-----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, B6nutrhqN1vb5S9claIkDEVTxYgCFrQ/N4tpx8vw7qbOyIs7fPoEW7BGR1wDmrQH 17KV9zGys84az5+vPRwYeQ== 0000950132-96-000705.txt : 19961115 0000950132-96-000705.hdr.sgml : 19961115 ACCESSION NUMBER: 0000950132-96-000705 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 18 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SMT HEALTH SERVICES INC CENTRAL INDEX KEY: 0000881917 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 251672183 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19897 FILM NUMBER: 96662171 BUSINESS ADDRESS: STREET 1: 10521 PERRY HIGHWAY CITY: WEXFORD STATE: PA ZIP: 15090 BUSINESS PHONE: 4129333300 MAIL ADDRESS: STREET 1: 10521 PERRY HIGHWAY CITY: WEXFORD STATE: PA ZIP: 15090 10-Q 1 FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 X Quarterly Report pursuant to Section 13 or 15(d) of the Securities ----- Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 or Transition report pursuant to Section 13 or 15(d) of the ------ Securities Exchange Act of 1934 For the transition period from to --------- --------- Commission File No.: 0-19897 SMT HEALTH SERVICES INC. (Exact name of registrant as specified in its charter) DELAWARE 25-1672183 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10521 PERRY HIGHWAY, WEXFORD, PENNSYLVANIA 15090 (Address of principal executive offices) 412-933-3300 (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: At October 31, 1996, 3,460,661 shares of Common Stock, $0.01 par value, of the registrant were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements SMT Health Services Inc. and Subsidiaries Consolidated Balance Sheets (unaudited)
September 30, December 31, 1996 1995 ------------- ------------ ASSETS - ------ CURRENT ASSETS: Cash and cash equivalents - unrestricted $ 4,349,569 $ 2,341,519 Cash and cash equivalents - restricted (Note 4) 670,000 1,600,000 Accounts receivable - no allowance for doubtful accounts 1,531,685 1,059,567 Notes receivable - current portion 51,082 47,760 Receivable from the sale of leases secured by equipment - current portion (Note 4) 376,916 342,789 Other current assets 661,345 249,961 ----------- ----------- Total current assets 7,640,597 5,641,596 ----------- ----------- PROPERTY AND EQUIPMENT: Equipment 208,720 174,556 Furniture and fixtures 60,874 59,712 Vehicles 166,425 125,103 Leasehold improvements 28,495 27,915 Leased medical equipment 33,830,009 22,167,551 ----------- ----------- Total property and equipment 34,294,523 22,554,837 Less accumulated depreciation and amortization (6,373,022) (6,613,759) ----------- ----------- Property and equipment, net 27,921,501 15,941,078 ----------- ----------- OTHER ASSETS: Notes receivable - noncurrent 13,502 52,240 Receivable from the sale of leases secured by equipment - noncurrent (Note 4) 591,480 878,590 Contract and license acquisition costs, net of accumulated amortization of $868,000 and $788,000, respectively 652,723 109,260 Deposits and other assets 568,698 506,041 Deferred income taxes, net of valuation allowance of $103,000 at December 31, 1995 (Note 5) 821,000 219,000 ----------- ----------- Total other assets 2,647,403 1,765,131 ----------- ----------- TOTAL ASSETS $38,209,501 $23,347,805 =========== ===========
See Notes to Consolidated Financial Statements. -2- SMT Health Services Inc. and Subsidiaries Consolidated Balance Sheets (unaudited) (continued)
September 30, December 31, 1996 1995 ------------- ------------- LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable $ 357,897 $ 270,277 Accrued wages and related taxes 20,510 57,823 Current portion of long-term debt and capital lease obligations 6,198,196 4,380,930 Other current liabilities 727,655 527,217 ----------- ------------ Total current liabilities 7,304,258 5,236,247 LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS - less current portion 20,466,683 12,709,905 ----------- ------------ Total liabilities 27,770,941 17,946,152 ----------- ------------ STOCKHOLDERS' EQUITY: Common Stock, $0.01 par value; authorized 10,000,000 shares; issued and outstanding 3,357,000 and 2,654,400, respectively 33,570 26,544 Cumulative Convertible Preferred Stock; $0.01 par value; authorized 994,600 shares; no shares issued and Outstanding -- -- Additional paid-in capital (Note 5) 9,729,745 6,636,070 Retained earnings/accumulated deficit 675,245 (1,260,961) ----------- ------------ Total Stockholders' equity 10,438,560 5,401,653 ----------- ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,209,501 $ 23,347,805 =========== ============
See Notes to Consolidated Financial Statements. -3- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Earnings (unaudited)
Three Months Three Months Ended Ended September 30, 1996 September 30, 1995 ------------------- ------------------ REVENUES: Service revenue $4,754,324 $3,821,904 Interest income 43,267 39,546 ---------- ---------- Total revenues 4,797,591 3,861,450 ---------- ---------- COSTS AND EXPENSES: Operating expenses - third parties 1,586,903 1,327,119 Depreciation and amortization 1,198,155 869,543 Selling, general and administrative 629,144 652,536 Interest - third parties 500,659 429,071 Other (Note 11) (300,000) -- ---------- ---------- Total costs and expenses 3,614,861 3,278,269 ---------- ---------- Income before income taxes 1,182,730 583,181 ---------- ---------- Income taxes (Note 5) 267,000 152,000 ---------- ---------- Net income $ 915,730 $ 431,181 ========== ========== Earnings per Common Share $.21 $.14 ========== ========== Weighted Average Shares outstanding (Note 2) 3,179,000 2,648,400 ========== ==========
See Notes to Consolidated Financial Statements. -4- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Earnings (unaudited)
Nine Months Nine Months Ended Ended September 30, 1996 September 30, 1995 ------------------- ------------------- REVENUES: Service revenue $13,478,930 $11,318,453 Interest income 127,537 86,451 ----------- ----------- Total revenues 13,606,467 11,404,904 ----------- ----------- COSTS AND EXPENSES: Operating expenses - third parties 4,477,630 4,026,381 Operating expenses - lease expenses - related parties -- 154,849 Depreciation and amortization 3,307,152 2,725,950 Selling, general and administrative 2,002,377 1,815,330 Interest - third parties 1,447,102 1,231,884 Interest - related parties -- 86,538 Other (Note 11) (300,000) -- ----------- ----------- Total costs and expenses 10,934,261 10,040,932 ----------- ----------- Income from continuing operations before income taxes, minority interests and gain on sale 2,672,206 1,363,972 Minority interests in earnings of subsidiaries (Note 7) -- 49,906 ----------- ----------- Income from continuing operations before income taxes and gain on sale 2,672,206 1,314,066 Gain on sale of partnership interests -- 48,219 ----------- ----------- Income from continuing operations before income taxes 2,672,206 1,362,285 Income taxes (Note 5) 736,000 360,000 ----------- ----------- Net income from continuing operations 1,936,206 1,002,285 ----------- ----------- Discontinued operations: Loss on disposal of discontinued operations, net of tax benefit of $102,000 in 1995 -- (198,000) Extraordinary item, debt forgiveness, net of income tax expense of $102,000 -- 198,000 ----------- ----------- Net Income $ 1,936,206 $ 1,002,285 =========== =========== Earnings per Common Share: Continuing operations $.50 $.36 Discontinued operations -- -- ----------- ----------- Earnings Per Common Share $.50 $.36 =========== =========== Weighted Average Shares outstanding (Note 2) 2,879,000 2,568,400 =========== ===========
See Notes to Consolidated Financial Statements. -5- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited)
Nine Months Nine Months Ended Ended September 30, 1996 September 30, 1995 ------------------ ------------------ CASH FLOWS FROM CONTINUING OPERATING ACTIVITIES: Net income $1,936,206 $1,002,285 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,307,152 2,725,950 Minority interests in subsidiaries -- 49,906 Negative amortization on capital lease obligations -- 5,521 Deferred income taxes 623,000 255,000 Gain on sale of partnership interests -- (48,219) Other -- 10,467 Changes in assets and liabilities of continuing operations: Accounts and notes receivable (362,247) (245,861) Other current assets (485,839) 23,176 Accounts payable and other 288,058 166,552 Accrued wages and related taxes (37,313) 52,864 --------- --------- NET CASH PROVIDED BY CONTINUING OPERATING ACTIVITIES 5,269,017 3,997,641 --------- --------- NET CASH USED IN DISCONTINUED OPERATING ACTIVITIES -- (64,264) --------- --------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,269,017 3,933,377 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of equipment (1,936,255) (220,404) Payment for purchase of acquired entity (642,840) -- Net change in cash restricted for equipment financing purposes 930,000 -- Net cash received for sale of partnership interests -- 122,854 Net cash received for sale of discontinued entities -- 110,000 Other (99,938) (52,409) --------- --------- NET CASH USED IN INVESTING ACTIVITIES (1,749,033) (39,959) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments under loan agreements and capital leases: Continuing operations: Related parties -- (329,627) Third parties (3,387,635) (2,326,303) Discontinued operations -- (27,807) Issuance of Common Stock from exercise of stock options and warrants 1,875,701 -- Other -- (1,649) --------- --------- NET CASH USED IN FINANCING ACTIVITIES (1,511,934) (2,685,386) --------- ---------
See Notes to Consolidated Financial Statements. -6- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Cash Flows (unaudited) (continued)
Nine Months Nine Months Ended Ended September 30, 1996 September 30, 1995 ------------------ ------------------ NET INCREASE IN CASH AND CASH EQUIVALENTS - (unrestricted) 2,008,050 1,208,032 CASH AND CASH EQUIVALENTS - (unrestricted) - Beginning of period 2,341,519 717,004 ------------------ ------------------ CASH AND CASH EQUIVALENTS - (unrestricted) - End of period $4,349,569 $1,925,036 ================== ==================
See Notes to Consolidated Financial Statements. -7- SMT Health Services Inc. and Subsidiaries Consolidated Statements of Changes in Stockholders' Equity For The Nine Month Period Ended September 30, 1996 (Unaudited)
Retained Common Stock Preferred Stock Additional Earnings/ Total ----------------------------- --------------------- Paid-In (Accumulated Stockholders' Shares Amount Shares Amount Capital Deficit) Equity ------------ --------------- ------- ------------ ------------- ------------ ----------- BALANCES - December 31, 1995 2,654,400 $26,544 -- $ -- $6,636,070 ($1,260,961) $5,401,653 Exercise of Stock Options and Warrants (Note 10) 702,600 7,026 -- -- 1,868,675 -- 1,875,701 Tax Adjustment Regarding Stock Option and Warrant Exercises (Note 5) -- -- -- -- 1,225,000 -- 1,225,000 Net Income -- -- -- -- -- 1,936,206 1,936,206 ------------ --------------- ------- ------------ ------------- ----------- ----------- BALANCES - September 30, 1996 3,357,000 $33,570 -- $ -- $9,729,745 $ 675,245 $10,438,560 ============ =============== ======= ============ ============= =========== ===========
See Notes to Consolidated Financial Statements. -8- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 1 - BASIS OF PRESENTATION SMT Health Services Inc. and its wholly owned subsidiaries (the "Company") are engaged primarily in providing medical diagnostic imaging services to hospitals, physicians and patients. The Company, through its subsidiaries, currently operates seventeen mobile Magnetic Resonance Imaging (MRI) Units ("MRI Units") in Pennsylvania, West Virginia, North Carolina, South Carolina, Virginia, Kentucky and Ohio. The Company's Common Stock and Warrants currently trade on the National Association of Securities Dealers, Inc. Automated Quotations Systems (NASDAQ) National Market System under the symbols "SHED" and "SHEDW", respectively. The unaudited consolidated financial statements as of and for the three and nine month periods ended September 30, 1996 and 1995 include the accounts of the Company and its majority and wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The unaudited consolidated financial statements included herein have been prepared by management in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures which are normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with SEC informational requirements. The financial statements reflect normal recurring accounting adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the interim period. The results of operations for the three and nine month periods ended September 30, 1996 are not necessarily indicative of the results for the entire current fiscal year ending December 31, 1996. The consolidated financial statements included herein should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company's Form 10-K/A (Amendment No. 1) for the year ended December 31, 1995 which is on file at the Securities and Exchange Commission. Certain amounts in the September 30, 1995 Statements of Earnings and Cash Flows have been reclassified to conform with the September 30, 1996 presentation. -9- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 2 - NET EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT The net earnings per common and common share equivalent are calculated using the weighted average common and common share equivalents outstanding during the year, except where anti-dilutive. Common share equivalents include shares issuable upon the exercise of stock options, rights and warrants less the number of shares assumed purchased with the proceeds available from the assumed exercise of the options, rights and warrants. The Treasury Stock Method of reflecting use of proceeds from options and warrants may not adequately reflect potential dilution if options and warrants to acquire a substantial number of Common Shares (greater than 20% of the number of Common Shares outstanding for the period for which the computation is being made) are outstanding. In such instances, the Modified Treasury Stock Method must be utilized. The Company's options and warrants to acquire Common Shares exceed 20% and accordingly, the Treasury Stock Method has been modified in determining the dilutive effect of the options and warrants on earnings per share data. Fully diluted earnings per common share are anti-dilutive and, accordingly, are not presented. NOTE 3 - CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES The Company is engaged primarily in providing mobile MRI services to small-to- medium-sized hospitals in Pennsylvania, West Virginia, North Carolina, South Carolina, Virginia, Kentucky and Ohio. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certain Significant Estimates: The Company operates mobile MRI Units which are capital intensive and subject to changes in technology. The Company primarily leases such equipment over a 48 to 60 month period and depreciates the equipment over the respective lease period to an estimated residual value which typically approximates 20% of the original cost of the -10- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 3 - CERTAIN SIGNIFICANT RISKS AND UNCERTAINTIES (Continued) equipment. The useful lives and residual values estimated by management are considered significant estimates. Management does not currently anticipate significant technological advances which could significantly affect its estimates. The Company is not dependent on any one customer or geographic region as a source of its revenues. However, the Company utilizes the services of Hospital Shared Services to process approximately 30% of its billings and collections. NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS Long-term debt and capital lease obligations consist of the following:
September 30, December 31, 1996 1995 ------------- ------------ Capital lease and loan obligations $26,664,879 $17,090,835 Less current portion 6,198,196 4,380,930 ----------- ------------ $20,466,683 $12,709,905 =========== ============
The total cost and accumulated amortization of property securing capital lease and loan obligations at September 30, 1996 were approximately $33,833,000 and $6,132,000, respectively. Interest rates under the capital leases and loan obligations range from 8.5% to 13.5%. The long-term debt and capital lease obligations balance includes approximately $970,000 of capital lease obligations due to third parties related to the equipment at the Auburn Regional Center for Cancer Care and Airport Regional Imaging Center, which the Company had treated as discontinued operations and sold in October 1994 and June 1995, respectively. Accordingly, the Company has recorded an offsetting receivable for the lease receivables due from the purchasers of the centers. Such lease receivables are secured by the equipment and accounts receivable of the centers. -11- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued) In November 1992, the Company issued a letter-of-credit in the amount of $198,500 pursuant to a lease transaction related to the Airport Regional Imaging Center. In exchange for restructuring the terms of the debt of this Center, the Company increased the outstanding letter-of-credit to an aggregate $400,000. In November 1994, the Company issued a letter-of-credit in the amount of $270,000 related to the purchase and financing of a new Mobile Unit. The lessor holding this letter-of-credit allowed the letter-of-credit to terminate on October 31, 1996. In relation to a refinancing of Mobile Units in February and March 1995, the Company issued two letters-of-credit in the aggregate amount of $930,000. In February 1996, the lessor holding one of the letters-of-credit totaling $330,000 allowed the letter-of-credit to expire. On July 31, 1996, the Company refinanced two MRI units which had previously been refinanced in March 1995 to more favorable lease terms. The new leases totaled approximately $2.3 million (net of a $150,000 down payment) in the aggregate and are being financed over a thirty-six month period at an interest rate of 9.25%. The refinancing resulted in annual cash flow savings to the Company of approximately $200,000. As a result of this refinancing, the $600,000 letter-of-credit which had been issued in March 1995 was terminated. The Company must maintain a cash balance on deposit with the bank which issued the letters-of-credit equal to the outstanding letters-of-credit. At September 30, 1996, the cash balance required to be on deposit totaled $670,000. In February 1995, the Company purchased an eighteen-month-old Siemens 1.0 Tesla Impact Mobile Unit for approximately $1.2 million. The Company financed the purchase of this unit under a 48 month dollar-out lease requiring monthly payments of approximately $31,000. In June 1995, the Company upgraded one of its .5 Tesla General Electric Signas to a 1.0 Tesla Signa for approximately $1.9 million. The Company financed the purchase of this unit with a 60 month dollar-out capital lease requiring monthly payments of approximately $41,000. In September 1995, the Company purchased a new unit for approximately $1.9 million. The Company financed the purchase of this new unit with a 60 month loan requiring monthly payments of approximately $40,000. -12- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued) The Company upgraded one of its .5 Tesla Signas to a 1.0 Tesla Horizon unit. The new unit was financed at a net total cost of approximately $2.0 million and was delivered in late February 1996. The Company financed the purchase of this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $44,000. The Company contracted with several new hospital clients and purchased a new Siemens 1.0 Tesla Impact unit which began service in mid-February 1996. The cost of this new unit approximated $1.9 million which was financed with a 60 month loan requiring monthly payments of approximately $41,000. In April 1996, the Company upgraded one of the units purchased from another mobile provider (Note 9) to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $1.9 million. The Company financed this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. In June 1996, the Company upgraded one of its .5 Tesla Signas to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $2.0 million with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. The Company in May 1996 signed an agreement with Siemens Medical Systems to upgrade the second unit purchased from another mobile provider (Note 9) and to purchase a new unit during the fourth quarter of 1996. Delivery of the upgraded unit occurred in July 1996 and the new unit was delivered and began operation on October 1, 1996. The upgrade's net cost approximated $1.9 million and the Company financed approximately $1.7 million with a 60 month finance agreement requiring monthly payments of approximately $36,000. The Company's new unit cost approximately $1.9 million and the Company financed approximately $1.7 million requiring a monthly payment of approximately $37,000. The Company purchased and took delivery of two new GE 1.0 Tesla Horizon units in September 1996. These units were purchased at a cost of approximately $1.8 million each and the Company financed approximately $1.6 million and $1.5 million with 60 month finance agreements requiring monthly payments of approximately $34,000 and $32,000, respectively. -13- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 4 - LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS (Continued) The Company completed a previously negotiated upgrade of a .5 Tesla system to a 1.0 Tesla Horizon on November 2, 1996. The new unit was financed at a net cost of approximately $1.5 million with a 60 month finance agreement requiring monthly payments of approximately $32,000. On November 1, 1996, the Company purchased a mobile MRI unit from Palmetto Community Health Network (the "Network") for approximately $390,000 and signed new service contracts with six South Carolina hospitals which are members of the Network. The Company began servicing the new hospitals immediately with the MRI unit purchased from the Network and plans to trade-in and upgrade the purchased unit to a new 1.0 Tesla Horizon in mid-December 1996. This new unit represents the Company's eighteenth mobile MRI unit and is the seventh new unit acquired this year. NOTE 5 - INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109 (SFAS 109). Deferred income taxes are provided to account for temporary differences between financial statement accounting and income tax reporting and relate principally to differences in reporting for diagnostic medical equipment, depreciation, accrued expenses and net operating loss carryforwards. As a result of the exercise of stock options pursuant to the Company's 1991 Employer Stock Option Plan, 1991 Director Stock Option Plan and warrants granted to a former director and outside consultant, the Company is entitled to a tax deduction of approximately $3.6 million. The deduction relates to the difference between the option exercise prices and the fair market value of the Common Stock at the time of such exercises. In accordance with SFAS 109, the Company recorded a deferred tax asset of approximately $1.2 million related to this deduction and in accordance with Accounting Principles Board Opinion #25 (APB #25) a corresponding credit was made to additional paid-in capital. Management believes no deferred tax asset valuation allowance is necessary as of September 30, 1996. -14- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 5 - INCOME TAXES (Continued) Income tax expense for the three and nine month periods ended September 30, 1996 reflects a $200,000 deferred tax benefit resulting from an adjustment to the Company's Federal net operating loss carryforward. At September 30, 1996, the Company had net operating loss carryforwards of approximately $8.0 million which are available to offset future Federal taxable income through 2010. NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION The total amount of interest payments during the nine months ended September 30, 1996 and 1995 were approximately $1,435,000 and $1,295,000, respectively. In addition, income tax payments for the nine month periods ended September 30, 1996 and 1995 were approximately $215,000 and $31,000, respectively. NOTE 7 - SALE OF PARTNERSHIP INTERESTS On June 30, 1995, in conjunction with the sale of the Airport Center which had been treated as a discontinued operation, the Company sold its majority ownership and general partner rights in four cardiac care partnerships for a total sale price of $300,000 comprised of $200,000 in cash and a $100,000, thirty-month note. The Company recognized a pre-tax gain on this sale of $48,219. The partnerships, which constituted approximately seven percent of the Company's revenues, had total assets of approximately $1.4 million, comprised primarily of diagnostic equipment and accounts receivable, and total liabilities of approximately $1.2 million comprised primarily of capital lease obligations associated with the diagnostic equipment. NOTE 8 - LITIGATION The Company had been named as a defendant, along with the hospital which contracts for the Company's MRI services, in a claim filed by a woman who alleged to have incurred partial paralysis as a result of being mishandled during an MRI procedure. The claim had been filed for $6.0 million in damages. The claim was settled by the Company's insurance company in November 1996 with no admission of liability by the Company and no financial effect to the Company. -15- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 9 - ACQUISITION On March 21, 1996, the Company purchased certain assets of a mobile provider which operated mobile units in the state of North Carolina (the "Seller"). The purchase price approximated $600,000 in cash [net of negotiated trade-in value of approximately $500,000 (which approximated the purchase price of the units acquired) for two of the Seller's mobile MRI units] in exchange for MRI Programs including Certificate of Need licenses or exemptions and certain customer service contracts. The Company traded-in and upgraded one of the purchased units to newer technology in April 1996 and traded-in and upgraded the second unit during July 1996 (Note 4). NOTE 10 - STOCK OPTIONS, UNIT PURCHASE OPTIONS AND WARRANTS During the period May through September 1996, stock options covering 503,500 shares of Common Stock were exercised pursuant to the Company's 1991 Employee Stock Option Plan and 1991 Director Stock Option Plan. The Company received approximately $1,016,000 as a result of such stock option exercises. At September 30, 1996, options to purchase 360,175 and 10,100 shares were exercisable pursuant to the employee and director stock option plans, respectively. During the period July through October 1996, transferees of a Unit Purchase Option initially granted to the Company's Initial Public Offering underwriter exercised the Option to purchase 120,000 units (comprised of 1.05 shares of Common Stock and one Warrant exercisable to 1.05 shares of Common Stock) at $5.94. The Company received approximately $713,000 as a result of such exercises and the Company issued 126,000 Common Shares and 120,000 Warrants. In August 1996, a transferee exercised 24,000 Warrants received from the aforementioned Unit Purchase Option exercise. As a result of the Warrant exercise, 25,200 Common Shares were issued (1.05 Common Shares per Warrant exercisable at $6.67 per share) and the Company received approximately $168,000. During July and October 1996, the Managing Director of Commonwealth Associates, Inc. and Commonwealth Associates Inc. each exercised 50,000 Warrants, respectively, at an exercise price of $4.47 in a cashless transaction whereby both tendered shares of Common Stock as payment of the purchase price in connection with the exercise of the Warrants. Accordingly, the Company issued 36,061 shares of Common Stock and retired into Treasury Stock 63,939 shares of Common Stock pursuant to this exercise. -16- SMT HEALTH SERVICES INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued) SEPTEMBER 30, 1996 NOTE 10 - STOCK OPTIONS, UNIT PURCHASE OPTIONS AND WARRANTS (Continued) During September 1996, a former outside director and consultant to the Company exercised 114,500 Warrants granted for services rendered at an exercise price of $4.02. Accordingly, the Company issued 114,500 shares of Common Stock and received approximately $460,000. NOTE 11 - STATE SALES TAX REFUND During September 1996, the Company received formal notification of a state sales tax refund of approximately $300,000, net of expenses. The refund is the result of sales tax paid to a certain state over a period of time which the Company determined (by obtaining a private letter ruling from the state) was actually exempt from such tax. Payment of the refund is expected in November 1996. NOTE 12 - RELATED PARTY TRANSACTIONS During late September 1996, the Company financed the purchase of a new MRI unit (Note 4) with DVI Financial Services Inc., a wholly-owned subsidiary of DVI, Inc. A shareholder of and a consultant to DVI Inc. serves as a member of the Company's Board of Directors. The new MRI unit cost approximately $1.8 million and the Company financed approximately $1.5 million at 9.5% over a 60 month period requiring monthly loan payments of approximately $32,000. -17- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The discussion that follows should be read in conjunction with the accompanying unaudited Consolidated Financial Statements and Notes thereto of SMT Health Services Inc. and Subsidiaries. Results of Operations The following table sets forth for the periods indicated the percentages which the items in the Statement of Earnings bear to revenues and the dollar increase (decrease) of such items as compared to the corresponding period in the prior year.
- --------------------------------------------------------------------------------------------------------- Percentage of Revenue Increase (Decrease) Prior Year - --------------------------------------------------------------------------------------------------------- Three Nine Months Three Nine Months Months Ended Ended Months Ended Ended - --------------------------------------------------------------------------------------------------------- 9/30/96 9/30/95 9/30/96 9/30/95 9/30/96 9/30/96 - --------------------------------------------------------------------------------------------------------- Revenues 100% 100% 100% 100% $ 936,000 $2,201,000 - --------------------------------------------------------------------------------------------------------- Cost & Expenses: - --------------------------------------------------------------------------------------------------------- Operating 33% 34% 33% 37% 260,000 296,000 - --------------------------------------------------------------------------------------------------------- Depreciation & 25% 23% 24% 24% 328,000 581,000 Amortization - --------------------------------------------------------------------------------------------------------- S, G & A 13% 17% 15% 16% ( 23,000) 187,000 - --------------------------------------------------------------------------------------------------------- Interest 10% 11% 11% 11% 71,000 129,000 - --------------------------------------------------------------------------------------------------------- Other ( 6%) -- ( 2%) -- ( 300,000) ( 300,000) - --------------------------------------------------------------------------------------------------------- Total Costs and Expenses 75% 85% 81% 88% 336,000 893,000 - --------------------------------------------------------------------------------------------------------- Income From Operations Before Taxes, Minority 25% 15% 19% 12% 600,000 1,308,000 Interests and Gain on Sale - --------------------------------------------------------------------------------------------------------- Minority Interests -- -- -- -- -- ( 50,000) - --------------------------------------------------------------------------------------------------------- Income From Operations Before Taxes and Gain On 25% 15% 19% 12% 600,000 1,358,000 Sale - --------------------------------------------------------------------------------------------------------- Gain on Sale of Partnership Interests -- -- -- -- -- ( 48,000) - --------------------------------------------------------------------------------------------------------- Income Before Income Taxes 25% 15% 19% 12% 600,000 1,310,000 - --------------------------------------------------------------------------------------------------------- Income Taxes 6% 4% 5% 3% 115,000 376,000 - --------------------------------------------------------------------------------------------------------- Net Income 19% 11% 14% 9% $ 485,000 $ 934,000 - ---------------------------------------------------------------------------------------------------------
-18- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Three Months Ended September 30, 1996 Compared To The Three Months Ended September 30, 1995 Revenues for the third quarter of 1996 increased $936,000, or 24%, to $4,798,000 compared to $3,862,000 for the third quarter of 1995. This increase in revenue was primarily attributed to the fact that the Company purchased one new unit in September 1995, one new unit in February 1996, two new units in March 1996 and upgraded two units to newer technology during 1996. Further revenue increases are due to increased utilization of the Company's mobile MRI units. Revenues derived from hospitals which the Company serviced in both comparable periods increased 9% during the third quarter of 1996 compared to the third quarter of 1995 primarily as a result of increased MRI procedures. The Company purchased two new units during September 1996 which did not have a material effect on the third quarter 1996 operations and which are anticipated to have a favorable impact in future periods. Operating expenses increased $260,000, or 20%, to $1,587,000 during the third quarter of 1996 compared to $1,327,000 during the third quarter of 1995. The increase is primarily due to approximately $370,000 of operating expenses associated with the Company's new units purchased in September 1995 and the first quarter of 1996, partially offset by a decrease of approximately $110,000 in operating expenses of units in operation for both comparable periods. This 9% decrease in expenses of units in operation for both comparable periods is principally the result of $62,000 savings on lower maintenance and cryogen contracts, $34,000 savings on state sales tax on certain units and $33,000 savings on general repairs and maintenance costs, partially offset by higher payroll costs for operational personnel. Depreciation and amortization expense increased $328,000, or 38%, in the third quarter of 1996 to $1,198,000 from $870,000 during the third quarter of 1995. This increase was primarily due to depreciation expense associated with the Company's new units purchased in September 1995 and the first quarter of 1996 as well as the units upgraded during 1996. Selling, general and administrative costs in the third quarter of 1996 decreased $23,000 to $629,000, or 13% of revenues, compared to $652,000, or 17% of revenues during the third quarter of 1995. The decrease is primarily due to lower consulting and professional fees. Interest expense for the third quarter of 1996 increased $71,000 to $500,000 compared to $429,000 for the third quarter of 1995 primarily as a result of the new units purchased in September 1995, February 1996 and March 1996, as well as the units upgraded during 1996. -19- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Three Months Ended September 30, 1996 Compared To The Three Months Ended September 30, 1995 (continued) Other expense for the three months ended September 30, 1996 reflects a $300,000 net state sales tax refund. The refund is the result of sales tax paid to a certain state over a period of time which the Company determined (by obtaining a private letter ruling from the state) was actually exempt from such tax. The Company received formal notice of the refund in September 1996 and payment is expected in November 1996. The Company reported net income of $916,000, or $.21 per share, during the third quarter of 1996 versus $431,000, or $.14 per share, during the third quarter of 1995. Income tax expense for the third quarter of 1996 was $267,000, an effective tax rate of approximately 24%, as compared to income tax expense of $152,000, an effective tax rate of approximately 26%, for the third quarter of 1995. Income tax expense for the third quarter of 1996 reflects a $200,000 deferred tax benefit resulting from an adjustment to the Company's Federal net operating loss carryforward (see Note 5 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference). Excluding the $200,000 tax adjustment, the Company's effective tax rate for the three months ended September 30, 1996 approximated 39%. Nine Months Ended September 30, 1996 Compared To The Nine Months Ended September 30, 1995 Revenues for the nine months ended September 30, 1996 increased $2,201,000, or 19%, to $13,606,000 compared to $11,405,000 for the nine months ended September 30, 1995. Excluding revenues of approximately $548,000 for the six months ended June 30, 1995 related to the company's cardiac partnerships, which were sold on June 30, 1995, mobile MRI revenues increased approximately 20%. This increase in revenue was primarily attributed to the aforementioned new units purchased during late 1995 and the first quarter of 1996, the upgrade of two units to newer technology during 1996, as well as increased utilization of the Company's mobile MRI units. Revenues derived from hospitals which the Company serviced in both comparable periods increased approximately 10% during the nine months ended September 30, 1996 compared to the nine months ended September 30, 1995 primarily as a result of increased MRI procedures. -20- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Nine Months Ended September 30, 1996 Compared To The Nine Months Ended September 30, 1995 (continued) Operating expenses increased $296,000, or 7%, to $4,477,000 during the nine months ended September 30, 1996 compared to $4,181,000 during the nine months ended September 30, 1995. Excluding approximately $179,000 of operating expenses associated with the cardiac partnerships which were sold on June 30, 1995, mobile MRI operating expenses increased $475,000 primarily due to approximately $830,000 of operating expenses associated with the Company's new units purchased in September 1995 and the first quarter of 1996, partially offset by a decrease of approximately $355,000, or 9%, in operating expenses of units in operation for both comparable periods. This 9% decrease is primarily a result of $164,000 of savings on lower maintenance and cryogen contracts, $124,000 saving on state sales tax on certain units, $66,000 savings on the rental of the tractors used to transport the MRI units and $57,000 savings on general repairs and maintenance costs, partially offset by higher payroll costs for operational personnel. Depreciation and amortization expense increased $581,000, or 21%, during the nine months ended September 30, 1996 to $3,307,000 from $2,726,000 during the nine months ended September 30, 1995. This increase was primarily due to depreciation expense associated with the Company's new units purchased during late 1995 and the first quarter of 1996, as well as the two units upgraded during 1996. Selling, general and administrative costs during the nine months ended September 30, 1996 increased $187,000 to $2,002,000, or 15% of revenues, compared to $1,815,000, or 16% of revenues during the nine months ended September 30, 1995. The increase is primarily due to increased compensation costs related to the Company's management bonus plan. Interest expense for the nine months ended September 30, 1996 increased $129,000 to $1,447,000 compared to $1,318,000 for the nine months ended September 30, 1995, primarily as a result of the new units purchased during late 1995 and the first quarter of 1996, as well as the units upgraded during 1996. Other expense for the nine months ended September 30, 1996 reflects a $300,000 net state sales tax refund. The refund is the result of sales tax paid to a certain state over a period of time which the Company determined (by obtaining a private letter ruling from the state) was actually exempt from such tax. The Company received formal notice of the refund in September 1996 and payment is expected in November 1996. -21- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) Nine Months Ended September 30, 1996 Compared To The Nine Months Ended September 30, 1995 (continued) The Company reported net income of $1,936,000, or $.50 per share, for the nine months ended September 30, 1996 versus $1,002,000, or $.36 per share, during the nine months ended September 30, 1995. Income tax expense for the nine months ended September 30, 1996 was $736,000, an effective tax rate of approximately 28%, as compared to income tax expense of $360,000, an effective tax rate of approximately 26%, for the nine months ended September 30, 1995. Income tax expense for the nine months ended September 30, 1996 reflects a $200,000 deferred tax benefit resulting from an adjustment to the Company's Federal net operating loss carryforward (see Note 5 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference). Excluding the $200,000 tax adjustment, the Company's effective tax rate for the nine months ended September 30, 1996 approximated 35%. LIQUIDITY AND CAPITAL RESOURCES During the nine months ended September 30, 1996, the Company experienced a net increase of $5,269,000 in cash from operations as compared to $3,933,000 during the nine months ended September 30, 1995. This increase is primarily due to increased income. The Company used cash in investing activities during the nine months ended September 30, 1996 of $1,749,000, primarily related to down payments and deposits on the purchase of new MRI units totaling approximately $1,936,000 as well as the purchase of a mobile MRI company in March 1996 for approximately $643,000 (see Note 9 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference) offset by a reduction of $930,000 in the amount of restricted cash related to equipment financing. The Company used cash in financing activities during the nine months ended September 30, 1996 of approximately $1,512,000 primarily related to $3,388,000 of principal payments under loan agreements and capital leases partially offset by approximately $1,876,000 received upon exercise of stock options and warrants during the second and third quarters of 1996. The Company experienced a net increase in unrestricted cash and cash equivalents of approximately $2,008,000 -22- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) during the nine months ended September 30, 1996 and maintained an unrestricted cash balance at September 30, 1996 of approximately $4,350,000. The Company also maintained a restricted cash balance of $670,000 at September 30, 1996. The Company's trade accounts receivable balance increased by $472,000 to $1,532,000 at September 30, 1996 primarily due to higher service revenues during the quarter ended September 30, 1996. In the experience of the Company, average accounts receivable collections typically do not exceed 40 days, as there are no billings subject to traditional third-party payors, and the accounts receivable balance turned over approximately ten times during the nine months ended September 30, 1996. Approximately 30% of the Company's billings and collections are processed through Hospital Shared Services ("HSS"), a representative of certain hospitals. As a fee for these services, HSS retains approximately 2.5% of gross billings to these hospitals and the Company records the service revenues and related receivables net of such fees. At September 30, 1996, the Company had a working capital surplus of $336,000. In addition, the Company's cash flow from operations totaled $5,269,000 for the nine months ended September 30, 1996 and the Company continues a positive cash flow. Further, $6,198,000 of the $7,304,000 of current liabilities relate to the current portion of capital leases and long-term debt which will be due over the next twelve months, as opposed to current assets of $7,641,000 which are highly liquid and turn over frequently. The Company has been able to meet all past debt service obligations, currently is able to meet all such obligations, and anticipates it will continue to meet such obligations. As in the past, management anticipates that such obligations will be funded by the revenues generated by the Mobile Units. To date, the Company has financed its equipment acquisitions and working capital requirements with loans and leases, from internal cash flow and capital contributions. As of September 30, 1996, the Company was a party to leases and loans covering all of its mobile MRI units. The aggregate outstanding principal balance of all such leases and loans was approximately $26,665,000 at September 30, 1996. On June 30, 1995, the Company sold its majority ownership and general partner rights in four cardiac care partnerships for a total sale price of $300,000 comprised of $200,000 in cash and a $100,000 thirty-month note. The Company recognized a pre-tax gain on this sale of $48,219. -23- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) The partnerships, which constituted approximately seven percent of the Company's revenues, had total assets of approximately $1.4 million, comprised primarily of diagnostic equipment and accounts receivable, and total liabilities of approximately $1.2 million comprised primarily of capital lease obligations associated with the diagnostic equipment. In February 1995, the Company purchased an eighteen-month-old Siemens 1.0 Tesla Impact Mobile Unit for approximately $1.2 million. The Company financed the purchase of this unit under a 48 month dollar-out lease requiring monthly payments of approximately $31,000. In June 1995, the Company upgraded one of its .5 Tesla General Electric Signas to a 1.0 Tesla Signa for approximately $1.9 million. The Company financed the purchase of this unit with a 60 month dollar-out lease requiring monthly payments of approximately $41,000. In September 1995, the Company purchased a new unit for approximately $1.9 million. The Company financed the purchase of this new unit with a 60 month loan requiring monthly payments of approximately $40,000. The Company upgraded one of its .5 Tesla Signas to a 1.0 Tesla Horizon unit. The new unit was financed at a net total cost of approximately $2.0 million and was delivered in late February 1996. The Company financed the purchase of this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $44,000. The Company contracted with several new hospital clients and purchased a new Siemens 1.0 Tesla Impact unit which began service in mid-February 1996. The cost of this new unit approximated $1.9 million which was financed with a 60 month loan requiring monthly payments of approximately $41,000. In April 1996, the Company upgraded one of the units purchased from another mobile provider (see Note 9 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference) to a Siemens 1.0 Tesla Impact unit with a net total cost of approximately $1.9 million. The Company financed this new unit with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. -24- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) In June 1996, the Company upgraded one of its .5 Tesla Signas to a Siemens 1.0 Tesla Impact unit. The new unit was financed at a net total cost of approximately $2.0 million and financed with a 60 month dollar-out lease requiring monthly payments of approximately $43,000. The Company in May 1996 signed an agreement with Siemens Medical Systems to upgrade the second unit purchased from another mobile provider (see Note 9 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference) and to purchase a new unit during the fourth quarter of 1996. Delivery of the upgraded unit occurred in July 1996 and the new unit was delivered and began operation on or about October 1, 1996. The upgrades' net cost approximated $1.9 million and the Company financed approximately $1.7 million with a 60 month finance agreement requiring monthly payments of approximately $36,000. The Company's new unit cost approximately $1.9 million and the Company financed approximately $1.7 million requiring a monthly payment of approximately $37,000. The Company purchased and took delivery of two new GE 1.0 Tesla Horizon units in mid-to-late September 1996. These units were purchased at a cost of approximately $1.8 million each and the Company financed approximately $1.6 million and $1.5 million with 60 month finance agreements requiring monthly payments of approximately $34,000 and $32,000, respectively. The Company completed a previously negotiated upgrade of a .5 Tesla system to a 1.0 Tesla Horizon on November 2, 1996. The new unit was financed at a net cost of approximately $1.5 million with a 60 month finance agreement requiring monthly payments of approximately $32,000. On November 1, 1996, the Company purchased a mobile MRI unit from Palmetto Community Health Network (the "Network") for approximately $390,000 and signed new service contracts with six South Carolina hospitals which are members of the Network. The Company began servicing the new hospitals immediately with the MRI unit purchased from the Network and plans to trade-in and upgrade the purchased unit to a new 1.0 Tesla Horizon in mid-December 1996. This new unit represents the Company's eighteenth mobile MRI unit and is the seventh new unit acquired this year. -25- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) Prior to July 1, 1995, the Company subleased certain truck cabs from Shared Mobile Enterprises ("SME"), which, in turn, leased such truck cabs from an independent third-party leasing company. Effective July 1, 1995, SME released the Company from its obligations under ten long-term subleases in exchange for the issuance to SME of 120,000 unregistered Common Shares valued at $3 per share, the weighted average closing price for the stock for the prior thirty trading days. The Company received an opinion from an independent financial advisor that the transaction was fair to the Company and its shareholders. At the same time, with the concurrence of the third-party leasing company, the Company assumed SME's obligations under its original lease and modified that lease by (i) extending the lease term by one additional year and (ii) adding one additional truck cab to the schedule of leased property with a corresponding increase in base rental payments. The $360,000 value of the shares represents the present value of the excess of the sublease payments over the original lease payments. The Company has capitalized the $360,000 and is amortizing this prepaid rent over a period which approximates the lease term. SME was one hundred percent beneficially owned by certain officers/directors and a former director/consultant of the Company who own approximately 18% of the Company's outstanding Common Shares. The Company has outstanding a letter-of-credit totaling $400,000 related to equipment financing at a freestanding diagnostic imaging center which it sold in June 1995 and on which it remains obligated (see Note 4 of the Company's unaudited consolidated financial statements included in Item 1, which information is incorporated herein by reference). In November 1994, the Company issued a letter-of-credit in the amount of $270,000 related to the purchase and financing of a new Mobile Unit. The lessor holding this letter-of-credit allowed the letter-of-credit to terminate October 31, 1996. In relation to a refinancing of four Mobile Units in February and March 1995, the Company issued two letters-of-credit in the aggregate amount of $930,000. In February 1996, the lessor holding one of the letters-of-credit totaling $330,000 allowed the letter-of-credit to expire. On July 31, 1996, the Company refinanced two MRI units which had previously been refinanced in March 1995 to more favorable lease terms. The new leases totaled approximately $2.3 million (net of a $150,000 down payment) in the aggregate and are being financed over a thirty-six month -26- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) period at an interest rate of 9.25%. The refinancing resulted in annual cash flow savings to the Company of approximately $200,000. As a result of this refinancing, the $600,000 letter-of-credit which had been issued in March 1995 was terminated. On March 21, 1996, the Company purchased certain assets of a mobile provider which operated mobile units in the state of North Carolina (the "Seller"). The purchase price approximated $600,000 in cash [net of negotiated trade-in value of approximately $500,000 (which approximated the purchase price of the units acquired) for two of the Seller's mobile MRI units] in exchange for MRI Programs including Certificate of Need licenses or exemptions and certain customer service contracts. The Company traded-in and upgraded one of the purchased units to newer technology in April 1996 and traded-in and upgraded the second unit in July 1996. The unit upgraded in July 1996 is currently contracted to provide temporary interim service to hospitals for a period of approximately one year. During 1996, the Company has signed long-term contracts with approximately 18 new customers and has extended for an additional two to three years approximately 26 existing customer contracts. At September 30, 1996, the Company had net operating loss carryforwards for federal income tax purposes of approximately $8.0 million which are available to offset future Federal taxable income through 2010. The Company had been named as a defendant, along with the hospital which contracts for the Company's MRI services, in a claim filed by a woman who alleged to have incurred partial paralysis as a result of being mishandled during an MRI procedure. The claim had been filed for $6.0 million in damages. The claim was settled by the Company's insurance company in November 1996 with no admission of liability and no financial effect to the Company. Management believes that the healthcare industry continues to be in a period of consolidation characterized by mergers, joint ventures, acquisitions, sales of all or part of healthcare companies or their assets, and other partnering and investment transactions of various structures and sizes involving healthcare companies. The Company continues to evaluate new opportunities that allow for the expansion of its business through the acquisition of additional Mobile Units in geographic -27- SMT HEALTH SERVICES INC. AND SUBSIDIARIES SEPTEMBER 30, 1996 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. (continued) LIQUIDITY AND CAPITAL RESOURCES (Continued) proximity to its existing regional markets or in locations that can serve as a basis for new market areas. The Company, like other healthcare companies, has participated from time to time and is participating in preliminary discussions with third parties regarding a variety of potential transactions, and the Company has considered and expects to continue to consider and explore potential transactions of various types with other healthcare companies. However, no assurances can be given as to whether any such transactions may be consummated or, if so, when. -28- PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. See Note 8 - Litigation regarding termination of a legal proceeding which information is included in Item 1 which is incorporated herein by reference. Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits. 10.01 Employment Agreement by and between SMT Health Services Inc. and Jeff D. Bergman dated July 1, 1996..................... Filed herewith. 10.02 Employment Agreement by and between SMT Health Services Inc. and Daniel Dickman dated July 1, 1996..................... Filed herewith. 10.03 Employment Agreement by and between SMT Health Services Inc. and David Spindler dated October 1, 1996................. Filed herewith. 10.04 Employment Agreement by and between SMT Health Services Inc. and David A. Zynn dated October 1, 1996..................... Filed herewith. 10.05 Master Equipment Lease dated August 28, 1996 by and between SMT Health Services Inc. and DVI Financial Services Inc............................................ Filed herewith. 10.06 Loan and Security Agreement dated September 11, 1996 by and between Siemens Credit Corporation and SMT Health Services Inc............................ Filed herewith. 10.07 Finance Lease and Security Agreement dated September 26, 1996 by and between Laurel Capital Corporation and SMT Health Services Inc............................ Filed herewith. 10.08 Finance Lease and Security Agreement dated July 26, 1996 by and between Laurel Capital Corporation and SMT Health Services Inc. (Lease 2165).............. Filed herewith. -29- PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K. (Continued) 10.09 Finance Lease and Security Agreement dated July 26, 1991 by and between Laurel Capital Corporation and SMT Health Services Inc. (Lease 2166).............. Filed herewith. 11.01 Earnings Per Share Computation................. Filed herewith. 27.01 Financial Data Schedule........................ Filed herewith. 99.01 Press release dated August 2, 1996............. Filed herewith. 99.02 Press release dated September 17, 1996......... Filed herewith. 99.03 Press release dated September 25, 1996......... Filed herewith. 99.04 Press release dated October 3, 1996............ Filed herewith. 99.05 Press release dated October 22, 1996........... Filed herewith. 99.06 Press release dated November 4, 1996........... Filed herewith. (b) Report on Form 8-K. The Company has not filed any reports on Form 8-K during the quarter ended September 30, 1996. -30- 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 understanding thereunto duly authorized. SMT Health Services Inc. (Registrant) Date: November 12, 1996 By: /s/ Jeff D. Bergman ------------------------------------ Jeff D. Bergman Chairman and Chief Executive Officer Date: November 12, 1996 By: /s/ David A. Zynn ------------------------------------ David A. Zynn Chief Financial Officer, Treasurer and Principal Accounting Officer -31- EXHIBIT INDEX -------------
Sequential Page Number Exhibit No. or Reference - ----------- ------------ 10.01 Employment Agreement by and between SMT Health Services Inc. and Jeff D. Bergman dated July 1, 1996 Filed herewith. 10.02 Employment Agreement by and between SMT Health Services Inc. and Daniel Dickman dated July 1, 1996 Filed herewith. 10.03 Employment Agreement by and between SMT Health Services Inc. and David Spindler dated October 1, 1996 Filed herewith. 10.04 Employment Agreement by and between SMT Health Services Inc. and David A. Zynn dated October 1, 1996 Filed herewith. 10.05 Master Equipment Lease dated August 28, 1996 by and between SMT Health Services Inc. and DVI Financial Services Inc. Filed herewith. 10.06 Loan and Security Agreement dated September 11, 1996 by and between Siemens Credit Corporation and SMT Health Services Inc. Filed herewith. 10.07 Finance Lease and Security Agreement dated September 26, 1996 by and between Laurel Capital Corporation and SMT Health Services Inc. Filed herewith. 10.08 Finance Lease and Security Agreement dated July 26, 1996 by and between Laurel Capital Corporation and SMT Health Services Inc. (Lease 2165) Filed herewith.
EXHIBIT INDEX -------------
Sequential Page Number Exhibit No. or Reference - ----------- ------------ 10.09 Finance Lease and Security Agreement dated July 26, 1991 by and between Laurel Capital Corporation and SMT Health Services Inc. (Lease 2166) Filed herewith. 11.01 Earnings Per Share Computation Filed herewith. 27.01 Financial Data Schedule Filed herewith. 99.01 Press release dated August 2, 1996 Filed herewith. 99.02 Press release dated September 17, 1996 Filed herewith. 99.03 Press release dated September 25, 1996 Filed herewith. 99.04 Press release dated October 3, 1996 Filed herewith. 99.05 Press release dated October 22, 1996 Filed herewith. 99.06 Press release dated November 4, 1996 Filed herewith.
EX-10.01 2 EMPLOYMENT AGREEMENT WITH JEFF BERGMAN Exhibit 10.01 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 1st day of July, 1996 (the "Effective Date"), by and between SMT HEALTH SERVICES INC., a Delaware corporation (the "Company"), and JEFF D. BERGMAN (the "Employee"). WITNESSETH: ----------- WHEREAS, the Company desires to secure the continued employment of Employee in an executive capacity; and WHEREAS, the Company and the Employee desire to enter into this Agreement in order to set forth certain terms and conditions of Employee's continued employment with the Company and to terminate the existing employment agreement dated as of March 1, 1995; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. Employment. The Company hereby agrees to continue to employ the ----------- Employee and the Employee hereby agrees to continue to be employed by the Company commencing on the date hereof for the Term (as defined below) of the Agreement, in the position and with the duties and responsibilities set forth in Section 2 below, and upon the other terms and subject to the conditions hereinafter stated. 2. Position, Duties and Responsibilities. -------------------------------------- (a) During the Term of the Agreement, the Employee shall serve as the Chairman of the Board, President and Chief Executive Officer of the Company. The Employee shall have general executive supervision over the property, business and affairs of the Company, subject to the policies and directions of, and the executive responsibilities that may be assigned to him by and reporting directly and solely to, the Board of Directors of the Company (the "Board of Directors"). The Employee shall be responsible for the development, coordination and implementation of the strategies for the Company's business. The Employee shall have general supervisory authority over the executive officers and other employees of the Company and responsibilities with respect to the retention and dismissal of such officers and employees, except that any executive officer performing the functions customarily assigned to a chief operating officer or chief financial officer, as the case may be, shall be appointed by and may be dismissed only with the consent of the Board of Directors. The Employee shall be a signatory, at all times during the term of this Agreement, on all bank accounts, of every nature and kind, and all other banking arrangements, including safety deposit boxes, lockbox accounts, and the like. Employee's duties shall be performed principally at the Company's executive offices which are located in the Pittsburgh Metropolitan Area and Employee shall not be required to perform duties outside the Pittsburgh Metropolitan Area which would necessitate changing his present residence, unless Employee otherwise agrees in writing. For purposes of this Agreement, the term "Pittsburgh Metropolitan Area" shall encompass the City of Pittsburgh, Pennsylva nia, the Borough of Wexford, Pennsylvania, and the territory within a fifteen (15) mile radius of such borough. The Company agrees that it shall not relocate or transfer its principal executive offices to a location outside the Pittsburgh Metropolitan Area. (b) During the Term, the Employee shall devote such time and attention to affairs of the Company as are necessary to faithfully and diligently perform his duties and responsibilities hereunder; provided, however, that nothing contained herein shall prohibit the Employee from (a) engaging in officiating in the National Football League or other leagues approved by the Board of Directors, (b) serving as a member of the Board of Directors or officer of any other for-profit entity so long as Employee has obtained the prior consent of Board of Directors , or (c) engaging in charitable and community affairs. 3. Term. The initial term of this Agreement shall be for a period of ----- three (3) years, commencing on July 1, 1996, and ending on June 30, 1999. On each quarterly anniversary of the Effective Date while Employee remains Employed hereunder, such term shall be automatically extended by three months, and shall continue until Employee's employment hereunder is terminated pursuant to Section 5 hereof (the initial term of this Agreement, as extended by each renewal period, is hereinafter defined as the "Term"). 4. Compensation. For the services rendered by Employee pursuant to ------------- Section 2 during the Term, the Employee shall be paid the compensation and receive the benefits as set forth on Exhibit A annexed hereto. --------- 5. Termination of Agreement. The Employee's employment hereunder may be ------------------------- terminated only as follows: (a) By the Company Without Cause. The Company may at any time ----------------------------- terminate the Employee's employment hereunder without Cause, by affirmative vote of a majority of the entire Board of Directors (without counting the presence or vote of the Employee), and upon no less than ninety (90) days' prior written notice to the Employee. (b) By the Employee Without Good Reason. The Employee may at any time ------------------------------------ terminate his employment hereunder for any reason upon no less than thirty (30) days' prior written notice to the Company; provided; however; Section 5(d) hereof shall apply in lieu of this Section 5(b) to any termination of employment by the Employee for Good Reason (as defined therein). (c) By the Company for Cause. The Company may at any time terminate ------------------------- the Employee's employment hereunder for Cause. Prior to such event, the Company by affirmative vote of a majority of the entire Board of Directors (without counting the presence or vote of the Employee) shall give the Employee prompt written notice specifying in reasonable detail the conduct which is believed to provide the basis for a termination of Employee for Cause. Except in the event of a termination of Employee pursuant to Section 5(c)(ii) (as to which the termination shall be immediately effective after receipt of such letter), within ten (10) business days of the Employee's receipt of such letter, the Employee shall be provided an opportunity, together with his counsel, to present and discuss with the Board of Directors the conduct which is asserted to provide a basis for such purposed for Cause termination. Following such meeting, if Employee does not, within ten (10) days thereof, take such reasonable steps as directed by a majority vote of the entire Board of Directors (without 2 counting the presence or vote of the Employee) to cease or correct the conduct which is asserted to provide a basis for such proposed for Cause termination, the Board of Directors may, by the affirmative vote of a majority of the entire Board of Directors (without counting the presence or vote of the Employee), terminate the Employee's employment for Cause. "Cause" shall mean only one or more of the following: (i) The material breach of this Agreement by Employee, which breach shall not have been cured by Employee within thirty (30) days after the Employee's receipt from the Company at the direction of a majority of the entire Board of Directors (without counting the presence or vote of the Employee) of written notice specifying in reasonable detail the nature of Employee's breach; (ii) The conviction of Employee for a crime of moral turpitude or a felony which is materially injurious to the reputation or business of the Company; and (iii) Any willful act or acts by Employee which is materially and demonstrably injurious to the Company (excluding any act ratified or approved by the Board of Directors of the Company and further excluding any act taken by Employee in good faith with a reasonable belief that such act was in the best interests of the Company). Neither the Employee's participation in or presence at any meeting at which a for Cause termination is discussed nor the Employee's efforts to cease or cure any conduct purported to be sufficient basis for a for Cause termination, shall be considered an admission, acknowledgment or agreement that such conduct does in fact provide a sufficient basis for a for Cause termination. (d) By the Employee for Good Reason. The Employee may terminate -------------------------------- employment hereunder for Good Reason at any time by providing prompt written notice to the Company within a reasonable time after the occurrence of the event(s) constituting such Good Reason. For purposes of this Agreement, "Good Reason" means only one or more of the following: (i) The material breach of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after the Company's receipt from the Employee or his agent of written notice specifying in reasonable detail the nature of the Company's breach. (ii) The required relocation of the Employee out of the Company's principal executive offices or the Pittsburgh Metropolitan Area without his specific prior written consent. (iii) The assignment to the Employee of any duties inconsistent in any material respect with the Employee's position (including status and reporting requirements), authority, duties, powers or responsibilities as contemplated by Section 2 of this Agreement, or any other diminution of such, authority, duties, position or responsibili ties, excluding for this purpose any isolated, insubstantial action by the Company not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of written notice from the Employee 3 to the Company that such action will be considered a Good Reason hereunder unless timely remedied. (iv) A material increase in Employee's responsibilities, workload, required hours or travel from that historically required of Employee, not remedied by the company within thirty (30) days after receipt of written notice from Employee to the Company that such increase will be considered a Good Reason hereunder unless timely remedied. (e) Death. The Employee's employment for all purposes under this ------ Agreement shall terminate upon his death. (f) Disability. In the event that the Employee is determined by a ----------- physician's written evaluation delivered to the Company (i) to be "permanently and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of 1986, as amended, or (ii) to have been for a period exceeding one year unable to perform the important duties hereunder due to an injury or sickness (and has not performed any such work) then the Company may, at its discretion, upon sixty (60) days notice to the Employee or his guardian, as the case may be, terminate the Employee's employment hereunder. (g) Mutual Written Agreement. This Agreement and the Employee's ------------------------- employment hereunder may be terminated at any time by the mutual written agreement of the Employee and the Company. 6. Compensation in Event of Termination. ------------------------------------- (a) Termination by Employee for Good Reason; by Company Without Cause. ------------------------------------------------------------------ In the event that the Employee's employment hereunder is terminated: (i) by the Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee: (i) Continuation of full salary, bonuses (including profit sharing) and benefits (including Automobile Allowance) during the time period equal to the remaining Term of the Agreement immediately prior to the Employee's termination (without regard to any future renewals that would have occurred absent such termination) (the "Termination Period"); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plan); and (iii) Continuing coverage, to the extent not prohibited by law, during the Termination Period or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter (or, at Employee's election, for a period of twelve (12) months from the date of Employee's termination of employment), for the Employee 4 and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (b) Termination for Cause by the Company. In the event that the ------------------------------------- Company shall terminate the Employee's employment hereunder for Cause pursuant to Section 5(c), this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (c) Termination by Employee Without Good Reason. In the event that the -------------------------------------------- Employee shall terminate employment hereunder (other than for Good Reason) pursuant to Section 5(b) hereof, this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (d) Death. In the event of the death of the Employee, then the Company ------ shall pay (or cause to be paid), within thirty (30) days of such death, or provide in the same manner as before the Employee's death, as applicable, the following compensation and benefits to the estate of the Employee, or the Employee's personal representative, or to those individuals designated in a writing delivered to the Company by the Employee prior to his death; (i) A lump sum payment equal to the sum of (A) the Employee's highest annual Base Salary; (B) the Employee's highest annualized Automobile Allowance; and (C) the Employee's highest award under the Company's Profit Sharing Plan, in each case, for any of the three years preceding the date of such termination (the "Lump Sum Amount"); and (ii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's death for the Employee's eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of death. In the event that such eligible dependents, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (e) Disability. In the event that the Company elects to terminate the ----------- Employee's employment hereunder pursuant to Section 5(f), then the Company shall pay (or cause to be paid) within thirty (30) days of the such termination or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee or his personal representative: (i) All amounts as the Employee is entitled to under the Company's disability policy and program applicable to Employee; (ii) The Lump Sum Amount; and 5 (iii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on the unfunded basis if necessary. (f) Mutual Written Consent. In the event that the Employee and the ----------------------- Company shall terminate the Employer's employment by mutual written agreement, the Company shall pay such compensation and provide such benefits, if any, as the parties may mutually agree upon in writing. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking employment or otherwise, nor shall any amounts received from employment, insurance or otherwise by the Employee offset or reduce in any manner the obligations of the Company hereunder. 7. Change in Control. ------------------ (a) Definition. For purposes of this Agreement, the term "Change of ----------- Control" shall mean the occurrence of any of the following events: (i) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a person with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (herein, "voting securities") is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting securities immediately prior to such sale or disposition; (ii) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty-five percent (25%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, (y) the Employee or any other person who is a director or executive officer of the Company as of the date hereof, or (z) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of January 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock or other voting securities whether or not such person shall have filed a statement 6 on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of 15 percent (15%) or more of the Company voting securities, shall not constitute a Change of Control; (iii) The Company's termination of its business and liquidation of its assets; (iv) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive less than fifty-two percent (52%) of the outstanding voting securities of the new or continuing corporation(s); or (v) If, on any Testing Date , less than a majority of the members of the Board of Directors are persons who were either (A) nominated or recommended for election by at least a two-thirds vote of those persons who were members of the Board of Directors or Nominating Committee of the Board of Directors two years prior to the Testing Date, or (B) elected by the Board of Directors, including at least a two-thirds vote in favor of such election by the persons who were members of the Board of Directors two years prior to the Testing Date. For the purpose of paragraph (v), each change in the composition of the members of the Board of Directors during employee's employment hereunder and for six (6) months thereafter, shall be considered a Testing Date. (b) Payment Following Change in Control. In the event that the ------------------------------------ Employee's employment hereunder is terminated (other than for cause, death, disability or pursuant to Section 5(c), (e) or (f), respectively) within twelve (12) months prior to or within twenty-four (24) months following a Change in Control, then, at Employee's sole election, in lieu of any compensation or benefits owed to Employee pursuant to Section 6 of this Agreement, the Company shall pay or provide the following compensation and benefits to Employee: (i) Unless rejected pursuant to paragraph (d), three times the Lump Sum Amount (reduced by any amounts previously paid pursuant to Section 6); and, otherwise, a lump sum payment equal to three times Employee's then current annual Base Salary (reduced by any amounts previously paid pursuant to Section 6); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans, which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plans); and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twenty-four (24) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company benefit plans in 7 effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (c) Alternative Payment Following Change in Control. If the Employee ------------------------------------------------ does not elect to receive the compensation and benefits set forth in paragraph (b), the Employee shall receive the compensation and benefits set forth in Section 6(a) with respect to such termination. (d) Employee shall receive three times the Lump Sum Amount pursuant to paragraph (b)(i), unless the applicable Board of Directors votes to limit such payment to three times Employee's then current annual Base Salary. The Company's Board of Directors shall be the applicable Board of Directors with respect to a change of control described in subparagraph (a)(i), (ii), (iii) or (v); and, the surviving entity's Board of Directors shall be the applicable Board of Directors in the case of a change of control described in subparagraph (a)(iv). 8. Expenses. Employee will be reimbursed all reasonable, ordinary and --------- necessary business expenses, including expenses for entertainment, travel and similar items that are approved by the Company. The Company will reimburse Employee for all expenses upon a presentation of Employee of itemized accounts of such expenditures in accordance and in the manner in a form reasonably described by the Company. 9. Effect of Termination. Upon the termination of the Employee's ---------------------- employment hereunder, neither the Company nor the Employee shall have any remaining duties or obligations hereunder except that: (a) the Company shall: (i) Pay the employee's accrued salary and any other accrued benefits for all periods ending on or prior to the date of termination under Sections 4 hereof or Exhibit A annexed hereto; --------- (ii) Reimburse the Employee for expenses incurred in accordance with Section 8 hereof for all periods ending on or prior to the date of termination; (iii) Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any Company benefit plan of which the Employee or any of his dependents is or was a participant or as otherwise required by law; (iv) Pay all compensation previously deferred by Employee and not yet paid by Company (together with interest, if any, thereon) and any other accrued benefits, including accrued vacation pay and the annual estate planning allowance not yet paid by the Company; (v) Pay the Employee and his beneficiaries any compensation or provide the Employee or his eligible dependents any benefits due pursuant to Sections 6 or 7 8 hereof or Exhibit A annexed hereto. --------- (b) Unless the employment of the Employee is terminated for Cause pursuant to Section 5(c) or by the Employee without Good Reason pursuant to Section 5(d), the vesting period and other restrictions shall lapse for all stock options or other stock awards previously granted to the Employee by the Company and all such stock awards shall be deemed to be fully vested. In such case, the Company shall extend the option exercise period to the third anniversary of the date of the Employee's termination for all such options held by the Employee as of the date of the termination of his employment hereunder. (c) Except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without Cause pursuant to Section 5(a), or by mutual agreement upon any other termination, the Employee shall remain bound by the terms of Section 10(a) hereof, and, in any event, Employee shall remain bound by the terms of Section 10(b)-(d) hereof. (d) The Company shall be authorized to withhold from any payment to the Employee, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. 10. Restrictions. The Company has invested and will continue to invest ------------- considerable resources in the development of its business and in the research, development and design of its activities and their delivery, which investment has or will result in the generation of proprietary, confidential and/or trade secret data, information, techniques and materials, both tangible and intangible, which are owned by the Company. (a) The Employee agrees that during the Term, and except in the event of Employee's termination of his employment hereunder for Good Reason or by the Company without Cause, for a period of two (2) year from the date of the termination of the Employee's employment hereunder, he will not directly or indirectly (i) engage in mobile magnetic resonance imaging business (the "Company Business") within one hundred fifty (150) miles of any location then serviced by the Company; (ii) compete or participate as agent, employee, consultant, advisor, representative or otherwise in any enterprise engaged in a business which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; or (iii) compete or participate as a stockholder, partner or joint venturer, or have any direct or indirect financial interest, in any enterprise which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; provided, however, that nothing contained herein shall prohibit the Employee from (A) owning, operating and managing and continuing to own, operate and manage the investments and businesses owned, operated or managed by Employee on the date hereof; (B) owning, operating or managing any business, or acting upon any business opportunity after obtaining approval of a majority of the Board of Directors of the Company and a majority of the independent members of the Board of Directors of the Company (if any); or (C) owning no more than five percent (5%) of any publicly-traded corporation with respect to which Employee does not serve as an officer, director, employee, consultant or in any other capacity other than as an investor. 9 (b) The Employee shall abide by and be bound as part of the employment relationship created by this Agreement to comply with the provisions regarding confidential information, attached as Exhibit B annexed hereto. --------- (c) To the extent the Employee develops, makes, conceives, contributes to or reduces to practice any intellectual property related to the duties of the Employee hereunder or which results in any way from the Employee using the resources of the Company, such intellectual property is and shall be the sole and exclusive property of the Company. Accordingly, the Employee shall abide by and be bound to comply with the provisions regarding ownership of intellectual property, attached as Exhibit C annexed hereto. --------- (d) During the Term, except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without cause pursuant to Section 5(a) and for an additional period of two (2) year immediately following termination of the Employee's employment with the Company, he shall abide by and be bound to comply with the additional restrictive covenants of the Company attached as Exhibit D annexed hereto. --------- (e) Employee agrees and acknowledges that the compensation due to him hereunder shall be full and adequate consideration for the Employee's agreement to the foregoing restrictions. Nothing in this Section 10 is intended to enhance or increase the rights otherwise available to the Employee in respect of an unlawful act or omission by the Company. 11. Acknowledgement. The Employee acknowledges that the restrictions set ---------------- forth in Section 10 hereto are reasonable in scope and essential to the preservation of the Company's business and proprietary properties and that the compensation paid to him pursuant to paragraph 10(e) fully compensates him for accepting such restrictions. The Company acknowledges that the compensation paid to the Employee pursuant to paragraph 10(e) is a reasonable payment for his acceptance of the restrictions in Section 10. 12. Severability. The covenants of the Employee contained in Section 10 ------------- hereto shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. If, at the time of enforcement, any sentence, paragraph, clause, or combination of the same of such independent agreement in Section 10 is in violation of the law of any state where applicable, such sentence, paragraph, clause, or combination of the same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph in Section 10 shall remain binding on the parties. In the event that any part of any covenant of Section 10 is determined by a court of law to be overly broad thereby making the covenant unenforceable, the parties agree that such court shall substitute a judicially enforceable limitation in its place, and that as so modified, the covenants shall be binding upon the parties as if originally set forth in this Agreement. 13. Notices. All notices and other communications hereunder shall be in -------- writing and 10 shall be deemed to have been given if delivered personally or sent by registered or certified mail (return receipt requested), postage prepaid, or by telecopy (immediately followed by telephone confirmation of delivery of such telecopy with the intended recipient of such notice and by notice in writing sent promptly by registered or certified mail as provided above) to the parties to this Agreement at the following addresses or at such other address for a party as shall be specified by like notice: To the Company: SMT Health Services Inc. 10521 Perry Highway Wexford, Pennsylvania 15090 (412) 933-3300 (412) 933-3311 (facsimile) With a copy to: Ronald Basso, Esquire Buchanan Ingersoll Professional Corporation One Oxford Center 20th Floor, 301 Grant Street Pittsburgh, Pennsylvania 15219 (412) 562-3943 (412) 562-1041 (facsimile) To the Employee: Jeff D. Bergman 335 Golfside Drive Wexford, Pennsylvania 15090 (412) 935-9590 With a copy to: Steven M. Cherin, Esquire Gefsky and Lehman, P.C. 2301 One PPG Place Pittsburgh, Pa 15222 (412) 391-2727 (412) 391-1685 (facsimile) All such notices and communications shall be deemed to have been received on the date of personal delivery, on the date that the telecopy is confirmed as having been received or on the third business day after the mailing thereof, as the case may be. 14. Governing Law. This Agreement shall be governed by and construed in -------------- accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of 11 law provisions. 15. Severability. If any provision of this Agreement is held to be ------------- illegal, invalid or unenforceable under present or future laws effective during the Term, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be effected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to the illegal, invalid or unenforceable provision as may be possible and still be legal, valid or enforceable. The lack of deductibility or recharacterization for tax or accounting purposes, or the imposition of any excise taxes or penalties, fines or other charges, or imposition of any injunction or similar restraint against the Company with respect to the payment of any amount or provision of any benefit hereunder, shall not be construed to make the provisions of this Agreement providing for such payment or provision "illegal, invalid or unenforceable", nor in any manner reduce the entitlement of the Employee, or his successor or assign to receive such payment or benefit. 16. Recharacterization of Payments. To the extent that, but for this ------------------------------- Section 16, any payment or benefit hereunder is determined by the Company's outside auditors, Internal Revenue Service, or by any court of component jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G (b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such amount as may be necessary to preclude any such payment or benefit from being considered an "Excess Parachute Payment" shall be recharacterized and shall constitute an unsecured, long-term loan from the Company to the Employee, his personal representative, his successors or assigns, as the case may be, payable together with accrued interest on the tenth anniversary of the payment of such recharacterized payment or the receipt of such recharacterized benefit, with interest at the Applicable Federal Rate for loans in excess of nine years, as defined in Section 1274 of the Code, on such principal amount. Such loan shall be evidenced by a promissory note in the form attached hereto as Exhibit E. --------- 17. Indemnification. The Company agrees to indemnify the Employee to the ---------------- fullest extent permitted by law for his services to, or on behalf of the Company, as an Employee hereunder, as a director and in any and every other capacity in which he may serve the Company or its interests. In furtherance of such agreement to indemnify, but no by way of limitation, the terms of the Company's Certificate of Incorporation and By-Laws providing for such indemnification and payment of expenses, as in effect on the date hereof (and, which are attached hereto as Exhibit F), are hereby incorporated by reference as --------- if fully stated herein. Additionally, the provisions of Exhibit G shall supplement such provisions. For the purpose of this Agreement, any amendment to said Certificate of Incorporation or By-Laws shall not be effective to reduce, qualify or otherwise limit the scope, benefit or enforceability of this provision; provided, however, if any such amendment extends or improves the -------- ------- scope, benefit or enforceability of the indemnification and payment of expenses contained in such By-Laws for any officer, director, employee or agent, such extended or improved provisions shall be deemed to be incorporated by reference herein for the benefit of the Employee without any further action by the Company or the Employee. 18. Arbitration. Except as otherwise provided herein, in the event of any ------------ controversy, 12 dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Employee's employment with the Company or the termination of such employment, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Employee agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Pittsburgh, Pennsylvania, in accordance with this Section 16 of the Agreement and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered, by a panel of three (3) arbitrators (the "Arbitration Panel") each of which shall have at least ten (10) years' experience in executive compensation and employment matters. The Company and the Employee shall each select one qualified arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third qualified arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. 19. Entire Agreement. This Agreement sets forth the entire understanding ----------------- of the parties with respect to the matters specified herein. No other terms or conditions and no amendments or modifications shall be binding unless made in writing and signed by the parties hereto. Upon execution and delivery by both parties of this Agreement, the parties agree that the Employee Agreement dated as of March 1, 1995, shall terminate without further obligation to either party. 20. Binding Effect. This Agreement shall be binding upon the parties --------------- hereto and shall inure to the benefit of such parties, their respective heirs, representatives, successors and permitted assigns. This Agreement may not be assigned by the Employee nor may it be assigned by the Company without the Employee's consent. 21. Expenses. The Company shall bear the costs of all expenses associated --------- with the creation, negotiation and execution of this Agreement, including the fees of its counsel, the Employee's counsel and of any consultant retained by the Company to advice the Employee and/or the Board of Directors with respect to the terms and conditions of this Agreement. The Company shall bear the full cost of each arbitrator selected pursuant to Section 16 hereof with respect to any dispute hereunder. Otherwise, each party shall pay their individual expenses with respect to this Agreement. * * * SIGNATURES APPEAR ON THE FOLLOWING PAGE * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SMT HEALTH SERVICES INC. 13 By: -------------------------------- Name: ------------------------------ Title: ----------------------------- EMPLOYEE: ----------------------------------- Jeff D. Bergman 14 EX-10.02 3 EMPLOYMENT AGREEMENT WITH DANIEL DICKMAN Exhibit 10.02 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 1st day of July, 1996 (the "Effective Date"), by and between SMT HEALTH SERVICES INC., a Delaware corporation (the "Company"), and DANIEL DICKMAN (the "Employee"). WITNESSETH: ----------- WHEREAS, the Company desires to secure the continued employment of Employee in an executive capacity; and WHEREAS, the Company and the Employee desire to enter into this Agreement in order to set forth certain terms and conditions of Employee's continued employment with the Company and to terminate the existing employment agreement dated as of March 1, 1995; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. Employment. The Company hereby agrees to continue to employ the ----------- Employee and the Employee hereby agrees to continue to be employed by the Company commencing on the date hereof for the Term (as defined below) of the Agreement, in the position and with the duties and responsibilities set forth in Section 2 below, and upon the other terms and subject to the conditions hereinafter stated. 2. Position, Duties and Responsibilities. -------------------------------------- (a) During the Term of the Agreement, the Employee shall serve as Executive Vice President and Chief Operating Officer of the Company. The Employee shall have general executive supervision over the property, business and affairs of the Company, subject to the policies and directions of, and the executive responsibilities that may be assigned to him by and reporting directly and solely to, the Board of Directors of the Company (the "Board of Directors"). The Employee shall be responsible for the develop ment, coordination and implementation of the strategies for the Company's business. The Employee shall have general supervisory authority over the executive officers (other than the Chief Executive Officer and President) and other employees of the Company and responsibilities with respect to the retention and dismissal of such officers and employees, except that any executive officer performing the functions customarily assigned to a chief executive officer, president, or chief financial officer, as the case may be, shall be appointed by and may be dismissed only with the consent of the Board of Directors. The Employee shall be a signatory, at all times during the term of this Agreement, on all bank accounts, of every nature and kind, and all other banking arrangements, including safety deposit boxes, lockbox accounts, and the like. Employee's duties shall be performed principally at the Company's executive offices which are located in the Pittsburgh Metropolitan Area and Employee shall not be required to perform duties outside the Pittsburgh Metropolitan Area which would necessitate changing his present residence, unless Employee otherwise agrees in writing. For purposes of this Agreement, the term "Pittsburgh Metropolitan Area" shall encompass the City of Pittsburgh, Pennsylvania, the Borough of Wexford, Pennsylvania, and the territory within a fifteen (15) mile radius of such borough. The Company agrees that it shall not relocate or transfer its principal executive offices to a location outside the Pittsburgh Metropolitan Area. (b) During the Term, the Employee shall devote such time and attention to affairs of the Company as are necessary to faithfully and diligently perform his duties and responsibilities hereunder; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as a member of the Board of Directors or officer of any other for-profit entity so long as Employee has obtained the prior consent of Board of Directors, or (b) engaging in charitable and community affairs. 3. Term. The initial term of this Agreement shall be for a period of ----- three (3) years, commencing on July 1, 1996, and ending on June 30, 1999. On each quarterly anniversary of the Effective Date while Employee remains Employed hereunder, such term shall be automatically extended by three months, and shall continue until Employee's employment hereunder is terminated pursuant to Section 5 hereof (the initial term of this Agreement, as extended by each renewal period, is hereinafter defined as the "Term"). 4. Compensation. For the services rendered by Employee pursuant to ------------- Section 2 during the Term, the Employee shall be paid the compensation and receive the benefits as set forth on Exhibit A annexed hereto. --------- 5. Termination of Agreement. The Employee's employment hereunder may be ------------------------- terminated only as follows: (a) By the Company Without Cause. The Company may at any time ----------------------------- terminate the Employee's employment hereunder without Cause, by affirmative vote of a majority of the entire Board of Directors (without counting the presence or vote of the Employee), and upon no less than ninety (90) days' prior written notice to the Employee. (b) By the Employee Without Good Reason. The Employee may at any time ------------------------------------ terminate his employment hereunder for any reason upon no less than thirty (30) days' prior written notice to the Company; provided; however; Section 5(d) hereof shall apply in lieu of this Section 5(b) to any termination of employment by the Employee for Good Reason (as defined therein). (c) By the Company for Cause. The Company may at any time terminate ------------------------- the Employee's employment hereunder for Cause. Prior to such event, the Company by affirmative vote of a majority of the entire Board of Directors (without counting the presence or vote of the Employee) shall give the Employee prompt written notice specifying in reasonable detail the conduct which is believed to provide the basis for a termination of Employee for Cause. Except in the event of a termination of Employee pursuant to Section 5(c)(ii) (as to which the termination shall be immediately effective after receipt of such letter), within ten (10) business days of the Employee's receipt of such letter, the Employee shall be provided an opportunity, together with his counsel, to present and discuss with the Board of Directors the conduct which is asserted to provide a basis for such purposed for Cause termination. Following such meeting, if Employee does not, within ten (10) days thereof, take such reasonable steps as directed by a majority vote of the entire Board of Directors (without counting the presence or vote of the Employee) to cease or correct the conduct which is asserted to provide a basis for such proposed for Cause termination, the Board of Directors may, by the 2 affirmative vote of a majority of the entire Board of Directors (without counting the presence or vote of the Employee), terminate the Employee's employment for Cause. "Cause" shall mean only one or more of the following: (i) The material breach of this Agreement by Employee, which breach shall not have been cured by Employee within thirty (30) days after the Employee's receipt from the Company at the direction of a majority of the entire Board of Directors (without counting the presence or vote of the Employee) of written notice specifying in reasonable detail the nature of Employee's breach; (ii) The conviction of Employee for a crime of moral turpitude or a felony which is materially injurious to the reputation or business of the Company; and (iii) Any willful act or acts by Employee which is materially and demonstrably injurious to the Company (excluding any act ratified or approved by the Board of Directors of the Company and further excluding any act taken by Employee in good faith with a reasonable belief that such act was in the best interests of the Company). Neither the Employee's participation in or presence at any meeting at which a for Cause termination is discussed nor the Employee's efforts to cease or cure any conduct purported to be sufficient basis for a for Cause termination, shall be considered an admission, acknowledgment or agreement that such conduct does in fact provide a sufficient basis for a for Cause termination. (d) By the Employee for Good Reason. The Employee may terminate -------------------------------- employment hereunder for Good Reason at any time by providing prompt written notice to the Company within a reasonable time after the occurrence of the event(s) constituting such Good Reason. For purposes of this Agreement, "Good Reason" means only one or more of the following: (i) The material breach of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after the Company's receipt from the Employee or his agent of written notice specifying in reasonable detail the nature of the Company's breach. (ii) The required relocation of the Employee out of the Company's principal executive offices or the Pittsburgh Metropolitan Area without his specific prior written consent. (iii) The assignment to the Employee of any duties inconsistent in any material respect with the Employee's position (including status and reporting requirements), authority, duties, powers or responsibilities as contemplated by Section 2 of this Agreement, or any other diminution of such, authority, duties, position or responsibili ties, excluding for this purpose any isolated, insubstantial action by the Company not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of written notice from the Employee to the Company that such action will be considered a Good Reason hereunder unless timely remedied. 3 (iv) A material increase in Employee's responsibilities, workload, required hours or travel from that historically required of Employee, not remedied by the company within thirty (30) days after receipt of written notice from Employee to the Company that such increase will be considered a Good Reason hereunder unless timely remedied. (e) Death. The Employee's employment for all purposes under this ------ Agreement shall terminate upon his death. (f) Disability. In the event that the Employee is determined by a ----------- physician's written evaluation delivered to the Company (i) to be "permanently and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of 1986, as amended, or (ii) to have been for a period exceeding one year unable to perform the important duties hereunder due to an injury or sickness (and has not performed any such work) then the Company may, at its discretion, upon sixty (60) days notice to the Employee or his guardian, as the case may be, terminate the Employee's employment hereunder. (g) Mutual Written Agreement. This Agreement and the Employee's ------------------------- employment hereunder may be terminated at any time by the mutual written agreement of the Employee and the Company. 6. Compensation in Event of Termination. ------------------------------------- (a) Termination by Employee for Good Reason; by Company Without Cause. ------------------------------------------------------------------ In the event that the Employee's employment hereunder is terminated: (i) by the Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee: (i) Continuation of full salary, bonuses (including profit sharing) and benefits (including Automobile Allowance) during the time period equal to the remaining Term of the Agreement immediately prior to the Employee's termination (without regard to any future renewals that would have occurred absent such termination) (the "Termination Period"); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plan); and (iii) Continuing coverage, to the extent not prohibited by law, during the Termination Period or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter (or, at Employee's election, for a period of twelve (12) months from the date of Employee's termination of employment), for the Employee and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot 4 be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (b) Termination for Cause by the Company. In the event that the ------------------------------------- Company shall terminate the Employee's employment hereunder for Cause pursuant to Section 5(c), this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (c) Termination by Employee Without Good Reason. In the event that the -------------------------------------------- Employee shall terminate employment hereunder (other than for Good Reason) pursuant to Section 5(b) hereof, this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (d) Death. In the event of the death of the Employee, then the Company ------ shall pay (or cause to be paid), within thirty (30) days of such death, or provide in the same manner as before the Employee's death, as applicable, the following compensation and benefits to the estate of the Employee, or the Employee's personal representative, or to those individuals designated in a writing delivered to the Company by the Employee prior to his death; (i) A lump sum payment equal to the sum of (A) the Employee's highest annual Base Salary; (B) the Employee's highest annualized Automobile Allowance; and (C) the Employee's highest award under the Company's Profit Sharing Plan, in each case, for any of the three years preceding the date of such termination (the "Lump Sum Amount"); and (ii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's death for the Employee's eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of death. In the event that such eligible dependents, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (e) Disability. In the event that the Company elects to terminate the ----------- Employee's employment hereunder pursuant to Section 5(f), then the Company shall pay (or cause to be paid) within thirty (30) days of the such termination or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee or his personal representative: (i) All amounts as the Employee is entitled to under the Company's disability policy and program applicable to Employee; (ii) The Lump Sum Amount; and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, 5 for the Employee and his eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on the unfunded basis if necessary. (f) Mutual Written Consent. In the event that the Employee and the ----------------------- Company shall terminate the Employer's employment by mutual written agreement, the Company shall pay such compensation and provide such benefits, if any, as the parties may mutually agree upon in writing. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking employment or otherwise, nor shall any amounts received from employment, insurance or otherwise by the Employee offset or reduce in any manner the obligations of the Company hereunder. 7. Change in Control. ------------------ (a) Definition. For purposes of this Agreement, the term "Change of ----------- Control" shall mean the occurrence of any of the following events: (i) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a person with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (herein, "voting securities") is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting securities immediately prior to such sale or disposition; (ii) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty-five percent (25%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, (y) the Employee or any other person who is a director or executive officer of the Company as of the date hereof, or (z) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of January 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock or other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of 15 percent (15%) or more of the Company voting securities, shall not constitute a Change of Control; 6 (iii) The Company's termination of its business and liquidation of its assets; (iv) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive less than fifty-two percent (52%) of the outstanding voting securities of the new or continuing corporation(s); or (v) If, on any Testing Date , less than a majority of the members of the Board of Directors are persons who were either (A) nominated or recommended for election by at least a two-thirds vote of those persons who were members of the Board of Directors or Nominating Committee of the Board of Directors two years prior to the Testing Date, or (B) elected by the Board of Directors, including at least a two-thirds vote in favor of such election by the persons who were members of the Board of Directors two years prior to the Testing Date. For the purpose of paragraph (v), each change in the composition of the members of the Board of Directors during employee's employment hereunder and for six (6) months thereafter, shall be considered a Testing Date. (b) Payment Following Change in Control. In the event that the ------------------------------------ Employee's employment hereunder is terminated (other than for cause, death, disability or pursuant to Section 5(c), (e) or (f), respectively) within twelve (12) months prior to or within twenty-four (24) months following a Change in Control, then, at Employee's sole election, in lieu of any compensation or benefits owed to Employee pursuant to Section 6 of this Agreement, the Company shall pay or provide the following compensation and benefits to Employee: (i) Unless rejected pursuant to paragraph (d), three times the Lump Sum Amount (reduced by any amounts previously paid pursuant to Section 6); and, otherwise, a lump sum payment equal to three times Employee's then current annual Base Salary (reduced by any amounts previously paid pursuant to Section 6); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans, which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plans); and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twenty-four (24) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit 7 plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (c) Alternative Payment Following Change in Control. If the Employee ------------------------------------------------ does not elect to receive the compensation and benefits set forth in paragraph (b), the Employee shall receive the compensation and benefits set forth in Section 6(a) with respect to such termination. (d) Employee shall receive three times the Lump Sum Amount pursuant to paragraph (b)(i), unless the applicable Board of Directors votes to limit such payment to three times Employee's then current annual Base Salary. The Company's Board of Directors shall be the applicable Board of Directors with respect to a change of control described in subparagraph (a)(i), (ii), (iii) or (v); and, the surviving entity's Board of Directors shall be the applicable Board of Directors in the case of a change of control described in subparagraph (a)(iv). 8. Expenses. Employee will be reimbursed all reasonable, ordinary and --------- necessary business expenses, including expenses for entertainment, travel and similar items that are approved by the Company. The Company will reimburse Employee for all expenses upon a presentation of Employee of itemized accounts of such expenditures in accordance and in the manner in a form reasonably described by the Company. 9. Effect of Termination. Upon the termination of the Employee's ---------------------- employment hereunder, neither the Company nor the Employee shall have any remaining duties or obligations hereunder except that: (a) the Company shall: (i) Pay the employee's accrued salary and any other accrued benefits for all periods ending on or prior to the date of termination under Sections 4 hereof or Exhibit A annexed hereto; --------- (ii) Reimburse the Employee for expenses incurred in accordance with Section 8 hereof for all periods ending on or prior to the date of termination; (iii) Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any Company benefit plan of which the Employee or any of his dependents is or was a participant or as otherwise required by law; (iv) Pay all compensation previously deferred by Employee and not yet paid by Company (together with interest, if any, thereon) and any other accrued benefits, including accrued vacation pay and the annual estate planning allowance not yet paid by the Company; (v) Pay the Employee and his beneficiaries any compensation or provide the Employee or his eligible dependents any benefits due pursuant to Sections 6 or 7 hereof or Exhibit A annexed hereto. --------- 8 (b) Unless the employment of the Employee is terminated for Cause pursuant to Section 5(c) or by the Employee without Good Reason pursuant to Section 5(d), the vesting period and other restrictions shall lapse for all stock options or other stock awards previously granted to the Employee by the Company and all such stock awards shall be deemed to be fully vested. In such case, the Company shall extend the option exercise period to the third anniversary of the date of the Employee's termination for all such options held by the Employee as of the date of the termination of his employment hereunder. (c) Except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without Cause pursuant to Section 5(a), or by mutual agreement upon any other termination, the Employee shall remain bound by the terms of Section 10(a) hereof, and, in any event, Employee shall remain bound by the terms of Section 10(b)-(d) hereof. (d) The Company shall be authorized to withhold from any payment to the Employee, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. 10. Restrictions. The Company has invested and will continue to invest ------------- considerable resources in the development of its business and in the research, development and design of its activities and their delivery, which investment has or will result in the generation of proprietary, confidential and/or trade secret data, information, techniques and materials, both tangible and intangible, which are owned by the Company. (a) The Employee agrees that during the Term, and except in the event of Employee's termination of his employment hereunder for Good Reason or by the Company without Cause, for a period of two (2) year from the date of the termination of the Employee's employment hereunder, he will not directly or indirectly (i) engage in mobile magnetic resonance imaging business (the "Company Business") within one hundred fifty (150) miles of any location then serviced by the Company; (ii) compete or participate as agent, employee, consultant, advisor, representative or otherwise in any enterprise engaged in a business which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; or (iii) compete or participate as a stockholder, partner or joint venturer, or have any direct or indirect financial interest, in any enterprise which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; provided, however, that nothing contained herein shall prohibit the Employee from (A) owning, operating and managing and continuing to own, operate and manage the investments and businesses owned, operated or managed by Employee on the date hereof; (B) owning, operating or managing any business, or acting upon any business opportunity after obtaining approval of a majority of the Board of Directors of the Company and a majority of the independent members of the Board of Directors of the Company (if any); or (C) owning no more than five percent (5%) of any publicly-traded corporation with respect to which Employee does not serve as an officer, director, employee, consultant or in any other capacity other than as an investor. (b) The Employee shall abide by and be bound as part of the employment relationship created by this Agreement to comply with the provisions regarding confidential information, attached as Exhibit B annexed hereto. --------- 9 (c) To the extent the Employee develops, makes, conceives, contributes to or reduces to practice any intellectual property related to the duties of the Employee hereunder or which results in any way from the Employee using the resources of the Company, such intellectual property is and shall be the sole and exclusive property of the Company. Accordingly, the Employee shall abide by and be bound to comply with the provisions regarding ownership of intellectual property, attached as Exhibit C annexed hereto. --------- (d) During the Term, except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without cause pursuant to Section 5(a) and for an additional period of two (2) year immediately following termination of the Employee's employment with the Company, he shall abide by and be bound to comply with the additional restrictive covenants of the Company attached as Exhibit D annexed hereto. --------- (e) Employee agrees and acknowledges that the compensation due to him hereunder shall be full and adequate consideration for the Employee's agreement to the foregoing restrictions. Nothing in this Section 10 is intended to enhance or increase the rights otherwise available to the Employee in respect of an unlawful act or omission by the Company. 11. Acknowledgement. The Employee acknowledges that the restrictions set ---------------- forth in Section 10 hereto are reasonable in scope and essential to the preservation of the Company's business and proprietary properties and that the compensation paid to him pursuant to paragraph 10(e) fully compensates him for accepting such restrictions. The Company acknowledges that the compensation paid to the Employee pursuant to paragraph 10(e) is a reasonable payment for his acceptance of the restrictions in Section 10. 12. Severability. The covenants of the Employee contained in Section 10 ------------- hereto shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. If, at the time of enforcement, any sentence, paragraph, clause, or combination of the same of such independent agreement in Section 10 is in violation of the law of any state where applicable, such sentence, paragraph, clause, or combination of the same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph in Section 10 shall remain binding on the parties. In the event that any part of any covenant of Section 10 is determined by a court of law to be overly broad thereby making the covenant unenforceable, the parties agree that such court shall substitute a judicially enforceable limitation in its place, and that as so modified, the covenants shall be binding upon the parties as if originally set forth in this Agreement. 13. Notices. All notices and other communications hereunder shall be in -------- writing and shall be deemed to have been given if delivered personally or sent by registered or certified mail (return receipt requested), postage prepaid, or by telecopy (immediately followed by telephone confirmation of delivery of such telecopy with the intended recipient of such notice and by notice in writing sent promptly by registered or certified mail as provided above) to the parties to this 10 Agreement at the following addresses or at such other address for a party as shall be specified by like notice: To the Company: SMT Health Services Inc. 10521 Perry Highway Wexford, Pennsylvania 15090 (412) 933-3300 (412) 933-3311 (facsimile) With a copy to: Ronald Basso, Esquire Buchanan Ingersoll Professional Corporation One Oxford Center 20th Floor, 301 Grant Street Pittsburgh, Pennsylvania 15219 (412) 562-3943 (412) 562-1041 (facsimile) To the Employee: Daniel Dickman 603 Golden Oaks Lane Pittsburgh, Pennsylvania 15237 (412) 364-9753 With a copy to: Steven M. Cherin, Esquire Gefsky and Lehman, P.C. 2301 One PPG Place Pittsburgh, Pa 15222 (412) 391-2727 (412) 391-1685 (facsimile) All such notices and communications shall be deemed to have been received on the date of personal delivery, on the date that the telecopy is confirmed as having been received or on the third business day after the mailing thereof, as the case may be. 14. Governing Law. This Agreement shall be governed by and construed in -------------- accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. 15. Severability. If any provision of this Agreement is held to be ------------- illegal, invalid or unenforceable under present or future laws effective during the Term, such provision shall be fully 11 severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be effected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to the illegal, invalid or unenforceable provision as may be possible and still be legal, valid or enforceable. The lack of deductibility or recharacterization for tax or accounting purposes, or the imposition of any excise taxes or penalties, fines or other charges, or imposition of any injunction or similar restraint against the Company with respect to the payment of any amount or provision of any benefit hereunder, shall not be construed to make the provisions of this Agreement providing for such payment or provision "illegal, invalid or unenforceable", nor in any manner reduce the entitlement of the Employee, or his successor or assign to receive such payment or benefit. 16. Recharacterization of Payments. To the extent that, but for this ------------------------------- Section 16, any payment or benefit hereunder is determined by the Company's outside auditors, Internal Revenue Service, or by any court of component jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G (b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such amount as may be necessary to preclude any such payment or benefit from being considered an "Excess Parachute Payment" shall be recharacterized and shall constitute an unsecured, long-term loan from the Company to the Employee, his personal representative, his successors or assigns, as the case may be, payable together with accrued interest on the tenth anniversary of the payment of such recharacterized payment or the receipt of such recharacterized benefit, with interest at the Applicable Federal Rate for loans in excess of nine years, as defined in Section 1274 of the Code, on such principal amount. Such loan shall be evidenced by a promissory note in the form attached hereto as Exhibit E. --------- 17. Indemnification. The Company agrees to indemnify the Employee to the ---------------- fullest extent permitted by law for his services to, or on behalf of the Company, as an Employee hereunder, as a director and in any and every other capacity in which he may serve the Company or its interests. In furtherance of such agreement to indemnify, but no by way of limitation, the terms of the Company's Certificate of Incorporation and By-Laws providing for such indemnification and payment of expenses, as in effect on the date hereof (and, which are attached hereto as Exhibit F), are hereby incorporated by reference as --------- if fully stated herein. Additionally, the provisions of Exhibit G shall supplement such provisions. For the purpose of this Agreement, any amendment to said Certificate of Incorporation or By-Laws shall not be effective to reduce, qualify or otherwise limit the scope, benefit or enforceability of this provision; provided, however, if any such amendment extends or improves the -------- ------- scope, benefit or enforceability of the indemnification and payment of expenses contained in such By-Laws for any officer, director, employee or agent, such extended or improved provisions shall be deemed to be incorporated by reference herein for the benefit of the Employee without any further action by the Company or the Employee. 18. Arbitration. Except as otherwise provided herein, in the event of any ------------ controversy, dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Employee's employment with the Company or the termination of such employment, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, 12 the Company and the Employee agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Pittsburgh, Pennsylvania, in accordance with this Section 16 of the Agreement and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered, by a panel of three (3) arbitrators (the "Arbitration Panel") each of which shall have at least ten (10) years' experience in executive compensation and employment matters. The Company and the Employee shall each select one qualified arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third qualified arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. 19. Entire Agreement. This Agreement sets forth the entire understanding ----------------- of the parties with respect to the matters specified herein. No other terms or conditions and no amendments or modifications shall be binding unless made in writing and signed by the parties hereto. Upon execution and delivery by both parties of this Agreement, the parties agree that the Employee Agreement dated as of March 1, 1995, shall terminate without further obligation to either party. 20. Binding Effect. This Agreement shall be binding upon the parties --------------- hereto and shall inure to the benefit of such parties, their respective heirs, representatives, successors and permitted assigns. This Agreement may not be assigned by the Employee nor may it be assigned by the Company without the Employee's consent. 21. Expenses. The Company shall bear the costs of all expenses associated --------- with the creation, negotiation and execution of this Agreement, including the fees of its counsel, the Employee's counsel and of any consultant retained by the Company to advice the Employee and/or the Board of Directors with respect to the terms and conditions of this Agreement. The Company shall bear the full cost of each arbitrator selected pursuant to Section 16 hereof with respect to any dispute hereunder. Otherwise, each party shall pay their individual expenses with respect to this Agreement. * * * SIGNATURES APPEAR ON THE FOLLOWING PAGE * * * IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SMT HEALTH SERVICES INC. By: --------------------------------- Name: ------------------------------- 13 Title: ------------------------------ EMPLOYEE: ------------------------------------ Daniel Dickman 14 EX-10.03 4 EMPLOYMENT AGREEMENT WITH DAVID SPINDLER Exhibit 10.03 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 1st day of October, 1996 (the "Effective Date"), by and between SMT HEALTH SERVICES INC., a Delaware corporation (the "Company"), and DAVID SPINDLER (the "Employee"). WITNESSETH: ----------- WHEREAS, the Company desires to secure the continued employment of Employee in an executive capacity; and WHEREAS, the Company and the Employee desire to enter into this Agreement in order to set forth certain terms and conditions of Employee's continued employment with the Company and to terminate the existing employment agreement dated as of January 1, 1996; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. Employment. The Company hereby agrees to continue to employ the ----------- Employee and the Employee hereby agrees to continue to be employed by the Company commencing on the date hereof for the Term (as defined below) of the Agreement, in the position and with the duties and responsibilities set forth in Section 2 below, and upon the other terms and subject to the conditions hereinafter stated. 2. Position, Duties and Responsibilities. -------------------------------------- (a) During the Term of the Agreement, the Employee shall serve as Senior Vice President of Operations and Marketing of the Company. The Employee shall have general executive supervision over the operations and marketing activities of the Company, subject to the policies and directions of, and the executive responsibilities that may be assigned to him by the Board of Directors of the Company (the "Board of Directors"). The Employee shall have general supervisory authority over day-to-day operations and securing new customers or markets for the Company, reporting to the Executive Vice President. Employee's duties shall be based at the Company's executive offices which are located in the Pittsburgh Metropolitan Area and Employee shall not be required to perform duties outside the Pittsburgh Metropolitan Area which would necessitate changing his present residence, unless Employee otherwise agrees in writing. For purposes of this Agreement, the term "Pittsburgh Metropolitan Area" shall encompass the City of Pittsburgh, Pennsylva nia, the Borough of Wexford, Pennsylvania, and the territory within a fifteen (15) mile radius of such borough. The Company agrees that it shall not relocate or transfer its principal executive offices to a location outside the Pittsburgh Metropolitan Area. (b) During the Term, the Employee shall devote such time and attention to affairs of the Company as are necessary to faithfully and diligently perform his duties and responsibilities hereunder; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as a member of the Board of Directors of any other for-profit entity so long as Employee has obtained the prior consent of the President or Executive Vice President, or (b) engaging in charitable and community affairs. 3. Term. The initial term of this Agreement shall be for a period of two ----- (2) years, commencing on October 1, 1996, and ending on September 30, 1998. On each quarterly anniversary of the Effective Date while Employee remains Employed hereunder, such term shall be automatically extended by three months, and shall continue until Employee's employment hereunder is terminated pursuant to Section 5 hereof (the initial term of this Agreement, as extended by each renewal period, is hereinafter defined as the "Term"). 4. Compensation. For the services rendered by Employee pursuant to ------------- Section 2 during the Term, the Employee shall be paid the compensation and receive the benefits as set forth on Exhibit A annexed hereto. --------- 5. Termination of Agreement. The Employee's employment hereunder may be ------------------------- terminated only as follows: (a) By the Company Without Cause. The Company may at any time ----------------------------- terminate the Employee's employment hereunder without Cause, by affirmative vote of a majority of the entire Board of Directors, and upon no less than ninety (90) days' prior written notice to the Employee. (b) By the Employee Without Good Reason. The Employee may at any time ------------------------------------ terminate his employment hereunder for any reason upon no less than thirty (30) days' prior written notice to the Company; provided; however; Section 5(d) hereof shall apply in lieu of this Section 5(b) to any termination of employment by the Employee for Good Reason (as defined therein). (c) By the Company for Cause. The Company may at any time terminate ------------------------- the Employee's employment hereunder for Cause. Prior to such event, the Company by affirmative vote of a majority of the entire Board of Directors shall give the Employee prompt written notice specifying in reasonable detail the conduct which is believed to provide the basis for a termination of Employee for Cause. Except in the event of a termination of Employee pursuant to Section 5(c)(ii) (as to which the termination shall be immediately effective after receipt of such letter), within ten (10) business days of the Employee's receipt of such letter, the Employee shall be provided an opportunity, together with his counsel, to present and discuss with the Board of Directors the conduct which is asserted to provide a basis for such purposed for Cause termination. Following such meeting, if Employee does not, within ten (10) days thereof, take such reasonable steps as directed by a majority vote of the entire Board of Directors to cease or correct the conduct which is asserted to provide a basis for such proposed for Cause termination, the Board of Directors may, by the affirmative vote of a majority of the entire Board of Directors, terminate the Employee's employment for Cause. "Cause" shall mean only one or more of the following: (i) The material breach of this Agreement by Employee, which breach shall not have been cured by Employee within thirty (30) days after the Employee's receipt from the Company at the direction of a majority of the entire Board of Directors of written notice specifying in reasonable detail the nature of Employee's breach; 2 (ii) The conviction of Employee for a crime of moral turpitude or a felony which is materially injurious to the reputation or business of the Company; and (iii) Any willful act or acts by Employee which is materially and demonstrably injurious to the Company (excluding any act ratified or approved by the Board of Directors of the Company and further excluding any act taken by Employee in good faith with a reasonable belief that such act was in the best interests of the Company). Neither the Employee's participation in or presence at any meeting at which a for Cause termination is discussed nor the Employee's efforts to cease or cure any conduct purported to be sufficient basis for a for Cause termination, shall be considered an admission, acknowledgment or agreement that such conduct does in fact provide a sufficient basis for a for Cause termination. (d) By the Employee for Good Reason. The Employee may terminate -------------------------------- employment hereunder for Good Reason at any time by providing prompt written notice to the Company within a reasonable time after the occurrence of the event(s) constituting such Good Reason. For purposes of this Agreement, "Good Reason" means only one or more of the following: (i) The material breach of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after the Company's receipt from the Employee or his agent of written notice specifying in reasonable detail the nature of the Company's breach. (ii) The required relocation of the Employee out of the Company's principal executive offices or the Pittsburgh Metropolitan Area without his specific prior written consent. (iii) The assignment to the Employee of any duties inconsistent in any material respect with the Employee's position (including status and reporting requirements), authority, duties, powers or responsibilities as contemplated by Section 2 of this Agreement, or any other diminution of such, authority, duties, position or responsibili ties, excluding for this purpose any isolated, insubstantial action by the Company not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of written notice from the Employee to the Company that such action will be considered a Good Reason hereunder unless timely remedied. (iv) A material increase in Employee's responsibilities, workload, required hours or travel from that historically required of Employee, not remedied by the company within thirty (30) days after receipt of written notice from Employee to the Company that such increase will be considered a Good Reason hereunder unless timely remedied. (e) Death. The Employee's employment for all purposes under this ------ Agreement shall terminate upon his death. 3 (f) Disability. In the event that the Employee is determined by a ----------- physician's written evaluation delivered to the Company (i) to be "permanently and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of 1986, as amended, the Company may, at its discretion, upon sixty (60) days notice to the Employee or his guardian, as the case may be, terminate the Employee's employment hereunder. (g) Mutual Written Agreement. This Agreement and the Employee's ------------------------- employment hereunder may be terminated at any time by the mutual written agreement of the Employee and the Company. 6. Compensation in Event of Termination. ------------------------------------- (a) Termination by Employee for Good Reason; by Company Without Cause. ------------------------------------------------------------------ In the event that the Employee's employment hereunder is terminated: (i) by the Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee: (i) Continuation of full salary, bonuses (including profit sharing) and benefits (including Automobile Allowance) during the time period equal to the remaining Term of the Agreement immediately prior to the Employee's termination (without regard to any future renewals that would have occurred absent such termination) (the "Termination Period"); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plan); and (iii) Continuing coverage, to the extent not prohibited by law, during the Termination Period or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter (or, at Employee's election, for a period of twelve (12) months from the date of Employee's termination of employment), for the Employee and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (b) Termination for Cause by the Company. In the event that the ------------------------------------- Company shall terminate the Employee's employment hereunder for Cause pursuant to Section 5(c), this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. 4 (c) Termination by Employee Without Good Reason. In the event that the -------------------------------------------- Employee shall terminate employment hereunder (other than for Good Reason) pursuant to Section 5(b) hereof, this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (d) Death. In the event of the death of the Employee, then the Company ------ shall pay (or cause to be paid), within thirty (30) days of such death, or provide in the same manner as before the Employee's death, as applicable, the following compensation and benefits to the estate of the Employee, or the Employee's personal representative, or to those individuals designated in a writing delivered to the Company by the Employee prior to his death; (i) A lump sum payment equal to the sum of (A) the Employee's highest annual Base Salary; (B) the Employee's highest annualized Automobile Allowance; and (C) the Employee's highest award under the Company's Profit Sharing Plan, in each case, for any of the three years preceding the date of such termination (the "Lump Sum Amount"); and (ii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's death for the Employee's eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of death. In the event that such eligible dependents, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (e) Disability. In the event that the Company elects to terminate the ----------- Employee's employment hereunder pursuant to Section 5(f), then the Company shall pay (or cause to be paid) within thirty (30) days of the such termination or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee or his personal representative: (i) All amounts as the Employee is entitled to under the Company's disability policy and program applicable to Employee; (ii) Sixty percent (60%) of Employee's then current Annual Base Salary; and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on the unfunded basis if necessary. 5 (f) Mutual Written Consent. In the event that the Employee and the ----------------------- Company shall terminate the Employer's employment by mutual written agreement, the Company shall pay such compensation and provide such benefits, if any, as the parties may mutually agree upon in writing. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking employment or otherwise, nor shall any amounts received from employment, insurance or otherwise by the Employee offset or reduce in any manner the obligations of the Company hereunder. 7. Change in Control. ------------------ (a) Definition. For purposes of this Agreement, the term "Change of ----------- Control" shall mean the occurrence of any of the following events: (i) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a person with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (herein, "voting securities") is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting securities immediately prior to such sale or disposition; (ii) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty-five percent (25%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, (y) the Employee or any other person who is a director or executive officer of the Company as of the date hereof, or (z) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of January 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock or other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of 15 percent (15%) or more of the Company voting securities, shall not constitute a Change of Control; (iii) The Company's termination of its business and liquidation of its assets; (iv) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such 6 reorganization, merger or consolidation receive less than fifty-two percent (52%) of the outstanding voting securities of the new or continuing corporation(s); or (v) If, on any Testing Date , less than a majority of the members of the Board of Directors are persons who were either (A) nominated or recommended for election by at least a two-thirds vote of those persons who were members of the Board of Directors or Nominating Committee of the Board of Directors two years prior to the Testing Date, or (B) elected by the Board of Directors, including at least a two-thirds vote in favor of such election by the persons who were members of the Board of Directors two years prior to the Testing Date. For the purpose of paragraph (v), each change in the composition of the members of the Board of Directors during employee's employment hereunder and for six (6) months thereafter, shall be considered a Testing Date. (b) Payment Following Change in Control. In the event that the ------------------------------------ Employee's employment hereunder is terminated (other than for cause, death, disability or pursuant to Section 5(c), (e) or (f), respectively) within twelve (12) months prior to or within twenty-four (24) months following a Change in Control, then, at Employee's sole election, in lieu of any compensation or benefits owed to Employee pursuant to Section 6 of this Agreement, the Company shall pay or provide the following compensation and benefits to Employee: (i) A lump sum payment equal to two times Employee's then current annual Base Salary (reduced by any amounts previously paid pursuant to Section 6); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans, which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plans); and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twenty-four (24) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (c) Alternative Payment Following Change in Control. If the Employee ------------------------------------------------ does not elect to receive the compensation and benefits set forth in paragraph (b), the Employee shall receive the compensation and benefits set forth in Section 6(a) with respect to such termination. 8. Expenses. Employee will be reimbursed all reasonable, ordinary and --------- necessary business expenses, including expenses for entertainment, travel and similar items that are 7 approved by the Company. The Company will reimburse Employee for all expenses upon a presentation of Employee of itemized accounts of such expenditures in accordance and in the manner in a form reasonably described by the Company. 9. Effect of Termination. Upon the termination of the Employee's ---------------------- employment hereunder, neither the Company nor the Employee shall have any remaining duties or obligations hereunder except that: (a) the Company shall: (i) Pay the employee's accrued salary and any other accrued benefits for all periods ending on or prior to the date of termination under Sections 4 hereof or Exhibit A annexed hereto; --------- (ii) Reimburse the Employee for expenses incurred in accordance with Section 8 hereof for all periods ending on or prior to the date of termination; (iii) Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any Company benefit plan of which the Employee or any of his dependents is or was a participant or as otherwise required by law; (iv) Pay all compensation previously deferred by Employee and not yet paid by Company (together with interest, if any, thereon) and any other accrued benefits, including accrued vacation pay not yet paid by the Company; (v) Pay the Employee and his beneficiaries any compensation or provide the Employee or his eligible dependents any benefits due pursuant to Sections 6 or 7 hereof or Exhibit A annexed hereto. --------- (b) Unless the employment of the Employee is terminated for Cause pursuant to Section 5(c) or by the Employee without Good Reason pursuant to Section 5(d), the vesting period and other restrictions shall lapse for all stock options or other stock awards previously granted to the Employee by the Company and all such stock awards shall be deemed to be fully vested. In such case, the Company shall extend the option exercise period to the third anniversary of the date of the Employee's termination for all such options held by the Employee as of the date of the termination of his employment hereunder. (c) Except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without Cause pursuant to Section 5(a), or by mutual agreement upon any other termination, the Employee shall remain bound by the terms of Section 10(a) hereof, and, in any event, Employee shall remain bound by the terms of Section 10(b)-(d) hereof. (d) The Company shall be authorized to withhold from any payment to the Employee, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. 8 10. Restrictions. The Company has invested and will continue to invest ------------- considerable resources in the development of its business and in the research, development and design of its activities and their delivery, which investment has or will result in the generation of proprietary, confidential and/or trade secret data, information, techniques and materials, both tangible and intangible, which are owned by the Company. (a) The Employee agrees that during the Term, and except in the event of Employee's termination of his employment hereunder for Good Reason or by the Company without Cause, for a period of two (2) year from the date of the termination of the Employee's employment hereunder, he will not directly or indirectly (i) engage in mobile magnetic resonance imaging business (the "Company Business") within one hundred fifty (150) miles of any location then serviced by the Company; (ii) compete or participate as agent, employee, consultant, advisor, representative or otherwise in any enterprise engaged in a business which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; or (iii) compete or participate as a stockholder, partner or joint venturer, or have any direct or indirect financial interest, in any enterprise which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; provided, however, that nothing contained herein shall prohibit the Employee from (A) owning, operating and managing and continuing to own, operate and manage the investments and businesses owned, operated or managed by Employee on the date hereof; (B) owning, operating or managing any business, or acting upon any business opportunity after obtaining approval of a majority of the Board of Directors of the Company and a majority of the independent members of the Board of Directors of the Company (if any); or (C) owning no more than five percent (5%) of any publicly-traded corporation with respect to which Employee does not serve as an officer, director, employee, consultant or in any other capacity other than as an investor. (b) The Employee shall abide by and be bound as part of the employment relationship created by this Agreement to comply with the provisions regarding confidential information, attached as Exhibit B annexed hereto. --------- (c) To the extent the Employee develops, makes, conceives, contributes to or reduces to practice any intellectual property related to the duties of the Employee hereunder or which results in any way from the Employee using the resources of the Company, such intellectual property is and shall be the sole and exclusive property of the Company. Accordingly, the Employee shall abide by and be bound to comply with the provisions regarding ownership of intellectual property, attached as Exhibit C annexed hereto. --------- (d) During the Term, except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without cause pursuant to Section 5(a) and for an additional period of two (2) year immediately following termination of the Employee's employment with the Company, he shall abide by and be bound to comply with the additional restrictive covenants of the Company attached as Exhibit D annexed hereto. --------- 9 (e) Employee agrees and acknowledges that the compensation due to him hereunder shall be full and adequate consideration for the Employee's agreement to the foregoing restrictions. Nothing in this Section 10 is intended to enhance or increase the rights otherwise available to the Employee in respect of an unlawful act or omission by the Company. 11. Acknowledgement. The Employee acknowledges that the restrictions set ---------------- forth in Section 10 hereto are reasonable in scope and essential to the preservation of the Company's business and proprietary properties and that the compensation paid to him pursuant to paragraph 10(e) fully compensates him for accepting such restrictions. The Company acknowledges that the compensation paid to the Employee pursuant to paragraph 10(e) is a reasonable payment for his acceptance of the restrictions in Section 10. 12. Severability. The covenants of the Employee contained in Section 10 ------------- hereto shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. If, at the time of enforcement, any sentence, paragraph, clause, or combination of the same of such independent agreement in Section 10 is in violation of the law of any state where applicable, such sentence, paragraph, clause, or combination of the same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph in Section 10 shall remain binding on the parties. In the event that any part of any covenant of Section 10 is determined by a court of law to be overly broad thereby making the covenant unenforceable, the parties agree that such court shall substitute a judicially enforceable limitation in its place, and that as so modified, the covenants shall be binding upon the parties as if originally set forth in this Agreement. 13. Notices. All notices and other communications hereunder shall be in -------- writing and shall be deemed to have been given if delivered personally or sent by registered or certified mail (return receipt requested), postage prepaid, or by telecopy (immediately followed by telephone confirmation of delivery of such telecopy with the intended recipient of such notice and by notice in writing sent promptly by registered or certified mail as provided above) to the parties to this Agreement at the following addresses or at such other address for a party as shall be specified by like notice: To the Company: SMT Health Services Inc. 10521 Perry Highway Wexford, Pennsylvania 15090 (412) 933-3300 (412) 933-3311 (facsimile) With a copy to: Ronald Basso, Esquire 10 Buchanan Ingersoll Professional Corporation One Oxford Center 20th Floor, 301 Grant Street Pittsburgh, Pennsylvania 15219 (412) 562-3943 (412) 562-1041 (facsimile) To the Employee: David Spindler 439 Jeffreys Drive Elizabeth, Pennsylvania 15037 (412) 754-0778 With a copy to: Steven M. Cherin, Esquire Gefsky and Lehman, P.C. 2301 One PPG Place Pittsburgh, Pa 15222 (412) 391-2727 (412) 391-1685 (facsimile) All such notices and communications shall be deemed to have been received on the date of personal delivery, on the date that the telecopy is confirmed as having been received or on the third business day after the mailing thereof, as the case may be. 14. Governing Law. This Agreement shall be governed by and construed in -------------- accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. 15. Severability. If any provision of this Agreement is held to be ------------- illegal, invalid or unenforceable under present or future laws effective during the Term, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be effected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to the illegal, invalid or unenforceable provision as may be possible and still be legal, valid or enforceable. The lack of deductibility or recharacterization for tax or accounting purposes, or the imposition of any excise taxes or penalties, fines or other charges, or imposition of any injunction or similar restraint against the Company with respect to the payment of any amount or provision of any benefit hereunder, shall not be construed to make the provisions of this Agreement providing for such payment or provision "illegal, invalid or unenforceable", nor in any manner reduce the entitlement of the Employee, or his successor or assign to receive such payment or benefit. 11 16. Recharacterization of Payments. To the extent that, but for this ------------------------------- Section 16, any payment or benefit hereunder is determined by the Company's outside auditors, Internal Revenue Service, or by any court of component jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G (b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such amount as may be necessary to preclude any such payment or benefit from being considered an "Excess Parachute Payment" shall be recharacterized and shall constitute an unsecured, long-term loan from the Company to the Employee, his personal representative, his successors or assigns, as the case may be, payable together with accrued interest on the tenth anniversary of the payment of such recharacterized payment or the receipt of such recharacterized benefit, with interest at the Applicable Federal Rate for loans in excess of nine years, as defined in Section 1274 of the Code, on such principal amount. Such loan shall be evidenced by a promissory note in the form attached hereto as Exhibit E. --------- 17. Indemnification. The Company agrees to indemnify the Employee to the ---------------- fullest extent permitted by law for his services to, or on behalf of the Company, as an Employee hereunder, as a director and in any and every other capacity in which he may serve the Company or its interests. In furtherance of such agreement to indemnify, but no by way of limitation, the terms of the Company's Certificate of Incorporation and By-Laws providing for such indemnification and payment of expenses, as in effect on the date hereof (and, which are attached hereto as Exhibit F), are hereby incorporated by reference as --------- if fully stated herein. Additionally, the provisions of Exhibit G shall supplement such provisions. For the purpose of this Agreement, any amendment to said Certificate of Incorporation or By-Laws shall not be effective to reduce, qualify or otherwise limit the scope, benefit or enforceability of this provision; provided, however, if any such amendment extends or improves the -------- ------- scope, benefit or enforceability of the indemnification and payment of expenses contained in such By-Laws for any officer, director, employee or agent, such extended or improved provisions shall be deemed to be incorporated by reference herein for the benefit of the Employee without any further action by the Company or the Employee. 18. Arbitration. Except as otherwise provided herein, in the event of any ------------ controversy, dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Employee's employment with the Company or the termination of such employment, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Employee agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Pittsburgh, Pennsylvania, in accordance with this Section 16 of the Agreement and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered, by a panel of three (3) arbitrators (the "Arbitration Panel") each of which shall have at least ten (10) years' experience in executive compensation and employment matters. The Company and the Employee shall each select one qualified arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third qualified arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. 19. Entire Agreement. This Agreement sets forth the entire understanding ----------------- of the parties with respect to the matters specified herein. No other terms or conditions and no 12 amendments or modifications shall be binding unless made in writing and signed by the parties hereto. Upon execution and delivery by both parties of this Agreement, the parties agree that the Employee Agreement dated as of March 1, 1995, shall terminate without further obligation to either party. 20. Binding Effect. This Agreement shall be binding upon the parties --------------- hereto and shall inure to the benefit of such parties, their respective heirs, representatives, successors and permitted assigns. This Agreement may not be assigned by the Employee nor may it be assigned by the Company without the Employee's consent. 21. Expenses. The Company shall bear the costs of all its expenses --------- associated with the creation, negotiation and execution of this Agreement, including the fees of its counsel and of any consultant retained by the Company to advice the Board of Directors with respect to the terms and conditions of this Agreement. Employee shall bear the cost of all of his expenses in connection therewith, including his counsel fees. The Company shall bear the full cost of each arbitrator selected pursuant to Section 16 hereof with respect to any dispute hereunder. Otherwise, each party shall pay their individual expenses with respect to this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SMT HEALTH SERVICES INC. By: --------------------------------- Name: ------------------------------- Title: ------------------------------ EMPLOYEE: ------------------------------------ David Spindler 13 EX-10.04 5 EMPLOYMENT AGREEMENT WITH DAVID ZYNN Exhibit 10.04 EMPLOYMENT AGREEMENT -------------------- EMPLOYMENT AGREEMENT (the "Agreement") made and entered into as of the 1st day of October, 1996 (the "Effective Date"), by and between SMT HEALTH SERVICES INC., a Delaware corporation (the "Company"), and DAVID ZYNN (the "Employee"). WITNESSETH: ----------- WHEREAS, the Company desires to secure the continued employment of Employee in an executive capacity; and WHEREAS, the Company and the Employee desire to enter into this Agreement in order to set forth certain terms and conditions of Employee's continued employment with the Company and to terminate the existing employment agreement dated as of January 1, 1996; NOW, THEREFORE, in consideration of the promises and mutual covenants contained herein and for other good and valuable consideration, the adequacy and receipt of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. Employment. The Company hereby agrees to continue to employ the ----------- Employee and the Employee hereby agrees to continue to be employed by the Company commencing on the date hereof for the Term (as defined below) of the Agreement, in the position and with the duties and responsibilities set forth in Section 2 below, and upon the other terms and subject to the conditions hereinafter stated. 2. Position, Duties and Responsibilities. -------------------------------------- (a) During the Term of the Agreement, the Employee shall serve as Treasurer, Assistant Secretary and Chief Financial Officer of the Company. The Employee shall have general executive supervision over the property, business and affairs of the Company, subject to the policies and directions of, and the executive responsibilities that may be assigned to him by the Board of Directors of the Company (the "Board of Directors"). The Employee shall have general supervisory authority over the financial affairs and reporting of the Company, reporting to the Executive Vice President. The Employee shall be a signatory, at all times during the term of this Agreement, on all bank accounts, of every nature and kind, and all other banking arrangements, including safety deposit boxes, lockbox accounts, and the like. Employee's duties shall be performed principally at the Company's executive offices which are located in the Pittsburgh Metropolitan Area and Employee shall not be required to perform duties outside the Pittsburgh Metropolitan Area which would necessitate changing his present residence, unless Employee otherwise agrees in writing. For purposes of this Agreement, the term "Pittsburgh Metropolitan Area" shall encompass the City of Pittsburgh, Pennsylvania, the Borough of Wexford, Pennsylvania, and the territory within a fifteen (15) mile radius of such borough. The Company agrees that it shall not relocate or transfer its principal executive offices to a location outside the Pittsburgh Metropolitan Area. (b) During the Term, the Employee shall devote such time and attention to affairs of the Company as are necessary to faithfully and diligently perform his duties and responsibilities hereunder; provided, however, that nothing contained herein shall prohibit the Employee from (a) serving as consultant to and a member of the Board of Directors of any other for-profit entity so long as Employee has obtained the prior consent of the President or Executive Vice President, or (b) engaging in charitable and community affairs. 3. Term. The initial term of this Agreement shall be for a period of two ----- (2) years, commencing on October 1, 1996, and ending on September 30, 1998. On each quarterly anniversary of the Effective Date while Employee remains Employed hereunder, such term shall be automatically extended by three months, and shall continue until Employee's employment hereunder is terminated pursuant to Section 5 hereof (the initial term of this Agreement, as extended by each renewal period, is hereinafter defined as the "Term"). 4. Compensation. For the services rendered by Employee pursuant to ------------- Section 2 during the Term, the Employee shall be paid the compensation and receive the benefits as set forth on Exhibit A annexed hereto. --------- 5. Termination of Agreement. The Employee's employment hereunder may be ------------------------- terminated only as follows: (a) By the Company Without Cause. The Company may at any time terminate ----------------------------- the Employee's employment hereunder without Cause, by affirmative vote of a majority of the entire Board of Directors, and upon no less than ninety (90) days' prior written notice to the Employee. (b) By the Employee Without Good Reason. The Employee may at any time ------------------------------------ terminate his employment hereunder for any reason upon no less than thirty (30) days' prior written notice to the Company; provided; however; Section 5(d) hereof shall apply in lieu of this Section 5(b) to any termination of employment by the Employee for Good Reason (as defined therein). (c) By the Company for Cause. The Company may at any time terminate the ------------------------- Employee's employment hereunder for Cause. Prior to such event, the Company by affirmative vote of a majority of the entire Board of Directors shall give the Employee prompt written notice specifying in reasonable detail the conduct which is believed to provide the basis for a termination of Employee for Cause. Except in the event of a termination of Employee pursuant to Section 5(c)(ii) (as to which the termination shall be immediately effective after receipt of such letter), within ten (10) business days of the Employee's receipt of such letter, the Employee shall be provided an opportunity, together with his counsel, to present and discuss with the Board of Directors the conduct which is asserted to provide a basis for such purposed for Cause termination. Following such meeting, if Employee does not, within ten (10) days thereof, take such reasonable steps as directed by a majority vote of the entire Board of Directors to cease or correct the conduct which is asserted to provide a basis for such proposed for Cause termination, the Board of Directors may, by the affirmative vote of a majority of the entire Board of Directors, terminate the Employee's employment for Cause. "Cause" shall mean only one or more of the following: (i) The material breach of this Agreement by Employee, which breach shall not have been cured by Employee within thirty (30) days after the Employee's receipt from 2 the Company at the direction of a majority of the entire Board of Directors of written notice specifying in reasonable detail the nature of Employee's breach; (ii) The conviction of Employee for a crime of moral turpitude or a felony which is materially injurious to the reputation or business of the Company; and (iii) Any willful act or acts by Employee which is materially and demonstrably injurious to the Company (excluding any act ratified or approved by the Board of Directors of the Company and further excluding any act taken by Employee in good faith with a reasonable belief that such act was in the best interests of the Company). Neither the Employee's participation in or presence at any meeting at which a for Cause termination is discussed nor the Employee's efforts to cease or cure any conduct purported to be sufficient basis for a for Cause termination, shall be considered an admission, acknowledgment or agreement that such conduct does in fact provide a sufficient basis for a for Cause termination. (d) By the Employee for Good Reason. The Employee may terminate -------------------------------- employment hereunder for Good Reason at any time by providing prompt written notice to the Company within a reasonable time after the occurrence of the event(s) constituting such Good Reason. For purposes of this Agreement, "Good Reason" means only one or more of the following: (i) The material breach of this Agreement by the Company, which breach shall not have been cured by the Company within thirty (30) days after the Company's receipt from the Employee or his agent of written notice specifying in reasonable detail the nature of the Company's breach. (ii) The required relocation of the Employee out of the Company's principal executive offices or the Pittsburgh Metropolitan Area without his specific prior written consent. (iii) The assignment to the Employee of any duties inconsistent in any material respect with the Employee's position (including status and reporting requirements), authority, duties, powers or responsibilities as contemplated by Section 2 of this Agreement, or any other diminution of such, authority, duties, position or responsibili ties, excluding for this purpose any isolated, insubstantial action by the Company not taken in bad faith and which is remedied by the Company within thirty (30) days after receipt of written notice from the Employee to the Company that such action will be considered a Good Reason hereunder unless timely remedied. (iv) A material increase in Employee's responsibilities, workload, required hours or travel from that historically required of Employee, not remedied by the company within thirty (30) days after receipt of written notice from Employee to the Company that such increase will be considered a Good Reason hereunder unless timely remedied. 3 (e) Death. The Employee's employment for all purposes under this ----- Agreement shall terminate upon his death. (f) Disability. In the event that the Employee is determined by a ----------- physician's written evaluation delivered to the Company (i) to be "permanently and totally disabled" as defined in (S) 22(e)(3) of the Internal Revenue Code of 1986, as amended, the Company may, at its discretion, upon sixty (60) days notice to the Employee or his guardian, as the case may be, terminate the Employee's employment hereunder. (g) Mutual Written Agreement. This Agreement and the Employee's ------------------------- employment hereunder may be terminated at any time by the mutual written agreement of the Employee and the Company. 6. Compensation in Event of Termination. ------------------------------------- (a) Termination by Employee for Good Reason; by Company Without Cause. ------------------------------------------------------------------ In the event that the Employee's employment hereunder is terminated: (i) by the Company without Cause pursuant to Section 5(a) hereof; or (ii) by the Employee for Good Reason pursuant to Section 5(d) hereof, then the Company shall pay or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee: (i) Continuation of full salary, bonuses (including profit sharing) and benefits (including Automobile Allowance) during the time period equal to the remaining Term of the Agreement immediately prior to the Employee's termination (without regard to any future renewals that would have occurred absent such termination) (the "Termination Period"); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plan); and (iii) Continuing coverage, to the extent not prohibited by law, during the Termination Period or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter (or, at Employee's election, for a period of twelve (12) months from the date of Employee's termination of employment), for the Employee and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (b) Termination for Cause by the Company. In the event that the Company ------------------------------------- shall terminate the Employee's employment hereunder for Cause pursuant to Section 5(c), this 4 Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (c) Termination by Employee Without Good Reason. In the event that the -------------------------------------------- Employee shall terminate employment hereunder (other than for Good Reason) pursuant to Section 5(b) hereof, this Agreement shall forthwith terminate and the obligations of the parties hereto shall be as set forth in Section 9 hereof. (d) Death. In the event of the death of the Employee, then the Company ------ shall pay (or cause to be paid), within thirty (30) days of such death, or provide in the same manner as before the Employee's death, as applicable, the following compensation and benefits to the estate of the Employee, or the Employee's personal representative, or to those individuals designated in a writing delivered to the Company by the Employee prior to his death; (i) A lump sum payment equal to the sum of (A) the Employee's highest annual Base Salary; (B) the Employee's highest annualized Automobile Allowance; and (C) the Employee's highest award under the Company's Profit Sharing Plan, in each case, for any of the three years preceding the date of such termination (the "Lump Sum Amount"); and (ii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's death for the Employee's eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of death. In the event that such eligible dependents, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (e) Disability. In the event that the Company elects to terminate the ----------- Employee's employment hereunder pursuant to Section 5(f), then the Company shall pay (or cause to be paid) within thirty (30) days of the such termination or provide in the same manner as before termination, as applicable, the following compensation and benefits to the Employee or his personal representative: (i) All amounts as the Employee is entitled to under the Company's disability policy and program applicable to Employee; (ii) Sixty percent (60%) of Employee's then current Annual Base Salary; and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twelve (12) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company Benefit Plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company 5 shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on the unfunded basis if necessary. (f) Mutual Written Consent. In the event that the Employee and the ----------------------- Company shall terminate the Employer's employment by mutual written agreement, the Company shall pay such compensation and provide such benefits, if any, as the parties may mutually agree upon in writing. The Employee shall not be required to mitigate the amount of any payment provided for in this Section 6 by seeking employment or otherwise, nor shall any amounts received from employment, insurance or otherwise by the Employee offset or reduce in any manner the obligations of the Company hereunder. 7. Change in Control. ------------------ (a) Definition. For purposes of this Agreement, the term "Change of ----------- Control" shall mean the occurrence of any of the following events: (i) The sale or other disposition by the Company of all or substantially all of its assets to a single purchaser or to a group of purchasers, other than to a person with respect to which, following such sale or disposition, more than eighty percent (80%) of, respectively, the then outstanding shares of Company common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (herein, "voting securities") is then owned beneficially, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the outstanding Company common stock and the combined voting power of the then outstanding voting securities immediately prior to such sale or disposition in substantially the same proportion as their ownership of the outstanding Company common stock and voting securities immediately prior to such sale or disposition; (ii) The acquisition in one or more transactions by any person or group, directly or indirectly, of beneficial ownership of twenty-five percent (25%) or more of the outstanding shares of Company common stock or the combined voting power of the then outstanding voting securities of the Company; provided, however, that any acquisition by (x) the Company or any of its subsidiaries, or any employee benefit plan (or related trust) sponsored or maintained by the Company or any of its subsidiaries, (y) the Employee or any other person who is a director or executive officer of the Company as of the date hereof, or (z) any person that is eligible, pursuant to Rule 13d-1(b) under the Exchange Act (as such rule is in effect as of January 1, 1995), to file a statement on Schedule 13G with respect to its beneficial ownership of Company common stock or other voting securities whether or not such person shall have filed a statement on Schedule 13G, unless such person shall have filed a statement on Schedule 13D with respect to beneficial ownership of 15 percent (15%) or more of the Company voting securities, shall not constitute a Change of Control; (iii) The Company's termination of its business and liquidation of its assets; 6 (iv) The reorganization, merger or consolidation of the Company into or with another person or entity, by which reorganization, merger or consolidation the persons who held one hundred percent (100%) of the voting securities of the Company prior to such reorganization, merger or consolidation receive less than fifty-two percent (52%) of the outstanding voting securities of the new or continuing corporation(s); or (v) If, on any Testing Date , less than a majority of the members of the Board of Directors are persons who were either (A) nominated or recommended for election by at least a two-thirds vote of those persons who were members of the Board of Directors or Nominating Committee of the Board of Directors two years prior to the Testing Date, or (B) elected by the Board of Directors, including at least a two-thirds vote in favor of such election by the persons who were members of the Board of Directors two years prior to the Testing Date. For the purpose of paragraph (v), each change in the composition of the members of the Board of Directors during employee's employment hereunder and for six (6) months thereafter, shall be considered a Testing Date. (b) Payment Following Change in Control. In the event that the ------------------------------------ Employee's employment hereunder is terminated (other than for cause, death, disability or pursuant to Section 5(c), (e) or (f), respectively) within twelve (12) months prior to or within twenty-four (24) months following a Change in Control, then, at Employee's sole election, in lieu of any compensation or benefits owed to Employee pursuant to Section 6 of this Agreement, the Company shall pay or provide the following compensation and benefits to Employee: (i) A lump sum payment equal to two times Employee's then current annual Base Salary (reduced by any amounts previously paid pursuant to Section 6); (ii) Any other amounts, awards, benefits or other compensation to which the Employee is or, prior to his termination of employment, was entitled during the Termination Period under any of the Company's other compensation plans, which to the extent of any vesting dates occurring during the Termination Period, shall be considered to vest on such date notwithstanding such termination (unless more quickly vested pursuant to Section 9(b) hereof or the terms of such plans); and (iii) Continuing coverage, to the extent not prohibited by law, for a period of twenty-four (24) months from the date of Employee's termination or until comparable benefits are made available to him in connection with subsequent employment, whichever period is shorter, for the Employee and his eligible dependents under all of the Company benefit plans in effect and applicable to Employee and his eligible dependents as of the date of termination. In the event that the Employee and/or his eligible dependents, because of the Employee's terminated status, cannot be covered or fully covered under any or all of the Company benefit plans, the Company shall continue to provide the Employee and/or his eligible dependents with the same level of such coverage in effect prior to termination, on an unfunded basis if necessary. (c) Alternative Payment Following Change in Control. If the Employee ------------------------------------------------ does not elect to receive the compensation and benefits set forth in paragraph (b), the Employee shall receive the compensation and benefits set forth in Section 6(a) with respect to such termination. 7 8. Expenses. Employee will be reimbursed all reasonable, ordinary and --------- necessary business expenses, including expenses for entertainment, travel and similar items that are approved by the Company. The Company will reimburse Employee for all expenses upon a presentation of Employee of itemized accounts of such expenditures in accordance and in the manner in a form reasonably described by the Company. 9. Effect of Termination. Upon the termination of the Employee's ---------------------- employment hereunder, neither the Company nor the Employee shall have any remaining duties or obligations hereunder except that: (a) the Company shall: (i) Pay the employee's accrued salary and any other accrued benefits for all periods ending on or prior to the date of termination under Sections 4 hereof or Exhibit A annexed hereto; --------- (ii) Reimburse the Employee for expenses incurred in accordance with Section 8 hereof for all periods ending on or prior to the date of termination; (iii) Pay or otherwise provide for any benefits, payments or continuation or conversion rights in accordance with the provisions of any Company benefit plan of which the Employee or any of his dependents is or was a participant or as otherwise required by law; (iv) Pay all compensation previously deferred by Employee and not yet paid by Company (together with interest, if any, thereon) and any other accrued benefits, including accrued vacation pay not yet paid by the Company; (v) Pay the Employee and his beneficiaries any compensation or provide the Employee or his eligible dependents any benefits due pursuant to Sections 6 or 7 hereof or Exhibit A annexed hereto. --------- (b) Unless the employment of the Employee is terminated for Cause pursuant to Section 5(c) or by the Employee without Good Reason pursuant to Section 5(d), the vesting period and other restrictions shall lapse for all stock options or other stock awards previously granted to the Employee by the Company and all such stock awards shall be deemed to be fully vested. In such case, the Company shall extend the option exercise period to the third anniversary of the date of the Employee's termination for all such options held by the Employee as of the date of the termination of his employment hereunder. (c) Except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without Cause pursuant to Section 5(a), or by mutual agreement upon any other termination, the Employee shall remain bound by the terms of Section 10(a) hereof, and, in any event, Employee shall remain bound by the terms of Section 10(b)-(d) hereof. 8 (d) The Company shall be authorized to withhold from any payment to the Employee, his estate or his beneficiaries hereunder all such amounts, if any, that the Company may reasonably determine it is required to withhold pursuant to any applicable law or regulation. 10. Restrictions. The Company has invested and will continue to invest ------------- considerable resources in the development of its business and in the research, development and design of its activities and their delivery, which investment has or will result in the generation of proprietary, confidential and/or trade secret data, information, techniques and materials, both tangible and intangible, which are owned by the Company. (a) The Employee agrees that during the Term, and except in the event of Employee's termination of his employment hereunder for Good Reason or by the Company without Cause, for a period of two (2) year from the date of the termination of the Employee's employment hereunder, he will not directly or indirectly (i) engage in mobile magnetic resonance imaging business (the "Company Business") within one hundred fifty (150) miles of any location then serviced by the Company; (ii) compete or participate as agent, employee, consultant, advisor, representative or otherwise in any enterprise engaged in a business which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; or (iii) compete or participate as a stockholder, partner or joint venturer, or have any direct or indirect financial interest, in any enterprise which has any material operations engaged in a business competitive with the Company Business within one hundred fifty (150) miles of any location then serviced by the Company; provided, however, that nothing contained herein shall prohibit the Employee from (A) owning, operating and managing and continuing to own, operate and manage the investments and businesses owned, operated or managed by Employee on the date hereof; (B) owning, operating or managing any business, or acting upon any business opportunity after obtaining approval of a majority of the Board of Directors of the Company and a majority of the independent members of the Board of Directors of the Company (if any); or (C) owning no more than five percent (5%) of any publicly-traded corporation with respect to which Employee does not serve as an officer, director, employee, consultant or in any other capacity other than as an investor. (b) The Employee shall abide by and be bound as part of the employment relationship created by this Agreement to comply with the provisions regarding confidential information, attached as Exhibit B annexed hereto. --------- (c) To the extent the Employee develops, makes, conceives, contributes to or reduces to practice any intellectual property related to the duties of the Employee hereunder or which results in any way from the Employee using the resources of the Company, such intellectual property is and shall be the sole and exclusive property of the Company. Accordingly, the Employee shall abide by and be bound to comply with the provisions regarding ownership of intellectual property, attached as Exhibit C annexed hereto. --------- (d) During the Term, except in the event of Employee's termination of his employment hereunder for Good Reason pursuant to Section 5(d) or by the Company without cause pursuant to Section 5(a) and for an additional period of two (2) year immediately following termination of the Employee's employment with the Company, he shall abide by and be bound to 9 comply with the additional restrictive covenants of the Company attached as Exhibit D annexed hereto. - --------- (e) Employee agrees and acknowledges that the compensation due to him hereunder shall be full and adequate consideration for the Employee's agreement to the foregoing restrictions. Nothing in this Section 10 is intended to enhance or increase the rights otherwise available to the Employee in respect of an unlawful act or omission by the Company. 11. Acknowledgement. The Employee acknowledges that the restrictions set ---------------- forth in Section 10 hereto are reasonable in scope and essential to the preservation of the Company's business and proprietary properties and that the compensation paid to him pursuant to paragraph 10(e) fully compensates him for accepting such restrictions. The Company acknowledges that the compensation paid to the Employee pursuant to paragraph 10(e) is a reasonable payment for his acceptance of the restrictions in Section 10. 12. Severability. The covenants of the Employee contained in Section 10 ------------- hereto shall be construed as an agreement independent of any other provision in this Agreement and the existence of any claim or cause of action of the Employee against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of such covenants. If, at the time of enforcement, any sentence, paragraph, clause, or combination of the same of such independent agreement in Section 10 is in violation of the law of any state where applicable, such sentence, paragraph, clause, or combination of the same shall be void in the jurisdictions where it is unlawful, and the remainder of such paragraph in Section 10 shall remain binding on the parties. In the event that any part of any covenant of Section 10 is determined by a court of law to be overly broad thereby making the covenant unenforceable, the parties agree that such court shall substitute a judicially enforceable limitation in its place, and that as so modified, the covenants shall be binding upon the parties as if originally set forth in this Agreement. 13. Notices. All notices and other communications hereunder shall be in -------- writing and shall be deemed to have been given if delivered personally or sent by registered or certified mail (return receipt requested), postage prepaid, or by telecopy (immediately followed by telephone confirmation of delivery of such telecopy with the intended recipient of such notice and by notice in writing sent promptly by registered or certified mail as provided above) to the parties to this Agreement at the following addresses or at such other address for a party as shall be specified by like notice: To the Company: SMT Health Services Inc. 10521 Perry Highway Wexford, Pennsylvania 15090 (412) 933-3300 (412) 933-3311 (facsimile) 10 With a copy to: Ronald Basso, Esquire Buchanan Ingersoll Professional Corporation One Oxford Center 20th Floor, 301 Grant Street Pittsburgh, Pennsylvania 15219 (412) 562-3943 (412) 562-1041 (facsimile) To the Employee: David Zynn 5011 Karrington Drive Gibsonia, Pennsylvania 15004 (412) 443-7567 With a copy to: Steven M. Cherin, Esquire Gefsky and Lehman, P.C. 2301 One PPG Place Pittsburgh, Pa 15222 (412) 391-2727 (412) 391-1685 (facsimile) All such notices and communications shall be deemed to have been received on the date of personal delivery, on the date that the telecopy is confirmed as having been received or on the third business day after the mailing thereof, as the case may be. 14. Governing Law. This Agreement shall be governed by and construed in -------------- accordance with the laws of the Commonwealth of Pennsylvania, without regard to its choice of law provisions. 15. Severability. If any provision of this Agreement is held to be ------------- illegal, invalid or unenforceable under present or future laws effective during the Term, such provision shall be fully severable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, and the remaining provisions hereof shall remain in full force and effect and shall not be effected by the illegal, invalid or unenforceable provision or by its severance herefrom. Furthermore, in lieu of illegal, invalid or unenforceable provision there shall be added automatically as part of this Agreement a provision as similar in terms to the illegal, invalid or unenforceable provision as may be possible and still be legal, valid or enforceable. The lack of deductibility or recharacterization for tax or accounting purposes, or the imposition of any excise taxes or penalties, fines or other charges, or imposition of any injunction or similar restraint against the Company with respect to the payment of any amount or provision of any benefit hereunder, shall not be construed to make the provisions of this Agreement providing for such payment or provision "illegal, invalid or unenforceable", nor in 11 any manner reduce the entitlement of the Employee, or his successor or assign to receive such payment or benefit. 16. Recharacterization of Payments. To the extent that, but for this ------------------------------- Section 16, any payment or benefit hereunder is determined by the Company's outside auditors, Internal Revenue Service, or by any court of component jurisdiction to be an "Excess Parachute Payment" as defined in Section 280G (b)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), such amount as may be necessary to preclude any such payment or benefit from being considered an "Excess Parachute Payment" shall be recharacterized and shall constitute an unsecured, long-term loan from the Company to the Employee, his personal representative, his successors or assigns, as the case may be, payable together with accrued interest on the tenth anniversary of the payment of such recharacterized payment or the receipt of such recharacterized benefit, with interest at the Applicable Federal Rate for loans in excess of nine years, as defined in Section 1274 of the Code, on such principal amount. Such loan shall be evidenced by a promissory note in the form attached hereto as Exhibit E. --------- 17. Indemnification. The Company agrees to indemnify the Employee to the ---------------- fullest extent permitted by law for his services to, or on behalf of the Company, as an Employee hereunder, as a director and in any and every other capacity in which he may serve the Company or its interests. In furtherance of such agreement to indemnify, but no by way of limitation, the terms of the Company's Certificate of Incorporation and By-Laws providing for such indemnification and payment of expenses, as in effect on the date hereof (and, which are attached hereto as Exhibit F), are hereby incorporated by reference as --------- if fully stated herein. Additionally, the provisions of Exhibit G shall supplement such provisions. For the purpose of this Agreement, any amendment to said Certificate of Incorporation or By-Laws shall not be effective to reduce, qualify or otherwise limit the scope, benefit or enforceability of this provision; provided, however, if any such amendment extends or improves the -------- ------- scope, benefit or enforceability of the indemnification and payment of expenses contained in such By-Laws for any officer, director, employee or agent, such extended or improved provisions shall be deemed to be incorporated by reference herein for the benefit of the Employee without any further action by the Company or the Employee. 18. Arbitration. Except as otherwise provided herein, in the event of any ------------ controversy, dispute or claim arising out of, or relating to, this Agreement, or the breach thereof, or arising out of any other matter relating to the Employee's employment with the Company or the termination of such employment, the parties may seek recourse only for temporary or preliminary injunctive relief to the courts having jurisdiction thereof and if any relief other than injunctive relief is sought, the Company and the Employee agree that such underlying controversy, dispute or claim shall be settled by arbitration conducted in Pittsburgh, Pennsylvania, in accordance with this Section 16 of the Agreement and the Commercial Arbitration Rules of the American Arbitration Association ("AAA"). The matter shall be heard and decided, and awards rendered, by a panel of three (3) arbitrators (the "Arbitration Panel") each of which shall have at least ten (10) years' experience in executive compensation and employment matters. The Company and the Employee shall each select one qualified arbitrator from the AAA National Panel of Commercial Arbitrators (the "Commercial Panel") and AAA shall select a third qualified arbitrator from the Commercial Panel. The award rendered by the Arbitration Panel shall be final and binding as between the parties hereto and their heirs, executors, administrators, successors and assigns, and judgment on the award may be entered by any court having jurisdiction thereof. 12 19. Entire Agreement. This Agreement sets forth the entire understanding ----------------- of the parties with respect to the matters specified herein. No other terms or conditions and no amendments or modifications shall be binding unless made in writing and signed by the parties hereto. Upon execution and delivery by both parties of this Agreement, the parties agree that the Employee Agreement dated as of March 1, 1995, shall terminate without further obligation to either party. 20. Binding Effect. This Agreement shall be binding upon the parties --------------- hereto and shall inure to the benefit of such parties, their respective heirs, representatives, successors and permitted assigns. This Agreement may not be assigned by the Employee nor may it be assigned by the Company without the Employee's consent. 21. Expenses. The Company shall bear the costs of all its expenses --------- associated with the creation, negotiation and execution of this Agreement, including the fees of its counsel and of any consultant retained by the Company to advice the Board of Directors with respect to the terms and conditions of this Agreement. Employee shall bear the cost of all of his expenses in connection therewith, including his counsel fees. The Company shall bear the full cost of each arbitrator selected pursuant to Section 16 hereof with respect to any dispute hereunder. Otherwise, each party shall pay their individual expenses with respect to this Agreement. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SMT HEALTH SERVICES INC. By: ------------------------------------------ Name: ---------------------------------------- Title: --------------------------------------- EMPLOYEE: --------------------------------------------- David Zynn 13 EX-10.05 6 EQUIPMENT LEASE WITH DVI FINANCIAL Exhibit 10.05 DVI FINANCIAL SERVICES INC. MASTER EQUIPMENT LEASE LESSOR: ("Master Lease") LEASE NO. 0001357 ---------- DVI Financial Services Inc. 500 Hyde Park DATE: August 28, 1996 Doylestown, PA 18901 ----------------- Telephone (215) 345-6600 LESSEE:SMT Health Services Inc. BILLING ADDRESS: EQUIPMENT ADDRESSES: 1200 Johnie Dodds Boulevard 10521 Perry Highway Mount Pleasant, SC 29464 Wexford, PA 15090 510 South Mill Street Manning, SC 29102 501 Robertson Boulevard Walterboro, SC 29488 TERMS AND CONDITIONS 1. LEASE. Lessor leases to Lessee, and Lessee hires from Lessor, all of the tangible personal property (with all present and future accessories, additions, upgrades, attachments, repairs and replacement parts, collectively called "Equipment") described in each equipment schedule executed from time to time pursuant to this Master Lease ("Equipment Schedule"). Each Equipment Schedule shall (a) be on Lessor's form, (b) incorporate all of the terms of this Master Lease, and (c) contain additional terms as Lessor and Lessee agree. 2. TERM. (a) The term of this Master Lease shall begin on the date set forth above and shall continue in effect so long as any Equipment Schedule remains in effect. (b) The lease term for each Equipment Schedule shall begin on the date of shipment to Lessee of the Equipment (or any part thereof) described in such Equipment Schedule or such later date as Lessor may designate in writing (the "Commencement Date"), and shall continue thereafter for the term set forth in such Equipment Schedule. On the Commencement Date, Lessee shall execute and deliver to Lessor a Delivery and Acceptance Certificate, in a form to be specified by Lessor, which confirms the Commencement Date. (c) THIS LEASE AND THE LEASE TERM FOR EACH EQUIPMENT SCHEDULE ARE NOT CANCELABLE BY LESSEE. 3. RENT AND PAYMENT. Lessee shall pay Lessor, as rental for the Equipment during each month of the term of any Equipment Schedule, the monthly rent set forth in such Equipment Schedule, together with any and all monthly rent payable pursuant to Section 8(a) hereof in connection with any accessions, additions, upgrades with attendant maintenance contracts, and improvements to any of the Equipment, which shall be payable in advance without notice or demand on the dates set forth in such Equipment Schedule. Lessee agrees to pay interim rent in an amount equal to the pro rata periodic monthly rent from the Commencement Date to the first regular monthly periodic rent payment date. Thereafter, the regular periodic rent shall be due on the first day of each succeeding period commencing with the first day of the month following the Commencement Date as set forth on the Equipment Schedule. Lessee shall pay the monthly rent and all other money due under this Master Lease or any Equipment Schedule by check or wire transfer so as to constitute immediately available funds at Lessor's address set forth above or at such other place as Lessor shall designate in writing, or if to an assignee of Lessor, at such place as such assignee shall designate in writing, and Lessee shall make such payments free and clear of all claims, demands or setoffs against Lessor or such assignee. Whenever any payment (of rent or otherwise) is not made within three (10) business days from the date due hereunder, Lessee shall pay Lessor a late charge of five percent (5%) of any payment not paid when due, plus the lesser of eighteen percent (18%) interest per year or the highest lawful rates on such payment until received, or such lesser maximum amount as is permitted by applicable law. In addition, Lessor at its option may require at any time that Lessee make all payments due hereunder or under any Equipment Schedule by certified check or by wire transfer. 4. REQUEST FOR EQUIPMENT. Lessee requests Lessor to order the Equipment described in any Equipment Schedule executed by Lessee from the supplier named in such Equipment Schedule, to arrange for delivery to Lessee at Lessee's expense, and to pay for the Equipment as provided in such Equipment Schedule. Lessee acknowledges and agrees that: (a) Lessee has independently selected the supplier and the Equipment, and that Lessor will rely on specifications provided by Lessee in ordering the Equipment; (b) Lessee shall be responsible for all costs and expenses relating to the selection, shipment, delivery, assembly, installation, testing, adjusting, servicing, operation and acceptance of the Equipment; (c) unless the Equipment Schedule otherwise provides, Lessor's payment to the supplier will occur only after Lessee has confirmed (on Lessor's Delivery and Acceptance Certificate) satisfactory delivery, assembly, installation, inspection and acceptance of the Equipment; (d) Lessor shall have no responsibility for any delay, failure or refusal on the part of any supplier to accept or fill Lessor's order; (e) upon Lessee's acceptance of Equipment, Lessee shall execute Lessor's Delivery and Acceptance Certificate; (f) Lessor has the option to terminate any Equipment Schedule and all obligations to Lessee under such Equipment Schedule, and to recover from Lessee any deposit paid by Lessor to the supplier, if the Equipment described in such Equipment Schedule has not been delivered, assembled, installed and accepted by Lessee within 60 days from the date that Lessor orders the Equipment; (g) no supplier is Lessor's agent, or authorized to bind Lessor or waive or alter any provision of this Master Lease or any Equipment Schedule; and (h) if Lessee cancels this Master Lease after execution of such but prior to the Lessee's execution of the Delivery and Acceptance Certificate, Lessor may withhold and keep any deposits or funds paid by Lessee to Lessor. 5. EQUIPMENT SELECTION; DISCLAIMER OF WARRANTIES; WAIVERS. (a) Lessee acknowledges, represents and warrants that Lessee has made the selection of Equipment based on Lessee's own judgment, and expressly disclaims any reliance upon statements made by Lessor or Lessor's agents, employees or salespersons. (b) LESSOR MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE CAPACITY, CONDITION, DESIGN, DURABILITY, MATERIAL, MERCHANTABILITY, PERFORMANCE, QUALITY, SUITABILITY, WORKMANSHIP OR VALUE OF THE EQUIPMENT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE OR THAT THE EQUIPMENT WILL SATISFY THE REQUIREMENTS OF ANYLAW, RULE, REGULATION, SPECIFICATION OR CONTRACT, OR ANY OTHER REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE WHATSOEVER WITH RESPECT TO THE EQUIPMENT OR ANY ASSOCIATED ITEM OR ANY ASPECT THEREOF. AS TO THE LESSOR, LESSEE LEASES THE EQUIPMENT "AS IS". (c) Lessee acknowledges that (i) Lessor is neither the manufacturer of the Equipment nor a manufacturer's agent, supplier or dealer, and has no familiarity with the Equipment; and (ii) Lessor shall have no obligation to assemble, install, test, adjust or service the Equipment. (d) Lessor shall not be liable, to Lessee or otherwise, to any extent whatsoever, for the selection, quality, condition, merchantability, suitability, fitness, operation or performance of the Equipment. Without limiting the generality of the foregoing, Lessor shall not be liable, to Lessee or otherwise, for any liability, claim, loss, damage or expense of any kind or nature (including strict negligent liability in tort) caused, directly or indirectly, by the Equipment or any inadequacy thereof for any purpose, or any deficiency or defect therein, or the use or maintenance thereof, or any repairs, servicing or adjustments thereto; or any delay in providing or failure to provide any part thereof, or any interruption or loss of service thereof, or any loss of business, or any damage whatsoever and howsoever caused. (e) REGARDLESS OF CAUSE, LESSEE WILL NOT ASSERT ANY CLAIM WHATSOEVER AGAINST LESSOR FOR LOSS OF ANTICIPATORY PROFITS OR ANY OTHER INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES. IT IS EXPRESSLY UNDERSTOOD AND AGREED THAT EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTIES OR EXCLUSION OF DAMAGES, IS INTENDED BY THE PARTIES TO BE SEVERABLE FROM ANY OTHER PROVISION AND IS A SEPARABLE AND INDEPENDENT ELEMENT OF RISK ALLOCATION AND IS INTENDED TO BE ENFORCED AS SUCH. (f) If the Equipment fails to comply with any representation or warranty made by the supplier or manufacturer thereof, or is defective or improperly assembled or installed or otherwise unsatisfactory for any reason, Lessee shall make claim on account thereof against the supplier or manufacturer thereof, and Lessee shall nevertheless pay all rent and perform all other obligations under this Master Lease and all Equipment Schedules without asserting any claim against Lessor. Lessor hereby assigns to Lessee, without recourse and solely for the purpose of prosecuting such a claim, all rights that Lessor may have against the supplier and manufacturer of Equipment for breach of warranty or other representations with respect to the Equipment; provided, however, that this assignment shall not preclude Lessor, in its sole discretion, from asserting and prosecuting such a claim. Lessee shall indemnify and hold Lessor harmless from and against any and all claims, costs, expenses, damages, losses and liabilities incurred or suffered by Lessor as a result or incident to any such action by Lessee for breach of warranty or other representations with respect to the Equipment. (g) Lessor makes no representation or warranty as to the treatment of this Master Lease or any Equipment Schedule for tax or accounting purposes or otherwise. (h) Lessee hereby waives its rights and remedies under Pennsylvania Commercial Code Section 10508 through 10522 with respect to Lessee's right to cancel any Equipment Schedule, reject any of the Equipment, recover damages or any other rights and remedies provided thereunder in connection with any default by Lessor or any other circumstances therein provided. 6. TITLE AND ASSIGNMENT. (a) Nothing contained in this Master Lease, or in any Equipment Schedule, shall give or convey to Lessee any right, title or interest in or to the Equipment, or any additions, upgrades, accessions, or improvements thereto, except as a Lessee as set forth in this Master Lease and such Equipment Schedule, and Lessee represents and agrees that Lessee shall hold the Equipment subject and subordinate to the rights of the owner thereof. The Equipment is and at all times shall remain the property of Lessor (or Lessor's successor in interest), and except as expressly set forth in this Master Lease or any Equipment Schedule, Lessee shall have no right, title, equity or interest in the Equipment and no right or option to purchase or otherwise acquire title to or ownership of the Equipment. Lessee shall, at Lessee's sole cost and expense: (i) defend and protect the ownership of, title to, and interest in the Equipment of Lessor, Lessor's successors in interest, and any assignee or secured party, against all parties claiming against or through Lessee; (ii) keep the Equipment free and clear from any legal process, liens, claims, demands and encumbrances (except those incurred by Lessor); and (iii) give Lessor prompt written notice of any legal process, liens, claims, demands and encumbrances made by any party (except Lessor) with respect to the Equipment. Lessee shall, and Lessor may on behalf of Lessee, at Lessee's expense, execute and file such financing statements, applications for registration and other documentation as Lessor shall require for the purpose of protecting or perfecting the interest of Lessor, or any assignee, transferee or secured party, in the Equipment. (b) Lessee shall, at Lessee's expense, affix to the Equipment such labels, signs or other devices as Lessor may supply to identify Lessor as the owner and Lessor of the Equipment. Lessee authorizes Lessor to insert in any Equipment Schedule and in any financing statement or other documents the serial numbers and other identification data of the Equipment when determined by Lessor. The Equipment is and at all times shall remain personal property regardless of any attachment or affixation of the Equipment to any real property or improvements thereon. (c) LESSEE SHALL NOT, WITHOUT LESSOR'S PRIOR WRITTEN CONSENT, (i) ASSIGN THIS MASTER LEASE OR ANY EQUIPMENT SCHEDULE OR ANY INTEREST HEREIN OR 1 THEREIN, (ii) ENTER INTO ANY SUBLEASE, LOAN OR SIMILAR ARRANGEMENT WITH RESPECT TO THE EQUIPMENT, OR (iii) TRANSFER, ASSIGN, CONVEY, ENCUMBER, PLEDGE OR OTHERWISE DISPOSE OF ANY EQUIPMENT OR ANY INTEREST THEREIN; AND ANY ATTEMPT BY LESSEE TO DO ANY OF THE FOREGOING WITHOUT LESSOR'S PRIOR WRITTEN CONSENT SHALL BE VOID. (d) Lessee shall keep, maintain and use the Equipment only at the place designated on the Equipment Schedule, and shall not move the Equipment to any other location without the Lessor's prior written consent. (e) This Master Lease and any rights of Lessor hereunder and under any Equipment Schedule shall be assignable by Lessor without notice to or the consent of Lessee. Lessee acknowledges and understands that the terms and conditions of each Equipment Schedule have been fixed by Lessor in anticipation of Lessor's ability to sell and assign its interest or grant a security interest under each Equipment Schedule and the Equipment listed therein in whole or in part to a security assignee (the "Secured Party") for the purpose of either assigning: (i) Lessee's obligation to pay rent pursuant to such Equipment Schedule (Lessor having transferred the right to receive such rent to the Secured Party), or (ii) securing a loan to Lessor. Lessor may also sell and assign its rights as owner and lessor of the Equipment under any Equipment Schedule to an assignee (the "Assignee") which may be represented by a bank or a trust company acting as a trustee (the "Owner Trustee") for the Assignee. After such assignments the term Lessor shall mean, as the case may be, such Assignee or Owner Trustee and any Secured Party (collectively "Lessor Transferee"). Lessee acknowledges and agrees that: (1) Any such Lessor Transferee shall have and be entitled to exercise any and all discretion, rights and powers of Lessor hereunder or under any Equipment Schedule, but such Lessor Transferee shall not be obligated to perform any of Lessor's obligations hereunder or under any Equipment Schedule; provided, however, that such Lessor Transferee shall not disturb Lessee's quiet and peaceful possession of the Equipment and use thereof for its intended purpose during the terms hereof so long as Lessee is not in default of any provision hereof and such Lessor Transferee continues to timely receive all amounts of rent payable under such Equipment Schedule; (2) Lessee will pay all rent and any and all other amounts payable by Lessee under any Equipment Schedule to such Lessor Transferee, notwithstanding and Lessee hereby waives any defense or claim of whatever nature, whether by reason of breach of such Equipment Schedule or otherwise, which Lessee may or might now or hereafter have as against Lessor or any prior Lessor Transferee (Lessee reserving its right to have recourse directly against Lessor on account of any such defense or claim); and (3) Subject to and without impairment of Lessee's leasehold rights in and to the Equipment, Lessee holds the Equipment for such Lessor Transferee to the extent of such Lessor Transferee's rights therein. 7. NET LEASE, TAXES AND FEES. (a) Lessor and Lessee acknowledge and agree that each Equipment Schedule constitutes a net lease and that Lessee's obligation to pay all rent and any and all amounts payable by Lessee under any Equipment Schedule shall be absolute and unconditional, and shall not be subject to any abatement, reduction, setoff, defense, counterclaim, interruption, deferment or recoupment for any reason whatsoever; and that such payments shall be and continue to be payable in all events. (b) Lessee shall, at Lessee's sole cost and expense and in addition to the rent due under any Equipment Schedule, promptly pay all taxes, assessments, license fees, permit fees, registration fees, fines, interest, penalties and all other governmental charges (including without limitation income, gross receipts, sales, use, excise, personal property, ad valorem, stamp, documentary and other taxes), whether levied, assessed or imposed on Lessee, Lessor, the Equipment or otherwise, relating to the Equipment or the delivery, leasing, operations, ownership, possession, purchase, registration, rental, sales or use thereof during the term of any Equipment Schedule, or the interest of Lessee in the Equipment or under any Equipment Schedule, or the rental or other payments thereunder or earnings arising therefrom (excepting only taxes on Lessor's net income). Lessee shall file all returns required in connection therewith and shall promptly furnish copies to Lessor. Lessee shall reimburse Lessor for any such taxes paid by Lessor within ten (10) days of receipt of Lessor's invoice therefor. Any applicable sales tax will be paid to the manufacturer, manufacturer's agent, supplier, dealer or appropriate taxing agency by Lessor. Where applicable, Lessee acknowledges that such tax may have been included in calculating lease payments. 8. CARE, USE, MAINTENANCE AND REPAIR, AND INSPECTION BY LESSOR. (a) Lessee shall, at Lessee's sole expense, at all times during the term of each Equipment Schedule and until return of the Equipment to Lessor, (i) maintain the Equipment in good operating order, repair, condition, appearance and protect the Equipment from deterioration, and provide all accessories, upgrades, repairs, replacement parts and service required therefor; (ii) enter into and maintain a maintenance contract with the manufacturer of the Equipment or, with the prior written consent of Lessor, with such other party as shall be acceptable to Lessor, and shall provide Lessor with a copy of such contract and all supplements thereto; (iii) use the Equipment in a careful, proper and lawful manner in accordance with standards, specifications or instructions issued by the manufacturer, and provide necessary site preparation, supplies, energy and personnel; (iv) comply with all the laws, ordinances, rules, regulations and other requirements relating to the installation, possession, use or maintenance of the Equipment, including the requirements of any applicable insurance policy or warranty; (v) obtain and comply with the requirements of all permits, licenses and agreements relating to the installation, possession, use or maintenance of the Equipment; and (vi) purchase, or permit Lessor to purchase, any and all additions, improvements, upgrades (as and when any upgrades may become available) and maintenance contracts associated with such upgrades, or accessions to any of the Equipment which Lessor may permit or require Lessee to acquire or which Lessor may, at its option, elect to acquire, with the cost of any and all such additions, improvements, upgrades, maintenance contracts or accessions to be treated as additional original equipment cost with respect to the applicable items of Equipment and which additional cost shall be amortized as additional rental payments by increasing the monthly rental amount payable under Section 3 hereof by the amount corresponding to the amount which would be payable as monthly rent hereunder as if such additional cost constituted a portion of the original equipment cost of the applicable Equipment for Equipment to be leased under the applicable Equipment Schedule for a term equal to the remaining lease term of the applicable Equipment Schedule. (b) Unless Lessor otherwise consents in writing, Lessee shall not: (i) part with possession of or control over the Equipment; (ii) permit any party other than Lessee and Lessee's qualified employees to operate the Equipment; (iii) permit any nonqualified party to repair or service the Equipment; (iv) permit the Equipment to be used for personal, family, household or agricultural purposes; or (v) make any additions, alterations orimprovements to the Equipment other than as required or permitted by the terms of this Master Lease. All repairs, replacement parts, alterations, additions, improvements, upgrades and accessions to any of the Equipment, whether or not any of the foregoing was authorized, required, financed or purchased by Lessor, shall become the property of Lessor. (c) Upon the request of Lessor, Lessee shall at reasonable times during business hours make the Equipment available to Lessor for inspection at the place where it is normally located and shall make Lessee's log and maintenance records pertaining to the Equipment available to Lessor for inspection. 9. LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee hereby represents, warrants and agrees that, with respect to this Master Lease and each Equipment Schedule: (a) The execution, delivery and performance thereof by Lessee have been duly authorized by all necessary corporate or partnership action. (b) Each individual executing such was duly authorized to do so. (c) This Master Lease and each Equipment Schedule constitute legal, valid and binding agreements of Lessee enforceable in accordance with their terms. (d) The Equipment is personal property and when subjected to use by Lessee will not become fixtures under applicable law. (e) During the lease term, Lessee shall deliver and shall cause all obligors, guarantors and parties whose contracts with Lessee are used as additional collateral under this Master Lease to deliver to Lessor audited or reviewed financial statements for each of such party's most recent fiscal years ended, tax returns and unaudited financial statements certified by such party for the most recent quarter ended, consisting of at least a balance sheet, income statements and statements of changes in financial position, and any other information requested by Lessor from time to time, prepared in accordance with generally accepted accounting principles. (f) Lessee shall provide any and all monthly operating statistics or data and shall use its best efforts to obtain from any party benefitting from the use of the Equipment through services provided by the Lessee any and all operating statistics, data, or information requested by Lessor from time to time. (g) The execution, delivery and performance of this Master Lease and each Equipment Schedule will not violate any law or regulation applicable to Lessee, or cause a default under any agreement to which Lessee is a party or is subject. 10. DELIVERY AND RETURN OF EQUIPMENT. Lessee hereby assumes the full expense of transportation and in-transit insurance to Lessee's premises and installation thereat of the Equipment. Upon termination (by expiration or otherwise) of each Equipment Schedule, Lessee shall, pursuant to Lessor's instructions and at Lessee's expense (including without limitation expenses of transportation and in-transit insurance), return the Equipment to Lessor in the same operating order, repair, condition, and appearance as when received, less normal depreciation and wear and tear. Lessee shall have the Equipment deinstalled and removed from its location only by the manufacturer of the Equipment or by such other party as shall have been previously approved in writing by Lessor. The manufacturer or such other preapproved party shall certify in writing to Lessor at the time of such deinstallation that the Equipment includes all appropriate or required upgrades and that it is in good working order. Lessee shall transport the Equipment by means and return the Equipment to Lessor at such address all as shall be directed by Lessor. Lessee shall bear all costs of deinstallation, removal and return of the Equipment, including all costs as may be incurred by Lessee or Lessor to acquire the upgrades required under the terms of this Master Lease, to service and repair the Equipment and to otherwise put the Equipment in the condition required under this Section 10. 11. INSURANCE. During the term hereof and until return of the Equipment to Lessor, Lessee shall, at Lessee's expense: (i) maintain insurance covering damage, destruction, loss or theft of the Equipment from any cause whatsoever for not less than an amount equal to the greater of the replacement value or the amount calculated pursuant to clause (vi) of Section 15(b) hereof; (ii) maintain public liability (including liability with respect to the use of the Equipment), professional liability insurance (covering Lessee and its employees and any and all other parties as may have possession of or as may operate any of the Equipment), and property damage insurance in an amount satisfactory to Lessor; (iii) maintain, if applicable as determined in the sole discretion of Lessor, business interruption and automobile insurance (where the Equipment constitutes mobile magnetic resonance imaging equipment or other mobile equipment); and (iv) promptly notify Lessor of any actual or alleged damage, destruction, liability, loss or theft relating to the Equipment or the use or operation thereof. All insurance shall be in form, substance and amount satisfactory to Lessor and/or Lessor's Transferee, shall contain a lender's form endorsement with waiver of breach of warranty clause (form 438-BFU or its equivalent), and shall be issued by insurers acceptable to Lessor, and shall name Lessor or any Lessor Transferee as loss payee with respect to all policies of property insurance and as an additional insured with respect to all other policies of insurance. Lessee shall obtain endorsements to all such policies of insurance which shall provide that any amendment or cancellation of any such policy shall not be effective unless Lessor shall have been given thirty (30) days' prior written notice of any such intended amendment or cancellation. Self-insurance is unacceptable unless Lessor shall so provide upon its prior written consent. Lessee shall deliver to Lessor originals or certified copies of such policies, certificates of coverage thereunder and loss payee, additional insured, and notice of amendment or cancellation endorsements. In addition, as collateral security for Lessee's obligations hereunder and under the Equipment Schedules, Lessee hereby assigns, transfers and conveys to Lessor all of Lessee's right, title and interest in and to all of the foregoing policies of insurance and the insurance coverage provided thereunder and Lessee shall deliver and cause each insurer under each of such policies of insurance to deliver to Lessor assignments of such policies and coverage which assignments shall be in form and substance satisfactory to Lessor. 12. RISK OF LOSS. During the term of each Equipment Schedule, and until return of the Equipment to Lessor, Lessee shall bear all risk of damage, destruction, loss or theft of the Equipment from any cause whatsoever. No damage, destruction, loss or theft of the Equipment or delay in payment or deficiency or absence of insurance proceeds, and no unavailability or delay in obtaining supplies, 2 parts or service for the Equipment or failure of the Equipment to function for any cause whatsoever, and no change in laws or regulations governing or restricting the use of the Equipment (including the future enactment of any laws or regulations prohibiting the use of the Equipment), shall release Lessee of the obligation to pay rent or any other obligation hereunder. Upon the occurrence of any reparable damage, Lessee shall promptly make such repairs and restore the Equipment to good repair, condition and working order. Upon the occurrence of any irreparable damage, destruction or loss of the Equipment, Lessee shall, at Lessor's option: (i) replace the Equipment with like equipment in good repair, conditionand working order with documentation creating clear title thereto in Lessor; or (ii) pay Lessor the amounts required under Section 15 of this Master Lease to the same extent as though a default had occurred hereunder. Subject to such conditions as Lessor may require, any insurance proceeds paid to Lessor as a result of any damage, destruction, loss or theft of the Equipment shall be applied to Lessee's obligations hereunder, provided that if the Equipment is not repaired or replaced as provided above, such insurance proceeds shall be applied first to Lessor's expected residual interest in the Equipment. Lessor shall have no obligation to collect or pursue any claim arising from any damage, destruction, loss or theft of the Equipment, including any claim under any applicable insurance policy. 13. INDEMNITY. Lessee shall, at Lessee's sole cost and expense, indemnify, hold harmless and defend Lessor and its agents, employees, officers and directors, and its successors in interest, from and against any and all claims, actions, suits, proceedings, costs, expenses, damages and liabilities, including attorney's fees, arising out of, connected with, resulting from or relating to the Equipment or the condition, delivery, leasing, location, maintenance, manufacture, operation, ownership, possession, purchase, repair, repossession, return, sale, selection, service or use thereof, including without limitation: (i) claims involving latent or other defects (whether or not discoverable by Lessee or Lessor), (ii) claims for trademark, patent or copyright infringement, and (iii) claims for injury or death to persons or damage to property or loss of business or anticipatory profits, whether resulting from acts or omissions of Lessee or Lessor or otherwise. Lessee shall give Lessor prompt written notice of any claim or liability covered by this section. The indemnities under this section shall survive the satisfaction of all other obligations of Lessee herein and the termination of this Master Lease or any Equipment Schedule. 14. SECURITY DEPOSIT. For the purpose of securing all of Lessee's obligations under this Master Lease and each Equipment Schedule, Lessee grants Lessor a security interest in any security deposit described in any Equipment Schedule. Any such security deposit may be commingled with other funds and shall be held without interest to Lessee. Upon default under this Master Lease or any Equipment Schedule, Lessor may, but shall not be obligated to, apply any such security deposit to any obligation of Lessee under this Master Lease or any Equipment Schedule, in which event Lessee shall promptly restore the amount thereof on demand. Upon compliance by Lessee with all terms of this Master Lease and each Equipment Schedule Lessor shall, at the end of the term of each Equipment Schedule and the return of the Equipment to Lessor as provided herein, refund to Lessee the balance of any security deposit pertaining to such Equipment Schedule. 15. DEFAULT AND REMEDIES. (a) The occurrences of any one or more of the following events ("Events of Default") shall constitute a default under this Master Lease, any Equipment Schedule, or any other agreement between Lessor and Lessee: (i) Lessee's failure to pay rent or any other amount required under an Equipment Schedule when due; (ii) Lessee's failure to perform any other obligation or observe any other term of this Master Lease or any Equipment Schedule; (iii) any representation or warranty made to Lessor by Lessee in this Master Lease or in any other agreement between Lessor and Lessee or by any guarantor proves to have been false in any material respect when made; (iv) Lessee or any guarantor suffers a material adverse change in its financial condition; (v) an event of default shall have occurred under and be continuing under any other financing arrangement by Lessee or any guarantor; (vi) levy, seizure or attachment of any Equipment; (vii) commencement of proceedings under any bankruptcy, arrangement, reorganization or insolvency law by or against, or appointment of a receiver or liquidator for any property of, Lessee or any guarantor; (viii) any failure by Lessee, or any direct or indirect subsidiary or affiliate of Lessee, or any direct or indirect owner or party controlling, directly or indirectly, Lessee or any direct or indirect subsidiary or affiliate of Lessee, to perform any obligation under any agreement between Lessee or any such subsidiary, affiliate, owner or controlling party, on the one hand, and Lessor, any Lessor Transferee, or any direct or indirect subsidiary or affiliate of Lessor or any Lessor Transferee, on the other hand, which agreement shall include, without limitation, any master lease, any equipment schedule, any promissory note or other debt obligation of Lessee to Lessor; or (ix) assignment for the benefit of creditors or bulk transfer of assets by, or insolvency, cessation of business, termination of existence, death or dissolution of, Lessee or any guarantor. As used in this Master Lease, the term "guarantor" shall include any guarantor of this Master Lease or any Equipment Schedule, and any owner of any property given as security for Lessee's obligations hereunder or thereunder. (b) Upon the occurrence of any one or more Events of Default, Lessor may exercise any one or more of the following remedies without demand or notice to Lessee and without terminating or otherwise affecting Lessee's obligations hereunder: (i) declare the entire balance of rent for the remaining term of this Lease to be immediately due and payable; (ii) require Lessee to assemble the Equipment and make it available to Lessor at a place designated by Lessor; (iii) take and hold possession of the Equipment and render the Equipment unusable, and for this purpose enter and remove the Equipment from any premises where the same may be located without liability to Lessor for any damage caused thereby; (iv) sell or lease the Equipment or any part thereof at public or private sale for cash, on credit or otherwise, with or without representations or warranties, and upon such terms as shall be acceptable to Lessor; (v) use and occupy the premises of Lessee for the purpose of taking, holding, reconditioning, displaying, selling or leasing the Equipment, without cost to Lessor or liability to Lessor; (vi) demand, sue for and recover from Lessee the sum of (A) all rent and other amounts due hereunder, plus, as liquidated damages for loss of a bargain and not as a penalty, and in lieu of any further payments of rent for the Equipment, an amount equal to Lessor's Return for such Equipment ("Lessor's Return" shall mean, if the applicable Equipment Schedule provides for Stipulated Loss Values, the applicable Stipulated Loss Value, and, otherwise, the present value, discounted at five percent (5%), of all unpaid rent payments to become due during the remaining lease term, (B) all late charges provided in this Master Lease or any Equipment Schedule; (C) all expenses, including attorney's fees, of Lessor or any Lessor Transferee incurred in enforcing any of their rights under this Master Lease or any Equipment Schedule, including the taking, holding, reconditioning, preparing for sale or lease, and selling or leasing of the Equipment; (D) all other expenses, including attorney's fees, incurred by Lessor or any Lessor Transferee incurred in enforcing any of their rights under this Master Lease or any Equipment Schedule and including any and all damages to real property arising from the removal of any of the Equipment, and in the event any party holding an interest in any real property upon which any of the Equipment is located shall demand a security deposit in connection with any such removal, Lessee shall deliver and provide such deposit; (E) any actual or anticipated loss in tax benefits to Lessor (as determined by Lessor) resulting from the default or Lessor's repossession or disposition of the Equipment; and (F) any other amounts payable by Lessee to Lessor underthis Master Lease or any Equipment Schedule or damages suffered by Lessor not otherwise compensated herein including, without limitation, damages arising from Lessee's failure to maintain the Equipment as provided herein. Any sale or lease of the Equipment by Lessor after default shall be free and clear of any interest of Lessee. (c) The rights and remedies of Lessor hereunder are in addition to all other rights and remedies provided by law. All of Lessor's rights and remedies are cumulative and not exclusive, and may be exercised separately or concurrently and in such order and manner as Lessor may determine. The exercise of any one remedy shall not be deemed to be an election of such remedy or to preclude the exercise of any other remedy. No default by Lessee or action by Lessor shall result in a termination of this Master Lease or any Equipment Schedule unless Lessor so notifies Lessee in writing, and no termination of this Master Lease or any Equipment Schedule shall release or impair any of Lessee's obligations hereunder or thereunder. 16. PURCHASE OPTION. Notwithstanding anything to the contrary in the Master Lease and Equipment Schedule, Lessor and Lessee hereby agree, provided no default has occurred and is continuing under the Master Lease, at the end of the Equipment Schedule term, Lessor will sell all, but not part of, the Equipment listed on the Equipment Schedule AS IS, WHERE IS and transfer title to Lessee for the considersation of One Hundred-One dollars (101.00) and will execute such documentation as necessary to effect such transfer of title to the extent title was conveyed to the Lessor. Any instrument(s) of transfer shall contain the following: THE EQUIPMENT TRANSFERRED HEREBY IS TRANSFERRED "AS IS" AND "WHERE IS". THE SELLER MAKES NO EXPRESS OR IMPLIED WARRANTIES OR REPRESENTATIONS OF ANY KIND WHATSOEVER IN REGARD TO SUCH EQUIPMENT. THE SELLER HEREBY DISCLAIMS ANY AND ALL REPRESENTATIONS AND WARRANTIES IN REGARD TO SUCH EQUIPMENT, INCLUDING, WITHOUT LIMITATION, THOSE OF MERCHANTABILITY OR FITNESS FOR USE OR FITNESS FOR ANY PARTICULAR USE, OR OF QUALITY, DESIGN, CONDITION, CAPACITY, SUITABILITY OR PERFORMANCE. 17. COSTS AND EXPENSES. Lessee shall pay to Lessor, on demand, all costs and expenses incurred by Lessor in connection with the execution, delivery, administration and enforcement of this Master Lease, any Equipment Schedule, the transactions contemplated hereby and thereby, and any costs and expenses related hereto or thereto, including without limitation filing fees, registration fees, attorney's fees and other out-of-pocket expenses. 18. PERFORMANCE BY LESSOR. If Lessee shall fail to perform any obligation under this Master Lease or any Equipment Schedule, Lessor shall have the right, but shall not be obligated, with or without prior notice to Lessee, to perform the same (or, in the case of Lessee's failure to maintain insurance, Lessor may obtain insurance protecting the interest of Lessor only), and the costs thereof, together with interest at the lesser of eighteen percent (18%) per year or the highest lawful rate, shall be immediately payable by Lessee as additional rent for the Equipment. 19. FURTHER ASSURANCES. Lessee shall, at its sole cost and expense, execute and deliver such financial statements, certificates of title and other related documents and take such action as Lessor or any Lessor Transferee may from time to time request for the purpose of continuing and assuring the rights intended to be created by this Lease or any Equipment Schedule, including without limitation, any redocumentation of errors and omissions of this Master Lease and any Equipment Schedule required by any Lessor Transferee or other successor to any interest of Lessor. 20. NOTICES. All notices, demands, requests and other communications under this Master Lease and any Equipment Schedule: (a) shall be in writing; (b) shall be delivered personally or by first class mail addressed to the party at its respective address set forth herein or such other address as such party may designate from time to time in writing; and (c) shall be effective when personally delivered or deposited in the United States mail, duly addressed with postage prepaid. 21. LAW GOVERNING - JURISDICTION, WAIVER OF JURY TRIAL. LESSEE WARRANTS, REPRESENTS AND AGREES THAT: (a) THIS MASTER LEASE AND ANY EQUIPMENT SCHEDULE HAVE BEEN MADE AND ENTERED INTO AS PENNSYLVANIA TRANSACTIONS; (b) THIS MASTER LEASE AND ANY EQUIPMENT SCHEDULE SHALL BE CONSTRUED, INTERPRETED, GOVERNED AND ENFORCED UNDER AND IN ACCORDANCE WITH THE SUBSTANTIVE LAWS (WITHOUT REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS) OF PENNSYLVANIA; (c) JURISDICTION TO HEAR AND DECIDE ANY CASE OR CONTROVERSY ARISING OUT OF, OR TO ENFORCE OR CONSTRUE, THIS MASTER LEASE OR ANY EQUIPMENT SCHEDULE, SHALL EXCLUSIVELY RESIDE AND VEST IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA, OR IF THAT COURT DOES NOT HAVE JURISDICTION, THEN IN THE COURT OF COMMON PLEAS OF THE COMMONWEALTH OF PENNSYLVANIA FOR THE COUNTY OF BUCKS; AND (d) THIS SECTION 21 MAY BE ENFORCED BY INJUNCTION, SPECIFIC PERFORMANCE OR ANY OTHER EXTRAORDINARY OR EQUITABLE REMEDY. LESSOR AND LESSEE HEREBY WAIVE THE RIGHT TO TRIAL BY JURY OF ANY MATTERS ARISING OUT OF THIS LEASE OR THE CONDUCT OF THE RELATIONSHIP BETWEEN LESSOR AND LESSEE. 23. MISCELLANEOUS. This Master Lease, any Equipment Schedule, and any other documents executed herewith or therewith constitute the entire agreement with respect to the subject matter hereof. No oral agreement, representation or warranty shall be binding. Any provision of this Master Lease which is invalid or unenforceable under applicable law shall not affect the remaining provisions hereof, and to this end the provisions hereof are declared to be severable. Section headings are for convenience of reference only, and shall not affect the interpretation hereof. If more than one Lessee is named herein, the liability of each shall be joint and several. Where appropriate and the 3 context permits, the singular shall include the plural and vice versa. Upon assignment of this Master Lease or any Equipment Schedule or Equipment (or any part hereof or thereof or any interest herein or therein) by Lessor, the term "Lessor" shall include the Assignee. Lessee waives notice and acceptance of this Master Lease and any Equipment Schedule by Lessor. Time is of the essence of this Master Lease and any Equipment Schedule. 24. WAIVER AND AMENDMENT. No waiver or amendment of this Master Lease or any Equipment Schedule, or any provision hereof or thereof, shall be effective unless in writing signed by Lessor. No delay or failure to exercise any right, power or remedy accruing to Lessor upon any default of Lessee shall impair any such right, power or remedy, nor shall it be construed as a waiver of any such default, or an acquiescence therein, or in any similar default thereafteroccurring, nor shall any waiver of any single default be deemed a waiver of any other default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of Lessor must be in writing and shall be effective only to the extent specifically set forth therein. LESSEE INITIAL ----------------- THIS MASTER LEASE, AND ANY EQUIPMENT SCHEDULE, ARE SUBJECT TO THE TERMS AND CONDITIONS SET FORTH HEREIN LESSEE ACKNOWLEDGES RECEIPT OF A COPY OF THIS MASTER LEASE THIS MASTER LEASE, AND ANY EQUIPMENT SCHEDULE, SHALL BECOME EFFECTIVE ONLY UPON WRITTEN ACCEPTANCE BY LESSOR LESSOR: DVI FINANCIAL SERVICES INC. LESSEE: SMT Health Services Inc. By: By: -------------------------------- -------------------------------- Name: Name: ------------------------------ ------------------------------ Title: Title: ----------------------------- ----------------------------- No security interest in an Equipment Schedule may be created through the transfer or possession of any counterpart of the orginal Equipment Schedule other than that Equipment Schedule marked "Secured Party's Original" and a certified copy of the Master Agreement. 4 EQUIPMENT SCHEDULE NO. 001 ----- TO MASTER EQUIPMENT LEASE NO. 0001357 --------- ("Master Lease") LESSOR: DVI Financial Services Inc. LESSEE: SMT Health Services Inc. DATE OF MASTER LEASE: August 28, 1996 DATE OF EQUIPMENT SCHEDULE: August 28, 1996 LEASE TERM: 60 COMMENCEMENT DATE: September 20, 1996 RENT COMMENCEMENT DATE: October 1, 1996 MONTHLY RENT: $31,837.53 In the event there is an increase in the thirty (30) month Treasury Note rate from the rate quoted in the proposal/commitment letter to the rate in effect on the date the Schedule funds, then Lessor reserves the right to adjust the Monthly Rent set forth in the Schedule by increasing the Monthly Rent by that same rate of increase. SALES/USE TAX: To be added to the monthly rental ADVANCED PAYMENT: First Only EQUIPMENT:ONE (1) GE HORIZON HISPEED 1.0T MOBILE MRI UNIT; ONE (1) 48' TRAILER S/N 15251 MODEL TL4853 VIN 1JJV482E5TL291834, TOGETHER WITH ALL PARTS, ACCESSORIES, ATTACHMENTS, ACCESSIONS, ADDITIONS, REPLACEMENTS, AND SUBSTITUTIONS THERETO AND THEREFOR. EQUIPMENT LOCATIONS: East Cooper Community Hospital 1200 Johnie Dodds Boulevard Mount Pleasant, SC 29464 Clarendon Memorial Hospital 510 South Mill Street Manning, SC 29102 Colleton Regional Hospital 501 Robertson Boulevard Walterboro, SC 29488 MASTER LEASE: This Equipment Schedule is issued pursuant to the Master Lease. All of the terms, conditions representations and warranties of the Master Lease are hereby incorporated by reference herein and made a part hereof as if they were expressly set forth in this Equipment Schedule and this Equipment Schedule constitutes a separate lease with respect to the Equipment described herein. The parties hereby reaffirm all of the terms, conditions, representations and warranties of the Master Lease except as modified herein, by their execution and delivery of this Equipment Schedule. If this Equipment Schedule contains a Stipulated Loss Value Rider, attached hereto as Rider "A" and incorporated herein by this reference, then the Stipulated Loss Value of each item of Equipment (to be determined as of the rental payment date which has most recently occurred as of the date of determination) shall be the percentage of the original purchase price of the item or the dollar amount, as applicable, set forth in the Rider opposite the applicable rental payment. If a 5 percentage of the purchase price of the Equipment is to be used to calculate the Stipulated Loss Value, the original purchase price of the Equipment subject to this Schedule, including all applicable taxes, freight, transportation, assembly, installation and other charges, is $1,514,989.00. ------------ DVI Financial Services Inc. SMT Health Services Inc. (Lessor) (Lessee) By: By: -------------------------------- -------------------------------- Title: Title: ----------------------------- ----------------------------- - ----------------------------------- ----------------------------------- (Print Name) (Print Name) DVI.sch 6 EX-10.06 7 LOAN AND SECURITY AGREEMENT WITH SIEMENS CREDIT Exhibit 10.06 SIEMENS Siemens Credit Corporation LOAN AND SECURITY AGREEMENT AGREEMENT #: 130-001480-000 ---------------- LENDER: SIEMENS CREDIT CORPORATION, 1301 AVENUE OF THE AMERICAS, NEW YORK, NY 10019 Administrative Offices:5300 Broken Sound Blvd. N.W., Boca Raton, FL 33487-3509 BORROWER: SMT Health Services Inc., 10521 Perry Highway, Wexford, PA 15090 ----------------------------------------------------------------- EQUIPMENT DESCRIPTION: Magnetom Mobile Impact as described in Quote #000172108 V02 ----------------------------------------------------------- SUPPLIER: Siemens Medical Systems, Inc., 186 Wood Avenue So., Iselin, NJ 08830 ----------------------------------------------------------- ORIGINAL EQUIPMENT LOCATION: Ohio Valley Medical Center, 2000 Eoff Street, Wheeling, WV 26003 & Wheeling Hospital, Medical Park, Wheeling, WV 26003 ------------------------------------------------------------------- LOAN AMOUNT: One Million Eight Hundred Twenty-One Thousand Two Hundred Sixty One Dollars (1,821,261.00) --------------------------------------------------------------- TERMS AND CONDITIONS OF AGREEMENT 1. THE LOAN: Lender hereby agrees, on the terms stated in this Loan and Security Agreement (herein "Agreement"), to lend to Borrower on an agreed upon date (herein "Loan Date"), the loan amount as set forth above in immediately available funds (the "Loan"). The proceeds of the Loan shall be applied by Borrower on the Loan Date to the purchase price of the property described above (herein "Equipment") in accordance with the "Pay Proceeds Authorization" previously given by Borrower to Lender (in a form supplied by Lender). Borrower's obligation to pay the principal of and interest on the Loan shall be evidenced by its promissory note in the form supplied by Lender (the "Note"), dated the date of the Loan, payable to the order of Lender. Interest on the loan shall accrue on the outstanding principal amounts thereof in accordance with the terms of the Note. Unless accelerated in accordance (CONTINUED ON FOLLOWING PAGES) - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the parties hereto have duly executed the Agreement as of the dates set forth below. The Agreement shall become effective at the time of Lender's acceptance (by execution hereof) at its New York address set forth above, by an authorized representative of Lender. For all purposes hereof, the date of the Agreement shall be the date of Lender's acceptance as set forth below. BORROWER ACKNOWLEDGES THAT NEITHER LENDER NOR THE SUPPLIER IS AN AGENT OF THE OTHER AND NEITHER HAS AUTHORITY TO BIND THE OTHER. BY EXECUTION HEREOF, THE SIGNER CERTIFIES THAT (S)HE HAS READ THE ENTIRE AGREEMENT AND NOTE, THAT LENDER OR ITS REPRESENTATIVES HAVE MADE NO AGREEMENT OR REPRESENTATIONS EXCEPT AS SET FORTH HEREIN OR IN THE NOTE, AND THAT (S)HE IS DULY AUTHORIZED TO EXECUTE THE AGREEMENT AND THE NOTE ON BEHALF OF BORROWER. ACCEPTED BY: LENDER: SIEMENS CREDIT CORPORATION BORROWER: SMT Health Services Inc. -------------------------------- BY: BY: -------------------------------- -------------------------------- NAME: NAME: ------------------------------ ------------------------------ TITLE: TITLE: ----------------------------- ----------------------------- DATE: DATE: ------------------------------ ------------------------------ with the provisions of the Agreement, the principal of and interest on the Loan shall be paid in accordance with the terms of the Note on the payment dates as set forth therein. Borrower agrees to pay on demand, as a late charge, 1.3% per month limited by the maximum rate permitted by law on all overdue payments hereunder and under the Note, whether such payments are due prior to or after a Default (as hereinafter defined). All amounts payable to Lender hereunder and under the Note shall be made not later than the date specified for payment, in lawful money of the United States of America and in immediately available funds, free and clear of and without any withholding, deduction, setoff or counterclaim. If any payment hereunder or under the Note is due on a day when banks are required to close in New York, New York, such payment shall be due on the next succeeding business day, except as may otherwise by provided herein or in the Note, all payments to Lender hereunder shall be paid to Lender at its address above or any other address designated by Lender in writing. All amounts paid shall be applied first, to the payment of all expenses and charges, including attorneys' fees, incurred by Lender in the protection of its rights or the pursuance of its remedies and to provide adequate indemnity to Lender against all taxes and liens which by all have, or may have, priority over the rights of Lender to any receipts or proceeds with respect to the Equipment; second, to the payment of all other costs, expenses and indemnities payable hereunder to the extent Lender is aware of the same, third, to the payment of all interest accrued and payable with respect to the Loan; and fourth, to the payment of principal on the Loan. The Loan or any part thereof, may not be prepaid without prior consent of Lender, which consent will not be unreasonably withheld. 2. CONDITIONS PRECEDENT: The obligation of Lender to make the Loan is subject to the fulfillment of the following conditions: (a) on the Loan Date, no Default or event which with the giving of notice or lapse of time or both would constitute a default has occurred and is continuing or would result from the performance of the Agreement; (b) no material adverse change shall have occurred prior to funding, in the financial condition or operations of the Borrower, (c) the Equipment shall be in good working condition; and (d) Lender shall have received from Borrower all documents requested by Lender. 3. SECURITY INTEREST: To secure all payments hereunder and under the Note and all other obligations of Borrower to Lender hereunder and under the Note (all hereinafter call "Obligations"). Borrower hereby grants to Lender a security interest in the Equipment, together with all accessions, attachments, replacements, substitutions, modification and additions thereto, now or hereafter acquired, and all proceeds thereof (including insurance proceeds). Borrower agrees to execute and authorizes Lender to file with such authorities and at such locations as it may deem appropriate, any further Uniform Commercial Code financing statements relating to the equipment and/or the Agreement and Borrower agrees to reimburse Lender upon demand for all costs incurred relative thereto. In addition, Borrower hereby irrevocably appoints Lender its agent and attorney-in-fact to execute in the name of Borrower and file any Uniform Commercial Code financing statements or security agreements with respect to the Equipment in any place Lender deems necessary. Borrower also agrees that a photocopy or original of the Agreement (including any addenda, attachments and amendments hereto) may be filed by Lender as a Uniform Commercial Code financing statement. 4. REPRESENTATIONS AND WARRANTIES: Borrower represents and warrants to Lender as of the Loan Date that: (a) Borrower is an entity duly organized and validly existing in good standing under the laws of the state of its organization; (b) Borrower has full power to own its properties to carry on its business as now being conducted and has full power to execute, deliver and perform all of its obligations under the Agreement and the Note; (c) the making and performance by Borrower of the Agreement and the Note have been duly authorized by all necessary action of Borrower and do not and will not violate any provision of law, statute, rule of regulation, or any judgment, franchise, permit, order, decree, ruling writ or injunction of any court or administrative body, or of Borrower's organizational or charger documents, or the terms of any of its securities or result in the breach of, or constitute a default under, or require any consent under, any indenture, bank loan, credit agreement or other agreement or instrument to which Borrower is a party or by which Borrower or any of its property may be bound or affected; (d) except for any Uniform Commercial Code financing statement filings, fixture filings or other recordings required hereunder with respect to the Equipment and the creation of the security interests contemplated hereby, no filings, recordations, notifications, registrations, notarizations, authentications or other formalities or property, stamp or similar taxes or duties and no approvals, licenses, orders authorizations, consents or undertakings of any governmental bodies or regulatory, supervisory authorities are necessary or appropriate in connection with the execution, delivery and performance by Borrower of the Agreement or the Note or for the payment to Lender of all sums hereunder or under the Note or for the legality, validity, binding effect or enforceability hereof or thereof; (e) the Agreement and the Note have been duly executed and delivered by Borrower and are legal, valid and binding enforceability hereof or thereof; (e) the Agreement and the Note have been duly executed and delivered by Borrower and are legal, valid and binding obligations of Borrower, enforceable in accordance with their respective terms; (f) there are no agreements or understandings to which Borrower and Lender are parties respecting the Equipment, verbal or written, other than those expressed herein and Borrower has not created any licensor encumbrances against the Equipment except the lien created hereby; (g) Borrower has good title to the Equipment free and clear of any liens and encumbrances except those granted to Lender hereunder, and the security interest granted to Lender herein will at all times constitute a valid perfected and enforceable first priority security interest in favor of Lender, subject to no other security interest, mortgage, lien or encumbrance except as may otherwise be permitted under the Agreement; (h) Borrower has delivered to Lender all requested balance sheets and the related statements of income and retained earnings of Borrower and its subsidiaries (if applicable) for its most recent fiscal year end and for the most recent fiscal quarter then ended and such balance sheets and statements fairly present the financial condition of Borrower (and its subsidiaries) as of such dates and the results of the operations of Borrower and its subsidiaries for the period ended on such dates, all in accordance with generally accepted accounting principles consistently applied. Since the end of the latest fiscal quarter there has been no material adverse change in such condition or operations (i) Borrower has filed all applicable tax returns required to be filed by it, and has paid or made provisions for the payment of all taxes which have become due pursuant to said returns or pursuant to any assessment received by Borrower except such taxes, if any, as are being contested in good faith and as to which adequate reservices have been provided in accordance with generally accepted accounting principles and such returns properly reflect the United States, state and local income and tax liability of Borrower for the period covered thereby. 5. COVENANTS: Borrower hereby covenants and agrees that until satisfaction of all its Obligations, it shall: (a) preserve and maintain its existence and all of its rights, privileges and franchises, and continue the conduct of its present business in an orderly, efficient and regular manner; (b) keep the Equipment free and clear of all liens, charges, encumbrances, taxes and assessments, and keep the Equipment at the original Equipment Location and not change the location of any item of the Equipment without the prior written consent of Lender which consent shall not be unreasonably withheld; (c) retain possession of the Equipment during the term of the Agreement and not sell, exchange, assign, loan, deliver, lease, mortgage or otherwise dispose of such Equipment; not alter the Equipment; and not allow the Equipment to be affixed to reality in such manner as to cause the Equipment not become a fixture; (d) operate the Equipment by qualified and duly authorized personnel only, in accordance with all applicable laws and regulations, and for business purposes only; and keep the Equipment in good repair and condition, properly maintain the Equipment or cause it to be properly maintained by a fully qualified service company, and immediately notify Lender in writing of the entity maintaining the Equipment and any change of such entity. Lender shall have the right upon advance notice to inspect the Equipment and all maintenance records thereto, if any, at any reasonable time during normal business hours and to require Borrower, at Borrower's expense, to affix plates or markings on the Equipment indicating lender's interest; (e) pay when due all license fees, charges, assessments, duties, privilege, sales use, excise, ad valorem, intangible, stamp, property, and other similar taxes now or hereafter imposed upon or relating to the ownership, purchase event that Lender shall pay any such taxes to reimburse Lender upon demand therefor; (f) promptly and duly execute and deliver to Lender such event that Lender shall pay any such taxes to reimburse Lender upon demand therefor; (f) promptly and duly execute and deliver to Lender such further documents, instruments and assurances and take such further action as Lender may from time to time reasonably request in order to carry out the intent and purpose of the Agreement and to establish and protect the rights and remedies created or intended to be created in favor of Lender hereunder, including without limitation, the execution and delivery of any Uniform Commercial Code financing statements, landlord and mortgagee waivers or those documents reasonably requested by Lender; (g) furnish Lender promptly with any financial information or statements requested by Lender; (h) timely file any and all tax returns and tax filings required under any governmental statue and pay and discharge, when due, all material obligations to third parties, except those obligations being contested in good faith, and for which Borrower shall have maintained in accordance with generally accepted accounting principles, adequate reserves for the payment of the same; (i) notify Lender immediately upon receipt of notice of any lien, attachment or judicial proceeding affecting the Equipment in whole or in part, and provide written notice to Lender thirty (30) days prior to any change in the name or address of Borrower, its identity or corporate structure, social security or taxpayer identification number as applicable, or discontinuance of any of its places of business, and immediately upon any Default or event which, with the lapse of time or giving of notice, would constitute a Default. 6. DISCLAIMER OF WARRANTIES; LIMITATION OF REMEDIES; LIMITATION OF LIABILITY: THIS AGREEMENT IS SOLELY A FINANCING AGREEMENT. BORROWER HAS SELECTED BOTH THE EQUIPMENT AND THE SUPPLIER OF THE EQUIPMENT AND ACKNOWLEDGES THAT LENDER IS NOT THE SUPPLIER OF THE EQUIPMENT. LENDER HAS NOT MADE, DOES NOT MAKE, AND HEREBY DISCLAIMS ALL WARRANTIES EXPRESS OR IMPLIED, RELATING TO THE EQUIPMENT, INCLUDING ALL EXPRESS OR IMPLIED WARRANTIES OR MERCHANTABILITY AND WARRANTIES OR FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL LENDER BE LIABLE (INCLUDING WITHOUT LITIGATION, UNDER ANY THEORY IN TORTS) FOR ANY LOSS OF USE, REVENUE, ANTICIPATED PROFITS OR SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH THE AGREEMENT OR THE USE, PERFORMANCE OR MAINTENANCE OF THE EQUIPMENT. Borrower agrees to settle all claims relating to the Equipment directly with the manufacturer, Supplier or service company of the Equipment, as applicable, and not with Lender. 7. RISK OF LOSS; INSURANCE: (a) Borrower agrees that it shall bear all risk of loss, damage to or destruction of the Equipment. Borrower shall give Lender prompt notice of any damage to or loss of the Equipment or of any occurrence arising from the possession, use or operation of the Equipment resulting in death or bodily injury, or damage to property. In the event of damage to any item(s) of Equipment, borrower shall immediately place such item(s) in good repair (with no abatement of payments hereunder or under the Note), with the proceeds of any insurance recovery applied to the cost of such repair. If, however, any item(s) of Equipment shall become lost, stolen, destroyed, worn out, damaged beyond repair, condemned, confiscated, seized or requisitioned (herein "Event of Loss"), Borrower shall, at the option of Lender, either replace the same with like equipment in good repair (with no abatement of payments hereunder or under the Note), or pay to Lender on the next scheduled payment date immediately following such Event of Loss, the remaining unpaid principal balance of the Note, all accrued but unpaid interest thereon, plus all other amounts due from Borrower hereunder, whereupon the Agreement shall terminate. (b) Until satisfaction by Borrower of its Obligations, Borrower, at its expense, shall maintain comprehensive general liability insurance, and "fire and allied perils" and "all risks" property insurance covering the Equipment (as primary insurance for Borrower and Lender), both in such amounts as Lender shall require, except that such property insurance shall be in an amount at least equal to the remaining unpaid principal balance of the Note and such insurance shall be placed with carriers acceptable to Lender. The liability insurance policy shall name Lender (and any assignee of Lender) as additional insured(s) and the property insurance policy shall name Lender (and any assignee of Lender) as loss payee(s) tot he extent its interest(s) may appear, and both policies shall provide that they may not be cancelled or altered without at least thirty (30) days prior written notice to Lender (and any assignee of Lender). Borrower irrevocably appoints Lender its agent and attorney-in-fact for the purpose of adjusting and settling any property insurance hereunder and endorsing in Borrower's name any instruments or payments received in respect thereof. Borrower shall furnish to Lender, upon request, a certificate of insurance that such coverage is in effect, however, Lender shall be under no duty either to ascertain the existence of or to examine such insurance policies or to advise Borrower in the event that such insurance coverage does not comply with the requirements hereof. 8. DEFAULT AND REMEDIES: (a) Any of the following shall constitute a default by Borrower hereunder (herein "Default"): (i) failure by Borrower to pay any amounts hereunder or under the Note when due and such remains unremedied for a period of ten (10) days from the due date; or (ii) failure of Borrower to comply with any provisions or perform any of its obligations arising under the Agreement or under any other documents or agreements related hereto and such remains unremedied by Borrower for a period of twenty (20) days; or (iii) any representations or warranties made or given by Borrower in connection with the Agreement or any other document or agreement related hereto were false or misleading in a material way when made; or (iv) subjection of the Equipment to levy or execution or other judicial process which is not or cannot be removed within thirty (30) days from the subjection thereof; or the imposition of any unauthorized lien on or transfer of the Equipment by or through Borrower; or (v) commencement of any insolvency, bankruptcy or similar proceedings by or against Borrower or any guarantor of any of Borrower's Obligations (herein "Guarantor"), including any assignment by Borrower or any Guarantor for the benefit of creditors, and in the case of any such involuntary proceedings, such is not dismissed within thirty (30) days of institution; or the inability of Borrower to generally pay its debts as they become due; or (vi) any act of Borrower which imperils the value of the Equipment or the prospect of full performance of the Obligations, including but not limited to the liquidation or dissolution of Borrower or the commencement of any acts relative thereto, or without the prior written consent of Lender, any sale or other disposition of all or substantially all of the assets of Borrower, or any merger or consolidation of Borrower unless Borrower is the surviving entity, or the cessation of business by Borrower; or (vii) a default by Borrower under any other agreement or note with Lender or any assignee of the Agreement and/or Note; or (viii) the death or dissolution of Borrower or of any Guarantor, the withdrawal of any partner if Borrower is a partnership, or the inability of Borrower or of any Guarantor hereunder to perform any of the obligations contained herein or in any applicable guaranty. (b) Upon any Default, Lender may exercise any one or more of the following remedies (which remedies shall be cumulative to the extent permitted by law); (i) terminate the Agreement; (ii) declare the remaining unpaid principal balance of the Note, plus all accrued but unpaid interest thereon, plus all other amounts due from Borrower hereunder, immediately due and payable in full without notice or demand, whereupon such shall become immediately due and payable; (iii) secure peaceable repossession and removal of the Equipment by Lender or its agent without judicial process; (iv) demand and Borrower shall at its own risk and expense immediately return the Equipment to Lender, packed for shipment in accordance with manufacturer's specifications and eligible for manufacturer's maintenance, freight prepaid and insured, to such location as Lender shall designate; (v) sell, lease or otherwise dispose of the Equipment at public or private sale without advertisement or notice except that required by law, upon such terms and at such place as Lender may deem advisable and lender may be the purchaser at any such sale; (vi) demand and Borrower shall pay all expenses in connection with the Equipment relating to its retaking, refurbishing, selling or the like; (vii) exercise any other right or remedy which may be available to it under the Uniform Commercial code or any other applicable law. Any proceeds received from Borrower or net proceeds received with respect to disposition of the Equipment, shall be applied by Lender to the Obligations, in the order of application as Lender shall elect. 9. INDEMNIFICATION: Borrower hereby indemnifies and agrees to hold Lender, its employees, officers, directors and agents harmless from and against any and all losses, claims, suits, damages, expenses and liabilities (including negligence, tort and strict liability), together with reasonable attorneys' fees, caused by, arising from, or related to, the manufacture, purchase, ownership, maintenance, modification, delivery, installation, possession, condition, use, acceptance, rejection, operation, disposition or return of the Equipment. 10. NOTICES; CHANGES: Notices, requests or other communications required hereunder to be sent to either party shall be in writing and shall be (a) by United States first class mail, postage prepaid, and addressed to the other party at the address set forth above (or to such other address as such party shall have designated by proper notice) or (b) by personal delivery. Borrower consents to service of process by certified mail at its address above (or to such other address as Borrower shall be designated by proper notice) in connection with any legal action brought by Lender. Borrower authorizes Lender to fill in descriptive material herein (including serial numbers) and to correct any patient errors hereunder or under the Note. 11. MISCELLANEOUS: THE AGREEMENT AND NOTE CONTAIN THE COMPLETE AGREEMENT OF THE PARTIES WITH RESPECT TO ITS SUBJECT MATTER AND SUPERSEDE AND REPLACE ANY PREVIOUSLY MADE PROPOSALS, REPRESENTATIONS, WARRANTIES OR AGREEMENTS. LENDER MAY ASSIGN OR TRANSFER THE AGREEMENT, THE NOTE AND/OR LENDER'S INTEREST IN THE EQUIPMENT WITHOUT NOTICE TO BORROWER. Any assignee of Lender shall have all of the rights but none of the obligations of Lender under the Agreement and Note, and BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST ANY ASSIGNEE OF LENDER ANY DEFENSE, COUNTERCLAIM OR OFFSET THAT BORROWER MAY HAVE AGAINST LENDER. BORROWER SHALL NOT ASSIGN OR IN ANY WAY DISPOSE OF ALL OR ANY PART OF ITS RIGHTS OR OBLIGATIONS UNDER THE AGREEMENT AND THE NOTE WITHOUT THE PRIOR WRITTEN CONSENT OF LENDER. The Agreement and the Note shall be binding upon and inure to the benefit of the parties hereto, their legal representatives, permitted successors and assigns. THE PARTIES HERETO WAIVE ALL RIGHTS TO A JURY TRIAL IN ANY LITIGATION ARISING FROM OR RELATED IN ANY WAY TO THE AGREEMENT, NOTE OR THE TRANSACTION CONTEMPLATED HEREBY. No amendment hereunder shall be effective unless in writing signed by the parties hereto and no waiver hereunder shall be effective unless in writing, signed by the party to be charged. No failure to exercise, no delay in exercising, and no single or partial exercise on the part of Lender of any right, remedy, or power hereunder, shall operate as a waiver thereof or preclude Lender from exercising any other right, remedy or power hereunder. Any provision of the Agreement or the Note which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability, without invalidating the remaining provisions hereof or of the Note. No action regardless of form arising out of the Agreement or the Note may be brought by Borrower more than two (2) years after the cause of action has accrued. The representations, warranties, obligations and indemnities of the Borrower hereunder shall survive the termination of the Agreement to the extent required for their full observance and performance. The obligations of each co-maker (if any) of the Agreement or the Note shall be primary, joint and several. In the event borrower fails to meet any obligation of it hereunder, Lender may at its option satisfy such obligation and Borrower shall reimburse Lender on demand therefor. In the event that legal or other action is required to enforce Lender's rights under the Agreement or under the Note (including but not limited to the exercise of remedies hereunder), borrower agrees to reimburse lender on demand for its reasonable attorneys' fees and its other related costs and expenses. Notwithstanding any applicable stage laws to the contrary, borrower agrees to reimburse lender for all reasonable attorneys' fees incurred by it incident to any action or proceeding involving the borrower brought pursuant to the bankruptcy code, as amended which are allowable under section 506(b) thereof. The captions in the Agreement are for convenience only and shall not defined or limit any of the terms hereof. THE AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. SIEMENS Siemens Credit Corporation PROMISSORY NOTE TO LOAN AND SECURITY AGREEMENT #: 130-001480-000 ---------------- - -------------------------------------------------------------------------------- PROMISSORY NOTE U.S. $1,821,261.00 -------------- --------------------------------------- (Date of Note) NEW YORK, NEW YORK ------------------ The undersigned, organized and validly existing under the laws of its state of organization, for value received, hereby unconditionally promises to pay to the order of Siemens Credit Corporation (the "Payee") at 1301 Avenue of the Americas, new York, NY 10019 in lawful money of the United States of America and in immediately available funds, the principal amount of U.S. One Million Eight ------------------ Hundred Twenty-One Thousand Two Hundred Sixty-One Dollars, with interest (based - --------------------------------------------------------- on a year of 360 days and 30 day months) at a per annum rate of Nine & Forty- ------------- Five Hundredths percent (9.45%) on the principal amount hereof remaining from - ----------------------- ----- time to time unpaid, such principal and interest to be paid in 60 consecutive --- monthly installments of $37,907.00 each, beginning on Date of Note Above and on ---------- ------------------- the same day of each consecutive month thereafter until fully paid. This Note evidences a Loan by the Payee to the undersigned pursuant to the Loan and Security Agreement indicated above between the undersigned and the Payee (the "Agreement") as from time to time may be amended, restated, replaced, supplemented, substituted for or renewed, and the holder of this Note is entitled to the benefits thereof, including without limitation, the security interest in the Equipment granted therein. Each term defined in the Agreement and not otherwise defined herein shall have the same definition when used herein. The principal hereof and accrued interest hereon shall become forthwith due and payable as provided in the Agreement. Payments hereunder not made when due shall accrue late charges as provided in the Agreement. This Note may not be prepaid in whole or in part (without the prior consent of the Lender (Payee) which consent will not be unreasonably withheld). All payments made pursuant to the terms of this Note shall be made free and clear of, and without deduction for, withholding, setoff or counterclaim of any kind. The undersigned hereby promises to pay all costs and expenses, including but not limited to reasonable attorneys' fees which may be incurred in connection with the enforcement and/or collection of this Note. Neither the failure on the part of the holder of this Note in exercising any right or remedy nor any single or partial exercise or the exercise of any other right or remedy shall operate as any waiver. No amendment hereunder shall be effective unless in writing signed by the undersigned and holder of this Note and no wavier hereunder shall be effective unless in writing, signed by the party to be charged. The undersigned hereby waives demand for payment, presentment, protest and notice of any kind in connection with the delivery, acceptance, performance, default or enforcement of this Note and hereby consents to any extensions of time, renewals, releases of any party to this Note, waivers or modifications that may be granted or consented to by the holder of this Note in respect of the time of payment or any other matter. Anything in this Note to the contrary notwithstanding, in the event that any payment of interest hereunder shall exceed the legal limit, such amount in excess of such limit shall be deemed a payment of principal hereunder. The undersigned authorizes the Payee to insert above as the date of the Note, the date on which the Payee disburses funds pursuant to the Agreement. THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF. MAKER WAIVES ALL RIGHTS TO A JURY TRIAL IN ANY LITIGATION ARISING FROM OR RELATED IN ANY WAY TO THIS NOTE OR THE TRANSACTION CONTEMPLATED HEREBY. - -------------------------------------------------------------------------------- IN WITNESS WHEREOF, the undersigned has caused this Note to be executed by its authorized representative, who certifies that (s)he has all necessary authority on behalf of the undersigned to execute this Note and bind it to the terms hereof. SMT Health Services Inc. BY: --------------------------------- NAME: ------------------------------- TITLE: ------------------------------ EX-10.07 8 FINANCE LEASE WITH LAUREL CAPITAL CORP. (9/26/96) Exhibit 10.07 LAUREL CAPITAL CORPORATION FINANCE LEASE 3810 McKnight East Drive Pittsburgh, PA 15237 [412] 366-6440 Finance Lease No. 2179 This Lease, made this 12th day of September 1996 by and between LAUREL CAPITAL CORPORATION ("Lessor") and SMT HEALTH SERVICES INC. ("Lessee"). 1. LEASE AGREEMENT. Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor, all the machinery, equipment and other personal property (individually "Item of Equipment" and collectively "Equipment") described in Equipment Lease Schedules which are or may from time to time hereafter be executed by Lessor and Lessee and attached hereto or incorporated herein by reference ("Schedules") upon the terms and conditions set forth in this Lease, as supplemented, as regards each Item of Equipment, by the terms and conditions set forth in the Schedule identifying that Item of Equipment. Whenever reference is made herein to "this Lease", it shall be deemed to include each of the several Schedules and the Insurance Schedule(s) referred to herein all of which constitute one undivided lease of the Equipment. 2. TERM. (a) The obligations under this Lease commence upon the written acceptance hereof by Lessor and shall end upon full performance and observance of each and every term, condition and covenant set forth in this Lease and any extensions hereof. The rental term for Equipment listed in each Schedule shall commence on the date indicated on such Schedule and shall terminate on the last day of the term stated in such Schedule. (b) In the event Lessor shall make payments on the Equipment prior to the commencement date of the rental term as indicated on the Schedule, Lessee shall pay interim rental payments from the date of such payments by Lessor to the commencement date of the rental term. The interim rental payments shall be based on the daily equivalent of two (2.00%) percent over the prime interest rate (fully floating) as announced from time to time by PNC Bank, National Association. Interim rental payments are due monthly. 3. RENT. The rent, including interim rental payments, for the Items of Equipment described in each Schedule shall be the amount stated in such Schedule. Rent is an absolute obligation of Lessee due upon the inception of each rental or interim rental term and payable as specified in each particular Schedule irrespective of any claims, demands, set-offs, actions, suits or proceedings that Lessee may have or assert against Lessor or any supplier of Equipment. Rent and interim rent shall be payable to Lessor at its office, 3810 McKnight East Drive, Pittsburgh, Pennsylvania 15237, or at such other place as Lessor or its assigns may designate in writing to Lessee from time to time. 4. DELINQUENT RENT PENALTY. If Lessee shall fail to pay any rent, interim rent installment or other amount due hereunder within ten (10) days after the due date and until all sums due hereunder have been declared due and payable in accordance with Paragraph 24, Lessee shall pay to Lessor a late charge of five (5%) percent of such amount due for each month or part thereof for which said rent or other sums shall be delinquent. After all sums are declared due and payable in accordance with Paragraph 24, Lessee shall pay interest at the rate of fifteen (15%) percent per annum or the maximum contract rate permitted by law, whichever is less, on such accelerated sums from the date of acceleration until paid, and whether or not judgment hereon has been entered. 5. DELIVERY AND INSTALLATION. Lessee will select the type, quantity and supplier of each Item of Equipment and in reliance thereon such Equipment will then be ordered by Lessor from such supplier or Lessor may at its option elect to accept an assignment of any existing purchase order. Lessor shall not be liable for loss or damage occasioned by any cause, circumstance or event of whatsoever nature, including, but not limited to, failure of or delay in delivery, delivery to wrong location, delivery of improper equipment or property other than the Equipment, damage to the Equipment, governmental regulations, strikes, embargoes or other causes, circumstances or events whether of a like or unlike nature. Lessee, at its expense, will pay all transportation, packing, installation, testing and other charges in connection with the delivery, installation and use of each Item of Equipment. In the event that the cost of any Item of Equipment differs from the price set forth in the purchase order therefor, the monthly rental shall be changed accordingly to fully reflect any such difference. In the event that Lessee fails or refuses to accept delivery of the Equipment within ninety (90) days following the execution of the Lease (unless such period is extended by an agreement between Lessor and Lessee in writing), Lessor may terminate the Lease and Lessee will remit to the Lessor an amount equal to the down payment and installments previously paid by the Lessor to the vendor or supplier of the Equipment, together with interest accrued thereon at the highest contractual rate enforceable against Lessee under applicable law but never at a rate higher than fifteen (15%) percent per annum. Lessor shall assign to Lessee without recourse all of Lessor's interest in and to the Equipment under the vendor purchase agreements. 6. WARRANTY OF LESSEE'S QUIET POSSESSION. Lessor warrants and covenants that so long as Lessee faithfully performs this Lease, Lessee, subject to the disclaimer of warranties set forth immediately below, shall be entitled to quietly possess and use the Equipment without interference. 7. DISCLAIMER OF WARRANTIES. EXCEPT FOR THE WARRANTIES SET FORTH ABOVE, LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER'S AGENT, MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO THE EQUIPMENT. THIS DISCLAIMER OF WARRANTIES INCLUDES BUT IS NOT LIMITED TO ANY WARRANTY REGARDING: THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE; THE DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP OF THE EQUIPMENT; COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT; OR LATENT DEFECTS; it being agreed that all such risks, as between Lessor and Lessee, are to be borne by the Lessee. Lessor is not responsible or liable for any direct, indirect, incidental or consequential damage to, or loss resulting from, the installation, operation or use of any Item of Equipment or any product manufactured thereby. 8. NATURE OF EQUIPMENT. Not withstanding anything to the contrary contained in this Agreement, including the characterization of this Agreement as a lease, the parties hereto acknowledge and agree that, legal title to each Item of Equipment leased hereunder shall be with the Lessee. Each Item of Equipment shall remain personal property, notwithstanding the manner in which it may be affixed to any real property. Lessee will otherwise take all action required to keep the Equipment free and clear of all levies, liens and encumbrances which result from any act or omission of the Lessee. Lessor assumes no liability and makes no representation as to the treatment by Lessee of this Lease, the Equipment, or to the rental payments for financial statement or tax purposes. 9. LOCATION OF EQUIPMENT. Each Item of Equipment shall be placed into service at the location specified in Exhibit B, Location of Equipment attached to the Schedule. Lessee shall promptly provide written notice to Lessor of any and all location changes. 10. LESSOR'S RIGHT OF INSPECTION. Lessor and its agents shall have the right during business hours to enter upon the premises where any Item of Equipment is located (to the extent Lessee can permit) for the purpose of inspection. 11. USE OF EQUIPMENT. Lessee must use the Equipment in a careful and proper manner in conformity with (i) all statutes and regulations of each governmental authority having jurisdiction over the Lessee and/or the Equipment and its use, and (ii) all policies of insurance relating to the Equipment and/or its use. In addition, Lessee shall not (i) use any Item of Equipment in any manner that would impair the applicability of manufacturer's warranties or render any Item of Equipment unfit for its originally intended use; nor (ii) permit anyone other than authorized and competent personnel to operate any Item of Equipment. 12. ALTERATIONS. Without the prior written consent of Lessor, which consent shall not be unreasonably withheld, Lessee shall not make any alterations, modifications or attachments to the Equipment. All alterations, modifications and attachments of whatsoever kind or nature made to any Item of Equipment must be removed without damaging the functional capabilities or economic value of the affected Item of Equipment upon the termination of the Lease. Under no circumstances shall any such alteration, modification or attachment be encumbered by Lessee. 13. MAINTENANCE AND REPAIRS. Lessee shall at its own expense and without authority to bind Lessor maintain each Item of Equipment in good mechanical condition and running order, normal wear and tear excepted. Immediately upon installation, Lessee shall provide to Lessor a perfected first lien security interest in any and all replacement parts. 14. RISK OF LOSS, DAMAGE AND THEFT. (a) All risk of loss, damage, theft or destruction, partial or complete, to any Item of Equipment incurred or occasioned by any cause, circumstance or event of whatever nature will be borne by Lessee from and after delivery of each Item of Equipment to a carrier FOB point of origin. Lessee shall promptly notify Lessor of any theft of or loss or damage to the Equipment. (b) Neither total nor partial loss of use or possession of any Item of Equipment shall abate the rent. (c) An Item of Equipment shall be deemed subjected to total loss when (i) it has disappeared regardless of the reason for disappearance or (ii) when it has sustained physical damage and the estimated cost of repair exceeds 75% of the fair market value (as determined by an independent appraiser chosen by Lessor) on the date of damage. Lessee's duty to pay rent for any Item of Equipment subjected to total loss shall be discharged by paying to Lessor the sum of the then unpaid principal plus accrued interest plus the purchase option at the price specified on the Schedule plus any applicable prepayment penalty plus all costs associated with releasing the Lessor's security interest plus any other sums then due and payable under the Lease. The amount of applicable insurance proceeds, if any, actually received by Lessor shall be subtracted from the amount for which Lessee is liable under this Paragraph 14. (d) Lessee shall cause any Equipment subjected to partial loss to be restored to original capability. Lessor shall, upon receiving satisfactory evidence of restoration, promptly pay to Lessee the proceeds of any insurance or compensation received by Lessor, by reason of such partial loss, provided however, that Lessor shall release such proceeds, to the extent such proceeds have been received by Lessor, in advance of restoration to the extent necessary to purchase materials or make progress payments upon the submission of appropriated work orders, invoices, estimates, or other satisfactory documentation. (e) Lessor shall not be obligated to undertake the collection of any claim against any person for either total or partial loss of any Item of Equipment. After Lessee discharges its obligations to Lessor under either 14(c) or 14(d) above, Lessee may, for Lessee's own account, proceed to recover from third parties and shall be entitled to retain any amount recovered. Lessor shall supply Lessee with any necessary assignment of claim. 15. INDEMNIFICATION. (a) Non-tax Liability. Lessee assumes liability for, and hereby agrees to ------------------ indemnify, protect and hold harmless, Lessor, its agents, servants, employees, officers, successors and assigns from and against, any and all liabilities, obligations, losses, damages, injuries, claims, demands, penalties, actions, costs and expenses, including reasonable attorney's fees, of whatsoever kind and nature, arising out of (i) the manufacture, installation, use, condition (including, but not limited to, latent and other defects and whether or not discoverable by Lessee or Lessor), operation, ownership, selection, delivery, leasing, removal or return of any Item of Equipment, regardless of where, how and by whom operated, or (ii) any failure on the part of Lessee to perform or comply with any covenantor condition of this lease. (b) Direct Tax Costs. In addition to all other rents payable hereunder, the ----------------- Lessee agrees to indemnify, protect and hold harmless Lessor, its agents, servants, employees, officers, successors and assigns from and against any and all taxes, license fees, assessments and other governmental charges, fees, fines or penalties of whatsoever kind or character and by whomsoever payable, which are levied, assessed, imposed or incurred during the lease term, (i) on or relating to each Item of Equipment, including any tax on the sale, ownership, use, leasing, shipment, transportation, delivery or operation thereof, (ii) on the exercise of any option, election or performance of an obligation by the Lessee hereunder, (iii) of the kind generally referred to in items (i) and (ii) above which may remain unpaid as of the date of delivery of any Item of Equipment to the Lessee irrespective of when the same may have been levied, assessed, imposed or incurred, and (iv) by reason of all gross receipts, business and occupation, and like taxes on or measured by rents payable hereunder levied by any state or local taxing authority having jurisdiction where any Item of Equipment is located. The Lessee agrees to comply with all state and local laws requiring the filing of ad valorem tax returns relating to each Item of Equipment. Any statements for such taxes received by the Lessor shall be promptly forwarded to the Lessee. This subparagraph shall not be deemed to obligate the Lessee to pay (i) any taxes, fees, assessments and charges which may have been included in the Lessor's cost of each Item of Equipment as set forth in Schedule(s) hereto, or (ii) any income or like taxes against the Lessor on or measured by the net income from the rents payable hereunder. The Lessee shall not be obligated to pay any amount under this subparagraph so long as it shall, at its expense and in good faith and by appropriate proceedings, contest the validity or the amount thereof unless such contest would adversely affect the title of the Lessee, or any security interest of Lessor, to an Item of Equipment or would subject any Item of Equipment to forfeiture or sale. The Lessee agrees to indemnify the Lessor against any loss, claim, demand and expense including legal expense resulting from such nonpayment or contest. (c) Indemnity Payment. The amount payable pursuant to subparagraphs 15(a) ------------------ and 15(b) shall be payable upon demand of the Lessor accompanied by a statement describing in reasonable detail such loss, liability, injury, claim, expense or tax and setting forth the computation of the amount so payable. (d) Survival. The indemnities and assumptions of liabilities and obligations --------- provided for in this Paragraph 15 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease. 16. LESSEE'S ASSIGNMENT. Without the prior written consent of the Lessor, Lessee shall not bail, hypothecate, transfer or dispose of any Item of Equipment or any interest in this Lease nor impair the Lessor's title to the Equipment. Lessee shall not assign this Lease, nor shall this Lease or any rights under this Lease or in any Item of Equipment inure to the benefit of any trustee in bankruptcy, receiver, creditor, or other successor of Lessee whether by operation of law or otherwise, without prior written consent of the Lessor. 17. LESSOR'S ASSIGNMENT. All rights of Lessor hereunder and in any Item of Equipment may be assigned, pledged, mortgaged, transferred, or otherwise disposed of, either in whole or in part, without notice to Lessee. No such assignee shall be obligated to perform any duty, covenant, or condition required to be performed by Lessor under the terms of this Lease. Such assignee shall have all rights, powers and remedies given to Lessor by this Lease, and upon notice to Lessee, shall be named as loss payee or co-insured under all policies of insurance maintained pursuant to Paragraph 18 hereof. If Lessor assigns this Lease or the monies due or to become due hereunder or any other interest herein, Lessee agrees not to assert against Lessor's assignee any defense, set-off, recoupment, claim or counterclaim which Lessee may have against Lessor, whether arising under this Lease or any other transaction between Lessor and Lessee. Subject to Paragraph 16 hereof and this Paragraph 17, this Lease inures to the benefit of, and is binding upon, the heirs, legatees, personal representatives, successors and assigns of the parties hereto. 18. INSURANCE. Lessee will at its own expense insure each Item of Equipment in compliance with the terms and conditions of the Insurance Schedule(s) attached hereto or incorporated herein by reference inform satisfactory to Lessor with insurance carriers approved by Lessor and in an amount not less than one hundred five (105%) percent of the unpaid principal balance due hereunder. The proceeds of any insurance policy due by reason of theft or loss of or damage to any Item of Equipment shall be applied as provided in Paragraph 14 hereof. In addition to the compliance with the terms and conditions of the Insurance Schedule(s) and the other terms and conditions of this Paragraph 18, the Lessee shall comply with the following conditions: (a) Lessee, prior to the inception of any rental term, shall deliver to Lessor all required policies of insurance or in the alternative certificates of insurance (in triplicate); (b) Lessee shall cause each insurer to agree by endorsement on the policies or certificates of insurance or by an independent instrument furnished Lessor that each such insurer will give at least thirty (30) days written notice to Lessor before any such policy or policies of insurance will be altered or cancelled for any reason, including without limitation, failure of the Lessee to pay premiums; (c) All coverage required by the Insurance Schedule(s) must be in effect when Lessor takes delivery or causes delivery to be made FOB point of origin; (d) All insurance policies must indicate that the Lessor is an additional insured for all aspects of liability insurance coverage and is loss payee for all aspects of insurance coverage relating to the theft or loss of or damage to Equipment and the proceeds of any public liability or property damage insurance shall be applied first to the extent of the Lessor's liability; (e) Lessee will furnish renewal policies or renewal certificates of insurance (in triplicate) listing Lessor as an additional insured and/or loss payee, as required by this Lease, no later than thirty (30) days prior to the expiration of any insurance coverage required hereby. 19. ADDITIONAL DOCUMENTS. If Lessor shall so request, Lessee shall execute and deliver to Lessor such documents, including without limitation, UCC Financing and Continuation Statements, as Lessor shall deem necessary or desirable for purposes of continuing this Lease or recording or filing to protect the interest of Lessor in each Item of Equipment. Any such filing or recording shall not be deemed evidence of any intent to create a security interest. 20. FURNISHING FINANCIAL INFORMATION. During the term of this Lease and any extensions or renewals hereof, Lessee will furnish to Lessor: (a) Within forty five (45) days after the end of each of the first three quarterly periods of Lessee's fiscal year, a balance sheet and statement of income of Lessee as at the close of such quarterly period from the beginning of the fiscal year to the date of such statement, prepared in accordance with generally accepted accounting principles, consistently applied, and in such reasonable detail as Lessor may request, certified as true, complete and correct by an authorized officer of the Lessee. (b) As soon as practicable, but in any event within ninety (90) days after the end of each fiscal year, a copy of its annual audit prepared by a certified public accountant selected by Lessee and satisfactory to Lessor. (c) In a timely manner such financial statements, reports and other information as the Lessee shall send from time to time to its stockholders and/or file with the Securities and Exchange Commission and/or other materials which Lessor shall reasonably request. 21. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR. If Lessee fails to promptly perform any of its obligations under this Lease, Lessor may perform the same for the account of Lessee without waiving Lessee's failure as a default. All sums paid or expense or liability incurred by Lessor in such performance (including reasonable legal fees) together with interest thereon at the highest contractual rate enforceable against Lessee, but never at a higher rate than 15% per annum simple, shall be payable by the Lessee upon demand as additional rent. 22. PURCHASE OPTION. Provided Lessee is not in default hereunder, Lessee may purchase all, but not less than all, of the Items of Equipment listed on each individual Schedule at the price specified in such Schedule at the end of the rental term. The purchase of the Items of Equipment shall occur AS IS, WHERE IS, WITHOUT ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER except that Lessor shall deliver title to the Items of Equipment free of any lien or encumbrance created by any act of the Lessor. In the event the Lessee fails to exercise its purchase option, Lessee will return those Items of Equipment not purchased, freight and insurance prepaid, to Lessor (or Lessor's nominee) at a location designated by Lessor. If Lessee fails to exercise its purchase option and fails to return any Item of Equipment, then at Lessor's option this Lease may be extended on a month-to-month basis, with rent payable on the first of each month, at the rate applicable during the lease term just ended. 23. EVENTS OF DEFAULT. Any of the following events or conditions shall constitute an Event of Default hereunder and entitle the Lessor, at its option, to avail itself of the remedies more fully set forth in Paragraph 24 hereof: (a) Non-payment by Lessee of any rent or other amount provided for in this Lease when the same becomes due whether by acceleration or otherwise; (b) Failure of the Lessee to perform any of the non-monetary obligations, terms or conditions of this Lease within thirty (30) of receipt of written notification thereof from Lessor; (c) The Lessee shall commence a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or the taking possession by any official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of its creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (d) If an involuntary case or other proceeding should be commenced against Lessee seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of thirty (30) days; (e) The occurrence of any event described in this Paragraph 23(c) through (d) hereof with respect to any guarantor or any other party liable for payment or performance of this Lease; (f) Any certificate, statement, representation, warranty or financial statement heretofore or hereafter furnished pursuant to or in connection with this Lease by or on behalf of Lessee or any guarantor or other party liable for payment or performance of this Lease is false in any material respect at the time as of which the facts therein set forth were stated or certified, or omits any substantial contingent or unliquidated liability or claim against Lessee or any such guarantor or other party, or, upon the date of execution of this document or any Schedule, there shall have been any materially adverse change in any of the facts disclosed by any such certificate, statement, representation or warranty, which shall not have been disclosed in writing to Lessor at or prior to the time of the execution of this document or such Schedule. 24. REMEDIES. Upon the happening of any Event of Default hereunder, the rights and duties of the parties shall be as set forth in this Paragraph 24. (a) Upon Lessor's demand, the Equipment shall be promptly delivered to Lessor, at that place or those places designated by Lessor. If Lessee does not so deliver the Equipment, Lessee shall make the Equipment available for retaking and authorizes Lessor, its employees and agents to enter the premises of the Lessee and any other premises (insofar as Lessee can permit) for the purpose of retaking. In the event of retaking, Lessee expressly waives all rights to possession and all claims for injuries suffered through or loss caused by retaking. Any repossession accomplished under this Paragraph 24(a) shall not release Lessee from liability for damages of Lessor sustained by reason of Lessee's default hereunder. (b) Lessor may revoke Lessee's privilege of paying rent in installments and, upon Lessor's demand, the Lessee shall promptly pay to Lessor the portion of the rent then remaining unpaid plus all other sums due and unpaid. (c) Lessor may sell or release the Equipment or any part thereof, at public auction or by private sale or lease at such time or times and upon such terms as Lessor may determine, free and clear of any rights of Lessee and, if notice thereof is required by law, any notice in writing of such sale or lease by Lessor to Lessee not less than ten (10) days prior to the date thereof shall constitute reasonable notice thereof to Lessee. All proceeds of the sale or releasing, or both (less (i) all expenses incurred in retaking the Equipment, making necessary repairs to the Equipment and enforcing this Lease, (ii) all damages that Lessor shall have sustained by reason of Lessee's default, and (iii) reasonable attorney's fees) shall be credited against Lessee's liability hereunder as and when received by Lessor. Sums in excess of Lessee's liability shall belong to Lessee. The Lessee shall be liable for any deficiency. (d) The provisions of this Paragraph 24 shall not prejudice Lessor's right to recover or prove damages for unpaid rent accrued prior to default, or bar an action for a deficiency as herein provided, and the bringing of an action with an entry of judgment against Lessee shall not bar the Lessor's right to repossess any or all Items of Equipment. (e) Lessor's remedies shall be available to Lessor's successors and assigns, shall be in addition to all other remedies provided bylaw, and may be exercised concurrently or consecutively. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OF THE EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE HEREBY WAIVES ANY RIGHT TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED BY THE LESSOR OR THE LESSEE IN CONNECTION WITH THIS LEASE. 25. GOVERNING LAW AND CONSENT OF JURISDICTION. This Lease has been executed and delivered in the Commonwealth of Pennsylvania. The laws and decisions of said Commonwealth will govern and control the construction, enforceability, validity and interpretation of this Lease, and of all agreements, instruments and documents, heretofore, now or hereafter executed by Lessee and delivered to Lessor pertaining or relating to this Lease or the transactions contemplated herein. The parties agree that any action or proceeding arising out of or relating to this Lease may be commenced in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the United States District Court for the Western District of Pennsylvania and Lessee agrees that, in addition to any other manner of service prescribed bylaw or rule of court, a summons and complaint commencing an action or proceeding in either such Court shall be properly served upon Lessee and shall confer personal jurisdiction if served personally or by United States registered mail, return receipt requested, to the Lessee at the address indicated below. 26. JUDGMENT BY CONFESSION. LESSEE HEREBY EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR LESSEE AND, WITH OR WITHOUT ONE OR MORE DECLARATIONS FILED, ENTER A JUDGMENT OR JUDGMENTS AGAINST LESSEE IN FAVOR OF LESSOR, AS OF ANY TERM, FOR THE SUM THEN DUE AND PAYABLE UNDER THIS LEASE, WITH COSTS OF SUIT AND ATTORNEY'S COMMISSION OF 15% FOR COLLECTION; WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION, AND INQUISITION AND EXTENSION UPON ANY LEVY IS HEREBY WAIVED AND CONDEMNATION AGREED TO, AND THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION HEREON IS ALSO HEREBY EXPRESSLY WAIVED AND NO BENEFIT OF EXEMPTION SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION LAW NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED. 27. CONFLICT OF PROVISIONS. In the event of any conflict of provisions between any Schedule and any other document, the provisions of the Schedule shall control. 28. AMENDMENTS AND WAIVERS. This document, the Schedule(s) and Insurance Schedule(s) executed by Lessor and Lessee constitute the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No term or provision of this Lease may be changed, waived, amended or terminated except by a written agreement signed by both Lessor and Lessee, except that Lessor may insert on the appropriate Schedule the serial number of any Item of Equipment after delivery thereof. No express or implied waiver by Lessor of any Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default whether similar in kind or otherwise. 29. NOTICES. Except as otherwise provided in Paragraph 28 above, service of all notices under this Lease shall be sufficient if given personally or mailed to the party involved at its respective address set forth in the most recent Schedule relating hereto, or at such address as such party may otherwise provide in writing from time to time. Any such notice mailed to such address shall be effective three (3) business days from the date of deposit in the United States mail, duly addressed with first class postage prepaid. 30. GENDER; NUMBER. Whenever the context of this Lease requires, the neuter gender includes the masculine and the feminine, and the singular number includes the plural. Whenever the word Lessor is used herein, it shall include all assignees of Lessor. If there is more than one Lessee named in this Lease, the liability of each shall be joint and several. 31. TITLES. The titles to the paragraphs of this Lease are solely for the convenience of the parties, and are not an aid in the interpretation of the instrument. 32. SEVERABILITY OF PROVISIONS. If any provision of this Lease is held invalid or unenforceable, the remaining provisions will not be affected thereby, and to this end the provisions of this Lease are declared severable. 33. LESSEE RIGHT TO SUBLEASE. Lessor acknowledges and agrees that Lessee will sublease the Equipment to SMT Mobile V Corp., or to any other wholly owned subsidiary of Lessee upon prior written notice to Lessor, for the purpose of providing magnetic resonance imaging services under certain Magnetic Resonance Imaging Service Agreements. Lessee shall execute and assign to Lessor such documents between Lessee and Sublessee as Lessor may reasonably request to protect Lessor's rights under this Lease. Lessee acknowledges and agrees that in no event shall any such sublease relieve Lessee from its obligations under this Lease. 34. ADDITIONAL SECURITY. Lessee covenants and agrees that on or before the commencement date of the rental term for the Equipment as designated in the Schedule, Lessee will provide or cause to be provided to Lessor, in form and substance satisfactory to Lessor an assignment of any and all Magnetic Resonance Imaging Service Agreements, or similar agreements, now existing or hereinafter acquired, to be serviced by the Equipment leased hereunder, and a first security interest in any and all payments due thereunder. Lessee will promptly provide written notice to Lessor of any additions, deletions, amendments, or substitutions to any such agreements. Lessee also covenants and agrees to provide, or cause to be provided to Lessor, upon Lessor's request, a Letter of Credit inform and substance satisfactory to Lessor. WITNESS the due execution hereof with the intent to be legally bound. ATTEST/WITNESS: LESSEE: SMT HEALTH SERVICES INC. ADDRESS: 10521 Perry Highway Wexford, PA 15090 By By David A. Zynn ------------------------ --------------------------------- Title Title CFO / Treasurer --------------------- ------------------------------ Accepted at Pittsburgh, Pennsylvania by: LAUREL CAPITAL CORPORATION By -------------------------------------- Title ----------------------------------- LAUREL CAPITAL CORPORATION 3810 McKnight East Drive Pittsburgh, PA 15237 GUARANTY September 12, 1996 Dear Sirs: For value received, Undersigned jointly and severally unconditionally guarantee to you and become surety to you for the full and prompt performance by SMT Health Services Inc.; 10521 Perry Highway; Wexford, PA 15090; herein called "Obligor", of all obligations which Obligor presently or hereafter may have to you, and payment when due of all sums presently or hereafter owing by Obligor to you, and agree to indemnify you against any losses you may sustain and expenses you may incur in the enforcement of this agreement. For the purposes of this guaranty and indemnity, all sums owing to you by Obligor shall be deemed to have become immediately due and payable if (a) Obligor defaults in any of its obligations to you; (b) a petition under any provisions of the Bankruptcy Code, as amended, or for the appointment of a receiver of any part of the property of Obligor be filed against Obligor, and be not dismissed within thirty days; (c) such a petition is filed by Obligor; (d) Obligor make a general assignment for the benefit of creditors, suspends business or commits any act amounting to a business failure, or (e) an attachment be levied or tax lien be filed against any of Obligor's property. This shall be a continuing guaranty and indemnity and, irrespective of the lack of any notice to or consent of the Undersigned, their obligations hereunder shall not be impaired in any manner whatsoever by any (a) new agreements or obligations of Obligor with you; amendments, extensions, modifications, renewals or waivers of default as to any existing or future agreements or obligations of Obligor or third parties with or to you, or extensions of credit by you to Obligor; (b) adjustments, compromises or releases of any obligations of Obligor, Undersigned or other parties, or exchanges, releases or sales of any security of Obligor, Undersigned or other parties; (c) fictitiousness, incorrectness, invalidity or unenforceability, for any reason, of any instrument or writing, or acts of commission or omission by you or Obligor; (d) compositions, extensions, moratoria or other relief granted to Obligor pursuant to any statute presently in force or hereafter enacted, or (e) interruptions in the business relations between you and Obligor. Notice of your acceptance hereof, of default and non-payment by Obligor or any other parties, of presentment, protest and demand, and of all other matters of which Undersigned otherwise might be entitled, is waived. The obligations hereunder of Undersigned are both joint and several, and shall be binding upon their respective heirs and personal representatives. The failure of any person to sign this guaranty and indemnity shall not affect the liability hereunder of any signer thereof. The death or release from liability hereunder of any of Undersigned shall not relieve the others from liability hereunder. Each of Undersigned may terminate his obligations hereunder as to then future transactions between you and Obligor by registered mail notice to you at your above-stated address, provided, however, that such termination shall not affect either his liability hereunder with respect to any obligations of Obligor to you incurred prior to your receipt of such notice, or the continuing liability of such of the others of Undersigned as have not given such notice. This guaranty and indemnity is assignable, shall be construed liberally in your favor and shall inure to the benefit of your successors and assigns. If Obligor should default in the performance of any of Obligor's obligations to you, and if any third party makes any payment to you with respect thereto, such third party shall, to the extent thereof, be subrogated to all of your rights against Undersigned hereunder. Legal rights and obligations hereunder shall be determined in accordance with the laws of the Commonwealth of Pennsylvania. UNDERSIGNED HEREBY EMPOWER THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR THEM AND, WITH OR WITHOUT ONE OR MORE DECLARATIONS FILED, ENTER A JUDGMENT OR JUDGMENTS AGAINST THEM OR ANY OF THEM IN FAVOR OF YOU, AS OF ANY TERM, FOR THE SUM THEN DUE AND PAYABLE UNDER THIS AGREEMENT OF GUARANTY, WITH COSTS OF SUIT AND ATTORNEY'S COMMISSION OF 15% FOR COLLECTION; WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION, AND INQUISITION AND EXTENSION UPON ANY LEVY IS HEREBY WAIVED AND CONDEMNATION AGREED TO, AND THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION HEREON IS ALSO HEREBY EXPRESSLY WAIVED AND NO BENEFIT OF EXEMPTION SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION LAW NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED. This Guaranty has been executed and delivered in the Commonwealth of Pennsylvania. The laws and decisions of said Commonwealth will govern and control the construction, enforceability, validity and interpretation of this Guaranty, and of all agreements, instruments and documents, heretofore, now or hereafter executed by Undersigned and delivered to Lessor pertaining or relating to this Guaranty or the transactions contemplated herein. The parties agree that any action or proceeding arising out of or relating to this Guaranty may be commenced in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the United States District Court for the Western District of Pennsylvania and Undersigned agrees that, in addition to any other manner of service prescribed by law or rule of court, a summons and complaint commencing an action or proceeding in either such Court shall be properly served upon Undersigned and shall confer personal jurisdiction if served personally or by United States registered mail, return receipt requested, to the Undersigned at the address indicated below. Very truly yours, CORPORATE GUARANTORS: SMT MOBILE V CORP. Attest: By By ----------------------------- --------------------------------------- Title Title Address: 10521 Perry Highway ------------------- Wexford PA 15090 ------------------- (Corporate Seal) CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT - --------------------------------------------- This Conditional Assignment and Security Agreement ("Agreement") dated September 12, 1996 is entered into between SMT Health Services Inc. ("Assignor"/"Lessee"/"Sublessor"), SMT Mobile V Corp. ("Sublessee") and Laurel Capital Corporation ("Assignee/Lessor"). This Agreement is entered into with reference to the following mutually agreed to facts: 1. WHEREAS, Assignor and Assignee have entered into that certain Master Equipment Lease ("Lease") dated September 12, 1996 providing for the lease of the personal property described in the Lease ("Equipment"); 2. WHEREAS, Assignor desires to sublease the Equipment pursuant to the terms of a sublease dated September 12, 1996 entered into between Assignor and Sublessee ("Sublease"). NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the above parties, hereby agree to the following terms and conditions: 1. Consent to Sublease. Assignee hereby consents to Assignor's Sublease of -------------------- the Equipment to Sublessee under the terms and conditions as provided herein. 2. Conditional Assignment. Assignor hereby conditionally assigns and grants ----------------------- to Assignee a security interest in and all of its rights flowing from and under the Lease and Sublease including without limitation the Equipment; provided, -------- however, Assignee does not hereby assume duties, liabilities or obligations of - ------- Assignor under the Sublease. 3. Conditional Nature of Assignment. Assignee hereby acknowledges and agrees --------------------------------- that so long as there exists no default of any of the terms of the Lease and/or Sublease, Assignor shall have the right to enjoy all of the rights, benefits and privileges arising under the Sublease. 4. Default. Upon or at any time after the occurrence of a breach under any -------- of the terms, provisions or conditions as defined in the Lease and/or Sublease, Assignee may, at its election, exercise any and all rights under the Lease and/or Sublease, in addition to all of its rights under the Lease and/or Sublease, in addition to all of its rights and remedies as a Secured party under the Uniform Commercial Code. 5. Term. This Agreement shall remain in full force and effect so long as any ----- of the obligations, liabilities and debtness of Assignor to Assignee, whether arising under the Lease or otherwise, remain outstanding. 6. Assignment. Assignee shall have the right to assign all of its rights ----------- under this Agreement. Assignor and Sublessee shall not have any right to assign this Agreement without the prior written consent of Assignee. 7. Amendment of Sublease. The Sublease shall not be changed, altered or ----------------------- modified in any manner, except by the prior written consent of Assignee. 8. Subordination. Sublessee acknowledges that the Sublease is in all -------------- respects subject and subordinate to the Lease, including without limitation, the rights of Assignee to repossess the equipment and void the Sublease in the event of a default by Assignor under the Lease. 9. Amendment. This Agreement shall not be released, discharged, changed or ----------- modified in any manner, except by the prior written consent of Assignee. 10. Waiver. No waiver of any right hereunder shall be deemed a waiver or ------- forfeiture of such right as to future matters. 11. California Law. This Agreement shall be governed by and construed in --------------- accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. LAUREL CAPITAL CORPORATION SMT HEALTH SERVICES INC. "Assignee/Lessor" "Assignor/Lessee/Sublessor" By: By: -------------------------- ---------------------------- Title: Title: ----------------------- -------------------------- - ------------------------------ -------------------------------- (Print Name) (Print Name) SMT MOBILE V CORP. "Sublessee" By: ---------------------------- Title: ------------------------- -------------------------------- (Print Name)
SCHEDULE OF LEASED EQUIPMENT LAUREL CAPITAL CORPORATION 810 MCKNIGHT EAST DRIVE LESSOR PITTSBURGH, PA 15237
SCHEDULE NO. 2179-1 ------ - ------------------------------------------------------------------------------- LESSEE (COMPLETE NAME AND ADDRESS) SUPPLIER (COMPLETE NAME AND ADDRESS) SMT Health Services Inc. 1) GE Medical Systems; P.O. Box 414 10521 Perry Highway Milwaukee, WI 53201 Wexford, PA 15090 2) Ellis Watts P.O. Box 44010 Cincinnati, OH 45244 - ------------------------------------------------------------------------------- 1. This schedule of leased equipment ("Schedule") is hereby made a part of the lease between the undersigned Lessor and the undersigned Lessee dated September 12, 1996. All terms and conditions of said lease are incorporated ------------------ herein by reference. 2. The equipment subject to the to the lease is: - ------------------------------------------------------------------------------- QUANTITY DESCRIPTION AND SERIAL NUMBER PRICE - ------------------------------------------------------------------------------- See Attached Schedule of Equipment, Exhibit "A" Include all taxes levied at the time of sale, or include in block 4.E. below, whichever is appropriate in jurisdiction where equipment is located. - ------------------------------------------------------------------------------- THE TOTAL EQUIPMENT COST INCLUDING TAXES LEVIED AT THE TIME OF SALE IS: $1,600,000 - ------------- - ------------------------------------------------------------------------------- 3. Equipment shall be located at See Attached Schedule of Location of Equipment. ---------------------------------------------- Exhibit "B" and shall not be removed therefrom without Lessor's prior written ----------- consent. 4. The original term of the lease as to the equipment described in this Schedule is 5 years commencing on September 15, 1996 and terminating on --- ------------------ September 15, 2001 unless sooner terminated under the terms of the lease. As ------------------ rent for the equipment, Lessee shall pay total rent of $2,027,926.80 as ------------- follows:
- ---------------------------------------------------------------------------------------------------------------------------- A B C D E F G Security Number and Date these Amt. of Tax on Total payment Date these Deposit type payments payment payment (D+E) payments (If any) of payments commence (if any) terminate ---------------------------------------------------------------------------------------------------------------------------- Monthly 60 9/15/96 33,798.79 0.00 33,798.79 7/15/2001 -------- ------------- -------------- -------------- ----------------- --------------- Quarterly -------- ------------- -------------- -------------- ----------------- --------------- Annually -------- ------------- -------------- -------------- ----------------- --------------- - ----------------------------------------------------------------------------------------------------------------------------
5. Lessee may, pursuant to Section 22 Purchase Option of the Lease Agreement, purchase all but not less than all of the Items of Equipment listed hereon for $1.00 at the end of the rental term. 6. By executing and delivering to Lessor, the Lessee Acceptance form attached hereto, Lessee warrants, covenants and agrees that (a) Lessee has received all Equipment described in this Schedule at the location described in 3 hereof; (b) Lessee has duly inspected and accepts such Equipment without reservations; (c) Lessee is unconditionally bound to pay to Lessor the Total Rent and other payments due under the Lease, whether or not any Equipment described herein may now be or hereafter become unsatisfactory in any respect; and (d) Notwithstanding anything contained herein, Lessor and Lessee shall continue to have all rights which either of them might otherwise have with respect to Equipment described herein against any manufacturer or seller of said Equipment or any part thereof. - -------------------------------------------------------------------------------- ADDITIONAL REMARKS: Lessee paid the first and last monthly rental payments in advance. - -------------------------------------------------------------------------------- SIGNATURES - IN INK - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Date , 19 Date , 19 ------------------------ --- ------------------------ --- Lessee: (Full legal name) Lessor: LAUREL CAPITAL CORPORATION SMT HEALTH SERVICES INC. By By ---------------------------------- ----------------------------------- - -------------------------------------------------------------------------------- EX-10.08 9 FINANCE LEASE 2165 WITH LAUREL CAPITAL CORP. Exhibit 10.08 LAUREL CAPITAL CORPORATION FINANCE LEASE 3810 McKnight East Drive Pittsburgh, PA 15237 [412] 366-6440 Finance Lease No. 2165 This Lease, made this 26st day of July 1996 by and between LAUREL CAPITAL CORPORATION ("Lessor") and SMT HEALTH SERVICES INC. ("Lessee"). 1. LEASE AGREEMENT. Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor, all the machinery, equipment and other personal property (individually "Item of Equipment" and collectively "Equipment") described in Equipment Lease Schedules which are or may from time to time hereafter be executed by Lessor and Lessee and attached hereto or incorporated herein by reference ("Schedules") upon the terms and conditions set forth in this Lease, as supplemented, as regards each Item of Equipment, by the terms and conditions set forth in the Schedule identifying that Item of Equipment. Whenever reference is made herein to "this Lease", it shall be deemed to include each of the several Schedules and the Insurance Schedule(s) referred to herein all of which constitute one undivided lease of the Equipment. 2. TERM. (a) The obligations under this Lease commence upon the written acceptance hereof by Lessor and shall end upon full performance and observance of each and every term, condition and covenant set forth in this Lease and any extensions hereof. The rental term for Equipment listed in each Schedule shall commence on the date indicated on such Schedule and shall terminate on the last day of the term stated in such Schedule. (b) In the event Lessor shall make payments on the Equipment prior to the commencement date of the rental term as indicated on the Schedule, Lessee shall pay interim rental payments from the date of such payments by Lessor to the commencement date of the rental term. The interim rental payments shall be based on the daily equivalent of two (2.00%) percent over the prime interest rate (fully floating) as announced from time to time by PNC Bank, National Association. Interim rental payments are due monthly. 3. RENT. The rent, including interim rental payments, for the Items of Equipment described in each Schedule shall be the amount stated in such Schedule. Rent is an absolute obligation of Lessee due upon the inception of each rental or interim rental term and payable as specified in each particular Schedule irrespective of any claims, demands, set-offs, actions, suits or proceedings that Lessee may have or assert against Lessor or any supplier of Equipment. Rent and interim rent shall be payable to Lessor at its office, 3810 McKnight East Drive, Pittsburgh, Pennsylvania 15237, or at such other place as Lessor or its assigns may designate in writing to Lessee from time to time. 4. DELINQUENT RENT PENALTY. If Lessee shall fail to pay any rent, interim rent installment or other amount due hereunder within ten (10) days after the due date and until all sums due hereunder have been declared due and payable in accordance with Paragraph 24, Lessee shall pay to Lessor a late charge of five (5%) percent of such amount due for each month or part thereof for which said rent or other sums shall be delinquent. After all sums are declared due and payable in accordance with Paragraph 24, Lessee shall pay interest at the rate of fifteen (15%) percent per annum or the maximum contract rate permitted by law, whichever is less, on such accelerated sums from the date of acceleration until paid, and whether or not judgment hereon has been entered. 5. DELIVERY AND INSTALLATION. Lessee will select the type, quantity and supplier of each Item of Equipment and in reliance thereon such Equipment will then be ordered by Lessor from such supplier or Lessor may at its option elect to accept an assignment of any existing purchase order. Lessor shall not be liable for loss or damage occasioned by any cause, circumstance or event of whatsoever nature, including, but not limited to, failure of or delay in delivery, delivery to wrong location, delivery of improper equipment or property other than the Equipment, damage to the Equipment, governmental regulations, strikes, embargoes or other causes, circumstances or events whether of a like or unlike nature. Lessee, at its expense, will pay all transportation, packing, installation, testing and other charges in connection with the delivery, installation and use of each Item of Equipment. In the event that the cost of any Item of Equipment differs from the price set forth in the purchase order therefor, the monthly rental shall be changed accordingly to fully reflect any such difference. In the event that Lessee fails or refuses to accept delivery of the Equipment within ninety (90) days following the execution of the Lease (unless such period is extended by an agreement between Lessor and Lessee in writing), Lessor may terminate the Lease and Lessee will remit to the Lessor an amount equal to the down payment and installments previously paid by the Lessor to the vendor or supplier of the Equipment, together with interest accrued thereon at the highest contractual rate enforceable against Lessee under applicable law but never at a rate higher than fifteen (15%) percent per annum. Lessor shall assign to Lessee without recourse all of Lessor's interest in and to the Equipment under the vendor purchase agreements. 6. WARRANTY OF LESSEE'S QUIET POSSESSION. Lessor warrants and covenants that so long as Lessee faithfully performs this Lease, Lessee, subject to the disclaimer of warranties set forth immediately below, shall be entitled to quietly possess and use the Equipment without interference. 7. DISCLAIMER OF WARRANTIES. EXCEPT FOR THE WARRANTIES SET FORTH ABOVE, LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER'S AGENT, MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO THE EQUIPMENT. THIS DISCLAIMER OF WARRANTIES INCLUDES BUT IS NOT LIMITED TO ANY WARRANTY REGARDING: THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE; THE DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP OF THE EQUIPMENT; COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT; OR LATENT DEFECTS; it being agreed that all such risks, as between Lessor and Lessee, are to be borne by the Lessee. Lessor is not responsible or liable for any direct, indirect, incidental or consequential damage to, or loss resulting from, the installation, operation or use of any Item of Equipment or any product manufactured thereby. 8. NATURE OF EQUIPMENT. Not withstanding anything to the contrary contained in this Agreement, including the characterization of this Agreement as a lease, the parties hereto acknowledge and agree that, legal title to each Item of Equipment leased hereunder shall be with the Lessee. Each Item of Equipment shall remain personal property, notwithstanding the manner in which it may be affixed to any real property. Lessee will otherwise take all action required to keep the Equipment free and clear of all levies, liens and encumbrances which result from any act or omission of the Lessee. Lessor assumes no liability and makes no representation as to the treatment by Lessee of this Lease, the Equipment, or to the rental payments for financial statement or tax purposes. 9. LOCATION OF EQUIPMENT. Each Item of Equipment shall be placed into service at the location specified in Exhibit B, Location of Equipment attached to the Schedule. Lessee shall promptly provide written notice to Lessor of any and all location changes. 10. LESSOR'S RIGHT OF INSPECTION. Lessor and its agents shall have the right during business hours to enter upon the premises where any Item of Equipment is located (to the extent Lessee can permit) for the purpose of inspection. 11. USE OF EQUIPMENT. Lessee must use the Equipment in a careful and proper manner in conformity with (i) all statutes and regulations of each governmental authority having jurisdiction over the Lessee and/or the Equipment and its use, and (ii) all policies of insurance relating to the Equipment and/or its use. In addition, Lessee shall not (i) use any Item of Equipment in any manner that would impair the applicability of manufacturer's warranties or render any Item of Equipment unfit for its originally intended use; nor (ii) permit anyone other than authorized and competent personnel to operate any Item of Equipment. 12. ALTERATIONS. Without the prior written consent of Lessor, which consent shall not be unreasonably withheld, Lessee shall not make any alterations, modifications or attachments to the Equipment. All alterations, modifications and attachments of whatsoever kind or nature made to any Item of Equipment must be removed without damaging the functional capabilities or economic value of the affected Item of Equipment upon the termination of the Lease. Under no circumstances shall any such alteration, modification or attachment be encumbered by Lessee. 13. MAINTENANCE AND REPAIRS. Lessee shall at its own expense and without authority to bind Lessor maintain each Item of Equipment in good mechanical condition and running order, normal wear and tear excepted. Immediately upon installation, Lessee shall provide to Lessor a perfected first lien security interest in any and all replacement parts. 14. RISK OF LOSS, DAMAGE AND THEFT. (a) All risk of loss, damage, theft or destruction, partial or complete, to any Item of Equipment incurred or occasioned by any cause, circumstance or event of whatever nature will be borne by Lessee from and after delivery of each Item of Equipment to a carrier FOB point of origin. Lessee shall promptly notify Lessor of any theft of or loss or damage to the Equipment. (b) Neither total nor partial loss of use or possession of any Item of Equipment shall abate the rent. (c) An Item of Equipment shall be deemed subjected to total loss when (i) it has disappeared regardless of the reason for disappearance or (ii) when it has sustained physical damage and the estimated cost of repair exceeds 75% of the fair market value (as determined by an independent appraiser chosen by Lessor) on the date of damage. Lessee's duty to pay rent for any Item of Equipment subjected to total loss shall be discharged by paying to Lessor the sum of the then unpaid principal plus accrued interest plus the purchase option at the price specified on the Schedule plus any applicable prepayment penalty plus all costs associated with releasing the Lessor's security interest plus any other sums then due and payable under the Lease. The amount of applicable insurance proceeds, if any, actually received by Lessor shall be subtracted from the amount for which Lessee is liable under this Paragraph 14. (d) Lessee shall cause any Equipment subjected to partial loss to be restored to original capability. Lessor shall, upon receiving satisfactory evidence of restoration, promptly pay to Lessee the proceeds of any insurance or compensation received by Lessor, by reason of such partial loss, provided however, that Lessor shall release such proceeds, to the extent such proceeds have been received by Lessor, in advance of restoration to the extent necessary to purchase materials or make progress payments upon the submission of appropriated work orders, invoices, estimates, or other satisfactory documentation. (e) Lessor shall not be obligated to undertake the collection of any claim against any person for either total or partial loss of any Item of Equipment. After Lessee discharges its obligations to Lessor under either 14(c) or 14(d) above, Lessee may, for Lessee's own account, proceed to recover from third parties and shall be entitled to retain any amount recovered. Lessor shall supply Lessee with any necessary assignment of claim. 15. INDEMNIFICATION. (a) Non-tax Liability. Lessee assumes liability for, and hereby agrees to ------------------ indemnify, protect and hold harmless, Lessor, its agents, servants, employees, officers, successors and assigns from and against, any and all liabilities, obligations, losses, damages, injuries, claims, demands, penalties, actions, costs and expenses, including reasonable attorney's fees, of whatsoever kind and nature, arising out of (i) the manufacture, installation, use, condition (including, but not limited to, latent and other defects and whether or not discoverable by Lessee or Lessor), operation, ownership, selection, delivery, leasing, removal or return of any Item of Equipment, regardless of where, how and by whom operated, or (ii) any failure on the part of Lessee to perform or comply with any covenantor condition of this lease. (b) Direct Tax Costs. In addition to all other rents payable hereunder, the ----------------- Lessee agrees to indemnify, protect and hold harmless Lessor, its agents, servants, employees, officers, successors and assigns from and against any and all taxes, license fees, assessments and other governmental charges, fees, fines or penalties of whatsoever kind or character and by whomsoever payable, which are levied, assessed, imposed or incurred during the lease term, (i) on or relating to each Item of Equipment, including any tax on the sale, ownership, use, leasing, shipment, transportation, delivery or operation thereof, (ii) on the exercise of any option, election or performance of an obligation by the Lessee hereunder, (iii) of the kind generally referred to in items (i) and (ii) above which may remain unpaid as of the date of delivery of any Item of Equipment to the Lessee irrespective of when the same may have been levied, assessed, imposed or incurred, and (iv) by reason of all gross receipts, business and occupation, and like taxes on or measured by rents payable hereunder levied by any state or local taxing authority having jurisdiction where any Item of Equipment is located. The Lessee agrees to comply with all state and local laws requiring the filing of ad valorem tax returns relating to each Item of Equipment. Any statements for such taxes received by the Lessor shall be promptly forwarded to the Lessee. This subparagraph shall not be deemed to obligate the Lessee to pay (i) any taxes, fees, assessments and charges which may have been included in the Lessor's cost of each Item of Equipment as set forth in Schedule(s) hereto, or (ii) any income or like taxes against the Lessor on or measured by the net income from the rents payable hereunder. The Lessee shall not be obligated to pay any amount under this subparagraph so long as it shall, at its expense and in good faith and by appropriate proceedings, contest the validity or the amount thereof unless such contest would adversely affect the title of the Lessee, or any security interest of Lessor, to an Item of Equipment or would subject any Item of Equipment to forfeiture or sale. The Lessee agrees to indemnify the Lessor against any loss, claim, demand and expense including legal expense resulting from such nonpayment or contest. (c) Indemnity Payment. The amount payable pursuant to subparagraphs 15(a) ------------------ and 15(b) shall be payable upon demand of the Lessor accompanied by a statement describing in reasonable detail such loss, liability, injury, claim, expense or tax and setting forth the computation of the amount so payable. (d) Survival. The indemnities and assumptions of liabilities and obligations --------- provided for in this Paragraph 15 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease. 16. LESSEE'S ASSIGNMENT. Without the prior written consent of the Lessor, Lessee shall not bail, hypothecate, transfer or dispose of any Item of Equipment or any interest in this Lease nor impair the Lessor's title to the Equipment. Lessee shall not assign this Lease, nor shall this Lease or any rights under this Lease or in any Item of Equipment inure to the benefit of any trustee in bankruptcy, receiver, creditor, or other successor of Lessee whether by operation of law or otherwise, without prior written consent of the Lessor. 17. LESSOR'S ASSIGNMENT. All rights of Lessor hereunder and in any Item of Equipment may be assigned, pledged, mortgaged, transferred, or otherwise disposed of, either in whole or in part, without notice to Lessee. No such assignee shall be obligated to perform any duty, covenant, or condition required to be performed by Lessor under the terms of this Lease. Such assignee shall have all rights, powers and remedies given to Lessor by this Lease, and upon notice to Lessee, shall be named as loss payee or co-insured under all policies of insurance maintained pursuant to Paragraph 18 hereof. If Lessor assigns this Lease or the monies due or to become due hereunder or any other interest herein, Lessee agrees not to assert against Lessor's assignee any defense, set-off, recoupment, claim or counterclaim which Lessee may have against Lessor, whether arising under this Lease or any other transaction between Lessor and Lessee. Subject to Paragraph 16 hereof and this Paragraph 17, this Lease inures to the benefit of, and is binding upon, the heirs, legatees, personal representatives, successors and assigns of the parties hereto. 18. INSURANCE. Lessee will at its own expense insure each Item of Equipment in compliance with the terms and conditions of the Insurance Schedule(s) attached hereto or incorporated herein by reference inform satisfactory to Lessor with insurance carriers approved by Lessor and in an amount not less than one hundred five (105%) percent of the unpaid principal balance due hereunder. The proceeds of any insurance policy due by reason of theft or loss of or damage to any Item of Equipment shall be applied as provided in Paragraph 14 hereof. In addition to the compliance with the terms and conditions of the Insurance Schedule(s) and the other terms and conditions of this Paragraph 18, the Lessee shall comply with the following conditions: (a) Lessee, prior to the inception of any rental term, shall deliver to Lessor all required policies of insurance or in the alternative certificates of insurance (in triplicate); (b) Lessee shall cause each insurer to agree by endorsement on the policies or certificates of insurance or by an independent instrument furnished Lessor that each such insurer will give at least thirty (30) days written notice to Lessor before any such policy or policies of insurance will be altered or cancelled for any reason, including without limitation, failure of the Lessee to pay premiums; (c) All coverage required by the Insurance Schedule(s) must be in effect when Lessor takes delivery or causes delivery to be made FOB point of origin; (d) All insurance policies must indicate that the Lessor is an additional insured for all aspects of liability insurance coverage and is loss payee for all aspects of insurance coverage relating to the theft or loss of or damage to Equipment and the proceeds of any public liability or property damage insurance shall be applied first to the extent of the Lessor's liability; (e) Lessee will furnish renewal policies or renewal certificates of insurance (in triplicate) listing Lessor as an additional insured and/or loss payee, as required by this Lease, no later than thirty (30) days prior to the expiration of any insurance coverage required hereby. 19. ADDITIONAL DOCUMENTS. If Lessor shall so request, Lessee shall execute and deliver to Lessor such documents, including without limitation, UCC Financing and Continuation Statements, as Lessor shall deem necessary or desirable for purposes of continuing this Lease or recording or filing to protect the interest of Lessor in each Item of Equipment. Any such filing or recording shall not be deemed evidence of any intent to create a security interest. 20. FURNISHING FINANCIAL INFORMATION. During the term of this Lease and any extensions or renewals hereof, Lessee will furnish to Lessor: (a) Within forty five (45) days after the end of each of the first three quarterly periods of Lessee's fiscal year, a balance sheet and statement of income of Lessee as at the close of such quarterly period from the beginning of the fiscal year to the date of such statement, prepared in accordance with generally accepted accounting principles, consistently applied, and in such reasonable detail as Lessor may request, certified as true, complete and correct by an authorized officer of the Lessee. (b) As soon as practicable, but in any event within ninety (90) days after the end of each fiscal year, a copy of its annual audit prepared by a certified public accountant selected by Lessee and satisfactory to Lessor. (c) In a timely manner such financial statements, reports and other information as the Lessee shall send from time to time to its stockholders and/or file with the Securities and Exchange Commission and/or other materials which Lessor shall reasonably request. 21. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR. If Lessee fails to promptly perform any of its obligations under this Lease, Lessor may perform the same for the account of Lessee without waiving Lessee's failure as a default. All sums paid or expense or liability incurred by Lessor in such performance (including reasonable legal fees) together with interest thereon at the highest contractual rate enforceable against Lessee, but never at a higher rate than 15% per annum simple, shall be payable by the Lessee upon demand as additional rent. 22. PURCHASE OPTION. Provided Lessee is not in default hereunder, Lessee may purchase all, but not less than all, of the Items of Equipment listed on each individual Schedule at the price specified in such Schedule at the end of the rental term. The purchase of the Items of Equipment shall occur AS IS, WHERE IS, WITHOUT ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER except that Lessor shall deliver title to the Items of Equipment free of any lien or encumbrance created by any act of the Lessor. In the event the Lessee fails to exercise its purchase option, Lessee will return those Items of Equipment not purchased, freight and insurance prepaid, to Lessor (or Lessor's nominee) at a location designated by Lessor. If Lessee fails to exercise its purchase option and fails to return any Item of Equipment, then at Lessor's option this Lease may be extended on a month-to-month basis, with rent payable on the first of each month, at the rate applicable during the lease term just ended. 23. EVENTS OF DEFAULT. Any of the following events or conditions shall constitute an Event of Default hereunder and entitle the Lessor, at its option, to avail itself of the remedies more fully set forth in Paragraph 24 hereof: (a) Non-payment by Lessee of any rent or other amount provided for in this Lease when the same becomes due whether by acceleration or otherwise; (b) Failure of the Lessee to perform any of the non-monetary obligations, terms or conditions of this Lease within thirty (30) of receipt of written notification thereof from Lessor; (c) The Lessee shall commence a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or the taking possession by any official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of its creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (d) If an involuntary case or other proceeding should be commenced against Lessee seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of thirty (30) days; (e) The occurrence of any event described in this Paragraph 23(c) through (d) hereof with respect to any guarantor or any other party liable for payment or performance of this Lease; (f) Any certificate, statement, representation, warranty or financial statement heretofore or hereafter furnished pursuant to or in connection with this Lease by or on behalf of Lessee or any guarantor or other party liable for payment or performance of this Lease is false in any material respect at the time as of which the facts therein set forth were stated or certified, or omits any substantial contingent or unliquidated liability or claim against Lessee or any such guarantor or other party, or, upon the date of execution of this document or any Schedule, there shall have been any materially adverse change in any of the facts disclosed by any such certificate, statement, representation or warranty, which shall not have been disclosed in writing to Lessor at or prior to the time of the execution of this document or such Schedule. 24. REMEDIES. Upon the happening of any Event of Default hereunder, the rights and duties of the parties shall be as set forth in this Paragraph 24. (a) Upon Lessor's demand, the Equipment shall be promptly delivered to Lessor, at that place or those places designated by Lessor. If Lessee does not so deliver the Equipment, Lessee shall make the Equipment available for retaking and authorizes Lessor, its employees and agents to enter the premises of the Lessee and any other premises (insofar as Lessee can permit) for the purpose of retaking. In the event of retaking, Lessee expressly waives all rights to possession and all claims for injuries suffered through or loss caused by retaking. Any repossession accomplished under this Paragraph 24(a) shall not release Lessee from liability for damages of Lessor sustained by reason of Lessee's default hereunder. (b) Lessor may revoke Lessee's privilege of paying rent in installments and, upon Lessor's demand, the Lessee shall promptly pay to Lessor the portion of the rent then remaining unpaid plus all other sums due and unpaid. (c) Lessor may sell or release the Equipment or any part thereof, at public auction or by private sale or lease at such time or times and upon such terms as Lessor may determine, free and clear of any rights of Lessee and, if notice thereof is required by law, any notice in writing of such sale or lease by Lessor to Lessee not less than ten (10) days prior to the date thereof shall constitute reasonable notice thereof to Lessee. All proceeds of the sale or releasing, or both (less (i) all expenses incurred in retaking the Equipment, making necessary repairs to the Equipment and enforcing this Lease, (ii) all damages that Lessor shall have sustained by reason of Lessee's default, and (iii) reasonable attorney's fees) shall be credited against Lessee's liability hereunder as and when received by Lessor. Sums in excess of Lessee's liability shall belong to Lessee. The Lessee shall be liable for any deficiency. (d) The provisions of this Paragraph 24 shall not prejudice Lessor's right to recover or prove damages for unpaid rent accrued prior to default, or bar an action for a deficiency as herein provided, and the bringing of an action with an entry of judgment against Lessee shall not bar the Lessor's right to repossess any or all Items of Equipment. (e) Lessor's remedies shall be available to Lessor's successors and assigns, shall be in addition to all other remedies provided bylaw, and may be exercised concurrently or consecutively. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OF THE EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE HEREBY WAIVES ANY RIGHT TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED BY THE LESSOR OR THE LESSEE IN CONNECTION WITH THIS LEASE. 25. GOVERNING LAW AND CONSENT OF JURISDICTION. This Lease has been executed and delivered in the Commonwealth of Pennsylvania. The laws and decisions of said Commonwealth will govern and control the construction, enforceability, validity and interpretation of this Lease, and of all agreements, instruments and documents, heretofore, now or hereafter executed by Lessee and delivered to Lessor pertaining or relating to this Lease or the transactions contemplated herein. The parties agree that any action or proceeding arising out of or relating to this Lease may be commenced in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the United States District Court for the Western District of Pennsylvania and Lessee agrees that, in addition to any other manner of service prescribed bylaw or rule of court, a summons and complaint commencing an action or proceeding in either such Court shall be properly served upon Lessee and shall confer personal jurisdiction if served personally or by United States registered mail, return receipt requested, to the Lessee at the address indicated below. 26. JUDGMENT BY CONFESSION. LESSEE HEREBY EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR LESSEE AND, WITH OR WITHOUT ONE OR MORE DECLARATIONS FILED, ENTER A JUDGMENT OR JUDGMENTS AGAINST LESSEE IN FAVOR OF LESSOR, AS OF ANY TERM, FOR THE SUM THEN DUE AND PAYABLE UNDER THIS LEASE, WITH COSTS OF SUIT AND ATTORNEY'S COMMISSION OF 15% FOR COLLECTION; WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION, AND INQUISITION AND EXTENSION UPON ANY LEVY IS HEREBY WAIVED AND CONDEMNATION AGREED TO, AND THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION HEREON IS ALSO HEREBY EXPRESSLY WAIVED AND NO BENEFIT OF EXEMPTION SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION LAW NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED. 27. CONFLICT OF PROVISIONS. In the event of any conflict of provisions between any Schedule and any other document, the provisions of the Schedule shall control. 28. AMENDMENTS AND WAIVERS. This document, the Schedule(s) and Insurance Schedule(s) executed by Lessor and Lessee constitute the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No term or provision of this Lease may be changed, waived, amended or terminated except by a written agreement signed by both Lessor and Lessee, except that Lessor may insert on the appropriate Schedule the serial number of any Item of Equipment after delivery thereof. No express or implied waiver by Lessor of any Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default whether similar in kind or otherwise. 29. NOTICES. Except as otherwise provided in Paragraph 28 above, service of all notices under this Lease shall be sufficient if given personally or mailed to the party involved at its respective address set forth in the most recent Schedule relating hereto, or at such address as such party may otherwise provide in writing from time to time. Any such notice mailed to such address shall be effective three (3) business days from the date of deposit in the United States mail, duly addressed with first class postage prepaid. 30. GENDER; NUMBER. Whenever the context of this Lease requires, the neuter gender includes the masculine and the feminine, and the singular number includes the plural. Whenever the word Lessor is used herein, it shall include all assignees of Lessor. If there is more than one Lessee named in this Lease, the liability of each shall be joint and several. 31. TITLES. The titles to the paragraphs of this Lease are solely for the convenience of the parties, and are not an aid in the interpretation of the instrument. 32. SEVERABILITY OF PROVISIONS. If any provision of this Lease is held invalid or unenforceable, the remaining provisions will not be affected thereby, and to this end the provisions of this Lease are declared severable. 33. LESSEE RIGHT TO SUBLEASE. Lessor acknowledges and agrees that Lessee will sublease the Equipment to SMT Mobile V Corp., or to any other wholly owned subsidiary of Lessee upon prior written notice to Lessor, for the purpose of providing magnetic resonance imaging services under certain Magnetic Resonance Imaging Service Agreements. Lessee shall execute and assign to Lessor such documents between Lessee and Sublessee as Lessor may reasonably request to protect Lessor's rights under this Lease. Lessee acknowledges and agrees that in no event shall any such sublease relieve Lessee from its obligations under this Lease. 34. ADDITIONAL SECURITY. Lessee covenants and agrees that on or before the commencement date of the rental term for the Equipment as designated in the Schedule, Lessee will provide or cause to be provided to Lessor, in form and substance satisfactory to Lessor an assignment of any and all Magnetic Resonance Imaging Service Agreements, or similar agreements, now existing or hereinafter acquired, to be serviced by the Equipment leased hereunder, and a first security interest in any and all payments due thereunder. Lessee will promptly provide written notice to Lessor of any additions, deletions, amendments, or substitutions to any such agreements. Lessee also covenants and agrees to provide, or cause to be provided to Lessor, upon Lessor's request, a Letter of Credit inform and substance satisfactory to Lessor. WITNESS the due execution hereof with the intent to be legally bound. ATTEST/WITNESS: LESSEE: SMT HEALTH SERVICES INC. ADDRESS: 10521 Perry Highway Wexford, PA 15090 By By David A. Zynn ------------------------ --------------------------------- Title Title CFO / Treasurer --------------------- ------------------------------ Accepted at Pittsburgh, Pennsylvania by: LAUREL CAPITAL CORPORATION By -------------------------------------- Title ----------------------------------- LAUREL CAPITAL CORPORATION 3810 McKnight East Drive Pittsburgh, PA 15237 GUARANTY July 26, 1996 Dear Sirs: For value received, Undersigned jointly and severally unconditionally guarantee to you and become surety to you for the full and prompt performance by SMT Health Services Inc.; 10521 Perry Highway; Wexford, PA 15090; herein called "Obligor", of all obligations which Obligor presently or hereafter may have to you, and payment when due of all sums presently or hereafter owing by Obligor to you, and agree to indemnify you against any losses you may sustain and expenses you may incur in the enforcement of this agreement. For the purposes of this guaranty and indemnity, all sums owing to you by Obligor shall be deemed to have become immediately due and payable if (a) Obligor defaults in any of its obligations to you; (b) a petition under any provisions of the Bankruptcy Code, as amended, or for the appointment of a receiver of any part of the property of Obligor be filed against Obligor, and be not dismissed within thirty days; (c) such a petition is filed by Obligor; (d) Obligor make a general assignment for the benefit of creditors, suspends business or commits any act amounting to a business failure, or (e) an attachment be levied or tax lien be filed against any of Obligor's property. This shall be a continuing guaranty and indemnity and, irrespective of the lack of any notice to or consent of the Undersigned, their obligations hereunder shall not be impaired in any manner whatsoever by any (a) new agreements or obligations of Obligor with you; amendments, extensions, modifications, renewals or waivers of default as to any existing or future agreements or obligations of Obligor or third parties with or to you, or extensions of credit by you to Obligor; (b) adjustments, compromises or releases of any obligations of Obligor, Undersigned or other parties, or exchanges, releases or sales of any security of Obligor, Undersigned or other parties; (c) fictitiousness, incorrectness, invalidity or unenforce-ability, for any reason, of any instrument or writing, or acts of commission or omission by you or Obligor; (d) compositions, extensions, moratoria or other relief granted to Obligor pursuant to any statute presently in force or hereafter enacted, or (e) interruptions in the business relations between you and Obligor. Notice of your acceptance hereof, of default and non-payment by Obligor or any other parties, of presentment, protest and demand, and of all other matters of which Undersigned otherwise might be entitled, is waived. The obligations hereunder of Undersigned are both joint and several, and shall be binding upon their respective heirs and personal representatives. The failure of any person to sign this guaranty and indemnity shall not affect the liability hereunder of any signer thereof. The death or release from liability hereunder of any of Undersigned shall not relieve the others from liability hereunder. Each of Undersigned may terminate his obligations hereunder as to then future transactions between you and Obligor by registered mail notice to you at your above-stated address, provided, however, that such termination shall not affect either his liability hereunder with respect to any obligations of Obligor to you incurred prior to your receipt of such notice, or the continuing liability of such of the others of Undersigned as have not given such notice. This guaranty and indemnity is assignable, shall be construed liberally in your favor and shall inure to the benefit of your successors and assigns. If Obligor should default in the performance of any of Obligor's obligations to you, and if any third party makes any payment to you with respect thereto, such third party shall, to the extent thereof, be subrogated to all of your rights against Undersigned hereunder. Legal rights and obligations hereunder shall be determined in accordance with the laws of the Commonwealth of Pennsylvania. UNDERSIGNED HEREBY EMPOWER THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR THEM AND, WITH OR WITHOUT ONE OR MORE DECLARATIONS FILED, ENTER A JUDGMENT OR JUDGMENTS AGAINST THEM OR ANY OF THEM IN FAVOR OF YOU, AS OF ANY TERM, FOR THE SUM THEN DUE AND PAYABLE UNDER THIS AGREEMENT OF GUARANTY, WITH COSTS OF SUIT AND ATTORNEY'S COMMISSION OF 15% FOR COLLECTION; WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION, AND INQUISITION AND EXTENSION UPON ANY LEVY IS HEREBY WAIVED AND CONDEMNATION AGREED TO, AND THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION HEREON IS ALSO HEREBY EXPRESSLY WAIVED AND NO BENEFIT OF EXEMPTION SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION LAW NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED. This Guaranty has been executed and delivered in the Commonwealth of Pennsylvania. The laws and decisions of said Commonwealth will govern and control the construction, enforceability, validity and interpretation of this Guaranty, and of all agreements, instruments and documents, heretofore, now or hereafter executed by Undersigned and delivered to Lessor pertaining or relating to this Guaranty or the transactions contemplated herein. The parties agree that any action or proceeding arising out of or relating to this Guaranty may be commenced in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the United States District Court for the Western District of Pennsylvania and Undersigned agrees that, in addition to any other manner of service prescribed by law or rule of court, a summons and complaint commencing an action or proceeding in either such Court shall be properly served upon Undersigned and shall confer personal jurisdiction if served personally or by United States registered mail, return receipt requested, to the Undersigned at the address indicated below. Very truly yours, CORPORATE GUARANTORS: SMT MOBILE V CORP. Attest: By By ----------------------------- --------------------------------------- Title Title Address: 10521 Perry Highway ------------------- Wexford PA 15090 ------------------- (Corporate Seal) CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT - --------------------------------------------- This Conditional Assignment and Security Agreement ("Agreement") dated July 26, 1996 is entered into between SMT Health Services Inc. ("Assignor"/"Lessee"/"Sublessor"), SMT Mobile V Corp. ("Sublessee") and Laurel Capital Corporation ("Assignee/Lessor"). This Agreement is entered into with reference to the following mutually agreed to facts: 1. WHEREAS, Assignor and Assignee have entered into that certain Master Equipment Lease ("Lease") dated July 26, 1996 providing for the lease of the personal property described in the Lease ("Equipment"); 2. WHEREAS, Assignor desires to sublease the Equipment pursuant to the terms of a sublease dated July 26, 1996 entered into between Assignor and Sublessee ("Sublease"). NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the above parties, hereby agree to the following terms and conditions: 1. Consent to Sublease. Assignee hereby consents to Assignor's Sublease of -------------------- the Equipment to Sublessee under the terms and conditions as provided herein. 2. Conditional Assignment. Assignor hereby conditionally assigns and grants ----------------------- to Assignee a security interest in and all of its rights flowing from and under the Lease and Sublease including without limitation the Equipment; provided, -------- however, Assignee does not hereby assume duties, liabilities or obligations of - ------- Assignor under the Sublease. 3. Conditional Nature of Assignment. Assignee hereby acknowledges and agrees --------------------------------- that so long as there exists no default of any of the terms of the Lease and/or Sublease, Assignor shall have the right to enjoy all of the rights, benefits and privileges arising under the Sublease. 4. Default. Upon or at any time after the occurrence of a breach under any -------- of the terms, provisions or conditions as defined in the Lease and/or Sublease, Assignee may, at its election, exercise any and all rights under the Lease and/or Sublease, in addition to all of its rights under the Lease and/or Sublease, in addition to all of its rights and remedies as a Secured party under the Uniform Commercial Code. 5. Term. This Agreement shall remain in full force and effect so long as any ----- of the obligations, liabilities and debtness of Assignor to Assignee, whether arising under the Lease or otherwise, remain outstanding. 6. Assignment. Assignee shall have the right to assign all of its rights ----------- under this Agreement. Assignor and Sublessee shall not have any right to assign this Agreement without the prior written consent of Assignee. 7. Amendment of Sublease. The Sublease shall not be changed, altered or ----------------------- modified in any manner, except by the prior written consent of Assignee. 8. Subordination. Sublessee acknowledges that the Sublease is in all -------------- respects subject and subordinate to the Lease, including without limitation, the rights of Assignee to repossess the equipment and void the Sublease in the event of a default by Assignor under the Lease. 9. Amendment. This Agreement shall not be released, discharged, changed or ----------- modified in any manner, except by the prior written consent of Assignee. 10. Waiver. No waiver of any right hereunder shall be deemed a waiver or ------- forfeiture of such right as to future matters. 11. California Law. This Agreement shall be governed by and construed in --------------- accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. LAUREL CAPITAL CORPORATION SMT HEALTH SERVICES INC. "Assignee/Lessor" "Assignor/Lessee/Sublessor" By: By: -------------------------- ---------------------------- Title: Title: ----------------------- -------------------------- - ------------------------------ -------------------------------- (Print Name) (Print Name) SMT MOBILE V CORP. "Sublessee" By: ---------------------------- Title: ------------------------- -------------------------------- (Print Name)
SCHEDULE OF LEASED EQUIPMENT LAUREL CAPITAL CORPORATION 810 MCKNIGHT EAST DRIVE LESSOR PITTSBURGH, PA 15237
SCHEDULE NO. 2165-1 ------ - ------------------------------------------------------------------------------- LESSEE (COMPLETE NAME AND ADDRESS) SUPPLIER (COMPLETE NAME AND ADDRESS) SMT Health Services Inc. 1) GE Medical Systems; P.O. Box 414 10521 Perry Highway Milwaukee, WI 53201 Wexford, PA 15090 2) Calumet Coach Company Calumet City, IL 60409-1411 - ------------------------------------------------------------------------------- 1. This schedule of leased equipment ("Schedule") is hereby made a part of the lease between the undersigned Lessee and the undersigned Lessor dated July 26, 1996. All terms and conditions of said lease are incorporated ------------- herein by reference. 2. The equipment subject to the to the lease is: - ------------------------------------------------------------------------------- QUANTITY DESCRIPTION AND SERIAL NUMBER PRICE - ------------------------------------------------------------------------------- See Attached Schedule of Equipment, Exhibit "A" Include all taxes levied at the time of sale, or include in block 4.E. below, whichever is appropriate in jurisdiction where equipment is located. - ------------------------------------------------------------------------------- THE TOTAL EQUIPMENT COST INCLUDING TAXES LEVIED AT THE TIME OF SALE IS: $1,290,273.87 - ------------- - ------------------------------------------------------------------------------- 3. Equipment shall be located at See Attached Schedule of Location of Equipment, ------------------------------------------- Exhibit "B" and shall not be removed therefrom without Lessor's prior written - ----------- consent. 4. The original term of the lease as to the equipment described in this Schedule is 3 years commencing on July 30, 1996 and terminating on ----- ------------- July 30, 1999 unless sooner terminated under the terms of the lease. As rent - ------------- for the equipment, Lessee shall pay total rent of $1,482,503.04 as follows: -------------
- ---------------------------------------------------------------------------------------------------------------------------- A B C D E F G Security Number and Date these Amt. of Tax on Total payment Date these Deposit type payments payment payment (D+E) payments (If any) of payments commence (if any) terminate ---------------------------------------------------------------------------------------------------------------------------- Monthly 36 7/31/96 41,180.64 0.00 41,180.64 5/31/99 -------- ------------- -------------- -------------- ----------------- --------------- Quarterly -------- ------------- -------------- -------------- ----------------- --------------- Annually -------- ------------- -------------- -------------- ----------------- --------------- - ----------------------------------------------------------------------------------------------------------------------------
5. Lessee may, pursuant to Section 22 Purchase Option of the Lease Agreement, purchase all but not less than all of the Items of Equipment listed hereon for $1.00 at the end of the rental term. 6. By executing and delivering to Lessor, the Lessee Acceptance form attached hereto, Lessee warrants, covenants and agrees that (a) Lessee has received all Equipment described in this Schedule at the location described in 3 hereof; (b) Lessee has duly inspected and accepts such Equipment without reservations; (c) Lessee is unconditionally bound to pay to Lessor the Total Rent and other payments due under the Lease, whether or not any Equipment described herein may now be or hereafter become unsatisfactory in any respect; and (d) Notwithstanding anything contained herein, Lessor and Lessee shall continue to have all rights which either of them might otherwise have with respect to Equipment described herein against any manufacturer or seller of said Equipment or any part thereof. - -------------------------------------------------------------------------------- ADDITIONAL REMARKS: Lessee paid the first and last monthly rental payments in advance. - -------------------------------------------------------------------------------- SIGNATURES - IN INK - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Date , 19 Date , 19 ------------------------ --- ------------------------ --- Lessee: (Full legal name) Lessor: LAUREL CAPITAL CORPORATION SMT HEALTH SERVICES INC. By By ---------------------------------- ----------------------------------- - -------------------------------------------------------------------------------- EX-10.09 10 FINANCE LEASE 2166 WITH LAUREL CAPITAL CORP. Exhibit 10.09 LAUREL CAPITAL CORPORATION FINANCE LEASE 3810 McKnight East Drive Pittsburgh, PA 15237 [412] 366-6440 Finance Lease No. 2166 This Lease, made this 26st day of July 1996 by and between LAUREL CAPITAL CORPORATION ("Lessor") and SMT HEALTH SERVICES INC. ("Lessee"). 1. LEASE AGREEMENT. Lessor hereby leases to Lessee, and Lessee hereby rents from Lessor, all the machinery, equipment and other personal property (individually "Item of Equipment" and collectively "Equipment") described in Equipment Lease Schedules which are or may from time to time hereafter be executed by Lessor and Lessee and attached hereto or incorporated herein by reference ("Schedules") upon the terms and conditions set forth in this Lease, as supplemented, as regards each Item of Equipment, by the terms and conditions set forth in the Schedule identifying that Item of Equipment. Whenever reference is made herein to "this Lease", it shall be deemed to include each of the several Schedules and the Insurance Schedule(s) referred to herein all of which constitute one undivided lease of the Equipment. 2. TERM. (a) The obligations under this Lease commence upon the written acceptance hereof by Lessor and shall end upon full performance and observance of each and every term, condition and covenant set forth in this Lease and any extensions hereof. The rental term for Equipment listed in each Schedule shall commence on the date indicated on such Schedule and shall terminate on the last day of the term stated in such Schedule. (b) In the event Lessor shall make payments on the Equipment prior to the commencement date of the rental term as indicated on the Schedule, Lessee shall pay interim rental payments from the date of such payments by Lessor to the commencement date of the rental term. The interim rental payments shall be based on the daily equivalent of two (2.00%) percent over the prime interest rate (fully floating) as announced from time to time by PNC Bank, National Association. Interim rental payments are due monthly. 3. RENT. The rent, including interim rental payments, for the Items of Equipment described in each Schedule shall be the amount stated in such Schedule. Rent is an absolute obligation of Lessee due upon the inception of each rental or interim rental term and payable as specified in each particular Schedule irrespective of any claims, demands, set-offs, actions, suits or proceedings that Lessee may have or assert against Lessor or any supplier of Equipment. Rent and interim rent shall be payable to Lessor at its office, 3810 McKnight East Drive, Pittsburgh, Pennsylvania 15237, or at such other place as Lessor or its assigns may designate in writing to Lessee from time to time. 4. DELINQUENT RENT PENALTY. If Lessee shall fail to pay any rent, interim rent installment or other amount due hereunder within ten (10) days after the due date and until all sums due hereunder have been declared due and payable in accordance with Paragraph 24, Lessee shall pay to Lessor a late charge of five (5%) percent of such amount due for each month or part thereof for which said rent or other sums shall be delinquent. After all sums are declared due and payable in accordance with Paragraph 24, Lessee shall pay interest at the rate of fifteen (15%) percent per annum or the maximum contract rate permitted by law, whichever is less, on such accelerated sums from the date of acceleration until paid, and whether or not judgment hereon has been entered. 5. DELIVERY AND INSTALLATION. Lessee will select the type, quantity and supplier of each Item of Equipment and in reliance thereon such Equipment will then be ordered by Lessor from such supplier or Lessor may at its option elect to accept an assignment of any existing purchase order. Lessor shall not be liable for loss or damage occasioned by any cause, circumstance or event of whatsoever nature, including, but not limited to, failure of or delay in delivery, delivery to wrong location, delivery of improper equipment or property other than the Equipment, damage to the Equipment, governmental regulations, strikes, embargoes or other causes, circumstances or events whether of a like or unlike nature. Lessee, at its expense, will pay all transportation, packing, installation, testing and other charges in connection with the delivery, installation and use of each Item of Equipment. In the event that the cost of any Item of Equipment differs from the price set forth in the purchase order therefor, the monthly rental shall be changed accordingly to fully reflect any such difference. In the event that Lessee fails or refuses to accept delivery of the Equipment within ninety (90) days following the execution of the Lease (unless such period is extended by an agreement between Lessor and Lessee in writing), Lessor may terminate the Lease and Lessee will remit to the Lessor an amount equal to the down payment and installments previously paid by the Lessor to the vendor or supplier of the Equipment, together with interest accrued thereon at the highest contractual rate enforceable against Lessee under applicable law but never at a rate higher than fifteen (15%) percent per annum. Lessor shall assign to Lessee without recourse all of Lessor's interest in and to the Equipment under the vendor purchase agreements. 6. WARRANTY OF LESSEE'S QUIET POSSESSION. Lessor warrants and covenants that so long as Lessee faithfully performs this Lease, Lessee, subject to the disclaimer of warranties set forth immediately below, shall be entitled to quietly possess and use the Equipment without interference. 7. DISCLAIMER OF WARRANTIES. EXCEPT FOR THE WARRANTIES SET FORTH ABOVE, LESSOR, NOT BEING THE MANUFACTURER OF THE EQUIPMENT NOR THE MANUFACTURER'S AGENT, MAKES NO EXPRESS OR IMPLIED WARRANTY OF ANY KIND WHATSOEVER WITH RESPECT TO THE EQUIPMENT. THIS DISCLAIMER OF WARRANTIES INCLUDES BUT IS NOT LIMITED TO ANY WARRANTY REGARDING: THE MERCHANTABILITY OF THE EQUIPMENT OR ITS FITNESS FOR ANY PARTICULAR PURPOSE; THE DESIGN OR CONDITION OF THE EQUIPMENT; THE QUALITY OR CAPACITY OF THE EQUIPMENT; THE WORKMANSHIP OF THE EQUIPMENT; COMPLIANCE OF THE EQUIPMENT WITH THE REQUIREMENTS OF ANY LAW, RULE, SPECIFICATION OR CONTRACT PERTAINING THERETO; PATENT INFRINGEMENT; OR LATENT DEFECTS; it being agreed that all such risks, as between Lessor and Lessee, are to be borne by the Lessee. Lessor is not responsible or liable for any direct, indirect, incidental or consequential damage to, or loss resulting from, the installation, operation or use of any Item of Equipment or any product manufactured thereby. 8. NATURE OF EQUIPMENT. Not withstanding anything to the contrary contained in this Agreement, including the characterization of this Agreement as a lease, the parties hereto acknowledge and agree that, legal title to each Item of Equipment leased hereunder shall be with the Lessee. Each Item of Equipment shall remain personal property, notwithstanding the manner in which it may be affixed to any real property. Lessee will otherwise take all action required to keep the Equipment free and clear of all levies, liens and encumbrances which result from any act or omission of the Lessee. Lessor assumes no liability and makes no representation as to the treatment by Lessee of this Lease, the Equipment, or to the rental payments for financial statement or tax purposes. 9. LOCATION OF EQUIPMENT. Each Item of Equipment shall be placed into service at the location specified in Exhibit B, Location of Equipment attached to the Schedule. Lessee shall promptly provide written notice to Lessor of any and all location changes. 10. LESSOR'S RIGHT OF INSPECTION. Lessor and its agents shall have the right during business hours to enter upon the premises where any Item of Equipment is located (to the extent Lessee can permit) for the purpose of inspection. 11. USE OF EQUIPMENT. Lessee must use the Equipment in a careful and proper manner in conformity with (i) all statutes and regulations of each governmental authority having jurisdiction over the Lessee and/or the Equipment and its use, and (ii) all policies of insurance relating to the Equipment and/or its use. In addition, Lessee shall not (i) use any Item of Equipment in any manner that would impair the applicability of manufacturer's warranties or render any Item of Equipment unfit for its originally intended use; nor (ii) permit anyone other than authorized and competent personnel to operate any Item of Equipment. 12. ALTERATIONS. Without the prior written consent of Lessor, which consent shall not be unreasonably withheld, Lessee shall not make any alterations, modifications or attachments to the Equipment. All alterations, modifications and attachments of whatsoever kind or nature made to any Item of Equipment must be removed without damaging the functional capabilities or economic value of the affected Item of Equipment upon the termination of the Lease. Under no circumstances shall any such alteration, modification or attachment be encumbered by Lessee. 13. MAINTENANCE AND REPAIRS. Lessee shall at its own expense and without authority to bind Lessor maintain each Item of Equipment in good mechanical condition and running order, normal wear and tear excepted. Immediately upon installation, Lessee shall provide to Lessor a perfected first lien security interest in any and all replacement parts. 14. RISK OF LOSS, DAMAGE AND THEFT. (a) All risk of loss, damage, theft or destruction, partial or complete, to any Item of Equipment incurred or occasioned by any cause, circumstance or event of whatever nature will be borne by Lessee from and after delivery of each Item of Equipment to a carrier FOB point of origin. Lessee shall promptly notify Lessor of any theft of or loss or damage to the Equipment. (b) Neither total nor partial loss of use or possession of any Item of Equipment shall abate the rent. (c) An Item of Equipment shall be deemed subjected to total loss when (i) it has disappeared regardless of the reason for disappearance or (ii) when it has sustained physical damage and the estimated cost of repair exceeds 75% of the fair market value (as determined by an independent appraiser chosen by Lessor) on the date of damage. Lessee's duty to pay rent for any Item of Equipment subjected to total loss shall be discharged by paying to Lessor the sum of the then unpaid principal plus accrued interest plus the purchase option at the price specified on the Schedule plus any applicable prepayment penalty plus all costs associated with releasing the Lessor's security interest plus any other sums then due and payable under the Lease. The amount of applicable insurance proceeds, if any, actually received by Lessor shall be subtracted from the amount for which Lessee is liable under this Paragraph 14. (d) Lessee shall cause any Equipment subjected to partial loss to be restored to original capability. Lessor shall, upon receiving satisfactory evidence of restoration, promptly pay to Lessee the proceeds of any insurance or compensation received by Lessor, by reason of such partial loss, provided however, that Lessor shall release such proceeds, to the extent such proceeds have been received by Lessor, in advance of restoration to the extent necessary to purchase materials or make progress payments upon the submission of appropriated work orders, invoices, estimates, or other satisfactory documentation. (e) Lessor shall not be obligated to undertake the collection of any claim against any person for either total or partial loss of any Item of Equipment. After Lessee discharges its obligations to Lessor under either 14(c) or 14(d) above, Lessee may, for Lessee's own account, proceed to recover from third parties and shall be entitled to retain any amount recovered. Lessor shall supply Lessee with any necessary assignment of claim. 15. INDEMNIFICATION. (a) Non-tax Liability. Lessee assumes liability for, and hereby agrees to ------------------ indemnify, protect and hold harmless, Lessor, its agents, servants, employees, officers, successors and assigns from and against, any and all liabilities, obligations, losses, damages, injuries, claims, demands, penalties, actions, costs and expenses, including reasonable attorney's fees, of whatsoever kind and nature, arising out of (i) the manufacture, installation, use, condition (including, but not limited to, latent and other defects and whether or not discoverable by Lessee or Lessor), operation, ownership, selection, delivery, leasing, removal or return of any Item of Equipment, regardless of where, how and by whom operated, or (ii) any failure on the part of Lessee to perform or comply with any covenant or condition of this lease. (b) Direct Tax Costs. In addition to all other rents payable hereunder, the ----------------- Lessee agrees to indemnify, protect and hold harmless Lessor, its agents, servants, employees, officers, successors and assigns from and against any and all taxes, license fees, assessments and other governmental charges, fees, fines or penalties of whatsoever kind or character and by whomsoever payable, which are levied, assessed, imposed or incurred during the lease term, (i) on or relating to each Item of Equipment, including any tax on the sale, ownership, use, leasing, shipment, transportation, delivery or operation thereof, (ii) on the exercise of any option, election or performance of an obligation by the Lessee hereunder, (iii) of the kind generally referred to in items (i) and (ii) above which may remain unpaid as of the date of delivery of any Item of Equipment to the Lessee irrespective of when the same may have been levied, assessed, imposed or incurred, and (iv) by reason of all gross receipts, business and occupation, and like taxes on or measured by rents payable hereunder levied by any state or local taxing authority having jurisdiction where any Item of Equipment is located. The Lessee agrees to comply with all state and local laws requiring the filing of ad valorem tax returns relating to each Item of Equipment. Any statements for such taxes received by the Lessor shall be promptly forwarded to the Lessee. This subparagraph shall not be deemed to obligate the Lessee to pay (i) any taxes, fees, assessments and charges which may have been included in the Lessor's cost of each Item of Equipment as set forth in Schedule(s) hereto, or (ii) any income or like taxes against the Lessor on or measured by the net income from the rents payable hereunder. The Lessee shall not be obligated to pay any amount under this subparagraph so long as it shall, at its expense and in good faith and by appropriate proceedings, contest the validity or the amount thereof unless such contest would adversely affect the title of the Lessee, or any security interest of Lessor, to an Item of Equipment or would subject any Item of Equipment to forfeiture or sale. The Lessee agrees to indemnify the Lessor against any loss, claim, demand and expense including legal expense resulting from such nonpayment or contest. (c) Indemnity Payment. The amount payable pursuant to subparagraphs 15(a) ------------------ and 15(b) shall be payable upon demand of the Lessor accompanied by a statement describing in reasonable detail such loss, liability, injury, claim, expense or tax and setting forth the computation of the amount so payable. (d) Survival. The indemnities and assumptions of liabilities and obligations --------- provided for in this Paragraph 15 shall continue in full force and effect notwithstanding the expiration or other termination of this Lease. 16. LESSEE'S ASSIGNMENT. Without the prior written consent of the Lessor, Lessee shall not bail, hypothecate, transfer or dispose of any Item of Equipment or any interest in this Lease nor impair the Lessor's title to the Equipment. Lessee shall not assign this Lease, nor shall this Lease or any rights under this Lease or in any Item of Equipment inure to the benefit of any trustee in bankruptcy, receiver, creditor, or other successor of Lessee whether by operation of law or otherwise, without prior written consent of the Lessor. 17. LESSOR'S ASSIGNMENT. All rights of Lessor hereunder and in any Item of Equipment may be assigned, pledged, mortgaged, transferred, or otherwise disposed of, either in whole or in part, without notice to Lessee. No such assignee shall be obligated to perform any duty, covenant, or condition required to be performed by Lessor under the terms of this Lease. Such assignee shall have all rights, powers and remedies given to Lessor by this Lease, and upon notice to Lessee, shall be named as loss payee or co-insured under all policies of insurance maintained pursuant to Paragraph 18 hereof. If Lessor assigns this Lease or the monies due or to become due hereunder or any other interest herein, Lessee agrees not to assert against Lessor's assignee any defense, set-off, recoupment, claim or counterclaim which Lessee may have against Lessor, whether arising under this Lease or any other transaction between Lessor and Lessee. Subject to Paragraph 16 hereof and this Paragraph 17, this Lease inures to the benefit of, and is binding upon, the heirs, legatees, personal representatives, successors and assigns of the parties hereto. 18. INSURANCE. Lessee will at its own expense insure each Item of Equipment in compliance with the terms and conditions of the Insurance Schedule(s) attached hereto or incorporated herein by reference inform satisfactory to Lessor with insurance carriers approved by Lessor and in an amount not less than one hundred five (105%) percent of the unpaid principal balance due hereunder. The proceeds of any insurance policy due by reason of theft or loss of or damage to any Item of Equipment shall be applied as provided in Paragraph 14 hereof. In addition to the compliance with the terms and conditions of the Insurance Schedule(s) and the other terms and conditions of this Paragraph 18, the Lessee shall comply with the following conditions: (a) Lessee, prior to the inception of any rental term, shall deliver to Lessor all required policies of insurance or in the alternative certificates of insurance (in triplicate); (b) Lessee shall cause each insurer to agree by endorsement on the policies or certificates of insurance or by an independent instrument furnished Lessor that each such insurer will give at least thirty (30) days written notice to Lessor before any such policy or policies of insurance will be altered or cancelled for any reason, including without limitation, failure of the Lessee to pay premiums; (c) All coverage required by the Insurance Schedule(s) must be in effect when Lessor takes delivery or causes delivery to be made FOB point of origin; (d) All insurance policies must indicate that the Lessor is an additional insured for all aspects of liability insurance coverage and is loss payee for all aspects of insurance coverage relating to the theft or loss of or damage to Equipment and the proceeds of any public liability or property damage insurance shall be applied first to the extent of the Lessor's liability; (e) Lessee will furnish renewal policies or renewal certificates of insurance (in triplicate) listing Lessor as an additional insured and/or loss payee, as required by this Lease, no later than thirty (30) days prior to the expiration of any insurance coverage required hereby. 19. ADDITIONAL DOCUMENTS. If Lessor shall so request, Lessee shall execute and deliver to Lessor such documents, including without limitation, UCC Financing and Continuation Statements, as Lessor shall deem necessary or desirable for purposes of continuing this Lease or recording or filing to protect the interest of Lessor in each Item of Equipment. Any such filing or recording shall not be deemed evidence of any intent to create a security interest. 20. FURNISHING FINANCIAL INFORMATION. During the term of this Lease and any extensions or renewals hereof, Lessee will furnish to Lessor: (a) Within forty five (45) days after the end of each of the first three quarterly periods of Lessee's fiscal year, a balance sheet and statement of income of Lessee as at the close of such quarterly period from the beginning of the fiscal year to the date of such statement, prepared in accordance with generally accepted accounting principles, consistently applied, and in such reasonable detail as Lessor may request, certified as true, complete and correct by an authorized officer of the Lessee. (b) As soon as practicable, but in any event within ninety (90) days after the end of each fiscal year, a copy of its annual audit prepared by a certified public accountant selected by Lessee and satisfactory to Lessor. (c) In a timely manner such financial statements, reports and other information as the Lessee shall send from time to time to its stockholders and/or file with the Securities and Exchange Commission and/or other materials which Lessor shall reasonably request. 21. PERFORMANCE OF OBLIGATIONS OF LESSEE BY LESSOR. If Lessee fails to promptly perform any of its obligations under this Lease, Lessor may perform the same for the account of Lessee without waiving Lessee's failure as a default. All sums paid or expense or liability incurred by Lessor in such performance (including reasonable legal fees) together with interest thereon at the highest contractual rate enforceable against Lessee, but never at a higher rate than 15% per annum simple, shall be payable by the Lessee upon demand as additional rent. 22. PURCHASE OPTION. Provided Lessee is not in default hereunder, Lessee may purchase all, but not less than all, of the Items of Equipment listed on each individual Schedule at the price specified in such Schedule at the end of the rental term. The purchase of the Items of Equipment shall occur AS IS, WHERE IS, WITHOUT ANY REPRESENTATIONS OR WARRANTIES WHATSOEVER except that Lessor shall deliver title to the Items of Equipment free of any lien or encumbrance created by any act of the Lessor. In the event the Lessee fails to exercise its purchase option, Lessee will return those Items of Equipment not purchased, freight and insurance prepaid, to Lessor (or Lessor's nominee) at a location designated by Lessor. If Lessee fails to exercise its purchase option and fails to return any Item of Equipment, then at Lessor's option this Lease may be extended on a month-to-month basis, with rent payable on the first of each month, at the rate applicable during the lease term just ended. 23. EVENTS OF DEFAULT. Any of the following events or conditions shall constitute an Event of Default hereunder and entitle the Lessor, at its option, to avail itself of the remedies more fully set forth in Paragraph 24 hereof: (a) Non-payment by Lessee of any rent or other amount provided for in this Lease when the same becomes due whether by acceleration or otherwise; (b) Failure of the Lessee to perform any of the non-monetary obligations, terms or conditions of this Lease within thirty (30) of receipt of written notification thereof from Lessor; (c) The Lessee shall commence a voluntary case or other proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or the taking possession by any official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the benefit of its creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; (d) If an involuntary case or other proceeding should be commenced against Lessee seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect, or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of thirty (30) days; (e) The occurrence of any event described in this Paragraph 23(c) through (d) hereof with respect to any guarantor or any other party liable for payment or performance of this Lease; (f) Any certificate, statement, representation, warranty or financial statement heretofore or hereafter furnished pursuant to or in connection with this Lease by or on behalf of Lessee or any guarantor or other party liable for payment or performance of this Lease is false in any material respect at the time as of which the facts therein set forth were stated or certified, or omits any substantial contingent or unliquidated liability or claim against Lessee or any such guarantor or other party, or, upon the date of execution of this document or any Schedule, there shall have been any materially adverse change in any of the facts disclosed by any such certificate, statement, representation or warranty, which shall not have been disclosed in writing to Lessor at or prior to the time of the execution of this document or such Schedule. 24. REMEDIES. Upon the happening of any Event of Default hereunder, the rights and duties of the parties shall be as set forth in this Paragraph 24. (a) Upon Lessor's demand, the Equipment shall be promptly delivered to Lessor, at that place or those places designated by Lessor. If Lessee does not so deliver the Equipment, Lessee shall make the Equipment available for retaking and authorizes Lessor, its employees and agents to enter the premises of the Lessee and any other premises (insofar as Lessee can permit) for the purpose of retaking. In the event of retaking, Lessee expressly waives all rights to possession and all claims for injuries suffered through or loss caused by retaking. Any repossession accomplished under this Paragraph 24(a) shall not release Lessee from liability for damages of Lessor sustained by reason of Lessee's default hereunder. (b) Lessor may revoke Lessee's privilege of paying rent in installments and, upon Lessor's demand, the Lessee shall promptly pay to Lessor the portion of the rent then remaining unpaid plus all other sums due and unpaid. (c) Lessor may sell or release the Equipment or any part thereof, at public auction or by private sale or lease at such time or times and upon such terms as Lessor may determine, free and clear of any rights of Lessee and, if notice thereof is required by law, any notice in writing of such sale or lease by Lessor to Lessee not less than ten (10) days prior to the date thereof shall constitute reasonable notice thereof to Lessee. All proceeds of the sale or releasing, or both (less (i) all expenses incurred in retaking the Equipment, making necessary repairs to the Equipment and enforcing this Lease, (ii) all damages that Lessor shall have sustained by reason of Lessee's default, and (iii) reasonable attorney's fees) shall be credited against Lessee's liability hereunder as and when received by Lessor. Sums in excess of Lessee's liability shall belong to Lessee. The Lessee shall be liable for any deficiency. (d) The provisions of this Paragraph 24 shall not prejudice Lessor's right to recover or prove damages for unpaid rent accrued prior to default, or bar an action for a deficiency as herein provided, and the bringing of an action with an entry of judgment against Lessee shall not bar the Lessor's right to repossess any or all Items of Equipment. (e) Lessor's remedies shall be available to Lessor's successors and assigns, shall be in addition to all other remedies provided bylaw, and may be exercised concurrently or consecutively. LESSEE WAIVES ANY AND ALL RIGHTS TO NOTICE AND TO JUDICIAL HEARING WITH RESPECT TO THE REPOSSESSION OF THE EQUIPMENT BY LESSOR IN THE EVENT OF A DEFAULT HEREUNDER BY LESSEE. LESSEE HEREBY WAIVES ANY RIGHT TO DEMAND A JURY TRIAL WITH RESPECT TO ANY ACTION OR PROCEEDING INSTITUTED BY THE LESSOR OR THE LESSEE IN CONNECTION WITH THIS LEASE. 25. GOVERNING LAW AND CONSENT OF JURISDICTION. This Lease has been executed and delivered in the Commonwealth of Pennsylvania. The laws and decisions of said Commonwealth will govern and control the construction, enforceability, validity and interpretation of this Lease, and of all agreements, instruments and documents, heretofore, now or hereafter executed by Lessee and delivered to Lessor pertaining or relating to this Lease or the transactions contemplated herein. The parties agree that any action or proceeding arising out of or relating to this Lease may be commenced in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the United States District Court for the Western District of Pennsylvania and Lessee agrees that, in addition to any other manner of service prescribed bylaw or rule of court, a summons and complaint commencing an action or proceeding in either such Court shall be properly served upon Lessee and shall confer personal jurisdiction if served personally or by United States registered mail, return receipt requested, to the Lessee at the address indicated below. 26. JUDGMENT BY CONFESSION. LESSEE HEREBY EMPOWERS THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR LESSEE AND, WITH OR WITHOUT ONE OR MORE DECLARATIONS FILED, ENTER A JUDGMENT OR JUDGMENTS AGAINST LESSEE IN FAVOR OF LESSOR, AS OF ANY TERM, FOR THE SUM THEN DUE AND PAYABLE UNDER THIS LEASE, WITH COSTS OF SUIT AND ATTORNEY'S COMMISSION OF 15% FOR COLLECTION; WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION, AND INQUISITION AND EXTENSION UPON ANY LEVY IS HEREBY WAIVED AND CONDEMNATION AGREED TO, AND THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION HEREON IS ALSO HEREBY EXPRESSLY WAIVED AND NO BENEFIT OF EXEMPTION SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION LAW NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED. 27. CONFLICT OF PROVISIONS. In the event of any conflict of provisions between any Schedule and any other document, the provisions of the Schedule shall control. 28. AMENDMENTS AND WAIVERS. This document, the Schedule(s) and Insurance Schedule(s) executed by Lessor and Lessee constitute the entire agreement between Lessor and Lessee with respect to the Equipment and the subject matter of this Lease. No term or provision of this Lease may be changed, waived, amended or terminated except by a written agreement signed by both Lessor and Lessee, except that Lessor may insert on the appropriate Schedule the serial number of any Item of Equipment after delivery thereof. No express or implied waiver by Lessor of any Event of Default hereunder shall in any way be, or be construed to be, a waiver of any future or subsequent Event of Default whether similar in kind or otherwise. 29. NOTICES. Except as otherwise provided in Paragraph 28 above, service of all notices under this Lease shall be sufficient if given personally or mailed to the party involved at its respective address set forth in the most recent Schedule relating hereto, or at such address as such party may otherwise provide in writing from time to time. Any such notice mailed to such address shall be effective three (3) business days from the date of deposit in the United States mail, duly addressed with first class postage prepaid. 30. GENDER; NUMBER. Whenever the context of this Lease requires, the neuter gender includes the masculine and the feminine, and the singular number includes the plural. Whenever the word Lessor is used herein, it shall include all assignees of Lessor. If there is more than one Lessee named in this Lease, the liability of each shall be joint and several. 31. TITLES. The titles to the paragraphs of this Lease are solely for the convenience of the parties, and are not an aid in the interpretation of the instrument. 32. SEVERABILITY OF PROVISIONS. If any provision of this Lease is held invalid or unenforceable, the remaining provisions will not be affected thereby, and to this end the provisions of this Lease are declared severable. 33. LESSEE RIGHT TO SUBLEASE. Lessor acknowledges and agrees that Lessee will sublease the Equipment to SMT Mobile VI Corp., or to any other wholly owned subsidiary of Lessee upon prior written notice to Lessor, for the purpose of providing magnetic resonance imaging services under certain Magnetic Resonance Imaging Service Agreements. Lessee shall execute and assign to Lessor such documents between Lessee and Sublessee as Lessor may reasonably request to protect Lessor's rights under this Lease. Lessee acknowledges and agrees that in no event shall any such sublease relieve Lessee from its obligations under this Lease. 34. ADDITIONAL SECURITY. Lessee covenants and agrees that on or before the commencement date of the rental term for the Equipment as designated in the Schedule, Lessee will provide or cause to be provided to Lessor, in form and substance satisfactory to Lessor an assignment of any and all Magnetic Resonance Imaging Service Agreements, or similar agreements, now existing or hereinafter acquired, to be serviced by the Equipment leased hereunder, and a first security interest in any and all payments due thereunder. Lessee will promptly provide written notice to Lessor of any additions, deletions, amendments, or substitutions to any such agreements. Lessee also covenants and agrees to provide, or cause to be provided to Lessor, upon Lessor's request, a Letter of Credit inform and substance satisfactory to Lessor. WITNESS the due execution hereof with the intent to be legally bound. ATTEST/WITNESS: LESSEE: SMT HEALTH SERVICES INC. ADDRESS: 10521 Perry Highway Wexford, PA 15090 By By David A. Zynn ------------------------ ---- ---------------- Title Title CFO / Treasurer --------------------- ---- ----------- Accepted at Pittsburgh, Pennsylvania by: LAUREL CAPITAL CORPORATION By -------------------------------------- Title ----------------------------------- LAUREL CAPITAL CORPORATION 3810 McKnight East Drive Pittsburgh, PA 15237 GUARANTY July 26, 1996 Dear Sirs: For value received, Undersigned jointly and severally unconditionally guarantee to you and become surety to you for the full and prompt performance by SMT Health Services Inc.; 10521 Perry Highway; Wexford, PA 15090; herein called "Obligor", of all obligations which Obligor presently or hereafter may have to you, and payment when due of all sums presently or hereafter owing by Obligor to you, and agree to indemnify you against any losses you may sustain and expenses you may incur in the enforcement of this agreement. For the purposes of this guaranty and indemnity, all sums owing to you by Obligor shall be deemed to have become immediately due and payable if (a) Obligor defaults in any of its obligations to you; (b) a petition under any provisions of the Bankruptcy Code, as amended, or for the appointment of a receiver of any part of the property of Obligor be filed against Obligor, and be not dismissed within thirty days; (c) such a petition is filed by Obligor; (d) Obligor make a general assignment for the benefit of creditors, suspends business or commits any act amounting to a business failure, or (e) an attachment be levied or tax lien be filed against any of Obligor's property. This shall be a continuing guaranty and indemnity and, irrespective of the lack of any notice to or consent of the Undersigned, their obligations hereunder shall not be impaired in any manner whatsoever by any (a) new agreements or obligations of Obligor with you; amendments, extensions, modifications, renewals or waivers of default as to any existing or future agreements or obligations of Obligor or third parties with or to you, or extensions of credit by you to Obligor; (b) adjustments, compromises or releases of any obligations of Obligor, Undersigned or other parties, or exchanges, releases or sales of any security of Obligor, Undersigned or other parties; (c) fictitiousness, incorrectness, invalidity or unenforce-ability, for any reason, of any instrument or writing, or acts of commission or omission by you or Obligor; (d) compositions, extensions, moratoria or other relief granted to Obligor pursuant to any statute presently in force or hereafter enacted, or (e) interruptions in the business relations between you and Obligor. Notice of your acceptance hereof, of default and non-payment by Obligor or any other parties, of presentment, protest and demand, and of all other matters of which Undersigned otherwise might be entitled, is waived. The obligations hereunder of Undersigned are both joint and several, and shall be binding upon their respective heirs and personal representatives. The failure of any person to sign this guaranty and indemnity shall not affect the liability hereunder of any signer thereof. The death or release from liability hereunder of any of Undersigned shall not relieve the others from liability hereunder. Each of Undersigned may terminate his obligations hereunder as to then future transactions between you and Obligor by registered mail notice to you at your above-stated address, provided, however, that such termination shall not affect either his liability hereunder with respect to any obligations of Obligor to you incurred prior to your receipt of such notice, or the continuing liability of such of the others of Undersigned as have not given such notice. This guaranty and indemnity is assignable, shall be construed liberally in your favor and shall inure to the benefit of your successors and assigns. If Obligor should default in the performance of any of Obligor's obligations to you, and if any third party makes any payment to you with respect thereto, such third party shall, to the extent thereof, be subrogated to all of your rights against Undersigned hereunder. Legal rights and obligations hereunder shall be determined in accordance with the laws of the Commonwealth of Pennsylvania. UNDERSIGNED HEREBY EMPOWER THE PROTHONOTARY OR ANY ATTORNEY OF ANY COURT OF RECORD WITHIN THE UNITED STATES OR ELSEWHERE TO APPEAR FOR THEM AND, WITH OR WITHOUT ONE OR MORE DECLARATIONS FILED, ENTER A JUDGMENT OR JUDGMENTS AGAINST THEM OR ANY OF THEM IN FAVOR OF YOU, AS OF ANY TERM, FOR THE SUM THEN DUE AND PAYABLE UNDER THIS AGREEMENT OF GUARANTY, WITH COSTS OF SUIT AND ATTORNEY'S COMMISSION OF 15% FOR COLLECTION; WITH RELEASE OF ALL ERRORS AND WITHOUT STAY OF EXECUTION, AND INQUISITION AND EXTENSION UPON ANY LEVY IS HEREBY WAIVED AND CONDEMNATION AGREED TO, AND THE EXEMPTION OF ALL PROPERTY FROM LEVY AND SALE ON ANY EXECUTION HEREON IS ALSO HEREBY EXPRESSLY WAIVED AND NO BENEFIT OF EXEMPTION SHALL BE CLAIMED UNDER OR BY VIRTUE OF ANY EXEMPTION LAW NOW IN FORCE OR WHICH MAY HEREAFTER BE ENACTED. This Guaranty has been executed and delivered in the Commonwealth of Pennsylvania. The laws and decisions of said Commonwealth will govern and control the construction, enforceability, validity and interpretation of this Guaranty, and of all agreements, instruments and documents, heretofore, now or hereafter executed by Undersigned and delivered to Lessor pertaining or relating to this Guaranty or the transactions contemplated herein. The parties agree that any action or proceeding arising out of or relating to this Guaranty may be commenced in the Court of Common Pleas of Allegheny County, Pennsylvania, or in the United States District Court for the Western District of Pennsylvania and Undersigned agrees that, in addition to any other manner of service prescribed by law or rule of court, a summons and complaint commencing an action or proceeding in either such Court shall be properly served upon Undersigned and shall confer personal jurisdiction if served personally or by United States registered mail, return receipt requested, to the Undersigned at the address indicated below. Very truly yours, CORPORATE GUARANTORS: SMT MOBILE VI CORP. Attest: By By ----------------------------- --------------------------------------- Title Title Address: 10521 Perry Highway ------------------- Wexford PA 15090 ------------------- (Corporate Seal) CONDITIONAL ASSIGNMENT AND SECURITY AGREEMENT - --------------------------------------------- This Conditional Assignment and Security Agreement ("Agreement") dated July 26, 1996 is entered into between SMT Health Services Inc. ("Assignor"/"Lessee"/"Sublessor"), SMT Mobile VI Corp. ("Sublessee") and Laurel Capital Corporation ("Assignee/Lessor"). This Agreement is entered into with reference to the following mutually agreed to facts: 1. WHEREAS, Assignor and Assignee have entered into that certain Master Equipment Lease ("Lease") dated July 26, 1996 providing for the lease of the personal property described in the Lease ("Equipment"); 2. WHEREAS, Assignor desires to sublease the Equipment pursuant to the terms of a sublease dated July 26, 1996 entered into between Assignor and Sublessee ("Sublease"). NOW, THEREFORE, FOR VALUABLE CONSIDERATION, the receipt and sufficiency of which are hereby acknowledged, the above parties, hereby agree to the following terms and conditions: 1. Consent to Sublease. Assignee hereby consents to Assignor's Sublease of -------------------- the Equipment to Sublessee under the terms and conditions as provided herein. 2. Conditional Assignment. Assignor hereby conditionally assigns and grants ----------------------- to Assignee a security interest in and all of its rights flowing from and under the Lease and Sublease including without limitation the Equipment; provided, -------- however, Assignee does not hereby assume duties, liabilities or obligations of - ------- Assignor under the Sublease. 3. Conditional Nature of Assignment. Assignee hereby acknowledges and agrees --------------------------------- that so long as there exists no default of any of the terms of the Lease and/or Sublease, Assignor shall have the right to enjoy all of the rights, benefits and privileges arising under the Sublease. 4. Default. Upon or at any time after the occurrence of a breach under any -------- of the terms, provisions or conditions as defined in the Lease and/or Sublease, Assignee may, at its election, exercise any and all rights under the Lease and/or Sublease, in addition to all of its rights under the Lease and/or Sublease, in addition to all of its rights and remedies as a Secured party under the Uniform Commercial Code. 5. Term. This Agreement shall remain in full force and effect so long as any ----- of the obligations, liabilities and debtness of Assignor to Assignee, whether arising under the Lease or otherwise, remain outstanding. 6. Assignment. Assignee shall have the right to assign all of its rights ----------- under this Agreement. Assignor and Sublessee shall not have any right to assign this Agreement without the prior written consent of Assignee. 7. Amendment of Sublease. The Sublease shall not be changed, altered or ----------------------- modified in any manner, except by the prior written consent of Assignee. 8. Subordination. Sublessee acknowledges that the Sublease is in all -------------- respects subject and subordinate to the Lease, including without limitation, the rights of Assignee to repossess the equipment and void the Sublease in the event of a default by Assignor under the Lease. 9. Amendment. This Agreement shall not be released, discharged, changed or ----------- modified in any manner, except by the prior written consent of Assignee. 10. Waiver. No waiver of any right hereunder shall be deemed a waiver or ------- forfeiture of such right as to future matters. 11. California Law. This Agreement shall be governed by and construed in --------------- accordance with the laws of the State of California. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. LAUREL CAPITAL CORPORATION SMT HEALTH SERVICES INC. "Assignee/Lessor" "Assignor/Lessee/Sublessor" By: By: -------------------------- ---------------------------- Title: Title: ----------------------- -------------------------- - ------------------------------ -------------------------------- (Print Name) (Print Name) SMT MOBILE VI CORP. "Sublessee" By: ---------------------------- Title: ------------------------- -------------------------------- (Print Name)
SCHEDULE OF LEASED EQUIPMENT LAUREL CAPITAL CORPORATION 810 MCKNIGHT EAST DRIVE LESSOR PITTSBURGH, PA 15237
SCHEDULE NO. 2166-1 ------ - ------------------------------------------------------------------------------- LESSEE (COMPLETE NAME AND ADDRESS) SUPPLIER (COMPLETE NAME AND ADDRESS) SMT Health Services Inc. 1) GE Medical Systems; P.O. Box 414 10521 Perry Highway Milwaukee, WI 53201 Wexford, PA 15090 2) Calumet Coach Company Calumet City, IL 60409-1411 - ------------------------------------------------------------------------------- 1. This schedule of leased equipment ("Schedule") is hereby made a part of the lease between the undersigned Lessor and the undersigned Lessee dated July 26, 1996. All terms and conditions of said lease are incorporated ------------- herein by reference. 2. The equipment subject to the to the lease is: - ------------------------------------------------------------------------------- QUANTITY DESCRIPTION AND SERIAL NUMBER PRICE - ------------------------------------------------------------------------------- See Attached Schedule of Equipment, Exhibit "A" Include all taxes levied at the time of sale, or include in block 4.E. below, whichever is appropriate in jurisdiction where equipment is located. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- THE TOTAL EQUIPMENT COST INCLUDING TAXES LEVIED AT THE TIME OF SALE IS: $1,294,962.33 - ------------- - ------------------------------------------------------------------------------- 3. Equipment shall be located at See Attached Schedule of Location of Equipment, ----------------------------------------------- Exhibit "B" and shall not be removed therefrom without Lessor's prior written ----------- consent. 4. The original term of the lease as to the equipment described in this Schedule is 3 years commencing on July 31, 1996 and terminating on ----- ------------- July 31, 1999 unless sooner terminated under the terms of the lease. ------------- As rent for the equipment, Lessee shall pay total rent of $1,487,890.08 as ------------- follows:
- ---------------------------------------------------------------------------------------------------------------------------- A B C D E F G Security Number and Date these Amt. of Tax on Total payment Date these Deposit type payments payment payment (D+E) payments (If any) of payments commence (if any) terminate ---------------------------------------------------------------------------------------------------------------------------- Monthly 36 7/31/96 41,330.28 0.00 41,330.28 5/31/99 ------ ------------- -------------- -------------- ----------------- --------------- Quarterly ----- ------------- -------------- -------------- ----------------- --------------- Annually ------ ------------- -------------- -------------- ----------------- --------------- - ----------------------------------------------------------------------------------------------------------------------------
5. Lessee may, pursuant to Section 22 Purchase Option of the Lease Agreement, purchase all but not less than all of the Items of Equipment listed hereon for $1.00 at the end of the rental term. 6. By executing and delivering to Lessor, the Lessee Acceptance form attached hereto, Lessee warrants, covenants and agrees that (a) Lessee has received all Equipment described in this Schedule at the location described in 3 hereof; (b) Lessee has duly inspected and accepts such Equipment without reservations; (c) Lessee is unconditionally bound to pay to Lessor the Total Rent and other payments due under the Lease, whether or not any Equipment described herein may now be or hereafter become unsatisfactory in any respect; and (d) Notwithstanding anything contained herein, Lessor and Lessee shall continue to have all rights which either of them might otherwise have with respect to Equipment described herein against any manufacturer or seller of said Equipment or any part thereof. - -------------------------------------------------------------------------------- ADDITIONAL REMARKS: Lessee paid the first and last monthly rental payments in advance. - -------------------------------------------------------------------------------- SIGNATURES - IN INK - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Date , 19 Date , 19 ------------------------ --- ------------------------ --- Lessee: (Full legal name) Lessor: LAUREL CAPITAL CORPORATION SMT HEALTH SERVICES INC. By By ---------------------------------- ----------------------------------- - -------------------------------------------------------------------------------- EX-11.01 11 EARNINGS PER SHARE COMPUTATION Exhibit 11.01 SMT EPS Calculation-Modified Treasury Stock Method Three Months Ended September 30, 1996
Exercise Assumed Assumptions Shares Price Proceeds Net income $915,730 Common Shares Outstanding 3,179,000 20% of Common Shares Outstanding 635,800 Common Stock Equivalent (Aggregate): Warrants-IPO 1,587,950 $6.67 $10,591,627 Effect of 5% Dividend 79,398 Options-employees 1993 Grant 121,275 3.33 403,846 1994 Grant 50 1.37 69 1995 Grant 36,750 2.46 90,405 1995 Grant-#2 150,000 3.81 571,875 1996 Grant 39,700 4.5 178,650 Options-Directors: 1992 Grant 2,100 3.21 6,741 1993 Grant 2,100 1.78 3,738 1994 Grant 2,100 2.2 4,620 1995 Grant 2,100 4.38 9,198 Misc Grant 0 1.78 0 Warrants-Directors All 500,000 3.88 1,940,000 Other 0 4.01 0 Warrants-Commonwealth 50,000 4.47 223,500 Underwriter options 76,000 5.94 451,440 Underwriter Warrants (Unit) 76,000 6.67 506,920 5% dividend on Warrants 7,600 Total CSE Aggregate 2,733,123 14,982,628
Average and Quarter End Market Value: Average Closing Price 6.83 Quarter End Closing Price 6.75
Computation: Primary Fully Diluted Total Proceeds 14,982,628 14,982,628 Application of assumed proceeds: Toward repurchase of o/s shares 4,342,514 4,291,650 Toward Paydown of debt 10,640,114 10,690,978 14,982,628 14,982,628 Adjustment to Net Income: Net income 915,730 915,730 Interest expense reduction: Debt paydown * avg. int rate * tax eff 180,882 181,747 Adjusted Net Income 1,096,612 1,097,477 Adjustments to Shares Outstanding: Actual shares o/s 3,179,000 3,179,000 Net additional shares 2,097,323 2,097,323 Adjusted shares o/s 5,276,323 5,276,323 Earnings Per Share: Before adjustment $0.29 $0.29 After adjustment $0.208 $0.21
SMT EPS Calculation- Modified Treasury Stock Method Nine Months Ended September 30, 1996
Exercise Assumed Assumptions Shares Price Proceeds Net income $1,936,206 Common Shares Outstanding 2,879,000 20% of Common Shares Outstanding 575,800 Common Stock Equivalent (Aggregate): Warrants-IPO 1,587,950 $6.67 10,591,627 Effect of 5% Dividend 79,398 Options-employees 1993 Grant 121,275 3.33 403,846 1994 Grant 50 1.37 69 1995 Grant 36,750 2.46 90,405 1995 Grant-#2 150,000 3.81 571,875 1996 Grant 39,700 4.5 178,650 Options-Directors: 1992 Grant 2,100 3.21 6,741 1993 Grant 2,100 1.78 3,738 1994 Grant 2,100 2.2 4,620 1995 Grant 2,100 4.38 9,198 Misc Grant 0 1.78 0 Warrants-Directors All 500,000 3.88 1,940,000 Other 0 4.01 0 Warrants-Commonwealth 50,000 4.47 223,500 Underwriter options 76,000 5.94 451,440 Underwriter Warrants (Unit) 76,000 6.67 506,920 5% dividend on Warrants 7,600 Total CSE Aggregate 2,733,123 14,982,628
Average and Quarter End Market Value: Average Closing Bid 6.21 Quarter End Closing Bid 6.75
Computation: Primary Fully Diluted Total Proceeds 14,982,628 14,982,628 Application of assumed proceeds: Toward repurchase of o/s shares 3,575,718 3,886,650 Toward Paydown of debt 11,406,910 11,095,978 14,982,628 14,982,628 Adjustment to Net Income: Net income 1,936,206 1,936,206 Interest expense reduction: Debt paydown * avg. int rate * tax eff 581,752 574,217 Adjusted Net Income 2,517,958 2,510,423 Adjustments to Shares Outstanding: Actual shares o/s 2,879,000 2,879,000 Net additional shares 2,157,323 2,157,323 Adjusted shares o/s 5,036,323 5,036,323 Earnings Per Share: Before adjustment $0.67 $0.67 After adjustment $0.50 $0.50
EX-27.01 12 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SEPTEMBER 30, 1996 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1996 JAN-01-1996 SEP-30-1996 5,019,569 0 1,531,685 0 0 7,640,597 34,294,523 6,373,022 38,209,501 7,304,258 0 33,570 0 0 10,404,990 38,209,501 13,478,930 13,606,467 0 9,487,159 0 0 1,447,102 2,672,206 736,000 1,936,206 0 0 0 1,936,206 .50 0
EX-99.01 13 PRESS RELEASE DATED 8/2/96 Exhibit 99.01 Contact: David Zynn, CPA Chief Financial Officer SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES INC. CLARIFIES PREVIOUS SHELF REGISTRATION ANNOUNCEMENT Pittsburgh, PA, August 2, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today clarified a misinterpretation in the market related to its previous July 16, 1996 press release announcing the effectiveness of a Form S-3 shelf registration statement. The Company clarified that the Form S-3 shelf registration statement does not represent an offering of securities by the Company. The Form S-3 shelf registration statement, declared effective by the Securities and Exchange Commission on July 12, 1996, simply provided registration rights to previously outstanding unregistered securities. In total, the shelf registration statement covers 3,494,623 shares of Common Stock, including approximately 1.8 million shares related to the Company's publicly- traded Warrants. Approximately 2.7 million of the total shares covered by the registration statement had been previously registered. SMT Health Services Inc., through its fleet of fourteen mobile MRI units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia and Kentucky. # # # EX-99.02 14 PRESS RELEASE DATED 9/17/96 Exhibit 99.02 Contact: David Zynn, CFO SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES RESPONDS TO ANNOUNCEMENT REGARDING CEO Pittsburgh, PA, September 17, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW), in response to an announcement last week by Northstar Health Services, Inc. (NASDAQ: NSTRE) that Northstar had named Jeff Bergman, the SMT's Chairman and CEO, individually as a defendant in a civil lawsuit, today stressed that the Company is not named as a defendant and that the allegations made in the lawsuit do not in any regard relate to SMT nor to Mr. Bergman in his capacity as Chairman, CEO and President of SMT. SMT Health Services Inc., through its fleet of fifteen mobile units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia, Kentucky and South Carolina. # # # EX-99.03 15 PRESS RELEASE DATED 9/25/96 Exhibit 99.03 Contact: David Zynn, CFO SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES ANNOUNCES PURCHASE OF NEW MOBILE MRI UNIT Pittsburgh, PA, September 25, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today announced that it has purchased a new 1.0 Tesla mobile MRI unit which will begin operation on October 1, 1996. The new unit represents the Company's seventeenth mobile MRI unit and is the sixth new unit acquired this year. This unit will service hospitals located in West Virginia which the Company recently signed to long-term service contracts. Earlier this month, the Company took delivery and began operation of a new mobile unit (which the Company had previously announced acquiring) to service new hospital customers in North Carolina and South Carolina. This unit represents the Company's initial venture into the state of South Carolina, where SMT expects to expand its operations further in months ahead. SMT Health Services Inc., through its fleet of seventeen mobile units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia, Kentucky and South Carolina. # # # EX-99.04 16 PRESS RELEASE DATED 10/3/96 Exhibit 99.04 Contact: David Zynn, CFO SMT Health Services Inc. (412) 933-3300 http://www.smthealth.com SMT HEALTH SERVICES ANNOUNCES PRELIMINARY THIRD QUARTER RESULTS Pittsburgh, PA, October 3, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today announced preliminary quarterly results for the third quarter ended September 30, 1996. The Company stated that it anticipates that net income for the 1996 third quarter will approximate $.19 to $.21 per share which exceed analyst estimates of approximately $.16 per share and the $.14 per share reported for the third quarter of 1995. The Company anticipates that net income from operations will approximate $.17 to $.19, including an after-tax adjustment of approximately $200,000 related to a sales tax refund. The Company also anticipates recording a deferred tax adjustment which will reduce its income tax provision approximately $200,000, or $.02 per share, during the third quarter of 1996. The Company anticipates that its net income for the nine months ended September 30, 1996 will approximate $.48 to $.50 per share as compared to net income per share of $.36 for the nine months ended September 30, 1995. The Company further announced that it continues a positive cashflow and maintained a cash balance of approximately $5.0 million as of September 30, 1996 as compared to $3.8 million and $3.9 million reported as of June 30, 1996 and December 31, 1995, respectively. Cash outflows during the nine months ended September 30, 1996 included approximately $600,000 for the acquisition of a mobile provider in March, approximately $2.0 million used to acquire new MRI units and other equipment and approximately $3.6 million of principal payments under loan agreements and capital leases. In addition to the approximate $5.4 million of cash generated from operations, SMT also received approximately $1.9 million as a result of the exercise of stock options and warrants during the second and third quarter. The statements contained in this press release are forward-looking statements that are subject to risks and uncertainties which could cause actual results to differ materially from those set forth herein, including material adjustments from final review by management and the Company's independent auditors. The Company anticipates announcing its actual results for the third quarter of 1996 on or about October 22, 1996. SMT Health Services Inc., through its fleet of seventeen mobile units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia, Kentucky and South Carolina. # # # EX-99.05 17 PRESS RELEASE DATED 10/22/96 Exhibit 99.05 Contact: David Zynn, CFO James K. White, Managing Director SMT Health Services Inc. Kehoe, White, Savage & Company, Inc. (412) 933-3300 (310) 437-0655 http://www.smthealth.com SMT HEALTH SERVICES REPORTS RECORD THIRD QUARTER AND NINE MONTH EARNINGS; NET INCOME UP 112% AND 93% RESPECTIVELY; MOBILE MRI REVENUES RISE 24% AND 19%, RESPECTIVELY Pittsburgh, PA, October 22, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today reported record earnings for the third quarter and nine month periods ended September 30, 1996. Net income for the 1996 third quarter increased 112% to $916,000, or $0.21 per share, from $431,000, or $.14 per share, reported for the third quarter of 1995. Net income for the nine months ended September 30, 1996 increased 93% to $1,936,000, or $.50 per share, as compared to $1,002,000, or $.36 per share for the nine months ended September 30, 1995. The Company attributed the income gains to increased revenues from four additional MRI units and greater operating efficiencies. Additional income gains are attributed to an approximate $180,000 state sales tax refund (after tax) and a $200,000 favorable tax provision adjustment resulting from an increase in the Company's Federal net operating loss carryforward. Excluding the tax adjustments, the Company's net income for the three and nine months ended September 30, 1996 increased approximately $105,000, or 24%, and $554,000, or 55%, over net income for the same periods of 1995, respectively. The Company's effective tax rate for 1996 has increased approximately 10% over 1995. However, the Company has available approximately $8.0 million of federal tax net operating loss carryforwards which are available to offset future Federal taxable income through 2010. The Company had reported preliminary results for the third quarter on October 3, 1996. Revenues for the third quarter of 1996 rose 24% to $4,798,000 from $3,861,000 recorded for the third quarter of 1995. The revenue gains stemmed from the addition of one new mobile unit placed into service in September 1995, one new mobile unit placed into service in February 1996, two new mobile units placed into service in late March 1996 and two units upgraded during 1996. Further revenue gains are attributed to greater utilization of the Company's existing fleet of mobile MRI units. Revenues derived from hospitals which the Company serviced in both comparable periods increased 9% during the third quarter of 1996, compared to the third quarter of 1995. Revenues for the nine months ended September 30, 1996 rose 19% to $13.6 million from $11.4 million in the similar year ago period. The Company previously announced that it had purchased and begun operation of two new MRI units in late September 1996 and one additional new unit on October 1, 1996 (increasing the Company's total MRI fleet to seventeen units). "The new units had little impact on our third quarter results but will have a positive impact on our earnings in the fourth quarter of 1996," stated Daniel Dickman, the Company's Executive Vice President and Chief Operating Officer. SMT Health Services Inc., through its fleet of seventeen mobile units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Ohio, Virginia, Kentucky and South Carolina. (table follows) SMT HEALTH SERVICES INC. AND SUBSIDIARIES CONSOLIDATED SUMMARY OF OPERATIONS
For The Three Months Ended For The Nine Months Ended September 30, September 30, ----------------------------- ------------------------- 1996 1995 1996 1995 ------------ ------------ ----------- ----------- Total Revenues $4,798,000 $3,861,000 $13,606,000 $11,405,000 * ---------- ---------- ----------- ----------- Operating Expenses 1,587,000 1,327,000 4,478,000 4,181,000 Depreciation and Amortization 1,198,000 870,000 3,307,000 2,726,000 Selling, General and Administrative 629,000 652,000 2,002,000 1,815,000 Interest Expense 501,000 429,000 1,447,000 1,319,000 Other ( 300,000) -- ( 300,000) -- ---------- ---------- ----------- ----------- Total Costs and Expenses $3,615,000 $3,278,000 $10,934,000 $10,041,000 ---------- ---------- ----------- =========== Income Before Income Taxes $1,183,000 $ 583,000 $ 2,672,000 $ 1,362,000 Income Taxes 267,000 ** 152,000 736,000** 360,000 ---------- -------- ----------- ----------- Net Income $ 916,000 $431,000 $ 1,936,000 $ 1,002,000 ========== ======== =========== =========== Earnings Per Common Share $.21 $.14 $.50 $.36 ========== ======== =========== =========== Average Number of Shares Outstanding 3,179,000 2,648,000 2,879,000 2,568,000 ========= =========== =========== =========
*Includes revenues related to the cardiac partnerships which were sold on June 30, 1995 totaling $548,000 for the nine months ended September 30, 1995. **Includes a $200,000 favorable adjustment to increase the Company's Federal Tax NOL. # # # EX-99.06 18 PRESS RELEASE DATED 11/4/96 Exhibit 99.06 Contact: David Zynn, CFO James K. White, Managing Director SMT Health Services Inc. Kehoe, White, Savage & Company, Inc. (412) 933-3300 (310) 437-0655 http://www.smthealth.com SMT HEALTH SERVICES ANNOUNCES ADDITION OF ITS EIGHTEENTH MOBILE MRI UNIT Pittsburgh, PA, November 4, 1996 -- SMT Health Services Inc. (NASDAQ/NMS: SHED, SHEDW) today announced that it has purchased a mobile MRI unit from Palmetto Community Health Network (the "Network") and has signed new service contracts with six (6) South Carolina hospitals which are members of the Network. The Company will begin servicing the new hospitals with the unit purchased from the Network immediately and plans to trade-in and upgrade the purchased unit to a new 1.0 T GE Horizon in mid-December. The Company anticipates signing several additional service contracts with Network affiliated hospitals. The new unit represents the Company's eighteenth mobile MRI unit and is the seventh new unit acquired this year. SMT Health Services Inc., through its fleet of eighteen mobile units, provides diagnostic imaging services to healthcare providers in Pennsylvania, West Virginia, North Carolina, Virginia, South Carolina, Kentucky and Ohio. # # # -----END PRIVACY-ENHANCED MESSAGE-----