SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) JANUARY 20, 1997
ADVANCED NMR SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-11914 22-2457487
------------------- --------------------------- ----------------
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION FILE NUMBER) IDENTIFICATION NO.)
OF INCORPORATION)
46 JONSPIN ROAD, WILMINGTON, MA 01887
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (508) 657-8876
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<PAGE>
ITEM 5. OTHER EVENTS.
-------------
On January 20, 1997, Advanced NMR Systems, Inc., a
Delaware corporation (the "Company") and its wholly-owned
subsidiary Medical Diagnostics, Inc., a Delaware corporation
("MDI"), entered into an Agreement and Plan of Merger (the
"Merger Agreement") with US Diagnostic Inc., a Delaware
corporation ("USD") and its newly-formed wholly-owned subsidiary
MDI Acquisition Corporation, a Delaware corporation
("Acquisition"). The Merger Agreement provides for the merger
(the "Merger") of Acquisition with and into MDI with MDI being
the surviving corporation of the Merger, and accordingly, MDI
would become a wholly-owned subsidiary of USD. The Merger would
become effective (the "Effective Time") upon the completion (or
waiver) of the closing conditions set forth in the Merger
Agreement.
At the Effective Time, in conversion of the MDI shares
upon the Merger, USD shall pay the Company $22,000,000 (the
"Merger Consideration") as follows: (i) to Chase Manhattan Bank
N.A. (the "Bank"), on behalf of the Company and MDI, an amount
sufficient to fully satisfy all of the Company's and MDI's
obligations to the Bank (approximately $12,000,000) and (ii) the
remainder (approximately $10,000,000) to the Company. As a
result of the Merger, USD will also be assuming approximately
$10,000,000 in payment obligations under MDI's capital leases.
Prior to entering into the Merger Agreement, the
Company engaged in extensive discussions and negotiations with
possible acquirors. USD had proposed the most attractive offer
among the possible acquirors. The amount of the Merger
Consideration was determined through arms-length negotiations
with USD. Prior to the entry into the Merger Agreement there had
not been any relationship by either the Company or MDI with USD.
After the Merger the Company will continue to provide
the existing rehabilitation services by retaining such business.
Immediately prior to the Effective Time, MDI will assign to the
Company its entire interest in MDI Rehab, Inc., MDI's wholly-
owned subsidiary that is engaged in the rehabilitation services
business. In addition, MDI will also cause one of its
subsidiaries to assign to the Company all of such subsidiary's
agreements relating to MDI's and such subsidiary's activities at
Faulkner Hospital Sagoff Women's Center. The Company will assume
all liabilities of MDI and its subsidiaries relating to such
assignments.
Each party to the Merger Agreement agreed to indemnify
the other for all losses resulting from any breach or violation
of any of the representations, warranties, covenants or
agreements contained in the Merger Agreement and any actions,
suits, proceedings and related costs and expenses incidental
thereto. The respective indemnification obligations expire 18
months after the date of the Merger Agreement, except that with
respect to tax and certain other specified matters (the "Excluded
Matters"), the indemnification obligation would survive for the
applicable statutory periods. In addition, a party's
indemnification obligation is only triggered (i) if and only to
the extent that the aggregate of all claims made against such
party exceeds $500,000 (the "Basket Limitation") and (ii) up to a
maximum cap of $3,000,000 (the "Cap"). These dollar limitations
or survival restrictions would not apply to the Excluded Matters
or to certain indemnification obligations relating to (i) MDI's
ongoing litigation with Raytel Corporation (the "Raytel
Litigation"), (ii) all claims of John Lynch, former Chief
Executive Officer of MDI, against MDI and its affiliates and
(iii) certain assumed employee agreements.
In the event that MDI is awarded and receives any
monetary damages in the Raytel Litigation, the Company would be
entitled to receive the net amount of such monetary award to the
extent that it has met its indemnification obligations to USD and
MDI under the special indemnification provisions relating to the
Raytel Litigation (the "Raytel Indemnification Obligations").
Prior to the Closing MDI will cause one of its subsidiaries to
assign to the Company all of such subsidiary's rights in and to
an escrow fund in the amount of $510,000, which relates to a
settlement amount received by the MDI venture with Raytel. Also,
to secure its Raytel Indemnification Obligations, the Company
agreed to transfer $1,000,000 of the Merger Consideration into a
blocked bank account and to pledge 1,250,000 shares (the "Pledged
Shares") of Advanced Mammography Systems, Inc. common stock owned
by the Company. The pledged collateral would be released upon a
settlement or a judgment on the merits by a trial court of the
Raytel Litigation, subject to fulfilling the Raytel
Indemnification Obligations. The Company may substitute
additional cash collateral for the Pledged Shares.
The Company also agreed to assume all of MDI's and its
subsidiaries' obligations under employment and related agreements
with four officers of MDI, including David Gaynor, its President.
The existing sublease with MDI for the premises in
Wilmington, Massachusetts would be amended to provide that either
party may terminate the sublease upon 60 days' written notice and
for the payment by MDI or USD of 50% of (a) amounts payable by
the Company to the landlord in the event of an early termination
of the underlying lease or (b) any deficiency resulting from the
Company's sublease of the premises at below the then current
lease payments, up to a maximum amount of $240,000.
The Company and MDI also made certain other covenants
that are customary in agreements similar to the Merger Agreement,
including (i) restrictions on any extraordinary acts as to the
operation of MDI during the interim period prior to the Closing,
(ii) post-closing restrictions on competition by the Company with
MDI for a three (3) year period, with certain exceptions and
(iii) the general release of MDI from any claims the Company may
have against MDI occurring at or prior to the Effective Time.
The Closing is conditioned upon the satisfaction of
customary conditions including, among other things, the receipt
of certain opinions, certificates and consents of governmental
authorities and other third parties, including the expiration or
termination of any notice and waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976. The Merger has
been authorized and approved by the Boards of Directors of the
Company, MDI, USD and Acquisition and it has also been authorized
and approved by the Company as the sole stockholder of MDI, but
it is not subject to approval by the Company's stockholders.
The Merger Agreement would be terminated if the Closing
does not occur on or prior to April 30, 1997. In addition, the
Merger Agreement may be terminated subject to the payment of a
$1,000,000 termination fee, if MDI's or the Company's Board of
Directors has accepted or recommended, in accordance with their
fiduciary duties under Delaware law, an acquisition proposal from
a third-party acquiror that is more favorable to MDI and the
Company than the Merger from a financial point of view. The
Merger Agreement may also be terminated, subject to the payment
of a $500,000 termination fee by the breaching party, as a result
of an intentional or willful breach by either party of any
representation, warranty or covenant made by either party or as
the result of the breach by either party of the representations
and warranties made by such party relating to its authority to
enter into the Merger Agreement and the enforceability of the
Merger Agreement against it.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS.
-----------------------------------------
(c) Exhibits
10. Agreement and Plan of Merger, dated January 20,
1997, among USD, Acquisition, the Company and MDI
(without exhibits or schedules).
99. Press Release, dated January 20, 1997, announcing
the execution of the Merger Agreement.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
ADVANCED NMR SYSTEMS, INC.
/s/ Jack Nelson
-----------------------------
Name: Jack Nelson
Title: Chairman
Dated: January 22, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Exhibit
------ ----------------------
10. Agreement and Plan of Merger, dated January
20, 1997, among USD, Acquisition, the Company
and MDI (without exhibits or schedules).
99. Press Release, dated January 20, 1997,
announcing the execution of the Merger
Agreement.
AGREEMENT AND PLAN OF MERGER,
Dated January 20, 1997,
among
US DIAGNOSTIC INC.
("USD"),
----
MDI ACQUISITION CORPORATION
("ACQUISITION"),
-------------
MEDICAL DIAGNOSTICS, INC.
("MDI"),
----
and
ADVANCED NMR SYSTEMS, INC.
("STOCKHOLDER").
------------
<PAGE>
TABLE OF CONTENTS
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Page
----
ARTICLE I Definitions . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II The Merger . . . . . . . . . . . . . . . . . . . . . 4
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . 4
2.2 Closing; Effective Time of the Merger . . . . . . . . 4
2.3 Effects of the Merger . . . . . . . . . . . . . . . . 4
2.4 Certificate of Incorporation and Bylaws . . . . . . . 4
2.5 Directors and Officers . . . . . . . . . . . . . . . 4
2.6 Effect on Capital Stock . . . . . . . . . . . . . . . 4
2.7 Conversion of Shares . . . . . . . . . . . . . . . . 5
ARTICLE III Representations and Warranties of USD . . . . . . 5
3.1 Organization; Authority . . . . . . . . . . . . . . . 5
3.2 Authorization; Enforceability . . . . . . . . . . . . 5
3.3 No Violation or Conflict . . . . . . . . . . . . . . 6
3.4 Consent of Governmental Authorities . . . . . . . . . 6
3.5 Legal Proceedings . . . . . . . . . . . . . . . . . . 6
3.6 Brokers . . . . . . . . . . . . . . . . . . . . . . . 6
3.7 Absence of Material Adverse Changes . . . . . . . . . 6
ARTICLE IV Representations and Warranties of Stockholder . . . . 7
4.1 Organization; Authority; Foreign Qualification . . . 7
4.2 Authorization; Enforceability . . . . . . . . . . . . 7
4.3 No Violation or Conflict . . . . . . . . . . . . . . 7
4.4 Consent of Governmental Authorities . . . . . . . . . 7
4.5 Health Care Providers . . . . . . . . . . . . . . . . 8
4.6 Financial Statements . . . . . . . . . . . . . . . . 8
4.7 Compliance with Laws . . . . . . . . . . . . . . . . 8
4.8 Legal Proceedings . . . . . . . . . . . . . . . . . . 8
4.9 Brokers . . . . . . . . . . . . . . . . . . . . . . . 9
4.10 Absence of Material Adverse Changes . . . . . . . . . 9
4.11 Transactions with Affiliates . . . . . . . . . . . . 9
4.12 Capitalization . . . . . . . . . . . . . . . . . . . 9
4.13 Rights, Warrants, Options . . . . . . . . . . . . . . 10
4.14 Properties . . . . . . . . . . . . . . . . . . . . . 10
4.15 Governmental Authorizations . . . . . . . . . . . . . 11
4.16 Insurance . . . . . . . . . . . . . . . . . . . . . . 11
4.17 Employment Matters . . . . . . . . . . . . . . . . . 12
4.18 Material Agreements . . . . . . . . . . . . . . . . . 13
4.19 List of Accounts . . . . . . . . . . . . . . . . . . 13
4.20 Major Customers . . . . . . . . . . . . . . . . . . . 13
4.21 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 14
4.22 Guarantees; Powers of Attorney . . . . . . . . . . . 14
4.23 Environmental Matters . . . . . . . . . . . . . . . . 14
4.24 1995 Merger Agreement . . . . . . . . . . . . . . . . 15
4.25 Disclosure . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE V Covenants . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Interim Operations of MDI . . . . . . . . . . . . . . 16
5.2 Access . . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Confidentiality . . . . . . . . . . . . . . . . . . . 17
5.4 Notification . . . . . . . . . . . . . . . . . . . . 17
5.5 Consent of Governmental Authorities and Others . . . 18
5.6 Acquisition Proposals; No Solicitation . . . . . . . 18
5.7 Best Efforts . . . . . . . . . . . . . . . . . . . . 18
5.8 Publicity . . . . . . . . . . . . . . . . . . . . . . 19
5.9 Sale or Assignment of Interest in MVA, MDI Rehab,
Middlesex and Faulkner . . . . . . . . . . . . . . . 19
5.10 Termination of MDI's Obligations under Employment
Agreements . . . . . . . . . . . . . . . . . . . . . 19
5.11 Release of Stockholder Guarantees . . . . . . . . . . 19
5.12 Intercompany Receivables . . . . . . . . . . . . . . 19
5.13 Lease Arrangements . . . . . . . . . . . . . . . . . 19
5.14 MMIV Escrow. . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VI Additional Agreements . . . . . . . . . . . . . . . . 20
6.1 Employees and Benefit Plans . . . . . . . . . . . . . 20
6.2 Investigation; Notices . . . . . . . . . . . . . . . 20
6.3 Survival of the Representations, Warranties,
Covenants and Agreements . . . . . . . . . . . . . . 20
6.4 Indemnification . . . . . . . . . . . . . . . . . . . 20
6.5 General Release . . . . . . . . . . . . . . . . . . . 22
6.6 Assignment of Rights of Stockholder Under 1995
Acquisition Agreement . . . . . . . . . . . . . . . . 22
6.7 Discharge of Bank Debt . . . . . . . . . . . . . . . 22
6.8 Blocked Account, Pledge and Security Agreement . . . 22
6.9 Restrictive Covenants . . . . . . . . . . . . . . . . 22
6.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . 24
6.11 Other Indemnifications . . . . . . . . . . . . . . . 25
ARTICLE VII Closing; Conditions Precedent; Termination . . . . 27
7.1 Closing . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Mutual Conditions Precedent . . . . . . . . . . . . . 27
7.3 Conditions Precedent to the Obligations of USD . . . 28
7.4 Conditions Precedent to the Obligations of
Stockholder and MDI . . . . . . . . . . . . . . . . . 29
7.5 Termination . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE VIII Miscellaneous . . . . . . . . . . . . . . . . . . 30
8.1 Notices . . . . . . . . . . . . . . . . . . . . . . . 30
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . 31
8.3 Assignment . . . . . . . . . . . . . . . . . . . . . 31
8.4 Waiver and Amendment . . . . . . . . . . . . . . . . 31
8.5 No Third Party Beneficiary . . . . . . . . . . . . . 31
8.6 Severability . . . . . . . . . . . . . . . . . . . . 31
8.7 Expenses; Termination Fee . . . . . . . . . . . . . . 31
8.8 Headings . . . . . . . . . . . . . . . . . . . . . . 32
8.9 Counterparts . . . . . . . . . . . . . . . . . . . . 32
8.10 Litigation; Prevailing Party . . . . . . . . . . . . 32
8.11 Injunctive Relief . . . . . . . . . . . . . . . . . . 32
8.12 Governing Law . . . . . . . . . . . . . . . . . . . . 32
8.13 Jurisdiction and Venue . . . . . . . . . . . . . . . 32
8.14 Obligations of MDI . . . . . . . . . . . . . . . . . 33
<PAGE>
SCHEDULES
---------
3.4 Consent of Governmental Authorities
3.6 Brokers
4.1 Foreign Qualification
4.3 Material Agreements
4.4 Consent of Governmental Authorities
4.6 Financial Statements
4.8 Legal Proceedings
4.8A Material Legal Proceedings
4.8B Claims of Officers and Directors
4.9 Brokers
4.10 Absence of Material Adverse Changes
4.11 Transactions with Affiliates
4.12 Capitalization
4.14(a) Real and Tangible Personal Property
4.14(b) Intellectual Property Rights
4.15 Governmental Authorizations
4.16 Insurance
4.17(c) Employment Agreements
4.17(d) Employee Benefit Plans
4.18 Material Agreements
4.19 List of Accounts
4.20 Major Customers
4.21 Taxes
4.22 Guaranties; Powers of Attorney
4.23 Environmental Matters
4.24 1995 Merger Agreement
5.1 Pre-Closing Matters
5.11 Release of Stockholder Guaranties
6.5 General Release
EXHIBITS
--------
A Certificate of Merger
B MVA Agreement
C Faulkner Agreement
D Blocked Account, Pledge and Security Agreement
E Opinion of Stockholder's Counsel
F Auditor's Comfort Letter
G Opinion of USD's Counsel
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger is entered into as of
January 20, 1997, among ADVANCED NMR SYSTEMS, INC., a Delaware
corporation ("Stockholder"), MEDICAL DIAGNOSTICS, INC., a
---------
Delaware corporation which is wholly owned by Stockholder
("MDI"), US DIAGNOSTIC INC., a Delaware corporation ("USD"), and
--
MDI ACQUISITION CORPORATION, a Delaware corporation which is
wholly-owned by USD ("Acquisition").
-----------
PRELIMINARY STATEMENT
----------------------
MDI is engaged in the business of owning and operating
diagnostic imaging centers in Massachusetts, New York, Tennessee,
West Virginia and Virginia and USD desires to acquire such
business through the merger of Acquisition with and into MDI.
MDI and USD believe that the mutual best interests of MDI and USD
and their respective shareholders will be served by the merger of
Acquisition with and into MDI upon the terms and subject to the
conditions of this Agreement.
AGREEMENT
----------
In consideration of the preliminary statement and the
respective covenants, representations and warranties contained in
this Agreement, the parties agree as set forth below.
ARTICLE I
DEFINITIONS
------------
In addition to terms defined elsewhere in this Agreement, the
following terms when used in this Agreement shall have the meanings
indicated below:
"Acquisition Common Stock" means the common stock of Acquisition,
------------------------
par value $.01 per share.
"Acquisition Transaction" has the meaning specified in Section
-----------------------
5.6 of this Agreement.
"Affiliate" has the meaning specified in Rule 144 promulgated by
---------
the Commission under the Securities Act.
"Affiliated Group" means an affiliated group as defined in
---------------
Section 1504 of the Code (or any analogous combined, consolidated or
unitary group defined under state, local or foreign income Tax law) of
which MDI or any of its Subsidiaries is or has been a member.
"Agreement" means this Agreement and Plan of Merger together with
--------
all exhibits and schedules referred to herein.
"Assumed Employees" has the meaning specified in Section 5.10 of
----------------- -----------
this Agreement.
"Assumed Employee Claims" has the meaning specified in Section
---------------------- -------
6.11 of this Agreement.
----
"Basket Limitation" has the meaning specified in Section 6.4 of
----------------- ------------
this Agreement.
"Cap Limitation" has the meaning specified in Section 6.4 of this
-------------- -----------
Agreement.
"Certificate of Merger" has the meaning set forth in Section 2.2
--------------------- -----------
of this Agreement.
"Chase" has the meaning set forth in Section 2.6 of this
----- -----------
Agreement.
"Closing" has the meaning specified in Section 2.2 of this
------- -----------
Agreement.
"Closing Date" has the meaning specified in Section 2.2 of this
------------ -----------
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
----
"Commission" means the Securities and Exchange Commission.
----------
"Covenant Period" has the meaning specified in Section 6.9 of
--------------- -----------
this Agreement.
"Delaware GCL" means the General Corporation Law of the State of
------------
Delaware.
"Effective Time" shall have the meaning set forth in Section 2.2
-------------- -----------
of this Agreement.
"Environmental Laws" has the meaning specified in Section 4.23 of
------------------ ------------
this Agreement.
"Environmental Permits" has the meaning specified in Section 4.23
--------------------- -----------
of this Agreement.
"ERISA" has the meaning specified in Section 4.17 of this
----- ------------
Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended, and the rules and regulations promulgated thereunder.
"Faulkner" has the meaning set forth in Section 5.9 of this
-------- -----------
Agreement.
"Financial Statements" means MDI's audited consolidated balance
--------------------
sheet and the related audited consolidated statements of operations,
stockholders' equity and cash flow as at and for the year ended
September 30, 1996.
"Guaranty" means, as to any Person, any contract, agreement or
--------
understanding of such Person pursuant to which such Person guarantees
the indebtedness, liabilities or obligations of others, directly or
indirectly, in any manner, including agreements to purchase such
indebtedness, liabilities or obligations, or to supply funds to or in
any manner invest in others, or to otherwise assure the holder of such
indebtedness, liabilities or obligations against loss.
"Hazardous Substances" has the meaning specified in Section 4.23
-------------------- -------------
of this Agreement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act
-------
of 1976, as amended, and the rules and regulations promulgated
thereunder.
"Knowledge" or "known" means, with respect to any representation
--------- -----
or warranty or other statement in this Agreement qualified by the
knowledge of any party, that such party has made a diligent
investigation as to the matters that are the subject of such
representation, warranty or other statement. Where reference is made
to the knowledge of Stockholder, MDI or USD, such reference shall mean
the actual knowledge of the executive officers of Stockholder, MDI or
USD, as the case may be, all having conducted the diligent
investigation contemplated by this definition.
"Licenses" has the meaning specified in Section 4.15 of this
-------- -----------
Agreement.
"Losses" has the meaning specified in Section 6.4 of this
------ -----------
Agreement.
"Lynch Litigation" has the meaning specified in Section 6.11 of
---------------- -----------
this Agreement.
"Material Agreements" has the meaning specified in Section 4.18
------------------- ------------
of this Agreement.
"MDI Common Stock" means the common stock of MDI, par value $.01
----------------
per share.
"MDI Intellectual Property" has the meaning specified in Section
------------------------- --------
4.14(b) of this Agreement.
------
"MDI Plans" has the meaning specified in Section 4.17 of this
--------- ------------
Agreement.
"MDI Rehab" has the meaning specified in Section 5.9 of this
--------- -----------
Agreement.
"Merger" has the meaning specified in Article II of this
-------
Agreement.
"Merger Consideration" has the meaning set forth in Section 2.6
-------------------- -----------
of this Agreement.
"Middlesex" has the meaning specified in Section 5.9 of this
--------- -----------
Agreement.
"MMIV" has the meaning specified in Section 6.11 of this
---- ------------
Agreement.
"MVA" has the meaning set forth in Section 5.9 of this Agreement.
--- -----------
"Pension Plan" has the meaning specified in Section 4.17 of this
------------ ------------
Agreement.
"Person" means any natural person, corporation, unincorporated
------
organization, partnership, association, joint stock company, joint
venture, trust or government, or any agency or political subdivision
of any government, or any other entity.
"Raytel" means Raytel Corporation, Raytel Medical Corporation and
-----
their respective Affiliates.
"Raytel Litigation" has the meaning specified in Section 6.11 of
----------------- ------------
this Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
--------------
and the rules and regulations promulgated thereunder.
"Subsidiary" of any Person means any Person, whether or not
---------
capitalized, in which such Person owns, directly or indirectly, an
equity interest of 50% or more, or any Person which may be controlled,
directly or indirectly, by such Person, whether through the ownership
of voting securities, by contract, or otherwise.
"Surviving Corporation" has the meaning set forth in Section 2.1
---------------------- -----------
of this Agreement.
"Symbols" has the meaning set forth in Section 6.9 of this
------ -----------
Agreement.
"Tax Returns" means returns, declarations, reports, claims for
-----------
refund, information returns or other documents (including any related
or supporting schedules, statements or information) filed or required
to be filed in connection with the determination, assessment or
collection of any Taxes of any party or the administration of any
laws, regulations or administrative requirements relating to any
Taxes.
"Taxes" has the meaning specified in Section 4.21 of this
----- -------------
Agreement.
"Termination Date" has the meaning specified in Section 7.5 of
---------------- -----------
this Agreement.
"Welfare Plan" has the meaning specified in Section 4.17 of this
------------ -------------
Agreement.
ARTICLE II
THE MERGER
----------
2.1 THE MERGER. Upon the terms and subject to the conditions
----------
set forth in this Agreement, and in accordance with the Delaware GCL,
at the Effective Time, Acquisition shall be merged (the "Merger") with
------
and into MDI. At the Effective Time, the separate corporate existence
of Acquisition shall cease, and MDI shall continue as the surviving
corporation of the Merger under the laws of the State of Delaware (the
"Surviving Corporation") under its present name. The corporate
---------------------
existence of USD and of Stockholder shall not be affected by the
Merger.
2.2 CLOSING; EFFECTIVE TIME OF THE MERGER. Unless this
-------------------------------------
Agreement is terminated in accordance with its terms, the consummation
of the transactions contemplated by this Agreement (the "Closing")
-------
shall take place at the offices of USD as soon as practicable, and in
any event within three days, after the satisfaction or waiver of the
conditions precedent to the obligations of the parties set forth in
Article VII (the "Closing Date"), or on such other date and at such
------------
other place as may be agreed to by the parties. On the Closing Date,
the parties hereto shall cause the Merger to be consummated by filing
a certificate of merger, substantially in the form set forth as
Exhibit A (the "Certificate of Merger"), with the Secretary of State
--------- ---------------------
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the Delaware GCL (the date
and time of the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware (or such later time as is specified
in the Certificate of Merger) being the "Effective Time").
--------------
2.3 EFFECTS OF THE MERGER. From and after the Effective Time,
---------------------
the Merger shall have the effects set forth under the applicable
provisions of the Delaware GCL.
2.4 CERTIFICATE OF INCORPORATION AND BYLAWS.
---------------------------------------
(a) CERTIFICATE OF INCORPORATION. At the Effective Time,
----------------------------
and until thereafter amended or repealed in accordance with their
terms and as provided by law, the Certificate of Incorporation of the
Surviving Corporation shall be the Certificate of Incorporation of
MDI, as in effect immediately prior to the Effective Time.
(b) BYLAWS. At the Effective Time, the Bylaws of the
------
Surviving Corporation shall be the Bylaws of MDI, as in effect
immediately prior to the Effective Time, until thereafter amended or
repealed in accordance with their terms and the Certificate of
Incorporation of the Surviving Corporation and as provided by law.
2.5 DIRECTORS AND OFFICERS. The directors of Acquisition
----------------------
immediately prior to the Effective Time shall be the directors of the
Surviving Corporation, each to hold office in accordance with the
Certificate of Incorporation and Bylaws of the Surviving Corporation,
and the officers of Acquisition immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, in each case
until their respective successors are duly elected or appointed, as
the case may be, and qualified.
2.6 EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue
-----------------------
of the Merger and without any action on the part of the holders of
shares of MDI Common Stock or any shares of capital stock of
Acquisition:
(a) COMMON STOCK OF ACQUISITION. Each share of Acquisition
---------------------------
Common Stock issued and outstanding immediately prior to the Effective
Time shall be converted into one share of validly issued, fully paid
and nonassessable common stock of the Surviving Corporation, which
shall be all of the issued and outstanding capital stock of the
Surviving Corporation as of the Effective Time.
(b) CONVERSION OF MDI COMMON STOCK. All of the outstanding
------------------------------
shares of MDI Common Stock shall be converted at the Effective Time
into the right of the record holder thereof to receive cash from USD
in an aggregate amount equal to Twenty-Two Million Dollars
($22,000,000) (the "Merger Consideration"); and the Merger
--------------------
Consideration shall be paid at the Effective Time as follows: (i) USD
shall deliver, by wire transfer, to Chase Manhattan Bank N.A.
("Chase"), on behalf of Stockholder and MDI, an amount sufficient to
-----
fully satisfy all of MDI's and its Subsidiaries' obligations to Chase;
and (ii) USD shall deliver, by wire transfer, to the record holder of
the MDI Common Stock at the Effective Time the remainder of the Merger
Consideration. Subject to the terms set forth above in this Section
-------
2.6(b), each issued and outstanding share of MDI Common Stock shall
-------
be converted at the Effective Time into the right to receive from USD
a number of dollars equal to a fraction, the numerator of which is
equal to the Merger Consideration (less amounts paid to Chase), and
the denominator of which is equal to the number of issued and
outstanding shares of MDI Common Stock at the Effective Time, all
payable as set forth above in this Section 2.6(b).
--------------
(c) CANCELLATION AND RETIREMENT OF MDI COMMON STOCK. As of
-----------------------------------------------
the Effective Time, each issued and outstanding share of MDI Common
Stock shall automatically be cancelled and retired and shall cease to
exist, and the sole holder of certificate(s) representing any such
shares of MDI Common Stock shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration upon
surrender of such certificate(s) in accordance with Section 2.7.
-----------
2.7 CONVERSION OF SHARES.
--------------------
(a) CONVERSION PROCEDURES. At the Effective Time, the sole
---------------------
holder of outstanding certificate(s) which prior thereto represented
shares of MDI Common Stock shall, upon surrender to USD of such
certificate(s), be entitled to the amount of cash specified in Section
-------
2.6.
----
(b) NO FURTHER OWNERSHIP RIGHTS IN MDI COMMON STOCK. The
------------------------------------------------
Merger Consideration paid upon the surrender of certificate(s)
representing shares of MDI Common Stock in accordance with the terms
of this Article II shall constitute full satisfaction of all rights
pertaining to the shares of MDI Common Stock theretofore represented
by such certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF USD
-------------------------------------
In order to induce Stockholder to enter into this Agreement and
to consummate the transactions contemplated hereby, USD makes the
representations and warranties set forth below to Stockholder.
3.1 ORGANIZATION; AUTHORITY. Each of USD and Acquisition is a
-----------------------
corporation duly organized, validly existing and in good standing
under the laws of its state of incorporation. USD has the corporate
authority to: (A) own or lease and operate its properties; and (B)
conduct its business as presently conducted. Each of USD and
Acquisition has the corporate power and authority to execute, deliver
and perform this Agreement.
3.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
-----------------------------
performance of this Agreement by USD and Acquisition and the
consummation by USD and Acquisition of the transactions contemplated
hereby have been duly authorized by all requisite corporate action.
The execution, delivery and performance of this Agreement by USD does
not require the approval of USD's stockholders. This Agreement has
been duly executed and delivered by USD and Acquisition and
constitutes the legal, valid and binding obligation of USD and
Acquisition, enforceable against them in accordance with its terms,
except to the extent that its enforcement is limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and by general principles
of equity.
3.3 NO VIOLATION OR CONFLICT. The execution, delivery and
------------------------
performance by USD and Acquisition of this Agreement and the
consummation by USD and Acquisition of the transactions contemplated
hereby: (A) do not and will not violate or conflict with any provision
of law or any regulation, or any writ, order, judgment or decree of
any court or governmental or regulatory authority specifically naming
USD, any of its Subsidiaries or Acquisition (other than where such
occurrence would not prohibit USD from consummating the transactions
contemplated hereby on or prior to the Termination Date), or any
provision of USD's or Acquisition's Certificate of Incorporation or
Bylaws; and (B) do not and will not, with or without the passage of
time or the giving of notice, result in the breach of, or constitute a
default, cause the acceleration of performance, or require any
consent, authorization or approval under, or result in the creation of
any lien, charge or encumbrance upon any property or assets of USD or
Acquisition pursuant to any instrument or agreement to which USD or
Acquisition is a party or any of their assets are bound (other than
where such occurrence would not prohibit USD from consummating the
transactions contemplated hereby on or prior to the Termination Date).
3.4 CONSENT OF GOVERNMENTAL AUTHORITIES. Except as set forth on
----------------------------------
Schedule 3.4 and other than in connection with the HSR Act, the
------------
Exchange Act, any applicable state securities laws, and the filing
and/or recordation of the Certificate of Merger under the Delaware
GCL, no consent, approval or authorization of, or registration,
qualification or filing with any federal, state, local or foreign
governmental or regulatory authority is required to be made by USD or
Acquisition in connection with the execution, delivery or performance
by USD or Acquisition of this Agreement or the consummation by USD or
Acquisition of the transactions contemplated hereby, except where the
failure to obtain such consent, approval or authorization or to make
such registration, qualification or filing would not prevent USD from
consummating the transactions contemplated hereby on or prior to the
Termination Date. USD knows of no reason why any of the consents,
approvals or authorizations set forth in this Section 3.4 or on
-----------
Schedule 3.4 would not be granted.
------------
3.5 LEGAL PROCEEDINGS. Neither USD nor any of its Subsidiaries
-----------------
is a party to any pending or, to the knowledge of USD, threatened,
legal, administrative or other proceeding, arbitration or
investigation, that would hinder USD in consummating the transactions
contemplated hereby on or prior to the Termination Date. To USD's
knowledge, neither USD nor any of its Subsidiaries is subject to any
order, injunction or other judgment of any court or governmental
authority that would hinder USD in consummating the transactions
contemplated hereby on or prior to the Termination Date.
3.6 BROKERS. Except as set forth on Schedule 3.6, USD has not
------- ------------
employed any financial advisor, broker or finder and has not incurred
and will not incur any broker's, finder's, investment banking or
similar fees, commissions or expenses, in connection with the
transactions contemplated by this Agreement.
3.7 ABSENCE OF MATERIAL ADVERSE CHANGES. Since December 31,
-----------------------------------
1995, there has been no material adverse change or material
deterioration in the financial condition, results of operations,
assets, liabilities or business of USD and its Subsidiaries on a
consolidated basis that would hinder USD in consummating the
transactions contemplated hereby on or prior to the Termination Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER
--------------------------------------------
In order to induce USD and Acquisition to enter into this
Agreement and to consummate the transactions contemplated hereby,
Stockholder makes the representations and warranties set forth below
to USD and Acquisition.
4.1 ORGANIZATION; AUTHORITY; FOREIGN QUALIFICATION. Each of
----------------------------------------------
Stockholder, MDI and MDI's Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of MDI and its Subsidiaries is
duly qualified to transact business as a foreign corporation in all
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification. Each
jurisdiction in which MDI or any of its Subsidiaries is qualified to
transact business as a foreign corporation is listed on Schedule 4.1.
-----------
Other than those jurisdictions listed on Schedule 4.1 hereto, there
------------
are no jurisdictions in which any of MDI or any of its Subsidiaries
own or lease property (real or personal), has offices or employees or
maintains inventory. Each of MDI and its Subsidiaries has the
corporate authority to: (A) own or lease and operate its properties;
and (B) conduct its business as presently conducted. Each of
Stockholder and MDI has the corporate power and authority to execute,
deliver and perform this Agreement.
4.2 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
-----------------------------
performance of this Agreement by Stockholder and MDI and the
consummation by them of the transactions contemplated hereby have been
duly authorized by all requisite corporate action. The execution,
delivery and performance of this Agreement by Stockholder and MDI and
the consummation by them of the transactions contemplated hereby does
not require the approval of Stockholder's stockholders. This
Agreement has been duly executed and delivered by Stockholder and MDI,
and constitutes the legal, valid and binding obligation of Stockholder
and MDI, enforceable against them in accordance with its terms, except
to the extent that its enforcement is limited by bankruptcy,
insolvency, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and by general principles
of equity.
4.3 NO VIOLATION OR CONFLICT. The execution, delivery and
------------------------
performance by Stockholder and MDI of this Agreement and the
consummation by Stockholder and MDI of the transactions contemplated
hereby: (A) do not and will not violate or conflict with any provision
of law or regulation, or any writ, order, judgment or decree of any
court or governmental or regulatory authority specifically naming
Stockholder or MDI or any of their respective Subsidiaries, or any
provision of Stockholder's or MDI's Certificate of Incorporation or
Bylaws; and (B) do not and will not, with or without the passage of
time or the giving of notice, result in the breach of, or constitute a
default, cause the acceleration of performance, or require any
consent, authorization or approval under, or result in the creation of
any lien, charge or encumbrance upon any property or assets of
Stockholder or MDI or any of MDI's Subsidiaries pursuant to any
Material Agreement, except for consents required under Material
Agreements listed on Schedule 4.3, all of which shall have been
------------
obtained by Stockholder on or prior to the Closing Date without any
significant cost or adverse effect.
4.4 CONSENT OF GOVERNMENTAL AUTHORITIES. Except as set forth on
-----------------------------------
Schedule 4.4 hereto and except in connection with the HSR Act, the
------------
Exchange Act, any applicable state securities laws, and the filing
and/or recordation of the Certificate of Merger under the Delaware
GCL, no consent, approval or authorization of, or registration,
qualification or filing with any federal, state or local governmental
or regulatory authority is required to be made by Stockholder or MDI
in connection with the execution, delivery or performance by
Stockholder and MDI of this Agreement or the consummation by them of
the transactions contemplated hereby, except where the failure to
obtain such consent, approval or authorization or to make such
registration, qualification or filing would not have a material
adverse effect on the financial condition, results of operations,
assets, liabilities or business of MDI and its Subsidiaries or
materially hinder MDI or Stockholder in consummating the transactions
contemplated hereby on or prior to the Termination Date. Neither
Stockholder nor MDI knows of any reason any of the consents, approvals
or authorizations set forth in this Section 4.4 or Schedule 4.4 would
----------- ------------
not be granted.
4.5 HEALTH CARE PROVIDERS. All physicians, technologists and
---------------------
other personnel retained or employed by MDI or its Subsidiaries
maintain in good standing all staff memberships, licenses, credentials
and other similar affiliations necessary or desirable for their
current provision of services on behalf of MDI and its Subsidiaries.
4.6 FINANCIAL STATEMENTS. The Financial Statements, as of the
--------------------
date thereof and for the period covered thereby, present fairly, in
all material respects, the financial position, results of operations,
and cash flows of MDI and its Subsidiaries. Except as otherwise noted
in Schedule 4.6, the Financial Statements were prepared in conformity
------------
with generally accepted accounting principles applied on a consistent
basis. The Financial Statements and supporting schedules were audited
by independent public accountants within the meaning of the rules
promulgated by the Commission. Other than as disclosed by the
Financial Statements or on Schedule 4.18 hereto, neither MDI nor any
-------------
of its Subsidiaries has any liabilities, commitments or obligations
(which could be material to any of them on a consolidated basis) of
any nature whatsoever, whether accrued, contingent or otherwise (other
than nonmaterial liabilities, commitments or obligations incurred
since September 30, 1996 in the ordinary course of business consistent
with past practices to Persons other than Affiliates of Stockholder)
nor any unrealized or anticipated losses which could be material to
MDI on a consolidated basis from any commitments of MDI or any of its
Subsidiaries, and, to Stockholder's and MDI's knowledge, there is no
reasonable basis for assertion against MDI or any of its Subsidiaries
of any liability, commitment or loss. MDI's accounts receivable, as
set forth in the Financial Statements, arose in the ordinary course of
business, constitute valid and undisputed claims which are not subject
to any counterclaims or offsets and have been collected or are
collectible at their recorded amounts, net of any reserves for
doubtful accounts in accordance with past practices and generally
accepted accounting principles applied on a consistent basis, subject
to contractual reimbursement allowances in accordance with past
practices and generally accepted accounting principles applied on a
consistent basis. MDI's billing practices are in compliance with all
applicable laws.
4.7 COMPLIANCE WITH LAWS. MDI and its Subsidiaries (and the
--------------------
properties used by them) are in compliance with all federal, state,
local and foreign laws, ordinances, regulations, judgments, rulings,
orders and other legal requirements applicable to them, their
properties or their operations, and neither MDI nor any of its
Subsidiaries (nor any of the properties used by any of them) is
relying on any exemption or deferral therefrom. Stockholder has
furnished USD with true and correct copies of all correspondence from
governmental authorities asserting that MDI or any of its Subsidiaries
is not or was not in compliance with any laws, ordinances,
regulations, judgments, rulings, orders or other requirements. All
deficiencies noted in any such report furnished to USD in accordance
with this Section 4.7 have been corrected.
-----------
4.8 LEGAL PROCEEDINGS. Except as set forth in Schedule 4.8,
----------------- ------------
neither MDI nor any of its Subsidiaries is a party to any pending or,
to the knowledge of Stockholder and MDI, threatened, legal,
administrative or other proceeding, arbitration or investigation.
Except for items set forth in Schedule 4.8A, none of the proceedings,
-------------
arbitrations or investigations set forth in Schedule 4.8, could have a
------------
material adverse effect on the financial condition, results of
operations, assets, liabilities, prospects or business of MDI and its
Subsidiaries on a consolidated basis or hinder Stockholder or MDI in
consummating the transactions contemplated hereby on or prior to the
Termination Date, and there is no valid basis for any such proceeding,
arbitration or investigation. MDI is not subject to any order,
injunction or other judgment of any court or governmental authority.
Except as otherwise set forth in Schedule 4.8B hereto, no director or
-------------
officer of MDI or any of its Subsidiaries has, since December 31,
1994, made any claim against MDI or any of its Subsidiaries for
indemnification or advancement of expenses or claims under any
director and officer liability insurance policy in connection with any
threatened, pending or completed action, suit or proceeding in which
any such director or officer is or was a party or threatened to be
made a party, whether civil, criminal, administrative or investigative
and, to the knowledge of Stockholder and MDI, no reasonable basis for
assertion against MDI or any of its Subsidiaries or against any
insurance company issuing any such director and officer liability
insurance policy exists.
4.9 BROKERS. Except as set forth on Schedule 4.9, neither
------- ------------
Stockholder nor MDI has employed any financial advisor, broker or
finder and neither has incurred and neither will incur any broker's,
finder's, investment banking or similar fees, commissions or expenses
to any other party in connection with the transactions contemplated by
this Agreement.
4.10 ABSENCE OF MATERIAL ADVERSE CHANGES. Except as set forth in
-----------------------------------
Schedule 4.10, since September 30, 1996: (A) each of MDI and its
-------------
Subsidiaries has conducted its businesses in the ordinary and usual
course; (B) there has been no material adverse change or material
deterioration in the financial condition, results of operations,
assets, liabilities, prospects or business of MDI and its Subsidiaries
on a consolidated basis; and (C) neither MDI nor any of its
Subsidiaries has engaged or agreed to engage in any of the actions
described in Section 5.1 (A) through (L), (N), (Q) and (R) or in any
---------------------------------------------
of the actions described in the next-to-last sentence of Section 5.1.
-----------
The outstanding principal balance of revolving loans and term loans
under MDI's credit facility is the maximum currently permitted
thereunder, and no principal payment thereunder has been made since
September 30, 1996.
4.11 TRANSACTIONS WITH AFFILIATES. Except as set forth in
----------------------------
Schedule 4.11, there are no, and since September 30, 1996 there have
-------------
been no, contracts, agreements or arrangements of any kind (including,
but not limited to those relating to, the sharing of overhead,
intercompany loans, the furnishing of services and the lease of
facilities) between any Affiliate of MDI, on the one hand, and MDI or
any of its Subsidiaries, on the other hand, including, but not limited
to, any loans or advances by MDI or any of its Subsidiaries to MVA,
MDI Rehab or Middlesex. Without limiting the generality of the
foregoing, except as set forth on Schedule 4.11, (i) no Affiliate of
-------------
MDI has any interest in any property (real or personal, tangible or
intangible, or otherwise) used in MDI's business, (ii) MDI and its
Subsidiaries have no indebtedness to Stockholder or any of its other
Affiliates and (iii) MDI and its Subsidiaries are not owed any
indebtedness by Stockholder or any of its other Affiliates. Except as
set forth on Schedule 4.11, all items required to be set forth thereon
-------------
are on arms'-length terms.
4.12 CAPITALIZATION. As of the date hereof, the authorized
--------------
capital stock of MDI consists of 1,000 shares of MDI Common Stock, of
which 100 shares are issued and outstanding. All of the issued and
outstanding shares of MDI Common Stock are owned beneficially and of
record by Stockholder, free and clear of any and all liens, claims,
charges, security interests, voting agreements or encumbrances of any
nature whatsoever. MDI has no treasury shares. All shares of MDI's
and each of its Subsidiaries' outstanding capital stock have been duly
authorized, are validly issued and outstanding, and are fully paid and
nonassessable. No securities issued by MDI or any of its Subsidiaries
from the date of its incorporation to the date hereof were issued in
violation of any statutory, contractual or common law preemptive
rights. There are no dividends or distributions which have accrued or
been declared but are unpaid on the capital stock of MDI or any of its
Subsidiaries. Except as set forth on Schedule 4.12, neither MDI nor
-------------
any of its Subsidiaries has declared or paid any dividends or
distributions since December 31, 1994. All taxes (including
documentary stamp taxes) required to be paid in connection with the
issuance by MDI or any of its Subsidiaries of MDI's and each of its
Subsidiaries' capital stock have been paid. All authorizations
required to be obtained from or registrations required to be effected
with any Person in connection with the issuances of securities by MDI
and each of its Subsidiaries from their respective dates of
incorporation to the date hereof have been obtained or effected and
all securities of MDI and its Subsidiaries have been issued in
accordance with the provisions of all applicable securities and other
laws. All of the outstanding securities of each of MDI's Subsidiaries
are owned by either MDI or another of its Subsidiaries, free and clear
of all liens, charges, claims or encumbrances except as set forth on
Schedule 4.12. Schedule 4.12 lists all Subsidiaries of MDI, their
------------- --------------
jurisdictions of incorporation or organization, the number of shares
of their respective capital stock or other equity interests issued and
outstanding. Except as set forth in Schedule 4.12, neither MDI nor
--------------
any of its Subsidiaries has any equity investment in any other
corporation, association, partnership, joint venture or other entity.
MDI Rehab's sole asset is its interest in MVA. Middlesex has no
assets.
4.13 RIGHTS, WARRANTS, OPTIONS. There are no outstanding: (A)
-------------------------
securities or instruments convertible into or exercisable for any of
the capital stock or other equity interests of MDI or any of its
Subsidiaries issued by MDI or any of its Subsidiaries or to which
Stockholder or MDI or any of its Subsidiaries is a party; (B) options,
warrants, subscriptions or other rights to acquire capital stock or
other equity interests of MDI or any of its Subsidiaries issued by
Stockholder or MDI or any of its Subsidiaries; or (C) commitments,
agreements or understandings of any kind to which Stockholder or MDI
or any of its Subsidiaries is a party, including employee benefit
arrangements, relating to the issuance or repurchase by MDI or any of
its Subsidiaries of any capital stock or other equity interests of MDI
or any of its Subsidiaries, any such securities or instruments
convertible into or exercisable for capital stock or other equity
interests of MDI or any such options, warrants or rights. Each of the
terms referenced in the foregoing sentence is hereinafter referred to
as "Options".
-------
4.14 PROPERTIES.
----------
(a) REAL AND TANGIBLE PERSONAL PROPERTY. Except as set
-----------------------------------
forth on Schedule 4.14(a), MDI or its Subsidiaries has valid title to
-----------------
all properties, interests in properties and assets (real and personal)
reflected in the consolidated balance sheet of MDI as at September 30,
1996 (except properties, interests in properties and assets sold or
otherwise disposed of since September 30, 1996 in the ordinary course
of business to Persons other than Affiliates of MDI consistent with
past practices), free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except the lien of
current taxes not yet due and payable. Schedule 4.14(a) hereof lists
----------------
each piece of real property owned, leased or utilized by MDI and/or
its Subsidiaries, including the location thereof and the use to which
it is put by MDI and/or any of its Subsidiaries. All improvements
located on any real property owned by MDI or any of its Subsidiaries
are in good structural condition, free from any termite infestation or
damage, roof leakage, wood rot or decay or any structural or other
defect or impairment of any nature whatsoever which might impair the
value, utility or life expectancy of such improvements, or which might
otherwise adversely affect the operation thereof. All of the real
property owned by MDI or any of its Subsidiaries and the improvements
thereon are suitable for the purposes for which they are currently
used. All of the real property owned by MDI or any of its
Subsidiaries has all utilities required for the full and complete
occupancy and operation thereof. There exist paved and publicly
dedicated roads providing pedestrian and vehicular ingress and egress
to and from all of such real property and no additional easements or
licenses are required for such access. To the best of Stockholder's
and MDI's knowledge, no fact or condition exists which could result in
the termination or impairment of any access to any of the real
property owned by MDI or any of its Subsidiaries, or which could
result in a discontinuation of necessary water, sewer, telephone, gas,
electric or other utilities or services to any of such real property.
To the best of Stockholder's and MDI's knowledge, none of the
improvements located on any of the real property owned by MDI or any
of its Subsidiaries encroach onto adjoining land or onto any
easements, and there is no encroachment of improvements from adjoining
land onto any of such real property. To the best of Stockholder's and
MDI's knowledge, none of the real property owned by MDI or any of its
Subsidiaries is located in an area identified as having special flood
or mud slide hazards or wet lands. To the best of Stockholder's and
MDI's knowledge, there are no soil or geological conditions which
might impair or adversely affect the current use of any of the real
property owned by MDI or any of its Subsidiaries. No written
notification has been received by Stockholder or MDI advising that the
whole or any portion of the real property owned by MDI is being
condemned or otherwise taken by any public authority. Except as set
forth on Schedule 4.14(a), the facilities, equipment and assets
--------------
utilized by MDI and/or its Subsidiaries and/or necessary to the
operations of MDI's and/or its Subsidiaries' businesses are owned or
leased by MDI and/or its Subsidiaries and are not obsolete, and are in
good operating condition and repair sufficient for the operation of
the business as presently conducted. Each of the leases under which
the properties of MDI and its Subsidiaries are leased is unmodified
and in full force and effect and there are no agreements between
Stockholder, MDI or any of their respective Subsidiaries and any third
parties claiming an interest in MDI's or its Subsidiaries' interest in
the leased property occupied by MDI or its Subsidiaries or otherwise
affecting its use and occupancy thereof. Neither MDI nor any of its
Subsidiaries is in default under any of such leases and no defaults
(whether or not subsequently cured) by MDI or its Subsidiaries have
been alleged thereunder. To the best of MDI's and Stockholder's
knowledge, each lessor named in any of such leases is not in default
thereunder, and no defaults by such lessor have been alleged
thereunder and are continuing. Schedule 4.14(a) also sets forth, with
----------------
respect to each lease (capitalized or otherwise) to which MDI or any
of its Subsidiaries is a party which is a Material Agreement: (A) the
parties to such lease; (B) the property covered by such lease; (C) a
schedule of payments payable under such lease (both throughout the
term of the lease and at the end of the lease); (D) whether MDI or any
of its Subsidiaries has any rights or obligations to acquire any
property which is subject to such lease and the price and terms
thereof; (E) the term of such lease; and (F) any options which MDI or
any of its Subsidiaries may have to extend the term of such lease.
Set forth on Schedule 4.14(a) is a list of the five largest lessors of
-----------------
equipment (measured by dollar volume) to MDI and its Subsidiaries
during the fiscal year ended September 30, 1996, and with respect to
each, the name and address and the dollar volume involved. The
amortization of each capitalized lease is based on the useful life of
the asset.
(b) INTELLECTUAL PROPERTY RIGHTS. MDI or one of its
-----------------------------
Subsidiaries owns, or is licensed or otherwise entitled to use, all
patents, trademarks, trade names, service marks, copyrights and
applications for any of the foregoing, together with all other
technology, know-how, tangible or intangible proprietary information
or material and formulae in the countries to which such apply, that
are material to the business of MDI and its Subsidiaries as currently
conducted (the "MDI Intellectual Property"), all of which are set
-------------------------
forth on Schedule 4.14(b). Except as disclosed on Schedule 4.14(b)
---------------- -----------------
hereto, no claims have been asserted in writing to MDI or any of its
Subsidiaries or, to the knowledge of Stockholder or MDI, otherwise
asserted or threatened, by any Person: (A) to the effect that the MDI
Intellectual Property infringes on any intellectual property rights of
any other Person; (B) against the use by MDI or any of its
Subsidiaries of any of the MDI Intellectual Property; or (C)
challenging or questioning the validity or effectiveness of any of the
MDI Intellectual Property. All registered trademarks and copyrights
listed on Schedule 4.14(b) are valid and subsisting.
----------------
4.15 GOVERNMENTAL AUTHORIZATIONS. MDI and its Subsidiaries have
---------------------------
in full force and effect all authorizations, consents, approvals,
franchises, licenses and permits required under applicable law or
regulation (collectively referred to as "Licenses") for the ownership
---------
of MDI's and its Subsidiaries' properties and operation of their
businesses as presently operated. Except as set forth on Schedule
--------
4.15, the execution, delivery and performance by Stockholder and MDI
-----
of this Agreement and the consummation by them of the transactions
contemplated hereby do not and will not have an adverse effect on any
of MDI's Licenses or require any consent or approval of, or any filing
with or notice to any governmental authority with respect to any
License.
4.16 INSURANCE. Schedule 4.16 sets forth a list and description
--------- -------------
of all insurance policies existing as of the date hereof providing
insurance coverage of any nature to MDI or any of its Subsidiaries.
Furthermore: (A) none of MDI or any of its Subsidiaries is in default
under any such policies and there is no inaccuracy in any application
for any such policies; (B) each of MDI and its Subsidiaries'
activities and operations have been conducted in a manner so as to
conform in all material respects to the applicable provisions of such
policies; (C) all premiums and other charges under each such policy
shall have been paid through the Closing Date and none of Stockholder,
MDI nor any of their respective Subsidiaries has received written
notice of cancellation or non-renewal with respect to any such policy;
and (D) timely notice has been given of any and all claims under all
such policies. Schedule 4.16 also lists all risks for which MDI and
-------------
its Subsidiaries are self-insured. MDI and its Subsidiaries have not,
during the past two years, been refused insurance coverage by any
company, nor have any of them had insurance coverage offered to them
at unreasonably high premiums or with limited coverage.
4.17 EMPLOYMENT MATTERS.
------------------
(a) LABOR UNIONS. None of the employees of MDI or any of
------------
its Subsidiaries is represented by any labor union, and neither MDI
nor any of its Subsidiaries is subject to any labor or collective
bargaining agreement. None of the employees of MDI or any of its
Subsidiaries is known by Stockholder or MDI to be engaged in
organizing any labor union or other employee group that is seeking
recognition as a bargaining unit. Neither MDI nor any of its
Subsidiaries has had any strikes, work stoppages, slow downs, lockouts
or claims of unfair labor practices for the past three years, and to
the best knowledge of the Stockholder and MDI, there exist no facts
which could reasonably be expected to lead thereto.
(b) EMPLOYMENT POLICIES. MDI has provided to USD all
-------------------
written employee policies, employee manuals or other written
statements of rules or policies concerning employment applicable to
the employees of MDI and/or its Subsidiaries.
(c) EMPLOYMENT AGREEMENTS. Except as set forth on Schedule
--------------------- --------
4.17(c), there are no employment, consulting, severance or
-------
indemnification arrangements, agreements, or understandings between
MDI or any of its Subsidiaries and any officer, director, consultant
or employee.
(d) EMPLOYEE BENEFIT PLANS. Schedule 4.17(d) sets forth a
----------------------- ----------------
complete list of all pension, retirement, stock purchase, stock bonus,
stock ownership, stock option, profit sharing, savings, medical,
disability, hospitalization, insurance, deferred compensation, bonus,
incentive, welfare or any other employee benefit plan, policy,
agreement, commitment, arrangement or practice currently or previously
maintained by Stockholder, MDI or any of MDI's Subsidiaries for any of
directors, officers, consultants, employees or former employees of MDI
or any of its Subsidiaries (the "MDI Plans"). Schedule 4.17(d) also
--------- ----------------
identifies each MDI Plan which constitutes an "employee pension
benefit plan" ("Pension Plan") or an "employee welfare benefit plan"
-----------
("Welfare Plan"), as such terms are defined in the Employee Retirement
--------------
Income Security Act of 1974, as amended ("ERISA"). None of the MDI
-----
Plans is a "multiemployer plan," as such term is defined in ERISA, or
is subject to Title IV of ERISA. Either MDI or a Subsidiary has
delivered or made available to USD true and complete copies of the
following for each MDI Plan, if applicable: (i) the Plan document;
(ii) summary plan description of the MDI Plan; (iii) the trust
agreement, insurance policy or other instrument relating to the
funding of the MDI Plan; (iv) the most recent Annual Report (Form 5500
series) and accompanying schedules filed with the IRS or Department of
Labor with respect to the MDI Plan; (v) the most recent audited
financial statement for the MDI Plan; and (vi) the most recent
determination letter issued by the IRS with respect that to the MDI
Plan that is intended to qualify under Section 401(a) of the Code.
Each Pension Plan has been determined by the IRS to be qualified
under Section 401(a) of the Code, and each such plan remains so
--------------
qualified; and to Stockholder's and MDI's knowledge, no facts or
circumstances exist which could result in the revocation of such
qualification. Each Welfare Plan which is intended to meet the
requirements for tax-favored treatment under the Code to Stockholder's
and MDI's knowledge meets such requirements. Without limiting the
generality of Section 4.7, each MDI Plan has been administered in
-----------
accordance with its terms and the Code, and each Pension Plan and
Welfare Plan has been administered in all material respects in
accordance with ERISA. No facts or circumstances exist which might
give rise to any liability of any of MDI Plan, USD, MDI, any
Subsidiary or Acquisition to any other Person. Stockholder and MDI
have paid all amounts required under applicable law, any Pension Plan
and any Welfare Plan to be paid as a contribution to each Pension Plan
and Welfare Plan through the date hereof. MDI has set aside adequate
reserves to meet contributions which are not yet due under any Pension
Plan or Welfare Plan. Neither MDI nor any of its Subsidiaries, nor
any other Person has engaged in any transaction or taken any other
action with respect to any MDI Plan which would subject MDI, any
Subsidiary, USD or Acquisition to: (A) any tax, penalty or liability
for prohibited transactions under ERISA or the Code; (B) any tax under
Code Sections 4971, 4972, 4976, 4977 or 4979; or (C) a penalty under
ERISA Sections 502(c) or 502(l). None of Stockholder, MDI or any of
their respective Subsidiaries, to the extent it is a fiduciary with
respect to any Pension Plan or Welfare Plan, has breached any of its
responsibilities or obligations imposed upon fiduciaries under ERISA
or the Code or which could result in any claim being made under, by or
on behalf of any Pension Plan or Welfare Plan or any participant or
beneficiary thereof other than benefit claims in the ordinary course,
in any such event which could give rise to liability to MDI or any of
its Subsidiaries. Each Welfare Plan which is a group health plan
within the meaning of Code Section 5000(b)(1) complies with and in
each and every case has complied with the applicable requirements of
Code Section 4980B and Part 6 of Title I of ERISA. Except as set
forth in Schedule 4.17(d), no MDI Plan, other than an MDI Plan which
-----------------
is an employee pension benefit plan (within the meaning of Section
3(2)(A) of ERISA), provides benefits, including without limitation,
death, health or medical benefits (whether or not insured), with
respect to current or former employees of MDI and any of its
Subsidiaries beyond their retirement or other termination of service
with any of MDI and any of its Subsidiaries, other than coverage
mandated by applicable law.
4.18 MATERIAL AGREEMENTS. Schedule 4.18 sets forth a list of all
------------------- -------------
written and oral agreements, leases (whether capitalized or
otherwise), arrangements or commitments to which either MDI or any of
its Subsidiaries is a party or by which it or any of the assets it
owns, leases or utilizes is bound which are expected to result in the
receipt or payment of $20,000 or more by MDI or any of its
Subsidiaries or which are material to the financial position, results
of operations or prospects of MDI and its Subsidiaries on a
consolidated basis or to the ability of MDI to consummate the
transactions contemplated hereby (the "Material Agreements"). MDI has
-------------------
furnished USD with true and complete copies of all Material
Agreements. The Material Agreements are each in full force and effect
and are the valid and legally binding obligations of MDI or the
applicable Subsidiary which is a party to same and, to Stockholder's
and MDI's knowledge, are valid and binding obligations of the
Certificate of Incorporation or Bylaws or in default under any
Material Agreement to which it is a party, and no event has occurred
which with the giving of notice or lapse of time or both would
constitute such a default. Except as set forth on Schedule 4.18,
-------------
neither MDI nor any of its Subsidiaries: (A) has any agreement,
contract or commitment which requires the making of any charitable
contributions; (B) has any agreement, contract or commitment which is
not terminable without penalty, liability or premium upon notice of 30
days or less; (C) has any agreement, contract or commitment containing
any severance, termination or similar provisions; (D) has any
outstanding obligation for borrowed money; (E) has any outstanding
loan or advance to any Person; (F) has any power of attorney
outstanding; (G) has any agreement, contract or commitment relating to
joint ventures, partnerships or debt or equity investments; (H) has
any agreements, contracts or commitments relating to non-competition
or, non-disclosure, non-solicitation or other similar restrictive
covenants; (I) has any agreements, contracts or commitments relating
to the registration of any of MDI's securities; (J) has any agreement,
contract or commitment relating to the voting or other rights with
respect to any securities of MDI or any of its Subsidiaries; and (K)
has any contract, commitment or arrangement with any hospital,
hospital management company, health maintenance organization,
insurance company, third party payor or managed care provider or
company.
4.19 LIST OF ACCOUNTS. Schedule 4.19 sets forth, as of the date
---------------- -------------
hereof: (A) the name and address of each bank or other institution in
which MDI or any of its Subsidiaries maintains an account (cash,
securities or other) or safe deposit box; (B) the name and phone
number of MDI's contact person at such bank or institution; (C) the
account number of the relevant account and a description of the type
of account; and (D) the persons authorized to transact business in
such accounts.
4.20 MAJOR CUSTOMERS. Set forth on Schedule 4.20 is a list of
-------------- -------------
the 10 largest customers (measured by dollar volume) of each of MDI
and each of its Subsidiaries for the year ended September 30, 1996,
and with respect to each, the name and address, dollar volume involved
and nature of the relationship. None of such customers of MDI and its
Subsidiaries has: (A) modified in any material respect, cancelled,
suspended or otherwise terminated its relationship with MDI or any of
its Subsidiaries; or (B) advised MDI or any of its Subsidiaries of its
intention to modify in any material respect, cancel, suspend or
terminate its relationship with MDI or any of its Subsidiaries, to
significantly decrease its purchase of services from MDI or any of its
Subsidiaries, to change the nature of its business relationship with
MDI or any of its Subsidiaries or to adversely change the terms upon
which it purchases services from MDI or any of its Subsidiaries.
4.21 TAXES. Except as set forth in Schedule 4.21: (A) there have
----- -------------
been timely filed (or shall timely be filed prior to the Effective
Time) all Tax Returns with respect to MDI and its Subsidiaries
required to be filed with any taxing authority with respect to Taxes
for any period ending on or before the Effective Time, taking into
account any extension of time to file granted to or obtained on behalf
of MDI and its Subsidiaries; (B) all Taxes shown to be payable on such
returns or reports that are due prior to the Effective Time have been
paid or shall be paid (prior to the Effective Time), and all such
returns or reports accurately reflect the proper amount of Taxes
payable for the applicable periods; (C) no deficiency for any Tax has
been asserted or assessed by a taxing authority against or with
respect to MDI or any of its Subsidiaries; (D) MDI and each of its
Subsidiaries have provided adequate reserves in their Financial
Statements for any Taxes that have not been paid, whether or not shown
as being due on any returns; (E) the income tax returns of MDI have
never been audited; and (F) MDI has not waived any restrictions on
assessment or collection of Taxes or consented to the extension of any
statute of limitations relating to Taxes. As used in this Agreement,
"Taxes" shall mean any and all taxes, fees, levies, duties, tariffs,
-----
imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed
with respect thereto) imposed by any government or taxing authority,
including, without limitation: taxes or other charges on or with
respect to income, franchises, windfall or other profits, gross
receipts, property, sales, use, capital stock, payroll, employment,
social security, workers compensation, unemployment compensation or
net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers duties,
tariffs and similar charges.
4.22 GUARANTEES; POWERS OF ATTORNEY. Except as set forth on
------------------------------
Schedule 4.22 hereto, neither MDI nor any of its Subsidiaries is a
-------------
party to any Guaranty, and none of them has executed any power of
attorney or similar agreement.
4.23 ENVIRONMENTAL MATTERS.
---------------------
(a) DEFINITIONS. For purposes of this Agreement, the
-----------
following terms shall have the following meanings: (A) "Hazardous
----------
Substances" means: (i) those substances defined in or regulated under
----------
the following federal statutes and their state counterparts, as each
may be amended from time to time, and all regulations thereunder: the
Hazardous Materials Transportation Act, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response, Compensation
and Liability Act, the Clean Water Act, the Safe Drinking Water Act,
the Atomic Energy Act, the Federal Insecticide, Fungicide, and
Rodenticide Act, the Toxic Substances Control Act and the Clean Air
Act; (ii) petroleum and petroleum products, byproducts and breakdown
products including crude oil and any fractions thereof; (iii) natural
gas, synthetic gas, and any mixtures thereof; (iv) polychlorinated
biphenyls; (v) any other chemicals, materials or substances defined or
regulated as toxic or hazardous or as a pollutant or contaminant or as
a waste under any applicable Environmental Law; and (vi) any substance
with respect to which a federal, state or local agency requires
environmental investigation, monitoring, reporting or remediation; and
(B) "Environmental Laws" means any federal, state, foreign, or local
-------------------
law, rule or regulation, now or hereafter in effect and as amended,
and any judicial or administrative interpretation thereof, including
any judicial or administrative order, consent decree or judgment,
relating to pollution or protection of the environment, health, safety
or natural resources, including, without limitation, those relating to
(i) releases or threatened releases of Hazardous Substances or
materials containing Hazardous Substances or (ii) the manufacture,
handling, transport, use, treatment, storage or disposal of Hazardous
Substances or materials containing Hazardous Substances.
(b) ENVIRONMENTAL STATUS. Except as described in Schedule
-------------------- --------
4.23 hereto: (A) MDI and each of its Subsidiaries are and have been in
----
compliance with all applicable Environmental Laws; (B) MDI and each of
its Subsidiaries have obtained all permits, approvals, identification
numbers, licenses or other authorizations required under any
applicable Environmental Laws ("Environmental Permits") and are and
---------------------
have been in compliance with their requirements; (C) such
Environmental Permits do not, in connection with the Merger, require
the consent or approval of, or any filing with or notice to, any
governmental authority; (D) there are no underground or aboveground
storage tanks or any surface impoundments, septic tanks, pits, sumps
or lagoons in which Hazardous Substances are being or have been
treated, stored or disposed of on any owned or leased real property or
on any real property formerly owned, leased or occupied by MDI or any
of its Subsidiaries; (E) there is no asbestos or asbestos-containing
material on any owned or leased real property in violation of
applicable Environmental Laws; (F) MDI and its Subsidiaries have not
released, discharged or disposed of Hazardous Substances at any real
property owned by any third party except in compliance with
Environmental Laws or any real property owned or leased or on any real
property formerly owned or leased by MDI or any of its subsidiaries
and none of such property is contaminated with any Hazardous
Substances; (G) neither MDI nor any of its subsidiaries is
undertaking, and neither MDI nor any of its Subsidiaries has
completed, any investigation or assessment or remedial or response
action relating to any such release, discharge or disposal of or
contamination with Hazardous Substances at any site, location or
operation, either voluntarily or pursuant to the order of any
governmental authority or the requirements of any Environmental Law;
and (H) there are no past or pending or, to the knowledge of the
Stockholder or MDI, threatened actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or violation,
notices of liability or potential liability, investigations,
proceedings, consent orders or consent agreements relating in any way
to Environmental Laws, any Environmental Permits or any Hazardous
Substances against MDI or any of its Subsidiaries or any of their
property which are outstanding or have been outstanding during the
past two years, and there are no circumstances that could be expected
to form the basis for any of the foregoing. MDI and its Subsidiaries
have made available to USD copies of any environmental reports,
studies or analyses in its possession relating to owned or leased real
property or the operations of MDI or its Subsidiaries.
4.24 1995 MERGER AGREEMENT. Without limiting the generality of
---------------------
any representation, warranty, covenant or agreement set forth herein
or made in connection herewith, except as set forth on Schedule 4.24,
-------------
Stockholder and MDI do not have knowledge that any of the
representations, warranties, covenants and agreements of any party set
forth in the Agreement and Plan of Merger, dated May 2, 1995, among
Stockholder, MDI and ANMR Acquisition Corp. (the "1995 Merger
Agreement") were not true and correct in all respects as of the date
thereof. Stockholder and MDI do not have knowledge that any party to
such Agreement has violated, or will violate as a result of the
execution, delivery and performance of this Agreement, any term,
provision or agreement set forth in the 1995 Merger Agreement or any
agreement executed in connection therewith. This Section 4.24 does
------------
not waive or affect any rights or remedies that Stockholder has or may
have against any Person under the 1995 Merger Agreement. All
consideration payable to Persons who were stockholders of record of
MDI immediately prior to the closing of the 1995 Merger Agreement has
been fully paid, and no dissenters' or appraisal rights were asserted
in connection with such transaction.
4.25 DISCLOSURE. No representation or warranty of Stockholder
----------
contained in this Agreement or the Schedules hereto, and no
certificate or notice furnished by or on behalf of Stockholder or MDI
to USD or its agents pursuant to this Agreement, contains or will
contain any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained
herein or therein not misleading.
ARTICLE V
COVENANTS
----------
During the period from the date of this Agreement to the Closing
Date, Stockholder agrees to cause MDI to perform all of MDI's
covenants and agreements in this Article V and USD and Acquisition
agree to perform all of their covenants and agreements in this
Article V, all as follows:
5.1 INTERIM OPERATIONS OF MDI. MDI shall operate its business
-------------------------
only in the ordinary and usual course consistent with past practices
and shall use its best efforts to preserve intact its business
organization and the goodwill of its customers, suppliers, employees
and others having business relations with it and to continuously
maintain insurance coverage substantially equivalent to the insurance
coverage in existence on the date hereof. In addition, without
limiting the foregoing, except as may be contemplated in, or disclosed
in Schedule 5.1 or any other schedule to, this Agreement without the
------------
written consent of USD, which shall not be unreasonably withheld, MDI
and each of its Subsidiaries shall not: (A) amend its Articles or
Certificate of Incorporation or Bylaws; (B) issue, sell or authorize
for issuance or sale, shares of any class of its securities
(including, but not limited to, by way of stock split or dividend) or
any subscriptions, options, warrants, rights or convertible
securities, or enter into any agreements or commitments of any
character obligating it to issue or sell any such securities; (C)
redeem, purchase or otherwise acquire, directly or indirectly, any
shares of its capital stock or any option, warrant or other right to
purchase or acquire any such shares; (D) declare or pay any dividend
or other distribution (whether in cash, stock or other property) with
respect to its capital stock; (E) voluntarily sell, transfer,
surrender, abandon or dispose of any of its assets or property rights
(tangible or intangible), other than non-material dispositions in the
ordinary course of business consistent with past practices, which
could not have a material adverse effect on the financial condition,
results of operations, assets, prospects, liabilities or business of
MDI and its Subsidiaries on a consolidated basis; (F) grant or make
any mortgage or pledge or subject itself or any of its properties or
assets to any lien, charge or encumbrance of any kind, except liens
for taxes not currently due or liens not exceeding $50,000 in the
aggregate; (G) create, incur or assume any liability or any
indebtedness, except in the ordinary course of business consistent
with past practices, but in no event in an aggregate amount exceeding
$50,000 more than is shown on MDI's September 30, 1996 Financial
Statements or cancel any debts or waive any claims or rights in an
aggregate amount in excess of $50,000; (H) make or commit to make any
capital expenditures in excess of $50,000 in the aggregate; (I) grant
any increase in the compensation payable or to become payable to
directors, officers or employees (including, without limitation, any
such increase pursuant to any MDI Plan or otherwise), other than merit
increases to officers and employees in the ordinary course of business
and consistent with past practices, but in no event to exceed $50,000
in the aggregate, or pay or satisfy any obligations for deferred
salary, accrued vacation or other deferred or accrued amounts to
Assumed Employees; (J) enter into any agreement, arrangement or
commitment that, if it existed on the date hereof, would be a Material
Agreement, or amend or terminate any of same or any existing Material
Agreement, or enter into, terminate or modify any contract, agreement
or arrangement with Stockholder or any Affiliate thereof (except to
the extent expressly contemplated hereby); (K) alter the manner of
keeping its books, accounts or records, or change in any manner the
accounting practices (including, but not limited to, those relating to
amortization and depreciation) therein reflected; (L) enter into any
commitment or transaction other than in the ordinary course of
business consistent with past practices; (M) take or omit to take any
action which would render any of its representations or warranties
untrue or misleading or which would be a breach of any of its
covenants; (N) write off the value of any inventory or accounts
receivable or increase the reserve for uncollectible receivables or
obsolete, damaged or otherwise unsalable inventory, except as required
by generally accepted accounting principles consistently applied or by
law, or discount, factor, sell or otherwise transfer any account
receivable; (O) approve any increase in the benefits payable under, or
establish any new MDI Plan; (P) take any action which could have a
material adverse effect on the financial condition, results of
operations, assets, liabilities, properties, prospects or business of
MDI or any of its Subsidiaries, or on employee, customer or supplier
relations or hinder MDI in consummating the transactions contemplated
hereby on or prior to the Termination Date, or reduce or downsize its
operations, reduce its work force or eliminate any operations; (Q)
make any Guaranty; (R) apply any of its assets to the direct or
indirect payment, discharge, satisfaction or reduction of any amount
payable directly or indirectly (i) to or for the benefit of any
Affiliate of MDI or any of its Subsidiaries (except for salary and
benefits as currently in effect and except in accordance with existing
agreements and arrangements which have been disclosed to USD by MDI in
writing) or (ii) to any Person, except in the ordinary course of
business consistent with past practices; or (S) agree, whether in
writing or otherwise, to do any of the foregoing. Without limiting
the generality of the foregoing, Stockholder shall not permit MDI or
any of its Subsidiaries, directly or indirectly, (i) to incur any
expenses or obligations in connection with the acquisition of any
interest in MVA owned by any third party (except for using the
$200,000 advanced by Stockholder to pay a portion of the purchase
price), (ii) to loan or otherwise advance any money to, or make any
investment in, MDI Rehab, Middlesex or MVA or otherwise become liable
for any obligations of MDI Rehab, Middlesex or MVA or (iii) to incur
any expenses or obligations with respect to MDI Rehab, Middlesex, MVA
or Faulkner; and Stockholder and MDI shall not permit any payment of
principal to Chase prior to the Closing. Stockholder shall not take
or omit to take any action which would render any of its
representatives or warranties herein untrue or misleading or which
would be a breach of any of its covenants herein.
5.2 ACCESS. MDI shall: (A) afford to USD and its agents and
------
representatives reasonable access to the properties, books, records
and other information of MDI and its Subsidiaries, provided that such
access shall be granted upon reasonable notice and at reasonable times
during normal business hours; (B) use its reasonable efforts to cause
MDI's personnel to assist USD in its investigation of MDI and its
Subsidiaries pursuant to this Section 5.2; and (C) furnish promptly to
-----------
USD all information and documents concerning its business, assets,
liabilities, properties and personnel as USD may from time to time
reasonably request. In addition, from the date of this Agreement
until the Closing Date, MDI shall cause one or more of its officers to
confer on a regular basis with officers of USD and to report on the
general status of its ongoing operations.
5.3 CONFIDENTIALITY. Except as otherwise required by law or in
---------------
the performance of obligations under this Agreement, any nonpublic
information received by a party or its advisors, agents or
representatives from the other party shall be kept confidential and
shall not be used or disclosed for any purpose other than in
furtherance of the transactions contemplated by this Agreement. The
obligation of confidentiality shall not extend to information which:
(A) is or becomes generally available to the public other than as a
result of a disclosure by a party in violation of this Agreement; (B)
was in the lawful possession of a party prior to its receipt from the
other party; or (C) becomes available to a party on a nonconfidential
basis from a source other than a party to this Agreement, provided
such source is not known to be in violation of a confidentiality
agreement. Upon termination of this Agreement, each party shall, upon
request, promptly return or destroy any confidential information
received from the other party. The covenants of the parties contained
in this Section 5.3 shall survive any termination of this Agreement
-----------
but shall terminate at the Closing, if it occurs, with respect to
information concerning MDI and its Subsidiaries.
5.4 NOTIFICATION. Stockholder and USD shall promptly notify the
------------
other in writing of the occurrence, or threatened occurrence, of: (A)
any event that would constitute a breach of this Agreement by such
party or any of its Subsidiaries or could be expected to have a
material adverse effect on MDI's or USD's (or any of its
Subsidiaries'), as the case may be, financial condition, results of
operations, assets, liabilities, prospects or business or on its
ability to consummate the transactions contemplated hereby on or prior
to the Termination Date; (B) any event that would cause any
representation or warranty made by such party in this Agreement to be
false or misleading in any respect; (C) any other matter which occurs
after the date of this Agreement which, if existing on the date of
this Agreement, would have been required to be disclosed herein;
provided, however, that the delivery of any notice under this Section
-------- ------- -------
5.4 shall not cure any breach of any provision set forth in this
--
Agreement or otherwise limit or affect the remedies available to the
party receiving such notice; (D) any notice from any governmental or
regulatory authority relating to the transactions contemplated hereby;
and (E) any notice or communication from any Person suggesting that
any notice, consent, filing or similar item is necessary to consummate
the transactions contemplated hereby. MDI will provide to USD true
and complete copies of all reports or notices to and other
communications with any governmental or regulatory authority relating
to MDI between the date of this Agreement and the Closing Date.
5.5 CONSENT OF GOVERNMENTAL AUTHORITIES AND OTHERS. Each of USD
----------------------------------------------
and Stockholder or MDI agrees to file, submit or request promptly
after the date of this Agreement and to prosecute diligently any and
all consents, approvals, authorizations, registrations,
qualifications, filings, applications and notices appropriate for
filing or submission to any governmental authorities, as provided in
Sections 3.4 and 4.4. Each of USD, MDI and Stockholder agrees to
--------------------
file, submit or request promptly after the date of this Agreement and
to prosecute diligently any and all consents, approvals,
authorizations, registrations, qualifications, filings, applications
and notices appropriate for filing or submission to any Person which
are required for, or otherwise in furtherance of, the consummation of
transactions contemplated hereby. Each of USD, MDI and Stockholder
shall promptly make available to the other such information as each of
them may reasonably request relating to its business, assets,
liabilities, properties and personnel as may be required by each of
them to prepare and file or submit such applications and notices and
any additional information requested by any governmental authority,
and shall update by amendment or supplement any such information given
in writing. Each of USD, MDI and Stockholder represents and warrants
to the other that such information, as amended or supplemented, shall
be true, correct and complete and not misleading.
5.6 ACQUISITION PROPOSALS; NO SOLICITATION. Stockholder shall
--------------------------------------
not, nor will it permit MDI or any of their respective directors,
officers, employees or agents to, directly or indirectly: (A) solicit,
initiate, encourage or participate in any negotiations or discussions
with respect to any offer or proposal to, directly or indirectly,
acquire all or a substantial portion of the business or properties, or
any of the capital stock or securities, of MDI or any of its
Subsidiaries, whether by merger (other than the Merger),
consolidation, share exchange, business combination, purchase of
assets, lease of assets, exchange of assets, pledge of assets, other
disposition of assets or otherwise (an "Acquisition Transaction"); or
(B) except as required by law, disclose to any Person, other than USD
or its agents, any information not customarily disclosed concerning
the business, assets, liabilities, properties and personnel of MDI, or
afford to any Person other than USD and its agents access to the
properties, books or records of MDI; except that as to both (A) and
(B) above, Stockholder and MDI may, following written notice to USD as
provided below, furnish information and access, in each case in
response to bona fide unsolicited requests therefor, but only to the
extent required by the fiduciary duties of the board of directors of
Stockholder or MDI imposed by Delaware law (as determined in good
faith by its respective Board of Directors based upon advice of
outside counsel), as the case may be, to any Person pursuant to
appropriate confidentiality agreements, and may participate in
discussions and negotiate with such Person in connection with any
Acquisition Transaction if the Board of Directors of Stockholder or
MDI determines in its good faith judgment that such action is
appropriate in furtherance of the best interests of MDI. In addition,
Stockholder and MDI shall direct its officers and other appropriate
personnel to cooperate with any such Person. If Stockholder or MDI
receives any offer or proposal, written or otherwise, of the type
referred to above, Stockholder shall promptly inform USD of such offer
or proposal and furnish USD with a copy thereof if such offer or
proposal is in writing.
5.7 BEST EFFORTS. Subject to the terms and conditions of this
------------
Agreement, each of Stockholder, MDI and USD shall use its best efforts
in good faith to take or cause to be taken as promptly as practicable
all reasonable actions that are within its control to cause to be
fulfilled: (A) those conditions precedent to its obligations to
consummate the Merger; and (B) those actions upon which the conditions
precedent to the other party's obligations to consummate the Merger
are dependent. Without limiting the generality of the foregoing, the
parties shall in good faith vigorously defend any action seeking to
enjoin, prohibit or materially restrict the Merger.
5.8 PUBLICITY. Stockholder and USD agree to cooperate in
---------
issuing any press release or other public announcement (including any
filings made with the Commission) concerning this Agreement or the
transactions contemplated hereby. Nothing contained herein shall
prevent any party from at any time furnishing any information to any
governmental authority which it is by law or otherwise so obligated to
disclose or from making any disclosure which its counsel deems
necessary or advisable in order to fulfill such party's disclosure
obligations under applicable law or the rules of NASDAQ.
5.9 SALE OR ASSIGNMENT OF INTEREST IN MVA, MDI REHAB, MIDDLESEX
-----------------------------------------------------------
AND FAULKNER. Immediately prior to the Effective Time, MDI shall sell
------------
or assign its interest in MDI Rehab, Inc. ("MDI Rehab"), which owns a
--------
75% interest in MVA Rehabilitation Associates ("MVA"), in Middlesex
---
MRI Center, Inc. ("Middlesex"), and in any leases or other agreements
---------
or instruments with or relating to Faulkner Hospital Sagoff Woman's
Center ("Faulkner"), including the exemption letter allowing for the
operation of the facility, and cause MDI and its Subsidiaries to be
released from any obligations relating to MVA, MDI Rehab, Middlesex
and/or Faulkner, pursuant to the terms of the Agreements attached
hereto as Exhibits B and C.
---------- -
5.10 TERMINATION OF MDI'S OBLIGATIONS UNDER EMPLOYMENT
-------------------------------------------------
AGREEMENTS. Immediately prior to the Effective Time, Stockholder
----------
shall assume all of MDI's and its Subsidiaries' obligations under
MDI's employment and related agreements with David Gaynor, Steven
James, Ruselle Robinson and Elaine McCarthy (the "Assumed Employees").
-----------------
5.11 RELEASE OF STOCKHOLDER GUARANTEES. The Stockholder is the
---------------------------------
guarantor of the obligations of MDI or its Subsidiaries listed on
Schedule 5.11. USD shall cooperate with the Stockholder and MDI in
-------------
obtaining the release of the Stockholder from such guarantees,
including USD making available such information as is reasonably
requested, regarding the business and financial condition of USD, and
also, where requested, USD shall provide a substitute guarantee.
5.12 INTERCOMPANY RECEIVABLES. At the Effective Time, (i) all
------------------------
obligations of Stockholder and its Subsidiaries (except MDI and its
Subsidiaries) and MVA and MDI Rehab and Middlesex to MDI and its
Subsidiaries shall be satisfied in accordance with their terms and
(ii) all obligations of MDI to Stockholder for advances made to MDI
and its Subsidiaries which are set forth on Schedule 5.1 as to be
------------
satisfied at the Closing shall be satisfied in accordance with their
terms.
5.13 LEASE ARRANGEMENTS. At the Closing, the parties shall amend
------------------
the existing Sublease between MDI and Stockholder so that either party
may terminate such Sublease upon 60 days' prior written notice,
without cost or liability for such termination. At the Closing, the
parties shall also enter into an agreement pursuant to which, in the
event that Stockholder (i) agrees with its landlord to terminate its
lease for the premises which are the subject of such Sublease and
vacate such premises prior to the expiration of such lease, MDI would
pay 50% of any amounts payable to Stockholder's landlord as a result
of such early termination or (ii) subleases all or a portion of such
premises for less than the current lease payments with respect to such
subleased premises, MDI would pay 50% of such deficiency; provided,
--------
however, that the aggregate cost to MDI under this Section 5.13 shall
-------
not exceed $240,000.
5.14 MMIV ESCROW. Immediately prior to the Effective Time, the
-----------
beneficiary on the MDI Escrow Account at Fleet Bank (#9375408388) will
be changed from MDI and Western Massachusetts Magnetic Resonance
Services, Inc. to Stockholder.
ARTICLE VI
ADDITIONAL AGREEMENTS
----------------------
6.1 EMPLOYEES AND BENEFIT PLANS. Upon consummation of the
---------------------------
Merger, USD shall permit employees of MDI and its Subsidiaries to
participate in each of USD's employee benefit plans and stock option
plans and with credit for prior service, subject to the eligibility
requirements and other terms and conditions of such plans. USD shall
not be required to continue the employment of any employees of MDI and
its Subsidiaries, but, to the extent USD desires to terminate the
employment of any of such employees, it shall be solely responsible
for effecting such termination and the consequences thereof, and
nothing set forth herein shall be deemed an employment agreement.
6.2 INVESTIGATION; NOTICES. The representations, warranties and
----------------------
covenants set forth in this Agreement shall not be affected or
diminished in any way by the receipt of any notice pursuant to Section
--------
5.4 or by any investigation (or failure to investigate) at any time by
---
or on behalf of the party for whose benefit such representations,
warranties and covenants were made. All statements contained in this
Agreement or any Schedule hereto, or in any certificate or notice
delivered pursuant hereto shall be deemed to be representations and
warranties for purposes of this Agreement.
6.3 SURVIVAL OF THE REPRESENTATIONS, WARRANTIES, COVENANTS AND
-----------------------------------------------------------
AGREEMENTS. All representations, warranties, covenants and
----------
agreements of USD, Stockholder and MDI contained in this Agreement
shall survive the Closing until the date which is 18 months after the
Closing Date, except for the representations, warranties, covenants
and agreements of Stockholder (a) contained in Sections 3.2, 4.2,
------------------
4.12, 4.13, 6.5, 6.8 and 6.11 which shall survive the Closing Date
-----------------------------
without limitation as to time, (b) relating to taxes of any kind or to
tax related matters, which shall survive the Closing Date until the
date which is thirty (30) days after the date the applicable statute
of limitations for the payment, collection or assessment of any such
tax has expired and (c) contained in Section 6.9 which shall survive
-----------
the Closing for three years.
6.4 INDEMNIFICATION.
---------------
6.4.1 Subject to the limitations set forth in Section
-------
6.4.4 hereof, Stockholder agrees to indemnify and hold harmless USD
-----
and its assigns from, against and in respect of, the full amount of
any and all liabilities, damages, claims, deficiencies, settlements,
fines, assessments, losses, taxes, penalties, interest, costs and
expenses, including, without limitation, reasonable fees and
disbursements of counsel (collectively "Losses") arising from, in
------
connection with, or incident to: (i) any breach or violation of any of
the representations, warranties, covenants or agreements of
Stockholder or MDI contained in this Agreement or in any document or
certificate delivered by Stockholder or MDI at or prior to the
Closing; and (ii) any and all actions, suits, proceedings, demands,
assessments, judgments, costs and expenses incidental to any of the
foregoing; provided, however, that notwithstanding the foregoing: (i)
-------- -------
this Section 6.4.1 shall not apply to the Raytel Litigation, the Lynch
-------------
Litigation or Assumed Employee Claims, and any indemnification with
respect to the Raytel Litigation, the Lynch Litigation or Assumed
Employee Claims shall be governed by Section 6.11; and (ii) this
-------------
Section 6.4.1 shall not apply to the extent a matter is covered by
-------------
Section 6.10.
------------
6.4.2 Subject to the limitations set forth in Section
--------
6.4.4 hereof, USD agrees to indemnify and hold harmless Stockholder
-----
from, against and in respect of, the full amount of any and all Losses
arising from, in connection with, or incident to: (i) any breach or
violation of any of the representations, warranties, covenants or
agreements of USD contained in this Agreement or in any document or
certificate delivered by USD at or prior to the Closing; and (ii) any
and all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses incidental to any of the foregoing.
6.4.3 A party or parties hereto agreeing to be
responsible for or to indemnify against any matter pursuant to this
Section 6.4 is referred to herein as the "Indemnifying Party" and the
-----------
other party or parties claiming indemnity is referred to as the
"Indemnified Party." An Indemnified Party under this Agreement shall,
with respect to claims asserted against such party by any third party,
give written notice to each Indemnifying Party of any liability which
might give rise to a claim for indemnity under this Agreement within
ten (10) business days of the receipt of any written claim from any
such third party, and with respect to other matters for which the
Indemnified Party may seek indemnification, give prompt written notice
to each Indemnifying Party; provided, however, that any failure to
-------- -------
give such notice will not waive any rights of the Indemnified Party
except to the extent the rights of the Indemnifying Party are
materially prejudiced. The Indemnifying Party shall in good faith and
at its sole cost and expense prosecute, contest and defend, by all
appropriate legal proceedings, with counsel satisfactory to the
Indemnified Party, all such claims. The Indemnified Party shall have
the right, at its own expense, to participate in such proceedings and
to be represented by separate attorneys of its choice. The
Indemnified Party and the Indemnifying Party agree to afford one
another the opportunity to be present at, and to participate in,
conferences with all Persons asserting claims for which
indemnification is sought hereunder. The Indemnified Party and the
Indemnifying Party shall actively cooperate with and assist each other
to the extent lawful and reasonably possible. The Indemnified Party
shall be kept fully informed of the defense of any such claim at all
stages thereof. In the event that the Indemnifying Party fails to
timely and in good faith defend against any such claim, the
Indemnified Party shall, after providing 10 days prior written notice
to the Indemnifying Party, have the right, but not the obligation, to
defend the same and may make any compromise or settlement thereof and
recover and be indemnified for the entire cost thereof from the
Indemnifying Party. If, in good faith, the Indemnified Party
concludes that there are specific defenses or counterclaims available
to the Indemnified Party which are different from or in addition to
those available to the Indemnifying Party, or that such claims may
have a material adverse effect on the Indemnified Party with respect
to the scope of the foregoing indemnities, then the Indemnified Party
shall have the right to direct the defense of any such claim and the
Indemnifying Party shall bear the expenses thereof. In the event that
the Indemnified Party is, directly or indirectly, conducting a defense
against any such claim, the Indemnifying Party shall cooperate with
the Indemnified Party in any such defense and make available to it all
such witnesses, records, materials and information in its possession
or under its control.
6.4.4 Except as otherwise set forth herein, no party
shall have any obligation under the indemnification provisions set
forth in Sections 6.4.1 or 6.4.2: (i) unless notice of a claim for
------------------------
indemnity in respect of any matter has been given such party on or
before the date which is 18 months after the date of Closing,
provided, however, that with respect to any tax matters, notice of a
-------- -------
claim for indemnity must be given on or before the date which is
thirty (30) days after the expiration of the applicable statute of
limitations; and (ii) until and only to the extent that the aggregate
of all claims for which USD, on the one hand, or Stockholder, on the
other hand, is responsible under the indemnification provisions of
Sections 6.4.1 or 6.4.2, respectively, exceeds $500,000 (the "Basket
----------------------- ------
Limitation"); and (iii) to the extent such liability exceeds
----------
$3,000,000 in the aggregate (the "Cap Limitation"). Notwithstanding
--------------
any provision to the contrary set forth herein, none of the
limitations of this Section 6.4.4 shall apply with respect to (or be
-------------
considered in giving effect to) the indemnification obligations of a
party arising in connection with the breach of any representation,
warranty or covenant set forth in Sections 3.2, 4.2, 4.12, 4.13, 6.5,
-----------------------------------
6.8, 6.9, 6.10 and 6.11, hereof and none of the limitations of this
-------------- -----
Section 6.4.4 shall apply with respect to any action based upon
-------------
intentional and willful, or fraudulent actions, misrepresentations or
breach of any party; and the Cap Limitation shall be inapplicable with
respect to indemnification obligations of a party arising in
connection with the breach of any provision of Articles II or V; and
----------------
the Basket Limitation shall be inapplicable with respect to
indemnification obligations of a party arising in connection with the
breach of any provision of Article II or Sections 5.2 through 5.14;
---------- ------------ ----
and the Basket Limitation with respect to indemnification obligations
of a party arising in connection with the breach of any provision of
Section 5.1 shall be $100,000, rather than $500,000. By way of
-----------
example, any liability under Section 6.11 shall not be included when
------------
calculating such $3,000,000 amount. For purposes of the calculation
under this subsection, there shall be an offset against claims of an
amount equal to the amount of any cash payment actually received by an
Indemnified Party after the Closing Date covering any such claim from
any insurance policy.
6.4.5 Except to the extent specifically provided for in
Section 6.10, Section 6.11 or elsewhere herein, the parties hereto
------------ -------------
agree that indemnification pursuant to this Section 6.4 is the sole
-----------
and exclusive monetary remedy of the parties for breach of contract
for the breach of any representation, warranty, covenant or agreement
of any party hereto under this Agreement; provided, however, that the
-------- -------
foregoing shall be inapplicable to intentional or willful breaches or
violations and shall not preclude any party from pursuing any
equitable remedies available to it.
6.5 GENERAL RELEASE. As a material inducement for USD and
---------------
Acquisition to enter into this Agreement, effective as the Effective
Time, except as expressly set forth on Schedule 6.5, Stockholder, on
------------
behalf of itself and its Subsidiaries (including MVA, Middlesex and
MDI Rehab), hereby unconditionally and irrevocably releases and
forever discharges, effective as of the Effective Time, MDI and its
respective Subsidiaries from any and all rights, claims, demands,
judgments, obligations, liabilities and damages, whether accrued or
unaccrued, asserted or unasserted, and whether known or unknown,
suspected or unsuspected, relating to MDI and/or any of its
Subsidiaries which ever existed, now exist, or may hereafter exist, by
reason of any tort, breach of contract, violation of law or other act
or failure to act which shall have occurred at or prior to the
Effective Time, including, but not limited to, any rights of
subrogation with respect to obligations of MDI to Chase. Stockholder
expressly intends that the foregoing release shall be effective
regardless of whether the basis for any claim or right hereby released
shall have been known to or anticipated by Stockholder.
6.6 ASSIGNMENT OF RIGHTS OF STOCKHOLDER UNDER 1995 ACQUISITION
----------------------------------------------------------
AGREEMENT. Effective as of the Effective Time, Stockholder shall be
---------
deemed to have assigned to USD all of its right, title and interest in
and to, and all of its benefits and privileges (other than rights to
bring or defend claims under the Lynch Litigation), if any, under the
1995 Merger Agreement, including, but not limited to, those relating
to indemnification, if any.
6.7 DISCHARGE OF BANK DEBT. Immediately prior to the Effective
----------------------
Time, Stockholder shall advise USD as to the exact amount of all of
MDI's and its Subsidiaries' obligations to Chase, as of the Effective
Time; and at the Effective Time, USD shall deliver such amount
directly to Chase on behalf of MDI by wire transfer in partial
satisfaction of the Merger Consideration and the amount to be paid to
Stockholder in cash under Section 2.6(b) shall be reduced by such
--------------
amount.
6.8 BLOCKED ACCOUNT, PLEDGE AND SECURITY AGREEMENT. At the
----------------------------------------------
Closing, Stockholder shall transfer $1,000,000 of the Merger
Consideration into a bank account and Stockholder shall also pledge
1,250,000 shares of Advanced Mammography Systems, Inc. common stock,
all to be held in accordance with the terms and conditions of the
Blocked Account, Pledge and Security Agreement, attached hereto as
Exhibit D. USD and Stockholder agree to execute such Agreement at the
---------
Closing.
6.9 RESTRICTIVE COVENANTS.
---------------------
6.9.1 NONCOMPETITION. Stockholder recognizes that in
--------------
order to assure USD and Acquisition that USD will retain the value of
MDI as a "going concern," it is necessary that Stockholder undertakes
not to utilize its special knowledge of the business of MDI and its
relationship with customers and suppliers of MDI to compete with USD
or MDI. Stockholder hereby agrees that it shall, for a period of
three (3) years after the Effective Time (such aggregate period being
hereinafter referred to as the "Covenant Period"), refrain from,
anywhere within a 50-mile radius of a site at which MDI or USD
conducts business at any time during the Covenant Period, or has
conducted business prior to the Effective Time, directly or
indirectly, owning, managing, operating, controlling or financing, or
participating in the ownership, management, operation, control or
financing of, or being connected with or having any interest in, or
otherwise taking any part as a stockholder, director, officer,
employee, consultant, independent contractor, partner or otherwise in,
any business competitive with that engaged in by MDI as of the
Effective Time (excluding the business of MVA, MDI Rehab, Middlesex
and Faulkner as of the Effective Time), including, but not limited to,
providing radiology, MRI, CT or other diagnostic imaging services, but
excluding breast imaging services and the research, development and
commercialization of diagnostic imaging technology and products
developed from such technology (the "Competitive Business"); provided,
--------
however, that the foregoing shall not apply solely to the ownership of
-------
not more than two percent (2%) of the outstanding stock of any company
listed by a national securities exchange or an over-the-counter stock
listed by the National Association of Securities Dealers, except the
foregoing restriction shall not apply to the ownership by Stockholder
of the securities of Advanced Mammography Systems, Inc.
6.9.2 CONFIDENTIAL INFORMATION. Stockholder agrees not
------------------------
to at any time subsequent to the Effective Time, disclose, directly or
indirectly, to any person or entity, or use or cause or authorize any
person or entity to use any confidential information relating to MDI
or any of its Subsidiaries or any information concerning financial
condition, results of operations, customers, suppliers, services,
inventions, sources, leads or methods of obtaining new products,
services or business, intangible property or methods of operating
their businesses or any other information relating to MDI or any of
its Subsidiaries which Stockholder knows or should know is regarded as
confidential and valuable by USD or MDI (whether or not any of the
foregoing information is actually novel or unique or is actually known
by others); provided, however, that this Section 6.9.2 shall not
-------- ------- -------------
restrict the disclosure of confidential information (i) to any
governmental entity to the extent required by law or (ii) which is
publicly known and available through no wrongful act of Stockholder or
its affiliates.
6.9.3 SOLICITATION OF BUSINESS. During the Covenant
------------------------
Period, Stockholder agrees that it will not, directly or indirectly,
at any time solicit or cause or authorize directly or indirectly to be
solicited, or accept or cause or authorize directly or indirectly to
be accepted, for or on behalf of itself or other persons or entities,
any Competitive Business of MDI or any of its Subsidiaries from
persons or entities who were customers of MDI or any of its
Subsidiaries at any time within one year prior to the Effective Time.
6.9.4 SOLICITATION OF PERSONNEL. During the Covenant
-------------------------
Period, Stockholder agrees that it will not solicit or cause or
authorize, directly or indirectly, to be solicited for employment or
employ or cause or authorize, directly or indirectly, to be employed
or engaged as an employee, independent contractor or sales agent, for
or on behalf of itself or any other person or entity, any person who
was an employee, independent contractor or sales agent of MDI or any
of its Subsidiaries at the Effective Date or whose employment was
terminated within three (3) months prior to or six months after the
Effective Date by USD, MDI or any of its Subsidiaries; provided, that
--------
the foregoing shall not apply to an employee of both MDI and its
Subsidiaries and also of Stockholder and its Subsidiaries; and,
provided, further, that the foregoing shall not apply to the Assumed
-------- -------
Employees or employees who perform duties principally for MVA, MDI
Rehab, Middlesex or Faulkner.
6.9.5 USE OF SYMBOLS. Stockholder agrees not to at any
--------------
time after the Effective Time, directly or indirectly, use or
authorize any person or entity (i) to use any name, mark, logo or
other identifying words or images (collectively, "Symbols") which are
---------
similar to those used by MDI or any of its Subsidiaries in connection
with any business product or service, whether or not competitive with
any business then being carried on by MDI or any of its Subsidiaries
or any product or service then being sold or provided by MDI or any of
its Subsidiaries except to the extent that any such Symbols primarily
relate to Stockholder.
6.9.6 INJUNCTIVE RELIEF. Stockholder acknowledges that
-----------------
it would be very difficult or impossible to measure the damages
resulting from the breach of any provision of this Section 6.9.
-----------
Stockholder further acknowledges that the restrictions herein are
reasonable and reasonably necessary for the protection of the
legitimate business interests and goodwill of MDI and USD, and that a
violation by Stockholder of any such covenant will cause irreparable
damage to MDI and USD. Therefore, Stockholder hereby agrees that any
breach or threatened breach by it of any provision of this Section 6.9
------------
shall entitle MDI and USD, in addition to any other legal remedies
available to them, to a temporary and permanent injunction or any
other appropriate decree of specific performance (without any bond or
security being required) in order to enjoin such breach or threatened
breach. It is the desire and intent of the parties that the
provisions of this Section 6.9 shall be enforced to the fullest extent
-----------
permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. Accordingly, if any
particular subparagraph or portion of this Section 6.9 shall be
-----------
adjudicated to be invalid or unenforceable, this Section 6.9 shall not
-----------
be deemed null and void and shall be deemed amended to delete
therefrom the portion thus adjudicated to be invalid or unenforceable,
such deletion to apply only with respect to the operation of this
Section 6.9 in that particular jurisdiction in which such adjudication
-----------
is made. In the event any provisions of this Section 6.9 relating to
-----------
the time period, scope of activities or areas of restrictions shall be
declared by a court of competent jurisdiction to exceed the maximum
time period, scope of activities or area such court deems reasonable
and enforceable, the time period, scope of activities or areas of
restrictions shall thereafter be deemed the maximum which such court
deems reasonable and enforceable.
6.10 TAX MATTERS.
-----------
6.10.1 Tax and Other Filings. Upon the request of any
---------------------
party, each other party shall on and after the Closing Date cooperate
with the requesting party and provide the requesting party with such
information and execute and deliver such documents as the requesting
party may reasonably request with respect to the filing and auditing
of Tax Returns and financial statements with respect to any required
filings with any government agencies or related claims with respect to
MDI and its Subsidiaries for all periods prior to the Closing Date.
USD further agrees to maintain the records of MDI and its Subsidiaries
received by reason of the Merger relating to the period prior to or
after the Closing Date for a period of six years, provided that should
--------
USD decide to dispose of any such records prior to the end of such six
year period it shall give prior written notice to the Stockholder in
order that the Stockholder may determine to take possession of any of
the records sought to be disposed of.
6.10.2 Indemnification for Taxes. Notwithstanding any
-------------------------
provision to the contrary set forth in Section 6.4.4 hereof or any
-------------
other provision hereof, Stockholder agrees to indemnify and hold USD
and MDI and its Subsidiaries and their respective successors and
assigns harmless from, against and in respect of: (i) all liabilities,
damages, claims, deficiencies, fines, assessments, losses, penalties,
interest, costs and expenses for Taxes (including, but not limited to,
those arising in connection with the transactions contemplated in
connection herewith) attributable to all Tax years or portions thereof
ending on or prior to the Closing Date imposed with respect to MDI or
any of its Subsidiaries or any Affiliated Group of which MDI or any of
its Subsidiaries was a member at any time prior to the Closing Date;
and (ii) any and all actions, suits, proceedings, demands,
assessments, judgments, costs (including, but not limited to,
reasonable fees and disbursements of counsel) and expenses incidental
to any of the foregoing. Notwithstanding the foregoing, if a court of
competent jurisdiction having final adjudicative authority and from
which no appeal is available shall determine that a party is not
entitled to indemnification with respect to a claim, then such party
shall not be entitled to recover its legal fees with respect to such
claim.
6.10.3 Returns for Tax Periods Ending on or Before the
-----------------------------------------------
Closing Date. Stockholder shall file (or cause to be filed) any Tax
-------------
Returns of MDI and its Subsidiaries for Tax periods ending on or
before the Closing Date which are to be filed after the Closing Date.
Such Tax Returns shall be prepared on a basis consistent with past
practice to the extent such past practice is consistent with all
state, local and foreign Tax laws, rules and regulations.
6.10.4 Returns for Tax Periods Beginning Before and
--------------------------------------------
Ending After the Closing Date. USD shall file (or cause to be filed)
-----------------------------
any Tax Returns of MDI and its Subsidiaries for Tax periods which
begin before the Closing Date and end after the Closing Date. Such
Tax Returns shall be prepared on a basis consistent with past practice
to the extent such past practice is consistent with all state, local
and foreign Tax laws, rules and regulations. USD shall send copies of
such Tax Returns to Stockholder. Stockholder shall pay to USD within
ten days of the date on which Taxes are paid with respect to such
periods an amount equal to the Tax liability of MDI and its
Subsidiaries for the portion of such period ending on the Closing
Date, subject to reasonable objection by Stockholder to the
calculations pursuant to Section 6.10.5. Such Tax liability shall be
computed as if the Tax periods of MDI and its Subsidiaries ended on
the Closing Date and included an allocable share of the income,
deductions and other Tax items of MDI and its Subsidiaries. The
income, deductions and other Tax items of MDI and its Subsidiaries for
such Tax periods shall be allocated to the portion of the period
ending on the Closing Date and the portion of the period beginning
after the Closing Date by closing the books of MDI and its
Subsidiaries as of the end of the Closing Date.
6.10.5 Calculation of Indemnity. The party seeking
------------------------
indemnification shall give the other party written notice of such
claim for indemnification pursuant to this Section 6.10 which notice
------------
shall include a calculation of the amount of the requested indemnity
payment. In the event of a dispute, the party presenting a claim for
indemnification shall be notified in writing by the party required to
indemnify as to the amount of the claim that is disputed and the basis
therefor. In such event, the calculation shall be reviewed by a
nationally recognized independent certified public accounting firm for
the party presenting the claim. For purposes of this Section 6.10.5,
--------------
and the calculation of any indemnity under this Section 6.10, interest
------------
or penalties accruing after the Closing Date with respect to a
liability for a Tax attributable to a taxable period ending on or
prior to the Closing Date shall be deemed to be attributable to a
taxable period ending on or prior to the Closing Date. If the
indemnifying party after consultation with its nationally recognized
independent certified accounting firm disagrees with the calculation
of the indemnity payment, such disagreement shall be referred for
resolution to such other nationally recognized independent certified
public accounting firm as is mutually agreed upon by the parties. The
decision of such firm shall be final and binding on the parties. The
fees of such other public accounting firm shall be shared equally by
Stockholder and USD. Neither party may select a public accounting
firm which is then or had been within the prior two years retained by
such party for accounting services.
6.11 OTHER INDEMNIFICATIONS.
-----------------------
6.11.1 Notwithstanding any provision to the contrary set
forth herein, Stockholder agrees to indemnify and hold harmless USD
and MDI and their respective Affiliates, successors and assigns from,
against and in respect of, and be primarily liable for, the full
amount of any and all Losses arising from, in connection with, or
incident or relating to: (i) the lawsuits styled Medical Diagnostics,
--------------------
Inc., et al v. Medical Imaging Partners, L.P., et al (Middlesex
----------- -------------------------------------
(County) Superior Court, Commonwealth of Massachusetts, Civil Docket
No. MICV92-95872) and/or Raytel Medical Corporation v. Medical
------------------------- --------
Diagnostics, Inc., et al (Court of Chancery of the State of Delaware,
------------------------
New Castle County, Case No. 13905) and any actions, suits or other
proceedings by Raytel to enjoin the Merger and all claims,
counterclaims, actions and/or causes of action of Raytel and/or any
other Person relating to or arising in connection with Mass. Mobile
Imaging Venture ("MMIV") or relating to the facts and circumstances
giving rise to such matters (the "Raytel Litigation"); and (ii) all
actions, suits, proceedings, demands, assessments, judgments, costs
and expenses incidental to any of the foregoing. Notwithstanding
anything to the contrary set forth herein, such indemnity shall not be
interpreted or construed to cover fees or disbursements of counsel to
MDI which accrued and were paid prior to January 1, 1997.
Notwithstanding anything to the contrary set forth herein, such
indemnity shall not pertain to any action taken, or, if a duty to act
exists not taken, by MDI or its Subsidiaries (other than MVA, MDI
Rehab and Middlesex) which is unrelated to the Raytel Litigation which
arises, accrues or occurs solely after the Effective Time and over
which USD had control. Notwithstanding the foregoing, such indemnity
shall not pertain to the distribution of undistributed profits of MMIV
for the period ended December 31, 1996 to Raytel, to the distribution
of a portion of MMIV's assets as of December 31, 1996 to Raytel in
liquidation of MMIV or to reasonable and customary out-of-pocket
expenses incurred in the liquidation of MMIV, in each instance in
accordance with the general partnership agreement of MMIV which
provides for the dissolution of MMIV as of December 31, 1996. Without
limiting the generality of the foregoing, the parties intend for the
foregoing indemnity to be interpreted and construed broadly: (i) to
fully indemnify, hold harmless and compensate USD and MDI and their
respective Affiliates, successors and assigns from, against and in
respect of any determination, ruling, judgment, award, order or other
finding relating to the Raytel Litigation in favor of Raytel or its
Affiliates or not in favor of MDI or any of its Affiliates, including,
but not limited to, any determination that Raytel is or may be
entitled to any revenues or profits relating to MMIV's or any of its
Affiliates' activities or operations after December 31, 1996; (ii) so
as to place USD and MDI and their respective Subsidiaries, successors
and assigns in the same position as if the Raytel Litigation were
dismissed with prejudice without cost or adverse effect to MDI or USD
or their respective Affiliates, successors or assigns on January 1,
1997; and (iii) so as to place USD and MDI and their respective
Subsidiaries, successors and assigns in the same position as if Raytel
had executed a general release in favor of each of them (except with
respect to the above-referenced permitted distributions by MMIV to
Raytel) as of January 1, 1997 without adverse cost or effect to any of
them. Subject to the foregoing provisions, in the event that MDI is
awarded and receives any monetary damages against Raytel in the Raytel
Litigation pursuant to a final judgment of a court of competent
jurisdiction which is not subject to further appeal, then if and only
to the extent that USD and MDI have been fully indemnified and held
harmless as provided above (and received full and final payment
therefor without offset), and all cases comprising the Raytel
Litigation have been settled or decided by a trial court of competent
jurisdiction, then Stockholder shall be entitled to the net amount
(i.e., after giving effect to any indemnity payment under this Section
---- -------
6.11) of any such monetary award against Raytel. Any payment under
----
this Section 6.11 relating to fees and disbursements of counsel to MDI
------------
shall be made within ten business days after demand. Any other
payment under this Section 6.11 shall be made within ten business days
------------
after any settlement or court order, judgment or ruling with respect
thereto.
6.11.2 Notwithstanding any provision to the contrary set
forth herein, Stockholder agrees to indemnify and hold harmless USD
and MDI and their respective Affiliates, successors and assigns from,
against and in respect of, and be primarily liable for, the full
amount of any and all Losses arising from, in connection with, or
incident or relating to: (i) existing litigation, arbitration or other
proceedings to which MDI and its former chief executive officer, John
Lynch, are parties (and all facts and circumstances giving rise
thereto), and all claims, counterclaims, actions, causes of action and
similar items of any nature whatsoever of John Lynch or his executors,
personal representatives, successors or assigns against MDI or any of
its Affiliates (collectively, the "Lynch Litigation"); and (ii) and
-----------------
all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses incidental to any of the foregoing.
Notwithstanding anything to the contrary set forth herein, such
indemnity shall not be interpreted or construed to cover fees or
disbursements of counsel which accrued and were paid prior to January
1, 1997. Without limiting the generality of the foregoing, the
parties intend for the foregoing indemnity to be interpreted and
construed broadly so as to place USD and MDI in the same position as
if John Lynch executed a general release in favor of MDI, USD and
their respective Affiliates, successors and assigns effective as of
January 1, 1997 without adverse cost or effect to any of them.
6.11.3 Notwithstanding any provision to the contrary set
forth herein, Stockholder agrees to indemnify and hold harmless USD
and MDI and their respective Affiliates, successors and assigns from,
against and in respect of, and be primarily liable for, the full
amount of any and all Losses arising from, in connection with, or
incident or relating to: (i) any claim, counterclaim, action, cause of
action or demand of any nature whatsoever, of any Assumed Employee,
which ever existed, now exists or may hereafter exist, by reason of
any tort, breach of contract, violation of law or other act or failure
to act which occurred prior to the Effective Time; (ii) any claim,
counterclaim, action, cause of action or demand of any nature
whatsoever of any Assumed Employee relating to such individual's
employment agreement(s) or arrangements with MDI and/or any of its
Subsidiaries, including, but not limited to, any claims for salary or
benefits (including, but not limited to, deferred compensation,
accrued vacation and severance benefits); and (iii) all actions,
suits, proceedings, demands, assessments, judgments, costs and
expenses incidental to any of the foregoing. Without limiting the
generality of the foregoing, the parties intend for the foregoing
indemnity to be interpreted and construed broadly so as to place USD
and MDI in the same position as if all such individuals had agreed to
terminate their respective employment and related agreements as of the
Effective Time and executed a general release in favor of MDI, USD and
their respective Affiliates, successors and assigns effective as of
the Effective Time without adverse cost or effect to MDI, USD and
their respective Affiliates, successors and assigns. Any and all of
the foregoing matters are hereafter referred to as "Assumed Employee
----------------
Claims".
-------
6.11.4 The parties expressly acknowledge and agree that,
notwithstanding any other provision to the contrary set forth in this
Agreement, the limitations of Section 6.4.4 shall be inapplicable to
-------------
this Section 6.11.
------------
6.11.5 Stockholder shall in good faith and at its sole
cost and expense prosecute, contest and defend, by all appropriate
legal proceedings, with counsel satisfactory to USD (USD hereby
acknowledges that Stockholder's present counsel in the Raytel
Litigation and the Lynch Litigation is satisfactory to USD), the
Raytel Litigation, the Lynch Litigation and any Assumed Employee
Claims. USD shall have the right to participate in such proceedings
and to be represented by separate attorneys of its choice at its own
cost and expense provided such participation does not hinder the
proceedings. In the event that, after the Effective Time, USD
determines, in its reasonable judgment, after written notice to
Stockholder specifying the grounds for its determination and an
opportunity to cure, that Stockholder is not in good faith
prosecuting, contesting and defending the Raytel Litigation, the Lynch
Litigation or any Assumed Employee Claims by all appropriate legal
proceedings, then USD, upon notice to Stockholder, shall have the
right, but not the obligation, to assume such prosecution, contest and
defense and compromise and settle the same, all at Stockholder's sole
cost and expense, and Stockholder shall cooperate therewith. USD
shall have the right to approve any settlement of the Raytel
Litigation and/or the Lynch Litigation and/or any Assumed Employee
Claims, which approval shall not be unreasonably withheld (it being
understood that it shall not be unreasonable to withhold consent to
any settlement involving injunctive or other equitable relief or any
settlement to the extent Stockholder could not immediately indemnify
the indemnified parties in full in cash under this Section 6.11).
------------
Stockholder agrees to afford USD and its counsel the opportunity to be
present at, and to participate in, all conferences with Raytel or its
counsel relating to the Raytel Litigation and/or the Lynch Litigation
and/or any Assumed Employee Claims. Stockholder shall keep USD fully
informed of the Raytel Litigation, the Lynch Litigation and any
Assumed Employee Claims.
ARTICLE VII
CLOSING; CONDITIONS PRECEDENT; TERMINATION
------------------------------------------
7.1 CLOSING. At the Closing, the parties shall deliver to each
-------
other such documents as may be specified, or required to satisfy the
conditions set forth, in Sections 7.2, 7.3 and 7.4, and such other
-------------------------
documents and instruments as each party may reasonably request from
the other party. All proceedings to be taken and all documents to be
executed at the Closing shall be deemed to have been taken, delivered
and executed simultaneously, and no proceeding shall be deemed taken
nor documents deemed executed or delivered until all have been taken,
delivered and executed.
7.2 MUTUAL CONDITIONS PRECEDENT. The respective obligations of
---------------------------
the parties to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions.
(a) GOVERNMENTAL CONSENTS. All consents and approvals
---------------------
required by governmental authorities for the consummation of the
transactions contemplated by this Agreement shall have been obtained,
including without limitation, the expiration or termination of any
notice and waiting period under the HSR Act.
(b) NO LITIGATION. No litigation, arbitration or other
-------------
proceeding shall be pending or, to the knowledge of the parties,
threatened by or before any court, arbitration panel or governmental
authority; no law or regulation shall have been enacted after the date
of this Agreement; and no judicial or administrative decision shall
have been rendered; in each case, which enjoins, prohibits or
materially restricts the consummation of the transactions contemplated
by this Agreement.
7.3 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF USD. The
----------------------------------------------
obligations of USD to consummate the transactions contemplated by this
Agreement are subject to the satisfaction at or prior to the Closing
of the following conditions.
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
-----------------------------------
representations and warranties of Stockholder and MDI contained in
this Agreement and in any certificate or notice delivered pursuant to
this Agreement shall be true and correct in all material respects
(except for representations and warranties which are by their terms
qualified by materiality, which shall be true and correct in all
respects after giving effect to the materiality qualification
contained in such representations and warranties) as of the Closing
Date with the same force and effect as though made on and as of such
date, except to the extent that such representations and warranties by
their terms are specifically made as of an earlier date.
(b) COVENANTS PERFORMED. The covenants of Stockholder and
-------------------
MDI contained in this Agreement to be performed or complied with on or
prior to the Closing Date shall have been duly performed or complied
with in all material respects.
(c) NO MATERIAL ADVERSE CHANGE. Since the date of this
--------------------------
Agreement, (i) there shall not have been disclosed or occurred any
event or condition of any character which has adversely affected or
could adversely affect in any material respect USD's ability to
operate the business of MDI, (ii) no event or condition shall have
occurred which has adversely affected or could adversely affect in any
material respect the financial condition, results of operations,
assets, liabilities, business or prospects of MDI and its Subsidiaries
on a consolidated basis and (iii) there shall have occurred no
material deterioration in the financial condition, results of
operations, assets, liabilities, business or prospects of MDI and its
Subsidiaries on a consolidated basis.
(d) CONSENTS. Stockholder shall have obtained all consents
--------
and approvals required to effectuate the transactions contemplated
herein or otherwise contemplated herein on behalf of MDI and its
Subsidiaries, all of which shall have been obtained without the
imposition of any materially adverse terms or condition.
(e) OPINION OF COUNSEL. USD shall have received from Reid
------------------
& Priest, LLP, legal counsel to Stockholder, an opinion letter, dated
the Closing Date, in form and substance reasonably satisfactory to
USD, with respect to the matters set forth in Exhibit E to this
---------
Agreement, which matters shall include a separate opinion from Ashby &
Geddes that stockholder approval by Stockholder's stockholders is not
required under the Delaware GCL for MDI to consummate the Merger.
(f) AUDITORS' "COMFORT" LETTERS. USD shall have received
---------------------------
from Richard A. Eisner & Company, LLP, auditors for Stockholder, a
letter dated as of a date not more than two days prior to the Closing
Date, in form and substance reasonably satisfactory to USD, with
respect to the matters set forth in Exhibit F to this Agreement and
---------
such additional matters reasonably requested by USD.
(g) CERTIFICATE OF STOCKHOLDER. Stockholder shall have
-------------------------
delivered to USD a certificate executed by its Chief Executive Officer
and Chief Financial Officer, dated the Closing Date, certifying in
such detail as USD may reasonably request, that the conditions
specified in Sections 7.3(a), (b) and (c) above have been fulfilled
----------------------------
and as to such other matters as USD may reasonably request.
(h) SALE OR ASSIGNMENT OF INTEREST IN MDI REHAB, MIDDLESEX,
-------------------------------------------------------
MVA AND FAULKNER. MDI shall have transferred or assigned its interest
----------------
in MDI Rehab, Middlesex, MVA and in Faulkner and caused MDI and its
Subsidiaries to be released from any obligations relating to Faulkner,
MDI Rehab, Middlesex or MVA, pursuant to the terms of the Agreements
attached hereto as Exhibits B and C, respectively.
(i) TERMINATION OF MDI'S OBLIGATIONS UNDER EMPLOYMENT
-------------------------------------------------
AGREEMENTS. Stockholder shall have assumed all of MDI's and its
----------
Subsidiaries' obligations under and relating to their employment
agreements with each of the Assumed Employees.
(J) INTERCOMPANY RECEIVABLES. All obligations of
------------------------
Stockholder and its Subsidiaries (except MDI and its Subsidiaries) and
MVA and MDI Rehab and Middlesex to MDI and its Subsidiaries shall have
been satisfied in accordance with their terms.
(K) RESIGNATIONS. Stockholder shall have delivered such
------------
resignations of officers and directors of MDI and its Subsidiaries as
USD shall have requested.
7.4 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF STOCKHOLDER AND
----------------------------------------------------------
MDI. The obligations of Stockholder and MDI to consummate the
---
transactions contemplated by this Agreement are subject to the
satisfaction at or prior to the Closing of the following conditions.
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
-----------------------------------
representations and warranties of USD contained in this Agreement or
in any certificate or notice delivered pursuant to this Agreement
shall be true and correct in all material respects (except for
representations and warranties which are by their terms qualified by
materiality, which shall be true and correct in all respects after
giving effect to the materiality qualifications contained in such
representations and warranties) as of the Closing Date with the same
force and effect as though made on and as of such date, except to the
extent such representations and warranties by their terms are
specifically made as of an earlier date.
(b) COVENANTS PERFORMED. The covenants of USD contained in
-------------------
this Agreement to be performed or complied with on or prior to the
Closing Date shall have been duly performed or complied with in all
material respects.
(c) NO MATERIAL ADVERSE CHANGE. No event or condition
--------------------------
shall have occurred which has adversely affected or may reasonably be
expected to adversely affect in any material respect the ability of
USD to consummate the transactions contemplated hereby.
(d) OPINION OF COUNSEL. Stockholder shall have received
------------------
from Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A., legal
counsel to USD, an opinion letter, dated the Closing Date, in form and
substance reasonably satisfactory to Stockholder, with respect to the
matters set forth in Exhibit G to this Agreement.
---------
(e) USD'S CERTIFICATE. USD shall have delivered to
-----------------
Stockholder a certificate executed by its President or a Vice
President, dated the Closing Date, certifying in such detail as
Stockholder may reasonably request, that the conditions specified in
Sections 7.4(a), (b) and (c) above have been fulfilled.
----------------------------
(f) TERMINATION OF GUARANTEES. The Stockholder shall be
-------------------------
released from its obligations under the guarantees listed in Schedule
-------
5.12 or USD shall indemnify it therefrom.
----
(g) INTERCOMPANY RECEIVABLES. All obligations of MDI and
------------------------
its Subsidiaries to Stockholder for advances subsequent to the date
hereof which are set forth on Schedule 5.1 as to be satisfied as of
------------
the Closing shall have been satisfied.
(h) MMIV ESCROW. All rights of MDI and Western
-----------
Massachusetts Magnetic Resonance Services, Inc. under the MDI Escrow
Agreement at Fleet Bank shall have been assigned to Stockholder.
7.5 TERMINATION. This Agreement and the transactions
-----------
contemplated hereby may be terminated prior to the Closing:
(a) at any time by mutual consent of the parties;
(b) by either party if the Closing has not occurred on or
prior to April 30, 1997 (the "Termination Date"), provided the failure
----------------
of the Closing to occur by such date is not the result of the failure
of the party seeking to terminate this Agreement to perform or fulfill
any of its obligations hereunder;
(c) by USD at any time in its sole discretion if any of the
representations or warranties of Stockholder in this Agreement are not
in all material respects true and accurate or if Stockholder breaches
in any material respect any covenant contained in this Agreement,
provided that if such misrepresentation or breach is curable, it is
not cured within ten business days after written notice thereof
specifying the nature of the breach, but in any event prior to the
Termination Date;
(d) by MDI or Stockholder at any time in its sole
discretion if any of the representations or warranties of USD or
Acquisition in this Agreement are not in all material respects true
and accurate or if USD or Acquisition breaches in any material respect
any covenant contained in this Agreement, provided that if such
misrepresentation or breach is curable, it is not cured within ten
business days after written notice thereof specifying the nature of
the breach, but in any event prior to the Termination Date; or
(e) subject to the payment of the termination fee referred
to in Section 8.7, by either USD or Stockholder, if MDI's or
-----------
Stockholder's Board of Directors has accepted or recommended or
resolved to accept or recommend to their respective stockholders in
accordance with their fiduciary duties under Delaware law, an
Acquisition Transaction which, after consultation with and based on
the advice of their independent counsel (which may include regularly
engaged independent counsel) and financial advisers, MDI's or
Stockholder's Board of Directors has determined in good faith to be
more favorable to the stockholders of MDI and Stockholder than the
Merger from a financial point of view.
In the event this Agreement is terminated pursuant to this
Section 7.5, this Agreement shall terminate and become void and of no
-----------
force and effect, the Merger shall be abandoned without further action
by any of the parties to this Agreement, and no party to this
Agreement shall have any liability or further obligation under this
Agreement, except for the agreements contained in Sections 5.3
-------------
(Confidentiality), 8.7 (Fees and Expenses), 8.10 (Litigation;
---- ----
Prevailing Parties), 8.12 (Governing Law) and 8.13 (Jurisdiction and
---- ----
Venue); provided that, unless payments are fully made under Section
------- --------
8.7, any termination of this Agreement pursuant to this Section 7.5
--- ------------
shall not relieve any party from any liability for the breach of any
representation, warranty or covenant contained in this Agreement or be
deemed to constitute a waiver of any remedy available for such breach.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 NOTICES. Any notice or other communication under this
-------
Agreement shall be in writing and shall be delivered personally or
sent by registered mail, return receipt requested, postage prepaid, or
sent by prepaid overnight courier to the parties at the addresses set
forth below their names on the signature pages of this Agreement (or
at such other addresses as shall be specified by the parties by like
notice), to the attention of the President of such party. Such
notices, demands, claims and other communications shall be deemed
given when actually received or: (A) in the case of delivery by
overnight service with guaranteed next day delivery, the next day or
the day designated for delivery; or (B) in the case of registered U.S.
mail, five days after deposit in the U.S. mail.
8.2 ENTIRE AGREEMENT. This Agreement and the Confidentiality
----------------
Agreement among the parties contain every obligation and understanding
between the parties relating to the subject matter hereof and merge
all prior discussions, negotiations and agreements, if any, between
them, and none of the parties shall be bound by any representations,
warranties, covenants, or other understandings, other than as
expressly provided or referred to herein. In the event that any term
herein is inconsistent with any term in such Confidentiality
Agreement, the provision providing the greater restriction as to
confidentiality shall govern.
8.3 ASSIGNMENT. This Agreement may not be assigned by any party
----------
without the written consent of the other parties. Subject to the
preceding sentence, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors, and
permitted assigns.
8.4 WAIVER AND AMENDMENT. Any representation, warranty,
--------------------
covenant, term or condition of this Agreement which may legally be
waived, may be waived, or the time of performance thereof extended, at
any time by the party hereto entitled to the benefit thereof, and any
term, condition or covenant hereof may be amended by the parties
hereto at any time. Any such waiver, extension or amendment shall be
evidenced by an instrument in writing executed on behalf of the
appropriate party by a person who has been authorized by its Board of
Directors to execute waivers, extensions or amendments on its behalf.
No waiver by any party hereto, whether express or implied, of its
rights under any provision of this Agreement shall constitute a waiver
of such party's rights under such provisions at any other time or a
waiver of such party's rights under any other provision of this
Agreement. No failure by any party hereto to take any action against
any breach of this Agreement or default by another party shall
constitute a waiver of the former party's right to enforce any
provision of this Agreement or to take action against such breach or
default or any subsequent breach or default by such other party.
8.5 NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in
--------------------------
this Agreement is intended, or shall be construed, to confer upon or
give any Person other than the parties hereto and their respective
successors and permitted assigns, any rights or remedies under or by
reason of this Agreement.
8.6 SEVERABILITY. In the event that any one or more of the
------------
provisions contained in this Agreement shall be declared invalid, void
or unenforceable, the remainder of the provisions of this Agreement
shall remain in full force and effect, and such invalid, void or
unenforceable provision shall be interpreted as closely as possible to
the manner in which it was written.
8.7 EXPENSES; TERMINATION FEE.
-------------------------
(a) EXPENSES. All expenses (including, without limitation,
--------
legal fees and expenses, investment banking fees, fees and expenses of
accountants) incurred by Stockholder or MDI in connection with the
transactions contemplated hereby will be borne by Stockholder on
behalf of MDI, and all expenses incurred by USD or Acquisition in
connection with the transactions contemplated hereby will be borne by
USD, except that USD shall bear all filing fees payable with respect
to filings required by the HSR Act and if this Agreement is terminated
other than pursuant to Section 7.5(d) the Stockholder shall reimburse
--------------
USD for one-half of such filing fees.
(b) TERMINATION FEE. If this Agreement is terminated (A)
---------------
pursuant to Section 7.5(e), (B) pursuant to Section 7.5(c) as a result
-------------- -------------
of an intentional or willful breach by Stockholder or MDI of any
representation, warranty or covenant by either of them contained
herein, or (C) pursuant to Section 7.5 (c) as a result of the breach
----------------
by Stockholder of any representation or warranty contained in Section
-------
4.2, then Stockholder and MDI shall jointly and severally pay USD an
---
amount equal to $1,000,000 if so terminated pursuant to Section 7.5(e)
--------------
and $500,000 if so terminated pursuant to Section 7.5(c). If this
--------------
Agreement is terminated (A) pursuant to Section 7.5(d) as a result of
--------------
an intentional or willful breach by USD or Acquisition of any
representation, warranty or covenant by either of them contained
herein or (B) pursuant to Section 7.5(d) as a result of any breach by
--------------
USD of any representation or warranty contained in Section 3.2, then
-----------
USD shall pay Stockholder $500,000. Any amount payable under this
Section 8.7(b) shall be payable in accordance with Section 8.7(d).
-------------- --------------
(c) CALCULATION. Each party agrees that the actual damages
------------
accruing to the other party from termination of this Agreement
pursuant to those termination provisions referenced in this Section
--------
8.7 are incapable of precise estimation and would be difficult to
---
prove, and that the damages stipulated herein bear a reasonable
relationship to the potential injury likely to be sustained in the
event of termination pursuant to such occurrence. The payments
stipulated in this Section 8.7 are intended by the parties to provide
------------
just compensation in the event of termination and is not intended to
constitute a penalty for nonperformance.
(d) TIME OF PAYMENT. Any payment required to be made
---------------
pursuant to this Section 8.7 shall be made to the party entitled to
-----------
payment not later than five business days after the occurrence of the
event for which the party is entitled to payment as provided for
herein. All payments required to be made pursuant to this Section 8.7
----------
shall be made by wire transfer of immediate available funds to an
account designated by the party entitled to payment.
8.8 HEADINGS. The section and other headings contained in this
--------
Agreement are for reference purposes only and shall not affect the
meaning or interpretation of any provisions of this Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in any number
-------------
of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. Any
telecopied counterpart of a manually executed original shall be deemed
a manually executed original.
8.10 LITIGATION; PREVAILING PARTY. In the event of any
----------------------------
litigation with regard to this Agreement, the prevailing party with
respect to a claim shall be entitled to receive from the
non-prevailing party with respect to such claim and such
non-prevailing party shall pay upon demand all reasonable fees and
expenses of counsel for such prevailing party.
8.11 INJUNCTIVE RELIEF. It is possible that remedies at law may
-----------------
be inadequate and, therefore, the parties hereto shall be entitled to
equitable relief including, without limitation, injunctive relief,
specific performance or other equitable remedies in addition to all
other remedies provided hereunder or available to the parties hereto
at law or in equity.
8.12 GOVERNING LAW. This Agreement has been entered into and
-------------
shall be construed and enforced in accordance with the laws of the
State of Delaware without reference to the choice of law principles
thereof.
8.13 JURISDICTION AND VENUE. This Agreement shall be subject to
----------------------
the exclusive jurisdiction of the courts of the State of Florida. The
parties to this Agreement agree that any breach of any term or
condition of this Agreement shall be deemed to be a breach occurring
in the State of Florida by virtue of a failure to perform an act
required to be performed in the State of Florida and irrevocably and
expressly agree to submit to the jurisdiction of the courts of the
State of Florida for the purpose of resolving any disputes among the
parties relating to this Agreement or the transactions contemplated
hereby. The parties irrevocably waive, to the fullest extent
permitted by law, any objection which they may now or hereafter have
to the laying of venue of any suit, action or proceeding arising out
of or relating to this Agreement, or any judgment entered by any court
in respect hereof brought in the State of Florida, and further
irrevocably waive any claim that any suit, action or proceeding
brought in the State of Florida has been brought in an inconvenient
forum.
8.14 OBLIGATIONS OF MDI. Notwithstanding any provision to the
------------------
contrary set forth herein, after the Effective Time, Stockholder: (i)
shall be solely responsible for all representations, warranties,
covenants and agreements of MDI set forth herein, as if Stockholder
(and not MDI) had made such representations, warranties, covenants and
agreements, and Stockholder shall cause MDI not to breach any such
representation or warranty or violate any such covenant or agreement;
and (ii) irrevocably waives any right that it may have to seek
indemnity or contribution or any similar remedy from MDI with respect
to any such matter.
[SIGNATURES BEGIN ON NEXT PAGE]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each executed and
delivered this Agreement as of the day and year first above written.
USD
----
US DIAGNOSTIC INC.
By:/s/ Jeffrey Goffman
------------------------------------
Name: Jeffrey Goffman
Title: CEO
777 South Flagler Drive
Suite 1006-W
West Palm Beach, Florida 33401
ACQUISITION
-----------
MDI ACQUISITION CORPORATION
By: Jeffrey Goffman
------------------------------------
Name: Jeffrey Goffman
Title: President
777 South Flagler Drive
Suite 1006-W
West Palm Beach, Florida 33401
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
STOCKHOLDER
-----------
ADVANCED NMR SYSTEMS, INC.
By:/s/ Jack Nelson
------------------------------------
Name: Jack Nelson
Title: Chairman
46 Jonspin Road
Wilmington, Massachusetts 01887
MDI
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MEDICAL DIAGNOSTICS, INC.
By: /s/ Jack Nelson
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Name: Jack Nelson
Title: Chairman
46 Jonspin Road
Wilmington, Massachusetts 01887
NEWS RELEASE
------------ Advanced NMR
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Contact: Beverly Tkaczenko at Systems, Inc
1 (800) 476 0569
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ADVANCED NMR SYSTEMS, INC. ANNOUNCES MERGER OF
IMAGING SERVICES DIVISION WITH U.S. DIAGNOSTIC INC.
Wilmington, MA, January 20, 1997 --- Advanced NMR Systems, Inc.
(NASDAQ: ANMR) announced today that its wholly owned subsidiary,
Medical Diagnostics, Inc. ("MDI"), pursuant to a definitive
agreement entered into by MDI and by ANMR as MDI's stockholder,
will merge with a newly formed subsidiary of US Diagnostic Inc.
(NASDAQ: USDL) in exchange for approximately $22.0 million in
cash (which includes approximately $12.0 million for repayment of
bank debt).
Upon the merger, USDL will gain a medical imaging services
business that owns and operates diagnostic imaging facilities in
Massachusetts, New York, Virginia, West Virginia and Tennessee.
Following the transaction, however, ANMR will continue to own and
to operate MDI's rehabilitation business and to own its interest
in the Faulkner Hospital Sagoff Women's Center (under
development), both of which will be transferred to ANMR
concurrent with the transaction. ANMR will also continue to own
and to operate its medical imaging technology business and to own
its stake in Advanced Mammography Systems, Inc. (NASDAQ: MAMO).
The transaction is expected to close as soon as practicable after
receipt of certain government consents including consent of the
Federal Trade Commission under the Hart-Scott-Rodino Antitrust
Improvements Act.
Commenting on the transaction, Jack Nelson, Chairman and CEO of
ANMR, said "We have been pleased with the results of our medical
imaging services business since we acquired MDI in 1995, and we
believe that its prospects continue to be bright. Nevertheless,
our financial position, weakened by continuing losses from our
technology operations, has not allowed us to invest in the
imaging services business or in MDI's other businesses to the
degree we had hoped when we originally completed the acquisition.
This transaction, combined with the elimination over the past few
months of significant costs from our technology operations, gives
us the financial security and liquidity to invest in our
rehabilitation business and to drive creation of shareholder
value from our imaging technologies."
This press release contains forward looking information based
upon current expectations that include a number of business risks
and uncertainties. The factors that could cause results to
differ materially include the following: delays in product
development, lack of market acceptance of technology,
technological innovations for competitors and changes in health
care regulations, including reimbursement.
Advanced NMR Systems, Inc. is a provider of diagnostic imaging
and rehabilitation services through its wholly owned subsidiary
Medical Diagnostics, Inc., and develops high field MRI
technology. Its subsidiary, Advanced Mammography Systems, Inc.
has developed the only dedicated breast imaging system based on
magnetic resonance imaging technology. MAMO has received U.S.
Food and Drug Administration clearance to begin marketing
activities for the product.
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