-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VRvwUX1F7mDP0zIs24Kv9P0acI64WFLHh0N0IVDXwMJLswBIRAmCscBQ0IwtazFS hySyhScc3EiMhAWA8UqrrA== 0000891618-00-000900.txt : 20000215 0000891618-00-000900.hdr.sgml : 20000215 ACCESSION NUMBER: 0000891618-00-000900 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RAYTEL MEDICAL CORP CENTRAL INDEX KEY: 0001002017 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISC HEALTH & ALLIED SERVICES, NEC [8090] IRS NUMBER: 942787342 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-27186 FILM NUMBER: 541536 BUSINESS ADDRESS: STREET 1: 2755 CAMPUS DR STREET 2: STE 200 CITY: SAN MATEO STATE: CA ZIP: 94403 BUSINESS PHONE: 6503490800 MAIL ADDRESS: STREET 1: 2755 CAMPUS DRIVE STREET 2: SUITE 200 CITY: SAN MATEO STATE: CA ZIP: 94403 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the Quarterly period ended December 31, 1999; 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 Number: 0-27186 --------- RAYTEL MEDICAL CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 94-2787342 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.)
2755 CAMPUS DRIVE, SUITE 200, SAN MATEO, CALIFORNIA 94403 (Address of principal executive offices) (Zip code) (650) 349-0800 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
CLASS SHARES OUTSTANDING AS OF JANUARY 28, 2000 ----- ----------------------------------------- COMMON STOCK ($.001 PAR VALUE) 8,746,344
2 RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of December 31, 1999 and September 30, 1999.............................3 Condensed Consolidated Statements of Operations for the three months ended December 31, 1999 and 1998................4 Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 1999 and 1998................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................7 Item 3. Quantitative and Qualitative Disclosures about Market Risks..........12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K......................................13 SIGNATURE......................................................................14
2 3 PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1999 AND SEPTEMBER 30, 1999 (000'S OMITTED) ASSETS
DECEMBER 31, SEPTEMBER 30, 1999 1999 ------------ ------------ (UNAUDITED) Current assets: Cash and cash equivalents $ 5,650 $ 6,110 Receivables, net 35,059 34,858 Prepaid expenses and other 3,006 3,143 --------- --------- Total current assets 43,715 44,111 Property and equipment, less accumulated depreciation and amortization 20,620 22,239 Intangible assets, less accumulated amortization 50,581 51,388 Other 48 45 --------- --------- Total assets $ 114,964 $ 117,783 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and capital lease obligations $ 1,464 $ 2,124 Accounts payable 4,499 3,793 Accrued compensation and benefits 2,962 3,391 Accrued liabilities 5,992 6,204 --------- --------- Total current liabilities 14,917 15,512 Long-term debt and capital lease obligations, net of current portion 24,934 27,246 Deferred liabilities 28 129 Minority interest in consolidated entities 2,152 2,867 --------- --------- Total liabilities 42,031 45,754 --------- --------- Stockholders' equity: Common stock 9 9 Additional paid-in capital 62,057 62,053 Common stock to be issued 1,045 1,045 Retained earnings 13,444 12,544 --------- --------- 76,555 75,651 Less treasury stock, at cost (3,622) (3,622) --------- --------- Total stockholders' equity 72,933 72,029 --------- --------- Total liabilities and stockholders' equity $ 114,964 $ 117,783 ========= =========
3 4 RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998 (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
DECEMBER 31, ----------------------- 1999 1998 -------- -------- Revenues: Cardiac information services $ 10,441 $ 11,717 Diagnostic imaging services 5,332 4,780 Heart facilities and other 8,112 9,308 -------- -------- Total revenues 23,885 25,805 -------- -------- Costs and expenses: Operating costs 10,402 11,844 Selling, general and administrative 9,376 9,115 Depreciation and amortization 2,188 2,069 -------- -------- Total costs and expenses 21,966 23,028 -------- -------- Operating income 1,919 2,777 Interest expense 553 672 Other expense (income) (253) (177) Minority interest 144 69 -------- -------- Income before income taxes 1,475 2,213 Provision for income taxes 575 863 -------- -------- Net income $ 900 $ 1,350 ======== ======== Net income per share: Basic $ .10 $ .16 ======== ======== Diluted $ .10 $ .15 ======== ======== Weighted average shares: Basic 8,745 8,667 ======== ======== Diluted 8,939 9,077 ======== ========
4 5 RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED DECEMBER 31, 1999 AND 1998 (UNAUDITED) (000'S OMITTED)
DECEMBER 31, --------------------- 1999 1998 ------- ------- Cash flows from operating activities: Net income $ 900 $ 1,350 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,188 2,069 Minority interest 144 69 Pay out of deferred compensation -- (1,245) Other, net (20) (2) Changes in operating accounts: Receivables, net (547) 2,452 Prepaid expenses and other 90 570 Accounts payable 756 (460) Accrued liabilities and other 42 993 ------- ------- Net cash provided by operating activities 3,553 5,796 ------- ------- Cash flows from investing activities: Capital expenditures (962) (2,080) Other, net 100 (4) ------- ------- Net cash used in investing activities (862) (2,084) ------- ------- Cash flows from financing activities: Income distributions to noncontrolling investors (937) (466) Paydown of line of credit (1,802) (2,648) Principal repayments of debt (417) (392) Other, net 5 47 ------- ------- Net cash used in financing activities (3,151) (3,459) ------- ------- Net increase (decrease) in cash and cash equivalents (460) 253 Cash and cash equivalents at beginning of period 6,110 7,463 ------- ------- Cash and cash equivalents at end of period $ 5,650 $ 7,716 ======= =======
The accompanying unaudited condensed consolidated financial statements of Raytel Medical Corporation (the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the three months ended December 31, 1999 are not necessarily indicative of results that may be expected for the year ending September 30, 2000. For further information, refer to the consolidated financial statements and notes included in the Company's Annual Report on Form 10-K for the year ended September 30, 1999. 5 6 For the three months ended December 31, 1999 and 1998, basic and diluted earnings per share are calculated as follows:
For the three months ended December 31, -------------------- (000's omitted, except per share amounts) 1999 1998 ------ ------ BASIC EARNINGS PER SHARE: Net income $ 900 $1,350 ====== ====== Weighted average shares outstanding 8,745 8,667 ====== ====== Per share $ .10 $ .16 ====== ====== DILUTED EARNINGS PER SHARE: Net income $ 900 $1,350 ====== ====== Weighted average shares outstanding 8,745 8,667 Shares to be issued 144 151 Options 50 259 Warrants -- -- ------ ------ 8,939 9,077 ====== ====== Per share $ .10 $ .15 ====== ======
Certain options and warrants to purchase shares of common stock were outstanding during the three months ended December 31, 1999 and 1998, but were not included in the computation of diluted earnings per share because their exercise prices were greater than the average market price of the common shares for the period. The options and warrants outstanding and their exercise prices are as follows:
For the three months ended December 31, ------------------------ (000's omitted, except per share amounts) 1999 1998 ------ ------ Options and warrants outstanding 995,443 482,814 Range of exercise prices $3.625-$13.50 $4.75 - $13.50
6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This discussion and analysis includes a number of forward-looking statements which reflect the Company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties, including those discussed under "Business Environment and Future Results" and elsewhere in this Item, that could cause actual results to differ materially from historical results or those anticipated. In this Item, the words "anticipates," "believes," "expects," "intends," "future" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. OVERVIEW The Company generates its revenues from cardiac information services which includes telephonic monitoring services for cardiac pacemaker patients ("Pacing"), cardiac event detection services ("CEDS") and Holter, diagnostic imaging services and from heart facilities. Following the Company's initial public offering in December 1995, the Company has entered into a series of transactions which expanded its heart center and physician practice management businesses. As a result, revenue is being provided from: Raytel Heart Center at Granada Hills ("RHCGH") beginning on February 1, 1996; the management of Southeast Texas Cardiology Associates II P.A. ("SETCA") beginning on September 18, 1996; the management of Comprehensive Cardiology Consultants, a Medical Group, Inc. ("CCMG") beginning on November 1, 1996; and Cardiovascular Ventures, Inc. ("CVI") beginning on August 15, 1997, which included the multi-specialty physician clinic, Heart and Family Health Institute ("HFHI") and seven cardiovascular diagnostic facilities. Under certain practice management contracts, revenues are recognized pursuant to long-term arrangements with physician groups under which the Company provides the physician group with a full range of services, including, but not limited to, office space, specialized clinical and procedural facilities, medical equipment, data processing and medical record keeping, billing and collection procedures and services, non-physician licensed personnel, such as nurses and technicians, as well as office staff and administrative personnel. In the case of SETCA and CCMG, the Company's practice management revenues are derived from the physician groups' revenues, generally as a purchased service, except for certain physician compensation and employment benefits, which are paid by the physician group on a priority basis. Under the above management services arrangements, the Company's practice management revenues represent approximately 83% and 66% of the revenues of the physician groups for the three months ended December 31, 1999 and 1998, respectively. For HFHI, the Company recognizes 100% of all medical revenue as the physicians are employees of the Company. On October 9, 1997, the Company announced it had entered into an agreement with The Baptist Hospital of Southeast Texas ("Baptist") to develop a Raytel Cardiovascular Center at the hospital. Under the agreement, Raytel was to manage the cardiovascular center, which will provide the entire continuum of cardiovascular services, including diagnostic, therapeutic and patient management programs. Among other duties, Raytel was to be responsible for the day-to-day operations of the heart center, including administrative support, information systems management, marketing and public relations activities. The Company began operations at Baptist during its fourth quarter of fiscal 1998. Due to the recent merger between Baptist and the Memorial Hermann Hospital System, a modified agreement became effective March 1, 1999. Therefore, during the first five months of fiscal 1999, the Company only recognized revenue to the extent of expenses. Effective March 1, 1999, the Company is recognizing revenue based on the modified agreement which calls for the Company to manage portions of the cardiovascular surgery and cardiology programs at Baptist and to develop and manage specialty clinics to support the cardiovascular program. 7 8 Effective March 27, 1999, the Company entered into a revised agreement with RHCGH. The new agreement results in significantly lower revenues and expenses than revenues and expenses recognized under the previous agreements. However, under the new agreement, the Company expects to generate income. Under the old agreements, operating expenses were in excess of revenues. In November 1999, the Company filed a demand for arbitration against CCMG with JAMS/Endispute, Inc. The Company provides management services to CCMG pursuant to a long-term management services agreement entered into between the parties in November 1996. The demand for arbitration asserts that Raytel is entitled to rescission, restitution and/or damages as a result of CCMG's material breaches of the management services agreement. The Company does not expect that an adverse opinion in the arbitration will have a material adverse effect on the financial condition of the Company. RESULTS OF OPERATIONS Three Months Ended December 31, 1999 Compared to Three Months Ended December 31, 1998 Revenues. For the three months ended December 31, 1999, total revenues were $23,885,000 compared to $25,805,000 for the three months ended December 31, 1998, representing a decrease of $1,920,000, or 7.4%. Cardiac information services revenues were $10,441,000 for the three months ended December 31, 1999, compared to $11,717,000 for the three months ended December 31, 1998, a decrease of $1,276,000, or 10.9%. The decrease in revenues for cardiac information services was due primarily to lower revenues from CEDS as a result of lower test volumes, and lower revenues from Pacing due to a decrease in test volumes as well as lower reimbursement rates. Diagnostic imaging services revenue was $5,332,000 for the three months ended December 31, 1999, compared to $4,780,000 for the three months ended December 31, 1998, an increase of $552,000, or 11.5%, due primarily to increases in revenue at certain centers and the imaging network due to an increase in patient volumes. Heart facilities and other revenues were $8,112,000 for the three months ended December 31, 1999, compared to $9,308,000 for the three months ended December 31, 1998, a decrease of $1,196,000, or 12.8%, due primarily to lower revenue at RHCGH due to the amended agreement partially offset by an increase in revenue at HFHI. Operating Expenses. Operating costs and selling, general and administrative expenses decreased by $1,181,000, or 5.6%, from $20,959,000 for the three months ended December 31, 1998 to $19,778,000 for the three months ended December 31, 1999, due primarily to lower expenses at RHCGH due to the amended agreement, partially offset by slight increases in costs and expenses in diagnostic imaging services, HFHI and cardiac information services. Operating costs and selling, general and administrative expenses as a percentage of total revenues increased from 81.2% for the three months ended December 31, 1998 to 82.8% for the three months ended December 31, 1999. At RHCGH operating expenses were slightly in excess of revenues for the period ended December 31, 1998. Depreciation and Amortization. Depreciation and amortization expense increased by $119,000, or 5.8%, from $2,069,000 for the three months ended December 31, 1998 to $2,188,000 for the three months ended December 31, 1999, and increased as a percentage of revenues from 8.0% for the three months ended December 31, 1998 to 9.2% for the three months ended December 31, 1999. Operating Income. As a result of the foregoing factors, operating income decreased by $858,000, or 30.9% from $2,777,000 for the three months ended December 31, 1998 to $1,919,000 for the three months ended December 31, 1999. Interest Expense. Interest expense decreased by $119,000, or 17.7%, from $672,000 for the three months ended December 31, 1998 to $553,000 for the three months ended December 31, 1999 due primarily to a decrease in debt. 8 9 Other Expense (Income). Other income increased by $76,000 due primarily to a series of insignificant items. Minority Interest. Minority interest increased by $75,000, from $69,000 for the three months ended December 31, 1998 to $144,000 for the three months ended December 31, 1999 due primarily to increased income in a certain cardiovascular diagnostic facility. Income Taxes. The provision for income taxes decreased by $288,000, or 33.4%, from $863,000 for the three months ended December 31, 1998 to $575,000 for the three months ended December 31, 1999 as a result of a lower taxable income. Net Income. As a result of the foregoing factors, net income decreased by $450,000, or 33.3%, from $1,350,000 for the three months ended December 31, 1998 to $900,000 for the three months ended December 31, 1999. SEGMENT INFORMATION The Company's reportable segments are strategic business units that offer different services. The Company has three reportable segments: Cardiac Information Services ("Information"), Diagnostic Imaging Services ("Imaging") and Heart Facilities and Other ("Facilities"). The Information segment provides remote cardiac monitoring and testing services utilizing telephonic and Internet communication technology. The Imaging segment operates a network of imaging centers throughout the United States. The Facilities segment provides diagnostic, therapeutic and patient management services primarily associated with cardiovascular disease. The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2 of the Company's 1999 Annual Report) except that the Company does not allocate all interest expense, taxes or corporate overhead to the individual segments. The Company evaluates performance based on profit or loss from operations before income taxes and unallocated amounts. The totals per the schedules below will not and should not agree to the consolidated totals. The difference is due to corporate overhead and other unallocated amounts which are reflected in the reconciliation to consolidated earnings before income taxes (in thousands):
Information Imaging Facilities Total ----------- ------- ---------- ----- For the three months ended December 31,1999: Net revenue $ 10,441 $ 5,332 $ 8,112 $ 23,885 Total operating expenses 8,716 3,912 6,144 18,772 --------- --------- --------- --------- Segment contribution 1,725 1,420 1,968 5,113 Depreciation and amortization 736 418 952 2,106 Interest expense -- 72 137 209 Minority interest/other expense (income) (12) (26) (48) (86) --------- --------- --------- --------- Segment profit $ 1,001 $ 956 $ 927 $ 2,884 ========= ========= ========= ========= Segment assets $ 38,368 $ 14,701 $ 57,272 $ 110,341 ========= ========= ========= ========= Capital expenditures $ 655 $ 265 $ 39 $ 959 ========= ========= ========= =========
9 10
Information Imaging Facilities Total ----------- ------- ---------- ----- For the three months ended December 31, 1998: Net revenue $ 11,717 $ 4,780 $ 9,308 $ 25,805 Total operating expenses 8,217 3,629 7,991 19,837 --------- --------- --------- --------- Segment contribution 3,500 1,151 1,317 5,968 Depreciation and amortization 695 456 881 2,032 Interest expense -- 3 184 187 Minority interest/other expense (income) (79) (38) 29 (88) --------- --------- --------- --------- Segment profit $ 2,884 $ 730 $ 223 $ 3,837 ========= ========= ========= ========= Segment assets $ 37,716 $ 15,251 $ 62,333 $ 115,300 ========= ========= ========= ========= Capital expenditures $ 562 $ 817 $ 671 $ 2,050 ========= ========= ========= =========
THREE MONTHS ENDED DECEMBER 31, ------------------------------- 1999 1998 ------- ------- Segment profit $ 2,884 $ 3,837 Unallocated amounts: Corporate general and administrative 1,006 1,122 Corporate depreciation and amortization 82 37 Corporate interest expense 344 485 Corporate other expense (income) (23) (20) ------- ------- Earnings before income taxes $ 1,475 $ 2,213 ======= =======
BUSINESS ENVIRONMENT AND FUTURE RESULTS The Company's future operating results may be affected by various trends in the healthcare industry as well as by a variety of other factors, some of which are beyond the Company's control. The healthcare industry is undergoing significant change as third-party payors attempt to control the cost, utilization and delivery of healthcare services. Substantially all of the Company's revenues are derived from Medicare, HMOs, commercial insurers and other third-party payors. Both government and private payment sources have instituted cost containment measures designed to limit payments made to healthcare providers by reducing reimbursement rates, limiting services covered, increasing utilization review of services, negotiating prospective or discounted contract pricing, adopting capitation strategies and seeking competitive bids. Revenue from the Company's Pacing operations during certain periods of the last three fiscal years has been negatively impacted by Medicare reimbursement rate reductions. Reimbursement rate reductions applicable to the Company's Pacing procedures became effective on January 1, 1997. These reductions had a negative effect on the Company's operating results for the last three quarters of fiscal 1997 and for the first quarter of fiscal 1998. The Company's Pacing operations have been favorably impacted for the period January 1, 1998 to December 31, 1998 due to an increase in Medicare reimbursement rates effective January 1, 1998. However, a slight decrease in these rates became effective on January 1, 1999, thereby having a negative effect on Pacing revenue for calendar 1999. The Company cannot predict with any certainty whether or when additional reductions or changes in Medicare or other third-party reimbursement rates or policies will be implemented. There can be no assurance that future changes, if any, will not adversely affect the amounts or types of services that may be reimbursed to the Company, or that 10 11 future reimbursement of any service offered by the Company will be sufficient to cover the costs and overhead allocated to such service. From time to time Congress considers legislation to reduce Medicare and Medicaid expenditures. Future legislation of this type could have a material adverse effect on the Company's business, financial condition and operating results. Governmental agencies promulgate regulations which mandate changes in the method of delivering services which could have a material adverse effect on the Company's business. A key element of the Company's long-range strategy was the development and operation of integrated heart centers and the acquisition of healthcare providers specializing in cardiology related services and the assets of physician practices and other businesses related to its current operations. The success of the Company's existing heart centers and physician practices depends upon several factors, including the Company's ability to: obtain and operate in compliance with appropriate licenses; control costs and realize operating efficiencies; educate patients, referring physicians and third-party payors about the benefits of such heart centers; and provide cost-effective services that meet or exceed existing standards of care. An element of the Company's strategy is to expand, in part, through acquisitions and investments in complementary healthcare businesses. The implementation of this strategy may place significant strain on the Company's administrative, operational and financial resources and increase demands on its systems and controls. There can be no assurances that businesses acquired by the Company, either recently or in the future, will be integrated successfully and profitably into the Company's operations, that suitable acquisitions or investment opportunities will be identified, or that any such transactions can be consummated. Providers of healthcare services are subject to numerous federal, state and local laws and regulations that govern various aspects of their business. There can be no assurance that the Company will be able to obtain regulatory approvals that may be required to expand its services or that new laws or regulations will not be enacted or adopted that will have a material adverse effect on the Company's business, financial condition or operating results. The healthcare businesses in which the Company is engaged are highly competitive. The Company expects competition to increase as a result of ongoing consolidations and cost-containment pressures, among other factors. The trading price of the Company's Common Stock could be subject to wide fluctuations in response to quarterly variations in the Company's operating results, shortfalls in such operating results from levels forecasted by securities analysts and other events or factors. In addition, the stock market has, from time to time, experienced extreme price and volume fluctuations that have particularly affected the market prices of companies in the healthcare service industries and that have often been unrelated to the operating performance of the affected companies. Announcements of changes in reimbursement policies of third-party payors, legislative or regulatory developments, economic news and other external factors may have a significant impact on the market price of healthcare stocks. LIQUIDITY AND CAPITAL RESOURCES The Company acquired CDS in June 1996 for cash in the amount of $14,254,000, SETCA in September 1996 for cash in the amount of $4,010,000 and CCMG in November 1996 for cash in the amount of $427,000 and CVI in August 1997 for cash in the amount of $16,980,000 plus $280,000 paid during fiscal 1998. At December 31, 1999, the Company had working capital of $28,798,000, compared to $28,599,000 at September 30, 1999. At December 31, 1999, the Company had cash and temporary cash investments of $5,650,000. At December 31, 1999, $17,245,000 was outstanding under the Company's line of credit. The Company batch-bills Medicare insurance carriers for most cardiac testing services performed during the first few months of each calendar year. This practice results in a temporary build-up of accounts receivable during the Company's second and third fiscal quarters and the collection of these receivables primarily during the subsequent fourth fiscal quarter. 11 12 The Company has a revolving line of credit with two banks in the amount of $45,000,000 to fund working capital needs, future acquisitions, equipment purchases and other business needs. Amounts outstanding under the line of credit bear interest based on a defined formula and are subject to certain covenants. The line of credit expires in August 2001 at which time any outstanding balance will be due and payable. The Company's long-term capital requirements will depend on numerous factors, including the rate at which the Company develops and opens new heart centers or acquires existing heart centers, physician practices or other businesses, if any. The Company believes that its cash and cash equivalent balances, together with amounts available from bank borrowings and cash generated by its operating activities, will be adequate to meet the Company's anticipated needs for working capital and capital expenditures through fiscal 2000. YEAR 2000 COMPLIANCE The Company, to date, has not experienced any significant Year 2000 problems. However, there can be no assurance that the Company will not experience any significant problems as it moves forward into Year 2000. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS The company is exposed to market risk from interest rate fluctuations because it uses variable rate debt to finance working capital requirements. The Company does not believe that there is any material market risk exposure with respect to other financial instruments that would require further disclosure under this item. 12 13 PART II. OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. EXHIBITS: The following exhibits are filed as a part of this Report:
Exhibit Number Title ------- ----- 10.63 Employment Agreement dated as of August 4, 1999, by and between Allan Zinberg and Raytel Medical Corporation 10.64 Consulting Agreement dated as of January 1, 2000 by and between Allan Zinberg and Raytel Medical Corporation 27 Financial data schedule
b. REPORTS ON FORM 8-K: The Company filed no reports on Form 8-K during the quarter ended December 31, 1999. 13 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. RAYTEL MEDICAL CORPORATION Dated: February 10, 2000 By: /s/ JOHN F. LAWLER, JR. ----------------------------- John F. Lawler, Jr. Vice President and Chief Financial Officer (duly authorized officer and principal financial officer) 14 15 EXHIBIT INDEX
Exhibit Number Title ------- ----- 10.63 Employment Agreement dated as of August 4, 1999, by and between Allan Zinberg and Raytel Medical Corporation 10.64 Consulting Agreement dated as of January 1, 2000 by and between Allan Zinberg and Raytel Medical Corporation 27 Financial data schedule
EX-10.63 2 EXHIBIT 10.63 1 EXHIBIT 10.63 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement"), dated August 20, 1999 (the "Effective Date"), is made and entered into by and between RAYTEL MEDICAL CORPORATION, INC., a Delaware corporation (the "Company"), and Allan Zinberg (the "Employee"). RECITALS A. The Company and the Employee desire to terminate the existing employment agreement between Raytel Medical Corporation and Allan Zinberg dated September 28, 1995 (the "1995 Agreement"), and to enter into this Agreement for the continued employment of the Employee as the Company' President and Chief Operating Officer, and of its subsidiary corporations, joint venture interests in various cardiovascular labs and imaging centers, and the Employee desires to accept such continued employment. The employment of the Employee by the Company pursuant to this Agreement is hereinafter sometimes referred to as the "Employment." B. The Company and the Employee hereby enter into this Agreement setting forth each and all of the terms and conditions of the Employment. NOW THEREFORE, in consideration of the premises and the agreements, representations and warranties, contained in this Agreement, the Company and the Employee hereby agree as follows: AGREEMENT 1. Duties Term and Exclusive Employment. 1.1 Duties and Responsibilities. Within the limitations established by this Agreement and the resolutions of the Board of Directors, the Employee shall have the title of President and Chief Operating Officer, but the Employee's responsibility and authority will be established by the Company's Chief Executive Officer, who shall establish specific projects for the Employee. The initial projects are set forth in Exhibit 1.1, attached hereto and incorporated herein by reference. It is the intention of the parties that the duties and responsibilities previously assigned to Employee as set forth in the Company's Bylaws and in the 1995 Employment Agreement (as defined in Paragraph 1.2, herein below) shall be re-assigned to the Chief Executive Officer or to other executives or employees within the Company during the term of this Agreement as defined in Paragraph 1.4 of this Agreement. 1.2 Termination of Existing Employment Agreement. Effective with the Effective Date of this Agreement, the employment agreement dated September 28, 1995 (the "1995 Employment Agreement") shall be terminated. -1- 2 1.3 Termination of Key Management Retention and Severance Arrangement. Effective with the Effective Date of this Agreement, Employee hereby waives participation in the Key Management Retention Bonus and Severance Plan adopted by the Compensation Committee of the Board of Directors at a meeting held on May 19, 1999. 1.4 Term of Employment. The Employment hereunder shall begin on the Effective Date and, unless earlier terminated as provided in Paragraphs 3 and 5 hereof, the Employment shall continue until midnight on December 31, 1999 (the "Term"). The Employment may not be extended except pursuant to the mutual written agreement of the parties and signed by the parties. 1.5 No Other Employment or Business Activities. During the Term of the Employment, the Employee shall work a minimum of forty (40) hours per week and shall diligently and conscientiously devote all of his working time and attention to discharging his duties to the Company and shall not, without the express prior written consent of the Board of Directors of the Company, render to any other person, corporation, partnership, firm, company, joint venture or other entity any services of any kind for compensation or engage in any other activity that would in any manner whatsoever interfere with the performance of the Employee's duties on behalf of the Company. The foregoing notwithstanding, nothing herein shall prevent the Employee from engaging in charitable activities or activities of professional associations, from managing any personal investments on his own personal time, provided that such investments are not otherwise competitive with the Company, or engaging in the additional activities listed and described in Exhibit 1.5, attached hereto and incorporated herein by reference. 1.6 Proprietary Information and Inventions Agreement. The Employee acknowledges his obligations under the Proprietary Information and Inventions Agreement of even date herewith, set forth in Exhibit 1.6, attached hereto and incorporated herein by reference (the "Proprietary Information and Inventions Agreement"), and agrees to be bound by the provisions thereof. 1.7 Indemnity Agreement. The parties acknowledge their respective rights and obligations under the Indemnity Agreement of even date herewith, set forth in Exhibit 1.7, attached hereto and incorporated herein by reference (the "Indemnity Agreement"), and agree to be bound by the provisions thereof. 2. Compensation. In full and complete consideration for the Employment and each and all of the services to be rendered to the Company, and any subsidiary of affiliate of the Company, by the Employee, the Employee shall receive compensation as follows, except as otherwise provided in Paragraph 3 hereof: 2.1 Base Salary. The Employee shall receive from the Company a base salary, at the initial annual rate of Two Hundred Ninety-three Thousand Two Hundred Fifty-two and 96/100 Dollars ($293,252.96), pro rated for any partial week, payable in -2- 3 periodic installments in accordance with the Company's payroll policy as in effect from time to time. From each salary payment the Company will withhold any pay to the proper governmental authorities any and all amounts required by law to be withheld for federal income tax, state income tax, federal social security tax, state disability insurance premiums, and any and all other amounts required by law to be withheld from the Employee's salary. The Company will also deduct from the Employee's salary payments those sums, if any, authorized by the Employee in writing and approved by the Company. The Company will make payments and contribution, such as unemployment insurance premiums, workers' compensation insurance premiums and the employer's portion of federal social security tax, which are required by law to be made by the Company for the Employee's benefit without any deduction from the Employee's salary payments. 2.2 Bonus Awards. The Employee will be eligible for consideration for incentive compensation ("Bonus Awards"), although no Bonus Awards are required to be paid hereunder. All Bonus Awards shall be determined by the Compensation Committee with approval from the Board of Directors in their sole discretion for the current fiscal period ending September 30, 1999, as they shall determine and based upon such factors as they deem relevant. Any such Bonus award will be deemed to be earned at the end of the current fiscal period and will be paid to the Employee within ninety (90) days following the end of the fiscal period for which such award is made; provided, however, that if, prior to the end of any such fiscal period, (i) the Employment is terminated as a result of the Employee's death or disability; (ii) the Company terminated the Employment other than For Cause pursuant to Paragraph 3.2 hereof; or (iii) the Employee terminates the Employment for Good Reason pursuant to Paragraph 3.4 hereof, in each case, the Employee shall be entitled to receive a prorated Bonus Award determined by multiplying the amount of the Bonus Award, if any, that the Employee would have received had the Employee been employed for the full fiscal period by a fraction, the numerator of which is the number of full months of Employment completed during the fiscal period and the denominator of which is the number of months in the fiscal period. Any such prorated bonus award will be paid to the Employee within ninety (90) days following the end of the fiscal period for which such award in made. 2.3 Stock Options. The Employee is presently the holder of stock options granted under the Company's 1990 Stock Option Plan, which options are subject to separate written Option Agreements. No such Option Agreement constitutes an agreement of employment, and no provision of any such Option Agreement shall operate to extend the term of the Employment hereunder. During the Employment, the Employee will not be eligible for the grant of additional options. Upon termination of employment, any unvested stock options shall be controlled by the provisions set forth in Paragraph 5, herein below. 2.4 Vacation. The Employee shall be entitled to paid vacation in accordance with the Company's vacation policy for senior executives, as in effect from time to time. -3- 4 2.5 Automobile Allowance. The Employee shall be entitled to the payment of a monthly allowance for automobile expenses throughout the Term of the Employment, in the same amount and in accordance with the arrangements currently in effect, or to such alternate automobile allowance of comparable economic value as may be in effect from time to time. 2.6 Insurance and Other Benefits. The Employee shall be entitled to participate in any life, medical, dental and/or disability insurance plans, together with nay supplemental insurance plans, as my be offered by the Company to its executive employees from time to time during the Employment. The Employee shall be eligible to participate in any other fringe benefits as may be provided by the Company to its executives, generally, during the Employment. 3. Termination of Employment. The Employment may be terminated prior to the end of the Term specified in Paragraph 1.4 hereof upon the occurrence of any of the following: 3.1 Death and Disability. The Employment shall automatically terminate upon the death of the Employee. The Company shall have the right, but not the obligation, to terminate the Employment at any time following determination of the Employee's total disability (as defined pursuant to the Company's long-term disability insurance plan covering the Employee if any such plan is then in effect, or otherwise as determined by the Company's Board of Directors). In the event of the Employee's total disability, the Employee's base salary pursuant to Paragraph 2.1 hereof, shall be continued for the lesser of: (i) the duration of the Employee's total disability, or (ii) the waiting period determined in the Company's long-term disability policy then in effect or (iii) one (1) year if no such policy is then in effect. In the event of the Employee's death or total disability, the Employee or his estate shall be entitled to receive (A) the Employee's base salary through the date of termination of the Employment (as extended, in the case of total disability), plus (B) any Bonus Award earned by the Employee as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus (C) any other benefits to which the Employee is entitled pursuant to the plans described in Paragraph 2.6, hereof. In the event of a partial disability that prevents the Employee from effectively performing his duties and responsibilities hereunder, the parties will attempt, in good faith, to negotiate a basis upon which the Employee may continue as an employee of the Company in a reduced capacity and at appropriately reduced compensation. If no such arrangement is agreed upon, the Company may elect to treat the Employee's disability as a total disability for purposes of this Paragraph 3.1. 3.2 Termination of Employment by the Company "For Cause". The Company shall have the unrestricted right, but not the obligation, to terminate the Employment at any time "For Cause" in the event of the Employee's (i) willful and repeated neglect of his duties hereunder (other than as a result of a physical disability not related to substance abuse), (ii) conviction of a crime involving moral turpitude, (iii) commission of any act of fraud or dishonesty against the Company, or (iv) breach of the -4- 5 Employee's obligations hereunder or under the Proprietary Information and Inventions Agreement which, if curable, is not cured within ten (10) days following notice thereof by the Company. The decisions to terminate the Employment For Cause, to take other action or to take no action in response to such occurrence shall be in the sole and exclusive discretion of the Company. Upon any termination of the Employment by the Company For Cause, the Employee shall be entitled to receive (A) the Employee's base salary through the date of such termination, plus (B) any bonus Award earned by the Employee as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus any other benefits to which the Employee is entitled pursuant to the plans described in Paragraph 2.6, hereof. 3.3 Other Termination of Employment by the Company. The Company may terminate the Employment hereunder at any time for any reason. However, if the Employment is terminated by the Company for any reason other than pursuant to Paragraphs 3.1 or 3.2 hereof, the Employee shall be entitled to receive his base salary through the date of termination of the Employment pursuant to this Agreement. In addition, Employee shall be entitled to receive a severance payment and other benefits as set forth in Paragraph 5, herein below. 3.4 Termination of Employment by the Employee for "Good Reason". The Employee shall have the right to terminate the Employment at any time for "Good Reason" in the event that, other than pursuant to Paragraphs 3.1 or 3.2 hereof, the Company, without the Employee's prior written consent, (i) materially breaches the terms of this Agreement in respect to the payment of compensation or benefits or in any other material respect and such breach is not cured within ten (10) days after notice thereof; (ii) requires the Employee , as a condition to the Employment, to be based more than one hundred (100) miles form the location where he is based as of the Effective Date; or (iii) requires the Employee, as a condition to the Employment, to perform illegal or fraudulent acts or omissions. If the Employee voluntarily terminates the Employment for Good Reason pursuant to this Paragraph 3.4, the Employee shall be entitled to receive the payments and other benefits specified in paragraph 3.3 hereof with respect to a termination be the Company other than For Cause. 3.5 Termination of Employment by the Employee Without "Good Reason". Upon any voluntary termination of the Employment by the Employee, other than for Good Reason pursuant to Paragraph 3.4 hereof, the Employee shall be entitled to receive (i) the Employee's base salary through the date of such termination, plus (ii) any Bonus award earned by the Employee as of the date of termination of the Employment pursuant to Paragraph 2.2 hereof but not yet paid, plus (iii) any other benefits to which the Employee is entitled pursuant to the plans described in Paragraphs 2.6, hereof. 4. Expenses. The Company will reimburse the Employee for those customary, ordinary and necessary business expenses incurred by him in the performance of his duties and activities on behalf of the Company. Such expenses will be reimbursed upon presentation by the Employee of appropriate documentation to substantiate such expenses -5- 6 pursuant to the policies and procedures of the Company governing reimbursement of business expenses to its executives. 5. Compensation upon Expiration of Agreement. The Company agrees to provide Employee with the severance benefits set forth in this Paragraph 5 upon the occurrence of the following events, whichever occurs first: (i) when this Agreement terminates, either as a result of the expiration of the Term set forth in Paragraph 1.4 hereof, or pursuant to Paragraph 3.3 or 3.4 hereof, or (ii) in the event there is a Change of Control (as defined herein) that occurs prior to the expiration of the Term set forth in Paragraph 1.4. Both such events are referred to herein as the "Termination Event." 5.1 Severance Payment. In the event there is a Termination Event (as defined herein) Employee shall be entitled to receive severance payments (the "Severance Payment") equal to his then current base salary for a period of twenty-four (24) months (the "Severance Period") following the date of the Termination Event. 5.2 Method and Manner of Payment. The Severance Payment shall be paid in periodic installments during the Severance Period, in accordance with the Company's payroll policy as in effect from time to time, and shall be in lieu of any other severance payment or other benefit to which the Employee might otherwise be entitled. Notwithstanding the foregoing, in the event there is a Change of Control, then the Company agrees immediately to make a lump sum payment of the balance of the Severance Payments remaining unpaid under Paragraph 5.1, hereof. The Company will secure the payment of the Severance Payment with an irrevocable letter of credit from a commercial bank that is acceptable to both the Company and the Employee in the form of Exhibit 5.3 to this Agreement (the "Letter of Credit") as of the effective date of a Change of Control as defined in Paragraph 5.8 herein below. 5.3 Services Following Change of Control. Employee agrees that if an acquiring entity desires Employee's services for a transition period, the Employee will provide those services for up to three (3) months on the same basis at the same salary rate in effect during the Term of this Agreement; provided however, that in no event will Employee's commitment to provide services extend past July 31, 2000. 5.4 Other Benefits. In addition, in the event of such a Termination Event, the Company will, to the extent its plans permit, continue to provide to the Employee coverage under the Company's life, medical and dental plans as presently in place at the Effective Date of this Agreement or as changed from time to time by the Company prior to the expiration of the Severance Period set forth in Paragraph 5.1, above, but not any disability plan. In the event that the Company may not continue to provide the benefit of any such plans, the Severance Payment shall be increased by an amount equal to the Employee's cost of providing such discontinued -6- 7 medical and dental coverages for himself and his dependents during the Severance Period, assuming, where applicable, the timely compliance by the Employee with any notification procedure required in order to obtain continuation coverage at group rates. Following the expiration of the Term specified in Paragraph 1.4, above, or if terminated earlier in accordance with Paragraph 3, above, Employee will no longer be eligible for vacation or any other benefits except as set forth in this Paragraph 5.4. 5.5 Automobile Allowance. Following the expiration of the Term specified in Paragraph 1.4, above, or if terminated earlier in accordance with Paragraph 3, above, the Employee shall be entitled to assume, and the Company agrees to assign, the lease of any automobile provided to the Employee during the Employment and the Company agrees to waive any ownership interest in the lease agreement or in the automobile. 5.6 Bonus and Stock Options. The Employee shall not be entitled to receive any bonus or incentive compensation award during the Severance Period. Any unvested stock options previously granted to Employee pursuant to the 1990 Stock Option Plan shall become fully vested upon any Termination Event occurring. All such stock option shall remain subject to the 1990 Stock Option Plan and any written agreement evidencing such grant of stock options to the Employee. 5.7 Unused Vacation. Employee shall be entitled to receive any unused, accrued vacation time, paid as a lump sum payment, less applicable taxes, to be paid on December 31, 1999. 5.8 Change of Control Defined. For purposes of this Agreement, and at any time during the Term hereof, the term Change of Control shall mean any of the following occurrences: (i) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of sixty-seven percent (67%) or more of the combined voting power of the Company's then outstanding Voting Securities; or (ii) Approval by shareholders of the Company, or the consummation, of: (1) a merger, consolidation or reorganization involving the Company; (2) a complete liquidation or dissolution of the Company; or (3) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person. For purposes of this Agreement the term "substantially all" shall include but not be limited to any disposition or series of dispositions of business units or other assets that collectively generated at least 50% of the Company's revenues or operating -7- 8 income (defined as earnings before interest and taxes ("EBIT")) (as measured by the Company's June 30, 1999 financial statements, a copy of which is attached hereto as Exhibit 5.8); or (iii) Richard F. Bader for any reason ceasing to be the Company's Chairman and/or Chief Executive Officer. 5.9 Covenant Not to Compete. Except as provided below, Employee may not during the two (2) year period following the date a Termination Event (the "Restricted Period"), engage, directly or indirectly, as owner, partner, stockholder, joint venturer consultant, or in any other capacity whatsoever become financially interested, in any business providing the same or similar cardiac testing or diagnostic imaging services as now being performed either by Raytel Cardiac Services, Inc., Raytel Imaging Holdings, Inc., or Raytel Imaging Network, Inc. (the "Restricted Services") anywhere within the continental United States for services performed by Raytel Cardiac Services, Inc. (the "Cardiac Testing Restricted Territory"), or within a ten (10) mile radius of any of the existing facilities which are owned, operated or managed either by Raytel Imaging Holdings, Inc. or Raytel Imaging Network, Inc. (the "Diagnostic Imaging Restricted Territory"). (i) The provisions of this Paragraph 5.9 shall not pertain to or restrict Employee from: (a) owning up to 5 % of the capital stock of any corporation whose stock is publicly traded; or (b) performing the duties and responsibilities of a full-time member of the teaching faculty at an accredited business school. (c) providing management consulting or similar services with respect to heart centers, cardiac catheterization laboratories and physician practice groups. (ii) If Employee elects not to exercise any unvested stock options available to him under Paragraph 5.6 of this Agreement, the Restricted Period set forth in this Paragraph 5.9 above shall end at the time Employee's right to exercise said options expire. (iii) Employee agrees that the time period provided for, and the geographical area encompassed by, the covenant contained in Paragraph 5.9 are necessary and reasonable in order to protect the Company in the conduct of the business and the utilization of its assets. (iv) If any court having jurisdiction at any time hereafter shall hold any provision or clause of this Paragraph 5.9 to be unreasonable as to its -8- 9 scope, territory or term, and if such court in its judgment or decree shall declare or determine a lesser scope, territory or term which such court deems to be reasonable, then such scope, territory or term, as the case may be, shall be deemed automatically to have been reduced or modified to conform to that declared or determined by such court to be reasonable. (v) It is expressly agreed that monetary damages would be inadequate to compensate the Company for any breach by Employee of the covenants set forth in this Paragraph 5.9 and, accordingly, that in the event of any breach or threatened breach by Employee of any such covenant, the Company will be entitled to seek and obtain preliminary and permanent injunctive relief in any court of competent jurisdiction, in addition to any other remedies at law or in equity to which the Company may be entitled. 6. Release of Claims. Employee and his successors and assigns release the Company and its shareholders, investors, directors, officers, employees, agents, attorneys, legal successors and assigns from any and all claims, actions and causes of action, whether now known or unknown, which Employee now has, or at any time had, or shall or may have against any of the released parties based upon or arising out of any matter, cause, fact, things, act or omission whatsoever occurring or existing at any time to and including the effective date of this Agreement, including, but not limited to, any claims of wrongful termination, breach of contract, fraud, negligent misrepresentation, intentional or negligent infliction of emotional distress, defamation or national origin, race, age, sex, disability or other discrimination or harassment under the Civil Rights Act of 1964, the Age Discrimination in Employment Act of 1967, the Americans With Disabilities Act, or other applicable state or federal law. The foregoing release of claims shall not apply to any obligations arising under this Agreement. 7. Conflicts of Interest. The Employee covenants, warrants and represents to the Company that he has the full right and authority to enter into the Employment and this Agreement, that he has no agreement, duty, commitment or responsibility of any kind or nature whatsoever with or to any other person, corporation, partnership, firm, company, joint venture or other entity which would conflict in any manner whatsoever with any of his duties, obligations or responsibilities to the Company pursuant to the Employment and/or this Agreement. As a condition of the Employment and of the Company's entering into this Agreement, the Company requires that the Employee not, and the Employee hereby specifically agrees, covenants, warrants and represents that during the Employment he will not, without the Company's express prior written consent, accept any employment, contractual or other relationship of any kind or nature whatsoever or engage in any association or dealing of any kind or nature whatsoever with any person, corporation, partnership, firm, company, joint venture, or other entity in violation of the Covenant Not to Compete set forth in Paragraph 5.9 above; provided that nothing herein shall prohibit Employee from owning up to five percent (5%) of the outstanding shares of any class of equity securities of a corporation engaged in any such prohibited activity whose securities -9- 10 are listed on a national securities exchange or quoted daily in the over-the-counter listings of The Wall Street Journal. 8. Duties of the Employee After Any Notice of Termination of the Employment. Following any notice of termination of the Employment, the Employee shall fully cooperate with the Company in all matters relating to the winding up of the Employee's work on behalf of the Company and the orderly transfer of all pending work and of the Employee's duties and responsibilities to such other person or persons as may be designated by the Company in its sole discretion. Upon any termination of the Employment, the Employee will immediately deliver to the Company any and all of the Company's property of any kind or nature whatsoever in the Employee's possession, custody or control, including, without limitation any and all Confidential Information as that term is defined in the Proprietary Information and Inventions Agreement. 9. No Solicitation. During the Employment and for two (2) years following any termination of the Employment, the Employee will not, without having received prior written permission of the Company's Chief Executive Officer to do so, directly or indirectly, on his own behalf or in the service of others, hire, interfere with or raid the officers, employees, and/or agents of the Company or in any manner attempt to persuade any such person to discontinue any relationship with the Company. The Employee and the Company confirm that this Paragraph 9 is reasonable and necessary for the protection of the trade secrets and proprietary information of the Company. 10. Arbitration. Except as otherwise expressly provided in this Agreement, any and all controversies, disputes and/or claims in any manner arising out of or relating to this Agreement or the Employment shall be settled solely be arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Such arbitration proceeding shall take place in the state and county of the Company's office where the Employee is based. Judgment on any decision rendered by the arbitrator may be entered in any court having jurisdiction thereof. Each party shall bear its own attorney's fees and expenses and other costs in any arbitration proceeding. All administrative fees and the fee of the arbitrator shall be borne by the parties equally. Except as otherwise expressly provided in this Agreement, the arbitration provisions set forth above in this Paragraph 10 are intended by the Employee and by the Company to be absolutely exclusive for all purposes whatsoever, and applicable to each and every controversy, dispute and/or claim in any manner arising out of or relating to this Agreement, and the Employment, the meaning, application and/or interpretation of this Agreement, any breach or claimed breach thereof and/or any voluntary or involuntary termination of this Agreement with or without cause, including, without limitation, any such controversy, dispute and/or claim which, if pursued through any state or federal court or administrative agency, would arise at law, in equity and/or pursuant to statutory, regulatory and/or common law rules, regardless of whether such dispute, controversy and/or claim would arise in and/or from contract, tort or any other legal and/or equitable theory or basis. Notwithstanding anything to the contrary contained in this Paragraph 10, the Company shall at all times have and retain the full, -10- 11 complete and unrestricted right to immediate and permanent injunctive and other relief as provided in Paragraph 11 below. 11. The Company's Right to Immediate Injunctive Relief. The Employee recognizes, acknowledges and agrees that any breach or any threatened breach of any Paragraph, term, provision or covenant of any of Paragraphs 1, 5.9, 6, 7, 8, or 9 of this Agreement or of the Proprietary Information and Inventions Agreement would cause irreparable injury to the Company which could not be adequately compensable in monetary damages and that the remedy at law for any such breach will be entirely insufficient and inadequate to protect the Company's legitimate interests. Therefore, the Employee specifically recognizes, acknowledges and agrees that the Company shall at any and all times be and remain fully entitled to seek and obtain immediate temporary, preliminary and permanent injunctive relief for any such breach or threatened breach from any court of competent jurisdiction. The prevailing party in any action instituted pursuant to this paragraph 11 shall be entitled to recover form the other party its reasonable attorneys' fees and other expenses incurred in such litigation. 12. Survival of Certain Provisions of this Agreement. Except as may otherwise be provided herein, each and all of the terms provisions and covenants of each of paragraphs 1, 2, 3, 5, 6, 7, 8, 9, 10 and 11 of this Agreement shall, for any and all purposes whatsoever, survive any termination of the Employment, regardless of whether such termination is by the Employee, the Company, by expiration or otherwise. 13. General. 13.1 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the Company, the Employee and each and all of their respective heirs, legal representatives, successors and assigns. The duties, responsibilities and obligations of the Employee under this Agreement shall be personal and not assignable or delegable by the Employee in any manner whatsoever to any person, corporation, partnerships, firm, company, joint venture or other entity. The Employee may not assign, transfer, convey, mortgage, pledge or in any other manner encumber the compensation or other benefits to be received by him or nay rights which he may have pursuant to the terms and provisions of this Agreement. Notwithstanding the foregoing, the Company covenants and agrees to require that any successor to the Company and any person acquiring the Company, the Company's shares, or assets of Company through a Change of Control shall agree to honor the obligation of the Company under this Agreement. 13.2 Waiver. No waiver of any breach of any warranty, representation, agreement, promise, covenant, paragraph, term or provision of this Agreement shall be deemed to be a waiver of any proceeding or succeeding breach of the same or any other warranty, representation, agreement, promise, covenant, paragraph, term and/or provision of this Agreement. No extension of the time for the performance of any obligation or other act required or permitted by this Agreement shall be deemed to be an extension of the time -11- 12 of the performance of any other obligation or any other act required or permitted by this Agreement. 13.3 Sole and Entire Agreement. This Agreement, and the other agreements referred to herein, including the Company's benefit plans, are the sole, complete and entire contract, agreement and understanding between the Company and the Employee concerning the Employment, the terms and conditions of the Employment, the duration of the Employment, the termination of the Employment and the compensation and benefits to be paid and provided by the Company to the Employee pursuant to the Employment. Except as otherwise provided herein, the Agreement supersedes any and all prior contracts, agreements, plans, agreements in principle, correspondence, letters of intent, understandings, and negotiations, whether oral or written, concerning the Employment, the terms and conditions of the Employment, the duration of the Employment, the termination of the Employment and the compensation and benefits to be paid by the Company to the Employee pursuant to the Employment. 13.4 Amendments. No amendment, modification, waiver, or consent relating to this Agreement will be effective unless and until it is embodied in a written document signed by the Company and by the Employee. 13.5 Originals. The Agreement may be executed by the Company and by the Employee in counterparts, each of which shall be deemed an original and which together shall constitute one instrument. 13.6 Headings. Each and all of the headings contained in this Agreement are for reference purposes only and shall not in any manner whatsoever affect the construction or interpretation of this Agreement or be deemed a part of this Agreement for any purpose whatsoever. 13.7 Savings Provision. To the extent that any provisions of this Agreement or any Paragraph, term, provision, sentence, phrase, clause or word of this Agreement shall be found to be illegal or unenforceable for any reason, such Paragraph, term, provision, sentence, phrase, clause or word shall be modified or deleted in such a manner as to make this Agreement, as so modified, legal and enforceable under applicable laws. The remainder of this Agreement shall continue in full force and effect. 13.8 Applicable Law. This Agreement and each and every provision of this Agreement shall be interpreted solely pursuant to the internal laws of the State of California without regard to any conflicts of law principles thereof. 13.9 Construction. The language of this Agreement and of each and every paragraph, term and provisions of this Agreement shall, in all cases, for any and all purposes, and in any and all circumstances whatsoever be construed as a whole, according to its fair meaning, not strictly for or against the Employee or the Company, and with no -12- 13 regard whatsoever to the identity or status of any person or persons who drafted all or any portion of this Agreement. 13.10 Notices. Any notices to be given pursuant to this Agreement by either party to the other party may be effected by personal delivery or by registered or certified mail, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses stated below, but each party may change its or his address by written notice to the other in accordance with this Paragraph 13.10. Notices delivered personally shall be deemed received on the date of delivery. Notices delivered by mail shall be deemed received on the third business day after the mailing thereof. Mailed notices to the Employee shall be addressed as follows: Allan Zinberg Simsbury, Connecticut Mailed notices to the Company shall be addressed as follows: Raytel Medical Corporation 2755 Campus Drive, Suite 200 San Mateo, California 94403-2515 Attention: Chief Executive Officer 13.10 Expenses. The Company shall pay, or reimburse the Employee for, all reasonable attorney's fees incurred by Employee in connection with the negotiation and preparation of this Agreement. IN WITNESS THEREOF, the Company and the Employee have each duly executed this Agreement as of the date first set forth above. RAYTEL MEDICAL CORPORATION EMPLOYEE By: /s/ Richard F. Bader By: /s/ Allan Zinberg ------------------------------------ ---------------------------------- Richard F. Bader Allan Zinberg Chief Executive Officer -13- EX-10.64 3 EX-10.64 1 EXHIBIT 10.64 CONSULTING SERVICES AGREEMENT THIS AGREEMENT is made and entered into as of January 1, 2000, by and between RAYTEL MEDICAL CORPORATION, a Delaware Corporation (the "Company"), and Allan Zinberg ("Consultant"). RECITALS A. The Company is engaged in the business of providing a variety of health care services, focusing on the needs of patients with cardiovascular disease; and B. The Company desires to retain the services of Consultant to perform certain consulting services and Consultant is willing to perform such services. NOW, THEREFORE, it is agreed as follows: AGREEMENT 1. Engagement and Performance of Services. (a) Engagement. The Company hereby engages Consultant to perform consulting services in accordance with the terms and conditions of this Agreement. (b) Description of Services. Consultant shall provide consulting services to senior management of the Company. Consultant shall report to the Chief Executive Officer of the Company or his designee and shall provide consulting services, as requested in such areas as: operational issues for cardiac monitoring services provided by Raytel Cardiac Services, re-structuring of certain cardiac catheterization operations, and strategic issues relating to the sale of specific operating assets or the acquisition of specific operating assets. (c) Term. The term of this Agreement shall commence on January 1, 2000, and, unless earlier terminated as provided in subsection 1(e) below, shall continue on a month to month basis until terminated as provided in paragraph (g) herein below. (d) Service Commitment. Consultant will hold himself available to provide consulting services, on a part-time basis, during the term of this Agreement. The Company shall use reasonable efforts to schedule the performance of Consultant's services so as not to interfere with Consultant's other business commitments. To the extent practicable, the parties will establish a schedule for the performance of the consulting services. Once established, changes in such schedule will be subject to reasonable notice and Consultant's other business -1- 2 commitments. Consultant will also hold himself available, for telephone consultation for reasonable periods of time. (e) Termination. The Company shall have the right to terminate this Agreement (i) upon Consultant's failure to perform any duties reasonably assigned to him hereunder, which failure is not cured within 10 days following written notice thereof or (ii) at any time upon written notice delivered to Consultant. Consultant may terminate this Agreement at any time upon thirty (30) days written notice delivered to the Company. (f) Facilities, Equipment and Supplies. Except as specifically agreed by the parties, Consultant will provide his consulting services hereunder at his own facility. If the parties agree that certain specified services shall be performed by Consultant at the Company's facility, the Company will provide to Consultant an office, access to telephone, facsimile and e-mail equipment, reasonable clerical support and general office supplies for his use in the performance of any such consulting services. (g) Other Activities. The Company acknowledges and agrees that, subject to his obligations hereunder and his obligations as set forth in the Employment Agreement between Consultant and the Company dated August 20, 1999 (the "Employment Agreement"), Consultant shall have the right to engage in other business activities and consulting activities for other entities during the term of this Agreement; provided, however, that during the term of this Agreement, Consultant will not, without the Company's prior written consent, directly or indirectly engage in any employment, consulting or other business activity other than for the Company relating to any line of business in which the Company is at such time engaged, or which would otherwise conflict with Consultant's obligations to the Company under this Agreement. The foregoing notwithstanding, nothing herein shall prevent the Employee from engaging in charitable activities or activities of professional associations, from managing any personal investments on his own personal time, provided that such investments are not otherwise competitive with the Company, or engaging in the additional activities listed and described in Exhibit 1.5, attached hereto and incorporated herein by reference. This Section 1(g) of this Consulting Agreement is subordinate to Section 5.9, Covenant Not to Compete, of the Employment Agreement between Consultant and the Company, and any conflict between this Consulting Agreement and the Employment Agreement shall be resolved in favor of the Employment Agreement. (h) Compensation. As compensation for the consulting services to be performed under this Agreement, and for holding himself available to perform such services, the Company shall pay Consultant a consulting fee of One Hundred Forty Dollars ($140.00) per hour, payable every two weeks on the 1st and 15th of each month for invoices received from Consultant during the term of this Agreement. In the event that this Agreement is terminated prior to the end of a normal pay period, Consultant shall be entitled to receive such consulting fee prorated through the date of termination. Consultant shall submit an invoice for services at least one week prior to the scheduled pay period to allow time for check processing and other administrative activities. Consultant shall be required to keep detailed time records of the -2- 3 actual hours or portions or hours spent performing the duties set forth in Paragraph 1(b). Travel and administrative time are not billable to the Company except as provided herein. However, in the event that Consultant is requested to travel to a location that requires more than four hours travel time, then consultant shall be compensated on a daily basis of One Thousand One Hundred Twenty Dollars ($1,120.00) per day for each day that consulting services were actually performed, and shall be compensated on a daily basis of Five Hundred Dollars ($500.00) per day for each day that no consulting services were actually performed. In addition, weekend days or an extra day taken at the Consultant's discretion for Consultant's travel convenience shall not be counted as a paid travel day. (i) Expenses. In addition to the compensation specified in Section 1(h) above, the Company will reimburse Consultant for reasonable out-of-pocket expenses incurred by Consultant and approved in advance by the Company in connection with the performance of his consulting services hereunder. Consultant shall also submit appropriate back-up documentation to support each request for reimbursement. (k) No Violation of Others' Rights. Consultant represents and warrants that in the course of performing his services hereunder, Consultant will not (i) use, disclose to the Company or induce the Company to use any confidential or proprietary documents or information belonging to any other person or entity, or (ii) infringe or wrongfully appropriate any patents, copyrights, trade secret rights, or other intellectual property rights of any other person or entity. 2. Protection of Confidential Information. (a) Definition of Confidential Information. For purposes of this Agreement, the term "Confidential Information" shall mean all information developed by or disclosed or made available to Consultant, his employees or representatives, in connection with the performance by Consultant of the consulting services hereunder (including information known to Consultant in his capacity as a director of the Company) which the Company protects against unrestricted disclosure to others and which: (i) if in written or other tangible form, is clearly designated as "Confidential;" and (ii) if disclosed orally, is reduced to or described in a writing designating such information as "Confidential" which is delivered to Consultant promptly following such oral disclosure. By way of illustration, but not limitation, Confidential Information may include inventions, concepts, designs, techniques, processes, market data, customer lists, referral sources, suppliers, financial information and plans and strategies. (b) Confidentiality. Consultant agrees, with respect to any Confidential Information developed by or disclosed to him: (i) To use such Confidential Information only for the purposes of performing the consulting services hereunder; -3- 4 (ii) To use the same methods and degree of care to prevent disclosure of such Confidential Information as he uses to prevent disclosure of his own proprietary and confidential information; (iii) To disclose the Confidential Information to his employees only on a need-to-know basis and not to disclose any Confidential Information to any third party without the prior written consent of the Company; and (iv) To return any Confidential Information in any tangible form to the Company at the request of the Company and to retain no copies or reproductions thereof. (c) Limitations. Consultant shall not be obligated to treat information as Confidential Information if such information: (i) Was rightfully in Consultant's possession or was rightfully known to Consultant prior to receipt from the Company; (ii) Is or becomes public knowledge without the fault of Consultant; (iii) Is or becomes rightfully available to Consultant without confidential restriction from a source not under the Company's control; or (iv) Is independently developed by Consultant without use of the Confidential Information disclosed hereunder; provided, however, that the burden of proof of such independent development shall be upon Consultant. (d) Survival of Obligations. The obligations of Consultant under this Section 2 shall survive the termination of this Agreement. 3. Miscellaneous. (a) Relationship of Parties. Consultant shall at all times during the performance of his services hereunder be an independent contractor, maintaining sole and exclusive control over his business and operations. (i) At no time will either party hold itself out to be the agent, employee, lessee, subleases, partner or joint venturer of the other party. (ii) Neither party hereto shall have the express or implied right or authority to assume or create any obligation on behalf of or in the name of the other party, or to bind the other party in regard to any contract, agreement or undertaking with any third party. -4- 5 (iii) Since Consultant is not an employee of the Company, neither Consultant nor any of its employees shall be entitled, by virtue of their services hereunder, to any of the benefits which the Company may make available to its employees, including but not limited to workers' compensation insurance and coverage. (iv) Consultant will be solely responsible for all tax returns and payments required to be filed with or made to any federal, state or local tax authority with respect to Consultant's performance of services and receipt of fees under this Agreement. (v) Consultant will be solely responsible for and must maintain adequate records of expenses incurred in the course of performing services under this Agreement. (vi) No part of Consultant's compensation will be subject to withholding by the Company for the payment of any social security, federal, state or any other employee payroll taxes. (vii) Should the Internal Revenue Service or the California Department of Employment Development make a determination that Consultant was not an independent contractor but was an employee and that the consulting compensation was ordinary salary subject to customary payroll tax withholding, then Consultant agrees that Consultant shall be responsible for the employee's portion of the customary payroll taxes, such as FICA, FUTA, Medicare and SDI. (b) Entire Agreement. This Agreement constitutes the entire agreement between the parties relating to the subject matter hereof and supersedes all prior, written or oral negotiations, representations or agreement. No modification of this Agreement shall be binding on either party unless it is in writing and signed by both parties. (c) Severability. The provisions of this Agreement are severable, and if one or more provisions are judicially determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions or portions of this Agreement shall nevertheless be binding on and enforceable by and between the parties hereto. (d) Assignment. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the parties hereto. Consultant shall not transfer or assign this Agreement without the prior written consent of the Company. (e) Governing Law. The rights and obligations of the parties to this Agreement shall be governed by and construed in accordance with the laws of the State of California. -5- 6 (f) Headings. Section headings are for convenience of reference only and shall not be considered in the interpretation of this Agreement. (g) Unavoidable Delays. Either party shall be excused for any delays or defaults in the performance of this Agreement (except the payment of amounts due and payable hereunder) unavoidably caused by the act of the other, the act of any agent of the other, the act of any governmental authority, acts of God, the elements, war, litigation, strikes, walkouts, or any other cause beyond its reasonable control. Each party shall use all reasonable diligence to avoid any such delay or default and to resume performance under this Agreement as soon as practicable after such delay or default. (h) Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed effectively given upon personal delivery or on the day sent by facsimile transmission if a true and correct copy is sent the same day by first class mail, postage prepaid, or by dispatch by an internationally recognized express courier service, and in each case addressed as follows: If to Consultant: ALLAN ZINBERG -------------------------------- Simsbury, Connecticut If to the Company: RAYTEL MEDICAL CORPORATION 2755 Campus Drive, Suite 200 San Mateo, California 94403-2515 ATTN: Richard F. Bader Chief Executive Officer (i) Attorneys' Fees and Costs. Should litigation arise concerning the enforcement or interpretation of this Agreement, the prevailing party shall be entitled to recover its reasonable attorneys' fees and costs as determined by the court. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first above written. RAYTEL MEDICAL CORPORATION CONSULTANT By: /s/ Richard F. Bader By: /s/ Allan Zinberg ------------------------------------ ----------------------------------- Richard F. Bader Allan Zinberg Chief Executive Officer -6- EX-27.1 4 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS SEP-30-2000 OCT-01-1999 DEC-31-1999 5,650 0 35,059 0 0 43,715 46,700 26,080 114,964 14,917 0 0 0 9 72,924 114,964 0 23,885 0 21,966 (109) 0 553 1,475 575 900 0 0 0 900 0.10 0.10 Represents net receivables. Included in TOTAL-COSTS.
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