<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 31, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DIAGNOSTIC HEALTH SERVICES, INC.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-2960048
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
2777 STEMMONS FREEWAY, SUITE
1525DALLAS, TEXAS 75207
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
1992 STOCK OPTION PLAN
1995 INCENTIVE STOCK OPTION PLAN
1995 NON-QUALIFIED STOCK OPTION PLAN
1997 NON-QUALIFIED STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
MAX W. BATZER
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
DIAGNOSTIC HEALTH SERVICES, INC.
2777 STEMMONS FREEWAY, SUITE 1525
DALLAS, TEXAS 75207
(NAME AND ADDRESS OF AGENT FOR SERVICE)
(214) 634-0403
(TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES OF COMMUNICATIONS TO:
SHAHE SINANIAN, ESQ.
GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
TEL: (212) 801-9200
FAX: (212) 223-7161
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE
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<S> <C> <C> <C> <C>
Common Stock, par value 770,310
$.001 per share shares(2) $1.94(3) $1,494,401.40(4) $452.85
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Common Stock, par value
$.001 per share 31,424 shares(5) $11.75(6) $369,232.00(7) $111.89
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Common Stock, par value 137,550
$.001 per share shares(8) $7.25(3) $997,237.50(4) $302.19
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Common Stock, par value 360,700
$.001 per share shares(9) $11.75(6) $4,238,225.00(7) $1,284.31
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Common Stock, par value 420,800
$.001 per share shares(10) $4.42(3) $1,859,936.00(4) $563.62
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Common Stock, par value 50,800
$.001 per share shares(11) $11.75(6) $596,900.00(7) $180.88
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Common Stock, par value 461,000
$.001 per share shares(12) $7.68(3) $3,540,480.00(4) $1,072.87
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Common Stock, par value 528,800
$.001 per share shares(13) $11.75(6) $6,213,400.00(7) $1,882.85
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Common Stock, par value 106,125
$.001 per share shares(14) $11.75(6) $1,246,968.70(15) $377.87
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TOTAL: 2,867,509 shares $20,556,780.60 $6,229.33
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</TABLE>
(Footnotes on the following page)
<PAGE>
(1) Pursuant to Rule 416(a), the number of shares of Common Stock being
registered shall be adjusted to include any additional shares which may
become issuable as a result of stock splits, stock dividends, or similar
transactions in accordance with the anti-dilution provisions of the 1992
Stock Option Plan, the 1995 Incentive Stock Option Plan, the 1995 Non-
Qualified Stock Option Plan and the 1997 Non-Qualified Stock Option Plan.
(2) Represents the aggregate number of shares issuable upon exercise of
currently outstanding options granted under the 1992 Stock Option Plan.
(3) Represents the weighted average exercise price (rounded to the nearest
cent) at which the shares will be issued.
(4) Computed in accordance with Rule 457(h) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the total registration
fee The aggregate offering price and amount of registration fee have been
computed based on the weighted average exercise price (rounded to the
nearest cent) at which the shares will be issued.
(5) Represents the aggregate number of shares underlying options presently
available for issuance under the 1992 Stock Option Plan.
(6) Represents the average of the high and low prices of the Common Stock
(rounded to the nearest cent) as reported on the Nasdaq National Market
on October 30, 1997.
(7) Computed in accordance with Rules 457(c) and (h) under the Securities Act
of 1933, as amended, solely for the purpose of calculating the total
registration fee. The aggregate offering price and amount of registration
fee have been computed based on the average of the high and low prices of
the Common Stock (rounded to the nearest cent) as reported on the Nasdaq
National Market on October 30, 1997, because the exercise price at which
the shares will be issued in the future is not currently determinable.
(8) Represents the aggregate number of shares issuable upon exercise of
currently outstanding options granted under the 1995 Incentive Stock
Option Plan.
(9) Represents the aggregate number of shares underlying options presently
available for issuance under the 1995 Incentive Stock Option Plan.
(10) Represents the aggregate number of shares issuable upon exercise of
currently outstanding options granted under the 1995 Non-Qualified Stock
Option Plan.
(11) Represents the aggregate number of shares underlying options presently
available for issuance under the 1995 Non-Qualified Stock Option Plan.
(12) Represents the aggregate number of shares issuable upon exercise of
currently outstanding options granted under the 1997 Non-Qualified Stock
Option Plan.
(13) Represents the aggregate number of shares underlying options presently
available for issuance under the 1997 Non-Qualified Stock Option Plan.
(14) Represents shares heretofore issued upon exercise of options granted
under the 1992 Stock Option Plan, the 1995 Incentive Stock Option Plan,
the 1995 Non-Qualified Stock Option Plan and the 1997 Non-Qualified Stock
Option Plan.
(15) Computed in accordance with Rule 457(c) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the total registration
fee. The aggregate offering price and amount of registration fee have
been computed based on the average of the high and low prices of the
Common Stock (rounded to the nearest cent) as reported on the Nasdaq
National Market on October 30, 1997.
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<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION 10(A) PROSPECTUS
The documents containing the information specified in Part I of Form S-8
will be sent or given to participating employees as specified by Rule
428(b)(1) of the Securities Act of 1933, as amended (the "Securities Act").
Such documents are not required to be and are not filed with the Securities
and Exchange Commission either as part of this Registration Statement, or as a
prospectus or prospectus supplement pursuant to Rule 424. These documents and
the documents incorporated by reference into this Registration Statement
pursuant to Item 3 of Part II of this Registration Statement, taken together,
constitute a prospectus that meets the requirements of Section 10(a) of the
Securities Act.
The following reoffer prospectus filed as part of the Registration Statement
has been prepared in accordance with the requirements of Part I of Form S-3
and, pursuant to General Instruction C of Form S-8, may be used by certain
officers, directors and controlling stockholders of the Company for the resale
to the public of Shares to be issued to them upon exercise of options
heretofore or hereafter granted under the 1992 Stock Option Plan, the 1995
Incentive Stock Option Plan, the 1995 Non-Qualified Stock Option Plan and the
1997 Non-Qualified Stock Option Plan (collectively, the "Plans"). Such persons
may be deemed to be in a control relationship with the Company within the
meaning of the Securities Act and the rules and regulations of the Commission
promulgated thereunder, and such Shares may be deemed to be "control
securities" within the meaning of General Instruction C to Form S-8. The
following reoffer prospectus may also be used for the resale to the public of
certain Shares heretofore issued upon exercise of options granted under the
Plans. Such Shares may be deemed to be "restricted securities" within the
meaning of General Instruction C to Form S-8.
I-1
<PAGE>
PROSPECTUS
1,360,060 SHARES
DIAGNOSTIC HEALTH SERVICES, INC.
COMMON STOCK
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This Prospectus relates to 1,360,060 shares of common stock, par value $.001
per share (the "Common Stock"), of Diagnostic Health Services, Inc., a
Delaware corporation (the "Company"), which may be offered and sold from time
to time pursuant to this Prospectus (the "Shares") by the persons named in
this Prospectus as "Selling Stockholders" (the "Selling Stockholders"). The
Selling Stockholders have acquired or will acquire the Shares upon exercise of
options granted under the Company's 1992 Stock Option Plan, 1995 Incentive
Stock Option Plan, 1995 Non-Qualified Stock Option Plan, or 1997 Non-Qualified
Stock Option Plan (referred to herein, collectively, as the "Plans"). See
"SELLING STOCKHOLDERS."
The Shares may be sold from time to time to purchasers directly by any of
the Selling Stockholders. Alternatively, the Selling Stockholders may sell the
Shares in one or more transactions (which may involve one or more block
transactions) on the National Association of Securities Dealers, Inc.
Automated Quotation System National Market ("Nasdaq"), in sales occurring in
the public market off Nasdaq, in separately negotiated transactions, or in a
combination of such transactions. Each sale may be made either at market
prices prevailing at the time of such sale or at negotiated prices. Some or
all of the Shares may be sold through brokers acting on behalf of the Selling
Stockholders or to dealers for resale by such dealers, and in connection with
such sales, such brokers or dealers may receive compensation in the form of
discounts or commissions from the Selling Stockholders and/or the purchasers
of such Shares for whom they may act as broker or agent (which discounts or
commissions are not anticipated to exceed those customary in the types of
transactions involved). However, any Shares covered by this Prospectus that
qualify for sale pursuant to Rule 144 under the Securities Act may be sold
under Rule 144 rather than pursuant to this Prospectus. See "PLAN OF
DISTRIBUTION."
The Shares will be sold, or otherwise disposed of, for the account of the
Selling Stockholders, and the Company will not be entitled to any of the
proceeds from such sales or dispositions. See "USE OF PROCEEDS." All expenses
incurred in connection with the registration of the Shares are being borne by
the Company, but all brokerage commissions and other expenses incurred by
individual Selling Stockholders will be borne by each such Selling
Stockholder. See "PLAN OF DISTRIBUTION."
The Selling Stockholders and any dealer participating in the distribution of
any Shares or any broker executing selling orders on behalf of the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any profit on the sale of any or all of the
Shares by them and any discounts or commissions received by any such brokers
or dealers may be deemed to be underwriting discounts and commissions under
the Securities Act. See "PLAN OF DISTRIBUTION."
The Selling Stockholders who are executive officers and directors of the
Company have agreed to certain restrictions on the sale of their Shares for a
period of one year following the date of this Prospectus. Upon the Company
being notified by a Selling Stockholder that any material arrangement has been
entered into with a broker or dealer for the sale of Shares through a block
trade, special offering or secondary distribution, or a purchase by a broker
or dealer, a supplement to this Prospectus will be filed, if required,
pursuant to Rule 424(b) under the Securities Act, disclosing (a) the name of
each such Selling Stockholder and of the participating broker or dealer, (b)
the number of Shares involved, (c) the price at which such Shares were sold,
(d) the commissions paid or the discounts or concessions allowed to such
broker or dealer, where applicable, (e) that such broker or dealer did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus, and (f) other facts material to the transaction.
See "PLAN OF DISTRIBUTION."
There is no assurance that any of the Selling Stockholders will sell any or
all of the Shares. The Common Stock of the Company is listed on Nasdaq under
the symbol "DHSM". On October 30, 1997, the closing price of the Common Stock
as reported by Nasdaq was $11.50 per share. Prospective investors are urged to
obtain a current price quotation.
Prospective investors should carefully consider the factors set forth under
"RISK FACTORS" beginning on page 5 of this Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus is October 31, 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION................................................. 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE....................... 3
THE COMPANY........................................................... 4
RISK FACTORS.......................................................... 5
USE OF PROCEEDS....................................................... 8
SELLING STOCKHOLDERS.................................................. 8
PLAN OF DISTRIBUTION.................................................. 11
LEGAL MATTERS......................................................... 12
EXPERTS............................................................... 12
</TABLE>
No person has been authorized to give any information or to make any
representation not contained in this Prospectus in connection with any
offering made hereby and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company or any other person. This Prospectus does not constitute an offer to
buy, nor shall there be any offer to sell, solicitation of an offer to buy or
sale of these securities by any person in any jurisdiction in which it is
unlawful for such person to make such an offer, solicitation or sale. Neither
the delivery of this Prospectus at any time nor any sale made hereunder shall
under any circumstances create any implication that there has been no change
in the affairs of the Company since the date hereof or that the information
contained herein is correct as of any time subsequent to such date.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed with the Commission, as well as the
Registration Statement (as defined below) of which this Prospectus is a part,
may be inspected and copied at the public reference facilities of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the Commission's Regional Offices at Seven World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60601-2511. Copies of such material also
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In
addition, certain material filed by the Company can be inspected at the NASD
Public Reference Room of the National Association of Securities Dealers
Automated Quotation System, Inc. at 1735 K Street, N.W., Washington, D.C.
20006-1506, through which the Company's Common Stock is quoted. Also, the
Company files such reports, proxy statements and other information with the
Commission pursuant to the Commission's EDGAR system. The Commission maintains
a web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission
pursuant to the EDGAR system. The address of the Commission's web site is
"http://www.sec.gov".
This Prospectus constitutes a part of a Registration Statement on Form S-8
(the "Registration Statement") filed by the Company on October 31, 1997 with
the Commission under the Securities Act. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information
contained in the Registration Statement and incorporates by reference certain
additional information. Such additional information can be inspected at and
obtained from the Commission in the manner set forth above. Statements
contained in this Prospectus or in any document incorporated herein by
reference as to the terms of any contract or other document
2
<PAGE>
referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement or such other document, each
such statement being qualified in all respects by such reference.
----------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the Commission
(File No. 0-21758) under the Exchange Act are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996;
(b) All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1996, consisting of (i) the
Company's Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 1997 and June 30, 1997, (ii) the Company's Current Reports on
Form 8-K dated April 4, 1997 and May 2, 1997, (iii) Amendment No. 1 on Form
8-K/A-1 to the Company's Current Report on Form 8-K dated April 4, 1997,
and (iv) Amendment No. 1 on Form 8-K/A-1 to the Company's Current Report on
Form 8-K dated May 2, 1997; and
(c) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A, dated May 11, 1993, filed
under Section 12 of the Exchange Act, including any subsequent amendment or
any report or other filing with the Commission updating such description.
In addition, all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of
a post-effective amendment to the Registration Statement which indicates that
all securities offered hereby have been sold or which deregisters all such
securities then remaining unsold, shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained
herein or in any subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus. All
information appearing in this Prospectus is qualified in its entirety by the
information and financial statements (including the notes thereto) appearing
in the documents incorporated herein by reference, except to the extent set
forth in the immediately preceding sentence.
Upon written or oral request, any of the documents incorporated by reference
in Item 3 of Part II of the Registration Statement (which documents are
incorporated by reference in this Section 10(a) Prospectus), other than
exhibits to such documents (unless such exhibits are specifically incorporated
by reference herein), as well as other documents required to be delivered to
employees pursuant to Rule 428(b), will be provided without charge to each
person (including any beneficial owner) to whom this Prospectus is delivered
upon the written or oral request of such person. Requests should be made to:
Diagnostic Health Services, Inc.
2777 Stemmons Freeway, Suite 1525
Dallas, Texas 75207
Attention: Stockholder Relations Department
Telephone: (214) 634-0403
3
<PAGE>
THE COMPANY
The following summary is qualified in its entirety by reference to, and
should be read in conjunction with, the more detailed information appearing
elsewhere in this Prospectus or incorporated herein by reference. Investors
should also carefully consider the information set forth under the heading
"RISK FACTORS."
The Company is a leading outsource provider of medical services to
hospitals, physicians' offices and other healthcare facilities primarily in
the Midwest and South Central United States. The Company provides radiology
and cardiology diagnostic services and equipment, as well as departmental
management services to healthcare facilities on an in-house and shared basis.
The Company also provides skilled and allied healthcare personnel on a
temporary basis to perform a variety of functions in hospitals, long-term care
facilities, physicians' offices, clinics and home healthcare settings. The
Company is committed to offering a broad range of services in a manner
responsive to the healthcare industry's increased focus on cost containment
without compromising the quality of patient care.
The market for the Company's services consists of hospitals, physicians and
other healthcare providers. According to the American Hospital Association
there are more than 5,000 hospitals, and according to the American Medical
Association there are more than 18,300 physician group practices, in the
United States. In the Company's core nineteen-state Midwestern and South
Central United States market, the Company estimates that there are
approximately 3,100 hospitals, approximately 13% of which are currently
serviced by the Company. Additional potential customers include long-term care
facilities, sub-acute care facilities and the expanding managed care
marketplace.
The Company currently provides shared diagnostic services, and staffs,
equips, operates and/or manages in-house radiology or cardiology departments,
for approximately 1,200 customers. The Company has achieved this market
presence through internal growth and strategic acquisitions. The Company's
strategy is to capitalize, within its business lines, on its demonstrated
ability to reduce the costs of providing radiology and cardiology services and
to consolidate providers of these services. The Company intends to implement
this strategy by continuing its aggressive acquisition and development program
with a strong geographic focus, cross-marketing its service lines across its
customer base to generate internal growth, pursuing the conversion of shared
service arrangements to in-house service agreements, and offering ancillary
services to complement its core radiology and cardiology services. The Company
also intends to pursue acquisitions of other service providers, as this highly
fragmented sector of the healthcare industry continues to consolidate.
In addition to diagnostic services, the Company provides, on a temporary
basis, allied healthcare personnel, including radiology technicians, physical
and occupational therapists and home healthcare professionals in its primary
market area and in Mexico City. Demand for such temporary personnel arises
from hiring freezes, the need to replace vacationing or sick personnel, and
other short-term needs. These services are complementary to the Company's core
business and afford the Company the opportunity to expand the services
provided to existing customers and to establish new client relationships.
Since 1991, the Company has significantly expanded the breadth of its
radiology and cardiology services. From 1991 to 1996, through internal growth
and the acquisition of twelve local service providers, the Company's gross
revenues increased from approximately $3.5 million to approximately $24.1
million, and income from operations increased from approximately $0.4 million
to $3.9 million. During the same period, the Company's customer base increased
from 323 to approximately 1,120. From December 31, 1996 to the date of this
Prospectus, the Company consummated three additional business acquisitions.
The Company was incorporated in Texas in 1983 and was reincorporated in
Delaware in 1992. Its principal executive office is located at 2777 Stemmons
Freeway, Suite 1525, Dallas, Texas 75207, and its telephone number is (214)
634-0403.
4
<PAGE>
RISK FACTORS
Prospective investors should consider carefully the following factors
associated with the ownership of Common Stock together with the other
information contained in this Prospectus or incorporated herein by reference.
RISKS INHERENT IN GROWTH STRATEGY
A significant component of the Company's historical growth has come through
acquisitions of other healthcare service providers, and the Company intends to
continue to seek acquisition opportunities in the future. This growth strategy
is dependent on the continued availability of suitable acquisition candidates.
As of the date of this Prospectus, although the Company has signed a letter of
intent for one acquisition, the Company has no binding commitments or
agreements with respect to any acquisitions, and there can be no assurance
that the Company will be able to identify or come to agreement with any future
acquisition candidates. The Company may also find itself in competition for
acquisition candidates with competitors who have greater financial and other
resources than the Company and who may be willing to pay higher prices for
acquisition targets.
In addition, even if the Company is successful in consummating future
acquisitions, there can be no assurance that any such acquisitions will be
beneficial to the Company. Any growth or success through acquisitions will be
dependent upon a number of factors, including the Company's ability to
evaluate properly the potential benefits of each prospective acquisition, the
Company's ability to consummate the acquisition on terms favorable to the
Company, and the Company's ability to promptly and profitably integrate the
acquired operations and retain key personnel and customer relations.
Acquisitions also place significant demands on the Company's financial and
management resources, which can divert management's attention from other
business concerns. Furthermore, the Company generally records significant
amounts of goodwill in connection with acquisitions, and if the Company were
to determine that the carrying value of goodwill was impaired, the Company
would be required to write down such carrying value, which would result in a
charge to earnings that could have a material adverse effect on the Company's
financial results.
UNCERTAINTIES SURROUNDING DILUTIVE IMPACT OF AND CAPITAL REQUIREMENTS RELATING
TO GROWTH STRATEGY
In order to grow its business by means of acquisitions, the Company will
require significant capital resources, both for the payment of the cost of
acquiring businesses, and for the effective integration, operation and
expansion of the acquired businesses. In the past, the Company has utilized
its Common Stock as a means of making payment for acquired businesses.
Depending on the agreed-upon value of the acquired business and the value of
the Common Stock, the Company may be required to issue a large number of
additional shares of Common Stock, thereby diluting existing stockholders,
including investors in this offering. Alternatively, to avoid such dilution,
or if the acquisition candidate is unwilling to accept Common Stock as all or
part of the consideration for the transaction, the Company might be required
to utilize more of its cash resources (if available), or may be required to
seek additional capital. There can be no assurance that such additional
capital, if and when required, will be available on terms acceptable to the
Company, if at all. If the Company is unable to obtain required capital
resources, its growth could be limited, and its existing operations could be
impaired.
DECREASE IN POTENTIAL ACQUISITION CANDIDATES
As the current consolidation trend in the healthcare services industry
continues, the Company can expect to encounter greater difficulty in
identifying suitable acquisition candidates, and in consummating acquisitions
of such businesses on terms favorable to the Company. Failure to identify and
consummate favorable acquisitions could have a material adverse effect on the
Company's business.
REDUCED CUSTOMER BASE DUE TO INDUSTRY CONSOLIDATION
As consolidation among healthcare providers continues, the Company's
customer base may be reduced either because customers are consolidated or
acquired by other entities, or because outsourcing decisions shift to
individuals with whom the Company has not had a prior relationship. There can
be no assurance that the
5
<PAGE>
Company will be able to maintain relationships with its customers following
such an acquisition or consolidation. Any significant reduction in the
Company's customer base would have a material adverse effect on the Company's
business.
RELIANCE ON KEY EMPLOYEES
The Company is substantially dependent on the personal efforts and abilities
of Max W. Batzer (Chairman of the Board and Chief Executive Officer) and Brad
A. Hummel (President and Chief Operating Officer). Each is a stockholder of
the Company and has an employment agreement with the Company. Mr. Batzer is
not required to devote his full time to the affairs of the Company, but is
prohibited from engaging in any other business activities which are
competitive with the business of the Company, or which materially interfere
with the performance of his duties and responsibilities to the Company. The
loss or unavailability of either of these officers or certain other key
employees for any significant period of time could have a material adverse
effect on the Company's business prospects or earning capacity. In addition to
$1.0 million per individual of key man life insurance payable to the Company's
commercial lender pursuant to a loan agreement, the Company maintains and is
sole beneficiary of key man life insurance policies on the lives of Messrs.
Batzer and Hummel in the amount of $500,000 per individual.
POTENTIAL FOR PROFESSIONAL LIABILITY CLAIMS
The nature of the Company's business and services entails the risk of
professional liability claims, which could arise, for example, out of faulty
testing procedures or mishandling of test results. This concern is heightened
as the Company is called upon to perform services that might be deemed to be
"invasive" in nature (entering or placing objects inside a patient's body).
The Company maintains professional liability insurance coverage with limits of
$5.0 million per occurrence and $5.0 million in the aggregate in respect of
such contingencies. However, there can be no assurance that claims will not be
asserted in the future, or that any damages assessed against the Company will
not exceed the limits of available insurance coverage. In addition, the
potential negative publicity that could arise from a professional liability
claim could have a material adverse effect on the Company, even if the Company
were ultimately to prevail in the defense of the claim.
POSSIBLE SHORTAGE OF QUALIFIED PERSONNEL
From time to time, the Company has experienced difficulties in obtaining
and/or retaining qualified healthcare professionals, and shortages of such
personnel may be expected from time to time in the future. The Company will be
competing for qualified personnel with numerous other healthcare providers,
many of whom have substantially greater financial and other resources than the
Company.
COMPETITION
Radiology and cardiology diagnostic services, as well as the provision of
allied healthcare professionals, are characterized by a high degree of
competition. This competition comes from a number of independent local
operators specializing in one or two clinical applications, and from a few
large diversified healthcare companies (primarily larger hospitals having the
resources and capability to provide shared diagnostic services to other
healthcare facilities) which provide these services as part of their overall
business. Although the Company believes that it has a competitive advantage
over most of the small operators (primarily because most of them do not
provide the full range of services offered by the Company, and do not have the
same volume of revenues to absorb necessary fixed overhead costs), the Company
may be vulnerable to competition from the larger healthcare companies, at
least one of which can be found in each of the Company's geographic markets,
and all of which are substantially larger and possess greater financial
resources than the Company. There can be no assurance that the Company will be
able to compete successfully in its markets.
6
<PAGE>
GOVERNMENT REGULATION; POTENTIAL NATIONAL HEALTHCARE REFORM
Many aspects of the medical industry in the United States are presently
subject to extensive federal and state governmental regulation, including
reimbursement rates and policies imposed by Medicare and other third-party
reimbursement programs (from which the Company receives a material portion of
its revenues). Laws and regulations affecting the Company's business include
federal and state "kickback laws," conflict of interest laws (such as the
federal "Stark" legislation), and licensing requirements relating to the
operation of independent physiological laboratories and the handling of
nuclear materials. In addition, both the Clinton Administration and the
Congress have periodically asserted a need to overhaul or reform the nation's
healthcare system. Such legislative initiatives, if enacted, could impose
pressures on the pricing structures applicable to the Company's services. In
particular, there is a possibility that a significant portion of healthcare
services will be rendered and administered through managed care systems, which
could have the effect of forcing price concessions and reductions on the part
of service providers such as the Company. Moreover, healthcare reform could
also entail a greater analysis of each patient's need for diagnostic testing,
with the aim of reducing the total volume of testing and the overall cost of
medical care. Depending on the nature and extent of any new laws and/or
regulations, or possible changes in the interpretation of existing laws and/or
regulations, any such changes may have a material adverse effect on the
Company's revenues, operating margins and profitability.
LIMITATIONS BROUGHT ON BY REIMBURSEMENT PROGRAMS
In 1995 and 1996, the Company derived approximately 4.9% and 9.3%,
respectively, of its total revenues from Medicare and Medicaid, and
approximately 2.2% and 5.6%, respectively, from other third-party indemnity
payors. In January 1992, the federal government implemented, through the
Medicare program, a resource-based relative value scale ("RBRVS") payment
methodology. Implementation of RBRVS reduced reimbursement rates for certain
of the Company's diagnostic procedures. Policymakers have from time to time
advocated that a RBRVS type of reimbursement system be imposed on private-
sector third-party payors. Implementation of such a program would reduce
reimbursements by private third-party payors, and would adversely affect the
Company's operating margins to the extent that costs on these procedures could
not be concomitantly reduced. There can be no assurance that some or any of
these reduced operating margins could be recouped through cost reductions or
otherwise.
TECHNOLOGICAL CHANGE AND OBSOLESCENCE
Diagnostic imaging technology is constantly undergoing development and
change. New technologies may be developed, or existing technologies refined,
which could render the Company's existing equipment technologically or
economically obsolete. Due to cost factors, competitive considerations or
other constraints, there can be no assurance that the Company will be able to
acquire or have access to any new or improved equipment that the Company may
need in order to serve its clients and customers.
POTENTIAL VOLATILITY OF STOCK PRICE
The market price of the Common Stock has been and may continue to be highly
volatile, and could in the future be subject to wide fluctuations in response
to the timing and size of acquisitions, quarter to quarter variations in
operating results, changes in earnings estimates by analysts, market
conditions in the industry, prospects of healthcare reform, changes in
government regulation, and general economic conditions. In addition, the stock
market has from time to time experienced significant price and volume
fluctuations that have been unrelated to the operating performance of
particular companies. Investors in the Common Stock must be willing to bear
the risk of such fluctuations in earnings and stock price.
ANTI-TAKEOVER CONSIDERATIONS
Certain provisions of the Company's Certificate of Incorporation, By-Laws,
Delaware law and certain executive employment agreements could, together or
separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company, and limit the price that certain investors
might be willing to pay in the future for the Company's Common Stock. These
provisions include a classified board of directors and the
7
<PAGE>
issuance, without further stockholder approval, of preferred stock with rights
and preferences which could be senior to the Common Stock. The Company is also
subject to Section 203 of the Delaware General Corporation Law, which may also
inhibit a change in control of the Company. In addition, the provisions of
certain executive employment agreements and stock option agreements may result
in economic benefits to the holders thereof upon the occurrence of a change in
control.
NO ANTICIPATED DIVIDENDS
The Company has not previously paid any dividends on its Common Stock and
for the foreseeable future intends to continue its policy of retaining any
earnings to finance the development and expansion of its business. In
addition, the loan agreement between the Company and its commercial lender
prohibits the payment of dividends.
FORWARD-LOOKING STATEMENTS
This Prospectus and the documents incorporated herein by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. Such forward-looking statements may
be deemed to include, among other things, statements related to anticipated
improvements in financial performance and management's long-term performance
goals, as well as statements relating to the Company's business and growth
strategies, including anticipated internal growth and plans to pursue
additional acquisitions of other healthcare service providers. Actual results
could differ materially from those addressed in the forward-looking statements
as a result of the factors discussed in this "RISK FACTORS" section and
elsewhere herein and in the documents incorporated herein by reference.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale or other disposition
of the Shares by the Selling Stockholders hereunder.
SELLING STOCKHOLDERS
This Prospectus may be used by certain officers, directors and controlling
stockholders of the Company for the resale to the public of Shares to be
issued to them upon exercise of options heretofore or hereafter granted under
the Plans. Such persons may be deemed to be in a control relationship with the
Company within the meaning of the Securities Act and the rules and regulations
of the Commission thereunder, and such Shares may be deemed to be "control
securities" within the meaning of General Instruction C to Form S-8. This
Prospectus may also be used for the resale to the public of certain Shares
heretofore issued upon exercise of options granted under the Plans. Such
Shares may be deemed to be "restricted securities" within the meaning of
General Instruction C to Form S-8. The securities referred to in this
paragraph may also be resold pursuant to Rule 144 under the Securities Act or
in other transactions exempt from registration.
8
<PAGE>
The persons who may resell Shares pursuant to this Prospectus are referred
to in this Prospectus collectively as "Selling Stockholders." The following
table sets forth as to each Selling Stockholder: the name of the Selling
Stockholder; the nature of any position, office or other material relationship
with the Company or its affiliates within the past three (3) years; the number
of shares of Common Stock of the Company and the percentage of the outstanding
shares of such class owned as of October 30, 1997; the number of such shares
which may be sold hereby for the account of the Selling Stockholder; and the
number of such shares and percentage of the outstanding shares of such class
that will be owned by the Selling Stockholder, assuming the sale of all the
Shares offered hereby.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
OWNED PRIOR TO OWNED AFTER
THE SALE(1) NUMBER OF THE SALE
------------------ SHARES ---------------------
NAME AND WHICH MAY BE
POSITION/RELATIONSHIP NUMBER PERCENT(2) SOLD HEREBY NUMBER PERCENT(2)
- --------------------- ------- ---------- ------------ ------- ----------
<S> <C> <C> <C> <C> <C>
Max W. Batzer............ 581,395 5.8% 420,227(3) 161,168 1.6%
Chairman of the Board
and Chief Executive
Officer
Brad A. Hummel........... 288,238 2.9% 288,227(4) 11 *
President and
Chief Operating Officer
Thomas M. Sestak......... 313,066 3.1% 186,645 126,421 1.3%
Director
Bo W. Lycke.............. 83,000 * 82,000 1,000 *
Director
James R. Angelica........ 445,052 4.5% 38,000(5) 407,052 4.1%
Senior Vice President
and
Director
Carol J. Gannon.......... 215,500 2.2% 15,000 200,500 2.0%
Senior Vice President
Christopher L. Turner.... 153,000 1.5% 153,000 -0- *
Chief Financial Officer
Bonnie G. Lankford....... 117,911 1.2% 117,911(6) -0- *
Senior Vice President
Don W. Caughron.......... 36,000 * 36,000 -0- *
Senior Vice President
Mark J. Foley............ 10,000 * 10,000 -0- *
Vice President-Marketing
and Sales
Gregory P. Blome......... 3,250 * 2,750(7) 500(8) *
Employee
Janice E. Bowser......... 200 * 200(7) -0- *
Employee
Miriam Lopez Candelario.. 1,750 * 500(7) 1,250(8) *
Employee
Michael Cooksey.......... 500 * 500(7) -0- *
Employee
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
OWNED PRIOR TO OWNED AFTER
THE SALE(1) NUMBER OF THE SALE
-------------------- SHARES -----------------------
NAME AND WHICH MAY BE
POSITION/RELATIONSHIP NUMBER PERCENT(2) SOLD HEREBY NUMBER PERCENT(2)
- --------------------- --------- ---------- ------------- ------- ----------
<S> <C> <C> <C> <C> <C>
Larry B. Dees........... 3,400 * 1,000 (7) 2,400 (8) *
Employee
Linda Drum.............. 500 * 500 (7) -0- *
Employee
Alan B. Jones........... 1,900 * 200 (7) 1,700 (8) *
Employee
James S. Krieg.......... 2,500 * 300 (7) 2,200 (8) *
Employee
Jeffery S. Lee.......... 5,500 * 1,750 (7) 3,750 (9) *
Employee
Jeff Manor.............. 1,000 * 1,000 (7) -0- *
Employee
David Mayfield.......... 2,950 * 1,000 (7) 1,950 (8) *
Employee
Susan E. McBride........ 500 * 100 (7) 400 (8) *
Employee
Julie McCullough........ 500 * 500 (7) -0- *
Employee
Tina M. Naumann......... 11,250 * 500 (7) 10,750 (10) *
Employee
Craig H. Sidwell........ 1,500 * 1,000 (7) 500 (8) *
Employee
Michele R. Walton....... 3,250 * 500 (7) 2,750 (11) *
Employee
Andrew P. Wynne......... 3,400 * 750 (7) 2,650 (8) *
Employee
Total................. 2,285,012 22.9% 1,360,060 924,952 9.3%
</TABLE>
- --------
* Represents less than 1% of outstanding Common Stock.
(1) Shares of Common Stock issued or issuable to the Selling Stockholders
upon exercise of options granted under the Plans or other employee benefit
plans of the Company or currently outstanding warrants, whether or not
exercisable, are included. Those individuals named as executive officers
and/or directors have agreed to certain limitations on the amount of shares
under the Plans which such individuals may sell from time to time. See
"Plan of Distribution."
(2) Percentages based on 9,987,757 shares of Common Stock outstanding as of
October 30, 1997.
(3) Includes 13,582 shares of Common Stock issued to Mr. Batzer in August
1997 upon exercise of options granted under one or more of the Plans.
(4) Includes 8,582 shares of Common Stock issued to Mr. Hummel in October
1997 upon exercise of options granted under one or more of the Plans.
(5) Represents 38,000 shares of Common Stock issued to Mr. Angelica in
September 1997 upon exercise of options granted under one or more of the
Plans.
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<PAGE>
(6) Includes 32,911 shares of Common Stock issued to Ms. Lankford in
September 1997 upon exercise of options granted under one or more of the
Plans.
(7) Represents shares of Common Stock heretofore issued by the Company upon
exercise of options granted under one or more of the Plans.
(8) Represents shares of Common Stock underlying currently outstanding
options heretofore granted under one or more of the Plans, which shares are
being registered pursuant to the Registration Statement of which this
Prospectus is a part.
(9) Includes (a) 1,750 shares of Common Stock underlying currently
outstanding options heretofore granted under one or more of the Plans,
which shares are being registered pursuant to the Registration Statement of
which this Prospectus is a part, and (b) 2,000 shares of Common Stock held
directly by Mr. Lee.
(10) Includes (a) 1,350 shares of Common Stock underlying currently
outstanding options heretofore granted under one or more of the Plans,
which shares are being registered pursuant to the Registration Statement of
which this Prospectus is a part, and (b) 9,400 shares of Common Stock held
directly by Ms. Naumann.
(11) Includes (a) 1,750 shares of Common Stock underlying currently
outstanding options heretofore granted under one or more of the Plans,
which shares are being registered pursuant to the Registration Statement of
which this Prospectus is a part, and (b) 1,000 shares of Common Stock held
directly by Ms. Walton.
The Company does not know whether any of the Selling Stockholders will use
this Prospectus in connection with the offer or sale of any Shares, or, if
this Prospectus is so used, how many Shares will be offered or sold. The
information set forth in this section may be updated by the Company by use of
supplements to this Prospectus issued subsequent to the date hereof.
PLAN OF DISTRIBUTION
The Shares may be sold from time to time to purchasers directly by any of
the Selling Stockholders. Alternatively, the Selling Stockholders may sell the
Shares in one or more transactions (which may involve one or more block
transactions) on Nasdaq, in sales occurring in the public market off Nasdaq,
in separately negotiated transactions, or in a combination of such
transactions. Each sale may be made either at market prices prevailing at the
time of such sale or at negotiated prices. Some or all of the Shares may be
sold through brokers acting on behalf of the Selling Stockholders or to
dealers for resale by such dealers, and in connection with such sales, such
brokers or dealers may receive compensation in the form of discounts or
commissions from the Selling Stockholders and/or the purchasers of such Shares
for whom they may act as broker or agent (which discounts or commissions are
not anticipated to exceed those customary in the types of transactions
involved). However, any Shares covered by this Prospectus that qualify for
sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144
rather than pursuant to this Prospectus.
The Selling Stockholders and any dealer participating in the distribution of
any Shares or any broker executing selling orders on behalf of the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act, in which event any profit on the sale of any or all of the
Shares by them and any discounts or commissions received by any such brokers
or dealers may be deemed to be underwriting discounts and commissions under
the Securities Act.
Any broker or dealer participating in any distribution of Shares in
connection with this offering may be deemed to be an "underwriter" within the
meaning of the Securities Act, and if so deemed will be required to deliver a
copy of this Prospectus, including a Prospectus Supplement, if required, to
any person who purchases any of the Shares from or through such broker or
dealer.
The Company will inform the Selling Stockholders that the anti-manipulation
rules under the Exchange Act may apply to sales in the market and will furnish
the Selling Stockholders upon request with a copy of such rules. The Company
will also inform the Selling Stockholders of the need for delivery of copies
of this Prospectus.
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<PAGE>
The Selling Stockholders who are executive officers and/or directors of the
Company have agreed to restrict the sale of their Shares for a period of one
year following the date of this Prospectus as follows: none of the Shares held
by such individuals from time to time may be sold except within 20 business
days after the Company's filing of its then-current quarterly or annual report
with the Commission; and within such time periods, each such Selling
Stockholder may sell up to 10% of his or her Shares following the filing of
the Company's quarterly report for the third quarter of 1997, up to an
additional 15% of his or her Shares following the filing of the Company's
annual report for the year ending December 31, 1997, up to an additional 15%
of his or her Shares following the filing of the Company's quarterly report
for the first quarter of 1998, up to an additional 20% of his or her Shares
following the filing of the Company's filing of its quarterly report for the
second quarter of 1998, and all remaining Shares commencing one year after the
date of this Prospectus.
Upon the Company being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker or dealer for the sale of
Shares through a block trade, special offering or secondary distribution, or a
purchase by a broker or dealer, a supplement to this Prospectus will be filed,
if required, pursuant to Rule 424(b) under the Securities Act, disclosing (a)
the name of each such Selling Stockholder and of the participating broker or
dealer, (b) the number of Shares involved, (c) the price at which such Shares
were sold, (d) the commissions paid or the discounts or concessions allowed to
such broker or dealer, where applicable, (e) that such broker or dealer did
not conduct any investigation to verify the information set out or
incorporated by reference in this Prospectus, and (f) other facts material to
the transaction.
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold only through registered or licensed
brokers or dealers. In addition, in certain states, the Shares may not be sold
unless they have been registered or qualified for sale in such state or an
exemption from such registration or qualification requirement is available and
is complied with.
There is no assurance that any of the Selling Stockholders will sell any or
all of the Shares offered hereby.
All expenses incurred in connection with the registration of the Shares are
being borne by the Company, but all brokerage commissions and other expenses
incurred by individual Selling Stockholders will be borne by each such Selling
Stockholder.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Greenberg Traurig Hoffman Lipoff Rosen & Quentel, New York, New
York ("Greenberg Traurig"). Shahe Sinanian, a shareholder of Greenberg
Traurig, serves as the Secretary of the Company.
EXPERTS
The consolidated financial statements of the Company appearing in its Annual
Report (Form 10-KSB) for the year ended December 31, 1996 have been audited by
Simonton, Kutac & Barnidge, L.L.P., Independent Certified Public Accountants,
as set forth in their report thereon included therein and incorporated herein
by reference. Such consolidated financial statements are incorporated herein
by reference in reliance upon such report given upon the authority of such
firm as experts in auditing and accounting. Audited consolidated financial
statements to be included in subsequently filed documents will be incorporated
herein by reference in reliance upon the reports pertaining to such
consolidated financial statements of such independent accountants as are the
Company's auditors from time to time (to the extent covered by consents filed
with the Commission) and upon the authority of such accountants as experts in
auditing and accounting.
12
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
Diagnostic Health Services, Inc. (the "Company") hereby incorporates by
reference into this Registration Statement the following documents heretofore
filed by the Company with the Securities and Exchange Commission (the
"Commission") (File No. 0-21758) pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"):
(a) The Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996;
(b) All other reports filed by the Company pursuant to Section 13(a) or
15(d) of the Exchange Act since December 31, 1996, consisting of (i) the
Company's Quarterly Reports on Form 10-QSB for the fiscal quarters ended
March 31, 1997 and June 30, 1997, (ii) the Company's Current Reports on
Form 8-K dated April 4, 1997 and May 2, 1997, (iii) Amendment No. 1 on Form
8-K/A-1 to the Company's Current Report on Form 8-K dated April 4, 1997,
and (iv) Amendment No. 1 on Form 8-K/A-1 to the Company's Current Report on
Form 8-K dated May 2, 1997; and
(c) The description of the Company's common stock, par value $.001 per
share (the "Common Stock"), contained in the Company's Registration
Statement on Form 8-A, dated May 11, 1993, filed under Section 12 of the
Exchange Act, including any subsequent amendment or any report or other
filing with the Commission updating such description.
In addition, all documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of
a post-effective amendment to this Registration Statement which indicates that
all securities offered hereby have been sold or which deregisters all such
securities then remaining unsold, shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The validity of the Common Stock to which this Registration Statement
relates will be passed upon for the Company by Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, New York, New York ("Greenberg Traurig"). Shahe
Sinanian, a shareholder of Greenberg Traurig, serves as the Secretary of the
Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145(a) of the General Corporation Law of the State of Delaware (the
"General Corporation Law") provides that a Delaware corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no cause to believe his or her conduct was unlawful.
II-1
<PAGE>
Section 145(b) of the General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or
in the right of the corporation to procure a judgment in its favor by reason
of the fact that such person acted in any of the capacities set forth above,
against expenses actually and reasonably incurred by him or her in connection
with the defense or settlement of such action or suit if he or she acted under
similar standards as set forth above, except that no indemnification may be
made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the court in which such action or suit was brought shall determine
that despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to be
indemnified for such expenses which the court shall deem proper.
Section 145 of the General Corporation Law further provides that to the
extent a director or officer of a corporation has been successful on the
merits or otherwise in the defense of any action, suit or proceeding referred
to in subsections (a) and (b) or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses actually and
reasonably incurred by him or her in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of
any other rights to which the indemnified party may be entitled; and that the
corporation may purchase and maintain insurance on behalf of such person
against any liability asserted against him or her or incurred by him or her in
any such capacity or arising out of his or her status as such, whether or not
the corporation would have the power to indemnify him or her against such
liabilities under such Section 145.
Section 102(b)(7) of the General Corporation Law provides that a corporation
in its original certificate of incorporation or an amendment thereto validly
approved by stockholders may eliminate or limit personal liability of members
of its board of directors or governing body for monetary damages for breach of
a director's fiduciary duty. However, no such provision may eliminate or limit
the liability of a director for breaching his or her duty of loyalty, failing
to act in good faith, engaging in intentional misconduct or knowingly
violating a law, paying a dividend or approving a stock repurchase or
redemption which was illegal, or obtaining an improper personal benefit. A
provision of this type has no effect on the availability of equitable
remedies, such as injunction or rescission, for breach of fiduciary duty. The
Company's Certificate of Incorporation contains such a provision.
Article Ninth of the Company's Certificate of Incorporation eliminates the
personal liability of directors and/or officers to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided that such elimination of the personal liability of a director and/or
officer of the Company does not apply to (i) any breach of such person's duty
of loyalty to the Company or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) actions prohibited under Section 174 of the General Corporation Law
(i.e., liabilities imposed upon directors who vote for or assent to the
unlawful payment of dividends, unlawful repurchases or redemption of stock,
unlawful distribution of assets of the Company to the stockholders without the
prior payment or discharge of the Company's debts or obligations, or unlawful
making or guaranteeing of loans to directors and/or officers), or (iv) any
transaction from which the director derived an improper personal benefit. In
addition, Article Tenth of the Company's Certificate of Incorporation and
Article IV of the Company's By-Laws provide that the Company shall indemnify
its corporate personnel, directors and officers to the fullest extent
permitted by the General Corporation Law, as amended from time to time.
The Company has in force an insurance policy under which its directors and
officers are insured, with limits of $5,000,000 per occurrence and $5,000,000
in the aggregate, against certain expenses in connection with the defense of
such actions, suits or proceedings to which they are parties by reason of
being or having been directors or officers of the Company.
The Company and its officers, directors and other persons are entitled to be
indemnified under certain circumstances for certain securities law violations
in accordance with the provisions of an underwriting agreement dated June 6,
1996 (the "Underwriting Agreement"), by and among the Company, certain selling
shareholders named in Schedule II to the Underwriting Agreement, and Rodman &
Renshaw, Inc., as representative of the several underwriters named in Schedule
I to the Underwriting Agreement.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Company as
disclosed above, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
The restricted securities to be reoffered and resold pursuant to this
Registration Statement were issued in transactions exempt from registration
pursuant to Section 4(2) of the Securities Act. Each such transaction involved
the issuance of shares of Common Stock pursuant to the exercise of options
granted under the Plans to persons who were officers, employees or directors
of the Company and who had access to material information with respect to the
Company.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 Specimen Form of Common Stock Certificate.
4.2 1992 Stock Option Plan.
4.3 1995 Incentive Stock Option Plan.
4.4 1995 Non-Qualified Stock Option Plan.
4.5 1997 Non-Qualified Stock Option Plan.
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel.
23.1 Consent of Simonton, Kutac & Barnidge, LLP.
Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel (contained
23.2 in Exhibit 5.1).
25.1 Power of Attorney (included as part of the signature page to this
Registration Statement and incorporated herein by reference).
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission Pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this Registration Statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) shall not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the Company
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of the annual report of the employee benefit plans
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Company pursuant to the foregoing provisions, or otherwise, the Company has
been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Company certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas, on October
31, 1997.
Diagnostic Health Services, Inc.
By: /s/ Max W. Batzer
__________________________________
Max W. Batzer
Chairman of the Board
and Chief Executive Officer
----------------
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Max W. Batzer and Brad A. Hummel, and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-
effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, and any other regulatory authority,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorneys-in-fact and agents or any of them, or their
substitutes, may lawfully do or cause to be done by virtue hereof.
----------------
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURE CAPACITY DATE
/s/ Max W. Batzer Chairman of the October 31, 1997
_____________________________________ Board and Chief
MAX W. BATZER Executive Officer
(principal executive officer)
/s/ Christopher L. Turner Chief Financial October 31, 1997
_____________________________________ Officer
CHRISTOPHER L. TURNER (principal financial
and accounting
officer)
/s/ Brad A. Hummel President, Chief October 31, 1997
_____________________________________ Operating Officer
BRAD A. HUMMEL and Director
/s/ Thomas M. Sestak Director October 31, 1997
_____________________________________
THOMAS M. SESTAK
/s/ Bo W. Lycke Director October 31, 1997
_____________________________________
BO W. LYCKE
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EHIBITX
UMBERN DESCRIPTION
- ------- -----------
<S> <C>
4.1 Specimen Form of Common Stock Certificate.
4.2 1992 Stock Option Plan.
4.3 1995 Incentive Stock Option Plan.
4.4 1995 Non-Qualified Stock Option Plan.
4.5 1997 Non-Qualified Stock Option Plan.
5.1 Opinion of Greenberg Traurig Hoffman Lipoff Rosen & Quentel.
23.1 Consent of Simonton, Kutac & Barnidge, LLP.
23.2 Consent of Greenberg Traurig Hoffman Lipoff Rosen & Quentel (contained in Exhibit 5.1).
25.1 Power of Attorney (included as part of the signature page to this Registration Statement and
incorporated herein by reference).
</TABLE>
- --------
All exhibits are filed herewith electronically.
<PAGE>
EXHIBIT 4.1
DHS _____ SHARES
__________________
Common Stock
CUSIP 252446 40 6
[LOGO]
DIAGNOSTIC HEALTH SERVICES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS
CERTIFIES
THAT
is the
owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE PER SHARE,
OF
DIAGNOSTIC HEALTH SERVICES, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of the Certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be
subject to all the provisions of the Articles of Incorporation of the
Corporation, as now or hereafter amended, to all of which the holder hereof by
acceptance hereof assents. This Certificate is not valid unless countersigned
and registered by the Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its authorized officers.
Dated:
[SEAL]
- --------------------------------- --------------------------------
Secretary President
<PAGE>
EXHIBIT 4.2
DIAGNOSTIC HEALTH SERVICES. INC.
--------------------------------
1992 STOCK OPTION PLAN
----------------------
1. PURPOSES.
--------
The purposes of the Diagnostic Health Services, Inc. 1992 Stock Option
Plan (this "Plan") are to aid Diagnostic Health Services, Inc. (the "Company")
and its subsidiaries in attracting and retaining capable management and
employees and to enable officers, directors and selected key employees and/or
consultants of the Company and its subsidiaries to acquire or increase ownership
interest in the Company on a basis that will encourage them to perform at
increasing levels of effectiveness and use their best efforts to promote the
growth and profitability of the Company and its subsidiaries. Consistent with
these objectives, this Plan authorizes the granting to officers, directors and
selected key employees and/or consultants of options (collectively, "Options")
to acquire shares of the Company's common stock, no par value ("Common Stock"),
pursuant to the terms and conditions hereinafter set forth. As used herein, the
term "subsidiary" has the same meaning as is ascribed to the term "subsidiary
corporation" under Section 425 of the Internal Revenue Code of 1986, as amended
(the "Code").
Options granted hereunder may be (i) "Incentive Options" (which term,
as used herein, shall mean Options that are intended to be "incentive stock
options" within the meaning of Section 422 of the Code) granted to selected key
employees of the Company, or (ii) "Nonqualified Options" (which term, as used
herein, shall mean options that are not intended to be Incentive Options)
granted to officers, directors and/or selected key employees and/or consultants
of the Company.
2. EFFECTIVE DATE.
--------------
This Plan shall become effective upon the approval hereof by the
stockholders of the Company: provided, however, that if such approval is not
-------- -------
granted on or prior to March 6, 1993 (being that date which is twelve (12)
months after the date of the adoption of this Plan by the Board of Directors of
the Company (the "Board")), this Plan shall not become effective,
notwithstanding any subsequent approval by the stockholders of the Company.
3. ADMINISTRATION.
--------------
(a) This Plan shall be administered by a committee (the "Committee")
consisting of three members of the Board, who are selected by the Board. (In the
event that, and for so long as, the entire Board shall consist of only three
members, then the Board shall constitute the Committee hereunder.) If, at any
time, there are less than three members of the Committee eligible to serve in
such capacity, the Board shall appoint one or more other eligible members of the
Board to serve on the Committee. All Committee members shall serve, and may be
removed, at the pleasure of the Board.
<PAGE>
(b) A majority of the members of the Committee (but not less than two)
shall constitute a quorum, and any action taken by a majority of such members
present at any meeting at which a quorum is present, or acts approved in writing
by all such members, shall be the acts of the Committee.
(c) Subject to the other provisions of this Plan, the Committee shall
have full authority to decide the date or dates on which Options will be granted
under this Plan (in each instance, the "Date of Grant"), to determine whether
the Options to be granted shall be Incentive Options or Nonqualified Options, or
a combination of both, to select the officers, directors and/or key employees
and/or consultants to whom Options will be granted, to determine the number of
shares of Common Stock to be covered by each Option, the price at which such
shares may be purchased upon the exercise of such Option (the "Exercise Price")
and other terms and conditions of such purchase. In making such determinations,
the Committee shall solicit the recommendations of the Chairman and President of
the Company and may take into account each proposed optionee's present and
potential contributions to the Company's business and any other factors which
the Committee may deem relevant. Subject to the other provisions of this Plan,
the Committee shall also have full authority to (i) interpret this Plan and any
stock option agreements evidencing Options granted hereunder ("Option
Agreements"), (ii) issue rules for administering this Plan, (ii) change, alter,
amend or rescind such rules, and (iv) make all other determinations necessary or
appropriate for the administration of this Plan. All determinations,
interpretations and constructions made by the Committee pursuant to this Section
3 shall be final and conclusive. No member of the Board or the Committee shall
be liable for any action, determination or omission taken or made in good faith
with respect to this Plan or any Option granted hereunder.
4. ELIGIBILITY.
-----------
(a) Subject to the provisions of Section 7 below, key employees of the
Company and its subsidiaries (including officers and directors who are
employees) shall be eligible to receive Incentive Options under this Plan, as
determined by the Committee.
(b) All officers, directors and other senior management of and/or key
consultants to the Company (as determined by the Committee) shall be eligible to
receive Nonqualified Options under this Plan.
(c) Anything elsewhere contained in this Plan to the contrary
notwithstanding, in no event and under no circumstances shall any Nonqualified
Options be granted under this Plan (other than to key consultants) providing for
an Exercise Price less than 100% of the fair market value per share on the Date
of Grant (but in no event less than 85% of such fair market value per share) if
the net pre-tax income of the Company in the full fiscal year immediately
preceding the Date of Grant of such Option (the "Prior Year") did not exceed
125% of the mean average annual net pre-tax income of the Company for the three
fiscal years immediately preceding the Prior Year. For purposes hereof, the
Company's net pre-tax income for any fiscal year shall be the consolidated net
pre-tax income of the Company and its subsidiaries as reflected in the Company's
consolidated audited financial statements for such fiscal year, which shall be
-2-
<PAGE>
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout all periods in question.
5. OPTION SHARES.
-------------
(a) The shares subject to Options granted under this Plan shall be
shares of Common Stock and, except as otherwise required or permitted by Section
5(b) below, (i) the aggregate number of shares with respect to which Incentive
Options may be granted hereunder shall not exceed 400,000 shares, and (ii) the
aggregate number of shares with respect to which Nonqualified Options may be
granted hereunder shall not exceed 1,600,000 shares. If an Option expires,
terminates or is otherwise surrendered, in whole or in part, the shares
allocable to the unexercised portion of such Option shall again become available
for grants of Options hereunder. As determined from time to time by the Board,
the shares available under this Plan for grants of Options may consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock which have been reacquired by the Company or a subsidiary following
original issuance.
(b) The aggregate number of shares of Common Stock as to which
Incentive Options and Nonqualified Options may be granted hereunder (as provided
in Section 5(a) above), the number of shares covered by each outstanding Option,
and the Exercise Price applicable to each outstanding Option shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, recapitalization or other
subdivision or consolidation of shares or other adjustment, or the payment of a
stock dividend in respect of the Common Stock; provided, however, that any
-------- -------
fractional shares resulting from any such adjustment shall be eliminated.
(c) The aggregate fair market value, determined on the Date of Grant,
of the shares of stock with respect to which Incentive Options are exercisable
for the first time by an Optionee (as such term is defined in Section 6 below)
during any calendar year (under all incentive stock option plans of the Company
and its subsidiaries) may not exceed $100,000.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
The Committee may, in its discretion, subject to Section 4 above,
grant to prospective optionees only Incentive Options, only Nonqualified
Options, or a combination of both, and each Option granted shall be clearly
identified as to its status. Each Option granted pursuant to this Plan shall be
evidenced by an Option Agreement between the Company and the officer, director,
key employee and/or key consultant to whom the Option is granted (the
"Optionee") in such form or forms as the Committee, from time to time, shall
prescribe, which agreements may but need not be identical to each other, but
shall comply with and be subject to the following terms and conditions:
(a) Exercise Price. The Exercise Price at which each share of Common
--------------
Stock may be purchased pursuant to an Option shall be determined by the
Committee, except that (i) subject to Section 7 below, the Exercise Price at
which each share of Common Stock may be
-3-
<PAGE>
purchased pursuant to an Incentive Option shall be not less than 100% of the
fair market value for each such share on the Date of Grant of such Incentive
Option, as determined by the Committee in good faith in accordance with Section
422 of the Code and applicable regulations thereunder, and (ii) the Exercise
Price at which each share of Common Stock may be purchased pursuant to a
Nonqualified Option shall be not less than 85% of the fair market value for each
such share on the Date of Grant of such Nonqualified Option, determined by the
Committee as aforesaid; provided, however, that the Option Agreement in respect
-------- -------
of any or all Nonqualified Options may (but need not) provide that, in the event
of any change in control and management of the Company or any sale of the
business of the Company, except to the extent that the subject Optionee (or
other person entitled to exercise such Nonqualified Option) affirmatively
elects, during a limited period of time after receiving notice of such event, to
permanently revoke and terminate the subject Nonqualified Option (in whole or in
part) and/or to reaffirm all or any portion of such Nonqualified Option without
giving effect to the reduction in Exercise Price hereinafter described, then the
otherwise applicable Exercise Price in respect of such Nonqualified Option may
thereafter be reduced (but not by more than 50%) in the event that, and at such
time(s) as, the subject Optionee (or other person entitled to exercise such
Nonqualified Option) thereafter exercises such Nonqualified Option (or the non-
revoked and non-reaffirmed portion thereof, as the case may be). Anything
contained in this Section 6(a) to the contrary notwithstanding, in the event
that the number of shares of Common Stock subject to any Option is adjusted
pursuant to Section 5(b) above, a corresponding adjustment shall be made in the
Exercise Price per share.
(b) Duration of Options. The duration of each Option granted hereunder
-------------------
shall be determined by the Committee, except that (i) subject to Section 7
below, each Incentive Option granted hereunder shall expire and all rights to
purchase shares of Common Stock pursuant thereto shall cease no later than that
date which is the day before the tenth anniversary of the Date of Grant of such
Incentive Option, and (ii) each Nonqualified Option granted hereunder shall
expire and all rights to purchase shares of Common Stock pursuant thereto shall
cease no later than that date which is the day before the eighth anniversary of
the Date of Grant of such Nonqualified Option, subject to extension by mutual
written agreement of the Company and the subject Optionee (in each instance, the
"Expiration Date").
(c) Vesting of Options. The vesting of each Option granted hereunder
------------------
shall be determined by the Committee. Only the vested portion(s) of any Option
may be exercised. Anything contained in this Section 6 or in any Option
Agreement to the contrary notwithstanding, an Optionee shall become fully (100%)
vested in each of his or her Incentive Options upon his or her termination of
employment with the Company or any of its subsidiaries by reason of death,
disability or retirement at age 65 or older in accordance with the Company's
standard retirement procedures then in effect (with such retirement being
hereinafter referred to as "retirement"). The Committee shall, in its sole
discretion, determine whether or not disability or retirement has occurred.
(d) Merger. Consolidation. etc. In the event that the Company shall,
---------------------------
pursuant to action by the Board, at any time propose to merge into, consolidate
with, or sell or otherwise transfer all or substantially all of its assets to,
another corporation and provision is not made
-4-
<PAGE>
pursuant to the terms of such transaction for (i) the assumption by the
surviving, resulting or acquiring corporation of all outstanding Options granted
pursuant to this Plan, (ii) the substitution of new options therefor, or (iii)
the payment of cash or other consideration in respect thereof, then the
Committee shall cause written notice of the proposed transaction to be given to
each Optionee not less than thirty (30) days prior to the anticipated effective
date of the proposed transaction. On a date which the Committee shall specify in
such notice, which date shall be not less than ten (10) days prior to the
anticipated effective date of the proposed transaction, each Optionee's Options
shall become fully (100%) vested and each Optionee shall have the right to
exercise his or her Options to purchase any or all shares then subject to such
Options; and if the proposed transaction is consummated, each Option, to the
extent not previously exercised prior to the effective date of the transaction,
shall terminate on such effective date. If the proposed transaction is abandoned
or otherwise not consummated, then to the extent that any Option not exercised
prior to such abandonment shall have vested solely by operation of this Section
6(d), such vesting shall be annulled and be of no further force or effect and
the vesting period otherwise established for or applicable to such Option
pursuant to Section 6(c) above shall be reinstituted as of the date of such
abandonment; provided, however, that nothing herein contained shall be deemed to
-------- -------
retroactively affect or impair any exercise of any such vested Option prior to
the date of such abandonment.
(e) Exercise of Options. A person entitled to exercise an Option, or
-------------------
any portion thereof, may exercise it (or such vested portion thereof) in whole
at any time, or in part from time to time, by delivering to the Company at its
principal office, directed to the attention of the President of the Company or
such other duly elected officer as shall be designated in writing by the
Committee to the Optionee, written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the aggregate Exercise Price for such shares. Such payment
shall be made in cash or by certified check or bank draft to the order of the
Company; provided, however, that the Committee may, in its sole discretion,
-------- -------
authorize such payment, in whole or in part, in any other form, including
payment by personal check or by the exchange of shares of Common Stock owned of
record by the person entitled to exercise the Option and having a fair market
value on the date of exercise equal to the price for which the shares of Common
Stock may be purchased pursuant to the Option.
(f) Non-Transferability. No Incentive Option granted hereunder shall
-------------------
be transferable other than by will or the laws of descent and distribution, and
during the subject Optionee's lifetime, no Incentive Option granted hereunder
may be exercised by anyone other than such Optionee; provided, however, that if
-------- -------
the Optionee dies or becomes incapacitated, the Incentive Option may be
exercised by his or her estate, legal representative or beneficiary, as the case
may be, subject to all other terms and conditions contained in this Plan and the
applicable Option Agreement. Any Nonqualified Option granted hereunder may, if
so provided in the subject Option Agreement, be transferable to members of the
Optionee's immediate family or by will or by the laws of decent and
distribution, and may, if so provided in the subject Option Agreement, be
pledged as collateral security in favor of another permitted holder of a
Nonqualified Option hereunder, solely as collateral for a loan made by such
other holder to the person making such pledge.
-5-
<PAGE>
(g) Termination of Employment; Competition. The following provisions
--------------------------------------
shall apply in the event of an Optionee's engaging in competition with the
Company, or in the event of the termination of an Optionee's employment with the
Company or any of its subsidiaries:
(i) In the event that an Optionee shall engage or participate in,
or become involved with, in any manner or capacity (whether as employee,
agent, consultant, advisor, officer, director, manager, partner, joint
venturer, investor, shareholder (other than passive investments in less
than 5% of the outstanding securities of any company) or otherwise), any
business enterprise which is engaged in the rendering of diagnostic
ultrasound services or any other business conducted or operated by the
Company on the date on which such Optionee first became involved with such
other business enterprise, or in the event that an Optionee's employment
with the Company or any of its subsidiaries shall be terminated either (A)
by the Company or any of its subsidiaries for "Cause" (as defined in any
applicable employment agreement to which such Optionee is a party), or (in
the absence of a definition contained in any applicable employment
agreement) for fraud, dishonesty, habitual drunkenness or drug use, for
willful disregard of assigned duties or instructions by such Optionee, or
for concrete actions causing substantial harm to the Company, or for other
material breach by the Optionee of any applicable employment agreement to
which the Optionee is a party, or (B) by the Optionee voluntarily and
without the written consent of the Company, then all outstanding Options
-----
granted hereunder to such Optionee shall automatically and immediately
terminate at the time that notice of termination of employment is given,
and shall not then or thereafter be exercisable in whole or in part;
provided, however, that nothing herein contained shall be deemed to modify
-------- -------
or amend the terms and conditions of any applicable employment agreement,
including but not limited to the grounds upon which any Optionee's
employment may be terminated.
(ii) In the event that an Optionee's employment with the Company
or any of its subsidiaries shall terminate (A) by reason of retirement, or
(B) under circumstances other than those specified in Section 6(g)(i) above
and for other than death or disability, then all outstanding Options
----
granted hereunder to such Optionee shall terminate three (3) months after
the date of such termination of employment or on the Expiration Date,
whichever shall first occur; provided, however, that if such Optionee dies
-------- -------
within such three (3) month period, then all outstanding Options granted
hereunder to such Optionee shall terminate on the first anniversary of such
Optionee's death or on the Expiration Date, whichever shall first occur.
(iii) In the event of the death or disability of an Optionee
while such Optionee is employed by the Company or any of its subsidiaries,
all outstanding Options granted hereunder to such Optionee shall terminate
on the first anniversary of such death or disability, as the case may be,
or on the Expiration Date, whichever shall first occur.
(iv) Anything contained in this Section 6 to the contrary
notwithstanding, an Option granted pursuant to this Plan may only be
exercised following
-6-
<PAGE>
the subject Optionee's termination of employment with the Company or any of
its subsidiaries for reasons other than death, disability or retirement if,
and to the extent that, such Option was exercisable immediately prior to
such termination of employment.
(v) An Optionee's transfer of employment between the Company and
any of its subsidiaries or between subsidiaries shall not constitute a
termination of employment, and the Committee shall determine in each case
whether an authorized leave of absence for professional education, military
service or otherwise shall constitute a termination of employment.
(vi) Nothing contained in this Section 6(g) shall be deemed to
modify or affect any vesting schedule provided in any Option Agreement,
which vesting schedule shall continue in effect and be applied and enforced
notwithstanding any modification of the exercise period arising by reason
of the application of this Section 6(g).
(h) No Rights as a Stockholder or to Continued Employment. No Optionee
-----------------------------------------------------
shall have any rights as a stockholder of the Company with respect to any shares
covered by an Option prior to the date of issuance to such Optionee of the
certificate or certificates for such shares. Neither this Plan nor any Option
granted hereunder shall confer upon an Optionee any right to continued
employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or its subsidiaries to terminate the employment of
such Optionee (subject to the terms and conditions of any applicable employment
agreement between the Company or any of its subsidiaries and the subject
Optionee).
(i) Designation. Each Option Agreement entered into pursuant to this
-----------
Plan shall specify whether the Options evidenced thereby are Incentive Options,
Nonqualified Options, or a combination of both.
(j) Other Terms and Conditions. Any Option Agreement entered into
--------------------------
pursuant to this Plan may contain such further terms and conditions (including a
right of first refusal in favor of the Company in the event that the Optionee
shall seek to transfer any shares acquired upon exercise of the subject Option)
as the Committee may determine, provided that such other terms and conditions
are not in violation of, in conflict with or otherwise inconsistent with the
requirements of this Plan.
7. TEN PERCENT STOCKHOLDERS.
------------------------
The Committee shall not grant an Incentive Option to an individual
who, at the time such Incentive Option is to be granted, owns (directly or by
attribution pursuant to Section 425(d) of the Code) shares of capital stock of
the Company possessing more than 10% of the voting power of all classes of
capital stock of the Company unless (a) the Exercise Price at which each share
of Common Stock may be purchased pursuant to such Incentive Option is at least
110% of the fair market value of each such share on the Date of Grant
(determined as provided in Section 6(a)(i) above), and (b) such Incentive
Option, by its terms, is not exercisable after the expiration of five years from
the Date of Grant thereof.
-7-
<PAGE>
8. ISSUANCE OF SHARES: RESTRICTIONS.
--------------------------------
(a) Subject to the conditions, restrictions and other qualifications
provided in this Section 8, the Company shall, within thirty (30) business days
after an Option has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, registered in the name
of such person, for the number of shares of Common Stock with respect to which
the Option has been exercised. The Company may legend any stock certificate
issued hereunder to reflect any restrictions provided for in this Section 8,
including but not limited to a "stop transfer" legend pursuant to Section 8(b)
below.
(b) Unless the shares subject to Options granted under the Plan have
been registered under the Securities Act of 1933, as amended (the "Act") (and,
if the person exercising the Option may be deemed an "affiliate" of the Company
as such term is defined in Rule 405 under the Act, such shares have been
registered under the Act for resale by such person), or the Company has
determined that an exemption from registration under the Act is available, the
Company may require, prior to and as a condition of the issuance of any shares
of Common Stock upon exercise of any Option, that the person exercising such
Option hereunder furnish the Company with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring such
shares solely with a view to investment for his or her own account and not with
a view to the resale or distribution of all or any part thereof, and that such
person will not dispose of any of such shares otherwise than in accordance with
the provisions of Rule 144 under the Act unless and until either the sale or
distribution of such shares is registered under the Act or the Company is
satisfied that an exemption from such registration is available.
(c) Anything herein contained to the contrary notwithstanding, the
Company shall not be obligated to sell or issue any shares of Common Stock
pursuant to the exercise of an Option granted hereunder unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Act and all other laws and/or regulations by which the Company
is bound or to which the Company or such shares may be subject; and the Company
reserves the right to delay the issuance and/or delivery of shares of Common
Stock for such period of time as may be required in order to effect compliance
with the applicable provisions of the Act and all other applicable laws and/or
regulations as aforesaid.
9. SUBSTITUTE OPTIONS.
------------------
Anything herein contained to the contrary notwithstanding, Options
may, at the discretion of the Board, be granted under this Plan in substitution
for options to purchase shares of capital stock of another corporation which is
merged into, consolidated with or all or a substantial portion of the property
or stock of which is acquired by, the Company or a subsidiary. The terms,
provisions and benefits to each Optionee under such substitute Options shall in
all respects be identical to the terms, provisions and benefits to such Optionee
of his or her options of the other corporation on the date of substitution,
except that such substitute Options shall provide for the purchase of shares of
Common Stock of the Company instead of shares of such other corporation.
-8-
<PAGE>
10. TERM OF THIS PLAN.
-----------------
Unless this Plan has been sooner terminated pursuant to Section 11
below, this Plan shall terminate on, and no Options hereunder shall be granted
after, the tenth (10th) anniversary of the date of Board adoption of this Plan.
Notwithstanding any such Plan termination, the provisions of this Plan shall
nonetheless continue thereafter to govern all Options theretofore granted
(including but not limited to any Nonqualified Options the Expiration Date of
which is extended to any date subsequent to the termination of this Plan) until
the exercise, expiration or cancellation of such Options.
11. AMENDMENT AND TERMINATION OF PLAN.
---------------------------------
The Board may at any time terminate this Plan, or amend this Plan from
time to time in such respects as the Board deems desirable; provided, however,
-------- -------
that, without the further approval of the stockholders of the Company in the
manner required under Section 2 above, no amendment shall (i) increase the
maximum aggregate number of shares of Common Stock with respect to which Options
may be granted under this Plan, or (ii) change the eligibility provisions of
Section 4 above; and further provided, that, subject to the provisions of
--- ------- --------
Sections 6 and 8 above, no termination hereof or amendment hereto shall
adversely affect the rights of an Optionee or other person holding an Option
theretofore granted hereunder without the consent of such Optionee or other
person, as the case may be.
-9-
<PAGE>
EXHIBIT 4.3
DIAGNOSTIC HEALTH SERVICES, INC.
-------------------------------
1995 INCENTIVE STOCK OPTION PLAN
--------------------------------
1. PURPOSES.
--------
The purposes of the Diagnostic Health Services, Inc. 1995 Incentive Stock
Option Plan (this "Plan") are to aid Diagnostic Health Services, Inc. (the
"Company") and its subsidiaries in attracting and retaining capable management
and employees and to enable selected key employees of the Company and its
subsidiaries to acquire or increase ownership interest in the Company on a basis
that will encourage them to perform at increasing levels of effectiveness and
use their best efforts to promote the growth and profitability of the Company
and its subsidiaries. Consistent with these objectives, this Plan authorizes the
granting to selected key employees of options (collectively, "Options") to
acquire shares of the Company's common stock, $.001 par value per share ("Common
Stock"), pursuant to the terms and conditions hereinafter set forth. As used
herein, the term "subsidiary" has the same meaning as is ascribed to the term
"subsidiary corporation" under Section 425 of the Internal Revenue Code of 1986,
as amended (the "Code").
Options granted hereunder shall be "incentive stock options", within the
meaning of Section 422 of the Code, granted to selected key employees of the
Company.
2. EFFECTIVE DATE.
--------------
This Plan shall become effective upon the approval hereof by the
stockholders of the Company; provided, however, that if such approval is not
-------- -------
granted on or prior to August 31, 1996 (being that date which is twelve (12)
months after the date of the adoption of this Plan by the Board of Directors of
the Company (the "Board")), this Plan shall not become effective,
notwithstanding any subsequent approval by the stockholders of the Company.
3. ADMINISTRATION.
--------------
(a) This Plan shall be administered by the Compensation Committee of
the Board, or, if no Compensation Committee shall then be constituted, a
committee consisting of three members of the Board, who are selected by the
Board (in either case, the "Committee"); provided, however, that in the event
-------- -------
that, and for so long as, the entire Board shall consist of only three members,
or the Board shall not have designated the membership of the Committee, then the
Board shall constitute the Committee hereunder. If, at any time, there are less
than three
1
<PAGE>
members of the Committee eligible to serve in such capacity, the Board shall
appoint one or more other eligible members of the Board to serve on the
Committee. All Committee members shall serve, and may be removed, at the
pleasure of the Board.
(b) A majority of the members of the Committee (but not less than two)
shall constitute a quorum, and any action taken by a majority of such members
present at any meeting at which a quorum is present, or acts approved in writing
by all such members, shall be the acts of the Committee.
(c) Subject to the other provisions of this Plan, the Committee shall
have full authority to decide the date or dates on which Options will be granted
under this Plan (in each instance, the "Date of Grant"), to select the key
employees to whom Options will be granted, to determine the number of shares of
Common Stock to be covered by each Option, the price at which such shares may be
purchased upon the exercise of such Option (the "Exercise Price") and other
terms and conditions of such purchase. In making such determinations, the
Committee shall solicit the recommendations of the Chairman and President of the
Company and may take into account each proposed optionee's present and potential
contributions to the Company's business and any other factors which the
Committee may deem relevant. Subject to the other provisions of this Plan, the
Committee shall also have full authority to (i) interpret this Plan and any
stock option agreements evidencing Options granted hereunder ("Option
Agreements"), (ii) issue rules for administering this Plan, (iii) change, alter,
amend or rescind such rules, and (iv) make all other determinations necessary or
appropriate for the administration of this Plan. All determinations,
interpretations and constructions made by the Committee pursuant to this Section
3 shall be final and conclusive. No member of the Board or the Committee shall
be liable for any action, determination or omission taken or made in good faith
with respect to this Plan or any Option granted hereunder.
4. ELIGIBILITY.
-----------
Subject to the provisions of Section 7 below, key employees of the Company
and its subsidiaries (including officers and directors who are employees) shall
be eligible to receive Incentive Options under this Plan, as determined by the
Committee.
5. OPTION SHARES.
-------------
(a) The shares subject to Options granted under this Plan shall be
shares of Common Stock and, except as otherwise required or permitted by Section
5(b) below, the aggregate number of shares with respect to which Options may be
granted hereunder shall not exceed 500,000 shares. If an Option expires,
terminates
2
<PAGE>
or is otherwise surrendered, in whole or in part, the shares allocable to the
unexercised portion of such Option shall again become available for grants of
Options hereunder. As determined from time to time by the Board, the shares
available under this Plan for grants of Options may consist either in whole or
in part of authorized but unissued shares of Common Stock or shares of Common
Stock which have been reacquired by the Company or a subsidiary following
original issuance.
(b) The aggregate number of shares of Common Stock as to which Options
and may be granted hereunder (as provided in Section 5(a) above), the number of
shares covered by each outstanding Option, and the Exercise Price applicable to
each outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued and/or outstanding shares of Common Stock
resulting from a stock split, combination of shares, recapitalization or other
subdivision or consolidation of shares or other adjustment, or the payment of a
stock dividend in respect of the Common Stock; provided, however, that any
-------- -------
fractional shares resulting from any such adjustment shall be eliminated.
(c) The aggregate fair market value, determined on the Date of Grant,
of the shares of stock with respect to which Options are exercisable for the
first time by an Optionee (as such term is defined in Section 6 below) during
any calendar year (under all incentive stock option plans of the Company and its
subsidiaries) may not exceed $100,000.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option granted pursuant to this Plan shall be evidenced by an Option
Agreement between the Company and the key employee to whom the Option is granted
(the "Optionee") in such form or forms as the Committee, from time to time,
shall prescribe, which agreements may but need not be identical to each other,
but shall comply with and be subject to the following terms and conditions:
(a) Exercise Price. The Exercise Price at which each share of Common
--------------
Stock may be purchased pursuant to an Option shall be determined by the
Committee, except that, subject to Section 7 below, the Exercise Price at which
each share of Common Stock may be purchased pursuant to an Option shall be not
less than 100% of the fair market value for each such share on the Date of Grant
of such Incentive Option, as determined by the Committee in good faith in
accordance with Section 422 of the Code and applicable regulations thereunder.
Anything contained in this Section 6(a) to the contrary notwithstanding, in the
event that the number of shares of Common Stock subject to any Option is
adjusted pursuant to Section 5(b) above, a corresponding adjustment shall be
made in
3
<PAGE>
the Exercise Price per share.
(b) Duration of Options. The duration of each Option granted
-------------------
hereunder shall be determined by the Committee, except that, subject to Section
7 below, each Option granted hereunder shall expire and all rights to purchase
shares of Common Stock pursuant thereto shall cease no later than that date
which is the day before the tenth anniversary of the Date of Grant of such
Option. The expiration date of each Option hereunder is referred to herein as
the "Expiration Date".
(c) Vesting of Options. The vesting of each Option granted hereunder
------------------
shall be determined by the Committee, provided that, if no vesting requirements
are specified at the time of the granting of any Option hereunder, then the
subject Option shall be deemed to be fully vested and exercisable on the Date of
Grant. Only the vested portion(s) of any Option may be exercised. Anything
contained in this Section 6 or in any Option Agreement to the contrary
notwithstanding, an Optionee shall become fully (100%) vested in each of his or
her Options upon his or her termination of employment with the Company or any of
its subsidiaries by reason of death, disability or retirement at age 65 or older
in accordance with the Company's standard retirement procedures then in effect
(with such retirement being hereinafter referred to as "retirement"). The
Committee shall, in its sole discretion, determine whether or not disability or
retirement has occurred.
(d) Merger, Consolidation, etc. In the event that the Company shall,
---------------------------
pursuant to action by the Board, at any time propose to merge into, consolidate
with, or sell or otherwise transfer all or substantially all of its assets to,
another corporation and provision is not made pursuant to the terms of such
transaction for (i) the assumption by the surviving, resulting or acquiring
corporation of all outstanding Options granted pursuant to this Plan, (ii) the
substitution of new options therefor, or (iii) the payment of cash or other
consideration in respect thereof, then the Committee shall cause written notice
of the proposed transaction to be given to each Optionee not less than thirty
(30) days prior to the anticipated effective date of the proposed transaction.
On a date which the Committee shall specify in such notice, which date shall be
not less than ten (10) days prior to the anticipated effective date of the
proposed transaction, each Optionee's Options shall become fully (100%) vested
and each Optionee shall have the right to exercise his or her Options to
purchase any or all shares then subject to such Options; and if the proposed
transaction is consummated, each Option, to the extent not previously exercised
prior to the effective date of the transaction, shall terminate on such
effective date. If the proposed transaction is abandoned or otherwise not
consummated, then to the extent that any Option not
4
<PAGE>
exercised prior to such abandonment shall have vested solely by operation of
this Section 6(d), such vesting shall be annulled and be of no further force or
effect and the vesting period otherwise established for or applicable to such
Option pursuant to Section 6(c) above shall be reinstituted as of the date of
such abandonment; provided, however, that nothing herein contained shall be
-------- -------
deemed to retroactively affect or impair any exercise of any such vested Option
prior to the date of such abandonment.
(e) Exercise of Options. A person entitled to exercise an Option, or
-------------------
any portion thereof, may exercise it (or such vested portion thereof) in whole
at any time, or in part from time to time, by delivering to the Company at its
principal office, directed to the attention of the President of the Company or
such other duly elected officer as shall be designated in writing by the
Committee to the Optionee, written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the aggregate Exercise Price for such shares. Such payment
shall be made in cash or by certified check or bank draft to the order of the
Company; provided, however, that the Committee may, in its sole discretion,
-------- -------
authorize such payment, in whole or in part, in any other form, including
payment by personal check or by the exchange of shares of Common Stock owned of
record by the person entitled to exercise the Option and having a fair market
value on the date of exercise equal to the price for which the shares of Common
Stock may be purchased pursuant to the Option.
(f) Non-Transferability. No Option granted hereunder shall be
-------------------
transferable other than by will or the laws of descent and distribution, and
during the subject Optionee's lifetime, no Option granted hereunder may be
exercised by anyone other than such Optionee; provided, however, that if the
-------- -------
Optionee dies or becomes incapacitated, the Option may be exercised by his or
her estate, legal representative or beneficiary, as the case may be, subject to
all other terms and conditions contained in this Plan and the applicable Option
Agreement.
(g) Termination of Employment; Competition. The following provisions
--------------------------------------
shall apply in the event of an Optionee's engaging in competition with the
Company, or in the event of the termination of an Optionee's employment with the
Company or any of its subsidiaries:
(i) In the event that an Optionee shall engage or participate in, or
become involved with, in any manner or capacity (whether as employee, agent,
consultant, advisor, officer, director, manager, partner, joint venturer,
investor, shareholder (other than passive investments in less than 5% of the
outstanding securities of any company) or otherwise), any business enterprise
which is engaged in the
5
<PAGE>
rendering of diagnostic ultrasound services, nuclear imaging, cardiac lab
management, paramedical personnel placement, or any other business conducted or
operated by the Company on the date on which such Optionee first became involved
with such other business enterprise, or in the event that an Optionee's
employment with the Company or any of its subsidiaries shall be terminated
either (A) by the Company or any of its subsidiaries for "Cause" (as defined in
any applicable employment agreement to which such Optionee is a party), or
(in the absence of a definition contained in any applicable employment
agreement) for fraud, dishonesty, habitual drunkenness or drug use, for willful
disregard of assigned duties or instructions by such Optionee, or for concrete
actions causing substantial harm to the Company, or for other material breach by
the Optionee of any applicable employment agreement to which the Optionee is a
party, or (B) by the Optionee voluntarily and without the written consent of the
Company, then all outstanding Options granted hereunder to such Optionee
----
shall automatically and immediately terminate at the time that notice of
termination of employment is given, and shall not then or thereafter be
exercisable in whole or in part; provided, however, that nothing herein
-------- -------
contained shall be deemed to modify or amend the terms and conditions of any
applicable employment agreement, including but not limited to the grounds upon
which any Optionee's employment may be terminated.
(ii) In the event that an Optionee's employment with the Company or any
of its subsidiaries shall terminate (A) by reason of retirement, or (B) under
circumstances other than those specified in Section 6(g)(i) above and for other
than death or disability, then all outstanding Options granted hereunder to
----
such Optionee shall terminate three (3) months after the date of such
termination of employment or on the Expiration Date, whichever shall first
occur; provided, however, that if such Optionee dies within such three (3) month
-------- -------
period, then all outstanding Options granted hereunder to such Optionee shall
terminate on the first anniversary of such Optionee's death or on the Expiration
Date, whichever shall first occur.
(iii) In the event of the death or disability of an Optionee while
such Optionee is employed by the Company or any of its subsidiaries, all
outstanding Options granted hereunder to such Optionee shall terminate on the
first anniversary of such death or disability, as the case may be, or on the
Expiration Date, whichever shall first occur.
(iv) Anything contained in this Section 6 to the contrary
notwithstanding, an Option granted pursuant to this Plan may only be exercised
following the subject Optionee's
6
<PAGE>
termination of employment with the Company or any of its subsidiaries
for reasons other than death, disability or retirement if, and to the
extent that, such Option was exercisable immediately prior to such
termination of employment.
(v) An Optionee's transfer of employment between the Company and
any of its subsidiaries or between subsidiaries shall not constitute a
termination of employment, and the Committee shall determine in each
case whether an authorized leave of absence for professional education,
military service or otherwise shall constitute a termination of
employment.
(vi) Nothing contained in this Section 6(g) shall be deemed to
modify or affect any vesting schedule provided in any Option Agreement,
which vesting schedule shall continue in effect and be applied and
enforced notwithstanding any modification of the exercise period arising
by reason of the application of this Section 6(g).
(h) No Rights as a Stockholder or to Continued Employment. No
-----------------------------------------------------
Optionee shall have any rights as a stockholder of the Company with respect to
any shares covered by an Option prior to the date of issuance to such Optionee
of the certificate or certificates for such shares. Neither this Plan nor any
Option granted hereunder shall confer upon an Optionee any right to continued
employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or its subsidiaries to terminate the employment of
such Optionee (subject to the terms and conditions of any applicable employment
agreement between the Company or any of its subsidiaries and the subject
Optionee).
(i) Designation. Each Option Agreement entered into pursuant to this
-----------
Plan shall specify therein that the subject Option has been granted under this
Plan.
(j) Other Terms and Conditions. Any Option Agreement entered into
--------------------------
pursuant to this Plan may contain such further terms and conditions (including a
right of first refusal in favor of the Company in the event that the Optionee
shall seek to transfer any shares acquired upon exercise of the subject Option)
as the Committee may determine, provided that such other terms and conditions
are not in violation of, in conflict with or otherwise inconsistent with the
requirements of this Plan.
7. TEN PERCENT STOCKHOLDERS.
------------------------
The Committee shall not grant an Option to an individual who, at the time
such Option is to be granted, owns
7
<PAGE>
(directly or by attribution pursuant to Section 425(d) of the Code) shares of
capital stock of the Company possessing more than 10% of the voting power of all
classes of capital stock of the Company unless (a) the Exercise Price at which
each share of Common Stock may be purchased pursuant to such Option is at least
110% of the fair market value of each such share on the Date of Grant
(determined as provided in Section 6(a)(i) above), and (b) such Option, by its
terms, is not exercisable after the expiration of five years from the Date of
Grant thereof.
8. ISSUANCE OF SHARES; RESTRICTIONS.
--------------------------------
(a) Subject to the conditions, restrictions and other qualifications
provided in this Section 8, the Company shall, within thirty (30) business days
after an Option has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, registered in the name
of such person, for the number of shares of Common Stock with respect to which
the Option has been exercised. The Company may legend any stock certificate
issued hereunder to reflect any restrictions provided for in this Section 8,
including but not limited to a "stop transfer" legend pursuant to Section 8(b)
below.
(b) Unless the shares subject to Options granted under the Plan have
been registered under the Securities Act of 1933, as amended (the "Act") (and,
if the person exercising the Option may be deemed an "affiliate" of the Company
as such term is defined in Rule 405 under the Act, such shares have been
registered under the Act for resale by such person), or the Company has
determined that an exemption from registration under the Act is available, the
Company may require, prior to and as a condition of the issuance of any shares
of Common Stock upon exercise of any Option, that the person exercising such
Option hereunder furnish the Company with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring such
shares solely with a view to investment for his or her own account and not with
a view to the resale or distribution of all or any part thereof, and that such
person will not dispose of any of such shares otherwise than in accordance with
the provisions of Rule 144 under the Act unless and until either the sale or
distribution of such shares is registered under the Act or the Company is
satisfied that an exemption from such registration is available.
(c) Anything herein contained to the contrary notwithstanding, the
Company shall not be obligated to sell or issue any shares of Common Stock
pursuant to the exercise of an Option granted hereunder unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Act and all other laws and/or regulations by which the Company
is bound or to which the Company or such shares may be subject; and the Company
reserves the right to delay the issuance
8
<PAGE>
and/or delivery of shares of Common Stock for such period of time as may be
required in order to effect compliance with the applicable provisions of the Act
and all other applicable laws and/or regulations as aforesaid.
9. SUBSTITUTE OPTIONS.
------------------
Anything herein contained to the contrary notwithstanding, Options may, at
the discretion of the Board, be granted under this Plan in substitution for
options to purchase shares of capital stock of another corporation which is
merged into, consolidated with or all or a substantial portion of the property
or stock of which is acquired by, the Company or a subsidiary. The terms,
provisions and benefits to each Optionee under such substitute Options shall in
all respects be identical to the terms, provisions and benefits to such Optionee
of his or her options of the other corporation on the date of substitution,
except that such substitute Options shall provide for the purchase of shares of
Common Stock of the Company instead of shares of such other corporation.
10. TERM OF THIS PLAN.
-----------------
Unless this Plan has been sooner terminated pursuant to Section 11 below,
this Plan shall terminate on, and no Options hereunder shall be granted after,
the tenth (10th) anniversary of the date of Board adoption of this Plan.
Notwithstanding any such Plan termination, the provisions of this Plan shall
nonetheless continue thereafter to govern all Options theretofore granted until
the exercise, expiration or cancellation of such Options.
11. AMENDMENT AND TERMINATION OF PLAN.
---------------------------------
The Board may at any time terminate this Plan, or amend this Plan from time
to time in such respects as the Board deems desirable; provided, however, that,
-------- -------
without the further approval of the stockholders of the Company in the manner
required under Section 2 above, no amendment shall (i) increase the maximum
aggregate number of shares of Common Stock with respect to which Options may be
granted under this Plan, or (ii) change the eligibility provisions of Section 4
above; and further provided, that, subject to the provisions of Sections 6 and 8
--- ------- --------
above, no termination hereof or amendment hereto shall adversely affect the
rights of an Optionee or other person holding an Option theretofore granted
hereunder without the consent of such Optionee or other person, as the case may
be.
9
<PAGE>
EXHIBIT 4.4
DIAGNOSTIC HEALTH SERVICES, INC.
--------------------------------
1995 NONQUALIFIED STOCK OPTION PLAN
-----------------------------------
1. PURPOSES.
--------
The purposes of the Diagnostic Health Services, Inc. 1995 Nonqualified
Stock Option Plan (this "Plan") are to aid Diagnostic Health Services, Inc. (the
"Company") and its subsidiaries in attracting and retaining capable management
and employees and to enable officers, directors, employees and/or consultants of
the Company and its subsidiaries to acquire or increase ownership interest in
the Company on a basis that will encourage them to perform at increasing levels
of effectiveness and use their best efforts to promote the growth and
profitability of the Company and its subsidiaries. Consistent with these
objectives, this Plan authorizes the granting to officers, directors, employees
and/or consultants of options (collectively, "Options") to acquire shares of the
Company's common stock, $.001 par value per share ("Common Stock"), pursuant to
the terms and conditions hereinafter set forth. As used herein, the term
"subsidiary" has the same meaning as is ascribed to the term "subsidiary
corporation" under Section 425 of the Internal Revenue Code of 1986, as amended
(the "Code").
Options granted hereunder are not intended to be and shall not be treated
as "incentive stock options" within the meaning of Section 422 of the Code.
2. EFFECTIVE DATE.
--------------
This Plan shall become effective upon the adoption and approval hereof by
the Board of Directors of the Company (the "Board").
3. ADMINISTRATION.
--------------
(a) This Plan shall be administered by the Compensation Committee of
the Board, or, if no Compensation Committee shall then be constituted, a
committee consisting of three members of the Board who are selected by the Board
(in either case, the "Committee"); provided, however, that in the event that,
-------- -------
and for so long as, the entire Board shall consist of only three members, then
the Board shall constitute the Committee hereunder. If, at any time, there are
less than three members of the Committee eligible to serve in such capacity, the
Board shall appoint one or more other eligible members of the Board to serve on
the Committee. All Committee members shall serve, and may be
<PAGE>
removed, at the pleasure of the Board.
(b) A majority of the members of the Committee (but not less than two)
shall constitute a quorum, and any action taken by a majority of such members
present at any meeting at which a quorum is present, or acts approved in writing
by all such members, shall be the acts of the Committee.
(c) Subject to the other provisions of this Plan, the Committee shall
have full authority to decide the date or dates on which Options will be granted
under this Plan (in each instance, the "Date of Grant"), to select the officers,
directors, employees and/or consultants to whom Options will be granted, to
determine the number of shares of Common Stock to be covered by each Option, the
price at which such shares may be purchased upon the exercise of such Option
(the "Exercise Price") and other terms and conditions of such purchase. In
making such determinations, the Committee shall solicit the recommendations of
the Chairman and President of the Company and may take into account each
proposed optionee's present and potential contributions to the Company's
business and any other factors which the Committee may deem relevant. Subject to
the other provisions of this Plan, the Committee shall also have full authority
to (i) interpret this Plan and any stock option agreements evidencing Options
granted hereunder ("Option Agreements"), (ii) issue rules for administering this
Plan, (ii) change, alter, amend or rescind such rules, and (iv) make all other
determinations necessary or appropriate for the administration of this Plan. All
determinations, interpretations and constructions made by the Committee pursuant
to this Section 3 shall be final and conclusive. No member of the Board or the
Committee shall be liable for any action, determination or omission taken or
made in good faith with respect to this Plan or any Option granted hereunder.
4. ELIGIBILITY.
-----------
(a) All officers, directors, employees and/or consultants of the
Company (as determined by the Committee) shall be eligible to receive Options
under this Plan .
(b) Anything elsewhere contained in this Plan to the contrary
notwithstanding, in no event and under no circumstances shall any Options be
granted under this Plan providing for an Exercise Price less than 100% of the
fair market value per share on the Date of Grant (but in no event less than 85%
of such fair market value per share) if the net pre-tax income of the Company in
the full fiscal year immediately preceding the Date of Grant of such Option (the
"Prior Year") did not exceed 125% of the mean average annual net pre-tax income
of the Company for the three fiscal years immediately preceding the Prior Year.
For purposes
-2-
<PAGE>
hereof, the Company's net pre-tax income for any fiscal year shall be the
consolidated net pre-tax income of the Company and its subsidiaries as reflected
in the Company's consolidated audited financial statements for such fiscal year,
which shall be prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout all periods in question.
5. OPTION SHARES.
-------------
(a) The shares subject to Options granted under this Plan shall be
shares of Common Stock and, except as otherwise required or permitted by Section
5(b) below, the aggregate number of shares with respect to which Incentive
Options may be granted hereunder shall not exceed 500,000 shares. If an Option
expires, terminates or is otherwise surrendered, in whole or in part, the shares
allocable to the unexercised portion of such Option shall again become available
for grants of Options hereunder. As determined from time to time by the Board,
the shares available under this Plan for grants of Options may consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock which have been reacquired by the Company or a subsidiary following
original issuance.
(b) The aggregate number of shares of Common Stock as to which Options
may be granted hereunder (as provided in Section 5(a) above), the number of
shares covered by each outstanding Option, and the Exercise Price applicable to
each outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, recapitalization or other subdivision or consolidation of shares or other
adjustment, or the payment of a stock dividend in respect of the Common Stock;
provided, however, that any fractional shares resulting from any such adjustment
- -------- -------
shall be eliminated.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option granted pursuant to this Plan shall be evidenced by an Option
Agreement between the Company and the officer, director, employee and/or
consultant to whom the Option is granted (the "Optionee") in such form or forms
as the Committee, from time to time, shall prescribe, which agreements may but
need not be identical to each other, but shall comply with and be subject to the
following terms and conditions:
(a) Exercise Price. The Exercise Price at which each share of Common
--------------
Stock may be purchased pursuant to an Option shall be determined by the
Committee, but shall in no event be less than 85% of the fair market value for
each such share on the Date of Grant of such Option, determined by the Committee
as aforesaid; provided, however, that the Option Agreement in respect of any or
-------- -------
-3-
<PAGE>
all Options may (but need not) provide that, in the event of any change in
control and management of the Company or any sale of the business of the
Company, except to the extent that the subject Optionee (or other person
entitled to exercise such Option) affirmatively elects, during a limited period
of time after receiving notice of such event, to permanently revoke and
terminate the subject Option (in whole or in part) and/or to reaffirm all or any
portion of such Option without giving effect to the reduction in Exercise Price
hereinafter described, then the otherwise applicable Exercise Price in respect
of such Option may thereafter be reduced (but not by more than 50%) in the event
that, and at such time(s) as, the subject Optionee (or other person entitled to
exercise such Option) thereafter exercises such Option (or the non-revoked and
non-reaffirmed portion thereof, as the case may be). Anything contained in this
Section 6(a) to the contrary notwithstanding, in the event that the number of
shares of Common Stock subject to any Option is adjusted pursuant to Section
5(b) above, a corresponding adjustment shall be made in the Exercise Price per
share.
(b) Duration of Options. The duration of each Option granted
-------------------
hereunder shall be determined by the Committee, but shall in no event be later
than that date which is the day before the eighth anniversary of the Date of
Grant of such Option, subject to extension by mutual written agreement of the
Company and the subject Optionee (in each instance, the "Expiration Date").
(c) Vesting of Options. The vesting of each Option granted hereunder
------------------
shall be determined by the Committee, provided that, if no vesting requirements
are specified at the time of the granting of any Option hereunder, then the
subject Option shall be deemed to be fully vested and exercisable on the Date of
Grant. Only the vested portion(s) of any Option may be exercised.
(d) Merger, Consolidation, etc. In the event that the Company shall,
---------------------------
pursuant to action by the Board, at any time propose to merge into, consolidate
with, or sell or otherwise transfer all or substantially all of its assets to,
another corporation and provision is not made pursuant to the terms of such
transaction for (i) the assumption by the surviving, resulting or acquiring
corporation of all outstanding Options granted pursuant to this Plan, (ii) the
substitution of new options therefor, or (iii) the payment of cash or other
consideration in respect thereof, then the Committee shall cause written notice
of the proposed transaction to be given to each Optionee not less than thirty
(30) days prior to the anticipated effective date of the proposed transaction.
On a date which the Committee shall specify in such notice, which date shall be
not less than ten (10) days prior to the anticipated effective date of the
proposed transaction, each Optionee's Options shall become fully (100%) vested
and each Optionee shall have the right to
-4-
<PAGE>
exercise his or her Options to purchase any or all shares then subject to such
Options; and if the proposed transaction is consummated, each Option, to the
extent not previously exercised prior to the effective date of the transaction,
shall terminate on such effective date. If the proposed transaction is abandoned
or otherwise not consummated, then to the extent that any Option not exercised
prior to such abandonment shall have vested solely by operation of this Section
6(d), such vesting shall be annulled and be of no further force or effect and
the vesting period otherwise established for or applicable to such Option
pursuant to Section 6(c) above shall be reinstituted as of the date of such
abandonment; provided, however, that nothing herein contained shall be
-------- -------
deemed to retroactively affect or impair any exercise of any such vested Option
prior to the date of such abandonment.
(e) Exercise of Options. A person entitled to exercise an Option, or
-------------------
any portion thereof, may exercise it (or such vested portion thereof) in whole
at any time, or in part from time to time, by delivering to the Company at its
principal office, directed to the attention of the President of the Company or
such other duly elected officer as shall be designated in writing by the
Committee to the Optionee, written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the aggregate Exercise Price for such shares. Such payment
shall be made in cash or by certified check or bank draft to the order of the
Company; provided, however, that the Committee may, in its sole discretion,
-------- -------
authorize such payment, in whole or in part, in any other form, including
payment by personal check or by the exchange of shares of Common Stock owned of
record by the person entitled to exercise the Option and having a fair market
value on the date of exercise equal to the price for which the shares of Common
Stock may be purchased pursuant to the Option.
(f) Non-Transferability. Any Option granted hereunder may, if so
-------------------
provided in the subject Option Agreement, be transferable to members of the
Optionee's immediate family or by will or by the laws of decent and
distribution, and may, if so provided in the subject Option Agreement, be
pledged as collateral security in favor of another permitted holder of an Option
hereunder, solely as collateral for a loan made by such other holder to the
person making such pledge.
(g) Termination of Employment; Competition. The following provisions
--------------------------------------
shall apply in the event of an Optionee's engaging in competition with the
Company, or in the event of the termination of an Optionee's employment with the
Company or any of its subsidiaries:
(i) In the event that an Optionee shall engage or participate in, or
become involved with, in any manner or
-5-
<PAGE>
capacity (whether as employee, agent, consultant, advisor, officer, director,
manager, partner, joint venturer, investor, shareholder (other than passive
investments in less than 5% of the outstanding securities of any company) or
otherwise), any business enterprise which is engaged in the rendering of
diagnostic ultrasound services, nuclear imaging, cardiac lab management,
paramedical personnel placement, or any other business conducted or operated by
the Company on the date on which such Optionee first became involved with such
other business enterprise, or in the event that an Optionee's employment with
the Company or any of its subsidiaries shall be terminated either (A) by the
Company or any of its subsidiaries for "Cause" (as defined in any applicable
employment agreement to which such Optionee is a party), or (in the absence of a
definition contained in any applicable employment agreement) for fraud,
dishonesty, habitual drunkenness or drug use, for willful disregard of assigned
duties or instructions by such Optionee, or for concrete actions causing
substantial harm to the Company, or for other material breach by the Optionee of
any applicable employment agreement to which the Optionee is a party, or (B) by
the Optionee voluntarily and without the written consent of the Company, then
----
all outstanding Options granted hereunder to such Optionee shall
automatically and immediately terminate at the time that notice of termination
of employment is given, and shall not then or thereafter be exercisable in whole
or in part; provided, however, that nothing herein contained shall be deemed to
-------- -------
modify or amend the terms and conditions of any applicable employment agreement,
including but not limited to the grounds upon which any Optionee's employment
may be terminated.
(ii) In the event that an Optionee's employment with the Company or any
of its subsidiaries shall terminate (A) by reason of retirement, or (B) under
circumstances other than those specified in Section 6(g)(i) above and for other
than death or disability, then all outstanding Options granted hereunder to
----
such Optionee shall terminate three (3) months after the date of such
termination of employment or on the Expiration Date, whichever shall first
occur; provided, however, that if such Optionee dies within such
-------- --------
three (3) month period, then all outstanding Options granted hereunder to such
Optionee shall terminate on the first anniversary of such Optionee's death or on
the Expiration Date, whichever shall first occur.
(iii) In the event of the death or disability of an Optionee while
such Optionee is employed by the Company or any of its subsidiaries, all
outstanding Options granted hereunder to such Optionee shall terminate on the
first anniversary of such death or disability, as the case may be,
-6-
<PAGE>
or on the Expiration Date, whichever shall first occur.
(iv) Anything contained in this Section 6 to the contrary
notwithstanding, an Option granted pursuant to this Plan may only be exercised
following the subject Optionee's termination of employment with the Company or
any of its subsidiaries for reasons other than death, disability or retirement
if, and to the extent that, such Option was exercisable immediately prior to
such termination of employment.
(v) An Optionee's transfer of employment between the Company and any of
its subsidiaries or between subsidiaries shall not constitute a termination of
employment, and the Committee shall determine in each case whether an authorized
leave of absence for professional education, military service or otherwise shall
constitute a termination of employment.
(vi) Nothing contained in this Section 6(g) shall be deemed to modify or
affect any vesting schedule provided in any Option Agreement, which vesting
schedule shall continue in effect and be applied and enforced notwithstanding
any modification of the exercise period arising by reason of the application of
this Section 6(g).
(h) No Rights as a Stockholder or to Continued Employment. No
-----------------------------------------------------
Optionee shall have any rights as a stockholder of the Company with respect to
any shares covered by an Option prior to the date of issuance to such Optionee
of the certificate or certificates for such shares. Neither this Plan nor any
Option granted hereunder shall confer upon an Optionee any right to continued
employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or its subsidiaries to terminate the employment of
such Optionee (subject to the terms and conditions of any applicable employment
agreement between the Company or any of its subsidiaries and the subject
Optionee).
(i) Designation. Each Option Agreement entered into pursuant to this
-----------
Plan shall specify therein that the subject Option has been granted under this
Plan.
(j) Other Terms and Conditions. Any Option Agreement entered into
--------------------------
pursuant to this Plan may contain such further terms and conditions (including a
right of first refusal in favor of the Company in the event that the Optionee
shall seek to transfer any shares acquired upon exercise of the subject Option)
as the Committee may determine, provided that such other terms and conditions
are not in violation of, in conflict with or otherwise inconsistent with the
requirements of this Plan.
-7-
<PAGE>
7. ISSUANCE OF SHARES; RESTRICTIONS.
--------------------------------
(a) Subject to the conditions, restrictions and other qualifications
provided in this Section 7, the Company shall, within thirty (30) business days
after an Option has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, registered in the name
of such person, for the number of shares of Common Stock with respect to which
the Option has been exercised. The Company may legend any stock certificate
issued hereunder to reflect any restrictions provided for in this Section 7,
including but not limited to a "stop transfer" legend pursuant to Section 7(b)
below.
(b) Unless the shares subject to Options granted under the Plan have
been registered under the Securities Act of 1933, as amended (the "Act") (and,
if the person exercising the Option may be deemed an "affiliate" of the Company
as such term is defined in Rule 405 under the Act, such shares have been
registered under the Act for resale by such person), or the Company has
determined that an exemption from registration under the Act is available, the
Company may require, prior to and as a condition of the issuance of any shares
of Common Stock upon exercise of any Option, that the person exercising such
Option hereunder furnish the Company with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring such
shares solely with a view to investment for his or her own account and not with
a view to the resale or distribution of all or any part thereof, and that such
person will not dispose of any of such shares otherwise than in accordance with
the provisions of Rule 144 under the Act unless and until either the sale or
distribution of such shares is registered under the Act or the Company is
satisfied that an exemption from such registration is available.
(c) Anything herein contained to the contrary notwithstanding, the
Company shall not be obligated to sell or issue any shares of Common Stock
pursuant to the exercise of an Option granted hereunder unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Act and all other laws and/or regulations by which the Company
is bound or to which the Company or such shares may be subject; and the Company
reserves the right to delay the issuance and/or delivery of shares of Common
Stock for such period of time as may be required in order to effect compliance
with the applicable provisions of the Act and all other applicable laws and/or
regulations as aforesaid.
-8-
<PAGE>
8. SUBSTITUTE OPTIONS.
------------------
Anything herein contained to the contrary notwithstanding, Options may, at
the discretion of the Board, be granted under this Plan in substitution for
options to purchase shares of capital stock of another corporation which is
merged into, consolidated with or all or a substantial portion of the property
or stock of which is acquired by, the Company or a subsidiary. The terms,
provisions and benefits to each Optionee under such substitute Options shall in
all respects be identical to the terms, provisions and benefits to such Optionee
of his or her options of the other corporation on the date of substitution,
except that such substitute Options shall provide for the purchase of shares of
Common Stock of the Company instead of shares of such other corporation.
9. TERM OF THIS PLAN.
-----------------
Unless this Plan has been sooner terminated pursuant to Section 10 below,
this Plan shall terminate on, and no Options hereunder shall be granted after,
the tenth (10th) anniversary of the date of the adoption and approval of this
Plan by the Board. Notwithstanding any such Plan termination, the provisions of
this Plan shall nonetheless continue thereafter to govern all Options
theretofore granted (including but not limited to any Options the Expiration
Date of which is extended to any date subsequent to the termination of this
Plan) until the exercise, expiration or cancellation of such Options.
10. AMENDMENT AND TERMINATION OF PLAN.
---------------------------------
The Board may at any time terminate this Plan, or amend this Plan from time
to time in such respects as the Board deems desirable; provided, however, that,
-------- -------
subject to the provisions of Sections 6 and 7 above, no termination hereof or
amendment hereto shall adversely affect the rights of an Optionee or other
person holding an Option theretofore granted hereunder without the consent of
such Optionee or other person, as the case may be.
-9-
<PAGE>
EXHIBIT 4.5
DIAGNOSTIC HEALTH SERVICES, INC.
--------------------------------
1997 NONQUALIFIED STOCK OPTION PLAN
-----------------------------------
1. PURPOSES.
--------
The purposes of the Diagnostic Health Services, Inc. 1997 Nonqualified
Stock Option Plan (this "Plan") are to aid Diagnostic Health Services, Inc. (the
"Company") and its subsidiaries in attracting and retaining capable management
and employees and to enable officers, directors, employees and/or consultants of
the Company and its subsidiaries to acquire or increase ownership interest in
the Company on a basis that will encourage them to perform at increasing levels
of effectiveness and use their best efforts to promote the growth and
profitability of the Company and its subsidiaries. Consistent with these
objectives, this Plan authorizes the granting to officers, directors, employees
and/or consultants of options (collectively, "Options") to acquire shares of the
Company's common stock, $.001 par value per share ("Common Stock"), pursuant to
the terms and conditions hereinafter set forth. As used herein, the term
"subsidiary" has the same meaning as is ascribed to the term "subsidiary
corporation" under Section 425 of the Internal Revenue Code of 1986, as amended
(the "Code").
Options granted hereunder are not intended to be and shall not be treated
as "incentive stock options" within the meaning of Section 422 of the Code.
2. EFFECTIVE DATE.
--------------
This Plan shall become effective upon the adoption and approval hereof by
the Board of Directors of the Company (the "Board").
3. ADMINISTRATION.
--------------
(a) This Plan shall be administered by the Compensation Committee of
the Board, or, if no Compensation Committee shall then be constituted, a
committee consisting of three members of the Board who are selected by the Board
(in either case, the "Committee"); provided, however, that in the event that,
-------- -------
and for so long as, the entire Board shall consist of only three members, then
the Board shall constitute the Committee hereunder. If, at any time, there are
less than three members of the Committee eligible to serve in such capacity, the
Board shall appoint one or more other eligible members of the Board to serve on
the Committee. All Committee members shall serve, and may be
<PAGE>
removed, at the pleasure of the Board.
(b) A majority of the members of the Committee (but not less than two)
shall constitute a quorum, and any action taken by a majority of such members
present at any meeting at which a quorum is present, or acts approved in writing
by all such members, shall be the acts of the Committee.
(c) Subject to the other provisions of this Plan, the Committee shall
have full authority to decide the date or dates on which Options will be granted
under this Plan (in each instance, the "Date of Grant"), to select the officers,
directors, employees and/or consultants to whom Options will be granted, to
determine the number of shares of Common Stock to be covered by each Option, the
price at which such shares may be purchased upon the exercise of such Option
(the "Exercise Price") and other terms and conditions of such purchase. In
making such determinations, the Committee shall solicit the recommendations of
the Chairman and President of the Company and may take into account each
proposed optionee's present and potential contributions to the Company's
business and any other factors which the Committee may deem relevant. Subject to
the other provisions of this Plan, the Committee shall also have full authority
to (i) interpret this Plan and any stock option agreements evidencing Options
granted hereunder ("Option Agreements"), (ii) issue rules for administering this
Plan, (ii) change, alter, amend or rescind such rules, and (iv) make all other
determinations necessary or appropriate for the administration of this Plan. All
determinations, interpretations and constructions made by the Committee pursuant
to this Section 3 shall be final and conclusive. No member of the Board or the
Committee shall be liable for any action, determination or omission taken or
made in good faith with respect to this Plan or any Option granted hereunder.
4. ELIGIBILITY.
-----------
(a) All officers, directors, employees and/or consultants of the
Company (as determined by the Committee) shall be eligible to receive Options
under this Plan.
(b) Anything elsewhere contained in this Plan to the contrary
notwithstanding, in no event and under no circumstances shall any Options be
granted under this Plan providing for an Exercise Price less than 100% of the
fair market value per share on the Date of Grant if the net pre-tax income of
the Company in the full fiscal year immediately preceding the Date of Grant of
such Option (the "Prior Year") did not exceed 125% of the mean average annual
net pre-tax income of the Company for the three fiscal years immediately
preceding the Prior Year; and in no event and under no circumstances (other than
by reason of any adjustment
-2-
<PAGE>
authorized herein to take place following the Date of Grant) shall the Exercise
Price under any Option on the Date of Grant of such Option be less than 85% of
the fair market value per share on such Date of Grant. For purposes hereof, the
Company's net pre-tax income for any fiscal year shall be the consolidated net
pre-tax income of the Company and its subsidiaries as reflected in the Company's
consolidated audited financial statements for such fiscal year, which shall be
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout all periods in question.
5. OPTION SHARES.
-------------
(a) The shares subject to Options granted under this Plan shall be
shares of Common Stock and, except as otherwise required or permitted by Section
5(b) below, the aggregate number of shares with respect to which Incentive
Options may be granted hereunder shall not exceed 1,000,000 shares. If an Option
expires, terminates or is otherwise surrendered, in whole or in part, the shares
allocable to the unexercised portion of such Option shall again become available
for grants of Options hereunder. As determined from time to time by the Board,
the shares available under this Plan for grants of Options may consist either in
whole or in part of authorized but unissued shares of Common Stock or shares of
Common Stock which have been reacquired by the Company or a subsidiary following
original issuance.
(b) The aggregate number of shares of Common Stock as to which Options
may be granted hereunder (as provided in Section 5(a) above), the number of
shares covered by each outstanding Option, and the Exercise Price applicable to
each outstanding Option shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, recapitalization or other subdivision or consolidation of shares or other
adjustment, or the payment of a stock dividend in respect of the Common Stock;
provided, however, that any fractional shares resulting from any such adjustment
- -------- -------
shall be eliminated.
6. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option granted pursuant to this Plan shall be evidenced by an Option
Agreement between the Company and the officer, director, employee and/or
consultant to whom the Option is granted (the "Optionee") in such form or forms
as the Committee, from time to time, shall prescribe, which agreements may but
need not be identical to each other, but shall comply with and be subject to the
following terms and conditions:
(a) Exercise Price. The Exercise Price at which each share of Common
--------------
Stock shall be purchased pursuant to an Option shall be determined by the
Committee in accordance with the requirements of this Plan, but shall
-3-
<PAGE>
in no event be less than 85% of the fair market value for each such share on the
Date of Grant of such Option, determined by the Committee as aforesaid;
provided, however, that the Option Agreement in respect of any or all Options
- -------- -------
may (but need not) provide that, in the event of any change in control and
management of the Company or any sale of the business of the Company, except to
the extent that the subject Optionee (or other person entitled to exercise such
Option) affirmatively elects, during a limited period of time after receiving
notice of such event, to permanently revoke and terminate the subject Option (in
whole or in part) and/or to reaffirm all or any portion of such Option without
giving effect to the reduction in Exercise Price hereinafter described, then the
otherwise applicable Exercise Price in respect of such Option may thereafter be
reduced (but not by more than 50%) in the event that, and at such time(s) as,
the subject Optionee (or other person entitled to exercise such Option)
thereafter exercises such Option (or the non-revoked and non-reaffirmed portion
thereof, as the case may be). Anything contained in this Section 6(a) to the
contrary notwithstanding, in the event that the number of shares of Common Stock
subject to any Option is adjusted pursuant to Section 5(b) above, a
corresponding adjustment shall be made in the Exercise Price per share.
(b) Duration of Options. The duration of each Option granted
-------------------
hereunder shall be determined by the Committee, but shall in no event be later
than that date which is the day before the eighth anniversary of the Date of
Grant of such Option, subject to extension by mutual written agreement of the
Company and the subject Optionee (in each instance, the "Expiration Date").
(c) Vesting of Options. The vesting of each Option granted hereunder
------------------
shall be determined by the Committee, provided that, if no vesting requirements
are specified at the time of the granting of any Option hereunder, then the
subject Option shall be deemed to be fully vested and exercisable on the Date of
Grant. Only the vested portion(s) of any Option may be exercised.
(d) Merger, Consolidation, etc. In the event that the Company shall,
---------------------------
pursuant to action by the Board, at any time propose to merge into, consolidate
with, or sell or otherwise transfer all or substantially all of its assets to,
another corporation and provision is not made pursuant to the terms of such
transaction for (i) the assumption by the surviving, resulting or acquiring
corporation of all outstanding Options granted pursuant to this Plan, (ii) the
substitution of new options therefor, or (iii) the payment of cash or other
consideration in respect thereof, then the Committee shall cause written notice
of the proposed transaction to be given to each Optionee not less than thirty
(30) days prior to the anticipated effective date of the proposed transaction.
On a date which the Committee shall specify in such notice, which date shall be
not less than ten (10) days prior to the anticipated
-4-
<PAGE>
effective date of the proposed transaction, each Optionee's Options shall become
fully (100%) vested and each Optionee shall have the right to exercise his or
her Options to purchase any or all shares then subject to such Options; and if
the proposed transaction is consummated, each Option, to the extent not
previously exercised prior to the effective date of the transaction, shall
terminate on such effective date. If the proposed transaction is abandoned or
otherwise not consummated, then to the extent that any Option not exercised
prior to such abandonment shall have vested solely by operation of this Section
6(d), such vesting shall be annulled and be of no further force or effect and
the vesting period otherwise established for or applicable to such Option
pursuant to Section 6(c) above shall be reinstituted as of the date of such
abandonment; provided, however, that nothing herein contained shall be deemed to
retroactively affect or impair any exercise of any such vested Option prior to
the date of such abandonment.
(e) Exercise of Options. A person entitled to exercise an Option, or
-------------------
any portion thereof, may exercise it (or such vested portion thereof) in whole
at any time, or in part from time to time, by delivering to the Company at its
principal office, directed to the attention of the President of the Company or
such other duly elected officer as shall be designated in writing by the
Committee to the Optionee, written notice specifying the number of shares of
Common Stock with respect to which the Option is being exercised, together with
payment in full of the aggregate Exercise Price for such shares. Such payment
shall be made in cash or by certified check or bank draft to the order of the
Company; provided, however, that the Committee may, in its sole discretion,
-------- -------
authorize such payment, in whole or in part, in any other form, including
payment by personal check or by the exchange of shares of Common Stock owned of
record by the person entitled to exercise the Option and having a fair market
value on the date of exercise equal to the price for which the shares of Common
Stock may be purchased pursuant to the Option.
(f) Non-Transferability. Any Option granted hereunder may, if so
-------------------
provided in the subject Option Agreement, be transferable to members of the
Optionee's immediate family or by will or by the laws of decent and
distribution, and may, if so provided in the subject Option Agreement, be
pledged as collateral security in favor of another permitted holder of an Option
hereunder, solely as collateral for a loan made by such other holder to the
person making such pledge.
(g) Termination of Employment; Competition. The following provisions
--------------------------------------
shall apply in the event of an Optionee's engaging in competition with the
Company, or in the event of the
-5-
<PAGE>
termination of an Optionee's employment with the Company or any of its
subsidiaries:
(i) In the event that an Optionee shall engage or participate in, or
become involved with, in any manner or capacity (whether as employee, agent,
consultant, advisor, officer, director, manager, partner, joint venturer,
investor, shareholder (other than passive investments in less than 5% of the
outstanding securities of any company) or otherwise), any business enterprise
which is engaged in the rendering of diagnostic ultrasound services, nuclear
imaging, cardiac lab management, paramedical personnel placement, or any other
business conducted or operated by the Company on the date on which such Optionee
first became involved with such other business enterprise, or in the event that
an Optionee's employment with the Company or any of its subsidiaries shall be
terminated either (A) by the Company or any of its subsidiaries for "Cause" (as
defined in any applicable employment agreement to which such Optionee is a
party), or (in the absence of a definition contained in any applicable
employment agreement) for fraud, dishonesty, habitual drunkenness or drug use,
for willful disregard of assigned duties or instructions by such Optionee, or
for concrete actions causing substantial harm to the Company, or for other
material breach by the Optionee of any applicable employment agreement to which
the Optionee is a party, or (B) by the Optionee voluntarily and without the
written consent of the Company, then all outstanding Options granted
----
hereunder to such Optionee shall automatically and immediately terminate at the
time that notice of termination of employment is given, and shall not then or
thereafter be exercisable in whole or in part; provided, however, that nothing
-------- -------
herein contained shall be deemed to modify or amend the terms and conditions of
any applicable employment agreement, including but not limited to the grounds
upon which any Optionee's employment may be terminated.
(ii) In the event that an Optionee's employment with the Company or any
of its subsidiaries shall terminate (A) by reason of retirement, or (B) under
circumstances other than those specified in Section 6(g)(i) above and for other
than death or disability, then all outstanding Options granted hereunder to
such Optionee shall terminate three (3) months after the date of such
termination of employment or on the Expiration Date, whichever shall first
occur; provided, however, that if such Optionee dies within such three (3)
-------- -------
month period, then all outstanding Options granted hereunder to such Optionee
shall terminate on the first anniversary of such Optionee's death or on the
Expiration Date, whichever shall first occur.
-6-
<PAGE>
(iii) In the event of the death or disability of an Optionee while
such Optionee is employed by the Company or any of its subsidiaries, all
outstanding Options granted hereunder to such Optionee shall terminate on the
first anniversary of such death or disability, as the case may be, or on the
Expiration Date, whichever shall first occur.
(iv) Anything contained in this Section 6 to the contrary
notwithstanding, an Option granted pursuant to this Plan may only be
exercised following the subject Optionee's termination of employment with the
Company or any of its subsidiaries for reasons other than death, disability
or retirement if, and to the extent that, such Option was exercisable
immediately prior to such termination of employment.
(v) An Optionee's transfer of employment between the Company and any of
its subsidiaries or between subsidiaries shall not constitute a termination
of employment, and the Committee shall determine in each case whether an
authorized leave of absence for professional education, military service or
otherwise shall constitute a termination of employment.
(vi) Nothing contained in this Section 6(g) shall be deemed to modify or
affect any vesting schedule provided in any Option Agreement, which vesting
schedule shall continue in effect and be applied and enforced notwithstanding
any modification of the exercise period arising by reason of the application
of this Section 6(g).
(h) No Rights as a Stockholder or to Continued Employment. No
-----------------------------------------------------
Optionee shall have any rights as a stockholder of the Company with respect to
any shares covered by an Option prior to the date of issuance to such Optionee
of the certificate or certificates for such shares. Neither this Plan nor any
Option granted hereunder shall confer upon an Optionee any right to continued
employment by the Company or any of its subsidiaries or interfere in any way
with the right of the Company or its subsidiaries to terminate the employment of
such Optionee (subject to the terms and conditions of any applicable employment
agreement between the Company or any of its subsidiaries and the subject
Optionee).
(i) Designation. Each Option Agreement entered into pursuant to this
-----------
Plan shall specify therein that the subject Option has been granted under this
Plan.
(j) Other Terms and Conditions. Any Option Agreement entered into
--------------------------
pursuant to this Plan may contain such further terms and conditions (including a
right of first refusal in favor of the
-7-
<PAGE>
Company in the event that the Optionee shall seek to transfer any shares
acquired upon exercise of the subject Option) as the Committee may determine,
provided that such other terms and conditions are not in violation of, in
conflict with or otherwise inconsistent with the requirements of this Plan.
7. ISSUANCE OF SHARES; RESTRICTIONS.
--------------------------------
(a) Subject to the conditions, restrictions and other qualifications
provided in this Section 7, the Company shall, within thirty (30) business days
after an Option has been duly exercised in whole or in part, deliver to the
person who exercised the Option one or more certificates, registered in the name
of such person, for the number of shares of Common Stock with respect to which
the Option has been exercised. The Company may legend any stock certificate
issued hereunder to reflect any restrictions provided for in this Section 7,
including but not limited to a "stop transfer" legend pursuant to Section 7(b)
below.
(b) Unless the shares subject to Options granted under the Plan have
been registered under the Securities Act of 1933, as amended (the "Act") (and,
if the person exercising the Option may be deemed an "affiliate" of the Company
as such term is defined in Rule 405 under the Act, such shares have been
registered under the Act for resale by such person), or the Company has
determined that an exemption from registration under the Act is available, the
Company may require, prior to and as a condition of the issuance of any shares
of Common Stock upon exercise of any Option, that the person exercising such
Option hereunder furnish the Company with a written representation in a form
prescribed by the Committee to the effect that such person is acquiring such
shares solely with a view to investment for his or her own account and not with
a view to the resale or distribution of all or any part thereof, and that such
person will not dispose of any of such shares otherwise than in accordance with
the provisions of Rule 144 under the Act unless and until either the sale or
distribution of such shares is registered under the Act or the Company is
satisfied that an exemption from such registration is available.
(c) Anything herein contained to the contrary notwithstanding, the
Company shall not be obligated to sell or issue any shares of Common Stock
pursuant to the exercise of an Option granted hereunder unless and until the
Company is satisfied that such sale or issuance complies with all applicable
provisions of the Act and all other laws and/or regulations by which the Company
is bound or to which the Company or such shares may be subject; and the Company
reserves the right to delay the issuance and/or delivery of shares of Common
Stock for such period of time as may be required in order to effect compliance
with the applicable provisions of the Act and all other applicable laws and/or
regulations as aforesaid.
-8-
<PAGE>
8. SUBSTITUTE OPTIONS.
------------------
Anything herein contained to the contrary notwithstanding, Options may, at
the discretion of the Board, be granted under this Plan in substitution for
options to purchase shares of capital stock of another corporation which is
merged into, consolidated with or all or a substantial portion of the property
or stock of which is acquired by, the Company or a subsidiary. The terms,
provisions and benefits to each Optionee under such substitute Options shall in
all respects be identical to the terms, provisions and benefits to such Optionee
of his or her options of the other corporation on the date of substitution,
except that such substitute Options shall provide for the purchase of shares of
Common Stock of the Company instead of shares of such other corporation.
9. TERM OF THIS PLAN.
-----------------
Unless this Plan has been sooner terminated pursuant to Section 10 below,
this Plan shall terminate on, and no Options hereunder shall be granted after,
the tenth (10th) anniversary of the date of the adoption and approval of this
Plan by the Board. Notwithstanding any such Plan termination, the provisions of
this Plan shall nonetheless continue thereafter to govern all Options
theretofore granted (including but not limited to any Options the Expiration
Date of which is extended to any date subsequent to the termination of this
Plan) until the exercise, expiration or cancellation of such Options.
10. AMENDMENT AND TERMINATION OF PLAN.
---------------------------------
The Board may at any time terminate this Plan, or amend this Plan from time
to time in such respects as the Board deems desirable; provided, however, that
-------- -------
subject to the provisions of Sections 6 and 7 above, no termination hereof or
amendment hereto shall adversely affect the rights of an Optionee or other
person holding an Option theretofore granted hereunder without the consent of
such Optionee or other person, as the case may be.
-9-
<PAGE>
EXHIBIT 5.1
-----------
[GREENBERG TRAURIG HOFFMAN LIPOFF ROSEN & QUENTEL LETTERHEAD]
October 31, 1997
Diagnostic Health Services, Inc.
2777 Stemmons Freeway, Suite 1525
Dallas, Texas 75207
Re: Registration Statement on Form S-8
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Diagnostic Health Services, Inc., a
Delaware corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") to be filed
under the Securities Act of 1933, as amended (the "Securities Act"), for the
registration of an aggregate of: (a) 2,761,384 shares of the Company's common
stock, par value $.001 per share (the "Common Stock"), issuable upon exercise of
options granted, or available to be granted, under the Company's 1992 Stock
Option Plan, the Company's 1995 Incentive Stock Option Plan, the Company's 1995
Non-Qualified Stock Option Plan, and the Company's 1997 Non-Qualified Stock
Option Plan (collectively, the "Plans"); and (b) 106,125 shares of Common Stock
heretofore issued upon exercise of options granted under the Plans. The opinion
set forth below relates only to the 2,761,384 shares of Common Stock (the
"Shares") issuable upon exercise of options granted, or available to be granted,
under the Plans.
In connection with this opinion, we have examined the Registration
Statement, the Company's Certificate of Incorporation, By-Laws and minutes, and
such other documents and records as we have deemed relevant. In our
examinations, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals, and the conformity
with the originals of all documents submitted to us as copies. In addition, we
have made such other examinations of law and of fact as we have deemed
appropriate in order to form a basis for the opinion hereinafter expressed.
With respect to the original issuance of the Shares pursuant to the
Plans, we have assumed that the Shares will be issued, and the certificates
evidencing the same will be duly delivered, in accordance with the terms of the
Plans and against receipt of the consideration stipulated therefor, which will
not be less than the par value of the Shares.
Based on the foregoing, we are of the opinion that the Shares have
been duly authorized and, when issued and paid for in accordance with the
foregoing assumptions, will be validly issued, fully paid and non-assessable.
The opinion set forth above is limited to the Delaware General
Corporation Law, as amended.
<PAGE>
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this opinion and consent, we do not thereby
admit that we are acting within the category of persons whose consent is
required under Section 7 of the Securities Act, or the rules and regulations of
the Securities and Exchange Commission promulgated thereunder.
Very truly yours,
/s/ GREENBERG TRAURIG HOFFMAN
LIPOFF ROSEN & QUENTEL
<PAGE>
EXHIBIT 23.1
------------
SIMONTON, KUTAC
& BARNIDGE, L.L.P.
Certified Public Accountants/Consultants to Business
909 Fannin, Suite 2050, Houston, Texas 77010-1007
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------------------
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 of our report dated March 21, 1997, relating
to the consolidated financial statements of Diagnostic Health Services, Inc.
(the "Company") for the years ended December 31, 1996 and 1995, which appears on
page F-1 of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996, and to the reference to our firm under the caption "Experts"
in the Prospectus.
/s/ Simonton, Kutac & Barnidge, L.L.P.
- --------------------------------------
Simonton, Kutac & Barnidge, L.L.P.
Houston, Texas
October 31, 1997
