-----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, KcZX4rBpUWhexRj3Nri3ayd9UgRqGEDZrM9PiCPMhvw/9At4aK6nSLjZMh57ezeb iXhx93XI9Wh4bosOjbZodg== 0000891618-98-002339.txt : 19980514 0000891618-98-002339.hdr.sgml : 19980514 ACCESSION NUMBER: 0000891618-98-002339 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NASD 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: 98617985 BUSINESS ADDRESS: STREET 1: 2755 CAMPUS DR STREET 2: STE 200 CITY: SAN MATEO STATE: CA ZIP: 94403 BUSINESS PHONE: 4153490800 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 March 31, 1998; 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 APRIL 30, 1998 ----- --------------------------------------- COMMON STOCK ($.001 PAR VALUE) 8,910,605
2 RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets as of March 31, 1998 and September 30, 1997...............................3 Condensed Consolidated Statements of Operations for the three months and the six months ended March 31, 1998 and 1997 ............................................4 Condensed Consolidated Statements of Cash Flows for the six months ended March 31, 1998 and 1997....................5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders .................12 Item 6. Exhibits and Reports on Form 8-K.....................................12 SIGNATURE.....................................................................14
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, 1998 AND SEPTEMBER 30, 1997 (000'S OMITTED) ASSETS
MARCH 31, SEPTEMBER 30, 1998 1997 --------- --------- (UNAUDITED) Current assets: Cash and cash equivalents $ 7,860 $ 7,873 Receivables, net 35,265 30,345 Prepaid expenses and other 3,951 3,970 --------- --------- Total current assets 47,076 42,188 Property and equipment, less accumulated depreciation and amortization 19,901 19,712 Intangible assets, less accumulated amortization 56,319 57,486 Other 39 35 --------- --------- Total assets $ 123,335 $ 119,421 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt and capital lease obligations $ 2,061 $ 1,893 Accounts payable 3,554 5,110 Accrued liabilities 9,774 10,794 --------- --------- Total current liabilities 15,389 17,797 Long-term debt and capital lease obligations, net of current portion 38,292 34,461 Deferred liabilities 1,366 1,163 Minority interest in consolidated entities 3,753 4,101 --------- --------- Total liabilities 58,800 57,522 --------- --------- Stockholders' equity: Common stock 9 9 Additional paid-in capital 61,492 61,261 Common stock to be issued 916 943 Retained earnings 4,017 1,097 --------- --------- 66,434 63,310 Less treasury stock, at cost (1,899) (1,411) --------- --------- Total stockholders' equity 64,535 61,899 --------- --------- Total liabilities and stockholders' equity $ 123,335 $ 119,421 ========= =========
3 4 RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) (000'S OMITTED, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED MARCH 31, SIX MONTHS ENDED MARCH 31, 1998 1997 1998 1997 -------- -------- -------- -------- Revenues: Pacing, CEDS and Holter $ 11,610 $ 11,802 $ 22,962 $ 23,971 Diagnostic imaging service 5,053 4,309 9,344 8,833 Heart center, practice management and other 10,488 4,325 20,709 8,284 -------- -------- -------- -------- Total revenues 27,151 20,436 53,015 41,088 -------- -------- -------- -------- Costs and expenses: Operating costs 12,471 8,127 24,819 16,364 Selling, general and administrative 8,882 7,439 17,116 15,107 Depreciation and amortization 2,171 1,462 4,324 2,943 -------- -------- -------- -------- Total costs and expenses 23,524 17,028 46,259 34,414 -------- -------- -------- -------- Operating income 3,627 3,408 6,756 6,674 Interest expense 780 104 1,509 252 Other expense (income) (128) (2,591) (198) (2,676) Minority interest 318 78 578 180 -------- -------- -------- -------- Income before income taxes 2,657 5,817 4,867 8,918 Provision for income taxes 1,063 2,327 1,947 3,567 -------- -------- -------- -------- Net income $ 1,594 $ 3,490 $ 2,920 $ 5,351 ======== ======== ======== ======== Net income per share: Basic $ .18 $ .41 $ .33 $ .64 ======== ======== ======== ======== Diluted $ .17 $ .39 $ .31 $ .60 ======== ======== ======== ======== Weighted average shares: Basic 8,919 8,411 8,919 8,370 ======== ======== ======== ======== Diluted 9,401 8,933 9,470 8,945 ======== ======== ======== ========
4 5 RAYTEL MEDICAL CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED) (000'S OMITTED)
MARCH 31, ----------------------- 1998 1997 ------- ------- Cash flows from operating activities: Net income $ 2,920 $ 5,351 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,324 2,943 Minority interest 578 180 Other, net 187 (531) Changes in operating accounts: Receivables, net (4,920) (2,780) Prepaid expenses and other 19 (699) Accounts payable (1,556) (476) Accrued liabilities and other (1,120) 456 ------- ------- Net cash provided by operating activities 432 4,444 ------- ------- Cash flows from investing activities: Capital expenditures (3,077) (1,890) Purchase of physician practice -- (427) Other, net (265) 579 ------- ------- Net cash used in investing activities (3,342) (1,738) ------- ------- Cash flows from financing activities: Repurchase of company stock (488) (469) Income distributions to noncontrolling investors (865) (614) Proceeds from (paydown) of line of credit 4,830 (1,671) Principal repayments of debt (841) (1,226) Other, net 261 322 ------- ------- Net cash provided by (used in) financing activities 2,897 (3,658) ------- ------- Net decrease in cash and cash equivalents (13) (952) Cash and cash equivalents at beginning of period 7,873 5,737 ------- ------- Cash and cash equivalents at end of period $ 7,860 $ 4,785 ======= =======
5 6 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 and six months ended March 31, 1998 are not necessarily indicative of results that may be expected for the year ending September 30, 1998. 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, 1997. The Company has adopted the provisions of Statement of Financial Accounting Standards No. 128, Earnings Per Share. The adoption of this accounting standard did not effect previously reported earnings per share. For the three months and six months ended March 31, 1998 and 1997, basic and diluted earnings per share are calculated as follows:
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED MARCH 31, ENDED MARCH 31, --------------------- -------------------- 1998 1997 1998 1997 ------ ------ ------ ------ (000's omitted, except per share amounts) BASIC EARNINGS PER SHARE: Net income $1,594 $3,490 $2,920 $5,351 ====== ====== ====== ====== Weighted average shares outstanding 8,919 8,411 8,919 8,370 ====== ====== ====== ====== Per share $ .18 $ .41 $ .33 $ .64 ====== ====== ====== ====== DILUTED EARNINGS PER SHARE: Net income $1,594 $3,490 $2,920 $5,351 ====== ====== ====== ====== Weighted average shares outstanding 8,919 8,411 8,919 8,370 Shares to be issued 132 136 132 134 Options 310 286 363 342 Warrants 40 100 56 99 ------ ------ ------ ------ 9,401 8,933 9,470 8,945 ====== ====== ====== ====== Per share $ .17 $ .39 $ .31 $ .60 ====== ====== ====== ======
Certain options to purchase shares of common stock were outstanding during the three months and six months ended March 31, 1998 and 1997, but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average market price of the common shares for the period. The options outstanding and their exercise prices are as follows:
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED MARCH 31, ENDED MARCH 31, ----------------------- ------------------------ 1998 1997 1998 1997 ------ ------ ------ ----- Options outstanding 109,725 557,162 55,313 553,644 Range of exercise prices $10.50 - $13.50 $11.25 - $13.50 $10.50 - $13.50 $11.25 - $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 the majority of its revenues from the provision of transtelephonic monitoring services for cardiac pacemaker patients ("Pacing"), cardiac event detection services ("CEDS") and Holter, diagnostic imaging services and cardiac catheterization procedures. Following the Company's initial public offering in December 1995, the Company has entered into a series of transactions which have expanded its heart center and physician practice management businesses. As a result, revenue is also 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 medical practice, Heart and Family Health Institute ("HFHI"). The Company's investments in two ventures ("Ventures") that operated four of the consolidated diagnostic imaging centers terminated during fiscal 1997. Revenues contributed by these ventures were $245,000 and $1,038,000 for the three months and six months ended March 31, 1997, respectively. 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 52.0% and 62.0% of the revenues of the physician groups for the three months ended March 31, 1998 and 1997, respectively and approximately 53.6% and 56.1% for the six months ended March 31, 1998 and 1997, respectively. For HFHI, the Company recognizes 100% of all medical revenue as the physicians are employees of the Company. On August 15, 1997, the Company acquired the stock of CVI, of New Orleans, Louisiana. CVI manages, owns and operates cardiovascular diagnostic facilities in Texas, Louisiana, Maryland and Florida and owns and manages a physician clinic in Florida. Total consideration for the transaction consisted of cash and transaction costs of approximately $16,980,000 and 500,000 shares of Raytel Common Stock. The contingent promissory notes in the aggregate principal amount of $820,000 were cancelled in accordance with the terms of the agreement. On October 9, 1997, the Company announced it had entered into an agreement with The Baptist Hospital of Southeast Texas to develop a Raytel Heart Center at the hospital. Under the agreement, Raytel will manage the heart center, which will provide a range of cardiovascular services, including diagnostic, therapeutic and patient wellness programs. Among other duties, Raytel will be responsible for the day-to-day operations of the heart center, including administrative support, information systems management and public relations activities. The Company expects to begin operations at Baptist Hospital during its third quarter of fiscal 1998. 7 8 In September 1996, the Company received a favorable administrative decision related to a billing dispute with a New York Medicare carrier whereby it was entitled to receive approximately $4.0 million. The time period for the Healthcare Finance Administration ("HCFA") and the Social Security Administration to file an appeal expired on February 10, 1997. After accounting for administrative costs and reimbursements due to Medtronic under the terms of the acquisition of CardioCare and a separate provision against the value of a non-operating asset, the Company recognized other income of $2,510,000 pretax in its second fiscal quarter ending March 31, 1997, with a positive after tax effect of $1,506,000 or $.17 per share (the "Decision"). RESULTS OF OPERATIONS Three Months Ended March 31, 1998 Compared to Three Months Ended March 31, 1997. The operations of CVI are included in the Company's Condensed Consolidated Statements of Operations since August 15, 1997, the effective date of the Company's acquisition of CVI. Accordingly, such results are included in the three month period ended March 31, 1998, but are not included in the three month period ended March 31, 1997. Revenues. Pacing, CEDS and Holter revenues decreased by $192,000, or 1.6%, from $11,802,000 for the three months ended March 31, 1997 to $11,610,000 for the three months ended March 31, 1998, due primarily to a slight decrease in CEDS revenue partially offset by a slight increase in Pacing revenue. Diagnostic imaging service revenues increased by $744,000, or 17.3%, from $4,309,000 for the three months ended March 31, 1997 to $5,053,000 for the three months ended March 31, 1998, due primarily to increases in revenues at certain centers due to an increase in volume, partially offset by decreased revenues due to the termination of a venture on June 30, 1997. Heart Center, practice management and other revenues increased by $6,163,000, or 142.5%, from $4,325,000 for the three months ended March 31, 1997 to $10,488,000 for the three months ended March 31, 1998 due primarily to the inclusion of revenues from CVI. As a result of the foregoing factors, total revenues increased by $6,715,000, or 32.9%, from $20,436,000 for the three months ended March 31, 1997 to $27,151,000 for the three months ended March 31, 1998. Operating Expenses. Operating costs and selling, general and administrative expenses increased by $5,787,000, or 37.2%, from $15,566,000 for the three months ended March 31, 1997 to $21,353,000 for the three months ended March 31, 1998 due primarily to the inclusion of costs and expenses from CVI. Operating costs and selling, general and administrative expenses as a percentage of total revenues increased from 76.2% for the three months ended March 31, 1997 to 78.6% for the three months ended March 31, 1998. At RHCGH, operating expenses were slightly in excess of revenues for the three month periods ended March 31, 1998 and 1997. Depreciation and Amortization. Depreciation and amortization expense increased by $709,000, from $1,462,000 for the three months ended March 31, 1997 to $2,171,000 for the three months ended March 31, 1998, due primarily to the inclusion of CVI, and increased as a percentage of revenues from 7.2% for the three months ended March 31, 1997 to 8.0% for the three months ended March 31, 1998. Operating Income. As a result of the foregoing factors, operating income increased by $219,000, or 6.4%, from $3,408,000 for the three months ended March 31, 1997 to $3,627,000 for the three months ended March 31, 1998. Interest Expense. Interest expense increased by $676,000, or 650.0%, from $104,000 for the three months ended March 31, 1997 to $780,000 for the three months ended March 31, 1998 due primarily to an increase in debt due to the CVI acquisition. Other expense (income). Other income decreased by $2,463,000, from $2,591,000 for the three months ended March 31, 1997 to $128,000 for the three months ended March 31, 1998 due primarily to the Decision. 8 9 Minority interest. Minority interest increased by $240,000, or 307.7%, from $78,000 for the three months ended March 31, 1997 to $318,000 for the three months ended March 31, 1998 due primarily to the inclusion of CVI. Income Taxes. The provision for income taxes decreased by $1,264,000, or 54.3%, from $2,327,000 for the three months ended March 31, 1997 to $1,063,000 for the three months ended March 31, 1998 as a result of decreased taxable income. Net Income. As a result of the foregoing factors, net income decreased by $1,896,000, or 54.3%, from $3,490,000 for the three months ended March 31, 1997 to $1,594,000 for the three months ended March 31, 1998. Six Months Ended March 31, 1998 Compared to Six Months Ended March 31, 1997. The operations of CVI are included in the Company's Condensed Consolidated Statements of Operations since August 15, 1997, the effective date of the Company's acquisition of CVI. Accordingly, such results are included in the six month period ended March 31, 1998, but are not included in the six month period ended March 31, 1997. The results of operations from the management service agreement with CCMG are included in the Company's Condensed Consolidated Statements of Operations since November 1, 1996, the effective date of the agreement. Accordingly, such results are included in the six month period ended March 31, 1998, but are only included for five months of the six month period ended March 31, 1997. Revenues. Pacing, CEDS and Holter revenues decreased by $1,009,000, or 4.2%, from $23,971,000 for the six months ended March 31, 1997 to $22,962,000 for the six months ended March 31, 1998, due primarily to lower reimbursement rates for Pacing during the October 1 to December 31, 1997 time period and from CEDS due to a combination of competitive pressures and lower reimbursement rates. Diagnostic imaging service revenues increased by $511,000, or 5.8%, from $8,833,000 for the six months ended March 31, 1997 to $9,344,000 for the six months ended March 31, 1998, due primarily to increases in revenues at certain centers due to an increase in volume, partially offset by decreased revenues due to the termination of two Ventures in fiscal 1997. Heart Center, practice management and other revenues increased by $12,425,000, or 150.0%, from $8,284,000 for the six months ended March 31, 1997 to $20,709,000 for the six months ended March 31, 1998 due primarily to the inclusion of revenues from CVI. As a result of the foregoing factors, total revenues increased by $11,927,000, or 29.0%, from $41,088,000 for the six months ended March 31, 1997 to $53,015,000 for the six months ended March 31, 1998. Operating Expenses. Operating costs and selling, general and administrative expenses increased by $10,464,000, or 33.2%, from $31,471,000 for the six months ended March 31, 1997 to $41,935,000 for the six months ended March 31, 1998, due primarily to inclusion of costs and expenses from CVI. Operating costs and selling, general and administrative expenses as a percentage of total revenues increased from 76.6% for the six months ended March 31, 1997 to 79.1% for the six months ended March 31, 1998. At RHCGH, operating expenses were slightly in excess of revenues for the six month periods ended March 31, 1998 and 1997. Depreciation and Amortization. Depreciation and amortization expense increased by $1,381,000, from $2,943,000 for the six months ended March 31, 1997 to $4,324,000 for the six months ended March 31, 1998, due primarily to the inclusion of CVI, and increased as a percentage of revenues from 7.2% for the six months ended March 31, 1997 to 8.2% for the six months ended March 31, 1998. Operating Income. As a result of the foregoing factors, operating income increased by $82,000, or 1.2%, from $6,674,000 for the six months ended March 31, 1997 to $6,756,000 for the six months ended March 31, 1998. Interest Expense. Interest expense increased by $1,257,000, or 498.8%, from $252,000 for the six months ended March 31, 1997 to $1,509,000 for the six months ended March 31, 1998 due primarily to an increase in debt due to the CVI acquisition. 9 10 Other expense (income). Other income decreased by $2,478,000 from $2,676,000 for the six months ended March 31, 1997 to $198,000 for the six months ended March 31, 1998 due primarily to the Decision. Minority interest. Minority interest increased by $398,000, or 221.1%, from $180,000 for the six months ended March 31, 1997 to $578,000 for the six months ended March 31, 1998 due primarily to the inclusion of CVI. Income Taxes. The provision for income taxes decreased by $1,620,000, or 45.4%, from $3,567,000 for the six months ended March 31, 1997 to $1,947,000 for the six months ended March 31, 1998 as a result of decreased taxable income. Net Income. As a result of the foregoing factors, net income decreased by $2,431,000, or 45.4%, from $5,351,000 for the six months ended March 31, 1997 to $2,920,000 for the six months ended March 31, 1998. 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, and 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. Although the Company's total revenues have increased in each of the last three fiscal years, revenue of the Company's Pacing operations during that period has been negatively impacted by Medicare reimbursement rate reductions in certain geographic areas. Additional reimbursement rate reductions applicable to the Company's Pacing procedures became effective on January 1, 1996 and January 1, 1997. These reductions had a negative effect on the Company's operating results for fiscal 1997 and the first quarter of fiscal 1998. The Company's Pacing operations have been favorably impacted since January 1, 1998 due to an increase in Medicare reimbursement rates effective on that date. 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 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 is the development and operation of integrated heart centers and the acquisition of cardiac 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 and future heart centers and physician practices will depend 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 10 11 integrated successfully and profitably into the Company's operations, that suitable acquisition 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's liquidity was materially improved as a result of the completion of the initial public offering of its Common Stock in December 1995 and its receipt of $20,400,000 in net proceeds therefrom. The Company acquired certain assets and assumed certain liabilities of 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 acquired the stock of CVI in August 1997 for cash and transaction costs in the amount of $16,980,000. At March 31, 1998, the Company had working capital of $31,687,000, compared to $24,391,000 at September 30, 1997. At March 31, 1998, the Company had cash and temporary cash investments of $7,860,000. At March 31, 1998, $30,791,000 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 five 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. 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 1999 at which time any outstanding balance will be converted to a five-year term loan. 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 1998. 11 12 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. The Company's annual meeting of stockholders was held on March 5, 1998. b. The following persons nominated by management were elected to serve as directors:
Shares ------------------------ Name For Withheld ---- --- -------- Gene I. Miller 6,889,286 21,361 Albert J. Henry 6,889,286 21,361 David Wertheimer, M.D. 6,889,286 21,361
The following directors remained in office; Richard F. Bader, F. David Rollo, M.D., Thomas J. Fogarty, M.D, and Allan Zinberg. Subsequently, on March 20, 1998, Albert J. Henry submitted his resignation to devote more time to his venture capital fund and other businesses. There was no disagreement between the Company and the director on any matter relating to the Company's operations, policies or practices. No replacement had been named as of the date of this filing. c. The following additional matters voted upon at the meeting and the results of the voting were as follows: 1. To ratify the appointment of Arthur Andersen LLP as the independent accountants of the Company for the fiscal year ending September 30, 1998.
Shares ---------------------------------- For Against Abstain ------- ------- ------- 6,890,358 1,779 18,510
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 ------ ----- 10.53 Employment Agreement dated as of March 1, 1998 between Swapan Sen and the Registrant 10.54 Employment Agreement dated as of March 1, 1998 between F. David Rollo, M.D. and the Registrant
12 13 10.55 Employment Agreement dated as of March 1, 1998 between Michael O. Kokesh and the Registrant 27 Financial data schedule
b. REPORTS ON FORM 8-K: The Company filed no reports on Form 8-K during the quarter ended March 31, 1998. 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: May 11, 1998 By: /s/ E. Payson Smith, Jr. -------------------------------- E. Payson Smith, Jr. Senior Vice President and Chief Financial Officer (duly authorized officer and principal financial officer) 14 15 EXHIBIT INDEX
Exhibit Number Title ------ ----- 10.53 Employment Agreement dated as of March 1, 1998 between Swapan Sen and the Registrant 10.54 Employment Agreement dated as of March 1, 1998 between F. David Rollo, M.D. and the Registrant 10.55 Employment Agreement dated as of March 1, 1998 between Michael O. Kokesh and the Registrant 27 Financial data schedule
EX-10.53 2 EMPLOYMENT AGREEMENT: SWAPAN SEN 1 Exhibit 10.53 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement"), dated March 1, 1998 (the "Effective Date"), is made and entered into by and between RAYTEL MEDICAL CORPORATION, a Delaware corporation (the "Company"), and Swapan Sen (the "Employee"). RECITALS A. The Company desires to continue the employment of the Employee as its Senior Vice President and as the President and General Manager of Raytel Imaging Holdings, Inc., a Delaware corporation ("RIH") and its subsidiary corporations, affiliated medical groups and joint venture interests in various imaging centers, and as the Company's President and General Manager of Raytel Cardiovascular Labs, Inc., a Delaware corporation ("RCL") and its subsidiary corporations, 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": and 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: 1. Duties Term and Exclusive Employment. 1.1 Duties and Responsibilities. Within the limitations established by the Company's Bylaws, the Employee shall have each and all of the duties and responsibilities of the Company's President and general manager of RIH and RCL. As such, the Employee shall have responsibility and authority with respect to the operations of the Company's diagnostic imaging centers and heart center programs, subject to the direction of the Company's Chief Operating Officer. 1.2 Term of Employment. The Employment hereunder shall begin on the Effective Date and, unless earlier terminated as provided in Paragraph 3 hereof, the Employment shall continue until midnight on the first anniversary of the Effective Date. The Employment shall be extended automatically for additional one (1) year terms upon each anniversary of the Effective Date, beginning on February 1, 1999, unless either party gives written notice to the other at least thirty (30) days prior to the expiration of -1- 2 the initial term (or, if applicable, any extended term) of his or its election not to extend the Employment for the subsequent term. 1.3 No Other Employment or Business Activities. During the term of the Employment, the Employee 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. 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 rate of One Hundred Seventy Thousand Thirty-two and 48/100 Dollars ($170,032.48) per year, payable in periodic installments in accordance with the Company's payroll policy as in effect from time to time. The base salary will be reviewed at least annually during the continuation of the Employment and may be increased (but not decreased) by the Company in the sole discretion of the Chief Executive Officer and the Chief Operating Officer based upon such factors as the Chief Executive Officer and the Chief Operating Officer deems relevant, including the financial condition and operating results of RIH and RCL. 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 Company's Chief -2- 3 Executive Officer and the Chief Operating Officer in its sole discretion for such fiscal periods as it shall determine and based upon such factors as it deems relevant. Each Bonus award will be deemed to be earned at the end of the applicable 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; (iii) the Employment is terminated by the Company giving notice pursuant to Paragraph 1.2 hereof; or (iv) 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 Deferred Compensation Plan. The Employee shall be entitled to participate in the Company's Deferred Compensation Plan so long as it is available generally to senior executives of the Company, and in any successor plan which may be adopted and in effect from time to time during the Employment. 2.4 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 be eligible for the grant of additional options at the sole discretion of the Company's Board of Directors based upon such factors as it deems relevant. 2.5 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. 2.6 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. 2.7 Insurance and Other Benefits. The Employee shall be entitled to participate in any life, medical, dental and/or disability insurance plans, together with -3- 4 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 1.2 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 Paragraphs 2.3 and 2.7 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 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 -4- 5 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 Paragraphs 2.3 and 2.7 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 (including a termination pursuant to notice given under Section 1.2 hereof), the Employee shall be entitled to receive his base salary through the date of termination of the Employment, plus an amount (the "Severance Payment") equal to his then current base salary for a period of twenty-four (24) months following the date of termination (the "Severance Period"). 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 pay or other benefit to which the Employee might otherwise be entitled. In addition, in the event of such a termination, the Company will, to the extent its plans permit, continue to provide to the Employee coverage under its life, medical, dental and/or disability plans, as in effect on the date of termination, during the Severance Period. 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 coverage 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. The Employee shall also be entitled, upon any such termination, to receive: (A) 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, (B) any other benefits to which the Employee is entitled pursuant to the plans described in paragraphs 2.3 and 2.7 hereof. 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 alters or reduces the Employee's duties, responsibilities and status with the Company from those which exist as of the Effective Date; (ii) assigns the Employee duties which are inconsistent with the Employee's position as Vice President and General Manager of the Company; (iii) 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; (iv) 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 (v) required the Employee , as a condition to the -5- 6 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 2.3 and 2.7 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 pursuant to the policies and procedures of the Company governing reimbursement of business expenses to its executives. 5. 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 competition with any actual or proposed business of the Company; 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 are listed on a national securities exchange or quoted daily in the over-the-counter listings of The Wall Street Journal. 6. Duties of the Employee After Any Notice of Termination of the Employment. Following any notice of termination of the Employment, the Employee -6- 7 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. 7. 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 and the Chief Operating Officer to do so, directly or indirectly, on his own behalf or in the service of others, interfere with or raid the officers, employees, consultants, agents and/or independent contractors 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 7 is reasonable and necessary for the protection of the trade secrets and proprietary information of the Company. 8. 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 8 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 o f 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 8, the Company shall at all times have and retain the full, complete and unrestricted right to immediate and permanent injunctive and other relief as provided in Paragraph 9 below. -7- 8 9. 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 1.4, 5, 6, 7 or 8 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 8 shall be entitled to recover form the other party its reasonable attorneys' fees and other expenses incurred in such litigation. 10. 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 1,4, 6, 7, 8, 9, 10 and 11 of this Agreement shall, for any and all purposes whatsoever, survive any termination oft he Employment, regardless of whether such termination is by the Employee, the Company, by expiration or otherwise. 11. General. 11.1 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 nay 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. 11.2 Waiver. No waiver of nay 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 of the performance of any other obligation or any other act required or permitted by this Agreement. 11.3 Sole and Entire Agreement. This Agreement, and the other agreements referred to herein, including the Company's benefit plans, are the sole, -8- 9 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. 11.4 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. 11.5 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. 11.6 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. 11.7 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. 11.8 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. 11.9 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 regard whatsoever to the identity or status of any person or persons who drafted all or any portion of this Agreement. -9- 10 11.10 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 11.10. 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: Swapan Sen 63 Bunning Drive Voorhees, New Jersey 08043 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 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 /s/ Swapan Sen ---------------------------- ----------------------- Richard F. Bader Swapan Sen Its: Chairman and Chief Executive Officer -10- EX-10.54 3 EMPLOYMENT AGREEMENT: F. DAVID ROLLO, M.D. 1 Exhibit 10.54 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement"), dated March 1, 1998 (the "Effective Date"), is made and entered into by and between RAYTEL MEDICAL CORPORATION, a Delaware corporation (the "Company"), and F. David Rollo (the "Employee"). RECITALS A. The Company desires to continue the employment of the Employee as its Senior Vice President and Executive Medical Director and its subsidiary corporations, affiliated medical groups and joint venture interests in various imaging centers, heart programs and diagnostic cardiac catheterization laboratories, 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"; and 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: 1. Duties Term and Exclusive Employment. 1.1 Duties and Responsibilities. Within the limitations established by the Company's Bylaws, the Employee shall have each and all of the duties and responsibilities of the Company's Senior Vice President and Executive Medical Director. As such, the Employee shall have responsibility and authority with respect to the operations of the Company's contract research organization, clinical aspects of the heart centers and physician practice management services, subject to the direction of the Company's Chief Executive Officer. 1.2 Term of Employment. The Employment hereunder shall begin on the Effective Date and, unless earlier terminated as provided in Paragraph 3 hereof, the Employment shall continue until midnight on the first anniversary of the Effective Date. The Employment shall be extended automatically for additional one (1) year terms upon each anniversary of the Effective Date, beginning on March 1, 1999, unless either party gives written notice to the other at least thirty (30) days prior to the expiration of the initial term (or, if applicable, any extended term) of his or its election not to extend the Employment for the subsequent term. -1- 2 1.3 No Other Employment or Business Activities. During the term of the Employment, the Employee 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. 1.4 Proprietary Information and Inventions Agreement. The Employee acknowledges his obligations under the Employment Agreement Regarding Proprietary Information and Inventions of even date herewith, attached hereto as Appendix A (the "Proprietary Information and Inventions Agreement"), and agrees to be bound by the provisions thereof. 1.5 Indemnity Agreement. The parties acknowledge their respective obligations under the Indemnity Agreement of even date herewith, attached hereto as Appendix B (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 rate of Two Hundred Fifty Thousand Dollars ($250,000) per year, payable in periodic installments in accordance with the Company's payroll policy as in effect from time to time. The base salary will be reviewed at least annually during the continuation of the Employment and may be increased (but not decreased) by the Company in the sole discretion of the Chief Executive Officer based upon such factors as the Chief Executive Officer deems relevant, including the clinical programs of the heart centers and physician practice management services. 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 -2- 3 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 Company's Chief Executive Officer in its sole discretion for such fiscal periods as it shall determine and based upon such factors as it deems relevant. Each Bonus award will be deemed to be earned at the end of the applicable 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; (iii) the Employment is terminated by the Company giving notice pursuant to Paragraph 1.2 hereof; or (iv) 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 Deferred Compensation Plan. The Employee shall be entitled to participate in the Company's Deferred Compensation Plan so long as it is available generally to senior executives of the Company, and in any successor plan which may be adopted and in effect from time to time during the Employment. 2.4 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 be eligible for the grant of additional options at the sole discretion of the Company's Board of Directors based upon such factors as it deems relevant. 2.5 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. 2.6 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 -3- 4 effect, or to such alternate automobile allowance of comparable economic value as may be in effect from time to time. 2.7 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 1.2 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 Paragraphs 2.3 and 2.7 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 Employee's obligations hereunder or under the Proprietary Information and Inventions Agreement which, if curable, is not cured within ten (10) days following -4- 5 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 Paragraphs 2.3 and 2.7 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 (including a termination pursuant to notice given under Section 1.2 hereof), the Employee shall be entitled to receive his base salary through the date of termination of the Employment, plus an amount (the "Severance Payment") equal to his then current base salary for a period of twelve (12) months following the date of termination (the "Severance Period"). 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 pay or other benefit to which the Employee might otherwise be entitled. In addition, in the event of such a termination, the Company will, to the extent its plans permit, continue to provide to the Employee coverage under its life, medical, dental and/or disability plans, as in effect on the date of termination, during the Severance Period. 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 coverage 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. The Employee shall also be entitled, upon any such termination, to receive: (A) 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, (B) any other benefits to which the Employee is entitled pursuant to the plans described in paragraphs 2.3 and 2.7 hereof. 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 alters or reduces the Employee's duties, responsibilities and status with the Company from those which exist as of the Effective Date; (ii) 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; (iii) 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 (iv) required the Employee , as a condition to the Employment, to perform illegal or -5- 6 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 2.3 and 2.7 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 pursuant to the policies and procedures of the Company governing reimbursement of business expenses to its executives. 5. 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 competition with any actual or proposed business of the Company; 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 are listed on a national securities exchange or quoted daily in the over-the-counter listings of The Wall Street Journal. 6. 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 -6- 7 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. 7. 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, interfere with or raid the officers, employees, consultants, agents and/or independent contractors 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 7 is reasonable and necessary for the protection of the trade secrets and proprietary information of the Company. 8. 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 8 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 o f 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 8, the Company shall at all times have and retain the full, complete and unrestricted right to immediate and permanent injunctive and other relief as provided in Paragraph 9 below. 9. 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 1.4, 5, 6, 7 or 8 of this -7- 8 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 8 shall be entitled to recover form the other party its reasonable attorneys' fees and other expenses incurred in such litigation. 10. 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 1,4, 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. 11. General. 11.1 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 nay 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. 11.2 Waiver. No waiver of nay 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 of the performance of any other obligation or any other act required or permitted by this Agreement. 11.3 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 -8- 9 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. 11.4 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. 11.5 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. 11.6 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. 11.7 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. 11.8 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. 11.9 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 regard whatsoever to the identity or status of any person or persons who drafted all or any portion of this Agreement. 11.10 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 11.10. -9- 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: F. David Rollo, M.D. 15735 Peach Hill Road Saratoga, CA 95070 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 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 /s/ F. David Rollo, M.D. ------------------------------------ ----------------------------- Richard F. Bader F. David Rollo, M.D. Its: Chairman and Chief Executive Officer -10- EX-10.55 4 EMPLOYMENT AGREEMENT: MICHAEL O. KOKESH 1 Exhibit 10.55 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement"), dated March 1, 1998 (the "Effective Date"), is made and entered into by and between RAYTEL MEDICAL CORPORATION, a Delaware corporation (the "Company"), and Michael Kokesh (the "Employee"). RECITALS A. The Company desires to continue the employment of the Employee as its Vice President, General Counsel and Secretary and its subsidiary corporations, affiliated medical groups and joint venture interests in various imaging centers, heart programs and diagnostic cardiac catheterization laboratories, 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"; and 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: 1. Duties Term and Exclusive Employment. 1.1 Duties and Responsibilities. Within the limitations established by the Company's Bylaws, the Employee shall have each and all of the duties and responsibilities of the Company's Vice President, General Counsel and Secretary. As such, the Employee shall have responsibility and authority with respect to the legal affairs of the Company, subject to the direction of the Company's Chief Executive Officer. 1.2 Term of Employment. The Employment hereunder shall begin on the Effective Date and, unless earlier terminated as provided in Paragraph 3 hereof, the Employment shall continue until midnight on the first anniversary of the Effective Date. The Employment shall be extended automatically for additional one (1) year terms upon each anniversary of the Effective Date, beginning on March 1, 1999, unless either party gives written notice to the other at least thirty (30) days prior to the expiration of the initial term (or, if applicable, any extended term) of his or its election not to extend the Employment for the subsequent term. -1- 2 1.3 No Other Employment or Business Activities. During the term of the Employment, the Employee 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. 1.4 Proprietary Information and Inventions Agreement. The Employee acknowledges his obligations under the Employment Agreement Regarding Proprietary Information and Inventions of even date herewith, attached hereto as Appendix A (the "Proprietary Information and Inventions Agreement"), and agrees to be bound by the provisions thereof. 1.5 Indemnity Agreement. The parties acknowledge their respective obligations under the Indemnity Agreement of even date herewith, attached hereto as Appendix B (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 rate of One Hundred Fifty Thousand and 00/100 Dollars ($150,000.00) per year, payable in periodic installments in accordance with the Company's payroll policy as in effect from time to time. The base salary will be reviewed at least annually during the continuation of the Employment and may be increased (but not decreased) by the Company in the sole discretion of the Chief Executive Officer based upon such factors as the Chief Executive Officer deems relevant, including the clinical programs of the heart centers and physician practice management services. 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 -2- 3 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 Company's Chief Executive Officer in its sole discretion for such fiscal periods as it shall determine and based upon such factors as it deems relevant. Each Bonus award will be deemed to be earned at the end of the applicable 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; (iii) the Employment is terminated by the Company giving notice pursuant to Paragraph 1.2 hereof; or (iv) 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 Deferred Compensation Plan. The Employee shall be entitled to participate in the Company's Deferred Compensation Plan so long as it is available generally to senior executives of the Company, and in any successor plan which may be adopted and in effect from time to time during the Employment. 2.4 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 be eligible for the grant of additional options at the sole discretion of the Company's Board of Directors based upon such factors as it deems relevant. 2.5 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 2.6 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. 2.7 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 1.2 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 Paragraphs 2.3 and 2.7 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 -4- 5 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 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 Paragraphs 2.3 and 2.7 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 Sections 3.1 or 3.2 hereof (including a termination pursuant to notice given under Section 1.2 hereof), the Employee shall be entitled to receive his base salary through the date of termination of the Employment, plus an amount (the "Severance Payment") equal to his then current base salary for a period of twelve (12) months following the date of termination (the "Severance Period") to the extent Employee has not found another position with a base salary equal to or greater than the Base Salary specified above in Section 2.1, and the Employer will make up the difference to the extent the base salary is less than the Severance Payment during the Severance Period. 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 pay or other benefit to which the Employee might otherwise be entitled. In addition, in the event of such a termination, the Company will, to the extent its plans permit, continue to provide to the Employee coverage under its life, medical, dental and/or disability plans, as in effect on the date of termination, during the Severance Period. 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 coverage 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. The Employee shall also be entitled, upon any such termination, to receive: (A) 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, (B) any other benefits to which the Employee is entitled pursuant to the plans described in paragraphs 2.3 and 2.7 hereof. -5- 6 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 alters or reduces the Employee's duties, responsibilities and status with the Company from those which exist as of the Effective Date; (ii) 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; (iii) 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 (iv) required 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 by 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 2.3 and 2.7 hereof through the date of termination. 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 pursuant to the policies and procedures of the Company governing reimbursement of business expenses to its executives. 5. 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 -6- 7 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 competition with any actual or proposed business of the Company; 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 are listed on a national securities exchange or quoted daily in the over-the-counter listings of The Wall Street Journal. 6. 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. 7. 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, interfere with or raid the officers, employees, consultants, agents and/or independent contractors 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 7 is reasonable and necessary for the protection of the trade secrets and proprietary information of the Company. 8. 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 8 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 o f or relating to this Agreement, and the Employment, the meaning, application and/or interpretation of this -7- 8 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 8, the Company shall at all times have and retain the full, complete and unrestricted right to immediate and permanent injunctive and other relief as provided in Paragraph 9 below. 9. 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 1.4, 5, 6, 7 or 8 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 8 shall be entitled to recover form the other party its reasonable attorneys' fees and other expenses incurred in such litigation. 10. 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 1.4, 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. 11. General. 11.1 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 nay 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. -8- 9 11.2 Waiver. No waiver of nay 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 of the performance of any other obligation or any other act required or permitted by this Agreement. 11.3 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. 11.4 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. 11.5 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. 11.6 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. 11.7 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. -9- 10 11.8 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. 11.9 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 regard whatsoever to the identity or status of any person or persons who drafted all or any portion of this Agreement. 11.10 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 11.10. 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: Michael Kokesh 160 San Anselmo Avenue San Francisco, CA 94127 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 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 /s/ Michael O. Kokesh ---------------------------- ------------------------- Richard F. Bader Michael O. Kokesh Its: Chairman and Chief Executive Officer -10- EX-27 5 FINANCIAL DATA SCHEDULE
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 6-MOS SEP-30-1998 OCT-01-1997 MAR-31-1998 7,860 0 35,265 0 0 47,076 38,670 (18,769) 123,335 15,389 0 0 0 9 64,526 123,335 0 53,015 0 46,259 380 0 1,509 4,867 1,947 2,920 0 0 0 2,920 .33 .31 REPRESENTS NET RECEIVABLES. INCLUDED IN TOTAL COSTS.
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