UNITED DIAGNOSTIC, INC.
238 ROBINSON STREET, SUITE 202
WAKEFIELD, RHODE ISLAND 02879
(401) 789-9995
---------------------
SPECIAL MEETING OF STOCKHOLDERS
To Be Held On September 25, 2001
The undersigned, as a stockholder of UNITED DIAGNOSTIC, INC., hereby
appoints Irving Rothstein, Esq., and if he is unable to act on my behalf,
Richard F. Horowitz, Esq., the true and lawful proxy and attorney in fact of the
undersigned to attend the Special Meeting of the Stockholders of the company to
be held Tuesday, September 25, 2001, at 10:00 a.m. at the offices of Heller,
Horowitz & Feit, P.C., 292 Madison Avenue, 20th Floor, New York, New York 10017,
and any adjournment thereof, and hereby authorizes him to vote, as designated
below, the number of shares which the undersigned would be entitled to vote, as
fully and with the same effect as the undersigned might do if personally present
on the following matters as set forth in the Proxy Statement and Notice dated
August 22, 2001. Messrs. Rothstein and Horowitz are members of the Company's
special counsel, the law firm Heller, Horowitz & Feit, P.C.
PROPOSAL NO. 1
TO AMEND THE CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY'S
AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS AND NUMBER OF SHARES
OF SERIES A CONVERTIBLE PREFERRED STOCK FILED ON NOVEMBER 19, 1996, TO (i)
CHANGE AND AMEND THE CONVERSION TERMS OF SUCH SERIES A CONVERTIBLE PREFERRED
SHARES AND (ii) TO CHANGE ALL 2,826 ISSUED AND OUTSTANDING SERIES A CONVERTIBLE
PREFERRED SHARES INTO 4,281,818 SHARES OF COMMON STOCK, $.01 PAR VALUE, AS
PROVIDED IN APPENDIX A.
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL NO. 2
TO RATIFY AND APPROVE A STOCK OPTION GRANT TO J. MARVIN FEIGENBAUM, THE
PRESIDENT AND CHIEF EXECUTIVE OF THE COMPANY AS SET FORTH IN APPENDIX B.
__ FOR __ AGAINST __ ABSTAIN
PROPOSAL NO. 3
TO ELECT THREE NOMINEES TO SERVE AS DIRECTORS OF THE COMPANY, ROBERT B.
FAGENSON AS CLASS 1 DIRECTOR UNTIL THE YEAR 2002 ANNUAL MEETING OF STOCKHOLDERS,
DAVID A. STERLING AS CLASS 2 DIRECTOR UNTIL THE YEAR 2003 ANNUAL MEETING OF
STOCKHOLDERS AND J. MARVIN FEIGENBAUM AS CLASS 3 DIRECTOR UNTIL THE YEAR 2004
ANNUAL MEETING OF STOCKHOLDERS.
__ FOR ALL __ AGAINST ALL __ ABSTAIN
Write the name of any nominee(s) that you vote
against_________________________________
THIS PROXY, WHEN PROPERLY EXECUTED, Dated: August 22, 2001
WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. ___________________________
IF NO DIRECTION IS MADE, THIS PROXY Signature*
WILL BE VOTED FOR ALL THE PROPOSALS.
---------------------------
Signature*
This Proxy is revocable and the *NOTE: Please sign exactly
undersigned reserves the right as the name(s) appear on
to attend the meeting and vote your stock certificate.
in person. The undersigned When attorney, executor,
hereby revokes any proxy heretofore administrator, trustee,
given in respect of the shares of Company. or guardian, please give the
full title as such. If more
than one name is shown, as in
the case of joint tenancy, each
party should sign.
YOU ARE URGED TO FILL IN, SIGN AND DATE THE PROXY AND RETURN IT PROMPTLY BY MAIL
IN THE ENCLOSED, POSTAGE-PAID ENVELOPE.
Proposal No. 1 is a stockholder proposal made by the following four holders of
Series A Convertible Preferred Stock: Barras Investment, Gorra Holding, Agudath
Shalom Banaich Inc. and Mifal Klita. Management has not taken any position with
respect to Proposal No. 1 and is not recommending that stockholders vote either
for or against such proposal.
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
X Filed by the Registrant
___ Filed by a Party other than the Registrant
Check the appropriate box:
X Preliminary Proxy Statement
___ Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2)
___ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Materials Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12.
UNITED DIAGNOSTIC, INC.
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
X No fee required.
___ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:_____________________________________________
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:______________________________________
UNITED DIAGNOSTIC, INC.
238 ROBINSON STREET, SUITE 202
WAKEFIELD, RHODE ISLAND 02879
(401) 789-9995
-------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To be held on September 25, 2001
--------------------------
To the Stockholders of United Diagnostic, Inc.:
NOTICE IS HEREBY GIVEN, that a special meeting of the stockholders of
United Diagnostic, Inc. will be held at 10:00 a.m. on Tuesday, September 25,
2001, at the offices of our special counsel, Heller, Horowitz & Feit, P.C.,
located at 292 Madison Avenue, 20th Floor, New York, New York 10017.
The purpose of the meeting is to (1) amend the certificate of
incorporation to change the company's amended certificate of designations,
preferences and rights and number of shares of series A convertible preferred
stock filed on October 26, 1996, to change and amend the conversion terms of
such series A convertible preferred shares; and to change all 2,826 issued and
outstanding series A convertible preferred shares into 4,281,818 shares of
common stock, $.01 par value, as provided in appendix A; (2) ratify a stock
option grant to J. Marvin Feigenbaum, the President and Chief Executive of the
company as set forth in Appendix B; and (3) elect three nominees to serve as
Directors of the company, Class 1 Director until the year 2002 annual meeting of
stockholders, Class 2 Director until the year 2003 annual meeting of
stockholders and Class 3 Director until the year 2004 annual meeting of
stockholders.
Proposal No. 1 is being put before the Common and Series A Convertible
Preferred stockholders pursuant to a proposal made by certain holders of the
outstanding Series A Convertible Preferred Stock. August 21, 2001, has been
fixed by the Board of Directors as the record date for determining the Common
Stockholders and with respect to Proposal No. 1 only, the Series A Convertible
Preferred Stockholders, who are entitled to notice of and to vote at the Special
Meeting. If you do not expect to be personally present at the meeting, but wish
your stock to be voted for the business to be transacted at the meeting, you
should fill in, sign and date the enclosed proxy and return it by mailing it in
the accompanying postage-paid envelope to our transfer agent, American Stock
Transfer & Trust Company, 40 Wall Street, 46th Floor, New York 10005.
By Order of
The Board of Directors
If you cannot be present, please sign the enclosed proxy and return it in the
envelope provided. No postage is necessary if mailed in the United States.
UNITED DIAGNOSTIC, INC.
238 ROBINSON STREET, SUITE 202
WAKEFIELD, RHODE ISLAND 02879
(401) 789-9995
--------------------------
PROXY STATEMENT
FOR A SPECIAL MEETING OF STOCKHOLDERS
To be held on September 25, 2001
--------------------------
GENERAL
Proposal No. 1 of the enclosed proxy has been prepared at the request
of certain series A convertible preferred stockholders for use at a special
meeting of stockholders to be held on Tuesday, September 25, 2001, at 10:00 a.m.
at the offices of our special counsel, Heller, Horowitz & Feit, P.C., 292
Madison Avenue, 20th Floor, New York, New York 10017.
The record date for this special meeting is August 21, 2001. The
holders of record of both common stock, $.01 par value, and series A convertible
preferred stock, $.01 par value, as of the close of business on August 21, 2001,
are entitled to vote as a separate class on Proposal No. 1. Only the holders of
record of common stock as of the close of business on August 21, 2001, are
entitled to vote on Proposal Nos. 2 and 3. As of July 1, 2001, there were
682,622 common shares outstanding and 2,826 series A convertible preferred
shares outstanding.
This proxy statement and the accompanying proxy card are first being
mailed to stockholders on or about August 22, 2001, to holders of record of
series A convertible preferred stock and common stock as of the record date. A
copy of the annual report for the year ended December 31, 2000, is being mailed
to all stockholders with this proxy statement. It is not expected that any
representatives of our principal accounting firm will attend the special meeting
or be available to answer any questions.
The presence in person or by proxy of the holders of a majority of the
outstanding shares of common stock will constitute a quorum for the transaction
of business at the special meeting. A majority of the common stock and a
separate majority of the series A convertible preferred stock, each voting as a
separate class, is required for the adoption of Proposal No. 1. Directors are
elected by a plurality of the votes of the common stock present in person or by
proxy and entitled to vote. Approval of Proposal No. 2 as well as any other
matter that may properly come before the special meeting requires the
affirmative vote of a majority of the common shares present in person or by
proxy and entitled to vote.
Please note that if you hold shares in "street name" (that is, through
a bank, broker or other nominee) and would like to attend the special meeting
and vote in person, you will need to bring an account statement or other
acceptable evidence of ownership in common stock as of the close of business on
August 21, 2001, the record date for voting. Alternatively, in order to vote,
you may contact the person in whose name your shares are registered and obtain a
proxy from that person and bring it to the special meeting.
Under the rules of the National Association of Securities Dealers,
Inc., member brokers generally may not vote shares held by them in street name
for customers unless they are permitted to do so under the rules of any national
securities exchange of which they are a member. Under the rules of NASDAQ, a
member who holds shares in street name for customers has the authority to vote
on certain items if it has transmitted proxy soliciting materials to the
beneficial owner but has not received instructions from that owner. NASDAQ rules
permit member brokers who do not receive instructions to vote on the proposals
presented in this proxy statement, other than the stockholder proposal. Under
NASDAQ rules, a stockholder proposal is a "non-discretionary" item, which means
that NASDAQ member brokers who have not received instructions from the
beneficial owners of common stock may not vote to approve the stockholder
proposal; any such broker non-vote will have the effect of a vote against the
proposal.
Shares that reflect abstentions or "broker non-votes", which are shares
represented at the special meeting held by brokers or nominees as to which
instructions have not been received from the beneficial owners or persons
entitled to vote such shares and with respect to which the broker or nominee
does not have discretionary voting power to vote such shares, will be counted
for purposes of determining whether a quorum is present for the transaction of
business at the special meeting. Abstentions, therefore, will have the effect of
negative votes with respect to any matter presented at the special meeting,
while "broker non-votes" will have no effect on any matter presented. If
authority to vote for the nominee is withheld on a proxy card, no vote will be
cast with respect to the share as represented thereby and the outcome of the
election will not be affected.
The 2000 Annual Report to stockholders is a reproduction of the Form
10-KSB for the year ended December 31, 2000, filed with the United States
Securities and Exchange Commission and is being mailed to all stockholders along
with this proxy statement. The financial statements contained in the Annual
Report accompanying this proxy statement are incorporated herein by reference.
Requests for information or documents may be directed in writing to the
attention of Lee Ann DeRita at the company at its principal executive office
located at 238 Robinson Street, Suite 202, Wakefield, Rhode Island 02879.
The purpose of the meeting is to (1) amend the Certificate of
Incorporation to change the company's Amended Certificate of Designations,
Preferences and Rights and Number of Shares of Series A Convertible Preferred
Stock filed on October 26, 1996, to change and amend the conversion terms of
such series A convertible preferred shares; and to change all 2,826 issued and
outstanding series A convertible preferred shares into 4,281,818 shares of
common stock, $.01 par value, as provided in appendix A; (2) both ratify and
approve a stock option grant to J. Marvin Feigenbaum, the President and Chief
Executive of the company as set forth in Appendix B; and (3) elect three
nominees to serve as Directors of the company, Class 1 Director until the year
2002 annual meeting of shareholders, Class 2 Director until the year 2003 annual
meeting of stockholders and Class 3 Director until the year 2004 annual meeting
of stockholders. Proposal No. 1 is being put before the common and series A
convertible preferred stockholders pursuant to a proposal made by certain
holders of our outstanding series A convertible preferred stock.
The Certificate of Designations, Preferences, and Rights and Number of
Shares of Series A Convertible Preferred Stock, filed on October 1, 1996, as
amended on October 23, 1996, provides that the holders of shares of series A
convertible preferred stock are not entitled to any voting rights, except as
otherwise provided by law. Section 242 of the Delaware General Corporation Law
provides that the holders of the outstanding shares of a class shall be entitled
to vote as a class under a proposed amendment, whether or not entitled to vote
therein by the Certificate of Incorporation, if the amendment would, among other
things, alter or change the powers, preferences or special rights of the shares
of such class so as to affect them adversely. By virtue of the foregoing
provisions of the Delaware General Corporation Law, the holders of the series A
convertible preferred stock are entitled to vote as a class on Proposal No. 1,
but are not entitled to vote on Proposals Nos. 2 or 3, or on any other matter
that may come before the meeting. By virtue of the filing of the Certificate of
Designations, such Certificate of Designations had the effect, by virtue of
Section 151(g) of the Delaware General Corporation Law, of amending the
Certificate of Incorporation of the Corporation. By reason of the foregoing, any
change in the Certificate of Designations would in effect be made by further
amending our Certificate of Incorporation and therefore, the holders of the
shares of common stock, in addition to the holders of the shares of series A
convertible preferred stock, voting as a separate class, are entitled to vote
upon such proposal. Proposal No. 1 will require the affirmative vote of a
separate majority of both the common and series A convertible preferred stock.
The preferred stockholders who have made Proposal No. 1 own an aggregate of
1,878 shares of the series A convertible preferred stock representing a majority
of the issued and outstanding preferred stock. We have been advised that these
preferred stockholders will vote all of their respective shares for Proposal No.
1. In addition, these preferred stockholders have advised us that they also own
an aggregate of 40,110 shares of our common stock and will vote all of their
common shares for Proposal No. 1.
Solicitation, Voting and Revocability of Proxies
As of the record date, an aggregate of 682,622 shares of common stock
and 2,826 shares of series A convertible preferred stock were issued and
outstanding. Only holders of record of common stock as of the close of business
on the record date are entitled to notice and to vote at the meeting with
respect to Proposal No. 1. Each share of common stock is entitled to one
non-cumulative vote on each of Proposals No. 1, No. 2 and No. 3. Unless
otherwise directed in any properly executed proxy timely received, the person
named therein will vote FOR Proposal No. 1 to amend the terms of the series A
convertible preferred stock; FOR Proposal No. 2 to ratify a stock option grant
to J. Marvin Feigenbaum, the President and Chief Executive of the company, as
set forth in Appendix B; and FOR Proposal No. 3 to elect three nominees to serve
as Directors of the company until the year 2002 annual meeting of stockholders,
all as set forth in this proxy statement.
Any proxy given pursuant to this solicitation is considered revocable
by the person giving it at any time before it is used at the meeting. Revocation
may be effected by a written notice of revocation of a proxy or if we receive a
duly executed proxy bearing a later date, any earlier dated proxy will be
revoked.
Proposal No. 1 is a stockholder proposal made by four holders of the
series A Convertible preferred stock: Barras Investment, Gorra Holding, Agudath
Shalom Banaich Inc. and Mifal Klita. Management is not taking a position
regarding Proposal No. 1, and has not participated in any negotiations with the
preferred stockholders who have made Proposal No. 1 relating to the ratio at
which they propose to have the series A convertible preferred shares changed
into common shares, or any other terms of the Proposal. These four series A
convertible preferred shareholders are paying the costs and expenses of the
company relating to the special meeting of stockholders and the proxy statement.
Counsel to the series A convertible preferred stockholders who made Proposal No.
1 are acting as our special counsel. As required by the securities laws,
arrangements will be made with brokerage houses and other custodians, nominees
and fiduciaries for the forwarding of proxy material to the beneficial owners of
shares held of record by such persons, and such persons will be reimbursed by
the four preferred stockholders for reasonable expenses incurred by them in
connection therewith. The preferred stockholders listed above who requested this
solicitation have agreed to pay all costs relating to this solicitation.
Holders of an aggregate of 1,878 series A convertible preferred shares
representing a majority (66.45%) of the issued and outstanding series A
convertible preferred shares have advised us that they will vote all of their
preferred shares for Proposal No. 1. Thus, under Delaware law, the necessary
approval of the preferred stock will be obtained.
Voting Securities and Security Ownership of Certain Beneficial Owners and
Management
Set forth below is certain information as of the record date with
respect to (1) the ownership of common stock which has been calculated based
upon 682,622 shares of common stock outstanding as of the record date prior to
the adoption of Proposal No. 1 and also calculated based upon 4,964,440 shares
of common stock outstanding assuming approval of Proposal No. 1 and (2) the
series A convertible preferred stock which has been calculated based upon 2,826
issued and outstanding shares of series A convertible preferred stock prior to
the adoption of Proposal No. 1 by (i) the series A convertible preferred
stockholders who have requested the preparation and distribution of these proxy
materials; (ii) each of our directors and executive officers; (iii) the persons
(including any "group" as that term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended), known by us to be the beneficial
owner of more than five percent of the common stock; and (iv) directors and
executive officers as a group. Except to the extent indicated in the footnotes
to the following table, each of the stockholders listed below possesses sole
voting power with respect to the securities listed opposite such stockholder's
name.
PLEASE NOTE THAT THE TABLE DID NOT COME THROUGH IN A FORM WE CAN USE. THE ONLY
CHANGE I WISH TO MAKE IS TO CHANGE FOOTNOTE 2 BY ALL OFFICERS AND DIRECTORS TO
FOOTNOTE 6 AND ADD A REFERENCE TO FOOTNOTE 6 IN THAT SAME LINE BY THE NUMBER
260,227. I ALSO WISH TO ADD A REFERENCE TO FOOTNOTE 2 BY THE NUMBER 260,075 ON
MARVIN'S LINE.
After Adoption
Prior to Adoption of Proposal No. 1 of Proposal No. 1
----------------------------------------------- --------------------------
Common Preferred Common Preferred
Shares Percent Shares Percent Shares Percent Shares
Name and Address Owned of Class Owned of Class Owned of Class Owned
- ---------------- ------- -------- --------- --------- ------- -------- ---------
Gorra Holding 0 N/A 400(1) 14.2% 606,000 12.2% 0
Marta Strasse #137
Zurich, PO Box 8040
Switzerland
Barras Investment 0 N/A 500(1) 17.7% 757,000 15.3% 0
Schimmez Strasse #1
Zurich, PO Box 8003
Switzerland
Agudath Shalom Banaich 13,700 (1) 2.0% 571(1) 20.2% 865,065 17.4% 0
1621 58th Street
Brooklyn, NY 11204
Mifal Klita 26,410 (1) 3.9% 407(1) 14.4% 616,605 12.4% 0
28 Marwill Street
Downsview, Ontario
M3H 3L3 Canada
J. Marvin Feigenbaum 10,075 (2) 1.5% 0 N/A 260,075 (2) 5.2% 0
238 Robinson Street
Wakefield, RI 02879
David Sterling 76 (3) (4) 0 N/A 76 (4) 0
238 Robinson Street
Wakefield, RI 02879
Robert B. Fagenson 76 (3) (4) 0 N/A 76 (4) 0
238 Robinson Street
Wakefield, RI 02879
Craig Osborne 89,963 (5) 19.0% 0 N/A 89,963 1.8% 0
10351 Santa Monica Blvd.
Los Angeles, CA 90025
All Officers and Directors 10,227 (6) 1.5% 0 N/A 260,227 (6) 5.2% 0
as a Group (3 persons in
number)
(1) Based solely upon information contained in a Schedule 13D filed with the
Securities and Exchange Commission on August 6, 2001.
(2) Includes (i) 142 shares of common stock; (ii) 647 shares of common stock
held in a trust for the benefit of a minor child; (iii) 779 options owned by the
Feigenbaum Foundation, a charitable foundation; and (iv) options and warrants to
purchase an aggregate of 8,507 shares. Mr. Feigenbaum disclaims ownership of
items (ii) and (iii). Also includes, subject to the adoptions of Proposal No. 2,
250,000 vested options exercisable for seven years at $.66 per share, but
excludes 250,000 options not currently vested. The 250,000 currently exercisable
options are subject to forfeiture in the event Mr. Feigenbaum terminates his
Employment Agreement pursuant to the "Change of Control" provision.
(3) Consists of options to purchase 76 shares of common stock under the
company's Non-Employee Director Stock Option Plan.
(4) Less than 1%.
(5) Based upon a Schedule 13D filed with the Securities and Exchange Commission
by Mr. Osborne on May 26, 1999.
(6) Includes the securities discussed in notes 2 and 3.
SERIES A CONVERTIBLE
PREFERRED STOCK SHAREHOLDER
PROPOSAL NO. 1
Amendment of the Certificate of Incorporation to change the company's Amended
Certificate of Designations, Preferences and Rights and Number of Shares of
Series A Convertible Preferred Stock filed on November 19, 1996, to (i) change
and amend the conversion terms of such Series A Convertible Preferred Shares and
(ii) to change all 2,826 issued and outstanding Series A Convertible Preferred
Shares into 4,281,818 shares of Common Stock, $.01 par value, as provided in
Appendix A.
General
Shareholder Proposal No. 1 proposes that the terms of the series A
convertible preferred stock will be revised to change each share of series A
convertible preferred stock into 1,515 shares of common stock effective
immediately upon the adoption of Proposal No 1. Each share of series A
convertible preferred stock cost $1,000. Proposal No. 1 would change each share
of series A convertible preferred stock into 1,515 shares of common stock
representing an effective rate of value to the common stock of $.66 per share
for purposes of the rate of exchange. As a result, if Proposal No. 1 is adopted,
each outstanding share of series A convertible preferred stock will represent
1,515 shares of common stock. No certificates or cash representing fractional
shares of common stock will be issued to stockholders because of the adoption of
Proposal No. 1. All outstanding certificates for shares of series A convertible
preferred stock will cease to represent series A convertible preferred stock and
will solely represent the right to receive common stock at the rate described
above.
Under Proposal No. 1, all of the outstanding shares of series A
convertible preferred stock would be changed into an aggregate of 4,281,818
shares of common stock. If this number is added to the 682,622 shares of common
stock already outstanding, it would result in a total amount of 4,964,440 shares
of common stock outstanding. Assuming Proposal No. 1 is adopted and all series A
convertible preferred stock is changed into common stock, all of the preferred
stockholders as a group, would own approximately 86% of the outstanding common
stock and the four preferred stockholders who have made Proposal No. 1 would own
in the aggregate approximately 57% of the outstanding common stock.
Background and Reason for Proposal No. 1
On June 1, 1998, we were notified by The Nasdaq Stock Market that our
common stock would be delisted from the Nasdaq Small Cap Market, effective as of
the close of business on June 1, 1998. The notification resulted from a
determination by a Nasdaq Listing Qualifications Panel, following a hearing held
on May 14, 1998, to reject the our request for continued inclusion on the Nasdaq
Small Cap Market. Our common stock was quoted on the Nasdaq Small Cap Market
through May 15, 1998. We believe that the delisting of our common stock has had
a depressive effect upon the market price of our common stock and adversely
affected the liquidity of the common stock because, subsequent to May 15, 1998,
the common stock has been quoted in the "pink sheets" maintained by National
Quotation Bureau, Inc., which is not an established trading market.
Currently, the series A convertible preferred stock is convertible into
such number of shares of common stock as shall equal $1,000 divided by a
conversion rate equal to the lesser of (i) 75% of the average closing bid price
of the common stock for the 5 days immediately preceding the date of the
holder's notice of conversion or (ii) $1,225.00, subject to certain adjustments.
Since the conversion price of the preferred stock is related to The Nasdaq Stock
Market bid price for the common stock, a conversion price is presently
indeterminable; consequently, conversions of series A convertible preferred tock
have been suspended.
Effect of Adoption of Proposal No. 1 on Employment Agreement
The adoption of Proposal No. 1 may trigger certain rights which J.
Marvin Feigenbaum, our President and Chief Executive Officer, has under his
Employment Agreement dated May 19, 1999. Mr. Feigenbaum's Employment Agreement
provides that, upon the occurrence of a change of control, commencing on the
date of such occurrence and continuing for a period of one year thereafter, in
the event of the first to occur of the termination of his employment for any
reason other than cause, or his resignation during such one year period, he
shall be entitled to a sum equal to the balance of the base salary for the
unexpired portion of the employment plus $208,000 payable in a single lump sum
payment upon the date of termination or resignation as the case may be. Change
of control is defined in the Employment Agreement as follows:
(i) any "person" (other than a "person" owning 10% or more of the
issued and outstanding Common Stock of the Company on the date hereof)
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Act")) becomes a "beneficial
owner" (as such term is defined in Rule 13d-3 promulgated under the
Act) (other than the Executive, the Company, any trustee or other
fiduciary holding securities under an employee benefit plan of the
Company, or any corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as
their ownership of stock of the Company) directly or indirectly, of
securities of the Company representing 25% or more of the combined
voting power of the Company's then outstanding securities; or
(ii) the stockholders of the Company approve a merger or consolidation
of the Company with any other corporation or other entity, other than
(a) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) more than
25% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation or (b) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no "person" (as hereinabove defined) acquires more than 25%
of the combined voting power of the Company's then outstanding
securities; or
(iii) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(iv) a majority of the current members of the Board no longer continue
to serve as directors or, in the case of the resignation or removal of
any current director, his successor is not elected by the remaining
current directors of the Company.
The adoption of Proposal No. 1 will result in an additional number of
shares of common stock being issued by us in excess of 25% of the combined
voting power of our presently outstanding securities. By virtue of the
foregoing, Mr. Feigenbaum may have the right, following the adoption of Proposal
No. 1 and for a period of one year thereafter, to determine whether or not he
will resign from the company and, in such case, may be entitled to the
above-described payments. Mr. Feigenbaum has not taken any position with respect
to Proposal No. 1, nor has he advised the company of his intentions with respect
to the continuation of his employment in the event Proposal No. 1 is adopted.
The four named preferred stockholders who have made Proposal No. 1
developed the idea of voluntarily restructuring the conversion terms of the
preferred stock. The preferred stockholders who have made Proposal No. 1 have
advised us that they believe that in order for the company to maximize its
attractiveness, it is imperative that the capital structure be adjusted and
there be no overhanging shares of series A convertible preferred stock or
uncertainty as to what the preferred stock may be converted into.
The four preferred stockholders believe that this amendment would
benefit all stockholders and have advised that they also intend to vote their
40,110 shares of common stock in favor of Proposal No. 1. The four preferred
stockholders have also advised management that they have no intention of seeking
election to the board of directors or assuming control of management.
As indicated above, this Proxy Statement has been prepared at the
specific request of the four preferred stockholders and management takes no
position as to the merits or advisability of Proposal No. 1. Management has not
negotiated the rate at which the series A convertible preferred stock will be
changed into common stock. The four preferred stockholders making Proposal No. 1
have agreed to pay all costs associated with this proxy. For more information
about the four preferred stockholders, you should review the Schedule 13D they
filed with the Securities and Exchange Commission which is available through the
SEC's web site at www.sec.gov or through the SEC's public reference room. The
telephone number for the public reference room is (202) 942-8090.
Exchange of Stock Certificates
Upon the adoption of Proposal No. 1, we will send a letter of
transmittal to each series A convertible preferred stockholder of record to use
in transmitting certificates representing shares of series A convertible
preferred stock to our transfer agent, American Stock Transfer & Trust Company,
which will act as the Exchange Agent. The letter of transmittal will contain
instructions for the surrender of series A convertible preferred certificates to
the Exchange Agent in exchange for certificates representing 1,515 whole shares
of common stock for every share of series A convertible preferred stock. No new
certificates will be issued to a stockholder until such stockholder has
surrendered all old certificates together with a properly completed and executed
letter of transmittal to the Exchange Agent.
Upon proper completion and execution of the letter of transmittal and
its return to the Exchange Agent, together with all series A convertible
preferred stock certificates, stockholders will receive a new certificate or
certificates representing the number of whole shares of common stock into which
their shares of series A convertible preferred stock has been changed into as a
result of the adoption of Proposal No. 1. Stockholders should not send their old
certificates to the Exchange Agent until they have received the letter of
transmittal. Shares not presented for surrender as soon as is practicable after
the letter of transmittal is sent shall be exchanged at the first time they are
presented for transfer. No service charges will be payable by stockholders in
connection with the exchange of certificates, all expenses of which will be
borne by the four preferred stockholders who have requested that Proposal No. 1
be put forth in this proxy statement.
A copy of the Certificate of Amendment as proposed to be revised is
attached hereto as Appendix A.
The affirmative approval of a separate majority of the outstanding
shares of common stock and a separate majority of the outstanding shares of
series A convertible preferred stock is required to approve Proposal No. 1. The
affirmative approval of a majority of the outstanding shares of preferred stock
is assured by reason of the fact that the four preferred stockholders who have
made Proposal No. 1 own, in the aggregate, 66.45% of the issued and outstanding
preferred stock.
PROPOSAL NO. 2
Approve Stock Option Grant Agreement for J. Marvin Feigenbaum
(Subject to Adoption of Proposal No. 1)
As an incentive to Mr. Feigenbaum to remain with the company, the Board
of Directors, subject to stockholder ratification and approval, grant Mr.
Feigenbaum 500,000 options exercisable at $.66 per share, subject to the
adoption of Proposal No. 1. Of these options, 250,000 become vested upon the
adoption of this Proposal No. 2 and the balance will vest equally on July 31,
2002 and 2003; provided, however, that in the event of a change of control event
following this special meeting, all unvested options will accelerate and
immediately vest. The options granted shall expire seven (7) years from the date
it may be first exercised. The exercise may be paid in cash or the delivery of
stock with a market value equal to the exercise price. In the event Mr.
Feigenbaum terminates his employment with the company within one year of the
adoption of Proposal No. 1, all options will be forfeited by him. The Option
Grant is contained in Appendix B.
The affirmative approval by a majority of the outstanding shares of
common stock are required to approve Proposal No. 2. Management has made no
recommendation to vote for or against Proposal No. 2.
PROPOSAL NO. 3
Election of Directors
Our Amended and Restated Certificate of Incorporation provides for a
classified Board of Directors with three classes, designated Class 1, Class 2
and Class 3. At the special meeting, one of each of Class 1, Class 2 and Class 3
Directors are to be elected, each to serve until the 2002, 2003 and 2004 annual
stockholder meetings, respectively, and until their successors are elected and
qualified. The number of Directors comprising the entire Board of Directors is
determined in accordance with our By-Laws. The By-Laws provide for the number of
Directors to be not less than three nor more than eleven in number. The Board of
Directors currently consists of a total of three (3) persons.
The affirmative vote of a plurality of the outstanding common stock
entitled to vote for Directors at the special meeting is required to elect the
Directors. All proxies timely received will be voted for the election as
Directors of the nominees specified in the enclosed proxy if no direction to the
contrary is given. In the event any nominee is unable to serve, the proxy
solicited hereby may be voted, in the discretion of the proxies, for the
election of another person in his stead. We know of no reason to anticipate this
will occur.
THE ONE NOMINEE FOR CLASS 1 DIRECTOR IS ROBERT B. FAGENSON TO SERVE UNTIL THE
2002 ANNUAL MEETING.
Robert B. Fagenson. Mr. Robert B. Fagenson, age 51, has been a Class 1
Director since 1995. Mr. Fagenson has, for more than the past five years, been
President and a Director of Fagenson & Co., Inc., a registered broker-dealer,
and Vice-President and Director of Starr Securities Inc., a registered
broker-dealer. Mr. Fagenson is a Director of Rent-Way, Inc., a publicly-held
multi store retail chain in the rent-to-own industry, and Intrenet Inc., a long
haul trucking company.
THE ONE NOMINEE FOR CLASS 2 DIRECTOR IS DAVID A. STERLING TO SERVE UNTIL THE
2003 ANNUAL MEETING
David A. Sterling. Mr. David A. Sterling, age 46, was elected to the
Board of Directors on December 6, 1994, as a Class 2 Director. Mr. Sterling, for
in excess of seven years, has been President of Sterling & Sterling, Inc., a
general insurance agency. Mr. Sterling holds a BBA Degree from Hofstra
University, New York.
THE ONE NOMINEE FOR CLASS 3 DIRECTOR IS J. MARVIN FEIGENBAUM TO SERVE UNTIL THE
2004 ANNUAL MEETING
J. Marvin Feigenbaum. Mr. J. Marvin Feigenbaum, age 51, was first
elected to the Board of Directors in June 1994, at which time he was also
appointed our President and Chief Executive Officer. Mr. Feigenbaum also served
as Chairman of the Board, President and Chief Executive Officer of Physicians
Clinical Laboratory, Inc., one of our subsidiaries, from October 3, 1997, until
May 12, 1999, and as President, Chief Executive Officer and Chief Financial
Officer of Analytical Biosystems Corporation, another subsidiary, from June 1994
until November 1997. For a period of four years until he voluntarily resigned in
May 1999, Mr. Feigenbaum served as a member of the Board of Directors and
Vice-Chairman of Comprehensive Care Corporation, a publicly owned company
engaged in the health care business, previously listed on the New York Stock
Exchange.
Executive Compensation
ANNUAL COMPENSATION PAYOUTS
NAME AND ALL OTHER ALL OTHER
PRINCIPAL POSITION YEAR SALARY COMPENSATION COMPENSATION
------------------ ---- ------ ------------ ------------
($) ($) ($)
J. Marvin Feigenbaum 2000 $208,000 $55,212(8) $55,212(8)
President and Chief 1999 $255,667(3) $74,897(5) $74,897(5)
Executive Officer (1)(2) 1998 $381,333(6) $11,784(7) $11,784(7)
- ---------------------
(1) President and Chief Executive and Financial Officer. President and Chief
Executive Officer of various subsidiaries.
(2) Includes salaries paid by subsidiaries.
(3) Includes (i) approximately $208,000 earned by Mr. Feigenbaum pursuant to his
employment agreement and (ii) approximately $47,667 that should have been paid
to Mr. Feigenbaum during 1998, but due to our financial condition, was
voluntarily deferred by Mr. Feigenbaum as a convenience to us and paid to Mr.
Feigenbaum in 1999 (see note 6).
(4) Represents accrued vacation paid in cash, bonus and interest earned on
payroll deferred by Mr. Feigenbaum as a convenience to us and paid to Mr.
Feigenbaum in 1999.
(5) Represents automobile allowance, automobile insurance premiums, automobile
maintenance and garage fees, life insurance premiums, disability insurance
premiums and relocation expenses.
(6) Includes approximately (i) $208,000 earned by Mr. Feigenbaum pursuant to his
employment agreement, (ii) $208,000 paid to Mr. Feigenbaum by a subsidiary
during the 12 month period ended December 31, 1998, and (iii) $13,000 of his
salary voluntarily deferred by Mr. Feigenbaum during 1997 and paid during 1998;
excludes approximately $47,667 that should have been paid to Mr. Feigenbaum
during 1998 but, due to our financial condition, was voluntarily deferred by Mr.
Feigenbaum as a convenience to us and paid to Mr. Feigenbaum in 1999 (see note
3).
(7) Represents automobile allowance, automobile insurance premiums and life
insurance premiums.
(8) Represents automobile allowance, automobile insurance premiums, automobile
maintenance and garage fees, life insurance premium, disability insurance
premiums and long term care insurance premiums.
(9) Represents accrued vacation paid in cash.
Compensation of Directors
Directors who are employees of the company do not receive any fee for
serving on the Board of Directors. Directors who are not also employees receive
a directors fee of $6,000 per annum, paid quarterly, and an attendance fee of
$500 per meeting attended. In addition, Directors are reimbursed for travel
expenses for attendance at board meetings. Non-Employee Directors are also
eligible for an initial and annual grant of stock options under the company's
Non-Employee Director Stock Option Plan.
1994 Incentive Stock Option Plan
In August, 1994, the Board of Directors adopted a 1994 Incentive Stock
Option Plan, which Plan was approved and adopted by our stockholders on November
16, 1994. The Plan provides for the issuance of up to 5,000 shares of our common
stock upon the exercise of options granted to officers, directors, full time
employees and consultants rendering services to us. Under the terms of the Plan,
options granted thereunder will be designated as options which qualify for
incentive stock option treatment ("ISO's") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options which do not so qualify
("Non-ISO's"). Unless sooner terminated, the Plan will expire on August 1, 2004
and options may be granted at any time or from time to time through such date.
The purpose of the Plan is to promote the interests of the Company and its
stockholders by strengthening our ability to attract and retain officers,
employees and consultants by furnishing suitable recognition of their ability to
contribute to our success and to align their interests and efforts with our long
term interests. The Plan succeeds our 1992 Incentive Stock Option Plan, which
has been terminated.
The Plan is administered by the Board of Directors or by a Stock Option
Committee designated by the Board of Directors, which in either case is known as
the Plan Administrator. The Plan Administrator has the discretion to determine
the eligible employees and consultants to whom, and the times and the prices at
which, options will be granted; whether such options shall be ISO's or
Non-ISO's; the periods during which each option will be granted; and the number
of shares subject to each option. The Plan Administrator shall have full
authority to interpret the plan and to establish and amend rules and regulations
relating thereto.
Under the Plan, the exercise price of an option designated as an ISO
shall not be less than the fair market value of our common stock on the date the
option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder such exercise price shall be at least 110%
of such fair market value. Exercise prices of Non-ISO's may not be less than 85%
of such fair market value. The aggregate fair market value of shares subject to
an option designated as an ISO for which any participant may be granted such an
option in any calendar year, shall not exceed $100,000 plus any unused
carryovers from a prior year. The "fair market value" will be the closing Nasdaq
bid price or, if the common stock is not quoted by Nasdaq, the low bid as
reported by the National Quotation Bureau, Inc. or a market maker of the common
stock or, if the common stock is not quoted by any of the above, by the Board of
Directors acting in good faith.
Options may be granted under the Plan for such periods as determined by
the Plan Administrator; provided however, that no option designated as an ISO
granted under the Plan shall be exercisable over a period in excess of ten
years, or in the case of a ten percent stockholder, five years. Options may be
exercised in whole at any time or in part from time to time. Options are not
transferable except to the estate of an option holder; provided, however, in the
case of a Non-ISO, and subject to Rule 16b-3 promulgated under Section 16 of the
Securities Exchange Act of 1934 and prevailing interpretations thereunder by the
staff of the Commission, a recipient of a Non-ISO may, with the consent of the
Plan Administrator, designate a named beneficiary of the Non-ISO in the event of
the death of such recipient, or assign such Non-ISO.
Except as described below, the Plan Administrator may from time to time
amend the Plan as it deems proper and in the best interests of the Company
without further approval of the stockholders.
The Board of Directors and the Plan Administrator may not amend certain
features of the Plan without the approval of our stockholders to the extent such
approval is required for compliance with Section 422 of the Code with respect to
ISO's, Section 162(m) of the Code with respect to Non-ISO's or Rule 16b-3
promulgated under Section 16 of the Exchange Act with respect to awards made to
individuals subject to Section 16 of the Exchange Act. Such amendments would
include (a) increasing the maximum number of shares of common stock that may be
issued under the Plan, (b) materially modifying the requirements as to
eligibility for participation in the Plan, or (c) otherwise materially
increasing the benefits accruing to participants under the Plan.
Options for a total of 2,500 Shares have been granted under the Plan,
including options for 2,143 shares granted directly or indirectly to Mr.
Feigenbaum.
Non-Employee Director Stock Option Plan
In August, 1994, the Board of Directors adopted the Non-Employee
Director Stock Option Plan, known as the Director Plan, which was approved and
adopted by our stockholders on November 16, 1994 and amended by our stockholders
on August 27, 1996. The Director Plan provides for issuance of a maximum of
2,857 shares of common stock upon the exercise of stock options granted under
the Director Plan. Options may be granted under the Director Plan until August
1, 2004 to our non-employee directors (as defined). The Director Plan provides
that each non-employee director will automatically be granted an option to
purchase 71 shares upon joining the Board of Directors (or, for those persons
who are directors on the date of approval of the Director Plan by the
stockholders, on such date), and options to purchase 114 shares on each
anniversary of the initial date of service or date of approval, as the case may
be. No options have been granted under the Director Plan since 1996 because we
essentially became inactive during 1997 and a market for the common stock has
neither been established or sustained since that time.
Under the terms of the Director Plan, the sum of the number of shares
to be received upon any grant multiplied by the fair market value of each share
at the time of grant may not exceed $75,000. All awards shall be reduced to the
extent they exceed such amount. The exercise price for options granted under the
Director Plan shall be 100% of the fair market value of the common stock on the
date of grant. Until otherwise provided in the Director Plan, the exercise price
of options granted under the Director Plan must be paid at the time of exercise,
either in cash, by delivery of shares of common stock of the Company or by a
combination of each. The term of each option is five years from the date of
grant, unless terminated sooner as provided in the Director Plan. The Director
Plan is administered by a committee of the Board of Directors composed of not
fewer than two persons who are officers of the Company. The Committee has no
discretion to determine which non-employee director will receive options or the
number of shares subject to the option, the term of the option or the
exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan do not qualify for incentive stock option treatment.
Options for a total of 152 shares have been granted under the Director
Plan, including options for 76 shares to each of Mr. Sterling and Mr. Fagenson.
Certain Relationships and Related Transactions
In May 2000, we made a $200,000 investment for a 7.5% common stock
interest in a newly formed company which is majority owned by Mr. J. Marvin
Feigenbaum, our chairman and CEO. Such investment was pursuant to an affirmative
vote, with Mr. Feigenbaum abstaining, by the Board of Directors at a meeting
held April 17, 2000. This corporation has suspended its efforts to implement its
proposed and intended business for the foreseeable future in light of prevailing
market conditions. The entire $200,000 investment was recognized as a loss for
the year ended December 31, 2000.
The affirmative vote of a plurality of the outstanding common shares entitled to
vote is required to elect the Directors in Proposal No. 3
FINANCIAL INFORMATION
A copy of our annual report on Form 10-KSB, without the accompanying
exhibits, for the fiscal year ended December 31, 2000, filed with the Securities
and Exchange Commission has been provided with this proxy statement. Additional
copies of such Form 10-KSB and/or the exhibits will be furnished, without
charge, upon a written request sent to Lee Ann DeRita, United Diagnostic, Inc.,
238 Robinson Street, Suite 202, Wakefield, Rhode Island 02879. Such request must
set forth a good faith representation that, as of August 21, 2001, the person
making the request was the beneficial owner of common stock or series A
convertible preferred stock entitled to vote at the 2001 special meeting of
stockholders.
OTHER BUSINESS
As of the date of this proxy statement, the foregoing is the only
business which the Board of Directors intends to present, and it is not aware of
any other matters which may come before the special meeting. If any other matter
or matters are properly brought before the special meeting, or any adjournments
thereof, it is the intention of the persons named in the accompanying form of
Proxy to vote the Proxy on such matters in accordance with their judgment.
STOCKHOLDER PROPOSALS FOR 2002 MEETING
Proposals of stockholders intended to be presented at the company's
2002 annual meeting of stockholders must be received by the company on or prior
to May 28, 2002, to be eligible for inclusion in the company's proxy statement
and form of proxy to be used in connection with the 2002 annual meeting of
stockholders.
By Order of the Board of Directors
DAVID A. STERLING
Secretary
Dated August 22, 2001
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN YOUR
PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF IT IS MAILED
IN THE UNITED STATES OF AMERICA
Appendix A
UNITED DIAGNOSTIC, INC.
FORM OF PROPOSED
AMENDED CERTIFICATE OF DESIGNATIONS, PREFERENCES AND
RIGHTS AND NUMBER
OF SHARES OF
SERIES A CONVERTIBLE PREFERRED STOCK
Pursuant to Section 151 of the
Delaware General Corporation Law
The undersigned President and Secretary, respectively, of NU-TECH
BIO-MED, INC., a Delaware corporation (the "Corporation") certifies that
pursuant to authority granted to and vested in the Board of Directors of the
Corporation by the provisions of the Certificate of Incorporation and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, its Board of Directors has duly adopted the following
resolutions amending the Certificate of Designation, Preferences and Rights and
Number of Shares of Series A Convertible Preferred Stock filed with the office
of the Secretary of State of Delaware on October 1, 1996 (the "Certificate of
Designation of Series A Preferred Stock"). The undersigned further certifies
that no shares of Series A Preferred Stock have been issued prior to the date of
this Amended Certificate of Designations. The Certificate of Designations of
Series A Preferred Stock is hereby amended in its entirety to read as follows:
RESOLVED, that pursuant to the authority vested in the Board of
Directors of the corporation of the Corporation's Certificate of Incorporation,
a series of preferred stock of the corporation be, and it hereby is, created out
of the authorized but unissued shares of the capital stock of the corporation,
such series to be designated Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock"), to consist of 14,000 shares, par value $.01 per
share, of which the preferences and relative and other rights, and the
qualifications, limitations or restrictions thereof, shall be (in addition to
those set forth in the Corporation's Certificate of Incorporation) as follows:
(1) Certain Definitions.
Unless the context otherwise requires, the terms defined in this
paragraph 1 shall have, for all purposes of this resolution, the meanings herein
specified.
Common Stock. The term "Common Stock" shall mean all shares now or
hereafter authorized of any class of Common Stock, par value $.01 per share of
the Corporation, and any other stock of the Corporation, howsoever designated,
authorized after the Issue Date, which has the right (subject always to prior
rights of any class or series of preferred stock) to participate in the
distribution of the assets and earnings of the Corporation without limit as to
per share amount.
Conversion Date. The term "Conversion Date" shall have the meaning set
forth in subparagraph 4(d) below.
Conversion Price. The term "Conversion Price" shall mean the price per
share of Common Stock used to determine the number of shares of Common Stock
deliverable upon conversion of a share of the Series A Convertible Preferred
Stock, which price shall initially be deemed to be $0.66.
Conversion Shares. The shares of Common Stock issued or issuable to the
holders of the Series A Preferred Stock upon conversion thereof in accordance
with the terms hereof.
Current Market Price. The term "Current Market Price" shall have the
meaning set forth in subparagraph 4(g) below.
Issue Date. The term "Issue Date" shall mean the date that shares of
Series A Convertible Preferred Stock are first issued by the Corporation.
Purchase Price. The term "Purchase Price" shall mean $1,000 per share.
Senior Stock. The term "Senior Stock" shall mean any class or series of
stock of the Corporation issued after the Issue Date ranking senior to the
Series A Convertible Preferred Stock in respect of the right to receive
dividends, and, for the purposes of paragraph 3 below, any class or series of
stock of the Corporation issued after the Issue Date ranking senior to the
Series A Convertible Preferred Stock in respect of the right to receive assets
upon the liquidation, dissolution or winding up of the affairs of the
Corporation.
Subsidiary. The term "Subsidiary" shall mean any Corporation of which
shares of stock possessing at least a majority of the general voting power in
electing the board of directors are, at the time as of which any determination
is being made, owned by the Corporation, whether directly or indirectly through
one or more Subsidiaries.
(2) Dividends.
Shares of Series A Convertible Preferred Stock shall not be entitled to
receive or earn any fixed dividends thereon.
(3) Distributions Upon Liquidation, Dissolution or Winding Up.
In the event of any voluntary or involuntary liquidation, dissolution
or winding up of the affairs of the Corporation, subject to the prior
preferences and other rights of any Senior Stock, but before any distribution or
payment shall be made to the holders of Junior Stock, the holders of the Series
A Convertible Preferred Stock shall be entitled to be paid $1,000 per share, and
no more, in cash or in property taken at its fair value as determined by the
Board of Directors, or both, at the election of the Board of Directors. If such
payment shall have been made in full to the holders of the Series A Convertible
Preferred Stock, and if payment shall have been made in full to the holders of
any Senior Stock of all amounts to which such holders shall be entitled, the
remaining assets and funds of the Corporation shall be distributed among the
holders of Junior Stock, according to their respective shares and priorities.
If, upon any such liquidation, dissolution or other winding up of the affairs of
the Corporation, the net assets of the Corporation distributable among the
holders of all outstanding shares of the Series A Convertible Preferred Stock
shall be insufficient to permit the payment in full to such holders of the
preferential amounts to which they are entitled, then the entire net assets of
the Corporation remaining after the distributions to holders of any Senior Stock
of the full amounts to which they may be entitled shall be distributed among the
holders of the Series A Convertible Preferred Stock ratably in proportion to the
full amounts to which they would otherwise be respectively entitled. Neither the
consolidation or merger of the Corporation into or with another Corporation,
Corporations, entity or other entities, nor the sale of all or substantially all
of the assets of the Corporation shall be deemed a 1iquidation, dissolution or
winding up of the affairs of the Corporation within the meaning of this
paragraph 3. Notwithstanding anything herein to the contrary, while any shares
of Series A Convertible Preferred Stock are outstanding, the Corporation shall
not establish any Senior Stock without the prior affirmative vote of a majority
of the shares of Series A Convertible Preferred Stockholders.
(4) Conversion Rights.
The Series A Convertible Preferred Stock shall be convertible into
Common Stock as follows:
(a) Optional Conversion. Subject to and upon compliance with the
provisions of this paragraph 4, on each of the 45th day following the Issue
Date, the 75th day following the Issue Date and the 105th day following the
Issue Date, up to one-third (1/3) of the outstanding shares of Series A
Convertible Preferred Stock shall be convertible into fully paid and
nonassessable shares of Common Stock, at the applicable Conversion Price, at the
option of the holder of any shares of Series A Convertible Preferred Stock upon
the terms hereinafter set forth.
(b) Mandatory Conversion. Each share of Series A Convertible Preferred
Stock shall be deemed automatically converted into Common Stock at the
Conversion Price on a date which is 270 days from the Issue Date following 30
days prior written notice from the Corporation; provided, however, for each day
after a date which is 60 days from the Issue Date that the Company does not have
an order from the Securities and Exchange Commission declaring effective a
registration statement covering the Conversion Shares, then a day shall be added
to the aforementioned 270 day period.
(c) Number of Shares. Each share of Series A Convertible Preferred
Stock shall be converted into a number of shares of Common Stock determined by
dividing (i) the Purchase Price by (ii) the Conversion Price in effect on the
Conversion Date. The Conversion Price shall be subject to adjustment as set
forth in subparagraph 4(f).
(d) Mechanics of Conversion. The holder of any shares of Series A
Convertible Preferred Stock may exercise the conversion right specified in
subparagraph 4(a) by surrendering to the Corporation or any transfer agent of
the Corporation the certificate or certificates for the shares to be converted,
accompanied by written notice specifying the number of shares to be converted;
provided that the Corporation shall not be obligated to issue to any such holder
certificates evidencing the shares of Common Stock issuable upon such conversion
unless certificates evidencing the shares of Series A Convertible Preferred
Stock are either delivered to the Corporation or any transfer agent of the
Corporation. Conversion of the Shares may be exercised in whole or in part by
the holder by telecopying an executed and completed notice of conversion to the
Corporation and delivering the original notice of conversion and the certificate
representing the shares of Series A Preferred Stock being converted to the
Corporation by express courier within three (3) business days of exercise.
Conversion shall be deemed to have been effected on the date when delivery of
notice of an election to convert and certificates for shares to be converted are
delivered to the Corporation and such date is referred to herein as the
"Conversion Date". Subject to the provisions of subparagraph 4(f)(vii), as
promptly as practicable thereafter, the Corporation shall issue and deliver to
or upon the written order of such holder a certificate or certificates for the
number of full shares of Common Stock to which such holder is entitled and a
check or cash with respect to any fractional interest in a share of common Stock
as provided in subparagraph 4(f). Subject to the provisions of subparagraph
4(f)(vii), the person in whose name the certificate or certificates for Common
Stock are to be issued shall be deemed to have become a holder of record of such
Common Stock on the applicable Conversion Date. Upon conversion of only a
portion of the number of shares covered by a certificate representing shares of
Series A Convertible Preferred Stock surrendered for conversion (in the case of
conversion pursuant to subparagraph 4(a), the Corporation shall issue and
deliver to or upon the written order of the holder of the certificate so
surrendered for conversion, at the expense of the Corporation, a new certificate
covering the number of shares of Series A Convertible Preferred Stock
representing the unconverted portion of the certificate so surrendered.
(e) Fractional Shares. No fractional shares of Common Stock or scrip
shall be issued upon conversion of shares of Series A Convertible Preferred
Stock. If more than one share of Series A Convertible Preferred Stock shall be
surrendered for conversion at any one time by the same holder, the number of
full shares of Common stock issuable upon conversion thereof shall be computed
on the basis of the aggregate number of shares of Series A Convertible Preferred
Stock so surrendered. Instead of any fractional shares of Common Stock which
would otherwise be issuable upon conversion of any shares of Series A
Convertible Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fractional interest in an amount equal to that fractional
interest of the Conversion Rate.
(f) Conversion Price Adjustments. The Conversion Price shall be subject
to adjustment from time to time as follows:
(i) Stock Dividends, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (A) declare a dividend or
make a distribution on its Common Stock in shares of its Common
Stock, (B) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares, or (C) combine or
reclassify the outstanding Common Stock into a smaller number of
shares, the Conversion Price in effect at the time of the record
date for such dividend or distribution or the effective date of
such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any shares of
Series A Convertible Preferred Stock surrendered for conversion
after such date shall be entitled to receive the number of shares
of Common Stock which he would have owned or been entitled to
receive had such Series A Convertible Preferred Stock been
converted immediately prior to such date. Successive adjustments
in the Conversion Price shall be made whenever any event
specified above shall occur.
(ii) Other Distributions. In case the Corporation shall fix a
record date for the making of a distribution to all holders of
shares of its Common Stock (A) of shares of any class other than
its Common Stock or (B) of evidence of indebtedness of the
Corporation or any Subsidiary or (C) of assets (excluding cash
dividends or distributions, and dividends or distributions
referred to in subparagraph 4(f)(i) above), or (D) of rights or
warrants (excluding those referred to in subparagraph 4(f)(i)
above), each holder of a share of Series A Convertible Preferred
Stock shall, upon the exercise of his right to convert after such
record date, receive, in addition to the shares of Common Stock
to which he is entitled, the amount of such shares, indebtedness
or assets (or, at the option of the Corporation, the sum equal to
the value thereof at the time of distribution as determined by
the Board of Directors in its sole discretion) that would have
been distributed to such holder if he had exercised his right to
convert immediately prior to the record date for such
determination.
(iii) Consolidation, Merger, Sale, Lease or Conveyance. In case
of any consolidation with or merger of the Corporation with or
into another Corporation, or in case of any sale, lease or
conveyance to another Corporation of the assets of the
Corporation as an entirety or substantially as an entirety, each
share of Series A Convertible Preferred Stock shall after the
date of such consolidation, merger, sale, lease or conveyance be
convertible into the number of shares of stock or other
securities or property (including cash) to which the Common Stock
issuable (at the time of such consolidation, merger, sale, lease
or conveyance) upon conversion of such share of Series A
Convertible Preferred Stock would have been entitled upon such
consolidation, merger, sale, lease or conveyance; and in any such
case, if necessary, the provisions set forth herein with respect
to the rights and interests thereafter of the holders of the
shares of Series A Convertible Preferred Stock shall be
appropriately adjusted so as to be applicable, as nearly as may
reasonably be, to any shares of stock or other securities or
property thereafter deliverable on the conversion of the shares
of Series A Convertible Preferred
(iv) Stock Adjustment for Lack of Timely Registration. is as set
forth in clause (ii) of the defined term "Conversion Price"
above, then the applicable Conversion Price shall be deemed to be
90% of the NASDAQ closing price. In addition to the foregoing,
the Conversion Price adjustments set forth in (a) and (b) above
shall be further reduced by 2% per month for each 30 day period
for which the registration statement Adjustment for Lack of
Timely Registration. The holders of the Series A Convertible
Preferred Stock are entitled to the registration rights as set
forth in that certain Registration Rights Agreement to be entered
into between the Corporation and the holders of the Series A
Convertible Preferred Stock. In the event that the Corporation
fails to obtain an order from the Securities and Exchange
Commission declaring effective the registration statement filed
by the Corporation under the Securities Act of 1933 in order to
register for sale by the holders the Conversion Shares within 120
days of receipt by the Corporation of the holder's Demand
Registration Request (as defined in the Registration Rights
Agreement), the applicable Conversion Price shall be adjusted as
follows: (A) if the applicable Conversion Price prior to
adjustment herein is as set forth in clause (i) of the defined
term "Conversion Price" above, then the percentage discount from
the NASDAQ closing price shall be deemed 35% instead of 25% or
(B) if the applicable Conversion Price prior to adjustment herein
is not effective beyond the initial 120 day period set forth
above. In no event shall this further adjustment exceed 12% in
the aggregate. By way of example, if the registration statement
is declared effective 150 days after the Demand Registration
Request, then the Conversion Price shall be the lesser of (x) 37%
of the NASDAQ closing price or (y) $15.40
(v) Rounding of Calculations: Minimum Adjustment. All
calculations under the provisions of subparagraph (e) shall be
made to the nearest cent or to the nearest one hundredth
(1/100th) of a share, as the case may be. Any provision of this
paragraph 4 to the contrary notwithstanding, no adjustment in the
Conversion Price shall be made if the amount of such adjustment
would be less than $0.01 until the end of three years after such
adjustment would otherwise have been required, but any such
amount shall be carried forward and an adjustment with respect
thereto shall be made at the time of and together with any
subsequent adjustment which, together with such amount any other
amount or amounts so carried forward, shall aggregate $0.01 or
more.
(vi) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. In any case in which the provisions of this
subparagraph (f) shall require that any adjustment shall become
effective immediately after a record date for an event, the
Corporation may defer until the occurrence of such event (A)
issuing to the holder of any share of Series A Convertible
Preferred Stock converted after such record date and before the
occurrence of such event the additional shares of Common Stock
issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock
issuable upon such conversion before giving effect to such
adjustment and (B) paying to such holder any amount of cash in
lieu of a fractional share of Common Stock pursuant to
subparagraph (e) of this paragraph 4, provided that the
Corporation upon request shall deliver to such holder a due bill
or other appropriate instrument evidencing such holder's right to
receive such additional shares, and such cash, upon the
occurrence of the event requiring such adjustment.
(g) Statement Regarding Adjustments. Whenever the Conversion Price
shall be adjusted as provided in subparagraph 4(e), the Corporation shall
forthwith file, at the office of any transfer agent for the Series A Convertible
Preferred Stock and at the principal office of the Corporation, a statement
showing in detail the facts requiring such adjustment and the Conversion Price
that shall be in effect after such adjustment, and the Corporation shall also
cause a copy of such statement to be sent by registered or certified mail,
return receipt requested, postage prepaid, to each holder of shares of Series A
Convertible Preferred Stock at its address appearing on the Corporation's
records. Each such statement shall be signed by the Corporation's independent
public accountants, if applicable. Where appropriate, such copy may be given in
advance and may be included as part of a notice required to be mailed under the
provisions of subparagraph 4(g).
(h) Notice to Holders. In the event the Corporation shall propose to
take any action of the type described in clause (i) (but only if the action of
the type described in clause (i) would result in an adjustment in the Conversion
Price), (iii), (iv) or (v) of subparagraph 4(e), the Corporation shall give
notice to each holder of shares of Series A Convertible Preferred Stock, in the
manner set forth in subparagraph 4(f), which notice shall specify the record
date, if any, with respect to any such action and the approximate date on which
such action is to take place. Such notice shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Conversion Price and the number, kind or class of shares or other securities
or property which shall be deliverable upon conversion of shares of Series A
Convertible Preferred Stock. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 10 days prior to
the date so fixed, and in case of all other action, such notice shall be given
at least 15 days prior to the taking of such proposed action. Failure to give
such notice, or any defect therein, shall not affect the legality or validity of
any such action.
(i) Costs. The Corporation shall pay all documentary, stamp, transfer
or other transactional taxes attributable to the issuance or delivery of shares
of Common Stock upon conversion of any shares of Series A Convertible Preferred
Stock; provided that the Corporation shall not be required to pay any taxes
which may be payable in respect of any transfer involved In the issuance or
delivery of any certificate for such shares in a name other than that of the
holder of the shares of Series A Convertible Preferred Stock in respect of which
such shares are being issued.
(j) Reservation of Shares. The Corporation shall reserve at all times
so long as any shares of Series A Convertible Preferred Stock remain
outstanding, free from preemptive rights, out of its treasury stock (if
applicable) or its authorized but unissued shares of Common Stock, or both,
solely for the purpose of effecting the conversion of the shares of Series A
Convertible Preferred Stock, sufficient shares of Common Stock to provide for
the conversion of all outstanding shares of Series A Convertible Preferred
Stock.
(k) Valid Issuance. All shares of Common Stock which may be issued upon
conversion of the shares of Series A Convertible Preferred Stock will upon
issuance by the Corporation be duly and validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issuance thereof, and the Corporation shall take no action which will cause a
contrary result (including, without limitation, any action which would cause the
Conversion Price to be less than the par value, if any, of the Common Stock).
(l) In addition to the conversion provisions of Sections 4(a) and (b),
if any shares of Series A Convertible Preferred Stock remain outstanding five
business days after the date upon which an amendment to the Certificate of
Designation is filed revising the Conversion Price to $0.66 per share, all such
outstanding shares of Series A Convertible Preferred Stock outstanding shall
automatically convert into shares of Common Stock pursuant to the terms of the
revised Certificate of Designation.
(5) Voting Rights.
The holders of record of shares of Series A Convertible Preferred Stock
shall not be entitled to any voting rights except as otherwise provided by law
or as set forth herein with respect to the establishment of Senior Stock.
(6) Redemption.
Shares of Series A Convertible Preferred Stock shall not be redeemable
by the Corporation.
(7) Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of Series A
Convertible Preferred Stock shall not have any preferences or relative,
participating, optional or other special rights, other than those specifically
set forth in this resolution (as such resolution may be amended from time to
time) and in the Corporation's Certificate of Incorporation.
(8) Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
(9) Severability of Provisions.
If any right, preference or limitation of the Series A Convertible
Preferred Stock set forth in this resolution (as such resolution may be amended
from time to time) is invalid, unlawful or incapable of being enforced by reason
of any rule of law or public policy, all other rights, preferences and
limitations set forth in this resolution (as so amended) which can be given
effect without the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed dependent upon any
other such right, preference or limitation unless so expressed herein.
(10) Status of Reacquired Shares.
Shares of Series A Convertible Preferred Stock which have been issued
and reacquired in any manner or converted shall (upon compliance with any
applicable provisions of the laws of the State of Delaware) not be reissued as
Series A Convertible Preferred Stock, but shall have the status of authorized
and unissued shares of Preferred Stock issuable in series undesignated as to
series and may be redesignated and reissued.
IN WITNESS WHEREOF, this Certificate has been made under the seal of
the Corporation and the hands of the undersigned on September 27, 1996 .
/s/J. Marvin Feigenbaum
----------------------------
Name: J. Marvin Feigenbaum
Title: President
Attest:
/s/ David Sterling
- ----------------------------
Name: David Sterling
Title: Secretary
Appendix B
STOCK OPTION GRANT CERTIFICATE
United Diagnostic Inc., a Delaware corporation (the "Company"), hereby
grants to J. Marvin Feigenbaum (the "Optionee") a stock option (the "Option") to
purchase 500,000 shares (the "Option Shares") of common stock, par value $0.01
per share, of the Company ("Common Stock"), pursuant to the terms and conditions
of this stock option grant certificate (this "Certificate").
1. Basic Terms of Option.
- ------------------------------
(a) Type of Option. The Option is hereby designated as a
Non-Qualified Stock Option.
(b) Term of Option. The Option shall expire at 5 p.m., New York
City time, on July 31, 2008 (the "Expiration Date"), unless
previously terminated pursuant to Section 1(f) hereof. To the
extent any portion of the Option has vested, the Option may be
exercised with respect to such vested portion during the term and
prior to the Expiration Date, even if the Optionee is no longer
employed by the Company.
(c) Exercise Price. The exercise price at which each Option Share
may be purchased shall be $.66 (the "Exercise Price"). The
Company shall pay all original issue or transfer taxes on the
exercise of this Option and all other fees and expenses
necessarily incurred by the Company in connection herewith. The
Exercise Price shall be payable in cash or in shares of Common
Stock, as provided in Section 2(a) hereof.
(d) Vesting. The Option shall vest and become exercisable in
accordance with Section 3 hereof. The date of grant is July 31,
2001, subject to ratification and approval of such grant by the
stockholders of the Company.
(e) Method of Exercise. The Option shall be exercisable in whole
or in part at any time, or from time to time, in accordance with
the terms of Section 2(a) hereof and in accordance with
applicable federal and state laws and regulations. The Option,
however, may not at any time be exercised with respect to a
fractional share.
(f) Employment Agreement. Unless otherwise provided in the
Employment Agreement, dated May 19, 1999, by and between the
Company and the Optionee (the "Employment Agreement"):
(i) If the employment of the Optionee shall be terminated
for cause (as defined in the Employment Agreement), or if
the Optionee leaves such employment voluntarily, the
unvested portion of the Option shall cease vesting
immediately and shall be forfeited upon such termination. If
such employment shall be terminated by reason of the
Optionee's death, retirement, or permanent disability, or by
the Company other than for cause, the unvested portion of
the option shall vest immediately, subject to the terms of
subsections (ii) and (iii) of this Section 1(f).
(ii) If the Optionee dies while employed by the Company or a
subsidiary or parent corporation, the Option, subject to the
provisions of subsection (iv) of this Section 1(f), may be
exercised by a legatee or legatees of the Optionee under the
Optionee's last will, or by Optionee's distributee or
distributees under the laws of descent and distribution, at
any time after the Optionee's death and before the
Expiration Date.
(iii) If the Optionee becomes disabled while employed by the
Company or a subsidiary or parent corporation, such Option,
subject to the provisions of subsection (iv) of this Section
1(f), may be exercised at any time after the Optionee's
termination of employment and before the Expiration Date.
(iv) This Option may not be exercised pursuant to this
Section 1(f) except to the extent that the Optionee was
entitled to exercise the Option, or any part thereof, at the
time of termination of employment, disability or death, and
in any event may not be exercised after the original
expiration date of the Option.
(v) In the event Mr. Feigenbaum exercises the change of
control provision contained in the Employment Agreement, he
will forfeit all of the options granted under Proposal No. 2
in the Company's Proxy Statement dated August 22, 2001 (the
"Proxy Statement").
(g) Accelerated Vesting upon Change in Control. If, at any time
following the 2001 meeting of stockholders of the Company and
before the Expiration Date, there shall be a Change in Control
(as defined below) prior to the time when the Option has become
fully vested, then any unvested portion of the Option shall vest
immediately upon the completion of such sale or sales. For
purposes of this Section 1(g), "Change in Control" shall mean as
follows:
(i) any "person" (other than a "person" owning 10% or more
of the issued and outstanding Common Stock of the Company on
the date of grant of the Option) (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Act")) becomes a "beneficial
owner" (as such term is defined in Rule 13d-3 promulgated
under the Act) (other than the Optionee, the Company, any
trustee or other fiduciary holding securities under an
employee benefit plan of the Company, or any corporation
owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their
ownership of stock of the Company) directly or indirectly,
of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding
securities; or
(ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation or
other entity, other than (a) a merger or consolidation which
would result in the voting securities of the Company
outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity)
more than 25% of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation
or (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in
which no "person" (as hereinabove defined) acquires more
than 25% of the combined voting power of the Company's then
outstanding securities; or
(iii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets; or
(iv) a majority of the current members of the Board of
Directors of the Company no longer continue to serve as
directors or, in the case of the resignation or removal of
any current director, his successor is not elected by the
remaining current directors of the Company.
2. Option Shares.
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(a) The Option is exercisable upon the presentation and surrender
of this Certificate and written notice of exercise of the Option
substantially in the form of Annex A hereto, accompanied by
payment of the Exercise Price for the Option Shares being
purchased in lawful money of the United States of America in
cash, by check made payable to the Company or in shares of Common
Stock. In the event the Optionee pays the Exercise Price for the
Option Shares being purchased in shares of Common Stock, upon
exercise of this Option the Optionee shall receive a reduced
number of shares of Common Stock equal to (i) the number of
shares of Common Stock that would be issuable pursuant to this
Option upon payment of the Exercise Price for the Option Shares
being purchased minus (ii) the number of shares of Common Stock
that have an aggregate Fair Market Value (as defined below) equal
to the aggregate Exercise Price for the Option Shares being
purchased. For purposes of the preceding sentence, the "Fair
Market Value" of a share of Common Stock shall mean the average
of the last reported sale prices for the Common Stock reported in
any recognized United States trading market, which is the primary
market for trading the Common Stock as determined by volume of
shares traded, including (a) any national securities exchange,
(b) the NASDAQ Stock Market, (c) the Over the Counter Bulletin
Board, or (d) the "pink sheets" for the ten (10) days preceding
the date of exercise.
(b) Status of Option Shares. Effective upon the exercise of the
Option in whole or in part and the receipt by the Company of the
Exercise Price for the Option Shares being purchased, the
Optionee shall be the holder of record of such shares and shall
have all of the rights of a stockholder with respect thereto
(including the right to vote such shares at any meeting at which
the holders of the Common Stock may vote, the right to receive
all dividends declared and paid upon such shares and the right to
exercise any rights or warrants issued in respect of any such
shares). The Company shall, upon receipt of the Exercise Price
for the Option Shares being purchased, issue in the name of the
Optionee a certificate representing the Option Shares purchased
from time to time.
(c) Legend. The Option Shares, unless registered under the
Securities Act of 1933 (the "Act"), shall bear the following
legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE
"SECURITIES ACT"), AND MAY NOT BE SOLD, PLEDGED, ASSIGNED, OR
OTHERWISE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (B) IN
COMPLIANCE WITH RULE 144 UNDER THE SECURITIES ACT, OR (C) THE
COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT NO REGISTRATION IS REQUIRED IN
CONNECTION WITH SUCH SALE, ASSIGNMENT OR TRANSFER OR THAT AN
EXEMPTION TO SUCH REGISTRATION IS AVAILABLE."
(d) Investment Intent. If the certificate representing the Option
Shares issuable upon a given exercise is required to bear the
legend set forth above (or a legend to like effect), the Optionee
shall, by such exercise of the Option, be deemed conclusively to
represent and to agree with the Company that the Optionee is
acquiring the Option Shares then being purchased for his or her
own account and not for the account of others, for investment
only, and not with a view to public sale or distribution.
(e) Registration of Option Shares. Within four (4) months from
the date of grant of this Option, the Company shall, at its sole
cost and expense, file with the Securities and Exchange
Commission either a form S-8, or similar form which may be
promulgated in the future, or a form S-3, or similar form which
may be promulgated in the future, with respect to the resale of
the Option Shares by the Optionee or its assigns.
(f) Adjustments.
(i) Merger, Sale of Assets, etc. In the event the Company,
at any time prior to the Optionee's exercise of the Option,
(i) reorganizes (other than a combination, reclassification,
exchange or subdivision); (ii) merges or consolidates the
Company with or into another corporation in which the
Company is not the surviving entity, or merges with another
corporation in which the Company is the surviving entity but
the shares of the Company's capital stock outstanding
immediately prior to the merger are converted by virtue of
the merger into other property, whether in the form of
securities, cash or otherwise; or (iii) sells or transfers
the Company's properties and assets as, or substantially as,
an entirety to any other person, then, as part of such
reorganization, merger, consolidation, sale or transfer,
provision shall be made so that the Optionee shall
thereafter be entitled to receive upon exercise of the
Option the number of securities or property of the successor
corporation resulting from such reorganization, merger,
consolidation, sale or transfer that a holder of the
securities deliverable upon exercise of the Option would
have been entitled to receive in such reorganization,
consolidation, merger, sale or transfer if the Option had
been exercised immediately prior to such reorganization,
merger, consolidation, sale or transfer.
(ii) Declaration of Dividends, Stock Splits, etc. In the
event the Company declares a dividend or distribution of its
capital stock, or effects a stock split or reverse stock
split with respect to its capital stock, or issues any
shares of its capital stock by reclassification of shares of
its capital stock, the exercise rights of the Optionee in
effect on the date of such event shall be adjusted
proportionately so that the Optionee thereafter shall be
entitled to receive upon exercise pursuant to the terms and
conditions hereof the aggregate number of shares of capital
stock that the Optionee would own or be entitled to receive
after the happening of any of the events mentioned in this
Section 2(f)(ii) if the Option had been exercised
immediately prior to the close of business on the date of
such happening.
(iii) Notice of Adjustment. The Company shall give written
notice to the Optionee within ten (10) days following the
consummation of any transaction within the scope of this
Section 2(f) and provide in such written notice a brief
description of the terms and conditions of such transaction.
3. Vesting of Option.
- ----------------------
(a) Vesting Conditions. The Option shall vest as follows:
---------------------
Date Total Number of Option Shares Vested at
---- ---------------------------------------
July 31, 2001 250,000
July 31, 2002 375,000
July 31, 2003 500,000
(b) Board's Right to Waiver or Acceleration. Any provision of this
Section 3 to the contrary notwithstanding, the Board of Directors of the Company
reserves the right, in its sole discretion, to waive any condition to the
vesting of the Option and accelerate the date on which any installment of the
Option shall vest in the event of a change in control of the Company or
otherwise.
4. General Provisions.
- ----------------------
(a) Administration and Construction. The provisions hereof shall be
administered and construed by the Board of Directors of the Company, whose
decisions shall be conclusive and binding on the Company, the Optionee and
anyone claiming under or through either of them. Without limiting the
generality of the foregoing, any determination as to whether or not an
event has occurred or failed to occur which causes any unvested portion of
the Option to be forfeited or become vested pursuant hereto, shall be made
in the good faith but otherwise absolute discretion of the Board of
Directors of the Company. By the Optionee's acceptance of this Certificate,
the Optionee and each person claiming under or through the Optionee
irrevocably consents and agrees to all actions, decisions and
determinations to be taken or made by the Board of Directors of the Company
in good faith pursuant to this Certificate.
(b) No Rights in Option Stock. The Optionee shall have no rights as a
shareholder in respect of any Option Shares as to which the Option shall
not have been exercised and payment made as herein provided.
(c) Recapitalization. If the Optionee receives, with respect to the Option,
any other option or warrant to purchase securities of the Company or of any
other entity as a result of any recapitalization, merger, consolidation,
combination, or exchange of shares or a similar corporate change, any such
other option or warrant received by the Optionee shall likewise be subject
to the terms and conditions of this Certificate and shall be included in
the term "Option." Similarly, any securities or other property as to which
such other option or warrant is exercisable shall be included in the term
"Option Shares." In the event of any such corporate change, the Exercise
Price set forth in Section 1(c) shall be appropriately adjusted by the
Board of Directors of the Company such that the aggregate price for all
such Option Shares is not changed.
(d) Legal Representative. In the event of the Optionee's death or a
judicial determination of the Optionee's incompetence, reference in this
Certificate to the Optionee shall be deemed to refer to his or her legal
representative or, where appropriate, to such person to whom the Optionee's
rights pursuant to this Certificate shall have passed by will or by the
laws of descent and distribution.
(e) Holidays. If any event provided for in this Certificate is scheduled to
take place on a legal holiday, such event shall take place on the next
succeeding day that is not a legal holiday.
(f) Notices to the Company. Any notice or other communication to the
Company pursuant to any provision of this Certificate shall be deemed to
have been delivered when delivered in person to the Corporate Secretary of
the Company or when deposited in the United States mail, first class
postage prepaid, addressed to the Corporate Secretary of the Company at 238
Robinson Street, Suite 202, Wakefield, RI 02879, or at such other address
of which the Company may from time to time give the Optionee written notice
in accordance with Section 5(g) hereof.
(g) Notices to the Optionee. Any notice or other communication to the
Optionee pursuant to any provision of this Certificate shall be deemed to
have been delivered when delivered to the Optionee in person or when
deposited in the United States mail, first class postage prepaid, addressed
to the Optionee at his or her address on the security holder records of the
Company or at such other address of which the Optionee may from time to
time give the Company written notice in accordance with Section 5(f)
hereof.
(h) Limited Assignability. This Option may be assigned or transferred by
the Optionee during his lifetime to (i) any family member of the Optionee,
(ii) any trust established by the Optionee for the benefit of himself or of
any family member, or (iii) any bonafide charity (each a "Permitted
Transferee"). Except for a Permitted Transferee, the Option shall not be
assignable or transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order as defined
by the Internal Revenue Code of 1986, as amended or Title I of the Optionee
Retirement Income Security Act, or the rules thereunder.
[SIGNATURE PAGE FOLLOWS]
UNITED DIAGNOSTIC INC.
By:________________________________________
Name: J. Marvin Feigenbaum
DATED: July 31, 2001 Title:President and Chief Executive Officer
ANNEX A
United Diagnostic Inc.
238 Robinson Street
Suite 202
Wakefield, RI 02879
Attention: Corporate Secretary
Dear Sir or Madam:
I am an optionee of United Diagnostic Inc. (the "Company"), having been
granted on July 31, 2001 an option for 500,000 shares at an exercise price of
$.66 per share. Of such grant, options for __________________ shares remain
unexercised and unexpired as of this date.
I hereby exercise the aforesaid options for ___________ shares (the
"Option Shares") and enclose (i) my check of $________________ in payment of the
exercise price for the Option Shares or (ii) common stock certificate number
____, representing _____________ shares of common stock of the Company, having
an aggregate fair market value of $_____________, as determined pursuant to
Section 2(a) of the Certificate, in payment of the exercise price for the Option
Shares.
Very truly yours,
______________________________
Date: J. Marvin Feigenbaum