SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1996
or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ______ to _______
Commission File No. 1-13392
US DIAGNOSTIC INC.
------------------
(Name of Small Business Issuer in its charter)
<TABLE>
<S> <C>
DELAWARE 11-3146389
- -------------------------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
</TABLE>
777 SOUTH FLAGLER DRIVE, SUITE 1201 EAST, WEST PALM BEACH, FLORIDA 33401
- ------------------------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (561) 832-0006
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, $.01 par value
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the 12 months (or for
such shorter period that the registrant was required to file such report(s), and
(2) has been subject to the filing requirements for the past ninety (90) days.
YES X NO
Check here if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State the issuer's revenues for its most recent fiscal year. $102,061,282.
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 15, 1997 was approximately $110,378,000 based on the last
sales price of the common stock on March 31, 1997.
As of March 15, 1997, 23,761,217 shares of common stock, $.01 par value, of the
registrant were issued and outstanding.
Certain exhibits are incorporated by reference as set forth in Item 13(a) Index
to Exhibits, in Part III.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
- ---- --- --------
Laurans A. Mendelson..... 58 Chairman of the Board and Director
Joseph A. Paul........... 39 Chief Executive Officer, President, Chief
Operating Officer and Director
Paul Andrew Shaw......... 40 Vice President, Chief Financial Officer and
Assistant Secretary
Todd R. Smith............ 33 Vice President and Chief Information Officer
Amos F. Almand, III...... 48 Senior Vice President and Director
Len Platt................ 43 Senior Vice President
Alan Winakor............. 37 Senior Vice President
Arthur Quillo............ 54 Senior Vice President
David Cohen.............. 43 Senior Vice President
C. Keith Hartley......... 54 Director
Charles J. Jacobson ..... 56 Director
Gordon C. Rausser........ 53 Director
Jeffrey A. Goffman....... 38 Former Director and Former Chief Executive
Officer(1)
Michael D. Karsch........ 36 Director and Former Executive Vice President,
Secretary and General Counsel(1)
- -------------------------------
(1) On February 3, 1997, Messrs. Goffman and Karsch were placed on voluntarily
administrative leave for an unspecified period of time by the Company's Board of
Directors. During this administrative leave they were relieved of all corporate
duties and were not to participate in any meetings of the Company's Board of
Directors. This action followed the recommendation of a Special Committee of the
Board of Directors reviewing the Company's former relationship with Coyote
Consulting and Financial Services, LLC and Keith Greenberg. On March 25, 1997
Messrs. Goffman and Karsch declared their election to treat themselves as having
been terminated without cause by the Company under their respective employment
agreements, thus, invoking constructive termination provisions of their
employment contracts. The Company has treated these elections as resignations.
2
<PAGE>
The Company has agreed to certain severance arrangements with Mr. Goffman.
Pursuant to these arrangements, Mr. Goffman resigned as a director, officer and
employee as of March 31, 1997. See Item 10 - Executive Compensation - Employment
Agreements. The Company has not agreed to any severance arrangements with Mr.
Karsch. The Company is currently exploring, through counsel, the possibility of
resolving any claims with respect to Mr. Karsch's employment contract. See Part
I Item 3 - Litigation.
Laurans A. Mendelson has been a Director of the Company since September
19,1996 and Chairman of the Board of the Company since February 2, 1997. Mr.
Mendelson has been Chairman of the Board and Chief Executive Officer of HEICO
Corporation, a publicly traded company, since 1990 and President since 1991. Mr.
Mendelson has been Chairman of the Board of Ambassador Square, Inc. (a real
estate development and management company) since 1980 and President of that
company since 1988, as well as Chairman of the Board of Columbia Ventures, Inc.
(a private investment company) since 1985 and that Company's President since
1988. He is a member of the Board of Trustees of Columbia University and was a
member of the Alumni Advisory Board to the Columbia University Board of Trustees
from 1990 through 1995 and of the Columbia College Board of Visitors from 1984
through 1990. Mr. Mendelson is also a member of the Board of Governors of the
Aerospace Industries Association, the Board of Trustees of Mt. Sinai Medical
Center, Miami Beach, Florida and Vice Chairman of the Board of Directors of the
Hollywood Economic Growth Corporation, Hollywood, Florida. He is a member of the
American Institute of Certified Public Accountants, the Florida Institute of
Certified Public Accountants, the New York State Society of Certified Public
Accountants and the Society of University Grand Founders of the University of
Miami. See Item 12 - Certain Relationships and Related Transactions.
Joseph A. Paul has been President, Chief Operating Officer and a director
of the Company since July, 1996. Mr. Paul was Interim Chief Executive Officer of
the Company from February, 1997 until March 31, 1997 when he was elected Chief
Executive Officer by the Board of Directors. From May, 1994 to June, 1996, he
was President of MediTek Health Corporation, which the Company acquired in July,
1996, from HEICO Corporation. From 1991 to 1996. Mr. Paul was Vice President of
HEICO Corporation and was responsible for forming MediTek Health Corporation.
Mr. Paul was the Vice President of Ambassador Square, Inc. from 1981 until 1996
and Vice President of Columbia Ventures from 1988 until 1996. Mr. Paul has been
an officer and director of Columbia Partners, Inc. since 1981. Mr. Paul was also
a director of Equity Bank from 1990 to 1996. Mr. Paul has a B.A. from the
University of Florida. He is a member of the American Institute of Certified
Public Accountants and the Florida Institute of Certified Public Accountants.
Paul Andrew Shaw has been Vice President and Chief Financial Officer of
the Company since July 1996 and Assistant Secretary since February 1997. He
served as Controller of MediTek Health Corporation from February 1992 until June
1996. Mr. Shaw was Controller for ExpoSystems for more than seven years until
February, 1992. He is a Certified Public Accountant licensed in Florida. Mr.
Shaw has a B.A. in Business Administration from the University of South Florida.
Todd R. Smith has been Vice President and Chief Information Officer since
January, 1996. From October 1992 until its acquisition by the Company in
November, 1995, Mr. Smith was the Vice President and then President of
FutureCare Affiliates, Inc., which he co-founded in 1992. From June, 1991 to
October, 1992 he was an Assistant Vice President of DVI Health Services Corp., a
publicly traded national health services organization, where he directed the
acquisition and development of six healthcare service businesses. From 1990 to
1991, he was President of Premier Health Strategies. From 1986 to 1991 he was
Director of Project Development of TME, Inc. where he directed the
3
<PAGE>
development of outpatient diagnostic imaging center limited partnerships. Mr.
Smith has a B.B.A. from the University of Texas at Austin. See Item 12 -
Certain Relationships and Related Transactions.
Amos F. Almand, III was elected Senior Vice President and a director in
May 1995. Mr. Almand has been a developer and operator of medical facilities and
other commercial properties in the Jacksonville, Florida area for over ten years
and was responsible for the development and syndication of eight medical
properties since 1983 and numerous other residential and commercial
developments. Mr. Almand organized and was the owner of the general partner of
Salisbury Imaging Ltd. from its founding in 1990 until its acquisition by the
Company in 1995. Mr. Almand has a B.A. in Finance from the University of
Georgia. Mr. Almand was an initial shareholder of Diversified Therapy Corp., in
which the Company owns a 20% interest. Mr. Almand is Chairman of the Board of
Directors of Diversified Therapy Corp. See Item 12 - Certain Relationships and
Related Transactions.
Len Platt has been Senior Vice President of the Company since November
1996 and is responsible for the operations of the Company's Southeast
operations. From January 1995 until November 1996, he held various positions at
Elscint, Inc. (a manufacturer of imaging equipment), including most recently,
National Sales Manager. From August 1991 until January 1995 he was regional
sales manager of Otsuka Electronics.
Alan Winakor has been Senior Vice President of the Company since September
1996 and is responsible for the operations of the Company's Northeast
operations. He was founder of Medical Marketing and Development, Inc. (owner and
operator of six outpatient facilities in the New York area), from its inception
in 1986 until the Company purchased it in September 1996. Mr. Winakor was an
initial shareholder of Diversified Therapy Corp., in which the Company owns a
20% interest. See Item 12 - Certain Relationships and Related Transactions.
Arthur Quillo oversees the operations of the Company's Midwest
operations. Mr. Quillo has over 14 years experience in the medical imaging
marketplace. He has had sales and sales management experience with Technicare
and Diasonics and as Vice President, Field Operations of Resonex (from 1993 to
1995). He was Chief Operating Officer of MRI Medical Diagnostics from its
inception in 1986 until the Company purchased it from August 1991 until October
1992, and the company declared bankruptcy in July 1993. He most recently
(1995-1996) was Director of Operations for Voxel. Mr. Quillo's earlier business
experience was with Xerox Corporation where he held a variety of field and
corporate positions over a 13 year period.
David Cohen has been Senior Vice President of the Company's West Coast
Operations since September 1995. Mr. Cohen has been responsible for and/or
involved with the development of diagnostic imaging centers for the past 13
years. Mr. Cohen was an independent consultant from October 1994 until September
1995. From November 1992 to September 1994, Mr. Cohen was the President of
FutureCare Affiliates, Inc., a company which he co-founded and that is the
majority owner of two imaging centers in California and which was acquired by
the Company in November, 1995. During 1991 and 1992, he was the Western Regional
Manager for New Ventures and Acquisitions for DVI Health Services, Inc., a
publicly-traded national health services organization. From 1986 to 1991 he
served as a Magnetic Resonance Imaging Consultant for Diasonics/Toshiba America
Medical Systems. Mr. Cohen has a degree from the University of Montreal, School
of Business.
C. Keith Hartley has been a director of the Company since September 1996.
Mr. Hartley has been a Managing Partner Corporate Finance of Forum Capital
Markets L.P., an investment banking firm, since August 1995. From May 1991 to
August 1995, he was an independent financial consultant. From
4
<PAGE>
February 1990 to May 1991, he was a Managing Director of Peers & Co., an
investment banking firm, and from 1973 to 1989 he was a Managing Director of
Drexel Burnham Lambert Incorporated. Mr. Hartley is a director of Comdisco,
Inc., Swisher International Group and Phoenix Shannon PLC, each of which is a
publicly traded company. Mr. Hartley has a B.A. from Dartmouth College and an
M.B.A. from Columbia University School of Business. See Item 12 - Certain
Relationships and Related Transactions.
Charles J. Jacobson has been a director since May 1995. Since October
1996, he has also been Chief Executive Officer of Diagnostic Equity Partners a
joint venture of the Company. Since 1983, Mr. Jacobson has been the Chairman and
Chief Executive Officer of Jacobson, Abernathy & Associates, Inc., a diversified
healthcare consulting firm with headquarters in the Tampa Bay area that provides
management and consulting services to hospitals, physician groups, independent
practice associations and other ancillary service organizations throughout the
Southeastern United States. Mr. Jacobson has over 25 years of healthcare-related
experience in the development of new healthcare ventures. He serves on the Board
of Directors of St. John's River Rural Health Network, all of which are in the
greater Jacksonville area. Mr. Jacobson has a B.S. from Christian Brothers
University and an M.B.A. from DePaul University. Mr. Jacobson is a member of the
Board of Directors of Diversified Therapy Corp., a 20% owned investee of the
Company. See Item 12 - Certain Relationships and Related Transactions.
Gordon C. Rausser, Ph.D. has been a director since October 1994 and a
consultant to the Company since January 1995. For more than eight years, Dr.
Rausser has been a principal and director of the Law & Economics Consulting
Group, Inc., an economics consulting group that provides consulting and
litigation support services primarily to Fortune 500 companies. He is Chairman
of the Board of TriColor Line, a commercial real estate and export/import
company with offices in San Francisco, London, and Prague. Dr. Rausser has
served as the Dean of the College of Natural Resources since 1994 and has been
the Robert Gordon Sproul Distinguished Professor at the University of California
at Berkeley since 1986. He has won fifteen national awards for his innovative
economic research and strategy analysis. He was also the Chairman of the
Department of Agricultural Resource Economics from 1979 to 1985 and again from
1992 to 1994. Dr. Rausser, while on leave from Berkley, served as Senior
Economist on the Council of Economic Advisors from 1986 to 1987 and as Chief
Economist of the Agency for International Development from 1988 to 1990. Dr.
Rausser has a B.S. from California State University at Fresno, and an M.S. and a
Ph.D. from the University of California, Davis. Mr. Rausser was an initial
shareholder of Diversified Therapy Corp., in which the Company owns a 20%
interest. Mr. Rausser is a member of Diversified Therapy Corp's. Board of
Directors. See Item 12 - Certain Relationships and Related Transactions.
Jeffrey A. Goffman founded the Company in 1993. From inception until June
1996, Mr. Goffman served as the Company's Chief Financial Officer and from
inception until February 1997, he served as the Company's Chairman of the Board.
He also served as Chief Executive Officer until February 1997 and as a director
until March 1997. Effective January 1995, Mr. Goffman commenced full-time
employment with the Company. Mr. Goffman was one of the founding partners of
Goffman and Associates, Certified Public Accountants, PC, an accounting firm in
Valley Stream, New York. From 1988 to 1992, Mr. Goffman was managing partner of
that firm and remained a partner in that firm until 1994. Mr. Goffman is a
certified public accountant licensed in New York and Florida and holds a B.S.
degree in Accounting from The University of Hartford. Mr. Goffman is a member of
the American Institute of Certified Public Accountants, the New York Society of
Certified Public Accountants and the Florida Institute of Certified Public
Accountants. See Item 12 - Certain Relationships and Related Transactions and
footnote 1 above.
5
<PAGE>
Michael D. Karsch has been a director of the Company since September 1996,
and was Executive Vice President, General Counsel and Secretary of the Company
from July 1996 until March 1997. Prior thereto, he was associated with the law
firm of Bachner, Tally, Polevoy & Misher LLP since 1990 becoming a partner in
July 1995. Mr. Karsch was an associate of the law firm of Skadden, Arps, Slate,
Meagher & Flom from 1986 to 1990. Mr. Karsch has a B.S. from the Wharton School
of the University of Pennsylvania and a J.D. from the University of Pennsylvania
Law School. See Item 12 - Certain Relationships and Related Transactions and
footnote 1 above.
Directors serve until the next annual meeting of stockholders of the
Company or until their successors are elected and qualified. Officers serve at
the discretion of the Board of Directors, subject to rights, if any, under
contracts of employment. Directors who are not officers receive a payment of
$1,000 for each meeting of the Board attended and $500 per Committee meeting
attended. Board members are also reimbursed for reasonable expenses incurred by
them in serving as a director of the Company. The 1995 Long-Term Incentive Plan
(the "1995 Plan") provides for the automatic grant of a non-qualified stock
option to purchase 10,000 shares of the Company's common stock to each director
who is not an employee or principal stockholder of, or referring physician to,
the Company (i) on the date such director is first elected or appointed to the
Board of Directors and (ii) each year thereafter on the day following any annual
meeting of stockholders (so long as the director's term as a director is
continuing for the ensuing year). The exercise price for all automatic grants to
directors is equal to the fair market value of the Company's common stock on the
date of grant.
The Audit Committee consists of Messrs. Hartley and Mendelson.
The Compensation Committee consists of Messrs. Hartley and Jacobson.
The Executive Committee consists of Messrs. Rausser, Hartley, Mendelson
and Paul.
On January 29, 1997 the Company's Board of Directors approved a special
committee of independent directors to review the Company's prior relationship
with Coyote Consulting and Financial Services LLC and Keith Greenberg and the
Company's prior disclosure regarding that relationship. The special committee is
composed of Messrs. Mendelson, Rausser and Hartley.
In February 1997, the Company's Board of Directors, based upon the
recommendations of the special committee, voted to place the Company's Chief
Executive Officer, Jeffrey Goffman, and the Company's Executive Vice President,
General Counsel and Secretary, Michael Karsch, on administrative leave. Messrs.
Goffman and Karsch consented to take administrative leave. In March 1997, the
Company disclosed that Messrs. Goffman and Karsch were no longer employed by the
Company. The Special Committee recommended, and the Board adopted, certain
procedures including background investigations of management and consulting
candidates, strengthening disclosure review, and the election of two additional
outside directors to the Board.
MEDICAL ADVISORY BOARD
The Company has formed a medical advisory board currently consisting of
the following physicians: Drs. Stephen Raskin, Robert Burke, Jeffrey Laborde,
Venkat Narayan, Stephen Novum, Greg Applegate and Sam Burke. The purpose of the
medical advisory board is to evaluate and consult with the Company on certain
medical matters. Drs. Laborde and Raskin each serve as radiologists at two
imaging centers and Drs. Novom and Narayan served as general partners at imaging
centers acquired by the Company.
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid or
accrued by the Company during the year ended December 31, 1996 for the Company's
Chief Executive Officer, the four highest compensated executive officers
employed by the Company at December 31, 1996, the former President of the
Company who resigned as President effective June 9, 1996 and the former Chief
Executive Officer of the Company whose employment concluded on March 31, 1997:
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
- ---------------------------------------------------------------------------- -------------------------
(A) (B) (C) (D) (E) (F) (G) (I)
OTHER
ANNUAL SECURITIES ALL
COMPEN- RESTRICTED UNDERLYING OTHER
PRINCIPAL SATION STOCK OPTIONS COMPENSA-
POSITION YEAR SALARY($) BONUS($) ($)(2) AWARD$(3) (#)(6) TION ($)
--------- ---- --------- -------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph A. Paul(4) 1996 98,485 25,000 6,000 573,125 300,000 45,555(7)
Chief Executive Officer,
President, Chief Operating
Officer and Director
David Cohen(12) 1996 225,383 82,006 12,000 -- 50,000 1,615(8)
Senior Vice President 1995 41,538 26,000 5,000 -- 100,000 --
Todd R. Smith(10) 1996 126,923 27,500 12,000 -- 20,000 542(8)
Vice President and Chief 1995 -- -- -- -- 80,000 --
Information Officer
Amos F. Almand, III(13) 1996 130,338 -- 12,000 -- 50,000 2,096(8)
Senior Vice President 1995 42,341 110,000 5,000 -- -- --
and Director
Robert D. Burke, M.D.(5) 1996 107,554 100,000 9,000 450,625 -- --
Former President and Former 1995 120,000 100,000 12,000 256,250 150,000 --
Director and Consultant 1994 120,000 -- 5,000 -- 100,000 --
Jeffrey A. Goffman(1)(11) 1996 189,038 -- 14,747 2,510,625 350,000 2,826(8)
Former Director, Former 1995 137,500 100,000 12,000 256,250 150,000 --
Chief Executive Officer 1994 120,000 -- 10,000 -- 40,000 --
and Former Chairman of
the Board
Michael D. Karsch(1)(9) 1996 100,000 25,000 6,000 321,875 100,000 769(8)
Director, Former
Executive Vice President,
Former General Counsel
and Former Secretary
</TABLE>
7
<PAGE>
- ---------------------
(1) On February 3, 1997, Messrs. Goffman and Karsch were placed on voluntarily
administrative leave for an unspecified period of time by the Company's Board of
Directors. During this administrative leave they were relieved of all corporate
duties and were not to participate in any meetings of the Company's Board of
Directors. This action followed the recommendation of a Special Committee of the
Board of Directors reviewing the Company's former relationship with Coyote
Consulting and Financial Services, LLC and Keith Greenberg. On March 25, 1997
Messrs. Goffman and Karsch declared their election to treat themselves as having
been terminated without cause by the Company under their respective employment
agreements, thus, invoking constructive termination provisions of their
employment contracts. The Company has treated these elections as resignations.
The Company has agreed to certain severance arrangements with Mr. Goffman.
Pursuant to these arrangements, Mr. Goffman resigned as a director, officer and
employee as of March 31, 1997. The Company has not agreed to any severance
arrangements with Mr. Karsch. The Company is currently exploring, through
counsel, the possibility of resolving any claims with respect to Mr. Karsch's
employment contract. See Part I Item 3 - Litigation.
(2) Represents car allowance.
(3) The number of shares of restricted stock outstanding at December 31, 1996
totaled 529,000. The aggregate value of the restricted stock was $4,893,250 at
December 31, 1996 based upon the closing market price of the Company's Common
Stock at that date. The total number of shares of outstanding restricted stock
included in the Summary Compensation Table, that vest in whole, or, in part, in
under three years from date of grant is 247,000. As of December 31, 1996, these
restricted shares were scheduled to vest in amounts of 50,000, 123,500 and
73,500 in 1996, 1997 and 1998, respectively. Dividends will be paid on
restricted stock to the extent paid on Common Stock.
(4) Joseph A. Paul joined the Company in July, 1996. These amounts do not
include a $200,000 bonus and $17,512 of vacation pay earned at MediTek Health
Corporation and accrued for prior to the acquisition of MediTek Health
Corporation by the Company and paid by the Company in July 1996 subsequent to
the date of acquisition. These amounts do not include Mr. Paul's 1996 salary and
bonus earned for the period prior to the acquisition of MediTek Health
Corporation by the Company (January 1, 1996 to June 30, 1996) in the amounts of
$70,488 and $37,500, respectively. Mr. Paul's salary and bonus at MediTek Health
Corporation was $140,413 and $50,000, respectively, in 1995 and $143,765 and
$50,000 in 1994, respectively.
(5) Dr. Burke resigned as President effective June 6, 1996 and did not stand
for re-election to the Board of Directors at the Company's September 19, 1996
annual meeting of stockholders. Salary and bonus for 1996 does not include
payments totalling $25,000 made by the Company in connection with Dr. Burke's
consulting agreement.
(6) In 1996 the Company granted 100,000, 50,000, 20,000, 50,000, 100,000 and
100,000 options to Messrs. Goffman, Cohen, Smith, Almand III, Karsch and Paul,
respectively, with an exercise price that was below the market price of the
underlying common stock. The exercise price per underlying share
8
<PAGE>
was $7.125, and the market price of the underlying common stock at the date the
options were granted was $12.875 per share.
(7) Reimbursement for Mr. Paul's relocation expenses totaled $43,040 and
Company contributions to the 401-K Plan totaled $2,515.
(8) Company contributions for 401-K Plan. The Company did not make
contributions in 1995 or 1994.
(9) Mr. Karsch was employed by the Company beginning on July 1, 1996. Amounts
reflect his compensation for the six month period ending December 31, 1996.
(10) Mr. Smith was granted 80,000 options in December, 1995 pursuant to an
employment contract. His employment commenced in January, 1996.
(11) See "Employment Agreements" for information regarding Mr. Goffman's 1996
bonus.
(12) Mr. Cohen's employment began in August 1995.
(13) Mr. Almand's employment began in June 1995.
The following table sets forth information concerning persons listed in
the Summary Compensation Table who were granted options during 1996:
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
(A) (B) (C) (D) (E) (F)
NUMBER OF % OF TOTAL MARKET PRICE
SECURITIES OPTIONS OF COMMON STOCK
UNDERLYING GRANTED TO EXERCISE AT DATE OF
OPTIONS EMPLOYEES OR BASE OPTIONS GRANTED EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR PRICE ($/SH) ($/SH) DATE
---- ------------ -------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Joseph A. Paul.............. 100,000(4) -- 7.125 12.875 6/1/2001
200,000(3) -- 12.125 12.625 10/9/2001
-------
Total 300,000 19.7%
------- ----
David Cohen................. 50,000(2) 3.3% 7.125 12.875 6/1/2001
Todd R. Smith............... 20,000(2) 1.3% 7.125 12.875 6/1/2001
Amos F. Almand, III......... 50,000(2) 3.3% 7.125 12.875 6/1/2001
Jeffrey A. Goffman(1)....... 100,000(2) -- 7.125 12.125 10/9/2001
250,000(3) -- 12.125 12.625 10/9/2001
-------
Total 350,000 23 %
-------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (F)
NUMBER OF % OF TOTAL MARKET PRICE
SECURITIES OPTIONS OF COMMON STOCK
UNDERLYING GRANTED TO EXERCISE AT DATE OF
OPTIONS EMPLOYEES OR BASE OPTIONS GRANTED EXPIRATION
NAME GRANTED (#) IN FISCAL YEAR PRICE ($/SH) ($/SH) DATE
---- ------------ -------------- ------------ ----------------- ----------
<S> <C> <C> <C> <C> <C>
Michael D. Karsch(1)........ 100,000(4) 6.6% 7.125 12.875 6/1/2001
<FN>
- -------------------------------------
(1) On February 3, 1997, Messrs. Goffman and Karsch were placed on voluntarily
administrative leave for an unspecified period of time by the Company's Board of
Directors. During this administrative leave they were relieved of all corporate
duties and were not to participate in any meetings of the Company's Board of
Directors. This action followed the recommendation of a Special Committee of the
Board of Directors reviewing the Company's former relationship with Coyote
Consulting and Financial Services, LLC and Keith Greenberg. On March 25, 1997
Messrs. Goffman and Karsch declared their election to treat themselves as having
been terminated without cause by the Company under their respective employment
agreements, thus, invoking constructive termination provisions of their
employment contracts. The Company has treated these elections as resignations.
The Company has agreed to certain severance arrangements with Mr. Goffman.
Pursuant to these arrangements, Mr. Goffman resigned as a director, officer and
employee as of March 31, 1997. The Company has not agreed to any severance
arrangements with Mr. Karsch. The Company is currently exploring, through
counsel, the possibility of resolving any claims with respect to Mr. Karsch's
employment contract. See Part I Item 3 - Litigation.
(2) Fifty percent of the options granted vest in equal annual amounts over a
three year period commencing one year from date of grant. The remaining fifty
percent vest in the same manner only if the underlying Common Stock of the
Company trades at $15.00 or more per share on or prior to June 1, 1999.
(3) The options granted vest in equal annual amounts over a three year period
commencing one year from date of grant only if the underlying common stock of
the Company trades at $16.00 or more per share on or prior to June 1, 1999.
(4) The options granted vest in equal annual amounts over a three year period
commencing one year from date of grant.
</FN>
</TABLE>
10
<PAGE>
The following table sets forth certain information concerning the
persons listed in the Summary Compensation Table who exercised stock options
during 1996 or held unexercised options at December 31, 1996:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
(A) (B) (C) (D) (E)
NUMBER OF VALUE OF
SECURITIES UNDER- UNEXERCISED
LYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
AT FY-END(#) FY-END($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------------- -------------
<S> <C> <C> <C> <C>
Joseph A. Paul.............. ---- ---- --/300,000 $--/$212,500
David Cohen................. ---- ---- 100,000/50,000 $412,500/$106,250
Todd R. Smith............... 15,000 $83,359 11,667/73,333 $32,083/189,167
Amos Almand, III............ ---- ---- --/50,000 $--/$106,250
Robert D. Burke, M.D........ 118,536 $593,229 70,488/60,976 $276,957/$251,514
Jeffrey A. Goffman(1)...... ---- ---- 90,000/450,000 $326,250/$625,000
Michael D. Karsch(1)(2)..... ---- ---- --/100,000 $--/$212,500
<FN>
- ----------
(1) On February 3, 1997, Messrs. Goffman and Karsch were placed on voluntarily
administrative leave for an unspecified period of time by the Company's Board of
Directors. During this administrative leave they were relieved of all corporate
duties and were not to participate in any meetings of the Company's Board of
Directors. This action followed the recommendation of a Special Committee of the
Board of Directors reviewing the Company's former relationship with Coyote
Consulting and Financial Services, LLC and Keith Greenberg. On March 25, 1997
Messrs. Goffman and Karsch declared their election to treat themselves as having
been terminated without cause by the Company under their respective employment
agreements, thus, invoking constructive termination provisions of their
employment contracts. The Company has treated these elections as resignations.
The Company has agreed to certain severance arrangements with Mr. Goffman.
Pursuant to these arrangements, Mr. Goffman resigned as a director, officer and
employee as of March 31, 1997. The Company has not agreed to any severance
arrangements with Mr. Karsch. The Company is currently exploring, through
counsel, the possibility of resolving any claims with respect to Mr. Karsch's
employment contract. See Part I Item 3 - Litigation.
(2) Does not include 50,000 warrants granted to Mr. Karsch on September 21,
1995, prior to his date of employment with the Company. The 50,000 warrants are
fully vested and exercisable and have an exercise price of $5.125 per share. As
of December 31, 1996, none of these warrants were exercised. The value of the
unexercised in-the-money exercisable warrants at December 31, 1996 was $206,250.
</FN>
</TABLE>
11
<PAGE>
EMPLOYMENT AGREEMENTS
David Cohen and the Company entered into a four-year employment
agreement in August 1995, pursuant to which he serves as Senior Vice President
of West Coast Operations. The agreement provides that Mr. Cohen's annual base
salary will be no less than 110% of the previous year's base salary. Mr. Cohen
is entitled to an annual bonus equal to the greater of five percent of the net
income before taxes of the Company's San Francisco Magnetic Resonance Center or
$50,000, which bonus is payable in perpetuity. Under the terms of the agreement,
Mr. Cohen is also entitled to an annual cumulative bonus of three percent of the
net income before taxes as generated by the executive's identification of all
merger and acquisition efforts, payable partly in cash and partly in stock
options. Mr. Cohen is also entitled to be granted 12,500 additional options with
an exercise price of $5.125 per share for each year in which the San Francisco
Magnetic Resonance Center earns a minimum of $250,000 before taxes. In the event
that Mr. Cohen's duties and authority are materially diminished or the Company
materially breaches the agreement, Mr. Cohen is entitled to deem his employment
terminated and receive all compensation which would have accrued to him under
the agreement for the longer of the remainder of the term or for a period of one
year. Mr. Cohen is entitled to participate in all other benefit plans provided
by the Company to its executives and to four weeks paid vacation per year and a
$1,000 per month car allowance. The agreement also restricts Mr. Cohen from
competing with the Company and from disclosing confidential information with
respect to the Company, although if Mr. Cohen so deems his employment
terminated, he may, under certain circumstances, waive certain payments from the
Company and be relieved from such restrictions.
Todd R. Smith and the Company are parties to a three-year employment
agreement, dated December 7, 1995 which was amended and restated on August 9,
1996 pursuant to which Mr. Smith serves as the Company's Vice President and
Chief Information Officer. The agreement provides for annual salary of not less
than $100,000 during 1996, $120,000 during 1997 and $125,000 for 1998. Mr. Smith
is also entitled to an annual discretionary bonus, and a bonus of $750 for each
facility whose computer system is bought on-line pursuant to certain
specifications. Mr. Smith is also entitled to participate in all other benefit
plans provided by the Company to its executives and to four weeks paid vacation
per year and a $1,000 per month car allowance. In the event that the Company
materially breaches the employment agreement or in the event of certain changes
in control or ownership of the Company, Mr. Smith may elect to deem his
employment terminated by the Company without cause. Mr. Smith, in accordance
with the provision of his employment agreement, would be entitled to receive
lump sum compensation equal to two years' annualized compensation (unless the
remaining term of the agreement is less than one year in which case Mr. Smith is
entitled to a one year's annualized compensation). The employment agreement
restricts Mr. Smith from competing with the Company during a 12 month period
after the date of termination.
Amos F. Almand, III and the Company are parties to a four-year
employment agreement, dated June 30, 1995, under which he serves as Senior Vice
President. The agreement requires the Company to nominate and use its best
efforts to elect Mr. Almand to its Board of Directors. Mr. Almand received base
salary of $130,338 under the agreement during 1996 and is entitled to increases
in annual base salary of not less than 10% per year. Mr. Almand is also entitled
to annual bonuses during the first, second and third years of the term of the
agreement equal to 10%, 5% and 2%, respectively, of the amount by which the net
income before taxes of the Company's imaging centers exceeds the prior year's
net income before taxes. Mr. Almand is entitled to participate in all other
benefit plans provided by the Company to its executives and to four weeks paid
vacation per year and a $1,000 per month car allowance. In the event that Mr.
Almand's duties and authority are materially diminished of material breach by
the Company of the agreement or of certain changes in control or ownership of
the Company, Mr. Almand is entitled to deem
12
<PAGE>
his employment terminated and receive a lump sum payment equal to the greater of
his salary and bonus for the remainder of the term or for a period of one year.
The agreement also restricts Mr. Almand from competing with the Company and from
disclosing certain confidential information with respect to the Company,
although if Mr. Almand so deems his employment terminated he may, under certain
circumstances, waive certain payments from the Company and be relieved from such
restrictions.
Joseph A. Paul and the Company are parties to a five-year employment
agreement, dated June 18, 1996, pursuant to which he serves as President and a
director of the Company. From February 2, 1997 until March 31, 1997 he was
interim Chief Executive Officer of the Company, at which time he became Chief
Executive Officer. The agreement provides for annual base salary of $200,000
during the first year of its term, and for annual increases in the remaining
years of at least five percent per year. The agreement also provides for an
annual bonus of $50,000 during the first year and a bonus equal to that paid to
the Company's Chief Executive Officer during each subsequent year. The
Compensation Committee of the Board of Directors is currently considering
modifying Mr. Paul's bonus arrangement for 1997 so that his bonus will be based
on the Company's earnings per share. Under the agreement, all options and
restricted stock awards granted to Mr. Paul will vest if he is terminated other
than for cause or upon a change of control of the Company. Mr. Paul is also
entitled to participate in all other benefit plans provided by the Company to
its executives and to four weeks paid vacation per year and a $1,000 per month
car allowance. Mr. Paul was reimbursed for a total of $43,040 of moving and
relocation expenses in 1996. The agreement also provided that upon the
occurrence of the following events, that Mr. Paul has the right to elect to deem
his employment to have been terminated by the Company without cause and receive
a lump sum payment equal to 2.9 times the salary and bonus paid to him by the
Company during the most recent year: (i) Mr. Paul shall no longer exercise all
of the duties and responsibilities and shall no longer possess substantially all
of the authority provided for in the agreement; (ii) the Company shall
materially breach the agreement; or (iii) certain changes of control or
ownership of the Company. The agreement also restricts Mr. Paul from competing
with the Company and from disclosing certain confidential information with
respect to the Company, although if Mr. Paul so deems his employment terminated
he may, under certain circumstances, waive certain payments from the Company and
be relieved of such restrictions.
Jeffrey A. Goffman and the Company were parties to an employment
agreement dated August 31, 1994 and amended on October 1, 1995 relating to his
employment as Chairman of the Board and Chief Financial Officer of the Company.
Mr. Goffman also served as Chief Executive Officer of the Company until March
31, 1997. Until June, 1996 and February, 1997, respectively, Mr. Goffman served
as Chief Financial Officer and Chairman of the Board, respectively. The
agreement provided for expiration on December 31, 2000. The agreement also
provided for an annual base salary of $200,000 and for annual increases in the
second and third years of the term of no less than five percent per year. The
agreement provided for an annual bonus of between $25,000 and $65,000 (at the
discretion of the Chairman of the Board) for each year during which the
Company's annual revenues exceed its prior year's revenues by at least 10% (or
at least 20% with respect to 1996). For 1997, however, the parties agreed to
modify his bonus arrangement to provide for a bonus of $10,000 for each $.01 of
fully-diluted 1997 earnings per share of the Company in excess of $.60. Mr.
Goffman was also entitled to participate in all other benefit plans provided by
the Company to its executives. Mr. Goffman was also entitled to four weeks paid
vacation per year and a $1,000 per month car allowance. Under this agreement,
the Company has the right to terminate Mr. Goffman for cause (i.e., conviction
of Mr. Goffman of a felony related to his employment or the Company, a judicial
finding that Mr. Goffman committed gross negligence or willful gross misconduct
in performing his duties or engaged in certain other activities which materially
harmed the Company or a material breach by Mr. Goffman of his obligations not to
compete with the Company or disclose confidential information with respect to
the Company), at which time Mr. Goffman would have no further right to
compensation thereunder. The agreement also provided that upon the occurrence of
the following events, that Mr. Goffman had the right to
13
<PAGE>
elect to deem his employment to have been terminated by the Company without
cause and receive a lump sum payment equal to 2.9 times the salary and bonus
paid him by the Company during the most recent year: (i) Mr. Goffman shall no
longer exercise all of the duties and responsibilities and shall no longer
possess substantially all of the authority provided for in the agreement; (ii)
the Company shall materially breach the agreement; or (iii) certain changes of
control or ownership of the Company. The agreement also restricts Mr. Goffman
from competing with the Company and from disclosing confidential information
with respect to the Company, although if Mr. Goffman so deems his employment
terminated he may, under certain circumstances, waive certain payments from the
Company and be relieved of such restrictions. On February 3, 1997, he was
voluntarily placed on administrative leave by the Company's Board of Directors.
During this administrative leave, he was relieved of all corporate duties and
did not to participate in any meetings of the Company's Board of Directors. On
March 25, 1997, Mr. Goffman declared his election to treat himself as having
been terminated without cause by the Company under his employment contract,
thus, invoking constructive termination provisions of his employment agreement.
The Company has treated this election as a resignation. This action followed the
recommendation of a Special Committee of the Board of Directors reviewing the
Company's former relationship with Coyote Consulting and Financial Services, LLC
and Keith Greenberg. For further information, see Item 3 - Litigation.
On April 24, 1997, the Company and Mr. Goffman entered into a Letter of
Intent (the "Letter") with respect to the resolution of certain disputes between
Mr. Goffman and the Company in connection with his employment with the Company.
Pursuant to the terms of the Letter, Mr. Goffman resigned as an officer,
director and employee of the Company effective as of March 31, 1997. Mr. Goffman
received $165,000 upon execution of the Letter with an additional $300,000 to be
paid in monthly installments of $16,666 over an 18 month period commencing from
the signing of a definitive agreement by the Company and Mr. Goffman. Mr.
Goffman also agreed to transfer or vote, as required by the Company, all proxies
or other agreements by which he exercises the right to vote or exercise legal
control over the Company's stock in which others have a beneficial interest. All
currently vested restricted stock and stock options will be kept by Mr. Goffman.
All unvested restricted stock as of March 31, 1997 (220,000 shares) will (i)
become vested (i.e., the applicable risk of forfeiture restrictions will lapse)
in accordance with the schedule originally established at the time of award of
such restricted stock (notwithstanding Mr. Goffman's resignation) or, if
earlier, upon the sale of the Company or a change of control (as defined), and
(ii) be placed in an escrow account held by a mutually agreeable escrow agent.
In addition, the Letter provides that unvested options for 100,000 shares of
Company common stock which are exercisable at $5.125 per share will be placed in
the escrow account. The Letter provides that notwithstanding Mr. Goffman's
resignation, these options shall vest in accordance with the schedule originally
established at the time such options were awarded to Mr. Goffman or, if earlier,
upon the sale of the Company or a change of control (as defined) on or before
March 31, 1999. The Letter provides that all other options which were unvested
as of March 31, 1997, (specifically the 100,000 options granted on June 1, 1996
exercisable at $7.125 and the 250,000 options granted on October 9, 1996
exercisable at $12.125) will vest only upon the sale of the Company or a change
in control (as defined above) on or before March 31, 1999. The Letter provides
that no option, whether currently vested or unvested, would be exercisable
beyond its original expiration date (exclusive of provisions for earlier
termination relating to termination of employment) or prior to the date when any
exercise price relating to the Company's common stock previously established for
the exercise of such option has been met. Because an incentive stock option may
not be exercised more than three months following termination of employment as a
matter of tax law, options exercised after such period would be treated as
non-statutory stock options. The Letter provides that any stock purchased as a
result of the exercise of an option held in the escrow account will remain in
the escrow account until released from escrow pursuant to its terms.
14
<PAGE>
The Letter provides that the Company and Mr. Goffman shall exchange
mutual special releases, releasing certain claims and retaining the ability to
bring certain possible claims against each other. The escrow account would be
available according to its terms to satisfy in whole, or in part, any claims
excepted from the mutual special release.
Michael D. Karsch and the Company were parties to a five-year
employment agreement, dated June 1, 1996, relating to Mr. Karsch's serving as
Senior Vice President, General Counsel and Secretary of the Company. The
agreement provides for an annual base salary of $200,000, and for annual
increases in the remaining years of not less than five percent per year. Under
the terms of the agreement, Mr. Karsch was entitled to a $50,000 bonus during
1996 (of which one-half was deferred to 1997) and was entitled to receive a cash
bonus in each year thereafter in an amount equal to the bonus paid to the
Company's Chief Executive Officer. Under the agreement, all options and
restricted stock awards granted to Mr. Karsch would vest if he is terminated
other than for cause or upon a change of control of the Company. Mr. Karsch was
also entitled to participate in all other benefit plans provided by the Company
to its executives and to four weeks paid vacation per year and a $1,000 per
month car allowance. In connection with Mr. Karsch's employment agreement, the
Company provided a loan of up to $100,000 for relocation expenses of which
approximately $51,000 was advanced and was outstanding as of March 15, 1997.
Under this agreement, the Company has the right to terminate Mr. Karsch for
cause (i.e., conviction of Mr. Karsch of a felony related to his employment or
the Company, a judicial finding that Mr. Karsch committed gross negligence or
willful gross misconduct in performing his duties or engaged in certain other
activities which materially harmed the Company or a material breach by Mr.
Karsch of his obligations under the agreement), at which time Mr. Karsch would
have no further right to compensation thereunder. The agreement also provided
that upon the occurrence of the following events, that Mr. Karsch had the right
to elect to deem his employment to have been terminated by the Company without
cause and receive a lump sum payment equal to 2.9 times the salary and bonus
paid him by the Company during the most recent year (as defined): (i) Mr. Karsch
shall no longer exercise all of the duties and responsibilities and shall no
longer possess substantially all of the authority provided for in the agreement;
(ii) the Company shall materially breach the agreement; or (iii) certain changes
of control or ownership of the Company. The agreement also restricts Mr. Karsch
from competing with the Company and from disclosing certain confidential
information with respect to the Company, although if Mr. Karsch so deems his
employment terminated he may, under certain circumstances, waive certain
payments from the Company and be relieved of such restrictions. Mr. Karsch was
also provided certain relocation benefits. On February 3, 1997, he was placed on
administrative leave by the Company's Board of Directors. During this
administrative leave, he was relieved of all corporate duties and was not to
participate in any meetings of the Company's Board of Directors. On March 25,
1997, Mr. Karsch declared his election to treat himself as having been
terminated without cause by the Company under his employment contract, thus
invoking constructive termination provisions of his employment agreement. The
Company has treated this election as a resignation. At this point, the Company
has not agreed to any severance arrangements with Mr. Karsch. The Company is
currently exploring, through counsel, the possibility of resolving any claims
with respect to Mr. Karsch's employment contract. This action followed the
recommendation of a Special Committee of the Board of Directors reviewing the
Company's former relationship with Coyote Consulting and Financial Services, LLC
and Keith Greenberg. For further information, see Item 3 - Litigation.
CONSULTING AGREEMENTS
Robert D. Burke resigned as President of the Company in June 1996, but
was paid in accordance with the terms of his employment agreement through
September 1996. Dr. Burke did not stand for re-election as a director at the
Company's Annual Meeting of Stockholders on September 19, 1996. On October 1,
1996, the Company and Dr. Burke entered into a three-year consulting agreement,
under which Dr. Burke is entitled to $100,000 per year. In 1991 Dr. Burke
entered into a Stipulation and Consent Agreement with the Florida Department of
Banking and Finance, relating to a company Dr. Burke was previously associated
with. The agreement provides that Dr. Burke will obtain prior approval of the
Department before acting as an owner, supervisor or principal of any securities
firm, dealer or investment advisor registered with the Department.
15
<PAGE>
The Company is a party to a Consulting Agreement effective as of
January 1, 1995, with Gordon C. Rausser, amended effective as of September 5,
1995 and September 9, 1996, pursuant to which Dr. Rausser acts as a consultant
to the Company on economic, financial and strategic matters. Under the
agreement, as amended, Dr. Rausser is entitled to a consulting fee of $25,000
per quarter until December 31, 1999, provided that he offers or agrees to serve
as a director of the Company and offers or agrees to serve as a consultant under
the Agreement. In connection with entering into the agreement, as amended, Dr.
Rausser received an option to purchase 400,000 shares of Common Stock of the
Company exercisable at $5.00 per share at any time through December 31, 1999. In
connection with this agreement, the Company also issued to Mr. Rausser 51,000
shares of restricted stock on March 17, 1997.
Charles Jacobson, a director of the Company, and an entity that he owns
an interest in, have management consulting arrangements with the Company under
which the Company is obligated to pay approximately $75,000 per year through
2000 for management consulting services.
In December 1994, the Company entered into a five-year consulting
agreement with Coyote Consulting amended in October 1995, and amended and
restated on June 1, 1996, effective January 1, 1996, pursuant to which it paid
an annual draw of $185,000. Coyote Consulting was also entitled to a finder's
fee of 2% of the aggregate purchase price of any entity acquired by the Company
as a result of an introduction by Coyote Consulting. It is believed that Coyote
Consulting is owned by Mr. Greenberg's wife, Elise Nulman Greenberg, and a
family trust. Mrs. Greenberg is a former employee of the Company.
In 1995, the Company paid Coyote Consulting a minimum cash draw of
approximately $116,000 against which no commissions were earned for that year.
Also in 1995, Coyote Consulting was granted 150,000 options to purchase Common
Stock at an exercise price of $5.125 and 50,000 shares of restricted Common
Stock recorded as deferred compensation by the Company in 1995, in the amount of
$175,000.
In 1996, the Company paid Coyote Consulting cash compensation of
$3,828,000. This amount represents 2% of the purchase price of completed
acquisitions introduced by Coyote Consulting. In addition, the Company granted
to Coyote Consulting 100,000 options to purchase Common Stock at an exercise
price of $7.125 and 55,000 shares of restricted Common Stock with a fair market
value of $708,125 at the date of grant. Pursuant to the terms of the consulting
agreement, Coyote Consulting was paid a minimum annual draw of $185,000 which
was credited against finder's fees earned by Coyote Consulting in 1996. Pursuant
to the terms of the consulting agreement, the Company leased or paid the cost of
two automobiles for use by Coyote Consulting during the term of the agreement,
for which $27,919 was paid in 1996, and $16,851 in 1995. Coyote was also
reimbursed for all expenses relating to acquisition searches for the Company.
The Company paid for two insurance policies on the life of Keith Greenberg. The
Company was the beneficiary of one policy for $2,000,000 and his wife was the
beneficiary on the second policy for $600,000.
In January 1997, the Company negotiated a Termination Agreement with
Coyote Consulting (the "Agreement"), which terminated the existing consulting
agreement, subject to ratification by the Company's Board. As of this date the
Company's Board has deferred the issue of ratification pending further study. In
connection with the terms of the unratified Agreement, the Company paid to
Coyote Consulting the sum of $620,000 representing one-half of the finder's fees
due
16
<PAGE>
Coyote Consulting upon closing of the then-pending acquisition of Medical
Diagnostics, Inc., which was closed in February 1997, and the then-pending
acquisition of American Shared Hospital Services. Under the terms of the
unratified Agreement the remaining portion of the finder's fees on such
acquisitions is payable at closing of the acquisitions. In the event that the
Company's acquisition of American Shared Hospital Services does not close, the
payment on account of the finder's fee will be credited toward finder's fees on
future acquisitions as discussed below, but shall not otherwise be refundable to
the Company by Coyote Consulting. On April 28, 1997, the Company announced it
had terminated further negotiations to acquire American Shared Hospital
Services.
Under the terms of the unratified Agreement, the Company agreed to pay
Coyote Consulting a finder's fee on 32 potential acquisitions that Coyote
Consulting introduced to the Company, if such acquisitions are consummated by
the Company. Under the terms of the unratified Agreement the Company also agreed
that all unvested shares of restricted stock and unvested stock options for
Company Common Stock held by Coyote Consulting will vest as of the date of the
Agreement, except that 50,000 unvested stock options granted June 1, 1996, with
an exercise price of $7.125 per share will, pursuant to the terms of the
original grant, vest only if the Company's Common Stock trades at a price in
excess of $15.00 per share prior to June 1, 1999. At the date of the Agreement,
Coyote Consulting held 105,000 shares of restricted stock of which 25,000 were
vested prior to the Agreement and a total of 250,000 stock options of which
50,000 were vested prior to the Agreement.
Coyote Consulting has recently informed the Company that it views the
unratified Agreement as no longer binding, null and void. Coyote Consulting has
not returned the sums paid under this Agreement.
Cash compensation paid to and the value of restricted stock granted and
compensatory stock options issued to Coyote Consulting for the years ended
December 31, 1996 and 1995, are as follows:
1996 1995
---- ----
Finders' fees for 1996 acquisitions $3,828,000 $ --
Payments in connection with termination agreement 620,000 --
Restricted stock grants 861,250 21,875
Compensatory stock options granted 287,500 --
Cash Draws -- 116,251
---------- -------
$5,596,750 $138,126
========== =======
17
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who beneficially own more
than 10% of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of common stock and other equity securities of the
Company. Such executive officers, directors, and greater than 10% beneficial
owners are required to furnish the Company with copies of all Section 16(a)
forms filed by such reporting persons.
Based solely on the Company's review of such forms furnished to the
Company and written representations from certain reporting persons, the Company
believes a number of the filing requirements applicable to the Company's
executive officers, directors and greater than 10% beneficial owners were not
complied with. The Company intends to work with its executive officers,
directors and 10% beneficial owners in furtherance of ensuring accurate
reporting of their beneficial ownership of the Company's securities.
The following table sets forth certain information concerning stock
ownership of all persons known by the Company to own beneficially 5% or more of
the outstanding shares of the Company's Common Stock, each director, each
executive officer named under "Executive Compensation" and all officers and
directors of the Company as a group, as of March 15, 1997 and their percentage
ownership of Common Stock based upon the amount of outstanding stock plus stock
that all officers and directors have the right to acquire within 60 days
pursuant to options, warrant conversion privileges or other rights.
18
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
NAME AND ADDRESS OF BENEFICIAL OWNER(3)
AMOUNT AND
NATURE OF PERCENT OF
BENEFICIAL OUTSTANDING
OWNERSHIP(2) COMMON STOCK (4)
------------ ----------------
(A) BENEFICIAL OWNERS
Fidelity Management & Research Company...... 1,242,500(1) 5.23%
Reese General Trust......................... 1,671,000(2) 7.03%
(B) EXECUTIVE OFFICERS AND DIRECTORS
Laurans A. Mendelson........................ 1,141,081(5) 4.80%
Joseph A. Paul.............................. 48,725(6) *
Todd R. Smith............................... 11,667(7) *
Amos F. Almand, III......................... 171,700(8) *
David Cohen................................. 103,622(9) *
C. Keith Hartley............................ 329,445(10) 1.39%
Charles J. Jacobson......................... 70,000(11) *
Gordon C. Rausser........................... 594,000(12) 2.50%
Robert D. Burke, M.D........................ 271,194(13) 1.14%
Jeffrey A. Goffman.......................... 3,953,081(14) 16.64%
Michael D. Karsch........................... 75,000(15) *
All officers and directors as a group
(16 persons)................................ 5,952,454 25.05%
- ----------------------
* less than 1%.
(1) Pursuant to the instructions in Item 7 of Schedule 13G, Fidelity
Management & Research Company ("Fidelity"), 82 Devonshire Street,
Boston, Massachusetts 02109, a wholly-owned subsidiary of FMR Corp. and
an investment adviser registered under Section 203 of the Investment
Advisers Act of 1940, is the beneficial owner of 1,242,500 shares or
5.23% of the Common Stock outstanding of the Company as a result of
acting as investment adviser to various investment companies registered
under Section B of the Investment Company Act of 1940.
Edward C. Johnson 3d, FMR Corp., through its control of Fidelity, and
the funds each has sole power to dispose of the 1,242,500 shares owned
by the Funds. Neither FMR Corp. nor Edward C. Johnson 3d, Chairman of
FMR Corp., has the sole power to vote or direct the voting of the
shares owned directly by the Fidelity Funds, which power resides with
the Funds' Boards of Trustees. Fidelity carries out the voting of the
shares under written guidelines established by the Funds' Boards of
Trustees. Members of the Edward C. Johnson 3d family and trusts for
their benefit are the predominant owners of Class B shares of Common
Stock of FMR Corp., representing approximately 49% of the voting power
of FMR Corp. Mr. Johnson 3d owns 12.0% and Abigail Johnson owns 24.5%
of the aggregate outstanding voting stock of FMR Corp. Mr. Johnson 3d
is Chairman of FMR Corp. and Abigail P. Johnson is a
19
<PAGE>
Director of FMR Corp. The Johnson family group and all other Class B
shareholders have entered into a shareholders' voting agreement under
which all Class B shares will be voted in accordance with the majority
vote of Class B shares. Accordingly, through their ownership of voting
Common Stock and the execution of the shareholders' voting agreement,
members of the Johnson family may be deemed, under the Investment
Company Act of 1940, to form a controlling group with respect to FMR
Corp.
(2) Reese General Trust, 14835 Southwest Freeway, Sugarland, Texas 77478 is
the beneficial owner of 1,671,000 shares or 7.03% of the Common Stock
outstanding of the Company. The shares were issued by the Company in
connection with the acquisition of U.S. Imaging Inc. ("U.S. Imaging")
on June 4, 1996. 671,000 shares are being held in escrow and will be
released to the Reese General Trust only in the event that certain
financial results are achieved by U.S. Imaging. Reese General Trust
granted to Jeffrey Goffman, the Company's Chairman on June 4, 1996, a
proxy to vote the shares of the Company's Common Stock owned by Reese
General Trust. See footnote 14 to this Item.
(3) Except as otherwise indicated, each of the parties listed above has
sole voting and investment power over the shares owned. The address for
all of the management and directors is care of US DIAGNOSTIC INC., 777
S. Flagler Drive, Suite 1201 East, West Palm Beach, Florida 33401.
(4) Based on shares outstanding on March 15, 1997.
(5) Includes 1,081,081 shares underlying a convertible debenture held by
HEICO Corporation of which Mr. Mendelson is the Chairman of the Board,
Chief Executive Officer and President and 20,000 shares owned by HEICO
Deferred Compensation Plan for which Mr. Mendelson has sole voting
power. Includes options to purchase 20,000 shares of Common Stock which
are currently exercisable. Includes 20,000 shares owned by LAM Limited
Partnership which Mr. Mendelson is President of LAM Management Inc.,
the general partner. 1,081,081 shares are subject to the proxy
arrangements referenced in footnote 14. Does not include options to
purchase 100,000 shares of Common Stock which vest upon (i) successful
completion by the Special Committee of the Board of Directors of its
work and final report and recommendation to the Board of Directors of
its findings and (ii) his continued involvement until the final
resolution of compliance issues with both the SEC and NASDAQ.
(6) Includes 45,000 restricted shares. Does not include options to purchase
300,000 shares of Common Stock which are not exercisable within 60
days.
(7) Includes options to purchase 11,667 shares of Common Stock which are
currently exercisable. Excludes options to purchase 73,333 shares of
Common Stock which are not exercisable within 60 days.
(8) Includes 140,000 shares of Common Stock held by Mr. Almand and his wife
as tenants by the entirety and 27,600 shares of Common Stock held in
Mr. Almand's individual retirement account. Also includes 4,100 shares
of Common Stock over which Mr. Almand has a proxy to vote in certain
circumstances which are held by Mr. Almand's sister and husband. Does
not include options to purchase 50,000 shares of Common Stock which are
not currently exercisable.
(9) Includes options to purchase 100,000 shares of Common Stock which are
currently exercisable. Does not include options to purchase 50,000
shares of Common Stock which are not exercisable within 60 days.
(10) Includes 319,445 shares of Common Stock underlying warrants exercisable
at an exercise price of $9.00 per share held by Forum Capital Markets
L.P. of which Mr. Hartley is Managing Partner. Forum Capital Markets
L.P. served as underwriter in connection with the Company's $57.5
million 9% Subordinate Convertible Debenture Offering. Includes options
to purchase 10,000 shares of Common Stock which are currently
exercisable. Does not include options to purchase 35,000 shares of
Common Stock which vest upon (i) successful completion by the Special
Committee of the Board of Directors of its work and final report and
recommendation to the Board of Directors of its findings and (ii) his
continued involvement until the final resolution of compliance issues
with both the SEC and NASDAQ.
(11) Includes options to purchase 70,000 shares of Common Stock which are
currently exercisable
(12) Includes 150,000 shares of Common Stock, 24,000 shares of restricted
stock, options to purchase 20,000 shares of Common Stock which are
currently exercisable and 400,000 warrants to purchase Common Stock
which are currently exercisable. Does not include 51,000 restricted
shares granted on March 17, 1997. Does not include options to purchase
35,000 shares of Common Stock which vest upon (i) successful completion
by the Special Committee of the Board of Directors of its work and
final report and recommendation to the Board of Directors of its
findings and (ii) his continued involvement until the final resolution
of compliance issues with both the SEC and NASDAQ.
20
<PAGE>
(13) Includes 85,000 restricted shares and options to purchase 70,488 shares
of Common Stock currently exercisable. Does not include options to
purchase 60,976 shares of Common Stock not exercisable within 60 days.
(14) Includes 115,000 shares of Common Stock, 245,000 restricted shares
granted under the 1995 Plan and 90,000 options to purchase Common Stock
currently exercisable and excludes options to purchase 450,000 shares
of Common Stock which are not exercisable within 60 days. Includes
3,503,081 shares of Common Stock over which Mr. Goffman has been
granted a proxy to vote in certain circumstances; pursuant to such
proxy and an agreement between Mr. Goffman and the Company, Mr.
Goffman agreed to transfer or vote, as required by the Company, all
such proxies. Mr. Goffman does not have investment power with respect
to any of such 3,503,081 shares and disclaims beneficial ownership with
respect to all such shares. See Item 10 - Executive Compensation -
Employment Agreements.
(15) Includes 50,000 warrants to purchase Common Stock which are currently
exercisable which were granted to Mr. Karsch prior to the date of his
employment with the Company and 25,000 shares of restricted stock
issued under the 1995 Plan. Does not include options to purchase
100,000 shares of Common Stock which are not exercisable within 60
days.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In July 1995, the Company acquired an 80% interest in Salisbury Imaging
Center in Jacksonville, Florida. Of this 80% interest, 13.3% was acquired from
Amos Almand, III, and the remaining 66.7% was acquired from third parties who
were not affiliates of Mr. Almand or the Company. In consideration of Mr.
Almand's 13.3% interest, the Company issued Mr. Almand 115,000 shares of its
Common Stock. At approximately the time that transaction was consummated Mr.
Almand became a Senior Vice President and a director of the Company.
Dr. Steven Novom, who was a director of the Company until September 1995,
is one of three stockholders of MED LINC, Inc. The Company and MED LINC were
parties to a consulting agreement under which the Company was obligated to pay
monthly consulting fees of $15,000 through June 1999. This consulting agreement
was entered into in conjunction with the acquisition of Computerized Medical
Imaging Center. In January 1996, the Company issued 93,000 shares of Common
Stock in full payment and cancellation of the remaining 41 months of this
agreement.
Dr. William M. Harper, IV., a former director of the Company, is one of
three stockholders of HPM, Inc. In connection with the Company's acquisition of
Columbus Diagnostic Center in 1994, the Company issued warrants to HPM, Inc. to
purchase 191,704 shares of common stock at $.01 per share. Of the 191,704 shares
of common stock underlying these warrants, 95,852 were IPO escrow shares. In
January 1996, 95,852 shares were issued upon exercise of the warrants.
Effective July 1, 1996, the Company entered into a joint venture with
Phycor of Jacksonville, Inc., a wholly-owned subsidiary of Phycor, Inc. to lease
outpatient imaging equipment and facilities and equipment to affiliated
providers in South Georgia and North Florida through Diagnostic Equity Partners,
a partnership. The Company contributed its Orange Park facility and its
Salisbury facility. Phycor of Jacksonville contributed its Orange Park Heart
Center and the entities are jointly developing additional facilities. In July
1996, the Company purchased the 20% of Salisbury owned by Amos Almand, III, a
director and officer of the Company for $567,437, which was equal to the
pro-rata price for the original purchase in 1995 and equal to or less than
market value.
Pursuant to the terms of a Subscription Agreement dated December 1, 1996,
the Company acquired approximately five million shares of common stock of
Diversified Therapy Corp. ("DTC") for
21
<PAGE>
$3.5 million. This represents approximately 20% of the outstanding common stock
of DTC at December 31,1996. DTC commenced operations in 1996 to develop a
leadership position in the ownership and operations of U.S. wound care treatment
facilities utilizing hyperbaric chambers. At the date of the subscription
agreement and on December 31, 1996, the President and a founder of DTC was Keith
Greenberg. Mr. Greenberg on behalf of Coyote Consulting Financial Services LLC
provided consulting services to the Company. Subsequent to year end, Mr.
Greenberg resigned as President of DTC. Mr. Almand, a Director and Executive
Officer of the Company, is Chairman of the Board of DTC. Messrs. Rausser and
Jacobson are Directors of the Company and Directors of DTC.
In July 1996, the Company consummated the acquisition of all of the
outstanding capital stock of MediTek Health Corporation from HEICO Corporation.
The consideration by the Company to HEICO Corporation was approximately $13
million in cash plus a five-year, $10 million convertible note. This convertible
note bears interest at a rate of 6 1/2% per annum and is convertible into common
stock of the Company at $9.25 per share or an aggregate of 1,081,081 shares. The
Company granted HEICO Corporation certain registration rights with respect to
these 1,081,081 shares of Common Stock. The Company also agreed to repay this
convertible note at any time prior to the effectiveness of such registration
upon HEICO Corporation's written request. Laurans A. Mendelson is the Chief
Executive Officer, President and Chairman of the Board of HEICO Corporation. In
accordance with the terms of the acquisition documents, Mr. Mendelson was
elected to the Company's Board of Directors by the Shareholders on September 19,
1996. Mr. Mendelson became Chairman of the Board of the Company in February
1997.
L. Keith Hartley, a member of the Company's Board of Directors, is the
managing partner of Forum Capital Markets L.P. ("Forum"). Forum was the
underwriter of the Company's $57,500,000 Subordinated Convertible Debenture
offering and was paid an underwriters fee of $2,875,000. In addition, the
Company sold to Forum, for nominal consideration, warrants which entitle Forum
to purchase 319,445 shares of Common Stock of the Company at an exercise price
of $9.00 per share. Mr. Hartley was elected to the Board of Directors of the
Company on September 19, 1996, subsequent to the Debenture offering.
In June 1996, the Company loaned $360,000 to Jeffrey A. Goffman, the
Company's Former Chief Executive Officer and Chairman of the Board in connection
with a private transaction. The loan bore interest at a rate of 10% per annum
and was repaid on July 1, 1996.
The Company entered into an Installation Agreement ("Agreement") dated
February 27, 1997 with CIERRA Solutions, Inc. ("CSI"). A brother of Todd Smith,
Vice President and Chief Information Officer of the Company, is a substantial
minority shareholder of CSI. CSI has been providing project management services
to the Company in connection with the deployment of a wide area computer network
to over 100 of the Company's locations and other services, since February 1996.
The effective date of the agreement is February 1, 1997 and has a one-year term.
Payments made to CSI in the year ending December 31, 1996 totaled $332,604,
including reimbursement for expenses and equipment purchases of $64,197.
During 1995 and 1996, respectively, the Company paid legal fees in the
amount of $352,756 and $429,468, respectively, to the law firm of Bachner,
Tally, Polevoy & Misher LLP of which Michael Karsch, a former executive officer
and director of the Company, was a partner until July, 1996. In 1995, prior to
his employment with the Company, Mr. Karsch was granted options to acquire
50,000 shares of the Company's common stock immediately exercisable at $5.125
per share for a term of five years. In connection with his employment agreement,
the Company provided to Mr. Karsch a loan of up to
22
<PAGE>
$100,000 for relocation expenses of which approximately $51,000 was outstanding
as of December 31, 1996.
In October 1996, the Company purchased from Alan Winakor, a Senior Vice
President with the Company, 100% of the outstanding capital stock of Medical
Marketing Development ("MMD"). Mr. Winakor was not an employee of the Company at
the date that MMD was acquired. The purchase price was comprised of cash in the
amount of $1,727,745 and 110,459 shares of the Company's Common Stock. In
addition, Mr. Winakor was president and the general partner of four additional
partnerships acquired by the Company in 1996. Total consideration paid to Mr.
Winakor for his ownership percentage of the four entities was $350,369 in cash
and 36,355 shares of the Company's Common Stock. An additional 76,234 and 12,355
shares of the Company's Common Stock are being held in escrow in connection with
the acquisition of MMD and the four partnerships, respectively. The shares will
be released to Mr. Winakor if certain financial results are achieved in 1997 by
the entities acquired.
In December, 1996, the Company and Jeffrey Goffman, who was at the time
the Company's Chief Executive Officer, entered into a Settlement Agreement with
Consolidated General Ltd., U.K. Errington Ltd., and certain other persons
(collectively, the "Claimants"). Under the Settlement Agreement, the Company
issued an aggregate of 68,400 shares of its Common Stock, with a fair market
value of $654,075 at the date of issuance, to the Claimants and paid to the
Claimants an aggregate of $1,345,925 in cash. In exchange, the Claimants
executed general releases in favor of the Company and Mr. Goffman. Under the
Settlement Agreement, the Claimants settled claims relating to allegations that
they had escrowed too many shares of their Common Stock under the escrow
agreement entered into in connection with the Company's initial public offering.
The Claimants also released their claims relating to promissory notes in the
aggregate principal amount of $850,000 executed by Mr. Goffman in favor of the
Claimants, which promissory notes were collateralized by 150,000 shares of the
Company's Common Stock owned by Mr. Goffman. After the execution of these
promissory notes, Mr. Goffman executed an assignment and assumption agreement on
behalf of himself and the Company, under which the Company purportedly assumed
Mr. Goffman's obligations under such promissory notes. These promissory notes
were executed by Mr. Goffman in payment of consideration to the Claimants under
consulting agreements between Mr. Goffman and the Claimants, which Mr. Goffman
asserted were entered into by him for the benefit of the Company. Under the
terms of these consulting agreements, the Claimants were to provide consulting
and advisory services to Mr. Goffman, purportedly on behalf of the Company, to
assist in funding, evaluating and structuring business opportunities and
transactions. The fair market value of the shares issued and the cash paid
totaled $2,000,000. The Company is reviewing this transaction further.
23
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT INDEX
2.1 - Agreement and Plan of Merger, dated as of August 1,1996, among the
Company, MICA Acquiring Corporation, a California corporation and
Medical Imaging Centers of America., a California Corporation(11)
3.1 - Certificate of Incorporation of the Registrant(1)
3.2 - Bylaws of the Registrant(2)
4.1 - Form of Unit Purchase Option(1)
4.2 - Form of Warrant Agreement(1)
4.3 - Escrow Agreement(1)
4.4 - Indenture - 9% Subordinated Convertible Debentures(14)
4.5 - Registration Rights Agreement(14)
10.1 - 1993 Stock Option Plan(1)
10.2 - Asset Purchase Agreement among the Company, Columbus Diagnostic Center
Inc. and Physicians Diagnostic Associates of Columbus, L.P.(1)
10.3 - Employment Agreement with Robert Burke, M.D.(1)
10.4 - Equipment Lease with Ventura Partners(1)
10.5 - Lease between the Company and United Properties Co.(1)
10.6 - Asset Purchase Agreement dated as of December 31, 1994 among the
Company, Santa Fe Imaging Center, Ltd. and Santa Fe Imaging Center Inc.,
a subsidiary of the Company.(2)
10.7 - Equipment Lease dated as of December 31, 1994 between Santa Fe Imaging
Center, Ltd. and Santa Fe Imaging Center Inc., a subsidiary of the
Company.(2)
10.8 - Property Lease dated as of December 31, 1994 among Santa Fe Imaging
Center, Ltd. and Santa Fe Imaging Center Inc., a subsidiary of the
Company and the Company.(2)
10.9 - Asset Purchase Agreement dated as of February 27, 1995 among the
Company, Open Air MRI, Inc., Community Radiology of Virginia, Inc. and
CROV Acquisition Corp., a subsidiary of the Company.(3)
10.10 - Radiology Agreement dated as of February 27, 1995 between Stephen
Raskin, M.D., P.C. and CROV Acquisition Corp., a subsidiary of the
Company.(3)
10.11 - Management Agreement dated as of February 27, 1995 among the Company,
Open Air MRI, Inc., Community Radiology of Virginia, Inc. and CROV
Acquisition Corp., a subsidiary of the Company.(3)
10.12 - Escrow Agreement dated as of February 27, 1995 among the Company, Open
Air MRI, Inc., Community Radiology of Virginia, Inc. and CROV
Acquisition Corp., a subsidiary of the Company.(3)
10.13 - Guaranty dated as of February 27, 1995 of the Company.(3)
10.14 - Stock Purchase Agreement dated as of February 15, 1995 among the
Company, Laborde Diagnostics, Inc. and Jeffrey J. Laborde, M.D.(4)
10.15 - Employment Agreement dated as of February 15, 1995 among the Company,
Laborde Diagnostics, Inc. and Jeffrey J. Laborde, M.D.(4)
10.16 - 1995 Long Term Incentive Plan(5)
10.17 - Consulting Agreement with Gordon Rausser(5)
10.18 - Consulting Agreement with Coyote Consulting(5)
10.19 - Consulting Agreement with Sawgrass Consulting(5)
10.20 - Asset Purchase Agreement dated as of October 10, 1995 among the Company,
Central Alabama Medical Enterprises, Inc. and Advanced Medical Imaging
Center, Inc., a subsidiary of the Company(6)
10.21 - Property Lease dated as of October 10, 1995 among the Company, Central
Alabama Medical Enterprises, Inc. and Advanced Medical Imaging Center,
Inc., a subsidiary of the Company(6)
10.22 - Employment Agreement dated as of August 1, 1995 between the Company and
David Cohen(6)
10.23 - Amendment to Employment Agreement of Jeffrey Goffman(7)
10.24 - Amendment to Coyote Consulting Agreement(7)
24
<PAGE>
10.25 - Merger Agreement dated as of February 27, 1996 among the Company, U.S.
Imaging, Inc. and U.S.I. Acquisition Inc., a subsidiary of the
Company.(8)
10.26 - Escrow Agreement dated as of June 4, 1996 among the Company and the
Reese General Trust.(8)
10.27 - Asset Purchase Agreement dated as of June 28, 1996 among the Company,
Allegheny Open MRI/CT Group and USDL Pittsburgh Inc., a subsidiary of
the Company.(9)
10.28 - Registration and Sale Rights Agreement dated as of June 28, 1996 among
the Company and the Allegheny Open MRI/CT Group.(9)
10.29 - Employment Agreement dated as of June 18, 1996 between the Company and
Joseph Paul.(9)
10.30 - Employment Agreement dated as of June 1, 1996 between the Company and
Michael Karsch.(9)
10.31 - Employment Agreement dated as of July 1, 1996 between the Company and
Andrew Shaw.(9)
10.32 - Stock Purchase Agreement dated as of June 20, 1996 among the Company,
MediTek Health Corporation and HEICO Corporation (10)
10.33 - Registration and Sale Rights Agreement dated as of June 20, 1996 between
the Company and HEICO Corporation.(10)
10.34 - Termination Agreement dated January 29, 1997 among the Company, Coyote
Consulting & Financial Services LLC and Keith Greenberg.(12)
10.35 - Loan and Security Agreement and Secured Promissory Note among US
Diagnostic Inc. and DVI Credit Corporation dated as of February 25,
1997.
10.36 - Subscription Agreement between Diversified Therapy Corp. and US
Diagnostic Inc.
10.37 - Employment Agreement dated August 31, 1994 between US Diagnostic Labs,
Inc. and Jeffrey A. Goffman.
10.38 - Amended and restated Employment Agreement dated August 9, 1996 between
the Company and Todd R. Smith.
10.39 - Employment Agreement dated June 30, 1995 between the Company and Amos F.
Almand, III.
10.40 - Employment Agreement dated October 15, 1996 between the Company and Len
Platt.
10.41 - Employment Agreement dated May 1, 1996 between the Company and Alan M.
Winakor.
10.42 - Employment Agreement dated October 15, 1996 between the Company and
Arthur Quillo.
10.43 - Consulting Agreement dated October 1, 1996 between the Company and
Robert Burke, M.D.
11 - Earnings Per Share Calculation.
21 - Subsidiaries.
27 - Financial Data Schedule.
99.1 - Press release dated January 29, 1997.(12)
99.2 - Complaints filed in the United States District Court of the Southern
District of Florida entitled Lynne M. Golden, Trustee, UAD 1/6/96; Lynne
M. Golden Trust; individually and on behalf of a class of all persons
similarly situated vs. U.S. Diagnostic Inc., Jeffrey A. Goffman, Keith
G. Greenberg, Joseph A. Paul, Robert D. Burke; Amos F. Almand, III and
Coyote Consulting & Financial Services LLC: Muriel Edelstein vs. U.S.
Diagnostic Inc., Jeffrey A. Goffman, Joseph A. Paul, Dr. Robert D. Burke
and Keith G. Greenberg: Steven Shapiro, Plaintiff; vs. U.S. Diagnostic
Inc., et al, Defendants: Sandra Neuman, Plaintiff vs. U.S. Diagnostic
Inc., et al., Defendants.(12)
99.3 - Permanent Injunction against Keith Greenberg.(12)
99.4 - Information and Guilty Plea by Keith Greenberg.(12)
99.4 - Information and Guilty Plea by Keith Greenberg(12)
99.5 - Press Release of US Diagnostic Inc. dated February 3, 1997(13)
- ----------
(1) Incorporated by reference to the Company's Registration Statement on
Form SB-2 (file no. 33-73414)
(2) Incorporated by reference to the Company's Report on Form 8-K dated
January 11, 1995.
(3) Incorporated by reference to the Company's Report on Form 8-K dated
February 27, 1995.
(4) Incorporated by reference to the Company's Report on Form 8-K dated
March 20, 1994.
(5) Incorporated by reference to the Company's Registration Statement on
Form SB-2
25
<PAGE>
(file no. 33-93536)
(6) Incorporated by reference to the Company's Report on Form 8-K dated
October 30, 1995.
(7) Incorporated by reference to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995.
(8) Incorporated by reference to the Company's Report on Form 8-K dated
June 5, 1996.
(9) Incorporated by reference to the Company's Report on Form 8-K dated
June 28, 1996.
(10) Incorporated by reference to the Company's Report on Form 8-K dated
July 24, 1996.
(11) Incorporated by reference to the Company's Report on Form 10-QSB for the
three months ended June 30, 1996.
(12) Incorporated by reference to the Company's Report on Form 8-K dated
January 29, 1997.
(13) Incorporated by reference to the Company's Report on Form 8-K dated
February 3, 1997.
(14) Incorporated by reference to the Company's Registration Statement on
Form S-3 dated June 6, 1996.
(b) No reports on Form 8-K were filed during the quarter ended December 31,
1996.
26
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this amendment to be signed on its
behalf by the undersigned, thereunto duly authorized.
US DIAGNOSTIC INC.
Date: April 30, 1997 By:/s/ JOSEPH A. PAUL
------------------
Joseph A. Paul
Chief Executive Officer, Chief Operating
Officer and President
<PAGE>
<TABLE>
<CAPTION>
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------ ----------- ----
<S> <C> <C>
10.35 - Loan and Security Agreement and Secured Promissory Note among US
Diagnostic Inc. and DVI Credit Corporation dated as of February 25,
1997.
10.36 - Subscription Agreement between Diversified Therapy Corp. and US
Diagnostic Inc.
10.37 - Employment Agreement dated August 31, 1994 between US Diagnostic Labs,
Inc. and Jeffrey A. Goffman.
10.38 - Amended and restated Employment Agreement dated August 9, 1996 between
the Company and Todd R. Smith.
10.39 - Employment Agreement dated June 30, 1995 between the Company and Amos F.
Almand, III.
10.40 - Employment Agreement dated October 15, 1996 between the Company and Len
Platt.
10.41 - Employment Agreement dated May 1, 1996 between the Company and Alan M.
Winakor.
10.42 - Employment Agreement dated October 15, 1996 between the Company and
Arthur Quillo.
10.43 - Consulting Agreement dated October 1, 1996 between the Company and
Robert Burke, M.D.
11 - Earnings Per Share Calculation.
21 - Subsidiaries.
27 - Financial Data Schedule.
</TABLE>
EXHIBIT 10.35
LOAN AND SECURITY AGREEMENT
among
US DIAGNOSTIC INC.
Borrower,
and
DVI BUSINESS CREDIT CORPORATION
Lender
Dated as of February 25, 1997
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1 DEFINITIONS........................................1
Section 1.1. Specific Definitions.................................1
Section 1.2. Generally Accepted Accounting Principles
and Uniform Commercial Code..........................6
Section 1.3. Construction.........................................6
Section 2 LOAN......................................................6
Section 2.1. The Loan.............................................6
Section 2.2. Note.................................................6
Section 2.3. Borrowing Base.......................................7
Section 2.4. Notice of Borrowing..................................7
Section 2.5. Use of Proceeds......................................7
Section 2.6. Repayment of Loan....................................7
Section 2.7. Term of Agreement....................................8
Section 2.8. Lender's Fees........................................8
Section 2.9. Interest on the Loans................................8
Section 2.10. Late Payments.......................................8
Section 2.11. Conditions to the Closing...........................9
Section 3 SECURITY INTEREST........................................11
Section 3.1. Grant of Security Interest..........................11
Section 4 SPECIFIC REPRESENTATIONS.................................11
Section 4.1. Name of Guarantors; Borrower........................11
Section 4.2. Mergers and Consolidations..........................12
Section 4.3. Purchase of Assets..................................12
Section 4.4. Change of Name or Identity..........................12
Section 4.5. Corporate Structure.................................12
Section 5 PROVISIONS CONCERNING ACCOUNTS...........................12
Section 5.1. Office and Records of Borrower......................12
Section 5.2. Representations.....................................12
Section 5.3. Returns and Repossessions...........................13
Section 5.4. Borrowing Base Reports..............................13
Section 5.5. Compliance Certificate..............................13
Section 5.6. Lender's Rights.....................................13
Section 5.7. Disclaimer of Liability.............................13
Section 5.8. Post Default Rights.................................13
Section 5.9. Accounts Owed by Federal Government.................14
Section 5.10. Business Activity Reports..........................14
Section 5.11. Post Closing Checklist.............................14
i
<PAGE>
Section 6 PROVISIONS CONCERNING GENERAL INTANGIBLES................14
Section 6.1. Contracts...........................................14
Section 7 PROVISIONS CONCERNING COLLATERAL.........................15
Section 7.1. Further Assurances..................................15
Section 7.2. Lender's Duty of Care...............................15
Section 7.3. Reinstatement of Liens..............................15
Section 7.4. Lender Expenses.....................................16
Section 7.5. Inspection of Records...............................16
Section 7.6. Waivers.............................................16
Section 8 REPRESENTATIONS AND WARRANTIES...........................17
Section 8.1. Corporate Status....................................17
Section 8.2. Authorization.......................................17
Section 8.3. No Breach...........................................17
Section 8.4. Taxes...............................................17
Section 8.5. Deferred Compensation Plans.........................17
Section 8.6. Litigation and Proceedings..........................18
Section 8.7. Business............................................18
Section 8.8. Laws and Agreements.................................18
Section 8.9. Ownership of Accounts...............................18
Section 8.10. Security Interest..................................18
Section 8.11. No Defaults........................................18
Section 8.12. Origination........................................18
Section 8.13. Legality...........................................18
Section 8.14. Consents...........................................18
Section 8.15. Financial Condition................................19
Section 8.16. Health Care Laws...................................19
Section 8.17. Guarantor Solvency.................................19
Section 8.18. Cumulative Representations.........................19
Section 8.19. Full Disclosure....................................20
Section 9 COVENANTS................................................20
Section 9.1. Encumbrance of Collateral...........................20
Section 9.2. Business............................................20
Section 9.3. Condition and Repair................................20
Section 9.4. Taxes...............................................20
Section 9.5. Accounting System...................................20
Section 9.6. Quarterly Financial Statements......................21
Section 9.7. Annual Financial Statements.........................21
Section 9.8. Further Information.................................21
Section 9.9. ERISA Covenants.....................................21
Section 9.10. Restrictions on Merger, Consolidation,
Sale of Assets, Issuance of Stock, etc.............21
Section 9.11. Health Care Covenants..............................22
ii
<PAGE>
Section 9.12. Distributions......................................22
Section 10 EVENTS OF DEFAULT........................................22
Section 11 REMEDIES.................................................24
Section 11.1. Specific Remedies..................................24
Section 11.2. Power of Attorney..................................25
Section 11.3. Expenses Secured...................................25
Section 11.4. Equitable Relief...................................25
Section 11.5. Remedies Are Cumulative............................25
Section 12 INDEMNITY................................................26
Section 12.1. General Indemnity.................................26
Section 13 MISCELLANEOUS............................................26
Section 13.1. Delay and Waiver...................................27
Section 13.2. Complete Agreement.................................27
Section 13.3. Severability; Headings.............................27
Section 13.4. Binding Effect.....................................27
Section 13.5. Notices............................................27
Section 13.6. Governing Law......................................28
Section 13.7. Waiver of Trial by Jury............................28
Section 13.8. Submission to Jurisdiction.........................28
SCHEDULES
1.1 Permitted Liens
4.1 Guarantors
4.2 Mergers and Consolidations
4.3 Purchase of Assets
4.5 Stock Ownership
5.1 Guarantor Offices
5.11 Post Closing Checklist
6.1 Contracts
8.6 Litigation and Proceedings
9.13 Permitted Distributions
EXHIBITS
1.1 Net Collectible Percentage
2.2 Promissory Note
5.5 Compliance Certification
iii
<PAGE>
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (this "AGREEMENT") is entered into as
of February 25, 1997 by and between DVI Business Credit Corporation, a Delaware
corporation ("LENDER"), and US Diagnostic Inc., a Delaware corporation
("BORROWER").
In consideration of the mutual covenants and agreements set forth
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and affirmed, the parties agree as
follows:
SECTION 1
DEFINITIONS
SECTION 1.1 SPECIFIC DEFINITIONS. The following definitions apply:
"ACCOUNT DEBTORS" mean Borrower's and each Guarantor's customers, the
insurance companies or other payors responsible for their customers' obligations
and all other persons who are obligated or indebted to Borrower or a Guarantor
in any manner, whether directly or indirectly, primarily or secondarily,
contingently or otherwise, with respect to Accounts.
"ACCOUNTS" mean all accounts, contract rights, instruments, documents,
general intangibles, chattel paper and obligations in any form owing to Borrower
or a Guarantor arising out of the sale or lease of goods or the rendition of
services by Borrower or a Guarantor whether or not earned by performance,
including any management fees paid to Borrower by a Subsidiary; all credit
insurance, guaranties, letters of credit, advises of credit and other security
for any of the above; all merchandise returned to or reclaimed by Borrower or a
Guarantor; and Borrower's Books relating to any of the foregoing.
"ADVANCE" means an advance of loan proceeds constituting all or a part
of the Loan.
"AFFILIATE" means with respect to any Person any other Person which
directly or indirectly Controls, is Controlled by or is under common Control
with that Person.
"BASE RATE" means the rate of interest announced publicly by Bank of
America, NT&SA in San Francisco, California, from time to time as its base rate.
"BORROWER'S BOOKS" means all of Borrower's and each Guarantor's books
and records including but not limited to: minute books; ledgers; records
indicating, summarizing or
1
<PAGE>
evidencing Borrower's and each Guarantor's assets, liabilities and the Accounts;
all information relating to Borrower's and each Guarantor's business operations
or financial condition; and all computer programs, disk or tape files,
printouts, runs and other computer-prepared information and the equipment
containing such information; provided, however, that confidential patient
records are not included therein, except to the extent otherwise permitted by
law.
"BORROWING BASE" means, on the date of determination thereof, an amount
equal to eighty percent (80%) of the Net Collectible Value for each type of
Eligible Account; provided, however, that workers compensation liens and
personal injury claims may never exceed twenty percent (20%) of the Borrowing
Base.
"BUSINESS DAY" means any day which is not a Saturday or Sunday, a legal
holiday or a banking holiday in the State of California.
"CLOSING DATE" means the date of the first Advance of the Loan.
"COLLATERAL" has the meaning specified in Section 3.1 hereof.
"COMMITMENT AMOUNT" means Twenty-Five Million Dollars ($25,000,000).
"CONTROL" means (i) the ownership of a majority of the voting power of
all classes of voting stock of a corporation, or (ii) the ownership of a
majority of the beneficial interest in income and capital of a person other than
a corporation.
"DISTRIBUTION" means, with respect to any shares of capital stock or
any warrant or right to acquire shares of capital stock or any other equity
security, (i) the retirement, redemption, purchase or other acquisition,
directly or indirectly, for value by the issuer of any such security, except to
the extent that the consideration therefor consists of shares of stock, (ii) the
declaration or (without duplication) payment of any dividend in cash, directly
or indirectly, on or with respect to any such security, (iii) any investment in
the holder of five percent (5%) or more of any such security if a purpose of
such investment is to avoid characterization of the transaction as a
Distribution, and (iv) any other cash payment constituting a distribution under
applicable laws with respect to such security.
"ELIGIBLE ACCOUNTS" means each Guarantor's accounts receivable from
commercial insurance, Medicare, Medicaid, managed care providers, workers'
compensation approved liens and claims and personal injury claims, or from
radiologists and other medical practices which collect receivables from such
payors with respect to services provided by the Guarantor, which have been due
and payable for one hundred eighty (180) or fewer days.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all references to sections thereof include such sections and any
predecessor provisions thereto, including any rules or regulations issued in
connection therewith.
"ERISA AFFILIATE" means each trade or business (whether or not
incorporated)
2
<PAGE>
that together with Borrower would be deemed a "contributing sponsor" to a single
employee plan within the meaning of Section 4001 of ERISA.
"EVENT OF DEFAULT" has the meaning specified in Section 10 hereof.
"GAAP" means generally accepted accounting principles set forth in the
opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants or in statements of the Financial Accounting
Standards Board, consistently applied.
"GOVERNMENTAL AUTHORITY" means any governmental or political
subdivision or any agency, authority, bureau, central bank, commission,
department or instrumentality thereof, or any court, tribunal, grand jury or
arbitrator, in any case whether foreign or domestic.
"GUARANTY" means each Unconditional Continuing Guaranty executed by
Guarantors unconditionally guaranteeing Borrower's Obligations under this
Agreement.
"GUARANTOR" means each of Borrower's material Subsidiaries all of which
are listed on SCHEDULE 4.1.
"HEALTH CARE LAWS" mean all federal, state and local laws relating to
health care providers and health care services, including, Section 1877(a) of
the Social Security Act as amended by the Omnibus Budget Reconciliation Act of
1993, 42 USC /section/ 1395nn.
"INDEBTEDNESS" of a Person means (i) all items (except items of capital
stock, capital or paid-in surplus or of retained earnings) which, in accordance
with GAAP, would be included in determining total liabilities as shown on the
liability side of the balance sheet of such Person as at the date as of which
Indebtedness is to be determined, including any lease which, in accordance with
GAAP, would constitute indebtedness; (ii) all indebtedness secured by any
mortgage, pledge, security, lien or conditional sale or other title retention
agreement to which any property or asset owned or held by such Person is
subject, whether or not the indebtedness secured thereby has been assumed; and
(iii) all indebtedness of others which such Person has directly or indirectly
guaranteed, endorsed (otherwise than for the collection or deposit in the
ordinary course of business), discounted or sold with recourse or agreed
(contingently or otherwise) to purchase or repurchase or otherwise acquire, or
in respect of which such Person has agreed to supply or advance funds (whether
by way of loan, stock or equity purchase, capital contribution or otherwise) or
otherwise to become directly or indirectly liable.
"LENDER EXPENSES" means (i) all costs or expenses (including taxes and
insurance premiums) required to be paid by Borrower under this Agreement or
under any of the other Loan Documents that are paid or advanced by Lender; (ii)
filing, recording, publication and search fees paid or incurred by Lender in
connection with Lender's transactions with Borrower; (iii) costs and expenses
reasonably incurred by Lender to correct any Event of Default or enforce any
provision of the Loan Documents or in gaining possession of, maintaining,
handling, preserving, storing, shipping, selling, and preparing for sale or
advertising to sell the Collateral, whether or not a sale is consummated, after
the occurrence of an Event of Default; (iv) costs and expenses of
3
<PAGE>
suit reasonably incurred by Lender in enforcing or defending the Loan Documents
or any portion thereof; (v) all costs or expenses reasonably incurred by Lender
to convert any data submitted to Lender by Borrower to an acceptable form; and
(vi) Lender's reasonable attorney fees and expenses incurred (before or after
execution of this Agreement) in advising Lender with respect to, or in
structuring, drafting, reviewing, negotiating, amending, terminating, enforcing,
defending or otherwise concerning, the Loan Documents or any portion thereof,
irrespective of whether suit is brought.
"LIEN" means any security interest, mortgage, pledge, assignment, lien
or other encumbrance of any kind, including any interest of a vendor under a
conditional sale contract or consignment and any interest of a lessor under a
capital lease.
"LOAN" means each loan or any other loan or loans made by Lender to
Borrower pursuant to this Agreement.
"LOAN AVAILABILITY" means the lesser of (a) the Commitment Amount or
(b) the Borrowing Base minus the aggregate Advances and other monetary
Obligations outstanding under this Agreement. Loan Availability will be
calculated as of the end of each calendar month; provided however, that during
the first three full calendar months following the Closing Date, Loan
Availability equals the Commitment Amount.
"LOAN DOCUMENTS" mean (i) this Agreement; (ii) the Note; (iii) the
Security Documents; (iv) the Lock Box Agreements; and (v) any other Exhibits,
Schedules, certificates, documents or instruments delivered by Borrower to
Lender pursuant to the terms of this Agreement.
"LOCK BOX AGREEMENTS" means those certain four Lock Box Agreements
between Borrower, and the lock box servicers chosen by Lender and Borrower and
the letter of instructions with respect thereto.
"MERGER AGREEMENT" means the Agreement and Plan of Merger dated as of
January 20, 1997 among Borrower, MDI Acquisition Corporation, Medical
Diagnostics, Inc. and Advanced NMR Systems, Inc.
"NET COLLECTIBLE PERCENTAGE" means the percentage described on EXHIBIT
1.1 attached hereto for each type of Eligible Account. The Net Collectible
Percentage may change from time to time in Lender's sole and absolute
discretion, written notification of which must be given to Borrower by Lender.
"NET COLLECTIBLE VALUE" means, for each type of Eligible Account, the
Net Collectible Percentage times the aggregate current outstanding amount for
such type of Eligible Account.
"NOTE" means the Secured Promissory Note executed by Borrower pursuant
to Section 2.2.
4
<PAGE>
"OBLIGATIONS" mean all obligations (monetary or otherwise) of Borrower
to Lender under or in connection with this Agreement, the Note and the other
Loan Documents.
"PERMITTED LIENS" mean (i) Liens for property taxes and assessments or
governmental charges or levies and Liens securing claims or demands of mechanics
and materialmen, provided that payment thereof is not yet due or is being
contested as permitted in this Agreement; (ii) Liens and priority claims
incidental to the conduct of business or the ownership of properties and assets
(including warehouse's and attorney's Liens and statutory landlord's Liens);
deposits, pledges or Liens to secure the performance of bids, tenders, or trade
contracts, or to secure statutory obligations; and surety or appeal bonds or
other Liens of like general nature incurred in the ordinary course of business
and not in connection with the borrowing of money; provided that in each case
the obligation secured is not overdue or, if overdue, is being contested in good
faith by appropriate actions or proceedings; and further provided that any such
warehouse's or statutory landlord's Liens have been subordinated to the Liens of
Lender in a manner satisfactory to Lender; (iii) Liens granted to Lender or any
Affiliate of Lender; and (iv) Liens existing on the date of this Agreement that
secure indebtedness outstanding on such date and that are disclosed on SCHEDULE
1.1 hereto.
"PERSON" means an individual, corporation, partnership, limited
liability company, trust, unincorporated association, joint venture, joint-stock
company, government (including political subdivisions), Governmental Authority
or any other entity.
"PROCEEDS" mean all proceeds and products of Collateral and all
additions and accessions to, replacements of, insurance or condemnation proceeds
of, and documents covering Collateral; all property received wholly or partly in
trade or exchange for Collateral; all claims against third parties arising out
of damage, destruction, or decrease in value of the Collateral; all leases of
Collateral; and all rents, revenues, issues, profits and proceeds arising from
the sale, lease, license, encumbrance, collection or any other temporary or
permanent disposition of the Collateral or any interest therein.
"SECURITY AGREEMENT" means each Security Agreement dated on or about
the date hereof between Lender and Guarantors.
"SECURITY DOCUMENTS" means the Guaranties, the Security Agreements and
any agreement or instrument entered into between Borrower or Guarantors and
Lender or executed by Borrower or Guarantors and delivered to Lender in
connection with this Agreement to secure repayment of the Loan.
"SUBSIDIARY" means any Affiliate of Borrower which is at the time,
directly or indirectly, owned or Controlled by Borrower or one or more
Subsidiaries.
"TERMINATION DATE" means the last day of any term as to which a written
notice of non-renewal pursuant to Section 2.7 has been received.
5
<PAGE>
"UNMATURED DEFAULT" means any event or condition that, with notice,
passage of time, or a determination by Lender or any combination of the
foregoing would constitute an Event of Default.
SECTION 1.2. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES AND UNIFORM
COMMERCIAL CODE. All financial terms used in this Agreement other than those
defined in Section 1, have the meanings accorded to them under GAAP. All other
terms used in this Agreement, other than those defined in this Section 1, have
the meanings accorded to them in the Uniform Commercial Code as is enacted in
any applicable jurisdiction.
SECTION 1.3. CONSTRUCTION
(a) Unless the context of this Agreement clearly requires otherwise,
the plural includes the singular, the singular includes the plural, the part
includes the whole, "including" is not limiting, and "or" has the inclusive
meaning of the phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and other similar terms in this Agreement refer to this Agreement
as a whole and not exclusively to any particular provision of this Agreement.
(b) Neither this Agreement nor any uncertainty or ambiguity herein may
be construed or resolved against any party hereto, whether under any rule of
construction or otherwise. On the contrary, this Agreement has been reviewed by
each of the parties and their respective counsel and is entitled to be construed
and interpreted according to the ordinary meaning of the words used so as to
accomplish the purposes and intentions of all parties hereto fairly.
SECTION 2
LOAN
SECTION 2.1 LOAN. Subject to the terms and conditions and relying on
the representations and warranties set forth herein, Lender shall advance to
Borrower from time to time, and Borrower shall borrow from Lender, a revolving
loan in an amount not to exceed Loan Availability. Within the limits of the Loan
Availability, Borrower may borrow, make repayments pursuant to Section 2.6 and
reborrow. If, at any time, the aggregate Advances and other Obligations
outstanding exceed the then Loan Availability, then Borrower shall pay to Lender
a sum sufficient to reduce the Advances and other Obligations outstanding to an
amount not greater than the Loan Availability. Lender's commitment to make
Advances expires and the amount of the Loan then outstanding matures and must be
repaid by Borrower, without further action on the part of Lender, on the
Termination Date.
SECTION 2.2 NOTE. All Advances made by Lender under this Agreement are
6
<PAGE>
evidenced by, and must be repaid with interest in accordance with a single
promissory note of Borrower in substantially the form of EXHIBIT 2.2 duly
completed, in the original principal amount equal to the Commitment Amount,
dated the Closing Date, payable to the Lender and maturing as to principal on
the Termination Date (the "NOTE"). The daily remittance to Borrower of deposits
and receipts received in the lock boxes pursuant to Section 2.6 are not Advances
made by Lender. The amount of each Advance and payment of principal amount
received by the Lender will be recorded in the books and records of the Lender,
which books and records, in the absence of manifest error, are conclusive as to
the outstanding balance of and other information related to the Loan. Lender is
entitled at any time to endorse on a schedule attached to the Note the amount
and type of each Advance and information relating thereto.
SECTION 2.3 BORROWING BASE. On a monthly basis, the Borrowing Base will
be recalculated by adding monthly billings to the prior month's Eligible
Accounts and subtracting deposits and adjustments, if applicable and then
multiplying this amount by the Net Collectable Percentage. The Borrowing Base
will be calculated on a monthly basis on the reports delivered to Lender
pursuant to Section 5.4. Loan Availability will be recalculated on the basis of
each month's Borrowing Base.
SECTION 2.4 NOTICE OF BORROWING. Whenever Borrower desires to borrow
under Section 2.1, Borrower shall deliver to Lender a Drawdown Request Form, in
a form reasonably satisfactory to Lender, signed by an authorized officer no
later than 2:00 p.m. Pacific Standard Time at least one (1) business day in
advance of the proposed funding date. The Drawdown Request Form must specify (i)
the funding date (which shall be a business day) with respect to the requested
Loan and (ii) the amount of the proposed Advance.
SECTION 2.5 USE OF PROCEEDS. The proceeds of the Loan must be used by
Borrower for the acquisition by Borrower of substantially all of the assets of
Medical Diagnostics, Inc. pursuant to the Merger Agreement, to fund the closing
costs incurred in connection with the transactions contemplated in this
Agreement and to fund Borrower's and each Guarantor's working capital
requirements from time to time.
SECTION 2.6. REPAYMENT OF LOAN
(a) Upon the execution hereof, Borrower shall become a party to the
Lock Box Agreements which provide for the receipt and processing of Account
payments. Within ten (10) days after the Closing Date, Borrower and each
Guarantor shall irrevocably direct: (i) all non-government payors to remit
payment to the servicer's post office box in Lender's name and control; and (ii)
all government payors to remit payment to a second post office box of such
servicer in Borrower's name. At the end of such ten (10) day period Borrower
shall certify to Lender that the required re-direct letters (in a form
satisfactory to Lender) have been sent to all Account Debtors. Prior to the
Closing Date, Borrower shall modify its billing system to direct all Account
Debtors billed on or after the Closing Date to make all payments to a lock box
account. Prior to the initial Advance, Borrower shall certify to Lender that the
required change in its billing system has been made. The Lock Box Agreements
provide for the servicer to deposit daily all receipts of the post office boxes
into deposit accounts, with non-government
7
<PAGE>
payor receipts paid into an account subject to Lender's control and, government
payor receipts paid into an account in Borrower's name; such accounts must be
(i) at a financial institution acceptable to Lender, and (ii) governed by terms
and conditions acceptable to Lender. All government payor receipts will be
immediately transferred to an account in the name and control of Lender. Any
receipts from Accounts received by Borrower or a Guarantor must be deposited in
the lock box account promptly upon receipt.
(b) Lender will debit the lock box account at the end of each day in
payment of (i) all Lender and other fees, reimbursements, principal payments and
other amounts then due and payable; and (ii) on the first day of each month with
respect to interest accrued on the Loan during the preceding month. Lender shall
apply excess receipts remaining in the lock box account after the payment of
fees, interest, reimbursements and other amounts to the principal amount of the
Loan on a daily basis. Deposits and receipts to the lock box account will reduce
the Borrowing Base on a monthly basis in accordance with Section 2.3 above.
(c) Borrower shall pay all charges for establishing and maintaining the
post office box accounts and all bank charges for such deposit accounts. Lender
shall deduct from the deposit accounts all sums Borrower owes to it hereunder,
including fees, interest, reimbursements and principal payments. Borrower shall
satisfy any Obligations not paid by such deduction by direct payment to Lender
at 4041 MacArthur Blvd., Suite 401, Newport Beach, California 92660.
SECTION 2.7. TERM OF AGREEMENT.The Term of this Agreement is one (1)
year from the Closing Date. This Agreement will be renewed for consecutive one
(1) year terms unless this Agreement is terminated, effective as of the last day
of a term, by written notice by Lender or Borrower no later than thirty (30)
days before the expiration of such term. All of Lender's obligations,
responsibilities and duties shall cease upon the date of termination of this
Agreement, except for its obligation to remit excess receipts from the lock box
deposit accounts in accordance with the terms of this Agreement.
SECTION 2.8. LENDER'S FEE. Upon execution hereof, Borrower shall pay
Lender an origination fee equal to one percent (1.0%) of the Commitment Amount
less $50,000 currently on deposit with Lender. Increases to the Commitment
Amount during the term will be charged on the incremental increase at the same
origination percentage. On or before the first day of each month, Borrower shall
pay Lender an unutilized loan fee of equal to one-quarter of one percent (0.25%)
of the difference between the Commitment Amount and the average outstanding Loan
amount for the immediately previous month. Lender's fees will be deducted, when
due, directly from receipts from accounts receivable deposited in accordance
with Section 2.6.
SECTION 2.9. INTEREST ON THE LOANS. All Advances shall bear interest on
the unpaid principal amount thereof from the date made until paid in full at a
fluctuating rate equal to the Base Rate plus two percent (2.0%). The outstanding
principal balance of all other Obligations shall bear interest from the date
such Obligations are due until paid in full at a fluctuating rate equal to the
Base Rate plus two percent (2.0%). Interest accrued but not paid
8
<PAGE>
pursuant to Section 2.5 shall be treated as an Advance if not otherwise paid
within five (5) days of the end of the month in which it accrues.
SECTION 2.10. LATE PAYMENTS. If Borrower fails to make any payment of
interest or principal, including the payment due upon maturity, when the same is
due and payable and such failure continues for five (5) days after nonpayment, a
late charge by way of damages to the extent provided in this Section 2.10 is
immediately due and payable. Borrower recognizes that default by Borrower in
making the payments herein agreed to be paid when due will result in the Lender
incurring additional expenses, in loss to the Lender of the use of the money due
and in frustration to the Lender in meeting its other commitments. Lender is
entitled to damages for the detriment caused thereby, but it is extremely
difficult and impractical to ascertain the extent of such damages. Borrower
shall pay on demand a sum equal to five cents ($.05) for each one dollar ($1.00)
of each payment which is not received within five (5) days after the date it is
due and payable is a reasonable estimate of the damages to the Lender. If any
part of the principal or interest is not paid when due, it thereafter bears
interest at the rate of eighteen percent (18%) per annum from and as of the date
of delinquency until paid; provided, however that the total amount payable
pursuant to this sentence and the immediately preceding sentence may not exceed
the greater of the two amounts due in accordance with the separate applications
of each sentence. If the specified interest rate at any time exceeds the maximum
rate allowed by law, then the applicable interest rate is reduced to the maximum
rate allowed by law.
SECTION 2.11 CONDITION TO THE CLOSING. The obligation of Lender to make
an Advance on the Closing Date is subject to Lender's determination that
Borrower has satisfied the following conditions on the Closing Date:
(a) The representations and warranties set forth in this Agreement are
true and correct on and as of the date hereof and are true and correct in all
material respects as of the Closing Date and Borrower has performed all
obligations required to have been performed by it hereunder prior to Closing
Date.
(b) Borrower has executed and delivered to Lender (or caused to be
executed and delivered to Lender by the appropriate Persons) the following:
(i) this Agreement;
(ii) the Note;
(iii) UCC-1 Financing Statements;
(iv) the Guaranties;
(v) the Security Agreements;
(vi) the Lock Box Agreements;
9
<PAGE>
(vii) a certification from an authorized officer that
Borrower has modified its billing system in accordance with Section 2.6;
(viii) evidence satisfactory to Lender that Borrower and each
Guarantor is a corporation or partnership duly formed, validly existing and in
good standing in the state in which it was formed and in each state in which it
is authorized to do business;
(ix) pay-off letters, UCC Termination Statements, and Lien
Releases as required to grant Lender a first priority security interest other
than Permitted Liens in Collateral pledged as security for repayment of the
Loan;
(x) signature and incumbency certificate of Borrower and
each Guarantor or the corporate general partner of a Guarantor which is a
partnership;
(xi) certified copies of resolutions of the Board of
Directors of Borrower, each corporate Guarantor and each corporate general
partner of a Guarantor which is a partnership, authorizing the execution and
delivery of the Loan Documents to be executed by Borrower and each Guarantor;
(xii) copies of the Articles of Incorporation of Borrower,
each corporate Guarantor and each corporate general partner of a Guarantor which
is a partnership, certified by the Secretary of State of each such Person's
jurisdiction of incorporation;
(xiii) copies of the certificate of limited partnership of
each Guarantor which is a partnership, certified by the Secretary of State
of each such Guarantor's jurisdiction of formation;
(xiv) copies of the Bylaws of Borrower, each corporate
Guarantor or the corporate general partner of a Guarantor which is a
partnership, certified by an officer thereof;
(xv) copies of the partnership agreement of each Guarantor
which is a partnership, certified by an officer of the corporate general partner
of such Guarantor;
(xvi) certified copies of the Merger Agreement and all
documents executed and delivered in connection with the transactions
contemplated thereby;
(xvii) the written opinion of counsel to Borrower with respect
to Borrower and each Guarantor issued on the Closing Date and satisfactory to
Lender in scope and substance; and
(xviii) a certificate from an officer of Borrower indicating
that the representations and warranties contained herein are true and correct as
of the Closing Date.
(c) Borrower has paid closing fees to Lender including Lender's legal
fees incurred by Lender for the negotiation and preparation of the Loan
Documents.
10
<PAGE>
(d) Neither an Event of Default nor an Unmatured Default has occurred
and is continuing.
(e) Neither Borrower nor any Guarantor has suffered a material or
adverse change in its business, operations or financial condition from that
reflected in the financial statements of Borrower delivered to Lender or
otherwise.
(f) Lender has received such additional supporting documents,
certificates and assurances as Lender reasonably requests which are satisfactory
to Lender in form and substance.
SECTION 3
SECURITY INTEREST
SECTION 3.1. GRANT OF SECURITY INTEREST. In order to secure prompt
payment and performance of the Obligations, Borrower hereby grants to Lender a
continuing first-priority pledge and security interest in all of Borrower's and
Guarantor's Accounts, together with such third-party consents, lien waivers and
estoppel certificates as Lender reasonably requires (the "COLLATERAL"), whether
now owned or existing or hereafter acquired or arising and regardless of where
located, subject only to Permitted Liens. This security interest in the
Collateral attaches to all Collateral without further action on the part of
Lender or Borrower.
SECTION 4
SPECIFIC REPRESENTATIONS
SECTION 4.1. NAME OF GUARANTORS; BORROWER
(a) The exact corporate name of Borrower is US Diagnostic Inc. Borrower
was incorporated under the laws of the State of Delaware. The following are all
previous legal names of Borrower: U.S. Diagnostic Labs Inc. Borrower uses the
following trade names: None. The following are all other trade names used by
Borrower in the past: None. The exact corporate name of each Guarantor is set
forth on the attached SCHEDULE 4.1. Each material Subsidiary of Borrower is
listed on SCHEDULE 4.1 and has executed a Guaranty and a Security Agreement.
(b) SCHEDULE 4.1 may be revised from time to time by Borrower and
Lender.
11
<PAGE>
If Borrower fails to remedy any item listed on SCHEDULE 5.11, Lender may
revise SCHEDULE 4.1 by deleting the Subsidiary with respect to which the
deficiency remains uncorrected from the list of Guarantors. The Accounts of such
Guarantor will no longer be considered Eligible Accounts and Lender shall
release such Subsidiary from its obligations under the Security Documents. If
Borrower desires to addd any Subsidiary to SCHEDULE 4.1, such Subsidiary may be
added to SCHEDULE 4.1 and the Accounts of such Subsidiary may be considered
Eligible Accounts upon the satisfaction of the following conditions:
(i) The representations and warranties set forth in this
Agreement, to the extent applicable, are true and correct in all material
respects with respect to the Subsidiary;
(ii) The Subsidiary delivers to Lender executed copies of
the documents listed in Section 2.11(b), to the extent applicable; and
(iii) Lender has (x) completed a review of the Subsidiary and
its Accounts, similar in scope to the review of Borrower and the Guarantors
completed prior to the Closing Date, satisfactory to Lender in its sole
discretion and (y) received such additional supporting documents, certificates
and assurances as Lender reasonably requests, which are satisfactory to Lender
in form and substance.
SECTION 4.2. MERGERS AND CONSOLIDATIONS. Except as disclosed on
SCHEDULE 4.2, no entity has merged into Borrower or any Subsidiary or been
consolidated with Borrower or any Subsidiary.
SECTION 4.3 PURCHASE OF ASSETS. Except as disclosed on SCHEDULE 4.3, no
entity has sold substantially all of its assets to Borrower or any Subsidiary or
sold assets to Borrower or any Subsidiary outside the ordinary course of such
seller's business at any time in the past.
SECTION 4.4 CHANGE OF NAME OR IDENTITY. Borrower shall not change its
or any Subsidiary's name, business structure, or identity or use or permit any
Subsidiary to use any new trade name without prior notification of Lender.
SECTION 4.5 CORPORATE STRUCTURE. Except as set forth on SCHEDULE 4.5,
Borrower, directly or indirectly, owns one hundred percent (100%) of each class
of the capital stock of each Guarantor.
SECTION 5
PROVISIONS CONCERNING ACCOUNTS
SECTION 5.1 OFFICE AND RECORDS OF BORROWER. Borrower's and each
Guarantor's
12
<PAGE>
chief executive offices are located at: 777 South Flagler Drive, West Palm
Beach, Florida 33401 or as otherwise indicated on the attached SCHEDULE 5.1.
Borrower and each Guarantor maintains all of their records with respect to
Accounts at 777 South Flagler Drive, West Palm Beach, Florida 33401 or as
otherwise indicated on the attached SCHEDULE 5.1. Borrower and each Guarantor
has not at any time within the past four (4) months maintained their chief
executive office or their records with respect to Accounts at any other location
and shall not do so hereafter except with the prior written consent of Lender.
SECTION 5.2 REPRESENTATIVES. Borrower represents and warrants that each
Account at the time of its assignment to Lender (a) will be owned solely by
Borrower or a Guarantor, (b) will be for a liquidated amount maturing as stated
in Borrower's Books; (c) will be a bona fide existing obligation created by the
rendition of services to Account Debtors or their insured by Borrower or a
Guarantor in the ordinary course of its business; and (d) will not be subject to
any known deduction, offset, counterclaim, return privilege, or other condition,
except as reflected on Borrower's Books. Borrower shall not nor will it permit
any Guarantor to redate any invoices nor reissue new invoices in full or partial
satisfaction of old invoices. Allowances, if any, as between Borrower or a
Guarantor and its customers will be on the same basis and in accordance with the
usual customary practices of Borrower as they exist on the date of this
Agreement.
SECTION 5.3. RETURNS AND REPOSSESSIONS. Borrower shall notify Lender
within five (5) business days of occurrence of all material claims asserted by
Account Debtors.
SECTION 5.4. BORROWING BASE REPORTS. No later than the 15th day of each
month, Borrower shall execute and deliver to Lender, in a form satisfactory to
Lender, (i) a monthly Borrowing Base report; (ii) a detailed Accounts aging
report as of the last day of the preceding month and a summary by payor class
aging of Accounts; (iii) a charges, collections and adjustment summary for the
preceding month; and (iv) a payor concentration schedule. Borrower shall upon
the request of Lender execute and deliver to Lender an updated Borrowing Base
report reflecting additional billings, writeoffs and deposits and all of
Borrower's accounts receivable data in a computer disc or tape format acceptable
to Lender. Lender shall periodically review Borrower's actual adjustments to
cash receipts and writeoffs, as well as Borrower's payor profile. To the extent
Borrower's adjustments, writeoffs and payor profile materially changes, Lender
may, in its sole discretion, change the Net Collectible Percentage attributable
to each type of Account by 15 days written notice to Borrower of such change.
SECTION 5.5. COMPLIANCE CERTIFICATE. With each final month-end
Borrowing Base report which Borrower delivers to Lender, Borrower shall deliver
to Lender a Compliance Certificate in the form of EXHIBIT 5.5 attached hereto,
which Compliance Certificate is completed and signed by an officer of Borrower.
SECTION 5.6. LENDER'S RIGHTS. Any officer, employee or agent of Lender
has the right, at any time or times hereafter, in the name of Lender or its
nominee (including Borrower), with prior notice to Borrower, to verify the
validity, amount or any other matter relating to any Accounts by mail, telephone
or otherwise; and all reasonable costs thereof are payable by
13
<PAGE>
Borrower to Lender. Lender, or its designee may at any time after the occurrence
and during the continuance of an Event of Default notify customers or Account
Debtors that Accounts have been assigned to Lender or of Lender's security
interest therein and collect the same directly and charge all reasonable
collection costs and expenses to Borrower's account.
SECTION 5.7. DISCLAIMER OF LIABILITY. Lender shall not be liable to
Borrower or any third person for the correctness, validity or genuineness of any
instruments or documents released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event) or for
the existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; and Lender, by
accepting a Lien on the Collateral or by releasing any Collateral to Borrower,
shall not be deemed to have assumed any obligation or liability to any supplier
or creditor of Borrower or to any other third party. Borrower agrees to
indemnify and defend Lender and hold it harmless in respect to any claim or
proceeding arising out of any matter referred to in this Section 5.7.
SECTION 5.8 POST DEFAULT RIGHTS. If an Event of Default has occurred
and is continuing hereunder, no discount, credit or allowance may be granted or
permitted by Borrower to any Account Debtor; provided, however, that,
notwithstanding the existence of an Event of Default, (i) each Guarantor may
continue to invoice and bill Account Debtors under discount, credit and
allowance arrangements that such Guarantor maintained in the ordinary course of
business prior to such Event of Default occurring, and (ii) Account Debtors may,
during the continuance of an Event of Default, utilize discount, credit and
allowance arrangements that a Guarantor extended to them in the ordinary course
of business. Lender may, if an Event of Default has occurred and is continuing,
settle or adjust disputes and claims directly with Account Debtors for amounts
and upon terms that Lender considers advisable, and in such cases, Lender will
credit Borrower's account with only the net amounts received by Lender in
payment of such disputed Accounts, after deducting all Lender Expenses incurred
in connection therewith.
SECTION 5.9. ACCOUNTS OWED BY FEDERAL GOVERNMENT. If any Accounts shall
arise out of a contract with the United States of America or any department,
agency, subdivision or instrumentality thereof, Borrower shall promptly notify
Lender thereof in writing and take all other action reasonably requested by
Lender to protect Lender's Lien on such Accounts under the provisions of the
federal laws on assignment of claims.
SECTION 5.10. BUSINESS ACTIVITY REPORTS. Borrower and its Affiliates
have filed and shall file all legally required notices and reports of its
business activities with all appropriate state taxing authorities and the
appropriate Governmental Authority of each other jurisdiction in which Borrower
or an Affiliate is legally required to file such a notice or report.
SECTION 5.11. POST CLOSING CHECKLIST. Lender has waived certain
deficiencies in the Accounts with respect to its usual closing requirements and
criteria. Lender has compiled a list of such deficiencies which is attached
hereto as SCHEDULE 5.11. Within ninety (90) days of the Closing Date, Borrower
shall correct the deficiencies to Lender's satisfaction. After the end of such
period, the Accounts of any Guarantor with respect to which a deficiency remains
14
<PAGE>
uncorrected will no longer be considered Eligible Accounts and will be excluded
from the calculation of the Borrowing Base. If as a result of the reduction of
the Borrowing Base outstanding Advances and other monetary Obligations exceed
Loan Availability, Borrower shall immediately repay the Loan in an amount
sufficient to reduce outstanding amounts to Loan Availability.
SECTION 6
PROVISIONS CONCERNING GENERAL INTANGIBLES
SECTION 6.1. CONTRACTS
(a) SCHEDULE 6.1. is a true and complete list of all radiology
and partnership agreements to which Borrower or any Subsidiary is a party and
all contracts and agreements listed in a filing by Borrower with the Securities
and Exchange Commission.
(b) Neither Borrower nor any of its Subsidiaries may amend,
modify or supplement any contract or agreement included in the Collateral or
waive any provision thereof other than in accordance with Borrower's standard
business practice, nor may such standard business practice be materially changed
without Lender's consent, which shall not be unreasonably withheld.
(c) Borrower and its Subsidiaries shall remain liable to perform
all of its duties and obligations under any contracts and agreements included in
the Collateral to the same extent as if this Agreement had not been executed;
and Lender shall not have any obligation or liability under such contracts and
agreements by reason of this Agreement or otherwise.
(d) Borrower and its Subsidiaries need not pay any amount due
under any contract or agreement listed on Schedule 6.1, nor otherwise perform
any action required under the terms of any such contract or agreement, if such
payment or performance is being contested in good faith by appropriate
proceedings promptly initiated and diligently conducted, if Lender is notified
in advance of such contest, and if Borrower or a Subsidiary establishes any
reserve or other appropriate provision required by GAAP.
SECTION 7
PROVISIONS CONCERNING COLLATERAL
SECTION 7.1. FURTHER ASSURANCES. Borrower shall execute and
deliver to Lender, concurrent with Borrower's execution of this Agreement and at
any time or times hereafter at the
15
<PAGE>
request of Lender, all financing statements, continuation financing statements,
security agreements, chattel mortgages, assignments, endorsements of
certificates of title, applications for titles, affidavits, reports, notices,
schedules of accounts, letters of authority and all other documents Lender may
reasonably request, in form satisfactory to Lender, to perfect and maintain
perfected Lender's Liens in the Collateral and in order to consummate fully all
of the transactions contemplated under the Loan Documents. Borrower hereby
irrevocably make, constitute, and appoint Lender (and any of Lender's officers,
employees or agents designated by Lender) as Borrower's true and lawful attorney
with power to sign the name of Borrower on any of the above-described documents
or on any other similar documents that need to be executed, recorded, or filed
in order to perfect or continue perfected Lender's Liens in the Collateral. The
appointment of Lender as Borrower's attorney is irrevocable as long as any
Obligations are outstanding. Any person dealing with Lender is entitled to rely
conclusively on any written or oral statement of Lender that this power of
attorney is in effect.
SECTION 7.2. LENDER'S DUTY OF CARE. Lender has no duty of care
with respect to the Collateral except that Lender shall exercise reasonable care
with respect to the Collateral in Lender's custody. Lender will be deemed to
have exercised reasonable care if such property is accorded treatment
substantially equal to that which Lender accords its own property or if Lender
takes such action with respect to the Collateral as the Borrower requests or
agrees to in writing, provided that no failure to comply with any such request
nor any omission to do any such act requested by the Borrower may be deemed a
failure to exercise reasonable care. Lender's failure to take steps to preserve
rights against any parties or property may not be deemed to be failure to
exercise reasonable care with respect to the Collateral in Lender's custody. All
risk, loss, damage or destruction of the Collateral is borne by Borrower.
SECTION 7.3. REINSTATEMENT OF LIENS. If, at any time after
payment in full by Borrower of all Obligations and termination of Lender's
Liens, any payments on Obligations previously made by Borrower or any other
Person must be disgorged by Lender for any reason whatsoever (including, the
insolvency, bankruptcy, or reorganization of Borrower or such other Person),
this Agreement and Lender's Liens granted hereunder are reinstated as to all
disgorged payments as though such payments had not been made, and Borrower shall
sign and deliver to Lender all documents and things necessary to perfect all
terminated Liens.
SECTION 7.4. LENDER EXPENSES. If Borrower fails to pay any moneys
(whether taxes, assessments, insurance premiums or otherwise) due to third
persons or entities, fails to make any deposits or furnish any required proof of
payment or deposit or fails to discharge any Lien not permitted hereby, all as
required under the terms of this Agreement, then Lender may, to the extent that
it determines that such failure by Borrower could have a material adverse effect
on Lender's interest in the Collateral, in its discretion and without prior
notice to Borrower, make payment of the same or any part thereof. Any amounts
paid or deposited by Lender constitute Advances, become part of the Obligations,
and are secured by the Collateral. Any payments made by Lender do not constitute
(a) an agreement by Lender to make similar payments in the future or (b) a
waiver by Lender of any Event of Default under this Agreement. Lender need not
inquire as to, or contest the validity of, any such expense, tax, security
interest, encumbrance or Lien, and the receipt of the usual official notice for
the payment of moneys to a governmental
16
<PAGE>
entity is conclusive evidence that the same was validly due and owing.
Borrower shall immediately and without demand reimburse Lender
for all sums expended by Lender that constitute Lender Expenses, and Borrower
hereby authorizes and approves all advances and payments by Lender for items
constituting Lender Expenses.
SECTION 7.5. INSPECTION OF RECORDS. During usual business hours
and upon reasonable advance notice to Borrower, Lender may inspect and examine
the Collateral and check and test the same as to quality, quantity, value and
condition and Borrower shall reimburse Lender for its costs and expenses in so
doing. Lender also has the right at any time or times hereafter, during usual
business hours and upon reasonable advance notice to Borrower to inspect and
verify Borrower's Books in order to verify the amount or condition of, or any
other matter relating to, the Collateral and Borrower's financial condition and
to copy and make extracts therefrom. Borrower waives the right to assert a
confidential relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by Lender pursuant
to this Agreement. Lender may directly contact any such accounting firm or
service bureau in order to obtain such information.
SECTION 7.6. WAIVERS. Except as specifically provided for herein,
Borrower waives demand, protest, notice of protest, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension or renewal of any or all
commercial paper, accounts, documents, instruments, chattel paper, and
guaranties at any time held by Lender on which Borrower may in any way be
liable.
SECTION 8
REPRESENTATIONS AND WARRANTIES
As of the date hereof Borrower hereby warrants and represents to
Lender the following:
SECTION 8.1. CORPORATE STATUS. Borrower, each corporate Guarantor
and each corporate general partner of a Guarantor which is a partnership is a
corporation and each Guarantor which is a partnership is a limited partnership
validly existing and in good standing under the laws of the state of its
incorporation or formation; and each of such entities is qualified and licensed
to do business and is in good standing in any state in which the conduct of its
business or its ownership of property requires that it be so qualified or
licensed, and has the power and authority (corporate and otherwise) to execute
and carry out the terms of the Loan Documents to which it is a party, to own its
assets and to carry on its business as currently conducted.
SECTION 8.2. AUTHORIZATION. The execution, delivery, and
performance by
17
<PAGE>
Borrower and Guarantors of this Agreement and each Loan Document to which they
are a party have been duly authorized by all necessary corporate or partnership
action. Borrower and Guarantors have duly executed and delivered this Agreement
and each Loan Document to which they are a party, and each of them constitutes a
valid and binding obligation of Borrower and Guarantors.
SECTION 8.3. NO BREACH. The execution, delivery and performance
by Borrower and Guarantors of this Agreement and each Loan Document to which
they are a party (a) will not contravene any law or any governmental rule or
order binding on Collateral; (b) will not violate any provision of the articles
of incorporation, bylaws or partnership agreements of Borrower, Guarantors or
any Guarantors' general partners; (c) will not violate any agreement or
instrument by which Borrower or Guarantors or their assets, is bound; (d) do not
require any notice to consent by any Governmental Authority; and (e) will not
result in the creation of a Lien on any assets of Borrower except the Lien to
Lender granted herein.
SECTION 8.4. TAXES. All assessments and taxes, whether real,
personal or otherwise, due or payable by or imposed, levied or assessed against
Borrower, Guarantor's or their property have been paid in full before
delinquency or before the expiration of any extension period; and Borrower and
Guarantors have made due and timely payment or deposit of all federal, state,
and local taxes, assessments, or contributions required of it by law, except
only for items that Borrower are currently contesting diligently and in good
faith and that have been fully disclosed in writing to Lender.
SECTION 8.5. DEFERRED COMPENSATION PLANS. Borrower and each ERISA
Affiliate have made all required contributions to all deferred compensation
plans to which such person is required to contribute, and neither Borrower nor
any ERISA Affiliate has any liability for any unfunded benefits of any
single-employer or multi-employer plans. Neither Borrower nor any ERISA
Affiliate is or at any time has been a sponsor of, provided, or maintained for
any employees any defined benefit plan.
SECTION 8.6. LITIGATION AND PROCEEDINGS. Except as set forth on
SCHEDULE 8.6 attached hereto, there are no outstanding judgments against
Borrower, Guarantors or their assets and there are no actions or proceedings
pending by or against Borrower or Guarantors before any court or administrative
agency. Borrower has no knowledge of any pending, threatened, or imminent
litigation, governmental investigations, or claims, complaints, actions, or
prosecutions involving Borrower or Guarantors, except for ongoing collection
matters in which Borrower or a Guarantor is the plaintiff and except as set
forth in SCHEDULE 8.6 hereto.
SECTION 8.7. BUSINESS. Borrower and each Guarantor had all
franchises, authorizations, patents, trademarks, copyrights and other rights
necessary to advantageously conduct their business. They are all in full force
and effect and are not in known conflict with the rights of others. Neither
Borrower nor any Guarantor is a party to or subject to any agreement or
restriction that is so unusual or burdensome that it might have a material
adverse effect on Borrower's business, properties or prospects.
SECTION 8.8. LAWS AND AGREEMENTS. Borrower and each Guarantor is
in
18
<PAGE>
compliance with all material contracts and agreements applicable to it,
including obligations to contribute to any employee benefit plan or pension plan
regulated by ERISA. Borrower and each Guarantor is in material compliance with
all laws applicable to it.
SECTION 8.9. OWNERSHIP OF ACCOUNTS. Prior to the Lender making
any Advance, Borrower or a Guarantor will be the sole owner of, and have good
and marketable title to the Accounts pledged as security for such Loan.
SECTION 8.10. SECURITY INTEREST. After giving effect to each Loan
contemplated by this Agreement, the Lender will be the holder of a valid
perfected first priority security interest in the pledged Accounts. Accounts
pledged to the Lender in connection with any Loan will be free and clear of all
liens other than Permitted Liens.
SECTION 8.11. NO DEFAULTS. As of the date on which an Eligible
Account is pledged to the Lender pursuant to the terms hereof there has been no
default under such Account.
SECTION 8.12. ORIGINATION. Each Account will have been originated
by Borrower or a Guarantor in the ordinary course of its business in accordance
with Borrower's or a Guarantor's regular credit approval process and does not
contravene any laws, rules or regulations applicable thereto.
SECTION 8.13. LEGALITY. No Eligible Account will have been
originated in, or be subject to the laws of, any jurisdiction whose laws would
make the terms hereof or any transaction contemplated hereby unlawful.
SECTION 8.14. CONSENTS. Except as set forth on SCHEDULE 8.14, no
consent or approval is required for the pledging of any Accounts to the Lender
pursuant to the terms of this Agreement, except for such consents or approvals
as have been obtained prior to the Closing Date.
SECTION 8.15. FINANCIAL CONDITION. All financial statements and
information relating to Borrower, Guarantors or their assets that have been or
may hereafter be delivered by Borrower to Lender are accurate and complete in
all material respects and have been prepared in accordance with GAAP. Borrower
and Guarantors have no material obligations or liabilities of any kind not
disclosed in that financial information, and there has been no material adverse
change in the financial condition of Borrower or Guarantors since the date of
the most recent financial statements submitted to Lender.
SECTION 8.16. HEALTH CARE LAWS.
(a) Borrower has obtained all permits, licenses and other
authorizations that are required under Health Care Laws applicable to Borrower
and is in compliance in all material respects with all terms and conditions of
the required permits, licenses and authorizations, and are also in compliance in
all material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such
19
<PAGE>
Health Care Laws.
(b) Borrower is not aware of, and has not received notice of, any
past, present or future events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with or prevent
compliance or continued compliance in any material respect with Health Care
Laws.
(c) There is no civil, criminal or administrative action, suit,
demand, claim, hearing, notice or demand letter, notice of violation,
investigation or proceeding pending or threatened against Borrower, relating in
any way to Health Care Laws.
SECTION 8.17. GUARANTOR SOLVENCY.
(a) Immediately following the execution of this Agreement and the
Loan Documents, and the completion of the transactions contemplated thereby each
Guarantor will be solvent, able to pay its debts as they mature, will have
capital sufficient to carry on its business and all businesses in which it is
about to engage, and will have assets which will have a present fair salable
value greater than the amount of its Indebtedness.
(b) No Guarantor intends to incur debts beyond its ability to pay
them as they mature and the aggregate of each Guarantor's property at a fair
valuation is sufficient in amount to pay its debts.
(c) No Guarantor is contemplating filing a petition in bankruptcy
or for an arrangement or reorganization under the Bankruptcy Reform Act, Title
11 of the United States Code, as amended from time to time, or any successor
statute, nor is there any threatened bankruptcy or insolvency proceedings
against any Guarantor.
SECTION 8.18. CUMULATIVE REPRESENTATIONS. The warranties,
representations and agreements set forth herein are cumulative and in addition
to any and all other warranties, representations and agreements that Borrower
gives, or cause to be given, to Lender, either now or hereafter.
SECTION 8.19. FULL DISCLOSURE. No representation, warranty or
statement by Borrower or Guarantors contained in this Agreement, any Schedule or
any document, instrument or certificate furnished by or on behalf of any of them
pursuant to this Agreement contains any untrue, incorrect, incomplete or
misleading statement of material fact, or knowingly omits to state a material
fact necessary to make the statements contained therein not misleading.
SECTION 9
COVENANTS
20
<PAGE>
SECTION 9.1. ENCUMBRANCE OF COLLATERAL. Borrower shall not
create, incur, assume or permit to exist any Lien on any Collateral now owned or
hereafter acquired by Borrower or its Subsidiaries, except for Liens to Lender
and Permitted Liens.
SECTION 9.2. BUSINESS. Borrower and Guarantors shall engage
primarily in business of the same general character as that now conducted by
Borrower and Guarantors.
SECTION 9.3. CONDITION AND REPAIR. Borrower and Guarantors shall
maintain in good repair and working order all material properties used in its
business and from time to time shall make all appropriate repairs and
replacements thereof.
SECTION 9.4. TAXES. Borrower and Guarantors shall pay all taxes,
assessments and other governmental charges imposed upon them or any of their
assets or in respect of any of their franchises, business, income or profits
before any penalty or interest accrues thereon, and all claims (including,
without limitation, claims for labor, services, materials and supplies) for sums
that have become due and payable and that by law have or might become a Lien or
charge upon any of their assets, provided that (unless any material item or
property would be lost, forfeited or materially impaired as a result thereof) no
such charge or claim need be paid if it is being contested in good faith by
appropriate proceedings promptly initiated and diligently conducted, if Lender
is notified in advance of such contest, and if Borrower establishes any reserve
or other appropriate provision required by GAAP. Borrower and Guarantors shall
make timely payment or deposit of all FICA payments and withholding taxes
required of it by applicable laws and will, upon request, furnish Lender with
proof satisfactory to Lender indicating that Borrower or a Guarantor has made
such payments or deposits.
SECTION 9.5. ACCOUNTING SYSTEM. Borrower at all times hereafter
shall maintain a standard and modern system of accounting in accordance with
GAAP, with ledger and account cards or computer tapes, disks, printouts, and
records that contain information pertaining to the Collateral that may from time
to time be requested by Lender. Borrower shall not modify or change its method
of accounting or enter into any agreement hereafter with any third-party
accounting firm or service bureau for the preparation or storage of Borrower's
accounting records without the accounting firm's or service bureau's agreeing to
provide to Lender information regarding the Collateral and Borrower's financial
condition.
SECTION 9.6. QUARTERLY FINANCIAL STATEMENTS. Borrower shall
furnish Lender as soon as practicable but in no event later than forty-five (45)
days after the end of each of the first three quarterly fiscal periods of each
fiscal year with unaudited quarterly financial statements in form and substance
as reasonably required by Lender, including a balance sheet, an income statement
and a statement of cash flows, prepared in accordance with GAAP, together with a
certificate executed by the chief financial officer of Borrower stating that the
financial statements fairly present the financial condition of Borrower as of
the date and for the periods covered and that as of the date of such certificate
there has not been a violation of any provision of this Agreement and no Event
of Default or Unmatured Default has occurred and is continuing.
21
<PAGE>
SECTION 9.7. ANNUAL FINANCIAL STATEMENTS. Borrower shall furnish
Lender as soon as practicable but in no event later than ninety (90) days after
the close of each fiscal year commencing with fiscal 1996 with audited annual
financial statements, which financial statements are prepared in accordance with
GAAP and certified without qualification by an independent certified public
accounting firm reasonably satisfactory to Lender. Borrower's current certified
public accounting firm, Arthur Andersen LLP, is satisfactory to Lender. With the
annual financial statements, Borrower shall deliver a certificate of its chief
financial officer attesting that there has not been a violation of any provision
of this Agreement and no Event of Default or Unmatured Default under the
Agreement has occurred and is continuing.
SECTION 9.8. FURTHER INFORMATION. Borrower shall furnish Lender
as soon as practicable with copies of all documents or reports filed by it with
the Securities and Exchange Commission. Borrower shall promptly supply Lender
with such other information concerning its affairs as Lender may reasonably
request from time to time hereafter and shall promptly notify Lender of any
material adverse change in Borrower's financial condition and any condition or
event that constitutes a breach of, or event that constitutes an Event of
Default under, this Agreement. In addition, Borrower authorizes Lender to
contact credit reporting agencies concerning Borrower's credit standing.
SECTION 9.9. ERISA COVENANTS. Borrower shall, and shall cause
each ERISA Affiliate to, comply with all applicable provisions of ERISA and all
other laws applicable to any deferred compensation plans with which Borrower or
any ERISA Affiliate is associated, and shall promptly notify Lender of the
occurrence of any event that could result in any material liability of Borrower
to any person to any person whatsoever with respect to any such plan.
SECTION 9.10. RESTRICTIONS ON MERGER, CONSOLIDATION, SALE OF
ASSETS, ISSUANCE OF STOCK, ETC. Unless authorized by Lender, neither Borrower
nor any of its Subsidiary may:
(a) merge or consolidate with any Person unless Borrower or its
Subsidiary is the surviving entity or the surviving entity becomes a Subsidiary
of Borrower;
(b) sell, lease or otherwise dispose of its assets in any
transaction or series of related transactions (other than sales in the ordinary
course of business);
(c) liquidate, dissolve or effect a recapitalization or
reorganization in any form of transaction;
(d) become subject to any agreement or instrument which by its
terms would restrict Borrower's right or ability to perform any of its
obligations to Lender pursuant to the terms of the Loan Documents; or
(e) only with respect to each Guarantor, authorize or issue any
additional stock or equity interest.
SECTION 9.11. HEALTH CARE COVENANTS.
22
<PAGE>
(a) Borrower and its Subsidiaries shall comply in all material
respects with, and will obtain all permits required by, all Health Care Laws
applicable to them.
(b) any governmental authority concerning any possible violation
of any Health Care Laws or any occurrence of which Borrower would be required to
notify any Governmental Authority with jurisdiction over Health Care Laws.
SECTION 9.12. DISTRIBUTIONS. Except as set forth on SCHEDULE 9.12
hereto, neither Borrower nor its Subsidiaries may make any Distributions, other
than a Distribution to Borrower or a Subsidiary without the prior written
consent of Lender, which consent may not be unreasonably withheld and which
consent will not be deemed to authorize any Distributions while an Event of
Default is continuing or if such Distribution would cause an Event of Default to
occur.
SECTION 10
EVENTS OF DEFAULT
An Event of Default is deemed to exist if any of the following
events have occurred and is continuing:
(a) Borrower fails to make any payment of principal or interest
or any other payment on the Note or any other Obligation when due and payable,
by acceleration or otherwise, and such failure continues for five (5) days after
notice of non-payment is received by Borrower;
(b) Borrower or a Guarantor fails to observe or perform any
covenant, condition or agreement to be observed or performed pursuant to the
terms hereof or any Loan Document to which it is a party and such failure is not
cured as soon as reasonably practicable and in any event within thirty (30) days
after written notice thereof by Lender;
(c) A court enters a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency, or
other similar law then in effect, or appoints a receiver, liquidator, assignee,
custodian, trustee, or sequestrator (or other similar official) of Borrower or
for any substantial part of their property, or orders the windup or liquidation
of Borrower's affairs; or a petition initiating an involuntary case under any
such bankruptcy, insolvency, or similar law is filed against Borrower and is
pending for sixty (60) days without dismissal;
(d) Borrower commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law then in effect, makes any general
assignment for the benefit of
23
<PAGE>
creditors, fails generally to pay its debts as such debts become due, or takes
corporate action in furtherance of any of the foregoing;
(e) Final judgment for the payment of money on any claim in
excess of $250,000 is rendered against Borrower or any Guarantor and remains
undischarged for twenty (20) days during which execution is not effectively
stayed;
(f) Any of the Guarantors revokes or attempts to revoke its
guaranty of any of the Obligations, or becomes the subject of an insolvency
proceeding of the type described in clauses (c) or (d) above with respect to
Borrower or fails to observe or perform any material covenant, condition or
agreement to be performed under any Loan Document to which it is a party;
(g) Any Collateral or any part thereof is sold, agreed to be
sold, conveyed or allocated by operation of law or otherwise;
(h) Borrower or a Guarantor defaults under the terms of any
Indebtedness or lease involving total payment obligations of Borrower or a
Guarantor in excess of $250,000 and such default is not cured within the time
period permitted pursuant to the terms and conditions of such Indebtedness or
lease, or an event occurs that gives any creditor or lessor the right to
accelerate the maturity of any such indebtedness or lease payments;
(i) Demand is made for payment of any Indebtedness in excess of
$250,000 that was not originally payable upon demand when incurred but the terms
of which were later changed to provide for payment upon demand;
(j) Borrower is enjoined, restrained or in any way prevented by
court order from continuing to conduct all or any material part of its business
affairs;
(k) A judgment or other claim in excess of $250,000 becomes a
Lien upon any or all of Borrower's assets or the Collateral, other than a
Permitted Lien;
(l) A notice of Lien, levy or assessment in excess of $250,000 is
filed of record with respect to any or all of Borrower's assets or the
Collateral by any Governmental Authority or any tax or debt owing at any time
hereafter to any one or more of such entities becomes a Lien upon any or all of
Borrower's assets or the Collateral and the same is not paid on the payment date
thereof, except to the extent such tax or debt is being contested by Borrower as
permitted in Section 8.4;
(m) There is a material impairment of the value of the Collateral
or priority of Lender's Liens on the Collateral;
(n) Any of Borrower's assets in excess of $250,000 or any
Collateral are seized, subjected to a distress warrant, levied upon or come into
the possession of any judicial officer;
24
<PAGE>
(o) Any representation or warranty made in writing to Lender by
any officer of Borrower or a Guarantor in connection with the transaction
contemplated in this Agreement is materially incorrect when made;
(p) If the aggregate dollar value of all judgments, defaults,
demands, claims and notices of Liens under clauses (e), (h), (i), (k), (l) and
(p) hereof exceeds $1,000,000; or
(q) Borrower or a Guarantor fails to direct all receipts for
Accounts to the lock boxes.
SECTION 11
REMEDIES
SECTION 11.1. SPECIFIC REMEDIES. Upon the occurrence and during
the continuance of any Event of Default:
(a) Lender may cease advancing money or extending credit to or
for the benefit of Borrower under this Agreement, under any other Loan Document,
or under any other agreement between Borrower and Lender.
(b) Lender may declare all Obligations to be due and payable
immediately, whereupon they shall immediately become due and payable without
presentment, demand, protest, or notice of any kind, all of which are hereby
expressly waived by Borrower.
(c) Lender may set off against the Obligations all Collateral,
balances, credits, deposits, accounts, or moneys of Borrower then or thereafter
held with Lender, including amounts represented by certificates of deposit.
(d) Lender may pay, purchase, contest, or compromise any
encumbrance, charge or Lien that, in the opinion of Lender, appears to be prior
or superior to its Lien and pay all reasonable expenses incurred in connection
therewith.
(e) Lender may (i) notify Account Debtors to make payment on
Account directly to Lender; (ii) settle, adjust, compromise, extend or renew
Accounts, whether before or after legal proceedings to collect such Accounts
have commenced; (iii) prepare and file any bankruptcy proofs of claim or similar
documents against any Account Debtor; (iv) prepare and file any notice,
assignment, satisfaction, or release of Lien, UCC termination statement or any
similar document; (v) sell or assign Accounts, individually or in bulk, upon
such terms, for such amounts, and at such time or times as Lender deems
advisable; and (vi) complete the performance required of Borrower or a Guarantor
under any contract or agreement to which Borrower is a party and out of which
Accounts arise or may arise.
25
<PAGE>
(f) Lender may (i) endorse Borrower's name on all checks, notes,
drafts, money orders or other forms of payment of or security for Accounts or
other Collateral; (ii) sign Borrower's name on drafts drawn on Account Debtors
or issuers of letters of credit; and (iii) notify the postal authorities in
Borrower's name to change the address for delivery of Borrower's mail to an
address designated by Lender, receive and open all mail addressed to Borrower,
copy all mail, return all mail relating to Collateral, and hold all other mail
available for pickup by Borrower.
SECTION 11.2. POWER OF ATTORNEY. Borrower hereby appoints Lender
(and any of Lender's officers, employees, or agents designated by Lender) as
Borrower's attorney, with power whether before or after the occurrence of an
Event of Default: (a) to endorse Borrower's name on any checks, notes,
acceptances, money orders, drafts or other forms of payment or security that may
come into Lender's possession; (b) to sign Borrower's name on drafts against
Account Debtors, on schedules and assignments of Accounts, on verifications of
Accounts, and on notices to Account Debtors; (c) to notify the post office
authorities to change the address for delivery of Borrower's mail to an address
designated by Lender, to receive and open all mail addressed to Borrower and to
retain all mail relating to the Collateral and forward all other mail to
Borrower; (d) to send requests for verification of Accounts; (e) to execute UCC
Financing Statements; and (f) to do all things necessary to carry out this
Agreement. The appointment of Lender as Borrower's attorney and each and every
one of Lender's rights and powers, being coupled with an interest, are
irrevocable as long as any Obligations are outstanding. Lender shall not
exercise the power granted in clauses 11.2(a) through 11.2(c) unless an Event of
Default has occurred and is continuing and shall not to exercise the power
granted in clause 11.2(d) prior to notification of Borrower of its intent to do
so, but such limitations do not limit the effectiveness of such power of
attorney at any time. Any person dealing with Lender is entitled to rely
conclusively on any written or oral statement of Lender that this power of
attorney is in effect. Lender may also use Borrower's stationery in connection
with exercising its rights and remedies and performing the Obligations of
Borrower.
SECTION 11.3. EXPENSES SECURED. All expenses, including attorney
fees, incurred by Lender in the exercise of its rights and remedies provided in
this Agreement, or by law shall be payable by Borrower to Lender, are part of
the Obligations, and are secured by the Collateral.
SECTION 11.4. EQUITABLE RELIEF. Borrower recognizes that in the
event Borrower fails to perform, observe, or discharge any of its Obligations or
liabilities under this Agreement, no remedy of law will provide adequate relief
to Lender, and Lender is entitled to temporary and permanent injunctive relief
in any such case without the necessity of proving actual damages.
SECTION 11.5. REMEDIES ARE CUMULATIVE. No remedy set forth herein
is exclusive of any other available remedy or remedies, but each is cumulative
and in addition to every other right or remedy given under this Agreement or
under any other agreement between Lender and Borrower or any Guarantor or now or
hereafter existing at law or in equity or by statute. Lender may pursue its
rights and remedies concurrently or in any sequence, and no exercise of one
right or remedy may be deemed to be an election. No delay by Lender
26
<PAGE>
constitutes a waiver, election, or acquiescence by it. Borrower on its behalf
waives any rights to require Lender to proceed against any Guarantor or any
other party; or proceed against or exhaust any security held from any Guarantor.
Lender may at any time and from time to time, without notice to, or consent of,
Borrower, and without affecting or impairing the obligation of Borrower
hereunder do any of the following: (i) renew or extend any obligations of any
Guarantor, or of any other party at any time directly or contingently liable for
payment of any of the obligations of any Guarantor; (ii) accept partial payments
of the obligations of any Guarantor; (iii) settle, release (by operation of law
or otherwise), compound, compromise, collect or liquidate any of the obligations
of any Guarantor and the security therefor in any manner; (iv) consent to the
transfer or sale of any security or bid and purchase at any sale of any security
of any Guarantor. The validity of this Agreement and the Obligations of Borrower
are not terminated, affected or impaired by reason of the waiving, delaying,
exercising or non-exercising, of any of Lender's rights against any Guarantor or
as a result of the substitution, release, repossession, sale, disposition or
destruction of any Collateral securing any obligations of any Guarantor.
Borrower is not released or discharged, either in whole or in part, by Lender's
failure or delay to perfect or continue the perfection of any security interest
in any Collateral which secures the obligations of any Guarantor or to protect
the property covered by such security interest.
SECTION 12
INDEMNITY
SECTION 12.1. GENERAL INDEMNITY. Borrower shall protect,
indemnify and defend and save harmless Lender and its directors, officers,
agents and employees from and against any and all loss, cost, liability
(including negligence, tort and strict liability), expense, damage, suits or
demands (including fees and disbursements of counsel) on account of any suit or
proceeding before any Governmental Authority which arises from the transactions
contemplated in this Agreement or otherwise arising in connection with or
relating to the Loan and any security therefor, unless such suit, claim or
damages are caused by the gross negligence or intentional malfeasance of Lender
or its directors, officer, agents or employees. Upon receiving knowledge of any
suit, claim or demand asserted by a third-party that Lender believes is covered
by this indemnity, Lender shall give Borrower timely notice of the matter and an
opportunity to defend it, at Borrower's sole cost and expense, with legal
counsel acceptable to Lender. Lender may, at its option, also require Borrower
to so defend the matter. This obligation on the part of Borrower survives the
termination of this Agreement and the repayment of the Note.
SECTION 13
MISCELLANEOUS
27
<PAGE>
SECTION 13.1. DELAY AND WAIVER. No delay or omission to exercise
any right impairs any such right or be a waiver thereof, but any such right may
be exercised from time to time and as often as may be deemed expedient. A waiver
on one occasion is limited to that particular occasion.
SECTION 13.2. COMPLETE AGREEMENT. This Agreement, the Schedules
and the other Loan Documents are the complete agreement of the parties hereto
and supersede all previous understandings relating to the subject matter hereof.
This Agreement may be amended only by an instrument in writing that explicitly
states that it amends this Agreement and is signed by the party against whom
enforcement of the amendment is sought. This Agreement may be executed in
counterparts, each of which will be an original and all of which will constitute
a single agreement.
SECTION 13.3. SEVERABILITY; HEADINGS. If any part of this
Agreement or the application thereof to any person or circumstance is held
invalid, the remainder of this Agreement is unaffected thereby. The section
headings herein are included for convenience only and may not be deemed to be a
part of this Agreement.
SECTION 13.4. BINDING EFFECT. This Agreement is binding upon and
inures to the benefit of the respective legal representatives, successors and
assigns of the parties hereto; provided however, Borrower may not assign any of
its rights or delegate any of its Obligations hereunder. Lender (and any
subsequent assignee) may transfer and assign this Agreement and deliver the
Collateral to the assignee, who thereupon has all of the rights of Lender; and
Lender (or such subsequent assignee who in turn assigns as aforesaid) is then
relieved and discharged of any responsibility or liability with respect to this
Agreement and said Collateral.
SECTION 13.5. NOTICES. Any notices under or pursuant to this
Agreement are deemed duly sent when delivered in hand or when mailed by
registered or certified mail, return receipt requested, or when delivered by
courier or when transmitted by telex, telecopy, or similar electronic medium to
the following addresses:
To Borrower: US Diagnostic Inc.
777 S. Flagler Drive, #1006
West Palm Beach, FL 33401
Attention: Joseph Paul, President
Telephone: (561) 832-0006
Facsimile: (561) 833-8391
Copies To: Stearns Weaver Miller Weissler
Aldhadeff & Setterson, P.A.
150 W. Flagler St.
Suite 2200
Miami, FL 33130
28
<PAGE>
Attention: Stuart D. Ames, Esq.
Telephone: (305) 789-3540
Facsimile: (305) 789-3395
To Lender: DVI Business Credit Corporation
4041 MacArthur Blvd., Suite 401
Newport Beach, CA 92660
Attention: Cynthia J. Cohn
Telephone: (714) 474-6100
Facsimile: (714) 474-6199
Copies to: DVI Business Credit Corporation
500 Hyde Park
Doylestown, PA 18901
Attention: Melvin C. Breaux, Esq.
General Counsel
Telephone: (215) 230-2931
Facsimile: (215) 230-3537
Any party may change such address by sending notice of the change
to the other parties; such change of address is effective only upon actual
receipt of the notice by the other parties.
SECTION 13.6. GOVERNING LAW. ALL ACTS AND TRANSACTIONS HEREUNDER
AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED,
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF CALIFORNIA WITHOUT
GIVING EFFECT TO CONFLICTS OF LAW PRINCIPLES.
SECTION 13.7. WAIVER OF TRIAL BY JURY. LENDER AND BORROWER HEREBY
WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS AGREEMENT OR
ANY OF THE LOAN DOCUMENTS OR THE RELATIONSHIP BETWEEN LENDER AND BORROWER.
SECTION 13.8. SUBMISSION TO JURISDICTION.
(a) BORROWER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF
ANY CALIFORNIA OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA, OVER ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. BORROWER
HEREBY AGREES THAT SERVICE OF COPIES OF SUMMONS AND COMPLAINTS AND ANY OTHER
PROCESS WHICH MAY BE SERVED IN ANY ACTION OR PROCEEDING ARISING HEREUNDER MAY BE
MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS BY REGISTERED
29
<PAGE>
OR CERTIFIED MAIL, POSTAGE PREPAID, TO BORROWER AT ITS ADDRESS SET FORTH AT THE
BEGINNING OF THIS AGREEMENT.
(b) NOTHING IN THIS PARAGRAPH 13.8 SHALL AFFECT THE RIGHT OF
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF LENDER TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ANY OF ITS
PROPERTIES IN THE COURTS OF OTHER JURISDICTIONS TO THE EXTENT OTHERWISE
PERMITTED BY LAW.
(c) TO THE EXTENT THAT BORROWER HAS OR HEREAFTER MAY ACQUIRE (i)
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OF CALIFORNIA OR ANY FEDERAL COURT
SITTING IN ORANGE COUNTY, CALIFORNIA OR FROM ANY LEGAL PROCESS OUT OF ANY SUCH
COURT (WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF
OR ITS PROPERTY, OR (ii) ANY OBJECTION TO THE LAYING OF THE VENUE OR OF AN
INCONVENIENT FORUM OF ANY SUIT, ACTION OR PROCEEDING, IF BROUGHT IN CALIFORNIA
OR FEDERAL COURT SITTING IN ORANGE COUNTY, CALIFORNIA UNDER PROCESS SERVED IN
ACCORDANCE WITH SUBPARAGRAPH (a) ABOVE, BORROWER HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY OR OBJECTION IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT
OF OR RELATING TO THIS AGREEMENT OR THE LOANS.
IN WITNESS WHEREOF, Borrower and Lender have executed this
Agreement by their duly authorized officers as of the date first above written.
BORROWER: LENDER:
US DIAGNOSTIC INC. DVI BUSINESS CREDIT CORPORATION
By: By:
----------------------------- ---------------------------
Name: Name:
Title: Title:
30
<PAGE>
Schedule 1.1
Permitted Liens
<PAGE>
Schedule 4.1
Guarantors
[List the exact corporate name of all material Subsidiaries of Borrower]
<PAGE>
Schedule 4.2
Mergers and Consolidations
[List all Mergers and Consolidations]
<PAGE>
Schedule 4.3
Purchase of Assets
[List all Asset Purchase Acquisitions]
<PAGE>
Schedule 4.5
Stock Ownership
[Describe all Guarantors which are not wholly-owned]
<PAGE>
Schedule 5.1
Guarantor Offices
[List the executive office and location at which records
are kept for each Guarantor]
<PAGE>
Schedule 5.11
Post Closing Checklist
[To be prepared by DVI]
<PAGE>
Schedule 6.1
Contracts
[List all radiology agreements, partnership agreements and SEC filings]
<PAGE>
Schedule 8.6
Litigation and Proceedings
[List outstanding judgments against Borrower or any of its assets, actions or
proceedings pending by or against Borrower other threatened or imminent actions
against Borrower and governmental investigations.]
<PAGE>
Schedule 8.14
[List required consents not obtained]
Consents
<PAGE>
Schedule 9.12
Permitted Distributions
[List permitted distributions, if any]
<PAGE>
Exhibit 5.5
Borrowing Base Report
COMPLIANCE CERTIFICATION
In connection with the Borrowing Base report dated the date hereof
delivered by US Diagnostic Inc. ("Borrower") pursuant to that certain Loan and
Security Agreement by and among Borrower and DVI Business Credit Corporation,
the undersigned hereby certifies as follows:
1. Borrower has complied and is in compliance in all material respects
with all of the terms, covenants and conditions of the Loan and
Security Agreement;
2. No Default or Event of Default exists under the Loan and Security
Agreement; and
3. The representations, warranties and covenants contained in Section
8 of the Loan and Security Agreement are true in all material
respects as of the date hereof.
Capitalized terms used herein not otherwise defined shall have the
respective earnings ascribed thereto in the Loan and Security Agreement.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
duly executed and delivered as of the ______ day of _______________, 199__.
Borrower:
US DIAGNOSTIC INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
SECURED PROMISSORY NOTE
Due March 1, 1998
FOR VALUE RECEIVED, US DIAGNOSTIC INC., a Delaware corporation
("MAKER") hereby promises to pay to DVI BUSINESS CREDIT CORPORATION or its
assignee ("HOLDER"), or order, principal in the sum of TWENTY-FIVE MILLION
DOLLARS ($25,000,000), or such amount as may be advance thereon from time to
time, with interest on the unpaid principal balance from time to time
outstanding at the fluctuating rate of interest announced publicly by Bank of
Amercia, NT&SA in San Francisco, California, from time to time as its base rate
plus Two percent (2%) per annum, computed on the basis of a 360-day year and
actual days elapsed, until paid. Interest is payable on the first business day
of each calendar month for the preceding month, with all unpaid principal and
interest due and payable in full on March 1, 1998.
1. If any part of the principal or interest of the Note is not paid when
due, it will be added to the principal amount of this Note and thereafter bear
interest at the rate provided above If the specified interest rate at any time
exceeds the maximum rate allowed by law, then the applicable interest rate is
reduced to the maximum rate allowed by law.
2. This Note may be prepaid in accordance with Section 2.6 of that certain
Loan and Security Agreement dated as of February 25, 1997 between Holder as
Lender and Maker as Borrower (the "AGREEMENT"). Notwithstanding the foregoing,
the Agreement may not be terminated, and is not terminated by any prepayment.
3. Principal and interest are payable to Holder at 4041 MacArthur Blvd.,
Suite 401, Newport Beach, California 92660, or such other place as the Holder
may, from time to time in writing, designate.
4. This Note is made pursuant to, and secured by the Agreement. All
capitalized terms used but not defined herein have the meanings ascribed to them
in the Agreement, the terms of which are incorporated herein by reference
thereto. This Note is also secured by the Security Documents referred to in the
Agreement. The Agreement and the Security Documents create a lien on and
security interest in, the personal property described therein ("COLLATERAL").
The Agreement and the Security Documents are collectively referred to as the
"LOAN AND SECURITY DOCUMENTS" and are hereby incorporated herein by reference
thereto and made a part of this Note.
5. The occurrence of an Event of Default under the Agreement may, at the
election of the Holder, make the entire unpaid balance of the principal amount
of this Note and accrued interest thereon immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor, or other notices or demands of any kind or character.
1
<PAGE>
6. Failure of the Holder to exercise the acceleration option of paragraph 5
of this Note on the occurrence of an Event of Default does constitute a waiver
of the right to exercise such option on the subsequent occurrence of an Event of
Default.
7. Principal and interest are payable in lawful money of the United States
of America which is legal tender in payment of all debts and dues, public and
private, at the time of payment. If any payment of principal or interest under
this Note becomes due on a Saturday, Sunday or legal or banking holiday, such
payment is due on the next succeeding business day. Maker waives presentment,
demand for payment, notice of nonpayment, protest, and notice of protest, and
all other notices and demands in connection with the delivery, acceptance,
performance, default, or enforcement of this Note, except as specifically
provided in the Agreement. Maker consents to any and all assignments of this
Note, extensions of time, renewals, and waivers that may be made or granted by
the Holder. Maker expressly agrees that such assignments, extensions of time,
renewals, or waivers do not affect Maker's liability hereunder. Maker agrees
that Holder may, without notice to Maker and without affecting the liability of
Maker, accept additional or substitute security for this Note, or release any
security or any party liable for this Note, or extend or renew this Note.
8. If Maker fails to make any payment of interest or principal under this
Note, including the payment due upon maturity, when the same is due and payable
and such failure continues for five (5) days after nonpayment, a late charge by
way of damages to the extent provided in this paragraph is immediately due and
payable. Maker recognizes that default by Maker in making the payments herein
agreed to be paid when due will result in the Holder incurring additional
expenses, in loss to the Holder of the use of the money due and in frustration
to the Holder in meeting its other commitments. Maker agrees that, if for any
reason Maker fails to pay any amount due under this Note when due, the Holder is
entitled to damages for the detriment caused thereby, but that it is extremely
difficult and impractical to ascertain the extent of such damages. Maker
therefore agrees that a sum equal to five cents ($.05) for each one dollar
($1.00) of each payment which is not received within five (5) days after the
date it is due and payable is a reasonable estimate of the damages to the
Holder, which sum Maker agrees to pay on demand.
9. If action is instituted on this Note (including without limitation, any
proceedings for collection hereof in any bankruptcy or probate matter or case),
or if proceedings are commenced on or under any of the Loan and Security
Documents, and Holder prevails in such proceedings Maker promises to pay the
Holder all costs of collection and enforcement including, without limitation,
reasonable attorneys' fees plus interest on any defaulted amount at the rate of
eighteen percent (18%) per annum.
10. Any and all notices or other communications or payments required or
permitted to be given hereunder are effective when received or refused if given
or rendered in writing, in the manner provided in the Agreement.
2
<PAGE>
11. This Note inures to the benefit of and is binding upon the Holder's
successors and assigns. References to the "Holder" are deemed to refer to the
holders of this Note at the time such reference becomes relevant.
12. If any term, provision, covenant, or condition of this Note is held by
a court of competent jurisdiction to be invalid, void, or unenforceable, the
rest of this Note remains in full force and effect to the greatest extent
permitted by law and is in no other way affected, impaired or invalidated.
13. Nothing contained herein or in the Loan and Security Documents may be
deemed to prevent recourse to and the enforcement against Maker and the
Collateral of all liabilities, obligations and undertakings contained herein and
in the Loan and Security Documents.
14. THIS NOTE IS GOVERNED BY AND MUST BE CONSTRUED UNDER THE LAWS OF THE
STATE OF CALIFORNIA AND MAKER AGREES TO SUBMIT TO THE JURISDICTION OF THE STATE
OR FEDERAL COURTS IN THE STATE OF CALIFORNIA.
Dated: February 25, 1997
US DIAGNOSTIC INC.
By:
--------------------------------
Name:
Title:
3
<PAGE>
Please FILL IN COMPLETELY
DATE IN:_____________________________ DATE NEEDED:____________________________
TIME IN:_____________________________ TIME NEEDED:_________ [ ] a.m. [ ] p.m.
CLIENT NAME: DVI BUSINESS CREDIT CORPORATION 10584/21___________________________
CLIENT/MATTER #
DOCUMENT NAME: PROMISSORY NOTE
ORIGINATOR: MJS1 RETURN TO: MJS1 [ ] CALL:_____________
(extension)
[ ] MAKE A COMPLETELY NEW COPY OF THIS DOCUMENT:
NEW CLIENT NAME:_____________________________ CLIENT/MATTER #:___________
NEW DOCUMENT TITLE:_________________________________________________________
[ ] CREATE A NEW VERSION OF THIS DOCUMENT FOR COMPARE-RITE LATER
[ ] TAPE INSERTIONS: Number of Tapes:________ Total Length:_______ mins.
[ ] COMPARE: Old Document:________________ New (Revised) Document:______________
OUTPUT OPTIONS
[ ] DRAFT: [ ] DOUBLE SPACE [ ] SINGLE SPACE
[ ] DOUBLE SPACE DRAFT--SETUP FOR SINGLE SPACE FINAL
[ ] FINAL: [ ] DOUBLE SPACE [ ] SINGLE SPACE
PAPER TYPES
[ ] 11" Draft [ ] 11" Bond [ ] Pleading [ ] Letterhead
[ ] 14" Draft/Bond [ ] Will [ ] Other____________________________
SPECIAL INSTRUCTIONS:___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
_______________________________________________________ [ ] Continued on reverse
FOR WORD PROCESSING USE ONLY
DOCUMENT LOCATOR: 198008.2 TOTAL PAGES: 4
DOCUMENT TYPE CODE: NONLIT
Non-Litigation Documents
TYPIST: *5/VME1 RETURN TO:___________________________________
COMMENTS/QUESTIONS/PROBLEMS/ACTIONS: 03/24/97 - 5:09pm
duped 195576.2
4
EXHIBIT 10.36
DIVERSIFIED THERAPY CORP.
SUBSCRIPTION AGREEMENT made as of this 1st day of December, 1996 between
Diversified Therapy Corp., a Delaware corporation (the "Company") and US
Diagnostic Inc. (the "Subscriber").
WHEREAS, the Company desires to issue 5,000,000 shares (the "Shares") of
Common Stock, $.01 par value per share (the "Common Stock") in a private
placement, on the terms and conditions hereinafter set forth and the Subscriber
desires to acquire the Shares;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants hereinafter set forth, the parties hereto do hereby agree as follows:
I. SUBSCRIPTION FOR UNITS AND REPRESENTATIONS BY SUBSCRIBER
1.1 Subject to the terms and conditions hereinafter set forth, the
Subscriber hereby subscribes for and agrees to purchase from the Company the
Shares for a price equal to $3,500,000 and the Company agrees to sell such
Shares to the Subscriber for said purchase price. The purchase price is payable
by wire transfer payable to the Company, contemporaneously with the execution
and delivery of this Subscription Agreement.
1.2 This Subscriber recognizes that the purchase of Shares involves a high
degree of risk in that (i) the Company has not commenced operations and requires
substantial funds in addition to the proceeds of this private placement; (ii) an
investment in the Company is highly speculative and only investors who can
afford the loss of their entire investment should consider investing in the
Company; (iii) he may not be able to liquidate his investment; (iv)
transferability of the Shares is extremely limited; and (v) in the event of a
disposition, an investor could sustain the loss of his entire investment. Such
risks are more fully set forth in the Term Sheet furnished by the Company to the
Subscriber.
1.3 The Subscriber hereby acknowledges that this offering of Shares has
not been reviewed by the United States Securities and Exchange Commission
("SEC") because of the Company's representations that this is intended to be a
nonpublic offering pursuant to Sections 4(2) or 3(b) of the Act. The Subscriber
represents that the Shares are being purchased for his own account, for
investment and not for distribution or resale to others. The Subscriber agrees
that he will not sell or otherwise transfer such securities unless they are
registered under the Act or unless and exemption from such registration is
available.
1.4 The Subscriber understands that the Shares have not been registered
under Act by reason of a claimed exemption under the provisions of the Act which
depends, in part, upon his investment intention. In this connection, the
Subscriber understands that it is the position of the SEC that the statutory
basis for such exemption would not be present if his representation merely meant
that his present intention was to hold such securities for a short period, such
as the capital gains period of tax statutes, for a deferred sale, for a market
rise, assuming that a market develops, or for any other fixed period. The
Subscriber realizes that, in the view of the SEC, a
<PAGE>
purchase now with an intent to resell would represent a purchase with an intent
inconsistent with his representation to the Company, and the SEC might regard
such a sale or disposition as a deferred sale to which such exemptions are not
available.
1.5 The Subscriber understands that there is no public market for the
Shares. The Subscriber understands that even if a public market develops for the
Common Stock, Rule 144 (the "Rule") promulgated under the Act requires, among
other conditions, a two year holding period prior to the resale (in limited
amounts) of securities acquired in a non-public offering without having to
satisfy the registration requirements under the Act. The Subscriber understands
that the Company makes no representation or warranty regarding its fulfillment
in the future of any reporting requirements under the Securities Exchange Act of
1934, as amended, or its dissemination to the public of any current financial or
other information concerning the Company, as is required by the Rule as one of
the conditions of its availability. The Subscriber understands and hereby
acknowledges that the Company is under no obligation to register the securities
comprising the Shares under the Act, with the exception of certain registration
rights set forth in Article IV herein. The Subscriber consents that the Company
may, if it desires, permit the transfer of the securities comprising the Shares
out of his name only when his request for transfer is accompanied by an opinion
of counsel reasonably satisfactory to the Company that neither the sale nor the
proposed transfer results in a violation of the Act or any applicable state
"blue sky" laws (collectively "Securities Laws") and subject to the provisions
of Section 1.9 hereof. The Subscriber agrees to hold the Company and its
directors, officers and controlling persons and their respective heirs,
representatives, successors and assigns harmless and to indemnify them against
all liabilities, costs and expenses incurred by them as a result of any
misrepresentations made by him contained herein or any sale or distribution by
the undersigned Subscriber in violation of any Securities Laws.
1.6 The Subscriber consents to the placement of a legend on any
certificate or other document evidencing the Shares stating that they have not
been registered under the Act and setting forth or referring to the restrictions
on transferability and sale thereof.
1.7 The Subscriber agrees to execute a lock-up agreement with the
underwriter in connection with any IPO similar in duration and terms as that
executed by the Founders (as defined below). The Company will use its best
efforts to insure that no Founder shall have its shares released from such
lock-up prior to the release of shares by Founder.
II. REPRESENTATIONS BY THE COMPANY
The Company represents and warrants to the Subscriber that prior to the
consummation of this offering and at the Closing Date:
(a) The Company is a corporation duly organized, existing and in good
standing under the laws of the State of Delaware and has the corporate power to
conduct the business which it conducts and proposes to conduct.
2
<PAGE>
(b) The execution, delivery and performance of this Subscription
Agreements by the Company will have been duly approved by the Board of Directors
of the Company and all other actions required to authorize and effect the offer
and sale of the Shares will have been duly taken and approved.
(c) The Company knows of no pending or threatened legal or governmental
proceedings to which the Company is a party which could materially adversely
affect the business, property, financial condition or operations of the Company.
III. REGISTRATION RIGHTS
3.1 The Company hereby agrees with the holders of the Shares or their
transferees (collectively, the "Holder") to use its best efforts to ensure that
the Shares (the "Registrable Securities") shall be registered for resale under
the Act, subject to the lock-up provisions of Section 1.7 hereof as part of the
Company's registration of securities in the initial public offering ("IPO"). If
the underwriter of the IPO objects to the inclusion of the Registrable
Securities in such registration statement, then the Company shall file a
registration statement with respect to the Registrable Securities prior to the
expiration of the underwriter's lockup.
The obligation of the Company under this Section 3.1 shall be limited to
one registration statement. The Company shall pay the expenses described in
Section 3.4 for the registration statement filed pursuant to this Section 3.1,
except for underwriting discounts and commissions and legal fees of the
Requesting Holders, which shall be borne by the Requesting Holders.
3.2 "PIGGYBACK" REGISTRATION RIGHTS. Commencing 24 months following the
closing of an IPO and until the Registrable Securities are eligible for sale
under Rule 144(k), if the Company shall determine to proceed with the actual
preparation and filing of an additional registration statement under the Act in
connection with the proposed offer and sale of any of its securities by it or
any of its security holders (other than a registration statement on Form S-4,
S-8 or other limited purpose form), the Company will give written notice of its
determination to all record holders of the Registrable Securities. Upon the
written request from the Holder within twenty (20) days after receipt of any
such notice from the Company, the Company will, except as herein provided, cause
all such Registrable Securities to be included in such registration statement,
all to the extent requisite to permit the sale or other disposition by the
prospective seller or sellers of the Registrable Securities to be so registered;
provided, further, that nothing herein shall prevent the Company from, at any
time, abandoning or delaying any registration. If any registration pursuant to
this Section 3.2 shall be underwritten in whole or in part, the Company may
require that the Registrable Securities requested for inclusion pursuant to this
Section 3.2 be included in the underwriting on the same terms and conditions as
the securities otherwise being sold through the underwriters. In the event that
the Registrable Securities requested for inclusion pursuant to this Section 3.2
together with any other shares which have similar piggyback registration rights
(such shares and the Registrable Securities being collectively referred to as
the "Requested Stock") would constitute more than 15% of the total number of
shares to be included in a proposed underwritten public offering, and if in the
good faith judgment of the managing underwriter of such public offering the
inclusion of all of the
3
<PAGE>
Requested Stock originally covered by a request for registration would reduce
the number of shares to be offered by the Company or interfere with the
successful marketing of the shares of stock offered by the Company, the number
of shares of Requested Stock otherwise to be included in the underwritten public
offering may be reduced pro-rata (by number of shares) among the holders thereof
requesting such registration or excluded in their entirety if so required by the
underwriter. To the extent only a portion of the Requested Stock is included in
the underwritten public offering, those shares of Requested Stock which are thus
excluded from the underwritten public offering shall be withheld from the market
by the holders thereof for a period, not to exceed 180 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering.
The obligation of the Company under this Section 3.2 shall be limited to
two registration statements.
3.3 REGISTRATION PROCEDURES. If and whenever the Company is required
by the provisions of Section 3.1 or 3.2 to effect the registration of
Registrable Securities under the Act, the Company will:
(a) prepare and file with the SEC a registration statement with respect to
such securities, and use its best efforts to cause such registration statement
to become and remain effective for such period as may be reasonably necessary to
effect the sale of such securities, not to exceed six months;
(b) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for such period as may
be reasonably necessary to effect the sale of such securities, not to exceed six
months;
(c) furnish to the security holders participating in such registration and
to the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) use its best efforts to register or qualify the securities covered by
such registration statement under such state securities or blue sky laws of such
jurisdictions as such participating holders may reasonably request in writing
within twenty (20) days following the original filing of such registration
statement, except that the Company shall not for any purpose be required to
execute a general consent to service of process or to qualify to do business as
a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) notify the security holders participating in such registration,
promptly after it shall receive notice thereof, of the time when such
registration statement has become effective or a supplement to any prospectus
forming a part of such registration statement has been filed;
4
<PAGE>
(f) notify such holders promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of any such
holders, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for such holders (and concurred in
by counsel for the Company), is required under the Act or the rules and
regulations thereunder in connection with the distribution of Common Stock by
such holder;
(h) prepare and promptly file with the SEC and promptly notify such
holders of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Act, any event shall have occurred as the
result of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise such holders, promptly after is shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such registration statement or the initiation or threatening of
any proceeding for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued.
3.4 EXPENSES.
(a) With respect to each registration requested pursuant to Section 3.1
hereof, and with respect to each inclusion of Registrable Securities in a
registration statement pursuant to Section 3.2 hereof, all fees, costs and
expenses of and incidental to such registration, inclusion and public offering
(as specified in paragraph (b) below) in connection therewith shall be borne by
the Company, provided, however, that any security holders participating in such
registration shall bear their pro rata share of the underwriting discount and
commissions and transfer taxes.
(b) The fees, costs and expenses of registration to be borne by the
Company as provided in paragraph (a) above shall include, without limitation,
all registration, filing, and NASD fees, printing expenses, fees and
disbursements of counsel and accountants for the Company, and all legal fees and
disbursements and other expenses of complying with state securities or blue sky
laws of any jurisdictions in which the securities to be offered are to be
registered and qualified (except as provided in 3.4(a) above). Fees and
disbursement of counsel and accountants for the selling security holders and any
other expenses incurred by the selling security holders not expressly included
above shall be borne by the selling security holders.
3.5 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless each holder of
Registrable Securities which are included in a registration statement pursuant
to the provisions of Sections
5
<PAGE>
3.1 or 3.2 hereof, its directors and officers, and any underwriter (as defined
in the Act) for such holder and each person, if any, who controls such holder or
such underwriter within the meaning of the Act, from and against, and will
reimburse such holder and each such underwriter and controlling person with
respect to, any and all loss, damage, liability, cost and expense to which such
holder or any such underwriter or controlling person may become subject under
the Act or otherwise, insofar as such losses, damages, liabilities, costs or
expenses are caused by any untrue statement or alleged untrue statement of any
material fact contained in such registration statement, any prospectus contained
therein or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided, however,
that the Company will not be liable in any such case to the extent that any such
loss, damage, liability, cost or expenses arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by such holder, such underwriter
or such controlling person in writing specifically for use in the preparation
thereof.
(b) Each holder of Registrable Securities included in a registration
pursuant to the provisions of Sections 3.1 or 3.2 hereof will indemnify and hold
harmless the Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its directors and
officers, any controlling person and any underwriter with respect to, any and
all loss, damage, liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject under the Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue statement, or alleged untrue statement of any material fact
contained in such registration statement, any prospectus contained therein or
any amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was so made in reliance upon and in
strict conformity with written information furnished by or on behalf of such
holder specifically for use in the preparation thereof.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) or (b) of this Section 3.5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said paragraph
(a) or (b), promptly notify the indemnifying party of the commencement thereof;
but the omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any indemnified party and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel satisfactory to such indemnified party,
provided, however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be legal defenses available to it and/or other
6
<PAGE>
indemnified parties which are different from or in addition to those available
to the indemnified party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties have the right to select
separate counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the indemnified
party shall have employed counsel in accordance with the provisions of the
preceding sentence, (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after the notice of the commencement of the action or (iii)
the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.
IV. MISCELLANEOUS
4.1 Any notice or other communication given hereunder shall be deemed
sufficient if in writing and sent by registered or certified mail, return
receipt requested, addressed to the Company, at the address furnished to
Subscriber and to the Subscriber at his address indicated on the last page of
this Subscription Agreement. Notices shall be deemed to have been given on the
date of mailing, except notices of change of address, which shall be deemed to
have been given when received.
4.2 This Subscription Agreement shall not be changed, modified or amended
except by a writing signed by the parties to be charged, and this Subscription
Agreement may not be discharged except by performance in accordance with its
terms or by a writing signed by the party to be charged.
4.3 This Subscription Agreement shall be binding upon the inure to the
benefit of the parties hereto and to their respective heirs, legal
representatives, successors and assigns. This Subscription Agreement sets forth
the entire agreement and understanding between the parties as to the subject
matter thereof and merges and supersedes all prior discussions, agreements and
understandings of any and every nature among them.
4.4 Notwithstanding the place where this Subscription Agreement may be
executed by any of the parties hereto, the parties expressly agree that all the
terms and provisions hereof shall be construed in accordance with and governed
by the laws of the State of Florida. The parties hereby agree that any dispute
which may arise between them arising out of or in connection with this
Subscription Agreement shall be adjudicated before a court located in Palm Beach
County, Florida and they hereby submit to the exclusive jurisdiction of the
courts of the State of Florida located in Palm Beach County, Florida and of the
federal courts in the Palm Beach Count, Florida with respect to any action or
legal proceeding commenced by any party, and irrevocably waive any objection
they now or hereafter may have respecting the venue of any such action or
proceeding brought in such a court or respecting the fact that such court is in
an
7
<PAGE>
inconvenient forum, relating to or arising out of this Subscription Agreement or
any acts or omissions relating to the sale of the securities hereunder, and
consent to the service of process in any such action or legal proceeding by
means of registered or certified mail, return receipt requested, in care of the
address set forth below or such other address as the undersigned shall furnish
in writing to the other.
4.5 This Subscription Agreement may be executed in counterparts. Upon the
execution and delivery of this Subscription Agreement by the Subscriber, this
Subscription Agreement shall become a binding obligation of the Subscriber with
respect to the purchase of shares as herein provided; subject, however, to the
right hereby reserved to the Company to enter into the same agreements with
other subscribers and to add and/or to delete other persons as subscribers.
4.6 The holding of any provision of this Subscription Agreement to be
invalid or unenforceable by a court of competent jurisdiction shall not affect
any other provision of this Subscription Agreement, which shall remain in full
force and effect.
4.7 It is agreed that a waiver by either party of a breach of any
provision of this Subscription Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
4.8 The parties agree to execute and deliver all such further documents,
agreements and instruments and take such other and further action as may be
necessary or appropriate to carry out the purposes and intent of this
Subscription Agreement.
IN WITNESS WHEREOF, the parties have executed this Subscription Agreement
as of the day and year first written above.
US DIAGNOSTIC INC.
------------------------
Subscription Accepted:
DIVERSIFIED THERAPY CORP.
By:
---------------------
Date:
-------------------
8
EXHIBIT 10.37
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT entered into as of this 31st day of August
1994, between U. S. Diagnostic Labs Inc. (the "Company"), and Jeffrey A. Goffman
(the "Executive").
WHEREAS, the Company desires to employ Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, and intending to be legally bound, the
Company and the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for a period commencing on the date
of this Agreement and ending five (5) years from the date hereof (the "Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6 and
7 shall remain in full force and effect and the provisions of Sections 6(a),
6(c) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in this Agreement.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as Chairman of the
Board and Chief Financial Officer of the Company with duties and
responsibilities that are customary for such executives. The Executive will also
perform services for such subsidiaries as may be necessary. The Executive will
use its best efforts to perform his duties and discharge his responsibilities
pursuant to this Agreement competently, carefully and faithfully. In determining
whether or not the Executive has used his best efforts hereunder, the Company's
delegation of authority to other employees and all surrounding circumstances
shall be taken into account and the best efforts of the Executive shall not be
judged solely on the Company's earnings or other results of the Executive's
performance.
(b) DEVOTION OF TIME. The Executive will devote substantially full
time during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company subject to his prior
obligations to act as consultant to Goffman & Associates, CPA. It is expressly
understood that the Executive will not enter the employ of or serve as a
consultant to, or in any way perform any services with or without compensation
to, any other persons, business or organization (other than as set forth above)
without the prior consent of the board of directors of the Company; provided,
that the Executive shall be permitted to devote a limited amount of his time,
without compensation, to charitable or similar organizations.
3. COMPENSATION AND EXPENSES.
-1-
<PAGE>
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay the Executive an annual base salary of
$120,000 during the first year of the Term, which thereafter shall be increased
at least annually and such additional amounts as set by the discretion of the
board of directors. Provided, however, in no event shall the Executive's annual
base salary for the second year be less than 110% of the first year base salary
($132,000) nor shall the annual base salary for the third year of the Term be
less than 110% of the second year minimum base salary ($145,200). The annual
base salary under this Section 3(a) will be reduced, however, to the extent that
the Executive elects to defer any portion thereof under the terms of any
deferred compensation or savings plan maintained by the Company. The Company
will pay the Executive his annual salary in equal installments no less
frequently than monthly.
(b) BONUS. The Executive shall be paid an annual bonus based on the
increase of net income before taxes attributable to each individual center
operated by the Company or its subsidiaries, over the net income before taxes of
each center during the prior year. For the purpose of calculating this bonus,
the base year for each center (the "Base Year") shall be the 12 month period
ending (i) on the last day of the month prior to acquisition of a center (a "New
Center") and (ii) on April 30, 1994 for the centers currently owned by the
Company (the "Existing Centers"). The year for which the bonus is payable (the
"Bonus Year") shall be measured from the 12 months beginning on (i) the first
day of the month following acquisition of a New center and each 12 month period
thereafter, and (ii) May 1, 1994 and each 12 month period thereafter for an
Existing Center. During the first, second and third year of the Term, such bonus
shall be 10%, 5% and 2d%, respectively, of net income before taxes of each New
Center and Existing Center in excess of the Base Year of each New Center and
Existing Center. Except in the case of death or disability, only those New
Centers and Existing Centers for which a full 12 month Bonus Year has ended in
such year of the Term shall be included. In the case of death or disability, the
Base Year shall be pro-rated by multiplying the next income before taxes for
each New Center and Existing Center times a fraction, the numerator of which
shall be the number of days during the applicable 12 month period until death or
disability and the denominator of which shall be 365. For each New Center and
Existing Center, the Bonus Year shall be based upon the time elapsed until the
date of death or disability.
(c) EXPENSES. In addition to any compensation received pursuant to
Section 3(a) and (b), the Company will reimburse or advance funds to the
Executive for all reasonable travel, entertainment and miscellaneous expenses
incurred in connection with the performance of his duties under this Agreement,
provided that the Executive properly accounts for such expenses to the Company
in accordance with the Company's practices. Such reimbursement or advances will
be made in accordance with policies and procedures of the Company in effect from
time to time relating to reimbursement of or advances to executive officers.
(d) STOCK GRANT. Upon execution of this Agreement, the Executive
shall be granted 50,000 fully vested Incentive Stock Options to purchase shares
of the Company's common stock at an exercise price of $5.00 or the initial
public offering price, whichever is lower.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the Executive
will be entitled to four (4) weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
-2-
<PAGE>
(b) EMPLOYEE BENEFIT PROGRAMS. Within limiting the compensation to
which the Executive is entitled pursuant to the provisions of Section 3 or this
Section 4, during the Term, the Executive will be entitled to participate in any
pension, insurance or other employee benefit plan that is maintained at that
time by the Company for its executive officers, including programs of life and
medical insurance and reimbursement of membership fees in civic, social and
professional organizations.
(c) AUTOMOBILE. The Company shall provide the Executive with a
non-accountable automobile allowance of $1,000 per month which includes all
costs associated with the use of an automobile including, without limitation,
lease or loan payments, fuel, maintenance and insurance.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause by
giving written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause (iii)
below shall not become effective unless the Executive shall fail to correct such
breach within three (3) months of receipt of written notice. At the conclusion
of such three-month period, this alleged breach shall be deemed to have been
cured unless written notice to the contrary is given. Upon any such termination
for cause, the Executive shall have no right to compensation, bonus or
reimbursement under Section 3, or to participate in any employee benefit
programs under Section 4 for any period subsequent to the effective date of
termination. "Cause" shall mean: (i) the Executive is convicted of a felony
which is related to the Executive's employment or the business of the Company;
(ii) the Executive, in carrying out his duties hereunder, has been found in a
civil action to have committed gross negligence, willful gross misconduct
resulting, misappropriated Company funds or otherwise defrauded the Company, in
any case, in material harm to the Company; and (iii) the Executive materially
breaches any provision of Section 6 or Section 7.
(b) DEATH OR DISABILITY. Except for the Company's obligations
contained in this Section 5, this Agreement and the obligations of the Company
hereunder will terminate upon the death or disability of the Executive. For
purposes of this Section 5(b), "disability" shall mean that for a period of six
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease.
Upon termination by death or disability, the Company will pay the
Executive or his legal representative, as the case may be: (i) his annual salary
at such time through the date of such termination of employment and (ii) the
Executive's pro-rata bonus due under Section 3(b) of this Agreement. Such sums
shall be paid upon the same terms and conditions as if this Agreement were in
fully force and effect.
(c) SPECIAL TERMINATION. In the event that (i) the Executive, with or
without change in title or formal corporate action, shall no longer exercise all
of the duties and responsibilities and shall no longer possess substantially all
the authority set forth in Section 2; or (ii) the Company materially breaches
this Agreement or the performance of its duties and obligations hereunder; or
(iii) any entity or person not now an executive officer of the Company becomes
either individually or as part of a group the beneficial owner of 408 or more of
the Company's common stock, the Executive, by written notice to the Company, may
elect to deem the Executive's employment hereunder to have been terminated by
the Company without cause, in which event the Executive shall be entitled to the
compensation, reimbursement and
-3-
<PAGE>
benefits payable pursuant to Section 3 and 4 herein for the remaining term of
this Agreement. If the remaining term of the Agreement is less than one year,
the Executive shall receive one year's salary at his then current rate, benefits
and bonus which bonus shall not be less than the last year [Fiscal].
Alternatively, in such event, the Executive, by written notice to the Company,
may elect to refuse all further obligations of the Company under Section 3 and
Section 4 and to release the Company with respect thereto, in which event the
Company shall release the Executive from the provisions of Section 6.
(d) VOLUNTARY TERMINATION. The Executive, on 30 days prior written
notice to the Company, may terminate his employment voluntarily (i) at any time
following termination of the initial Term or (ii) at any time following the
death or disabling illness of a member of the Executive's immediate family or
similar personal, non-business related occurrence as a result of which the
Executive concludes he must devote a substantial amount of his time and energies
to his family or other personal matter and not to his business activities so as
to preclude his fulfilling his obligations under this Agreement. Upon any such
termination, the Company will pay the Executive (i) his annual salary at such
time pursuant to Section 3(a) through the date of such termination of employment
and (ii) any bonus on a pro-rata basis which would have been payable through the
date of termination pursuant to Section 3(b). Such sums shall be paid upon the
same terms and conditions as if this Agreement were in fully force and effect.
(e) CONTINUING EFFECT. Notwithstanding any termination of the
Executive's employment as provided in this Section 5 or otherwise the Provisions
of Sections 6 and 7 shall remain in full force and effect, except as otherwise
provided in Sections 5(a) and (c).
6. NONCOMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Except as provided for in Sections
2(b) and 6(b) hereof, until termination of his employment and for a period of 12
months commencing on the date of termination, the Executive, directly or
indirectly, in association with or as a stockholder, director, officer,
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with the Company or any of its affiliates in the offer, sale or
marketing of products or services that are competitive with the products or
services offered by the Company, within any metropolitan area in the United
States or elsewhere in which the Company is then engaged in the offer and sale
of competitive products or services except as provided in (b) below.
Additionally, the foregoing shall not prevent Executive from accepting
employment with an enterprise engaged in two or more lines of business, one of
which is the same or similar to the Company's business (the "Prohibited
Business") if Executive's employment is totally unrelated to the Prohibited
Business; provided, further, the foregoing shall not prohibit Executive from
owning up to 58 of the securities of any publicly-traded enterprise provided
Executive is not an employee, director, officer, consultant to such enterprise
or otherwise reimbursed for services rendered to such enterprise.
(b) EXECUTIVE'S OTHER ON-GOING BUSINESS. It is hereby understood that
the Executive is currently affiliated with certain businesses enumerated in
Section 2(b) hereof. The Company acknowledges that the operation of such
businesses, even if in the future they should compete with the Company, will not
violate the Provisions of this Section 6.
(c) SOLICITATION OF CUSTOMERS. Except as provided for in Section
6(b), during the periods in which the provisions of Section 6(a) shall be in
effect, the Executive, directly or indirectly, will not seek Prohibited Business
from any Customer (as defined below) on behalf of any enterprise or business
other than the Company, refer Prohibited Business from any Customer to any
enterprise or business other
-4-
<PAGE>
than the Company or receive commissions based on sales or otherwise relating to
the Prohibited Business from any Customer, or any enterprise or business other
than the Company. For purposes of this Section 6(c), the term "Customer" means
any person, firm, corporation, partnership, association or other entity to which
the Company or any of its affiliates sold or provided goods or services during
the 12 month period prior to the time at which any determination is required to
be made as to whether any such person, firm, corporation, partnership,
association or other entity is a Customer.
(d) NO PAYMENT. The Executive acknowledges and agrees that no separate
or additional payment will be required to be made to him in consideration of his
undertakings in this Section 6.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that during his employment he will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) confidential or secret plans, programs, documents,
agreements or other material relating to the business, services or activities of
the Company and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). All records, files, materials and Confidential
Information excluding personal items, obtained by the Executive in the course of
his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he may be associated
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the board of directors of the Company, unless such
Confidential Information previously shall have become public knowledge through
no action by or omission of the Executive.
8. ASSIGNABILITY. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
or assigns of the Company, provided that such successor or assign shall acquire
all or substantially all of the assets and business of the Company. The
Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
9. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by an arbitration proceeding that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and the agreement of the Executive and the Company that
this Agreement shall be construed by the tribunal in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in the
light of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If in an arbitration proceeding, a tribunal shall
refuse to enforce all of the separate covenants deemed included herein because
taken together they are more extensive 13 than necessary to assure to the
Company the intended benefits of this Agreement, it is expressly understood and
agreed by the parties hereto that the provisions of this Agreement that, if
eliminated, would permit the remaining separate provisions to be enforced in
such proceeding shall be deemed eliminated, for the purposes of such
-5-
<PAGE>
proceeding, from this Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be considered
divisible as to such provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the consideration moving from
either of the parties to the other. The remaining provisions of this Agreement
shall be valid and binding and of like effect as though such provision were not
included.
10. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
With a Copy to: Michael Karsch, Esq.
Bachner Tally Polevoy & Misher
380 Madison Avenue
New York, NY 10017
To the Company: U.S. Diagnostic Labs Inc.
12 N. Cottage
Valley Stream, New York 11580
To the Executive: Jeffrey A. Goffman
12 N. Cottage
Valley Stream, New York 11580
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
12. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Palm Beach, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
13. ATTORNEY'S FEES. In the event that there is any controversy or
claim arising out of or relating
-6-
<PAGE>
to this Agreement, or to the interpretation, breach or enforcement thereof, and
any action or proceeding including that in arbitration as provided for in
Section 13 of this Agreement, is commenced to enforce the provisions of this
Agreement, the prevailing party shall be entitled to an award by the court or
arbitrator, as appropriate, of reasonable attorney's fee, costs and expenses.
14. GOVERNING LAW. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed or interpreted according to the internal laws of the State of
New York without regard to choice of law considerations.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision 16 hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph headings
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
U.S. DIAGNOSTIC LABS. INC.
By:_________________________
Robert Burke, President
_________________________
Jeffrey A. Goffman
-7-
EXHIBIT 10.38
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement")
entered into as of this 9th day of August 1996, between U.S. Diagnostic Labs
Inc. (the "Company"), and Todd R. Smith (the "Executive").
WHEREAS, the Company and the Employee entered into an Employment
Contract with an effective date of December 7th, 1995 (the "Original
Agreement");
WHEREAS, the Company and the Employee each desire to amend and restate
said Original Agreement;
WHEREAS, the Company desires to ensure the continued availability to
the Company of the Executive's services, and the Executive is willing to
continue such employment and render such services, all upon and subject to the
terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, and intending to be legally bound, the
Company and the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby continues to employ the Executive, and
the Executive hereby accepts such continued employment with the Company, for a
period commencing on December 5th, 1995 and ending three years from the date
thereof (the "Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6 and
7 shall remain in full force and effect and the provisions of Sections 6(a),
6(c) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in this Agreement.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as Vice President and
Chief Information Officer of the Company with duties and responsibilities that
are customary for such executives. The Executive will use his best efforts to
perform his duties and discharge his responsibilities pursuant to this Agreement
competently, carefully and faithfully. The Executive shall be appointed to the
management committee composed of other senior executives of the Company.
(b) DEVOTION OF TIME. The Executive will devote substantially full
time during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company. It is expressly
understood that the Executive will not enter the employ of or serve as a
consultant to, or in any way perform any services with or without compensation
to, any other persons, business or organization without the prior consent of the
board of directors of the Company; provided, that the Executive shall be
permitted to devote a limited amount of his time, without compensation, to
charitable or similar organizations.
-1-
<PAGE>
(c) MEDICAL OPPORTUNITIES. Executive agrees to present to the
Company all potential opportunities for acquisitions, joint ventures and similar
transactions in the medical or healthcare field. Executive may pursue such
opportunities if declined by the Company.
3. COMPENSATION AND EXPENSES.
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay the Executive an annual base salary of
$100,000 during the first year of the Term. The annual base salary may be
increased in the second and third years of the term at the discretion of the
Board of Directors. Provided, however, in no event shall the Executive's base
salary for the second year be less than $120,000, nor shall the base salary for
the third year be less than $125,000. The annual base salary under this Section
3(a) will be reduced, however, to the extent that the Executive elects to defer
any portion thereof under the terms of any deferred compensation or savings plan
maintained by the Company. The Company will pay the Executive his annual salary
in equal installments no less frequently than bimonthly in accordance with the
Company's policies.
(b) BONUS. The Executive shall be paid an annual bonus as determined
at the discretion of the Board of Directors. Such bonus will be paid within 60
days of the end of each fiscal year. In addition, the Executive shall be paid a
bonus equal to $750.00 for each Facility which is brought On-Line as defined
herein. The provision of teleradiology, document imaging, PACs, accounting
software or any other new application shall not be a determinant for obtaining
such bonus. A Facility shall be an individual non-contiguous space used for a
clinic (diagnostic or other), physician's office, billing and collecting office,
regional executive or administrative office, storage facilities, and corporate
headquarters. In addition, each Facility owned by a holding company, such as the
MediTek Facilities, shall be counted individually rather than as one Facility.
On-Line shall mean providing a data communication link between the Company's
main office and a Facility such that the Company will have access to its new
radiology information system ("RIS"), new billing and collecting ("B&C") system
as well as existing computer systems and software applications which are already
in place and which the Company chooses not to convert to the new RIS and B&C
applications at such Facility. The bonus earned for each Facility shall be paid
to the Executive the month after such Facility went On-Line.
(c) STOCK OPTIONS. Executive has been granted 80,000 options under
the Company's 1995 Long Term Incentive Plan ("Plan") at an exercise price equal
to $6.50 per option. Such options will vest over three (3) years such that
33,333.33 options shall vest on December 7th, 1996; 1997 and 1998 respectively.
In addition, Executive has been granted an additional 20,000 options under the
Plan at an exercise price equal to $7.00 per option. Such additional options
will vest over three (3) years such that 6,666.66 options shall vest on June
1st, 1997, 1998, and 1999 respectively provided that for 10,000 of the
additional options to vest the last sale price for Company's Common Stock must
be at least $15.00 for one day. All options granted to Executive shall vest if
Executive is terminated without Cause or upon a Change in Control of the Company
as defined herein. Executive shall be entitled to future discretionary grants of
options under the Plan.
(d) EXPENSES. In addition to any compensation received pursuant to
Section 3(a) and (b), the Company will reimburse or advance funds to the
Executive for all reasonable travel, entertainment and miscellaneous expenses
incurred in connection with the performance of his duties under this Agreement,
provided that the Executive properly accounts for such expenses to the Company
in accordance with the
-2-
<PAGE>
Company's practices. Such reimbursement or advances will be made in accordance
with policies and procedures of the Company in effect from time to time relating
to reimbursement of or advances to executive officers.
(e) ADVANCES. The Company agrees to make a reasonable advance to
Executive against future earned bonuses should Executive elect to receive
same.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the Executive
will be entitled to four (4) weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
(b) EMPLOYEE BENEFIT PROGRAMS. During the Term, the Executive will be
entitled to participate in any pension, insurance or other employee benefit plan
that is maintained at that time by the Company for its executive officers,
including programs of life and medical insurance and reimbursement of membership
fees in civic, social and professional organizations.
(c) AUTOMOBILE. The Company shall provide the Executive with a
non-accountable automobile allowance of $1,000 per month which includes all
costs associated with the use of an automobile including, without limitation,
lease or loan payments, fuel, maintenance and insurance.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for Cause by
giving written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause (iii)
below shall not become effective unless the Executive shall fail to correct such
breach within three months of receipt of written notice. At the conclusion of
such three month period, this alleged breach shall be deemed to have been cured
unless written notice to the contrary is given. Upon any such termination for
cause, the Executive shall have no right to compensation, bonus or reimbursement
under Section 3, or to participate in any employee benefit programs under
Section 4 for any period subsequent to the effective date of termination.
"Cause" shall mean: (i) the Executive is convicted of a felony which is related
to the Executive's employment or the business of the Company; (ii) the
Executive, in carrying out his duties hereunder, has been found in a civil
action to have committed gross negligence, willful gross misconduct,
misappropriated Company funds or otherwise defrauded the Company, in any case,
resulting in material harm to the Company; and (iii) the Executive materially
breaches any provision of Sections 2, 6 or 7.
(b) DEATH OR DISABILITY. Except for the Company's obligations
contained in this Section 5, this Agreement and the obligations of the Company
hereunder will terminate upon the death or disability of the Executive. For
purposes of this Section 5(b), "disability" shall mean that for a period of six
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease.
-3-
<PAGE>
Upon termination by death or disability, the Company will pay the
Executive or his legal representative, as the case may be: (i) his annual salary
at such time through the date of such termination of employment and (ii) the
Executive's pro-rata bonus due under Section 3(b) of this Agreement. Such sums
shall be paid upon the same terms and conditions as if this Agreement were in
fully force and effect.
(c) SPECIAL TERMINATION. In the event that (i) the Company materially
breaches this Agreement or the performance of its duties and obligations
hereunder; or (ii) any entity or person not now an executive officer of the
Company becomes either individually or as part of a group the beneficial owner
of 40% or more of the Company's common stock; or (iii) the merger,
consolidation, reorganization or liquidation of the Company (a "Change in
Control"), the Executive, by written notice to the Company, may elect to deem
the Executive's employment hereunder to have been terminated by the Company
without cause, in which event the Executive shall receive lump sum compensation,
bonuses payable, reimbursement and benefits payable pursuant to Section 3 and 4
herein equal to two years, unless if the remaining term of the Agreement is less
than one year, the Executive shall receive lump sum compensation, bonuses
payable, reimbursement and benefits payable pursuant to Section 3 and 4 herein
equal to one year. Alternatively, in such event, the Executive, by written
notice to the Company, may elect to refuse all further obligations of the
Company under Section 3 and Section 4 and to release the Company with respect
thereto, in which event the Company shall release the Executive from the
provisions of Section 6.
6. NONCOMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Except as provided for in Sections
2(b) and 6(b) hereof, until termination of his employment and for a period of 12
months commencing on the date of termination, the Executive, directly or
indirectly, in association with or as a stockholder, director, officer,
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with the Company or any of its affiliates in the offer, sale or
marketing of radiology products or services, including radiology practice
management services, that are competitive with the products or services offered
by the Company as of the date of this Agreement, or any other business engaged
in by the Company after the date of this Agreement in which Executive is
actively involved on behalf of the Company, within any metropolitan area in the
United States or elsewhere in which the Company is then engaged in the offer and
sale of competitive products or services except as provided in (b) below.
Additionally, the foregoing shall not prevent Executive from accepting
employment with an enterprise engaged in two or more lines of business, one of
which is the same or similar to the Company's business (the "Prohibited
Business") if Executive's employment is totally unrelated to the Prohibited
Business; provided, further, the foregoing shall not prohibit Executive from
owning up to 5% of the securities of any publicly-traded enterprise provided
Executive is not an employee, director, officer, consultant to such enterprise
or otherwise reimbursed for services rendered to such enterprise.
(b) SOLICITATION OF CUSTOMERS. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company, refer
Prohibited Business from any Customer to any enterprise or business other than
the Company or receive commissions based on sales or otherwise relating to the
Prohibited Business from any Customer, or any enterprise or business other than
the Company. For purposes of this Section 6(b), the term "Customer"
-4-
<PAGE>
means any person, firm, corporation, partnership, association or other entity to
which the Company or any of its affiliates sold or provided goods or services
during the 12-month period prior to the time at which any determination is
required to be made as to whether any such person, firm, corporation,
partnership, association or other entity is a Customer.
(c) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment will be required to be made to him in
consideration of his undertakings in this Section 6.
(d) RELEASE. The provisions of this Section 6 shall not apply if this
Agreement is terminated by the Company without cause or by Executive upon a
material breach by the Company.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that during his employment he will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) confidential or secret plans, programs, documents,
agreements or other material relating to the business, services or activities of
the Company and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). All records, files, materials and Confidential
Information excluding personal items, obtained by the Executive in the course of
his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he may be associated
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the board of directors of the Company, unless such
Confidential Information previously shall have become public knowledge through
no action by or omission of the Executive.
8. ASSIGNABILITY. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
or assigns of the Company, provided that such successor or assign shall acquire
all or substantially all of the assets and business of the Company. The
Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
9. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by an arbitration proceeding that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and the agreement of the Executive and the Company that
this Agreement shall be construed by the tribunal in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in the
light of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If in an arbitration proceeding, a tribunal shall
refuse to enforce all of the separate covenants deemed included herein because
taken together they are more extensive than necessary to assure to the Company
the intended benefits of this Agreement, it is expressly understood and agreed
by the parties hereto that the provisions of this Agreement that, if eliminated,
would permit the remaining separate provisions to be
-5-
<PAGE>
enforced in such proceeding shall be deemed eliminated, for the purposes of
such proceeding, from this Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be considered
divisible as to such provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the consideration moving from
either of the parties to the other. The remaining provisions of this Agreement
shall be valid and binding and of like effect as though such provision were not
included .
10. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
To the Company: U.S. Diagnostic Labs Inc.
777 S. Flagler Drive
West Palm Beach, Florida 33401
Attention: Jeffrey A. Goffman
To the Executive: Todd R. Smith
287 Barcelona Road
West Palm Beach, Florida 33401
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
12. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Palm Beach, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
13. ATTORNEY'S FEES. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or proceeding
-6-
<PAGE>
including that in arbitration as provided for in Section 12 of this Agreement,
is commenced to enforce the provisions of this Agreement, the prevailing party
shall be entitled to an award by the court or arbitrator, as appropriate, of
reasonable attorney's fee, costs and expenses.
14. GOVERNING LAW. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
U.S. DIAGNOSTIC LABS. INC.
By:________________________________
Jeffrey A. Goffman, Chairman
________________________________
Todd R. Smith, ("Executive")
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of this
30th day of June 1995, between U.S. Diagnostic Labs Inc. (the "Company"), and
Amos F. Almand, III (the "Executive").
WHEREAS, the Company desires to employ Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to enter into such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, and intending to be legally bound, the
Company and the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby to employ the Executive, and the
Executive hereby accepts employment with the Company, for a period commencing on
the date of this Agreement and ending four years from the date hereof (the
"Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6 and
7 shall remain in full force and effect and the provisions of Sections 6(a),
6(c) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in this Agreement.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as Vice President of
the Company with duties and responsibilities that are customary for such
executives. The Executive will also be president and chief officer of the one or
more subsidiaries operating Salisbury Imaging Center ("SIC") and any other
imaging centers owned by the Company in the Jacksonville, Florida area. The
Executive will use his best efforts to perform his duties and discharge his
responsibilities pursuant to this Agreement competently, carefully and
faithfully. In determining whether or not the Executive has used his best
efforts hereunder, the Company's delegation of authority to other employees and
all surrounding circumstances shall be taken into account and the best efforts
of the Executive shall not be judged solely on the Company's earnings or other
results of the Executive's performance.
(b) DEVOTION OF TIME. The Executive will devote substantially full
time during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company. It is expressly
understood that the Executive will not enter the employ of or serve as a
consultant to, or in any way perform any services with or without compensation
to, any other persons, business or organization (other than a set forth above)
without the prior consent of the board of directors of the Company; provided,
that the Executive shall be permitted to devote a limited amount of his time,
without compensation, to charitable or similar organizations.
(c) BOARD OF DIRECTORS. During the term of this Agreement, the
Company shall nominate and use its best efforts to elect Executive to its Board
of Directors. Executive shall be entitled to receive such compensation as a
director as is paid to the other employee directors for their service on the
Board.
-1-
<PAGE>
(d) DISTRIBUTIONS AND CAPITAL RESERVE ACCOUNT. The Company and
Executive agree that SIC shall make distributions from time to time, but at
least quarterly, to the Company and Executive in proportion to their ownership
of SIC. Such distributions shall be in amount equal to cash flow from
operations, less any amount that Executive and the Chairman of the Company agree
is necessary to fund the operations of SIC and for the Capital Reserve Account
described below: In addition, SIC shall establish a special Capital Reserve
Account for the purpose of funding the replacement and upgrading of its plant
and equipment, which shall be invested in an interest-bearing account at a local
financial institution. During each year, an amount of cash equal to five percent
(5%) of the net income (after provision for income taxes) of SIC shall be
deposited into the Capital Reserve Account, but such deposit shall be made only
from any distributions of profits. Each year's contribution to the Capital
Reserve Account shall be deducted form the amounts of dividends or other
distributions which would otherwise be made to the stockholder with respect to
that year, as follows:
(1) One-fifth (1/5) from Executive; and
(2) Four-fifths (4/5) from the Company.
All disbursements from the Capital Reserve Account shall be made upon the joint
decision of Executive and the Company.
(e) MEDICAL OPPORTUNITIES. Executive agrees to present to the Company
all potential opportunities for acquisitions, joint ventures and similar
transactions in the medical or healthcare field. Executive may pursue such
opportunities if declined by the Company.
3. COMPENSATION AND EXPENSES.
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay the Executive an annual base salary of
$120,000 during the first year of the Term, which thereafter shall be increased
at least annually and such additional amounts as set by the discretion of the
Board of Directors. Provided, however, in no event shall the Executive's annual
base salary for the second year be less than 110% of the first year base salary
($132,000) nor shall the annual base salary for the third year of the Term be
less than 110% of the second year minimum base salary ($145,200). The annual
base salary under this Section 3(a) will be reduced, however, to the extent that
the Executive elects to defer any portion thereof under the terms of any
deferred compensation or savings plan maintained by the Company. The Company
will pay the Executive his annual salary in equal installments no less
frequently than monthly.
(b) BONUS. The Executive shall be paid a signing bonus of $100,000
and an annual bonus based on the increase of net income before taxes
attributable to each individual center operated by the Company or its
subsidiaries, over the net income before taxes of each center during the prior
year. For the purpose of calculating this bonus, the base year for each center
(the "Base Year") shall be the 12 month period ending (i) on the last day of the
month prior to acquisition of a center (a "New Center") and (ii) on June 30,
1995 for the centers currently owned by the Company (the "Existing Centers").
The year for which the bonus is payable (the "Bonus Year") shall be measured
from the 12 months beginning on (i) the first day of the month following
acquisition of a New Center and each 12 month period thereafter, and (ii) July
-2-
<PAGE>
1, 1995 and each 12 month period thereafter for an Existing Center. During the
first, second and third year of the Term, such bonus shall be 10%, 5% and 2%,
respectively, of net income before taxes of each New Center and Existing Center
in excess of the Base Year of each New Center and Existing Center. Except in the
case of death or disability, only those New Centers and Existing Centers for
which a full 12 month Bonus Year has ended in such year of the Term shall be
included. In the case of death or disability, the Base Year shall be pro-rated
by multiplying the next income before taxes for each New Center and Existing
Center times a fraction, the numerator of which shall be the number of days
during the applicable 12 month period until death or disability and the
denominator of which shall be 365. For each New Center and Existing Center, the
Bonus Year shall be based upon the time elapsed until the date of death or
disability.
(c) EXPENSES. In addition to any compensation received pursuant to
Section 3(a) and (b), the Company will reimburse or advance funds to the
Executive for all reasonable travel, entertainment and miscellaneous expenses
incurred in connection with the performance of his duties under this Agreement,
provided that the Executive properly accounts for such expenses to the Company
in accordance with the Company's practices. Such reimbursement or advances will
be made in accordance with policies and procedures of the Company in effect from
time to time relating to reimbursement of or advances to executive officers.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the Executive
will be entitled to four (4) weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
(b) EMPLOYEE BENEFIT PROGRAMS. Within limiting the compensation to
which the Executive is entitled pursuant to the provisions of Section 3 or this
Section 4, during the Term, the Executive will be entitled to participate in any
pension, insurance or other employee benefit plan that is maintained at that
time by the Company for its executive officers, including programs of life and
medical insurance and reimbursement of membership fees in civic, social and
professional organizations. The Company will pay the cost of all medical
insurance premiums for Employee and his family during the Term.
(c) AUTOMOBILE. The Company shall provide the Executive with a
non-accountable automobile allowance of $1,000 per month which includes all
costs associated with the use of an automobile including, without limitation,
lease or loan payments, fuel, maintenance and insurance.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause by
giving written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause (iii)
below shall not become effective unless the Executive shall fail to correct such
breach within three (3) months of receipt of written notice. At the conclusion
of such three-month period, this alleged breach shall be deemed to have been
cured unless written notice to the contrary is given. Upon any such termination
for cause, the Executive shall have no right to compensation, bonus or
-3-
<PAGE>
reimbursement under Section 3, or to participate in any employee benefit
programs under Section 4 for any period subsequent to the effective date of
termination. "Cause" shall mean: (i) the Executive is convicted of a felony
which is related to the Executive's employment or the business of the Company;
(ii) the Executive, in carrying out his duties hereunder, has been found in a
civil action to have committed gross negligence, willful gross misconduct
resulting, misappropriated Company funds or otherwise defrauded the Company, in
any case, in material harm to the Company; and (iii) the Executive materially
breaches any provision of Section 6 or Section 7.
(b) DEATH OR DISABILITY. Except for the Company's obligations
contained in this Section 5, this Agreement and the obligations of the Company
hereunder will terminate upon the death or disability of the Executive. For
purposes of this Section 5(b), "disability" shall mean that for a period of six
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease.
Upon termination by death or disability, the Company will pay
the Executive or his legal representative, as the case may be: (i) his annual
salary at such time through the date of such termination of employment and (ii)
the Executive's pro-rata bonus due under Section 3(b) of this Agreement. Such
sums shall be paid upon the same terms and conditions as if this Agreement were
in fully force and effect.
(c) SPECIAL TERMINATION. In the event that (i) the Executive, with or
without change in title or formal corporate action, shall no longer exercise all
of the duties and responsibilities and shall no longer possess substantially all
the authority set forth in Section 2; or (ii) the Company materially breaches
this Agreement or the performance of its duties and obligations hereunder; or
(iii) any entity or person not now an executive officer of the Company becomes
either individually or as part of a group the beneficial owner of 40% or more of
the Company's common stock, the Executive, by written notice to the Company, may
elect to deem the Executive's employment hereunder to have been terminated by
the Company without cause, in which event the Executive shall be entitled to the
compensation, reimbursement and benefits payable pursuant to Section 3 and 4
herein for the remaining term of this Agreement. If the remaining term of the
Agreement is less than one year, the Executive shall receive one year's salary
at his then current rate, benefits and bonus. Alternatively, in such event, the
Executive, by written notice to the Company, may elect to refuse all further
obligations of the Company under Section 3 and Section 4 and to release the
Company with respect thereto, in which event the Company shall release the
Executive from the provisions of Section 6.
(d) VOLUNTARY TERMINATION. The Executive, on 30 days prior written
notice to the Company, may terminate his employment voluntarily (i) at any time
following termination of the initial Term or (ii) at any time following the
death or disabling illness of a member of the Executive's immediate family or
similar personal, non-business related occurrence as a result of which the
Executive concludes he must devote a substantial amount of his time and energies
to his family or other personal matter and not to his business activities so as
to preclude his fulfilling his obligations under this Agreement. Upon any such
termination, the Company will pay the Executive (i) his annual salary at such
time pursuant to Section 3(a) through the date of such termination of employment
and (ii) any bonus on a pro-rata basis which would have been payable through the
date of termination pursuant to Section 3(b). Such sums shall be paid upon the
same terms and conditions as if this Agreement were in fully force and effect.
-4-
<PAGE>
(e) CONTINUING EFFECT. Notwithstanding any termination of the
Executive's employment as provided in this Section 5 or otherwise the Provisions
of Sections 6 and 7 shall remain in full force and effect, except as otherwise
provided in Sections 5(a) and (c).
6. NONCOMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Except as provided for in Sections
2(b) and 6(b) hereof, until termination of his employment and for a period of 12
months commencing on the date of termination, the Executive, directly or
indirectly, in association with or as a stockholder, director, officer,
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with the Company or any of its affiliates in the offer, sale or
marketing of products or services that are competitive with the products or
services offered by the Company, within any metropolitan area in the United
States or elsewhere in which the Company is then engaged in the offer and sale
of competitive products or services except as provided in (b) below.
Additionally, the foregoing shall not prevent Executive from accepting
employment with an enterprise engaged in two or more lines of business, one of
which is the same or similar to the Company's business (the "Prohibited
Business") if Executive's employment is totally unrelated to the Prohibited
Business; provided, further, the foregoing shall not prohibit Executive from
owning up to 5% of the securities of any publicly-traded enterprise provided
Executive is not an employee, director, officer, consultant to such enterprise
or otherwise reimbursed for services rendered to such enterprise.
(b) SOLICITATION OF CUSTOMERS. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company, refer
Prohibited Business from any Customer to any enterprise or business other than
the Company or receive commissions based on sales or otherwise relating to the
Prohibited Business from any Customer, or any enterprise or business other than
the Company. For purposes of this Section 6(b), the term "Customer" means any
person, firm, corporation, partnership, association or other entity to which the
Company or any of its affiliates sold or provided goods or services during the
12 month period prior to the time at which any determination is required to be
made as to whether any such person, firm, corporation, partnership, association
or other entity is a Customer.
(c) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment will be required to be made to him in
consideration of his undertakings in this Section 6.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that during his employment he will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) confidential or secret plans, programs, documents,
agreements or other material relating to the business, services or activities of
the Company and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). All records, files, materials and Confidential
Information excluding personal items, obtained by the Executive in the course of
his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he
-5-
<PAGE>
may be associated or disclose any such Confidential Information to any person,
firm, corporation, association or other entity for any reason or purpose
whatsoever without the prior written consent of the board of directors of the
Company, unless such Confidential Information previously shall have become
public knowledge through no action by or omission of the Executive.
8. ASSIGNABILITY. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
or assigns of the Company, provided that such successor or assign shall acquire
all or substantially all of the assets and business of the Company. The
Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
9. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by an arbitration proceeding that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and the agreement of the Executive and the Company that
this Agreement shall be construed by the tribunal in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in the
light of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If in an arbitration proceeding, a tribunal shall
refuse to enforce all of the separate covenants deemed included herein because
taken together they are more extensive than necessary to assure to the Company
the intended benefits of this Agreement, it is expressly understood and agreed
by the parties hereto that the provisions of this Agreement that, if eliminated,
would permit the remaining separate provisions to be enforced in such proceeding
shall be deemed eliminated, for the purposes of such proceeding, from this
Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be considered
divisible as to such provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the consideration moving from
either of the parties to the other. The remaining provisions of this Agreement
shall be valid and binding and of like effect as though such provision were not
included.
10. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
With a Copy to: Michael Karsch, Esq.
Bachner Tally Polevoy & Misher LLP
380 Madison Avenue
New York, NY 10017
To the Company: U.S. Diagnostic Labs Inc.
777 South Flagler Drive
-6-
<PAGE>
Suite 1104 West
West Palm Beach, Florida 33401
To the Executive: Amos F. Almand, III
4063 Salisbury Road
Suite 203
Jacksonville, Florida 33216
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
12. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Palm Beach, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
13. ATTORNEY'S FEES. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or proceeding including that in
arbitration as provided for in Section 12 of this Agreement, is commenced to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to an award by the court or arbitrator, as appropriate, of reasonable attorney's
fee, costs and expenses.
14. GOVERNING LAW. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement
-7-
<PAGE>
are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
U.S. DIAGNOSTIC LABS. INC.
By:
--------------------------
Jeffrey A. Goffman, Chairman
--------------------------
Amos F. Almand, III
-8-
EXHIBIT 10.40
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of this
15th day of October 1996, between US Diagnostic Inc. (the "Company"), and Len
Platt (the "Executive").
WHEREAS, the Company desires to ensure the availability to the
Company of the Executive's services, and the Executive is willing to enter into
such employment and render such services, all upon and subject to the terms and
conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, and intending to be legally bound, the
Company and the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby to employ the Executive, and the
Executive hereby accepts such continued employment with the Company, for a
period commencing on November 1, 1996 (or such other date as mutually agreed)
and ending three years from the date thereof (the "Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6 and
7 shall remain in full force and effect and the provisions of Sections 6(a),
6(c) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in this Agreement.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as Executive Vice
President of the Company in charge of the "Southeast Region" with duties and
responsibilities that are customary for such executives. The Executive will use
his best efforts to perform his duties and discharge his responsibilities
pursuant to this Agreement competently, carefully and faithfully. The Executive
shall be appointed to the management committee composed of other senior
executives of the Company.
(b) DEVOTION OF TIME. The Executive will devote substantially full
time during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company. It is expressly
understood that the Executive will not enter the employ of or serve as a
consultant to, or in any way perform any services with or without compensation
to, any other persons, business or organization without the prior consent of the
board of directors of the Company; provided, that the Executive shall be
permitted to devote a limited amount of his time, without compensation, to
charitable or similar organizations.
(c) MEDICAL OPPORTUNITIES. Executive agrees to present to the Company
all potential opportunities for acquisitions, joint ventures and similar
transactions in the medical or healthcare field. Executive may pursue such
opportunities if declined by the Company.
3. COMPENSATION AND EXPENSES.
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay him an annual base salary of $125,000
during the first year of the Term. The annual
-1-
<PAGE>
base salary will be increased in the second year to $132,500 and the third year
to $140,000. In addition, Executive will be eligible for a bonus of up to 40% of
his based salary on an annual basis. For the first twelve months of his
employment, Executive will be guaranteed a minimum bonus of $25,000, which will
be paid in the same intervals as his base salary
(b) BONUS. The Executive bonus will be based on two components. The
first component will be based on achieving the budgeted net operation margin for
the Southesast region. The bonus for this category will be 10% of Executive's
base salary. In addition, Executive will be entitled to 10% of the excess Net
Operating Margin over the budgeted base amount, not to exceed 40% of his base
salary. The second component will be based on keeping the accounts receivable
for his region at a minimum of 75% of the total A/R under ninety days. The bonus
for this component will be 10% of Executive's base salary. The bonus for this
category will be 10% of Executive's base salary and such combination of both
components shall not exceed 40% of the base salary.
(c) COMMISSION/BONUS DUE FROM ELSCINT. The Company will compensate
Executive for any commission/bonus's which are due him that he would have to
forfeit as is mutually agreed upon.
(d) Stock OPTIONS. Executive will be granted 50,000 stock options to
be issued at fair market value. These options shall vest over the term of
Executive's three year contract and will automatically vest on any change of
control of the Company. In addition, Executive will be eligible for an
additional 10,000 stock options at the end of the year one and year two, again
at fair market value after the time of issuance. All options granted to
Executive shall vest if Executive is terminated without Cause or upon a Change
in Control of the Company as defined herein. Executive shall be entitled to
future discretionary grants of options under the Plan.
(e) EXPENSES. In addition to any compensation received pursuant to
Section 3(a) and (b), the Company will reimburse Executive for all out-of-pocket
moving expenses, including, but not limited to commissions on the sale of
Executive's house, moving and packing expenses, points on a new mortgage for his
home in West Palm Beach, as well as any related house hunting trips as is
mutually agreed upon.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the Executive
will be entitled to three (3) weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
(b) EMPLOYEE BENEFIT PROGRAMS. During the Term, the Executive will be
entitled to health insurance in accordance with the Company's existing benefit
package for senior management. This will include company paid premiums for
employment coverage as well as the right to participate in the Company 401K
plan, etc
(c) AUTOMOBILE. The Company shall provide the Executive with a $750
automobile car allowance which will be paid to Executive monthly.
5. TERMINATION.
-2-
<PAGE>
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for Cause by
giving written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause (iii)
below shall not become effective unless the Executive shall fail to correct such
breach within three months of receipt of written notice. At the conclusion of
such three month period, this alleged breach shall be deemed to have been cured
unless written notice to the contrary is given. Upon any such termination for
cause, the Executive shall have no right to compensation, bonus or reimbursement
under Section 3, or to participate in any employee benefit programs under
Section 4 for any period subsequent to the effective date of termination.
"Cause" shall mean: (i) the Executive is convicted of a felony which is related
to the Executive's employment or the business of the Company; (ii) the
Executive, in carrying out his duties hereunder, has been found in a civil
action to have committed gross negligence, willful gross misconduct,
misappropriated Company funds or otherwise defrauded the Company, in any case,
resulting in material harm to the Company; and (iii) the Executive materially
breaches any provision of Sections 2, 6 or 7.
(b) DEATH OR DISABILITY. Except for the Company's obligations
contained in this Section 5, this Agreement and the obligations of the Company
hereunder will terminate upon the death or disability of the Executive. For
purposes of this Section 5(b), "disability" shall mean that for a period of six
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease.
Upon termination by death or disability, the Company will pay the
Executive or his legal representative, as the case may be: (i) his annual salary
at such time through the date of such termination of employment and (ii) the
Executive's pro-rata bonus due under Section 3(b) of this Agreement. Such sums
shall be paid upon the same terms and conditions as if this Agreement were in
fully force and effect.
(c) SPECIAL TERMINATION. In the event that (i) the Company materially
breaches this Agreement or the performance of its duties and obligations
hereunder; or (ii) any entity or person not now an executive officer of the
Company becomes either individually or as part of a group the beneficial owner
of 40% or more of the Company's common stock; or (iii) the merger,
consolidation, reorganization or liquidation of the Company (a "Change in
Control"), the Executive, by written notice to the Company, may elect to deem
the Executive's employment hereunder to have been terminated by the Company
without cause, in which event the Executive shall receive lump sum compensation,
bonuses payable, reimbursement and benefits payable pursuant to Section 3 and 4
herein equal to two years, unless if the remaining term of the Agreement is less
than one year, the Executive shall receive lump sum compensation, bonuses
payable, reimbursement and benefits payable pursuant to Section 3 and 4 herein
equal to one year. Alternatively, in such event, the Executive, by written
notice to the Company, may elect to refuse all further obligations of the
Company under Section 3 and Section 4 and to release the Company with respect
thereto, in which event the Company shall release the Executive from the
provisions of Section 6.
6. NONCOMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Except as provided for in Sections
2(b) and 6(b) hereof, until termination of his employment and for a period of 12
months commencing on the date of termination, the Executive, directly or
indirectly, in association with or as a stockholder, director, officer,
-3-
<PAGE>
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with the Company or any of its affiliates in the offer, sale or
marketing of radiology products or services, including radiology practice
management services, that are competitive with the products or services offered
by the Company as of the date of this Agreement, or any other business engaged
in by the Company after the date of this Agreement in which Executive is
actively involved on behalf of the Company, within any metropolitan area in the
United States or elsewhere in which the Company is then engaged in the offer and
sale of competitive products or services except as provided in (b) below.
Additionally, the foregoing shall not prevent Executive from accepting
employment with an enterprise engaged in two or more lines of business, one of
which is the same or similar to the Company's business (the "Prohibited
Business") if Executive's employment is totally unrelated to the Prohibited
Business; provided, further, the foregoing shall not prohibit Executive from
owning up to 5% of the securities of any publicly-traded enterprise provided
Executive is not an employee, director, officer, consultant to such enterprise
or otherwise reimbursed for services rendered to such enterprise.
(b) SOLICITATION OF CUSTOMERS. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company, refer
Prohibited Business from any Customer to any enterprise or business other than
the Company or receive commissions based on sales or otherwise relating to the
Prohibited Business from any Customer, or any enterprise or business other than
the Company. For purposes of this Section 6(b), the term "Customer" means any
person, firm, corporation, partnership, association or other entity to which the
Company or any of its affiliates sold or provided goods or services during the
12-month period prior to the time at which any determination is required to be
made as to whether any such person, firm, corporation, partnership, association
or other entity is a Customer.
(c) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment will be required to be made to him in
consideration of his undertakings in this Section 6.
(d) RELEASE. The provisions of this Section 6 shall not apply if this
Agreement is terminated by the Company without cause or by Executive upon a
material breach by the Company.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that during his employment he will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) confidential or secret plans, programs, documents,
agreements or other material relating to the business, services or activities of
the Company and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). All records, files, materials and Confidential
Information excluding personal items, obtained by the Executive in the course of
his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he may be associated
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the
-4-
<PAGE>
board of directors of the Company, unless such Confidential Information
previously shall have become public knowledge through no action by or omission
of the Executive.
8. ASSIGNABILITY. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
or assigns of the Company, provided that such successor or assign shall acquire
all or substantially all of the assets and business of the Company. The
Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
9. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by an arbitration proceeding that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and the agreement of the Executive and the Company that
this Agreement shall be construed by the tribunal in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in the
light of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If in an arbitration proceeding, a tribunal shall
refuse to enforce all of the separate covenants deemed included herein because
taken together they are more extensive than necessary to assure to the Company
the intended benefits of this Agreement, it is expressly understood and agreed
by the parties hereto that the provisions of this Agreement that, if eliminated,
would permit the remaining separate provisions to be enforced in such proceeding
shall be deemed eliminated, for the purposes of such proceeding, from this
Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be considered
divisible as to such provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the consideration moving from
either of the parties to the other. The remaining provisions of this Agreement
shall be valid and binding and of like effect as though such provision were not
included .
10. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
To the Company: US Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, Florida 33401
Attention: Joseph A. Paul
To the Executive: 4504 Azeele Street
Tampa, Florida 33609
Attention: Len Platt
-5-
<PAGE>
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
12. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Palm Beach, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
13. ATTORNEY'S FEES. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or proceeding including that in
arbitration as provided for in Section 12 of this Agreement, is commenced to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to an award by the court or arbitrator, as appropriate, of reasonable attorney's
fee, costs and expenses.
14. GOVERNING LAW. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
US DIAGNOSTIC. INC.
By:
--------------------------
Joseph A. Paul, President
--------------------------
Len Platt
-7-
EXHIBIT 10.41
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT entered into as of this 1st day of May
1996, between U. S. Diagnostic Labs Inc. (the "Company"), and Alan M. Winakor
(the "Executive").
WHEREAS, the Company desires to employ Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, and intending to be legally bound, the
Company and the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company, for a period commencing on the date
of this Agreement and ending five years from the date hereof (the "Term").
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6 and
7 shall remain in full force and effect and the provisions of Sections 6(a),
6(c) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in this Agreement.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as Senior Vice
President of the Company with duties and responsibilities that are customary for
such executives. The Executive will also be president and chief executive
officer of the one or more subsidiaries operating imaging centers owned by the
Company in the New York/New Jersey/Pennsylvania area. The Executive will use his
best efforts to perform his duties and discharge his responsibilities pursuant
to this Agreement competently, carefully and faithfully. The Executive shall be
appointed to the managment committee composed of other senior executives of the
Company.
(b) DEVOTION OF TIME. The Executive will devote substantially full
time during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company. It is expressly
understood that the Executive will not enter the employ of or serve as a
consultant to, or in any way perform any services with or without compensation
to, any other persons, business or organization (other than as set forth above)
without the prior consent of the board of directors of the Company; provided,
that the Executive shall be permitted to devote a limited amount of his time,
without compensation, to charitable or similar organizations.
(c) MEDICAL OPPORTUNITIES. Executive agrees to present to the Company
all potential opportunities for acquisitions, joint ventures and similar
transactions in the medical or healthcare field. Executive may pursue such
opportunities if declined the Company.
3. COMPENSATION AND EXPENSES.
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the Company shall pay the Executive an annual base salary of
$200,000 during the first year of the Term,
<PAGE>
which thereafter shall be increased at least annually and such additional
amounts as set by the discretion of the board of directors. Provided, however,
in no event shall the Executive's annual base salary for the second year be less
than 105% of the first year base salary ($210,000) nor shall the annual base
salary for the remaining years of the Term be less than 105% of the previous
year's minimum base salary. The annual base salary under this Section 3(a) will
be reduced, however, to the extent that the Executive elects to defer any
portion thereof under the terms of any deferred compensation or savings plan
maintained by the Company. The Company will pay the Executive his annual salary
in equal installments no less frequently than bimonthly in accordance with the
Company's policies.
(b) BONUS. The Executive shall be paid an annual bonus of $50,000 in
each of the first two years of the Term. For the remaining years of the Term,
Executive shall be paid a bonus of $50,000 only in each year in which the net
income before taxes attributable to the six imaging centers previously operated
by Medical Marketing Development, Inc. is at least $3 million (the "Income
Target"). Such bonus will be paid within 120 days of the end of each fiscal
year.
(c) STOCK OPTIONS. Employee shall be granted 100,000 options under
the Company's 1995 Long Term Incentive Plan ("Plan") at fair market value on the
date of grant by the Board of Directors. Such options will vest 20,000 in each
year in which the Income Target is met. If such options do not vest in any year,
they will be automatically cancelled. Executive shall also be entitled to
discretionary grants of options under the Plan. All options granted to Executive
shall vest if Executive is terminated without cause or upon a change in control
of the Company.
(d) EXPENSES. In addition to any compensation received pursuant to
Section 3(a) and (b), the Company will reimburse or advance funds to the
Executive for all reasonable travel, entertainment and miscellaneous expenses
incurred in connection with the performance of his duties under this Agreement,
provided that the Executive properly accounts for such expenses to the Company
in accordance with the Company's practices. Such reimbursement or advances will
be made in accordance with policies and procedures of the Company in effect from
time to time relating to reimbursement of or advances to executive officers.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the Executive
will be entitled to four (4) weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
(b) EMPLOYEE BENEFIT PROGRAMS. During the Term, the Executive will be
entitled to participate in any pension, insurance or other employee benefit plan
that is maintained at that time by the Company for its executive officers,
including programs of life and medical insurance and reimbursement of membership
fees in civic, social and professional organizations.
(c) AUTOMOBILE. The Company shall provide the Executive with a
non-accountable automobile allowance of $1,000 per month which includes all
costs associated with the use of an automobile including, without limitation,
lease or loan payments, fuel, maintenance and insurance.
-2-
<PAGE>
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for cause by
giving written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based upon clause (iii)
below shall not become effective unless the Executive shall fail to correct such
breach within three months of receipt of written notice. At the conclusion of
such three month period, this alleged breach shall be deemed to have been cured
unless written notice to the contrary is given. Upon any such termination for
cause, the Executive shall have no right to compensation, bonus or reimbursement
under Section 3, or to participate in any employee benefit programs under
Section 4 for any period subsequent to the effective date of termination.
"Cause" shall mean: (i) the Executive is convicted of a felony which is related
to the Executive's employment or the business of the Company; (ii) the
Executive, in carrying out his duties hereunder, has been found in a civil
action to have committed gross negligence, willful gross misconduct resulting,
misappropriated Company funds or otherwise defrauded the Company, in any case,
in material harm to the Company; and (iii) the Executive materially breaches any
provision of Sections 2, 6 or 7.
(b) DEATH OR DISABILITY. Except for the Company's obligations
contained in this Section 5, this Agreement and the obligations of the Company
hereunder will terminate upon the death or disability of the Executive. For
purposes of this Section 5(b), "disability" shall mean that for a period of six
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease.
Upon termination by death or disability, the Company will pay the
Executive or his legal representative, as the case may be: (i) his annual salary
at such time through the date of such termination of employment and (ii) the
Executive's pro-rata bonus due under Section 3(b) of this Agreement. Such sums
shall be paid upon the same terms and conditions as if this Agreement were in
fully force and effect.
6. NONCOMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Except as provided for in Sections
2(b) and 6(b) hereof, until termination of his employment and for a period of 12
months commencing on the date of termination, the Executive, directly or
indirectly, in association with or as a stockholder, director, officer,
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with the Company or any of its affiliates in the offer, sale or
marketing of radiology products or services, including radiology practice
management services, that are competitive with the products or services offered
by the Company as of the date of this Agreement, or any other business engaged
in by the Company after the date of this Agreement in which Executive is
actively involved on behalf of the Company, within any metropolitan area in the
United States or elsewhere in which the Company is then engaged in the offer and
sale of competitive products or services except as provided in (b) below.
Additionally, the foregoing shall not prevent Executive from accepting
employment with an enterprise engaged in two or more lines of business, one of
which is the same or similar to the Company's business (the "Prohibited
Business") if Executive's employment is totally unrelated to the Prohibited
Business; provided, further, the foregoing shall not prohibit Executive from
owning up to 5% of the securities of any publicly-traded enterprise provided
Executive is not an employee, director, officer, consultant to such enterprise
or otherwise reimbursed for
-3-
<PAGE>
services rendered to such enterprise.
(b) SOLICITATION OF CUSTOMERS. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company, refer
Prohibited Business from any Customer to any enterprise or business other than
the Company or receive commissions based on sales or otherwise relating to the
Prohibited Business from any Customer, or any enterprise or business other than
the Company. For purposes of this Section 6(b), the term "Customer" means any
person, firm, corporation, partnership, association or other entity to which the
Company or any of its affiliates sold or provided goods or services during the
12-month period prior to the time at which any determination is required to be
made as to whether any such person, firm, corporation, partnership, association
or other entity is a Customer.
(c) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment will be required to be made to him in
consideration of his undertakings in this Section 6.
(d) RELEASE. The provisions of this Section 6 shall not apply if this
Agreement is terminated by the Company without cause or by Executive upon a
material breach by the Company.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that during his employment he will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) confidential or secret plans, programs, documents,
agreements or other material relating to the business, services or activities of
the Company and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). All records, files, materials and Confidential
Information excluding personal items, obtained by the Executive in the course of
his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he may be associated
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the board of directors of the Company, unless such
Confidential Information previously shall have become public knowledge through
no action by or omission of the Executive.
8. ASSIGNABILITY. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
or assigns of the Company, provided that such successor or assign shall acquire
all or substantially all of the assets and business of the Company. The
Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
9. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by an arbitration proceeding that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and
-4-
<PAGE>
the agreement of the Executive and the Company that this Agreement shall be
construed by the tribunal in such a manner as to impose only those restrictions
on the Executive's conduct that are reasonable in the light of the circumstances
and as are necessary to assure to the Company the benefits of this Agreement. If
in an arbitration proceeding, a tribunal shall refuse to enforce all of the
separate covenants deemed included herein because taken together they are more
extensive than necessary to assure to the Company the intended benefits of this
Agreement, it is expressly understood and agreed by the parties hereto that the
provisions of this Agreement that, if eliminated, would permit the remaining
separate provisions to be enforced in such proceeding shall be deemed
eliminated, for the purposes of such proceeding, from this Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be considered
divisible as to such provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the consideration moving from
either of the parties to the other. The remaining provisions of this Agreement
shall be valid and binding and of like effect as though such provision were not
included .
10. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
To the Company: U.S. Diagnostic Labs Inc.
777 S. Flagler Drive
Suite 1104 West
West Palm Beach, Florida 33401
With a Copy to: Michael Karsch, Esq.
Bachner, Tally, Polevoy & Misher LLP
380 Madison Avenue
New York, NY 10017
To the Executive: Alan M. Winakor
c/o Medical Marketing Development, Inc.
100 Herricks Road
Mineola, New York 11501
With a Copy to: Charles Bilich, Esq.
Meltzer, Lippe, Goldstein, Wolfe, Schlissel
& Sazer, P.C.
The Chancery
190 Willis Avenue
Mineola, New York 11501
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of
-5-
<PAGE>
successful facsimile delivery. Time shall be counted to, or from, as the case
may be, the delivery in person or by mailing.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
12. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in New York, New York (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
13. ATTORNEY'S FEES. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or proceeding including that in
arbitration as provided for in Section 12 of this Agreement, is commenced to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to an award by the court or arbitrator, as appropriate, of reasonable attorney's
fee, costs and expenses.
14. GOVERNING LAW. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed or interpreted according to the internal laws of the State of
New York without regard to choice of law considerations.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
U.S. DIAGNOSTIC LABS. INC.
By:
-----------------------------
Jeffrey A. Goffman, Chairman
-----------------------------
Alan M. Winakor
-7-
EXHIBIT 10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of this
15th day of October 1996, between US Diagnostic Inc. (the "Company"), and Arthur
Quillo (the "Executive").
WHEREAS, the Company desires to ensure the availability to the
Company of the Executive's services, and the Executive is willing to enter into
such employment and render such services, all upon and subject to the terms and
conditions contained in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants set forth in this Agreement, and intending to be legally bound, the
Company and the Executive agree as follows:
1. TERM OF EMPLOYMENT.
(a) TERM. The Company hereby to employ the Executive, and the
Executive hereby accepts such continued employment with the Company, for a
period commencing on November 15, 1996 or such other date as mutually agreed and
ending three years from the date thereof (the "Term") as Executive Vice
President, Midwest/South Central Region.
(b) CONTINUING EFFECT. Notwithstanding any termination of this
Agreement at the end of the Term or otherwise, the provisions of Sections 6 and
7 shall remain in full force and effect and the provisions of Sections 6(a),
6(c) and 7 shall be binding upon the legal representatives, successors and
assigns of the Executive, except as otherwise provided in this Agreement.
2. DUTIES.
(a) GENERAL DUTIES. The Executive shall serve as Executive Vice
President of the Company in charge of the "South Central" and "Midwest Region"
with duties and responsibilities that are customary for such executives. The
Executive will use his best efforts to perform his duties and discharge his
responsibilities pursuant to this Agreement competently, carefully and
faithfully. The Executive shall be appointed to the management committee
composed of other senior executives of the Company.
(b) DEVOTION OF TIME. The Executive will devote substantially full
time during normal business hours (exclusive of periods of sickness and
disability and of such normal holiday and vacation periods as have been
established by the Company) to the affairs of the Company. It is expressly
understood that the Executive will not enter the employ of or serve as a
consultant to, or in any way perform any services with or without compensation
to, any other persons, business or organization without the prior consent of the
board of directors of the Company; provided, that the Executive shall be
permitted to devote a limited amount of his time, without compensation, to
charitable or similar organizations.
(c) MEDICAL OPPORTUNITIES. Executive agrees to present to the Company
all potential opportunities for acquisitions, joint ventures and similar
transactions in the medical or healthcare field. Executive may pursue such
opportunities if declined by the Company.
3. COMPENSATION AND EXPENSES.
(a) SALARY. For the services of the Executive to be rendered under
this Agreement, the
-1-
<PAGE>
Company shall pay him an annual base salary of $125,000 with annual increments
of not less than 5% annually for a Term of three years. In addition, Executive
will be eligible for a bonus of up to 40% of his based salary on an annual
basis. For the first twelve months of his employment, Executive will be
guaranteed a minimum bonus of $25,000, which will be paid in the same intervals
as his base salary
(b) BONUS. The Executive bonus will be based on two components. The
first component will be based on achieving the budgeted net operation margin for
the Southesast region. The bonus for this category will be 10% of Executive's
base salary. In addition, Executive will be entitled to 10% of the excess Net
Operating Margin over the budgeted base amount, not to exceed 40% of his base
salary. The second component will be based on keeping the accounts receivable
for his region at a minimum of 75% of the total A/R under ninety days. The bonus
for this category will be 10% of Executive's base salary and such combination of
both components shall not exceed 40% of the base salary.
(c) STOCK OPTIONS. Executive will be granted 50,000 stock options to
be issued at fair market value. These options shall vest over the term of
Executive's contract and will automatically vest on any change of control of the
Company.
(d) EXPENSES. In addition to any compensation received pursuant to
Section 3(a) and (b), the Company will reimburse Executive for all out-of-pocket
moving expenses, including, but not limited to commissions on the sale of
Executive's house, moving and packing expenses, as well as any related house
hunting trips, etc.
(e) TEMPORARY LIVING. The Company will provide Executive with
temporary living accommodations in Houston, Texas to facilitate Executive's
travel to and from California until the Company relocates Executive to the
Midwest Region.
4. BENEFITS.
(a) VACATION. For each 12-month period during the Term, the Executive
will be entitled to three (3) weeks of vacation without loss of compensation or
other benefits to which he is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
(b) EMPLOYEE BENEFIT PROGRAMS. During the Term, the Executive will be
entitled to health insurance in accordance with the Company's existing benefit
package for senior management. This will include company paid premiums for
employment coverage as well as the right to participate in the Company 401K
plan, etc.
(c) AUTOMOBILE. The Company shall provide the Executive with a $750
automobile car allowance which will be paid to Executive monthly.
5. TERMINATION.
(a) TERMINATION FOR CAUSE. The Company may terminate the Executive's
employment pursuant to the terms of this Agreement at any time for Cause by
giving written notice of termination. Such termination will become effective
upon the giving of such notice, except that termination based
-2-
<PAGE>
upon clause (iii) below shall not become effective unless the Executive shall
fail to correct such breach within three months of receipt of written notice.
At the conclusion of such three month period, this alleged breach shall be
deemed to have been cured unless written notice to the contrary is given. Upon
any such termination for cause, the Executive shall have no right to
compensation, bonus or reimbursement under Section 3, or to participate in any
employee benefit programs under Section 4 for any period subsequent to the
effective date of termination. "Cause" shall mean: (i) the Executive is
convicted of a felony which is related to the Executive's employment or the
business of the Company; (ii) the Executive, in carrying out his duties
hereunder, has been found in a civil action to have committed gross negligence,
willful gross misconduct, misappropriated Company funds or otherwise defrauded
the Company, in any case, resulting in material harm to the Company; and (iii)
the Executive materially breaches any provision of Sections 2, 6 or 7.
(b) DEATH OR DISABILITY. Except for the Company's obligations
contained in this Section 5, this Agreement and the obligations of the Company
hereunder will terminate upon the death or disability of the Executive. For
purposes of this Section 5(b), "disability" shall mean that for a period of six
months in any 12-month period the Executive is incapable of substantially
fulfilling the duties set forth in Section 2 because of physical, mental or
emotional incapacity resulting from injury, sickness or disease.
Upon termination by death or disability, the Company will pay the
Executive or his legal representative, as the case may be: (i) his annual salary
at such time through the date of such termination of employment and (ii) the
Executive's pro-rata bonus due under Section 3(b) of this Agreement. Such sums
shall be paid upon the same terms and conditions as if this Agreement were in
fully force and effect.
(c) SPECIAL TERMINATION. In the event that (i) the Company materially
breaches this Agreement or the performance of its duties and obligations
hereunder; or (ii) any entity or person not now an executive officer of the
Company becomes either individually or as part of a group the beneficial owner
of 40% or more of the Company's common stock; or (iii) the merger,
consolidation, reorganization or liquidation of the Company (a "Change in
Control"), the Executive, by written notice to the Company, may elect to deem
the Executive's employment hereunder to have been terminated by the Company
without cause, in which event the Executive shall receive lump sum compensation,
bonuses payable, reimbursement and benefits payable pursuant to Section 3 and 4
herein equal to two years, unless if the remaining term of the Agreement is less
than one year, the Executive shall receive lump sum compensation, bonuses
payable, reimbursement and benefits payable pursuant to Section 3 and 4 herein
equal to one year. Alternatively, in such event, the Executive, by written
notice to the Company, may elect to refuse all further obligations of the
Company under Section 3 and Section 4 and to release the Company with respect
thereto, in which event the Company shall release the Executive from the
provisions of Section 6.
6. NONCOMPETITION AGREEMENT.
(a) COMPETITION WITH THE COMPANY. Except as provided for in Sections
2(b) and 6(b) hereof, until termination of his employment and for a period of 12
months commencing on the date of termination, the Executive, directly or
indirectly, in association with or as a stockholder, director, officer,
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with the Company or any of its affiliates in the offer, sale or
marketing of radiology products or services, including radiology practice
-3-
<PAGE>
management services, that are competitive with the products or services offered
by the Company as of the date of this Agreement, or any other business engaged
in by the Company after the date of this Agreement in which Executive is
actively involved on behalf of the Company, within any metropolitan area in the
United States or elsewhere in which the Company is then engaged in the offer and
sale of competitive products or services except as provided in (b) below.
Additionally, the foregoing shall not prevent Executive from accepting
employment with an enterprise engaged in two or more lines of business, one of
which is the same or similar to the Company's business (the "Prohibited
Business") if Executive's employment is totally unrelated to the Prohibited
Business; provided, further, the foregoing shall not prohibit Executive from
owning up to 5% of the securities of any publicly-traded enterprise provided
Executive is not an employee, director, officer, consultant to such enterprise
or otherwise reimbursed for services rendered to such enterprise.
(b) SOLICITATION OF CUSTOMERS. During the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, will not seek Prohibited Business from any Customer (as defined
below) on behalf of any enterprise or business other than the Company, refer
Prohibited Business from any Customer to any enterprise or business other than
the Company or receive commissions based on sales or otherwise relating to the
Prohibited Business from any Customer, or any enterprise or business other than
the Company. For purposes of this Section 6(b), the term "Customer" means any
person, firm, corporation, partnership, association or other entity to which the
Company or any of its affiliates sold or provided goods or services during the
12-month period prior to the time at which any determination is required to be
made as to whether any such person, firm, corporation, partnership, association
or other entity is a Customer.
(c) NO PAYMENT. The Executive acknowledges and agrees that no
separate or additional payment will be required to be made to him in
consideration of his undertakings in this Section 6.
(d) RELEASE. The provisions of this Section 6 shall not apply if this
Agreement is terminated by the Company without cause or by Executive upon a
material breach by the Company.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Executive
acknowledges that during his employment he will learn and will have access to
confidential information regarding the Company and its affiliates, including
without limitation (i) confidential or secret plans, programs, documents,
agreements or other material relating to the business, services or activities of
the Company and its affiliates and (ii) trade secrets, market reports, customer
investigations, customer lists and other similar information that is proprietary
information of the Company or its affiliates (collectively referred to as
"Confidential Information"). All records, files, materials and Confidential
Information excluding personal items, obtained by the Executive in the course of
his employment with the Company are confidential and proprietary and shall
remain the exclusive property of the Company or its affiliates, as the case may
be. The Executive will not, except in connection with and as required by his
performance of his duties under this Agreement, for any reason use for his own
benefit or the benefit of any person or entity with which he may be associated
or disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior written consent of the board of directors of the Company, unless such
Confidential Information previously shall have become public knowledge through
no action by or omission of the Executive.
-4-
<PAGE>
8. ASSIGNABILITY. The rights and obligations of the Company under
this Agreement shall inure to the benefit of and be binding upon the successors
or assigns of the Company, provided that such successor or assign shall acquire
all or substantially all of the assets and business of the Company. The
Executive's obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.
9. SEVERABILITY.
(a) The Executive expressly agrees that the character, duration and
geographical scope of the provisions set forth in this Agreement are reasonable
in light of the circumstances as they exist on the date hereof. Should a
decision, however, be made at a later date by an arbitration proceeding that the
character, duration or geographical scope of such provisions is unreasonable,
then it is the intention and the agreement of the Executive and the Company that
this Agreement shall be construed by the tribunal in such a manner as to impose
only those restrictions on the Executive's conduct that are reasonable in the
light of the circumstances and as are necessary to assure to the Company the
benefits of this Agreement. If in an arbitration proceeding, a tribunal shall
refuse to enforce all of the separate covenants deemed included herein because
taken together they are more extensive than necessary to assure to the Company
the intended benefits of this Agreement, it is expressly understood and agreed
by the parties hereto that the provisions of this Agreement that, if eliminated,
would permit the remaining separate provisions to be enforced in such proceeding
shall be deemed eliminated, for the purposes of such proceeding, from this
Agreement.
(b) If any provision of this Agreement otherwise is deemed to be
invalid or unenforceable or is prohibited by the laws of the state or
jurisdiction where it is to be performed, this Agreement shall be considered
divisible as to such provision and such provision shall be inoperative in such
state or jurisdiction and shall not be part of the consideration moving from
either of the parties to the other. The remaining provisions of this Agreement
shall be valid and binding and of like effect as though such provision were not
included .
10. NOTICES AND ADDRESSES. All notices, offers, acceptance and any
other acts under this Agreement (except payment) shall be in writing, and shall
be sufficiently given if delivered to the addressees in person, by Federal
Express or similar receipted delivery, by facsimile delivery or, if mailed,
postage prepaid, by certified mail, return receipt requested, as follows:
To the Company: US Diagnostic Inc.
777 S. Flagler Drive
West Palm Beach, Florida 33401
Attention: Joseph A. Paul
To the Executive: 35 Woodhaven Drive
Laguna Niguel, CA 92677
Attention: Arthur Quillo
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in
-5-
<PAGE>
person or by mailing.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument. The execution of this
Agreement may be by actual or facsimile signature.
12. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Palm Beach, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
13. ATTORNEY'S FEES. In the event that there is any controversy or
claim arising out of or relating to this Agreement, or to the interpretation,
breach or enforcement thereof, and any action or proceeding including that in
arbitration as provided for in Section 12 of this Agreement, is commenced to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to an award by the court or arbitrator, as appropriate, of reasonable attorney's
fee, costs and expenses.
14. GOVERNING LAW. This Agreement and any dispute, disagreement, or
issue of construction or interpretation arising hereunder whether relating to
its execution, its validity, the obligations provided therein or performance
shall be governed or interpreted according to the internal laws of the State of
Florida without regard to choice of law considerations.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire Agreement
between the parties and supersedes all prior oral and written agreements between
the parties hereto with respect to the subject matter hereof. Neither this
Agreement nor any provision hereof may be changed, waived, discharged or
terminated orally, except by a statement in writing signed by the party or
parties against which enforcement or the change, waiver discharge or termination
is sought.
16. SECTION AND PARAGRAPH HEADINGS. The section and paragraph
headings in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
-6-
<PAGE>
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
US DIAGNOSTIC. INC.
By:
--------------------------
Joseph A. Paul, President
--------------------------
Arthur Quillo
-7-
EXHIBIT 10.43
CONSULTING AGREEMENT
Agreement made this 1st day of October, 1996, by and between US
Diagnostic Inc., a Delaware corporation ("USDL") and Robert Burke, M.D.
("Burke").
NOW, THEREFORE, in consideration of the premises and the obligations
undertaken by the parties pursuant hereto, the parties agree:
I. RECITALS
1.1. USDL is engaged in the ownership and operation of diagnostic imaging
centers.
1.2. Burke is a practicing radiologist with extensive experience in the
ownership and operation of diagnostic imaging facilities.
1.3. PURPOSE. USDL desires to engage Burke, under the terms of this
agreement, to provide his skills as supervision to assist in the management of
USDL and the evaluation of potential acquisitions.
II. ENGAGEMENT, SERVICES AND DUTIES
2.1. ENGAGEMENT. USDL hereby engages Burke, and Burke hereby accepts
engagement as a part-time consultant to the Company, subject to all provisions
hereof.
2.2. DUTIES. Burke shall consult with respect to the operations of USDL's
diagnostic imaging centers and the acquisition of additional imaging centers in
order to assist in the efficient operations of USDL. Burke shall consult with
USDL on all matters requested by USDL. Burke shall be available to report to,
consult with and advise USDL on all matters pertaining to the operation of the
Company at such times as USDL may reasonably request. Burke shall devote a
minimum of 15 and a maximum of 30 hours per month in such capacity. Burke shall,
at the reasonable request of USDL, deliver to USDL narrative reports, which
shall be in writing, discussing the operations of USDL.
2.3. BEST EFFORTS AND REASONABLE CARE. Burke will exert his best efforts
to assist the management of USDL in accordance with the terms and provisions of
this agreement, and will use reasonable care in providing such services.
2.4. CONFIDENTIALITY. Burke will not disclose or otherwise use in an
unauthorized manner confidential business and patient records and documents of
USDL without the express written consent of USDL while this agreement is in
effect or after this agreement is terminated.
<PAGE>
COMPENSATION
3.1. FEES. Burke will be entitled to receive a consulting fee of $100,000
per annum, payable monthly commencing October 1, 1996.
3.2. EXPENSES. Burke shall be reimbursed for all reasonable out-of-pocket
expenses incurred in connection with this agreement.
IV. TERM OF AGREEMENT
4.1. TERM. This agreement will terminate on September 30, 1999 unless
terminated by either party as hereinafter provided.
4.2. TERMINATION BY USDL. (a) The Company may terminate this Agreement at
any time for cause by giving written notice of termination. Such termination
will become effective upon the giving of such notice, except that termination
based upon clause (iii) below shall not become effective unless Burke shall fail
to correct such breach within three months of receipt of written notice. At the
conclusion of such three month period, this alleged breach shall be deemed to
have been cured unless written notice to the contrary is given. Upon any such
termination for cause, Burke shall have no right to compensation or
reimbursement under Section 3 for any period subsequent to the effective date of
termination. "Cause" shall mean: (i) Burke is convicted of a felony which is
related to Burke's employment or the business of the Company; (ii) Burke, in
carrying out his duties hereunder, has been found in a civil action to have
committed gross negligence, willful gross misconduct, misappropriated Company
funds or otherwise defrauded the Company, resulting in any case in material harm
to the Company; and (iii) Burke materially breaches any provision of Sections 5
or 6.
(b) This Agreement and the obligations of the Company hereunder will
terminate upon the death or disability of Burke. For purposes of this Section
4.2(b), "disability" shall mean that for a period of six months in any 12-month
period Burke is incapable of substantially fulfilling the duties hereunder
because of physical, mental or emotional incapacity resulting from injury,
sickness or disease.
4.3. TERMINATION BY BURKE. Burke shall have the right upon sixty (60) days
prior written notice to terminate this agreement.
4.4. TERMINATION BY EITHER PARTY. In addition, and without prejudice to any
other rights it may have to terminate this agreement or to seek other available
remedies, including but not limited to remedies for breach of contract, either
party shall have the right at any time, by giving written notice to the other
party, to terminate this agreement upon a date specified therein, which shall
not be less than sixty (60) days from the date notice is given, upon the
occurrence of any of the following events of default:
2
<PAGE>
4.4.1. If the other party shall fail to make any payment which it is
obligated to make pursuant to the terms of this agreement and such failure shall
continue for a period of thirty (30) days after notice thereof to the defaulting
party.
4.4.2. If the other party shall fail to keep, observe or perform any
material covenant, agreement, term of provision of this agreement, other than an
obligation to pay money, to be kept, observed or performed by such party, and
such failure shall continue for a period of thirty (30) days after notice
thereof to the defaulting party.
4.5 AUTOMATIC TERMINATION. This agreement shall terminate automatically if
Burke becomes (i) an executive officer of a publicly traded company or (ii) a
director, officer or consultant (other than as a consultant solely providing
radiology services and not business services) of a company, other than Midtown
Imaging, P.A, whose primary business is radiology or diagnostic imaging.
4.6 PAYMENT UPON TERMINATION. If this agreement is terminated by either
party, the current and accrued consulting fee due Burke pursuant to Section 3.1.
above and all reimbursable expenses due thereunder, shall be paid to Burke by
USDL within the ten (10) days of such termination.
V. NON-COMPETITION AGREEMENT
5.1. COMPETITION WITH THE COMPANY. Until termination of his engagement and
for a period of 12 months commencing on the date of termination, Burke directly
or indirectly, in association with or as a stockholder, director, officer,
consultant, employee, partner, joint venturer, member or otherwise of or through
any person, firm, corporation, partnership, association or other entity, will
not compete with USDL or any of its affiliates in the offer, sale or marketing
of radiology products or services, including radiology practice management
services, that are competitive with the products or services offered by USDL
within five miles of any facility owned or operated by USDL outside of the State
of Florida which is then engaged in the offer and sale of competitive products
or services. The foregoing shall not prohibit Burke from (i) continuing his
existing medical practice at Midtown Imaging, P.A., (ii) engaging in the offer,
sale or marketing of radiology products or services, including radiology
practice management services within the State of Florida, (iii) providing
radiology "reading "services on an independent contractor basis anywhere in the
United States, and (iv) owning up to 5% of the securities of any publicly-traded
enterprise provided Burke is not an employee, director, officer, consultant to
such enterprise or otherwise reimbursed for services rendered to such
enterprise.
5.2. NO PAYMENT. Burke acknowledges and agrees that no separate or
additional payment will be required to be made to him in consideration of his
undertakings in this Section 5.
3
<PAGE>
5.3. RELEASE. The provisions of this Section 5 shall not apply if this
Agreement is terminated by USDL without cause or by Burke upon a material breach
by USDL.
VI. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
6.1. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Burke acknowledges that
during his engagement he will learn and will have access to confidential
information regarding USDL and its affiliates, including without limitation (i)
confidential or secret plans, programs, documents, agreements or other material
relating to the business, services or activities of USDL and its affiliates and
(ii) trade secrets, market reports, customer investigations, customer lists and
other similar information that is proprietary information of USDL or its
affiliates (collectively referred to as "Confidential Information"). All
records, files, materials and Confidential Information excluding personal items,
obtained by Burke in the course of his employment with USDL are confidential and
proprietary and shall remain the exclusive property of USDL or its affiliates,
as the case may be. Burke will not, except in connection with and as required by
his performance of his duties under this Agreement, for any reason use for his
own benefit or the benefit of any person or entity with which he may be
associated or disclose any such Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
without the prior written consent of the board of directors of USDL, unless such
Confidential Information previously shall have become public knowledge through
no action by or omission of Burke.
VII. MISCELLANEOUS
7.1. ACCESS TO THE CENTER, CONFIDENTIALITY OF RECORDS. Burke shall, during
the term hereof, be given such access as is reasonably necessary to USDL's
facilities and its records, in order that he may carry out his obligations
hereunder, subject to confidentiality requirements of patient medical records as
established by USDL in consultation with Burke. Burke shall use his best efforts
to maintain the confidentiality of all files and records, including patient
records, of USDL, disclosing the same only as directed by law or by USDL in any
particular instance.
7.2. SUCCESSORS. All the provisions herein contained shall be binding upon
and inure to the benefit of the successors (including resulting corporations in
a merger, consolidation or other reorganization) and assigns of Burke and USDL
to the same extent as if each such successor and assign were in each case named
as a party to this agreement.
7.3. RESTRICTION ON ASSIGNMENT. Neither party hereto may assign its
interest in or delegate the performance of its obligations under this agreement
to any person without obtaining the prior written consent of the other party.
7.4. RIGHTS CUMULATIVE; NO WAIVER. No right or remedy herein conferred upon
or reserved to either of the parties hereto is intended to be exclusive of any
other right or remedy, and each and every right and remedy shall be cumulative
and in addition to any
4
<PAGE>
other right or remedy given hereunder, or now or hereafter legally existing upon
the occurrence of an event of default hereunder. The failure to either party to
insist at any time upon the strict failure to either party to insist at any time
upon the strict observance or performance of any of the provisions of this
agreement, shall not impair any such right or remedy or be construed as a waiver
or relinquishment thereof with respect to subsequent defaults. Every right and
remedy given by this agreement to the parties hereto may be exercised from time
to time and as other as may be deemed expedient by the parties, as the case may
be.
7.5. HEADINGS. The headings to the various sections of the agreement have
been inserted for convenience of reference only and shall not modify, define,
limit or expand the express provisions of this agreement.
7.6. COUNTERPARTS. This agreement may be executed in any number of
counterparts, each of which shall be an original, and each counterpart shall
together constitute but one and the same agreement.
7.7. NOTICES. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deeded to have been duly give, if any
hand delivered, upon receipt thereof, or if mailed by certified or registered
mail, postage prepared, three (3) days following deposit in the U.S. mail and,
in any event, to be addressed as follows:
If to Burke:
Robert Burke, M.D.
11 Sheldrake Lane
Palm Beach Gardens, Florida 33418
If to USDL:
US Diagnostic Inc.
777 South Flagler Drive
West Palm Beach, Florida 33401
Attention: Jeffrey A. Goffman, Chairman
or to such other person and address as the parties may designate in writing.
7.8 EFFECT OF INVALIDITY. Should any part of this agreement, for any
reason, be declared invalid, such decision shall not affect the validity of any
remaining portion, which remaining portion shall remain in full force and effect
as if this agreement had been executed with the invalid portion thereof
eliminated.
7.9 AUTHORIZATION FOR AGREEMENT. The execution and performance of this
agreement by USDL and Burke have duly authorized by all necessary corporate
action, and this
5
<PAGE>
agreement constitutes a valid and binding obligation of USDL and Burke,
enforceable against each of them in accordance with its time.
7.10. NOTICE OF CLAIMS. Any party shall immediately give notice of any
claim against it to any party from whom it intends to seek indemnity pursuant to
section 5.1 or 5.2 hereof.
7.11. ARBITRATION. Any controversy, dispute or claim arising out of or
relating to this Agreement, or its interpretation, application, implementation,
breach or enforcement which the parties are unable to resolve by mutual
agreement, shall be settled by submission by either party of the controversy,
claim or dispute to binding arbitration in West Palm Beach, Florida (unless the
parties agree in writing to a different location), before a single arbitrator in
accordance with the rules of the American Arbitration Association then in
effect. In any such arbitration proceeding the parties agree to provide all
discovery deemed necessary by the arbitrator. The decision and award made by the
arbitrator shall be final, binding and conclusive on all parties hereto for all
purposes, and judgment may be entered thereon in any court having jurisdiction
thereof.
7.12. ATTORNEY'S FEES. In the event that there is any controversy or claim
arising out of or relating to this Agreement, or to the interpretation, breach
or enforcement thereof, and any action or proceeding including that in
arbitration as provided for in Section 7.11 of this Agreement, is commenced to
enforce the provisions of this Agreement, the prevailing party shall be entitled
to an award by the court or arbitrator, as appropriate, of reasonable attorney's
fee, costs and expenses.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed as of the 1st day of October, 1996.
ROBERT BURKE, M.D. US DIAGNOSTIC INC.
________________________ By:___________________________
Jeffrey A. Goffman, Chairman
EXHIBIT 11
US DIAGNOSTIC INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
1996 1995
---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
PRIMARY EARNINGS PER SHARE:
<S> <C> <C>
Primary Weighted Average Shares of Common Stock
and Common Stock Equivalents Outstanding 13,576 4,996
======== =======
Net Income (Loss) $ (6,331) $ 3,331
======== =======
Earnings (Loss) Per Share - Primary $ (.47) $ .67
======== =======
FULLY DILUTED EARNINGS PER SHARE: (1)
Weighted Average Shares Outstanding 13,576 4,996
Dilutive Effect of Assumed Warrant Conversions 10,886 7,182
-------- -------
Fully Diluted Weighted Average Shares of Common Stock
and Common Stock Equivalents Outstanding 24,462 11,761
======== =======
Net Income (Loss) $ (6,331) $ 3,331
Adjustments to Net Income for Interest Savings 2,837 3,682
-------- -------
Adjusted Net Income (Loss) $ (3,494) $ 7,013
======== =======
Earnings (Loss) Per Share - Fully Diluted $ (.14) $ .60
======== =======
<FN>
- ----------
(1) This calculation is submitted for 1996 in accordance with Regulation S-K
Item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No.
15 because it produces an anti-dilutive result.
</FN>
</TABLE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
STATE OF
CORPORATE NAME INCORPORATION % OWNED
<S> <C> <C>
Advanced Medical Imaging Center, Inc. Delaware 100.00%
Affiliated Medical Imaging Network, Inc. California 100.00%
AH Imaging, Inc. Delaware 100.00%
Columbus Diagnostic Center Inc. Delaware 100.00%
Commumity Radiology of Virginia Inc. Virginia 100.00%
Computerized Medical Imaging Center Inc. Delaware 56.90%
DI Imaging Center Inc. Delaware 100.00%
Diagnostic Equity Partners Florida 50.00%
Eastside Imaging, Inc. Texas 100.00%
Fannin Street Imaging, Inc. Texas 100.00%
FCA of Van Nuys, Inc. California 100.00%
Finance Funding Corp. Florida 100.00%
First Choice Networks, Inc. Florida 100.00%
Fort Bend Imaging, Inc. Texas 100.00%
Futurecare Affiliates, Inc. Delaware 100.00%
Gulf Coast Imaging Services, Inc. Texas 100.00%
Hamilton Wolfe Imaging, Inc. Texas 100.00%
Heights Imaging Center Inc. Delaware 100.00%
Imaging Management Services Inc. Delaware 100.00%
Integrated Health Concepts Inc. Texas 70.00%
Kaley Imaging, Inc. Florida 100.00%
Laborde Diagnostic Inc. Louisiana 80.00%
LB Imaging Center, Inc. Delaware 100.00%
Medical Marketing Development, Inc Delaware 100.00%
Medical Imaging Centers of America, Inc. California 100.00%
Medical Imaging Centers of America, Inc. (General Partner) Missouri 82.00%
Medical Imaging Equipment Leasing, Inc. Florida 100.00%
Medical Marketing Development Inc. New York 100.00%
MediTek-Broward, Inc. Florida 100.00%
MediTek-Chatham Industries, Inc. Florida 100.00%
</TABLE>
<PAGE>
EXHIBIT 21 CONTINUED
PAGE 2
<TABLE>
<CAPTION>
STATE OF
CORPORATE NAME INCORPORATION % OWNED
<S> <C> <C>
MediTek-Greystone, Inc. Florida 100.00%
MediTek-HE, Inc. Florida 100.00%
MediTek-ICOT, Inc. Florida 100.00%
MediTek-Newark, Inc. Florida 100.00%
MediTek-Palm Beach Gardens Inc. Florida 100.00%
MediTek-Palms, Inc. Florida 100.00%
MediTek-PBGMRI, Inc. Florida 100.00%
MediTek-Premier North, Inc. Florida 100.00%
MediTek-Premier, Inc. Florida 100.00%
MediTek-Sun Coast, Inc. Florida 100.00%
MediTek Anesthesia, Inc. Florida 100.00%
MediTek Capital Corp. Florida 100.00%
MediTek Gwinnet, Inc. Georgia 100.00%
MediTek Health Care Management, Inc. Florida 100.00%
MediTek Health Corporation Florida 100.00%
MediTek Industries, Inc. Florida 100.00%
MediTek Therapy, Inc. Florida 100.00%
MICA CAL II, Inc. California 92.50%
MICA CAL X, Inc. Florida 100.00%
MICA FLO I, Inc. California 50.00%
MICA Imaging, Inc. California 100.00%
MICA OR I, Inc. California 94.90%
MICA Pacific, Inc. California 100.00%
Modesto Imaging Center Inc. Delaware 100.00%
Owner Diagnostics, Inc. California 67.53%
San Antonio Diagnostic Imaging, Inc. Delaware 100.00%
San Francisco Magnetic Resonance Center, Inc. Delaware 100.00%
Santa Fe Imaging Center Inc. Delaware 100.00%
South Coast Radiologists, A Corporation Oregon 100.00%
Steeplechase Diagnostic Center, Inc. Texas 100.00%
Townley Group, Inc. California 50.10%
U.S Cancer Care, Inc. California 50.10%
U.S. Imaging, Inc. Texas 100.00%
</TABLE>
<PAGE>
EXHIBIT 21 CONTINUED
Page 3
<TABLE>
<CAPTION>
STATE OF
CORPORATE NAME INCORPORATION % OWNED
<S> <C> <C>
USD Dayton Inc. Delaware 100.00%
Wilkes Barre Imaging New York 60.00%
Medical Diagnostic, Inc. Delaware 100.00%
Western Massachusetts Magnetic Resonance Services, Inc. Massachusetts 100.00%
MRI Associates, Inc. Massachusetts 100.00%
MDI Investments, Inc. Massachusetts 100.00%
Greater Boston MRI Services, Inc. Massachusetts 100.00%
Mobile MRI of Western Mass., Inc. Massachusetts 100.00%
Central Massachusetts MRI Services, Inc. Massachusetts 100.00%
Casco Bay MR Services, Inc. Maine 100.00%
MDI Finance & Leasing, Inc. Massachusetts 100.00%
Merrimack Scanning, Inc. New Hampshire 100.00%
Middlesex MRI Center, Inc. Massachusetts 100.00%
MDI-New York, Inc. New York 100.00%
MDI Rehab, Inc. Massachusetts 100.00%
Meritus PLS, Inc. Virginia 100.00%
Greater Springfield MRI, Inc. Massachusetts 100.00%
MICA CAL. III, Inc. Florida 100.00%
MICA CAL. IV, Inc. Florida 100.00%
MICA CAL. I, Inc. California 100.00%
MediTek-Wellington Corp, Florida 100.00%
MICA CAL VII, Inc. California 43.19%
MediTek-Winter Park Inc. Florida 100.00%
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHDEULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 18,640,729
<SECURITIES> 7,280,000
<RECEIVABLES> 60,712,594
<ALLOWANCES> (10,593,150)
<INVENTORY> 0
<CURRENT-ASSETS> 81,359,973
<PP&E> 91,770,792
<DEPRECIATION> (11,824,836)
<TOTAL-ASSETS> 339,023,383
<CURRENT-LIABILITIES> 73,377,181
<BONDS> 155,447,410
0
0
<COMMON> 237,492
<OTHER-SE> 133,274,593
<TOTAL-LIABILITY-AND-EQUITY> 339,023,383
<SALES> 0
<TOTAL-REVENUES> 102,061,282
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 96,800,721
<LOSS-PROVISION> 4,015,944
<INTEREST-EXPENSE> 8,974,246
<INCOME-PRETAX> (5,354,529)
<INCOME-TAX> (600,318)
<INCOME-CONTINUING> (6,330,848)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,330,848)
<EPS-PRIMARY> (.47)
<EPS-DILUTED> (.47)
</TABLE>
