 31, 1996, the Company had a total of 98 employees, all
of which were full-time. All employees of Palm Beach Radiotherapy Associates,
Ltd., which is reported on an unconsolidated basis, are employees of the Palm
Beach Partnership and not of the Company. Physicians and other medical
professionals render services as independent contractors to the Palm Beach
Partnership and the Agencies. The Company is not a party to any collective
bargaining agreements. The Company considers its relationship with its employees
to be good.
8
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ITEM 2. DESCRIPTION OF PROPERTY
The Company and its affiliates own or lease the following
properties:
Approximate Land and Lease Date
Entity Size Building Expiration Equipment
- --------------------------- ------------- -------- ---------- ---------
Corporate office
Fort Lauderdale, Florida 4,700 sq. ft Leased 06-30-99 Owned
Office condominium unit(1)
Hollywood, Florida 3,500 sq. ft. Owned N/A None
Leader Health Care Center
Med Tech Services of
South Florida, Inc.
Davie, Florida 6,891 sq. ft. Leased 06-30-97 Owned
Med Tech Services of
South Florida, Inc.
Tamarac, Florida 1,700 sq. ft. Leased 9-30-98 Owned
Med Tech Services of
South Florida, Inc.
Fort Lauderdale, Florida 3,500 sq. ft. Leased 10-1-97 Owned
Med Tech Services of
South Florida, Inc.
Palm Beach, Florida 3,298 sq. ft. Leased 11-30-98 Owned
Southern Cross Home
Health, Inc.
Hollywood, Florida 1,100 sq. ft. Leased 09-30-96 Owned
Palm Beach Center
Palm Beach, Florida 4,700 sq. ft. Leased 03-18-01 Owned/Leased
AOS of South Broward, Inc.
Hollywood, Florida 1,275 sq. ft. Leased 09-29-05 Owned
(1) Owned subject to mortgage and leased to a third-party.
In Management's opinion, the Company's corporate and
subsidiaries' offices and the facilities in which each center is housed are
suitable for the purposes for which they are used.
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ITEM 3. LEGAL PROCEEDINGS
The Company, through its subsidiary CTI of Palm Beach, Inc.
("CTIPB"), is involved in four separate legal proceedings arising from a dispute
between CTIPB, as managing general partner of Palm Beach Radiotherapy
Associates, Ltd., a Florida limited partnership (the "Palm Beach Partnership")
and the other general partner of the Palm Beach Partnership, Good Samaritan
Hospital, Inc. ("Good Samaritan"). As a result of a buyout of limited partners
in 1995, the only remaining partners of the Palm Beach Partnership are CTIPB and
Good Samaritan, with each holding an interest as a general partner and as a
limited partner. Each owns an aggregate 50% interest in the Palm Beach
Partnership. The existing proceedings are as follows:
1. On June 12, 1996, the Palm Beach Partnership, by and through
CTIPB as its managing general partner, filed a suit against Good
Samaritan in Palm Beach County, Florida, Circuit Court seeking
declaratory judgment concerning the terms of the facility lease
and radiation agreement for the Palm Beach Partnership and
prohibiting Good Samaritan from evicting the Palm Beach
Partnership from its premises at Good Samaritan Hospital. Good
Samaritan has filed a counterclaim seeking eviction, unspecified
monetary damages and other injunctive relief against the Palm
Beach Partnership.
2. On June 18, 1996, the Palm Beach Partnership, by and through
CTIPB as managing general partner, filed suit against Good
Samaritan in Palm Beach County Circuit Court seeking unspecified
monetary damages, together with injunctive relief, based on Good
Samaritan's alleged violation of a non-competition agreement with
the Palm Beach Partnership relating to radiation therapy
equipment.
3. On June 26, 1996, the Palm Beach Partnership, by and through
CTIPB as managing general partner, filed a demand for arbitration
against Good Samaritan with the American Arbitration Association
in Palm Beach County, Florida, seeking a determination of the
amount of base rent due under the Palm Beach Partnership's
equipment lease and an award of all amounts already paid which
exceed this amount. Good Samaritan has filed a counterclaim
seeking damages of approximately $400,000 against the Palm Beach
Partnership.
4. On July 15, 1996, Good Samaritan filed suit in Palm Beach County
Circuit Court seeking a judicial dissolution of the Palm Beach
Partnership.
The above-described legal proceedings are all interrelated and
arise from the decision of Good Samaritan to conduct its radiation therapy
business through its own affiliates rather than through the Palm Beach
Partnership with CTIPB. CTIPB disputes Good Samaritan's right to do so under the
applicable provisions of the partnership agreement and Florida partnership law.
The Company believes that CTIPB's position in these cases is meritorious and
intends to litigate vigorously while at the same time seeking a favorable
negotiated resolution; however, these cases are in a very preliminary stage and
in the opinion of management of the Company, the ultimate liability with respect
to these actions will not materially affect the financial position, results of
operations or cash flows of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal
year ended May 31, 1996, to a vote of security holders of the Company through
the solicitation of proxies or otherwise.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common Stock
------------
The Company's Common Stock commenced trading on the American
Stock Exchange Emerging Company Marketplace ("AMEX.ECM") on March 18, 1992,
under the symbol "CTH.EC". The quotations set forth below do not necessarily
represent actual transactions and do not reflect retail mark ups, mark downs or
commissions.
The following table sets forth for the fiscal periods indicated
the high and low reported sales price for the Company's Common Stock on the
AMEX.ECM System.
Fiscal Year Ended May 31,
1996 1995
------------------ -----------------
Quarter High Low High Low
------- ---- --- ---- ---
First Quarter 2-1/2 1-7/8 2-3/4 1-3/8
Second Quarter 4-5/16 2-1/8 2-5/8 1-7/8
Third Quarter 2-5/8 2 2-3/8 1-9/16
Fourth Quarter 3-1/8 1-11/16 2-7/8 1-7/8
As of August 16, 1996, the Company's Common Stock was held by 261
shareholders of record. In addition, the Company believes that there are an
additional 960 holders of its Common Stock who hold the shares in "street name."
In fiscal 1996, the Company paid no dividends on its Common Stock
nor does it anticipate paying cash dividends on its Common Stock in the
foreseeable future. In the event that the Company changes this policy, future
payment of dividends on its Common Stock would depend, among other things, upon
the operations and financial condition of the Company.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
In August 1994, the Company sold substantially all of the assets
of the free standing radiation therapy facilities for $3,500,000 consisting of
$900,000 cash and $2,600,000 in a subordinated promissory note which bears
interest at prime and is payable monthly over six years. The Company recorded
the note net of a discount of 14% or $448,803, based on, among other factors,
the Company's incremental borrowing rate and the credit risk of the buyers. The
buyers also assumed approximately $750,000 in long-term debt. Concurrent with
the sale, the Company entered into a 12-year management and billing and
collection agreements under which the Company will receive 9.5% of annual net
collected revenues. In addition, the Company entered into a six-year consulting
agreement with the buyers whereby the Company will receive $16,500 per month for
consulting services.
In order to comply with Stark II, the Company took the following
steps at three of its centers in fiscal 1995:
o At the center in Palm Beach, Florida, referring physicians held
60% of the equity in the partnership. Under a mandatory buy-out
provision of the Partnership Agreement, CTI of Palm Beach, Inc.,
the Administrative General Partner and a subsidiary of the
Company, purchased all of the physician limited partnership
interests in the subject partnership for $364,080. Then, pursuant
to its contractual rights under the partnership agreement, Good
Samaritan Health Corp., the Special Limited Partner which
previously held 20% of the partnership, acquired one-half of the
60% interest for $182,040. As a result, the Company, through its
subsidiary, currently has a 50% interest in the subject
partnership.
o At a center in Tampa, Florida, referring physicians held 78.74%
of the equity with CTI of Tampa, Inc., a subsidiary of the
Company, holding the remaining 21.26% interest. In January 1995,
the subject partnership sold all of its assets to a subsidiary of
Oncology Services Corporation. Tampa used a portion of the cash
proceeds to pay off all existing liabilities and provide a
liquidating distribution to each partner (the Company's
distribution was $388,000). The sale of Tampa's assets did not
have a material impact on the Company's statement of operations.
Concurrent with the sale, the Company entered into a ten-year
consulting agreement with the Buyer under which the Company will
receive $150,000 per year for such services.
o The Company sold its 9% interest in Macon Radiotherapy
Associates, Ltd. for approximately $168,000. The sale of the
Company's interest in this partnership resulted in a gain of
approximately $98,000. The Company will continue its billing and
collection and management fee agreements at this center.
During fiscal 1996, the Company continued its efforts to
establish radiation therapy centers in Logan, West Virginia, and Lakewood, New
Jersey. The Company expects these centers to be operational in late fiscal 1997.
The Company has received commitments from a third-party financing source
totaling approximately $3,000,000 to establish these radiation therapy centers.
The Company believes that the financing requirements for these new centers will
not exceed $3,000,000. Under the terms of the financing, monthly payments,
commencing upon the opening of a new center, will be made over a sixty-month
period at interest rates ranging from 11.0% to 13.5%.
In May 1996, the Company sold all of its interest in a radiation
therapy center under development in Yonkers, New York. The Company will receive
$300,000 in cash as a reimbursement for expenses incurred associated with the
development of the facility. Such amount is due in equal monthly installments
over a one year period beginning seven months after the facility opens (which is
estimated in December 1996).
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As part of the transaction, the Company also entered into a
three-year non-competition agreement, a five-year consulting agreement, a
turn-key license agreement and an option agreement allowing the buyer to
participate as an equity owner in future transactions of a similar nature. Such
amounts are payable beginning 18 months after the center opens and are limited,
on a monthly basis, to a percentage of the fees collected by the center.
The Company is presently working at setting up bone marrow
transplant centers. The Company has formed a medical/scientific advisory board
consisting of five experts in oncology and bone marrow transplants and opened
its first center in fiscal 1996.
Results of Operations:
----------------------
Comparison of the Fiscal Year Ended May 31, 1996 to the Fiscal
-----------------------------------------------------------------
Year Ended May 31, 1995
-----------------------
Revenues for fiscal 1996 increased $848,000, or 7.7%, over fiscal
1995, from $11,017,000 in 1995 to $11,865,000 in 1996. This increase was
principally attributable to the increase in revenues from the home health care
services offset by the reduction in revenues resulting from the sale of the
radiation therapy facilities in 1995.
For the fiscal years ended May 31, 1996 and 1995, revenues were
derived from the following payor sources:
<TABLE>
<CAPTION>
1996 1995
------------------ ----------------
Amount % Amount %
------ --- ------ ---
<S> <C> <C> <C> <C>
Medicare $ 9,002,000 75.9 $ 7,634,000 69.3
Health Maintenance Organizations -- -- 370,000 3.4
Commercial Insurance 872,000 7.3 975,000 8.8
Other (primarily Medicaid) 413,000 3.5 560,000 5.1
----------- ----- ----------- -----
Net patient service revenue 10,287,000 86.7 9,539,000 86.6
Billing/Collection and Management Fees 1,207,000 10.2 1,078,000 9.8
Other Miscellaneous Revenues 371,000 3.1 400,000 3.6
----------- ----- ----------- -----
$11,865,000 100.0 $11,017,000 100.0
=========== ===+== =========== =====
</TABLE>
Changes in the current mix of payors, specifically those which
would result in a decrease in the percentage of revenues from Medicare or
third-party payors, may adversely effect the Company's future results of
operations.
Patient service revenues are derived from the operations of
Leader and Med Tech and the Company's radiation therapy center in
Mississippi. Patient service revenues increased $748,000 from
$9,539,000 in 1995 to $10,287,000 in 1996. Revenues from Leader
and Med Tech (collectively the "home health division") increased
$1,577,000 from $8,501,000 in 1995 to $10,078,000 in 1996. The
increase in revenues is primarily the result of an increase in
the average projected reimbursement rate from Medicare from
$65.88 per visit in 1995 to $83.62 per visit in 1996, which was
partially offset by a decrease in Medicare home health visits
from 112,761 in 1995 to 105,190 in 1996. Revenues from Leader
increased $72,000 between 1995 and 1996. Currently, Med Tech has
agreements to provide home health services to patients by
13
<PAGE>
utilizing the nursing services of other home health agencies.
These agreements may be cancelled with 10 days notice by either
party. If such agreements were cancelled, this could adversely
affect Med Tech's ability to service its patients. If the
certificate of need requirements were to change, the number of
home health agencies competing in the market could increase
significantly, thus having an adverse effect on the Company. Med
Tech participates in the Medicare program under which services
are rendered to Medicare program beneficiaries and are reimbursed
based on cost-reimbursement principles.
Other revenues, which consist principally of
management/consulting and billing and collection revenues and
interest income, increased $100,000 from $1,478,000 in 1995 to
$1,578,000 in 1996. This increase is primarily attributed to an
increase in revenues from the management/consulting and billing
and collection contracts entered into as part of the 1995 sales
of radiation facilities. Interest income increased $57,000 during
1996 as a result of an increase in interest earned on invested
cash.
Operating expenses in fiscal 1996 increased $604,000, or 5.7%
from $10,594,000 in 1995 to $11,198,000 in 1996. This increase was primarily
attributable to the following.
As a result of the Company's participation in the Medicare
program, the Company is able to allocate a part of its general
and administrative expense to its Medicare certifed home health
agency and be reimbursed for such costs by the Medicare system.
Accordingly, the Company's policy is to treat the allocation of
such expenses as a decrease in its general and administrative
expenses and an increase in its professional care of patients
expenses.
Professional care of patients expenses increased $805,000 from
$8,871,000 in 1995 to $9,676,000 in 1996 as a result of the
increase of $501,000 in the general and administrative expenses
allocated to Med Tech and an increase in other direct
administrative costs of Med Tech as a result of the growth
experienced in the latter part of fiscal 1995.
General and administrative expenses decreased $494,000 from
$1,045,000 in 1995 to $551,000 in 1996. This decrease is
attributed to the allocation of more general and administrative
expenses to Med Tech as discussed above offset by increases in
insurance, professional fees and travel expenses. Included in
general and administrative expenses for the fiscal years ended
May 31, 1996 and 1995, is a provision for certain potentially
unrecoverable costs related to the development of new radiation
therapy centers the Company intends to establish of $59,000 and
$150,000, respectively.
Direct costs of clinical supplies increased $77,000 from $358,000
in 1995 to $435,000 in 1996. This increase was the result of the
increase in revenues from Leader.
Liquidity and Capital Resources:
--------------------------------
As of May 31, 1996, the Company had working capital of
$3,317,000, including cash of $865,000 as compared to working capital of
$2,146,000 at May 31, 1995. The increase was primarily attributable to the
increase in accounts receivable as a result of a significant increase in home
health care revenues during the fourth quarter of 1996. The Company has financed
accounts receivable through a long-term revolving credit facility.
14
<PAGE>
During fiscal 1996, cash decreased $501,000. Cash used in
operating activities amounted to $734,000 in 1996, compared to cash provided by
operating activities of $1,137,000 in 1995. The principal components resulting
in a use of cash in operating activities in 1996, were an increase in accounts
receivable of $1,125,000; and the payment of the May 31, 1995 amount due to
Medicare of $826,000. The increase in accounts receivable is the result of the
significant increase in revenues from the home health division during the fourth
quarter and a projected balance due on the Company's 1996 cost report of
$407,000. The Company's current ratio (current assets over current liabilities)
was 3.33 for 1996 and 2.27 for 1995. Cash used in investing activities was
$329,000 in 1996, compared to cash provided by investing activities of $337,000
in 1995 and was the result of $305,000 invested in new ventures, $239,000 in the
acquisition of property and equipment, $125,000 invested in the purchase of a
physical therapy company and $105,000 in advances to related parties. These
amounts were offset by $433,000 in collections under notes receivable. Cash
provided by financing activities was $562,000 in 1996, compared to cash used in
investing activities of $635,000 in 1995 and was the result of the net
borrowings of the Company during the year.
Under the terms related to the sale of the Centers, the Company
will receive approximately $50,000 per month due under the notes from the buyer
over the next six years, $16,500 in consulting fees per month over the next six
years, and payments of 9.5% of the net monthly revenues collected by the buyer
which the Company believes will average approximately $25,000 to $30,000 per
month over the next twelve years. As a result of the sale of the Company's
interest in the Tampa radiation therapy center, the Company will receive
$150,000 per year over the next nine years in consulting fees.
The Company guarantees certain financing agreements of the Palm
Beach and Logan partnerships.
As of May 31, 1996, the Company has guaranteed the following
amounts:
Partnership Amount Description
----------- ------ -----------
Palm Beach $608,000 (1) Equipment leased and leasehold
improvements; (2) Term loan
Logan $388,000 Equipment leased
Except for those items discussed above, there are no existing
material sources of liquidity available to the Company or material commitments
for capital expenditures. There are no material trends, favorable or
unfavorable, in the Company's capital resources. Management is unaware, except
for those items discussed above, of any trends, demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in the
Company's liquidity increasing or decreasing in any material way.
15
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Financial Statements
Page
----
Report of Independent Accountants 17
Consolidated Balance Sheets as of May 31, 1996 and 1995 18
Consolidated Statements of Operations for the
Years Ended May 31, 1996 and 1995 19
Consolidated Statements of Stockholders' Equity for the
Years Ended May 31, 1996 and 1995 20
Consolidated Statements of Cash Flows for the
Years Ended May 31, 1996 and 1995 21-22
Notes to Consolidated Financial Statements 23-36
16
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
Cancer Treatment Holdings, Inc.
Fort Lauderdale, Florida
We have audited the accompanying consolidated balance sheets of Cancer Treatment
Holdings, Inc. and subsidiaries as of May 31, 1996 and 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cancer Treatment
Holdings, Inc. and subsidiaries as of May 31, 1996 and 1995, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
August 21, 1996
17
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MAY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 865,265 $ 1,366,141
Accounts receivable, net of allowance for doubtful
accounts of $124,338 in 1996 and $145,604 in 1995 3,054,893 1,929,785
Notes receivable, net of a discount of $94,758 in 1996
and $107,465 in 1995 338,574 325,867
Receivables from related parties 127,931 22,503
Other current assets 351,221 525,483
----------- -----------
Total current assets 4,737,884 4,169,779
Long-term notes receivable, net of a discount of
$169,764 in 1996 and $264,522 in 1995 1,574,684 1,613,258
Property and equipment, net 1,115,214 784,974
Investments in and advances to partnerships and ventures 880,858 1,010,064
Intangible assets, net 956,809 993,638
Other assets 131,464 123,132
----------- -----------
Total assets $ 9,396,913 $ 8,694,845
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 67,876 $ 191,700
Accounts payable and accrued expenses 1,099,486 1,005,622
Due to Medicare -- 826,319
Income taxes payable 254,000 --
----------- -----------
Total current liabilities 1,421,362 2,023,641
Long-term debt, net of current portion 1,155,400 180,085
Deferred income taxes 211,400 234,000
Minority interest 21,753 21,753
----------- -----------
Total liabilities 2,809,915 2,459,479
----------- -----------
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock; $.003 par value, 50,000,000
shares authorized, 3,495,760 shares issued 10,487 10,487
Capital in excess of par value 5,163,105 5,163,105
Retained earnings 1,693,487 1,341,855
----------- -----------
6,867,079 6,515,447
Treasury stock: 159,284 shares, at cost (280,081) (280,081)
----------- -----------
Total stockholders' equity 6,586,998 6,235,366
----------- -----------
Total liabilities and stockholders' equity $ 9,396,913 $ 8,694,845
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
18
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED MAY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Net patient service revenues $ 10,286,657 $ 9,538,733
Other revenues 1,578,422 1,478,106
------------ ------------
Total revenues 11,865,079 $ 11,016,839
------------ ------------
Operating expenses:
Professional care of patients 9,676,435 8,871,244
Direct cost of clinical supplies 434,587 357,664
General and administrative 551,239 1,045,194
Interest expense 126,884 56,655
Depreciation and amortization 409,072 263,133
------------ ------------
Total expenses 11,198,217 10,593,890
------------ ------------
Income before equity in earnings (loss) of partnerships,
gain on sale of centers, minority
interest and income taxes 666,862 422,949
Equity in earnings (loss) of partnerships (5,230) 78,230
Gain on sale of centers -- 349,207
Minority interest -- 9,668
------------ ------------
Income before provision for income taxes 661,632 860,054
Provision for income taxes 310,000 346,000
------------ ------------
Net income $ 351,632 $ 514,054
============ ============
Per share data:
Net income per share $ .11 $ .15
============ ============
Weighted average number of shares outstanding 3,336,476 3,336,476
============ ============
</TABLE>
See accompanying Notes to Consolidated Financial Statements
19
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 1996 AND 1995
-------------
<TABLE>
<CAPTION>
Common Stock Capital Total
---------------------- In Excess Retained Treasury Stockholders'
Shares Amount of Par Earnings Stock Equity
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance May 31, 1994 3,495,760 $ 10,487 $5,163,105 $ 827,801 $ (280,081) $5,721,312
Net income -- -- 514,054 -- 514,054
---------- ---------- ---------- ---------- ---------- ----------
Balance May 31, 1995 3,495,760 10,487 5,163,105 1,341,855 (280,081) 6,235,366
Net income -- -- 351,632 -- 351,632
---------- ---------- ---------- ---------- ---------- ----------
Balance May 31, 1996 3,495,760 $ 10,487 $5,163,105 $1,693,487 $ (280,081) $6,586,998
========== ========== ========== ========== ========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
20
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MAY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 351,632 $ 514,054
----------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Accretion of discount on notes receivable (107,465) (76,816)
Gain on sale of centers -- (349,207)
Gain on sale or liquidation of investments -- (98,029)
Depreciation 242,843 128,339
Amortization 166,229 134,794
Provision for potentially unrecoverable capitalized costs 59,452 161,688
Equity in loss (earnings) of unconsolidated partnerships 5,230 (78,230)
Deferred tax expense 16,800 234,000
Minority interest -- (9,668)
Change in operating assets and liabilities, net of
acquisitions and dispositions:
Accounts receivable (1,125,108) (110,491)
Other current and non-current assets 134,813 (76,841)
Accounts payable and accrued expenses 93,864 (63,334)
Due to Medicare (826,319) 826,319
Income taxes payable 254,000 --
----------- -----------
Net cash provided by (used in) operating activities (734,029) 1,136,578
----------- -----------
Cash flows from investing activities:
Proceeds from sale of centers, net of transaction costs -- 469,378
Collections of notes receivable 433,332 288,888
Proceeds from sale of investments -- 345,280
Advances to related parties (105,428) (215,401)
Investments in Partnerships and ventures (305,309) (650,262)
Acquisitions (125,000) (65,000)
Distributions received from Partnerships 12,500 365,000
Acquisition of property and equipment (239,033) (200,669)
----------- -----------
Net cash provided by (used in) investing activities (328,938) 337,214
----------- -----------
Cash flows from financing activities:
Release of restricted cash -- 37,500
Distributions to minority interests -- (480,082)
Repayments of long-term debt, including revolving
credit agreements (2,644,520) (642,149)
Borrowings for long-term debt, including revolving
credit agreements 3,224,111 449,575
----------- -----------
Net cash provided by (used in) financing activities 562,091 (635,156)
----------- -----------
Net increase (decrease) in cash and cash equivalents (500,876) 838,636
Cash and cash equivalents at beginning of year 1,366,141 527,505
----------- -----------
Cash and cash equivalents at end of year $ 865,265 $ 1,366,141
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
21
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE YEARS ENDED MAY 31, 1996 AND 1995
SUPPLEMENTAL DISCLOSURES:
1996 1995
-------- --------
Interest paid $126,884 $ 83,847
Income taxes paid 61,500 --
NON-CASH FINANCING AND INVESTING ACTIVITIES:
In August 1994, the Company sold substantially all of the assets of two of its
radiation therapy centers to an unrelated third party. The Company received
$469,378 in cash and an interest bearing note for $2,600,000 which the Company
has recorded net of a discount of $448,803. The sale resulted in a gain of
$349,207. The remaining assets sold and liabilities assumed in the transaction
were as follows:
Property, plant and equipment $(2,406,207)
Intangible assets, net (847,800)
Other assets (33,470)
Minority interest 257,167
Long-term debt 758,312
During fiscal 1996, the Company acquired property and equipment of approximately
$272,000 through capital lease financing.
See accompanying Notes to Consolidated Financial Statements
22
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
----------------
1. BUSINESS:
---------
Cancer Treatment Holdings, Inc. ("CTH"), a Nevada corporation, with its
subsidiaries (the "Company") is primarily engaged in providing the
ambulatory treatment of cancer using a variety of modalities, including
radiation therapy and conventional chemotherapy through home infusion,
and home nursing services.
Radiation Therapy Services
--------------------------
Presently, the Company owns and operates one radiation therapy facility
and also owns a 50% interest in a facility in West Palm Beach, Florida,
which is organized as a limited partnership with a subsidiary of the
Company serving as a general partner. In addition, the Company provides
management and/or consulting services for seven radiation therapy
facilities.
Nursing and Infusion Services
-----------------------------
The Company owns and operates Leader Health Care Center, Inc.
("Leader"), which is a provider of home infusion services in the South
Florida area. Through Leader, the Company wholly owns Southern Cross
Home Health, Inc. ("Southern Cross") and Med Tech Services of South
Florida, Inc. ("Med Tech"), which are providers of nursing and various
therapy and aide services to individuals in their homes in the South
Florida area.
2. SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------
Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the accounts
of all subsidiaries and partnerships in which the Company owns more than
50%. All significant intercompany investments, accounts and transactions
have been eliminated. Investments in partnerships in which the ownership
interest is 50% or less and the Company exercises significant influence
over operating and financial policies are accounted for using the equity
method.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
23
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
2. SIGNIFICANT ACCOUNTING POLICIES: (continued)
-------------------------------
Cash Equivalents
----------------
The Company considers all highly-liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Revenue Recognition
-------------------
Net Patient Service Revenues are derived from home health care and
radiation therapy.
Home health care services are provided to Medicare and non-Medicare
patients. The Company participates in the Medicare program under which
services rendered to Medicare program beneficiaries are reimbursed based
on cost-reimbursement principles and are subject to audit and
retroactive adjustment by the respective Medicare program fiscal
intermediary. Differences between the estimated settlements and final
amounts are recognized as increases or decreases in net patient service
revenues in the year of settlement. In the opinion of management,
retroactive adjustments, if any, would not be material to the financial
position or results of operations of the Company.
Radiation therapy for services provided by the centers are reported on a
consolidated basis. The Company accepts assignment from Medicare and HMO
patients treated at the centers. Consequently, the Company is prohibited
from collecting the full usual, customary prevailing charges for
treatments provided to patients under the Medicare program. Therefore,
patient fees generated from services provided to Medicare and HMO
patients are recorded net of the Medicare contractual allowance in the
accompanying financial statements.
Other revenues include management and/or consulting fees from the
centers which the Company manages or for which the Company provides
consulting services. Management fees are principally based on a
percentage of collections with annual maximum fees. Consulting fees are
recognized over the term of the consulting agreement. The Company also
provides centralized billing and collection services for six centers.
Billing and collection fees are principally based on a percentage of
collections with annual maximum fees. Other revenues also include
interest income of $286,000 and $229,000 in 1996 and 1995, respectively.
24
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
2. SIGNIFICANT ACCOUNTING POLICIES: (continued)
-------------------------------
Property and Equipment
----------------------
Property and equipment is stated at cost and depreciated over its
estimated useful lives ranging from five to forty years using the
straight-line method. Leasehold improvements and assets held under
capital leases are amortized on a straight-line basis over the shorter
of the estimated useful life or the lease term. Upon disposition, the
cost and accumulated depreciation of property and equipment are removed
from the accounts and any gain or loss is reflected in the statement of
operations.
In March 1995, the Financial Accounting Standards Board issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." The statement requires that
long-lived assets, such as property and equipment, and certain
identifiable intangible assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable based on estimated future cash flows
expected to result from the use of the asset and its eventual
disposition. The Company is required to adopt this standard for fiscal
year 1997. This statement upon its adoption will not have a material
impact on the Company's financial statements.
Capitalized Development Costs
-----------------------------
The Company capitalizes costs including legal fees, architectural fees,
rent payments and lease deposits related to the development of new
radiation centers which are expected to benefit future periods. Costs
are capitalized until the center begins to generate revenues or when the
Company abandons its plans to establish the center or such establishment
is no longer possible.
Intangible Assets
-----------------
Costs in excess of the estimated fair value of net identifiable assets
of acquired business ("goodwill") are amortized on a straight-line basis
over twenty years. Other intangible assets consist of licenses which are
amortized over ten years and amounts attributable to certain consulting
agreements obtained in connection with the sale of two radiation therapy
centers (see Note 3) which are amortized over the life of such
agreements.
The Company periodically evaluates the carrying amount of goodwill and
other intangible assets to recognize and measure the possible impairment
of these assets. Based on the expected recovery from cash flows, the
Company believes there is no impairment to intangible assets.
25
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
2. SIGNIFICANT ACCOUNTING POLICIES: (continued)
-------------------------------
The following table summarizes intangible assets, net of accumulated
amortization of $351,525 and $201,846 at May 31, 1996 and 1995,
respectively.
1996 1995
-------- ---------
Goodwill $345,554 $256,149
Other 611,255 737,489
--------- ---------
$956,809 $993,638
======== ========
Income Taxes
------------
Deferred income taxes are provided based on the estimated future tax
effects of differences between financial statement carrying amounts and
the tax bases of existing assets and liabilities. A valuation allowance
is provided if, based on the weight of available evidence, it is more
likely than not that some or all of the deferred tax assets will not be
realized.
Per Share Data
--------------
Per share data is based on the weighted average number of common shares
outstanding during each year after considering the exercise of stock
options and conversion of debentures into common stock. In computing the
income per share for 1996 and 1995, convertible debentures and stock
options are not considered because they have an anti-dilutive effect.
Reclassifications
-----------------
Certain amounts have been reclassified in the 1995 financial statements
to conform to the 1996 presentation.
3. ASSET ACQUISITIONS AND DISPOSALS:
--------------------------------
In May 1996, the Company sold all of its interest in a radiation therapy
center under development in Yonkers, New York. The Company will receive
$300,000 in cash as a reimbursement for expenses incurred associated
with the development of the facility. Such amount is due in equal
monthly installments over a one year period beginning seven months after
the facility opens (which is estimated in December 1996). This
receivable is included in long-term notes receivable as of May 31, 1996.
As part of the transaction, the Company also entered into a three-year
non-competition agreement, a five-year consulting agreement, a turn-key
license agreement and an option agreement allowing the buyer to
participate as an equity owner in future transactions of a similar
26
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
3. ASSET ACQUISITION AND DISPOSALS: (continued)
-------------------------------
nature. The aggregate proceeds for these respective agreements total
$1,950,000. Such amounts are payable beginning 18 months after the
center opens and are limited, on a monthly basis, to a percentage of the
fees collected by the center. Such amounts will be recorded in income
when contingencies regarding collectability of such amounts are
resolved.
In June 1996, the Company acquired, for $125,000 in cash, certain assets
of a physical therapy operation. As a result of the transaction, the
Company recorded goodwill in the amount of $112,250.
In August 1994, the Company sold substantially all of the assets of two
of its radiation therapy centers for $3,500,000 consisting of $900,000
in cash and $2,600,000 in a subordinated promissory note which bears
interest at prime and is payable in monthly installments over six years.
The Company recorded the note net of a discount of 14%, or $448,803,
based on, among other factors, the Company's incremental borrowing rate
and the credit risk of the buyer. The net gain on the sale amounted to
$349,207. Concurrent with the sale, the Company entered into a
twelve-year management and billing and collection agreement under which
the Company will receive 9.5% of annual net collected revenues and a
six-year consulting agreement whereby the Company will receive $16,500
per month for consulting services.
During 1995, the Company increased its ownership in Palm Beach
Radiotherapy Associates, Ltd. ("Palm Beach") from 20% to 50%. The
purchase price for the additional 30% was $182,040. During 1995, the
Company also acquired the remaining minority interest in Leader and Med
Tech. The total price was $65,000 including goodwill of $33,000.
In 1995, in order to comply with the Physician Ownership of and
Referrals to Health Care Entities Act (the "Stark Law"), the Company
took the following steps at two of its radiation therapy centers:
(i) The Company, through a wholly-owned subsidiary, CTI of Tampa,
Inc., held a 21.26% general partner interest in Tampa Radiotherapy
Associates, Ltd. ("Tampa"). Tampa sold all of its assets and
provided a liquidating distribution of approximately $303,000 to
the Company. The sale of Tampa's assets did not have a material
impact on the Company's statement of operations. Concurrent with
the asset sale, the Company entered into a ten-year consulting
agreement with the buyer under which the Company will receive
$150,000 per year for such services.
(ii) The Company sold its 9% interest in Macon Radiotherapy Associates,
Ltd. ("Macon") for approximately $168,000. The sale of the
Company's interest in Macon resulted in a pre-tax gain of
approximately $98,000.
27
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
4. PROPERTY AND EQUIPMENT:
----------------------
Property and equipment consists of the following at May 31, 1996 and
1995:
1996 1995
---------- ----------
Land $ 33,000 $ 33,000
Buildings and leasehold improvements 1,122,979 836,229
Office furniture and equipment 388,034 320,793
Medical equipment 163,853 --
---------- ----------
1,707,866 1,190,022
Less accumulated depreciation 592,652 405,048
---------- ----------
$1,115,214 $ 784,974
========== ==========
The Company owns an office condominium unit with a net book value of
$475,645 which is leased under a lease agreement with a remaining period
of two years that requires a minimum base annual rental of $48,000.
Rental income for the years ended May 31, 1996 and 1995, amounted to
$59,192 and $71,718, respectively. The Company incurred rental property
expense of $32,690 and $34,149 during fiscal years 1996 and 1995,
respectively, which includes depreciation expense of $16,677 each year.
Under the terms of the lease, the Company expects to receive future
minimum leasing gross income of $48,000 in fiscal year 1997 and $39,000
in fiscal year 1998.
5. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS AND VENTURES:
--------------------------------------------------------
The Company's investments in and advances to partnerships and ventures
consists of the following at May 31, 1996 and 1995:
1996 1995
--------- ----------
Investment in Palm Beach (a) $171,634 $ 196,392
Advances to Palm Beach 419,879 423,075
Development of new centers 289,345 390,597
-------- ----------
$880,858 $1,010,064
======== ==========
28
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
5. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS AND VENTURES: (continued)
--------------------------------------------------------
(a) The Company receives a management fee equal to 8% of patient
revenues collected, not to exceed $116,400 annually, subject to
adjustments upward for increases in the CPI, not to exceed 5%
annually. The Company also provides billing and collection
services and receives compensation equal to 5% of patient
revenues collected, not to exceed $87,300 annually. The maximum
annual fee is subject to adjustments upward for increases in the
consumer price index, not to exceed 5% annually.
The condensed summary of financial information for Palm Beach as of and
for the twelve months ended May 31 is as follows:
Financial Position: 1996 1995
------------------ ----------- -----------
Current assets $ 595,185 $ 357,071
Land, building, leasehold
improvements and equipment, net 655,187 1,018,411
Other assets 3,568 11,059
----------- -----------
Total assets 1,253,940 1,386,541
----------- -----------
Current liabilities including amounts
due to the Company of $419,879 in
1996 and $423,075 in 1995 1,088,396 1,047,827
Long-term portion of mortgage
and notes payable 118,750 256,461
----------- -----------
Total liabilities 1,207,146 1,304,288
----------- -----------
Partners' capital $ 46,794 $ 82,253
=========== ===========
Results of Operations:
Net revenues $ 1,626,329 $ 1,525,019
Operating expenses 1,607,459 (1,657,845)
----------- -----------
Income (loss) from operations 18,870 (132,826)
Other expenses (29,330) (76,739)
----------- -----------
Net loss $ (10,460) $ (209,565)
=========== ===========
At May 31, 1996, the difference between the Company's investment and its
equity in the net assets of Palm Beach was $148,000. This amount is
being amortized to income over a period of twenty years. The Company's
investment in Palm Beach is reflected net of non-interest bearing demand
notes payable to Palm Beach aggregating $130,000.
29
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
5. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS AND VENTURES: (continued)
--------------------------------------------------------
The Company is in the process of establishing radiation therapy centers
in Logan, West Virginia, and Lakewood, New Jersey. The Company expects
these centers to be operational in fiscal 1997. The Company has received
commitments from a third-party financing source totaling approximately
$3,000,000 for the establishment of these radiation therapy centers. The
Company believes that the financing required for these new centers will
not exceed $3,000,000. Under the terms of the financing, monthly
payments, commencing upon the opening of a center, will be made over a
sixty-month period at interest rates ranging from 11.0% to 13.5%.
6. LONG-TERM DEBT:
--------------
Long-term debt at May 31, 1996 and 1995, consists of the following:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
$2,000,000 revolving credit facility, interest at
LIBOR plus 8% (13.43% at May 31, 1996) due
weekly, maturing in March 2001, collateralized
by accounts receivable. Borrowings limited to 80%
of allowable accounts receivable. Unused
availability of $565,000 at May 31, 1996 $ 778,123 $ --
$450,000 bank line of credit, variable interest
rate (10.00% at May 31, 1995), due on demand,
collateralized by notes receivable -- 149,575
Mortgage payable, interest at 8.5%, interest and
principal due monthly, maturing in January 1998,
collateralized by office condominium with a net
carrying value of $475,645 174,167 192,506
Capitalized lease obligations, interest at 13.05%,
interest and principal due monthly, maturing
March 2001 244,649 --
Other borrowings 26,337 29,704
---------- ----------
1,223,276 371,785
Less current portion 67,876 191,700
---------- ----------
$1,155,400 $ 180,085
========== ==========
</TABLE>
30
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
6. LONG-TERM DEBT: (continued)
--------------
Future principal payments of debt classified as long-term are as follows:
Year Ending May 31,
-------------------
1998 $ 203,835
1999 56,343
2000 59,239
2001 835,983
-----------
$1,155,400
===========
7. INCOME TAXES:
------------
The provision for income taxes for the years ended May 31, 1996 and
1995, consist of the following:
1996 1995
-------- --------
Current:
Federal $230,000 $ 17,400
State 63,200 5,000
-------- --------
293,200 22,400
-------- --------
Deferred:
Federal 15,500 273,100
State 1,300 50,500
--------- --------
16,800 323,600
-------- --------
Provision for income taxes $310,000 $346,000
======== ========
31
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
7. INCOME TAXES: (continued)
------------
The reconciliation between the statutory charge for income taxes and the
actual charge for income taxes from operations for the years ended May
31, 1996 and 1995, is shown in the following table:
1996 1995
-------- -------
Computed expected tax expense: $225,000 $292,400
State income taxes 61,900 49,500
Change in valuation allowance 133,400 (92,200)
NOL, capital loss utilization -- (700)
Investment in subsidiary (151,500) (164,100)
Goodwill and other nondeductible expenses 21,500 303,200
Graduated tax rates -- (21,600)
Other, net 19,700 (18,500)
-------- --------
Effective provision for income taxes $310,000 $346,000
======== ========
The significant components of the deferred tax assets and liabilities as
of May 31, 1996 and 1995, were as follows:
1996 1995
--------- --------
Deferred tax assets:
Allowance for doubtful accounts $ 74,600 $ 52,000
Property and equipment 44,400 --
Investment in subsidiary 308,000 196,200
NOL carryforward -- 59,600
Other 200 10,100
Valuation allowance (133,400) --
--------- --------
293,800 317,900
Deferred tax liabilities:
Notes receivable 288,000 317,100
Intangible assets 143,400 101,400
Investments -- 14,000
Other 2,800 9,000
--------- --------
434,200 441,500
Net deferred tax liability $(140,400) $(123,600)
========= =========
The Company provides a valuation allowance against deferred tax assets
if, based upon the weight of available evidence, it is more likely than
not that some or all of the deferred tax assets will not be realized.
The Company has established a valuation allowance against deferred tax
32
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
7. INCOME TAXES: (continued)
------------
assets of $133,400 and $0 at May 31, 1996 and 1995, respectively. The
increase in the valuation allowance for the year ended May 31, 1996
results from the uncertainty of the realization of the full benefit of
the Company's tax planning strategy whereby the Company will utilize a
loss on the sale of stock of one of its subsidiaries.
8. COMMITMENTS AND CONTINGENCIES:
-----------------------------
The Company leases office space under five-year operating lease
agreements. Future minimum annual lease commitments under these leases
are as follows:
Year Ending May 31
------------------
1997 $217,022
1998 103,429
1999 66,430
2000 4,903
Rent expense for fiscal years ended 1996 and 1995, amounted to
approximately $239,000 and $147,000, respectively.
As a general partner, the Company is jointly and severally liable for
the liabilities concerning the actions of the Palm Beach and Logan
partnerships and has guaranteed certain liabilities of these
partnerships amounting to $996,000 at May 31, 1996. In this connection,
the Company could be held responsible for any and all liabilities
arising from the actions of Palm Beach. The Company, along with the
other general partner of Palm Beach, have also executed demand
promissory notes payable to Palm Beach which have been assigned by Palm
Beach as collateral to certain creditors of that partnership.
The Company is involved in several legal proceedings arising from a
dispute between the Company, as managing general partner of the Palm
Beach Partnership, and the other general partner of the Palm Beach
Partnership. The dispute relates to the decision of the other general
partner to conduct its radiation therapy business through its own
affiliates rather than through the Palm Beach Partnership. In the
opinion of management, the amount of ultimate liability with respect to
these actions will not materially affect the financial position, results
of operations or cash flows of the Company.
9. EMPLOYEE BENEFIT PLANS:
----------------------
The Company has established an Employee Benefit Plan (the "Plan") under
Section 401(k) of the Internal Revenue Code. The Plan allows all full
time employees to defer up to 15% of their income on a pre-tax basis
through contributions to the Plan. Employer contributions are matched by
the Company as deemed advisable by the Executive Compensation Committee.
For fiscal years 1996 and 1995, the Company's expense related to
matching contributions amounted to $33,295 and $7,310, respectively.
33
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
9. EMPLOYEE BENEFIT PLANS: (continued)
----------------------
During fiscal year 1995, the Company established a deferred fringe
benefit plan for the employees of Med Tech. The plan is administered by
the Compensation Committee of the Board of Directors of the Company and
provides for contributions based upon achievements of specific goals by
the Company and the participating employees. Vesting begins at 20% after
two years of service, and from the third through the sixth years,
vesting increases by 20% each year until full vesting occurs. Each year,
contributions, if any, are determined by the Board of Directors of the
Company. The Company's fiscal year 1995 contribution expense was
$100,000. No amounts were contributed in fiscal year 1996.
10. WARRANTS, STOCK OPTIONS AND TREASURY STOCK:
------------------------------------------
The Company has established an employee stock option plan which provides
for the issuance of up to 100,000 shares of Common Stock. The exercise
price is determined by a committee of the Board but may not be less than
100% of the fair market value of the Common Stock on the date of the
grant of the option. The term of each option is also determined by the
committee, but in no event may the term of an option be longer than ten
years from the date of grant. Such options will expire upon termination
of employment with the Company.
The Company has also granted stock options to officers, directors and
financial advisors. All options were granted at or above prevailing
market prices and are exercisable over terms of up to six years.
During fiscal year 1996, the Company extended the term of 250,000
options previously issued to the Chairman of the Board to August 6,
2005. In addition on August 6, 1995, the Chairman was granted an
additional 250,000 non-qualified options at $3.50 per share which are
exercisable in installments of 83,334 shares per year on August 7, 1995,
1996 and 1997. These non-qualified options expire on August 6, 2005. The
exercise price per share of the options at the date of the modification
of the option term was in excess of the fair market value of the stock
underlying the option, therefore, no compensation expense was recorded
by the Company as a result of the modification of these options.
34
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
10. WARRANTS, STOCK OPTIONS AND TREASURY STOCK: (continued)
------------------------------------------
A summary of changes in common stock options during fiscal year 1996 and
1995 is as follows:
<TABLE>
<CAPTION>
Employee Plan Other Grants
----------------------- -------------------------
Number of Price per Number of Price per
Shares Share Shares Share
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Outstanding at May 31, 1994 47,000 $2.50-$3.50 667,500 $2.06-$5.00
Granted 33,000 $3.50 20,000 $2.38
------ -------
Outstanding at May 31, 1995 80,000 $3.50 687,500 $2.38-$5.00
Granted 10,000 $3.50 380,000 $3.125-$3.50
------ ----- -------
Outstanding at May 31, 1996 90,000 $3.50 1,067,500 $2.38-$5.00
====== =========
Amount exercisable 47,000 800,834
====== =======
</TABLE>
As of May 31, 1996, the Company has reserved 1,067,500 shares of its
Common Stock for issuance upon the exercise of all outstanding options.
The Company presently measures stock-based compensation as the
difference between the market price of the Company's stock and the
amount to be paid for the stock at the measurement date. In October
1995, the Financial Accounting Standards Board issued Statement No. 123,
"Accounting for Stock-Based Compensation," which introduces a fair
value-based method of accounting for stock-based compensation. Although
expense recognition for grants of stock, stock options and other equity
instruments to employees based on the new fair value accounting rules is
not mandatory, the standard requires disclosure of pro forma net income
and earnings per share under the new method for grants awarded after
January 1, 1995. The new disclosure requirements are effective for the
Company's fiscal year 1997. The Company anticipates adopting only the
disclosure requirements of this statement, therefore, the statement will
not have a material impact on the Company's financial position or
results of operations.
35
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
----------------
11. FINANCIAL INSTRUMENTS AND SIGNIFICANT CUSTOMERS:
-----------------------------------------------
Concentrations of Credit Risk
-----------------------------
Financial instruments which subject the Company to concentrations of
credit risk consist principally of cash equivalents, accounts receivable
and notes receivable. The Company maintains its cash and cash
equivalents in bank accounts with highly-rated financial institutions,
which may, at times, exceed federally insured limits. The Company has
not experienced any losses in such accounts. Concentrations of credit
risk with respect to accounts receivable are minimized as such amounts
are principally due from Medicare. Approximately 84% and 69% of the
Company's accounts receivable at May 31, 1996 and 1995, respectively,
are due from Medicare. The Company's credit risk with respect to notes
receivable is minimized as the notes are collateralized by equipment and
property of a radiation therapy facility. Additionally, the notes have
been paid in accordance with their respective terms through May 31,
1996.
Fair Value of Financial Instruments
-----------------------------------
The carrying value of long-term notes receivable and debt, including the
current portion, approximated fair value as of May 31, 1996 and 1995,
based on current rates for similar types of borrowing arrangements.
Significant Customers
---------------------
Med Tech is a Medicare-certified home health agency and, as such, has a
license to bill Medicare. The Company has entered into several contracts
with non-Medicare certified home health agencies to provide home health
services. These contracts may be cancelled by either party with ten days
notice. The Company recorded revenues from these contracts of $7,340,000
and $5,876,000 in fiscal years 1996 and 1995, respectively. One contract
represented $6,127,000 and $4,244,000 of the respective amounts in
fiscal years 1996 and 1995, respectively.
36
<PAGE>
PART II
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this item with respect to the
executive officers and directors of the Company is incorporated herein by
reference to the section entitled "Compensation of Directors and Executive
Officers" and "Election of Directors" in the Company's proxy statement for its
1996 Annual Meeting of Shareholders (the "1996 Proxy Statement").
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item with respect to executive
compensation is incorporated herein by reference to the section entitled
"Compensation of Directors and Executive Officers" in the Company's 1996 Proxy
Statement.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item with respect to security
ownership is incorporated herein by reference to the section entitled "Voting
Securities and Principal Holders Thereof" in the Company's 1996 Proxy Statement.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item with respect to security
ownership is incorporated herein by reference to the section entitled "Voting
Securities and Principal Holders Thereof" in the Company's 1996 Proxy Statement.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements and Exhibits
Financial Statements
--------------------
The consolidated financial statements of the Company and
its subsidiaries filed as a part of this Annual Report on
Form 10-KSB are listed it Item 7 of this Annual Report on
Form 10-KSB, which listing is hereby incorporated herein
by reference.
37
<PAGE>
<TABLE>
<CAPTION>
Exhibits
--------
Exhibit
No. Description of Items
------ --------------------
<S> <C>
3.1 Articles of Incorporation of the Company (as amended)(1)
3.2 By-Laws(3)
10.1 Asset Sales Agreement between RTI and SBHD, including amendments (without
exhibits)(1)
10.2 Third Amendment to Asset Purchase Agreement between CTI and SBHD(2)
10.3 Employment contract between CTH and Ullrich Klamm, Ph.D.(4)
10.4 Employment contract between CTH and Stanley L. Malkin, M.D.(4)
10.5 Agreements between CTI of West Broward, Inc. and Coral Springs Radiation
Therapy Regional Center, Inc.(5)
10.6 Agreements between Boca Raton Radiotherapy Associates, Ltd. and Boca Raton
Radiation Therapy Regional Center, Inc.(5)
10.7 Asset Purchase Agreement between Tampa Radiotherapy Associates, Ltd. and
Oncology Services Associates, P.A., dated January 1, 1995.(6)
10.8 Consulting Agreement between Oncology Services Corporation and its affiliates,
and Cancer Treatment Holdings, Inc., dated January 1, 1995 (6)
10.9 Agreements between Cancer Treatment Holdings, Inc., CTI of New York and
Yonkers Radiation Medical Practice, P.C.
10.10 Loan and Security Agreement between Med Tech Funding Corporation and
COPELCO/American Healthfund, Inc.
21.1 Subsidiaries of the Registrant
27 Financial Data Schedule (Electronic filing only)
(1) Incorporated by reference to Form S-18 as filed
with the Securities and Exchange Commission on
April 14, 1988, File No. 33-21269-A.
(2) Incorporated by reference to the Registrant's
Form 10-K for fiscal year ended May 31, 1990, as
filed with the Securities and Exchange Commission
on August 28, 1990.
(3) Incorporated by reference to the Registrant's
Form 10-K for the fiscal year ended May 31, 1992,
as filed with the Securities and exchange
Commission on August 28, 1992.
(4) Incorporated by reference to the Registrant's
Form 10-K for the fiscal year ended May 31, 1993,
as filed with the securities and Exchange
Commission on August 30, 1993.
(5) Incorporated by reference to the Registrant's
Form 10-KSB for the fiscal year ended May 31,
1995, as filed with the Securities and Exchange
Commission on August 25, 1995.
</TABLE>
38
<PAGE>
Exhibits (continued)
--------
Exhibit
No. Description of Items
------- --------------------
(6) Incorporated by reference to the Registrant's
Amendment No. 1 to Form S-3 as filed with the
Securities and Exchange Commission on February
13, 1995.
(b) Reports on Form 8-K filed during the three months ended
May 31, 1995.
There were no reports on Form 8-K filed during the three
months ended May 31, 1996.
39
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
CANCER TREATMENT HOLDINGS, INC.
by: /s/ Ullrich Klamm, Ph.D.
-------------------------------------
Ullrich Klamm, Ph.D.
Chairman and Chief Executive Officer
August 26, 1996
40
<PAGE>
SIGNATURES
----------
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated:
Signatures Position Dated
- ---------- -------- -----
/s/ Ullrich Klamm, Ph.D. Chairman of the Board August 26, 1996
- ------------------------ Chief Executive Officer
Ullrich Klamm, Ph.D.
/s/ Louis W. Boisvert, III Chief Financial Officer August 26, 1996
- -------------------------- and Vice President of Finance
Louis W. Boisvert, III
/s/ Carol Befanis O'Donnell, Esq. Corporate Secretary August 26, 1996
- ---------------------------
Carol Befanis O'Donnell,Esq.
/s/ Lisa M. Dobrovosky Treasurer, Controller August 26, 1996
- ----------------------
Lisa M. Dobrovosky
/s/ Salvatore Russo, Ph.D. Director August 26, 1996
- --------------------------
Salvatore Russo, Ph.D.
/s/ Jack Mull, M.D. Director August 26, 1996
- -------------------
Jack Mull, M.D.
/s/ Jack W. Buechner Director August 26, 1996
- --------------------
Jack W. Buechner
/s/ John P. Rosenthal Director August 26, 1996
- ---------------------
John P. Rosenthal
41
UMBRELLA AGREEMENT
------------------
AGREEMENT made as of this May 1, 1996, among and between CANCER TREATMENT
HOLDINGS, INC. ("CTH"), a Nevada corporation, CTI OF NEW YORK, INC., a New York
corporation ("CTI"), both such companies having their principal place of
business at 4491 South State Road 7, Suite 200, Fort Lauderdale, Florida 33314,
and YONKERS RADIATION MEDICAL PRACTICE, P.C. ("YRMP"), a New York professional
service corporation, having its principal place of business at 138 South
Broadway, Yonkers, New York.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, CTH desires to sell all of its interest in that certain facility
for radiation treatment located at 138 South Broadway, Yonkers, New York; and
WHEREAS, YRMP desires to acquire the aforementioned facility
and all ancillary interests; and
WHEREAS, the parties desire to have an on-going relationship in the form
of a consulting agreement and a right to participate together in future
transactions;
NOW, THEREFORE, the parties hereby agree as follows:
1. Definitions.
-----------
(a) "Affiliate" means any natural person, corporation,
unincorporated organization, limited liability company, partnership,
association, joint-stock company, joint venture, trust or government, or any
agency or political subdivision of any government ("Person") which, directly or
indirectly, through one or more intermediaries, controls the subject Person, or
any Person which is controlled by or under common control with any such
<PAGE>
Person, or any partners, officers or directors of any of the foregoing. For
purposes hereof, "control" (including the correlative terms "controlling",
"controlled by", or "under common control with"), as to any Person, means
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities or by contract or otherwise.
(b) "Date of Commencement" shall mean the date on which the Facility
is capable of treating its first patient; and on such date, YRMP shall promptly
notify CTH.
(c) The "Facility" shall mean that certain facility for radiation
treatment located at 138 South Broadway, Yonkers, New York.
(d) "Net Cash Collections" shall mean total fees collected from the
Facility reduced by refunds, as calculated on a monthly basis, less $41,667.
(e) The "Notes" shall mean the Turn-Key Note and the Option Note
contemplated by Sections 5 and 6 of the Agreement.
(f) The "Sub-sublease" shall mean the sub-sublease as contemplated
by Section 2, below.
2. Assignment and Assumption of Sublease. CTI hereby agrees to lease
-------------------------------------
to YRMP and YRMP hereby agrees to lease from CTI pursuant to the Sub-sublease
that real property which is currently the subject of a sublease (the "Sublease")
dated May 17, 1995, between CTI, as Sublessee, and St. Joseph's Hospital,
Yonkers, as Sublessor, located at 138 South Broadway, Yonkers, New York. The
2
<PAGE>
form of Sub-sublease shall be substantially the same form as that attached
hereto as Exhibit "A".
CTH and CTI represent and warrant that a true and complete copy of
the Sublease is attached as Exhibit "A" to Exhibit "A", that the Sublease is in
full force and effect and that no default by either party thereunder has
occurred or is threatened.
CTI covenants and agrees that, upon the expiration of the seventh
year of the Sub-sublease (i.e., as of April 30, 2003), CTI shall assign the
Sublease to YRMP, and YRMP shall be substituted for CTI as, and become, the
sublessee thereunder. Upon such event, YRMP shall assume all of CTI's
obligations and be entitled to all of CTI's rights and benefits under the
Sublease, including, but not limited to, the right to receive the security
deposit referred to in Section 14 of the Sublease as provided therein and any
rights or options to extend the term of the Sublease as set forth therein. In
order to carry out the covenant and agreement set forth in this paragraph, at
such expiration (i.e., April 30, 2003), CTI and YRMP shall execute an Assignment
and Assumption Agreement substantially in the form of Exhibit "B" hereto.
CTH and CTI covenant, jointly and severally, with YRMP that the
Sublease shall remain in full force and effect and that CTI shall fulfill all of
its obligations thereunder until the Sublease is assigned to YRMP as provided in
the foregoing paragraph of this Section 2.
Further, YRMP and its affiliates, covenant to indemnify and hold
harmless CTH from any and all liabilities and claims of any nature whatsoever
3
<PAGE>
arising on or after the date hereof and based on events or circumstances that
occur on or as of the date hereof, by reason of that certain guaranty made by
CTH dated May 17, 1995, and given in connection with the aforementioned Sublease
(the terms of such indemnification are set forth in Section 11, below), and this
agreement by YRMP to indemnify CTH shall survive for a period of ten (10) years
from the date hereof.
3. Non-Competition Agreement. CTH and CTI hereby agree to certain
---------------------------
restrictions upon certain of their respective activities for a period of three
years from the date hereof as set forth in the form of non-competition agreement
attached hereto as Exhibit "C", the aggregate consideration for which shall be
$150,000 per annum payable to CTH on a monthly basis, in arrears. Except as
otherwise provided below, the non-competition fee shall be $12,500 per month and
payment thereof shall be made on the fifteenth day of each month with the first
such payment being due on the fifteenth day of the nineteenth full calendar
month after the Date of Commencement, and relating to the eighteenth such month.
Such monthly payments shall continue beyond the three-year term until a total of
$450,000 has been paid. Notwithstanding the foregoing, each such monthly payment
(except the final payment) shall be limited as provided in Section 7, and any
cumulative shortfall (whether by deferral described above or the limitation of
Section 7) in the total amount of payments due to CTH under this Section 3 shall
be added to the final payment due on the seventh anniversary of the Date of
Commencement.
4
<PAGE>
4. Consulting Agreement. YRMP further agrees to enter into a five-year
---------------------
consulting agreement with CTH, in the form attached hereto as Exhibit "D", the
consideration for which will be $100,000 per annum, payable by YRMP to CTH on a
monthly basis, in arrear. on the 15th day of the month following the month for
which such payment is due; provided, however, that the first payment pursuant to
this Section 4 shall be made on the fifteenth day of the nineteenth full
calendar month after the Date of Commencement and shall relate to the eighteenth
such month. Such monthly payments shall continue beyond the five-year term of
the Consulting Agreement until the full $500,000 due thereunder has been paid.
Notwithstanding the foregoing, each such monthly payment (except the final
payment) shall be limited as provided in Section 7, and any cumulative shortfall
(whether by deferral described above or the limitation of Section 7) in the
total amount of payments due to CTH under this Section 4 shall be added to the
final payment due on the seventh anniversary of the Date of Commencement.
5. Turn-Key License Agreement. YRMP agrees to purchase the turn-key
----------------------------
license agreement between Oxford Oncology Group and CTI dated August 10, 1994,
for an aggregate amount of $250,000, which will be evidenced by a Promissory
Note (the "Turn-Key Note") made by YRMP to the order of CTH substantially in the
form attached hereto as Exhibit "E". YRMP shall assume, as a principal, all
contractual rights, guarantees and obligations, as defined in the turn-key
license agreement.
5
<PAGE>
6. Option Agreement. YRMP shall pay CTH an aggregate amount of $750,000
-----------------
for a fifteen year option, subject to adjustment as provided in Section 7 below,
to elect to participate as an up to 50% "partner" (or similar relationship) with
CTH or any of its Affiliates in any future transactions whereby CTH or its
Affiliates establish or operate a radiation treatment facility similar to the
business presently contemplated at the Facility; provided, however, that the
foregoing option shall not apply to medical facilities currently operated or
under development by CTH's Affiliates in West Palm Beach, Florida, Logan, West
Virginia and Lakewood, New Jersey. The payment required in this Section shall be
evidenced by a Promissory Note (the "Option Note") made by YRMP to the order of
CTH, substantially in the form attached hereto as Exhibit "F."
7. Payments. The payments to be made to CTH and/or CTI as contemplated in
--------
Sections 3 through 6, above, including the payments for consulting fees,
non-competition fees and payments under the Notes as contemplated above, shall
be subject to the following: Such payments shall be made from, and only from, up
to 10% of the Net Cash Collections of the Facility calculated on a monthly basis
for the month prior to the month in which payment is being made. The proceeds
available from such 10% of Net Cash Collections shall be paid to satisfy in the
following order of priority, (i) YRMP's obligations under the Non-Competition
Agreement, (ii) YRMP's obligations under the Consulting Agreement, (iii) YRMP's
obligations under the Turn-Key Note, and finally (iv) YRMP's obligations under
the Option Note.
6
<PAGE>
YRMP shall also pay to CTH the amount of $250,000 in cash or such
--------
greater amount of actual expenses incurred by CTH in connection with the
development of the Facility, as YRMP shall agree, payable in equal, monthly
installments over a 12-month period beginning on the fifteenth day of the
seventh full calendar month following the Date of Commencement. Such amount
shall represent the reimbursement of CTH for its expenses associated with its
development of the Facility, and which amount shall also serve as an
unrestricted deposit and shall be the property of CTH and applied as follows;
provided that upon the expiration of the seven-year term of the Notes, and only
- -------- --------
so long as all of the contractual and lease payments to be made by YRMP to CTH
- -------
and/or CTI, as provided in Sections 3 and 4, above, have been made, then the
aforementioned deposit (i.e., $250,000 or the actual amount of approved expenses
--------
if greater) will be "credited" toward the outstanding principal amount of and
interest owing under the Notes, in the order of priority set forth above in this
Section 7, so that the principal amount of the Turn-Key Note is paid in full, in
any event. If, after such application, there is still a balance owing on the
Option Note, YRMP shall have the option of paying such Note in full in order to
preserve the entire fifteen (15) year period of the option set forth in Section
6, or of paying only a part or none of such balance, in which event the term in
Section 6 whereby YRMP is provided a right of participation in certain future
transactions shall be adjusted to reduce such term in proportion to the
aggregate of the amount received by CTH as payments due under the Option Note.
7
<PAGE>
For example, if the remaining balance owed to CTH under the Option Note after
the expiration of the seven-year term is $375,000, then 50% would remain unpaid
and the fifteen-year term of the "participation option" of Section 6 would be
reduced by 50% (or 7 1/2 years). To the extent that the amount of the deposit
exceeds the outstanding amounts of the installments of principal and interest
due on the Notes at the expiration of the seven-year term thereof, CTH shall
have the right to retain such excess.
8. Initial Payment. YRMP has paid to CTH $139,000 in cash prior to the
---------------
execution of this Agreement as (LINED OUT- partial -LINED OUT) reimbursement for
payment of construction costs for the Facility, receipt of which is acknowledged
by CTH.
9. The Vault. CTH and CTI jointly and severally warrant the construction of
---------
the vault (the "Vault") to house radiation equipment at the Facility until the
earlier to occur of the following events: (i) the equipment is used to treat the
first patient or (ii) the Vault has been tested for leakage and it is confirmed
that the Vault is in compliance with all applicable Federal and New York State
and local laws, regulations, codes and standards (the "Applicable Laws") with
respect to construction and radiation shielding (the "Conditions"). CTH shall be
responsible for testing the Vault to confirm that it is in compliance with
Applicable Laws, and shall pay all costs associated with such testing. YRMP
shall provide CTH, its employees, agents and contractors access to the Facility
and the Vault to conduct the required tests. Once either of the Conditions has
been satisfied, YRMP shall be responsible to assure that the Vault continues to
8
<PAGE>
comply with the Applicable Laws and neither CTH nor CTI shall have any further
liability with respect to construction or operation of the Vault.
10. Assignment and Assumption of Construction Agreement. CTH hereby
------------------------------------------------------
agrees to Assign to YRMP and YRMP hereby agrees to assume from CTH that certain
Standard Form of Agreement between Owner and Contractor between CTH and Milio
Construction Co. Inc.
11. Indemnification.
---------------
(a) Indemnity by YRMP. (1) YRMP shall indemnify and hold harmless
-----------------
CTH and CTI and their respective successors and assigns, against, and in respect
of, any and all damages, claims, losses, and liabilities, including attorney's
fees and costs at the pre-trial, trial and appellate levels, which may arise out
of: (i) any breach or violation of this Agreement by YRMP; (ii) any breach of
any covenant set forth in Section 2, above; or (iii) any leakage of radiation at
the Facility occurring after either of the Conditions has been satisfied.
(b) Indemnification by CTH and CTI. CTH and CTI shall, jointly and
------------------------------
severally, indemnify and hold harmless YRMP, its successors and assigns, against
and in respect of, any and all damages, claims, losses or liabilities, including
attorney's fees and costs at the pre-trial, trial and appellate levels, which
may arise out of: (i) any breach or violation of this Agreement by either of or
both of them; or (ii) any leakage of radiation at the Facility occurring before
either of the Conditions has been satisfied.
9
<PAGE>
(c) Notice of Claim. Upon obtaining knowledge thereof, the party
---------------
seeking indemnification hereunder (the "Indemnitee") shall promptly notify YRMP
or CTH and CTI (the "Indemnitor") in writing of any damage, claim, loss,
liability or expense which the Indemnitee has determined has given or could give
rise to a claim under subsections (a) or (b) of this Section 11 (such written
notice being hereinafter referred to as a "Notice of Claim"). A Notice of Claim
shall specify, in reasonable detail, the nature of any such claim giving rise to
a right of indemnification.
(d) Defense of Third Party Claims. With respect to any claim or
-------------------------------
demand set forth in a Notice of Claim relating to a third party claim, the
Indemnitor shall defend, in good faith and at its sole expense, any such claim
or demand, and the Indemnitee shall have the right to participate in the defense
of any such third party claim. So long as the Indemnitor is defending in good
faith any such third party claim, the Indemnitee shall not settle or compromise
such third party claim. The Indemnitee shall make available to the Indemnitor or
its representatives all records and other materials reasonably required by the
Indemnitor for its use in contesting any third party claim and shall cooperate
fully with the Indemnitor in the defense of all such claims. If the Indemnitor
does not so elect to defend any such third party claim, Indemnitee shall have no
obligation to do so.
(e) Limitation on Claims. In case any event shall occur which
----------------------
would otherwise entitle either party to assert a claim for indemnification
10
<PAGE>
hereunder, no loss, damage or expense shall be deemed to have been sustained by
such party to the extent of (a) any tax savings realized by such party with
respect thereto, or (b) any proceeds received by such party from any insurance
policies with respect thereto. No Indemnitee shall be required to institute any
insurance claim or exhaust any remedies against any insurance carrier as a
condition to claiming or obtaining indemnification hereunder.
12. Miscellaneous.
-------------
(a) Waiver. Any term or provision of this Agreement may be waived at
------
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
(b) Entire Agreement. This Agreement, along with the agreements
-----------------
attached hereto as Exhibits "A" - "F", contains the entire understanding of the
parties hereto with respect to the transactions contemplated hereby, and may not
be amended, modified or altered, except by an instrument in writing signed by
the party against whom such amendment, modification or alteration is sought to
be enforced.
(c) Governing Law. This Agreement shall be construed and interpreted
-------------
in accordance with the laws of the State of New York.
(d) Binding Effect. This Agreement shall bind and inure to the
--------------
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
(e) Expenses. Each party shall pay and be responsible for the costs
--------
and expenses, including, without limitation, attorney's fees, incurred by such
11
<PAGE>
party in connection with the negotiation, preparation and execution of this
Agreement and the transactions contemplated hereby.
(f) Arbitration. If a dispute arises out of this Agreement and the
-----------
parties cannot resolve the dispute through negotiation, the dispute will be
settled by arbitration. Unless otherwise mutually agreed to between the parties,
the arbitration shall be conducted in accordance with the rules and regulations
of the American Arbitration Association then in effect. Such arbitration may be
initiated by any party by making a written demand for arbitration on the other
party. The demand shall contain a statement setting forth the nature of the
dispute, the amount of damages involved, if any, and the remedy sought. Within
ten (10) days of that demand, each party will appoint a mutually agreed upon
arbitrator. If the parties are unable to agree upon an arbitrator within thirty
(30) days or such demand, the matter shall be arbitrated by three (3)
individuals in which case each party hereto shall select an arbitrator and the
third arbitrator and chairman or the arbitration panel shall be selected by the
first two arbitrators chosen, or if they are unable to agree within thirty (30)
days of the selection of the third arbitrator, the third arbitrator and chairman
shall be appointed by the American Arbitration Association. Judgment on the
award rendered by the arbitrators may be entered by any court having
jurisdiction thereof. The cost of arbitration shall be shared equally between
the parties.
12
<PAGE>
(g) No Rights to Others. Nothing herein contained or implied is
--------------------
intended or shall be construed to confer upon or give to any person, firm or
corporation, any rights other than the parties hereto.
(h) Notices. All notices, requests, demands and other communications
-------
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by facsimile with
a hard copy sent by U.S. Mail, or when delivered by private overnight courier
service. e.g., Federal Express, to the party at the address set forth below or
to such other address as either party may from time to time give notice of in
accordance with the provisions hereof.
If to CTH or CTI: Cancer Treatment Holdings, Inc.
4491 South State Road 7
Suite 200
Fort Lauderdale, Florida 33314
Attention: Ullrich Klamm, Ph.D.
Facsimile: (305) 321-9588
If to YRMP: Yonkers Radiation Medical Practice, P.C.
138 South Broadway
Yonkers, New York ___________
Attention: President
Facsimile: _________________________
With a copy to: Radiation Therapy Regional Center
1850 Boy Scout Drive
Suite 101A
Fort Myers, Florida 33907
Attention: G. David Schiering, Esq.
Facsimile: (941) 936-2683
(i) Counterparts. This Agreement may be executed simultaneously in
two counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same agreement, binding upon both parties
13
<PAGE>
hereto, notwithstanding that both parties are not signatories to the original or
the same counterpart.
IN WITNESS WHEREOF, the parties have caused this Umbrella Agreement to be
executed as of the day and year first above written.
CANCER TREATMENT HOLDINGS, INC.
By: /s/Ullrich Klamm Ph.D.
-----------------------------
CTI OF NEW YORK, INC.
By: /s/Ullrich Klamm Ph.D.
-----------------------------
YONKERS RADIATION MEDICAL
PRACTICE, P.C.
By: /s/Daniel Dosoretz
-----------------------------
14
<PAGE>
SCHEDULE OF EXHIBITS
--------------------
Exhibit "A" - Sub-Sublease
Exhibit "B" - Assignment and Assumption of Lease
Agreement
Exhibit "C" - Non-Competition Agreement
Exhibit "D" - Consulting Agreement
Exhibit "E" - Turn-Key Note
Exhibit "F" - Option Note
15
<PAGE>
SUB-SUBLEASE
------------
THIS SUB-SUBLEASE, made as of this 14th day of May, 1996, by and between
----
CTI OF NEW YORK, INC., a New York Corporation ("CTI"), and YONKERS RADIATION
MEDICAL PRACTICE, P.C. ("YRMP"), a New York corporation, having its principal
place of business at, 138 South Broadway, Yonkers, New York.
W I T N E S S E T H:
--------------------
WHEREAS, CTI hereby represents and warrants that it has sublet the ground
floor of the building located at 138 South Broadway, Yonkers, New York (the
"Premises") pursuant to that certain Sublease (the "Sublease") dated May 17,
1995, by and between St. Josephs Hospital, Yonkers (the "Sublessor"), as
Sublessor and CTI of New York, Inc., as Sublessee, a copy of which Sublease is
attached hereto as Exhibit "A"; and
WHEREAS, CTI represents and warrants that said Sublease is in full force
and effect and that no defaults thereunder have occurred or, to the best of its
knowledge, are threatened; and
WHEREAS, YRMP desires to sub-sublet the Premises and CTI is willing to
sub-sublet the Premises to YRMP on the terms and conditions hereinafter set
forth; and
WHEREAS, CTI has deposited with Sublessor the sum of $10,000 as security
for performance of its obligations under the Sublease.
NOW, THEREFORE, CTI, for and in consideration of the rents, covenants and
agreements hereinafter contained on the part of YRMP to be paid, kept and
performed, does hereby sub-sublet and demise unto YRMP, and YRMP hereby takes
EXHIBIT "A"
<PAGE>
and hires from CTI, the Premises together with all personal property and
fixtures now installed or to be installed at the Premises,
TO HAVE AND TO HOLD the same unto YRMP, its successors and assigns for a
term to commence on May __, 1996 (the "Commencement Date") and to expire on
April 30, 2003, subject to the Sublease and upon the rentals, terms, covenants
and conditions hereinafter set forth,
AND CTI and YRMP hereby further agree as follows:
RENTAL PAYMENTS
---------------
1. The recitals set forth above are true and correct and are
hereby incorporated into this Sub-sublease by reference.
2. YRMP covenants and agrees to pay CTI an annual base rental of
$139,677.50 for the first year of the term hereof payable in equal monthly
installments of $11,639.79, plus sales tax, if any, which installments shall be
payable to CTH monthly, in advance on or before the 1st day of each month for
which the rent is otherwise due. YRMP's obligations to commence shall begin on
the Commencement Date with CTI remaining responsible for its obligations to pay
rent under the Sublease attached hereto as Exhibit "A". The annual base rent due
and payable hereunder in the second through seventh years is set forth on
Schedule "A" attached hereto and made a part hereof.
3. YRMP shall not be responsible for the payment of any real estate
taxes or assessments, or any portion of any such real estate taxes or
2
<PAGE>
assessments during the term of this Sub-sublease. YRMP will, however, be solely
responsible for the payment of all utilities, including metered water charges,
to that portion of the Premises occupied by YRMP.
TERMS AND CONDITIONS
--------------------
4. This Sub-sublease is subject to the terms, provisions and covenants of
that certain Sublease (see Exhibit "A") dated May 17, 1995, by and between St.
Josephs Hospital, Yonkers as Sublessor and CTI of New York, Inc., as Sublessee,
and YRMP shall hereby enjoy all of the benefits and assume all of the
obligations of CTI set forth therein.
5. Notwithstanding the provisions of paragraph 4, above, CTI hereby
reserves the right for itself and for 138/Fourth Avenue Corp., as Landlord (the
"Landlord"), under that certain Lease dated December 1994 (the "Lease"), a copy
of which is attached hereto as Exhibit "B", to enter the Premises, said right
inuring to the benefit of the Landlord as well as to CTI.
6. With respect to any work, services, repairs, repaintings and restoration
or the performance of other obligations required of the Landlord under the
Lease, CTI's sole obligations with respect thereto shall be to request the same
upon the request of YRMP and to use its best efforts to obtain the same from the
Landlord.
7. Each party hereto agrees to perform and comply with the terms and
provisions, covenants and conditions of the Lease and the Sublease, and not to
do, suffer or permit anything to be done that would result in a default or cause
the Sublease and/or the Lease to be terminated or forfeited.
3
<PAGE>
8. In connection with any alterations desired to be made by YRMP, the terms
of the Lease shall apply. In addition, YRMP shall also obtain CTI's written
consent prior to making any such alterations, which consent CTI agrees to not
unreasonably withhold.
9. Absent the prior written approval of CTI, YRMP shall have no right to
assign or transfer its interest under this Sub-sublease to any third party or
entity not affiliated, controlled, managed, owned by, or under common control
with, YRMP.
10. If YRMP shall fail to pay the rent as provided herein, then CTI may,
unless YRMP shall have cured such default within 10 days after written notice
thereof from CTI, exercise any of the remedies of the Landlord set forth in
Paragraphs 17, 18 and 19 of the Lease, and YRMP shall remain liable to the
extent provided therein.
11. YRMP may use the Premises solely for the purposes identified in
Paragraph 45 of the Lease.
12. CTI's rights under the Sublease and the Lease (excepting rights as are
personal to CTI) may be enforceable against the Sublessor and the Landlord by
YRMP on behalf of CTI; provided, however, that YRMP shall advise CTI, in
writing, before taking any action to enforce such rights.
13. YRMP agrees and covenants to protect, indemnify and hold CTI, its
agents, officers, employees and affiliates harmless from any and all claims,
suits liability and damages or expenses, including legal fees and costs, at the
pre-trial, trial and appellate levels, by reason of any injury or injuries
4
<PAGE>
sustained by anyone or to the Premises, including injuries caused by leakage of
radiation arising during the term of this Sub-sublease or occurring during
YRMP's use and occupancy of the Premises.
14. During the term of this Sub-sublease or any extension thereof, YRMP
shall maintain, at its sole cost and expense, property damage and personal
liability insurance, which policies name CTI, Sublessor and Landlord as an
additional insured. Said policies shall provide personal injury coverage of at
lease $3,000,000 in the aggregate and $1,000,000 per individual, and $500,000
for property damage. Said insurance limits have been agreed to by CTI based upon
YRMP's representation that it will require all physicians working at the
Premises to carry their own individual insurance with personal injury and
property damage coverage of no less than those amounts provided under YRMP's
insurance policies. Each of said policies shall also provide that CTI, Sublessor
and Landlord be notified in writing by the insurer 30 days prior to any
cancellation or termination of said policies. In the event YRMP fails to
maintain such coverage during the term of this Sub-sublease, CTI may, but is not
required to, obtain such insurance coverage, the cost of which shall be paid for
by YRMP as additional rent. A certificate(s) of insurance confirming the
placement of the insurance required by this Sub-sublease shall be delivered to
CTI, Sublessor and Landlord prior to the Commencement Date hereof. YRMP hereby
releases CTI, to the extent of its insurance coverage, from any and all
liability for any loss or damage caused by fire or any of the extended coverage
5
<PAGE>
casualties or any other casualty insured against, even if such fire or other
casualty shall be brought about by the fault or negligence of CTI, or any
persons claiming under CTI, provided, however, this release shall be in force
and effect only with respect to loss or damage occurring during such time as the
YRMP's policies of fire and extended coverage insurance shall contain a clause
to the effect that this release shall not affect such policies or the right of
the YRMP to recover thereunder. YRMP agrees that its fire and extended coverage
insurance policies shall include such a clause so long as the same is
obtainable. Except as provided in this paragraph, nothing in the Sub-sublease
contained shall be deemed to release either party thereto from liability for
damages resulting from the fault or negligence of said party or its agents or
from responsibility for repairs necessitated thereby or by any default thereof
hereunder.
15. Any notices or demands to be given pursuant to the Lease, the Sublease
or this Sub-sublease, shall be sent to CTI and/or YRMP at the addresses above
set forth, or at such other addresses as either party shall designate by written
notice given to the other party in conformity herewith.
16. YRMP shall deposit with CTI the sum of $10,000 as security for the full
and faithful performance by YRMP of all of the terms, covenants and conditions
of this Sub-sublease. CTI will assign to YRMP its right to recover from the
Sublessor the security deposit that CTI deposited with the Sublessor, if the
Sublease is assigned to YRMP. If the Sublease is not assigned to YRMP, YRMP's
6
<PAGE>
security deposit under this Sub-sublease shall be applied in accordance with the
provisions of the Sublease and to the extent Sublessor withholds CTI's deposit,
CTI will withhold YRMP's deposit. To the extent Sublessor returns the whole or
any portion of CTI's deposit to CTI, CTI will return such amounts to YRMP at the
expiration of the term of the Sub-sublease; provided that YRMP has fully and
faithfully performed all of the terms covenants and conditions of this
Sub-sublease.
17. This Sub-sublease shall be construed and enforced in accordance with the
laws of the State of New York. This Sub- sublease may only be modified or
changed by a written agreement signed by both CTI and YRMP.
IN WITNESS WHEREOF, the parties hereto have caused this Sub- sublease to
be executed as of the day and year first above written.
WITNESSES: SUB-SUBLESSOR:
CTI OF NEW YORK, INC.
/s/ Indistinguishable By: /s/Ullrich Klamm Ph.D.
- ------------------------------ -----------------------------
/s/ Indistinguishable Its: President
- ------------------------------ ----------------------------
SUB-SUBLESSEE:
YONKERS RADIATION MEDICAL
PRACTICE, P.C.
/s/ Indistinguishable By: /s/Daniel Dosoretz
- ------------------------------ -----------------------------
/s/ Indistinguishable Its: President
- ------------------------------ ----------------------------
7
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF LEE )
BEFORE ME, the undersigned authority, personally appeared ULLRICH KLAMM,
--------------
as PRESIDENT of YONKERS RADIATION MEDICAL PRACTICE, P.C., who is personally
---------
known to me or who has produced DANIEL DOSORETZ as identification, and he/she
---------------
stated that he/she executed the within instrument on behalf of said
corporation voluntarily for the purposes set forth therein.
WITNESS my hand and official seal, this 14th day of May, 1996.
----
/s/Maria Margarita Suarez
- ------------------------------- -------------------------------
Notary Public, State of Florida (Print, type or stamp
At Large commissioned name of
Notary Public) 2/26/00
SEAL
STATE OF )
) SS:
COUNTY OF )
BEFORE ME, the undersigned authority, personally appeared ULLRICH KLAMM,
--------------
as PRESIDENT of CTI OF NEW YORK, INC., who is personally known to me or who
has produced as identification, and he/she stated that
---------------------
he/she executed the within instrument on behalf of said corporation voluntarily
for the purposes set forth therein.
WITNESS my hand and official seal, this 14th day of May, 1996.
----
/s/Maria Margarita Suarez
- ------------------------------- -------------------------------
Notary Public, State of Florida (Print, type or stamp
At Large commissioned name of
Notary Public) 2/26/00
SEAL
8
<PAGE>
SCHEDULE A TO SUB-SUBLEASE DATED MAY __, 1996
SUBLESSEE'S RENT - YEARS 2 THROUGH 7
------------------------------------
YEAR PER YEAR RENT PER MONTH RENT
- ---- ------------- --------------
2 $143,171.25 $11,930.94
3 $146,840.31 $12,236.69
4 $150,692.12 $12,557.68
5 $154,737.02 $12,894.75
6 $158,983.72 $13,248.64
7 $163,442.38 $13,620.20
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
-----------------------------------
CTI OF NEW YORK, INC., a New York corporation ("Assignor") in
consideration of the sum of Ten and No/100 Dollars ($10.00) in hand paid and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, hereby assigns, transfers, sets over and conveys to YONKERS
RADIATION MEDICAL PRACTICE, P.C., a New York corporation ("Assignee"), having
its principal place of business at, 138 South Broadway, Yonkers, New York, all
of Assignor's right, title and interest in and to that certain Sublease (the
"Sublease") dated May 17, 1995, by and between St. Josephs Hospital, Yonkers
(the "Sublessor"), as sublessor and CTI of New York, Inc., as sublessee, a true
and complete copy of which Sublease, together with all amendments thereto, if
any, are attached hereto as Exhibit "A", and in any and all security deposits
thereunder in the possession of the Sublessor.
Assignor represents and warrants that:
(a) Assignor is the sole owner of all of the sublessee's right,
title and interest in and to the Sublease; and
(b) The Sublease is valid and enforceable and has not been altered,
modified or amended, except as disclosed to Assignee in Exhibit
"A."
Assignee hereby accepts the foregoing Assignment and agrees to
assume, fulfill, perform and discharge all the various commitments, obligations
and liabilities of Assignor under and by virtue of the Sublease hereby assigned,
and does hereby agree to defend, indemnify and hold harmless Assignor from any
liability, damages, causes of actions, expenses and attorneys' fees incurred by
Assignor by reason of the failure of Assignee from and after the effective date
hereof to fulfill, perform and discharge all of the various commitments,
obligations and liabilities of Assignor under and by virtue of the Sublease
assigned hereunder.
IN WITNESS WHEREOF, Assignor has executed this Assignment this
14th day of May , 1996, which Assignment is effective this date.
- ----- --------- -----
ASSIGNOR:
WITNESSES:
CTI OF NEW YORK, INC.
/s/Indistinguishable By: /s/Ullrich Klamm Ph.D.
- ------------------------------- -----------------------------
/s/Indistingushable Its: President
- ------------------------------- ----------------------------
EXHIBIT "B"
<PAGE>
ASSIGNEE:
YONKERS RADIATION MEDICAL
PRACTICE, P.C.
/s/Indistingushable By: /s/Daniel Dosoretz
- ------------------------------- -----------------------------
/s/Indistingushable Its: President
- ------------------------------- ----------------------------
STATE OF FLORIDA )
) SS:
COUNTY OF LEE )
BEFORE ME, the undersigned authority, personally appeared DANIEL DOSORETZ,
---------------
as PRESIDENT of YONKERS RADIATION MEDICAL PRACTICE, P.C., who is personally
------------
known to me or who has produced as identification, and
------------------------
he/she stated that he/she executed the within instrument on behalf of said
corporation voluntarily for the purposes set forth therein.
WITNESS my hand and official seal, this 14th day of May, 1996
---- ---- ----
/s/Maria Margarita Suarez
- ------------------------------- -------------------------------
Notary Public, State of Florida (Print, type or stamp
At Large commissioned name of
Notary Public)
SEAL
2
<PAGE>
STATE OF FLORIDA )
) SS:
COUNTY OF LEE )
BEFORE ME, the undersigned authority, personally appeared ULLRICH KLAMM,
---------------
as PRESIDENT of CTI OF NEW YORK, INC., who is personally known to me or who
-------------
has produced as identification, and he/she stated
-----------------------------
that he/she executed the within instrument on behalf of said corporation
voluntarily for the purposes set forth therein.
WITNESS my hand and official seal, this 14th day of May, 1996
---- ---- ----
/s/Maria Margarita Suarez
- ------------------------------- -------------------------------
Notary Public (Print, type or stamp
commissioned name of
Notary Public)
SEAL
3
<PAGE>
NON-COMPETITION AGREEMENT
FOR VALUABLE CONSIDERATION, the receipt and adequacy of which are hereby
acknowledged, and in connection with an Agreement among CANCER TREATMENT
HOLDINGS, INC. ("CTH"), CTI OF NEW YORK, INC. ("CTI," and together with CTH, the
"First Party") and YONKERS RADIATION MEDICAL PRACTICE, P.C. ("YRMP"), of even
date herewith, the undersigned First Party hereby agrees with YRMP not to (1)
engage in the development or ownership of (except as holder of less than five
percent (5%) of the shares of a corporation listed on a recognized stock
exchange, or traded over the counter, if price quotations are regularly
published in the Wall Street Journal), or (2) serve as an employee of or
independent contractor for the provision of medical administrative services to,
any entity or facility which engages in the provision of radiation therapy
services (the "Prohibited Activity"), for a period of three (3) years from the
date hereof, anywhere in Westchester or the Bronx, New York either directly or
indirectly, as a partner, owner, agent, representative, officer, director, or
shareholder; provided, however, that the First Party may engage in the
Prohibited Activity with the Albert Einstein College of Medicine-Montefiori
Medical Center, located at 3301 Bainbridge Avenue, Bronx, New York. (LINED OUT-
or any venture in such geographical area so long as the First Party offers the
Second Party a right of first refusal of at least a 50% interest with respect to
any such venture.-LINED OUT) The parties acknowledge that a breach of this
EXHIBIT "C"
<PAGE>
covenant may not be fully compensable by money damages and that therefore, in
the event of a breach or anticipated breach, YRMP, its successors and assigns or
its/their designee shall be entitled to injunctive relief as well as such other
remedies as may be available at law or in equity.
This instrument shall be binding upon the First Party and its successors
and assigns, and shall inure to the benefit of YRMP and its successors and
assigns.
DATED this 14th day of May, 1996.
------
Attest: CTI of NEW YORK, INC.
/s/Indistinguishable By: /s/Ullrich Klamm Ph.D.
- ------------------------------- -----------------------------
/s/Indistinguishable Its: President
- ------------------------------- ----------------------------
CANCER TREATMENT HOLDINGS, INC.
/s/Indistinguishable By: /s/Ullrich Klamm Ph.D.
- ------------------------------- -----------------------------
/s/Indistinguishable Its: President
- ------------------------------- ----------------------------
YONKERS RADIATION MEDICAL
PRACTICE, P.C.
/s/Indistinguishable By: Daniel Dosoretz
- ------------------------------- -----------------------------
/s/Indistinguishable Its: President
- ------------------------------- ----------------------------
2
<PAGE>
CONSULTING AGREEMENT
--------------------
THIS CONSULTING AGREEMENT (the "Agreement") is entered into this 14th day
----
of May, 1996, between CANCER TREATMENT HOLDINGS, INC., a Nevada corporation (the
"Consultant") and YONKERS RADIATION MEDICAL PRACTICE, P.C., a New York
professional corporation ("YRMP").
W I T N E S S E T H:
--------------------
WHEREAS, YRMP has acquired from Consultant's affiliate an opportunity to
create and operate a radiation therapy center located at 138 South Broadway,
Yonkers, New York (the "Facility"); and
WHEREAS, Consultant has experience in managing radiation therapy centers
which experience YRMP wishes to utilize; and
WHEREAS, YRMP and Consultant each desire to agree on terms whereby
Consultant will provide consulting services to YRMP in connection with the
operation of the Facility;
NOW, THEREFORE, it is mutually agreed between the parties as follows:
1. Consulting Services. YRMP hereby engages Consultant to provide YRMP
--------------------
with consulting services in connection with the operation of the Facility.
Representatives of Consultant shall be available to consult with YRMP, its
agents, employees and other personnel, approximately forty (40) hours per month
during the term of this Agreement. Consultant shall provide YRMP with advice at
such times as are mutually agreeable to the parties with respect to operation of
the Facility, which shall include, but not be limited to, advice concerning
EXHIBIT "D"
<PAGE>
management of the Facility, insurance claim processing, medical and clinical
management affairs and management of personnel. Representatives of Consultant
shall be available to render the consulting services required hereunder at such
times during the week as are reasonably necessary to comply with YRMP's normal
business operations at the Facility. Availability by telephone and use of mail
shall satisfy Consultant's obligations with respect to availability. Consultant
shall not be required to render services outside Westchester County, New York,
or Consultant's principal office in the State of Florida. Consultant may engage
in other businesses, except as expressly prohibited by that certain
Noncompetition Agreement, of even date herewith among Consultant, CTI of New
York, Inc. and YRMP.
2. Compensation. YRMP shall pay Consultant for its consulting services
------------
hereunder, EIGHT THOUSAND THREE HUNDRED THIRTY THREE AND 33/100 ($8,333.33)
DOLLARS per month for each month during the term of this Agreement, payable in
arrears on or before the fifteenth day of each calendar month following the
month for which such payment is due; provided, however, that the first payment
------------------
pursuant to this Agreement shall be made on the fifteenth day of the nineteenth
full calendar month after the Date of Commencement and shall relate to the
eighteenth such month. Such monthly payments shall continue beyond the 5-year
term hereof until the $500,000 due hereunder has been paid in full. Each such
monthly payment, except the final such payment, shall be limited as provided in
2
<PAGE>
Sections 4 and 7 of that certain Umbrella Agreement of even date herewith among
Consultant, CTI and YRMP.
3. Independent Contractor. In performing the services herein specified,
----------------------
Consultant shall act as an independent contractor and shall be solely
responsible for the payment of all applicable federal, state and local taxes
with respect to amounts received by Consultant from YRMP under this Agreement.
YRMP shall have no obligation to withhold any taxes from such payments pursuant
to Section 2 of this Agreement.
4. Assignment. Consultant may not assign any of its rights or
----------
obligations under this Agreement, except to an affiliate of Consultant, without
the express written consent of YRMP, which consent may be withheld in its sole
discretion.
5. Term. This Agreement shall remain in full force and effect for a
----
period of five (5) years from and after the date first above written unless
terminated earlier pursuant to Section 6 hereof.
6. Termination.
-----------
(a) YRMP may terminate this Agreement upon the occurrence of either
of the following events (subject to Subsection (c), below):
(1) If Consultant substantially defaults in the performance
of any material covenant, agreement, term or provision of this Agreement;
(2) If Consultant declares bankruptcy or materially defaults
on any of its obligations under any other agreement related to or in connection
3
<PAGE>
with the transaction contemplated hereby.
(b) Consultant may terminate this Agreement if YRMP substantially
defaults in the performance of any material covenant, agreement, term or
provision contained in this Agreement (subject to Subsection (c), below).
(c) Upon the occurrence of any of the foregoing and as a condition
to any termination of this Agreement by either of the parties, the
non-defaulting party shall be required to provide written notice to the
defaulting party of the particular event of default. The defaulting party shall
thereafter have thirty (30) business days within which to cure said default. If
the defaulting party shall not have cured said default within said thirty (30)
business days, then, at the option of the non-defaulting party and upon
providing further written notice to the defaulting party, this Agreement shall
terminate as of the date of such further notice.
7. Confidentiality. During the term of this Agreement, and for a period of
---------------
three (3) years thereafter, Consultant agrees to hold confidential and not
disclose to others for any reason, or use for Consultant's own benefit, any
confidential information about YRMP's business learned while performing its
services hereunder, except as required by law to disclose as part of any
proceeding involving the parties, or which becomes a part of the public domain
through no fault of Consultant.
4
<PAGE>
8. Miscellaneous.
-------------
(a) Non-Waiver. No delay or failure by either party to exercise any
----------
right under this Agreement, and no partial or single exercise of that right,
shall constitute a waiver of that or any other right.
(b) Entire Agreement. This Agreement contains the entire
------------------
understanding of the parties hereto with respect to the transactions
contemplated hereby, and may not be amended, modified or altered, except by an
instrument in writing signed by the party against whom such amendment,
modification or alteration is sought to be enforced.
(c) Governing Law. This Agreement shall be construed and
--------------
interpreted in accordance with the laws of the State of New York.
(d) Change in Law. If any change occurs in any applicable law,
-------------
regulation or statute adopted after the date hereof which renders this Agreement
or any material provision hereof unlawful or in contravention of such law,
regulation or statute, the parties hereby agree to negotiate in good faith to
enter into such arrangement which complies with such law, regulation or statute,
and which law, regulation or statute upholds the rights and obligations of the
parties as provided herein.
(e) Binding Effect. This Agreement shall bind and inure to the
--------------
benefit of the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
5
<PAGE>
(f) Arbitration. If a dispute arises out of this Agreement and the
-----------
parties cannot resolve the dispute through negotiation, the dispute will be
settled by arbitration. Unless otherwise mutually agreed to between the parties,
the arbitration shall be conducted in accordance with the rules and regulations
of the American Arbitration Association then in effect. Such arbitration may be
initiated by any party by making a written demand for arbitration on the other
party. The demand shall contain a statement setting forth the nature of the
dispute, the amount of damages involved, if any, and the remedy sought. Within
ten (10) days of that demand, each party will appoint a mutually agreed upon
arbitrator. If the parties are unable to agree upon an arbitrator, the matter
shall be arbitrated by three (3) individuals within 30 days of such demand, in
which case each party hereto shall select an arbitrator and the third arbitrator
and chairman of the arbitration panel shall be selected by the first two
arbitrators chosen or if they are unable to agree within thirty (30) days of the
selection of the third arbitrator, the third arbitrator and chairman shall be
appointed by the American Arbitration Association. Judgment on the award
rendered by the arbitrators may be entered by any court having jurisdiction
thereof. The cost of arbitration shall be shared equally between the parties.
(g) No Rights to Others. Nothing herein contained or implied is
-------------------
intended or shall be construed to confer upon or give to any person, firm or
6
<PAGE>
corporation any rights, other than the parties hereto.
(h) Notices. All notices, requests, demands and other communications
-------
required or permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by facsimile with
a hard copy sent by U.S. Mail, or by private overnight mail service. e.g.,
Federal Express, to the party at the address set forth below or to such other
address as either party may from time to time give notice of in accordance with
the provisions hereof.
If to CTH: Cancer Treatment Holdings, Inc.
4491 South State Road 7
Suite 200
Fort Lauderdale, Florida 33314
Attention: Ullrich Klamm, Ph.D.
Facsimile: (305) 321-9588
If to YRMP: Yonkers Radiation Medical Practice, P.C.
138 South Broadway
Yonkers, New York ____________
Attention: _______________, President
Facsimile:_________________________
With a copy to: Radiation Therapy Regional Center
1850 Boy Scout Drive
Suite 101A
Fort Myers, Florida 33907
Attention: G. David Schiering, Esq.
Facsimile: (941) 936-2683
(i) Counterparts. This Agreement may be executed simultaneously in
------------
two counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same agreement, binding upon both parties
hereto, notwithstanding that both parties are not signatories to the original or
the same counterpart.
7
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to executed as
of the day and year first above written.
CANCER TREATMENT HOLDINGS, INC.
By:/s/Ullrich Klamm Ph.D.
----------------------------
Its: President
---------------------------
YONKERS RADIATION MEDICAL
PRACTICE, P.C.
By: /s/Daniel Dosoretz
----------------------------
Its: President
---------------------------
8
<PAGE>
TURN-KEY NOTE
-------------
$250,000 May 14 , 1996
------- -----------
FOR VALUE RECEIVED, the undersigned, YONKERS RADIATION MEDICAL PRACTICE,
P.C. maintaining a place of business at 138 South Broadway, Yonkers, New York
(hereinafter call the "Maker"), promises to pay to the order of CANCER TREATMENT
HOLDINGS, INC., a Nevada corporation, with its principal place of business at
4491 South State Road Seven, Fort Lauderdale, Florida 33314 (hereinafter called
the "Payee"), at the Payee's aforementioned address, or at such other place as
the Payee may designate in writing to the Maker, in lawful money of the United
States of America, the principal sum of TWO HUNDRED FIFTY THOUSAND ($250,000)
DOLLARS, together with 11-1/4% simple interest calculated on the basis of a
365-day year and the actual number of days elapsed, which principal along with
accrued interest thereon shall be paid in sixty-six (66) equal monthly
installments of ______$5097.01________ DOLLARS (LINED OUT-commencing___________,
1996,-LINED OUT) payable on the fifteenth (15th) day of the full calendar month
following the month for which such payment is due, provided, however, that the
first such payment shall be due on the fifteenth day of the nineteenth full
calendar month after the Date of Commencement as defined in that certain
Umbrella Agreement of even date herewith among Maker, Payee and CTI of New York,
Inc. (the "Umbrella Agreement"), and shall relate to the eighteenth such month.
Each of such payments except the last shall be subject to the limitation
provided for in Section 7 of the Umbrella Agreement , and in the case of the
last such payment, that certain deposit referred to in such Section 7 of the
Umbrella Agreement shall be applied as therein set forth.
If this Note is collected by suit or legal proceeding, the Maker agrees to
pay the holder hereof the costs and reasonable attorneys fees incurred in the
collection hereof.
It is the intention of the parties hereto to comply with applicable usury
laws (now or hereafter enacted); accordingly, notwithstanding any provision to
the contrary in this Note, or in any of the documents securing payment hereof or
otherwise relating hereto, in no event shall this Note or such documents require
the payment or permit the collection of interest in excess of the maximum amount
permitted by such laws. If any such excess of interest is contracted for,
charged, taken, reserved or received under this Note or under the terms of any
of the documents securing payment hereof or otherwise relating hereto, or in the
event that all or part of the principal or interest of this Note shall be
prepaid, so that under any of such circumstances the amount of interest
contracted for, charged, taken, reserved or received under this Note or under
any of the instruments securing payment hereof or otherwise relating hereto,
this Note or otherwise relating hereto, on the amount of principal actually
EXHIBIT "E"
<PAGE>
outstanding from time to time under this Note shall exceed the maximum amount of
interest permitted by applicable usury laws, now or hereafter enacted, then in
any such event (i) the provisions of this paragraph shall govern and control,
(ii) any such excess which may have been collected at final maturity of said
indebtedness either shall be applied as a credit against the then unpaid
principal amount hereof or refunded to the Maker at the Payee's option, and
(iii) upon such final maturity, the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable usury
laws as now or hereafter construed by the courts having jurisdiction thereof.
Without limiting the foregoing, all calculations of the rate of interest
contracted for, charged, taken, reserved or received under this Note or under
such other documents which are made for the purpose of determining whether such
rate exceeds the maximum lawful rate, shall be made, to the extent permitted by
law, by amortizing, prorating, allocating and spreading in equal parts during
the period of the full stated term of the loan evidenced hereby, all interest at
any time contracted for, charged, taken, reserved or received from the Maker or
otherwise by the Payee in connection with such indebtedness.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by the holder hereof and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of the holder hereof except to the extent that
actual cash proceeds of such instrument are unconditionally received by the
holder and applied to this indebtedness in the manner elsewhere herein provided.
There shall be no penalty for prepayment or for late payment hereunder, or
like defaults; provided, however, that the foregoing shall not be construed as a
limitation upon any amounts otherwise due hereunder.
The legality, enforceability and construction of this Note and the
obligations evidenced hereby shall be governed by the law of the State of New
York without regard to its law of conflicts of law, or choice of law and, to the
extent applicable, by the laws of the United States of America.
YONKERS RADIATION MEDICAL PRACTICE, P.C.
By:/s/ Daniel Dosoretz
-------------------------------------
<PAGE>
PROMISSORY NOTE
$750,000 May 14 , 1996
------- ------------
FOR VALUE RECEIVED, the undersigned, YONKERS RADIATION MEDICAL PRACTICE,
P.C. maintaining a place of business at 138 South Broadway, Yonkers, New York
(hereinafter call the "Maker"), promises to pay to the order of CANCER TREATMENT
HOLDINGS, INC., a Nevada corporation, with its principal place of business at
4491 South State Road Seven, Fort Lauderdale, Florida 33314 (hereinafter called
the "Payee"), at the Payee's aforementioned address, or at such other place as
the Payee may designate in writing to the Maker, in lawful money of the United
States of America, the principal sum of SEVEN HUNDRED FIFTY THOUSAND ($750,000)
DOLLARS, together with 11-1/4% simple interest calculated on the basis of a
365-day year and the actual number of days elapsed, which principal along with
accrued interest thereon shall be paid in sixty-six (66) equal monthly
installments of ____$15,291.04________ DOLLARS (LINED OUT- commencing ________,
1996, -LINED OUT) payable on the fifteenth (15th) day of the full calendar month
following the month for which such payment is due, provided, however, that the
first such payment shall be due on the fifteenth day of the nineteenth full
calendar month after the Date of Commencement as defined in that certain
Umbrella Agreement dated as of even date herewith among Maker, Payee and CTI of
New York, Inc. (the "Umbrella Agreement"), and shall relate to the eighteenth
such month. Each of such payments except the last shall be subject to the
limitation as provided in Section 7 of the Umbrella Agreement , and in the case
of the last such payment, that certain deposit referred to in such Section 7 of
the Umbrella Agreement shall be applied as therein set forth and Maker may make
the election set forth in such Section 7 not to pay all or any part of the last
such payment remaining due after such application.
If this Note is collected by suit or legal proceeding, the Maker agrees to
pay the holder hereof the costs and reasonable attorneys fees incurred in the
collection hereof.
It is the intention of the parties hereto to comply with applicable usury
laws (now or hereafter enacted); accordingly, notwithstanding any provision to
the contrary in this Note, or in any of the documents securing payment hereof or
otherwise relating hereto, in no event shall this Note or such documents require
the payment or permit the collection of interest in excess of the maximum amount
permitted by such laws. If any such excess of interest is contracted for,
charged, taken, reserved or received under this Note or under the terms of any
of the documents securing payment hereof or otherwise relating hereto, or in the
event that all or part of the principal or interest of this Note shall be
prepaid, so that under any of such circumstances the amount of interest
EXHIBIT "F"
<PAGE>
contracted for, charged, taken, reserved or received under this Note or under
any of the instruments securing payment hereof or otherwise relating hereto,
this Note or otherwise relating hereto, on the amount of principal actually
outstanding from time to time under this Note shall exceed the maximum amount of
interest permitted by applicable usury laws, now or hereafter enacted, then in
any such event (i) the provisions of this paragraph shall govern and control,
(ii) any such excess which may have been collected at final maturity of said
indebtedness either shall be applied as a credit against the then unpaid
principal amount hereof or refunded to the Maker at the Payee's option, and
(iii) upon such final maturity, the effective rate of interest shall be
automatically reduced to the maximum lawful rate allowed under applicable usury
laws as now or hereafter construed by the courts having jurisdiction thereof.
Without limiting the foregoing, all calculations of the rate of interest
contracted for, charged, taken, reserved or received under this Note or under
such other documents which are made for the purpose of determining whether such
rate exceeds the maximum lawful rate, shall be made, to the extent permitted by
law, by amortizing, prorating, allocating and spreading in equal parts during
the period of the full stated term of the loan evidenced hereby, all interest at
any time contracted for, charged, taken, reserved or received from the Maker or
otherwise by the Payee in connection with such indebtedness.
Any check, draft, money order or other instrument given in payment of all
or any portion hereof may be accepted by the holder hereof and handled in
collection in the customary manner, but the same shall not constitute payment
hereunder or diminish any rights of the holder hereof except to the extent that
actual cash proceeds of such instrument are unconditionally received by the
holder and applied to this indebtedness in the manner elsewhere herein provided.
There shall be no penalty for prepayment or for late payment hereunder, or
like defaults; provided, however, that the foregoing shall not be construed as a
limitation upon any amounts otherwise due hereunder.
The legality, enforceability and construction of this Note and the
obligations evidenced hereby shall be governed by the law of the State of New
York without regard to its law of conflicts of law, or choice of law and, to the
extent applicable, by the laws of the United States of America.
YONKERS RADIATION MEDICAL PRACTICE, P.C.
By: /s/Daniel Dosoretz
-------------------------------------
LOAN AND SECURITY AGREEMENT
between
MED-TECH FUNDING CORPORATION
as Borrower
and
COPELCO/AMERICAN HEALTHFUND, INC.,
as Lender
March 22, 1996
--
Page 1 of 27
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT, dated as of MARCH_22__, 1996 (this
"AGREEMENT"), is entered into by and among MED-TECH FUNDING Corporation, a
Delaware corporation (the "Borrower"), and COPELCO/AMERICAN HEALTHFUND, INC.,
a Delaware corporation (the "Lender").
Preliminary Statement:
----------------------
The Borrower desires to obtain, and the Lender has agreed to provide, a
revolving credit facility which revolving credit facility will be used to
fund the purchase of certain accounts receivable from various healthcare
providers ("Providers"), in each case pursuant to an Accounts Purchase and
Servicing Agreement among the respective Provider, the Borrower, as
Purchaser, and Copelco/American Healthfund, Inc., as Administrator (each a
"Purchase Agreement" and collectively, the "Purchase Agreements");
Intending to be legally bound hereby, the parties hereto agree as follows:
I. CERTAIN DEFINITIONS.
-------------------
1.1 DEFINITIONS. Capitalized terms used but not defined herein shall have
the meanings ascribed to them in the Purchase Agreements. As used in this
Agreement, the following terms shall have these meanings:
"BORROWING BASE" shall mean, as of any date of determination, the lesser
of (i) the sum of each of the Purchaser Capital Investments (in each case as
calculated from time to time) under each Purchase Agreement and (ii) 80% of
the Estimated Net Value of all Purchased Accounts.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or any day
on which banking institutions in New York City are permitted or required by
law, executive order or governmental decree to remain closed or a day on
which the Lender is closed for business.
"COLLATERAL" means (i) all accounts, instruments and general intangibles
of the Borrower, including all assets acquired by the Borrower from the
Providers from time to time pursuant to the Purchase Agreements, including,
without limitation, all of the Borrower's right, title and interest in and to
the Purchased Accounts, all Proceeds (including insurance Proceeds) thereof,
as well as all Commercial Lockboxes, all Government Lockboxes and all
collection accounts and other deposit accounts, and all funds deposited
therein, and any instruments from time to time representing or evidencing the
same; (ii) the Purchase Agreements and any other documents or agreements now
or hereafter in effect relating to the purchase, servicing or processing of
Purchased Accounts (collectively, the "BORROWER ASSIGNED AGREEMENTS"),
Page 2 of 27
<PAGE>
including all rights of the Borrower to receive moneys due and to become due
under or pursuant to the Borrower Assigned Agreements, all rights of the
Borrower to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to the Borrower Assigned Agreements, any claims of the
Borrower for damages arising out of or for breach of or default under the
Borrower Assigned Agreements, and the right of the Borrower to amend, waive
or terminate the Borrower Assigned Agreements, to perform under the Borrower
Assigned Agreements and to compel performance and otherwise exercise all
remedies under the Borrower Assigned Agreements; and all promissory notes
made, from time to time, by the Provider payable to the order of the Borower
as further described in Section 3.11.
"DEFAULT RATE" shall mean 400 basis points above the interest rate
otherwise applicable on all Loans.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 8.1.
"GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally accepted
accounting principles as in effect from time to time in the United States,
consistently applied.
"INDEBTEDNESS FOR BORROWED MONEY" shall mean (i) all indebtedness,
liabilities, and obligations, now existing or hereafter arising, for money
borrowed by the Borrower, whether or not evidenced by any note, indenture, or
agreement and (ii) all indebtedness of others for money borrowed with respect
to which the Borrower has become liable by way of a guarantee or indemnity.
"INTEREST PERIOD" shall mean with respect to any Loan, the weekly period
commencing on the date such Loan is made and ending on the first day prior to
the weekly anniversary thereof and each like weekly period thereafter.
"LIBOR" means the annual rate in effect in the London Interbank Market
applicable to one month deposits of U.S. dollars as reported in the Wall
Street Journal on the second Business Day prior to the date of determination.
If the Wall Street Journal is not published on such Business Day or does not
report such rate, such rate shall be as reported by such other publication or
source as the Lender shall select.
"LIEN" means any lien, mortgage, security interest, chattel mortgage,
pledge or other encumbrance (statutory or otherwise) of any kind securing
satisfaction of an obligation, including any agreement to give any of the
foregoing, any conditional sales or other title retention agreement, any
lease in the nature thereof, and the filing of or the agreement to give any
financing statement under the Uniform Commercial Code of any jurisdiction or
similar evidence of any encumbrance, whether within or outside the United
States.
"LOAN" shall have the meaning set forth in Section 2.1.
Page 3 of 27
<PAGE>
"LOAN DOCUMENTS" shall mean this Agreement, the Note, and all financing
statements and other agreements, documents and certificates required to be
delivered hereunder (other than any Purchase Agreements).
"NOTE" shall mean the Revolving Credit Note.
"OBLIGATIONS" shall mean all now existing or hereafter arising debts,
obligations, covenants, and duties of payment or performance of every kind,
matured or unmatured, direct or contingent, owing, arising, due, or payable
to the Lender by or from the Borrower arising out of this Agreement or any
other Loan Document, including, without limitation, all obligations to repay
principal of and interest on all the Loans, and to pay interest, fees, costs,
charges, expenses, professional fees, and all sums chargeable to the Borrower
under the Loan Documents, whether or not evidenced by any note or other
instrument.
"PERMITTED LIENS" shall mean Liens in favor of the Lender under the Loan
Documents.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, company, business trust or entity.
"POTENTIAL DEFAULT" shall mean an event that with the giving of notice or
lapse of time or both would become an Event of Default.
"PROCEEDS" shall have the meaning assigned to such term in the UCC.
"REGULATION" means any statute, law, ordinance, regulation, order or rule
of any foreign, federal, state, local or other government or governmental
body.
"REVOLVER TERMINATION DATE" shall have the meaning set forth in
Section 2.1.
"REVOLVING LOAN COMMITMENT" shall have the meaning set forth in
Section 2.1.
"REVOLVING CREDIT NOTE" shall have the meaning set forth in Section
2.2.
"UNIFORM COMMERCIAL CODE" or "UCC" shall mean the Uniform Commercial Code
as in effect from time to time in the Commonwealth of Pennsylvania.
1.2 ACCOUNTING TERMS. All accounting terms used herein shall be
construed in accordance with Generally Accepted Accounting Principles.
II. THE LOAN
--------
2.1 THE LOANS.
Page 4 of 27
<PAGE>
(a) Subject to the terms and conditions hereof, the Lender
agrees to make revolving credit loans (collectively called the "LOANS" and
individually a "LOAN") to the Borrower from time to time during the period
commencing the date hereof and ending on MARCH__21__,2001 or on any earlier
date as provided in Section 8.1 hereof (the "REVOLVER TERMINATION DATE"), in
a principal amount not to exceed at any time outstanding in the aggregate TWO
MILLION DOLLARS - $2,000,000) (the "REVOLVING LOAN COMMITMENT").
(b) Within the limits of the Revolving Loan Commitment and the
Borrowing Base, the Borrower may borrow, prepay (in accordance with Section
2.7) and reborrow Loans. All Loans shall, in any event, be repaid by the
Borrower on the Revolver Termination Date.
(c) The Lender's failure to deliver any bill, statement or
invoice with respect to amounts due under this Agreement shall not affect the
Borrower's obligation to pay any installment of principal, interest or any
other amount under this Agreement when due and payable.
2.2 THE NOTE. The Loans shall all be evidenced by a single
promissory note of the Borrower (the "REVOLVING CREDIT NOTE") in principal
face amount equal to the Revolving Loan Commitment, payable to the order of
the Lender and otherwise in the form attached hereto as EXHIBIT A. The
Revolving Credit Note shall be dated the date the first Loan is made and
shall bear interest in accordance with the terms hereof. The Revolving Credit
Note shall mature upon the Revolver Termination Date and, upon maturity, each
outstanding Loan shall be due and payable. The Lender shall maintain records
of all Loans evidenced by the Revolving Credit Note and of all payments
thereon, which records shall be conclusive absent manifest error.
2.3 FUNDING PROCEDURES.
(a) Each request for a Loan shall be made not later than 11:00
a.m. on a Business Day by delivery to the Lender of a written request signed
by the Borrower, or in the alternative a telephone request followed promptly
by written confirmation of the request, in substantially the form reasonably
requested by the Lender from time to time, including the date and amount of
the Loan to be made. Until such time as the Lender shall reasonably direct
the use of a different form of request, the form of request attached hereto
as EXHIBIT B shall be used to request the making of Loans. Each request shall
be received not less than two (2) Business Days prior to the date of the
proposed borrowing. No request shall be effective until actually received by
the Lender. Upon receipt by the Lender the request for a Loan shall not be
revocable by the Borrower.
(b) Not later than the close of business on the date of each
Loan, the Lender shall make available to the Borrower the amount of such Loan
in immediately available funds.
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(c) If the Lender makes a Loan on a day on which all or any
part of an outstanding Loan is to be repaid, the Lender shall apply the
proceeds of the new Loan to make such repayment and only an amount equal to
the difference (if any) between the amount being borrowed and the amount
being repaid shall be made available by the Lender to the Borrower as
provided in paragraph (b).
2.4 INTEREST.
(a) LIBOR. Each Loan shall bear interest on the principal
amount thereof from the date made until such Loan is paid in full, at a rate
per annum initially equal to LIBOR (determined as of the date such Loan is
funded) plus 800 BASIS POINTS. Such rate shall be adjusted by the Lender,
based upon LIBOR determined on the first day of each Interest Period.
(b) DEFAULT RATE.
(i) If any Event of Default specified in Section
8.1(a) or Section 8.1(d) shall occur; or
(ii) If any other Event of Default occurs and the
Lender declares the Note to be immediately due and payable;
THEN, the rate of interest applicable to each Loan then outstanding shall be
the Default Rate. Unless waived by the Lender, the Default Rate shall apply
from the date of the Event of Default until the date such Event of Default or
breach is cured, and interest accruing at the Default Rate shall be payable
upon demand.
2.5 FEES.
(a) ORIGINATION FEE. Upon the execution and delivery of this
Agreement by the Borrower and the Lender, the Borrower shall pay to the
Lender a fee (the "Origination Fee") in an amount equal to $20,000 in
immediately available funds. Once paid, the Origination Fee shall not be
refundable to the Borrower, in whole or in part, for any reason.
(b) Item omitted
(c) Item omitted.
2.6 Item omitted
2.7 PREPAYMENTS. The Borrower shall make such prepayments of the
Loans required for the Borrower to comply with Section 7.7 if at any time the
aggregate outstanding Loans exceed the lesser of (i) the Revolving Loan
Commitment or (ii) the then current Borrowing Base.
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2.8 PAYMENTS.
(a) DUE DATES. Accrued interest on each Loan for each
Interest Period shall be due and payable on the first Business Day
following the end of such Interest Period.
(b) APPLICATION OF PAYMENTS, PAYMENT ADMINISTRATION, ETC. All
payments and prepayments shall be applied first to any unpaid interest and
thereafter to principal and to such other outstanding amounts in such order
as the Lender may specify in its discretion. Except as otherwise provided
herein, all payments of principal, interest, fees, or other amounts payable
by the Borrower hereunder shall be remitted to the Lender in immediately
available funds not later than 11:00 a.m. on the day when due. Whenever any
payment is stated as due on a day which is not a Business Day, the maturity
of such payment shall be extended to the next succeeding Business Day and
interest shall continue to accrue during such extension.
(c) APPLICATION OF FUNDS DUE BORROWER UNDER PURCHASE
AGREEMENTS. The lender, in its capacity as Administrator under the Purchase
Agreements, is hereby authorized to apply any and all amounts due the
Borrower under Section 5(h) of the Purchase Agreements to make any payments
of accrued interest and any payments or prepayments of principal due under
this Agreement.
III. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
3.1 ORGANIZATION, STANDING. The Borrower (i) is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and (ii) has the corporate power and
authority necessary to own its assets, carry on its business and enter into
and perform its obligations hereunder, and under each Purchase Agreement.
3.2 CORPORATE AUTHORITY, ETC. The execution, delivery and
performance of this Agreement and each Purchase Agreement have been duly
authorized by all necessary corporate action of the Borrower. The execution,
delivery and performance of this Agreement and each Purchase Agreement by the
Borrower do not and under present law will not require any consent or
approval of any person, do not and under present law will not violate any
law, rule, regulation order, writ, judgment, injunction, decree,
determination or award, do not and will not violate any provision of its
charter or by-laws, do not and will not result in any breach of any material
agreement, lease or instrument to which it is a party, by which it is bound
or to which any of its assets are or may be subject, and do not and will not
give rise to any Lien upon any of its assets except in favor of the Lender.
Further, the Borrower is not in default under any such agreement, lease or
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instrument. No authorizations, approvals or consents of, and no filings or
registrations with, any governmental or regulatory authority or agency (other
than filings or notices required to perfect any security interests in favor
of the Lender) are necessary for the execution, delivery or performance by
the Borrower of this Agreement or for the validity or enforceability thereof.
3.3 VALIDITY OF DOCUMENTS. Each of this Agreement, the Note and
each Purchase Agreement is the legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms.
3.4 NO LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Borrower of any
nature whatsoever, including without limitation any action, suit, proceeding
or investigation which questions the validity of this Agreement or the
Revolving Credit Note or the right of Borrower to enter into this Agreement
or issue the Revolving Credit Note or to consummate the transactions
contemplated hereby and thereby, nor is the Borrower aware that there is any
basis for the foregoing. The Borrower is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality.
3.5 NEW COMPANY. The Borrower is a new company formed for the sole
purpose of consummating the transactions described in the Purchase
Agreements, this Agreement, and all agreements executed and delivered in
connection therewith and herewith and its only activities have been incident
thereto. Without limiting the foregoing, the Borrower has entered into no
contracts or agreements of any nature except those set forth or referred to
in this Agreement, the Purchase Agreements and certain agreements executed
and delivered in connection therewith and herewith.
3.6 NO SUBSIDIARIES; NO PARTNERSHIPS. The Borrower has no
subsidiaries and is not engaged in any partnership with any other Person, nor
does it hold an equity interest in any other Person.
3.7 COLLATERAL. No Liens in favor of any Person, other than the
Lender, exist on or with respect to the Collateral. Upon the filing of the
financing statements, the security interest granted under this Agreement will
constitute a valid, first priority perfected security interest (to the extent
perfection may occur by filing). Attached hereto as Schedule 3.7 is a list
showing all places at which the Borrower maintains, or will maintain, the
Collateral and all records relating to the Collateral. The address of the
chief executive office of the Borrower is identified on Schedule 3.7.
3.8 NO INVESTMENTS, MATERIAL AGREEMENTS. The Borrower (i) is not a
party to any indenture, agreement, contract, instrument or lease or subject
to any charter, by-law or other corporate restriction or any injunction,
order, or other corporate restriction or decree, which would materially and
adversely affect its business, operations, properties or assets; and (ii) has
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no material contingent or long term liability or commitment which would
materially affect its business that has not been disclosed to the Lender in
writing.
3.9 NO CONTINGENT LIABILITIES. The Borrower has not assumed,
guaranteed or endorsed, or otherwise become directly or contingently liable
in connection with, any liability of any other Person.
3.10 NO DEFAULTS. No Event of Default or other event, act or
occurrence which, with the giving of notice or the lapse of time or both
would become an Event of Default has occurred and is continuing. Without
limiting the generality of the foregoing, the Borrower is in compliance with
all terms, covenants and conditions applicable to it under each Purchase
Agreement to which it is a party, and the Borrower knows of no default by the
Provider under any such Purchase Agreement.
3.11 INITIAL CAPITALIZATION. The Borrower has received an initial
capital contribution from its shareholders in the aggregate amount of $75,000
(the "Initial Capital Contribution") which the Borrower may lend and relend,
in whole or in part, from time to time, to the Provider provided such loan is
evidenced by a demand promissory note made by the Provider and delivered, as
collateral security for the Borrower's obligations hereunder to the Lender.
3.12 DISCLOSURE GENERALLY. The representations and statements made
by or on behalf of the Borrower in connection with this Agreement and each
Loan hereunder, do not contain any untrue statement of a material fact or
omit to state a material fact or any fact necessary to make the
representations made not materially misleading. No written information,
exhibit, report or financial statement furnished by the Borrower to the
Lender in connection with this Agreement or the Loans contains any material
misstatement of fact or omits to state a material fact or any fact necessary
to make the statements contained therein not materially misleading.
IV. SECURITY.
4.1 GRANT OF SECURITY INTEREST. To secure the payment, promptly when
due, and the punctual performance of all of the Obligations, the Borrower
hereby grants, pledges and assigns to the Lender, a general continuing lien
upon, and security interest in, all of the Collateral.
4.2 FINANCING STATEMENTS. The Borrower shall execute and deliver to
the Lender, at any time or times hereafter, such Uniform Commercial Code
financing statements and all such other agreements and documents, and do such
other and further acts as the Lender may reasonably request, in form and
substance reasonably acceptable to the Lender, in order to further evidence
or carry out the intent of Section 4.1 or to perfect the lien and security
interest created pursuant to Section 4.1 or intended so to be, and the
Borrower shall pay the costs of any recording or filing of the same. The
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Borrower agrees, to the extent permitted by applicable law, that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement and may be filed
by the Lender as such. The Lender may execute and file financing statements
and amendments thereto without the Borrower's signature to the extent
permitted by law.
4.3 INSPECTION OF COLLATERAL. The Lender (by any of its officers,
employees and/or agents) shall have the right upon reasonable prior notice,
at any time or times during the Borrower's usual business hours, to inspect
the Collateral and all records related thereto ( and to make extracts from
such records), subject to restrictions resulting from patient confidentiality
considerations. The Borrower shall keep accurate records of the Collateral,
including all information necessary to identify the amounts due on any
Purchased Accounts and the services giving rise to such Purchased Accounts.
4.4 RELEASE OF SECURITY INTEREST. Upon the termination of this
Agreement, and the payment in full of the Obligations, the Lender shall
reassign to the Borrower the Collateral, release the security interest
therein and file terminations of all financing statements covering the
Collateral.
4.5 COMPLIANCE WITH PURCHASE AGREEMENTS. The Borrower will duly
perform and comply with all of the terms of each Purchase Agreement to be
performed or complied with by it and will take such action as is necessary to
preserve the Borrower's rights thereunder.
4.6 OTHER ACTIONS. Until the occurrence of an Event of Default
hereunder, the Borrower shall be authorized to:
(a) pursue any remedies available under any Purchase Agreement or
other Borrower Assigned Agreement;
(b) prove any claim and file such other papers or documents as may
be necessary or advisable in order to have any claim against a Provider
allowed in any bankruptcy proceedings involving a Provider, and take such
other actions in relation to such proceedings as may be necessary or
advisable in relation thereto; and
(c) take any other actions under any Purchase Agreement or other
Borrower Assigned Agreement that the Borrower is required or permitted to
take thereunder.
The Borrower shall have the right to contract with other parties for, or
otherwise delegate to other parties, with the prior approval of the Lender,
the performance of any or all of the actions referred to above; provided,
however, that any such contract or delegation will not relieve the Borrower
of its obligations relating to the performance of such actions.
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V. CONDITIONS PRECEDENT.
5.1 ALL LOANS. The obligation of the Lender to make any Loan is
conditioned upon the following:
(a) DOCUMENTS. The Borrower shall have delivered and the Lender
shall have received a request for a Loan, as provided in Sections 2.1 and
2.3. In addition, a Purchase Agreement, in each case in such form and
substance as is satisfactory to the Lender, shall be in effect between the
Borrower and each Provider which originated any accounts which are, or in
connection with the requested Loan, are to become, Purchased Accounts
included in the Collateral, and the Borrower shall have delivered a copy of
each such Purchase Agreement to the Lender.
(b) COVENANTS; REPRESENTATIONS. In the case of each Purchase
Agreement referred to in paragraph (a), the Borrower and the Provider
thereunder shall be in compliance with all covenants, agreements and
conditions in such Purchase Agreement, and the Borrower shall be in
compliance with all covenants, agreements and conditions applicable to it
under this Agreement. The representations and warranties of the Provider
contained in each such Purchase Agreement and the representations and
warranties of the Borrower contained in this Agreement shall be true with the
same effect as if such representation or warranty had been made on the date
such Loan is made. Also, the Lender shall have received a certificate dated
the date of the Loan signed by the chief executive officer, chief financial
officer or controller of the Borrower, to the foregoing effect.
(c) DEFAULTS. After giving effect to such Loan, no Event of
Default or Potential Default shall exist.
5.2 CONDITIONS TO FIRST LOAN. The obligation of the Lender to make the
first Loan hereunder is conditioned upon the following:
(a) ARTICLES, BYLAWS. The Lender shall have received copies of
the Articles or Certificate of Incorporation and Bylaws of the Borrower,
certified by the secretary or assistant secretary of the Borrower;
(b) EVIDENCE OF AUTHORIZATION. The Lender shall have received
certified copies of all corporate or other action taken by each Person other
than the Lender who is a party to any Loan Document to authorize its
execution and delivery and performance of the Loan Documents and to authorize
the Loans hereunder, together with such other related certificates and
documents as the Lender shall reasonably require;
(c) LEGAL OPINIONS. The Lender shall have received a favorable
written opinion of OLLE, MACAULAY AND ZORRILLA P.A., counsel to the Borrower,
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which shall be addressed to the Lender and be dated the date of the first
Loan, in substantially the form attached as EXHIBIT C, and such other legal
opinion or opinions as the Lender may reasonably request;
(d) INCUMBENCY. The Lender shall have received a certificate signed
by the secretary or assistant secretary of each corporate signatory to the
Loan Documents other than the Lender, together with the true signature of the
officer or officers authorized to execute and deliver the Loan Documents and
certificates thereunder, upon which the Lender shall be entitled to rely
conclusively until the Lender shall have received a further certificate of
the appropriate secretary or assistant secretary amending the prior
certificate and submitting the signature of the officer or officers named in
the new certificate as being authorized to execute and deliver Loan Documents
and certificates thereunder;
(e) NOTE. The Lender shall have received an executed Note payable
to the order of the Lender and otherwise in the form of EXHIBIT A hereto;
(f) OTHER AGREEMENTS. The Borrower shall have executed and delivered
each other Loan Document required hereunder and all certificates, instruments
and other documents then required to be delivered pursuant to any Loan
Documents, in each instance in form and substance reasonably satisfactory to
the Lender; and
(g) FINANCING STATEMENTS. The Borrower shall have executed and
delivered financing statements determined by the Lender and its counsel to be
necessary for perfecting the security interest of the Lender in the
Collateral, and such financing statements shall have been filed in the
appropriate filing offices.
(h) INITIAL CAPITALIZATION. The shareholders of the Borrower shall
have made the Initial Capital Contribution to the Borrower.
VI. AFFIRMATIVE COVENANTS
The Borrower covenants and agrees that, without the prior written consent
of the Lender, from and after the date hereof and so long as the Revolving
Loan Commitment is in effect or any Obligations remain unpaid or outstanding,
the Borrower will:
6.1 REPORTS. Furnish to the Lender the following:
(a) NO DEFAULT. Within forty-five (45) calendar days after the end
of each of the first three fiscal quarters of each fiscal year and within
ninety (90) calendar days after the end of each fiscal year, a certificate
signed by the chief financial officer, treasurer or controller of the
Borrower certifying that, to the best of such officer's knowledge, after due
inquiry, (i) the Borrower has complied with all covenants, agreements and
conditions in each Loan Document and that each representation and warranty
contained in each Loan Document is true and correct with the same effect as
though each such representation and warranty had been made on the date of
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such certificate (except to the extent such representation or warranty
related to a specific prior date), and (ii) no event has occurred and is
continuing which constitutes an Event of Default or Potential Default, or
describing each such event and the remedial steps being taken by the
Borrower.
(b) MATERIAL CHANGES. The Borrower shall promptly notify the Lender
of any litigation, administrative proceeding, investigation, business
development, or change in financial condition which could reasonably have a
material adverse effect on the business, operations, assets or condition
(financial or otherwise) of the Borrower.
(c) OTHER INFORMATION. The Borrower will provide to the Lender such
financial and other information and reports regarding the operations,
business affairs, prospects and financial condition of the Borrower as the
Lender may reasonably request.
6.2 TAXES AND OTHER CHARGES. Pay or cause to be paid after notice that the
same are due all taxes, assessments and governmental charges imposed upon the
Borrower, except as may be contested in good faith by the Borrower by
appropriate proceedings and for which adequate reserves have been established
by the Borrower as reflected in the Borrower's financial statements.
6.3 CORPORATE EXISTENCE. Preserve its corporate existence.
6.4 COMPLIANCE WITH PURCHASE AGREEMENT AND REGULATIONS.
(a) PURCHASE AGREEMENTS. Comply with all terms, covenants and
conditions of each Purchase Agreement applicable to it.
(b) REGULATIONS. Comply in all material respects with all
Regulations applicable to its business, the noncompliance with which could
have a material adverse effect on the business, operations, assets or
condition (financial or otherwise) of the Borrower.
6.5 NOTICE OF EVENTS. Promptly upon discovery by the Borrower or any
officer of the Borrower of any of the events described in subsections (a)
through (e) hereof, the Borrower shall deliver to an officer of the Lender
telephone notice, and within three (3) calendar days of such telephone notice
deliver to the Lender a written notice, which describes the event and all
action the Borrower proposes to take with respect thereto:
(a) an Event of Default under this Agreement;
(b) any Potential Default or event which would entitle the Lender to
terminate or suspend the Revolving Loan Commitment hereunder or to accelerate
the Obligations;
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(c) the institution of, any material adverse determination in, or
the entry of any default judgment or order or stipulated judgment or order
in, any suit, action, arbitration, administrative proceeding, criminal
prosecution or governmental investigation;
(d) any change in any Regulation, including, without limitation,
changes in tax laws and regulations, which could reasonably have a material
adverse impact on the ability of the Borrower to perform its obligations
under the Loan Documents or a material adverse effect on the business,
operations, assets or condition (financial or otherwise) of the Borrower; or
(e) a Termination Event under any Purchase Agreement between the
Borrower and a Provider.
6.6 GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Maintain its books and
records at all times in accordance with Generally Accepted Accounting
Principles.
6.7 USE OF PROCEEDS. Use the proceeds of the Loans to fund the purchase
of accounts receivable as contemplated by the Purchase Agreements.
6.8 CORPORATE SEPARATENESS. At all times ensure that:
(a) at least two directors of the Borrower are, and will at all
times remain, Independent (as such term is defined in the Borrower's
Certificate or Articles of Incorporation);
(b) the Borrower's funds and other assets are not commingled with
those of any other Person;
(c) the Borrower will not direct or participate in the management of
any other Person's operations and no affiliate of the Borrower will be
permitted to direct or participate in the management of the Borrower (other
than the Provider and the Guarantor with respect to the Provider's ownership
of the Borrower);
(d) the Borrower will conduct its business from an office separate
from that of any other Person;
(e) the Borrower will have stationery and other business forms and a
mailing address and a telephone number separate from that of any other
Person;
(f) the Borrower will at all times be adequately capitalized in
light of its contemplated business;
(g) the Borrower will at all times provide for its own operating
expenses and liabilities from its own funds;
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(h) the Borrower will maintain its assets and transactions
separately from those of any other Person and reflect such assets and
transactions in financial statements separate and distinct from those of any
other Person and evidence such assets and transactions by appropriate entries
in books and records separate and distinct from those of any other Person;
(i) the Borrower will hold itself out to the public under its own
name as a legal entity separate and distinct from any other Person;
(j) the Borrower will not hold itself out as having agreed to pay,
or as being liable, primarily or secondarily, for any obligations of any
other Person;
(k) the Borrower will not maintain any joint account with any other
Person or become liable as a guarantor or otherwise with respect to any debt
or contractual obligation of any other Person;
(l) the Borrower will not make any payment or distribution of assets
with respect to any obligation of any other Person or grant any Lien on any
of its assets to secure any obligation of any other Person;
(m) the Borrower will not make loans, advances or otherwise extend
credit to any other Person except as contemplated in Section 3.11 hereof;
(n) the Borrower will hold regular duly noticed meetings of its
stockholders and directors and make and retain minutes of such meetings;
(o) the Borrower will have bills of sale (or other similar
instruments of assignment) and, if appropriate, UCC-1 financing statements,
with respect to all assets purchased from any other Person;
(p) the Borrower will file its own tax returns or, if it is a member
of a consolidated group, will join in the consolidated return of such group
as a separate member thereof;
(q) the Borrower will maintain its assets in such a manner that it
will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any other Person; and
(r) the Borrower will comply with all provisions of its Certificate
or Articles of Incorporation and Bylaws and shall observe all corporate
formalities.
VII. NEGATIVE COVENANTS.
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The Borrower covenants and agrees that, without the prior written consent
of the Lender, from and after the date hereof and so long as the Revolving
Loan Commitment is in effect or any Obligations remain unpaid or outstanding,
the Borrower will not:
7.1 MERGER, CONSOLIDATION. Merge or consolidate with or into any other
Person.
7.2 INDEBTEDNESS FOR BORROWED MONEY. Incur, create, or permit to exist
any Indebtedness for Borrowed Money except the Obligations.
7.3 LIENS. Create, assume or permit to exist any Lien on any of the
Borrower's property or assets, whether now owned or hereafter acquired, or
upon any income or profits therefrom, except Permitted Liens.
7.4 GUARANTEES. Guarantee or otherwise in any way become or be
responsible for indebtedness or obligations (including working capital
maintenance, take-or-pay contracts, etc.) of any other Person, contingently
or otherwise.
7.5 JUDGMENT, ATTACHMENT. Permit any of its assets to be subject to any
judgments, attachments or levies, which judgments, attachments or levies have
not been stayed by appeal, satisfied, bonded or discharged within thirty (30)
calendar days after service of notice thereof to the Borrower.
7.6 TRANSFER OF ASSETS. Sell, transfer, pledge, assign or otherwise
dispose of any of its assets, except the resale of Purchased Accounts to a
Provider pursuant to the terms of the Purchase Agreement pursuant to which
such Purchased Accounts were acquired by the Borrower.
7.7 BORROWING BASE. Permit the unpaid principal amount of the Loans
outstanding at any time, in the aggregate, to exceed the Borrowing Base;
provided, however, that this covenant shall not be deemed breached if, within
five (5) Business Days after each date on which the Borrower knows or should
know such aggregate unpaid principal amount of Loans exceeds such level, a
prepayment shall be made in accordance with the prepayment provisions of
Section 2.7 in an amount sufficient to assure continued compliance with this
covenant going forward.
VIII. DEFAULT.
8.1 EVENTS OF DEFAULT. The Borrower shall be in default if any one or
more of the following events ("Events of Default") occurs:
(a) PRINCIPAL, INTEREST OR OTHER AMOUNTS. The Borrower fails to
pay any principal of or interest on the Note when due and payable or fails to
pay when it is due and payable any other amount payable under any Loan
Document;
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(b) COVENANTS.
(i) The Borrower fails to observe or perform as and
when required any of the terms, conditions or covenants contained in any Loan
Document (other than those referred to in clauses (ii) and (iii) below); or
(ii) The Borrower fails to observe or perform as and
when required any of the terms, conditions or covenants contained in Section
6.1 or 6.4(a) of this Agreement, and such failure shall continue for five
Business Days after written notice to the Borrower by the Lender; or
(iii) Any Borrower fails to observe or perform as and
when required any of the terms, conditions or covenants contained in Sections
6.2, 6.4(b) or 6.6 of this Agreement, and such failure shall continue for
thirty days after written notice to the Borrower by the Lender; or
(iv) Less than 100% of the voting securities of the
Borrower are owned directly (or through one or more wholly owned
subsidiaries) by Med. Tech. Services of South Florida, Inc.
(c) REPRESENTATIONS, WARRANTIES, ETC. Any representation or
warranty made by the Borrower herein or in any Loan Document or in any
exhibit, schedule, report or certificate delivered pursuant hereto or thereto
shall prove to have been false, misleading or incorrect in any material
respect when made or deemed to have been made;
(d) BANKRUPTCY, ETC. The Borrower is dissolved or liquidated,
makes an assignment for the benefit of creditors, files a petition in
bankruptcy, is adjudicated insolvent or bankrupt, petitions or applies to any
tribunal for any receiver or trustee, commences any proceeding relating to
itself under any bankruptcy, reorganization, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, has commenced
against it any the proceeding which remains undismissed for a period of
thirty (30) days, indicated its consent to, approval of or acquiescence in
any such proceeding, or any receiver of or trustee for the Borrower or any
substantial part of the property of the Borrower is appointed, or the
Borrower suffers any such receivership or trusteeship to continue
undischarged for a period of thirty (30) days;
(e) TERMINATION EVENT. A Termination Event occurs under any
Purchase Agreement; THEN and in every such event other than that specified in
clause (d), the Lender may terminate the Revolving Loan Commitment and may
declare the Loans and all other Obligations, including without limitation
accrued interest, to be, and the Loans and all other Obligations shall
thereupon become, due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
Upon the occurrence of any event specified in clause (d) above, the Revolving
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Loan Commitment shall automatically terminate and the Loans and all other
Obligations, including without limitation accrued interest, shall immediately
be due and payable without presentment, demand, protest or other notice of
any kind, all of which are hereby waived by the Borrower. (Any date on which
the Loans and such other obligations are declared due and payable pursuant to
this Section 8.1, shall be a "REVOLVER TERMINATION DATE" for purposes of this
Agreement.) Following the occurrence of a Revolver Termination Date, the
Lender may, in addition to exercising any and all rights under this
Agreement, exercise any rights provided under the UCC and other applicable
law.
IX. MISCELLANEOUS.
9.1 WAIVER. No failure or delay on the part of the Lender in
exercising any right, power or remedy under any Loan Document shall operate
as a waiver thereof; nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy under any Loan Document. The
remedies provided under the Loan Documents are cumulative and not exclusive
of any remedies provided by law.
9.2 AMENDMENTS. No amendment, modification, termination or waiver of
any Loan Document or any provision thereof nor any consent to any departure
by the Borrower therefrom shall be effective unless the same shall be in
writing and be signed by Lender and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for
which given. No notice to or demand on the Borrower shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
9.3 GOVERNING LAW. This Agreement and all rights and obligations of
the parties hereunder shall be governed by and be construed and enforced in
accordance with the laws of the Commonwealth of Pennsylvania without regard
to Pennsylvania or federal principles of conflict of laws.
9.4 ASSIGNMENT. The Borrower may not assign this Agreement or its
rights hereunder without the prior written consent of the Lender. The Lender
may sell, assign, transfer and create a security interest in any of the Loan
Documents, including the Note, and any assignee or secured party may enforce
the rights of the Lender hereunder without the consent, participation or
joinder of the Lender.
9.5 NOTICES. All notices, requests, demands, directions,
declarations and other communications between the Lender and the Borrower
shall, except as otherwise expressly provided, be mailed by registered or
certified mail, return receipt requested, or telegraphed, or telefaxed, or
delivered in hand to the applicable party at its address indicated opposite
its name on the signature page hereto. The foregoing shall be effective and
deemed received three days after being deposited in the mails, postage
prepaid, addressed as aforesaid and shall whenever sent by telegram,
telegraph or telefax or delivered in hand be effective when received. Either
party may change its address by a communication in accordance herewith.
Page 18 of 27
<PAGE>
9.6 SURVIVAL OF WARRANTIES AND CERTAIN AGREEMENTS. All agreements,
representations and warranties made or deemed made herein shall survive the
execution and delivery of this Agreement, the making of the Loans hereunder
and the execution and delivery of the Note. Notwithstanding anything in this
Agreement or implied by law to the contrary, the agreements of the Borrower
set forth in Sections 2.1(c) and 2.8, shall survive the payment of the Loans
and the termination of this Agreement. This Agreement shall remain in full
force and effect until the latest to occur of the termination of the
Revolving Loan Commitment or the repayment in full of all amounts owed by the
Borrower under any Loan Document.
9.7 SEVERABILITY. The invalidity, illegality or unenforceability in
any jurisdiction of any provision in or obligation under this Agreement, the
Note or other Loan Documents shall not affect or impair the validity,
legality or enforceability of the remaining provisions or obligations under
this Agreement, the Note or other Loan Documents or of such provision or
obligation in any other jurisdiction.
9.8 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. THE BORROWER AND
THE LENDER HEREBY CONSENTS TO THE NON EXCLUSIVE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COMMONWEALTH OF PENNSYLVANIA AND THE STATE
OF FLORIDA AND IRREVOCABLY AGREES THAT, SUBJECT TO LENDER'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THE NOTE, THIS AGREEMENT
OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. THE BORROWER
ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NONEXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT,
SUCH NOTE, OR SUCH OTHER LOAN DOCUMENT. THE BORROWER DESIGNATES AND APPOINTS
PRENTICE HALL CORPORATION SYSTEM (OR SUCH OTHER PERSON AS SHALL ACT AS
REGISTERED AGENT OF THE BORROWER IN PENNSYLVANIA AND AS TO WHOM THE BORROWER
SHALL PROVIDE NOTICE IN WRITING TO THE LENDER) AND SUCH OTHER PERSONS AS MAY
HEREAFTER BE SELECTED BY SUCH PERSON WHICH IRREVOCABLY AGREE IN WRITING TO SO
SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY
SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY
THE BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF
ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY CERTIFIED MAIL TO THE BORROWER,
AS APPLICABLE, AT ITS ADDRESS PROVIDED IN SECTION 9.5, EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE
BORROWER REFUSES TO ACCEPT SERVICE, THE BORROWER HEREBY AGREES THAT SERVICE
Page 19 of 27
<PAGE>
UPON IT BY MAIL SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR
SHALL LIMIT THE RIGHT OF THE LENDER TO BRING PROCEEDINGS AGAINST THE BORROWER
IN THE COURTS OF ANY OTHER JURISDICTION.
9.9 WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER EACH HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR
ANY DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE LENDER/BORROWER RELATIONSHIP ESTABLISHED HEREBY. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS AGREEMENT
AND THE OTHER LOAN DOCUMENTS, INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS,
TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS. THE BORROWER AND THE LENDER EACH ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO THE TRANSACTION, THAT EACH HAS ALREADY RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON
THE WAIVER IN THEIR RELATED FUTURE DEALINGS. THE BORROWER AND THE LENDER EACH
FURTHER WARRANTS AND REPRESENTS THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE LOAN DOCUMENTS, OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE LOANS. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY
THE COURT.
9.10 COUNTERPARTS; EFFECTIVENESS. This Agreement and any amendment
hereto or waiver hereof may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
9.11 USE OF DEFINED TERMS. All words used herein in the singular or
plural shall be deemed to have been used in the plural or singular where the
context or construction so requires. Any defined term used in the singular
preceded by "any" shall be taken to indicate any number of the members of the
relevant class.
Page 20 of 27
<PAGE>
9.12 NO THIRD PARTY RIGHTS. No Person who is not a party to this
Agreement or a permitted assignee hereof will be entitled to rely on, or will
have any rights or benefits under, this Agreement.
IN WITNESS WHEREOF, the Borrower and the Lender have caused this
Agreement to be executed by their proper corporate officers thereunto duly
authorized as of the day and year first above written.
Address: MED-TECH FUNDING CORPORATION
Suite 200 By:/s/Louis W. Boisvert, III
4491 South State Road Seven ---------------------------------
Fort Lauderdale, FL 33314 Title: Chairman
Address: COPELCO/AMERICAN HEALTHFUND, INC.
100 Berwyn Park #105 By:/s/Gregory Campbell
Berwyn, PA 19312 -------------------------------
Title:
Page 21 of 27
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
$_______________________, 199___
FOR VALUE RECEIVED, MED-TECH FUNDING CORPORATION a (the "Borrower"),
hereby promises to pay to the order of Copelco/American Healthfund, Inc. (the
"Lender") the principal amount of $2,000,000 or so much thereof as shall have
been advanced as Loans under the Agreement referred to below and shall be
outstanding, such payment to be made at such time or times and in the manner
specified in the Agreement; provided, however, that all Loans shall be repaid
in full on or before the Revolver Termination Date.
This Note is issued under and secured by the Loan and Security
Agreement dated as of ___________, 199___ between the Borrower and the Lender
(as from time to time amended, restated, supplemented or otherwise modified,
the "Agreement"). Terms used herein and not defined herein are used with the
respective meanings set forth in the Agreement.
Interest on the outstanding principal amount of each Loan evidenced
by this Note shall accrue at the rate or rates specified in, and be payable
in accordance with the terms of, the Agreement.
The Agreement provides for the acceleration of the payment of
principal of and interest on such Loans upon the happening of certain Events
of Default as defined in the Agreement.
The Borrower waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest, and any and all
other notices or demands in connection with this Note, except any notice
expressly required by the Agreement.
This Note shall be governed by and construed in accordance with
Pennsylvania law.
MED-TECH FUNDING CORPORATION
By:/s/Louis W. Boisvert, III
-------------------------
Title: Chairman
Page 22 of 27
<PAGE>
EXHIBIT B
FORM OF LOAN REQUEST
______________, 19___
Copelco/American Healthfund, Inc.
Suite 112
200 Berwyn Park
Berwyn, PA 19312
Re: Loan and Security Agreement dated as of __________________.
Ladies and Gentlemen:
Pursuant to Section 2.3 of the Loan and Security Agreement described
above (the "Agreement"), the Borrower hereby requests the following Loan:
(1) The date of the proposed Loan is _________, 19___ (which day is
a Business Day).
(2) The aggregate amount of the proposed Loan is $_____________ (or
such lesser amount as may be borrowed under the terms of the Agreement).
(3) The proceeds of such Loan will be used for the purchase of the
accounts described on Schedule A hereto.
You are authorized and directed to disburse the proceeds of the Loan
in the manner set forth in Schedule A hereto.
The Borrower hereby certifies that the following statements are true
and correct on and as of the date hereof, and will be true and correct on and
as of the date of the proposed Loan, before and after giving effect thereto
and to the application of the proceeds therefrom:
(a) the representations and warranties of the Borrower contained in
the Agreement and the representations and warranties of the respective
Provider contained in each Purchase Agreement referred to in Section 5.1(a)
Page 23 of 27
<PAGE>
of the Agreement (in each case except to the extent such representations and
warranties by their express terms relate to an earlier date) are true and
correct and will be true and correct on the date of the Loan as if made on
and as of such date;
(b) the Borrower has complied and on the date of the Loan will be
in compliance with all the terms, covenants and conditions of the Agreement;
and
(c) no Event of Default or event which, with notice or passage of
time or both, would constitute an Event of Default exists or shall result
from the proposed Loan.
Very truly yours,
/s/Louis W. Boisvert, III
-----------------------------------
By: Louis W. Boisvert, III
--------------------------------
Page 24 of 27
<PAGE>
DISBURSEMENT INSTRUCTIONS
1. Disburse the following amounts to or for the account of the following
Providers at the accounts specified below:
Deposit
Provider Amount Account
-------- ------ -------
Such disbursements shall be on account of the Initial Payments payable by
the Borrower to such Providers for Batches of Purchased Accounts purchased
under the Accounts Purchase and Servicing Agreement dated as of
_______________, 1996 (the "Purchase Agreements") among each of the
Providers, the Borrower and the Lender, as Administrator, net of (i) any
payments due from the Providers to the Borrower for Rejected Accounts, as
specified in paragraph 2 below, and (ii) any fees and expenses due from the
Borrower or the Providers to the Lender, as specified in paragraph 3 below.
2. Disburse the following amounts to the Collection Account under the
Purchase Agreement in payment of the repurchase of Rejected Accounts under
Section 7(d) of the Purchase Agreement by the following Providers:
Provider Amount
-------- ------
3. Credit to the Lender the following amounts for the fees and expenses
listed below due from the Borrower and/or the Providers under the Loan
Agreement and the Purchase Agreement respectively:
Fees and Expenses Amount
----------------- ------
Page 25 of 27
<PAGE>
EXHIBIT C
[FORM OF OPINION]
Page 26 of 27
CANCER TREATEMENT HOLDINGS, INC.
LIST OF SUBSIDIARIES
ADVANCED ONCOLOGY SERVICES, INC. FLORIDA
AOS OF SOUTH BROWARD, INC. FLORIDA
AOS OF PENSACOLA, INC. FLORIDA
CTH INTERNATIONAL, INC. FLORIDA
CTI OF GEORGIA, INC. FLORIDA
CTI OF MISSISSIPPI, INC. FLORIDA
CTI OF NEW JERSEY, INC. FLORIDA
CTI OF NEW YORK, INC. NEW YORK
CTI OF PALM BEACH, INC. FLORIDA
CTI OF TAMPA, INC. FLORIDA
CTI OF TENNESSEE, INC. FLORIDA
CTI OF VIRGINIA, INC. FLORIDA
CTI OF WEST BROWARD, INC. FLORIDA
FLORIDA PHYSICAL THERAPY & FLORIDA
REHABILITATION SERVICES, INC.
HOLLYWOOD MEDICAL CORPORATION FLORIDA
LEADER HEALTH CARE CENTER, INC. FLORIDA
LOGAN RADIATION THERAPY INC. DELAWARE
LOGAN ONCOLOGY CARE WEST VIRGINIA
MED. TECH. SERVICES OF FLORIDA
SOUTH FLORIDA, INC.
MED-TECH SERVICES OF PALM FLORIDA
PALM BEACH, INC.
MED-TECH FUNDING CORPORATION DELAWARE
SOUTHERN CROSS HOME HEALTH, INC. FLORIDA
1
<PAGE>
PALM BEACH RADIOTHERAPY FLORIDA
ASSOCIATES, LTD.
THE BONE MARROW TRANSPLANT FLORIDA
CENTER AT BAPTIST HOSPITAL OF
PENSACOLA, L.C.
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CANCER TREATMENT HOLDINGS, INC. FOR THE FISCAL YEAR
ENDED MAY 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> MAY-31-1996
<CASH> 865
<SECURITIES> 0
<RECEIVABLES> 3,646
<ALLOWANCES> 124
<INVENTORY> 0
<CURRENT-ASSETS> 4,738
<PP&E> 1,708
<DEPRECIATION> 593
<TOTAL-ASSETS> 9,397
<CURRENT-LIABILITIES> 1,421
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 6,577
<TOTAL-LIABILITY-AND-EQUITY> 9,397
<SALES> 11,865
<TOTAL-REVENUES> 11,865
<CGS> 435
<TOTAL-COSTS> 10,636
<OTHER-EXPENSES> 5
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 127
<INCOME-PRETAX> 662
<INCOME-TAX> 310
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 352
<EPS-PRIMARY> .11
<EPS-DILUTED> .11
</TABLE>
