UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 (NO FEE REQUIRED)
For the transition period from ___________________ to ______________
Commission File No. 0-17973.
MEDCROSS, INC.
(Name of small business issuer in its charter)
Florida 59-2291344
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3227 Bennet Street North, St. Petersburg, Florida 33713
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (813) 521-1793
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.007 par value
(Title of Class)
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 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. [ ]
The issuer's revenue for its most recent fiscal year was $3,122,953.
The aggregate market value of Common Stock held by non-affiliates based upon
the closing bid price of $3.875 on February 29, 1996, as reported by NASDAQ was
approximately $10,240,846.
As of February 29, 1996 there were 6,781,983 shares of Medcross, Inc. Common
Stock, $.007 par value, outstanding.
Transitional Small Business Disclosure Format (Check one): YES [ ] NO [X]
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Item 1. Description of Business.
General
Medcross, Inc. (the "Company") was incorporated in Florida on April 21, 1983.
The Company's offices are located at 3227 Bennet Street North, St. Petersburg,
Florida, 33713. The telephone number at that address is (813) 521-1793. The
Company has several wholly owned and partially owned subsidiaries. Together
with its subsidiaries, the Company currently concentrates its efforts into four
distinct areas:
* Ownership and operation of an Internet access and related services
business which provides such services to individuals and businesses
throughout the United States;
* Ownership and operation of domestic radiological diagnostic imaging
services;
* Management of therapeutic medical modalities; and
* Sales and service of diagnostic imaging equipment in the Far East.
The Company has only recently entered into the Internet related business via
its acquisition of I-Link Worldwide, Inc., a Utah corporation ("I-Link") in
February 1996. See "Recent Developments".
Recent Developments
I-Link Acquisition. On February 23, 1996, the Company closed its acquisition
of all of the issued and outstanding common stock of I-Link from ILINK, Ltd.,
a Utah limited partnership in exchange for the issuance of an aggregate of
4,000,000 shares of common stock, par value $.007 per share (the "Common
Stock"), of the Company. Prior to the acquisition, the assets and liabilities
of ILINK, Ltd. were transferred to I-Link (which had no prior activity) at
their historical cost. The purchase price was determined through arms-length
negotiation. The acquisition was accounted for under the purchase method of
accounting. Pursuant to the terms of the Stock Purchase Agreement, 2,600,000
shares of the Common Stock issued pursuant to the acquisition of I-Link were
placed in escrow to be released as follows:
1. 1,600,000 shares of Common Stock are to be released upon the receipt
of proceeds greater than or equal to $4,000,000 from the sale of the
Company's securities pursuant to the conduct of one or more private
or public offerings prior to December 31, 1996; and
2. 1,000,000 shares of Common Stock are to be released upon the
first to occur of the following:
(i) the monthly revenue derived from subscribers serviced by I-Link
and revenue derived from the sale of related products and/or
services equals or exceeds $1,000,000; or
(ii) the number of subscribers serviced by I-Link exceeds 100,000 one
year from the date of receipt by the Company of gross proceeds
equal to $4,000,000 from the sale of its securities pursuant to
one or more private or public offerings.
I-Link provides Internet access services to individuals and businesses in the
United States. I-Link is also the owner of a proprietary technology (patent
pending) which enables the transmission of information via facsimile over the
Internet.
There was no affiliation or relationship between the Company, its affiliates,
officers or directors, or associates of such persons and I-Link or ILINK, Ltd.
or any of their officers, directors, stockholders, or partners prior to the
acquisition.
Note Offering. Simultaneous with the closing of its acquisition of I-Link, the
Company completed a private placement of $1,000,000 in aggregate principal
amount of convertible promissory notes (the "10% Notes"). The 10% Notes are
payable upon the earlier of August 31, 1996 (subject to extension) or the
Company's receipt of proceeds of at least $4,000,000 from subsequent debt or
equity offerings. The 10% Notesbear interest payable semi-annually at the rate
of 10% until August 31, 1996 (13% after such date of the term of the 10% Note
is extended). Up to $1,250 of each $50,000 in principal amount of note is
convertible at any time at the option of the holder, into a maximum of 350,000
shares of Common Stock at the rate of approximately $.0714 per share, subject
to certain antidilution adjustments.
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The 10% Notes may be extended until February 29, 1997 upon payment by the
Company of 2.5% of the then outstanding principal balance of the 10% Note. The
proceeds of such offering were used to pay outstanding accounts payable and
other debts of I-Link.
Network Services
I-Link, the Company's newest subsidiary, provides Internet services to
individuals and businesses in the United States. The Internet is a global
network of more than six million individual private and public computer
networks. The Internet links universities, government agencies, commercial
entities, individuals and other computer users. The Internet was originally
used predominantly by technology-oriented individuals. In recent years, the
demand for access to the Internet has increased among small businesses and
private individuals. The computer networks that comprise the Internet
communicate through an open, non-proprietary communications protocol known as
"TCP/IP," which determines addressing mechanisms and the routing of
information. The Internet's networks are connected in a variety of ways,
including regular telephone lines, high-speed dedicated leased lines, and fiber
optic links.
The focus of the Company's business has shifted as a result of the Company's
acquisition of I-Link. I-Link provides Network Services and has developed a
proprietary technology which permits connection of non TCP/IP devices such as
facsimile ("fax") telephone to the Internet. The technology (patent pending)
is a comprehensive method which permits communication without any special
hardware or software.
I-Link offers subscribers a complete Internet access solution comprised of
software, licensed from companies such as Spyglass, Inc. ("Spyglass"),
integrated with high quality access network services provided by AT&T. The
Company is currently working to provide its technical support on a 24-hour a
day basis. I-Link's network provides subscribers with direct access to a wide
range of Internet-related resources including E-Mail, World Wide Web sites,
USENET news groups and other database information.
I-Link has established and operates a high-speed interconnected network of
nodes or points of presence ("POPs"). The POPs have banks of modems into which
users dial to connect to the Internet. Multiple POPs are used to provide local
access to the modems. I-Link currently has 22 POPs (five of which are
currently in operation and 17 of which are ready for operation) in major cities
throughout the United States. I-Link's operating POPs are located in Dallas,
Austin, San Antonio, Houston and New Orleans; the other 17 POPs are located in
Seattle, Portland, San Francisco, Los Angeles, San Diego, Salt Lake City,
Denver, Phoenix, Atlanta, Orlando, Boston, New York and Washington, D.C. POPs
allow subscribers to access the Internet via I-Link's computers for the price
of a local telephone call. I-Link's nationwide telecommunications network is
connected to leased high speed datalines which tie into the worldwide network
of Internet users. I-Link intends to expand to 60 POPs in the United States
and Canada by the end of calendar 1996 and intends to establish additional POPs
internationally. Generally, each POP requires a capital expenditure between
$10,000 and $25,000. Consequently, I-Link's ability to expand will be
dependent largely on the availability of additional capital, of which there can
be no assurance.
Fax4Less. I-Link has developed a proprietary technology (patent pending) known
as Fax4Less which enables the transmission of information via facsimile
(a "fax") over the Internet. The technology is a comprehensive method which
permits communication between non-TCP/IP (i.e., non-Internet compatible)
devices. The originator of a fax via Fax4Less does not need any special
hardware or software and the recipient of such a fax does not have to be an
I-Link subscriber. The technology developed by I-Link enables the transmission
of a facsimile message via the Internet through a series of local telephone
calls, thus eliminating the long distance telephone charges normally applicable
to facsimile transmissions. In addition, Fax4Less enables an E-Mail message to
be sent to a recipient over the Internet. The central component of the
Fax4Less network is a "Fax Engine" which is reached by a local telephone call;
once reached, the Fax Engine delivers a fax to the recipient through a second
local telephone call. In the event that a geographic location or area is not
reachable by a local Fax Engine, a facsimile may be sent using a long distance
provider with whom I-Link has contracted, which generally provides the
requisite long distance service at a less expensive rate than otherwise
available to a user (permitting the user the benefits of I-Link's high-volume
discount).
The Fax4Less service provides a wide range of additional options. Fax-Mail
enables a subscriber to receive, store and even reroute facsimile messages to
any facsimile machine and modem or to E-Mail. The Virtual Fax Machine
technology enables a subscriber to create a "virtual facsimile machine" in a
location separate and apart from the subscriber's physical location. For
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example, a subscriber may have a local phone number in Los Angeles, California
and could physically receive facsimile information in New York. Fax4Less' fax
broadcast service enables a subscriber to send a single fax to many recipients
in various destinations simultaneously.
I-Link expects to begin offering the service within the next few months and to
charge a fixed monthly fee of $89 for Fax4Less service.
I-Link is in the process of applying for United States patent protection
relating to Fax4Less. There can be no assurance that a patent will be
forthcoming.
Local Access. To provide Internet access, it is only necessary to provide a
modem into which subscriber may call (with associated Internet connection
equipment and facilities). Therefore, one POP may service the entire country
or the world. However, all subscribers outside of the local area of such POP
would incur long distance phone charges when they call the POP. Such
customers' long distance costs would, in most cases, vastly exceed the Internet
service provider's charges to the customer for Internet access. While several
companies promote this form of Internet access, I-Link believes such providers
will not be able to compete with locally provided service. Locally provided
service results when the Internet service provider establishes a POP in a
subscriber's local area. I-Link provides access through local POPs.
Subscribers in close proximity to a local POP do not incur long distance phone
charges which management believes to be a significant benefit of I-Link's
service. The provision of local service nationally requires the construction
of many POPs across the country, consequently, I-Link is in the process of
establishing such a nationwide network of local POPs.
Internet Growth. Use of the Internet has grown rapidly since the
commercialization of the Internet in the early 1990s. According to a report
entitled "Market Opportunities in the Era of Internet Commercialization"
prepared by the International Data Corporation in February 1994 (the "IDC
Report"), there were approximately 22 million Internet users as of the end of
1993, with a projected increase to approximately 38 million users by the end of
1994. The rapid growth in popularity of the Internet is in large part due to:
(i) increased presence of computers and modems in households and businesses
throughout the United States; (ii) the growth of informational, entertainment
and commercial applications and resources of the Internet; (iii) increased
exposure and awareness of the resources of the Internet among individuals and
businesses; and (iv) the increasing availability of user-friendly navigational
and utility tools which enable easy access to the Internet's resources.
Internet Service and Software Providers. With the growth and increasing
commercialization of the Internet, a number of companies have emerged to
provide Internet software and access services. Access providers vary widely in
the geographic coverage, customer focus and levels of Internet access provided
to subscribers. For example, many access providers are regional in scope,
requiring subscribers outside a local or regional calling area to incur long
distance charges. Access providers may also concentrate on certain types of
subscribers such as businesses or individuals which differ substantially in the
type of service and support required.
Providers may also differ according to whether they provide direct or non-
direct access to the Internet. Direct access through Internet protocols such
as Serial Line Interface Protocol (or "SLIP") or Point-to-Point Protocol
(or "PPP") enable users to establish direct connections to other computers on
the Internet. I-Link provides direct access. A number of the major on-line
service providers, such as AOL and Prodigy, currently offer non-direct access
to the Internet which requires users to access the Internet through a host
computer controlled by the service provider. Under this type of architecture,
users are dependent on the service provider to determine which Internet
applications are available to them. Other regional and national Internet
access providers generally offer direct Internet access to customers which
enables users to access the full range of Internet resources.
A number of companies have also emerged to provide access software for the
Internet. Access software generally utilizes standard communication protocols
such as TCP/IP, which enable the user's computer to communicate with other
computers on the Internet. These software packages are generally sold as
stand-alone software packages to individual users and must be configured by the
user for use with specific access services. This configuration process is
often difficult and complex, especially for less sophisticated users. Finally,
new browsers and navigational tools have been introduced which do not include
TCP/IP software and must be used in conjunction with access software, thus
complicating further users' ability to install and configure Internet software
and access services.
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In addition to issues of software and service integration, other problems
remain which deter individual users from adopting Internet software and
services. For example, until recently, the absence of easy-to-use navigational
tools meant that use of the Internet was effectively limited to the small
number of potential users who were familiar and comfortable with UNIX operating
systems. UNIX is a powerful yet cryptic engineering-oriented operating system
integrally responsible for the development of TCP/IP and the Internet.
Furthermore, high prices charged by many Internet service providers have also
deterred users. Nationwide, reliable service and 24-hour-a-day customer
service support have not always been available to subscribers, in particular
because many access providers are small regional companies with limited
resources.
Business Strategy. I-Link's objective has been to capitalize on the growing
demand for Internet services and to gain market share by aggressively building
its subscriber base. I-Link has pursued the idea that by expanding its
subscriber base through providing high quality software and services it can
build a nationwide brand identity, increase customer loyalty and achieve higher
retention rates.
I-Link has been primarily focused on providing access services to the
individual subscriber market (such as home users and independent professionals)
and small business users. Management believes that individual and small
business users are among the fastest growing segments of the Internet market.
In the past, individual and small business users have had difficulty accessing
the Internet because of the difficulty in integrating software packages and
services from different vendors. I-Link's strategy is to establish a high-
quality, nationwide brand identity in this market through offering a complete
Internet solution comprised of easy-to-use software, integrated with high
quality access service and customer service support, which I-Link is working to
provide on a 24 hour a day basis.
I-Link has adopted a flat rate pricing structure which it believes encourages
usage by eliminating subscribers' concerns about incurring significant hourly
charges, which has the potential to increase subscriber retention rates.
Currently, I-Link charges $17.95 per month for unlimited hours of service. It
has been I-Link's belief that its value price point will help attract new
subscribers and facilitate rapid penetration of the individual subscriber
market.
Assuming that adequate capital can be raised, I-Link plans to aggressively
expand its high-speed, digital network and expand to 60 POPs by the end of
calendar 1996, including expansion into Canada. It has been I-Link's belief
that expansion is necessary to build the subscriber base and to promote
nationwide brand name recognition.
I-Link Software. I-Link's navigation software suite for Internet access
includes: (i) an installer; (ii) TCP/IP and PPP, the software used by
computers on the Internet to establish and maintain communication between
themselves; (iii) an easy to use, on-line registration form; (iv) I-Mail, a
proprietary e-mail package ("I-Mail"); and (v) Enhanced I-Link Mosaic, which is
licensed from Spyglass ("Mosaic"). It is intended that I-Link's next release
of software will incorporate RSA Data Security encryption, allowing privacy and
data security.
The on-line registration portion of the software allows the subscriber to
download a current list of I-Link's local, Internet-access phone numbers. This
feature prevents the software from going "stale" on the shelf as additional
local POPs are added to I-Link's existing POPs. The registration software also
allows the subscriber to customize its billing method on-line. For example, a
subscriber can modify credit card or checking account billing or choose one of
I-Link's pre-payment discount plans.
Services. I-Link currently provides a variety of competitively priced Internet
access services in two categories. The Company's primary focus is on
individuals who connect to the Internet via a modem (referred to as "dial-up"
accounts). Dial-up subscribers can access the Internet by calling I-Link's
local POPs or a low-cost, nationwide telephone number. I-Link also offers
network accounts (principally for business users who desire to connect internal
computer networks to the Internet) that connect to the Internet via dedicated
telecommunications lines. I-Link bills its subscribers monthly.
Subscriber Applications. In addition to Fax4Less, I-Link provides its
subscribers with access to the full range of available Internet applications,
including:
Electronic Mail (E-Mail): E-Mail is an Internet application by which an
Internet user can exchange messages with any other user who has an E-Mail
address. Messages can be sent almost instantly to designated individuals or
groups on a mailing list. I-Link has developed its own proprietary E-Mail
package called I-Mail.
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World Wide Web: The World Wide Web is a browsing and searching system
comprised of thousands of computer servers, referred to as home pages, each
linked by a special communications protocol called Hypertext. This open
protocol allows Internet users to view and access text, graphics, video and
audio resident on a home page or to connect instantaneously to related and
linked information on the same server or other home pages. Since the
Internet is an open system, any company can create a home page on the World
Wide Web in order to provide users with product or service information.
Users can then solicit more information and, in some cases, make purchases
electronically. It is expected that the World Wide Web will continue to grow
rapidly as more businesses and individuals become aware of the advantages of
communications on the Internet.
USENET News Groups: USENET is a network of thousands of computers attached
to the Internet that provide forums, or news groups, that allow users to
exchange information on a variety of topics of shared interest. Internet
users can seek or provide information on diverse topics ranging from sports
or other hobbies, to job opportunities, to restaurant and travel suggestions.
File Transfer: The Internet can be easily used to move electronic files
(including data, programs or text) from one computer to another. This can be
very useful for parties that collaborate on data files where the parties are
separated by great distances. Unlike a transmission via a fax machine, data
transferred over the Internet remains in digital format and does not need to
be re-entered by a receiving party. It can be manipulated and then
re-transmitted to other Internet users.
Software and Services Development: I-Link has placed significant emphasis on
developing advanced features for its core enabling technologies. As new
technological developments occur in the Internet industry, it will become
necessary to develop additional features to I-Link's service offerings that
provide added value to its subscribers.
Network Infrastructure. I-Link maintains an extensive network infrastructure
that enables it to provide nationwide digital Internet access services to its
subscribers. Such infrastructure provides significant performance capability
and low operating cost. I-Link uses high performance RISC based computers.
RISC computers are significantly faster than PCs and are used in demanding
applications. I-Link's expanding network of POPs gives subscribers access to
the Internet by means of a local telephone call. I-Link's ability to offer
efficient access to the Internet is due in part to the Company's high-capacity
telecommunications data network configured for facilitating Internet access.
I-Link closely monitors data traffic on its network, and has planned to expand
the capacity of its network by the addition of POPs and expansion of POPs at
existing locations as demand rises. POPs are monitored by a network operator.
Disaster recovery is a key part of I-Link's network infrastructure. In the
event of a disaster at a network hub, all traffic can be rerouted to an
alternate hub for instant recovery.
I-Link's network is scalable and distributed from the high speed RISC
architecture to the transaction-oriented database for managing all facets of
the business. All aspects of I-Link's server technology (including on-line
user registration, time management, billing information, network authentication
and many other aspects) were designed to handle many users in an easily
expandable (or scalable) fashion.
I-Link's fiber optic network backbone is composed of high speed frame links and
Asynchronous Transfer Mode ("ATM") links, capable of transmitting data up to 20
gigabytes per second. I-Link's fiber optic network backbone is joined directly
to the Internet backbone, the National Science Foundation Network ("NSFNET")
Network Access Point ("NAP"), permitting high speeds, supplying rapid
adaptation to traffic growth, creating efficiency and providing dependability.
With AT&T as the supplier of the backbone's fiber, I-Link has been able to
benefit from AT&T's Synchronous Optical Network ("SONET") technology, which is
a high speed redundant fiber optic networking technology which increases
network reliability.
I-Link maintains a network operations center at its Austin, Texas facility.
Through this center, I-Link's technical staff constantly monitors network
utilization and security, including equipment at individual POPs to ensure
reliable Internet access service. The center also supports E-Mail and USENET
news groups for I-Link's subscribers.
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I-Link has continued to optimize and increase the capacity and capabilities of
its network. I-Link has efforts currently underway to increase the data
capacity, speed, reliability and fault tolerance of its network. Network
system software is continually enhanced to increase the security of I-Link's
network and to enhance trouble shooting capability. I-Link has also developed
and acquired network management software that allows I-Link to monitor network
traffic and service quality.
Competition. The market for Internet access services is extremely competitive.
Given that there are no substantial barriers to entry, it is likely that
competition in this market will intensify in the future. I-Link's current and
prospective competitors include many large companies that have substantially
greater market presence and financial, technical, marketing and other resources
than the Company. I-Link competes or expects to compete directly or indirectly
with the following categories of companies: (i) other national and regional
commercial Internet service providers, such as Performance Systems
International ("PSI"), Bolt, Beranek & Newman, Inc. ("BBN") and UUNET
Technologies ("UUNET"); (ii) established on-line services companies which
currently offer or are expected to offer Internet access, such as America
Online, Inc. ("AOL"), Compuserve Incorporated ("CompuServe") (a division of H&R
Block, Inc.), Prodigy Services Company ("Prodigy") (a joint venture of
International Business Machines Corporation ("IBM") and Sear, Roebuck and Co.),
GEnie ("GEnie") (a division of General Electric Information Services) and
Delphi Internet Services ("Delphi") (a division of News Corporation); (iii)
computer hardware and software and other technology companies, such as IBM and
Microsoft; (iv) national long distance carriers, such as AT&T Corporation
("AT&T"), MCI Communications Corporation ("MCI") and Sprint Corporation
("Sprint") that currently offer electronic messaging services; (v) regional
telephone companies such as Pacific Bell; (vi) cable operators, such as Tele-
Communications, Inc.; and (vii) nonprofit or educational Internet service
providers.
Although most of the established on-line service companies and tele-
communications companies currently offer only limited Internet access, many of
these services have announced plans to offer expanded Internet access. The
Company expects that all of the major on-line services companies will
eventually compete fully in the Internet access market. Certain companies,
including AOL, BBN and PSI, have obtained or expanded their Internet access
products and services as a result of acquisitions. In addition, the Company
believes that new competitors, including large computer hardware and software
media and telecommunications companies, such as the regional telephone
companies, will enter the Internet access market, resulting in even greater
competition for I-Link. The ability of these competitors or others to bundle
services and products with Internet services could place the Company, assuming
completion of the I-Link Acquisition, at a significant competitive
disadvantage. Increased competition, price or otherwise, could result in
erosion of the Company's market share and may require price reductions and
increased spending on marketing and product development. Any of these events
could have a material adverse effect on the Company's financial condition and
operating results.
Marketing and Distribution. I-Link's primary focus has been on providing
Internet services to individuals and small to medium-sized businesses on a
national level. I-Link's current strategy is to sell its service by providing
easy to use (user-friendly) software, providing a high power, high speed
network and by providing its software at low price points. The Company's goal
is to expand the channels of distribution for its software in order to
facilitate rapid growth of its subscriber base. I-Link's distribution channels
include the following: retail channels, bundling with hardware or software
original equipment manufacturers ("OEMS") and direct mail. In addition, I-Link
is able to use its own network to sell and distribute software products to
existing customers. It is the Company's intention to continue to develop and
market I-Link's services and products consistent with I-Link's current
strategy. In addition, the Company will seek to establish relationships with
computer equipment and modem manufacturers to promote and distribute its
products and services. Management hopes that this will create new distribution
channels to customers and enable wholesale distribution as well.
I-Link recently reached an agreement with the national supercenter chains
CompUSA and Computer City to provide its Internet navigation software and
network access together in a retail package. I-Link's software is also
currently available in Egghead Software Stores, Bookstop, Micro Center, and
other retail outlets in the Southwestern region of the United States. The
Company intends to continue to develop retail outlets as a primary software
distribution method. Management believes that combining software and access
together in a retail package is a very effective distribution technique.
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I-Link has been actively pursuing OEM relationships with modem and other
hardware manufacturers to include or "bundle" I-Link's software suite with
their products. I-Link has recently signed an agreement with Jamsa Press
pursuant to which I-Link's software suite will be included on CD that is
inserted in the most recent printing of The World Wide Web Directory.
Subscriber Support. I-Link is currently working to provide network monitoring
and subscriber assistance services 24 hours a day, seven days a week. Most
support personnel respond to telephone inquiries, although a number of staff
are dedicated to also responding to E-Mail inquires. There can be no assurance
that I-Link's subscriber support resources will be sufficient to manage the
planned expansion of the subscriber base. I-Link is taking steps to help
ensure that subscriber support resources are matched with projected increases
in subscribers. Failure to adequately match subscriber support resources to
projected increases in subscribers could adversely affect I-Link's business.
Radiological Diagnostic Services
The majority of the Company's revenue in 1995 and 1994 was derived from owning
and operating outpatient diagnostic imaging facilities in Florida. This
revenue was primarily generated from two subsidiaries operating magnetic
resonance imaging (MRI) facilities.
On November 30, 1990, the Company closed on its limited partnership offering of
Medcross Imaging, Ltd. ("Partnership"). The Partnership was formed for the
purpose of purchasing a Philips T-5 MRI mounted in a mobile van to provide
services to health care facilities on the southwest coast of Florida. The
Partnership commenced operations in February 1991. During May and June 1992,
in a series of individual transactions, the Company acquired an additional
26.75% ownership interest in Medcross Imaging, Ltd. Prior to the acquisitions,
the Company had a 41.5% ownership interest. The Company increased its
ownership of Medcross Imaging, Ltd. to 80.75% on October 1, 1993 and 81.75% on
October 1, 1994. The Partnership significantly upgraded the MRI to
state-of-the-art performance in August 1993 at a cost of over $250,000. The
upgraded machine can now produce better images in less time, thereby increasing
the profit potential of the mobile unit.
In June 1993, the Company purchased Waters Edge Scanning Associates, Ltd.,
renamed "Tampa MRI" after the acquisition. Serving the Tampa, Florida market,
the acquisition of this facility was consistent with Medcross' "cluster"
approach of operating multiple MRI's in a single market or adjacent markets.
After the acquisition was complete, this MRI was upgraded for higher efficiency
and better images and the facility was remodeled.
In October 1994, the Company closed on the acquisition of a 75% ownership
interest in Urological Ultrasound Services of Tampa Bay (UUSTB) from Urology
Ultrasound, Inc. Prior to the acquisition, the Company owned the other 25%
ownership interest in UUSTB. The total consideration given for the 75%
partnership interest was $168,162. The purchase price was determined by arms
length negotiation and was paid in cash at closing. The acquisition was
accounted for under the purchase method of accounting. UUSTB was organized on
September 9, 1987 and is in the business of providing mobile ultrasound
services to urologic patients in west central Florida. When the Company
acquired the 75% partnership interest in UUSTB from Urology Ultrasound, Inc.,
the partnership ceased to exist. The Company immediately transferred all
assets and liabilities of the partnership, except cash of $115,603, to
Urological Ultrasound Services of Tampa Bay, Inc., a wholly owned subsidiary of
the Company, formed for the purpose of this acquisition. Prior to the
acquisition, the Company recorded its share of income and loss on its 25%
ownership interest in UUSTB using the equity method. On May 1, 1995, the
Company transferred all of the assets and certain liabilities of Urological
Ultrasound Services of Tampa Bay, Inc. to Tampa MRI.
Regulatory and Legislative Developments. The Company's businesses are subject
to federal law and various federal and state regulations. While the Company
believes that its operations comply with applicable regulations, the Company
has not sought or received interpretive rulings to that effect. Additionally,
there can be no assurance that subsequent laws, subsequent changes in present
laws or interpretations of laws will not adversely affect the Company's
operations.
8
<PAGE>
During the past several years, there has been increasing pressure from federal
and state regulatory and legislative bodies to prevent physicians from
referring patients to diagnostic imaging facilities in which they have an
ownership interest. Many prominent physicians, legislators, medical ethicists,
and others feel that ownership of imaging facilities can impair a physician's
judgement about the need for a diagnostic test. Studies have shown that
physicians who have an ownership interest in imaging facilities tend to refer
more patients for diagnostic testing than physicians who have no ownership
interest.
On the federal level, a physician self referral bill, introduced by
Representative Fortney "Pete" Stark, passed Congress and was signed by
President Clinton in 1993. The bill bans physicians from referring Medicare
patients to imaging and almost any other type of diagnostic or therapeutic
outpatient medical facility in which they have an ownership or financial
interest, effective January 1, 1995. Many states, including Florida, Illinois,
Minnesota, New York, and New Jersey, have passed laws regarding physician self
referral. Some simply require disclosure of ownership, while others restrict
physicians from referring to facilities in which they have an ownership
interest.
The Florida legislature enacted the Patient Self-Referral Act of 1992,
effective April 8, 1992. This Act prohibits physician self-referral to health
care entities in which such physicians have a financial interest, effective
October 1, 1994. Management believes these legislative and regulatory actions
should have no material adverse effect upon the Company's existing operations.
However, the Self-Referral Act also imposed a fee cap, effective July 1, 1992,
limiting the technical and professional fees of all providers of "clinical
laboratory services, physical therapy services, comprehensive rehabilitative
services, diagnostic imaging services, and radiation therapy services" to no
more than 115% of the Medicare limiting charge for non-participating
physicians. The statute specifically excludes hospitals and physician group
practices from the fee cap provision and does not apply to patients eligible
for Medicaid or Medicare reimbursement. Most of the Company's MRI and
ultrasound operations in Florida, as currently operated, would be subject to
the fee cap provision and would be severely impacted if the fee cap provision
is enforced inasmuch as 37% of the Company's revenue in 1995 was generated
from such services.
Several lawsuits have been filed by various providers against the State of
Florida in both federal and state court alleging, among other things, that the
fee cap provision violates the Equal Protection Clause of the U.S. Constitution
and seeking to enjoin the state from enforcing the fee cap provision. In July
1992, the United States District Court for Northern District of Florida granted
a permanent injunction in a case entitled Panama City Medical Center, Ltd.,
et.al. vs. Robert B. Williams, et.al. (File No. 92-40198-WS). The State of
Florida appealed the decision granting the federal court injunction and, on
February 15, 1994, the U.S. Court of Appeals for the Eleventh Circuit reversed
the decision of the lower court, finding that the fee cap provision did not
violate the Equal Protection Clause and ruling that the entry of the injunction
was in error. A motion for rehearing filed in the action has been denied and a
petition has been filed seeking appeal to the U.S. Supreme Court. On June 30,
1992 the Florida Circuit Court, Second Judicial Circuit, enjoined the State of
Florida from enforcing the fee cap provision. The Company intervened as a
party plaintiff in the state court action. An injunction has been obtained
preventing the State of Florida from enforcing the fee cap. The State of
Florida is seeking a review of that injunction on appeal. See "Item 3. Legal
Proceedings".
The ultrasound services provided by the Company are related specifically to
urology. Approximately 80% of the Company's patients are covered by Medicare.
Therefore, changes in Medicare reimbursement rules and regulations may have a
significant impact on the profitability of the Company's ultrasound operations.
Reimbursement rates for procedures are set annually. The 1996 reimbursement
rates for the procedures primarily performed by the Company were increased from
between 1.7% to 2.1% over 1995's reimbursement rates.
On March 20, 1995, the Florida Medicare Part B carrier issued a Final Local
Medical Review Policy regarding procedures that can be billed by independent
physiological laboratories (IPL), the classification of the Company's
ultrasound operations. These changes do not allow the IPL's to receive
reimbursement from Medicare for the procedures performed by the Company after
April 30, 1995. On May 1, 1995, the Company transferred its ultrasound
operations to Tampa MRI.
Health Care Industry Competition. It is common for hospitals, physicians,
physician groups, and others in the health care field to form ventures to own
and operate medical equipment. The Company is in competition with such groups.
There are many companies offering general business consulting services. The
companies that may compete with the Company in the future and that currently
offer consulting services may be larger and have far greater financial
resources than the Company. Also, if the cost of a particular medical device
9
<PAGE>
is reduced and the utilization by physicians increases, more hospitals will be
able to afford to acquire their own equipment rather than receive service on a
shared basis.
Magnetic Resonance Imaging. MRI is a multi-billion dollar industry that has
rapidly gained acceptance by physicians throughout the nation. MRI is the
imaging modality of choice for soft tissue in the head, neck, and spine. Over
3,000 MRI units have been installed in hospitals, outpatient diagnostic imaging
centers, physicians' offices, and in mobile vehicles. Over 7 million MRI
procedures were performed in the U.S. in 1991. At an estimated average of $900
per procedure, the MRI market in the United States generates over $6 billion
annually. New uses for MRI are continually being developed. MRI is being used
to a greater degree than ever before to scan shoulders, knees, ankles, elbows,
breasts, and even the cardiac system. Technological improvements should soon
enable MRI to be used effectively in imaging the chest and abdominal areas.
The revenue from MRI services accounted for 70% and 71% of total revenue of the
Company in 1995 and 1994, respectively. Contracts with two hospitals that
accounted for 40% and 46% of the revenue from MRI services in 1995 and 1994
respectively, were due to expire on February 28, 1996. On December 5, 1995,
the Company renewed the contracts with the two hospitals effective October 1,
1995. The agreements are substantially similar to the prior arrangements
except with respect to a change in the minimum arrangement and a reduction in
per patient charges. These contracts expire on February 28, 1997.
Many of the MRI systems placed into operation in the market area of the
Company's existing MRI centers were purchased and operated by physicians. For
some physicians, it was the only way to gain access to this expensive
technology. For others, it was an opportunity to invest in a technology that
they use to help diagnose their patients' medical problems. The Company
competes for patient referrals from physicians with the other MRI centers
located in its immediate market area. Because physicians can no longer refer
to entities in which they have an ownership interest, the physicians have no
financial predisposition to refer to a given center. The Company's ability to
obtain referrals will be based upon the quality of its service and its ability
to obtain contracts to treat managed care patients. Two new MRI centers have
recently begun operations in the market area of Medcross Imaging, Ltd., which
has reduced the number of procedures performed by Medcross Imaging, Ltd. and
has had a negative impact on revenue. In January 1996, the two hospitals to
which Medcross Imaging, Ltd. provides service recently obtained a major managed
care contract which management believes will significantly increase the number
of patients treated at those two facilities. Tampa MRI has obtained several
managed care contracts during 1995. While this has reduced the average per
patient charges, it has increased the number of patients treated.
The Company has not ruled out expanding its ownership and operation of MRI
facilities. However, the Company has not allocated any personnel or financial
resources to the start up or acquisition of additional radiological diagnostic
imaging services.
Ultrasound. The Company's consolidated revenue did not reflect revenue from
ultrasound services until the fourth quarter of 1994. Prior to that time, the
Company's ultrasound operations were performed by a joint venture in which the
Company had a 25% ownership interest . Income from the joint venture was
reported on the equity method. Effective October 1, 1994, the Company
purchased the other 75% ownership interest in the joint venture, which was
primarily owned by the physicians receiving services from the joint venture.
On May 1, 1995, the Company transferred all of its ultrasound operations to
Tampa MRI. The ultrasound services are provided at each physician's office
under the physician's direction. The Company is not looking to expand its
operations outside of the current market area. There are two main competitors
in the Company's market area. Management believes that it will maintain its
contracts with the physicians offices and may even add additional physician
offices through its marketing efforts.
Therapeutic Services
In the late 1980's, the Company was one of the industry leaders, providing
mobile kidney lithotripsy service throughout the southeastern United States.
The Company put the world's first mobile kidney lithotripter into operation in
1986. During the next two years, the Company developed four additional mobile
kidney lithotripsy networks. In 1986, the Company coordinated the development
of one of the leading outpatient lithotripsy centers in the nation. That
center, located in St. Petersburg, Florida, was owned by over 100 urologists
and continues to provide treatments for over 1,500 patients per year. In 1992,
65% of the ownership in the facility was sold to CORAM, a publicly held
corporation. In 1994, upon renewal, the Company's responsibilities under the
10
<PAGE>
Management Agreement were reduced to providing financial services. The annual
revenue from this management contract was also reduced from an average of
approximately $180,000 to $47,100 per year. In 1995, the remaining 35% of the
ownership in the facility was sold to CORAM. In August 1995, the Management
Agreement was terminated. The Company has management agreements with three
other owners of mobile kidney lithotripters that operate in seven different
states. The Company provides turn-key operations, management, and financial
services under its agreements with the owning entities. The Company also
provides the trained technicians who operate the lithotripters and, when
requested, the drivers who transport the equipment between the using
facilities. The Company does not expect any expansion or new development
efforts in the lithotripsy area.
The Company had a 7-1/2% ownership interest in International Prostate Partners,
formed in 1992. International Prostate Center - Cayman, Ltd., a wholly owned
Cayman Island subsidiary of International Prostate Partners, provided trans-
urethral microwave therapy (TUMT) services in Georgetown, Grand Cayman, for
patients with benign prostate hyperplasia (BPH). The manufacturer is in the
process of obtaining approval from the United States Food and Drug
Administration (FDA) to sell the technology in the U.S. The Company contracted
to provide a full range of management services, beginning in 1993, to
International Prostate Partners and International Prostate Center - Cayman,
Ltd. Operations began in January 1994. The patient case load was insufficient
to support operating expenditures. Therefore, the operations were closed down
and the equipment put in storage pending FDA approval. In August 1, 1995, the
Company sold its interest in the partnership and its Management Agreement was
terminated. The initial patient studies have been completed and the
information has been submitted to the FDA as part of the manufacturer's
application for Pre-Market Approval (PMA). If approved by the FDA, the Company
plans to be involved in providing TUMT services in the United States. The
Company has proposed this technology to its existing lithotripsy clients,
however, any decisions to be made are pending FDA approval. No assurance can
be given by the Company as to when, or if, FDA approval will be received.
Foreign Sales and Service of Diagnostic Imaging Equipment
In January 1993, the Company formed Medcross Asia, Ltd., a wholly owned
subsidiary headquartered in Hong Kong. This subsidiary was formed to identify
opportunities for the Company to enter the medical field in the Far East. The
Chairman of the Board of Directors and President of the Company have extensive
experience in manufacturing, trading, investment banking, and real estate in
Hong Kong, the People's Republic of China, Taiwan, and Japan.
China is a rapidly expanding market just beginning to be tapped by western
companies, especially in the area of medical equipment. Medcross, Inc. is one
of the few companies, and by far the smallest company, seeking to export
computerized tomography (CT) equipment to the area. The Company's competitors
include the original equipment manufacturers such as Picker International,
General Electric, Siemens, Toshiba, Hitachi, Elscint, and Shimadzu. In
addition, several companies specializing in the sale and refurbishment of used
CT equipment have entered the China market. These companies include Link
Equipment Services International, Ltd., Medical Science and Technology
International, Inc., Access International, Inc., AJK, Inc., Makers
International, Inc., and U.S. Pacific International Medical Equipment Company,
Ltd. China's hospitals and clinics are in need of virtually every type of
medical imaging equipment, and even outdated American technology is in high
demand.
On January 7, 1994, the Company entered into a joint venture agreement with
China National Medical Equipment and Supplies Import & Export Shenyang
Corporation (CNMC). The joint venture company, Shenyang Medcross Huamei
Medical Equipment Company, Ltd. (SMHME) is located in the People's Republic of
China. SMHME is 51% owned by the Company and 49% owned by CNMC. SMHME imports
used and refurbished CT scanners for resale to hospitals in the province of
Shenyang. SMHME also provides warranty service, including parts and labor, for
the machines it sells and intends to provide warranty service for other
machines already existing in the province. The Company's responsibilities
include locating, purchasing, refurbishing, and shipping used medical equipment
to SMHME. CNMC was required to contribute $380,000 in cash to SMHME of which
$260,417 has been contributed. Medcross contributed CT scanner equipment and
parts with an agreed upon value of $390,000 and a cost basis of $251,972 to
SMHME. The Company opened an office in Beijing to sell and service used CT
scanning equipment in the People's Republic of China outside the province of
Shenyang. In May 1995, the Company closed its Beijing office and is actively
pursuing the sale of such operations.
11
<PAGE>
Item 2. Description of Property.
The Company currently leases approximately 3,400 square feet for its corporate
offices located at 3227 Bennet Street North, St. Petersburg, Florida on a
month-to-month basis. The Company leases approximately 3,600 square feet for
its outpatient MRI center located in Tampa, Florida under two leases. The
lease for the business office expires July 31, 1996 and the Company has a one
year renewal option. The lease for the medical facility expires May 31, 1998.
The Company has the option to extend the medical facility lease an additional
two years.
I-Link leases approximately 1,500 square feet of space, which space houses its
corporate offices in Austin, Texas. Such lease has a term of three years,
which is scheduled to expire on November 30, 1997 but which I-Link is
negotiating to terminate. Pursuant to the terms of such lease, I-Link pays
rent on a monthly basis of $1,740. I-Link has recently entered into a ten-
month lease for 5,000 square feet of space in Austin, Texas, which will house
its corporate offices. Pursuant to such lease, I-Link will pay rent of $5,000
per month. I-Link also leases several other spaces to house its POPs through-
out the United States. Such spaces vary in size and are rented on a month-to-
month basis.
Item 3. Legal Proceedings.
The Florida legislature enacted the Patient Self-Referral Act of 1992,
effective April 8, 1992. The Self-Referral Act imposed a fee cap, effective
July 1, 1992, limiting the technical and professional fees of all providers of
"clinical laboratory services, physical therapy services, comprehensive
rehabilitative services, diagnostic imaging services, and radiation therapy
services" to no more than 115% of the Medicare limiting charge for non-
participating physicians. The statute specifically excludes hospitals and
physician group practices from the fee cap provision and does not apply to
patients eligible for Medicaid or Medicare reimbursement.
On June 30, 1992 in an action brought in the Florida Circuit Court, Second
Judicial Circuit, in and for Leon County, entitled Physical Therapy
Rehabilitation Center of Coral Springs, Inc., et.al. vs. State of Florida,
et.al. (File Nos. 92-2736, 92-2751, 92-2785, and 92-2879) the Circuit Court
enjoined the State of Florida from enforcing such fee cap provision. On June
24, 1994, the Company intervened as a party plaintiff in such state court
action in accordance with an order entered on June 16, 1994. On July 7, 1994,
the Circuit Court granted a motion for Summary Judgement filed by the
plaintiffs (including the Company), ruling that the fee cap provision was un-
constitutional insofar as it related to the business of the Company, due to a
defect in the title of the bill that contains the fee cap provision. The
Attorney General of the State of Florida filed an appeal to the June 16 and
July 7 Circuit Court rulings. On November 1, 1994 the appeal court, namely,
the District Court of Appeals, First District, on its own motion, quashed the
July 7 order for lack of jurisdiction because the appeal of the June 16 order
was still pending. An injunction has been obtained preventing the State of
Florida from enforcing the fee cap. The State of Florida is seeking a review
of that injunction on appeal. There can be no assurance as to the outcome of
any of such litigation or as to the enforceability of the fee cap provision.
See "Item 1. Business -Regulatory and Legislative Developments".
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its Annual Shareholders Meeting on October 17, 1995. Mr.
Henry Toh and Mr. Joel Kanter were elected as Class II Directors at the meeting
to serve for three years. Ms. Po Shin Wong and Dr. R. Huston Babcock, neither
of whom are Class II Directors, were not up for election and their terms of
office as Directors continued after the meeting.
The Shareholders approved the adoption of the Medcross, Inc. 1995 Director's
Stock Option and Appreciation Rights Plan, which provides for the issuance of
incentive stock options, non-qualified stock options, and stock appreciation
rights. The Preferred shareholders voted 192,500 shares in favor and none
against. The common stock shareholders voted 141,381 shares in favor, 60,175
shares against, and 15,316 shares abstained.
The shareholders approved the adoption of the Medcross, Inc. 1995 Employee
Stock Option and Appreciation Rights Plan, which provides for the issuance of
incentive stock options, non-qualified stock options, and stock appreciation
rights. The Preferred shareholders voted 192,500 shares in favor and none
against. The common stock shareholders voted 166,531 shares in favor, 48,375
shares against, and 1,966 shares abstained.
12
<PAGE>
The shareholders ratified the selection of Coopers & Lybrand and the Company's
independent public accounts for the 1995 fiscal year by a vote of 1,005,983
votes in favor, 23,857 votes against, and 7,050 votes abstained.
Item 5. Market for Common Equity and Related Stockholder Matters.
The Company's common stock has traded on the National Association of Security
Dealers, Inc. Automated Quotation System (NASDAQ) since March 23, 1993 under
the symbol "MDCR". The symbol was changed to "ILNK" effective March 8, 1996.
Prior to March 23, 1993, the Company's common stock was quoted on the NASD OTC
Bulletin Board. The range of high and low bid information for each full
quarterly period within the two most recent fiscal years is as follows:
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
March 31, 1994 $5.00 $3.75
June 30, 1994 4.00 3.00
September 30, 1994 3.13 2.75
December 31, 1994 3.13 2.00
March 31, 1995 $2.13 $1.13
June 30, 1995 1.13 0.63
September 30, 1995 1.13 0.88
December 31, 1995 1.25 1.00
</TABLE>
These quotations reflect interdealer prices, without retail markup, markdown,
or commission and may not represent actual transactions.
As of February 29, 1996 there were approximately 200 shareholders of record. In
addition, as of the same date, there were 56 individual participants in
security position listings furnished by Cede & Co., New York, New York,
registered clearing agency and holder of approximately 17% of the Company's
outstanding common stock.
The Company has never paid any cash dividends on its common stock and does not
anticipate doing so in the foreseeable future. Before any dividend can be paid
on the Company's common stock, all accrued and unpaid dividends on the
Company's preferred stock must be paid. At December 31, 1995, accrued and
unpaid dividends on the Company's preferred stock totalled $432,891.
Item 6. Management's Discussion and Analysis.
Results of Operation
The following Table represents the net operating revenue and operating profit
of the Company for each category of service offered. The net operating revenue
and operating profits shown are net of intercompany transactions that were
eliminated in consolidation.
<TABLE>
<CAPTION>
Year Ended December 31
1995 1994
--------- ---------
<S> <C> <C>
NET OPERATING REVENUE
Diagnostic Imaging $ 2,486,708 $ 2,761,458
Sales and Services of Medical Equipment 337,889 504,015
Management and Other 298,356 507,452
--------- ---------
$ 3,122,953 $ 3,772,925
========= =========
13
<PAGE>
<CAPTION>
Year Ended December 31
1995 1994
--------- ---------
<S> <C> <C>
OPERATING PROFIT (LOSS)
Diagnostic Imaging $ 322,314 $ 660,739
Sales and Services of Medical Equipment ( 171,083) ( 581,856)
Management and Other ( 644,986) ( 610,464)
--------- ---------
$( 493,755) $( 531,581)
========= =========
</TABLE>
Diagnostic Imaging. Net operating revenue from diagnostic imaging services
decreased 10% in 1995 as compared to 1994. MRI revenue of Tampa MRI accounted
for $116,575 of the decrease. This decrease is mainly related to an 8.7%
decrease in the average revenue per procedure. Tampa MRI has been successful
in obtaining several managed care contracts. Managed care contracts provide
for fixed charges per patient, generally lower than the charges obtainable for
other patients, which should be offset by an increase in the number of
procedures performed. MRI revenue of Medcross Imaging, Ltd. decreased $367,101
in 1995 as compared to 1994. This decrease was caused by a decrease in the
number of MRI procedures performed of 17% and a decrease in the average revenue
per procedure of 8%. The decrease in the average revenue per procedure of
Medcross Imaging, Ltd. is mainly due to the decrease of the per procedure
charges to the hospital clients pursuant to service contracts placed into
effect on October 1, 1995. These contracts extended the service period to the
hospitals from February 29, 1996 to February 28, 1997. While the charge per
procedure is reduced, each hospital must meet specific monthly minimum quotas.
The decrease in the number of patients treated by Medcross Imaging, Ltd. was
caused by increased competition in the area. A mobile MRI company began
providing service to a local hospital in the first quarter of 1995. The
hospital closed in June 1995 and the mobile company opened an MRI center in St.
Petersburg, Florida which creates direct competition for Medcross Imaging, Ltd.
The two client hospitals to which Medcross Imaging, Ltd. provides service, have
recently obtained a large managed care contract. Management believes that this
contract will increase the number of patients treated in 1996. The decreases
of Tampa MRI and Medcross Imaging, Ltd. were offset by the inclusion of
Urological Ultrasound Services of Tampa Bay, Inc. (UR) which was acquired and
included in the consolidated financial statements of the Company effective
October 1, 1994. On May 1, 1995, the Company transferred its ultrasound
operations to Tampa MRI. The inclusion of the ultrasound operations resulted
in an increase in diagnostic imaging revenue of $208,926 in 1995 as compared to
1994. The revenue from these operations, as a wholly owned subsidiary and a
joint venture combined, declined 12% in 1995 as compared to 1994. This decline
was due to a decrease in the average revenue per patient of 24%. This decrease
was due to the direct billing by the physicians, to whom services are provided,
of the professional portion of the procedures performed. In addition,
guidelines issued by the American Medical Association have bundled two of the
procedures, whereby in the event procedures are performed at the same time,
reimbursement for only one of those procedures is made. Management believes
that this will not have a material adverse effect on the operations of the
ultrasound services.
Net operating revenue from diagnostic imaging services increased 8% in the
fourth quarter of 1995 as compared to third quarter of 1995. MRI revenue of
Tampa MRI and the ultrasound operations increased 29% and 27%, respectively,
while MRI revenue of Medcross Imaging, Ltd. decreased 16%. The increase in the
revenue of Tampa MRI and ultrasound operations is due to an increase of the
number of procedures performed of 31% and 20%, respectively. The decrease in
net operating revenue of Medcross Imaging, Ltd. is due to a 26% decrease in
average revenue per procedure, offset by a 14% increase in the number of
procedures performed. This decrease in average revenue per procedure is due to
the renegotiated contract prices to the hospitals that are serviced by Medcross
Imaging, Ltd.
The operating profit from diagnostic imaging services decreased 51% in 1995 as
compared to 1994. This decrease included a decline in operating profit from
MRI services of $376,759, slightly offset by the operating profit from
ultrasound services of $38,334. Total operating expenses for diagnostic
imaging services increased $63,675 in 1995 as compared to 1994. Operating
expenses from ultrasound services increased $170,592 in 1995 as a result of
only having three months of operations in 1994. This was offset by a decrease
of $106,917 in total operating expenses for MRI services. The provision for
doubtful accounts for diagnostic imaging services increased $61,202 in 1995 as
compared to 1994. $16,211 of this increase was due to the inclusion of
ultrasound services in 1995.
14
<PAGE>
The operating profits from diagnostic imaging services increased from $21,339
in the third quarter of 1995 to $63,845 in the fourth quarter of 1995. Tampa
MRI and the ultrasound operations showed increased operating profits of $25,132
and $13,954, respectively, while Medcross Imaging, Ltd. showed decreased
operating profit of $23,238. The net increase in operating profit for
diagnostic imaging services was due to an increase in number of procedures
performed in the fourth quarter of 1995, offset by a decrease in the average
revenue per procedure.
During the past several years, there has been increasing pressure from federal
and state regulatory and legislative bodies to prevent physicians from
referring patients to diagnostic imaging facilities in which they have an
ownership interest. Legislation passed in the state of Florida, where all of
the Company's diagnostic imaging services operate, placed a fee cap on
diagnostic imaging services. An injunction has been obtained preventing the
State of Florida from enforcing the fee cap. See "Item 3. Legal Proceedings".
In addition, approximately 80% of the patients treated by the Company's
ultrasound operations are Medicare beneficiaries. Medicare has issued final
regulations eliminating reimbursement to independent physiological laboratories
for the procedures the Company performs. This will have a significant effect
on the Company's ultrasound operations. See "Item 1. Business - Regulatory
and Legislative Developments".
Foreign Sales and Service of Medical Equipment. The Company sells and services
used and refurbished computerized tomography (CT) scanners in the People's
Republic of China through its own office in Beijing and a joint venture
company, Shenyang Medcross Huamei Medical Equipment Company, Ltd. (SMHME), of
which it owns 51%. During the last four months of 1994, the Beijing office
completed the installation of two CT scanners and SMHME completed the
installation of one CT scanner. In the first quarter of 1995, the Company's
Beijing office completed the installation of two additional CT scanners. On
May 31, 1995, the Beijing office was closed and the responsibilities for the
parts depot and the remaining inventory have been transferred to SMHME.
Various issues have been raised by the purchasers in China regarding
maintenance of scanners, parts depot, etc. The Company has received $125,000
in payments through December 31, 1995. However, the Company has elected to
fully reserve for all amounts due to the Beijing office for the four scanners
installed. This resulted of an expense of $126,910 in 1995 and $188,842 in
1994 and an allowance for doubtful accounts of $315,753 as of December 31,
1995. In June 1995, the Company has written down one of the CT scanners in
inventory to what management believes is fair market value. This resulted in
$49,122 of additional cost of goods sold. The Company has decided to sell its
Beijing operations, and has held discussions regarding the sale of the China
operations. No assurance can be given regarding the outcome of such
negotiations.
Management and Other. Net operating revenue from management and other
activities decreased by $209,096 in 1995 as compared to 1994. A significant
portion of the decrease, $106,406 was related to the management contract with
Bay Area Renal Stone Center (BARSC). This contract accounted for $133,881 in
management fees in 1994 and $27,475 in management fees in 1995. In 1992 BARSC
sold a 65% ownership interest in its operations to CORAM, a publicly held
corporation. In August 1994, upon renewal of the Company's management
contract, its responsibilities were reduced to providing financial services.
In 1995, BARSC sold the remaining 35% ownership interest in its operations to
CORAM. In August 1995, the Company's management contract with BARSC was
terminated. UUSTB, the unconsolidated subsidiary, accounted for $81,222 of the
decrease in 1995. These management fees were included in the consolidation
because this partnership was recorded on an equity basis. In 1995, any
management fees collected from UR were eliminated in consolidation. The
management contract with International Prostate Partners accounted for $32,100
of the decrease. The patient case load of International Prostate Partners and
its wholly owned foreign subsidiary was insufficient to support its operating
expenditures. Therefore, in 1994, the operation was closed down and the
equipment stored pending FDA approval of the technology. This resulted in the
reduction of the Company's management fee revenue. In August 1994, upon the
sale of the Company's interest in International Prostate Partners, the
management contract was terminated. The annual management fee revenue based
upon contracts currently in effect is $245,160. The net operating loss for
management and other activities increased $34,522 in 1995 to $644,986. This
increased loss is related to the reduced revenue described above offset by a
decrease in corporate overhead expenses of $174,574. Salaries and benefits
decreased $141,417 and other operating expenses decreased $28,156 in 1995 as
compared to 1994.
The operating loss from management and other activities decreased $138,519 in
the fourth quarter of 1995 as compared to the third quarter of 1995. This
fourth quarter decrease is due to a decrease in salaries and benefits of
$22,389, a decrease in other operating expenses of $129,359, offset by a
decrease in net operating revenue of $11,675. Total operating expenses for the
fourth quarter of 1995 included consulting expenses that are not expected to
recur in 1996.
15
<PAGE>
Consolidated Operating Results. Net operating revenue of the Company decreased
17% in 1995 as compared to 1994. This was a result of decreased revenue of
diagnostic imaging services, foreign operations, and management fee revenue.
Cost of goods sold was entirely related to the sale and service of CT equipment
in China. Salaries and benefits decreased by $130,459 in 1995 as compared to
1994. This decrease was in the area of management and other ($141,417) offset
by an increase in salaries and benefits for diagnostic imaging services of
$10,492. The decrease in repairs and maintenance expenses and depreciation and
amortization was mainly related to diagnostic imaging services.
The provision for doubtful accounts increased $61,202 for diagnostic imaging
services, offset by a decrease in the provision for doubtful accounts for
foreign operations of $61,932. Other operating expenses decreased $132,379, of
which $126,173 was due to the reduction in expenses of the foreign operations.
Net operating profit of the Company in the fourth quarter of 1995 was $111.
This is an increase of $162,251 over the operating loss of $162,140 in the
third quarter of 1995. This increase is due to increase in the operating
profit of diagnostic imaging and management and other activities. Overall, net
operating revenue increased 5% and total operating expenses decreased 17% in
the fourth quarter of 1995 as compared to the third quarter of 1995.
Management expects the increase in net operating revenue and the decrease in
operating expenses to continue in the first quarter of 1996.
The decrease in interest expense in 1995 as compared to 1994 was due to the
reduction of the long term debt. The decline in interest income was related to
reduced cash balances. The difference between the decrease from unconsolidated
subsidiaries in 1995 and the loss from unconsolidated subsidiaries in 1994 is
primarily attributable to a $71,250 write down in 1994 of the Company's cost
basis investment in International Prostate Partners, which ceased operations in
1994, and to the recognition of a gain in 1995 from the sale of the Company's
ownership interest in the same partnership.
Liquidity and Capital Resources
Working capital provided by operations during 1995 was $237,787, compared to
$361,713 in 1994. The decrease in working capital provided by operating
activities was $123,926 even though net loss was $163,525 less than the net loss
recorded in 1994. The decline in working capital from operations was greater
than the decline in net loss for several reasons. There was no cash flow
received from unconsolidated subsidiaries in 1995 compared to distributions of
$120,853 in 1994. Also, income from unconsolidated subsidiaries was $20,500 in
1995 while in 1994, the Company reported a loss from unconsolidated
subsidiaries of $66,249. The working capital position of the Company at
December 31, 1995 was $354,226, which excludes $669,799 of the current portion
of long term debt which is payable in common stock of Medcross, Inc. At
December 31, 1994, the working capital position of the company was $462,632.
Cash flow provided by operating activities was $319,632 in 1995 compared to a
deficit of $372,213 in 1994. The increase in cash flow from operations was
mainly related to the decrease in cash expenditures for inventory of CT
equipment for sale in China.
Investing activities expenditures during 1995 related to the purchase of
additional equipment for the Tampa MRI unit. Investing activities providing
resources to the Company were related to the sale of medical equipment by Tampa
MRI and the sale of an interest in an unconsolidated subsidiary.
During 1995, the Company reduced its long term debt and capital lease
obligations by $617,322 and the outstanding balance of its line of credit by
$151,000. As of December 31, 1995 the balance outstanding under the line of
credit was $400,000. The Company was in violation of loan covenants regarding
cash balances, consolidated equity ratios, past days sales, and cash flow
coverage ratios under the line of credit at December 31, 1995. The bank has
waived these covenant violations through June 30, 1996. The Company has
reached an agreement with First Union National Bank pursuant to which the
Company has agreed to secure alternative financing to repay amounts outstanding
under the line of credit by June 30, 1996. In the event that the Company is
unable to secure such financing, the Company would be obligated to repay
amounts outstanding under the line of credit in increments of $10,000 per month
commencing on July 1, 1996, subject to negotiation of the terms of the balloon
payment thereafter. The Company is presently negotiating terms of alternative
financing, but there can be no assurance that such negotiations will be
successful.
16
<PAGE>
During the first quarter of 1995, the Company received advances totaling
$218,000 from Mortgage Network International, payable on demand. The Company's
Vice Chairman/President has management control over Mortgage Network
International. The advances were subsequently formalized by the Company
issuing a Promissory Note bearing interest at 1% over prime rate of Southwest
Bank of Texas, N.A. with a maturity of October 1, 1995. Subsequent to October
1, 1995, the Company and Mortgage Network International modified the note such
that: (i) a principal payment in the amount of $88,000 is due and payable on
December 31, 1996; (ii) interest thereon is payable monthly at a rate of 10.5%;
and (iii) the remaining principal amount of $130,000 with interest thereon at
the rate of 10.5% will be paid in 36 equal monthly payments of $4,225.32.
The effect of foreign currency translation on cash flow in 1994 was almost
entirely related to the difference between the stipulated exchange rate and the
joint venture agreement of SMHME and the actual exchange rate at the time the
contributions were made.
Concurrent with the Company's acquisition of the securities of I-Link in
February 1996, the Company issued an aggregate of $1 million in 10% Notes and
received net proceeds of approximately $845,000. The proceeds of such offering
were used to pay operating expenses of I-Link and certain other indebtedness of
I-Link. See "Recent Developments". The Company will require additional
financing in order to successfully integrate the business of I-Link, to fund
the cash flow operating deficit of I-Link, to expand its business, and to
discharge outstanding indebtedness, including the 10% Notes, the Mortgage
Network International advances, and the outstanding balance of the Company's
line of credit with First Union National Bank. Although the Company is
presently negotiating for alternative financing to repay First Union National
Bank and Mortgage Network International, there can be no assurance such
negotiations will be successful. Additional funding through one or more debt
or equity offerings in the capital markets will be necessary to continue to
implement the growth of the Company's business and expand its operations,
including those of I-Link. The availability of such capital sources will
depend on prevailing market conditions, interest rates, and financial position
and results of operations of the Company. Therefore, there can be no assurance
that such financing will be available or that the Company will not be required
to issue significant debt or equity securities in order to obtain such
financing.
Item 7. Financial Statements.
See Index to Consolidated Financial Statements on page 30.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance With Section 16(a) of the Exchange Act.
The Company's Articles of Incorporation provide that the number of directors of
the Company shall not be less than five or more than nine. On November 8,
1993, the Board of Directors voted to reduce the size of the Board to five
members effective at the next annual shareholders meeting which was held on
January 24, 1994. Currently, the Board of Directors has four members. One
vacancy on the Board of Directors exists due to the resignation of Bijan
Taghavi, a Class I Director, in July 1995. The Company's Articles of
Incorporation provide that the Board of Directors is divided into three
classes. The terms of office of Messrs. Joel S. Kanter and Henry Y. L. Toh,
Class II directors, stood for re-election at the annual meeting of stockholders
in 1995 (and will stand for re-election at the third succeeding annual meeting
of stockholders). The terms of office of Ms. Po Shin Wong and Dr. R. Huston
Babcock, Class III directors, expire at the next annual meeting of
shareholders. The term of office of a Class I director expires at the next
succeeding annual meeting of shareholders.
Biographical information with respect to the present executive officers,
directors, and key employees of the Company are set forth below. There are no
family relationships between any present executive officers and directors.
17
<PAGE>
Po Shin Wong, Chairman of the Board of Directors (age 53): Ms. Wong was
elected by the Board of Directors as a Class III director in March 1992 to
fill a vacancy created by the expansion of the Board of Directors and as
Chairman of the Board of Directors of the Company. Ms. Wong has served as a
director of Grand Fur Ltd., an investment management, trading, and manu-
facturing company in Hong Kong, since 1973 and is a director of Linkcost,
Ltd., which corporation indirectly owns Four M International, Inc. (Four M).
Henry Y. L. Toh, Vice Chairman of the Board of Directors and President (age
38): Mr. Toh was elected by the Board of Directors as a Class II director in
March 1992 to fill a vacancy existing prior to that date and as Vice Chairman
of the Board of Directors. Mr. Toh was elected President of the Company on
May 24, 1993 and was appointed Acting Chief Financial Officer in September
1995. Mr. Toh is a director of Four M. Mr. Toh served as a senior tax
manager in international taxation and mergers and acquisitions with KPMG Peat
Marwick from March 1980, to February 17, 1992. He is a graduate of Rice
University.
R. Huston Babcock, M.D., Neurosurgeon (age 65): Dr. Babcock, a Director of
the Company, served as Chairman of the Board of Directors of the Company from
its inception in April 1983 until March 1992. He was President of the
Company from inception until November 1987. He was Medical Director of the
Company from November 1987 to February 1993. Dr. Babcock is a neurosurgeon
and has been engaged in the full-time private practice of medicine on the West
Coast of Florida since 1960.
Joel S. Kanter, President, Windy City, Inc. (age 39): Mr. Kanter was elected
by the Board of Directors as a Class II director in March 1992 to fill a
vacancy created by the expansion of the Board of Directors. Mr. Kanter has
been the President of Windy City, Inc., a closely-held investment management
and consulting firm, since July 1986 and serves as a director thereof. Mr.
Kanter is also president and a director of Walnut Financial Services, a
provider of financial services, a director of I-Flow Corporation, a public
company that manufactures home infusion pumps, a director of TransGlobal
Services, Inc., a public company primarily in the business of providing
temporary engineering personnel, GranCare, Inc., a public company that owns
and operates nursing homes and pharmacies, a director of Healthcare
Acquisition Corp. which is a Special Purpose Acquisition Corporation which is
seeking to acquire an ongoing business in the healthcare field, and a
director of Osteoimplant Technology, Inc., which is in the business of
manufacturing and selling hip, shoulder, and elbow implant devices.
John W. Edwards (age 41): Pursuant to the terms of his employment agreement
with I-Link and subject to the approval of the I-Link Board of Directors, Mr.
Edwards is expected to be elected Chief Executive Officer of I-Link. Mr.
Edwards served as President and a director of Coresoft, Inc., a softward
company developing object-oriented computer solutions for small business from
September 1995 to April 1996. During the period August 1988 through July 1995
Mr. Edwards served in a number of executive positions with Novell, Inc., a
software company providing networking software, including Executive Vice
President of Strategic Marketing, Executive Vice President of the Appware and
Desktop Systems Groups and Vice President of Marketing of the Netware Systems
Group. Mr. Edwards was involved in the development of the NetWare 386 product
line. He is a visiting faculty member at the Marriott School of Management at
Brigham Young University. Mr. Edwards received a B.S. degree in Computer
Science from Brigham Young University and has taken graduate couses in
Computer Science at Brigham Young University.
Clay Wilkes, Chairman of the Board and Chief Executive Officer of I-Link (age
35): Mr. Wilkes has served as President of ILINK, Ltd. since its inception.
From February 1993 through June 1994, Mr. Wilkes has served as a consultant
to IBM in Austin, Texas on the PowerPC project. From August 1990 through
September 1992, he was responsible for UNIX product development at Novell,
Inc. in Provo, Utah where he managed the networking server and client
development groups. Mr. Wilkes has spent many years in the management and
development of computer communications software. Mr. Wilkes attended the
University of Oregon and Brigham Young University and has done graduate work
in Computer Science at Utah State University.
Alex Radulovic, Director of Technology of I-Link (age 26): Mr. Radulovic has
served as Director of Technology of ILINK, Ltd. since its inception. Pursuant
to the terms of his employment agreement with I-Link, Mr. Radulovic is
expected to be elected Executive Vice President of I-Link at its next Board
meeting. Mr. Radulovic served as a software consultant to IBM Corporation in
Austin, Texas, from December 1992 through June 1994, where his
responsibilities included the development and support of NetWare for AIX and
a wide range of AIX communications projects. From October 1991 through
November 1992, Mr. Radulovic served as a software engineer for development of
Netware 4.0 at Novell, Inc. in Provo, Utah. Mr. Radulovic also served as a
software engineer for development of the RAID Development at Computer System
Architects in Provo, Utah. Mr. Radulovic studied Computer Science at Brigham
Young University, Mechanical Engineering at Belgrade University (Yugoslavia)
and Physics at Beogradski, Skojevici (Belgrade, Yugoslavia).
Dorothy L. Michon, Vice President - Operations (age 40): Ms. Michon joined
the Company in August 1983 as C.T. Technologist, was promoted to Technical
Director in 1983, and then Associate Director of Operations in 1985. She was
elected as the Company's Vice President - Operations in March 1990. She
holds an Associates degree in Radiology Technology and a Bachelor of Science
degree in Professional Management from Nova University.
18
<PAGE>
Stephanie E. Giallourakis, Controller/Secretary (age 32): Ms. Giallourakis
joined the Company as a staff accountant in 1987, was promoted to Controller
of the Company in July 1993 and has been Secretary of the Company since
September 1995. Ms. Giallourakis holds a Bachelor of Arts degree in Business
Administration and Accounting from the University of South Florida.
Each officer of the Company is chosen by the Board of Directors and holds his
or her office until his or her successor shall have been duly chosen and
qualified or until his or her death or until he or she shall resign or be
removed as provided by the By-Laws.
There are no material proceedings to which any director, officer or affiliate
of the Company, any owner of record or beneficially of more than five percent
of any class of voting securities of the Company, or any associate of any such
director, officer, affiliate of the Company or security holder is a party
adverse to the Company or any of its subsidiaries or has a material interest
adverse to the Company or any of its subsidiaries.
Compliance with Section 16(a) of the Exchange Act of 1934. Section 16(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of equity securities of the Company with the
Securities and Exchange Commission (SEC) and NASDAQ. Officers, directors, and
greater than ten percent shareholders are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms that they file.
Based solely upon a review of Forms 3, Forms 4, and Forms 5 furnished to the
Company pursuant to Rule 16a-3 under the Exchange Act during the most recent
fiscal year, the Company believes that all such forms required to be filed
pursuant to Section 16(a) of the Exchange Act were timely filed, as necessary,
by the officers, directors, and security holders required to file the same
during the fiscal year ended December 31, 1995; however, the Company has never
received copies of any Forms 3, Forms 4, or Forms 5 from JW Charles Financial
Services, Inc., which entity had a contractual right to receive a warrant to
purchase at the time, greater than ten percent of the Company's common stock
pursuant to a financial consulting agreement dated as of November 4, 1994,
which warrants were not issued by the Company until March 1995.
Item 10. Executive Compensation.
Summary Compensation Table. The Company did not have any executive officers
who served as such at the end of the last fiscal year that earned more than
$100,000 in salary and bonus. The following table sets forth the aggregate
cash compensation paid for services rendered to the Company during the last
three fiscal years by the Company's Chief Executive Officer.
<TABLE>
<CAPTION>
Long-Term Compensation
-----------------------------------------------
Annual Compensation Awards Payouts
--------------------------------------- ---------------------- -----------
Other Securities
Annual Restricted Underlying All Other
Name and Compen- Stock Options/ LTIP Compen-
Principal Position Year Salary ($) Bonus ($) sation ($) Awards ($) SARs (#) Payouts ($) sation ($)
- ------------------ ---- ---------- --------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Henry Y.L. Toh<F1> 1995 58,051 0 225<F2> 0<F3> 11,167 0 N/A
President and CEO 1994 54,362 0 815<F2> 0 1,167 0 N/A
1993 54,000 0 810<F2> 0 81,900 0 N/A
<FN>
<F1>1 Mr. Toh began his employment with the Company in April 1992 and was appointed President and CEO in May 1993.
<F2>2 Represents Company contributions to 401(k) plan on behalf of Mr. Toh.
<F3>3 Mr. Toh had no restricted stock holdings at the end of the last fiscal year.
</FN>
</TABLE>
Option/SAR Grants in Last Fiscal Year (1995). The following table sets forth
certain information with respect to the options granted during the last fiscal
year to the Company's Chief Executive Officer.
19
<PAGE>
<TABLE>
<CAPTION>
Number of Securities Percent of Total Exercise
Underlying Options/SARs Granted to or Base
Name Options/SARS Granted (#) Employees in Fiscal Year Price ($/Sh) Expiration Date
- ---------------- ------------------------ ------------------------ ------------ ---------------
<S> <C> <C>
Henry Y.L. Toh 1,167<F1> 100% $0.875 06/29/2005
10,000<F1> 100% $1.25 10/16/2005
<FN>
<F1>1 Does not reflect options to purchase 160,000 shares of Common Stock granted subsequent to the
end of the 1995 fiscal year.
</FN>
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values. The following table sets forth certain information with
respect to options exercised during fiscal 1995 by the Company's Chief Executive
Officer and with respect to unexercised options held by such person at the end
of fiscal 1995.
<TABLE>
<CAPTION>
Shares Number of Securities Value of Unexercised in
Acquired on Value Underlying Unexercised the Money Options/SARs
Name Exercise (#) Realized $ Options/SARS at FY-End (#) at FY-End ($)<F1>
- -------------- ------------ ---------- -------------------------- --------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Henry Y.L. Toh -- -- 36,904<F2> 58,497 0 $ 146
<FN>
<F1>1 The calculations of the value of unexercised options are based on the difference between
the closing bid price on NASDAQ of the Common Stock on December 31, 1995, and the exercise
price of each option, multiplied by the number of shares covered by the option.
<F2>2 Subsequent to the 1995 fiscal year end, 24,570 and 57,330 of the Exercisable and Unexercisable
Options, respectively, were relinquished, and 150,000 options exercisable at $1.125 through
February 7, 2006 were issued to Mr. Toh.
</FN>
</TABLE>
No awards were made under any long-term incentive plans during 1995 or 1994.
Director Compensation
Directors are compensated $100 for each meeting of the Board of Directors
attended. In addition, directors have been automatically granted options under
the Company's 1992 Director Plan to purchase 1,167 shares of Common Stock on
the last Friday in June each year until adoption of the 1995 Director Stock
Option Plan. Pursuant to the 1995 Director Stock Option Plan which was
recently approved at the annual meeting of stockholders held in October 1995,
directors receive options in accordance with the following formula: (i) on
October 17, 1995; (ii) on the first business day of January 1996; and (iii) on
the first business day of each January thereafter, each member of the Board of
Directors then serving will receive options to purchase 10,000 shares of Common
Stock at an exercise price equal to the fair market value of the Common Stock on
the date of the grant. The Company's compensation committee may also grant
options at its discretion to reward directors for extraordinary service to the
Company.
Consulting Agreements
The Company entered into a consulting agreement for the three month period
ended October 23, 1995 with Bijan Taghavi, formerly an officer and director of
the Company. Pursuant to such agreement, Mr. Taghavi was engaged to provide
such consulting services as requested by the Company in exchange for
compensation at the rate of $5,208 per month. Mr. Taghavi's consulting
agreement contains certain mutual release, non-competition and confidentiality
provisions.
The Company entered into a consulting agreement with Timothy R. Barnes,
formerly an officer of the Company (the "Barnes Agreement"), which agreement
expired February 6, 1996. The Barnes Agreement provided for the issuance to
Mr. Barnes of warrants to purchase 36,858 shares of Common Stock exercisable at
a purchase price equal to the fair market value of the Common Stock at the date
of grant. The Barnes Agreement also contained standard non-competition and
confidentiality provisions.
The Company also entered into two consulting agreements with Jason H. Pollak,
the initial term of one of which expired on January 31, 1996 and the second of
such agreements commenced thereafter. The term of the second agreement was for
a period of three years, subject to earlier termination by the Company.
Pursuant to the terms of the first of such agreements (collectively, the
"Pollak Agreements"), Mr. Pollak received 50,000 shares of Common Stock. The
20
<PAGE>
second of the Pollak Agreements provided Mr. Pollak with an option to purchase
up to 50,000 shares of Common Stock each year at prices of $1.50, $2.50 and
$3.50, respectively. The second of the Pollak Agreements was terminated by the
Company on March 5, 1996 (upon thirty days' advance notice which renders such
termination effective April 4, 1996). The shares of Common Stock subject to
the Barnes Agreement and the Pollak Agreements have been included in
registration statements on Form S-8 recently filed by the Company with the
Commission (Registration Nos. 33-63751, 33-63749 and 333-01525, respectively).
Employment Agreements
In February 1996, the Company entered into two-year employment agreements with
Henry Toh, President and Chief Executive Officer, Dorothy Michon, Vice President
of Operations, and with Stephanie Giallourakis, Controller and Secretary. The
Employment Agreements are each for an initial period ending on December 31, 1997
and are automatically renewable for successive one-year periods unless written
notice to the contrary is given by the Company not less than 120 days prior to
expiration of the term. Pursuant to the terms of the employment agreements,
each such officer is required to devote such of his or her time to the business
and affairs of the Company as is required to fulfill the duties and
responsibilities of his or her office. Mr. Toh is entitled under his employment
agreement to receive compensation at the rate of $54,000 per year, Ms. Michon is
entitled to compensation at the rate of $63,000 and Ms. Giallourakis is entitled
to compensation at the rate of $53,000 per year. Each such officer is entitled
to an annual bonus in the discretion of the Board of Directors and may
participate in fringe benefit, deferred compensation, stock benefit and option
plans of the Company. In the event of termination by the Company other than for
"cause" (as defined in the agreement) or by Mr. Toh upon "good reason" (as
defined in the agreement) the Company is required to pay Mr. Toh, as liquidated
damages or severance pay, monthly termination payments equal to the base salary
in effect for a period of six months after such termination and, with respect to
Ms. Michon and Ms. Giallourakis, each such officer is entitled to monthly
termination payments equal to the base salary in effect for periods of three
months after any such termination. Each of the employment agreements contains
confidentiality and non-solicitation provisions.
I-Link entered into three-year employment agreements on February 21, 1996 with
each of Clay Wilkes, an officer and employee, and Alex Radulovic, an employee of
I-Link. Under his employment agreement, Mr. Wilkes is employed as Chairman of
the Board and Chief Executive Officer of I-Link at a salary of $95,000 per
annum, subject to adjustment upon satisfaction of performance criteria. Under
his employment agreement, Mr. Radulovic is employed as Executive Vice President
of I-Link at a salary of $90,000 per annum, subject to adjustment upon
satisfaction of performance criteria. In the event of termination by the
Company not involving "Just Cause" (as defined in the agreement) or upon a
material breach by the Company which is unremedied for 30 days after written
notice, each of Mr. Wilkes and Mr. Radulovic are entitled to receive, as
liquidated damages or severance pay, an amount equal to the Monthly Compensation
(as defined in the agreement) and, in addition, all options shall vest and all
Common Stock of Medcross held in escrow shall be released. Each of the
agreements contain non-competition and confidentiality provisions.
On April 8, 1996, subject to the approval of I-Link Board of Directors, I-Link
entered into a three-year employment agreement with John Edwards. Pursuant to
the terms of the employment agreement, Mr. Edwards will be employed as the Chief
Executive Officer and a Director of I-Link and will be required to devote
substantially all of his working time to the business and affairs of I-Link.
Mr. Edwards is entitled under his employment agreement to receive compensation
at the rate of $175,000 per year and is entitled to a profitability bonus in the
discretion of the I-Link Board of Directors and to participate in fringe
benefits of the Company as are generally provided to executive officers. In
addition, Mr. Edwards is entitled to receive an option to purchase one million
of the shares of Common Stock of Medcross, Inc. at an exercise price of $7.00.
Of such options, 83,333 vest and become exercisable on the first calendar day of
each quarter for the twelve (12) quarters after April 8, 1996. In the event of
termination by I-Link or in the event of a violation of a material provision of
the agreement by I-Link which is unremedied for thirty (30) days and after
written notice or in the event of a "Change in Control" (as defined in the
agreement), Mr. Edwards is entitled to receive, as liquidated damages or
severance pay, an amount equal to the Monthly Compensation (as defined in the
agreement) for the remaining term of the agreement. The agreement contains non-
competition and confidentiality provisions.
21
<PAGE>
Committees of the Board of Directors
Audit Committee. The Company's audit committee (the "Audit Committee") is
responsible for making recommendations to the Board of Directors concerning the
selection and engagement of the Company's independent certified public
accountants and for reviewing the scope of the annual audit, audit fees, and
results of the audit. The Audit Committee also reviews and discusses with
management and the Board of Directors such matters as accounting policies and
internal accounting controls, and procedures for preparation of financial
statements. Dr. Babcock is Chairman of the Audit Committee and Mr. Kanter is a
member of such committee.
Compensation Committee. The Company's compensation committee (the "Compensation
Committee") approves the compensation for executive employees of the Company.
Ms. Wong is Chairperson of the Compensation Committee and Mr. Kanter and Dr.
Babcock are members of such committee.
Executive Committee. The Company's executive committee (the "Executive
Committee") is vested with all the powers of the Board of Directors, subject to
the limitations set forth in the Florida Business Corporation Act. Ms. Wong is
Chairperson of the Executive Committee and Messrs. Toh and Kanter are members of
such committee.
Executive Stock Option Plan
The Company's 1989 Executive Stock Option Plan (the "ESOP"), which recently
expired pursuant to its terms, authorized the grant of stock options to key
employees of the Company including officers. Options granted under the ESOP
were non-qualified stock options exercisable at a price per share not less than
the highest bid price per share of the Common Stock as quoted on NASDAQ on the
date an option is granted. Options granted under the ESOP are exercisable not
less than one year nor more than five years after the grant date.
As of February 29, 1996, options for the purchase of 8,505 shares of Common
Stock at prices of $2.75 per share were outstanding. In connection with
adoption of the 1995 Director Plan (as hereinafter defined), the Board of
Directors recently authorized suspension of future grants of options under the
ESOP; however, outstanding options granted under the ESOP will continue to be
governed by the terms thereof until exercise or expiration of such options.
Director Stock Option Plan
The Company's Director Stock Option Plan (the "DSOP") authorizes the grant of
stock options to directors of the Company. Options granted under the DSOP are
non-qualified stock options exercisable at a price equal to the fair market
value per share of Common Stock on the date of any such grant. Options granted
under the DSOP are exercisable not less than six months nor more than ten years
after the date of grant.
As of February 29, 1996, options for the purchase of 24,564 shares of Common
Stock at prices ranging from $.875 to $3.875 per share were outstanding. To
date, no options have been exercised. In connection with adoption of the 1995
Employee Plan (as hereinafter defined), the Board of Directors recently
authorized the termination of future grants of options under the DSOP; however,
outstanding options granted under the DSOP will continue to be governed by the
terms thereof until exercise or expiration of such options.
Stock Purchase Plan
In accordance with the Employee Qualified Stock Purchase Plan (the "Purchase
Plan"), employees may contribute up to ten percent of their base wages toward
the purchase of Common Stock. The exercise price of options granted under the
Purchase Plan is the lesser of 85% of the market value on the first business day
of the payment period (September 1) or the last business day of the payment
period (August 31). As of February 29, 1996, the Company had 36,059 shares of
Common Stock reserved for issuance on exercise of the purchase rights granted
under the Purchase Plan.
22
<PAGE>
1995 Director Stock Option Plan
In October 1995, the stockholders of the Company approved adoption of the
Company's 1995 Director Stock Option and Appreciation Rights Plan, which plan
provides for the issuance of incentive options, non-qualified options and stock
appreciation rights (the "1995 Director Plan").
The 1995 Director Plan provides for automatic and discretionary grants of stock
options which qualify as incentive stock options (the "Incentive Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as options which do not so qualify (the "Non-Qualified Options") to be
issued to directors. In addition, stock appreciation rights (the "SARs") may be
granted in conjunction with the grant of Incentive Options and Non-Qualified
Options.
The 1995 Director Plan provides for the grant of Incentive Options, Non-
Qualified Options and SARs to purchase up to 250,000 shares of Common Stock
(subject to adjustment in the event of stock dividends, stock splits and other
similar events). To the extent that an Incentive Option or Non-Qualified Option
is not exercised within the period of exercisability specified therein, it will
expire as to the then unexercised portion. If any Incentive Option, Non-
Qualified Option or SAR terminates prior to exercise thereof and during the
duration of the 1995 Director Plan, the shares of Common Stock as to which such
option or right was not exercised will become available under the 1995 Director
Plan for the grant of additional options or rights to any eligible employee.
The shares of Common Stock subject to the 1995 Director Plan may be made
available from either authorized but unissued shares, treasury shares, or both.
The 1995 Director Plan also provides for the grant of Non-Qualified Options on a
non-discretionary basis pursuant to the following formula: each member of the
Board of Directors then serving shall receive a Non-Qualified Option to purchase
10,000 shares of Common Stock at an exercise price equal to the fair market
value per share of the Common Stock on that date. Pursuant to such formula,
directors received options to purchase 10,000 shares of Common Stock as of
October 17, 1995, and will receive options to purchase 10,000 shares of Common
Stock on the first business day of each January beginning in 1996. Each option
is immediately exercisable for a period of ten years from the date of grant.
The Company has 250,000 shares of Common Stock reserved for issuance under the
1995 Director Plan. As of February 29, 1996, options exercisable to purchase
230,000 shares of Common Stock at prices ranging from $1.00 to $1.25 per share
have been granted under the 1995 Director Plan.
1995 Employee Stock Option Plan
In October 1995, the stockholders of the Company approved adoption of the
Company's 1995 Employee Stock Option and Appreciation Rights Plan (the "1995
Employee Plan"), which plan provides for the issuance of Incentive Options, Non-
Qualified Options and SARs.
Directors of the Company are not eligible to participate in the 1995 Employee
Plan. The 1995 Employee Plan provides for the grant of stock options which
qualify as Incentive Stock Options under Section 422 of the Code, to be issued
to officers who are employees and other employees, as well as Non-Qualified
Options to be issued to officers, employees and consultants. In addition, SARs
may be granted in conjunction with the grant of Incentive Options and Non-
Qualified Options.
The 1995 Employee Plan provides for the grant of Incentive Options, Non-
Qualified Options and SARs of up to 400,000 shares of Common Stock (subject to
adjustment in the event of stock dividends, stock splits and other similar
events). To the extent that an Incentive Option or Non-Qualified Option is not
exercised within the period of exercisability specified therein, it will expire
as to the then unexercised portion. If any Incentive Option, Non-Qualified
Option or SAR terminates prior to exercise thereof and during the duration of
the 1995 Employee Plan, the shares of Common Stock as to which such option or
right was not exercised will become available under the 1995 Employee Plan for
the grant of additional options or rights to any eligible employee. The shares
of Common Stock subject to the 1995 Employee Plan may be made available from
either authorized but unissued shares, treasury shares, or both. The Company
has 400,000 shares of Common Stock reserved for issuance under the 1995 Employee
Plan. As of February 29, 1996, options to purchase 75,000 shares of Common
Stock with exercise prices of $1.125 per share have been granted under the 1995
Employee Plan.
23
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The common stock and Class A Preferred Stock constitute the only voting
securities of the Company. Each share of Class B Preferred Stock is
convertible, at the option of the holder thereof, into approximately 24.47
shares, subject to adjustment upon the occurrence of certain events, of the
Company's common stock. The table below sets forth information, to the best of
the Company's knowledge, with respect to the total number of shares of the
Company's common stock and Class A Preferred Stock beneficially owned by each
director, the Company's Chief Executive Officer, each beneficial owner of more
than five percent of either security, and all directors and executive officers
as a group, as reported by each such person, as of February 29, 1996. On that
date, there were 6,781,983 shares of the Company's common stock issued and out-
standing, 160,000 shares of the Company's Class A Preferred Stock issued and
outstanding and 7,500 shares of the Company's Class B Preferred Stock issued
and outstanding. The table below also sets forth as to each holder the percent
of votes represented assuming the common stock and Class A Preferred Stock
vote as a single class.
<TABLE>
<CAPTION>
% of Outstanding
Shares of Common Stock
Beneficially Owned<F1>
Number of Shares ----------------------
Name and Address Beneficially Percent Percent
of Beneficial Owner Title of Class Owned of Class of Votes
- -------------------------------- ----------------------- ---------------- ---------- ----------
<S> <S> <C> <C> <C>
Four M International, Inc.<F2> Common Stock 3,915,570<F3> 36.6% 36.6%
Casa Fortuna, S.A.<F2> Class A Preferred Stock 160,000 100.0%
Linkcost, Ltd.<F2>
1980 Post Oak Boulevard
Houston, Texas 77056
ILINK, Ltd. Common Stock 2,913,344 43.0% 27.2%
c/o Clay Wilkes
4030 West Baker Lane
Suite 320
Austin, TX 78759
Clay Wilkes<F4> Common Stock 1,646,263<F5> 24.3% 15.4%
4030 West Baker Lane
Suite 320
Austin, TX 78759
T6-G Limited Partnership<F7> Common Stock 548,891<F5> 8.1% 5.1%
185 South State Street
Salt Lake City, UT
Benchmark Equity Group Common Stock 761,570<F6> 11.2% 7.1%
16815 Royal Crest Drive
Suite 160
Houston, TX 77058
R. Huston Babcock, M.D. Common Stock 666,006<F8> 9.5% 6.1%
731 12th Street North Class B Preferred Stock 7,500 100.0%
St. Petersburg, Florida 33705
Po Shin Wong<F2> Common Stock 22,334<F9> * *
3227 Bennet Street North
St. Petersburg, FL 33713
24
<PAGE>
<CAPTION>
% of Outstanding
Shares of Common Stock
Beneficially Owned
Number of Shares ----------------------
Name and Address Beneficially Percent Percent
of Beneficial Owner Title of Class Owned of Class of Class
- -------------------------------- ----------------------- ---------------- ---------- ----------
<S> <S> <C> <C> <C>
Henry Y.L. Toh<F2> Common Stock 172,334<F9> 2.5% 1.6%
3227 Bennet Street North
St. Petersburg, FL 33713
Joel S. Kanter Common Stock 22,334<F9> * *
Windy City, Inc.
8000 Towers Crescent Drive
Suite 1070
Vienna, VA 22180
All Executive Officers and Common Stock 2,582,129<F10> 35.6% 21.0%
Directors as a Group (6 Persons)
____________________
* Represents less than 1%.
<FN>
<F1>(1) Unless otherwise noted, all of such shares are owned of record by each person or entity named
as beneficial owner and such person or entity has sole voting and dispositive power with
respect to the shares of Common Stock owned by each of them. Such person or entity's percentage
of ownership is determined by assuming that any options or convertible securities held by such
person or entity which are exercisable within 60 days from the date hereof have been exercised
or converted, as the case may be.
<F2>(2) Mr. Toh, an officer and director of the Company and one of two directors of Four M, and Ms.
Wong, a director of the Company and the sole director of Linkcost and Casa, have both disclaimed
beneficial ownership of the shares of Class A Preferred Stock owned by Four M.
<F3>(3) Represents the number of shares of Common Stock issuable upon conversion of the shares of Class
A Preferred Stock owned by the noted stockholder which shares of Common Stock are the subject of
options granted by the noted stockholder. As set forth herein below, Four M has granted certain
options exercisable commencing August 1, 1996 (subject to the satisfaction of certain conditions)
to purcahse the 3,915,570 shares of Common Stock issuable upon conversion of 160,000 shares of
Class A Preferred Stock. The exercise price is equal to the lesser of 200% of the average of
the closing bid and ask price per share of Common Stock for the ten (10) business days preceding
August 1, 1996 or $1.79 per share. Commonwealth Associates received the right to purchase
545,285 shares of Common Stock prior to December 31, 1996 and 537,500 shares of Common Stock
prior to December 31, 1997. Benchmark Equity Group, Inc. received the right to purchase 545,285
shares of Common Stock prior to December 31, 1996 and 537,500 shares prior to December 1997.
Certain members of management of I-Link have the right to purchase 825,000 shares of Common Stock
prior to December 31, 1996 and 825,000 shares prior to December 31, 1997. Scott Cook has
received the right to purchase 100,000 shares of Common Stock prior to December 31, 1996.
<F4>(4) ILINK, Ltd., a limited partnership, owns an aggregate 2,913,344 shares. Mr. Wilkes, an officer
and director of I-Link, owns a 61.6424% interest in ILINK, Ltd. and, therefore, pursuant to Rule
13d-1 under the Exchange Act, may be deemed to indirectly beneficially own 1,646,263 of the
shares owned by ILINK, Ltd.
<F5>(5) Excludes shares of Common Stock issuable upon conversion of Class A Preferred Stock subject of
an option exercisable commencing on July 1, 1996 granted by Four M.
<F6>(6) Excludes shares of Common Stock issuable upon conversion of Class B Preferred Stock subject of
an option exercisable commencing July 1, 1996 granted by R. Huston Babcock to the noted
shareholder and shares of Common Stock issuable upon conversion of Class A Preferred Stock
subject of an option exercisable commencing July 1, 1996 granted by Four M to the noted
shareholders.
<F7>(7) ILINK, Ltd., a limited partnership, owns an aggregate 2,913,344 shares. T6-G Limited
Partnership owns a 9.5% interest in ILINK, Ltd. and, therefore, pursuant to Rule 13d-1 under
the Exchange Act, may be deemed to indirectly beneficially own 548,891 of the shares owned by
ILINK, Ltd.
25
<PAGE>
<F8>(8) Includes: (a) 183,542 shares of Common Stock into which the 7,500 shares of Class B Preferred
Stock owned by the noted stockholder are convertible; and (b) 22,334 shares of Common Stock
issuable pursuant to options exercisable within 60 days of the date hereof. The shares of
Common Stock issuable upon conversion of such shares of Class B Preferred Stock are subject
to an option granted by the noted stockholder to Benchmark Equity Group, Inc.
<F9>(9) Represents shares of Common Stock issuable pursuant to options exercisable within 60 days of
the date hereof.
<F10>(10)Includes 289,336 shares of Common Stock issuable pursuant to options exercisable within 60
days of the date hereof and 183,542 shares of Common Stock into which the 7,500 shares of Class
B Preferred Stock are convertible. Excludes shares of Common Stock issuable upon conversion of
Class A Preferred Stock subject of an option exercisable commencing on July 1, 1996 granted by
Four M.
</FN>
</TABLE>
Item 12. Certain Relationships and Related Transactions.
During the first quarter of fiscal 1995, the Company received advances totaling
$218,000 from Mortgage Network International. Henry Y.L. Toh, the President
and Chief Executive Officer of the Company, has management control over
Mortgage Network International ("MNI"). Such advances were previously payable
upon demand. Subsequent to the extension of such advances, the Board of
Directors approved delivery of a promissory note representing the aggregate
amount of such advances, which promissory note matured by its terms on October
1, 1995 and bears interest at one percent over the prime rate of interest
established by Southwest Bank of Texas, N.A. Subsequently, the Company and MNI
modified the note such that: (i) a principal payment in the amount of $88,000
is due and payable on December 31, 1996; (ii) interest thereon is payable
monthly at the rate of 10.5%; and (iii) the remaining principal amount of
$130,000 with interest thereon at the rate of 10.5% will be paid in 36 equal
monthly payments of $4,225.32.
See "Executive Compensation - Employment Agreements" for a description of the
terms of employment agreements between the Company and certain of its officers
and between I-Link and certain of its officers.
Item 13. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this Report (see Exhibit Index
on page 50):
2(a)<F6> Management Agreement Assignment, effective June 1, 1993 between
Florida Medical Enterprises, Inc. and Waters Edge Scanning
Associates, Inc.
2(b)<F6> Lease Assignment and Asset Purchase Agreement dated as of June 1,
1993 between Waters Edge Scanning Associates, Ltd. and Medcross,
Inc.
2(c)<F10> Joint Venture Interest Purchase Agreement, effective October 1,
1994 between Medcross, Inc. and Urology Ultrasound, Inc.
2(d)<F15> Stock Purchase Agreement, dated February 13, 1996, by and among
Medcross, Inc., ILINK, Ltd., and Gnet Enterprises, Inc.
2(e)<F15> Escrow Agreement, dated February 21, 1996, by and among Medcross,
Inc., ILINK, Ltd., and De Martino, Finkelstein, Rosen & Virga.
3(a) Amendment to the Amended and Restated Articles of Incorporation
dated December 18, 1995.
3(b) Composite copy of the Amended and Restated Articles of
Incorporation incorporating all amendments through the date of
the filing of this Form 10-KSB.
3(c)<F8> Bylaws of the Company, as amended.
3(d) Articles of Incorporation of I-Link Worldwide, Inc.
3(e) Bylaws of I-Link Worldwide, Inc.
4(a)<F1> Specimen Common Stock Certificate.
4(b)<F7> Promissory Note payable to Waters Edge Scanning Associates, Ltd.
in the amount of $600,000, dated June 1, 1993.
4(c)<F7> Promissory Note contingently payable to Waters Edge Scanning
Associates, Ltd. in the amount of $365,000, dated June 1, 1993.
4(d)<F7> Promissory Note contingently payable to Waters Edge Scanning
Associates, Ltd. in the amount of $365,000, dated June 1, 1993.
4(e)<F8> Form of Promissory Note payable to limited partners of Medcross
Imaging, Ltd. in the aggregate amount of $75,000, dated October
1, 1993.
4(f)<F11> Series CS Warrant to Purchase Common Shares of Medcross, Inc.
4(g)<F13> Common Stock Purchase Option to Purchase Common Shares of
Medcross, Inc.
26
<PAGE>
4(h)<F15> Form of 10% Convertible Promissory Note dated February 21, 1996.
4(i) Non-Negotiable 10% Promissory Note payable to Scott Cook in the
amount of $100,000, dated October 19, 1995.
4(j) Guaranty by and between Medcross, Inc. and Scott Cook, dated
October 19, 1995.
4(k) Security Agreement by and between ILINK, Ltd., Scott Cook, and
Medcross, Inc. dated October 19, 1995.
4(l) Common Stock Purchase Option to Purchase Common Shares of
Medcross, Inc.
9(a)<F4> Shareholder's Agreement dated February 19, 1992 among Four M
International, Inc., Walnut Capital Corp., Windy City, Inc., and
Canadian Imperial Bank of Commerce Trust Company (Bahamas)
Limited.
9(b)<F10> First Amendment to Shareholder's Agreement.
*10(a)<F9> The Company's Director Stock Option Plan.
*10(b)<F2> The Company's Executive Stock Option Plan.
10(c)<F2> MR Service Agreement, dated August 14, 1990, between Medcross
Imaging, Ltd. and HealthTrust, Inc. with respect to Edward White
Hospital.
10(d)<F2> MR Service Agreement, dated August 14, 1990, between Medcross
Imaging, Ltd. and HealthTrust, Inc. with respect to South Bay
Hospital.
10(e)<F3> Stock Purchase Agreement, dated February 9, 1992, between
Medcross, Inc., Four M International Limited, Walnut Capital
Corp, Windy City, Inc., and Canadian Imperial Bank of Commerce
Trust Company.
10(f)<F5> First Amendment to Stock Purchase Agreement, dated May 21, 1992,
between Medcross, Inc., Four M International, Inc., Walnut
Capital Corp., Windy City, Inc., and Canadian Imperial Bank of
Commerce Trust Company (Bahamas) Limited, as trustee.
10(g)<F10> Financial Consulting Agreement and Common Stock Purchase Warrant
dated as of November 3, 1994 between Medcross, Inc. and JW
Charles Financial Services, Inc.
10(h)<F11> Consulting Agreement, dated as of August 6, 1995, between the
Company and Timothy R. Barnes.
10(i)<F12> Consulting Agreement, dated September 1, 1995, by and among
Medcross, Inc., Kalo Acquisitions, LLC, and Jason H. Pollak.
10(j)<F13> Amendment to and Restatement of the Amended and Restated
Consulting Agreement, dated March 4, 1996, by and among
Medcross, Inc., Kalo Acquisitions, LLC, and Jason H. Pollak.
10(k)<F13> Termination of Amended and Restated Consulting Agreement, dated
March 5, 1996, by and among Medcross, Inc., Kalo Acquisitions,
LLC, and Jason H. Pollak.
10(l)<F14> MR Service Agreement effective October 1, 1995, by and between
Medcross Imaging, Ltd. and South Bay Hospital.
10(m)<F14> MR Service Agreement effective October 1, 1995, by and between
Medcross Imaging, Ltd. and Edward White Hospital.
*10(n) Employment Agreement, dated February 4, 1996, between Medcross,
Inc. and Henry Y.L. Toh.
*10(o) Employment Agreement, dated January 1, 1996, between Medcross,
Inc. and Dorothy L. Michon.
*10(p) Employment Agreement, dated January 1, 1996, between Medcross,
Inc. and Stephanie E. Giallourakis.
*10(q) Employment Agreement, dated February 14, 1996, between Medcross,
Inc. and Clay Wilkes.
*10(r) Employment Agreement, dated February 14, 1996, between Medcross,
Inc. and Alex Radulovic.
*10(s) The Company's 1995 Director Stock Option and Appreciation Rights
Plan.
*10(t) The Company's 1995 Employee Stock Option and Appreciation Rights
Plan.
*10(u) Employment Agreement, dated April 8, 1996, between Medcross, Inc.
and John W. Edwards.
11 Statement regarding computation of earnings per common share.
21 Subsidiaries of the registrant.
23 Consent of Coopers & Lybrand L.L.P.
27 Financial Data Schedule
- --------------
[FN]
<F1>1 Incorporated by reference to the Company's registration statement on
Form S-18 file number 33-27978-A.
<F2>2 Incorporated by reference to the Company's annual report on Form 10-K
for the year ended December 31, 1990, file number 0-17973.
<F3>3 Incorporated by reference to the Company's annual report on Form 10-K
for the year ended December 31, 1991, file number 0-17973.
<F4>4 Incorporated by reference to the Company's current report on Form 8-K
dated March 30, 1992, file number 0-17973.
<F5>5 Incorporated by reference to the Company's current report on Form 8-K
dated May 21, 1992, file number 0-17973.
<F6>6 Incorporated by reference to the Company's current report on Form 8-K
dated June 30, 1993, file number 0-17973.
<F7>7 Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarter ended June 30, 1993, file number 0-17973.
27
<PAGE>
<F8>8 Incorporated by reference to the Company's quarterly report on Form
10-Q for the quarter ended September 30, 1993, file number 0-17973.
<F9>9 Incorporated by reference to the Company's annual report on Form 10-K
for the year ended December 31, 1993, file number 0-17973.
<F10>10 Incorporated by reference to the Company's annual report on Form
10-KSB for the year ended December 31, 1994, file number 0-17973.
<F11>11 Incorporated by reference to the Company's registration statement filed
on Form S-8, file number 33-63751.
<F12>12 Incorporated by reference to the Company's registration statement on
Form S-8, file number 33-63749.
<F13>13 Incorporated by reference to the Company's registration statement on
Form S-8, file number 333-01525.
<F14>14 Incorporated by reference to the Company's current report on Form 8-K,
dated October 31, 1995, file number 0-17973.
<F15>15 Incorporated by reference to the Company's current report on Form 8-K,
dated February 23, 1996, file number 0-17973.
<F16>* Indicates a management contract or compensatory plan or
arrangement required to be filed herewith.
[/FN]
(b) A report on Form 8-K dated October 31, 1994 was filed by the Company
regarding the acquisition of the 75% ownership interest in Urological
Ultrasound Services of Tampa Bay, a partnership in which the Company
already owned a 25% ownership interest. The Form 8-K was amended in
January 1995 to include financial statements of the partnership and
proforma financial statements of the Company.
A report on Form 8-K dated October 31, 1995 was filed by the Company
regarding various contracts entered into by the corporation. No
financial statements were included.
A report on Form 8-K dated February 23, 1996 was filed by the Company
regarding the acquisition of the securities of I-Link Worldwide, Inc.,
the completion of a private placement of $1,000,000 in aggregate
principal amount of convertible promissory notes, and the conversion of
Class A Preferred Stock into Common Stock. No financial statements were
included.
28
<PAGE>
SIGNATURES
In accordance with 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.
Dated: April 15, 1996 MEDCROSS, INC.
(Registrant)
By: /s/ Henry Y.L. Toh
Henry Y.L. Toh
President/Director/CEO/Acting CFO
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.
SIGNATURE DATE
/s/ Po Shin Wong April 15, 1996
Po Shin Wong
Chairman of the Board
/s/ Henry Y. L. Toh April 15, 1996
Henry Y. L. Toh
Vice Chairman of the Board
President and Chief Executive Officer
/s/ R. Huston Babcock, M.D. April 15, 1996
R. Huston Babcock, M.D.
Director
/s/ Joel S. Kanter April 15, 1996
Joel S. Kanter
Director
29
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Accountants 31
Consolidated Balance Sheet 32
Consolidated Statements of Operations 33
Consolidated Statements of Cash Flows 34
Notes to Consolidated Financial Statements 36
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Medcross, Inc.
St. Petersburg, Florida
We have audited the accompanying consolidated balance sheet of Medcross,
Inc. and subsidiaries as of December 31, 1995 and the related statements of
operations and cash flows for the two 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 provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Medcross, Inc. and subsidiaries as of December 31, 1995 and the consolidated
results of their operations and their cash flows for the two years then ended in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand, LLP
Tampa, Florida
April 15, 1996
31
<PAGE>
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995
Assets
<S> <C>
Current assets
Cash and cash equivalents $ 79,316
Accounts receivable less allowances of $694,436 921,793
Inventory 829,988
Prepaid expenses 87,253
---------
Total current assets 1,918,350
---------
Property and equipment
Office furniture, equipment, leasehold
improvements, and vehicles 386,736
Medical equipment and vehicles 2,970,122
---------
3,356,858
Less accumulated depreciation 1,736,701
---------
Net property and equipment 1,620,157
---------
Investment in unconsolidated subsidiary 6,250
Intangible assets less accumulated amortization of $244,887 535,468
Other assets 66,638
---------
Total assets $ 4,146,863
=========
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses $ 615,373
Advance deposits received 233,728
Note payable - related party 88,000
Notes payable 400,000
Current portion of long-term debt - relate party 39,230
Current portion of long-term debt 702,447
Current obligations under capital lease 155,145
---------
Total current liabilities 2,233,923
---------
Long-term debt - related party 87,682
Minority interest in consolidated subsidiaries 370,092
Commitments and contingencies -
Stockholders' equity
Preferred stock 2,075,000
Common stock, $.007 par value, authorized 20,000,000
shares, issued and outstanding 1,803,092 shares 12,622
Additional paid-in capital 3,428,854
Accumulated deficit (4,061,310)
---------
Total stockholders' equity 1,455,166
---------
Total liabilities and stockholders' equity $ 4,146,863
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended December 31
1995 1994
----------- -----------
<S> <C> <C>
Net health care service revenue $ 2,785,064 $ 3,268,910
Equipment sales and service 337,889 504,015
--------- ---------
Net operating revenue 3,122,953 3,772,925
--------- ---------
Cost of goods sold - equipment sales and service 154,481 542,195
Salaries and benefits 1,123,340 1,253,799
Repairs and maintenance 309,255 321,988
Provision for doubtful accounts 365,093 365,690
Depreciation and amortization 465,020 488,963
Other operating expenses 1,199,519 1,331,898
--------- ---------
Operating loss ( 493,755) ( 531,581)
--------- ---------
Interest expense ( 160,423) ( 168,183)
Interest income 10,717 29,815
Gain (loss) on sale of property and equipment ( 765) 425
Equity in net income (loss) of unconsolidated
subsidiaries 20,500 ( 66,249)
Other income 59,377 4,630
--------- ---------
Loss before minority interest in net income
(loss) of consolidated subsidiaries and
income tax benefit ( 564,349) ( 731,143)
Minority interest in net income (loss) of
consolidated subsidiaries 12,440 ( 52,385)
--------- ---------
Loss before income tax benefit ( 551,909) ( 783,528)
Income tax benefit - ( 68,094)
--------- ---------
Net loss $( 551,909) $( 715,434)
========= =========
Loss per common and equivalent share $( .08) $( .10)
========= =========
Weighted average common and equivalent
shares outstanding 6,866,926 6,915,549
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net loss $( 551,909) $( 715,434)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities
Depreciation 380,396 403,191
Amortization 84,624 85,745
Warranty liability ( 94,091) 93,280
Warrant expense 16,667 3,333
Professional fees 50,000 -
Provision for doubtful accounts 365,093 365,690
Gain (loss) on sale of property and equipment 765 ( 425)
Equity in net loss (income) of
unconsolidated subsidiaries ( 20,500) 66,249
Distributions from unconsolidated subsidiary - 120,853
Minority interest in net income (loss)
of consolidated subsidiaries ( 12,440) 52,385
Provision for deferred income tax benefit - ( 68,094)
Decrease (increase) in assets:
Accounts receivable ( 161,353) ( 431,078)
Inventory 91,926 ( 825,079)
Prepaid expenses 41,338 ( 12,358)
Organization and loan costs 14,055 ( 47,206)
Other assets 5,127 2,146
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 201,634 267,739
Other current liabilities ( 91,970) 266,850
--------- ---------
Net cash provided (used) by operating
activities 319,362 ( 372,213)
--------- ---------
Cash flows from investing activities
Purchase of property and equipment ( 23,222) ( 47,611)
Purchase interest in Urological Ultrasound
Services of Tampa Bay - ( 168,162)
Purchase minority interest in Medcross
Imaging, Ltd. - ( 9,000)
Proceeds from sale of property and equipment 5,755 425
Investment in unconsolidated subsidiary ( 6,250) ( 3,750)
Sale of interest in unconsolidated subsidiary 28,000 -
--------- ---------
Net cash provided (used) by investing
activities 4,283 ( 228,098)
--------- ---------
- continued -
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
<TABLE>
<CAPTION>
MEDCROSS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
Year Ended December 31
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from financing activities
Net proceeds from notes payable -
related parties $ 218,000 $ -
Net proceeds (reduction of) from notes
payable ( 151,000) 276,000
Reductions of long-term debt - related party ( 3,088) -
Reductions of long-term debt ( 367,783) ( 389,143)
Reduction of capital lease obligations ( 246,451) ( 223,765)
Issuance of common stock 15 8
Additional paid-in capital 1,805 2,974
Minority interest contributions - 260,417
Minority interest distributions ( 54,750) ( 55,517)
--------- ---------
Net cash used by financing activities ( 603,252) ( 129,026)
--------- ---------
Effect of foreign currency translation on
cash flows ( 2,234) ( 86,263)
--------- ---------
Decrease in cash and cash equivalents ( 281,941) ( 815,600)
Cash and cash equivalents at beginning of year 361,157 1,176,757
--------- ---------
Cash and cash equivalents at end of year $ 79,316 $ 361,157
========= =========
Supplemental cash flow information
Interest paid $ 129,859 $ 140,979
========= =========
Income taxes paid (received) $ - $ -
========= =========
</TABLE>
In May 1994, the Company revalued the accounts receivable of Tampa MRI that were
purchased in June 1993. Purchased receivables were revalued at $183,273 greater
than originally recorded, which resulted in a corresponding decrease in
goodwill.
In July 1994, a holder of Class B Preferred Stock converted 695 shares into
17,008 shares of common stock.
In October 1994, upon dissolution of Urological Ultrasound Services of Tampa
Bay, $108,612 in assets and liabilities, excluding cash, were distributed to
the Company.
In November 1994, a Warrant to purchase 250,000 shares of common stock was
issued pursuant to a Financial Consulting Agreement. The Warrant was valued at
$20,000, which is included in paid-in capital and is being expensed over the
one-year term of the agreement.
In February 1995, a holder of Class B Preferred Stock converted 9,305 shares
into 227,714 shares of common stock.
In September 1995, the Company entered into a consulting agreement whereby
50,000 shares of common stock was issued. The market price of the common stock
upon issuance was $62,500 and is being expensed over the five month term of the
consulting agreement.
In September 1995, one of the noteholders of the $600,000 promissory note
demanded payment, due in common stock. A reduction of $5,201 of the debt
resulted in an issuance of 1,849 shares of common stock.
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Business
Nature of business
The Company is in two businesses. Domestically the Company is a provider of
diagnostic and clinical services to healthcare facilities and directly to
patients both with its own equipment and equipment of other entities under
management contracts. In China, the Company sells and services used medical
equipment.
Note 2 - Accounting policies
A summary of significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:
Principles of consolidation
The consolidated financial statements include the accounts of Medcross, Inc.
(the Company) and the following subsidiaries:
- Medcross Imaging, Ltd., a limited partnership, provides mobile magnetic
resonance imaging services to healthcare facilities. The Company is the
sole general partner of the partnership and had a 81.75% ownership interest
as of December 31, 1995 and 1994.
- Waters Edge Scanning Associates, Inc., a Florida corporation, provides
magnetic resonance imaging services. This wholly owned subsidiary acquired
the assets of Waters Edge Scanning Associates, Ltd. and its general partner,
Florida Medical Enterprises, Inc. on June 1, 1993.
- Urological Ultrasound Services of Tampa Bay, Inc., a Florida corporation,
provides mobile ultrasound services. This wholly owned subsidiary began
operations in October 1994 after completion of an acquisition of the 75%
ownership interest not previously owned by the Company. Prior to that time,
the Company recorded its share of income or loss from the 25% ownership
interest on the equity method. On May 1, 1995, this subsidiary distributed
all of its assets net of liabilities to the Company. All of the assets of
this subsidiary, except cash, were contributed to Waters Edge Scanning
Associates, Inc.
- Medcross Asia, Ltd., a Hong Kong corporation, was formed by the Company as
a wholly owned subsidiary in 1993. This corporation is seeking investment
and equipment trading opportunities in the Far East.
- Shenyang Medcross Huamei Medical Equipment Company, Ltd. (SMHME), a People's
Republic of China (PRC) corporation formed in January 1994, sells and
services used computerized tomography (CT) equipment in the Shenyang
Province of the PRC. The Company has a 51% ownership interest in SMHME.
All significant intercompany transactions are eliminated in consolidation.
Use of estimates
The preparation of financial statements in conforming with generally accepted
accounting principals 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.
Estimates also affect the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates.
36
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Accounting policies - continued
Fair value of financial instruments
To meet the reporting requirements of FASB Statement No. 107 ("Disclosure about
Fair Value of Financial Instruments"), the Company calculates the fair value of
financial instruments and includes this additional information in the notes to
the consolidated financial statements when the fair value is different than the
book value of those financial instruments. When the fair value is equal to the
book value, no additional disclosure is made. The Company uses quoted market
prices whenever available to calculate these fair values. When quoted market
prices are not available, the Company uses standard pricing models for various
types of financial instruments which takes into account the present value of
future cash flows.
Cash and cash equivalents
Cash and cash equivalents include all cash balances and highly liquid
investments with a maturity of three months or less.
Inventory
Inventories consist of used and refurbished computerized tomography scanners
held for sale in China. Inventories are valued at the lower of cost or market
using the specific identification method.
Property and equipment
Property and equipment are stated at cost. Depreciation is calculated using
the declining balance method over the estimated useful lives of the assets, four
to nine years. Expenditures for maintenance and repairs are charged to expense
as incurred, and renewals and betterments are capitalized. Gains or losses on
disposals are credited or charged to operations.
Investment in unconsolidated subsidiaries
During 1995, the Company sold its interest in an unconsolidated subsidiary for
$28,000, which was a $78,750 investment in a Florida partnership formed in
February 1993. This investment was accounted for under the cost method of
accounting. The Company had a 7.5% equity and profits interest in this
partnership. The partnership's primary business was the sole shareholder of a
Cayman Islands corporation which discontinued operations during the second
quarter of 1994. As a result, the Company recorded a $71,250 writedown of the
value of the investment during 1994.
Until October 1, 1994, the Company had an interest in another unconsolidated
subsidiary, Urological Ultrasound Services of Tampa Bay (UUSTB). This
subsidiary was accounted for under the equity method of accounting, whereby the
cost of the investment was adjusted for the allocable share of the undistributed
income or losses of the subsidiary. The Company had a 25% equity and profits
interest in UUSTB before it purchased the remaining ownership interest. At that
time, the partnership was dissolved and a new company was formed (See Note 5).
During 1995, the Company invested $6,250 in a joint venture formed in October
1995. The Company has an 18.75% interest in this joint venture and it is
accounted for under the cost method of accounting. The joint venture was formed
to determine the feasibility of the commercialization of telemedicine.
37
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Accounting policies - continued
Intangible assets
Organization cost is amortized on the straight-line basis over a period of
sixty months. Loan costs are amortized on a straight-line basis over the period
of the loans (36 months to 60 months). Syndication and other issuance costs
incurred with respect to equity offerings of the Company and sale of limited
partnerships interests are deferred and offset against the proceeds of the
offerings at closing. Goodwill is amortized on the straight-line basis over a
period of twenty to twenty-five years.
Revenue recognition
The Company recognizes revenue from health care services at the time services
are performed net of contractual allowances based on agreements with third party
payers. The Company records revenue from equipment sales when installation is
completed. Advance deposits received prior to installation are recorded as a
current liability.
Warranty liability
Equipment sales are generally accompanied by a service warranty. Expected
future product warranty costs are recorded as an expense and liability when the
product is sold.
Foreign currency translation
The functional currency for the Company's foreign operations is the applicable
local currency. The translation from the applicable foreign currencies to U.S.
dollars is performed for balance sheet accounts using current exchange rates in
effect at the balance sheet date and for income statement items using a weighted
average exchange rate for the period. The gains or losses, net of applicable
deferred income taxes, resulting from such translations are included in
stockholders' equity.
Some transactions of the Company and its subsidiaries are made in currencies
different from their own. Gains and losses from these transactions are
generally included in income as they occur.
Net foreign currency transaction gains or losses are not material for any of
the periods presented. The effect of foreign currency translation on cash flows
in 1994 is primarily the difference between the capital contribution exchange
rate stipulated in the joint venture agreement and the exchange rate at the time
of the contribution.
Income taxes
The Company records deferred taxes in accordance with the Financial Accounting
Standards Board (FASB) Statement 109, "Accounting for Income Taxes." The
Statement requires recognition of deferred tax assets and liabilities for the
temporary differences between the tax bases of assets and liabilities and the
amounts at which they are carried in the financial statements based upon the
enacted tax rates in effect for the year in which the differences are expected
to reverse. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized.
38
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 2 - Accounting policies - continued
Income (loss) per common and equivalent share
Income (loss) per common and equivalent share is based on the weighted average
number of common shares outstanding and the dilutive effect of common stock
equivalents consisting of stock options and convertible preferred stock. Fully
diluted earnings per share are not presented because they approximate earnings
per common and equivalent share.
Note 3 - Major customers and concentrations of credit risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its cash and cash equivalents with what it
believes to be high credit quality financial institutions and attempts to limit
its exposure in any one particular instrument.
The Company provided magnetic resonance imaging services to two major customers
in 1995 and 1994. The revenue and accounts receivable balances, net of
contractual allowances, at year end for each of these customers were as follows:
<TABLE>
<CAPTION>
Revenue Accounts Receivable
1995 1994 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Customer A $566,945 $825,751 $87,223 $92,263
Customer B 304,791 395,033 18,200 55,301
</TABLE>
Note 4 - Related party transactions
The Company had a management agreement with the unconsolidated subsidiary, of
which the Company is a general partner. The Company also had a management
agreement with the previously unconsolidated subsidiary of which it purchased
the 75% interest in October 1994. The Company recognized revenue from these
entities in the amount of $3,200 and $111,534 during 1995 and 1994,
respectively. There were no accounts receivables from these entities at
December 31, 1995.
During the first quarter of fiscal 1995, the Company received advances totaling
$218,000 from Mortgage Network International. Henry Y.L. Toh, the President and
Chief Executive Officer of the Company, has management control over Mortgage
Network International ("MNI"). Such advances were previously payable upon
demand. Subsequent to the extension of such advances, the Board of Directors
approved delivery of a promissory note representing the aggregate amount of such
advances, which promissory note matured by its terms on October 1, 1995 and
bears interest at one percent over the prime rate of interest established by
Southwest Bank of Texas, N.A. Subsequently, the Company and MNI modified the
Note such that: (i) a principal payment in the amount of eighty-eight thousand
dollars ($88,000) is due and payable on December 31, 1996; (ii) interest thereon
is payable monthly at the rate of 10.5%; and (iii) the remaining principal
amount of one-hundred thirty thousand dollars ($130,000) with interest thereon
at the rate of 10.5% will be paid in thirty-six (36) equal monthly payments of
four-thousand, two hundred, and twenty-five dollars and thirty-two cents
($4,225.32).
39
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 5 - Acquisition of assets
In October 1994, the Company closed on the acquisition of a 75% ownership
interest in Urological Ultrasound Services of Tampa Bay (UUSTB) from Urology
Ultrasound, Inc. Prior to the acquisition, the Company owned the other 25%
ownership interest in UUSTB. The total consideration given for the 75%
partnership interest was $168,162. The purchase price was paid in cash at
closing. UUSTB was organized on September 9, 1987 and is in the business of
providing urological ultrasound services to urologic patients in west central
Florida. When the Company acquired the 75% partnership interest in UUSTB from
Urology Ultrasound, Inc., the partnership ceased to exist. The Company
immediately transferred all assets and liabilities of the partnership, except
cash of $115,603 to Urological Ultrasound Services of Tampa Bay, Inc., a wholly
owned subsidiary of Medcross, formed for the purpose of this acquisition.
The acquisition was accounted for as a purchase. The results of operations of
the acquired enterprise is included in the consolidated financial statements
beginning October 1, 1994. Prior to the acquisition, the Company recorded its
share of income and loss on its 25% ownership interest in UUSTB using the
equity method.
The following table presents the pro forma financial information of the Company
and UUSTB for the year ended December 31, 1994 assuming such transactions had
occurred on January 1, 1994:
<TABLE>
<CAPTION>
Income (loss)
Net Operating Net Income Per Common
Year Ended December 31, 1994 Revenue (Loss) Share
------------- ---------- -------------
<S> <C> <C> <C>
Company $ 3,772,925 $(713,421) $(.10)
UUSTB 252,347 20,006 ===
--------- -------
Combined 4,025,272 (693,415)
Pro forma adjustments ( 76,034) ( 3,010)
--------- -------
Pro forma combined $ 3,949,238 $(696,425) $(.10)
========= ======= ===
</TABLE>
Note 6 - Purchase of minority interest
In October 1994, the Company acquired an additional 1% ownership interest in
Medcross Imaging, Ltd. Prior to the acquisition, the Company had a 80.75%
ownership interest. The acquisition increased the Company's ownership interest
in Medcross Imaging, Ltd. to 81.75%. The acquisition was made by purchasing a
limited partnership unit from a certain limited partner for $9,000. The
purchase price was paid in cash.
Note 7 - Notes payable
<TABLE>
<S> <C>
Unsecured promissory note, payable to Mortgage Network
International, interest payable at 10.5% payable monthly,
principal balance due December 31, 1996. $ 88,000
=========
Line of credit, $700,000, payable to First Union National
Bank, interest payable at 3/4% above prime rate, (prime
rate was 8.5% at December 31, 1995), principal balance due
June 30, 1996, collateralized by accounts receivable and
general assets of the Company. $ 400,000
=========
</TABLE>
The line of credit contains restrictive covenants relating to equity
requirements, minimum cash balances, acquisitions, debt to equity ratios,
borrowing base requirements, and net cash flow coverage requirements. On
December 31, 1995, the Company was in violation of the consolidated equity, net
cash flow coverage, past days sales and cash balance covenants. The Company
received a waiver from the bank of these loan covenant violations thru June 30,
1996. The company is continuing its attempts to secure new financing to repay
the line of credit.
40
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 7 - Notes payable - continued
The Company has reached an agreement with First Union National Bank pursuant to
which the Company has agreed to secure alternative financing to repay amounts
outstanding under the line of credit by June 30, 1996. In the event that the
Company is unable to secure such financing, the Company will be obligated to
repay amounts outstanding under the line of credit in increments of $10,000 per
month commencing on July 1, 1996, subject to negotiation of the terms of the
balloon payment thereafter which could be due on July 1, 1996. In the event the
line of credit is due on July 1, 1996, the Company will be required to secure
alternative financing to repay amounts outstanding.
Note 8 - Long-term debt
<TABLE>
<CAPTION>
Long-term debt at December 31, 1995 was as follows:
<S>
Equipment obligation, payable to First Union National Bank,
due in monthly installments of $28,929, plus accrued
interest at prime rate plus 3/4% per annum, (prime rate was
8.5% at December 31, 1995) until a final payment due
February 10, 1996, collateralized by certificate of deposit
and certain medical equipment. $ 32,648
Unsecured promissory note in amount of $600,000 inclusive of
simple interest through September 30, 1995 at rate of 5.33%,
payable on September 30, 1996 in 213,333 shares of Medcross
common stock. The holder may demand payment of principal
and interest any time after September 30, 1995. After this
date, the note bears interest at the rate of 8% per annum
payable in cash. 594,799
Unsecured promissory notes, payable to 11 individuals,
interest only paid quarterly, maturing September 30, 1996,
convertible on demand by holders into 18,750 shares of
Medcross common stock after September 30, 1995. 75,000
Unsecured promissory note, payable to Mortgage Network
International due in 36 equal monthly installments of
principal and interest totalling $4,225.32. The interest
rate is 10.5% 126,912
-------
829,359
Less current portion 741,677
-------
$ 87,682
=======
<CAPTION>
Principal repayments on long term obligations are expected to occur as follows:
<S> <C>
Years ending December 31, 1996 741,677
1997 43,554
1998 44,128
-------
$829,359
=======
</TABLE>
Certain financing agreements contain restrictive covenants relating to equity
requirements, guarantor agreements, sales of property, acquisitions and debt to
equity ratio. The most restrictive covenant is that Medcross Imaging, Ltd.
cannot, without first having obtained a written consent of the lender, make
distributions to any of the partners unless its debt coverage ratio is equal to
or greater than 1.3 to 1.0 for any twelve consecutive months calculated on a
quarterly basis. At December 31, 1995, the Company was in compliance with the
covenants.
41
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 9 - Leases
The Company has a capital lease for its MRI equipment at Tampa MRI which
requires monthly payments of $22,886. The lease allows the Company to purchase
the equipment for $1 upon termination at July 31, 1996. At December 31, 1995,
the Company's property and equipment included $704,202 of medical equipment
under capital lease with accumulated amortization of $249,214.
The Company leases its corporate office and its China offices in Shenyang and
Beijing on a month-to-month basis.
The Company leases the facilities where Tampa MRI operates under two separate
operating leases. The lease for the medical facility is for five years,
commencing June 1, 1993, with a current lease payment of $3,431 per month, plus
sales tax. The Company has the option to extend the lease for an additional
two-year period. The lease for the business office space is for one year,
commencing June 1, 1995, with a current lease payment of $1,363 per month, plus
sales tax. The Company has the option to extend the lease for an additional
one-year period.
<TABLE>
<CAPTION>
Future minimum lease payments under the leases are as follows:
Capital Operating
-------- ---------
<S> <C> <C>
1996 $160,202 $ 47,987
1997 - 41,172
1998 - 17,155
------- -------
Total minimum obligations 160,202 $106,314
Less interest 5,057 =======
-------
Present value of net minimum obligations 155,145
=======
</TABLE>
Lease expense for 1995 and 1994 was $107,360 and $141,717, respectively.
Note 10 - Commitments and contingencies
As part of the consideration for the purchase of the assets of Waters Edge
Scanning Associates, Ltd. two contingent notes with a net present value of
$639,212 were issued. The contingencies are based on the MRI center meeting
various levels of cash receipts through September 30, 1995. These contingent
notes were not recorded due to the fact that the contingencies were not met.
The Company has guaranteed $100,000 of a promissory note issued by I-Link
payable to Scott Cook.
Note 11 - Income taxes
<TABLE>
<CATPION>
The components of the provision (benefit) for income taxes for the years ended
December 31, 1995 and 1994 were as follows:
1995 1994
----------- -----------
<S> <C> <C>
Current tax expense $ - $ -
Deferred tax expense (benefit)
Current - 118,671
Deferred - ( 186,765)
--------- ---------
$ - $( 68,094)
========= =========
</TABLE>
42
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 11 - Income taxes - continued
<TABLE>
<CAPTION>
The sources of significant timing differences which gave rise to deferred tax
assets and liabilities as of December 31, 1995 are as follows:
Total Current Non-current
---------- ---------- -----------
<S> <C> <C> <C>
Conversion of subsidiaries from accrual to cash for tax purposes $(272,773) $(272,773) $ -
Book basis of property and equipment in excess of tax (339,419) - (339,419)
------- ------- -------
Total deferred tax liabilities (612,192) (272,773) (339,419)
------- ------- -------
Tax operating loss carryforward 778,180 231,422 546,758
Allowance for marketable securities 29,034 29,034 -
Non-deductible vacation accrual 12,317 12,317 -
Tax basis of goodwill and intangible assets in excess of book 107,115 - 107,115
Foreign loss 36,134 - 36,134
Tax capital loss carryforward 34,508 - 34,508
Valuation allowance for capital loss carryforward and deferred
tax asset in excess of deferred tax liability (385,096) ( -) (385,096)
------- ------- -------
Total deferred tax assets 612,192 272,773 339,419
------- ------- -------
Net deferred tax asset (liability) $ - $ - $ -
======= ======= =======
<CAPTION>
The valuation allowance increased $108,484 in 1995. The difference between the
actual tax provision and the amounts obtained by applying the statutory U.S.
Federal Income Tax rate to the income before taxes is as follows:
1995 1994
---------- ----------
<S> <C> <C>
Tax benefit at statutory rate $(187,649) $(266,400)
Increase (decrease) in taxes resulting from the tax effects of:
State income taxes - net ( 30,355) ( 43,094)
Non-deductible meals and entertainment 33 7,434
Non-deductible stock warrant amortization 6,583 1,316
Non-taxable foreign currency translation adjustments 2,710 2013
Increase in total valuation allowance 108,484 240,509
Increase of prior year operating loss carryforward - ( 4,436)
Expiration of capital loss carryforward 1,224 1596
Allowance for douftul accounts 115,644 -
Adjust basis of property and equipment book to tax difference - ( 7,032)
Other ( 16,674) -
------- -------
$ - $( 68,094)
======= =======
</TABLE>
As of December 31, 1995, the Company had a $1,970,075 net operating loss carry
forward and a $87,361 capital loss carryforward. The net operating loss carry
forward will expire between the years 2006 and 2009. These amounts are subject
to annual limitations pursuant to provisions of the Internal Revenue Code
relating to cumulative changes in ownership. The capital loss carryforward will
expire between the years 1996 and 1997. A valuation allowance has been
recognized to offset that portion of the deferred tax assets whose realization
is conditioned upon the realization of future taxable income or capital gains.
43
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Stockholders' equity
Common stock
In August 1994, the Company issued 17,008 shares of common stock upon the
conversion of 695 shares of preferred stock.
In February 1995, the Company issued 227,714 shares of common stock upon the
conversion of 9,305 shares of preferred stock.
In November 1995, the Company issued 50,000 shares of common stock to a
consultant for consulting services as provided in a consulting agreement.
In November 1995, the Company issued 1,849 shares of common stock upon demand
pursuant to a promissory note.
The Company issued 2,080 shares and 1,136 shares of common stock pursuant to
the Employee Stock Purchase Plan in 1995 and 1994, respectively.
Preferred stock
In 1992, the Board of Directors approved and filed with the state of Florida an
Amendment to the Articles of Incorporation designating 200,000 shares of
preferred stock as Class A Variable Rate Cumulative Convertible Preferred Stock
("Class A Preferred Stock") and 22,500 shares of preferred stock as Class B
Variable Rate Cumulative Convertible Preferred Stock ("Class B Preferred
Stock"). The Class A Preferred Stock and Class B Preferred Stock both have a
par value of $10 per share and are entitled to receive cumulative dividends at
a rate equal to 2% above the 30 day certificate of deposit rate in effect on the
first day of each month at the Texas Commerce Bank. The Company has the right
to redeem the Class A and Class B Preferred Stock for $10 per share plus the
amount of any accrued and unpaid dividends. Shares of Class A and Class B
Preferred Stock may be converted into such number of whole shares of common
stock as is determined by multiplying the number of shares of Class A Preferred
Stock by a fraction, the numerator of which is $10 and the denominator is the
conversion price ($.408625). Each share of Class A Preferred Stock will entitle
the holder thereof to that number of votes which is equal to the number of
shares of common stock into which the Class A Preferred Stock is convertible.
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, the holders of the Class A Preferred Stock shall be
entitled to distribution before any payments shall be made in the respect to the
Class B Preferred Stock or common stock in amount equal to the par value per
share plus all accrued and unpaid dividends and the holders of Class B Preferred
Stock shall be entitled to distribution before any payments shall be made in the
respect to common stock in an amount equal to the par value per share plus all
accrued and unpaid dividends.
On March 1, 1993, the Company and the holders of Class A Preferred Stock signed
an agreement to eliminate the redemption provision of the Class A Preferred
Stock. An amendment to the Company's Articles of Incorporation to eliminate the
redemption provision of the Class A Preferred Stock and increase the number of
authorized shares of preferred stock to 500,000 was approved by the shareholders
at the annual meeting held on January 24, 1994 and filed with the State of
Florida.
During 1994, 695 shares of Class B Preferred Stock were converted into common
stock.
In February 1995, 9,305 shares of Class B Preferred Stock were converted into
common stock.
In December 1995, the Board of Directors approved and filed with the State of
Florida an Amendment to the Articles of Incorporation designating 240,000 shares
of preferred stock as Class C 12% Cumulative Convertible Preferred Stock (the
"Class C Preferred Stock"). The Class C Preferred Stock has a par value of $10
per share and is entitled
44
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Stockholders' equity - continued
to receive cumulative dividends equal to 12% per annum of the liquidation
preference per share of $20. The Company does not have the right to redeem the
Class C Preferred Stock. The issued and outstanding shares of Class C
Preferred Stock shall convert to Common Stock on the second anniversary
(December 18, 1997) of the filing of the designation with the Secretary of State
of Florida (the "Conversion Date"). The shares of Class C Preferred Stock held
by each holder thereof shall be converted into such number of whole shares of
Common Stock as is determined by multiplying the number of shares of Class C
Preferred Stock by a fraction, the numerator of which is 20 and the denominator
of which is 70% of the average of the bid and ask prices per share of Common
Stock as quoted by NASDAQ for the 20 consecutive trading days prior to the
Conversion Date. In the case no transaction price is available, the closing bid
price shall be used, or, in the case of no closing transaction price and no
closing bid price being available, the fair market value of the Common Stock as
determined in good faith by the Company's Board of Directors shall be used. In
the event of any voluntary or involuntary liquidation, dissolution, or winding
up of the affairs of the Company, each share of Class C Preferred Stock shall
have a liquidation preference of $20 per share. With respect to the payment of
dividends and rights to redemption and upon liquidation, the holders of Class C
Preferred Stock shall be subordinate to the issued and outstanding shares of
Class A Preferred Stock and Class B Preferred Stock of the Company and shall
rank senior to the shares of Common Stock of the Company.
At December 31, 1995, the Company had 200,000 shares of Class A Preferred Stock,
7,500 shares of Class B Preferred Stock, and no shares of Class C Preferred
Stock issued and outstanding.
At December 31, 1995, 30,000 of the 500,000 shares of preferred stock authorized
remain undesignated and unissued. Accrued and unpaid dividends at December 31,
1995 were $319,623 and $14,981 for Class A Preferred Stock and Class B Preferred
Stock, respectively.
Executive stock option plan
The Company's Executive Stock Option Plan which recently expired, authorized the
granting of stock options to key employees of the Company including officers.
Options granted under the Plan are non-qualified stock options exercisable at a
price not less than the highest bid price per share at which the stock is quoted
on the National Association of Securities Dealers, Inc. Automated Quotation
System on the date the option is granted. Options are exercisable not less than
one year or more than five years after the grant date.
As of December 31, 1995, options for the purchase of 74,363 shares of common
stock at prices ranging from $1.3125 to $2.875 per share were outstanding.
Options for the purchase of 33,763 shares were exercisable within sixty (60)
days of year end. No options were exercised in 1994 or in 1995.
Director stock option plan
The Company's Director Stock Option Plan which recently expired, authorized the
granting of stock options to Directors of the Company. Options granted under
the Plan are non-qualified stock options exercised for a price equal to the fair
market value per share of common stock on the date of any such grant. Options
are exercisable not less than six months or more than ten years after the date
of grant.
As of December 31, 1995, options for the purchase of 74,964 shares of common
stock at prices ranging from $0.875 to $3.875 per share were outstanding.
Options for the purchase of 35,556 shares were exercisable within 60 days of
year end. To date, no options have been exercised.
45
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Stockholders' equity - continued
Stock purchase plan
In accordance with the Employee Qualified Stock Purchase Plan adopted in June
1990, employees may contribute up to 10 percent of their base wages towards the
purchase of the Company's common stock. The option price is the lesser of 85%
of the market value on the first business day of the Payment Period (September
1) or the last business day of the Payment Period (August 31). As of December
31, 1995, the Company had 36,059 shares of common stock reserved for issuance
on exercise of the purchase rights. On August 31, 1995, 2,080 shares of common
stock were issued at a price of $0.875 per share. On August 31, 1994, 1,136
shares of common stock were issued at a price of $2.625 per share.
1995 Director Stock Option Plan
In October 1995, the stockholders of the Company approved adoption of the
Company's 1995 Director Stock Option and Appreciation Rights Plan, which plan
provides for the issuance of incentive options, non-qualified options and stock
appreciation rights (the "1995 Director Plan").
The 1995 Director Plan provides for automatic and discretionary grants of stock
options which qualify as incentive stock options (the "Incentive Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), as
well as options which do not so qualify (the "Non-Qualified Options") to be
issued to directors. In addition, stock appreciation rights (the "SARs") may
be granted in conjunction with the grant of Incentive Options and Non-Qualified
Options.
The 1995 Director Plan provides for the grant of Incentive Options, Non-
Qualified Options, and SARs to purchase up to 250,000 shares of common stock (
subject to adjustment in the event of stock dividends, stock splits, and other
similar events). To the extent that an Incentive Option or Non-Qualified Option
is not exercised within the period of exercisability specified therein, it will
expire as to the then unexercised portion. If any Incentive Option, Non-
Qualified Option or SAR terminates prior to exercise thereof and during the
duration of the 1995 Director Plan, the shares of common stock as to which such
option or right was not exercised will become available under the 1995 Director
Plan for the grant of additional options or rights to any eligible employee.
The shares of common stock subject to the 1995 Director Plan may be made
available from either authorized but unissued shares, treasury shares, or both.
The 1995 Director Plan also provides for the grant of Non-Qualified Options on
a discretionary basis pursuant to the following formula: each member of the
Board of Directors then serving shall receive a Non-Qualified Option to purchase
10,000 shares of common stock at an exercise price equal to the fair market
value per share of the common stock on that date. Pursuant to such formula,
directors received options to purchase 10,000 shares of common stock as of
October 17, 1995, and will receive options to purchase 10,000 shares of common
stock on the first business day of each January beginning in 1996. Each option
is immediately exercisable for a period of ten years from the date of grant.
The Company has 250,000 shares of common stock reserved for issuance under the
1995 Director Option Plan.
As of December 31, 1995, options exercisable to purchase 40,000 shares of common
stock at a price of $1.25 per share have been granted under the 1995 Director
Plan. As of December 31, 1995, no options have been exercised.
1995 Employee Stock Option Plan
In October 1995, the stockholders of the Company approved adoption of the
Company's 1995 Employee Stock Option and Appreciation Rights Plan (the "1995
Employee Plan"), which plan provides for the issuance of Incentive Options,
Non-Qualified Options, and SARs.
46
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Stockholders' equity - continued
Directors of the Company are not eligible to participate in the 1995 Employee
Plan. The 1995 Employee Plan provides for the grant of stock options which
qualify as Incentive Stock Options under Section 422 of the Code, to be issued
to officers who are employees and other employees, as well as Non-Qualified
Options to be issued to officers, employees, and consultants. In addition, SARs
may be granted in conjunction with the grant of Incentive Options and Non-
Qualified Options.
The 1995 Employee Plan provides for the grant of Incentive Options, Non-
Qualified Options, and SARs of up to 400,000 shares of common stock (subject to
adjustment in the event of stock dividends, stock splits, and other similar
events). To the extent that an Incentive Option or Non-Qualified Option is not
exercised within the period of exercisability specified therein, it will expire
as to the then unexercisable portion. If any Incentive Option, Non-Qualified
Option or SAR terminates prior to exercise thereof and during the duration of
the 1995 Employee Plan, the shares of common stock as to which such option or
right was not exercised will become available under the 1995 Employee Plan for
the grant of additional options or rights to any eligible employee. The shares
of common stock subject to the 1995 Employee Plan may be made available from
either authorized but unissued shares, treasury shares, or both. The Company
has 400,000 shares of common stock reserved for issuance under the 1995
Employee Plan. As of December 31, 1995, no options to purchase shares of common
stock have been granted under the 1995 Employee Plan.
Other warrants and options
Pursuant to the terms of a Consulting Agreement dated as of October 13, 1992
between the Company and The Equity Group, Inc., the Company issued two Common
Stock Purchase Warrants (the "Equity Warrants") each covering 21,429 shares of
common stock to The Equity Group as partial consideration for its rendering
financial public relations and consulting services to the Company. Both Equity
Warrants are exercisable at a price of $3.50 per share and expire on October
14, 1997.
Pursuant to the terms of a Financial Consulting Agreement dated as of November
3, 1994 between the Company and JW Charles Financial Services, Inc., the Company
issued a Common Stock Purchase Warrant (the "JW Charles Warrant") covering
250,000 shares of common stock to JW Charles Financial Services as partial
consideration for its rendering financial consulting services to the Company.
The warrant is exercisable at a price of $2.00 per share and expires on November
3, 1999.
The JW Charles and Equity Warrants (the "Warrants") contain anti-dilution
provisions providing for adjustments in the exercise price. The JW Charles
Warrant also contains anti-dilution provisions providing for adjustments in the
number of shares covered by the warrant. The holders of the Warrants have no
voting, dividend, or other stockholder rights or privileges unless and until the
Warrants have been exercised. The holders of the Warrants have been granted
"piggy back" registration rights under the Securities Act of 1933 with respect
to the Warrants and the underlying shares of common stock. The Company will pay
the expense of such registration and of such registration qualifications of
the Warrants and underlying shares of common stock under the Securities Act of
1933 of such dates as the holders of the Warrants may determine.
Pursuant to a Consulting Agreement dated as of August 6, 1995 between the
Company and Timothy R. Barnes, formerly an officer of the Company, the Company
issued a Common Stock Purchase Warrant covering 36,858 shares of common stock
as consideration for the rendering of consulting services to the Company. The
Warrant is exercisable at a price of $1.00 per share and expires on August 5,
1999.
47
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 12 - Stockholders' equity - continued
Pursuant to the issuance of a promissory note by I-Link to Scott Cook, the
Company issued a Common Stock Purchase Option covering 100,000 shares of the
Company's common stock. The option is exercisable at a price of $1.00 and
expires on December 31, 1999.
Pursuant to a Consulting Agreement dated as of October 18, 1995 between the
Company and Jason H. Pollak and Kalo Acquisitions, LLC, the Company issued an
Option to purchase common stock covering 150,000 shares of common stock as
consideration for the rendering of consulting services to the Company. The
agreement provided Mr. Pollak with an option to purchase 50,000 shares of common
stock each year at purchase prices of $1.50,. $2.50, and $3.50. The option
expires on January 31, 1999.
Note 13 - Geographic segment information
<TABLE>
<CAPTION>
The Company's operations consist of providing diagnostic and clinical outpatient
health care services domestically and the sale and service of used medical
equipment in the People's Republic of China (PRC). Financial information for
the different geographic segments is as follows:
Year Ended
December 31, 1995 Domestic China Corporate Eliminations Consolidated
- ------------------------ ---------- ----------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue $2,486,708 $ 340,233 $ 423,956 $ (127,944) $ 3,122,953
========= ========== ========== ============ ==========
Operating Profit (Loss) $ 196,714 $( 171,083) $( 519,386) $ - $( 493,755)
========= ========== ========== ============ ==========
Identifiable Assets $3,048,001 $ 1,098,742 $ 682,277 $ (682,157) $ 4,146,683
========= ========= ========== ============ ==========
Amortization and Depreciation $ 438,498 $ 13,011 $ 13,511 $ - $ 465,020
========= ========== ========== ============ ==========
Capital Expenditures $ 20,801 $ 2,046 $ 375 $ - $ 23,222
========= ========== ========== ============ ==========
<CAPTION>
Year Ended
December 31, 1994 Domestic China Corporate Eliminations Consolidated
- ---------------------------- ---------- ----------- ----------- ------------ ------------
Revenue $2,761,458 $ 512,973 $ 630,853 $( 132,359) $ 3,772,925
========= ========== ========== ========== ==========
Operating Profit (Loss) $ 537,338 $( 581,856) $( 487,063) $ - $( 531,581)
========= ========== ========== ========== ==========
Identifiable Assets $3,710,698 $ 1,284,824 $ 217,780 $ - $ 5,213,302
========= ========== ========== ========== ==========
Amortization and Depreciation $ 459,663 $ 10,861 $ 18,412 $ - $ 488,936
========= ========== ========== ========== ==========
Capital Expenditures $ 10,257 $ 18,590 $ 2,032 $ - $ 30,879
========= ========== ========== ========== ==========
</TABLE>
The corporate office provides management and operational services for domestic
outpatient health care services. The eliminations represent charges for these
services to entities included in the consolidation.
48
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Subsequent Events
On February 23, 1996, the Company closed its acquisition of all of the issued
and outstanding common stock of I-Link Worldwide Inc., a Utah corporation
("I-Link") from ILINK, Ltd., a Utah limited partnership in exchange for the
issuance of an aggregate of 4,000,000 shares of Common Stock of the Company.
The purchase price was determined through arms-length negotiation. The
acquisition was accounted for using the purchase method of accounting. Pursuant
to the terms of the stock purchase agreement, 2,600,000 shares of the Common
Stock issued pursuant to the acquisition of I-Link, Ltd. were placed in escrow
to be released as follows:
1. 1,600,000 shares of Common Stock are to be released upon the receipt of
proceeds greater than or equal to $4,000,000 from the sale of the
Company's securities pursuant to the conduct of one or more private or
public offerings prior to December 31, 1996; and
2. 1,000,000 shares of Common Stock are to be released upon the first to
occur of the following:
(i) the monthly revenue derived from subscribers serviced by ILINK,
Ltd. and revenue derived from the sale of related products and/or
services equals or exceeds $1,000,000; or
(ii) the number of subscribers serviced by ILINK, Ltd. exceeds 100,000
one year from the date of receipt by the Company of gross proceeds
equal to $4,000,000 from the sale of its securities pursuant to one
or more private or public offerings.
I-Link provides Internet access services to individuals and businesses in the
United States. I-Link is also the owner of a proprietary technology (patent
pending) which enables the transmission of information via facsimile over the
Internet.
There was no affiliation or relationship between the Company, its affiliates,
officers or directors, or associates of such persons and I-Link or ILINK, Ltd.
or any of their officers, directors, stockholders, or partners prior to the
acquisition.
Simultaneous with the closing of its acquisition of I-Link, the Company
completed a private placement of $1,000,000 in aggregate principal amount of
convertible promissory notes (the "10% Notes"). The 10% Notes are payable upon
the earlier of August 31, 1996 (subject to extension) or the Company's receipt
of proceeds of at least $4,000,000 from subsequent debt or equity offerings.
The 10% Notes bear interest payable semi-annually at the rate of 10% until
August 31, 1996 (13% after such date of the term of the 10% Note is extended).
Up to $1,250 of each $50,000 in principal amount of note is convertible at any
time at the option of the holder, into a maximum of 350,000 shares of Common
Stock at the rate of approximately $.0714 per share, subject to certain
antidilution adjustments. The 10% Notes may be extended until February 29,
1997 upon payment by the Company of 2.5% of the then outstanding principal
balance of the 10% Note. The proceeds of such offering were used to pay
outstanding accounts payable and other debts of I-Link.
The following presents the pro forma financial information of the Company and
I-Link as applicable for the year ended December 31, 1995 assuming such
transactions had occurred on January 1, 1995 and for the year ended December 31,
1994 assuming the transactions had occurred on January 1, 1994:
49
<PAGE>
MEDCROSS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 14 - Subsequent Events - continued
<TABLE>
<CAPTION>
Loss
Net Operating Per Common
Year Ended December 31, 1995 Revenue Net Loss Share
------------- ------------ ----------
<S> <C> <C> <C>
Company $ 3,122,953 $( 551,909) $(.08)
I-Link 229,721 (1,446,219) ===
--------- ---------
Combined 3,352,674 (1,998,128)
Pro forma adjustments - ( 496,988)
--------- ---------
Pro forma combined $ 3,352,674 $(2,310,116) $(.34)
========= ========= ===
<CAPTION>
Loss
Net Operating Per Common
Year Ended December 31, 1994 Revenue Net Loss Share
------------- ------------ ----------
Company $ 3,772,925 $( 715,434) $(.10)
I-Link - ( 165,125) ===
--------- ---------
Combined 3,772,925 ( 880,559)
Pro forma adjustments - ( 207,078)
--------- ---------
Pro forma combined $ 3,772,925 $(1,087,637) $(.16)
========= ========= ===
</TABLE>
On February 21, 1996, in connection with the grant of an option by the Kanter
Group, 40,000 shares of outstanding Class A Preferred Stock of the Company was
converted into 978,891 shares of Common Stock. Options to acquire the 3,915,570
shares of Common Stock issuable upon conversion of the remaining 160,000 shares
of Class A Preferred Stock outstanding have been granted by Four M. Dr. R.
Huston Babcock, holder of all 7,500 shares of Class B Preferred Stock has also
granted an option to purchase the 183,542 shares of Common Stock issuable upon
conversion thereof.
The Kanter Group sold to certain persons, including affiliates and associated
persons of Commonwealth Associates, 978,891 shares of Common Stock issued upon
conversion of 40,000 shares of Class A Preferred Stock at a purchase price of
$485,000 (equal to $.4955 per share). Four M has granted certain options
exercisable commencing August 1, 1996 (subject to the satisfaction of certain
conditions) to purchase the 3,915,570 shares of Common Stock issuable upon
conversion of 160,000 shares of Class A Preferred Stock. The exercise price is
equal to the lesser of 200% of the average of the closing bid and ask price per
share of Common Stock for the ten (10) business days preceding August 1, 1996 or
$1.79 per share. Commonwealth Associates received the right to purchase 545,285
shares of Common Stock prior to December 31, 1996 and 537,500 shares of Common
Stock prior to December 31, 1997. Benchmark Equity Group, Inc. received the
right to purchase 545,285 shares of Common Stock prior to December 31, 1996 and
537,500 shares prior to December 1997. Certain members of management of I-Link
have the right to purchase 825,000 shares of Common Stock prior to December 31,
1996 and 825,000 shares prior to December 31, 1997. Scott Cook has received
the right to purchase 100,000 shares of Common Stock prior to December 31, 1996.
Dr. R. Huston Babcock has granted an option, upon substantially the same terms
and conditions as Four M, to purchase 183,542 shares of Common Stock issuable
upon conversion of 7,500 shares of Class B Preferred Stock to Benchmark Equity
Group, Inc.
On March 5, 1996, the Consulting Agreement between the Company and Jason H.
Pollak and Kalo Acquisitions, LLC was terminated and options to purchase 100,000
shares of the Company's common stock were subsequently terminated.
50
<PAGE>
EXHIBITS FOR 10-KSB 1995
Page #
3(a) Amendment to the Amended and Restated Articles of
Incorporation dated December 31, 1995. . . . . . . . . 51
3(b) Composite copy of the Amended and Restated Articles
of Incorporation incorporating all amendments through
the date of the filing of this Form 10-KSB.. . . . . . 54
3(d) Articles of Incorporation of I-Link Worldwide, Inc.. . 69
3(e) Bylaws of I-Link Worldwide, Inc. . . . . . . . . . . . 72
4(i) Non-Negotiable 10% Promissory Note payable to Scott Cook
in the amount of $100,000, dated October 19, 1995. . . 85
4(j) Guaranty by and between Medcross, Inc. and Scott Cook,
dated October 19, 1995 . . . . . . . . . . . . . . . . 88
4(k) Security Agreement by and between ILINK, Ltd., Scott Cook,
and Medcross, Inc. dated October 19, 1995. . . . . . . 92
4(l) Common Stock Purchase Option to Purchase Common Shares
of Medcross, Inc.. . . . . . . . . . . . . . . . . . . 100
*10(n) Employment Agreement, dated February 4, 1996, between
Medcross, Inc. and Henry Y.L. Toh. . . . . . . . . . . 110
*10(o) Employment Agreement, dated January 1, 1996, between
Medcross, Inc. and Dorothy L. Michon.. . . . . . . . . 118
*10(p) Employment Agreement, dated January 1, 1996, between
Medcross, Inc. and Stephanie E. Giallourakis.. . . . . 126
*10(q) Employment Agreement, dated February 14, 1996, between
Medcross, Inc. and Clay Wilkes . . . . . . . . . . . . 134
*10(r) Employment Agreement, dated February 14, 1996, between
Medcross, Inc. and Alex Radulovic. . . . . . . . . . . 143
*10(s) The Company's 1995 Director Stock Option and Appreciation
Rights Plan. . . . . . . . . . . . . . . . . . . . . . 152
*10(t) The Company's 1995 Employee Stock Option and Appreciation
Rights Plan. . . . . . . . . . . . . . . . . . . . . . 164
*10(u) Employment Agreement, dated April 8, 1996, between
Medcross, Inc. and John W. Edwards . . . . . . . . . . 175
11 Statement regarding computation of earnings per common
share. . . . . . . . . . . . . . . . . . . . . . . . . 184
21 Subsidiaries of the registrant.. . . . . . . . . . . . 185
23 Consent of Coopers & Lybrand L.L.P.. . . . . . . . . . 186
27 Financial Data Schedule. . . . . . . . . . . . . . . . 187
* Indicates a management contract or compensatory plan or arrangement
required to be filed herewith.
51
ARTICLES OF AMENDMENT
TO THE
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MEDCROSS, INC.
Pursuant to Article III of the Amended and Restated Articles of Incorporation
of the Corporation (the "Articles of Incorporation"), and the provisions of
Section 607.0602 of the Florida Business Corporation Act, the board of directors
of the Corporation (the "Board of Directors") has resolved to amend Article III
of the Articles of Incorporation.
1.The name of the corporation is Medcross, Inc.
2.Article III is hereby amended by adding Section III(f), which shall read in
its entirety as follows:
"(f) Of the 500,000 shares of Preferred Stock authorized hereunder,
240,000 shares of Preferred Stock shall be designated as Class C 12% Cumulative
Convertible Preferred Stock (the "Class C Preferred Stock"), shall have a par
value of $10.00 per share, and shall have the following rights and preferences:
1. Dividends. The holders of the Class C Preferred Stock shall be
entitled to cumulative preferential dividends, when, as and if declared
by the Board of Directors in an amount equal to 12% per annum of the
liquidation preference per share of $20.00. Dividends may be paid (to
the extent permissible under the Florida Business Corporation Act) to
the holders of the Class C Preferred Stock in cash or shares of Common
Stock or Preferred Stock or obligations of the Corporation (or any
combination thereof), at the option of the Corporation.
2. Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation,
each share of Class C Preferred Stock shall have a liquidation preference
of $20.00 per share.
3. Voting Rights. Except as otherwise required by applicable law, the
Class C Preferred Stock shall have no voting rights; provided, however,
that each holder of Class C Preferred Stock shall be entitled to notice
of all stockholders meetings at the same time and in the same manner as
notice is given to all stockholders entitled to vote at such meetings.
4. Redemption. The Corporation may not redeem any shares of Class C
Preferred Stock.
5. Conversion Into Common Stock. (a) Subject to the terms and
conditions of this subsection, issued and outstanding shares of Class C
Preferred Stock shall convert to common stock of the Corporation, par
value $.007 per share (the "Common Stock"), on the second anniversary of
the filing of this Certificate of Designation with the Secretary of State
of Florida (the "Conversion Date"), and with no other action required by
52
<PAGE>
the Corporation or the holder of the Class C Preferred Stock. The shares
of Class C Preferred Stock held by each holder thereof shall be converted
into such number of whole shares of Common Stock as is determined by
multiplying the number of shares of Class C Preferred Stock by a
fraction, the numerator of which is 20 and the denominator of which is
the Conversion Price (as hereinafter defined). However, on any
liquidation of the Corporation, the right of conversion shall terminate
at the close of business on the last full business day before the date
fixed for payment of the amount distributable on the Class C Preferred
Stock.
(b) Promptly after the receipt of certificates representing Class C
Preferred Stock and surrender of Class C Preferred Stock, the Corporation
shall issue and deliver, or cause to be issued and delivered, to the
holder a certificate or certificates for the number of whole shares of
Common Stock issuable upon the conversion of such Class C Preferred
Stock. No fractional shares shall be issued upon conversion of the Class
C Preferred Stock into shares of Common Stock. To the extent permitted
by law, the conversion shall be deemed to have been effected as of the
close of business on the Conversion Date (or on the next preceding
business day if the Conversion Date is not a business day) and at that
time the rights of the holder of Class C Preferred Stock, as such holder,
shall cease, and the holder of the Class C Preferred Stock shall become
the holder of record of shares of Common Stock.
(c) The conversion price per share of Class C Preferred Stock (the
"Conversion Price") shall be seventy percent (70%) of the average of the
bid and asked prices per share of the Common Stock as quoted by Nasdaq
(or the closing bid price if no transaction price is available, or, in
the case of no closing transaction price and no closing bid price being
available, the fair market value of the Common Stock as determined in
good faith by the Corporation's Board of Directors) for the twenty (20)
consecutive trading days prior to the Conversion Date.
6. Rank. With respect to the payment of dividends and rights to
redemption and upon liquidation, the shares of the Class C Preferred
Stock shall be subordinate to the issued and outstanding shares of Class
A Preferred Stock and Class B Preferred Stock of the Corporation and
shall rank senior to the shares of Common Stock of the Corporation."
3.The foregoing amendment was duly adopted by the Board of Directors without the
requirement of shareholder action by meeting held on December 8, 1995, pursuant
to the provisions of the Florida Business Corporation Act.
53
<PAGE>
IN WITNESS WHEREOF, Medcross, Inc. has caused this Certificate of Amendment to
the Articles of Incorporation to be executed by its President and attested to by
its Secretary this 18th day of December, 1995.
MEDCROSS, INC.
By: /s/ Henry Y.L. Toh
_______________________________
Henry Y.L. Toh, President
ATTEST:
/s/ Stephanie E, Giallourakis
__________________________________
Stephanie Giallourakis, Secretary
54
<PAGE>
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
MEDCROSS, INC.
MEDCROSS, INC., a corporation organized and existing under the laws of the
State of Florida, hereby certifies as follows:
1. The name of the corporation is MEDCROSS, INC. and the name under which
the corporation was originally incorporated is Mobile Medical, Inc. The date of
filing its original Articles of Incorporation with the Department of State was
April 21, 1983.
2. These Amended and Restated Articles of Incorporation have been adopted by
the shareholders and the Board of Directors pursuant to Sections 607.194(4) and
607.194(2), respectively, Florida Statutes.
ARTICLE I
NAME
The name of this corporation is MEDCROSS, INC.
ARTICLE II
PURPOSES
This corporation may engage in any activity or business permitted under the
laws of the United States of America and of this State.
ARTICLE III
CAPITAL STOCK
The maximum number of shares of stock which this corporation is authorized to
have at any time is:
(a) 20,000,000 shares of common stock, having a par value of $.007 per
share (the "Common Stock"); and
(b) 500,000 shares of preferred stock, having a par value of $10.00 per
share (the "Preferred Stock"). The Preferred Stock may be issued in one or more
series. The Board of Directors shall have the authority to divide the Preferred
Stock into one or more series and, subject to the provisions and limitations set
forth herein, to determine the relative rights and preferences of the shares of
any series so established with regard to the rate or manner of payment of
dividends, whether such shares may be redeemed and, if so, the redemption price
and the terms and conditions of redemption, sinking fund provisions, if any, for
the redemption or purchase of such shares, the terms and conditions, if any, on
which such shares may be converted, and voting rights, if any. Provided,
55
<PAGE>
however, except as to any rights and preferences as determined by the Board of
Directors as set forth above, all shares of such Preferred Stock regardless of
series shall be identical.
(c) Of the 250,000 shares of Preferred Stock authorized hereunder, 7,500
shares of Preferred Stock shall be designated 12% Cumulative Convertible
Preferred Stock, shall have a par value of $10 per share, and shall have the
following rights and preferences:
1.Dividends. The holders of the shares of 12% Cumulative Convertible
Preferred Stock shall be entitled to receive out of any assets at the time
legally available therefor and when and as declared by the Board of Directors
dividends at the rate of One Dollar and Twenty Cents ($1.20) per share per
annum, and no more, payable in cash quarterly commencing on April 1, 1992, and
continuing on the first day of July, October, January, and April of each year
that any shares of 12% Cumulative Convertible Preferred Stock are outstanding.
Such dividends are prior and in preference to any declaration or payment of any
distribution (as defined below) on the Common Stock of the Company. Such
dividends shall accrue on each share of 12% Cumulative Convertible Preferred
Stock from day to day from the date of initial issuance thereof whether or not
earned or declared, so that if such dividends with respect to any previous
dividend period at the rate provided for herein have not been paid on, or
declared and set apart for, all shares of 12% Cumulative Convertible Preferred
Stock at the time outstanding, the deficiency shall be fully paid on, or
declared and set apart for, such shares before any distribution shall be paid
on, or declared and set apart for, the Common Stock.
For purposes hereof, unless the context otherwise requires, the
term "distribution" shall mean the transfer of cash or property without
consideration, whether by way of dividend or otherwise, payable other than in
Common Stock, on the repurchase or redemption of shares of capital stock of the
Company (other than redemptions provided for in Subsection 3 hereof or
repurchases of Common Stock held by employees of the Company upon termination of
their employment pursuant to agreements providing for such repurchase) for cash
or property.
2.Voting Rights. Each share of 12% Cumulative Convertible Preferred
Stock shall entitle the holder thereof to 40 votes on all matters submitted to a
vote of the Company's shareholders.
3.Redemption.
(a) The Company may, at any time after issuance of the
12% Cumulative Convertible Preferred Stock, call for redemption at the
Redemption Price (as defined below) any or all of the outstanding shares of 12%
Cumulative Convertible Preferred Stock in accordance with this Subsection 3. If
the Company redeems less than all the outstanding shares of 12% Cumulative
Convertible Preferred Stock, the Company shall redeem from each holder a number
of shares of 12% Cumulative Convertible Preferred Stock that bears the same
proportion to all the shares of 12% Cumulative Convertible Preferred Stock to be
redeemed as the shares of 12% Cumulative Convertible Preferred Stock held of
record by the holder bears to all the shares of 12% Cumulative Convertible
Preferred Stock at the time outstanding. However, if a fraction of a share
would be redeemed from any holder, the Company may, in order to avoid the
redemption of a fractional share, redeem the next higher whole number of shares
from the holder or, at its option, add that fraction to the shares to be
redeemed from any other holder or holders.
56
<PAGE>
(b) The Company shall mail notice of any redemption by
certified mail, postage prepaid, to each holder of record of the shares of the
12% Cumulative Convertible Preferred Stock to be redeemed, at his or her address
registered with the Company, which notice shall be accompanied by payment in
full of the Redemption Price. The date of the mailing of notice of redemption
shall be the Redemption Date.
(c) If notice of redemption has been mailed and the
Company has made payment of the Redemption Price, on the Redemption Date all
rights of the holders of the shares, as shareholders of the Company by reason of
the ownership of the shares, shall cease, and after the Redemption Date the
shares shall not be outstanding. If less than all the shares represented by any
certificate are redeemed, a new certificate, representing the unredeemed shares,
shall be issued to the holder thereof without cost (except for the payment of
any applicable transfer taxes) to the holder.
(d) To facilitate the redemption of any shares of 12%
Cumulative Convertible Preferred Stock, the Board of Directors is authorized to
cause the transfer books of the Company to be closed as to such shares as of the
record date for determining the holders of 12% Cumulative Convertible Preferred
Stock entitled to notice of redemption.
(e) For purposes hereof, the term "Redemption Price"
shall mean $10.50 per share of 12% Cumulative Convertible Preferred Stock.
(f) In the event that the shares of 12% Cumulative
Convertible Preferred Stock are redeemed, the Board of Directors reserves the
right to further amend the Company's Articles of Incorporation to amend and
re-designate the rights and preferences applicable to the shares of Preferred
Stock designated herein as 12% Cumulative Convertible Preferred Stock.
4.Optional Conversion Into Common Stock.
(a) Subject to the provisions of Subsection 3 hereof
regarding redemption, and subject to the terms and conditions of this Subsection
4, the holder of any share or shares of 12% Cumulative Convertible Preferred
Stock has the right at any time after the expiration of six months after the
issuance of the shares of 12% Cumulative Convertible Preferred Stock at its
option to convert all or a portion of the shares of 12% Cumulative Convertible
Preferred Stock held by it into such number of whole shares of Common Stock as
is determined by multiplying the number of shares of 12% Cumulative Convertible
Preferred Stock converted by 40. However, on any liquidation of the Company,
the right of conversion shall terminate at the close of business on the last
full business day before the date fixed for payment of the amount dis-tributable
on the 12% Cumulative Convertible Preferred Stock. The holder may exercise this
right of conversion only by giving written notice that the holder elects to
convert a stated number of shares of the 12% Cumulative Convertible Preferred
Stock into shares of Common Stock on the date specified in the notice and
surrendering to the Company a certificate or certificates for the 12% Cumulative
Convertible Preferred Stock to be converted, at its principal office, at any
time during its usual business hours on or before the date set forth in the
notice, together with a statement of the name or names (with addresses) in which
the certificate or certificates for Common Stock should be issued.
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(b) Promptly after the receipt of the written notice
referred to above and surrender of the share or shares of 12% Cumulative
Convertible Preferred Stock to be converted, the Company shall issue and
deliver, or cause to be issued and delivered, to the holder a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such share or shares. No fractional shares shall be issued upon
conversion of the 12% Cumulative Convertible Preferred Stock into shares of
Common Stock. To the extent per-mitted by law, the conversion shall be deemed
to have been effected as of the close of business on the date specified in the
written notice, and at that time the rights of the holder of the share or
shares, as such a holder, shall cease, and the holder of the 12% Cumulative
Convertible Preferred Stock shall become the holder of record of the shares of
Common Stock.
5.Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Company, the holders
of shares of the 12% Cumulative Convertible Preferred Stock then outstanding
shall be entitled to be paid, out of the assets of the Company available for
distribution to its stockholders, whether from capital, surplus, or earnings,
before any payment shall be made in respect of the Common Stock, an amount equal
to Ten Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon
to the date fixed for distribution. After setting apart or paying in full the
preferential amounts due the holders of the 12% Cumulative Convertible Preferred
Stock, the remaining assets of the Company available for distribution to
stockholders, if any, shall be distributed exclusively to the holders of Common
Stock, each such issued and outstanding share of Common Stock entitling the
holder thereof to receive an equal proportion of said remaining assets. If upon
liquidation, dissolution, or winding up of the Company, the assets of the
Company available for distribution to its shareholders shall be insufficient to
pay the holders of the 12% Cumulative Convertible Preferred Stock the full
amounts to which they respectively shall be entitled, the holders of the 12%
Cumulative Convertible Preferred Stock shall share ratably in any distribution
of assets according to the respective amounts which would be payable in respect
of the shares held by them upon such distribution if all amounts payable on or
with respect to said shares were paid in full. Neither a consolidation nor
merger of the Company into or with any other corporation or corporations, nor
the merger of any other corporation into the Company, nor the sale or transfer
by the Company of all or any part of its assets, nor a reorganization of the
Company, nor the purchase or redemption of all or part of the outstanding shares
of any class or classes of the capital stock of the Company, nor a reduction of
the capital stock of the Company shall be deemed to be a liquidation,
dissolution, or winding up of the Company within the meaning of any of the
provisions of this Subsection 5.
(d)Of the 250,000 shares of Preferred Stock authorized hereunder, 200,000
shares of Preferred Stock shall be designated Class A Variable Rate Cumulative
Convertible Preferred Stock ("Class A Preferred Stock"), shall have a par value
of $10.00 per share, and shall have the following rights and preferences:
1.Dividends. The holders of the shares of Class A Preferred Stock
shall be entitled to receive out of any assets at the time legally available
therefor and when and as declared by the Board of Directors cumulative dividends
at the rate of 5.55% per annum; provided, however, the dividend rate shall be
adjusted monthly commencing on April 1, 1992, and continuing on the first day of
each and every month thereafter while each share of Class A Preferred Stock is
outstanding. The dividend rate for each such month shall be equal to the
published rate paid by Texas Commerce Bank, National Association, Houston,
Texas, on 30-day certificates of deposit in effect on the first day of each such
month plus 2%. Dividends shall be payable in cash quarterly
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commencing on April 1, 1992, and continuing on the first day of July, October,
January, and April of each year that any shares of Class A Preferred Stock are
outstanding. Such dividends are prior and in preference to any declaration or
payment of any distribution (as defined below) on the Common Stock of the
Company. Such dividends shall accrue on each share of Class A Preferred Stock
from day to day from the date of initial issuance thereof whether or not there
are funds legally available for payment of dividends, or such dividends are
earned or declared, so that if such dividends with respect to any previous
dividend period at the rate provided for herein have not been paid on, or
declared and set apart for, all shares of Class A Preferred Stock at the time
outstanding, the deficiency shall be fully paid on, or declared and set apart
for, such shares before any distribution shall be paid on, or declared and set
apart for, the Common Stock.
For purposes hereof, unless the context otherwise requires, the
term "distribution" shall mean the transfer of cash or property without
consideration, or issuance of indebtedness, whether by way of dividend or
otherwise, payable other than in Common Stock, as a dividend on any class or
series of capital stock of the Company on the repurchase or redemption of shares
of capital stock of the Company (other than repurchases of Common Stock held by
employees of the Company upon termination of their employment pursuant to
agreements providing for such repurchase) for cash or property or as a payment
by the Company in liquidation of all or a portion of its assets.
2.Voting Rights. Each share of Class A Preferred Stock shall entitle
the holder thereof to that number of votes which is equal to the number of
shares of Common Stock into which the Class A Preferred Stock is convertible
pursuant to Subsection 4 at the time the vote is taken, on all matters submitted
to a vote of the Company's shareholders. Except as otherwise provided herein or
required by law, holders of shares of Class A Preferred Stock shall vote with
the holders of shares of Common Stock and any other class of stock entitled to
vote and not as a separate class.
3.[Intentionally omitted.]
4.Optional Conversion Into Common Stock.
(a) Subject to the terms and conditions of this
Subsection 4, the holder of any share or shares of Class A Preferred Stock has
the right at any time after the issuance of the shares of Class A Preferred
Stock at its option to convert all or a portion of the shares of Class A
Preferred Stock held by it into such number of whole shares of Common Stock as
is determined by multiplying the number of shares of Class A Preferred Stock by
a fraction, the numerator of which is $10.00 and the denominator is the
Conversion Price (as hereinafter defined). However, on any liquidation of the
Company, the right of conversion shall terminate at the close of business on the
last full business day before the date fixed for payment of the amount
distributable on the Class A Preferred Stock. The holder may exercise this
right of conversion only by giving written notice that the holder elects to
convert a stated number of shares of the Class A Preferred Stock into shares of
Common Stock on the date specified in the notice and surrendering to the Company
a certificate or certificates for the Class A Preferred Stock to be converted,
at its principal office, at any time during its usual business hours on or
before the date set forth in the notice, together with a statement of the name
or names (with addresses) in which the certificate or certificates for Common
Stock should be issued.
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(b) Promptly after the receipt of the written notice
referred to above and surrender of the share or shares of Class A Preferred
Stock to be converted, the Company shall issue and deliver, or cause to be
issued and delivered, to the holder a certificate or certificates for the number
of whole shares of Common Stock issuable upon the conversion of such share or
shares. No fractional shares shall be issued upon conversion of the Class A
Preferred Stock into shares of Common Stock. To the extent permitted by law,
the conversion shall be deemed to have been effected as of the close of business
on the date specified in the written notice, and at that time the rights of the
holder of the share or shares, as such a holder, shall cease, and the holder of
the Class A Preferred Stock shall become the holder of record of the shares of
Common Stock.
(c) The conversion price per share of Common Stock as of
any date (the "Conversion Price") shall be $.058375 (the "Initial Conversion
Price"), as adjusted from time to time in accordance with paragraph (d) of this
Subsection 4.
(d) (1) In the event that the Company shall make any
distribution of its assets upon or with respect to its Common Stock, as a
liquidating or partial liquidating dividend, each holder of a share of Class A
Preferred Stock shall, upon the exercise of his right to convert after the
record date for such distribution or, in the absence of a record date, after the
date of such distribution, receive, in addition to the shares subscribed for,
the amount of such assets (or, at the option of the Company, a sum equal to the
value thereof at the time of distribution as determined by the Board of
Directors in its sole discretion) which would have been distributed to such
holder if he had exercised his right to convert immediately prior to the record
date for such distribution or, in the absence of a record date, immediately
prior to the date of such distribution.
(2) If at any time the Company shall subdivide
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced and conversely, in case the outstanding shares of Common
Stock of the Company shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(3) If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or the sale of all or substantially all
of its assets to another corporation, shall be effected in such a way that
holders of shares of Common Stock shall be entitled to receive stock,
securities, or assets with respect to or in exchange for their shares of Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale, each holder of a share(s) of Class A Preferred
Stock shall have the right thereafter for so long as such share(s) is
outstanding to convert such share(s) into the kind and amount of stock,
securities, or assets receivable upon such reorganization, reclassification,
consolidations, merger, or sale by a holder of the number of shares of Common
Stock into which such share(s) of Class A Preferred Stock might have been
converted immediately prior to such reorganization, reclassification,
consolidations, merger, or sale, subject to adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for herein.
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(4) Before taking any action which would cause an
adjustment reducing the Conversion Price at any time in effect below the then
par value of the shares of Common Stock issuable upon conversion of shares of
Class A Preferred Stock, the Company shall take any corporate action which may
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable shares of such Common Stock at such Conversion Price as so
adjusted.
(5) Whenever the Conversion Price is adjusted, as
herein provided, the Company shall send to each holder of a share of Class A
Preferred Stock a certificate of a firm of independent public accountants (who
may be the accountants regularly employed by the Company) selected by the Board
of Directors setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(6) In case:
(1) the Company shall declare a dividend
(or any other distribution) on its Common Stock; or
(2) the Company shall authorize the
granting to holders of shares of Common Stock of rights to subscribe for or
purchase any shares of capital stock of any class or of any other rights; or
(3) of any capital reorganization or
reclassification of the capital stock of the Company or of any consolidation or
merger of the Company with another corporation, or of the sale of all or
substantially all of its assets to another corporation which is to be effected
in such a way that holders of the Common Stock shall be entitled to receive
stock, securities, or other assets with respect to or in exchange for Common
Stock; or
(4) of the voluntary or involuntary
dissolution, liquidation, or winding up of the Company;
then the Company shall promptly send to the holder of each share of Class A
Preferred Stock, at least 30 days prior to the applicable record date
hereinafter specified, a notice stating (1) the date on which a record is to
be taken for the purpose of such dividend or distribution of rights, or, if
a record date is not to be taken, the date as of which the holders of shares
of Common Stock of record would be entitled to such dividend or distribution
of rights, or (2) the date on which such capital reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation, or
winding up is expected to become effective, and the date as of which it is
expected that the holders of shares of Common Stock of record shall be entitled
to exchange their shares of Common Stock for securities or other assets
deliverable upon such reorganization, reclassification, consolidation, merger,
sale, dissolution, liquidation, or winding up.
5.Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Company, the holders
of shares of the Class A Preferred Stock then outstanding shall be entitled to
be paid, out of the assets of the Company available for distribution to its
stockholders, whether from capital, surplus, or earnings, before any payment
shall be made in respect of the Class B Preferred Stock or Common Stock, an
amount equal to Ten
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Dollars ($10.00) per share, plus all accrued and unpaid dividends thereon to the
date fixed for distribution. After setting apart or paying in full the
preferential amounts due the holders of the Class A Preferred Stock, the
remaining assets of the Company available for distribution to stockholders, if
any, shall be distributed exclusively to the holders of Class B Preferred Stock
or Common Stock. If upon liquidation, dissolution, or winding up of the
Company, the assets of the Company available for distribution to its
shareholders shall be insufficient to pay the holders of the Class A Preferred
Stock the full amounts to which they respectively shall be entitled, the holders
of the Class A Preferred Stock shall share ratably in any distribution of assets
according to the respective amounts which would be payable in respect of the
shares held by them upon such distribution if all amounts payable on or with
respect to said shares were paid in full. Neither a consolidation nor merger of
the Company into or with any other corporation or corporations, nor the merger
of any other corporation into the Company, nor the sale or transfer by the
Company of all or any part of its assets, nor a reorganization of the Company,
nor the purchase or redemption of all or part of the outstanding shares of any
class or classes of the capital stock of the Company, nor a reduction of the
capital stock of the Company shall be deemed to be a liquidation, dissolution,
or winding up of the Company within the meaning of any of the provisions of this
Subsection 5.
(e)Of the 250,000 shares of Preferred Stock authorized hereunder, 22,500
shares of Preferred Stock shall be designated Class B Variable Rate Cumulative
Convertible Preferred Stock ("Class B Preferred Stock"), shall have a par value
of $10.00 per share, and shall have the following rights and preferences:
1.Dividends. The holders of the shares of Class B Preferred Stock
shall be entitled to receive out of any assets at the time legally available
therefor and when and as declared by the Board of Directors cumulative dividends
at the rate of 5.55% per annum; provided, however, the dividend rate shall be
adjusted monthly commencing on April 1, 1992, and continuing on the first day
of each and every month thereafter while each share of Class B Preferred Stock
is outstanding. The dividend rate for each such month shall be equal to the
published rate paid by Texas Commerce Bank, National Association, Houston,
Texas, on 30-day certificates of deposit in effect on the first day of each such
month plus 2%. Dividends shall be payable in cash quarterly commencing on April
1, 1992, and continuing on the first day of July, October, January, and April of
each year that any shares of Class B Preferred Stock are outstanding. Such
dividends are prior and in preference to any declaration or payment of any
distribution (as defined below) on the Common Stock of the Company. Such
dividends shall accrue on each share of Class B Preferred Stock from day to day
from the date of initial issuance thereof whether or not there are funds legally
available for payment of dividends, or such dividends are earned or declared, so
that if such dividends with respect to any previous dividend period at the rate
provided for herein have not been paid on, or declared and set apart for, all
shares of Class B Preferred Stock at the time outstanding, the deficiency shall
be fully paid on, or declared and set apart for, such shares before any
distribution shall be paid on, or declared and set apart for, the Common Stock.
For purposes hereof, unless the context otherwise requires, the
term "distribution" shall mean the transfer of cash or property without
consideration, or issuance of indebtedness, whether by way of dividend or
otherwise, payable other than in Common Stock, as a dividend on any class or
series of capital stock of the Company on the repurchase or redemption of shares
of capital stock of the Company (other than redemptions provided for in
Subsection 3 hereof or repurchases of Common Stock held by employees of the
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Company upon termination of their employment pursuant to agreements providing
for such repurchase) for cash or property or as a payment by the Company in
liquidation of all or a portion of its assets.
2.Voting Rights. Except as otherwise provided by law, the shares of
Class B Preferred Stock shall have no voting rights.
3.Redemption.
(a) The Company may, at any time after issuance of the
Class B Preferred Stock, call for redemption at the Redemption Price (as defined
below) any or all of the outstanding shares of Class B Preferred Stock in
accordance with this Subsection 3. The Company shall mail notice of any
redemption by certified mail, postage prepaid, to each holder of record of
the shares of the Class B Preferred Stock to be redeemed, at his or her address
registered with the Company, which notice shall be accompanied by payment in
full of the Redemption Price. The date of the mailing of notice of redemption
shall be the Redemption Date.
(b) If notice of redemption has been mailed and the
Company has made payment of the Redemption Price, on the Redemption Date all
rights of the holders of the shares, as shareholders of the Company by reason
of the ownership of the shares, shall cease, and after the Redemption Date the
shares shall not be outstanding. If less than all the shares represented by
any certificate are redeemed, a new certificate, representing the unredeemed
shares, shall be issued to the holder thereof without cost (except for the
payment of any applicable transfer taxes) to the holder. If called for
redemption, the right to convert Class B Preferred Stock to Common Stock
pursuant to Subsection 4 shall terminate on the close of business on the day
before the date fixed for actual payment of the Redemption Price unless the
Company shall default in paying the Redemption Price.
(c) To facilitate the redemption of any shares of Class B
Preferred Stock, the Board of Directors is authorized to cause the transfer
books of the Company to be closed as to such shares as of the record date for
determining the holders of Class B Preferred Stock entitled to notice of
redemption.
(d) For purposes hereof, the term "Redemption Price"
shall mean $10.00 per share of Class B Preferred Stock, plus the amount of any
accrued and unpaid dividends on such share on the date payment of the Redemption
Price is paid.
4.Optional Conversion Into Common Stock.
(a) Subject to the provisions of Subsection 3 hereof
regarding redemption, and subject to the terms and conditions of this Subsection
4, the holder of any share or shares of Class B Preferred Stock has the right at
any time after the issuance of the shares of Class B Preferred Stock at its
option to convert all or a portion of the shares of Class B Preferred Stock
held by it into such number of whole shares of Common Stock as is determined by
multiplying the number of shares of Class B Preferred Stock by a fraction, the
numerator of which is $10.00 and the denominator is the Conversion Price (as
hereinafter defined). However, on any liquidation of the Company, the right
of conversion shall terminate at the close of business on the last full business
day before the date fixed for payment of the amount distributable on the Class B
Preferred Stock. The holder may exercise this right of conversion only by
giving written notice
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that the holder elects to convert a stated number of shares of the Class B
Preferred Stock into shares of Common Stock on the date specified in the notice
and surrendering to the Company a certificate or certificates for the Class B
Preferred Stock to be converted, at its principal office, at any time during its
usual business hours on or before the date set forth in the notice, together
with a statement of the name or names (with addresses) in which the certificate
or certificates for Common Stock should be issued.
(b) Promptly after the receipt of the written notice
referred to above and surrender of the share or shares of Class B Preferred
Stock to be converted, the Company shall issue and deliver, or cause to be
issued and delivered, to the holder a certificate or certificates for the number
of whole shares of Common Stock issuable upon the conversion of such share or
shares. No fractional shares shall be issued upon conversion of the Class B
Preferred Stock into shares of Common Stock. To the extent permitted by law,
the conversion shall be deemed to have been effected as of the close of business
on the date specified in the written notice, and at that time the rights of the
holder of the share or shares, as such a holder, shall cease, and the holder of
the Class B Preferred Stock shall become the holder of record of the shares of
Common Stock.
(c) The conversion price per share of Common Stock as of
any date (the "Conversion Price") shall be $.058375 (the "Initial Conversion
Price"), as adjusted from time to time in accordance with paragraph (d) of this
Subsection 4.
(d) (1) In the event that the Company shall make any
distribution of its assets upon or with respect to its Common Stock, as a
liquidating or partial liquidating dividend, each holder of a share of Class B
Preferred Stock shall, upon the exercise of his right to convert after the
record date for such distribution or, in the absence of a record date, after the
date of such distribution, receive, in addition to the shares subscribed for,
the amount of such assets (or, at the option of the Company, a sum equal to the
value thereof at the time of distribution as determined by the Board of
Directors in its sole discretion) which would have been distributed to such
holder if he had exercised his right to convert immediately prior to the record
date for such distribution or, in the absence of a record date, immediately
prior to the date of such distribution.
(2) If at any time the Company shall subdivide
its outstanding shares of Common Stock into a greater number of shares, the
Conversion Price in effect immediately prior to such subdivision shall be
proportionately reduced and conversely, in case the outstanding shares of Common
Stock of the Company shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(3) If any capital reorganization or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with another corporation, or the sale of all or substantially all
of its assets to another corporation, shall be effected in such a way that
holders of shares of Common Stock shall be entitled to receive stock,
securities, or assets with respect to or in exchange for their shares of Common
Stock, then, as a condition of such reorganization, reclassification,
consolidation, merger, or sale, each holder of a share(s) of Class B Preferred
Stock shall have the right thereafter for so long as such share(s) is
outstanding to convert such share(s) into the kind and amount of stock,
securities, or assets receivable upon such
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reorganization, reclassification, consolidations, merger, or sale by a holder of
the number of shares of Common Stock into which such share(s) of Class B
Preferred Stock might have been converted immediately prior to such
reorganization, reclassification, consolidations, merger, or sale, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for herein.
(4) Before taking any action which would cause an
adjustment reducing the Conversion Price at any time in effect below the then
par value of the shares of Common Stock issuable upon conversion of shares of
Class B Preferred Stock, the Company shall take any corporate action which may
be necessary in order that the Company may validly and legally issue fully paid
and nonassessable shares of such Common Stock at such Conversion Price as so
adjusted.
(5) Whenever the Conversion Price is adjusted, as
herein provided, the Company shall send to each holder of a share of Class B
Preferred Stock a certificate of a firm of independent public accountants (who
may be the accountants regularly employed by the Company) selected by the Board
of Directors setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
(6) In case:
(1) the Company shall declare a dividend
(or any other distribution) on its Common Stock; or
(2) the Company shall authorize the
granting to holders of shares of Common Stock of rights to subscribe for or
purchase any shares of capital stock of any class or of any other rights; or
(3) of any capital reorganization or
reclassification of the capital stock of the Company or of any consolidation
or merger of the Company with another corporation, or of the sale of all or
substantially all of its assets to another corporation which is to be effected
in such a way that holders of the Common Stock shall be entitled to receive
stock, securities, or other assets with respect to or in exchange for Common
Stock; or
(4) of the voluntary or involuntary
dissolution, liquidation, or winding up of the Company;
then the Company shall promptly send to the holder of each share of Class B
Preferred Stock, at least 30 days prior to the applicable record date
hereinafter specified, a notice stating (1) the date on which a record is to
be taken for the purpose of such dividend or distribution of rights, or, if a
record date is not to be taken, the date as of which the holders of shares of
Common Stock of record would be entitled to such dividend or distribution of
rights, or (2) the date on which such capital reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation, or winding up is expected
to become effective, and the date as of which it is expected that the holders
of shares of Common Stock of record shall be entitled to exchange their shares
of Common Stock for securities or other assets deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up.
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5.Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Company, the holders
of shares of the Class B Preferred Stock then outstanding shall be entitled to
be paid, out of the assets of the Company available for distribution to its
stockholders, whether from capital, surplus, or earnings, before any payment
shall be made in respect of the Common Stock, an amount equal to Ten Dollars
($10.00) per share, plus all accrued and unpaid dividends thereon to the date
fixed for distribution. After setting apart or paying in full
the preferential amounts due the holders of the Class B Preferred Stock, the
remaining assets of the Company available for distribution to stockholders, if
any, shall be distributed exclusively to the holders of Common Stock, each such
issued and outstanding share of Common Stock entitling the holder thereof to
receive an equal proportion of said remaining assets. If upon liquidation,
dissolution, or winding up of the Company, the assets of the Company available
for distribution to its shareholders shall be insufficient to pay the holders of
the Class B Preferred Stock the full amounts to which they respectively shall be
entitled, the holders of the Class B Preferred Stock shall share ratably in any
distribution of assets according to the respective amounts which would be
payable in respect of the shares held by them upon such distribution if all
amounts payable on or with respect to said shares were paid in full. Neither a
consolidation nor merger of the Company into or with any other corporation or
corporations, nor the merger of any other corporation into the Company, nor the
sale or transfer by the Company of all or any part of its assets, nor a
reorganization of the Company, nor the purchase or redemption of all or part
of the outstanding shares of any class or classes of the capital stock of the
Company, nor a reduction of the capital stock of the Company shall be deemed
to be a liquidation, dissolution, or winding up of the Company within the
meaning of any of the provisions of this Subsection 5.
(f)Of the 500,000 shares of Preferred Stock authorized hereunder, 240,000
shares of Preferred Stock shall be designated as Class C 12% Cumulative
Convertible Preferred Stock (the "Class C Preferred Stock"), shall have a par
value of $10.00 per share, and shall have the following rights and preferences:
1. Dividends. The holders of the Class C Preferred Stock shall be
entitled to cumulative preferential dividends, when, as and if declared by the
Board of Directors in an amount equal to 12% per annum of the liquidation
preference per share of $20.00. Dividends may be paid (to the extent
permissible under the Florida Business Corporation Act) to the holders of the
Class C Preferred Stock in cash or shares of Common Stock or Preferred Stock or
obligations of the Corporation (or any combination thereof), at the option of
the Corporation.
2. Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation, each
share of Class C Preferred Stock shall have a liquidation preference of $20.00
per share.
3. Voting Rights. Except as otherwise required by applicable law, the
Class C Preferred Stock shall have no voting rights; provided, however, that
each holder of Class C Preferred Stock shall be entitled to notice of all stock-
holders meetings at the same time and in the same manner as notice is given to
all stockholders entitled to vote at such meetings.
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4. Redemption. The Corporation may not redeem any shares of Class C
Preferred Stock.
5. Conversion Into Common Stock.
(1) Subject to the terms and conditions of this subsection, issued
and outstanding shares of Class C Preferred Stock shall convert to common stock
of the Corporation, par value $.007 per share (the "Common Stock"), on the
second anniversary of the filing of this Certificate of Designation with the
Secretary of State of Florida (the "Conversion Date"), and with no other action
required by the Corporation or the holder of the Class C Preferred Stock. The
shares of Class C Preferred Stock held by each holder thereof shall be converted
into such number of whole shares of Common Stock as is determined by multiplying
the number of shares of Class C Preferred Stock by a fraction, the numerator of
which is 20 and the denominator of which is the Conversion Price (as hereinafter
defined). However, on any liquidation of the Corporation, the right of
conversion shall terminate at the close of business on the last full business
day before the date fixed for payment of the amount distributable on the Class
C Preferred Stock.
(2) Promptly after the receipt of certificates representing Class
C Preferred Stock and surrender of Class C Preferred Stock, the Corporation
shall issue and deliver, or cause to be issued and delivered, to the holder a
certificate or certificates for the number of whole shares of Common Stock
issuable upon the conversion of such Class C Preferred Stock. No fractional
shares shall be issued upon conversion of the Class C Preferred Stock into
shares of Common Stock. To the extent permitted by law, the conversion shall
be deemed to have been effected as of the close of business on the Conversion
Date (or on the next preceding business day if the Conversion Date is not a
business day) and at that time the rights of the holder of Class C Preferred
Stock, as such holder, shall cease, and the holder of the Class C Preferred
Stock shall become the holder of record of shares of Common Stock.
(3) The conversion price per share of Class C Preferred Stock (the
"Conversion Price") shall be seventy percent (70%) of the average of the bid and
asked prices per share of the Common Stock as quoted by Nasdaq (or the closing
bid price if no transaction price is available, or, in the case of no closing
transaction price and no closing bid price being available, the fair market
value of the Common Stock as determined in good faith by the Corporation's Board
of Directors) for the twenty (20) consecutive trading days prior to the
Conversion Date.
6. Rank. With respect to the payment of dividends and rights to
redemption and upon liquidation, the shares of the Class C Preferred Stock
shall be subordinate to the issued and outstanding shares of Class A Preferred
Stock and Class B Preferred Stock of the Corporation and shall rank senior to
the shares of Common Stock of the Corporation."
ARTICLE IV
VOTING RIGHTS
Each holder of Common Stock is entitled to one vote for each share of Common
Stock that he holds on each matter submitted to a vote at a meeting of
shareholders.
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ARTICLE V
BOARD OF DIRECTORS
1. Number. The property, business, and affairs of the corporation shall be
managed and controlled by the Board of Directors. The number of directors of
the corporation shall not be less than five nor more than nine, the exact number
of directors to be determined from time to time by resolution adopted by
affirmative vote of a majority of the whole Board of Directors, and such exact
number shall be five until otherwise determined by resolution adopted by
affirmative vote of a majority of the whole Board of Directors; provided,
however, that the number of directors shall not be reduced so as to shorten the
term of a director at that time in office. As used in this Article V, the term
"whole Board" means the total number of directors which the corporation would
have if there were no vacancies.
2. Classes. The Board of Directors shall be divided into three classes, as
nearly equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each year.
Directors of the first class shall be elected to hold office for a term expiring
at the next succeeding annual meeting, directors of the second class shall be
elected to hold office for a term expiring at the second succeeding annual
meeting, and directors of the third class shall be elected to hold office for
a term expiring at the third succeeding annual meeting. Any vacancies in the
Board of Directors for any reason, and any newly created directorships resulting
from any increase in the number of directors, may be filled by the Board of
Directors acting by a majority of the directors then in office and any directors
so chosen would hold office until the next election of the class for which such
directors have been chosen and until their successors are elected and qualified.
No decrease in the number of directors shall shorten the term of any incumbent
director. At each annual meeting of shareholders the successors to the class of
directors whose term shall then expire shall be elected to hold office for a
term expiring at the third succeeding annual meeting.
3. Removal. Any director may be removed by the vote of a majority of the
whole Board of Directors, but only for cause. Except as may otherwise be
provided by law, cause for removal shall be construed to exist only if: (a) the
director whose removal is proposed has been convicted of a felony by a court of
competent jurisdiction; or (b) such director has been adjudicated by a court of
competent jurisdiction to be liable for negligence or misconduct in the
performance of his duty to the corporation in a matter of substantial importance
to the corporation and such adjudication is no longer subject to direct appeal.
In addition, any director or the entire Board of Directors may be removed, with
or without cause, by the affirmative vote of the holders of at least 67% of the
outstanding shares of the corporation then entitled to vote generally in the
election of directors cast at a meeting of the shareholders called for that
purpose.
4. Vacancies. Any vacancies in the Board of Directors resulting from death,
resignation, retirement, removal from office, the creation of a new directorship
by an increase in the authorized number of directors, or otherwise shall be
filled by a majority vote of the directors then in office, though less than a
quorum of the entire Board of Directors. Directors so chosen to fill any
vacancy shall hold office for a term expiring at the annual meeting of
shareholders at which the term of the class to which they have been elected
expires.
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5. Amendment, Alteration, Repeal, Etc. Notwithstanding anything contained
in these Articles of Incorporation to the contrary, the affirmative vote of the
holders of at least 67% of the outstanding shares of the corporation then
entitled to vote in the election of directors shall be required to amend, alter,
or repeal or to adopt any provision inconsistent with, this Article V.
ARTICLE VI
LIQUIDATION, REORGANIZATION, MERGER, CONSOLIDATION,
SALE OF SUBSTANTIALLY ALL ASSETS, OR RECLASSIFICATION OF
SECURITIES
Any liquidation, reorganization, merger, consolidation, sale of substantially
all of the corporation's assets, or the reclassification of its securities shall
be approved by (a) the holders of at least a majority of the issued and
outstanding Common Stock held by other than officers, directors, and those
persons who hold 5% or more of the outstanding Common Stock, and (b) a vote of
a majority of shares of issued and outstanding Common Stock held by the
Company's officers, directors, and those persons who hold 5% or more of the
outstanding Common Stock. Notwithstanding anything contained in these Articles
of Incorporation to the contrary, the affirmative vote of the holders of at
least 67% of the outstanding shares of the corporation then entitled to vote
in the election of directors shall be required to amend, alter, or repeal, or to
adopt any provision inconsistent with, this Article VI.
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ARTICLES OF INCORPORATION
OF
I-LINK WORLDWIDE INC.
The undersigned natural person, being over the age of eighteen (18) years,
acting as sole incorporator of a corporation under the Utah Revised Business
Corporation Act, as codified at Section 16-10a-101, et seq. (the "Act"), adopts
the following Articles of Incorporation for such corporation.
ARTICLE I
NAME
The name of the corporation is I-Link Worldwide Inc. (the "Corporation").
ARTICLE II
PURPOSE
The Corporation is organized to engage in any lawful act or activity for which
corporations may be organized under the Act.
ARTICLE III
AUTHORIZED CAPITAL
The total number of shares which the Corporation shall have authority to issue
is One Hundred (100). All of the authorized shares shall be designated common
stock and shall have a par value of One Cent ($.01) per share. The common stock
shall have unlimited voting rights as provided in the Act and shall be entitled
to receive the net assets of the Corporation upon dissolution.
ARTICLE IV
REGISTERED OFFICE AND AGENT
The street address of the initial registered office of the Corporation is 201
South Main Street, Suite 1800, Salt Lake City, Utah 84111. The name of the
corporation's initial registered agent at that address is Prentice Hall Legal
& Financial Services.
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ARTICLE V
INITIAL BOARD OF DIRECTORS
One director shall constitute the initial board. The name and address of the
person who is to serve as the director until the first annual meeting or until
his successor is elected and has qualified is:
Clay Wilkes One Chisholm Trail, Suite 4250
Round Rock, Texas 78681
ARTICLE VI
LIMITATION OF LIABILITY OF DIRECTORS
To the fullest extent permitted by the Act or any other applicable law as now
in effect or as may hereafter be amended, a director of this corporation shall
not be personally liable to the Corporation or its shareholders for monetary
damages for any action taken or any failure to take any action as a director.
ARTICLE VII
INCORPORATOR
The name and address of the incorporator is:
William D. Holyoak 201 South Main Street, Suite 1800
Salt Lake City, Utah 84111
DATED this 2nd day of February, 1996.
/s/ William D. Holyoak
________________________________
William D. Holyoak, Incorporator
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ACKNOWLEDGEMENT OF REGISTERED AGENT
The undersigned hereby accepts and acknowledges appointment as initial
registered agent of the corporation named above.
PRENTICE HALL LEGAL &
FINANCIAL SERVICES
/s/ Unknown signature
________________________________
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BYLAWS
OF
I-LINK WORLDWIDE INC.
Adopted by Resolution dated February 3, 1996
ARTICLE 1. OFFICES
1.1 Business Offices. The principal office of the corporation shall
be located in Austin, Texas. The corporation may have such other offices,
either within or without Utah, as the board of directors may designate or as the
business of the corporation may require from time to time.
1.2 Registered Office. The registered office of the corporation
required to be kept by the Utah Revised Business Corporation Act (as it may be
amended from time to time, the "Act") shall be located within the State of Utah
and may be, but need not be, identical with the principal office. The address
of the registered office may be changed from time to time.
ARTICLE 2. SHAREHOLDERS
2.1 Annual Meeting. The annual meeting of the shareholders shall be
held at such date and time as shall be fixed by the board of directors, for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the day fixed for the annual meeting shall be a
legal holiday in the State of Utah, such meeting shall be held on the next
succeeding business day.
2.2 Special Meetings. Special meetings of the shareholders, for any
purpose or purposes described in the meeting notice, may be called by the
president or by the board of directors, and shall be called by the president
at the written request of the holders of not less than one-tenth of all the
votes entitled to be cast on any issue proposed to be considered at the meeting.
2.3 Place of Meeting. The board of directors may designate any
place, either within or without the State of Utah, as the place of meeting for
any annual or any special meeting of the shareholders. If no designation is
made by the directors, the place of meeting shall be the principal office of
the corporation in the State of Utah.
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2.4 Notice of Meeting.
(a) Content and Mailings Requirements. Written notice stating
the date, time and place of each annual or special shareholder meeting shall be
delivered no fewer than 10 nor more than 60 days before the date of the meeting,
either personally or by mail, by or at the direction of the president, the board
of directors, or other persons calling the meeting, to each shareholder of
record entitled to vote at such meeting and to any other shareholder entitled
by the Act or the articles of incorporation to receive notice of the meeting.
Notice of special shareholder meetings shall include a description of the
purpose or purposes for which the meeting is called.
(b) Effective Date. Written notice shall be deemed to be
effective at the earlier of: (1) when mailed, if addressed to the shareholder's
address shown in the corporation's current record of shareholders; (2) when
received; (3) five days after it is mailed; or (4) on the date shown on the
return receipt if sent by registered or certified mail, return receipt
requested, and the receipt is signed by or on behalf of the addressee.
(c) Effect of Adjournment. If any shareholder meeting is
adjourned to a different date, time or place, notice need not be given of the
new date, time and place, if the new date, time and place is announced at the
meeting before adjournment. But if a new record date for the adjourned meeting
is or must be fixed, then notice must be given pursuant to the requirements of
this section to those persons who are shareholders as of the new record date.
2.5 Waiver of Notice.
(a) Written Waiver. A shareholder may waive any notice
required by the Act, the articles of incorporation or the bylaws, by a writing
signed by the shareholder entitled to the notice, which is delivered to the
corporation (either before or after the date and time stated in the notice) for
inclusion in the minutes or filing with the corporate records.
(b) Attendance at Meetings. A shareholder's attendance at a
meeting: (1) waives objection to lack of notice or defective notice of the
meeting, unless the shareholder at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting because of lack of
notice or effective notice; and (2) waives objection to consideration of a
particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder objects to considering
the matter when it is presented.
2.6 Record Date.
(a) Fixing of Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders,
or shareholders
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entitled to receive payment of any distribution, or in order to make a
determination of shareholders for any other proper purpose, the board of
directors may fix in advance a date as the record date. Such record date shall
not be more than 70 days prior to the date on which the particular action
requiring such determination of shareholders is to be taken. If no record date
is so fixed by the board for the determination of shareholders entitled to
notice of, or to vote at, a meeting of shareholders, the record date for
determination of such shareholders shall be at the close of business on the day
before the first notice is delivered to shareholders. If no record date is
fixed by the board for the determination of shareholders entitled to receive a
distribution, the record date shall be the date the board authorizes the
distribution. If no record date is fixed by the board for the determination of
shareholders entitled to take action without a meeting, the record date shall be
the date the first shareholder signs a consent.
(b) Effect of Adjournment. When a determination of share-
holders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof unless the board of directors fixes a new record date, which it must
do if the meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting.
2.7 Shareholder List. After fixing a record date for a share-
holders' meeting, the corporation shall prepare a list of the names of its
shareholders entitled to be given notice of the meeting. The list must be
arranged by voting group and within each voting group by class or series of
shares, must be alphabetical within each class or series, and must show the
address of, and the number of shares held by, each shareholder. The shareholder
list must be available for inspection by any shareholder, beginning on the
earlier of ten days before the meeting for which the list was prepared or two
business days after notice of the meeting is given for which the list was
prepared and continuing through the meeting and any adjournment thereof. The
list shall be available at the corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held.
2.8 Shareholder Quorum and Voting Requirements.
(a) Quorum. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Unless the articles of incorporation or the
Act provide otherwise, a majority of the votes entitled to be cast on the matter
by the voting group constitutes a quorum of that voting group for action on that
matter. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
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(b) Voting Groups. If the articles of incorporation or the
Act provide for voting by a single voting group on a matter, action on that
matter is taken when voted upon by that voting group. If the articles of
incorporation or the Act provide forvoting by two or more voting groups on a
matter, action on that matter is taken only when voted upon by each of those
voting groups counted separately. Action may be taken by one voting group on
a matter even though no action is taken by another voting group entitled to vote
on the matter.
(c) Shareholder Action. If a quorum exists, action on a
matter, other than the election of directors, by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation or the Act require a
greater number of affirmative votes. Directors are elected by a plurality of
the votes cast by the shares entitled to vote in the election at a meeting at
which a quorum is present.
2.9 Proxies. At all meetings of shareholders, a shareholder may
vote in person or by proxy which is executed in writing by the shareholder or
which is executed by his or her duly authorized attorney-in-fact. Such proxy
shall be filed with the secretary of the corporation or other person authorized
to tabulate votes before or at the time of the meeting. No proxy shall be valid
after 11 months from the date of its execution unless otherwise provided in the
proxy.
2.10 Voting of Shares. Unless otherwise provided in the articles of
incorporation or by applicable law, each outstanding share, regardless of class,
is entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders. Except as provided by specific court order, no shares of the
corporation owned, directly or indirectly, by a second corporation, domestic
or foreign, shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time for purposes of any meeting if a
majority of the shares entitled to vote for the election of directors of such
second corporation are held by the corporation. The prior sentence shall not
limit the power of the corporation to vote any shares, including its own shares,
held by it in a fiduciary capacity.
2.11 Meetings by Telecommunications. Any or all shareholders may
participate in an annual or special meeting by, or conduct the meeting through
the use of, any means of communication by which all shareholders participating
may hear each other during the meeting. A shareholder participating in a
meeting by this means is deemed to be present in person at the meeting.
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2.12 Action Without a Meeting.
(a) Written Consent. Any action which may be taken at a
meeting of the shareholders may be taken without a meeting and without prior
notice if one or more consents in writing, setting forth the action so taken,
shall be signed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shareholders entitled to vote with respect to the
subject matter thereof were present and voted. Action taken under this section
has the same effect as action taken at a meeting of shareholders and may be
described as such in any document.
(b) Post-Consent Notice. Unless the written consents of all
shareholders entitled to vote have been obtained, notice of any shareholder
approval without a meeting shall be given at least ten days before the
consummation of the action authorized by such approval to (i) those shareholders
entitled to vote who have not consented in writing, and (ii) those shareholders
not entitled to vote and to whom the Act requires that notice of the proposed
action be given. Any such notice must contain or be accompanied by the same
material that is required under the Act to be sent in a notice of meeting at
which the proposed action would have been submitted to the shareholders for
action.
(c) Effective Date and Revocation of Consents. No action
taken pursuant to this section shall be effective unless all written consents
on which the corporation relies for the taking of an action are received by the
corporation within a 60-day period and not revoked. Such action is effective as
of the date the last written consent necessary to effect the action is received,
unless all of the written consents specify a later date as the effective date of
the action. If the corporation has received written consents signed by all
shareholders entitled to vote with respect to the action, the effective date of
the action may be any date that is specified in all the written consents as the
effective date of the action. Any such writing may be received by the
corporation by electronically transmitted facsimile or other form of
communication providing the corporation with a complete copy thereof, including
a copy of the signatures thereto. Any shareholder giving a written consent
pursuant to this section may revoke the consent by a signed writing describing
the action and stating that the consent is revoked, provided that such writing
is received by the corporation prior to the effective date of the action.
(d) Unanimous Consent for Election of Directors.
Notwithstanding subsection (a) of this section, directors may not be elected
by written consent unless such consent is unanimous by all shares entitled to
vote for the election of directors.
ARTICLE 3. BOARD OF DIRECTORS
3.1 General Powers. All corporate powers shall be exercised by or
under the authority of, and the business and affairs of the corporation shall be
managed under the direction of, the board of directors.
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3.2 Number, Tenure and Qualifications. The authorized number of
directors shall be not less than one nor more than seven. The current number
of directors shall be within the limits specified above, as determined from time
to time by resolution adopted by either the shareholders or the directors. Each
director shall hold office until the next annual meeting of shareholders or
until the director's earlier death, resignation or removal. However, if a
director's term expires, the director shall continue to serve until his or her
successor shall have been elected and qualified, or until there is a decrease in
the number of directors. Directors do not need to be residents of Utah or
shareholders of the corporation.
3.3 Regular Meetings. A regular meeting of the board of directors
shall be held without other notice than this bylaw immediately after, and at the
same place as, the annual meeting of shareholders, for the purpose of appointing
officers and transacting such other business as may come before the meeting.
The board of directors may provide, by resolution, the time and place for the
holding of additional regular meetings without other notice than such
resolution.
3.4 Special Meetings. Special meetings of the board of directors
may be called by or at the request of the president or any director. The person
authorized to call special meetings of the board of directors may fix any place
as the place for holding any special meeting of the board of directors.
3.5 Notice of Special Meetings. Notice of the date, time and place
of any special director meeting shall be given at least two days previously
thereto either orally or in writing. Oral notice shall be effective when
communicated in a comprehensive manner. Written notice is effective as to each
director at the earlier of: (a) when received; (b) five days after deposited in
the United States mail, addressed to the director's address shown in the records
of the corporation; or (c) the date shown on the return receipt if sent by
registered or certified mail, return receipt requested, and the receipt is
signed by or on behalf of the director. Any director may waive notice of any
meeting before or after the date and time of the meeting stated in the notice.
Except as provided in the next sentence, the waiver must be in writing and
signed by the director entitled to the notice. A director's attendance at or
participation in a meeting shall constitute a waiver of notice of such meeting,
unless the director at the beginning of the meeting, or promptly upon his
arrival, objects to holding the meeting or transacting business at the meeting
because of lack of or defective notice, and does not thereafter vote for or
assent to action taken at the meeting. Unless required by the articles of
incorporation, neither the business to be transacted at, nor the purpose of, any
special meeting of the board of directors need be specified in the notice
or waiver of notice of such meeting.
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3.6 Quorum and Voting.
(a) Quorum. A majority of the number of directors prescribed
by resolution adopted pursuant to section 3.2 of these bylaws, or if no number
is prescribed, the number in office immediately before the meeting begins, shall
constitute a quorum for the transaction of business at any meeting of the board
of directors, unless the articles of incorporation require a greater number.
(b) Voting. The act of the majority of the directors present
at a meeting at which a quorum is present when the vote is taken shall be the
act of the board of directors unless the articles of incorporation require a
greater percentage.
(c) Presumption of Assent. A director who is present at a
meeting of the board of directors or a committee of the board of directors when
corporate action is taken is deemed to have assented to the action taken unless:
(1) the director objects at the beginning of the meeting, or promptly upon his
or her arrival, to holding or transacting business at the meeting and does not
thereafter vote for or assent to any action taken at the meeting; (2) the
director contemporaneously requests that his or her dissent or abstention as
to any specific action be entered in the minutes of the meeting; or (3) the
director causes written notice of his or her dissent or abstention as to any
specific action be received by the presiding officer of the meeting before its
adjournment or to the corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
3.7 Meetings by Telecommunications. Any or all directors may
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
hear each other during the meeting. A director participating in a meeting by
this means is deemed to be present in person at the meeting.
3.8 Action Without a Meeting. Any action required or permitted to
be taken by the board of directors at a meeting may be taken without a meeting
if all the directors consent to such action in writing. Action taken by written
consent is effective when the last director signs the consent, unless, prior to
such time, any director has revoked a consent by a signed writing received by
the corporation, or unless the consent specifies a different effective date.
A signed consent has the effect of an action taken at a meeting of directors
and may be described as such in any document.
3.9 Resignation. A director may resign at any time by giving a
written notice of resignation to the corporation. Such a resignation is
effective when the notice is received by the corporation unless the notice
specifies a later effective date, and the acceptance of such recognition shall
not be necessary to make it effective.
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3.10 Removal. The shareholders may remove one or more directors at a
meeting called for that purpose if notice has been given that a purpose of the
meeting is such removal. The removal may be with or without cause unless the
articles of incorporation provide that directors may only be removed with cause.
If a director is elected by a voting group of shareholders, only the
shareholders of that voting group may participate in the vote to remove that
director. A director may be removed only if the number of votes cast to remove
him or her exceeds the number of votes cast not to remove him or her.
3.11 Vacancies. Unless the articles of incorporation provide
otherwise, if a vacancy occurs on the board of directors, including a vacancy
resulting from an increase in the number of directors, the shareholders may fill
the vacancy. During such time that the shareholders fail or are unable to fill
such vacancies then and until the shareholders act: (1) the board of directors
may fill the vacancy; or (2) if the directors remaining in office constitute
fewer than a quorum of the board, they may fill the vacancy by the affirmative
vote of a majority of all the directors remaining in office. If the vacant
office was held by a director elected by a voting group of shareholders: (1)
if one or more directors are elected by the same voting group, only such
directors are entitled to vote to fill the vacancy if it is filled by the
directors; and (2) only the holders of shares of that voting group are entitled
to vote to fill the vacancy if it is filled by the shareholders. A vacancy that
will occur at a specific later date (by reason of a resignation effective at a
later date) may be filled before the vacancy occurs but the new director may not
take office until the vacancy occurs.
3.12 Compensation. By resolution of the board of directors, each
director may be paid his or her expenses, if any, of attendance at each meeting
of the board of directors and may be paid a stated salary as director or a fixed
sum for attendance at each meeting of the board of directors or both. No such
payment shall preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
3.13 Committees. The board of directors may create one or more
committees and appoint members of the board of directors to serve on them. Each
committee must have two or more members, who serve at the pleasure of the board
of directors. Those sections of this Article III which govern meetings, action
without meetings, notice and waiver of notice, and quorum and voting
requirements of the board of directors, apply to committees and their members.
ARTICLE 4. OFFICERS
4.1 Number. The officers of the corporation shall be a president, a
secretary and a treasurer, each of whom shall be appointed by the board of
directors. Such other officers and assistant officers as may be deemed
necessary, including any vice-presidents, may also be appointed by the board of
directors. If specifically authorized by the board of directors, an officer may
appoint one or more officers or assistant officers. The same individual may
simultaneously hold more than one office in the corporation.
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4.2 Appointment and Term of Office. The officers of the corporation
shall be appointed by the board of directors for a term as determined by the
board of directors. The designation of a specified term does not grant to the
officer any contract rights, and the board can remove the officer at any time
prior to the termination of such term. If no term is specified, the officer
shall hold office until he or she resigns, dies or until he or she is removed
in the manner provided in section 4.3 of these bylaws.
4.3 Removal. Any officer or agent may be removed by the board of
directors at any time, with or without cause. Such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Appointment
of an officer or agent shall not of itself create contract rights.
4.4 Resignation. Any officer may resign at any time, subject to any
rights or obligation under any existing contracts between the officer and the
corporation, by giving notice to the president or board of directors. An
officer's resignation shall be effective when received by the corporation,
unless the notice specifies a later effective date, and the acceptance of such
resignation shall not be necessary to make it effective.
4.5 Authority and Duties of Officers. The officers of the
corporation shall have the authority and shall exercise the powers and perform
the duties specified below and as may be additionally specified by the board of
directors or these bylaws, except that in each event each officer shall exercise
such powers and perform such duties as may be required by law:
(a) President. Unless the board of directors has designated
the chairman of the board as chief executive officer, the president shall be the
chief executive officer of the corporation and, subject to the control of the
board of directors, shall in general supervise and control all of the business
and affairs of the corporation. Unless there is a chairman of the board, the
president shall, when present, preside at all meetings of the shareholders and
of the board of directors. The president may sign, with the secretary or any
other proper officer of the corporation thereunto authorized by the board of
directors, certificates for shares of the corporation and deeds, mortgages,
bonds, contracts, or other instruments which the board of directors has
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the board of directors or by these
bylaws to some other officer or agent of the corporation, or shall be required
by law to be otherwise signed or executed. In general, the president shall
perform all duties incident to the office of president and such other duties as
may be prescribed by the board of directors from time to time.
(b) Vice-President. If appointed, the vice-president (or if
there is more than one, each vice-president) shall assist the president and
shall perform such duties as may be assigned to him or her by the president or
by the board of directors. If appointed, in the absence of the president or in
the event of his death, inability or refusal to act, the vice-president (or in
the event there is more than one vice-
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president, the vice-presidents in the order designated at the time of their
election, or in the absence of any designation, then in the order of their
appointment) shall perform the duties of the president, and when so acting,
shall have all the powers of and be subject to all the restrictions upon the
president. (If there is no vice-president, then the treasurer shall perform
such duties of the president.)
(c) Secretary. The secretary shall: (i) keep the minutes of
the proceedings of the shareholders, the board of directors and any committees
of the board in one or more books provided for that purpose; (ii) see that all
notices are duly given in accordance with the provisions of these bylaws or as
required by law; (iii) be custodian of the corporate records; (iv) when
requested or required, authenticate any records of the corporation; (v) keep a
register of the post office address of each shareholder which shall be furnished
to the secretary by such shareholder; (vi) sign with the president, or a vice-
president, certificates for shares of the corporation, the issuance of which
shall have been authorized by resolution of the board of directors; (vii) have
general charge of the stock transfer books of the corporation; and (viii) in
general, perform all duties incident to the office of secretary and such other
duties as from time to time may be assigned by the president or by the board of
directors. Assistant secretaries, if any, shall have the same duties and
powers, subject to the supervision of the secretary.
(d) Treasurer. The treasurer shall: (i) have charge and
custody of and be responsible for all funds and securities of the corporation;
(ii) receive and give receipts for moneys due and payable to the corporation
from any source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies, or other depositaries as shall be
selected by the board of directors; and (iii) in general, perform all of the
duties incident to the office of treasurer and such other duties as from time to
time may be assigned by the president or by the board of directors. If
required by the board of directors, the treasurer shall give a bond for the
faithful discharge of his or her duties in such sum and with such surety or
sureties as the board of directors shall determine. Assistant treasurers, if
any, shall have the same powers and duties, subject to the supervision of the
treasurer.
4.6 Salaries. The salaries of the officers shall be fixed from time
to time by the board of directors.
ARTICLE 5. INDEMNIFICATION OF DIRECTORS,
OFFICERS, AGENTS AND EMPLOYEES
5.1 Indemnification of Directors. The corporation shall indemnify
and advance expenses to the directors of the corporation to the fullest extent
permitted by applicable law. Without limiting the generality of the foregoing,
the corporation shall indemnify the directors of the corporation in all cases in
which a corporation may indemnify a director under section 16-10a-902 of the
Act. The corporation shall consider and act expeditiously as possible upon any
and all requests by a director for indemnification or
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advancement of expenses.
5.2 Indemnification of Officers, Agents and Employee Who Are Not
Directors. The board of directors may indemnify and advance expenses to any
officer, employee or agent of the corporation who is not a director of the
corporation to any extent consistent with public policy, as determined by the
general or specific actions of the board of directors.
5.3 Insurance. By action of the board of directors, notwithstanding
any interest of the directors in such action, the corporation may purchase and
maintain liability insurance on behalf of a person who is or was a director,
officer, employee, fiduciary or agent of the corporation, against any liability
asserted against or incurred by such person in that capacity or arising from
such person's status as a director, officer, employee, fiduciary or agent,
whether or not the corporation would have the power to indemnify such person
under the applicable provisions of the Act.
ARTICLE 6. STOCK
6.1 Issuance of Shares. The corporation may issue the number of
shares of each class or series of capital stock authorized by the articles of
incorporation. The issuance or sale by the corporation of any shares of its
authorized capital stock of any class shall be made only upon authorization by
the board of directors, unless otherwise provided by statute. The board of
directors may authorize the issuance of shares for consideration consisting of
any tangible or intangible property or benefit to the corporation, including
cash, promissory notes, services performed, contracts or arrangements for
services to be performed, or other securities of the corporation. Shares shall
be issued for such consideration as shall be fixed from time to time by the
board of directors.
6.2 Certificates for Shares.
(a) Content. Shares may but need not be represented by
certificates in such form as determined by the board of directors and stating
on their face, at a minimum, the name of the corporation and that it is formed
under the laws of the State of Utah, the name of the person to whom issued, and
the number and class of shares and the designation of the series, if any, the
certificate represents. Such certificates shall be signed (either manually or
by facsimile) by the president or a vice-president and by the secretary or an
assistant secretary and may be sealed with a corporate seal or a facsimile
thereof. Each certificate for shares shall be consecutively numbered or
otherwise identified.
(b) Legend as to Class or Series. If the corporation is
authorized to issue different classes of shares or different series within a
class, the designations, relative rights, preferences and limitations applicable
to each class and the variations in rights, preferences and limitations
determined for each series (and the authority of the board of directors to
determine variations for future series) must be summarized on the front or
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back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the corporation will furnish the share-
holder this information on request in writing and without charge.
(c) Shareholder List. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the corporation.
(d) Transferring Shares. All certificates surrendered to the
corporation for transfer shall be cancelled and no new certificate shall be
issued until the former certificate for a like number of shares shall have been
surrendered and cancelled, except that in case of a lost, destroyed, or
mutilated certificate, a new one may be issued therefor upon such terms and
indemnity to the corporation as the board of directors may prescribe.
6.3 Shares Without Certificates. The board of directors may
authorize the issuance of some or all of the shares of any or all of its classes
or series without certificates. Within a reasonable time after the issuance or
transfer of shares without certificates, the corporation shall send the share-
holder a written statement of the information required on certificates under
section 6.2 of these bylaws.
6.4 Registration of the Transfer of Shares. Registration of the
transfer of shares of the corporation shall be made only on the stock transfer
books of the corporation. In order to register a transfer, the record owner
shall surrender the shares to the corporation for cancellation, properly
endorsed by the appropriate person or persons with reasonable assurances that
the endorsements are genuine and effective. Unless the corporation has
established a procedure by which a beneficial owner of shares held by a nominee
is to be recognized by the corporation as the owner, the person in whose name
shares stand in the books of the corporation shall be deemed by the corporation
to be the owner thereof for all purposes.
ARTICLE 7. MISCELLANEOUS
7.1 Inspection of Records by Shareholders and Directors. A share-
holder or director of the corporation is entitled to inspect and copy, during
regular business hours at the corporation's principal office, any of the records
of the corporation required to be maintained by the corporation under the Act,
if such person gives the corporation written notice of the demand at least five
business days before the date on which such a person wishes to inspect and copy.
The scope of such inspection right shall be as provided under the Act.
7.2 Corporate Seal. The board of directors may provide a corporate
seal which may be circular in form and have inscribed thereon any designation
including the name of the corporation, the state of incorporation, and the words
"Corporate Seal."
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7.3 Amendments. The corporation's board of directors may amend or
repeal the corporation's bylaws at any time unless:
(a) the articles of incorporation or the Act reserve this
power exclusively to the shareholders in whole or part; or
(b) the shareholders, in adopting, amending or repealing a
particular bylaw, provide expressly that the board of directors may not amend
or repeal that bylaw; or
(c) the bylaw either establishes, amends or deletes a greater
shareholder quorum or voting requirement.
Any amendment which changes the voting or quorum requirement for the
board must meet the same quorum requirement and be adopted by the same vote and
voting groups required to take action under the quorum and voting requirements
then in effect or proposed to be adopted, whichever are greater.
7.4 Fiscal Year. The fiscal year of the corporation shall be
established by the board of directors.
[End of Bylaws]
THIS NOTE HAS NOT BEEN THE SUBJECT OF REGISTRATION UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE AND HAS BEEN ISSUED IN RELIANCE ON EXEMPTIONS FROM
THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS. THIS
NOTE MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT AS PERMITTED UNDER SUCH SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
THIS NOTE HAS NOT BEEN THE SUBJECT OF REGISTRATION UNDER THE
TEXAS SECURITIES ACT OF 1957 AND IS BEING SOLD IN RELIANCE UPON AN
EXEMPTION CONTAINED IN SECTION 5.I OF THE TEXAS SECURITIES ACT AND
SECTION 109.13 OF THE TEXAS ADMINISTRATIVE CODE. THIS NOTE MAY NOT
BE SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR UNLESS
AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
NON-NEGOTIABLE 10% PROMISSORY NOTE
$200,000 Round Rock, Texas
October 19, 1995
FOR VALUE RECEIVED, the undersigned, ILINK, Ltd., a Utah limited
partnership (the "Maker"), hereby promises to pay to the order of Scott Cook
(the "Payee") at 1700 Pacific Avenue, Suite 500, Dallas, Texas 75201, or at
such other place as the holder hereof may from time to time designate in
writing, the principal amount of two hundred thousand dollars ($200,000) in one
installment, due upon the earlier of: (i) December 22, 1995; or (ii) the
Maker's receipt of proceeds of at least an aggregate of one million dollars
($1,000,000) from an equity financing conducted by the Maker, together with
simple interest from and after the date hereof at the rate of ten percent (10%)
per annum computed on the unpaid principal balance. Interest shall be payable
at such time as the outstanding principal balance hereunder shall be due. This
Note may not be negotiated, assigned or transferred by the Payee. By acceptance
of this Non-Negotiable 10% Promissory Note (the "Note"), the Payee represents,
warrants, covenants and agrees that it will abide by and be bound by its terms.
Repayment of amounts outstanding and/or owing hereunder is: (i)
secured pursuant to the terms of a certain security agreement, dated as of the
date hereof, between the Maker, the Payee and Medcross, Inc. ("Medcross") and a
certain pledge agreement, dated as of the date hereof, between Clay Wilkes and
Medcross; and (ii) guaranteed, in part, pursuant to the terms of a certain
Guaranty, dated as of the date hereof, executed by Medcross.
The unpaid principal balance and/or any applicable interest under
this Note may be prepaid in part or in full by the Maker without penalty, upon
notice to the Payee stating the repayment amount and repayment date.
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Except as set forth herein, Maker waives presentment, demand and
presentation for payment, notice of nonpayment and dishonor, protest and notice
of protest and expressly agrees that this Note and/or any payment hereunder or
pursuant hereto may be extended from time to time by the Payee without in any
way affecting the liability of Maker.
Any notice required by the provisions of this Note to be given to the
Payee shall be in writing and may be delivered by personal service, facsimile
transmission or by registered or certified mail, return receipt requested, with
postage thereon fully prepaid or overnight delivery courier. All such
communications shall be addressed to the Payee of record at its address
appearing on the books of the Maker. Service of any such communication made
only by mail shall be deemed complete on the date of actual delivery as shown by
the addressee's registry or certification receipt or at the expiration of the
third business day after the date of mailing, whichever is earlier in time.
Whenever any provision of this Note requires a notice to be given to the Maker
by the Payee, then and in each such case, such notice shall be in writing and
shall be sent by registered or certified mail, return receipt requested with
postage thereon fully prepaid to the Maker at its principal place of business.
No notice required hereunder shall be valid unless signed by the Payee giving
the notice unless signed by the Payee required to give such notice.
Upon the occurrence of any Event of Default (as hereafter defined),
this Note shall be considered to be in default and the entire unpaid principal
sum hereof, together with accrued interest, shall at the option of the holder
hereof become immediately due and payable in full. The following shall each
constitute an event of default ("Event of Default") hereunder: (i) the failure
to pay when due any interest hereunder or any of the principal sum hereof and
the continuance of such failure for a period of thirty (30) days after written
notice from the Payee to the Maker of such failure; (ii) the violation by Maker
of any covenant or agreement contained in this Note and the continuance of such
violation for a period of thirty (30) days after written notice from the Payee
to the Maker of such failure; (iii) the assignment for the benefit of creditors
by the Maker; (iv) the application for the appointment of a receiver or
liquidator for the Maker or for property of the Maker; (v) the filing of a
petition in bankruptcy by or against the Maker; (vi) the issuance of an
attachment or the entry of a judgment against the Maker in excess of $100,000;
(vii) the making or sending of a notice of an intended bulk sale by the Maker;
(viii) the termination of existence, dissolution or insolvency of the Maker; or
(ix) any change in control of the Maker. Upon the occurrence of an Event of
Default and the placement of this Note in the hands of an attorney for
collection, the Maker agrees to pay reasonable collection costs and expenses,
including reasonable attorneys' fees and interest from the date of the default
at the rate of fifteen percent (15%) per annum computed on the unpaid principal
balance.
The validity and construction of this Note and all matters pertaining
hereto are to be determined in accordance with the laws of the State of Texas
without regard to the conflicts of law principles thereof.
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IN WITNESS WHEREOF, the Maker, by its appropriate officers thereunto
duly authorized, has executed and affixed its corporate seal upon this Note as
of this 19th day of October, 1995.
ILINK, Ltd.
By: /s/ Clay Wilkes
Clay Wilkes, President of
G Net Enterprises, Inc., as the
General Partner of ILINK, Ltd.
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GUARANTY
THIS GUARANTY (the "Guaranty") is made and given as of this 19th day
of October, 1995, by Medcross, Inc., a Florida corporation (the "Guarantor"), in
favor of Scott Cook, an individual resident of the State of Texas (the
"Beneficiary").
WITNESSETH:
WHEREAS, the Beneficiary has agreed to loan an aggregate of Two
Hundred Thousand Dollars ($200,000) (the "Loan") to ILINK, Ltd., a Utah limited
partnership (the "Partnership"), in exchange for: (a) execution and delivery by
the Partnership of a promissory note in the same amount in favor of the
Beneficiary (the "Promissory Note");(b) execution and delivery by the Partner-
ship of a certain security agreement providing for the grant of security
interests in the assets of the Partnership to each of the Beneficiary and the
Guarantor (the "Security Agreement"); and (c) execution and delivery of this
Guaranty by the Guarantor, guaranteeing repayment to the Beneficiary of up to
One Hundred Thousand Dollars ($100,000) of the principal amount of the
Promissory Note;
WHEREAS, as consideration for the Beneficiary's agreement to extend
the Loan to the Partnership: (a) the Partnership has agreed to execute and
deliver the Promissory Note; (b) the Partnership has agreed to execute and
deliver the Security Agreement; and (c) the Guarantor has agreed to execute and
deliver this Guaranty; and
WHEREAS, as consideration for and as a condition to the Guarantor's
agreement to execute and deliver this Guaranty and to provide the guarantee
described herein, Clay Wilkes, the president and sole stockholder of G Net
Enterprises, Inc. ("GNet"), the general partner of the Partnership, has entered
into a certain pledge agreement pursuant to which Mr. Wilkes has pledged all of
the capital stock of GNet to the Guarantor.
NOW THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the Guarantor and the Beneficiary covenant and agree as
follows:
SECTION 1. Guaranty. The Guarantor hereby guarantees repayment to
the Beneficiary of One Hundred Thousand Dollars ($100,000) of the principal
amount due under the Promissory Note within ninety (90) days of maturity thereof
(including expiration of any applicable grace period). Such repayment
obligation shall be hereinafter referred to as the "Obligation." In the event
of a failure by the Partnership to pay its obligations under the Promissory
Note, the Guarantor shall be required, upon receiving notice from the
Beneficiary of such failure, to repay the Obligation as set forth herein in
favor of the Beneficiary. Repayment of the Obligation may be made, at the
discretion of the Guarantor, in cash or by the issuance of shares of common
stock of the Guarantor having an aggregate value of One Hundred Thousand Dollars
($100,000), based on a price per share equal to eighty (80) percent of the
average of the closing bid and asked prices of a share of such common stock as
quoted by the Nasdaq SmallCap Market (or such other quotation system or
exchange on which the Guarantor's securities are then quoted or traded, as
applicable) on the business day immediately preceding the day repayment of the
Obligation shall be due
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as required hereunder. In the event that the Guarantor elects to repay the
Obligation hereunder by issuing shares of its common stock, the Guarantor shall,
as soon as is practicable after such issuance, file a registration statement
relating to such securities with the Securities and Exchange Commission.
SECTION 2. Guaranty Absolute. Upon effectiveness hereof as
hereinafter provided, this Guaranty shall become irrevocable, absolute, and
continuing. The Guarantor hereby guarantees that the Obligation will be repaid
as set forth above in accordance with the terms of the Promissory Note. The
liability of the Guarantor under this Guaranty shall be absolute and
unconditional irrespective of any change in the time, manner or place of payment
of the Promissory Note or any amendment, waiver of or consent to the departure
from the terms of the Promissory Note; provided that, the Guarantor has been
previously provided with written notice of any of the foregoing and has
consented thereto in writing. This Guaranty shall continue to be effective or
be reinstated, as the case may be, if payment of the Company's obligation is
rescinded or must otherwise be returned by the Beneficiary upon the insolvency,
bankruptcy or reorganization of the Partnership or otherwise, as though such
payment had not been made.
SECTION 3. Representations and Warranties. The Guarantor hereby
represents and warrants that: (a) except as otherwise provided herein, the
Guarantor has the requisite power and authority to execute, deliver and perform
pursuant to the provisions of this Guaranty; (b) the execution, delivery and
performance by the Guarantor of this Guaranty does not contravene any provision
of any agreement or contract to which the Guarantor is a party; and (c) this
Guaranty constitutes the legal, valid and binding obligation of the Guarantor
enforceable against the Guarantor in accordance with its terms, except to the
extent that enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect or
by legal or equitable principles relating to or limiting creditors' rights
generally and except that the remedy of specific performance and injunctive and
other forms of equitable relief are subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
SECTION 4. Effective Date. This Guaranty is subject to and shall
become effective upon approval hereof by the board of directors of the
Guarantor (the "Board of Directors"). The Beneficiary, by counter-execution
hereof, acknowledges that: (i) the guarantee provided hereby is subject to and
requires such approval; and (ii) this Guaranty shall be presented by the
Guarantor for approval to the Board of Directors on or before November 24, 1995.
SECTION 5. Addresses for Notices. All notices and other
communications delivered hereunder shall be in writing and mailed (express, next
day or two-day service) or hand delivered and addressed as follows:
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If to the Beneficiary:Scott Cook
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
Facsimile: (214) 953-4109
If to the Guarantor: Medcross, Inc.
3227 Bennet Street North
St. Petersburg, Florida 33713
Facsimile: (813) 521-4249
Attention: Henry L. Toh, President
or as to each party to such other address as shall be designated by such party
in a written notice complying with the terms of this section. All such notices
and other communications shall be deemed to have been delivered when received as
evidenced by a return receipt or such other written evidence or receipt of
delivery as regularly provided by the mail, delivery or courier service
entrusted with delivery of such notice.
SECTION 6. No Waiver, Remedies. No failure or delay on the part of
the Beneficiary to exercise any right hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
other remedies provided by law.
SECTION 7. Continuing Guaranty. This Guaranty shall: (a) remain in
full force and effect until payment in full of the Obligation; (b) be binding
upon the Guarantor, its successors, heirs, personal representatives and assigns;
(c) be assignable only upon the prior written consent of the Guarantor and only
to the extent permitted by law; and (d) inure to the benefit of and be
enforceable by the Beneficiary and its successors, transferees and permitted
assigns.
SECTION 8. Surrender and Termination. Upon fulfillment and
satisfaction of the Obligation, the Beneficiary shall surrender and release this
Guaranty to the Guarantor and this Guaranty shall be deemed to have been
terminated and be of no further force and effect.
SECTION 9. Severability. The provisions of this Guaranty shall be
considered severable in the event that any of such provisions are held by a
court of competent jurisdiction to be invalid, void or otherwise unenforceable.
Such invalid, void or otherwise unenforceable provisions shall be automatically
replaced by other provisions which are valid and enforceable and which are as
similar as possible in term and intent to those provisions deemed to be invalid,
void or otherwise unenforceable. Notwithstanding the foregoing, the remaining
provisions hereof shall remain enforceable to the fullest extent permitted by
law.
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SECTION 10. Governing Law. This Guaranty shall be governed by, and
construed in accordance with, the laws of the State of Florida without giving
effect to the principles of conflicts of laws thereof.
SECTION 11. Amendments, Etc. No amendment, modification or waiver
of any provision of this Guaranty shall be effective unless the same shall be in
writing and signed by the Beneficiary and then such amendment, modification or
waiver shall be effective only in the specific instance and for the specific
purpose for which given.
IN WITNESS WHEREOF, the Guarantor has executed and delivered this
Guaranty as of the date first above written.
WITNESS: THE GUARANTOR
By: /s/ Unknown By: /s/ Henry Y.L. Toh
Henry Y.L. Toh, President
ACKNOWLEDGED, AGREED TO AND ACCEPTED
this _____ day of October 1995:
By: /s/ Scott Cook
Scott Cook, the Beneficiary
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SECURITY AGREEMENT
THIS SECURITY AGREEMENT (the "Agreement") is entered into as of this
19th day of October, 1995, by and between ILINK, Ltd., a Utah limited partner-
ship (the "Partnership"), Scott Cook, the holder of a promissory note issued by
the Partnership in connection herewith (the "Noteholder") and Medcross, Inc.,
the guarantor of one-half of the principal amount payable under such promissory
note (the "Guarantor").
WHEREAS, the Partnership has issued a certain promissory note dated
as of the date hereof (the "Note") to the Noteholder in the principal amount of
Two Hundred Thousand Dollars ($200,000);
WHEREAS, the Guarantor has agreed to execute a guaranty in favor of
the Noteholder (the "Guaranty"), guaranteeing repayment of up to One Hundred
Thousand Dollars ($100,000) in principal amount payable under the Note;
WHEREAS, as consideration for and as a condition to execution and
delivery of the Guaranty and provision by the Guarantor of the guarantee
described therein, Clay Wilkes, the president and sole stockholder of G Net
Enterprises, Inc. ("GNet"), the general partner of the Partnership, has agreed
to execute a certain pledge agreement pursuant to which Mr. Wilkes shall pledge
all of the capital stock of GNet to the Guarantor; and
WHEREAS, in connection with and as a condition to the issuance of the
Note and delivery of the Guaranty, the Partnership has agreed to secure repay-
ment of the amounts outstanding under the Note by the grant to each of the Note-
holder and the Guarantor, in equal part, of pari passu security interests in and
to certain collateral as set forth herein.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
expressly acknowledged, the parties hereto agree as follows:
Section 1. Security Interests.
In order to secure the payment when due of amounts owing under the
Note and to further secure performance of the liabilities and obligations of
the Partnership pursuant to the terms of the Note (collectively, the
"Obligations"), the Partnership hereby grants to the Noteholder and the
Guarantor, each in equal part, on a pari passu basis, continuing security
interests in and to all of the Partnership's right, title and interest in and to
the property described or referred to below pursuant to and in accordance with
the provisions of this Agreement.
The collateral subject hereto (the "Collateral") shall include,
without limitation: (a) all of the Partnership's software programs, databases,
network licenses, proprietary licenses, Internet and/or other subscribers,
customers, customer lists, customer accounts and customer agreements (also
colloquially known as the "customer base") and all goodwill associated there-
with; (b) all furniture, fixtures, equipment, telephonic and
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electronic devices, facsimile machines, computers, computer equipment and
leases; and (c) all patents, trademarks, tradenames, servicemarks, copyrights
and other industrial or intellectual property now or hereafter owned or acquired
by the Partnership (including without limitation, all intellectual property
necessary or appurtenant to the Partnership's business and/or products) and all
interests, rights and benefits, both present and future, of the Partnership in,
under or to the same (collectively, the patents, trademarks, tradenames,
servicemarks, copyrights and other industrial and intellectual property shall be
referred to hereinafter as the "Intellectual Property").
Section 2. Attachment.
The parties hereto hereby acknowledge and confirm that the security
interests granted herein shall attach:
(a) immediately upon the date hereof with respect to the items of
Collateral in which the Partnership has any right; and
(b) forthwith upon the Partnership's acquisition of any right in
items of Collateral in which the Partnership, subsequent to the date hereof,
acquires such rights.
For greater certainty and without in any way limiting the foregoing,
the parties hereto acknowledge and confirm that they have not agreed to postpone
the time for attachment of said security interests.
Section 3. Filing; Further Assurances.
In the event that the same shall be required, the Partnership shall
execute, deliver, file and record (in such manner and form as the Noteholder
and/or the Guarantor may reasonably require), or shall permit the Noteholder
and/or the Guarantor to file and record, any registrations, financing state-
ments, any carbon, photographic or other reproduction of a registration,
financing statement or this Agreement and any specific assignments or other
paper that may be necessary or desirable, or that the Noteholder and/or the
Guarantor may request, in order to create, preserve, perfect and validate the
respective security interests of each of the Noteholder and the Guarantor in the
Collateral or to enable the Noteholder and the Guarantor to exercise and enforce
their respective rights hereunder with respect to the Collateral.
Section 4. Covenants of the Partnership.
The Partnership hereby covenants and agrees as follows:
(a) except for any existing encumbrances of public record,
encumbrances in favor of the Noteholder and the Guarantor, and subordinate
security interests in the Collateral hereafter granted in good faith by the
Partnership, the Partnership shall keep the Collateral free and clear at all
times from any and all encumbrances of any nature, kind or priority whatsoever
and shall defend the Partnership's title in and to the Collateral against
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the claims of all persons (other than the Noteholder and the Guarantor). The
Noteholder and/or the Guarantor may at any time contest the validity and
enforceability asserted as against them of any encumbrance;
(b) the Partnership shall pay all real and personal property taxes,
assessments and charges and all franchise, income, unemployment, old age
benefit, withholding, sales and other taxes assessed against it or payable by
it at such times and in such manner to prevent any penalty from accruing or any
lien or charge from attaching to the Collateral. The provisions of this
subsection, however, shall not preclude the Partnership from contesting in good
faith any such tax, nor shall the Partnership be in default under this
subsection by reason of the existence of a lien for taxes not then due;
(c) the Partnership shall immediately notify each of the Noteholder
and the Guarantor of any event causing an encumbrance, a substantial loss or
diminution in the value of all or any material part of the Collateral and the
amount or an estimate of the amount of such encumbrance, loss or diminution; and
(d) the Partnership shall notify each of the Noteholder and the
Guarantor in writing: (i) at least ten (10) days prior to any change of name
of the Partnership or consummation of a business combination between the
Partnership and any other entity, including a combination with or into such
entity or an acquisition of or by such entity; (ii) at least ten (10) days prior
to any transfer of the Partnership's interest in any part of the Collateral, not
in the ordinary course or expressly permitted hereunder; (iii) promptly of any
significant loss of or damage to Collateral; and (iv) at least ten (10) days
prior to any other significant change in the Collateral and any records relating
thereto.
Section 5. Representations and Warranties.
The Partnership represents and warrants as follows:
(a) the Partnership is a duly organized and validly existing limited
partnership under the laws of the State of Utah. The execution and delivery of
this Agreement has been duly authorized and all necessary and appropriate
actions have been undertaken in connection therewith;
(b) the Partnership is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other
charge or encumbrance, except for encumbrances of record and the security
interests created by this Agreement;
(c) this Agreement is the legal, valid and binding obligation of the
Partnership enforceable against it in accordance with its terms; and
(d) GNet, a duly organized and validly formed corporation, is the
general partner of the Partnership and has all of the requisite power and
authority to execute and deliver this Agreement and to perform its obligations
under this Agreement on behalf of the Partnership.
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Section 6. Event(s) of Default.
The Partnership shall be in default ("Default") under this Agreement
upon the occurrence of any of the following events ("Event(s) of Default"),
which occurrence shall not have been remedied within thirty (30) days after
written notice thereof:
(a) failure of the Partnership to make any interest and/or principal
and/or other payment when due under the Note (after expiration of any applicable
grace period);
(b) failure in the performance of any covenant or representation
contained herein or in the Note;
(c) the dissolution, winding-up, termination of existence or
insolvency of the Partnership, other than in connection with a business
combination and provided, however, that nothing hereunder shall be deemed to
preclude the Partnership from effecting a business combination, including a
combination with or into another entity or an acquisition of the Partnership
or by the Partnership with respect to another entity with the prior approval of
each of the Noteholder and the Guarantor;
(d) the appointment of a receiver, manager, liquidator or other
custodian for any part of the Collateral, the taking by a secured party of
possession of any of the Collateral or the assignment of the Collateral by the
Partnership for the benefit of creditors; and
(e) the commencement of any proceedings, whether voluntary or
involuntary, under any bankruptcy or insolvency law or laws relating to the
relief of borrowers, readjustment of indebtedness or arrangement, reorganization
or composition by or against the Partnership, which proceeding, if involuntarily
commenced, is not dismissed within thirty (30) days of commencement.
Section 7. Remedies Upon Event of Default.
Upon the occurrence of an Event of Default and at any time or times
thereafter, the Obligations shall become immediately due and payable. If any
Event of Default shall have occurred and notice is so provided, the Noteholder
and the Guarantor shall possess and share equally all of the rights and remedies
of secured parties provided by this Agreement, including the power and the
authority to realize upon, sell or otherwise dispose of the Collateral. Such
sale or other disposition, subject to any requirements of applicable law, may
be by public or private proceedings, at such time and place by such method, in
such manner and on such terms as the Noteholder and the Guarantor may determine.
Except as required by applicable law, such sale or disposition may be made with-
out advertisement or any notice to the Partnership or to any person other than
the Noteholder and the Guarantor. Where reasonable notification of the time
and/or place of such sale or other disposition is so required, such requirement
shall be met if such notice
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is mailed, postage prepaid, at least ten (10) days
before the time of such sale or disposition to the Partnership. The Noteholder
and the Guarantor may respectively or collectively require the Partnership to
make all records relating to the Collateral available to them at a place or
places reasonably convenient. The proceeds of any such sale or disposition
shall be applied in the following order of priorities: (i) to the payment of
all costs and expenses of collection, taking possession, storage, custody, sale
or other disposition and delivery (including legal costs and reasonable
attorneys' fees) of the Collateral and all of the charges against the
Collateral; then (ii) to the repayment of the Obligations on a para passu
basis; and then (iii) any surplus remaining from proceeds shall be paid to the
Partnership.
Section 8. Termination of Security Interest; Release of Collateral.
Upon the repayment and performance in full by the Partnership of all
of the Obligations, the security interests of the Noteholder and the Guarantor
shall terminate and all rights to the Collateral shall revert to the Partner-
ship. Upon such repayment and performance by the Partnership, the Noteholder
and the Guarantor shall each execute and deliver to the Partnership such docu-
ments as the Partnership shall reasonably request to evidence the termination of
the security interests in the Collateral granted hereby.
Section 9. Waivers; Non-Exclusive Remedies.
No failure on the part of either of the Noteholder or the Guarantor
to exercise, no delay in exercising and no course of dealing with respect to,
any rights, power or remedy under this Agreement shall operate as a waiver
thereof; nor shall any single or partial exercise by the Noteholder or the
Guarantor of any right, power or remedy under this Agreement preclude any other
right, power or remedy of either of the Noteholder or the Guarantor. The
remedies in this Agreement are cumulative and are not exclusive of any other
remedies provided by law.
Section 10. Governing Law; Meaning of Terms.
This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas, with giving effect to the principles of
conflicts of laws thereof.
Section 11. Severability.
If any provision hereof is deemed invalid, void or otherwise
unenforceable by a court of competent jurisdiction, the provisions hereof shall
be considered severable and the remaining provisions hereof shall remain in full
force and effect to the fullest extent permitted by law.
Section 12. Headings.
The headings in this Agreement are for the purpose of reference only
and shall not limit or otherwise affect the meaning hereof.
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Section 13. Notices.
All notices, communications and distributions hereunder shall be
given or made to the following parties at the following addresses:
(a) If to the Partnership:
ILINK, Ltd.
One Chisolm Trail, Suite 4250
Round Rock, Texas 78681
Facsimile: (512) 244-9681
Attention: Clay Wilkes, President
(b) If to the Noteholder:
Scott Cook
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
Facsimile: (214) 953-4109
(c) If to the Guarantor:
Medcross, Inc.
3227 Bennet Street North
St. Petersburg, Florida 33713
Facsimile: (813) 521-4249
Attention: Henry Y.L. Toh, President
With a copy to:
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036-2492
Facsimile: (202) 659-1290
Attention: Ralph V. De Martino, Esq.
or at such other address as the addressee may hereafter specify by written
notice to the other parties hereto. Such notices and other communications will
be effectively given only if and when given in writing and delivered at the
address above or duly sent by registered or certified mail, return receipt
requested, postage prepaid, or by express mail service or by private overnight
mail service (e.g., Federal Express), or by facsimile transmission, and shall be
effective immediately when given.
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Section 14. Amendments.
The Noteholder, the Guarantor and the Partnership may from time to
time enter into written agreements supplemental hereto for the purpose of
adding, amending or modifying the provisions hereof. In addition, the Note-
holder and the Guarantor may execute and deliver to the Partnership a written
instrument waiving any of the requirements of this Agreement. Any such supple-
mental written agreement or waiver shall be binding upon the Partnership, the
Noteholder and the Guarantor.
Section 15. Survival.
All agreements, representations and warranties made herein shall
survive the execution and, subsequently, the termination of this Agreement.
Section 16. Assignment.
This Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective successors and permitted assigns. Except to
a surviving entity upon the Partnership's business combination with or into
another entity (pursuant to which the Partnership does not survive), this Agree-
ment shall not be assignable, in whole or in part, by the Partnership without
the prior written consent of the Noteholder and the Guarantor. This Agreement
may be assigned, in whole or in part, by the Noteholder and/or the Guarantor
upon the prior written approval by the non-assigning parties hereto.
Section 17. Failure to Perfect.
Neither the Noteholder nor the Guarantor shall be liable or
accountable for any negligence or failure to perfect its respective security
interests, mortgages and charges granted herein, seize, collect, realize, sell
or obtain payment for the Collateral or any part thereof and shall not be bound
to institute proceedings for the purpose of seizing, collecting, realizing or
obtaining possession or payment of the same for the purpose of preserving the
rights of the Partnership or any other person, firm or corporation in respect
of same.
* * * * *
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IN WITNESS WHEREOF, the Partnership, the Noteholder and the
Guarantor have executed this Agreement and agree to be bound hereby as of the
date first written above.
THE PARTNERSHIP:
ILINK, Ltd.
By: /s/ Clay Wilkes
Clay Wilkes, President of
G Net Enterprises, Inc., as the
General Partner of ILINK, Ltd.
THE NOTEHOLDER:
By: /s/ Scott Cook
Scott Cook
THE GUARANTOR:
MEDCROSS, INC.
By: /s/ Henry Y.L. Toh
Henry Y.L. Toh, President
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<TABLE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF: (i) AN EFFECTIVE REGISTRATION STATEMENT FOR
SUCH SECURITIES UNDER SAID ACT, OR (ii) AN EXEMPTION THEREFROM
UNDER SAID ACT.
Void after 5:00 p.m. (New York, New York time) on
December 31, 1999 as provided herein.
Issue Date: October 19, 1995 Option to Purchase Common Shares
Expiration Date: December 31, 1999Exercisable Commencing: January 1, 1996
COMMON STOCK PURCHASE OPTION
TO PURCHASE COMMON SHARES OF
MEDCROSS, INC.
Medcross, Inc. (the "Company), a Florida corporation, hereby certifies that for
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Company, Scott Cook is entitled, subject to the terms set forth in this
option (the "Option"), at any time or from time to time, commencing January 1, 1996 (the
"Exercise Date") through but not later than December 31, 1999 (the "Expiration Date"), to
purchase from the Company One Hundred Thousand (100,000) shares of common stock,
$.007 par value (the "Common Stock") of the Company (the "Shares") at an exercise price
of one dollar ($1.00) per Share (such exercise price per Share, as adjusted from time to time
pursuant to the provisions set forth below, being referred to herein as the "Exercise Price").
This Option and all rights hereunder, to the extent such rights shall not have been exercised,
shall terminate and become null and void to the extent the Holder fails to exercise any
portion of this Option prior to 5:00 p.m., New York, New York time, on the Expiration
Date.
1. Restrictions on Transfer of Shares
The Shares underlying this Option are restricted securities and have not been
the subject of registration under the Securities Act of 1933, as amended (the "Act"), and may
not be sold, transferred, pledged, hypothecated or otherwise disposed of in the absence of:
(i) an effective registration statement for such securities under said Act, or (ii) an exemption
therefrom under said Act.
2. Exercise of Option
(a) All or any part of this Option may be exercised by the holder of this
Option (the "Holder") by surrendering it, with the form of subscription annexed hereto duly
executed by such Holder, to the Company at its principal executive office or to the
Company's transfer agent accompanied by payment in full, in cash or by certified or official
bank check, of the Exercise Price payable in respect of all or part of the Option being
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exercised. If less than the entire Option is exercised, the Company shall, upon such exercise,
execute and deliver to the Holder hereof a new option in the same form as this Option
evidencing the right to purchase Shares hereunder to the extent not exercised. This Option
shall be deemed to have been exercised prior to the close of business on the date this
Option is surrendered and payment is made in accordance with the foregoing provision;
(b) The Company shall, at the time of any exercise of all or part of this
Option, upon the request of the Holder hereof, acknowledge in writing its continuing
obligation to afford to such Holder any rights to which such Holder shall continue to be
entitled after such exercise in accordance with the provisions of this Option; provided that
if the Holder of this Option shall fail to make any such request, such failure shall not affect
the continuing obligations of the Company to afford to such Holder any such rights;
(c) The Shares which may be delivered upon the exercise of this Option
shall, upon delivery, be fully paid and nonassessable and free from all taxes, liens and
charges with respect thereto; and
(d) The Company shall cooperate with the Holder in an exercise pursuant
to which all or part of the Shares will be sold simultaneously with the exercise of this Option
with the broker-dealer, if any, participating in such sale being irrevocably instructed to remit
the proceeds of the exercise to the Company upon settlement of the sale of the underlying
Shares.
3. Fractional Shares
No fractional securities or scrip representing fractional securities shall be
issued upon the exercise of this Option. With respect to any fraction of a security called for
upon any such exercise hereof, the Company shall pay to the Holder an amount in cash
equal to such fraction multiplied by the current market value of such security, determined
as follows:
(a) If the security is listed on a national securities exchange or admitted
to unlisted trading privileges on such exchange, the current value shall be the last reported
sale price of the security on such exchange on the last business day prior to the date of
exercise of this Option, or if no such sale is made on such day, the average closing bid and
asked prices for such day on such exchange; or
(b) If the security is not listed or admitted to unlisted trading privileges,
the current value shall be the last reported sale price on the Nasdaq National Market
System ("NASDAQ/NMS") or the mean of the last reported bid and asked prices reported
by the Nasdaq SmallCap Market ("NASDAQ") or the NASD OTC Bulletin Board (or, if
not so quoted, by the National Quotation Bureau, Inc.) on the last business day prior to the
date of the exercise of this Option; or
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(c) If the security is not so listed or admitted to unlisted trading privileges
and prices are not reported on NASDAQ, or the NASD OTC Bulletin Board (or by the
National Quotation Bureau, Inc.), an amount, not less than the book value, determined in
such reasonable manner as may be prescribed by the board of directors of the Company.
4. Rights of the Holder
(a) The Company shall advise the Holder or its transferee, whether the
Holder holds the Option or has exercised the Option and holds Shares, by written notice at
least thirty (30) days prior to the filing of any registration statement under the Act covering
any securities of the Company, for its own account or for the account of others, and will for
a period of three years beginning on the Exercise Date, upon the request of the Holder,
include in any registration statement, such information as may be required to permit a
public offering of the Shares underlying the Option (the "Registrable Securities"). The
Company shall supply prospectuses and such other documents as the Holder may reasonably
request in order to facilitate the public sale or other disposition of the Registrable
Securities, use its best efforts to register and qualify any of the Registrable Securities for
sale in such states as such Holder reasonably designates and do any and all other acts and
things which may be necessary to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities. Notwithstanding the foregoing, if such public
offering is on a firm commitment underwritten basis and the managing underwriter thereof
advises the Company and the Holder in writing that the sale of such securities would impair
the underwritten offering of securities for the account of the Company, the Holder will not
be permitted to include such securities in the subject offering; and the Holder thereafter
may exercise his/its rights to a demand registration via a separate registration statement and
pursuant to Section 4(b) hereof immediately.
(b) If the Holder gives notice to the Company at any time to the effect that
the Holder desires to register Registrable Securities under the Act, under such
circumstances that a public distribution (within the meaning of the Act) of any such
securities will be involved then the Company will, within thirty (30) days after receipt of
such notice, file a registration statement pursuant to the Act, so as to enable the Registrable
Securities to be publicly sold under the Act as promptly as practicable thereafter and the
Company will use its best efforts to cause such registration statement to become and remain
effective; provided, that the Holder shall furnish the Company with appropriate information
in connection therewith as the Company may reasonably request in writing. The Holder
may, at its option, request the filing of a registration statement under the Act on one
occasion during the three-year period beginning on the Exercise Date. The Holder may, at
its option, request the registration of the Registrable Securities in a registration statement
filed by the Company as contemplated by Section 4(a) or in connection with a request made
pursuant to this Section 4(b) prior to acquisition of the Shares issuable upon exercise of the
Option and even though the Holder has not given notice of exercise of the Option. The
Holder may, at its option, request such registration during the requisite three-year period
with respect to the Registrable Securities, and such registration rights may be exercised by
the Holder prior to or subsequent to the exercise of the Option. Within ten days after
receiving any such notice pursuant to this subparagraph (b), the Company shall give notice
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to the Holder, advising that the Company is proceeding with the preparation and filing of
a registration statement. In the event the registration statement is not filed within the
period specified herein, unless such delay is caused by a requirement to include financial
statements and the delay is not beyond the date such statements are required to be filed
with the Securities and Exchange Commission, the expiration date of this Option shall be
extended by an amount of time equal to the delay in filing. All costs and expenses related
to the preparation and filing of a registration statement shall be borne by the Company,
except that the Holder shall bear the fees of its own counsel and any underwriting discounts
or commissions applicable to any of the securities sold by Holder. If the Company
determines to include securities to be sold by it in any registration statement pursuant to this
Section 4(b), such registration shall be deemed to have been a registration under
Section 4(a).
The Company will maintain the effectiveness of such registration statement
under the Act for a period of at least six months (and for up to an additional three months
if requested by the Holder) from the effective date thereof. The Company shall supply
prospectuses, and such other documents as the Holder may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities and use its best
efforts to register and qualify any of the Registrable Securities for sale in such states as such
Holder reasonably designates.
(c) The Holder of this Option shall not, by virtue hereof, be entitled to any
voting or other rights of a stockholder in the Company, either at law or equity, and the
rights of the Holder are limited to those expressed in this Option.
5. Adjustments
(a) The number of shares of Common Stock purchasable on exercise of this
Option and the purchase prices therefor shall be subject to adjustment from time to time
in the event that the Company shall: (1) pay a dividend in, or make a distribution of, shares
of Common Stock; (2) subdivide its outstanding shares of Common Stock into a greater
number of shares; (3) combine its outstanding shares of Common Stock into a smaller
number of shares; or (4) spin-off a subsidiary by distributing, as a dividend or otherwise,
shares of the subsidiary to its stockholders. In any such case, the total number of Shares
and the number of any other shares of Common Stock purchasable on exercise of this
Option immediately prior thereto shall be adjusted so that the Holder shall be entitled to
receive, at the same aggregate exercise price, the number of Shares and the number of any
other shares of Common Stock that the Holder would have owned or would have been
entitled to receive immediately following the occurrence of any of the events described
above had this Option been exercised in full immediately prior to the occurrence (or
applicable record date) of such event. An adjustment made pursuant to this subsection
shall, in the case of a stock dividend or distribution, be made as of the record date and, in
the case of a subdivision or combination, be made as of the effective date thereof. If, as a
result of any adjustment pursuant to this subsection, the Holder shall become entitled to
receive shares of two or more classes or series of securities of the Company, the board of
directors of the Company shall equitably determine the allocation of the adjusted exercise
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price between or among shares or other units of such classes or series and shall notify the
Holder of such allocation.
(b) In the event of any reorganization or recapitalization of the Company
or in the event the Company consolidates with or merges into or with another entity or
transfers all or substantially all of its assets to another entity, then and in each such event,
the Holder, on exercise of this Option as provided herein, at any time after the
consummation of such reorganization, recapitalization, consolidation, merger or transfer,
shall be entitled, and the documents executed to effectuate such event shall so provide, to
receive the stock or other securities or property to which the Holder would have been
entitled upon such consummation if the Holder had exercised this Option immediately prior
thereto. In such case, the terms of this Option shall survive the consummation of any such
reorganization, recapitalization, consolidation, merger or transfer and shall be applicable to
the shares of stock or other securities or property receivable on the exercise of this Option
after such consummation.
(c) Whenever a reference is made in this section to the issue or sale of
shares of Common Stock, the term "Common Stock" shall mean the Common Stock of the
Company of the class authorized as of the date hereof and any other class of stock ranking
on a parity with such Common Stock.
(d) Whenever the number of shares of Common Stock purchasable upon
exercise of this Option or the exercise prices thereof shall be adjusted as required herein,
the Company shall forthwith file such information with its Secretary at its principal office,
and with the price determined as herein provided and setting forth in detail the facts
requiring such adjustment. Each such officer's certificate shall be made available at all
reasonable times for inspection by the Holder and the Company shall, forthwith after such
adjustment, deliver a copy of such certificate to the Holder.
(e) The Company: (1) shall not cause the par value of any shares of
Common Stock issuable on exercise of this Option to be in excess of the amount payable
therefor on such exercise, and (2) shall take all action as may be necessary or appropriate
so that the Company may validly and legally issue fully paid and non-assessable shares of
Common Stock (or other securities or property deliverable hereunder) upon the exercise of
this Option. This Option shall bind the successors and assigns of the Company.
(f) Notwithstanding anything in this section to the contrary, no adjustment
in the number of shares of Common Stock purchasable on exercise of this Option shall be
made with respect to dilution which would result from the issuance of Common Stock
pursuant to the exercise of options which may be or have been granted pursuant to any
employee incentive plan of the Company, whether qualified or non-qualified.
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6. Notices of Record Dates, Etc.
(a) If the Company shall fix a record date of the holders of Common Stock
(or other securities at the time deliverable on exercise of this Option) for the purpose of
entitling or enabling them to receive any dividends or other distribution, or to receive any
right to subscribe for or purchase any shares of any class of any securities or to receive any
other right contemplated by Section 5 or otherwise; or
(b) In the event of any reorganization or recapitalization of the Company,
any reclassification of the capital stock of the Company, any consolidation or merger of the
Company with or into another corporation or any transfer of all or substantially all of the
assets of the Company to another entity; or
(c) In the event of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then, in any such event, the Company shall mail or cause to be mailed to the Holder a
notice specifying, as the case may be: (1) the date on which a record is to be taken for the
purpose of such dividend, distribution or right and stating the amount and character of such
dividend, distribution or right, or (2) the date on which a record is to be taken for the
purpose of voting on or approving such reorganization, recapitalization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up and the date on
which such event is to take place and the time, if any, is to be fixed, as of which the Holder
of record of Common Stock (or any other securities at the time deliverable on exercise of
this Option) shall be entitled to exchange its shares of Common Stock (or such other
securities) for securities or other property deliverable on such reorganization,
recapitalization, reclassification, consolidation, merger, conveyance, dissolution, liquidation
or winding up. Such notice shall be mailed at the same date as the Company shall inform
its stockholders, but in no event less than ten days preceding such record date.
7. Reservation of Shares
The Company shall at all times reserve, for the purpose of issuance on
exercise of this Option, such number of shares of Common Stock (or such class or classes
of capital stock or other securities) as shall from time to time be sufficient to comply with
this Option, and the Company shall take such corporate action as may in the opinion of its
counsel be necessary to increase its authorized and unissued shares of Common Stock (or
such other class or classes of capital stock or other securities) in such number as shall be
sufficient for such purpose.
8. Approvals
The Company shall from time to time use its best efforts to obtain and
continue in effect any and all permits, consents, registrations, qualifications and approvals
of governmental agencies and authorities and to make all filings under applicable securities
laws that may be or become necessary in connection with the issuance, sale, transfer and
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delivery of this Option and the issuance of securities on any exercise hereof. Nothing
contained in this section shall in any way expand, alter or limit the rights of the Holder set
forth in Section 1 hereof.
9. Restrictions on Transfer
This Option has not been registered under the Act or qualified under any state
securities or "blue sky" law. This Option may not be offered, sold or otherwise transferred
unless registered and qualified pursuant to the provisions of such Act and "blue sky" laws,
or unless an exemption from registration and qualification is available.
10. Effective Date
This Option is subject to and shall become effective upon approval hereof by
the board of directors of the Company (the "Board of Directors"). The Holder
acknowledges that: (i) the exercise of the rights granted herein is subject to and require
such approval; and (ii) this Option shall be presented by the Company for approval to the
Board of Directors on or before November 24, 1995.
11. Survival
All agreements, covenants, representations and warranties herein shall survive
the execution and delivery of this Option and any investigation at any time made by or on
behalf of any parties hereto and the exercise, sale and purchase of this Option, the Options
and the Shares (and any other securities or property) issuable on exercise hereof.
12. Notices
All demands, notices, consents and other communications to be given
hereunder shall be in writing and shall be deemed duly given when delivered personally or
five days after being mailed by first class mail, postage prepaid, properly addressed, as
follows:
(a) if to the Company, to:
Medcross, Inc.
3227 Bennet Street North
St. Petersburg, Florida 33713
Facsimile: (813) 521-4249
Attention: Henry Y.L. Toh, President
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with a copy to:
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036-2492
Facsimile: (202) 659-1290
Attention: Ralph V. De Martino, Esq.
(b) if to the Holder to:
Scott Cook
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
Facsimile: (214) 953-4109
The Company and each Holder may change such address at any time or times by notice
hereunder to the other.
13. Amendments; Waivers; Terminations; Governing Law; Headings; Entire
Agreement
This Option and any term hereof may be changed, waived, discharged or
terminated only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought. This Option shall be governed
by and construed and interpreted in accordance with the laws of the State of Florida. The
headings in this Option are for convenience of reference only and are not part of this
Option. This Option is intended to and does contain and embody all of the understandings
and agreements, both written and oral, of the parties hereto with respect to the subject
matter of this Option, and there exists no oral agreement or understanding, express or
implied, whereby the absolute, final and unconditional character and nature of this Option
shall be in any way invalidated, empowered or affected. A modification or waiver of any
of the terms, conditions or provisions of this Option shall be effective only if made in writing
and executed with the same formality of this Option.
IN WITNESS WHEREOF, Medcross, Inc. has duly caused this Common Stock
Purchase Option to be signed in its name and on its behalf by its duly authorized officers,
as of the date first set forth above.
ATTEST: MEDCROSS, INC.
/s/ Stephanie E. Giallourakis By: /s/ Henry Y.L. Toh
Secretary Henry Y.L. Toh, President
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Annex to Option
FORM OF ASSIGNMENT
(To be executed upon transfer of Common Stock Purchase Option)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
to ______________________________ the right represented by the within Option, together
with all rights, title and interest therein, and does hereby irrevocably constitute and appoint
______________________________ attorney to transfer such Option on the option register
of the within named Company, with full power of substitution.
DATED: _______________, 199___.
Signature:
(Signature must conform in all respects to
name of holder as specified on the face of
the Option)
Signature Guaranteed:
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Annex to Option
FORM OF SUBSCRIPTION
(To be completed and signed only upon an exercise of the Option in whole or in
part)
TO: American Stock Transfer & Trust Company, as transfer agent for Medcross, Inc.
The undersigned, the Holder of the attached Option, hereby irrevocably elects to
exercise the purchase right represented by the Option for, and to purchase thereunder,
Shares (as such terms are defined in the Option dated October ___, 1995 from Medcross, Inc.
to _________________________________ (or other securities or property), and herewith makes
payment of $______________ therefor in cash or by certified or official bank check. The
undersigned hereby requests that the Certificate(s) for such securities be issued in the name(s) and
delivered to the address(es) as follows:
Name:
Address:
Social Security Number:
Deliver to:
Address:
If the foregoing Subscription evidences an exercise of the Option to purchase
fewer than all of the Shares (or other securities or property) to which the undersigned is entitled
under such Option, please issue a new Option, of like tenor, for the remaining portion of the
Option (or other securities or property) in the name(s), and deliver the same to the address(es),
as follows:
Name:
Address:
DATED: _______________, 19___.
(Name of Holder)
(Signature of Holder or Authorized Signatory)
Signature Guaranteed:
(Social Security or Taxpayer Identification
Number of Holder)
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<TABLE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated February 4, 1996 between Medcross, Inc., a Florida
corporation (the "Company"), and Henry Toh, an individual resident of Houston, Texas (the
"Executive").
WHEREAS, the Executive is a highly valued and trusted employee of the
Company; and
WHEREAS, the Company desires to offer the Executive continued employment
upon the terms and conditions set forth herein and the Executive desires to accept such
employment;
NOW THEREFORE in consideration of the mutual benefits to be derived from
this Agreement, the Company and the Executive hereby agree as follows:
1. Term of Employment; Office and Duties.
During the Period of Employment (as hereafter defined), the Company shall
employ the Executive as a senior executive of the Company with the title of President and Chief
Executive Officer, with the responsibilities prescribed for such office in the Bylaws of the Company
and in such other capacities as the Company may designate, from time to time.
During the Period of Employment, the Executive shall devote such portion of his
time to the business and affairs of the Company as may be necessary to perform the duties of his
office except for vacations, illness or incapacity.
The Company shall not require that the Executive be based in any place other
than Houston, Texas and the Executive shall not be required to perform his duties hereunder for
more than 15 working days in any year, or for more than 14 consecutive days at any one time, at
any office located in any place other than the aforementioned area.
2. Term; Period of Employment
Subject to extension or termination as hereinafter provided, the period of
employment hereunder shall be from the date of execution of this Agreement (the "Execution
Date") for a period of two (2) years ending December 31, 1997 (the "Period of Employment"),
provided that the Period of Employment shall be automatically extended for successive one (1) year
periods unless written notice to the contrary is given by the Company to the Executive not less than
120 days prior to: (a) the expiration of the initial period in the Period of Employment; and (b) the
expiration of each successive year thereafter.
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3. Compensation and Benefits.
For all services rendered by the Executive as President and Chief Executive
Officer of the Company during the Period of Employment (and any extension thereof), including,
without limitation, services as an executive officer, director, or member of any committee of the
Company or any subsidiary, affiliate or division thereof, the Executive shall be compensated as
follows:
(a) Base Salary. Commencing as of the Execution Date the Company shall
pay the Executive a fixed salary ("Base Salary") at a rate of: fifty-four thousand dollars ($54,000)
per annum from the Execution Date. The Board of Directors will periodically review, at least
annually, the Executive's Base Salary with a view to increasing it further if, in the sole judgment
of the Board of Directors, the earnings of the Company or the services of the Executive merit such
an increase. Annual increases in Base Salary, once granted, shall not be subject to revocation and
shall become a part of the Base Salary. Base Salary will be payable in accordance with the
customary payroll practices of the Company, but in no event less frequently than bi-monthly.
(b) Bonus. The Company shall pay the Executive an annual bonus if, in the
sole judgment of the Board of Directors, the earnings of the Company or the services of the
Executive merit such bonus.
(c) Fringe Benefits. During the Period of Employment and any extension
thereof, the Executive shall be entitled to participate in fringe benefit, deferred compensation, stock
benefit and stock option plans or programs of the Company, if any, to the extent that his position,
tenure, salary, age, health and other qualifications make him eligible to participate, subject to the
rules and regulations applicable thereto. Such additional benefits shall include, but not be limited
to, paid sick leave and health insurance, all in accordance with the policies of the Company. The
Company shall not make any changes in any existing plan, program or arrangement which would
adversely affect the Executive's rights or benefits thereunder. Nothing paid to the Executive under
any plan or arrangement presently in effect or made available in the future shall be deemed in lieu
of the Base Salary payable to the Executive pursuant to Subsection (a) of this Section.
(d) Perquisites. During the Period of Employment and any extension thereof,
the Executive will be entitled to benefits and perquisites offered to its employees by the Company
as determined by the Board of Directors.
(e) Vacations. The Executive shall be entitled to the number of vacation days
in each calendar year, and to compensation in respect of earned but unused vacation days
determined in accordance with the Company's vacation policy. The Executive shall also be entitled
to all paid holidays given by the Company to its employees.
(f) Business Expenses. During the term of the Executive's employment
hereunder, the Executive shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in performing services hereunder, including all expenses of
travel and living expenses while away from home on business or at the request of and in the service
of the Company, provided that such expenses are incurred and accounted for in accordance with
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the policies and procedures established by the Board of Directors.
4. Disability.
The Company shall provide the Executive with substantially the same disability
insurance benefits as being provided by the Company for senior executives. In the event of the
Executive's Disability (as hereinafter defined), the Executive shall continue to receive his full salary
at the rate then in effect for such period of disability, provided that payments so made to the
Executive during the first three months of the disability period shall be reduced by the sum of the
amounts, if any, payable to the Executive at or prior to the time of such payment under disability
benefit plans of the Company and which were not previously applied to reduce any such payment.
In addition, the Executive shall continue to be covered by all of the Company's life, medical, health
and dental plans, at the Company's expense, for the term of such disability.
5. Death.
During the Period of Employment and extensions thereof, the Company shall
provide term life insurance on the life of the Executive with a death benefit of at least $50,000.
The Executive shall designate the beneficiary of such policy, such beneficiary subject to change
from time to time by the Executive. In the event of the Executive's death, the Company shall pay
to the Executive's spouse, or if he leaves no spouse, to his estate, the Executive's base salary to the
date of death. The Executive's family shall continue to be covered by all of the Company's life,
medical, health and dental plans, at the Company's expense, for twenty-four (24) months following
the Executive's death.
6. Termination of Employment.
Notwithstanding any other provision of this Agreement, Executive's employment
with the Company may be terminated upon written notice to the other party as follows:
(a) By the Company, in the event of the Executive's death or Disability (as
hereinafter defined) or for Cause (as hereinafter defined). For purposes of this Agreement,
"Cause" shall mean either: (i) the indictment of, or the bringing of formal charges against,
Executive by a governmental authority of competent jurisdiction for charges involving criminal
fraud or embezzlement; or (ii) the conviction of Executive of a crime involving an act or acts of
dishonesty, fraud or moral turpitude by the Executive, which act or acts constitute a felony. For
purposes of this Agreement, "Disability" shall mean the inability of Executive, in the reasonable
judgment of a physician appointed by the Board of Directors, to perform his duties of employment
for the Company or any of its subsidiaries because of any physical or mental disability or incapacity,
where such disability shall exist for an aggregate period of more than 120 days in any 365-day
period or for any period of 90 consecutive days. The Company shall by written notice to the
Executive specify the event relied upon for termination pursuant to this Subsection 7(a), and
Executive's employment hereunder shall be deemed terminated as of the date of such notice. In
the event of any termination under this Subsection 7(a), the Company shall pay all amounts then
due to the Executive under Section 5 of this Agreement and, if such termination was for Cause,
the Company shall have no further obligations to Executive under this Agreement. In the event
of a termination due to Executive's Disability or death, the Company shall comply with its
obligations under Sections 5 and 6.
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(b) By the Company, for any reason and in its sole and absolute discretion,
provided that in such event the Company shall, as liquidated damages or severance pay, or both,
continue to pay to Executive the Base Salary (at a monthly rate equal to the rate in effect
immediately prior to such termination) for the 6-month period commencing on the date of
termination (the "Termination Payments"). For the avoidance of doubt, the intent of the foregoing
is that the Company shall pay to Executive ratably, over a 6-month period, the amount of the Base
Salary.
(c) By the Executive for "Good Reason," which shall be deemed to exist: (i)
if the Company's Board of Directors fails to elect or reelect the Executive to, or removes the
Executive from, any of the offices referred to in Section 1(a); (ii) if the scope of Executive's duties
is significantly reduced (excluding, for this purpose, changes in responsibilities resulting from the
growth or shrinkage of the Company's business) (but not excluding changes resulting from a sale
of the Company, whether by merger, tender offer or otherwise); (iii) if the Board of Directors shall
require that the Executive relocate from the metropolitan area in which he resides as of the date
of this Agreement; (iv) if the Company shall have continued to fail to comply with any material
provision of this Agreement after a 30-day period to cure (if such failure is curable) following
written notice to the Company of such non-compliance; or (v) if the Executive shall cease to be a
Director of the Company or its successor without his consent. In the event of any termination
under this Section, the Company shall, as liquidated damages or severance pay, or both, pay the
Termination Payments to Executive for the 6-month period commencing on the date notice of such
termination is given to the Company.
(d) In the event of a termination pursuant to Sections 7(b) or 7(c), Executive
and his family shall continue to be covered by the Company's life, medical, health and death plans
during the period in which Executive continues to receive payments hereunder. Such coverage shall
be at the Company's expense to the same extent as if Executive were still employed by the
Company. The Company shall also provide to Executive, at the Company's expense, outplacement
services of a nature customarily provided to a senior executive.
7. Inventions and Confidential Information.
The parties hereto recognize that a major need of the Company is to preserve its
specialized knowledge, trade secrets, and confidential information. The strength and good will of
the Company is derived from the specialized knowledge, trade secrets, and confidential information
generated from experience with the activities undertaken by the Company and its subsidiaries. The
disclosure of this information and knowledge to competitors would be beneficial to them and
detrimental to the Company, as would the disclosure of information about the marketing practices,
pricing practices, costs, profit margins, design specifications, analytical techniques, and similar items
of the Company and its subsidiaries. By reason of his being a senior executive of the Company,
the Executive has or will have access to, and has obtained or will obtain, specialized knowledge,
trade secrets and confidential information about the Company's operations and the operations of
its subsidiaries, which operations extend throughout the United States. Therefore, Executive hereby
agrees as follows, recognizing that the Company is relying on these agreements in entering into this
Agreement:
(a) During and after the Period of Employment (as extended), the Executive will
not use, disclose to others, or publish or otherwise make available to any other party any inventions
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or any confidential business information about the affairs of the Company, including but not limited
to confidential information concerning the Company's products, methods, engineering designs and
standards, analytical techniques, technical information, customer information, employee
information, and other confidential information acquired by him in the course of his past or future
services for the Company. Executive agrees to hold as the Company's property all memoranda,
books, papers, letters, formulas and other data, and all copies thereof and therefrom, in any way
relating to the Company's business and affairs, whether made by him or otherwise coming into his
possession, and on termination of his employment, or on demand of the Company, at any time, to
deliver the same to the Company within twenty four hours of such termination or demand.
(b) During the Period of Employment (as extended) and for one year thereafter,
Executive will not induce or otherwise attempt to influence any employee of the Company to leave
the Company's employ or hire any such employee (unless the Board of Directors shall have
authorized such employment and the Company shall have consented thereto in writing).
8. Indemnification.
The Company will indemnify the Executive (and his legal representatives) and will
advance any and all costs of defense of the Executive (and his legal representatives) to the fullest
extent permitted by the laws of the State of Florida, as in effect at the time of the subject act or
omission, or the Certificate of Incorporation and Bylaws of the Company, as in effect at such time
or on the date of this Agreement, whichever affords greater protection to the Executive, and the
Executive shall be entitled to the protection of any insurance policies the Company may elect to
maintain generally for the benefit of its directors and officers, against all costs, charges and
expenses whatsoever incurred or sustained by him or his legal representative in connection with any
action, suit or proceeding to which he (or his legal representatives or other successors) may be
made a party by reason of his being or having been a director or officer of the Company or any
of its subsidiaries.
9. Consolidation; Merger; Sale of Assets.
Nothing in this Agreement shall preclude the Company from combining,
consolidating or merging with or into, transferring all or substantially all of its assets to, or entering
into a partnership or joint venture with, another corporation or other entity, or effecting any other
kind of corporate combination provided that the corporation resulting from or surviving such
combination, consolidation or merger, or to which such assets are transferred, or such partnership
or joint venture assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger, transfer of assets or formation of such partnership
or joint venture, this Agreement shall inure to the benefit of, be assumed by, and be binding upon
such resulting or surviving transferee corporation or such partnership or joint venture, and the term,
"Company," as used in this Agreement, shall mean such corporation, partnership or joint venture,
or other entity and this Agreement shall continue in full force and effect and shall entitle the
Executive and his heirs, beneficiaries and representatives to exactly the same compensation,
benefits, perquisites, payments and other rights as would have been their entitlement had such
combination, consolidation, merger, transfer of assets or formation of such partnership or joint
venture not occurred.
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10. Survival of Obligations.
Sections 8, 9, 10, and 11 shall survive the termination for any reason of this
Agreement (whether such termination is by the Company, by the Executive, upon the expiration
of this Agreement or otherwise).
11. Severability.
In case any one or more of the provisions or part of a provision contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any
jurisdiction, such invalidity, illegality or unenforceability shall be deemed not to affect any other
jurisdiction or any other provision or part of a provision of this Agreement, nor shall such invalidity,
illegality or unenforceability affect the validity, legality or enforceability of this Agreement or any
provision or provisions hereof in any other jurisdiction; and this Agreement shall be reformed and
construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal
or unenforceable had never been contained herein and such provision or part reformed so that it
would be valid, legal and enforceable in such jurisdiction to the maximum extent possible. In
furtherance and not in limitation of the foregoing, the Company and the Executive each intend that
the covenants contained in Section 8 shall be deemed to be a series of separate covenants, one for
each county of the State of Florida and one for each and every other state, territory or jurisdiction
of the United States set forth therein. If, in any judicial proceeding, a court shall refuse to enforce
any of such separate covenants, then such unenforceable covenants shall be deemed eliminated
from the provisions hereof for the purpose of such proceedings to the extent necessary to permit
the remaining separate covenants to be enforced in such proceedings. If, in any judicial proceeding,
a court shall refuse to enforce any one or more of such separate covenants because the total time
thereof is deemed to be excessive or unreasonable, then it is the intent of the parties hereto that
such covenants, which would otherwise be unenforceable due to such excessive or unreasonable
period of time, be enforced for such lesser period of time as shall be deemed reasonable and not
excessive by such court.
12. Entire Agreement; Amendment.
This Agreement contains the entire agreement between the Company and the
Executive with respect to the subject matter hereof and thereof. This Agreement may not be
amended, waived, changed, modified or discharged except by an instrument in writing executed by
or on behalf of the party against whom enforcement of any amendment, waiver, change,
modification or discharge is sought. No course of conduct or dealing shall be construed to modify,
amend or otherwise affect any of the provisions hereof.
13. Notices.
All notices, request, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given if physically delivered, delivered by express
mail or other expedited service or upon receipt if mailed, postage prepaid, via first-class mail as
follows:
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To the Company: To the Executive:
Medcross, Inc. Henry Toh
3227 Bennet Street North 1111 Hermann Drive, Unit 6E
St. Petersburg, FL 33713 Houston, TX 77004
with an additional copy by like means to:
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W.
Suite 400
Washington, D.C. 20036
and/or to such other persons and addresses as any party shall have specified in writing to the other.
14. Arbitration.
(a) Any controversy or claim brought by the Executive in his capacity as a present or
former securityholder or an employee or officer, against the Company, arising out of or relating to
any acts or omissions of the Company, or any of its officers, directors, agents, affiliates, associates,
employees or controlling persons (including without limitation any controversy or claim relating to
a purchase or sale of securities of the Company) shall be settled by binding arbitration under the
Federal Arbitration Act in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA") and judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. Any controversy or claim brought by the Company
against the Executive, whether in his capacity as an officer, director, employee or present or former
securityholder of the Company shall also be settled by arbitration under the Federal Arbitration
Act in accordance with the commercial arbitration rules of the American Arbitration Association
("AAA") and judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. Any controversy or claim brought by the Company against the
Executive, whether in his capacity as an officer, director, employee or present or former
securityholder of the Company shall also be settled by arbitration under the Federal Arbitration
Act in accordance with the commercial arbitration rules of the AAA and judgment rendered by the
arbitrators may be entered in any court having jurisdiction thereof.
(b) The arbitration of any dispute pursuant to this Section 15 shall be held in St.
Petersburg, Florida.
Notwithstanding the foregoing in order to preserve the status quo pending the
resolution by arbitration of a claim seeking relief of an injunctive or equitable nature, any party,
upon submitting a matter to arbitration as required by this Section 15, may simultaneously or
thereafter seek a temporary restraining order or preliminary injunction from a court of competent
jurisdiction pending the outcome of the arbitration.
The Executive acknowledges that this Section 15 limits a number of the Executive's rights,
including without limitation (i) the right to have claims resolved in a court of law and before a
jury; (ii) certain discovery rights; and (iii) the right to appeal any decision.
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15. Assignability.
This Agreement shall not be assignable by the Executive, but it shall be binding upon, and
shall inure to the benefit of, his heirs, executors, administrators and legal representatives. This
Agreement shall be assignable by the Company.
16. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Florida.
17. Waiver and Further Agreement.
Any waiver of any breach of any terms or conditions of this Agreement shall not operate as
a waiver of any other breach of such terms or conditions or any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of such provision or of any other
provision hereof. Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably require in order
to effectuate the terms and purposes of this Agreement.
18. Headings of No Effect.
The paragraph headings contained in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
COMPANY:
MEDCROSS, INC.
By: /s/ Henry Y.L. Toh
Its: President/CEO
EXECUTIVE:
/s/ Henry Y.L. Toh
Henry Toh
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EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1996 between Medcross, Inc., a Florida corporation
(the "Company"), and Dorothy L. Michon, an individual resident of Pinellas County, Florida (the
"Executive").
WHEREAS, the Executive is a highly valued and trusted employee of the Company; and
WHEREAS, the Company desires to offer the Executive continued employment upon the
terms and conditions set forth herein and the Executive desires to accept such employment;
NOW THEREFORE in consideration of the mutual benefits to be derived from this
Agreement, the Company and the Executive hereby agree as follows:
I.Term of Employment; Office and Duties.
During the Period of Employment (as hereafter defined), the Company shall employ the
Executive as a senior executive of the Company with the title of Vice President of Operations with
the responsibilities prescribed for such office in the Bylaws of the Company and in such other
capacities as the Company may designate, from time to time.
During the Period of Employment, the Executive shall devote such portion of her time to
the business and affairs of the Company as may be necessary to perform the duties of her office
except for vacations, illness or incapacity.
The Company shall not require that the Executive be based in any place other than St.
Petersburg, Florida, and the Executive shall not be required to perform her duties hereunder for
more than 15 working days in any year, or for more than 14 consecutive days at any one time, at
any office located in any place other than the aforementioned area.
II.Term; Period of Employment
Subject to extension or termination as hereinafter provided, the period of employment
hereunder shall be for a period of two (2) years ending December 31, 1997 (the "Period of
Employment"), provided that the Period of Employment shall be automatically extended for
successive one (1) year periods unless written notice to the contrary is given by the Company to the
Executive not less than 120 days prior to: (a) the expiration of the initial period in the Period of
Employment; and (b) the expiration of each successive year thereafter.
III.Compensation and Benefits.
For all services rendered by the Vice President of Operations of the Company during the
Period of Employment (and any extension thereof), including, without limitation, services as an
executive officer, director, or member of any committee of the Company or any subsidiary, affiliate
or division thereof, the Executive shall be compensated as follows:
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(a) Base Salary. Commencing as of the date hereof, the Company shall pay the Executive
a fixed salary ("Base Salary") at a rate of: sixty-three thousand dollars ($63,000) per annum. The
Board of Directors will periodically review, at least annually, the Executive's Base Salary with a view
to increasing it further if, in the sole judgment of the Board of Directors, the earnings of the
Company or the services of the Executive merit such an increase. Annual increases in Base Salary,
once granted, shall not be subject to revocation and shall become a part of the Base Salary. Base
Salary will be payable in accordance with the customary payroll practices of the Company, but in
no event less frequently than bi-monthly.
(b) Bonus. The Company shall pay the Executive an annual bonus if, in the sole
judgment of the Board of Directors, the earnings of the Company or the services of the Executive
merit such bonus.
(c) Fringe Benefits. During the Period of Employment and any extension thereof, the
Executive shall be entitled to participate in fringe benefit, deferred compensation, stock benefit and
stock option plans or programs of the Company, if any, to the extent that her position, tenure,
salary, age, health and other qualifications make her eligible to participate, subject to the rules and
regulations applicable thereto. Such additional benefits shall include, but not be limited to, paid
sick leave and health insurance, all in accordance with the policies of the Company. The Company
shall not make any changes in any existing plan, program or arrangement which would adversely
affect the Executive's rights or benefits thereunder. Nothing paid to the Executive under any plan
or arrangement presently in effect or made available in the future shall be deemed in lieu of the
Base Salary payable to the Executive pursuant to Subsection (a) of this Section.
(d) Perquisites. During the Period of Employment and any extension thereof, the
Executive will be entitled to benefits and perquisites offered to its employees by the Company as
determined by the Board of Directors.
(e) Vacations. The Executive shall be entitled to the number of vacation days in each
calendar year, and to compensation in respect of earned but unused vacation days determined in
accordance with the Company's vacation policy. The Executive shall also be entitled to all paid
holidays given by the Company to its employees.
IV.Business Expenses.
During the term of the Executive's employment hereunder, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all expenses of travel and living expenses while away from
home on business or at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the policies and procedures established
by the Board of Directors.
V.Disability.
The Company shall provide the Executive with substantially the same disability insurance
benefits as being provided by the Company for senior executives. In the event of the Executive's
Disability (as hereinafter defined), the Executive shall continue to receive her full salary at the rate
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then in effect for such period of disability, provided that payments so made to the Executive during
the first three months of the disability period shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of such payment under disability benefit plans of
the Company and which were not previously applied to reduce any such payment. In addition, the
Executive shall continue to be covered by all of the Company's life, medical, health and dental
plans, at the Company's expense, for the term of such disability.
VI.Death.
During the Period of Employment and extensions thereof, the Company shall provide term
life insurance on the life of the Executive with a death benefit of at least $50,000. The Executive
shall designate the beneficiary of such policy, such beneficiary subject to change from time to time
by the Executive. In the event of the Executive's death, the Company shall pay to the Executive's
spouse, or if she leaves no spouse, to her estate, the Executive's base salary to the date of death.
The Executive's family shall continue to be covered by all of the Company's life, medical, health and
dental plans, at the Company's expense, for twelve (12) months following the Executive's death.
VII.Termination of Employment.
Notwithstanding any other provision of this Agreement, Executive's employment with the
Company may be terminated upon written notice to the other party as follows:
(a) By the Company, in the event of the Executive's death or Disability (as hereinafter
defined) or for Cause (as hereinafter defined). For purposes of this Agreement, "Cause" shall mean
either: (i) the indictment of, or the bringing of formal charges against, Executive by a governmental
authority of competent jurisdiction for charges involving criminal fraud or embezzlement; or (ii) the
conviction of Executive of a crime involving an act or acts of dishonesty, fraud or moral turpitude
by the Executive, which act or acts constitute a felony. For purposes of this Agreement, "Disability"
shall mean the inability of Executive, in the reasonable judgment of a physician appointed by the
Board of Directors, to perform her duties of employment for the Company or any of its subsidiaries
because of any physical or mental disability or incapacity, where such disability shall exist for an
aggregate period of more than 120 days in any 365-day period or for any period of 90 consecutive
days. The Company shall by written notice to the Executive specify the event relied upon for
termination pursuant to this Subsection 7(a), and Executive's employment hereunder shall be
deemed terminated as of the date of such notice. In the event of any termination under this
Subsection 7(a), the Company shall pay all amounts then due to the Executive under Section 5 of
this Agreement and, if such termination was for Cause, the Company shall have no further
obligations to Executive under this Agreement. In the event of a termination due to Executive's
Disability or death, the Company shall comply with its obligations under Sections 5 and 6.
(b) By the Company, for any reason and in its sole and absolute discretion, provided that
in such event the Company shall, as liquidated damages or severance pay, or both, continue to pay
to Executive the Base Salary (at a monthly rate equal to the rate in effect immediately prior to such
termination) for the 3-month period commencing on the date of termination (the "Termination
Payments"). For the avoidance of doubt, the intent of the foregoing is that the Company shall pay
to Executive ratably, over a 3-month period, the amount of the Base Salary.
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(c) By the Executive for "Good Reason," which shall be deemed to exist: (i) if the
Company's Board of Directors fails to elect or reelect the Executive to, or removes the Executive
from, any of the offices referred to in Section 1(a); (ii) if the scope of Executive's duties is
significantly reduced (excluding, for this purpose, changes in responsibilities resulting from the
growth or shrinkage of the Company's business) (but not excluding changes resulting from a sale
of the Company, whether by merger, tender offer or otherwise); (iii) if the Board of Directors shall
require that the Executive relocate from the metropolitan area in which she resides as of the date
of this Agreement; or (iv) if the Company shall have continued to fail to comply with any material
provision of this Agreement after a 30-day period to cure (if such failure is curable) following
written notice to the Company of such non-compliance. In the event of any termination under this
Section, the Company shall, as liquidated damages or severance pay, or both, pay the Termination
Payments to Executive for the 3-month period commencing on the date notice of such termination
is given to the Company.
(d) In the event of a termination pursuant to Sections 7(b) or 7(c), Executive and her
family shall continue to be covered by the Company's life, medical, health and death plans at the
Company's expense to the same extent as if Executive were still employed by the Company, and the
Company shall provide to Executive, at the Company's expense, outplacement services of a nature
customarily provided to a senior executive.
VIII.Inventions and Confidential Information.
The parties hereto recognize that a major need of the Company is to preserve its specialized
knowledge, trade secrets, and confidential information. The strength and good will of the Company
is derived from the specialized knowledge, trade secrets, and confidential information generated
from experience with the activities undertaken by the Company and its subsidiaries. The disclosure
of this information and knowledge to competitors would be beneficial to them and detrimental to
the Company, as would the disclosure of information about the marketing practices, pricing
practices, costs, profit margins, design specifications, analytical techniques, and similar items of the
Company and its subsidiaries. By reason of her being a senior executive of the Company, the
Executive has or will have access to, and has obtained or will obtain, specialized knowledge, trade
secrets and confidential information about the Company's operations and the operations of its
subsidiaries, which operations extend throughout the United States. Therefore, Executive hereby
agrees as follows, recognizing that the Company is relying on these agreements in entering into this
Agreement:
(a) During and after the Period of Employment (as extended), the Executive will not use,
disclose to others, or publish or otherwise make available to any other party any inventions or any
confidential business information about the affairs of the Company, including but not limited to
confidential information concerning the Company's products, methods, engineering designs and
standards, analytical techniques, technical information, customer information, employee information,
and other confidential information acquired by her in the course of her past or future services for
the Company. Executive agrees to hold as the Company's property all memoranda, books, papers,
letters, formulas and other data, and all copies thereof and therefrom, in any way relating to the
Company's business and affairs, whether made by her or otherwise coming into her possession, and
on termination of her employment, or on demand of the Company, at any time, to deliver the same
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to the Company within twenty four hours of such termination or demand.
(b) During the Period of Employment (as extended) and for one year thereafter, Executive
will not induce or otherwise attempt to influence any employee of the Company to leave the
Company's employ or hire any such employee (unless the Board of Directors shall have authorized
such employment and the Company shall have consented thereto in writing).
IX.Indemnification.
The Company will indemnify the Executive (and her legal representatives) and will advance
any and all costs of defense of the Executive (and her legal representatives) to the fullest extent
permitted by the laws of the State of Florida, as in effect at the time of the subject act or omission,
or the Certificate of Incorporation and Bylaws of the Company, as in effect at such time or on the
date of this Agreement, whichever affords greater protection to the Executive, and the Executive
shall be entitled to the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers, against all costs, charges and expenses
whatsoever incurred or sustained by her or her legal representative in connection with any action,
suit or proceeding to which she (or her legal representatives or other successors) may be made a
party by reason of her being or having been a director or officer of the Company or any of its
subsidiaries.
10. Consolidation; Merger; Sale of Assets.
Nothing in this Agreement shall preclude the Company from combining, consolidating or
merging with or into, transferring all or substantially all of its assets to, or entering into a
partnership or joint venture with, another corporation or other entity, or effecting any other kind
of corporate combination provided that the corporation resulting from or surviving such
combination, consolidation or merger, or to which such assets are transferred, or such partnership
or joint venture assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger, transfer of assets or formation of such partnership
or joint venture, this Agreement shall inure to the benefit of, be assumed by, and be binding upon
such resulting or surviving transferee corporation or such partnership or joint venture, and the term,
"Company," as used in this Agreement, shall mean such corporation, partnership or joint venture,
or other entity and this Agreement shall continue in full force and effect and shall entitle the
Executive and her heirs, beneficiaries and representatives to exactly the same compensation,
benefits, perquisites, payments and other rights as would have been their entitlement had such
combination, consolidation, merger, transfer of assets or formation of such partnership or joint
venture not occurred.
11. Survival of Obligations.
Sections 8, 9, 10, and 11 shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Executive, upon the expiration of this
Agreement or otherwise).
12. Severability.
In case any one or more of the provisions or part of a provision contained in this Agreement
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shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction,
such invalidity, illegality or unenforceability shall be deemed not to affect any other jurisdiction or
any other provision or part of a provision of this Agreement, nor shall such invalidity, illegality or
unenforceability affect the validity, legality or enforceability of this Agreement or any provision or
provisions hereof in any other jurisdiction; and this Agreement shall be reformed and construed in
such jurisdiction as if such provision or part of a provision held to be invalid or illegal or
unenforceable had never been contained herein and such provision or part reformed so that it
would be valid, legal and enforceable in such jurisdiction to the maximum extent possible. In
furtherance and not in limitation of the foregoing, the Company and the Executive each intend that
the covenants contained in Section 8 shall be deemed to be a series of separate covenants, one for
each county of the State of Florida and one for each and every other state, territory or jurisdiction
of the United States set forth therein. If, in any judicial proceeding, a court shall refuse to enforce
any of such separate covenants, then such unenforceable covenants shall be deemed eliminated
from the provisions hereof for the purpose of such proceedings to the extent necessary to permit
the remaining separate covenants to be enforced in such proceedings. If, in any judicial proceeding,
a court shall refuse to enforce any one or more of such separate covenants because the total time
thereof is deemed to be excessive or unreasonable, then it is the intent of the parties hereto that
such covenants, which would otherwise be unenforceable due to such excessive or unreasonable
period of time, be enforced for such lesser period of time as shall be deemed reasonable and not
excessive by such court.
13. Entire Agreement; Amendment.
This Agreement contains the entire agreement between the Company and the Executive with
respect to the subject matter hereof and thereof. This Agreement may not be amended, waived,
changed, modified or discharged except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification or discharge is
sought. No course of conduct or dealing shall be construed to modify, amend or otherwise affect
any of the provisions hereof.
14. Notices.
All notices, request, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given if physically delivered, delivered by express mail or other
expedited service or upon receipt if mailed, postage prepaid, via first class mail as follows:
(1) To the Company: (2) To the Executive:
Medcross, Inc. Dorothy L. Michon
3227 Bennet Street North 631 Garland Circle
St. Petersburg, FL 33713 Indian Rocks Beach, FL 34635
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with an additional copy by like means to:
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W.
Suite 400
Washington, D.C. 20036
and/or to such other persons and addresses as any party shall have specified in writing to the other.
15. Arbitration.
(a) Any controversy or claim brought by the Executive in her capacity as a present or
former securityholder or an employee or officer, against the Company, arising out of or relating to
any acts or omissions of the Company, or any of its officers, directors, agents, affiliates, associates,
employees or controlling persons (including without limitation any controversy or claim relating to
a purchase or sale of securities of the Company) shall be settled by binding arbitration under the
Federal Arbitration Act in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA") then in effect and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any controversy or claim
brought by the Company against the Executive, whether in her capacity as an officer, director,
employee or present or former securityholder of the Company shall also be settled by arbitration
under the Federal Arbitration Act in accordance with the commercial arbitration rules of the AAA
and judgment upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
(b) The arbitration of any dispute pursuant to this Section 15 shall be held in St.
Petersburg, Florida.
(3) Notwithstanding the foregoing in order to preserve the status quo pending the
resolution by arbitration of a claim seeking relief of an injunctive or equitable nature, any party,
upon submitting a matter to arbitration as required by this Section 15, may simultaneously or
thereafter seek a temporary restraining order or preliminary injunction from a court of competent
jurisdiction pending the outcome of the arbitration.
(4) The Executive acknowledges that this Section 15 limits a number of the Executive's
rights, including without limitation (i) the right to have claims resolved in a court of law and
before a jury; (ii) certain discovery rights; and (iii) the right to appeal any decision.
16. Assignability.
This Agreement shall not be assignable by the Executive, but it shall be binding upon, and
shall inure to the benefit of, her heirs, executors, administrators and legal representatives. This
Agreement shall be assignable by the Company.
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17. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Florida.
18. Waiver and Further Agreement.
Any waiver of any breach of any terms or conditions of this Agreement shall not operate as
a waiver of any other breach of such terms or conditions or any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of such provision or of any other
provision hereof. Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably require in order
to effectuate the terms and purposes of this Agreement.
19. Headings of No Effect.
The paragraph headings contained in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
COMPANY:
MEDCROSS, INC.
By: /s/ Henry Y.L. Toh
Its: President
EXECUTIVE:
/s/ Dorothy L. Michon
Dorothy L. Michon
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<S> <C> <C>
</TABLE>
<TABLE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of January 1, 1996 between Medcross, Inc., a Florida corporation
(the "Company"), and Stephanie Giallourakis, an individual resident of Pinellas County, Florida (the
"Executive").
WHEREAS, the Executive is a highly valued and trusted employee of the Company; and
WHEREAS, the Company desires to offer the Executive continued employment upon the
terms and conditions set forth herein and the Executive desires to accept such employment;
NOW THEREFORE in consideration of the mutual benefits to be derived from this
Agreement, the Company and the Executive hereby agree as follows:
1. Term of Employment; Office and Duties.
(a) During the Period of Employment (as hereafter defined), the Company shall employ
the Executive as a senior executive of the Company with the title of Controller and Secretary, with
the responsibilities prescribed for such office in the Bylaws of the Company and in such other
capacities as the Company may designate, from time to time.
(b) During the Period of Employment, the Executive shall devote such portion of her
time to the business and affairs of the Company as may be necessary to perform the duties of her
office except for vacations, illness or incapacity.
The Company shall not require that the Executive be based in any place other than St.
Petersburg, Florida, and the Executive shall not be required to perform her duties hereunder for
more than 15 working days in any year, or for more than 14 consecutive days at any one time, at
any office located in any place other than the aforementioned area.
2. Term; Period of Employment
Subject to extension or termination as hereinafter provided, the period of employment
hereunder shall be for a period of two (2) years ending December 31, 1997 (the "Period of
Employment"), provided that the Period of Employment shall be automatically extended for
successive one (1) year periods unless written notice to the contrary is given by the Company to the
Executive not less than 120 days prior to: (a) the expiration of the initial period in the Period of
Employment; and (b) the expiration of each successive year thereafter.
3. Compensation and Benefits.
For all services rendered by the Executive as Controller and Secretary of the Company
during the Period of Employment (and any extension thereof), including, without limitation, services
as an executive officer, director, or member of any committee of the Company or any subsidiary,
affiliate or division thereof, the Executive shall be compensated as follows:
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(a) Base Salary. Commencing as of the date hereof, the Company shall pay the Executive
a fixed salary ("Base Salary") at a rate of: fifty-three thousand dollars ($53,000) per annum. The
Board of Directors will periodically review, at least annually, the Executive's Base Salary with a view
to increasing it further if, in the sole judgment of the Board of Directors, the earnings of the
Company or the services of the Executive merit such an increase. Annual increases in Base Salary,
once granted, shall not be subject to revocation and shall become a part of the Base Salary. Base
Salary will be payable in accordance with the customary payroll practices of the Company, but in
no event less frequently than bi-monthly.
(b) Bonus. The Company shall pay the Executive an annual bonus if, in the sole
judgment of the Board of Directors, the earnings of the Company or the services of the Executive
merit such bonus.
(c) Fringe Benefits. During the Period of Employment and any extension thereof, the
Executive shall be entitled to participate in fringe benefit, deferred compensation, stock benefit and
stock option plans or programs of the Company, if any, to the extent that her position, tenure,
salary, age, health and other qualifications make her eligible to participate, subject to the rules and
regulations applicable thereto. Such additional benefits shall include, but not be limited to, paid
sick leave and health insurance, all in accordance with the policies of the Company. The Company
shall not make any changes in any existing plan, program or arrangement which would adversely
affect the Executive's rights or benefits thereunder. Nothing paid to the Executive under any plan
or arrangement presently in effect or made available in the future shall be deemed in lieu of the
Base Salary payable to the Executive pursuant to Subsection (a) of this Section.
(d) Perquisites. During the Period of Employment and any extension thereof, the
Executive will be entitled to benefits and perquisites offered to its employees by the Company as
determined by the Board of Directors.
(e) Vacations. The Executive shall be entitled to the number of vacation days in each
calendar year, and to compensation in respect of earned but unused vacation days determined in
accordance with the Company's vacation policy. The Executive shall also be entitled to all paid
holidays given by the Company to its employees.
4. Business Expenses.
During the term of the Executive's employment hereunder, the Executive shall be entitled
to receive prompt reimbursement for all reasonable expenses incurred by the Executive in
performing services hereunder, including all expenses of travel and living expenses while away from
home on business or at the request of and in the service of the Company, provided that such
expenses are incurred and accounted for in accordance with the policies and procedures established
by the Board of Directors.
5. Disability.
The Company shall provide the Executive with substantially the same disability insurance
benefits as being provided by the Company for senior executives. In the event of the Executive's
Disability (as hereinafter defined), the Executive shall continue to receive her full salary at the rate
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then in effect for such period of disability, provided that payments so made to the Executive during
the first three months of the disability period shall be reduced by the sum of the amounts, if any,
payable to the Executive at or prior to the time of such payment under disability benefit plans of
the Company and which were not previously applied to reduce any such payment. In addition, the
Executive shall continue to be covered by all of the Company's life, medical, health and dental
plans, at the Company's expense, for the term of such disability.
6. Death.
During the Period of Employment and extensions thereof, the Company shall provide term
life insurance on the life of the Executive with a death benefit of at least $50,000. The Executive
shall designate the beneficiary of such policy, such beneficiary subject to change from time to time
by the Executive. In the event of the Executive's death, the Company shall pay to the Executive's
spouse, or if she leaves no spouse, to her estate, the Executive's base salary to the date of death.
The Executive's family shall continue to be covered by all of the Company's life, medical, health and
dental plans, at the Company's expense, for twelve (12) months following the Executive's death.
7. Termination of Employment.
Notwithstanding any other provision of this Agreement, Executive's employment with the
Company may be terminated upon written notice to the other party as follows:
(a) By the Company, in the event of the Executive's death or Disability (as hereinafter
defined) or for Cause (as hereinafter defined). For purposes of this Agreement, "Cause" shall mean
either: (i) the indictment of, or the bringing of formal charges against, Executive by a governmental
authority of competent jurisdiction for charges involving criminal fraud or embezzlement; or (ii) the
conviction of Executive of a crime involving an act or acts of dishonesty, fraud or moral turpitude
by the Executive, which act or acts constitute a felony. For purposes of this Agreement, "Disability"
shall mean the inability of Executive, in the reasonable judgment of a physician appointed by the
Board of Directors, to perform her duties of employment for the Company or any of its subsidiaries
because of any physical or mental disability or incapacity, where such disability shall exist for an
aggregate period of more than 120 days in any 365-day period or for any period of 90 consecutive
days. The Company shall by written notice to the Executive specify the event relied upon for
termination pursuant to this Subsection 7(a), and Executive's employment hereunder shall be
deemed terminated as of the date of such notice. In the event of any termination under this
Subsection 7(a), the Company shall pay all amounts then due to the Executive under Section 5 of
this Agreement and, if such termination was for Cause, the Company shall have no further
obligations to Executive under this Agreement. In the event of a termination due to Executive's
Disability or death, the Company shall comply with its obligations under Sections 5 and 6.
(b) By the Company, for any reason and in its sole and absolute discretion, provided that
in such event the Company shall, as liquidated damages or severance pay, or both, continue to pay
to Executive the Base Salary (at a monthly rate equal to the rate in effect immediately prior to such
termination) for the 3-month period commencing on the date of termination (the "Termination
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Payments"). For the avoidance of doubt, the intent of the foregoing is that the Company shall pay
to Executive ratably, over a 3-month period, the amount of the Base Salary.
(c) By the Executive for "Good Reason," which shall be deemed to exist: (i) if the
Company's Board of Directors fails to elect or reelect the Executive to, or removes the Executive
from, any of the offices referred to in Section 1(a); (ii) if the scope of Executive's duties is
significantly reduced (excluding, for this purpose, changes in responsibilities resulting from the
growth or shrinkage of the Company's business) (but not excluding changes resulting from a sale
of the Company, whether by merger, tender offer or otherwise); (iii) if the Board of Directors shall
require that the Executive relocate from the metropolitan area in which she resides as of the date
of this Agreement; or (iv) if the Company shall have continued to fail to comply with any material
provision of this Agreement after a 30-day period to cure (if such failure is curable) following
written notice to the Company of such non-compliance. In the event of any termination under this
Section, the Company shall, as liquidated damages or severance pay, or both, pay the Termination
Payments to Executive for the 3-month period commencing on the date notice of such termination
is given to the Company.
(d) In the event of a termination pursuant to Sections 7(b) or 7(c), Executive and her
family shall continue to be covered by the Company's life, medical, health and death plans at the
Company's expense to the same extent as if Executive were still employed by the Company, and the
Company shall provide to Executive, at the Company's expense, outplacement services of a nature
customarily provided to a senior executive.
8. Inventions and Confidential Information.
The parties hereto recognize that a major need of the Company is to preserve its specialized
knowledge, trade secrets, and confidential information. The strength and good will of the Company
is derived from the specialized knowledge, trade secrets, and confidential information generated
from experience with the activities undertaken by the Company and its subsidiaries. The disclosure
of this information and knowledge to competitors would be beneficial to them and detrimental to
the Company, as would the disclosure of information about the marketing practices, pricing
practices, costs, profit margins, design specifications, analytical techniques, and similar items of the
Company and its subsidiaries. By reason of her being a senior executive of the Company, the
Executive has or will have access to, and has obtained or will obtain, specialized knowledge, trade
secrets and confidential information about the Company's operations and the operations of its
subsidiaries, which operations extend throughout the United States. Therefore, Executive hereby
agrees as follows, recognizing that the Company is relying on these agreements in entering into this
Agreement:
(a) During and after the Period of Employment (as extended), the Executive will not use,
disclose to others, or publish or otherwise make available to any other party any inventions or any
confidential business information about the affairs of the Company, including but not limited to
confidential information concerning the Company's products, methods, engineering designs and
standards, analytical techniques, technical information, customer information, employee information,
and other confidential information acquired by her in the course of her past or future services for
the Company. Executive agrees to hold as the Company's property all memoranda, books, papers,
letters, formulas and other data, and all copies thereof and therefrom, in any way relating to the
Company's business and affairs, whether made by her or otherwise coming into her possession, and
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on termination of her employment, or on demand of the Company, at any time, to deliver the same
to the Company within twenty four hours of such termination or demand.
(b) During the Period of Employment (as extended) and for one year thereafter, Executive
will not induce or otherwise attempt to influence any employee of the Company to leave the
Company's employ or hire any such employee (unless the Board of Directors shall have authorized
such employment and the Company shall have consented thereto in writing).
9. Indemnification.
The Company will indemnify the Executive (and her legal representatives) and will advance
any and all costs of defense of the Executive (and her legal representatives) to the fullest extent
permitted by the laws of the State of Florida, as in effect at the time of the subject act or omission,
or the Certificate of Incorporation and Bylaws of the Company, as in effect at such time or on the
date of this Agreement, whichever affords greater protection to the Executive, and the Executive
shall be entitled to the protection of any insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers, against all costs, charges and expenses
whatsoever incurred or sustained by her or her legal representative in connection with any action,
suit or proceeding to which she (or her legal representatives or other successors) may be made a
party by reason of her being or having been a director or officer of the Company or any of its
subsidiaries.
10. Consolidation; Merger; Sale of Assets.
Nothing in this Agreement shall preclude the Company from combining, consolidating or
merging with or into, transferring all or substantially all of its assets to, or entering into a
partnership or joint venture with, another corporation or other entity, or effecting any other kind
of corporate combination provided that the corporation resulting from or surviving such
combination, consolidation or merger, or to which such assets are transferred, or such partnership
or joint venture assumes this Agreement and all obligations and undertakings of the Company
hereunder. Upon such a consolidation, merger, transfer of assets or formation of such partnership
or joint venture, this Agreement shall inure to the benefit of, be assumed by, and be binding upon
such resulting or surviving transferee corporation or such partnership or joint venture, and the term,
"Company," as used in this Agreement, shall mean such corporation, partnership or joint venture,
or other entity and this Agreement shall continue in full force and effect and shall entitle the
Executive and her heirs, beneficiaries and representatives to exactly the same compensation,
benefits, perquisites, payments and other rights as would have been their entitlement had such
combination, consolidation, merger, transfer of assets or formation of such partnership or joint
venture not occurred.
11. Survival of Obligations.
Sections 8, 9, 10, and 11 shall survive the termination for any reason of this Agreement
(whether such termination is by the Company, by the Executive, upon the expiration of this
Agreement or otherwise).
12. Severability.
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In case any one or more of the provisions or part of a provision contained in this Agreement
shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction,
such invalidity, illegality or unenforceability shall be deemed not to affect any other jurisdiction or
any other provision or part of a provision of this Agreement, nor shall such invalidity, illegality or
unenforceability affect the validity, legality or enforceability of this Agreement or any provision or
provisions hereof in any other jurisdiction; and this Agreement shall be reformed and construed in
such jurisdiction as if such provision or part of a provision held to be invalid or illegal or
unenforceable had never been contained herein and such provision or part reformed so that it
would be valid, legal and enforceable in such jurisdiction to the maximum extent possible. In
furtherance and not in limitation of the foregoing, the Company and the Executive each intend that
the covenants contained in Section 8 shall be deemed to be a series of separate covenants, one for
each county of the State of Florida and one for each and every other state, territory or jurisdiction
of the United States set forth therein. If, in any judicial proceeding, a court shall refuse to enforce
any of such separate covenants, then such unenforceable covenants shall be deemed eliminated
from the provisions hereof for the purpose of such proceedings to the extent necessary to permit
the remaining separate covenants to be enforced in such proceedings. If, in any judicial proceeding,
a court shall refuse to enforce any one or more of such separate covenants because the total time
thereof is deemed to be excessive or unreasonable, then it is the intent of the parties hereto that
such covenants, which would otherwise be unenforceable due to such excessive or unreasonable
period of time, be enforced for such lesser period of time as shall be deemed reasonable and not
excessive by such court.
13. Entire Agreement; Amendment.
This Agreement contains the entire agreement between the Company and the Executive with
respect to the subject matter hereof and thereof. This Agreement may not be amended, waived,
changed, modified or discharged except by an instrument in writing executed by or on behalf of the
party against whom enforcement of any amendment, waiver, change, modification or discharge is
sought. No course of conduct or dealing shall be construed to modify, amend or otherwise affect
any of the provisions hereof.
14. Notices.
All notices, request, demands and other communications hereunder shall be in writing and
shall be deemed to have been duly given if physically delivered, delivered by express mail or other
expedited service or upon receipt if mailed, postage prepaid, via first class mail as follows:
To the Company: (e) To the Executive:
Medcross, Inc. Stephanie Giallourakis
3227 Bennet Street North 1545 Pleasant Grove Drive
St. Petersburg, FL 33713 Dunedin, FL 34698
with an additional copy by like means to:
De Martino Finkelstein Rosen & Virga
1818 N Street, N.W.
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Suite 400
Washington, D.C. 20036
and/or to such other persons and addresses as any party shall have specified in writing to the other.
15. Arbitration.
(a) Any controversy or claim brought by the Executive in her capacity as a present or
former securityholder or an employee or officer, against the Company, arising out of or relating to
any acts or omissions of the Company, or any of its officers, directors, agents, affiliates, associates,
employees or controlling persons (including without limitation any controversy or claim relating to
a purchase or sale of securities of the Company) shall be settled by binding arbitration under the
Federal Arbitration Act in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA") then in effect and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. Any controversy or claim
brought by the Company against the Executive, whether in her capacity as an officer, director,
employee or present or former securityholder of the Company shall also be settled by arbitration
under the Federal Arbitration Act in accordance with the commercial arbitration rules of the AAA
and judgment upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof.
(b) The arbitration of any dispute pursuant to this Section 15 shall be held in St.
Petersburg, Florida.
(c) Notwithstanding the foregoing in order to preserve the status quo pending the
resolution by arbitration of a claim seeking relief of an injunctive or equitable nature, any party,
upon submitting a matter to arbitration as required by this Section 15, may simultaneously or
thereafter seek a temporary restraining order or preliminary injunction from a court of competent
jurisdiction pending the outcome of the arbitration.
(d) The Executive acknowledges that this Section 15 limits a number of the Executive's
rights, including without limitation (i) the right to have claims resolved in a court of law and
before a jury; (ii) certain discovery rights; and (iii) the right to appeal any decision.
16. Assignability.
This Agreement shall not be assignable by the Executive, but it shall be binding upon, and
shall inure to the benefit of, her heirs, executors, administrators and legal representatives. This
Agreement shall be assignable by the Company.
17. Governing Law.
This Agreement shall be governed by and construed under the laws of the State of Florida.
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18. Waiver and Further Agreement.
Any waiver of any breach of any terms or conditions of this Agreement shall not operate as
a waiver of any other breach of such terms or conditions or any other term or condition, nor shall
any failure to enforce any provision hereof operate as a waiver of such provision or of any other
provision hereof. Each of the parties hereto agrees to execute all such further instruments and
documents and to take all such further action as the other party may reasonably require in order
to effectuate the terms and purposes of this Agreement.
19. Headings of No Effect.
The paragraph headings contained in this Agreement are for reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
COMPANY:
MEDCROSS, INC.
By: /s/ Henry Y.L. Toh
Its: President
EXECUTIVE:
/s/ Stephanie E. Giallourakis
Stephanie Giallourakis
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<S> <C> <C>
</TABLE>
<TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this 14th day
of February, 1996 between I-Link Worldwide Inc., a Utah corporation (the "Company") and Clay
Wilkes, an individual resident of Austin, Texas (the "Employee"), and shall be effective on the date
and time of Closing under the Purchase Agreement referred to hereinbelow.
WITNESSETH:
WHEREAS, pursuant to the terms of a certain Stock Purchase Agreement, dated as of the
date hereof (the "Purchase Agreement"), by and between Medcross, Inc. ("Medcross") and ILINK,
Ltd. ("ILINK"), Medcross is acquiring all of the issued and outstanding capital stock of the
Company from ILINK;
WHEREAS, in connection with Medcross' acquisition of all of the issued and outstanding
capital stock of the Company and pursuant to the terms of the Purchase Agreement, the Company
has agreed to enter into this Agreement with the Employee to provide for employment of the
Employee as the Chairman of the Board and Chief Executive Officer of the Company;
WHEREAS, the Employee has been a highly valued and trusted employee of ILINK and
the Company;
WHEREAS, it is therefore the desire of the Company to offer the Employee employment
with the Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, it is the desire of the Employee to accept the Company's offer of employment
with the Company upon the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and mutual covenants, conditions and
agreements contained herein and for such other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. Employment. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to be employed by the Company upon the terms and subject to the
conditions set forth herein for the period of employment as set forth in Section 2 hereof (the
"Period of Employment").
2. Term; Period of Employment. Subject to extension or termination as hereinafter
provided, the Period of Employment hereunder shall be from the date hereof (the "Effective Date")
through the third anniversary of the Effective Date and shall continue thereafter until terminated
by either party.
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3. Office and Duties. During the Period of Employment:
(a) the Company shall employ the Employee as Chairman of the Board and Chief
Executive Officer of the Company with the responsibilities reasonably prescribed for such position
by the Board of Directors of the Company; and
(b) the Company shall cause Employee to be elected a director of the Company;
and
(c) the Employee shall devote substantially all of his working time to the business
and affairs of the Company; except (i) for vacations of two (2) weeks per year, (ii) illness or (iii)
incapacity. Notwithstanding the preceding sentence, nothing in this Agreement shall preclude the
Employee from devoting reasonable amounts of time:
(i) for serving as a director or member of a committee of any organization or entity
involving no conflict of interest with the Company; or
(ii) engaging in charitable and community activities;
provided, however, that such activities do not interfere with the performance by the Employee of
his duties hereunder. In consideration of such employment, the Employee agrees that he shall not,
directly or indirectly, individually or as a member of any partnership or joint venture, or as an
officer, director, stockholder, employee or agent of any other person, firm, corporation, business
organization or other entity, engage in any trade or business activity or pursuit for his own account
or for, or on behalf of, any other person, firm, corporation, business organization or other entity,
irrespective of whether the same competes, conflicts or interferes with that of the Company or the
performance of the Employee's obligations hereunder; provided, however, that nothing contained
herein shall be construed to prevent the Employee from investing in the stock of any corporation,
which does not compete with the Company, which is listed on a national securities exchange or
traded in the over-the-counter market if the Employee does not and will not as a result of such
investment own more than five percent (5%) of the stock of such corporation ("Permitted
Investments"). The Employee represents and warrants that he is not party to any agreement, oral
or written, which restricts in any way: (a) his ability to perform his obligations hereunder; or (b) his
right to compete with a previous employer or such employer's business.
4. Compensation and Benefits. In exchange for the services rendered by the Employee
pursuant hereto in any capacity during the Period of Employment, including without limitation,
services as an officer, director, or member of any committee of the Company or any affiliate,
subsidiary or division thereof, the Employee shall be compensated as follows:
(a) Compensation. The Company shall pay the Employee compensation equal to
at least Ninety-Five Thousand Dollars ($95,000) per annum as it may be adjusted herein below
("Salary") at a rate of Seven Thousand Nine Hundred Sixteen Dollars and Sixty-Seven Cents
($7,916.67) per month (such monthly amount as the same may be increased from time to time by
virtue of the adjustments set forth hereinbelow shall be defined as the "Monthly Compensation").
Such salary shall be increased prospectively effective upon the satisfaction of the following
performance criteria by the Company: the Salary shall be increased and be payable at the
annualized rate of One Hundred Thirty Thousand Dollars ($130,000) per annum effective at the
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beginning of the fiscal quarter next succeeding that fiscal quarter in which the number of the
Company's subscribers equals or exceeds 25,000 or the Company's Monthly Net Revenue therefrom
equals or exceeds $250,000; thereafter, the Salary shall increase such that it will be payable at the
annualized rate of One Hundred Fifty Thousand Dollars ($150,000) effective at the beginning of
the fiscal quarter next succeeding that fiscal quarter in which the number of Company's subscribers
equals or exceeds 50,000 or the Company's Monthly Net Revenue therefrom equals or exceeds
$500,000; thereafter the Salary shall increase such that it will be payable at the annualized rate of
One Hundred Eighty Thousand Dollars ($180,000) effective at the beginning of that fiscal quarter
following the fiscal quarter in which the number of the Company's subscribers equals or exceeds
75,000 or the Company's Monthly Net Revenue therefrom equals or exceeds $750,000. Such Salary
shall be payable in accordance with the customary payroll practices of the Company. "Monthly Net
Revenue" shall be defined as net revenue of the Company for a calendar month determined in
accordance with generally accepted accounting principles and consistent with past practices.
(b) Profitability Bonus. The Company may pay the Employee a bonus if, in the
sole judgment of the Board of Directors, the earnings of the Company or the services of the
Employee merit such a bonus. In the event that the Company is profitable, the Company shall pay
Employee a bonus at least equal to 10% of his other compensation.
(c) Withholding and Employment Tax. Payment of all compensation hereunder
shall be subject to customary withholding tax and other employment taxes as may be required with
respect to compensation paid by an employer/corporation to an employee.
5. Business Expenses. The Company shall pay or reimburse the Employee for all
reasonable travel or other expenses incurred by the Employee in connection with the performance
of his duties under this Agreement, provided that the same are incurred, in accordance with such
procedures as the Company may from time to time establish for employees and as required to
preserve any deductions for federal income taxation purposes to which the Company may be
entitled.
6. Other Benefits The Company shall provide the Employee health insurance for the
Employee and his dependents, life insurance, and disability insurance benefits and such other
benefits as are generally provided to executive officers of the Company. The Employee shall have
the right to participate in any and all Company stock option, stock purchase and similar plans
currently in effect or hereafter adopted for which he is eligible.
7. Termination of Employment. Notwithstanding any other provision of this Agreement,
employment hereunder may be terminated:
(a) By the Company, in the event of the employee's death or Disability or for "Just
Cause." "Just Cause" shall be defined to include: (i) the Employee's indictment of a crime
constituting a felony or conviction of a crime involving an act or acts of dishonesty, fraud or moral
turpitude; or (ii) violation of any material Company policy or failure to observe any directive of the
Board of Directors. The Employee shall be deemed to have a "Disability" for purposes of this
Agreement if he is unable to perform, by reason of physical or mental incapacity, his duties or
obligations under this Agreement for a total period of ninety (90) days in any 365-day period. The
Board of Directors shall determine whether and when the Disability of the Employee has occurred
and such determination shall not be arbitrary or unreasonable. The Company shall by written
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notice to the Employee given within thirty (30) days after discovery of the occurrence of an event
or circumstance which constitutes "Just Cause," specify the event or circumstance giving rise to the
Company's exercise of its right under Section 8(a) and, with respect to Just Cause arising under
Section 8(a)(i), the Employee's employment hereunder shall be deemed terminated as of the date
of such notice; with respect to Just Cause arising under Sections 8(a)(ii) the Company shall provide
the Employee with thirty (30) days written notice of such violation or failure and the Employee
shall be given reasonable opportunity during such thirty (30) day period to cure the subject violation
or failure; or
(b) By the Company, in its sole and absolute discretion, provided that in such
event the Company shall, as liquidated damages or severance pay, or both, pay to the Employee
an amount equal to the Employee's Monthly Compensation (as defined in Section 4(a) hereof) for
the remaining term hereof (the "Remaining Compensation"). In addition, all of the Employee's
options shall vest and all Common Stock of Medcross held in escrow pursuant to an Escrow
Agreement dated the date hereof between ILINK and De Martino Finkelstein Rosen & Virga shall
be released; or
(c) By the Employee, upon any violation of any material provision of this
Agreement by the Company, which violation remains unremedied for a period of thirty (30) days
after written notice of the same is delivered to the Company by the Employee or in the event of
a "Change In Control" as defined in Section 9(b) hereof, provided that in such event, the Company
shall, as liquidated damages or severance pay, or both, pay to the Employee the Remaining
Compensation. In addition, all of the Employee's options shall vest and all Common Stock of
Medcross held in escrow pursuant to an Escrow Agreement dated the date hereof between ILINK
and De Martino Finkelstein Rosen & Virga shall be released; or
(d) Failure to timely make more than one monthly payment of Remaining
Compensation under Section 8(b) or (c) hereof shall result in the Company being obligated to pay
the balance of the Remaining Compensation to the Employee in a lump sum distribution.
8. Non-Competition. Notwithstanding any earlier termination, during the Period of
Employment and for one (1) year thereafter:
(a) the Employee shall not, anywhere in North America or in any other place or
venue where the Company or any affiliate, subsidiary or division thereof now conducts or operates,
or may conduct or operate its business in the future, directly or indirectly, individually or as a
member of any partnership or joint venture, or as an officer, director, stockholder, employee or
agent of any other person, firm, corporation, business organization or other entity, participate in,
engage in, solicit or have any financial or other interest in any activity or any business or other
enterprise in the field of marketing, distribution, sale, production, research or development of
Internet related access services or any services or products using the Internet as a means of delivery,
or in any other field which is or may be reasonably expected to become competitive with the
current or contemplated business of the Company or any affiliate, subsidiary or division thereof
(unless the Board of Directors shall have authorized such activity and the Company shall have
consented thereto in writing), as an individual or as a member of any partnership or joint venture,
or as an officer, director, stockholder, investor, employee or agent of any other person, firm,
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corporation, business organization or other entity; provided, however, that nothing contained herein
shall be construed to prevent the employee from investing in Permitted Investments; and
(b) the Employee shall not: (i) solicit or induce any employee of the Company
to terminate his employment or otherwise leave the Company's employ or hire any such employee
(unless the Board of Directors shall have authorized such employment and the Company shall have
consented thereto in writing); or (ii) contact, service or solicit any clients, customers, vendors,
suppliers or other accounts of the Company, either as an individual or as a member of any
partnership or joint venture, or as an officer, director, stockholder, investor, employee or agent of
any other person, firm, corporation, business organization or other entity; provided however, that
the provisions of this Section 9 shall be of no force and effect in the event of a Change of Control.
A "Change In Control" shall be deemed to occur in the event that prior to December 31, 1997 any
person or "group" (as that term is construed for purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended ("Rule 13d-3")), other than such persons or groups that
currently are or by virtue of the transactions contemplated in that certain Private Placement
Memorandum of Medcross dated February 5, 1996 (as amended and supplemented), may be
deemed to be "affiliate(s)" of the Company (as that term is defined in Rule 405 under the Securities
Act of 1933, as amended), obtain "beneficial ownership" of 51% or more of the issued and
outstanding shares of Medcross, Inc.'s Common Stock as that term is defined in Rule 13d-3. A
Change in Control shall also be deemed to occur if: (a) Medcross, Inc. is merged into another
corporation and, after such merger, the voting securities of Medcross outstanding immediately prior
to such merger represent less than 75% of the voting securities of the surviving corporation, (b)
Medcross does not continue to own at least 75% of outstanding stock of the Company, or (c) all
or substantially all of the assets of the Company are sold.
9. Confidential Information. The parties hereto recognize that it is fundamental to the
business and operation of the Company, its affiliates, subsidiaries and divisions thereof to preserve
the specialized knowledge, trade secrets, and confidential information of the foregoing concerning
the Internet services industry. The strength and good will of the Company is derived from the
specialized knowledge, trade secrets, and confidential information generated from experience
through the activities undertaken by the Company, its affiliates, subsidiaries and divisions thereof.
The disclosure of any of such information and the knowledge thereof on the part of competitors
would be beneficial to such competitors and detrimental to the Company, its affiliates, subsidiaries
and divisions thereof, as would the disclosure of information about the marketing practices, pricing
practices, costs, profit margins, design specifications, analytical techniques, concepts, ideas, process
developments (whether or not patentable), customer and client agreements, vendor and supplier
agreements and similar items or technologies. By reason of his being an employee of the Company,
in the course of his employment, the Employee has or shall have access to, and has obtained or
shall obtain, specialized knowledge, trade secrets and confidential information such as that
described herein about the business and operation of the Company, its affiliates, subsidiaries and
divisions thereof. Therefore, the Employee hereby agrees as follows, recognizing and
acknowledging that the Company is relying on the following in entering into this Agreement:
(a) The Employee hereby sells, transfers and assigns to the Company, or to any
person or entity designated by the Company, any and all right, title and interest of the Employee
in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee solely or jointly, in whole or in part,
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during the term hereof which: (i) relate to methods, apparatus, designs, products, processes or
devices distributed, sold, leased, used or under construction or development by the Company or any
affiliate, subsidiary or division thereof; or (ii) otherwise relate to or pertain to the business,
operations or affairs of the Company or any affiliate, subsidiary or division thereof. The Company
shall acquire all right, title and interest to the Employee's inventions, ideas, disclosures and
improvements including Faxlink whether made or conceived during the term hereof or before;
provided however that the Company shall acquire no right, title or interest to the Employee's
inventions, ideas, disclosure and improvement relating to Voicelink, whether made or conceived
during the term hereof or before, the parties expressly acknowledging that all such right, title and
interest is retained by the Employee. The Employee shall make adequate written records of all
inventions (which records shall be the Company's property) and shall communicate promptly and
disclose to the Company, in such form as the Company requests, all information, details and data
pertaining to such inventions, ideas, disclosures and improvements. Whether during the Period of
Employment or thereafter, the Employee shall execute and deliver to the Company such formal
transfers and assignments and such other papers and documents as may be required of the
Employee to permit the Company or any person or entity designated by the Company to file,
enforce and prosecute the patent applications relating to any of the foregoing and, as to
copyrightable material, to obtain copyright thereon; and
(b) Notwithstanding any earlier termination, during the Period of Employment and
for a period of one (1) year thereafter, the Employee shall keep secret and retain in strict
confidence, and shall not, except in furtherance of the Company's business, use, disclose to others,
or publish any information, other than information which is in the public domain or becomes
publicly available through no wrongful act on the part of the Employee, which information shall
be deemed not to be confidential information, relating to the business, operation or other affairs
of the Company, its affiliates, subsidiaries and divisions thereof, including but not limited to
confidential information concerning the marketing practices, pricing practices, costs, profit margins,
products, methods, guidelines, procedures, engineering designs and standards, design specifications,
analytical techniques, technical information, customer, client, vendor or supplier information,
employee information, and any and all other confidential information acquired by him in the course
of his past or future services for the Company or any affiliate, subsidiary or division thereof. The
Employee shall hold as the Company's property all notes, memoranda, books, records, papers,
letters, formulas and other data and all copies thereof and therefrom in any way relating to the
business, operation or other affairs of the Company, its affiliates, subsidiaries and divisions thereof,
whether made by him or otherwise coming into his possession. Upon termination of his
employment or upon the demand of the Company, at any time, the Employee shall deliver the same
to the Company within twenty-four (24) hours of such termination or demand.
10. Reasonableness of Restrictions. The Employee hereby agrees that the restrictions
in this Agreement, including without limitation, those relating to the duration of the provisions
hereof and the territory to which such restrictions apply, are necessary and fundamental to the
protection of the business and operation of the Company, its affiliates, subsidiaries and divisions
thereof, and are reasonable and valid, and all defenses to the strict enforcement thereof by the
Employee are hereby waived by the Employee.
11. Reformation. In the event that a court of competent jurisdiction determines that the
non-compete or the confidentiality provisions hereof are unreasonably broad or otherwise
unenforceable because of the length of their respective terms or the breadth of their territorial
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scope, or for any other reason, the parties hereto agree that such court may reform the terms
and/or scope of such covenants so that the same are reasonable and, as reformed, shall be
enforceable.
12. Remedies. Subject to Section 14 below, in the event of a breach of any of the
provisions of this Agreement, the non-breaching party shall provide written notice of such breach
to the breaching party. The breaching party shall have thirty (30) days after receipt of such notice
in which to cure its breach. If, on the thirty-first (31st) day after receipt of such notice, the
breaching party shall have failed to cure such breach, the non-breaching party thereafter shall be
entitled to seek damages. It is acknowledged that this Agreement is of a unique nature and of
extraordinary value and of such a character that a breach hereof by the Employee shall result in
irreparable damage and injury to the Company for which the Company may not have any adequate
remedy at law. Therefore, if, on the thirty-first (31st) day after receipt of such notice, the breaching
party shall have failed to cure such breach, the non-breaching party shall also be entitled to seek
a decree of specific performance against the breaching party, or such other relief by way of
restraining order, injunction or otherwise as may be appropriate to ensure compliance with this
Agreement. The remedies provided by this Section 13 are non-exclusive and the pursuit of such
remedies shall not in any way limit any other remedy available to the parties with respect to this
Agreement, including, without limitation, any remedy available at law or equity with respect to any
anticipatory or threatened breach of the provisions hereof.
13. Certain Provisions; Specific Performance. In the event of a breach by the Employee
of the non-competition or confidentiality provisions hereof, such breach shall not be subject to the
cure provision of Section 13 above and the Company shall be entitled to seek immediate injunctive
relief and a decree of specific performance against the Employee. Such remedy is non-exclusive
and shall be in addition to any other remedy to which the Company or any affiliate, subsidiary or
division thereof may be entitled. Monetary breaches by the Company shall not be subject to the
notice and cure provisions hereunder.
14. Consolidation; Merger; Sale of Assets. Nothing in this Agreement shall preclude the
Company from combining, consolidating or merging with or into, transferring all or substantially
all of its assets to, or entering into a partnership or joint venture with, another corporation or other
entity, or effecting any other kind of corporate combination, provided that, the corporation resulting
from or surviving such combination, consolidation or merger, or to which such assets are
transferred, or such partnership or joint venture assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a consolidation, merger, transfer of assets or
formation of such partnership or joint venture, this Agreement shall inure to the benefit of, be
assumed by, and be binding upon such resulting or surviving transferee corporation or such
partnership or joint venture, and the term "Company," as used in this Agreement, shall mean such
corporation, partnership or joint venture, or other entity and subject to the provisions of this
Agreement relating to the Change of Control this Agreement shall continue in full force and effect
and shall entitle the Employee and his heirs, beneficiaries and representatives to exactly the same
compensation, benefits, perquisites, payments and other rights as would have been their entitlement
had such combination, consolidation, merger, transfer of assets or formation of such partnership
or joint venture not occurred.
15. Survival. Sections 9 through 14 shall survive the termination for any reason of this
Agreement (whether such termination is by the Company, by the Employee, upon the expiration
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of this Agreement by its terms or otherwise); provided, however, that in the event that the
Company ceases to exist and neither an affiliate, subsidiary or division thereof has assumed, at its
option, the obligations of the Company hereunder, the Employee shall no longer be bound by the
Non-Competition provision set forth in Section 9 hereof.
16. Severability. The provisions of this Agreement shall be considered severable in the
event that any of such provisions are held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable. Such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are valid and enforceable and which are as similar
as possible in term and intent to those provisions deemed to be invalid, void or otherwise
unenforceable. Notwithstanding the foregoing, the remaining provisions hereof shall remain
enforceable to the fullest extent permitted by law.
between the Company and the Employee with respect to the subject matter hereof and thereof.
This Agreement may not be amended, changed, modified or discharged, nor may any provision
hereof be waived, except by an instrument in writing executed by or on behalf of the party against
whom enforcement of any amendment, waiver, change, modification or discharge is sought. No
course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the
provisions hereof.
18. Notices. All notices, request, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if physically delivered, delivered by
express mail or other expedited service or upon receipt if mailed, postage prepaid, via first class
mail as follows:
(a) To the Company: I-LINK Worldwide, Inc.
One Chisolm Trail, Suite 4250
Round Rock, Texas 78681
Attention: Corporate Secretary
(b) With an additional copy
by like means to: De Martino Finkelstein & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
Attn: Ralph V. De Martino, Esq.
One Chisholm Trail, Suite 4250
Round Rock, Texas 78681
(d) With an additional copy Parsons Behle & Latimer
by like means to: 201 South Main Street
Suite 1800
Salt Lake City, Utah 84145-0898
Attn: William D. Holyoak, Esq.
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and/or to such other persons and addresses as any party hereto shall have specified in writing to
the other.
19. Assignability. This Agreement shall not be assignable by the Employee, but it shall
be binding upon, and shall inure to the benefit of, his heirs, executors, administrators and legal
representatives. This Agreement shall be assignable by the Company to any affiliate, subsidiary or
division thereof and to any successor in interest.
20. Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Texas, without regard to the principles of conflicts of laws thereof.
21. Waiver and Further Agreement. Any waiver of any breach of any terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or
any other term or condition hereof, nor shall any failure to enforce any provision hereof operate
as a waiver of such provision or of any other provision hereof. Each of the parties hereto agrees
to execute all such further instruments and documents and to take all such further action as the
other party may reasonably require in order to effectuate the terms and purposes of this
Agreement.
22. Headings of No Effect. The paragraph headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
THE COMPANY
I-LINK WORLDWIDE INC.
By: /s/ Clay Wilkes
THE EMPLOYEE
/s/ Clay Wilkes
Clay Wilkes
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<S> <C> <C>
</TABLE>
<TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this 14th day
of February, 1996 between I-Link Worldwide Inc., a Utah corporation (the "Company") and Alex
Radulovic, an individual resident of Austin, Texas (the "Employee"), and shall be effective on the
date and time of Closing under the Purchase Agreement referred to hereinbelow.
WITNESSETH:
WHEREAS, pursuant to the terms of a certain Stock Purchase Agreement, dated as of the
date hereof (the "Purchase Agreement"), by and between Medcross, Inc. ("Medcross") and ILINK,
Ltd. ("ILINK"), Medcross is acquiring all of the issued and outstanding capital stock of the
Company from ILINK;
WHEREAS, in connection with Medcross' acquisition of all of the issued and outstanding
capital stock of Worldwide and pursuant to the terms of the Purchase Agreement, the Company
has agreed to enter into this Agreement with the Employee to provide for employment of the
Employee as the Executive Vice President of the Company;
WHEREAS, the Employee has been a highly valued and trusted employee of ILINK and
Worldwide;
WHEREAS, it is therefore the desire of the Company to offer the Employee employment
with the Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, it is the desire of the Employee to accept the Company's offer of employment
with the Company upon the terms and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the premises and mutual covenants, conditions and
agreements contained herein and for such other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally bound
hereby, agree as follows:
1. Employment. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to be employed by the Company upon the terms and subject to the
conditions set forth herein for the period of employment as set forth in Section 2 hereof (the
"Period of Employment").
2. Term; Period of Employment. Subject to extension or termination as hereinafter
provided, the Period of Employment hereunder shall be from the date hereof (the "Effective Date")
through the third anniversary of the Effective Date and shall continue thereafter until terminated
by either party.
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3. Office and Duties. During the Period of Employment:
(a) the Company shall employ the Employee as Executive Vice President of the
Company with the responsibilities reasonably prescribed for such position by the Board of Directors
of the Company; and
(b) the Employee shall devote substantially all of his working time to the business
and affairs of the Company; except (i) for vacations of three (3) weeks per year, (ii) illness or (iii)
incapacity. Notwithstanding the preceding sentence, nothing in this Agreement shall preclude the
Employee from devoting reasonable amounts of time:
(i) for serving as a director or member of a committee of any organization
or entity involving no conflict of interest with the Company; or
(ii) engaging in charitable and community activities;
provided, however, that such activities do not interfere with the performance by the Employee of
his duties hereunder. In consideration of such employment, the Employee agrees that he shall not,
directly or indirectly, individually or as a member of any partnership or joint venture, or as an
officer, director, stockholder, employee or agent of any other person, firm, corporation, business
organization or other entity, engage in any trade or business activity or pursuit for his own account
or for, or on behalf of, any other person, firm, corporation, business organization or other entity,
irrespective of whether the same competes, conflicts or interferes with that of the Company or the
performance of the Employee's obligations hereunder; provided, however, that nothing contained
herein shall be construed to prevent the Employee from investing in the stock of any corporation,
which does not compete with the Company, which is listed on a national securities exchange or
traded in the over-the-counter market if the Employee does not and will not as a result of such
investment own more than five percent (5%) of the stock of such corporation ("Permitted
Investments"). The Employee represents and warrants that he is not party to any agreement, oral
or written, which restricts in any way: (a) his ability to perform his obligations hereunder; or (b) his
right to compete with a previous employer or such employer's business.
4. Compensation and Benefits. In exchange for the services rendered by the Employee
pursuant hereto in any capacity during the Period of Employment, including without limitation,
services as an officer, director, or member of any committee of the Company or any affiliate,
subsidiary or division thereof, the Employee shall be compensated as follows:
(a) Compensation. The Company shall pay the Employee compensation equal to
at least Ninety Thousand Dollars ($90,000) per annum as it may be adjusted herein below ("Salary")
at a rate of Seven Thousand Five Hundred Dollars and ($7,500) per month (such monthly amount
as the same may be increased from time to time by virtue of the adjustments set forth hereinbelow
shall be defined as the "Monthly Compensation"). Such salary shall be increased prospectively
effective upon the satisfaction of the following performance criteria by the Company: the Salary
shall be increased and be payable at the annualized rate of One Hundred Ten Thousand Dollars
($110,000) per annum effective at the beginning of the fiscal quarter next succeeding that fiscal
quarter in which the number of the Company's subscribers equals or exceeds 25,000 or the
Company's Monthly Net Revenue therefrom equals or exceeds $250,000; thereafter, the Salary shall
increase such that it will be payable at the annualized rate of One Hundred Thirty Thousand
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Dollars ($130,000) effective at the beginning of the fiscal quarter next succeeding that fiscal quarter
in which the number of Company's subscribers equals or exceeds 50,000 or the Company's Monthly
Net Revenue therefrom equals or exceeds $500,000; thereafter the Salary shall increase such that
it will be payable at the annualized rate of One Hundred Fifty Thousand Dollars ($150,000)
effective at the beginning of that fiscal quarter following the fiscal quarter in which the number of
the Company's subscribers equals or exceeds 75,000 or the Company's Monthly Net Revenue
therefrom equals or exceeds $750,000. Such Salary shall be payable in accordance with the
customary payroll practices of the Company. "Monthly Net Revenue" shall be defined as net
revenue of the Company for a calendar month determined in accordance with generally accepted
accounting principles and consistent with past practices as construed for purposes of Generally
Accepted Accounting Principles, realized in a single month.
(b) Profitability Bonus. The Company may pay the Employee a bonus if, in the
sole judgment of the Board of Directors, the earnings of the Company or the services of the
Employee merit such a bonus. In the event that the Company is profitable, the Company shall pay
Employee a bonus at least equal to 10% of his other compensation.
(c) Withholding and Employment Tax. Payment of all compensation hereunder
shall be subject to customary withholding tax and other employment taxes as may be required with
respect to compensation paid by an employer/corporation to an employee.
5. Business Expenses. The Company shall pay or reimburse the Employee for all
reasonable travel or other expenses incurred by the Employee in connection with the performance
of his duties under this Agreement, provided that the same are incurred, in accordance with such
procedures as the Company may from time to time establish for employees and as required to
preserve any deductions for federal income taxation purposes to which the Company may be
entitled.
6. Other Benefits. The Company shall provide the Employee health insurance for the
Employee and his dependents, life insurance, and disability insurance benefits and such other
benefits as are generally provided to executive officers of the Company. The Employee shall have
the right to participate in any and all Company stock option, stock purchase and similar plans
currently in effect or hereafter adopted for which he is eligible.
7. Termination of Employment. Notwithstanding any other provision of this Agreement,
employment hereunder may be terminated:
(a) By the Company, in the event of the employee's death or Disability or for "Just
Cause." "Just Cause" shall be defined to include: (i) the Employee's indictment of a crime
constituting a felony or conviction of a crime involving an act or acts of dishonesty, fraud or moral
turpitude; or by the Employee; (ii) violation of any material Company policy or, failure to observe
any directive of the Board of Directors, the Chairman thereof or the President. The Employee
shall be deemed to have a "Disability" for purposes of this Agreement if he is unable to perform,
by reason of physical or mental incapacity, his duties or obligations under this Agreement for a total
period of ninety (90) days in any 365-day period. The Board of Directors shall determine whether
and when the Disability of the Employee has occurred and such determination shall not be arbitrary
or unreasonable. The Company shall by written notice to the Employee given within thirty (30)
days after discovery of the occurrence of an event or circumstance which constitutes "Just Cause,"
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specify the event or circumstance giving rise to the Company's exercise of its right under Section
8(a) and, with respect to Just Cause arising under Section 8(a)(i), the Employee's employment
hereunder shall be deemed terminated as of the date of such notice; with respect to Just Cause
arising under Sections 8(a)(ii) the Company shall provide the Employee with thirty (30) days written
notice of such violation or failure and the Employee shall be given reasonable opportunity during
such thirty (30) day period to comply with the subject directive or cure the subject violation or
failure; or
(b) By the Company, in its sole and absolute discretion, provided that in such
event the Company shall, as liquidated damages or severance pay, or both, pay to the Employee
an amount equal to the Employee's Monthly Compensation (as defined in Section 4(a) hereof) for
the remaining term hereof (the "Remaining Compensation"). In addition, all of the Employee's
options shall be vest and all Common Stock of Medcross held in escrow pursuant to an Escrow
Agreement dated the date hereof between ILINK and De Martino Finkelstein Rosen & Virga shall
be released; or
(c) By the Employee, upon any violation of any material provision of this
Agreement by the Company, which violation remains unremedied for a period of thirty (30) days
after written notice of the same is delivered to the Company by the Employee or in the event of
a "Change In Control" as defined in Section 9(b) hereof, provided that in such event, the Company
shall, as liquidated damages or severance pay, or both, pay to the Employee the Remaining
Compensation. In addition, all of the Employee's options shall vest and all Common Stock of
Medcross held in escrow pursuant to an Escrow Agreement dated the date hereof between ILINK
and De Martino Finkelstein Rosen & Virga shall be released; or
(d) Failure to timely make more than one monthly payment of Remaining
Compensation under Section 8(b) or (c) hereof shall result in the Company being obligated to pay
the balance of the Remaining Compensation to the Employee in a lump sum distribution.
8. Non-Competition. Notwithstanding any earlier termination, during the Period of
Employment and for one (1) year thereafter:
(a) the Employee shall not, anywhere in North America or in any other place or
venue where the Company or any affiliate, subsidiary or division thereof now conducts or operates,
or may conduct or operate its business in the future, directly or indirectly, individually or as a
member of any partnership or joint venture, or as an officer, director, stockholder, employee or
agent of any other person, firm, corporation, business organization or other entity, participate in,
engage in, solicit or have any financial or other interest in any activity or any business or other
enterprise in the field of marketing, distribution, sale, production, research or development of
Internet related access services or any services or products using the Internet as a means of delivery
or in any other field which is or may be reasonably expected to become competitive with the
current or contemplated business of the Company or any affiliate, subsidiary or division thereof
(unless the Board of Directors shall have authorized such activity and the Company shall have
consented thereto in writing), as an individual or as a member of any partnership or joint venture,
or as an officer, director, stockholder, investor, employee or agent of any other person, firm,
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corporation, business organization or other entity; provided, however, that nothing contained herein
shall be construed to prevent the employee from investing in Permitted Investments; and
(b) the Employee shall not: (i) solicit or induce any employee of the Company
to terminate his employment or otherwise leave the Company's employ or hire any such employee
(unless the Board of Directors shall have authorized such employment and the Company shall have
consented thereto in writing); or (ii) contact, service or solicit any clients, customers, vendors,
suppliers or other accounts of the Company, either as an individual or as a member of any
partnership or joint venture, or as an officer, director, stockholder, investor, employee or agent of
any other person, firm, corporation, business organization or other entity; provided however, that
the provisions of this Section 9 shall be of no force and effect in the event of a Change of Control.
A "Change In Control" shall be deemed to occur in the event that prior to December 31, 1997 any
person or "group" (as that term is construed for purposes of Rule 13d-3 under the Securities
Exchange Act of 1934, as amended ("Rule 13d-3")), other than such persons or groups that
currently are or by virtue of the transactions contemplated in that certain Private Placement
Memorandum of Medcross dated February 5, 1996 (as amended and supplemented), may be
deemed to be "affiliate(s)" of the Company (as that term is defined in Rule 405 under the Securities
Act of 1933, as amended), obtain "beneficial ownership" of 51% or more of the issued and
outstanding shares of Medcross, Inc.'s Common Stock as that term is defined in Rule 13d-3.
A Change in Control shall also be deemed to occur if: (a) Medcross, Inc. is merged into
another corporation and, after such merger, the voting securities of Medcross outstanding
immediately prior to such merger represent less than 75% of the voting securities of the surviving
corporation, (b) Medcross does not continue to own at least 75% of outstanding stock of the
Company, or (c) all or substantially all of the assets of the Company are sold.
9 . Confidential Information. The parties hereto recognize that it is fundamental to the
business and operation of the Company, its affiliates, subsidiaries and divisions thereof to preserve
the specialized knowledge, trade secrets, and confidential information of the foregoing concerning
the Internet services industry. The strength and good will of the Company is derived from the
specialized knowledge, trade secrets, and confidential information generated from experience
through the activities undertaken by the Company, its affiliates, subsidiaries and
divisions thereof. The disclosure of any of such information and the knowledge thereof on the part
of competitors would be beneficial to such competitors and detrimental to the Company, its
affiliates, subsidiaries and divisions thereof, as would the disclosure of information about the
marketing practices, pricing practices, costs, profit margins, design specifications, analytical
techniques, concepts, ideas, process developments (whether or not patentable), customer and client
agreements, vendor and supplier agreements and similar items or technologies. By reason of his
being an employee of the Company, in the course of his employment, the Employee has or shall
have access to, and has obtained or shall obtain, specialized knowledge, trade secrets and
confidential information such as that described herein about the business and operation of the
Company, its affiliates, subsidiaries and divisions thereof. Therefore, the Employee hereby agrees
as follows, recognizing and acknowledging that the Company is relying on the following in entering
into this Agreement:
(a) The Employee hereby sells, transfers and assigns to the Company, or to any
person or entity designated by the Company, any and all right, title and interest of the Employee
in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and
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copyrightable material, made or conceived by the Employee solely or jointly, in whole or in part,
during the term hereof which: (i) relate to methods, apparatus, designs, products, processes or
devices distributed, sold, leased, used or under construction or development by the Company or any
affiliate, subsidiary or division thereof; or (ii) otherwise relate to or pertain to the business,
operations or affairs of the Company or any affiliate, subsidiary or division thereof. The Company
shall acquire all right, title and interest to the Employee's inventions, ideas, disclosures and
improvements including Faxlink whether made or conceived during the term hereof or before;
provided however that the Company shall acquire no right, title or interest to the Employee's
inventions, ideas, disclosure and improvement relating to Voicelink, whether made or conceived
during the term hereof or before, the parties expressly acknowledging that all such right, title and
interest is retained by the Employee. The Employee shall make adequate written records of all
inventions (which records shall be the Company's property) and shall communicate promptly and
disclose to the Company, in such form as the Company requests, all information, details and data
pertaining to such inventions, ideas, disclosures and improvements. Whether during the Period of
Employment or thereafter, the Employee shall execute and deliver to the Company such formal
transfers and assignments and such other papers and documents as may be required of the
Employee to permit the Company or any person or entity designated by the Company to file,
enforce and prosecute the patent applications relating to any of the foregoing and, as to
copyrightable material, to obtain copyright thereon; and
(b) Notwithstanding any earlier termination, during the Period of Employment and
for a period of one (1) year thereafter, the Employee shall keep secret and retain in strict
confidence, and shall not, except in furtherance of the Company's business, use, disclose to others,
or publish any information, other than information which is in the public domain or becomes
publicly available through no wrongful act on the part of the Employee, which information shall
be deemed not to be confidential information, relating to the business, operation or other affairs
of the Company, its affiliates, subsidiaries and divisions thereof, including but not limited to
confidential information concerning the marketing practices, pricing practices, costs, profit margins,
products, methods, guidelines, procedures, engineering designs and standards, design specifications,
analytical techniques, technical information, customer, client, vendor or supplier information,
employee information, and any and all other confidential information acquired by him in the course
of his past or future services for the Company or any affiliate, subsidiary or division thereof. The
Employee shall hold as the Company's property all notes, memoranda, books, records, papers,
letters, formulas and other data and all copies thereof and therefrom in any way relating to the
business, operation or other affairs of the Company, its affiliates, subsidiaries and divisions thereof,
whether made by him or otherwise coming into his possession. Upon termination of his
employment or upon the demand of the Company, at any time, the Employee shall deliver the same
to the Company within twenty-four (24) hours of such termination or demand.
10. Reasonableness of Restrictions. The Employee hereby agrees that the restrictions
in this Agreement, including without limitation, those relating to the duration of the provisions
hereof and the territory to which such restrictions apply, are necessary and fundamental to the
protection of the business and operation of the Company, its affiliates, subsidiaries and divisions
thereof, and are reasonable and valid, and all defenses to the strict enforcement thereof by the
Employee are hereby waived by the Employee.
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11. Reformation. In the event that a court of competent jurisdiction determines that the
non-compete or the confidentiality provisions hereof are unreasonably broad or otherwise
unenforceable because of the length of their respective terms or the breadth of their territorial
scope, or for any other reason, the parties hereto agree that such court may reform the terms
and/or scope of such covenants so that the same are reasonable and, as reformed, shall be
enforceable.
12. Remedies. Subject to Section 14 below, in the event of a breach of any of the
provisions of this Agreement, the non-breaching party shall provide written notice of such breach
to the breaching party. The breaching party shall have thirty (30) days after receipt of such notice
in which to cure its breach. If, on the thirty-first (31st) day after receipt of such notice, the
breaching party shall have failed to cure such breach, the non-breaching party thereafter shall be
entitled to seek damages. It is acknowledged that this Agreement is of a unique nature and of
extraordinary value and of such a character that a breach hereof by the Employee shall result in
irreparable damage and injury to the Company for which the Company may not have any adequate
remedy at law. Therefore, if, on the thirty-first (31st) day after receipt of such notice, the breaching
party shall have failed to cure such breach, the non-breaching party shall also be entitled to seek
a decree of specific performance against the breaching party, or such other relief by way of
restraining order, injunction or otherwise as may be appropriate to ensure compliance with this
Agreement. The remedies provided by this Section 13 are non-exclusive and the pursuit of such
remedies shall not in any way limit any other remedy available to the parties with respect to this
Agreement, including, without limitation, any remedy available at law or equity with respect to any
anticipatory or threatened breach of the provisions hereof.
13. Certain Provisions; Specific Performance. In the event of a breach by the Employee
of the non-competition or confidentiality provisions hereof, such breach shall not be subject to the
cure provision of Section 13 above and the Company shall be entitled to seek immediate injunctive
relief and a decree of specific performance against the Employee. Such remedy is non-exclusive
and shall be in addition to any other remedy to which the Company or any affiliate, subsidiary or
division thereof may be entitled. Monetary breaches by the Company shall not be subject to the
notice and cure provisions hereunder.
14. Consolidation; Merger; Sale of Assets. Nothing in this Agreement shall preclude the
Company from combining, consolidating or merging with or into, transferring all or substantially
all of its assets to, or entering into a partnership or joint venture with, another corporation or other
entity, or effecting any other kind of corporate combination, provided that, the corporation resulting
from or surviving such combination, consolidation or merger, or to which such assets are
transferred, or such partnership or joint venture assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a consolidation, merger, transfer of assets or
formation of such partnership or joint venture, this Agreement shall inure to the benefit of, be
assumed by, and be binding upon such resulting or surviving transferee corporation or such
partnership or joint venture, and the term "Company," as used in this Agreement, shall mean such
corporation, partnership or joint venture, or other entity and subject to the provisions of this
Agreement relating to the Change of Control this Agreement shall continue in full force and effect
and shall entitle the Employee and his heirs, beneficiaries and representatives to exactly the same
compensation, benefits, perquisites, payments and other rights as would have been their entitlement
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had such combination, consolidation, merger, transfer of assets or formation of such partnership
or joint venture not occurred.
15. Survival. Sections 9 through 14 shall survive the termination for any reason of this
Agreement (whether such termination is by the Company, by the Employee, upon the expiration
of this Agreement by its terms or otherwise); provided, however, that in the event that the
Company ceases to exist and neither an affiliate, subsidiary or division thereof has assumed, at its
option, the obligations of the Company hereunder, the Employee shall no longer be bound by the
Non-Competition provision set forth in Section 9 hereof.
16. Severability. The provisions of this Agreement shall be considered severable in the
event that any of such provisions are held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable. Such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are valid and enforceable and which are as similar
as possible in term and intent to those provisions deemed to be invalid, void or otherwise
unenforceable. Notwithstanding the foregoing, the remaining provisions hereof shall remain
enforceable to the fullest extent permitted by law.
17. Entire Agreement; Amendment. This Agreement contains the entire agreement
between the Company and the Employee with respect to the subject matter hereof and thereof.
This Agreement may not be amended, changed, modified or discharged, nor may any provision
hereof be waived, except by an instrument in writing executed by or on behalf of the party against
whom enforcement of any amendment, waiver, change, modification or discharge is sought. No
course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the
provisions hereof.
18. Notices. All notices, request, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if physically delivered, delivered by
express mail or other expedited service or upon receipt if mailed, postage prepaid, via first class
mail as follows:
(a) To the Company: I-LINK Worldwide, Inc.
One Chisolm Trail, Suite 4250
Round Rock, Texas 78681
Attention: Corporate Secretary
(b) With an additional copy
by like means to: De Martino Finkelstein & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
Attn: Ralph V. De Martino, Esq.
(c) To the Employee: Mr. Alex Radulovic
One Chisholm Trail, Suite 4250
Round Rock, Texas 78681
(d) With an additional copy
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by like means to: Parsons Behle & Latimer
201 South Main Street
Suite 1800
Salt Lake City, Utah 84145-0898
Attn: William D. Holyoak, Esq.
and/or to such other persons and addresses as any party hereto shall have specified in writing to
the other.
19. Assignability. This Agreement shall not be assignable by the Employee, but it shall
be binding upon, and shall inure to the benefit of, his heirs, executors, administrators and legal
representatives. This Agreement shall be assignable by the Company to any affiliate, subsidiary or
division thereof and to any successor in interest.
20. Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Texas, without regard to the principles of conflicts of laws thereof.
21. Waiver and Further Agreement. Any waiver of any breach of any terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or
any other term or condition hereof, nor shall any failure to enforce any provision hereof operate
as a waiver of such provision or of any other provision hereof. Each of the parties hereto agrees
to execute all such further instruments and documents and to take all such further action as the
other party may reasonably require in order to effectuate the terms and purposes of this
Agreement.
22. Headings of No Effect. The paragraph headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
THE COMPANY
I-LINK WORLDWIDE INC.
By: /s/ Clay Wilkes
THE EMPLOYEE
/s/ Alex Radulovic
Alex Radulovic
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<S> <C> <C>
</TABLE>
<TABLE>
MEDCROSS, INC.
1995 DIRECTOR STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.1. Medcross, Inc. (the "Company"), a Florida corporation, hereby establishes a
stock option and appreciation rights plan to be named the Medcross, Inc. 1995 Director Stock
Option and Appreciation Rights Plan (the "Director Plan").
Section 1.2. The purpose of this Director Plan is to induce persons who are directors of the
Company (or any of its subsidiaries) to remain with the Company and to provide such persons
incentives and rewards in recognition of their contributions to the Company's progress. The
Director Plan provides for the grant of options to purchase shares of common stock of the
Company, $.007 par value per share (the "Common Stock") which: (a) qualify as incentive stock
options ("Incentive Options") under Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), to directors who are employees, and (b) do not so qualify ("Non-Qualified Options")
to directors, including those who are not employees. This Director Plan also provides for the grant
of stock appreciation rights ("Rights") in connection with the grant of options hereunder. Incentive
Options and Non-Qualified Options may be collectively referred to hereinafter as the "Options" as
the context may require.
Section 1.3. All Options and other rights previously granted by the Company under any
other plan previously adopted by the Company shall continue to be governed by such plan. All
Options granted on or after the date that this Director Plan has been approved and adopted by the
Company's board of directors (the "Board of Directors") shall be governed by the terms and
conditions of this Director Plan unless the terms of such an option specifically indicate that it is not
to be so governed.
ARTICLE II
ADMINISTRATION
Section 2.1. All determinations under this Director Plan concerning the selection of persons
eligible to receive awards hereunder and with respect to the timing, pricing and amount of an award
hereunder (other than pursuant to a non-discretionary formula hereinafter set forth) shall be made
by an administrator (the "Administrator") who shall be charged with administration of this Director
Plan. The Administrator shall be either: (a) the Board of Directors, if each member thereof is a
"disinterested person" for the purposes of this Director Plan within the meaning of such term as
defined by Rule 16b-3 (as such rule may be amended from time to time, "Rule 16b-3") under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or (b) in the discretion of the
Board of Directors by a committee (the "Committee") of not less than two members of the Board
of Directors, each of whom is a "disinterested person." A "disinterested person" within the meaning
of Rule 16b-3 as in effect upon the date this Director Plan is adopted by the Board of Directors
is a person who has not been granted or awarded equity securities (within the meaning of the
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Exchange Act) under this or any other plan of the Company (or any affiliate thereof) at any time
within one year prior to such person's service as a member of the Administrator, or during such
service except as otherwise permitted by Rule 16b-3(c). In the event this Director Plan is
administered by the Committee, the Committee shall select one of its members to serve as the
chairman thereof, and shall hold its meetings at such times and places as it may determine. In such
case, a majority of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative vote of a majority of the members present at any meeting at
which a quorum is present, or (ii) the approval in writing by a majority of the members of the
Committee, shall be necessary to constitute action by the Committee.
With respect to persons subject to Section 16 of the Exchange Act, transactions under this
Director Plan are intended to comply with all applicable conditions of Rule 16b-3 or its successors
under the Exchange Act. To the extent that any provision of this Director Plan or action by the
Administrator fails to so comply, it shall be deemed to be null and void, to the extent permitted by
law and deemed advisable by the Administrator.
Section 2.2. The provisions of this Director Plan relating to Incentive Options are intended
to comply in every respect with Section 422 of the Code ("Section 422") and the regulations
promulgated thereunder. In the event that any future statute or regulation shall modify Section
422, this Director Plan shall be deemed to incorporate by reference such modification. Any stock
option agreement relating to the grant of any Incentive Option pursuant to this Director Plan,
which option is outstanding and unexercised at the time that any modifying statute or regulation
becomes effective, shall also be deemed to incorporate by reference such modification, and no
notice of such modification need be given to the Optionee (as hereinafter defined). Any stock
option agreement relating to an Incentive Option shall provide that the Optionee (as hereinafter
defined) hold the stock received upon exercise of such Incentive Option for a minimum of two
years from the date of grant of the Incentive Option and one year from the date of exercise of such
Incentive Option, absent the written approval, consent or waiver of the Administrator.
Section 2.3. If any provision of this Director Plan is determined to disqualify the shares of
Common Stock purchasable upon exercise of an Incentive Option granted under this Director Plan
from the special tax treatment provided by Section 422, such provision shall be deemed to
incorporate by reference the modification required to qualify such shares of Common Stock for said
tax treatment.
Section 2.4. The Company shall grant Options under this Director Plan in accordance with
determinations made by the Administrator pursuant to the provisions of this Director Plan. All
Options granted pursuant to this Director Plan shall be clearly identified as Incentive Options or
Non-Qualified Options. The Administrator may from time to time adopt (and thereafter amend
or rescind) such rules and regulations for carrying out the provisions of this Director Plan and take
such action in the administration of this Director Plan, not inconsistent with the provisions hereof,
as it shall deem proper. The Board of Directors or, subject to the supervision of the Board of
Directors, the Committee, as the Administrator, shall have plenary discretion, subject to the express
provisions of this Director Plan, to determine which directors shall be granted Options, the number
of shares subject to each Option, the time or times when an Option may be exercised (whether in
whole or in installments), whether Rights under Section 7.6 hereof shall be granted, the terms and
provisions of the respective option agreements (which need not be identical), including such terms
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and provisions which may be amended from time to time as shall be required, in the judgment of
the Administrator to conform to any change in any law or regulation applicable hereto, and to
make all other determinations deemed necessary or advisable for the administration of this Director
Plan. The interpretation and construction of any provision of this Director Plan by the
Administrator (unless otherwise determined by the Board of Directors) shall be final, conclusive
and binding upon all persons.
Section 2.5. Directors of the Company shall be granted Non-Qualified Options on a
non-discretionary basis in accordance with the following formula: On (i) October 17, 1995, (ii) the
first business day of January 1996 and (iii) the first business day of each January thereafter, each
member of the Board of Directors then serving shall receive a Non-Qualified Option to purchase
10,000 shares of Common Stock at an exercise price equal to the fair market value per share of
such shares on that date. Each such Option shall be exercisable immediately and for ten years from
the date of grant unless sooner terminated pursuant to the terms of this Director Plan. Each such
Option shall be subject to the restrictions upon transfer, limitations on exercise and restrictions
upon transfer of the shares of Common Stock to be issued upon exercise of the Option as are set
forth elsewhere herein or as are imposed by applicable law, including without limitation applicable
federal and state securities laws. Except as otherwise provided in this section, all Non-Qualified
Options issued pursuant to this section shall be subject to the other terms and conditions of this
Director Plan; to the extent such terms and conditions are inconsistent with this section, this section
shall control. To the extent required pursuant to Rule 16b-3 as such rule relates to formula awards,
this section shall not be amended more than once every six months other than to comport with
changes in the Code, the Employee Retirement Income Security Act or the rules thereunder.
Section 2.6. No member of the Administrator shall be liable for any action or determination
made in good faith with respect to administration of this Director Plan or the Options granted
hereunder. A member of the Administrator shall be indemnified by the Company, pursuant to the
Company's bylaws, for any expenses, judgments or other costs incurred as a result of a lawsuit filed
against such member claiming any rights or remedies arising out of such member's participation in
administration of this Director Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section 3.1. There shall be reserved for issuance or transfer upon exercise of the Options
to be granted from time to time under this Director Plan an aggregate of 250,000 shares of
Common Stock of the Company (subject to adjustment as provided in Article VIII hereof). The
shares of Common Stock issued upon exercise of any Option granted under this Director Plan may
be shares of Common Stock previously issued and reacquired by the Company at any time or
authorized but unissued shares of Common Stock, as the Board of Directors from time to time may
determine.
Section 3.2. In the event that any Options outstanding under this Director Plan for any
reason expire or are terminated without having been exercised in full or shares of Common Stock
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subject to Options are surrendered in whole or in part pursuant to Rights granted under Section
7.6 hereof (except to the extent that shares of Common Stock are issued as payment to the holder
of the Option upon such surrender) the unpurchased shares of Common Stock subject to such
Option and any such surrendered shares may again be available for transfer under this Director
Plan.
Section 3.3. No Options shall be granted pursuant to this Director Plan to any Optionee
after the tenth anniversary of the earlier of: (a) the date that this Director Plan is adopted by the
Board of Directors, or (b) the date that this Director Plan is approved by the stockholders of the
Company.
ARTICLE IV
ELIGIBILITY
Section 4.1. Subject to Section 2.5 above, Non-Qualified Options may be granted pursuant
to this Director Plan to directors of the Company (or any of its subsidiaries) as selected by the
Administrator. Incentive Options may be granted pursuant to this Director Plan only to directors
who are also employees of the Company (or any of its subsidiaries) as selected by the
Administrator. Persons granted Options pursuant to this Director Plan are referred to herein as
"Optionees." For purposes of determining who is an employee with respect to eligibility for
Incentive Options, Section 422 of the Code shall govern. The Administrator may determine (in its
sole discretion) that any person who would otherwise be eligible to be granted Options shall,
nonetheless, be ineligible to receive any award under this Director Plan.
Section 4.2. Except as otherwise provided in Section 2.5 above, the Administrator will (in
its discretion) determine the directors to be granted Options, the time or times at which Options
shall be granted, the number of shares of Common Stock subject to each Option, the terms of a
vesting or forfeiture schedule, if any, the type of Option issued, the period during which Options
may be exercised, the manner in which Options may be exercised and all other terms and conditions
related to the Options; provided, however, no Option will be granted which has terms or conditions
inconsistent with those stated in Articles V and VI hereof. Relevant factors in making such
determinations may include the value of the services rendered by the respective Optionee, his or
her present and potential contributions to the Company, and such other factors which the
Administrator within its discretion deems to be relevant in accomplishing the purpose of this
Director Plan.
Section 4.3. No Options may be granted to any member of the Committee or, if this
Director Plan is administered by the Board of Directors rather than the Committee, no Options
(other than pursuant to a non-discretionary formula such as and including that which is set forth
in Section 2.5 above which meets the conditions in Rule 16b-3(c)(2)(ii) under the Exchange Act)
may be granted to any director, if such director has, during the one year prior to such person's
service as a member of the Administrator of this Director Plan or during such service, received any
equity securities pursuant to any plan of the Company or any of its affiliates (other than pursuant
to the formula set forth in Section 2.5 of this Plan or otherwise in a manner described in Rule 16b-
3 as such rule may be amended from time to time), may be granted to any director unless a
majority of the Board of Directors and a majority of the members of the Board of Directors
members voting on the grant of such Options have not received equity securities hereunder (other
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than pursuant to Section 2.5 above or otherwise in a manner described in Rule 16b-3 as such rule
may be amended from time to time) at any time within one year prior to the date of such action,
pursuant to this Director Plan or any other plan of the Company or any of its affiliates entitling
such directors to acquire equity securities of the Company or any of its affiliates.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.1. Each Option granted under this Director Plan shall be evidenced by a stock
option certificate and agreement (the "Stock Option Certificate and Agreement") in a form
consistent with the provisions of this Director Plan, provided that the following terms and
conditions shall apply:
(a) The price at which each share of Common Stock covered by an Option may be
purchased shall be set forth in the Stock Option Certificate and Agreement and shall be determined
by the Administrator, provided that the option price for any Incentive Option shall not be less than
the "fair market value" of the shares of Common Stock at the time of grant determined in
accordance with Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this Director Plan to an Optionee who,
on the date of the grant, directly or indirectly owns more than ten percent (10%) of the voting
power of all classes of capital stock of the Company (or its parent or subsidiary), not including the
shares of Common Stock obtainable upon exercise of the Option, the minimum exercise price of
such Option shall be not less than one hundred ten percent (110%) of the "fair market value" of
the shares of Common Stock on the date of grant determined in accordance with Section 5.1(b)
below.
(b) The "fair market value" shall be determined by the Administrator, which
determination shall be binding upon the Company and its directors. The determination of the fair
market value shall be based upon the following: (i) if the shares of Common Stock are not listed
and traded upon a recognized securities exchange and there is no report of stock prices with respect
to the shares of Common Stock published by a recognized stock quotation service, on the basis of
the recent purchases and sales of the shares of Common Stock in arms-length transactions; or (ii)
if the shares of Common Stock are not then listed and traded upon a recognized securities
exchange or listed for quotation on the NASDAQ Stock Market, and there are reports of stock
prices by a recognized quotation service, upon the basis of the last reported sale or transaction price
of such stock on the date of grant as reported by a recognized quotation service, or, if there is no
last reported sale or transaction price on that day, then upon the basis of the mean of the last
reported closing bid and closing asked prices for such stock on that day or on the date nearest
preceding that day; or (iii) if the shares of Common Stock shall then be listed and traded upon a
recognized securities exchange or listed for quotation on the NASDAQ Stock Market, upon the
basis of the last reported sale or transaction price at which shares of Common Stock were traded
on such recognized securities exchange on the date of grant or, if the shares of Common Stock
were not traded on such date, upon the basis of the last reported sale or transaction price on the
date nearest preceding that date. The Administrator shall also consider such other factors relating
to the fair market value of the shares of Common Stock as it shall deem appropriate.
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(c) For the purpose of determining whether an Optionee owns more than ten percent
(10%) of the voting power of all classes of stock of the Company, an Optionee is considered to own
those shares which are owned directly or indirectly through brothers and sisters (including
half-blooded siblings), spouse, ancestors and lineal descendants; and proportionately as a
shareholder of a corporation, a partner of a partnership, and/or a beneficiary of a trust or an estate
that owns shares of the Company.
(d) Notwithstanding any other provision of this Director Plan, in accordance with the
provisions of Section 422(d) of the Code, to the extent that the aggregate fair market value
(determined at the time the Option is granted) of the shares of Common Stock of the Company
with respect to which Incentive Options (without reference to this provision) are exercisable for the
first time by any individual in any calendar year under any and all stock option plans of the
Company, its subsidiary corporations and its parent (if any) exceeds $100,000, such Options shall
be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted more than one
Incentive Option or Non-Qualified Option during the duration of this Director Plan, and may be
issued a combination of Non-Qualified Options and Incentive Options.
(f) Except as set forth in Section 2.5 above, the duration of any Option and any Right
related thereto shall be within the sole discretion of the Administrator; provided, however, that any
Incentive Option granted to a ten percent (10%) or less stockholder or any Non-Qualified Option
shall, by its terms, be exercised within ten years after the date the Option is granted and any
Incentive Option granted to a greater than ten percent (10%) stockholder shall, by its terms, be
exercised within five years after the date the Option is granted.
(g) An Option and any Right related thereto shall not be transferable by the Optionee
other than by will, or by the laws of descent and distribution. An Option may be exercised during
the Optionee's lifetime only by the Optionee.
(h) At least six months shall elapse from the date on which an Option is granted
hereunder to the date on which any share of Common Stock underlying such Option is sold or any
Right related thereto is exercised, unless the Administrator otherwise consents in writing.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section 6.1 If the employment or service of an Optionee is terminated for cause, the
option rights of such Optionee, both accrued and future, under any then outstanding Non-Qualified
or Incentive Option (except as to Options granted pursuant to Section 2.5 above) shall terminate
immediately. "Cause" shall mean incompetence in the performance of duties, disloyalty, dishonesty,
theft, embezzlement, unauthorized disclosure of patents, processes or trade secrets of the Company,
individually or as an employee, partner, associate, officer or director of any organization. The
determination of the existence and the proof of "cause" shall be made by the Board of Directors
or the Committee and, subject to the review of any determination made by the Committee by the
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Board of Directors, such determination shall be binding on the Optionee and the Company.
Section 6.2. If the employment or service of the Optionee is terminated by either the
Optionee or the Company for any reason other than for cause, death, or for disability, as defined
in Section 22(e)(3) of the Code, the option rights of such Optionee under any then outstanding
Non-Qualified or Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be
exercisable by such Optionee at any time prior to the expiration of the Option or within three
months after the date of such termination, whichever period of time is shorter, but only to the
extent of the accrued right to exercise the Option at the date of such termination.
Section 6.3. In the case of an Optionee who becomes disabled, as defined by Section
22(e)(3) of the Code, the option rights of such Optionee under any then outstanding Non-Qualified
or Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be exercisable by such
Optionee at any time prior to the expiration of the Option or within one year after the date of
termination of employment or service due to disability, whichever period of time is shorter, but only
to the extent of the accrued right to exercise the Option at the date of such termination.
Section 6.4. In the event of the death of an Optionee, the option rights of such Optionee
under any then outstanding Non-Qualified or Incentive Option shall be exercisable by the person
or persons to whom these rights pass by will or by the laws of descent and distribution, at any time
prior to the expiration of the Option or within three years after the date of death, whichever period
of time is shorter, but only to the extent of the accrued right to exercise the Option at the date of
death. If a person or estate acquires the right to exercise a Non-Qualified or Incentive Option by
bequest or inheritance, the Administrator may require reasonable evidence as to the ownership of
such Option, and may require such consents and releases of taxing authorities as the Administrator
may deem advisable.
Section 6.5. With the exception of Non-Qualified Options issued pursuant to Section 2.5
hereof, the Administrator may also provide that a director who is also an employee must be
continuously employed by the Company for such period of time as the Administrator, in its
discretion, deems advisable before the right to exercise any portion of an Option granted to such
employee will accrue, and may also set such other targets, restrictions or other terms relating to the
employment of the Optionee which targets, restrictions, or terms must be fulfilled or complied with,
as the case may be, prior to the exercise of any portion of an Option granted to any employee-
director.
Section 6.6. Options granted under this Director Plan shall not be affected by any change
of duties or position, so long as the Optionee continues in the service of the Company.
Section 6.7. Nothing contained in this Director Plan, or in any Option granted pursuant to
this Director Plan, shall confer upon any Optionee any right with respect to continuance of
employment or service by the Company nor interfere in any way with the right of the Company to
terminate the Optionee's employment or service or change the Optionee's compensation at any
time.
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ARTICLE VII
PURCHASE OF SHARES
Section 7.1. Except as provided in this Article VII, an Option shall be exercised by tender
to the Company of the full exercise price of the shares of Common Stock with respect to which the
Option is being exercised and written notice of such exercise. The right to purchase shares of
Common Stock shall be cumulative so that, once the right to purchase any shares has accrued, such
shares or any part thereof may be purchased at any time thereafter until the expiration or
termination of the Option. A partial exercise of an Option shall not affect the right of the
Optionee to exercise the Option from time to time, in accordance with this Director Plan, as to the
remaining number of shares of Common Stock subject to the Option. The purchase price of the
shares shall be in United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the approval of the
Administrator, exercise his or her Option by tendering to the Company shares of Common Stock
of the Company owned by him or her and having an aggregate fair market value at least equal to
the full exercise price. The fair market value of any shares of Common Stock so surrendered shall
be determined by the Administrator in accordance with Section 5.1(b) hereof.
Section 7.2. Except as provided in Article VI above, an Option may not be exercised unless
the holder thereof is a director of the Company at the time of exercise.
Section 7.3. No Optionee, or Optionee's executor, administrator, legatee, or distributee or
other permitted transferee, shall be deemed to be a holder of any shares of Common Stock subject
to an Option for any purpose whatsoever unless and until a stock certificate or certificates for such
shares are issued to such person under the terms of this Director Plan. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date such stock certificate is
issued, except as provided in Article VIII hereof.
Section 7.4. If: (i) the listing, registration or qualification of the Options issued hereunder,
or of any securities issuable upon exercise of such Options (the "Subject Securities") upon any
securities exchange or quotation system or under federal or state law is necessary as a condition of
or in connection with the issuance or exercise of the Options, or (ii) the consent or approval of any
governmental regulatory body is necessary as a condition of or in connection with the issuance or
exercise of the Options, the Company shall not be obligated to deliver the certificates representing
the Subject Securities or to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or obtained. The Company
will take reasonable action to so list, register or qualify the Options and the Subject Securities, or
effect or obtain such consent or approval, so as to allow for their issuance.
Section 7.5. An Optionee may be required to represent to the Company as a condition of
his or her exercise of Options issued under this Director Plan that: (i) the Subject Securities
acquired upon exercise of his or her Option are being acquired by him or her for investment
purposes only and not with a view to distribution or resale, unless counsel for the Company is then
of the view that such a representation is not necessary and is not required under the Securities Act
of 1933, as amended (the "Securities Act"), or any other applicable statute, law, regulation or rule;
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and (ii) that the Optionee shall make no exercise or disposition of an Option or of the Subject
Securities in contravention of the Securities Act, the Exchange Act or the rules and regulations
thereunder. Optionees may also be required to provide (as a condition precedent to exercise of
an Option) such documentation as may be reasonably requested by the Company to assure
compliance with applicable law and the terms and conditions of this Director Plan and the subject
Option.
Section 7.6. The Administrator may, in its discretion, grant in connection with any Option,
at any time prior to the exercise thereof, the right (previously defined as a "Right" or collectively,
the "Rights") to surrender all or part of the Option to the extent that such Option is exercisable and
receive in exchange an amount (payable in cash, shares of Common Stock valued at the then fair
market value, or a combination thereof as determined by the Administrator) equal to the difference
(the "Spread") between the then fair market value of the shares of Common Stock issuable upon
the exercise of the Option (or portions thereof surrendered) and the option price payable upon the
exercise of the Option (or portions thereof surrendered). Such Rights may be included in an
Option only under the following conditions: (a) the Rights will expire no later than the expiration
of the underlying Option; (b) the Rights may be for no more than one hundred percent (100%) of
the Spread; (c) the Rights are transferable only when the underlying Option is transferable and
under the same conditions; (d) the Rights may be exercised only when the underlying Option is
eligible to be exercised; and (e) the Rights may be exercised only when the Spread is positive, i.e.,
when the market price of the Common Stock subject to the Option exceeds the exercise price of
the Option.
Section 7.7. An Option may also be exercised by tender to the Company of a written notice
of exercise together with advice of the delivery of an order to a broker to sell part or all of the
shares of Common Stock subject to such exercise notice and an irrevocable order to such broker
to deliver to the Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and procedures to be
followed in connection with such a "cashless exercise" shall be approved in advance by the
Administrator.
ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OFSTOCK, ADJUSTMENTS,
REORGANIZATIONS, ETC.
Section 8.1. In the event that the outstanding shares of Common Stock of the Company are
hereafter increased or decreased or changed into or exchanged for a different number of shares or
kind of shares or other securities of the Company or of another corporation by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of
shares or a dividend payable in capital stock, appropriate adjustment shall be made by the
Administrator in the number and kind of shares for the purchase of which Options may be granted
under this Director Plan, including the maximum number that may be granted to any one person.
In addition, the Administrator shall make appropriate adjustments in the number and kind of shares
as to which outstanding Options, or portions thereof then unexercised, shall be exercisable, to the
end that the Optionee's proportionate interest shall be maintained as before the occurrence to the
unexercised portion of the Option and with a corresponding adjustment in the option price per
share. Any such adjustment made by the Administrator shall be conclusive.
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Section 8.2. The grant of an Option pursuant to this Director Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure or to merge or to consolidate or to dissolve, liquidate
or sell, or transfer all or any part of its business or assets.
Section 8.3. Upon the dissolution or liquidation of the Company, or upon a reorganization,
merger or consolidation of the Company as a result of which the outstanding securities of the class
then subject to Options hereunder are changed into or exchanged for cash or property or securities
not of the Company's issue, or upon a sale of substantially all the property of the Company to an
association, person, party, corporation, partnership, or control group as that term is construed for
purposes of the Exchange Act, this Director Plan shall terminate, and all Options theretofore
granted hereunder shall terminate, unless provision be made in writing in connection with such
transaction for the continuance of this Director Plan and/or for the assumption of Options
theretofore granted, or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices, in which event this Director Plan and the Options
theretofore granted shall continue in the manner and under the terms so provided. If this Director
Plan and unexercised Options shall terminate pursuant to the foregoing sentence, all persons
owning any unexercised portions of the Options then outstanding shall have the right, at such time
prior to the consummation of the transaction causing such termination as the Company shall
designate, to exercise the unexercised portions of such Options, including the portions thereof which
would, but for this Section 8.3, not yet be exercisable.
ARTICLE IX
DURATION, AMENDMENT AND TERMINATION
Section 9.1. The Board of Directors may at any time terminate this Director Plan or make
such amendments hereto as it shall deem advisable and in the best interests of the Company,
without action on the part of the stockholders of the Company, unless such approval is required
pursuant to Section 422 of the Code or the regulations thereunder or Rule 16b-3 under the
Exchange Act; provided, however, that no such termination or amendment shall, without the
consent of the individual to whom any Option shall theretofore have been granted, affect or impair
the rights of such individual under such Option, and provided further, that unless the holders of
a majority of each of the classes of the Company's outstanding voting stock entitled to vote thereon
shall have first approved thereof, no amendment of this Director Plan shall be made whereby: (a)
the total number of shares of Common Stock which may be issued pursuant to the exercise of
Options under this Director Plan to all individuals, or any of them, shall be increased, except by
operation of the adjustment provisions of Article VIII hereof, (b) the authority to administer this
Director Plan by the Administrator shall be withdrawn, (c) the maximum term of the Options shall
be extended, (d) the minimum option price of Incentive Options shall be decreased, (e) the price
to Optionees to whom Options have been granted shall be changed, or (f) the class of individuals
eligible to participate in this Director Plan is modified. Pursuant to SEC 422(b) of the Code, no
Incentive Option may be granted pursuant to this Director Plan after ten years from the date this
Director Plan is adopted or the date this Director Plan is approved by the stockholders of the
Company, whichever is earlier.
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ARTICLE X
RESTRICTIONS
Section 10.1. Any shares of Common Stock issued pursuant to exercise of Options granted
under this Director Plan shall be subject to such restrictions on transfer and limitations as shall, in
the opinion of the Administrator, be necessary or advisable to assure compliance with the laws,
rules and regulations of the United States government or any state or jurisdiction thereof. In
addition, except for those Non-Qualified Options issued pursuant to Section 2.5 above, the
Administrator may in any Stock Option Certificate and Agreement impose such other restrictions
upon the exercise of an Option or upon the sale or other disposition of the shares of Common
Stock deliverable upon exercise thereof as the Administrator may, in its sole discretion, determine.
By accepting an award pursuant to this Director Plan, each Optionee shall thereby agree to any
such restrictions.
Section 10.2. Any certificate issued to evidence shares of Common Stock issued pursuant
to exercise of an Option shall bear such legends and statements as the Administrator, the Board
of Directors or counsel to the Company shall deem advisable to assure compliance with the laws,
rules and regulations of the United States government or any state or jurisdiction thereof. No
shares of Common Stock will be delivered pursuant to exercise of the Options granted under this
Director Plan until the Company has obtained such consents or approvals from such regulatory
bodies of the United States government or any state or jurisdiction thereof as the Administrator,
the Board of Directors or counsel to the Company deems necessary or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Section 11.1. The Company is vested with authority under this Director Plan to assist any
employee to whom an Option is granted hereunder (including any director of the Company or any
of its subsidiaries who is also an employee) in the payment of the purchase price payable on
exercise of such Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as shall have been
authorized by or under authority of the Board of Directors. Any such assistance shall comply with
the requirements of Regulation G promulgated by the Board of the Federal Reserve System, as
amended from time to time, and any other applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Section 12.1. The proceeds received by the Company from the issuance and sale of
Common Stock upon exercise of Options granted pursuant to this Director Plan are to be added
to the general funds of the Company and used for its corporate purposes as determined by the
Board of Directors.
ARTICLE XIII
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EFFECTIVENESS OF DIRECTOR PLAN
Section 13.1. This Director Plan shall become effective upon adoption by the Board of
Directors, and Options may be issued hereunder from and after that date subject to the provisions
of Section 3.3 above. This Director Plan must be approved by the Company's stockholders in
accordance with the applicable provisions (relating to the issuance of stock or options) of the
Company's governing documents and state law or, if no such approval is prescribed therein, by the
affirmative vote of the holders of a majority of the votes cast at a duly held stockholders meeting
at which a quorum representing a majority of all the Company's outstanding voting stock is present
and voting (in person or by proxy) or, without regard to any required time period for approval, by
any other method permitted by Section 422 of the Code and the regulations thereunder. If such
stockholder approval is not obtained within one year of the adoption of this Director Plan by the
Board of Directors or within such other time period required under Section 422 of the Code and
the regulations thereunder, this Director Plan shall remain in force, provided however, that all
Options issued and issuable hereunder shall automatically be deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval or adoption of this Director Plan by
the Board of Directors, this Director Plan is executed and adopted as of the 19th day of September,
1995.
Medcross, Inc.
[CORPORATE SEAL]
By: /s/ Henry Y.L. Toh
Its: President
ATTEST:
By: /s/ Stephanie Giallourakis
Secretary
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<S> <C> <C>
</TABLE>
<TABLE>
MEDCROSS, INC.
1995 EMPLOYEE STOCK OPTION AND APPRECIATION RIGHTS PLAN
ARTICLE I
ESTABLISHMENT AND PURPOSE
Section 1.1. Mecross, Inc. (the "Company"), a Florida corporation, hereby establishes a stock
option and appreciation rights plan to be named the Mecross, Inc. 1995 Employee Stock Option
and Appreciation Rights Plan (the "1995 Employee Plan").
Section 1.2. The purpose of this 1995 Employee Plan is to induce persons who are officers,
employees and consultants (none of whom is also a director) of the Company or any of its
subsidiaries who are in a position to contribute materially to the Company's prosperity to remain
with the Company, to offer said persons incentives and rewards in recognition of their contributions
to the Company's progress, and to encourage said persons to continue to promote the best interests
of the Company. This 1995 Employee Plan provides for the grant of options to purchase shares
of common stock of the Company, par value $.007 per share (the "Common Stock") which qualify
as incentive stock options ("Incentive Options") under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), to persons who are employees, as well as options which do not
so qualify ("Non-Qualified Options") to be issued to persons, including those who are not
employees. This 1995 Employee Plan also provides for grants of stock appreciation rights ("Rights")
in connection with the grant of options under this 1995 Employee Plan. Incentive Options and
Non-Qualified Options may be collectively referred to hereinafter as the "Options" as the context
may require.
Section 1.3. All options and other rights previously granted by the Company under any
other plan previously adopted by the Company shall continue to be governed by such plan. All
Options granted hereunder on or after the date that this 1995 Employee Plan has been approved
and adopted by the Company's board of directors (the "Board of Directors") shall be governed by
the terms and conditions of this 1995 Employee Plan unless the terms of such option specifically
indicate that it is not to be so governed.
ARTICLE II
ADMINISTRATION
Section 2.1. All determinations under this 1995 Employee Plan concerning the selection of
persons eligible to receive awards under this 1995 Employee Plan and with respect to the timing,
pricing and amount of an award under this 1995 Employee Plan (other than pursuant to a non-
discretionary formula set forth in this Plan) shall be made by the administrator (the
"Administrator") of this 1995 Employee Plan. The Administrator shall be either: (a) the Board of
Directors, if each member of the Board of Directors is a "disinterested person" for the purposes
of this 1995 Employee Plan within the meaning of such term as defined by Rule 16b-3 (as such rule
may be amended from time to time, "Rule 16b-3"), under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or (b) in the discretion of the Board of Directors by a committee
(the "Committee") of not less than two members of the Board of Directors, each of whom is a
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"disinterested person." A "disinterested person" within the meaning of Rule 16b-3 as in effect upon
the date this 1995 Employee Plan is adopted by the Board of Directors is a person who has not
been granted or awarded equity securities (within the meaning of the Exchange Act) under this
1995 Employee Plan or any other plan of the Company or any affiliate thereof at any time within
one year prior to such person's service as a member of the Administrator or during such service,
except as otherwise permitted by Rule 16b-3(c). In the event this 1995 Employee Plan is
administered by the Committee, the Committee shall select one of its members to serve as the
chairman thereof and shall hold its meetings at such times and places as it may determine. In such
case, a majority of the total number of members of the Committee shall be necessary to constitute
a quorum; and (i) the affirmative act of a majority of the members present at any meeting at which
a quorum is present, or (ii) the approval in writing by a majority of the members of the Committee,
shall be necessary to constitute action by the Committee.
With respect to persons subject to Section 16 of the Exchange Act, transactions under this
1995 Employee Plan are intended to comply with all applicable conditions of Rule 16b-3 or its
successors under the Exchange Act. To the extent that any provision of this 1995 Employee Plan
or action by the Administrator fails to so comply, it shall be deemed to be null and void, to the
extent permitted by law and deemed advisable by the Administrator.
Section 2.2. The provisions of this 1995 Employee Plan relating to Incentive Options are
intended to comply in every respect with Section 422 of the Code ("Section 422") and the
regulations promulgated thereunder. In the event that any future statute or regulation shall modify
Section 422, this 1995 Employee Plan shall be deemed to incorporate by reference such
modification. Any stock option agreement relating to the grant of any Incentive Option pursuant
to this 1995 Employee Plan, which option is outstanding and unexercised at the time that any
modifying statute or regulation becomes effective, shall also be deemed to incorporate by reference
such modification, and no notice of such modification need be given to the Optionee (as hereinafter
defined). Any stock option agreement relating to an Incentive Option shall provide that the
Optionee (as hereinafter defined) hold the stock received upon exercise of such Incentive Option
for a minimum of two years from the date of grant of the Incentive Option and one year from the
date of exercise of such Incentive Option, absent the written approval, consent or waiver of the
Administrator.
Section 2.3. If any provision of this 1995 Employee Plan is determined to disqualify the
shares of Common Stock purchasable upon exercise of an Incentive Option granted under this 1995
Employee Plan from the special tax treatment provided by Section 422, such provision shall be
deemed to incorporate by reference the modification required to qualify such shares of Common
Stock for said tax treatment.
Section 2.4. The Company shall grant Options under this 1995 Employee Plan in accordance
with determinations made by the Administrator pursuant to the provisions of this 1995 Employee
Plan. All Options granted pursuant to this 1995 Employee Plan shall be clearly identified as
Incentive Options or Non-Qualified Options. The Administrator may from time to time adopt (and
thereafter amend or rescind) such rules and regulations for carrying out this 1995 Employee Plan
and take such action in the administration of this 1995 Employee Plan, not inconsistent with the
provisions hereof, as it shall deem proper. The Board of Directors or, subject to the supervision
of the Board of Directors, the Committee, as the Administrator, shall have plenary discretion,
subject to the express provisions of this 1995 Employee Plan, to determine which officers,
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employees and consultants shall be granted Options, the number of shares subject to each Option,
the time or times when an Option may be exercised (whether in whole or in installments), whether
Rights under Section 7.6 hereof shall be granted, the terms and provisions of the respective option
agreements (which need not be identical), including such terms and provisions which may be
amended from time to time as shall be required, in the judgment of the Administrator, to conform
to any change in any law or regulation applicable hereto, and to make all other determinations
deemed necessary or advisable for the administration of this 1995 Employee Plan. The
interpretation and construction of any provision of this 1995 Employee Plan by the Administrator
(unless otherwise determined by the Board of Directors) shall be final, conclusive and binding upon
all persons. Directors of the Company (or any subsidiary of the Company) may not participate in
this 1995 Employee Plan.
Section 2.5. No member of the Administrator shall be liable for any action or determination
made in good faith with respect to administration of this 1995 Employee Plan or the Options
granted hereunder. A member of the Administrator shall be indemnified by the Company, pursuant
to the Company's bylaws, for any expenses, judgments or other costs incurred as a result of a
lawsuit filed against such member claiming any rights or remedies arising out of such member's
participation in the administration of this 1995 Employee Plan.
ARTICLE III
TOTAL NUMBER OF SHARES TO BE OPTIONED
Section 3.1. There shall be reserved for issuance or transfer upon exercise of Options to be
granted from time to time under this 1995 Employee Plan an aggregate of 400,000 shares of
Common Stock of the Company (subject to adjustment as provided in Article VIII hereof). The
shares issued upon exercise of any Options granted under this 1995 Employee Plan may be shares
of Common Stock previously issued and reacquired by the Company at any time or authorized but
unissued shares of Common Stock, as the Board of Directors from time to time may determine.
Section 3.2. In the event that any Options outstanding under this 1995 Employee Plan for
any reason expire or are terminated without having been exercised in full or shares of Common
Stock subject to Options are surrendered in whole or in part pursuant to Rights granted under
Section 7.6 hereof (except to the extent that shares of Common Stock are issued as payment to the
holder of the Option upon such surrender) the unpurchased shares of Common Stock subject to
such Option and any such surrendered shares of Common Stock may again be available for transfer
under this 1995 Employee Plan.
Section 3.3. No Options shall be granted pursuant to this 1995 Employee Plan to any
Optionee after the tenth anniversary of the earlier of: (a) the date that this 1995 Employee Plan
is adopted by the Board of Directors, or (b) the date that this 1995 Employee Plan is approved by
the stockholders of the Company.
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ARTICLE IV
ELIGIBILITY
Section 4.1. Non-Qualified Options may be granted pursuant to this 1995 Employee Plan
only to officers, employees and consultants of the Company (or any of its subsidiaries) selected by
the Administrator, and Incentive Options may be granted pursuant to this 1995 Employee Plan only
to employees (including officers who are also employees) of the Company (or any of its
subsidiaries) selected by the Administrator. Persons granted Options pursuant to this 1995
Employee Plan are referred to herein as "Optionees." For purposes of determining who is an
employee with respect to eligibility for Incentive Options, Section 422 of the Code shall govern.
The Administrator may determine (in its sole discretion) that any person who would otherwise be
eligible to be granted Options shall, nonetheless, be ineligible to receive any award under this 1995
Employee Plan.
Section 4.2. The Administrator will (in its discretion) determine the persons to be granted
Options, the time or times at which Options shall be granted, the number of shares of Common
Stock subject to each Option, the terms of a vesting or forfeiture schedule, if any, the type of
Option issued, the period during which such Options may be exercised, the manner in which
Options may be exercised and all other terms and conditions of the Options; provided, however,
no Option will be granted which has terms or conditions inconsistent with those stated in Articles
V and VI hereof. Relevant factors in making such determinations may include the value of the
services rendered by the respective Optionee, his or her present and potential contributions to the
Company, and such other factors which are deemed relevant in accomplishing the purpose of this
1995 Employee Plan.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
Section 5.1. Each Option granted under this 1995 Employee Plan shall be evidenced by a
stock option certificate and agreement (the "Stock Option Certificate and Agreement") in a form
consistent with this 1995 Employee Plan, provided that the following terms and conditions shall
apply:
(a) The price at which each share of Common Stock covered by an Option may be
purchased shall be set forth in the Stock Option Certificate and Agreement and shall be determined
by the Administrator, provided that the option price for any Incentive Option shall not be less than
the "fair market value" of the shares of Common Stock at the time of grant determined in
accordance with Section 5.1(b) below. Notwithstanding the foregoing, if an Incentive Option to
purchase shares of Common Stock is granted pursuant to this 1995 Employee Plan to an Optionee
who, on the date of the grant, directly or indirectly owns more than ten percent (10%) of the voting
power of all classes of capital stock of the Company (or its parent or subsidiary), not including the
shares of Common Stock obtainable upon exercise of the Option, the minimum exercise price of
such Option shall be not less than one hundred ten percent (110%) of the "fair market value" of
the shares of Common Stock on the date of grant determined in accordance with Section 5.1(b)
below.
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(b) The "fair market value" shall be determined by the Administrator, which
determination shall be binding upon the Company and its officers, employees and consultants. The
determination of the fair market value shall be based upon the following: (i) if the shares of
Common Stock are not listed and traded upon a recognized securities exchange and there is no
report of stock prices with respect to the shares of Common Stock published by a recognized stock
quotation service, on the basis of the recent purchases and sales of the shares of Common Stock
in arms-length transactions; or (ii) if the shares of Common Stock are not then listed and traded
upon a recognized securities exchange or quoted on the NASDAQ Stock Market, and there are
reports of stock prices by a recognized quotation service, upon the basis of the last reported sale
or transaction price of such stock on the date of grant as reported by a recognized quotation
service, or, if there is no last reported sale or transaction price on that day, then upon the basis of
the mean of the last reported closing bid and closing asked prices for such stock on that day or on
the date nearest preceding that day; or (iii) if the shares of Common Stock shall then be listed and
traded upon a recognized securities exchange or quoted on the NASDAQ Stock Market, upon the
basis of the last reported sale or transaction price at which shares of Common Stock were traded
on such recognized securities exchange on the date of grant or, if the shares of Common Stock
were not traded on such date, upon the basis of the last reported sale or transaction price on the
date nearest preceding that date. The Administrator shall also consider such other factors relating
to the fair market value of the shares of Common Stock as it shall deem appropriate.
(c) For the purpose of determining whether an Optionee owns more than ten percent
(10%) of the voting power of all classes of stock of the Company, an Optionee is considered to own
those shares which are owned directly or indirectly through brothers and sisters (including
half-blooded siblings), spouse, ancestors and lineal descendants; and proportionately as a
shareholder of a corporation, a partner of a partnership, and/or a beneficiary of a trust or an estate
that owns shares of the Company.
(d) Notwithstanding any other provision of this 1995 Employee Plan, in accordance with
the provisions of Section 422(d) of the Code, to the extent that the aggregate fair market value
(determined at the time the Option is granted) of the shares of Common Stock of the Company
with respect to which Incentive Options (without reference to this provision) are exercisable for the
first time by any individual in any calendar year under any and all stock option plans of the
Company, its subsidiary corporations and its parent (if any) exceeds $100,000, such Options shall
be treated as Non-Qualified Options.
(e) An Optionee may, in the Administrator's discretion, be granted more than one
Incentive Option or Non-Qualified Option during the duration of this 1995 Employee Plan, and
may be issued a combination of Non-Qualified Options and Incentive Options; provided, however,
that non-employees are not eligible to receive Incentive Options and directors are not eligible to
receive any Options hereunder.
(f) The duration of any Option and any Right related thereto shall be within the sole
discretion of the Administrator; provided, however, that any Incentive Option granted to a ten
percent (10%) or less stockholder or any Non-Qualified Option shall, by its terms, be exercised
within ten years after the date the Option is granted and any Incentive Option granted to a greater
than ten percent (10%) stockholder shall, by its terms, be exercised within five years after the date
the Option is granted.
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(g) An Option and any Right related thereto shall not be transferable by the Optionee
other than by will, or by the laws of descent and distribution. An Option may be exercised during
the Optionee's lifetime only by the Optionee.
(h) At least six months shall elapse from the date on which an Option is granted to an
officer or beneficial owner of more than ten percent (10%) of the outstanding shares of Common
Stock of the Company under this 1995 Employee Plan by the Administrator to the date on which
any share of Common Stock underlying such Option is sold or any Right related thereto is
exercised, unless the Administrator otherwise consents in writing.
ARTICLE VI
EMPLOYMENT OR SERVICE OF OPTIONEE
Section 6.1. If the employment or service of an Optionee is terminated for cause, the option
rights of such Optionee, both accrued and future, under any then outstanding Non-Qualified or
Incentive Option shall terminate immediately. "Cause" shall mean incompetence in the
performance of duties, disloyalty, dishonesty, theft, embezzlement, unauthorized disclosure of
patents, processes or trade secrets of the Company, individually or as an employee, partner,
associate, officer or director of any organization. The determination of the existence and the proof
of "cause" shall be made by the Administrator and, subject to the review of any determination made
by the Administrator, such determination shall be binding on the Optionee and the Company.
Section 6.2. If the employment or service of the Optionee is terminated by either the
Optionee or the Company for any reason other than for cause, death, or for disability, as defined
in Section 22(e)(3) of the Code, the option rights of such Optionee under any then outstanding
Non-Qualified or Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be
exercisable by such Optionee at any time prior to the expiration of the Option or within three
months after the date of such termination, whichever period of time is shorter, but only to the
extent of the accrued right to exercise the Option at the date of such termination.
Section 6.3. In the case of an Optionee who becomes disabled, as defined by Section
22(e)(3) of the Code, the option rights of such Optionee under any then outstanding Non-Qualified
or Incentive Option shall, subject to the provisions of Section 5.1(h) hereof, be exercisable by such
Optionee at any time prior to the expiration of the Option or within one year after the date of
termination of employment or service due to disability, whichever period of time is shorter, but only
to the extent of the accrued right to exercise the Option at the date of such termination.
Section 6.4. In the event of the death of an Optionee, the option rights of such Optionee
under any then outstanding Non-Qualified or Incentive Option shall be exercisable by the person
or persons to whom these rights pass by will or by the laws of descent and distribution, at any time
prior to the expiration of the Option or within three years after the date of death, whichever period
of time is shorter, but only to the extent of the accrued right to exercise the Option at the date of
death. If a person or estate acquires the right to exercise a Non-Qualified or Incentive Option by
bequest or inheritance, the Administrator may require reasonable evidence as to the ownership of
such Option, and may require such consents and releases of taxing authorities as the Administrator
may deem advisable.
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Section 6.5. The Administrator may also provide that an employee must be continuously
employed by the Company for such period of time as the Administrator, in its discretion, deems
advisable before the right to exercise any portion of an Option granted to such employee will
accrue, and may also set such other targets, restrictions or other terms relating to the employment
of the Optionee which targets, restrictions, or terms must be fulfilled or complied with, as the case
may be, prior to the exercise of any portion of an Option granted to any employee.
Section 6.6. Options granted under this 1995 Employee Plan shall not be affected by any
change of duties or position, so long as the Optionee continues in the service of the Company.
Section 6.7. Nothing contained in this 1995 Employee Plan, or in any Option granted
pursuant to this 1995 Employee Plan, shall confer upon any Optionee any right with respect to
continuance of employment or service by the Company nor interfere in any way with the right of
the Company to terminate the Optionee's employment or service or change the Optionee's
compensation at any time.
ARTICLE VII
PURCHASE OF SHARES
Section 7.1. Except as provided in this Article VII, an Option shall be exercised by tender
to the Company of the full exercise price of the shares of Common Stock with respect to which the
Option is exercised and written notice of the exercise. The right to purchase shares of Common
Stock shall be cumulative so that, once the right to purchase any shares of Common Stock has
accrued, such shares or any part thereof may be purchased at any time thereafter until the
expiration or termination of the Option. A partial exercise of an Option shall not affect the right
of the Optionee to exercise the Option from time to time, in accordance with this 1995 Employee
Plan, as to the remaining number of shares of Common Stock subject to the Option. The purchase
price of the shares shall be in United States dollars, payable in cash or by certified bank check.
Notwithstanding the foregoing, in lieu of cash, an Optionee may, with the approval of the
Administrator, exercise his or her Option by tendering to the Company shares of Common Stock
of the Company owned by him or her and having an aggregate fair market value at least equal to
the full exercise price. The fair market value of any shares of Common Stock so surrendered shall
be determined by the Administrator in accordance with Section 5.1(b) hereof.
Section 7.2. Except as provided in Article VI above, an Option may not be exercised unless
the holder thereof is an officer, employee, or consultant of the Company at the time of exercise.
Section 7.3. No Optionee, or Optionee's executor, administrator, legatee, or distributee or
other permitted transferee, shall be deemed to be a holder of any shares of Common Stock subject
to an Option for any purpose whatsoever unless and until a stock certificate or certificates for such
shares are issued to such person under the terms of this 1995 Employee Plan. No adjustment shall
be made for dividends (ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date such stock certificate is
issued, except as provided in Article VIII hereof.
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Section 7.4. If: (i) the listing, registration or qualification of the Options issued hereunder,
or of any securities issuable upon exercise of such Options (the "Subject Securities") upon any
securities exchange or quotation system or under federal or state law is necessary as a condition of
or in connection with the issuance or exercise of the Options, or (ii) the consent or approval of any
governmental regulatory body is necessary as a condition of or in connection with the issuance or
exercise of the Options, the Company shall not be obligated to deliver the certificates representing
the Subject Securities or to accept or to recognize an Option exercise unless and until such listing,
registration, qualification, consent or approval shall have been effected or obtained. The Company
will take reasonable action to so list, register, or qualify the Options and the Subject Securities, or
effect or obtain such consent or approval, so as to allow for their issuance.
Section 7.5. An Optionee may be required to represent to the Company as a condition of
his or her exercise of Options issued under this 1995 Employee Plan that: (i) the Subject Securities
acquired upon exercise of his or her Option are being acquired by him or her for investment
purposes only and not with a view to distribution or resale, unless counsel for the Company is then
of the view that such a representation is not necessary and is not required under the Securities Act
of 1933, as amended (the "Securities Act"), or any other applicable statute, law, regulation or rule;
and (ii) that the Optionee shall make no exercise or disposition of an Option or of the Subject
Securities in contravention of the Securities Act, the Exchange Act or the rules and regulations
thereunder. Optionees may also be required to provide (as a condition precedent to exercise of
an Option) such documentation as may be reasonably requested by the Company to assure
compliance with applicable law and the terms and conditions of this 1995 Employee Plan and the
subject Option.
Section 7.6. The Administrator may, in its discretion, grant in connection with any Option,
at any time prior to the exercise thereof, the right (previously defined as a "Right" or collectively,
the "Rights") to surrender all or part of the Option to the extent that such Option is exercisable and
receive in exchange an amount (payable in cash, shares of Common Stock valued at the then fair
market value, or a combination thereof as determined by the Administrator) equal to the difference
(the "Spread") between the then fair market value of the shares of Common Stock issuable upon
the exercise of the Option (or portions thereof surrendered) and the option price payable upon the
exercise of the Option (or portions thereof surrendered). Such Rights may be included in an
Option only under the following conditions: (a) the Rights will expire no later than the expiration
of the underlying Option; (b) the Rights may be for no more than one hundred percent (100%) of
the Spread; (c) the Rights are transferable only when the underlying Option is transferable and
under the same conditions; (d) the Rights may be exercised only when the underlying Option is
eligible to be exercised; and (e) the Rights may be exercised only when the Spread is positive, i.e.,
when the market price of the stock subject to the Option exceeds the exercise price of the Option.
Section 7.7. An Option may also be exercised by tender to the Company of a written notice
of exercise together with advice of the delivery of an order to a broker to sell part or all of the
shares of Common Stock subject to such exercise notice and an irrevocable order to such broker
to deliver to the Company (or its transfer agent) sufficient proceeds from the sale of such shares
to pay the exercise price and any withholding taxes. All documentation and procedures to be
followed in connection with such a "cashless exercise" shall be approved in advance by the
Administrator.
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ARTICLE VIII
CHANGE IN NUMBER OF OUTSTANDING SHARES OFSTOCK, ADJUSTMENTS,
REORGANIZATIONS, ETC.
Section 8.1. In the event that the outstanding shares of Common Stock of the Company are
hereafter increased or decreased or changed into or exchanged for a different number of shares or
kind of shares or other securities of the Company or of another corporation by reason of
reorganization, merger, consolidation, recapitalization, reclassification, stock split, combination of
shares, or a dividend payable in capital stock, appropriate adjustment shall be made by the
Administrator in the number and kind of shares for the purchase of which Options may be granted
under this 1995 Employee Plan, including the maximum number that may be granted to any one
person. In addition, the Administrator shall make appropriate adjustments in the number and kind
of shares as to which outstanding Options, or portions thereof then unexercised, shall be
exercisable, to the end that the Optionee's proportionate interest shall be maintained as before the
occurrence to the unexercised portion of the Option and with a corresponding adjustment in the
option price per share. Any such adjustment made by the Administrator shall be conclusive.
Section 8.2. The grant of an Option pursuant to this 1995 Employee Plan shall not affect
in any way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or to consolidate or to
dissolve, liquidate or sell, or transfer all or any part of its business or assets.
Section 8.3. Upon the dissolution or liquidation of the Company, or upon a reorganization,
merger or consolidation of the Company as a result of which the outstanding securities of the class
then subject to Options hereunder are changed into or exchanged for cash or property or securities
not of the Company's issue, or upon a sale of substantially all the property of the Company to an
association, person, party, corporation, partnership, or control group as that term is construed for
purposes of the Exchange Act, this 1995 Employee Plan shall terminate, and all Options theretofore
granted hereunder shall terminate, unless provision be made in writing in connection with such
transaction for the continuance of this 1995 Employee Plan and/or for the assumption of Options
theretofore granted, or the substitution for such Options of options covering the stock of a
successor employer corporation, or a parent or a subsidiary thereof, with appropriate adjustments
as to the number and kind of shares and prices, in which event this 1995 Employee Plan and
options theretofore granted shall continue in the manner and under the terms so provided. If this
1995 Employee Plan and unexercised Options shall terminate pursuant to the foregoing sentence,
all persons owning any unexercised portions of Options then outstanding shall have the right, at
such time prior to the consummation of the transaction causing such termination as the Company
shall designate, to exercise the unexercised portions of their Options, including the portions thereof
which would, but for this Section 8.3 not yet be exercisable.
SECTION IX
DURATION, AMENDMENT AND TERMINATION
Section 9.1. The Board of Directors may at any time terminate this 1995 Employee Plan
or make such amendments hereto as it shall deem advisable and in the best interests of the
Company, without action on the part of the stockholders of the Company unless such approval is
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required pursuant to Section 422 of the Code or the regulations thereunder or Rule 16b-3 under
the Exchange Act; provided, however, that no such termination or amendment shall, without the
consent of the individual to whom any Option shall theretofore have been granted, affect or impair
the rights of such individual under such Option, and provided, further, that unless the holders of
a majority of each of the classes of the Company's outstanding voting stock entitled to vote thereon
shall have first approved thereof, no amendment of this 1995 Employee Plan shall be made
whereby: (a) the total number of shares of Common Stock which may be optioned under this 1995
Employee Plan to all individuals, or any of them, shall be increased, except by operation of the
adjustment provisions of Article VIII hereof, (b) the authority to administer this 1995 Employee
Plan by the Administrator shall be withdrawn, (c) the maximum term of the Options shall be
extended, (d) the minimum option price of Incentive Options shall be decreased, (e) the price to
Optionees to whom Options have been granted shall be changed, or (f) the class of individuals
eligible to participate in this 1995 Employee Plan is modified. Pursuant to Section 422(b) of the Code,
no Incentive Option may be granted pursuant to this 1995 Employee Plan after ten years from the
date this 1995 Employee Plan is adopted or the date this 1995 Employee Plan is approved by the
stockholders of the Company, whichever is earlier.
ARTICLE X
RESTRICTIONS
Article 10.1. Any shares of Common Stock issued pursuant to this 1995 Employee Plan shall
be subject to such restrictions on transfer and limitations as shall, in the opinion of the
Administrator, be necessary or advisable to assure compliance with the laws, rules and regulations
of the United States government or any state or jurisdiction thereof. In addition, the
Administrator may in any Stock Option Certificate and Agreement impose such other restrictions
upon the exercise of an Option or upon the sale or other disposition of the shares of Common
Stock deliverable upon exercise thereof as the Administrator may, in its sole discretion, determine.
By accepting an award pursuant to this 1995 Employee Plan, each Optionee shall thereby agree to
any such restrictions.
Article 10.2. Any certificate issued to evidence shares of Common Stock issued pursuant
to an Option shall bear such legends and statements as the Administrator, the Board of Directors
or counsel to the Company shall deem advisable to assure compliance with the laws, rules and
regulations of the United States government or any state or jurisdiction thereof. No shares of
Common Stock will be delivered pursuant to exercise of the Options granted under this 1995
Employee Plan until the Company has obtained such consents or approvals from such regulatory
bodies of the United States government or any state or jurisdiction thereof as the Administrator,
the Board of Directors or counsel to the Company deems necessary or advisable.
ARTICLE XI
FINANCIAL ASSISTANCE
Article 11.1. The Company is vested with authority under this 1995 Employee Plan to assist
any employee to whom an Option is granted hereunder (including any officer of the Company or
any of its subsidiaries who is also an employee) in the payment of the purchase price payable on
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exercise of such Option, by lending the amount of such purchase price to such employee on such
terms and at such rates of interest and upon such security (or unsecured) as shall have been
authorized by or under authority of the Board of Directors. Any such assistance shall comply with
the requirements of Regulation G promulgated by the Board of the Federal Reserve System, as
amended from time to time, and any other applicable law, rule or regulation.
ARTICLE XII
APPLICATION OF FUNDS
Article 12.1. The proceeds received by the Company from the issuance and sale of Common
Stock upon exercise of Options granted pursuant to this 1995 Employee Plan are to be added to
the general funds of the Company and used for its corporate purposes as determined by the Board
of Directors.
ARTICLE XIII
EFFECTIVENESS OF PLAN
Article 13.1. This 1995 Employee Plan shall become effective upon adoption by the Board
of Directors, and Options may be issued hereunder from and after that date subject to the
provisions of Section 3.3 above. This 1995 Employee Plan must be approved by the Company's
stockholders in accordance with the applicable provisions (relating to the issuance of stock or
options) of the Company's governing documents and state law or, if no such approval is prescribed
therein, by the affirmative vote of the holders of a majority of the votes cast at a duly held
stockholders meeting at which a quorum representing a majority of all the Company's outstanding
voting stock is present and voting (in person or by proxy) or, without regard to any required time
period for approval, by any other method permitted by Section 422 of the Code and the regulations
thereunder. If such stockholder approval is not obtained within one year of the adoption of this
1995 Employee Plan by the Board of Directors or within such other time period required under
Section 422 of the Code and the regulations thereunder, this 1995 Employee Plan shall remain in
force, provided however, that all Options issued and issuable hereunder shall automatically be
deemed to be Non-Qualified Options.
IN WITNESS WHEREOF, pursuant to the approval of this 1995 Employee Plan by the
Board of Directors, this 1995 Employee Plan is executed and adopted as of the 19th day of
September, 1995.
Medcross, Inc.
[CORPORATE SEAL]
By: /s/ Henry Y.L. Toh
Its: President
ATTEST:
By: /s/ Stephanie Giallourakis
Secretary
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<S> <C> <C>
</TABLE>
<TABLE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of this ____
day of April, 1996 between I-Link Worldwide Inc., a Utah corporation (the "Company") and John
Edwards, an individual resident of Provo, Utah (the "Employee"), and shall be effective upon
execution.
WITNESSETH:
WHEREAS, the Company is a wholly-owned subsidiary of Medcross, Inc. ("Medcross");
WHEREAS, the Employee is desirous of becoming an employee of the Company;
WHEREAS, it is the desire of the Company to offer the Employee employment with the
Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, it is the desire of the Employee to accept the Company's offer of employment
with the Company upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants, conditions
and agreements contained herein and for such other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto, each intending to be legally
bound hereby, agree as follows:
1. Employment. The Company hereby agrees to employ the Employee and the
Employee hereby agrees to be employed by the Company upon the terms and subject to the
conditions set forth herein for the period of employment as set forth in Section 2 hereof (the
"Period of Employment").
2. Term; Period of Employment. Subject to termination as hereinafter provided, the
Period of Employment hereunder shall be from the date hereof (the "Effective Date") through the
third anniversary of the Effective Date. Such Period of Employment may be extended for such
period and upon such terms as the parties hereto may hereafter mutually agree.
3. Office and Duties. During the Period of Employment:
(a) the Company shall employ the Employee as Chief Executive Officer with the
responsibilities reasonably prescribed for such position by the Board of Directors of the Company;
and
(b) the Company shall cause Employee to be elected a director of the Company;
and
(c) the Employee shall devote substantially all of his working time to the business
and affairs of the Company; except (i) for vacations of two (2) weeks per year, (ii) illness or (iii)
incapacity. Notwithstanding the preceding sentence, nothing in this Agreement shall preclude the
Employee from devoting reasonable amounts of time:
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(i) for serving as a director or member of a committee of any organization or entity
involving no conflict of interest with the Company; or
(ii) engaging in charitable and community activities;
provided, however, that such activities do not interfere with the performance by the Employee of
his duties hereunder. In consideration of such employment, the Employee agrees that he shall not,
without the prior written consent of the Company, directly or indirectly, individually or as a member
of any partnership or joint venture, or as an officer, director, stockholder, employee or agent of any
other person, firm, corporation, business organization or other entity, engage in any trade or
business activity or pursuit for his own account or for, or on behalf of, any other person, firm,
corporation, business organization or other entity, irrespective of whether the same competes,
conflicts or interferes with that of the Company or the performance of the Employee's obligations
hereunder; provided, however, that nothing contained herein shall be construed to require the
Employee to change or terminate existing relationships or to divest himself from existing ownership
interests in other entities or to prevent the Employee from investing in the stock of any corporation,
which does not compete with the Company, which is listed on a national securities exchange or
traded in the over-the-counter market if the Employee does not and will not as a result of such
investment own more than five percent (5%) of the stock of such corporation ("Permitted
Investments"). The Employee represents and warrants that he is not party to any agreement, oral
or written, which restricts in any way: (a) his ability to perform his obligations hereunder; or (b) his
right to compete with a previous employer or such employer's business.
4. Compensation and Benefits. In exchange for the services rendered by the Employee
pursuant hereto in any capacity during the Period of Employment, including without limitation,
services as an officer, director, or member of any committee of the Company or any affiliate,
subsidiary or division thereof, the Employee shall be compensated as follows:
(a) Compensation. The Company shall pay the Employee compensation equal to
at least One Hundred Seventy-Five Thousand Dollars ($175,000) per annum as it may be adjusted
herein below ("Salary") at a rate of Fourteen Thousand Five Hundred Eighty Dollars and Thirty-
Three Cents ($14,580.33) per month (such monthly amount as the same may be increased from
time to time by virtue of the adjustments set forth hereinbelow shall be defined as the "Monthly
Compensation").
(b) Profitability Bonus. The Company may pay the Employee a bonus if, in the
sole judgment of the Board of Directors, the earnings of the Company or the services of the
Employee merit such a bonus.
(c) Withholding and Employment Tax. Payment of all compensation hereunder
shall be subject to customary withholding tax and other employment taxes as may be required to
be withheld or otherwise imposed pursuant to applicable laws, rules or regulations to which the
Company as an employer is subject with respect to compensation paid by an employer/corporation
to an employee.
(d) Options. Upon commencement of employment of the Employee hereunder,
the Company shall grant to the Employee an option to purchase one million (1,000,000) shares of
the common stock of Medcross (the "Common Stock") at an exercise price of $7.00; such option
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shall vest and become exercisable with respect to 83,333 shares of Common Stock immediately, and
shall thereafter vest and be exercisable in increments of 83,333 shares of Common Stock on a
quarterly basis on the first calendar day of each quarter for the twelve quarters following execution
hereof.
In the event of termination of the Employee's employment pursuant to Section 7(a) hereof,
the Option shall remain exercisable to the extent vested through the date of termination hereunder
and shall expire as to any portions thereof which have not vested prior to such date.
In the event of termination of the Employee's employment pursuant to Sections 7(b) and
7(c) hereof, the Option shall fully vest and become immediately exercisable upon termination by
the Company as set forth in Section 7(b) and upon delivery by the Employee of the notice set forth
in Section 7(c), respectively.
To the extent that this Agreement is terminated by the Employee as the result of a Change
in Control (as defined in Section 8(b) and referred to in Section 7(c) hereof), the Option shall
remain exercisable with respect to those portions of the Option vested through the date on which
such Change in Control occurs and shall expire with respect to any portion thereof which have not
vested prior to such date. In the event that a Change in Control occurs and the Employee remains
in the employ of the Company or its successor, such Option shall continue to vest and be
exercisable in accordance with its terms and shall be exercisable for Common Stock of Medcross,
or the securities of the successor as the same may be issuable to other holders of Common Stock
of Medcross.
5. Business Expenses. The Company shall pay or reimburse the Employee for all
reasonable travel or other expenses incurred by the Employee in connection with the performance
of his duties under this Agreement, provided that the same are incurred, in accordance with such
procedures as the Company may from time to time establish for employees and as required to
preserve any deductions for federal income taxation purposes to which the Company may be
entitled.
6. Other Benefits The Company shall provide the Employee health insurance for the
Employee and his dependents, life insurance, and disability insurance benefits and such other
benefits as are generally provided to executive officers of the Company. The Employee shall have
the right to participate in any and all Company stock option, stock purchase and similar plans
currently in effect or hereafter adopted for which he is eligible.
7. Termination of Employment. Notwithstanding any other provision of this Agreement,
employment hereunder may be terminated:
(a) By the Company, in the event of the employee's death or Disability or for "Just
Cause." "Just Cause" shall be defined to include: (i) the Employee's indictment of a crime
constituting a felony or conviction of a crime involving an act or acts of dishonesty, fraud or moral
turpitude; or (ii) violation of any material Company policy or failure to observe any directive of the
Board of Directors. The Employee shall be deemed to have a "Disability" for purposes of this
Agreement if he is unable to perform, by reason of physical or mental incapacity, his duties or
obligations under this Agreement for a total period of ninety (90) days in any 365-day period. The
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Board of Directors shall determine whether and when the Disability of the Employee has occurred
and such determination shall not be arbitrary or unreasonable. The Company shall by written
notice to the Employee given within thirty (30) days after discovery of the occurrence of an event
or circumstance which constitutes "Just Cause," specify the event or circumstance giving rise to the
Company's exercise of its right under Section 7(a) and, with respect to Just Cause arising under
Section 7(a)(i), the Employee's employment hereunder shall be deemed terminated as of the date
of such notice; with respect to Just Cause arising under Sections 7(a)(ii) the Company shall provide
the Employee with thirty (30) days written notice of such violation or failure and the Employee
shall be given reasonable opportunity during such thirty (30) day period to cure the subject violation
or failure; or
(b) By the Company, in its sole and absolute discretion, provided that in such
event the Company shall, as liquidated damages or severance pay, or both, pay to the Employee
an amount equal to the Employee's Monthly Compensation (as defined in Section 4(a) hereof) for
the remaining term hereof (the "Remaining Compensation"); or
(c) By the Employee, upon any violation of any material provision of this
Agreement by the Company, which violation remains unremedied for a period of thirty (30) days
after written notice of the same is delivered to the Company by the Employee or in the event of
a "Change In Control" as defined in Section 8(b) hereof, provided that in such event, the Company
shall, as liquidated damages or severance pay, or both, pay to the Employee the Remaining
Compensation; or
(d) Failure to timely make more than one monthly payment of Remaining
Compensation under Section 7(b) or 7(c) hereof shall result in the Company being obligated to pay
the balance of the Remaining Compensation to the Employee in a lump sum distribution and the
Option under Section 4(d) shall fully vest as set forth herein.
8. Non-Competition. Notwithstanding any earlier termination, during the Period of
Employment and for one (1) year thereafter:
(a) The Employee shall not, anywhere in North America or in any other place or
venue where the Company or any affiliate, subsidiary or division thereof now conducts or operates,
or may conduct or operate its business in the future, directly or indirectly, individually or as a
member of any partnership or joint venture, or as an officer, director, stockholder, employee or
agent of any other person, firm, corporation, business organization or other entity, participate in,
engage in, solicit or have any financial or other interest in any activity or any business or other
enterprise in the field of marketing, distribution, sale, production, research or development of
Internet related access services or any services or products primarily using the Internet as a means
of delivery, or in any other field which is or may be reasonably expected to become competitive
with the current or contemplated business of the Company or any affiliate, subsidiary or division
thereof (unless the Board of Directors shall have authorized such activity and the Company shall
have consented thereto in writing), as an individual or as a member of any partnership or joint
venture, or as an officer, director, stockholder, investor, employee or agent of any other person,
firm, corporation, business organization or other entity; provided, however, that nothing contained
herein shall be construed to prevent the employee from investing in Permitted Investments; and
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(b) The Employee shall not: (i) solicit or induce any employee of the Company
to terminate his employment or otherwise leave the Company's employ or hire any such employee
(unless the Board of Directors shall have authorized such employment and the Company shall have
consented thereto in writing); or (ii) contact, service or solicit any clients, customers, vendors,
suppliers or other accounts of the Company, either as an individual or as a member of any
partnership or joint venture, or as an officer, director, stockholder, investor, employee or agent of
any other person, firm, corporation, business organization or other entity with respect to any
business, matter, service or product related to similar, comparable to or otherwise competitive with
that which is provided by the Company; provided however, that the provisions of this Section 9 shall
be of no force and effect in the event of a Change of Control. A Change in Control shall be
deemed to occur if: (a) Medcross, Inc. is merged into another corporation and, after such merger,
the voting securities of Medcross outstanding immediately prior to such merger represent less than
75% of the voting securities of the surviving corporation, (b) Medcross does not continue to own
at least 75% of outstanding stock of the Company, or (c) all or substantially all of the assets of the
Company are sold.
9. Confidential Information. The parties hereto recognize that it is fundamental to the
business and operation of the Company, its affiliates, subsidiaries and divisions thereof to preserve
the specialized knowledge, trade secrets, and confidential information of the foregoing concerning
the Internet services industry. The strength and good will of the Company is derived from the
specialized knowledge, trade secrets, and confidential information generated from experience
through the activities undertaken by the Company, its affiliates, subsidiaries and divisions thereof.
The disclosure of any of such information and the knowledge thereof on the part of competitors
would be beneficial to such competitors and detrimental to the Company, its affiliates, subsidiaries
and divisions thereof, as would the disclosure of information about the marketing practices, pricing
practices, costs, profit margins, design specifications, analytical techniques, concepts, ideas, process
developments (whether or not patentable), customer and client agreements, vendor and supplier
agreements and similar items or technologies. By reason of his being an employee of the Company,
in the course of his employment, the Employee has or shall have access to, and has obtained or
shall obtain, specialized knowledge, trade secrets and confidential information such as that
described herein about the business and operation of the Company, its affiliates, subsidiaries and
divisions thereof. Therefore, the Employee hereby agrees as follows, recognizing and
acknowledging that the Company is relying on the following in entering into this Agreement:
(a) The Employee hereby sells, transfers and assigns to the Company, or to any
person or entity designated by the Company, any and all right, title and interest of the Employee
in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and
copyrightable material, made or conceived by the Employee solely or jointly, in whole or in part,
during the term hereof which: (i) relate to methods, apparatus, designs, products, processes or
devices distributed, sold, leased, used or under construction or development by the Company or any
affiliate, subsidiary or division thereof; or (ii) otherwise relate to or pertain to the business,
operations or affairs of the Company or any affiliate, subsidiary or division thereof. The Company
shall acquire all right, title and interest to the Employee's inventions, ideas, disclosures and
improvements whether made or conceived during the term hereof or before. The Employee shall
make adequate written records of all inventions (which records shall be the Company's property)
and shall communicate promptly and disclose to the Company, in such form as the Company
requests, all information, details and data pertaining to such inventions, ideas, disclosures and
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improvements. Whether during the Period of Employment or thereafter, the Employee shall
execute and deliver to the Company such formal transfers and assignments and such other papers
and documents as may be required of the Employee to permit the Company or any person or entity
designated by the Company to file, enforce and prosecute the patent applications relating to any
of the foregoing and, as to copyrightable material, to obtain copyright thereon; and
(b) Notwithstanding any earlier termination, during the Period of Employment and
for a period of one (1) year thereafter, the Employee shall keep secret and retain in strict
confidence, and shall not, except in furtherance of the Company's business, use, disclose to others,
or publish any information, other than information which is in the public domain or becomes
publicly available through no wrongful act on the part of the Employee, which information shall
be deemed not to be confidential information, relating to the business, operation or other affairs
of the Company, its affiliates, subsidiaries and divisions thereof, including but not limited to
confidential information concerning the marketing practices, pricing practices, costs, profit margins,
products, methods, guidelines, procedures, engineering designs and standards, design specifications,
analytical techniques, technical information, customer, client, vendor or supplier information,
employee information, and any and all other confidential information acquired by him in the course
of his past or future services for the Company or any affiliate, subsidiary or division thereof. The
Employee shall hold as the Company's property all notes, memoranda, books, records, papers,
letters, formulas and other data and all copies thereof and therefrom in any way relating to the
business, operation or other affairs of the Company, its affiliates, subsidiaries and divisions thereof,
whether made by him or otherwise coming into his possession. Upon termination of his
employment or upon the demand of the Company, at any time, the Employee shall deliver the same
to the Company within twenty-four (24) hours of such termination or demand.
10. Reasonableness of Restrictions. The Employee hereby agrees that the restrictions
in this Agreement, including without limitation, those relating to the duration of the provisions
hereof and the territory to which such restrictions apply, are necessary and fundamental to the
protection of the business and operation of the Company, its affiliates, subsidiaries and divisions
thereof, and are reasonable and valid, and all defenses to the strict enforcement thereof by the
Employee are hereby waived by the Employee.
11. Reformation. In the event that a court of competent jurisdiction determines that the
non-compete or the confidentiality provisions hereof are unreasonably broad or otherwise
unenforceable because of the length of their respective terms or the breadth of their territorial
scope, or for any other reason, the parties hereto agree that such court may reform the terms
and/or scope of such covenants so that the same are reasonable and, as reformed, shall be
enforceable.
provisions of this Agreement, the non-breaching party shall provide written notice of such breach
to the breaching party. The breaching party shall have thirty (30) days after receipt of such notice
in which to cure its breach. If, on the thirty-first (31st) day after receipt of such notice, the
breaching party shall have failed to cure such breach, the non-breaching party thereafter shall be
entitled to seek damages. It is acknowledged that this Agreement is of a unique nature and of
extraordinary value and of such a character that a breach hereof by the Employee shall result in
irreparable damage and injury to the Company for which the Company may not have any adequate
remedy at law. Therefore, if, on the thirty-first (31st) day after receipt of such notice, the breaching
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party shall have failed to cure such breach, the non-breaching party shall also be entitled to seek
a decree of specific performance against the breaching party, or such other relief by way of
restraining order, injunction or otherwise as may be appropriate to ensure compliance with this
Agreement. The remedies provided by this Section 13 are non-exclusive and the pursuit of such
remedies shall not in any way limit any other remedy available to the parties with respect to this
Agreement, including, without limitation, any remedy available at law or equity with respect to any
anticipatory or threatened breach of the provisions hereof.
13. Certain Provisions; Specific Performance. In the event of a breach by the Employee
of the non-competition or confidentiality provisions hereof, such breach shall not be subject to the
cure provision of Section 13 above and the Company shall be entitled to seek immediate injunctive
relief and a decree of specific performance against the Employee. Such remedy is non-exclusive
and shall be in addition to any other remedy to which the Company or any affiliate, subsidiary or
division thereof may be entitled. Monetary breaches by the Company shall not be subject to the
notice and cure provisions hereunder.
14. Consolidation; Merger; Sale of Assets. Nothing in this Agreement shall preclude the
Company from combining, consolidating or merging with or into, transferring all or substantially
all of its assets to, or entering into a partnership or joint venture with, another corporation or other
entity, or effecting any other kind of corporate combination, provided that, the corporation resulting
from or surviving such combination, consolidation or merger, or to which such assets are
transferred, or such partnership or joint venture assumes this Agreement and all obligations and
undertakings of the Company hereunder. Upon such a consolidation, merger, transfer of assets or
formation of such partnership or joint venture, this Agreement shall inure to the benefit of, be
assumed by, and be binding upon such resulting or surviving transferee corporation or such
partnership or joint venture, and the term "Company," as used in this Agreement, shall mean such
corporation, partnership or joint venture, or other entity and subject to the provisions of this
Agreement relating to the Change of Control this Agreement shall continue in full force and effect
and shall entitle the Employee and his heirs, beneficiaries and representatives to exactly the same
compensation, benefits, perquisites, payments and other rights as would have been their entitlement
had such combination, consolidation, merger, transfer of assets or formation of such partnership
or joint venture not occurred.
15. Survival. Sections 9 through 14 shall survive the termination for any reason of this
Agreement (whether such termination is by the Company, by the Employee, upon the expiration
of this Agreement by its terms or otherwise); provided, however, that in the event that the
Company ceases to exist and neither an affiliate, subsidiary or division thereof has assumed, at its
option, the obligations of the Company hereunder, the Employee shall no longer be bound by the
Non-Competition provision set forth in Section 9 hereof.
16. Severability. The provisions of this Agreement shall be considered severable in the
event that any of such provisions are held by a court of competent jurisdiction to be invalid, void
or otherwise unenforceable. Such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are valid and enforceable and which are as similar
as possible in term and intent to those provisions deemed to be invalid, void or otherwise
unenforceable. Notwithstanding the foregoing, the remaining provisions hereof shall remain
enforceable to the fullest extent permitted by law.
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17. Entire Agreement; Amendment. This Agreement contains the entire agreement
between the Company and the Employee with respect to the subject matter hereof and thereof.
This Agreement may not be amended, changed, modified or discharged, nor may any provision
hereof be waived, except by an instrument in writing executed by or on behalf of the party against
whom enforcement of any amendment, waiver, change, modification or discharge is sought. No
course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the
provisions hereof.
18. Notices. All notices, request, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if physically delivered, delivered by
express mail or other expedited service or upon receipt if mailed, postage prepaid, via first class
mail as follows:
(a) To the Company: I-Link Worldwide Inc.
4030 West Braker
Austin, Texas 78759
Attention: Clay Wilkes
(b) With an additional copy
by like means to: De Martino Finkelstein Rosen & Virga
1818 N Street, N.W., Suite 400
Washington, D.C. 20036
Attn: Ralph V. De Martino, Esq.
(c) To the Employee: John Edwards
1397 North 1450 East
Provo, Utah 84604
and/or to such other persons and addresses as any party hereto shall have specified in writing to
the other.
19. Assignability. This Agreement shall be assignable by the Employee with the prior
written consent of the Company and shall be binding upon and shall inure to the benefit of, his
heirs, executors, administrators, legal representatives and any permitted assignee. This Agreement
shall be assignable by the Company to any affiliate, subsidiary or division thereof and to any
successor in interest, subject to the Employee's right to terminate employment hereunder pursuant
to Section 7(c) above.
20. Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Utah, without regard to the principles of conflicts of laws thereof.
21. Waiver and Further Agreement. Any waiver of any breach of any terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or
any other term or condition hereof, nor shall any failure to enforce any provision hereof operate
as a waiver of such provision or of any other provision hereof. Each of the parties hereto agrees
to execute all such further instruments and documents and to take all such further action as the
other party may reasonably require in order to effectuate the terms and purposes of this Agreement.
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22. Headings of No Effect. The paragraph headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or interpretation of this
Agreement.
23. Counterparts. This Agreement may be executed simultaneously in two or more
counterparts each of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
THE COMPANY
I-LINK WORLDWIDE INC.
By: /s/ Clay Wilkes
Clay Wilkes, President
THE EMPLOYEE
/s/ John Edwards
John Edwards
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<S> <C> <C>
</TABLE>
<TABLE>
<CAPTION>
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
1995 1994
<S> <C> <C>
Earnings per common and common equivalent share
Net income (loss) available to common $( 551,909) $( 715,434)
Weighted average common shares outstanding 1,727,443 1,510,568
Adjustments
Assumed issuance of shares purchased under
stock option and stock purchase plans 14,846 71,121
Assumed exercise of warrants 17,535 18,017
Assumed conversion of:
Class A Variable Rate
Cumulative Convertible Preferred Stock 4,894,463 4,894,463
Class B Variable Rate
Cumulative Convertible Preferred Stock 212,639 421,380
Total shares 6,866,926 6,915,549
Earnings (loss) per common share $ (.08) $ (.10)
Fully diluted earnings per common and common equivalent share
Net income (loss) available to common $( 551,909) $( 715,434)
Weighted average common shares outstanding 1,727,443 1,510,568
Adjustments
Assumed issuance of shares purchased under
stock option and stock purchase plans 15,083 71,121
Assumed exercise of warrants 17,872 18,017
Assumed conversion of:
Class A Variable Rate Cumulative
Convertible Preferred Stock 4,894,463 4,894,463
Class B Variable Rate Cumulative
Convertible Preferred Stock 212,640 421,380
Total shares 6,867,501 6,915,549
Earnings (loss) per common share $ (.08) $ (.10)
187
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</TABLE>
<TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Name and State of Incorporation
and Organization Trade Name
Waters Edge Scanning Associates, Inc., Waters Edge Scanning Associates
a Florida corporation Tampa MRI
Medcross Imaging, Ltd., Medcross Imaging
a Florida limited partnership
Medcross Asia, Ltd., ---
a Hong Kong corporation
Urological Ultrasound Services Urological Ultrasound Services of
of Tampa Bay, Inc. a Florida of Tampa Bay
corporation
Shenyang Medcross Huamei Medical ---
Equipment Co., Ltd., a Peoples
Republic of China corporation
I-Link Worldwide, Inc., I-Link
a Utah corporation
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<S> <C> <C>
</TABLE>
<TABLE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of Medcross, Inc. and
Subsidiaries on Form S-3 (File No. 33-56312) and Forms S-8/S-3 (File Nos. 33-37061, 33-81646) and
Forms S-8 (File Nos. 33-63751, 33-37062, 333-01525, and 33-63749) of our report dated March 26,
1996, on our audits of the consolidated financial statements of Medcross, Inc. and Subsidiaries as of
December 31, 1995, and for the years ended December 31, 1995 and 1994, which report is included
in this Annual Report on Form 10-KSB.
/s/ Coopers & Lybrand, LLP
Tampa, Florida
April 15, 1996
<S> <C> <C>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS DOCUMENT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MEDCROSS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS INCLUDED
IN THIS COMPANY'S FORM 10-KSB FOR THE YEAR ENDED DECEMBER 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 79,316
<SECURITIES> 0
<RECEIVABLES> 1,616,229
<ALLOWANCES> 694,436
<INVENTORY> 829,988
<CURRENT-ASSETS> 1,918,350
<PP&E> 3,356,685
<DEPRECIATION> 1,736,701
<TOTAL-ASSETS> 4,146,863
<CURRENT-LIABILITIES> 2,233,923
<BONDS> 0
0
2,075,000
<COMMON> 12,622
<OTHER-SE> (632,456)
<TOTAL-LIABILITY-AND-EQUITY> 4,146,863
<SALES> 3,122,953
<TOTAL-REVENUES> 3,122,953
<CGS> 154,481
<TOTAL-COSTS> 3,616,708
<OTHER-EXPENSES> 89,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 160,423
<INCOME-PRETAX> (551,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (551,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (551,909)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
