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 1, 1995
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NMR of America, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-9367 22-2468314
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) ID Number)
430 Mountain Avenue, Murray Hill, New Jersey 07974
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(Address of principal executive offices)
Registrant's telephone number, including area code: (908) 665-9400
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(Former name or former address, if changed since last report)
<PAGE>
NMR of America, Inc. is filing this current report on Form 8-K relating to
the Company's acquisitions of Advanced Specialty Imaging, L.P., Golf MRI Center,
L.P. and Diagnostic Imaging Center, L.P. as the foregoing acquisitions, in the
aggregate, exceed the significance criteria set forth in Item 310 (c) (2) of
Regulation S-B.
Item 2. Acquisition or Disposition of Assets
- ------- ------------------------------------
General.
- -------
Diagnostic Imaging Center, L.P. and Golf MRI Center, L.P.
On February 10, 1995 pursuant to an Agreement to Acquire Partnership
Interests among the Registrant, NMR of America, Inc. (hereinafter referred to as
"NMR", the "Company" or the "Registrant"), Parvez H. Shirazi, M.D., an Illinois
physician, and Golf Western Imaging Corporation, an Illinois corporation, NMR
acquired 75% of the outstanding limited partnership interests (hereinafter
referred to as the "Acquired Partnership Interests") of Diagnostic Imaging
Center L.P. and Golf MRI Center L.P., both of which are Illinois limited
partnerships (hereinafter referred to as the "Limited Partnerships") effective
January 1, 1995. Golf Western Imaging Corporation is wholly owned by Dr.
Shirazi. Included in the Acquired Partnership Interests were all of the general
partnership units of the Limited Partnerships. The Limited Partnerships
collectively operate as a multi-modality imaging center located in Des Plaines,
Illinois.
As consideration for the acquisition, the Company paid $1,050,000 in cash
and issued 125,000 unregistered shares of the common stock of NMR, which was
assigned a fair value of approximately $500,000 based upon the last transaction
price of $4.00 per share for NMR's common stock on the closing date of the
transaction. The price for NMR's purchase of the Acquired Partnership Interests
was determined as a result of arms length negotiations conducted between NMR and
the other parties to the transaction.
The acquisitions of Diagnostic Imaging Center, L.P. and Golf MRI Center,
L.P. will be accounted for as purchases and result in the recording of costs in
excess of net assets acquired totaling $523,029 and $1,591,664, respectively,
which will be amortized over twenty years.
Reference is made to the Agreement to Acquire Partnership Interests dated
as of February 10, 1995, a copy of which is filed as an exhibit to this report,
for a complete description of the terms and conditions of the acquisition.
The diagnostic imaging equipment owned by the Limited Partnerships had been
financed through borrowings. In conjunction with the acquisition, the Limited
Partnerships refinanced outstanding obligations aggregating $1,823,167 in the
form of five year promissory notes payable to a bank lender, which are
collateralized by the Limited Partnership's imaging equipment and guaranteed by
NMR. The notes bear interest at one percent (1.0%) over the bank's prevailing
prime rate. Portions of the principal amount of the notes mature during each
fiscal year 1995 through 2000 as follows:
1995 -$ 76,766 1997 -$321,420 1999 -$392,258
1996 -$290,953 1998 -$355,077 2000 -$386,693
As of January 1, 1995, the Limited Partnerships employed 13 full-time and part-
time persons including 5 persons in clerical and administrative positions and 8
persons in clinical and technical capacities. NMR intends to consolidate all
financial record keeping as well as marketing, administrative and corporate
management activities of the Limited Partnerships into its Murray Hill, NJ
corporate office.
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<PAGE>
Item 2. Acquisition or Disposition of Assets, continued
- ------- -----------------------------------------------
Advanced Specialty Imaging, L.P.
On January 5, 1995, pursuant to an Asset Purchase Agreement, NMR, through
its wholly owned subsidiary, Imaging Networks, Inc., acquired effective January
1, 1995, the net assets of Advanced Specialty Imaging, L.P. (ASI), an Illinois
Limited Partnership engaged in the business of operating a magnetic resonance
imaging center located in Libertyville, Illinois. The center is currently doing
business under the tradename "Libertyville Imaging Center" (hereinafter referred
to as the "Libertyville Center").
As consideration for the acquisition, NMR assumed certain of ASI's assets
and liabilities. In addition, the Company agreed to pay deferred consideration
of up to $300,000, which is conditioned upon the center achieving certain levels
of revenue during the calendar year 1995. The purchase price for NMR's purchase
of ASI was determined as a result of arms length negotiations conducted between
NMR and the other parties to the transaction.
The acquisition of ASI will be accounted for as a purchase and result in
the recording of costs in excess of net assets acquired totaling $2,969 which
will be amortized over twenty years. The deferred consideration, if paid, will
be capitalized to goodwill.
Reference is made to the Asset Purchase Agreement dated as of January 5,
1995, a copy of which is filed as an exhibit to this report, for a complete
description of the terms and conditions of the acquisition.
The diagnostic equipment owned by the Center has been financed through
borrowings. In conjunction with the acquisition, NMR negotiated a substantial
reduction in the outstanding principal balance of ASI's long-term equipment
financing obligation with its lender and then refinanced the remaining
obligation aggregating $650,000, in the form of a five year promissory note
payable to a bank. The note is collateralized by the Libertyville Center's
imaging equipment and is guaranteed by the Registrant. The note bears interest
at one percent (1.0%) over the bank's prevailing prime rate. Portions of the
principal amount of the note mature during each fiscal year 1995 through 1999 as
follows:
1995 -$ 34,110 1997 -$117,952 1999 -$141,470
1996 -$107,584 1998 -$129,176 2000 -$119,708
As of January 1, 1995, the Libertyville Center employed 5 full-time persons
including 3 persons in clerical and administrative positions and 2 persons in
clinical and technical capacities. NMR intends to consolidate all financial
record keeping as well as marketing, administrative and corporate management
activities of the Libertyville Center into its Murray Hill, NJ corporate office.
Description of the Centers
- --------------------------
Diagnostic Imaging Center, L.P. and Golf MRI Center, L.P.
Diagnostic Imaging Center, L.P. was founded in 1987. Golf MRI Center, L.P. was
founded in 1991. The Limited Partnerships operate in a 5,000 square foot
facility located at 9680 Golf Road, Des Plaines, Illinois and a 500 square foot
facility located at 9301 Golf Road, Des Plaines, Illinois (hereinafter referred
to as the "Des Plaines Center"). The Des Plaines Center utilizes the following
diagnostic imaging equipment, which is owned by the Limited Partnerships.
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<PAGE>
Description of the Centers, continued
- -------------------------------------
Imaging Modality Manufacturer Year Installed
- ---------------- ------------ --------------
Golf MRI Center, L.P.:
Magnetic resonance Toshiba 1991
Diagnostic Imaging Center, L.P.:
Computerized axial tomography Elscint 1994
Ultrasound Toshiba 1988
Nuclear Medicine Toshiba 1987
Nuclear Medicine Elscint 1991
X-Ray - Dual Photon Norland 1991
X-Ray Integrand 1987
Advanced Specialty Imaging, L.P.
The Libertyville Center operates in a 5,063 square foot facility located at 333
Peterson Road, Libertyville, IL.
The Libertyville Center utilizes the following diagnostic imaging equipment
which is owned by the Company.
Modality Manufacturer Year Installed
- -------- ------------ --------------
Magnetic Resonance Phillips 1993
X-Ray Universal 1992
Additional Agreements
- ---------------------
Diagnostic Imaging Center, L.P. and Golf MRI Center, L.P.
In conjunction with the acquisition of the Limited Partnerships , NMR
entered into a Management Services Agreement with the Limited Partnerships which
provides for payment to NMR of a fee equal to ten percent (10%) of the Limited
Partnerships cash collections in consideration for NMR's providing certain
management and administrative services to the Limited Partnerships.
Additionally, at the time of the acquisition, the Limited Partnerships
entered into a three year Radiology Services Agreement (the "Radiology
Agreement") with Parvez H. Shirazi, M.D. Pursuant to the Radiology Agreement,
Dr. Shirazi provides and is responsible for , among other things, diagnostic
interpretations of imaging procedures performed at the Des Plaines Center. As
an independent contractor, Dr. Shirazi maintains his own malpractice insurance.
Compensation under the Radiology Agreement is based upon fifteen percent (15%)
of the fees collected by the Limited Partnerships for diagnostic imaging
procedures.
In conjunction with the acquisition, the Limited Partnerships also entered
into a three year Medical Administrative Services Agreement with Dr. Shirazi.
Pursuant to the Agreement, Dr. Shirazi is obligated to manage the Center's daily
medical administrative activities in consideration for annual compensation of
$55,000.
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<PAGE>
Additional Agreements, continued
- --------------------------------
In conjunction with the acquisition, NMR financed $550,000 of the cash
portion of the purchase price using a five year term note payable to a bank
lender. The note bears interest at a variable rate equal to the bank's
prevailing prime rate plus one percent. The note is collateralized by the Des
Plaines Center's imaging equipment and is guaranteed by NMR. The note agreement
requires the Company to meet certain financial ratios as of March 31 of each
year the agreement is in effect. Portions of the principal amount of the note
mature during each fiscal year 1996 through 2000 as follows:
1996 -$ 91,207 1998 -$109,121 2000 -$130,553
1997 -$ 99,762 1999 -$119,357
The 125,000 shares of common stock issued by NMR in connection with the
acquisition of the Limited Partnerships, have been or will be issued in reliance
upon an exemption from the registration requirements of the Securities Act of
1933 (the "Act") and the recipient of the shares has acknowledged that none of
the shares can be transferred absent compliance with the registration
requirements of the Act or the availability of an exemption therefrom. In
conjunction with the issuance of the shares, NMR obtained a two-year irrevocable
proxy from the recipient of the shares to vote such shares at any Annual or
Special Meeting of the Shareholders of NMR in accordance with the
recommendations of NMR's management, in the event of a contested election for
directors.
Advanced Specialty Imaging, S.C.
At the time of the acquisition, NMR entered into a letter agreement which
contemplates a six month initial term and is renewable at NMR's option with
Michael Messing, M.D., an Illinois physician. Pursuant to the agreement, Dr.
Messing will provide diagnostic interpretations of imaging procedures performed
at the Libertyville Center. As an independent contractor, Dr. Messing maintains
his own malpractice insurance. Compensation under the agreement is at a rate of
$75 for each complete MRI procedure for which a diagnostic interpretation is
rendered.
Prior to the acquisitions, none of the officers, directors, shareholders or
partners of the Limited Partnerships or ASI had any material relationship with
NMR or its affiliates.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
- ------- -------------------------------------------------------------------
(a) Financial Statements of Businesses Acquired.
1) Unaudited Historical Combined Balance Sheets as of December 31,
1994 and March 31, 1994, respectively.
2) Unaudited Historical Combined Statements of Operations for the
year ended March 31, 1994.
3) Unaudited Historical Combined Statements of Operations for the
nine months ended December 31, 1994
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<PAGE>
Financial Statements, Pro Forma Financial Information and Exhibits, continued.
- ------------------------------------------------------------------------------
(b) Pro Forma Financial Information.
1) Unaudited Pro Forma Combined Balance Sheets as of December 31,
1994.
2) Unaudited Pro Forma Combined Statements of Operations for the
year ended March 31, 1994.
3) Unaudited Pro Forma Combined Statements of Operations for the
nine months ended December 31, 1994.
(b) Exhibits:
2(a) Agreement to Acquire Partnership Interests among the
Registrant, Parvez H. Shirazi, M.D. and Golf Western Imaging
Corporation (Schedules and Exhibits thereto are listed therein
and will be provided supplementally to the Commission, upon
request).
(b) Asset Purchase Agreement among the Registrant and Advanced
Specialty Imaging, L.P., including exhibits.
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<PAGE>
SIGNATURES
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 hereunto duly authorized.
NMR OF AMERICA, INC.
By /s/ John P. O'Malley III
------------------------------
John P. O'Malley III
Executive Vice President-Finance
Chief Financial Officer
Dated: July 31, 1995
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<PAGE>
UNAUDITED HISTORICAL COMBINED AND PRO FORMA FINANCIAL STATEMENTS
The Registrant's fiscal year end is March 31, while the Limited Partnership
and ASI's fiscal year-ending dates are December 31. Accordingly, the unaudited
historical combined and pro forma balance sheets as of March 31 and December 31,
1994 reflect the financial position of the acquired entities as of December 31,
1993 and September 30, 1994, respectively. Similarly, the unaudited historical
combined and pro forma statements of operations for the year ended March 31,
1994 and for the nine months ended December 31, 1994 reflect the results of
operations of the Limited Partnerships and ASI for the year ended December 31,
1993 and for the nine months ended September 30, 1994, respectively.
-8-
<PAGE>
<TABLE><CAPTION>
Diagnostic Imaging Center, L.P. ("DIC") and Golf MRI Center, L.P. ("Golf") and
Advanced Specialty Imaging, L.P. ("ASI")
Unaudited Historical Combined Balance Sheets
As of December 31, 1994
DIC, Golf
DIC and And ASI
Golf ASI Combined
ASSETS ------------ ------------ ------------
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents $70,231 $2,975 $73,206
Due from affiliated physician associations, net 902,726 70,582 973,308
Other current assets 157 2,308 2,465
------------ ------------ ------------
Total current assets 973,114 75,865 1,048,979
Land buildings and equipment 3,719,842 2,195,000 5,914,842
Less, accumulated depreciation and amortization 1,668,656 621,081 2,289,737
------------ ------------ ------------
2,051,186 1,573,919 3,625,105
Other assets 90,214 28,550 118,764
------------ ------------ ------------
Total assets $3,114,514 $1,678,334 $4,792,848
============ ============ ============
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable and accrued expenses $301,280 $35,812 $337,092
Current installments on notes payable 571,596 1,854,946 2,426,542
------------ ------------ ------------
Total current liabilities 872,876 1,890,758 2,763,634
Notes payable, less current installments 1,286,021 1,286,021
Other long term liabilities
Partner's equity:
General partner equity 436,840 (21,242) 415,598
Limited partner equity 518,777 (191,182) 327,595
------------ ------------ ------------
Total partners' equity 955,617 (212,424) 743,193
------------ ------------ ------------
Total liabilities and partners' equity $3,114,514 $1,678,334 $4,792,848
============ ============ ============
</TABLE>
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<PAGE>
<TABLE><CAPTION>
Diagnostic Imaging Center, L.P. ("DIC") and Golf MRI Center, L.P. ("Golf") and
Advanced Specialty Imaging, L.P. ("ASI")
Unaudited Historical Combined Balance Sheets
As of March 31,1994
DIC, Golf
DIC and and ASI
Golf ASI Combined
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $446,195 $9,505 $455,700
Due from affiliated phsician associations, net 604,651 155,143 759,794
Other current assets 29,593 13,552 43,145
----------- ----------- -----------
Total current assets 1,080,439 178,200 1,258,639
Land buildings and equipment 3,076,619 2,184,500 5,261,119
Less, accumulated depreciation and amortization 1,140,027 277,734 1,417,761
----------- ----------- -----------
1,936,592 1,906,766 3,843,358
Other assets 82,169 117,534 199,703
----------- ----------- -----------
Total assets $3,099,200 $2,202,500 $5,301,700
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND PARTNERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $414,820 $178,381 $593,201
Current installments on notes payable 551,712 1,684,674 2,236,386
----------- ----------- -----------
Total current liabilities 966,532 1,863,055 2,829,587
Notes payable, less current installments 1,245,395 1,245,395
Other long term liabilities 0
Partner's equity:
Genral partner equity 227,511 33,944 261,455
Limited partner equity 659,762 305,501 965,263
----------- ----------- -----------
Total partners' equity 887,273 339,445 1,226,718
----------- ----------- -----------
Total liabilities and partners' equity $3,099,200 $2,202,500 $5,301,700
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
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<PAGE>
<TABLE><cpation>
Diagnostic Imaging Center, L.P. ("DIC") and Golf MRI Center, L.P. ("Golf") and
Advanced Specialty Imaging, L.P. ("ASI")
Unaudited Historical Combined Stetements of Operations
For the year ended March 31, 1994
DIC and Golf
DIC and and ASI
Golf ASI Combined
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Revenue, net $2,592,767 $1,055,106 $3,647,873
- --------------------------------------------------------------------------------------------------
Costs and expenses:
Payroll and related costs 443,353 289,722 733,075
Depreciation and amortization 547,089 309,528 856,617
Med supplies and other operating costs 1,309,140 606,587 1,915,727
Other general and administrative 99,659 32,354 132,013
- --------------------------------------------------------------------------------------------------
2,399,241 1,238,191 3,637,432
- --------------------------------------------------------------------------------------------------
Operating income (loss) 193,526 (183,085) 10,441
Interest income 101,471 191,918 293,389
Other income
- --------------------------------------------------------------------------------------------------
Net Income $92,055 ($375,003) ($282,948)
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE>
<TABLE><CAPTION>
Diagnostic Imaging Center, L.P. ("DIC") and Golf MRI Center, L.P. ("Golf") and
Advanced Specialty Imaging, L.P. ("ASI")
Unaudited Historical Combined Stetements of Operations
For the nine months ended December 31, 1994
DIC and Golf
DIC and and ASI
Golf ASI Combined
__________________________________________________________________________________________________
Revenue, net $2,123,364 $611,551 $2,734,915
__________________________________________________________________________________________________
<S> <C> <C> <C>
Costs and expenses:
Payroll and related costs 315,667 151,748 467,415
Depreciation and amortization 490,512 262,011 752,523
Med supplies and other operating costs 1,095,679 378,470 1,474,149
Other general and administrative 65,841 41,973 107,814
__________________________________________________________________________________________________
1,967,699 834,202 2,801,901
__________________________________________________________________________________________________
Operating income (loss) 155,665 (222,651) (66,986)
Interest income 90,786 194,642 285,428
Other income
__________________________________________________________________________________________________
Net Income $64,879 ($417,293) ($352,414)
__________________________________________________________________________________________________
__________________________________________________________________________________________________
</TABLE>
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<PAGE>
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro form combined balance sheets as of December 31,
1994 and unaudited pro forma combined results of operations for the nine months
ended December 31, 1994 and for the twelve months ended March 31, 1994 have been
prepared by the Registrant and give effect to the acquisition of the Limited
Partnerships and ASI as of the beginning of the periods presented. These pro
forma results have been prepared for comparative purposes only and do not
purport to be indicative of the results of operations which actually would have
resulted had the Limited Partnerships and ASI been acquired as of the dates
indicated, or which may result in the future.
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<PAGE>
<TABLE><CAPTION>
Diagnostic Imaging Center, L.P. ("DIC") and Golf MRI Center, L.P. ("Golf") and
Advanced Specialty Imaging, L.P. ("ASI")
Unaudited Historical Combined Balance Sheets
as of December 31, 1994 Pro-Forma
DIC and Combined
Historical Golf ASI NMR, DIC
Historical DIC and Pro-Forma Historical Pro-Forma Golf and
NMR Golf Adjustments ASI Adjustments ASI
---------- ---------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $5,460,050 $70,231 ($1,050,000)(A) $2,975 ($45,000)(C) $4,948,256
550,000 (B)
(40,000)(C)
Due from affiliated physician associations, net 8,915,708 902,726 (270,818)(D) 70,582 (14,116)(D) 9,604,082
Other current assets 821,116 157 2,308 823,581
---------- ---------- ----------- ---------- ----------- -----------
Total current assets 15,196,874 973,114 (810,818) 75,865 (59,116) 15,375,919
Land buildings and equipment, net 10,897,955 2,051,186 (637,926)(E) 1,573,919 (923,269)(E) 12,961,865
Cost in excess of net assets acquired 2,375,750 1,878,867 (F) 7,863 (F) 4,262,480
Other assets 1,667,971 90,214 (5,929)(G) 28,550 (18,000)(G) 1,762,806
---------- ---------- ----------- ---------- ----------- -----------
Total assets $30,138,550 $3,114,514 $424,194 $1,678,334 ($992,522) $34,363,070
---------- ---------- ----------- ---------- ----------- -----------
---------- ---------- ----------- ---------- ----------- -----------
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued expenses $2,279,510 $301,280 $174,133 (H) $35,812 $2,790,735
Current installments on capital leases,
notes and mortgage payable 2,194,315 571,596 (286,596)(I) 1,854,946 (1,757,431)(K) 2,668,037
91,207 (B)
---------- ---------- ----------- ---------- ----------- -----------
Total current liabilities 4,473,825 872,876 (21,256) 1,890,758 (1,757,431) 5,458,772
Convertible subordinated debt, net 2,103,834 2,103,834
Obligations under capital leases, notes and
mortgage payable, less current installments 9,139,539 1,286,021 286,596 (I) 552,485 (K) 11,723,434
458,793 (B)
Minority interests 1,926,532 155,678 (J) 2,082,210
Shareholders' and partners' equity 12,494,820 955,617 500,000 (A) (212,424) 212,424 (L) 12,994,820
(955,617)(J)
---------- ---------- ----------- ---------- ----------- -----------
Total liabilities and equity $30,138,550 $3,114,514 $424,194 $1,678,334 ($992,522) $34,363,070
---------- ---------- ----------- ---------- ----------- -----------
---------- ---------- ----------- ---------- ----------- -----------
</TABLE>
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<PAGE>
(A) To reflect payment of the cash portion of the purchase price ($1,050,000)
by NMR and the issuance of 125,000 unregistered shares of NMR common stock,
valued at $4.00 per share, in exchange for a 75% interest in Golf and DIC.
(B) To reflect the financing of $550,000 of the cash portion of the purchase
price paid by NMR in the form of a five year note payable to a bank.
(C) To reflect the expenditure of legal and accounting fees relating to the
transactions by NMR.
(D) To adjust the accounts receivable balances of the acquired entities for
amounts which were deemed to be uncollectible by NMR as of the acquisition
date.
(E) To reflect land buildings and equipment, net at their estimated fair values
as of the acquisition date based upon independent appraisals which were
prepared in conjunction with the acquisitions, as follows:
As of December 31,
1994
-----------------
Golf and DIC:
Historical land, buildings
and equipment, net $2,051,186
Estimated fair values as of acquisition date
based on appraisals:
CT equipment (500,000)
MRI equipment (450,000)
Nuclear medicine equipment (220,000)
Ultrasound equipment (80,000)
X-ray equipment (37,000)
Furniture and fixtures (26,260)
Leasehold improvements (100,000)
---------
Adjustment to historical land, buildings
and equipment, net $ 637,926
=========
ASI:
Historical land, buildings
and equipment, net $1,573,919
Estimated fair values as of acquisition date
based on appraisals:
MRI equipment (525,000)
X-ray equipment (5,000)
Furniture and fixtures (35,000)
Leasehold improvements (85,650)
---------
Adjustment to historical land, buildings
and equipment, net $ 923,269
=========
15
<PAGE>
(F) To reflect costs in excess of net assets acquired calculated as follows:
Golf and DIC:
Consideration paid by NMR:
Cash $1,050,000
NMR common stock
(125,000 shares at $4.00/share) 500,000
---------
Total consideration paid to sellers 1,550,000
Transaction related expenses incurred by NMR 40,000
Golf and DIC historical net book value
as of December 31, 1994 $ 955,617
Adjustments (referenced to corresponding
pro forma adjustments):
To write-down accounts receivable (D) (270,818)
To write-down fixed assets (E) (637,926)
To write-down miscellaneous assets (G) (5,929)
To accrue unrecorded liabilities (H) (174,133)
To record minority interests (J) (155,678)
Less: Adjusted net book value of Golf and DIC (288,867)
---------- ---------
Costs in excess of net assets acquired relating
to Golf and DIC as of December 31, 1994 $1,878,867
=========
ASI:
Consideration paid by NMR:
Cash $ -
NMR common stock -
---------
Total consideration paid to sellers _
Transaction related expenses incurred by NMR 45,000
ASI historical net book value as of
December 31, 1994 $ (212,424)
Adjustments (referenced to corresponding
pro forma adjustments):
To write-down accounts receivable (D) (14,116)
To write-down fixed assets (E) (923,269)
To write-down miscellaneous assets (G) (18,000)
To reduce outstanding long-term
debt obligations (K) 1,204,946
Less: Adjusted net book value of ASI 37,137
---------- ---------
Costs in excess of net assets acquired relating
to ASI as of December 31, 1994 $ 7,863
=========
(G) To reflect miscellaneous assets at their estimated realizable values as of
the acquisition date.
16
<PAGE>
(H) To accrue liabilities not recorded on the Golf and DIC's financial
statements as of the acquisition date, which relate to the operations of
Golf and DIC prior to the acquisition.
(I) To reclassify certain of Golf and DIC's current portion of notes payable to
non-current based upon the refinancing of such obligations in conjunction
with the acquisition.
(J) To reflect elimination of Golf and DIC's historical partners' equity
accounts and the reclassification of DIC and Golf's 25% limited partner
minority interest to the "minority interest" line item of the Registrant's
balance sheet.
(K) To reflect the $1,204,946 reduction in outstanding principal under ASI's
long-term debt obligations, which was negotiated by NMR in conjunction with
the acquisition, and the proper classification of the remaining balance
($650,000) in accordance with the refinancing as of the acquisition date.
(L) To reflect the elimination of ASI's historical partners' equity accounts.
17
<PAGE>
<TABLE><CAPTION>
UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1994
Pro Forma
Pro Forma Historical Pro Forma Combined
Historical Historical Adj.'s Golf and Adj.'s NMR, ASI,
NMR ASI ASI DIC Golf and DIC Golf and DIC
----------- ---------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue, net $15,597,260 $1,055,106 $2,592,767 $19,245,133
----------- ---------- ---------- ------------
Costs and Expenses:
Payroll and related costs 3,957,626 289,722 ($113,342)(A) 443,353 4,577,359
Depreciation and amortization 2,545,108 309,528 (229,624)(B) 547,089 ($271,250)(B) 2,900,851
0
Medical supplies and other operating costs 5,186,883 606,587 (102,370)(F) 1,309,140 (52,904)(F) 6,947,336
55,000 (G)
Other general and administrative 689,347 32,354 99,659 821,360
----------- ---------- ---------- ---------- ------------ ------------
12,378,964 1,238,191 (445,336) 2,399,241 (269,154) 15,301,906
----------- ---------- ---------- ---------- ------------ ------------
Operating income (loss) 3,218,296 (183,085) 445,336 193,526 269,154 3,943,227
Interest expense 824,420 191,918 (128,347)(D) 101,471 50,983 (H) 1,040,445
25,000 (I)
Other income (expense), net 130,694 130,694
----------- ---------- ---------- ---------- ------------ ------------
Income before minority interest
and income taxes 2,524,570 (375,003) 573,683 92,055 218,171 3,033,476
Minority interest in income of ltd partnerships 1,049,070 74,500 (J) 1,123,570
----------- ---------- ---------- ---------- ------------ ------------
Income before income taxes 1,475,500 (375,003) 573,683 92,055 143,672 1,909,907
Provision for income taxes 108,000 14,504 (E) 17,208 (E) 139,712
----------- ---------- ---------- ---------- ------------ ------------
Net income $1,367,500 ($375,003) $559,179 $92,055 $126,463 $1,770,195
----------- ---------- ---------- ---------- ------------ ------------
----------- ---------- ---------- ---------- ------------ ------------
Weighted average number of shares:
Primary 4,757,102 125,000 (K) 4,882,102
----------- ------------ ------------
----------- ------------ ------------
Fully diluted 4,757,102 125,000 (K) 4,882,102
----------- ------------ ------------
----------- ------------ ------------
Earnings per share:
Primary $0.29 $0.36
----------- ------------
----------- ------------
Fully diluted $0.29 $0.36
----------- ------------
----------- ------------
</TABLE>
-18-
<PAGE>
<TABLE><CAPTION>
UNAUDITED PRO FORMA COMBINED
STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Pro Forma Historical Pro Forma Combined
Historical Historical Adj.'s Golf and Adj.'s NMR, ASI,
NMR ASI ASI DIC Golf and DIC Golf and DIC
----------- ----------- ----------- ---------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenue, net $13,112,088 $611,551 $2,123,364 $15,847,003
----------- ----------- ---------- -----------
Costs and Expenses:
Payroll and related costs 3,438,313 151,748 ($16,748)(A) 315,667 3,888,981
Depreciation and amortization 2,209,562 262,011 (202,083)(B) 490,512 ($284,008)(B) 2,475,994
Medical supplies and other operating costs 4,165,729 378,470 (66,171)(C) 1,095,679 (77,018)(F) 5,496,690
41,250 (G)
Other general and administrative 431,296 41,973 65,841 539,110
----------- ----------- ---------- ---------- ----------- ----------
10,244,900 834,202 (285,002) 1,967,699 (319,776) 12,442,024
Operating income (loss) 2,867,188 (222,651) 285,002 155,665 319,776 3,404,979
Interest expense 834,233 194,642 (152,366)(D) 90,786 38,237 (H) 1,005,532
18,750 (I)
Other income (expense), net 7,930 7,930
----------- ----------- --------- ---------- ---------- ----------
Income before minority interest
and income taxes 2,040,885 (417,293) 437,368 64,879 281,538 2,407,377
Minority interest in income of ltd partnerships 375,034 84,416 (J) 459,450
----------- ----------- --------- ---------- ---------- ----------
Income before income taxes 1,665,851 (417,293) 437,368 64,879 197,123 1,947,927
Provision for income taxes 161,000 1,927 (E) 25,152 (E) 188,079
----------- ----------- --------- ---------- ---------- ----------
Net income $1,504,851 ($417,293) $435,440 $64,879 $171,971 $1,759,848
----------- ----------- --------- ---------- ---------- ----------
----------- ----------- --------- ---------- ---------- ----------
Weighted average number of shares:
Primary 5,055,544 125,000 (K) 5,180,544
----------- ---------- ----------
----------- ---------- ----------
Fully diluted 5,055,544 125,000 (K) 5,180,544
----------- ---------- ----------
----------- ---------- ----------
Earnings per share:
Primary $0.30 $0.34
----------- ----------
----------- ----------
Fully diluted $0.30 $0.34
----------- ----------
----------- ----------
</TABLE>
-19-
<PAGE>
(A) To reflect the elimination of salaries and benefits relating to
administrative personnel who will not be retained by ASI following the
transaction due to the consolidation of all administrative functions at
NMR's corporate office located in Murray Hill, New Jersey.
(B) To adjust historical depreciation and amortization expense to reflect
depreciation based upon the estimated fair values of the fixed assets,
based upon independent appraisals obtained by the Company, and amortizaton
expense based upon costs in excess of net assets acquired recorded in
conjunction with the transactions (see Balance Sheet adjustment (F)) as
follows:
Golf and DIC:
For the For the nine
year ended months ended
March 31, 1994 December 31, 1994
-------------- -----------------
Historical depreciation
and amortization expense $547,089 $490,512
Appraised fair values as of the
acquisition date (remaining useful lives):
CT equipment $500,000 (10 years) (50,000) (37,500)
MRI equipment $450,000 (8 years) (56,250) (42,188)
Nuclear medicine equipment
$220,000 (5-8 years) (39,108) (28,960)
Ultrasound equipment $80,000 (5 years) (16,000) (12,000)
X-Ray equipment $37,000 (7 years) (5,286) (3,964)
Furniture and Fixtures $26,260 (5-7 years) (5,252) (3,939)
Leasehold improvements $100,000 (10 years) (10,000) (7,500)
Costs in excess of net assets acquired
$1,878,867 (20 years) (93,943) (70,458)
------- -------
Adjustment to historical depreciation expense $271,250 $284,008
======= =======
ASI:
For the For the nine
year ended months ended
March 31, 1994 December 31, 1994
-------------- ------------------
Historical depreciation
and amortization expense $309,528 $262,011
Appraised fair values as of the
acquisition date (remaining useful lives):
MRI equipment $525,000 (8 years) (65,625) (49,219)
X-Ray equipment $5,000 (7-8 years) (714) (535)
Furniture and Fixtures $35,000 (5 years) (4,607) (3,455)
Leasehold improvements $85,650 (10 years) (8,565) (6,424)
Costs in excess of net assets acquired
$7,863 (20 years) (393) (295)
------- -------
Adjustment to historical depreciation expense $229,624 $202,083
======= =======
20
<PAGE>
(C) To reflect elimination of management fees paid to former general partner
pursuant to original limited partnership agreement which is no longer in
effect following the acquisition by NMR.
(D) To reflect the reduction in interest expense based upon the reduction, of
approximately $1,200,000, in ASI's outstanding principal balance under its
original equipment financing obligation, which was negotiated in
conjunction with the acquisition. Interest on the refinanced $650,000 note
payable was calculated using a five year repayment term (monthly
installments) and an effective interest rate of 10%.
(E) To reflect the income tax provision of the acquired entities based upon
their historical earnings adjusted for the impact of the related pro forma
adjustments, using the effective tax rates of the Registrant during the
applicable periods.
(F) To reflect contractual reductions in fees paid to radiologists based upon
the rates of compensation contemplated by radiology contracts negotiated in
conjunction with the acquisitions.
(G) To reflect fees to be earned by Dr. Shirazi based upon his medical
administrative services agreement at a rate of $55,000 per annum.
(H) To reflect interest expense on the $550,000 note payable obligation
incurred by NMR in connection with the acquisition of Golf and DIC (using
an effective interest rate of 10% and a five year repayment term).
(I) To reflect a reduction in interest income earned by NMR due to the net
expenditure of $500,000 in cash in connection with the acquisition of Golf
and DIC (using an effective interest rate of 5%).
(J) To reflect the minority interest (25%) based upon the historical earnings
of Golf and DIC adjusted for the impact of related pro forma adjustments
during the applicable periods.
(K) Reflects 125,000 shares issued in connection with the acquisition of Golf
and DIC, which were assumed to be outstanding during the entire period.
21
<PAGE>
EXHIBIT INDEX
NMR of America, Inc.
Current Report on Form 8-K
Dated July 31, 1995
Sequential
Exhibit No. Description Page Number
- ----------- ----------- -----------
2 (a) Agreement to Acquire Partnership
-----
Interests among the Registrant
Parvez H. Shirazi, M.D. and Golf
Western Imaging Corporation
(Schedules and Exhibits thereto
are listed therein and will be
provided supplementally to the
Commission, upon request).
(b) Asset Purchase Agreement among the
-----
Registrant and Advanced Specialty
Imaging, L.P., including exhibits.
EXHIBIT 2 (a)
<PAGE>
AGREEMENT TO ACQUIRE PARTNERSHIP INTERESTS
------------------------------------------
THIS AGREEMENT TO ACQUIRE PARTNERSHIP INTERESTS ("Agreement") is
---------
made and entered into as of the 10th day of February, 1995, by and
----
among PARVEZ H. SHIRAZI, M.D. ("Shirazi"), GOLF WESTERN IMAGING
-------
CORPORATION, an Illinois corporation ("General Partner") (Shirazi and
---------------
General Partner are sometimes hereinafter collectively referred to as
"Seller") and IMAGING NETWORKS, INC., a Delaware corporation
------
("Buyer").
-----
RECITALS:
A. Shirazi recently acquired certain of the partnership
interests ("DIC Units") in Diagnostic Imaging Center Limited
-----------
Partnership, an Illinois limited partnership ("DIC") from the
---
individuals and entities named on Schedule 1 ("Previous DIC
---
Partners"), and Shirazi and the individual and entities named on
--------
Schedule 2 ("Remaining DIC Partners") together currently own all of
----------------------
the DIC Units.
B. Shirazi recently acquired certain of the limited partnership
interests ("Golf L.P. Units") in Golf MRI Center Limited Partnership,
---------------
an Illinois limited partnership ("Golf") from the individuals and
----
entities named on Schedule 3 ("Previous Golf Partners"), and Shirazi
-----------------------
and the individual and entities named on Schedule 4 ("Remaining Golf
--------------
Partners") together currently own all of the Golf L.P. Units.
--------
C. Shirazi owns all of the equity interest in General Partner
which is the owner of all of the general partnership interests ("Golf
----
G.P. Units") in Golf (Golf L.P. Units and Golf G.P. Units are
-----------
sometimes hereinafter collectively referred to as "Golf Units").
----------
D. DIC and Golf (collectively, the "Partnerships" and
----------------
individually a "Partnership") are engaged in the business of owning
-----------
and operating diagnostic imaging centers (collectively, the
"Business").
E. Buyer wishes to purchase from Seller, and Seller wishes to
sell and transfer to Buyer, 158 DIC Units (which shall include all DIC
Units owned by Shirazi as general partner of DIC) and 308 Golf Units
(which shall include all of the Golf G.P. Units) (collectively, the
"Purchased Interests") so that Buyer will own a seventy-five percent
---------------------
(75 %) interest in, and will be the sole general partner of, each
Partnership. Concurrently herewith, the parties wish to make certain
changes to the Limited Partnership Agreement of each Partnership and
in the compensation of the general partner of each Partnership. The
foregoing transactions will be entered into upon the terms and subject
to the conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants of the
parties hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
1. Transactions at Closing. Subject to the terms and conditions
-------------------------
hereinafter set forth, on the Closing Date (as hereinafter defined),
(a) Seller shall sell, assign, transfer and deliver to Buyer, and
Buyer shall purchase from Seller, the Purchased Interests, and (b)
Shirazi, General Partner and Buyer, as applicable, will enter into a
Second Amended and Restated Limited Partnership Agreement for DIC (the
"DIC Restated Partnership Agreement") substantially in the form
--------------------------------------
attached hereto as Exhibit A, and an Amended and Restated Limited
Partnership Agreement for Golf (the "Golf Restated Partnership
----------------------------
Agreement"), substantially in the form attached hereto as Exhibit B
---------
(the DIC Restated Partnership Agreement and Golf Restated Partnership
Agreement are sometimes hereinafter collectively referred to as the
"Restated Partnership Agreements").
--------------------------------
2. Purchase Consideration.
-----------------------
(a) The purchase price to be paid by Buyer to Seller for the
Purchased Interests shall be $1,050,000 (the "Cash Price") and
-----------
125,000 unregistered shares of NMR of America, Inc., a Delaware
corporation ("NMR"), the 100% owner of Buyer, common stock,
substantially in the form attached hereto as Exhibit C ("Purchase
--------
Shares") (the Cash Price and Purchase Shares are sometimes
------
hereinafter collectively referred to as the "Purchase
---------
Consideration"). Upon delivery to Seller, the Purchase Shares
-------------
will be validly issued and outstanding, fully paid and
nonassessable.
(b) At the Closing, Buyer shall pay the Cash Price to Seller
by bank wire transfer or otherwise by delivery of immediately
available funds to an account or accounts of Seller at a bank or
banks specified by Seller and shall deliver the Purchase Shares
upon Seller's execution of the Purchase Share Letter Agreement,
substantially in the form attached hereto as Exhibit D ("Purchase
--------
Share Letter Agreement"). Seller acknowledges and agrees that the
----------------------
Purchase Shares have not been registered under the United States
Securities Act of 1933, as amended, or under any other
applicable securities laws and that such Purchase Shares may not
be sold, assigned, pledged or otherwise disposed of at any time
without an effective registration under such Act and laws or
exemption therefrom.
(c) The Purchase Consideration shall be allocated among the
DIC Units, Golf L.P. Units and the Golf G.P. Units as set forth
in Exhibit 2 attached hereto. The Purchase Consideration shall be
payable to Seller as set forth on Exhibit 2, except as otherwise
directed in writing by Seller.
(d) Buyer, or general partner of the Partnership, shall
have the power and authority to make any and all elections under
the Internal Revenue Code of 1986 with respect to the Partnership
and to make all decisions with respect to the filing of the tax
return of the Partnership.
3. Representations and Warranties of Shirazi and General
---------------------------------------------------------
Partner. As an inducement to Buyer to enter into this Agreement and
---------
perform its obligations hereunder, Shirazi and General Partner,
jointly and severally, represent and warrant to Buyer as follows:
-2-
<PAGE>
(a) Organization and Good Standing. General Partner is a
----------------------------------
corporation duly organized, existing and in good standing under the
laws of its state of incorporation. General Partner has all requisite
corporate power and authority to own and use its assets and to carry
on its business as it is now being conducted, and is duly qualified to
do business as a foreign corporation and is in good standing in every
state in which the ownership of its assets or the conduct of its
business makes any such qualification necessary.
(b) Authorization. General Partner has all requisite corporate
----------------
power and authority, and Shirazi has the legal capacity, to make,
execute and deliver and to perform its or his obligations under this
Agreement and each of the Other Documents (as hereinafter defined) to
which it or he is a party. This Agreement and the Other Documents to
which General Partner is a party have been duly authorized by all
requisite corporate action on the part of General Partner. This
Agreement is, and upon execution and delivery thereof at the Closing
the Other Documents to which they are parties will be, the valid and
binding obligations of each of General Partner and Shirazi,
enforceable against each of the General Partner and Shirazi in
accordance with their respective terms. As used herein, "Other
------
Documents" means all of the instruments and documents required or
------------
contemplated herein to be entered into by General Partner or Shirazi.
(c) No Violation. Neither the execution and delivery of this
--------------
Agreement and the Other Documents nor the performance by General
Partner and Shirazi of their respective obligations hereunder and
thereunder will: (i) result in any violation of the articles of
incorporation or by-laws of General Partner; (ii) constitute a default
under any contract, instrument, document, agreement, lease, license or
other arrangement to which General Partner or Shirazi is a party or by
which any of them or any property or assets of any of them may be
bound or affected; (iii) constitute an event which would permit any
party to modify, alter, amend, cancel or otherwise affect or terminate
any such contract, instrument, document, agreement, lease, license or
other arrangement, or accelerate the maturity of any indebtedness or
other obligation of General Partner or Shirazi; or (iv) violate any
law, statute, ordinance, rule or regulation of any governmental
department, commission, board, agency or instrumentality
("Governmental Authority"). Neither General Partner nor Shirazi is a
----------------------
party or subject to, or bound by, any judgment, injunction or decree
of any court or Governmental Authority which may restrict or interfere
with the performance by General Partner and Shirazi of their
respective obligations under this Agreement or the Other Documents.
(d) Title to Purchased Interests. Seller is the sole owner of the
------------------------------
Purchased Interests, free and clear of all claims, liens, security
interests, encumbrances and rights of third parties whatsoever
(collectively, "Liens"), with full right, power and authority to sell,
-----
transfer, convey, assign and deliver the Purchased Interests to Buyer
as provided herein. Upon consummation of the transactions contemplated
hereby in accordance with the terms hereof, Buyer will be vested with
good and marketable title to the Purchased Interests, free and clear
of all Liens whatsoever, other than applicable transfer restrictions
under federal and state securities laws and under the Restated
Partnership Agreements.
-3-
<PAGE>
4. Representations and Warranties Of Shirazi and General
---------------------------------------------------------
Partner with respect to Partnerships. As a further inducement to Buyer
--------------------------------------
to enter into this Agreement and perform its obligations hereunder,
each of Shirazi and General Partner, jointly and severally, hereby
represent and warrant to and covenant with Buyer as follows:
(a) Organization and Good Standing. Each Partnership is a
----------------------------------
limited partnership duly formed, existing and in good standing
under the laws of the State of Illinois. Each Partnership has all
requisite partnership power and authority to own and use the
Assets (as defined below) and to carry on the Business as it has
heretofore been conducted by such Partnership, and is duly
qualified to do business as a foreign limited partnership and is
in good standing in every state in which the ownership of its
assets or the conduct of the Business makes any such
qualification necessary, which states (if any) are set forth in
Schedule 4(a) attached hereto.
(b) No Violation. Neither the execution and delivery of this
--------------
Agreement and the Other Documents nor the performance by Shirazi
and General Partner of their respective obligations hereunder and
thereunder will: (i) result in any violation of either
Partnership's Certificate of Limited Partnership or Agreement of
Limited Partnership; (ii) constitute a default under any
contract, instrument, document, agreement, lease, license or
other arrangement to which either Partnership is a party or by
which either Partnership or any of their property or assets may
be bound or affected; (iii) constitute an event which would
permit any party to modify, alter, amend, cancel or otherwise
affect or terminate any such contract, instrument, document,
agreement, lease, license or other arrangement, or accelerate the
maturity of any indebtedness or other obligation of either
Partnership; (iv) create or impose any Lien on any of either
Partnership's Assets; or (v) violate any law, statute, ordinance,
rule or regulation of any Governmental Authority. Neither
Partnership is a party or subject to, or bound by, any judgment,
injunction or decree of any court or Governmental Authority.
(c) Certificate of Limited Partnership and Partnership
----------------------------------------------------
Agreement. True and complete copies of the Certificate of Limited
-----------
Partnership and the Limited Partnership Agreement of each
Partnership, in each case together with any amendments thereto,
are attached hereto as Schedule 4(c). The partners of each
Partnership and their respective percentage interests in such
Partnership are accurately described in the recitals of this
Agreement. No Person (as hereinafter defined) or entity has any
right or option to acquire or convert any debt or equity into any
interest in either Partnership.
(d) Fixed Assets. Schedule 4(d) sets forth all machinery and
--------------
equipment, furniture, fixtures, leasehold improvements, tools,
vehicles, test equipment, computer hardware and software and
other equipment owned or used by either Partnership in the
conduct of the Business (collectively, the "Fixed Assets").
--------------
Except as set forth on Schedule 4(d), all of the Fixed Assets are
in good condition and repair, ordinary wear and tear excepted.
The locations of all of the Fixed Assets are listed on Schedule
4(d) attached hereto.
(e) Title to and Composition of Assets. The assets of each
------------------------------------
Partnership (collectively, the "Assets") include all of the
------
assets reflected on the Balance Sheets of
-4-
<PAGE>
each Partnership dated December 31, 1994 (the "Balance Sheets Date")
--------------------
attached hereto as Exhibit 4(e) (collectively, the "Balance Sheets")
--------------
and those acquired by each Partnership since that date, except for
drugs or supplies sold or used and expenses incurred in the ordinary
course of business. Each Partnership has good and marketable title to
all of the Assets free and clear of all Liens other than those listed
on Schedule 4(e) attached hereto (the "Existing Liens"). No Person or
---------------
entity other than the Partnerships has any right to the use or
possession of any of the Assets. Substantially all of the Fixed Assets
are used in and are material to the Business. Except as described in
Schedule 4(e), there is no material asset currently used in connection
with the Business (whether tangible and intangible, including contract
rights) which is not owned by the Partnerships and included in the
Assets. The Assets include all of the property or assets necessary in
connection with the Business. No currently effective financing
statement under the Uniform Commercial Code with respect to any of the
Assets has been filed in any jurisdiction, and neither Partnership has
signed any such financing statement or any security agreement
authorizing any secured party thereunder to file any such financing
statement, except as disclosed on Schedule 4(e).
(f) Financial Statements. Seller has delivered to Buyer true
--------------------
and accurate and complete copies of the financial statements of each
Partnership listed on Schedule 4(f), all of which (the "Financial
----------
Statements") have been prepared in accordance with generally accepted
----------
accounting principles on a basis consistent with prior periods and
fairly present the financial condition of each Partnership as of the
dates thereof and the results of operation and cash flows of such
Partnership for the periods then ended. Except as set forth on
Schedule 4(f), each of the Financial Statements fully reflect the
costs to each Partnership of all Employee Benefit Plans (as defined in
Section 4(n)) attributable to the operations of such Partnership,
including, without limitation, accruals for the "normal cost" (as
-----------
defined in SFAS No. 87) of all Employee Pension Plans (as defined in
Section 4(n)) or other obligation under any Employee Pension Plan
which is an employee stock ownership plan as defined in Treasury
Regulation Sec.54.4975-11 and all accruals for retiree Employee Welfare
Plans (as defined in Section 4(n)) which are or will be required under
SFAS No. 106 and incurred but not reported claims under any Employee
Benefit Plan, all reasonably anticipated retroactive adjustments from
insurers, including, without limitation, those underwriting any
Employee Benefit Plan, and all contributions to any funding vehicle
associated with any Employee Benefit Plan for benefits attributable to
the periods which are the subject of each of the Financial Statements.
(g) No Adverse Change. Except as set forth on Schedule 4(g), since
----------------
the Balance Sheets Date, (i) there has been no material, adverse
change in the Business or in the relationship of either Partnership
with any of their customers or suppliers, (ii) neither Partnership has
entered into any transaction outside the usual normal and ordinary
course of its business or suffered any damage, destruction, change or
loss involving the Assets or the Business, whether or not insured, and
(iii) neither Partnership has made any distribution to its partners,
redeemed or repurchased any partnership interests or paid any
indebtedness owing to, or paid any other amount to, any of its
partners or to any Person or entity affiliated with either
Partnership.
-5-
<PAGE>
(h) Contracts and Agreements. Attached hereto as Schedule 4(h) is
------------------------
a true and complete list of all contracts, commitments, leases,
agreements and arrangements, oral and written, to which either
Partnership is a party or by which either Partnership or any of their
assets are bound (collectively the "Contracts"). Seller has delivered
----------
to Buyer correct and complete copies of all written Contracts,
including all amendments thereto, and summaries of all oral Contracts.
Each of the Contracts is in full force and effect, is valid and
enforceable in accordance with its respective terms and is not subject
to any claims, charges, set-offs or defenses; there is no existing
default or alleged default thereunder; there has not occurred any
event which, with the passage of time or the giving of notice (or
both), would constitute a default thereunder; and there are no
unresolved disputes under or arising out of any of the Contracts.
Neither Partnership has received notice that any party to any Contract
intends to cancel or terminate any Contract, and neither Partnership
is aware of any basis for any such cancellation or termination.
(i) Permits, Licenses, etc. Each Partnership holds all permits,
----------------------
licenses, franchises, certificates, registrations, approvals or
authorizations by or of Governmental Authorities or third parties
necessary or desirable for the use of the Assets, the occupancy of the
Leased Real Property (as defined below), or operation of the Business
as now being conducted or as now contemplated to be conducted by
Seller, including, without limitation, all certificates of need and
certificates of exemption, all of which are in full force and effect
and are identified on Schedule 4(i) attached hereto (the "Permits")
and copies of which have been delivered to Buyer. Neither Partnership
has received notice of any cancellation or revocation of any of the
Permits or to the effect that any of the Permits may not be renewed.
(j) Consents. Other than the consents (the "Required Consents")
--------- -----------------
listed in Schedule 4(j) attached hereto, no consent of any third party
and no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is or was
required for (i) the purchase of the DIC Units from the Previous DIC
Partners by Shirazi, (ii) the purchase of the Golf L.P. Units from the
Previous Golf Partners by Shirazi or (iii) the execution, performance
or consummation by Shirazi and General Partner of this Agreement and
the transactions contemplated hereby.
(k) Compliance with Laws. Each Partnership has complied in all
---------------------
material respects with all applicable laws, statutes, ordinances,
rules, regulations and orders of Governmental Authorities
(collectively "Laws"), and neither Partnership has received notice
asserting any violation thereof or non-compliance therewith. Shirazi's
purchase of the DIC Units from the Previous DIC Partners and his
purchase of the Golf L.P. Units from the Previous Golf Partners
complied with all applicable Laws including, without limitation, the
Federal Physician Self-Referral Law, 42 U.S.C. Sec. 1395nn, Fraud and
Abuse Law, 42 U.S.C. Sec. 1320a-7b(b), and Illinois Health Care Worker
Referral Act, 225 ILCS 47/1 et seq. and any regulations promulgated
-----
thereunder.
(l) Litigation. Except as set forth in Schedule 4(l) attached
----------
hereto, there is no claim, demand, suit, action, arbitration or other
administrative proceeding or investigation pending or threatened
against either Partnership, or to which either
-6-
<PAGE>
Partnership is otherwise a party, or which may affect either
Partnership, the Business or any of the Assets, before any court or
any Governmental Authority; nor do Shirazi, General Partner or the
Partnerships know of any basis for any such claim, demand, suit,
action, proceeding or investigation. Neither Partnership is engaged in
any legal action to recover monies due it or for damages sustained by
it. Schedule 4(l) sets forth all citations, violations, inspections or
investigations by any Governmental Authority with respect to the
Partnerships or the Business during the three-year period prior to the
date hereof, together with a description of the status and/or
resolution thereof.
(m) Labor Matters. Schedule 4(m) attached hereto lists each former
-------------
employee whose employment was terminated for any reason by either
Partnership at any time during the last two years and the date of such
termination which has resulted in a dispute or claim against either of
the Partnerships. Except as set forth in Schedule 4(m) hereto, there
is not now pending or threatened, and during the one-year period prior
to the date hereof there has not been pending or threatened, any
strike, picket, work stoppage, work slowdown, notice to bargain,
obligation to bargain, union organizational activity or other labor
trouble relating to the Business.
(n) Employee Benefit Plans.
-----------------------
(i) Disclosure. Except for those plans, policies,
----------
programs, arrangements and agreements described in Schedule
4(n)(i), neither Partnership have at any time maintained, made
contributions to or been obligated to make contributions to (or
have any other liabilities with respect to) any of the following
(whether or not written or terminated): (A) any employee welfare
benefit plan, as defined in Section 3(1) of ERISA, including, but
not limited to, any severance agreement or plan, any medical
plan, life insurance plan, short-term or long-term disability
plan or dental plan, (B) any employee pension benefit plan, as
defined in Section 3(2) of ERISA, including, but not limited to,
any qualified defined contribution or defined benefit
arrangement, nonqualified deferred compensation or retirement
plan or arrangement, excess benefit plan, top hat plan or
deferred compensation plan, or (C) any other plan, policy,
program, arrangement or agreement to provide employee or similar
benefits to any current or former employee, independent
contractor, nonemployee director, customer or supplier or the
dependents or beneficiaries thereof, including, but not limited
to, any personnel policy, vacation time, holiday pay, bonus
program, service award, moving expense reimbursement program,
tool allowance, safety equipment allowance and sick leave,
deferred compensation plan which is not defined in Section 3(2)
of ERISA, bonus or incentive plan, stock option, restricted
stock, stock bonus, deferred bonus plan, salary reduction
agreement, change-of-control agreement, employment agreement or
consulting agreement or any material fringe benefit plan or
program; which could result in Buyer or either Partnership having
any liability, whether direct or indirect. Neither Partnership
has any Plan Affiliate or Past Plan Affiliate other than the
other Partnership.
(ii) Adequacy of Accruals. All contributions, payments,
----------------------
premiums, reimbursements, expenses or accruals with respect to
the Employee Benefit Plans
-7-
<PAGE>
for all periods prior to or as of the Closing (including periods from
the first day of the then current plan year to the Closing) shall have
been paid, accrued on the Financial Statements, funded by a funding
vehicle separate from the assets of each Partnership; provided that in
computing the obligation of each Partnership to pay any bonus or
incentive compensation or any other benefit attributable to such
Partnership's current fiscal year and which is determined based upon
the profits of such Partnership, the amount of any bonus or incentive
compensation or other benefit attributable to the period prior to the
Closing shall be determined based upon the assumption that the profits
shown on their Balance Sheets and accompanying income statement are
the profits for the current fiscal year.
(iii) Due Diligence. A true, current and complete copy of each
--------------
written Employee Benefit Plan as amended to the Closing, together with
audited financial statements and/or actuarial reports for the three
(3) most recent plan years; a copy of each current trust agreement,
insurance contract, or any other funding vehicle, if required, with
respect to each such Employee Benefit Plan; a copy of any and all
determination letters, rulings or notices issued by any Governmental
Authority with respect to such Employee Benefit Plan which has current
relevance; a copy of any required Form 5500 Annual Report and any
required PBGC Form 1 for the three (3) most recent plan years of any
Employee Benefit Plan; a copy of any required Form 990 and 990-T for
the three (3) most recent trust years of any trust with respect to an
Employee Benefit Plan; and a copy of each summary plan description and
summary of material modifications, any other general explanation or
other written communication provided to participants or beneficiaries
under any Employee Benefit Plan for which either Partnership could
have any liability, and any other related contracts, committee
minutes, insurance policies or other agreements or documentation
necessary or appropriate for the customary operation of any Employee
Benefit Plan, or the amendment, termination or modification of any
Employee Benefit Plan (or, to the extent in the possession of Seller
or either Partnership), have been delivered to Buyer. A description of
the material terms of any unwritten Employee Benefit Plan, including a
description of eligibility, participation, benefits, funding
arrangements and assets or other relevant aspects of the obligation,
is set forth in Schedule 4(n)(iii).
(iv) Compliance. Each Employee Benefit Plan (a) has been and
----------
currently complies in form and in operation in all respects with all
applicable requirements of ERISA and the Internal Revenue Code, as
amended (the "Code"), the regulations and administrative rulings
promulgated thereunder and applicable case law; (b) has been and is in
compliance with the reporting and disclosure requirements of
applicable Federal and state laws and regulations and administrative
rulings promulgated thereunder and applicable case law; (c) has been
and is operated and administered in compliance with its terms (except
as otherwise required by law); (d) has been and is operated,
administered, maintained and funded in compliance with the applicable
requirements of the Code and ERISA in such a manner as to qualify,
where intended or otherwise appropriate, for both Federal and state
purposes, for income tax exclusions to its participants, tax-exempt
income for its funding vehicle, and the allowance of
-8-
<PAGE>
deductions and credits with respect to contributions thereto; (e) if
intended to be qualified under Sections 401(a) or 403(a) of the Code,
has received a favorable determination letter from the Internal
Revenue Service ("Service"); and (f) if intended to be exempt under
-------
Code Section 501(c)(9), has received a favorable approval letter from
the Service.
(v) Litigation. With respect to each Employee Benefit Plan (or
----------
trust with respect thereto), there are no actions, suits or, to the
knowledge of Seller or the Partnerships, investigations or claims
pending or overtly threatened with respect to the assets thereof
(other than uncontested, routine claims for benefits), and none of
Seller or the Partnerships knows or has any reasonable grounds to know
of any basis for any such liability, action, suit, investigation, or
claim against any Employee Benefit Plan, any fiduciary or plan
administrator or other Person dealing with any Employee Benefit Plan
or the assets of any such Employee Benefit Plan.
(vi) Fiduciary Matters. With respect to each Employee Benefit
-----------------
Plan, no "fiduciary," "party-in-interest" or "disqualified person"
--------- ----------------- -------------------
with respect to any such plan: (a) entered into any "prohibited
----------
transaction," as such terms are defined in ERISA or the Code and the
-----------
regulations, administrative rulings and case law thereunder (but only
to the extent any such prohibited transaction rules are applicable to
any such plan); (b) breached a fiduciary obligation; (c) has any
liability for any failure to act or comply in connection with the
administration or investment of the assets of such plan; or (d)
engaged in any transaction with respect to such plan which could
subject Buyer or the Partnerships to either civil liability or penalty
under Section 409 or 502 of ERISA or the tax or penalty on prohibited
transactions imposed by Section 4975 of the Code.
(vii) Extraneous Statements. None of Partnerships or any officer,
---------------------
director or employee of the Partnerships has made any statements,
whether oral or in writing, regarding any Employee Benefit Plan, which
materially alters the terms of the Employee Benefit Plan and which
will result in additional liability to Buyer or the Partnerships,
whether direct or indirect, in excess of any current or potential
liability of the Partnerships as of the Closing described pursuant to
Section 4(n)(ii).
(viii) Multiemployer and Multiple Employer Plans. None of the
-------------------------------------------
Partnerships has at any time participated in, made contributions to or
had any other liability with respect to any plan, policy, program,
arrangement or agreement which is a "multiemployer plan" as defined in
------------------
Section 4001 of ERISA, a "multiemployer plan" within the meaning of
------------------
Section 3(37) of ERISA, a "multiple employer plan" within the meaning
----------------------
of Code Section 413(c) or a "multiple employer welfare arrangement"
----------------------------------------
within the meaning of Section 3(40) of ERISA, which could result in
Buyer or the Partnerships having any current or future obligation to
contribute to, or any other liability with respect to any such plan,
whether direct or indirect, and neither Partnership has incurred (or
could incur) any current or potential withdrawal liability, whether
direct or indirect, as
-9-
<PAGE>
a result of a complete or partial withdrawal (or potential partial
withdrawal) from any such plan.
(ix) Retiree Matters. Neither of the Partnerships has ever
---------------
maintained or contributed to or been obligated to make contributions
to (or had any other liability with respect to) any funded or unfunded
Employee Welfare Plan, whether or not terminated, which provides
medical, health, life insurance or other welfare-type benefits for
retirees or former employees, their spouses or dependents (except for
limited continued medical benefit coverage required to be provided
under Section 4980B of the Code or Part 6 of Subtitle B of Title I of
ERISA or state continuation coverage laws ("COBRA")) which would give
-----
rise to the Partnerships or Buyer having any obligation to maintain or
contribute to (or having any other liability, whether direct or
indirect with respect to) any such plan as of the Closing or at any
time in the future.
(x) Defined Benefit Plan Matters. None of the Employee Pension
-----------------------------
Plans has incurred any "accumulated funding deficiency" as such term
------------------------------
is defined in Section 302 of ERISA or Section 412 of the Code, whether
or not waived, has posted or is required to provide security under
Code Section 401(a)(29) or Section 307 of ERISA and no event or
condition has occurred which has or could result in the imposition of
a lien under Code Section 412 or Section 302 of ERISA. No liability to
the Pension Benefit Guaranty Corporation (the "PBGC") (except for
payment of premiums not past due) has been incurred with respect to
any Employee Pension Plan, no reportable event within the meaning of
Section 4043 of ERISA has occurred with respect to any Employee
Pension Plan, the PBGC has not threatened or instituted the
termination of any Employee Pension Plan and no Employee Pension Plan
has been completely or partially terminated.
(xi) Reports. All required reports and descriptions
-------
(including Form 5500 Annual Reports, Summary Annual Reports,
PBGC-1s and Summary Plan Descriptions) with respect to each
Employee Benefit Plan have been appropriately filed or
distributed to participants, and the requirements of COBRA have
been satisfied with respect to each Employee Benefit Plan.
(xii) Funding, Contributions and Other Expenses. As of the
------------------------------------------
Closing, the fair market value of the assets of each Employee
Pension Plan will equal or exceed the present value of all vested
and non-vested liabilities of each such plan determined in
accordance with any applicable PBGC methods, factors and
assumptions applicable to a defined benefit pension plan
terminating on such date. Any contribution made or accrued with
respect to any Employee Benefit Plan is fully deductible by the
Partnerships.
(xiii) Other Matters. The Partnerships have not incurred any
-------------
liability to the PBGC, the Service, the Department of Labor or
otherwise with respect to any Employee Benefit Plan currently or
previously maintained by the Partnerships that has not been
satisfied in full, and no condition exists that presents a
material risk
-10-
<PAGE>
to the Partnerships or Buyer of incurring such a liability (except for
the payment of premiums to the PBGC that are not past due).
(xiv) Definitions. As used in this Agreement, the following terms
-----------
shall have the following respective meanings:
(A) the term "Employee Pension Plan" shall mean any plan
----------------------
described in clause (B) of Section 4(n)(i) hereof, whether or not
scheduled, which either Partnership has at any time maintained,
made contributions to or had any other liability with respect to,
and which could result in Buyer or either Partnership having any
liability, whether direct or indirect;
(B) the term "Employee Benefit Plan" shall mean any Employee
---------------------
Welfare Plan, Employee Pension Plan or Other Plan;
(C) the term "Employee Welfare Plan" shall mean any plan
----------------------
described in clause (A) of Section 4(n)(i) hereof, whether or not
scheduled, which either Partnership has at any time maintained,
made contributions to or obligated itself to make contributions
to or had any other liability with respect to, and which could
result in Buyer or either Partnership having any liability,
whether direct or indirect;
(D) the term "ERISA" shall mean the Employee Retirement
-----
Income Security Act of 1974, as amended;
(E) the term "Other Plan" shall mean any other plan, policy,
----------
program, arrangement or agreement described in clause (C) of
Section 4(n)(i)thereof, whether or not scheduled, which either
Partnership has at any time maintained, made contributions to or
obligated itself to make contributions to or had any other
liability with respect to, and which could result in Buyer or
either Partnership having any liability, whether direct or
indirect;
(F) the term "Past Plan Affiliate" shall mean any Person or
-------------------
entity who is not a Plan Affiliate as of the Closing, but who has
been a Plan Affiliate at any other time; and
(G) with respect to any Person or entity ("First Person"),
the term "Plan Affiliate" shall mean any other Person or entity
---------------
with whom the First Person constitutes all or part of a
controlled group or affiliated service group, or which would be
treated with the First Person as under common control or whose
employees would be treated as employed by the First Person, under
Section 414 of the Code and any regulations, administrative
rulings and case law interpreting the foregoing.
-11-
<PAGE>
(o) Environmental Laws.
-------------------
(i) Except as may be disclosed in Schedule 4(o), each Partnership
is in compliance with all applicable Environmental Laws (as
hereinafter defined), and neither Partnership has received notice of
any violation or alleged violation of any such Environmental Laws.
Each Partnership possesses all required permits, licenses,
certificates and registrations required under applicable Environmental
Laws, and has filed all notices or applications required thereby,
which, if not possessed or filed, could result or has resulted in
material adverse consequences for either Partnership or Buyer.
(ii) Without limiting the generality of Sections 4(k) and 4(o)(i),
neither Partnership has generated, transported, treated, stored, or
disposed of, nor has there been a release or threatened release of,
any Contaminant (as hereinafter defined) in, under or upon any real
property, equipment or other personal property now or heretofore
owned, leased, used or operated by the Partnerships, except in
compliance with all applicable Environmental Laws. Except as disclosed
on Schedule 4(o), there are no underground storage tanks under or upon
any real property now or heretofore owned, leased, used or operated by
the Partnerships. "Contaminant" for purposes of this Agreement shall
-----------
include, without limitation: any pollutant or contaminant (as that
term is defined in 42 U.S.C. Sec.9601(33)), toxic pollutant (as that
term is defined in 33 U.S.C. Sec.1362(13)), hazardous substance (as
that term is defined in 42 U.S.C. Sec.Sec.9601 et seq. and the
------
regulations promulgated thereunder), hazardous chemical (as that term
is defined by 29 C.F.R. Sec.1910.1200(c)), hazardous waste (as that
term is defined in 42 U.S.C. Sec.6202(2)), radioactive material,
including without limitation any source, special nuclear or by-product
material as defined in 42 U.S.C. Sec.Sec.2011 et seq., asbestos and
------
asbestos containing material, polychlorinated biphenyls, petroleum and
petroleum waste, including crude oil or any petroleum derived
substance, waste or breakdown or decomposition product thereof, or any
constituent of any such petroleum substance or waste, or any substance
or material which because of its toxicity, corrosiveness, ignitability,
reactivity or infectious characteristics may pose a threat to human
health or the environment.
(iii) Except as disclosed on Schedule 4(o), neither Partnership is
or has been subject to, or has received any notice of, any private,
administrative or judicial action, or notice of any intended private,
administrative, or judicial action, relating to the presence or
alleged presence of Contaminants in, under or upon any real property,
equipment or other personal property now or heretofore owned, leased,
used or operated by the Partnerships or used by the Partnerships for
the storage or distribution of inventory or for the disposal of any
waste, product or by-product, and there is no basis for any such
notice or action. There are no pending or threatened actions or
proceedings or notices of potential actions or proceedings from any
Governmental Authority or any other entity against the Partnerships
regarding any matter relating to health, safety or protection of the
environment.
-12-
<PAGE>
(iv) Without limiting any of the other representations or
warranties of Seller herein, there are and have been no past or
present events, conditions, circumstances, activities, practices,
incidents or actions which could be expected to interfere with or
prevent continued compliance with any Environmental Law or which
may give rise to any legal liability or otherwise form the basis
of any claim, action, suit, proceeding, hearing or investigation
against either Partnership or involving any real property now or
heretofore owned, leased, used or operated by the Partnerships,
or any assets now or heretofore owned, used, leased or operated
by the Partnerships, based on any condition, violation or alleged
violation of any Environmental Law.
(v) Neither Partnership has sent, transported, caused the
transportation of or disposed of any Contaminant or otherwise at
any site, location or facility (whether or not any such site,
location or facility is or was owned, used, operated or leased by
the Partnerships), except in compliance with all applicable
Environmental Laws.
(vi) As used herein, "Environmental Laws" mean all federal,
------------------
state or local statutes, laws, codes, rules, regulations,
ordinances, orders, standards, permits, licenses or requirements
(including consent decrees, judicial decisions and administrative
orders), presently in force, as amended or reauthorized,
pertaining to the protection, preservation, conservation or
regulation of the environment, or imposing requirements relating
to public or employee health and safety, including without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"), 42 U.S.C. Sec. 9601
------
et seq., the Resource Conservation and Recovery Act of 1976
-- ---
("RCRA"), 42 U.S.C. Sec. 6901 et seq., the Emergency Planning and
---- -- ---
Community Right to Know Act ("Right-to-Know Act"), 42 U.S.C. Sec.
-----------------
11001 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Sec. 7401 et
-- --- --
seq., the Federal Water Pollution Control Act ("Clean Water
--- -----------
Act"), 33 U.S.C. Sec. 1251 et seq., the Toxic Substances Control
--- -- ---
Act ("TSCA"), 15 U.S.C. Sec. 2601 et seq., the Safe Drinking Water
---- -- ---
Act, 42 U.S.C. Sec. 300F et seq., and the Occupational Safety and
-- ---
Health Act ("OSHA"), 29 U.S.C. Sec. 651 et seq.
---- -- ---
(p) Insurance Policies. Schedule 4(p) attached hereto contains a
------------------
true and complete list of all policies of insurance currently owned or
maintained by either Partnership with respect to the Business or the
Assets. Said list includes policy numbers, identity of insurers and a
description of the type and amount of coverage under each such policy.
All such policies are in full force and effect, and neither
Partnership has received notice of cancellation or intent to cancel
with respect thereto or is aware of any basis for such action.
Schedule 4(p) also contains a complete list of all claims made under
such policies during the past three years.
(q) Taxes. Each Partnership has filed all federal, state,
-----
municipal, local and foreign tax returns which it is required to have
filed, and such returns are complete and correct. The Partnerships
have paid or made adequate provision for the payment of all taxes,
interest, penalties, assessments or deficiencies which have or may
become due
-13-
<PAGE>
pursuant to said returns, or pursuant to any assessment received with
respect thereto, or which is otherwise due and payable by the
Partnerships. The Partnerships have delivered to Buyer true, current
and complete copies of all said tax returns for the three (3) most
recent years. There is pending no audit or examination of any such tax
return of the Partnerships by any Governmental Authority, nor has
either Partnership, Shirazi or General Partner received notice of any
such audit or examination. There are no unexpired waivers by either of
the Partnerships of any statute of limitations with respect to any
taxes, and there are no pending or threatened actions, proceedings or
investigations by any Governmental Authority with respect to taxes.
(r) Employee Salaries. Attached hereto as Schedule 4(r) is a
-----------------
true and complete list setting forth the names, dates of hire,
classification by duty and current compensation of all employees of
each Partnership. Except as set forth on Schedule 4(r), since the
Balance Sheet Date there has been no payment of any bonus or
extraordinary compensation, and there has been no increase in the
compensation or rate of compensation payable, to any employee of
either Partnership, nor any material change in any Employee Benefit
Plan, nor has any such bonus or extraordinary compensation, general
increase or material change in Employee Benefit Plan been promised to
any employee orally or in writing.
(s) Collectibility of Receivables. The accounts receivable of
-----------------------------
each Partnership (collectively, the "Accounts Receivable") arose only
-------------------
in the ordinary course of business in accordance with the customary
credit policies of such Partnership. All of the Accounts Receivable
are collectible without set-off or counterclaim and will be collected
in the ordinary course of business subject to a reserve for
uncollectible Accounts Receivable not to exceed 25 % of the face
amount of such Accounts Receivable.
(t) Condition of Inventory. The inventories of supplies of each
----------------------
Partnership (collectively, the "Inventory") are (i) of good and
standard quality, (ii) fit for the purpose for which they were made
and salable or useable (as the case may be) in the ordinary course of
business, (iii) contain no obsolete or surplus items, and (iv) are at
or above the levels required by any Federal or State agency regulating
the Partnerships. Without limiting the generality of Section 4(k), all
items of Inventory (including the packaging and labeling thereof) are
in compliance in all material respects with all applicable Laws.
(u) Real Property. There is no real property owned by either
-------------
Partnership and used in connection with the Business. A description of
all real property leased by each Partnership and used in connection
with the Business and of the buildings and improvements located
thereon is set forth on Schedule 4(u) (the "Leased Real Property" ).
--------------------
Each Partnership enjoys peaceful and undisturbed possession under all
such leases, all of such leases are valid and in full force and
effect, neither Partnership nor, to either Partnership's knowledge,
any other party is in default under any of such leases and no event
has occurred which with the giving of notice or the passage of time
or both would constitute a default by either Partnership or, to
either Partnership's knowledge, any other party under any of such
leases. With respect to the Leased Real Property, except as
reflected in Schedule 4(u):
-14-
<PAGE>
(i) no portion thereof is subject to any pending condemnation
proceeding or other proceeding by any public or quasi-authority
and, to the knowledge of the Partnerships, Shirazi and General
Partner, there is no threatened condemnation or proceeding with
respect thereto;
(ii) to the knowledge of the Partnerships, Shirazi and
General Partner, the buildings, plants, improvements, structures
and fixtures owned, leased or used by the Partnerships at or upon
the Leased Real Property, including, but not limited to, heating,
ventilation and air conditioning systems, plumbing, electrical,
water and sewage system, roof, foundation and floors have to date
been reasonably maintained and are in good operating condition
for their intended use subject to the provision of usual and
customary maintenance and repair performed in the ordinary course
with respect to similar properties of like age and construction;
(iii) no notice of any increase in the assessed valuation of
the Leased Real Property or of any contemplated special
assessment has been received by the Partnerships and, to the
knowledge of the Partnerships, Shirazi and General Partner there
is no threatened special assessment and none of the Leased Real
Property is located in a special service district or in an area
for which federal flood risk insurance is necessary nor is the
land on or in any flood zone, flood way or mud slide hazard;
(iv) the land does not serve any adjoining property for any
purpose inconsistent with the use of the land;
(v) all facilities located on any parcel of the Leased Real
Property are supplied with all utilities and other services
necessary for the operation of such facilities as presently
operated, all of which services are adequate to conduct that
portion of Business as presently conducted at each of such
facilities;
(vi) there are no leases, subleases, licenses, concessions,
easements or other agreements, written or oral, granting to any
party or parties the right of use or occupancy of any portion of
the parcels of the Leased Real Property;
(vii) there are no parties other than the Partnerships in
possession of the parcels of the Leased Real Property; and
(viii) all parcels of the Leased Real Property are currently
occupied by the Partnerships and regularly used for their
intended use in connection with the active conduct of the
Business.
(v) Intellectual Property. Schedule 4(v) lists or describes all
---------------------
patents, trademarks, service marks, trade names, copyrights and
applications therefor, inventions, discoveries, processes, technology,
know-how, trade secrets and other proprietary rights (collectively,
"Intellectual Property Rights") owned or licensed by the Partnerships
------------------------------
and used in, or otherwise necessary to the conduct of, the Business as
of the date hereof. To
-15-
<PAGE>
the knowledge of the Partnerships, Shirazi and General Partner, except
as set forth on Schedule 4(v), each Partnership owns or has the right
to use all Intellectual Property Rights, free of any Liens other than
Existing Liens, such use does not conflict with or violate any valid
patent, trademark, service mark, trade name or copyright of third
parties, and neither Partnership has received any notice of a conflict
with the asserted rights of others in connection with Intellectual
Property Rights. To the knowledge of the Partnerships, Shirazi and
General Partner, none of the Intellectual Property Rights is being
infringed by any third parties. Except as set forth in Schedule 4(v),
neither Partnership is obligated to pay any royalty or license fee to
any Person in order to use any of the Intellectual Property Rights.
(w) Other Liabilities. Neither Partnership has any liabilities or
-----------------
obligations (direct or indirect, absolute or contingent, matured or
unmatured, asserted or unasserted or otherwise) of whatever nature,
whether arising out of contract, tort, statute or otherwise, except
(i) liabilities and obligations in the amounts and categories set
forth in the Balance Sheets as of the Balance Sheets Date, (ii)
liabilities and obligations incurred in the ordinary course of
business since the Balance Sheet Date and recorded on the books of
each respective Partnership (not included within the meaning of
"ordinary course of business" for purposes of this Agreement are any
----------------------------
tort liabilities or any liability arising out of a violation of Law or
breach of a contractual or other obligation), and (iii) liabilities
and obligations listed in Schedule 4(w) attached hereto.
(x) Books and Records. The books and records of each Partnership
------------------
accurately reflect all material transactions of such Partnership and
have been properly kept and maintained in the ordinary course of the
Business and in accordance with the generally accepted accounting
principles on a basis consistent with prior periods.
(y) Interest of Partnerships in Customers, etc. Except as
-----------------------------------------------
disclosed in Schedule 4(y), neither the Partnerships, nor any of
General Partner, Shirazi, or any member of his immediate family has
any direct or indirect interest in any competitor, supplier or
customer of the Partnerships or in any other Person or entity with
whom the Partnerships does business.
(z) No Brokers. Neither Shirazi nor General Partner has
-----------
retained any broker or finder, made any statement or representation to
any Person or entity which would entitle such Person or entity to, or
agreed to pay, any broker's, finder's or similar fees or commissions
in connection with the transactions contemplated by this Agreement.
(aa) Conditions of Participation. All claims for reimbursement for
---------------------------
services rendered by the Partnerships have been submitted to third
parties in compliance with applicable Laws and regulations. The
Partnerships, for all programs for which they participate, have met
and do meet, without material exception, the requirements for
participation in all Medicare and Medicaid programs in the States in
which the Business is conducted and are certified for participation in
such programs. To the best of Seller's knowledge, there is not any
pending or threatened proceeding or investigation under such programs
involving either Partnership. Except as otherwise disclosed on
Schedule 4(aa), Seller has no knowledge of any condition relating to
the Partnerships which constitutes
-16-
<PAGE>
a material deficiency under any State Medicaid program or the Medicare
program or any other State or Federal law relating to the licensing or
operation of the Partnerships. The Partnerships are in material
compliance, without obtaining waivers, variances or extensions, with
the standard requirements, conditions and regulations for
participating in any state Medicaid program and the federal Medicare
program, and state licensure laws for diagnostic imaging centers. All
deficiency reports, inspection reports and citations issued for the
past three years are listed on Schedule 4(aa), each of which has been
previously furnished to Buyer or will be furnished to the Buyer prior
to Closing.
(ab) No Illegal Payments. Seller and/or the Partnerships have not,
-------------------
directly or indirectly, paid or delivered, accepted, or agreed to pay
or deliver any remuneration, fee, commission or sum of money or item
of property, however characterized, to any individual, sole
proprietorship, partnership, joint venture, trust, unincorporated
association, corporation, entity or government (whether Federal,
state, county, city or otherwise, including, without limitation, any
instrumentality, division, agency or department thereof) ("Person"),
government official or other party which is in any manner related to
the Business of the Partnerships and which Seller and/or the
Partnerships knows or has reason to believe to have been illegal under
any federal, state or local law, which payment or delivery may impose
liability on Buyer or the Partnerships or form the basis for the
exclusion of the Partnerships as providers under Medicare and Medicaid
programs.
(ac) No Referrals by Interested Parties. From and after January 1,
----------------------------------
1995 and through the Closing Date that there have been no referrals of
Medicare or Medicaid patients to the Partnerships by physicians owning
partnership interests in the Partnerships or having any financial
relationship with the Partnerships.
(ad) Related Party Transactions. Schedule 4-(ad) specifies all
---------------------------
entities that have transacted business with (a) the Partnerships or
(b) patients of the Partnership, that are "related" through common
ownership or control to the Partnerships under the Medicare definition
of such term, or the definition of such term under the Medicaid
program of any State. For each such entity, Schedule 4-(ad) also
states the nature of the transaction and the nature of the
relationship, including, but not limited to, the percentage of common
ownership or relationship that creates control. Attached to Schedule
4-(ad) are all contracts or written agreements between such entities
and the Partnerships.
(ae) Customers and Suppliers. Since the Balance Sheet Date,
------------------------
neither Partnership has lost or has received any information
indicating that it is likely to lose any material supplier or any
customer which accounts for more than five percent of its sales.
(af) Completeness of Warranties. The representations and
-----------------------------
warranties of the Shirazi and General Partner made in or pursuant to
this Agreement do not omit to state any material fact necessary in
order to make the statements made therein, in light of the
circumstances under which they are made, not misleading. There is no
fact or circumstance known to the Partnerships, Shirazi or General
Partner that has not been
-17-
<PAGE>
disclosed to Buyer herein that materially and adversely affects
or could affect the Purchased Interests, Assets or the Business.
5. Representations and Warranties of Buyer. As an inducement to
---------------------------------------
Shirazi and General Partner to enter into this Agreement and perform
their obligations hereunder, Buyer hereby represents and warrants to
and covenants with Shirazi and General Partner as follows:
(a) Organization and Good Standing. Buyer is a corporation
-------------------------------
duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has the requisite corporate
power to own and to carry on its business as it is now being
conducted.
(b) Authorization. Buyer has the requisite corporate power
-------------
and authority to make, execute and deliver and to perform its
obligations under this Agreement and the Other Documents, all of
which have been duly authorized by all requisite corporate action
on the part of Buyer. This Agreement is, and upon execution and
delivery thereof at the Closing the Other Documents will be, the
valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms.
(c) No Violation. Neither the execution and delivery of
------------
this Agreement and the Other Documents nor the performance by
Buyer of its obligations hereunder and thereunder will: (i)
result in any violation of the articles of incorporation or by-
laws of Buyer; (ii) constitute a default under any contract,
instrument, document, agreement, lease, license or other
arrangement to which Buyer is a party or by which Buyer or its
property or assets may be bound or affected; or (iii) violate any
Law. Buyer is not a party or subject to, or bound by, any
judgment, injunction or decree of any court or governmental
authority which may restrict or interfere with the performance by
Buyer of its obligations under this Agreement.
(d) No Brokers. Buyer has not retained any broker or finder,
----------
made any statement or representation to any Person or entity
which would entitle such Person or entity to, or agreed to pay,
any broker's, finder's or similar fees or commissions in
connection with the transactions contemplated by this Agreement.
6. Covenants of Shirazi and General Partner. Between the date
----------------------------------------
hereof and the Closing, Shirazi and General Partner will cause the
Partnerships to:
(a) Continue to perform all repairs, replacements and
maintenance necessary to maintain the tangible Assets in as good
condition as exists on the date hereof, ordinary wear and tear
excepted.
(b) Pay and discharge all wages, salaries, bonuses, accrued
vacation, holiday and sick pay, contributions to Employee Benefit
Plans and other benefits, commissions and amounts, if any, due
and owing to all employees of the Partnerships through the
Closing Date, including worker's compensation claims.
-18-
<PAGE>
(c) Continue to carry on the Business in a businesslike and
diligent manner consistent with prior practice and in the
ordinary course, and will use their best efforts to preserve each
Partnership's business organization and its relationships with
its customers, suppliers and others having business relationships
with it and to keep available the services of its present
employees.
(d) Afford to Buyer and Buyer's authorized agents or
representatives full access during normal business hours to the
Leased Real Property and to all of the Assets, and will furnish
to Buyer or its agents or representatives such documents and
other information concerning the Business as Buyer may reasonably
request. No investigation or inquiry made by Buyer pursuant to
this Agreement shall in any way affect or lessen the
representations and warranties of Shirazi and General Partner
herein, their survival after the Closing Date or the indemnity
contained in Section 11 hereof.
(e) Use their best efforts to obtain the Required Consents
and to cause all of the conditions to the Closing to be
fulfilled.
(f) Execute the following: (i) Radiology Services Agreement
by and between Parvez H. Shirazi, M.D., S.C. and DIC in
substantially the form attached hereto as Exhibit E ("Radiology
---------
Services Agreement"); (ii) Medical Administrative Services
-------------------
Agreement by and among Parvez H. Shirazi, M.D., S.C. and each
Partnership in substantially the form attached hereto as Exhibit
F ("Medical Administrative Services Agreement"); (iii) Tenant
-------------------------------------------
Estoppels by and between the landlord of each parcel of Leased
Real Property (each a "Landlord"), other than the parcel of
Leased Real Property at 9301 Golf Road, Des Plaines, Illinois,
and the applicable Partnership in substantially the form attached
hereto as Exhibit G ("Tenant Estoppels"); and (iv) such other
----------------
instruments and documents as Buyer's counsel may reasonably
request.
(g) Avoid taking any action that would make any of the
representations and warranties of Shirazi and General Partner
contained herein untrue or misleading when made or as of the
Closing Date.
7. Conditions to Obligations of Buyer. The obligation of Buyer
-----------------------------------
to close the transactions contemplated by this Agreement is subject to
the satisfaction by Shirazi and General Partner at or before the
Closing of each of the following conditions:
(a) Representations and Warranties. All representations
------------------------------
and warranties of Shirazi and General Partner made in or pursuant
to this Agreement shall be true and correct at and as of the
Closing Date, as if made at and as of the Closing Date.
(b) Performance. Shirazi and General Partner shall have
-----------
performed and complied with all covenants and conditions required
under this Agreement to be performed or complied with by them at
or prior to the Closing.
(c) Condition of Assets. The tangible Assets on the
--------------------
Closing Date shall be in the same condition as on the Balance
Sheets Date, reasonable wear and tear excepted,
-19-
<PAGE>
and no material portion of the Assets shall have been damaged,
destroyed or rendered unusable, whether or not such occurrence
shall have been covered by insurance.
(d) Delivery of Closing Documents. Shirazi and General
--------------------------------
Partner shall have delivered all documents required to be
delivered by them at the Closing pursuant to Section 10 hereof.
(e) Absence of Proceedings. No claim, suit, action or other
-----------------------
proceeding shall be pending or threatened before any court or
Governmental Authority seeking to restrain, prohibit or obtain
damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby and no
investigation or inquiry shall have been made or commenced by any
Governmental Authority in connection with this Agreement or such
transactions.
(f) Approval of Buyer's Counsel. All actions, instruments
----------------------------
and documents reasonably required to carry out this Agreement or
incidental hereto, and all other related legal matters, shall
have been approved as to form and substance by Katten Muchin &
Zavis, counsel for Buyer, and said counsel shall have received
all documents, certificates and other papers reasonably requested
by it in connection therewith.
(g) No Adverse Change. There shall not have been any material
-----------------
adverse change, or any discovery of a condition or any occurrence
of any event which, in the reasonable determination of Buyer, has
resulted or is likely to result in a material adverse change in
the Business or the Assets.
(h) Consents. Shirazi and General Partner shall have
--------
obtained and delivered to Buyer the Required Consents.
(i) Shirazi's and General Partner's Opinion of Counsel.
-----------------------------------------------------
Buyer shall have received an opinion of Maynard Jaffe, Esq.,
counsel for Shirazi and General Partner, addressed to Buyer and
dated as of the Closing Date, to the effect set forth in Exhibit
H attached hereto.
(j) UCC Lien Searches. Each Partnership shall have
-------------------
conducted and obtained UCC, tax lien and judgment searches dated
no more than 10 days prior to the Closing Date showing that there
are no financing statements, judgments, taxes or other Liens
outstanding against such Partnership or any of the Assets, other
than the Existing Liens.
8. Conditions to Obligations of Shirazi and General Partner.
-----------------------------------------------------------
The obligation of Shirazi and General Partner to close the
transactions contemplated by this Agreement is subject to the
satisfaction by Buyer at or before the Closing of each of the
following conditions:
(a) Representations and Warranties. All representations
------------------------------
and warranties of Buyer made in or pursuant to this Agreement
shall be true and correct at and as of the Closing Date, as if
made at and as of the Closing Date.
-20-
<PAGE>
(b) Performance. Buyer shall have performed and complied with all
-----------
covenants and conditions required of Buyer under this Agreement to be
performed or complied with by it at or prior to the Closing.
(c) Consents. The Required Consents shall have been duly obtained.
--------
(d) Delivery of Closing Documents. Buyer shall have delivered all
-----------------------------
documents required to be delivered by it at the Closing pursuant to
Section 10 hereof.
(e) Absence of Proceedings. No claim, suit, action or other
-----------------------
proceeding shall be pending or threatened before any court or
governmental agency seeking to restrain, prohibit or obtain damages or
other relief in connection with this Agreement or the consummation of
the transactions contemplated hereby and no investigation or inquiry
shall have been made or commenced by any governmental agency in
connection with this Agreement or such transactions.
(f) Approval by Shirazi's and General Partner's Counsel. All
----------------------------------------------------
actions, proceedings, instruments, and documents reasonably required
to carry out this Agreement or incidental hereto, and all other
related legal matters, shall have been approved as to form and
substance by Maynard Jaffe, Esq., counsel for Shirazi and General
Partner, and said counsel shall have received all documents,
certificates and other papers reasonably requested by it in connection
therewith.
(g) Opinion of Buyer's Counsel. Shirazi and General Partner shall
--------------------------
have received an opinion of Katten Muchin & Zavis, counsel for Buyer,
addressed to Shirazi and General Partner and dated as of the Closing
Date, to the effect set forth in Exhibit I attached hereto.
9. Closing. The closing of the transactions contemplated by
-------
this Agreement (the "Closing") shall take place concurrently with the
-------
execution and delivery of this Agreement, or at such other time or
date to which the parties may agree in writing (the "Closing Date"),
-------------
effective as of the close of business on January 1, 1995 (the
"Effective Date"), and shall be conducted at the offices of Katten
---------------
Muchin & Zavis.
10. Deliveries at Closing: Further Assurances.
------------------------------------------
(a) At the Closing, Shirazi and/or General Partner shall deliver
to Buyer the following:
(i) Assignment of Purchased Interest. An Assignment of the
----------------------------------
Purchased Interests, duly executed by Seller.
(ii) Restated Partnership Agreements. The Restated Partnership
--------------------------------
Agreements, duly executed by Shirazi and General Partner.
(iii) Consents. Copies of the Required Consents.
--------
-21-
<PAGE>
(iv) Resolutions. Resolutions adopted by the Board of Directors of
-----------
General Partner approving the transactions contemplated by this
Agreement, certified by a duly authorized officer as having been
adopted and in full force and effect as of the Closing Date.
(v) Opinion of Counsel. An opinion of Maynard Jaffe, Esq., counsel
------------------
for Shirazi and General Partner in substantially the form attached
hereto as Exhibit H.
(vi) Seller's Certificate. A certificate signed by Shirazi and an
--------------------
executive officer of General Partner and dated the Closing Date,
certifying that the conditions contained in Sections 7(a) and 7(b)
have been satisfied.
(vii) Purchase Share Letter Agreement. The Purchase Share Letter
--------------------------------
Agreement executed by Shirazi.
(viii) Radiology Services Agreement. The Radiology Services
----------------------------
Agreement executed by Shirazi and DIC.
(ix) Medical Administrative Services Agreement. The Medical
---------------------------------------------
Administrative Services Agreement executed by Shirazi and each
Partnership.
(xi) Tenant Estoppels. The Tenant Estoppels executed by each
-----------------
Landlord and the applicable Partnership.
(xii) Further Instruments. Such other instruments and documents as
-------------------
Buyer's counsel may reasonably request.
(b) At the Closing, Buyer shall deliver to Shirazi and/or General
Partner the following:
(i) Purchase Consideration. The Cash Price, payable by cashier's
----------------------
or certified check or by wire transfer of immediately available funds
and the Purchase Shares.
(ii) Restated Partnership Agreements. The Restated Partnership
-------------------------------
Agreements, duly executed by Buyer.
(iii) Resolutions. Resolutions adopted by the Board of Directors
-----------
of Buyer approving the transactions contemplated by this Agreement,
certified by a duly authorized officer as having been adopted and in
full force and effect as of the Closing Date.
(iv) Opinion of Counsel. An opinion of Katten Muchin & Zavis,
-------------------
counsel for Buyer in substantially the form attached hereto as Exhibit
I.
-22-
<PAGE>
(v) Buyer's Certificate. A certificate of Buyer, signed by an
-------------------
executive officer of Buyer and dated as of the Closing Date,
certifying that the conditions contained in Sections 8(a) and 8(b)
have been satisfied.
(vi) Management Services Agreement. The Management Services
-------------------------------
Agreement by and between each Partnership and NMR, in substantially
the form attached hereto as Exhibit J ("Management Services
--------------------
Agreement") executed by each Partnership and NMR.
---------
(vii) Radiology Services Agreement. The Radiology Services
----------------------------
Agreement executed by DIC.
(viii) Medical Administrative Services Agreement. The Medical
--------------------------------------------
Administrative Services Agreement executed by each Partnership.
(ix) Tenant Estoppels. The Tenant Estoppels executed by each
-----------------
Landlord and the applicable Partnership.
(x) Further Instruments. Such other instruments and documents as
-------------------
Seller's counsel may reasonably request.
(c) The parties hereto shall at the Closing and from time to
time thereafter, upon the request of the remaining parties, do,
execute, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, all such further acts, assignments,
transfers, powers of attorney, assurances and instruments as the
remaining parties may reasonably request to consummate the
transactions contemplated by the Agreement and to fulfill the
intentions of the parties hereunder.
11. Indemnification.
---------------
(a) Each of Shirazi and General Partner, jointly and severally,
hereby agrees to indemnify, defend (with counsel reasonably acceptable
to Buyer) and hold forever harmless Buyer, each of Buyer's affiliates,
the shareholders, directors, officers, partners, employees, agents of
Buyer and Buyer's affiliates, Buyer's employee benefit plans, plan
affiliates and the fiduciaries of such plans and the Partnerships
(collectively, "Buyer Indemnitees") from and against any liability,
-----------------
loss, cost, damage or expense (including reasonable attorneys' fees
and fees or costs incurred in investigating, preparing, defending
against or prosecuting any litigation, claim, action, suit, proceeding
or demand), incurred or suffered by any of them, directly or
indirectly, by reason of:
(i) Any breach of any representation, warranty, covenant or
agreement contained herein or in any document or instrument
delivered to Buyer by any of Shirazi and General Partner
hereunder, or any action, demand or claim by any third party
against or affecting any Buyer Indemnitee which, if successful,
would give rise to a breach of any such representation or
warranty; or
-23-
<PAGE>
(ii) The assertion against Buyer, either Partnership or any
of their partners of any debt, liability, claim or obligation
arising or accruing on or prior to the Closing Date which is
required to be disclosed in this Agreement, and is not listed on
Schedule 4(w) or disclosed in any other Schedule to this
Agreement;
or
(iii) Any claim by Previous DIC Partners and/or Previous Golf
Partners against the Partnerships or Buyer or any claim by
Remaining DIC Partners and/or Remaining Golf Partners arising or
accruing on or prior to the Closing Date; or
(iv) Any fact, event, condition or omission existing or
threatened on or prior to the Closing Date (whether or not
disclosed in any Schedule to this Agreement) pertaining to any
past or present facility, property, operation or activity of the
Partnerships (or any of their predecessors or affiliates), which
at any time whether before or after the Closing gives rise to any
investigation, claim or liability relating to health, safety or
the protection of the environment.
(b) Buyer hereby agrees to indemnify, defend (with counsel
reasonably acceptable to Shirazi) and hold Shirazi, General Partner
and their affiliates, and the directors, officers, employees and
agents of General Partner (collectively, "Seller's Indemnitees") free
---------------------
and harmless from and against any liability, loss, cost, damage or
expense (including reasonable attorneys' fees and fees or costs
incurred in investigating, preparing, defending against or prosecuting
any litigation, claim, action, suit, proceeding or demand), incurred
or suffered by any of them, directly or indirectly, by reason of any
breach of any representation, warranty, covenant or agreement of Buyer
contained herein or in any document or instrument delivered to Shirazi
and/or General Partner by Buyer hereunder, or any action, demand or
claim by any third party against or affecting any Seller's Indemnitee
which, if successful, would give rise to a breach of any such
representation or warranty.
(c) If any claim (herein called a "Third-Party Claim") is
------------------
hereafter made by a third party which might result in a right to
indemnification hereunder, the party seeking such indemnification (the
"Indemnitee") may make a demand for indemnification hereunder by
----------
giving written notice to the party against whom indemnification is
sought (the "Indemnitor") stating in reasonable detail the nature of
----------
the Third-Party Claim so far as known to the Indemnitee. Such notice
shall be given within a reasonable time after the Indemnitee shall
become aware of the Third-Party Claim, adequate to permit timely
defensive action; provided, however, that the failure to give timely
notice shall not relieve the Indemnitor of its obligation to indemnify
the Indemnitee in respect of the Third-Party Claim unless the
Indemnitee is materially prejudiced thereby. The Indemnitee shall
permit the Indemnitor to assume the defense of any such Third-Party
Claim or any litigation resulting therefrom (and to prosecute by way
of counterclaim or third-party complaint any claim against such third-
party arising out of or relating to such Third-Party Claim), provided
that counsel selected to conduct the defense of such Third-Party Claim
or litigation shall be reasonably satisfactory to the Indemnitee.
After such assumption by the defense of the Indemnitor, the Indemnitor
shall not be liable under this section for any legal or other expenses
subsequently incurred by the Indemnitee in
-24-
<PAGE>
connection with such defense, other than reasonable costs of
investigation, but the Indemnitee may participate in such defense
at its expense. If the Indemnitor fails to defend a Third-Party
Claim promptly or with diligence, then the Indemnitee may defend
such claim at the expense of the Indemnitor. The Indemnitor shall
not, except with the written consent of the Indemnitee, consent
to entry of any judgment or enter into any settlement in respect
of such Third-Party Claim or litigation which does not include as
an unconditional term thereof the giving by the claimant or
plaintiff to the Indemnitee of an unconditional release from all
liability in respect of such Third-Party Claim or litigation. The
Indemnitor shall not settle any such Third-Party Claim or
litigation being defended by the Indemnitor without the prior
written consent of the Indemnitee, which consent will not be
unreasonably withheld.
(d) Notwithstanding anything to the contrary contained in
Section 11 (c), if any Third-Party Claim with respect to an
Indemnitee could involve criminal liability on the part of such
Indemnitee or civil liability on the part of such Indemnitee in
excess of $25,000, then (i) such Indemnitee shall have the sole
right to defend such Third-Party Claim or any litigation
resulting therefrom, at the expense of the Indemnitor, (ii) the
Indemnitor may participate in the defense thereof at its own
expense, and (iii) if such Third-Party Claim involves no criminal
liability, no settlement of any such Third-Party Claim or
litigation shall be made without the express consent of the
Indemnitor, which consent will not be unreasonably withheld,
provided that if the Indemnitor declines such consent, Indemnitee
shall provide security reasonably satisfactory to the Indemnitor
for the amount of the Third-Party Claim.
(e) Notwithstanding anything herein to the contrary, the
aggregate indemnification obligations of Seller under this
Agreement shall not exceed $1,550,000.
12. Acknowledgment Regarding Holy Farm Radiologists. Buyer and
-------------------------------------------------
Seller acknowledge that they will attempt to accommodate Holy Family
Radiologists ("HFR") as a potential future equity investor in the
Partnerships, subject to the agreement that future equity
participation by HFR, if any, shall not cause Buyer to forfeit its
right to be the sole general partner of Golf and/or DIC or own less
than 51% of the partnership interests in either Golf or DIC.
13. Agreement Regarding Fees Owed Shirazi and General Partner.
-------------------------------------------------------------
Buyer and Seller acknowledge and agree that DIC owes Shirazi $75,000
for past services rendered ("DIC Debt") and that Golf owes General
Partner $50,000 for past services rendered ("Golf Debt") and that from
and after the Closing Date the DIC Debt and Golf Debt shall be paid to
Shirazi and General Partner, respectively, over a two (2) year period
in equal monthly installments without interest; provided, however,
that in the event that Buyer, as general partner of the Partnerships,
makes loans to either of the Partnerships ("Buyer Loans"), then (a)
payments on the Golf Debt and the DIC Debt may be deferred until
repayments are made on the Buyer Loans, (b) no repayments may be made
on the Buyer Loans unless repayments are concurrently made on the
deferred portion of the DIC Debt and the Golf Debt in proportion to
the respective outstanding balances of the Buyer Debt, on the one
hand, and the deferred portion of the DIC Debt and the Golf Debt, on
the other hand, and (c) any repayment of the Golf Debt or the DIC Debt
which
-25 -
<PAGE>
is deferred past such two-year period shall bear interest beginning at
the end of such two-year period at the same rate of interest as is
being paid on the Buyer Loans.
14. Shirazi Guaranty of Loan. From and after the Closing Date,
--------------------------
Buyer hereby agrees to indemnify, defend (with counsel reasonably
acceptable to Shirazi) and hold Shirazi free and harmless from and
against any liability, loss, cost, damage or expense (including
reasonable attorneys' fees and fees or costs incurred in
investigating, preparing, defending against or prosecuting any
litigation, claim, action, suit, proceeding or demand), incurred or
suffered by him, directly or indirectly, arising out of or
attributable to Shirazi's Guaranty of the Commercial National Bank of
Berwyn loans to the Partnerships (the "Loans") and to use its
reasonable efforts to cause such Loans to be repaid or refinanced and
such Guaranty to be terminated within ten (10) days of the Closing
Date.
15. Right of First Refusal. In conjunction with the acquisition of
----------------------
the Purchased Interests, Shirazi covenants and agrees that he will
provide buyer with written notice of his desire to participate in a
diagnostic imaging venture ("Venture") utilizing positron emission
tomography (PET Scanning). Such notice to Buyer shall reasonably set
forth the nature and proposed terms and conditions of the Venture.
Such proposed terms and conditions shall, at a minimum, provide for
Shirazi to render or coordinate radiology services to such Venture and
for Buyer to own equity in the Venture which is commensurate with
Buyer's level of assumption of any equipment related financing and
subject to a minimum equity participation of seventy-five percent (75
%) by Buyer. After receipt of such notice to Buyer, Buyer agrees to
perform such tasks as it deems necessary to investigate the
feasibility of such Venture and to complete such investigation within
sixty (60) days of receipt of the foregoing written notice. Subsequent
to the completion of such investigation, and any negotiations between
Buyer and Shirazi, Buyer shall provide Shirazi with written notice of
Buyer's intent to participate or not participate in such Venture.
Shirazi will not participate in any Venture without complying with the
terms of this section. If, after such compliance, Buyer determines not
to participate in the Venture in question, Shirazi may participate in
such Venture and such participation shall not be deemed a violation of
the terms of the non-competition provisions contained in the Radiology
Services Agreement or the Medical Administrative Services Agreement.
16. Survival. The representations and warranties of the
-------
parties herein shall survive the Closing.
17. Expenses. Each party hereto shall bear its own expenses,
--------
including the fees of any attorneys, accountants or others
engaged by such party, in connection with this Agreement and the
transactions contemplated hereby.
18. Notices. All notices, requests, demands and other
-------
communications made hereunder shall be in writing and shall be
deemed to have been duly given when delivered by overnight
courier or personally or three days after being sent by certified
mail, postage and certification fees prepaid, return receipt
requested, as follows:
-26-
<PAGE>
If to Shirazi and/or General Partner:
1618 Midwest Club Drive
Oak Brook, Illinois 60521
Attention: Parvez H. Shirazi, M.D.
With a copy to:
1301 West 22nd Street, Suite 807
Oak Brook, Illinois 60521
Attention: Maynard Jaffe, Esq.
If to Buyer:
NMR Of America, Inc.
430 Mountain Avenue
Murray Hill, New Jersey 07974
Attention: Mr. John P. O'Malley
With a copy to:
Katten Muchin & Zavis
525 W. Monroe Street, Suite 1600
Chicago, Illinois 60661-3693
Attention: Robin Heiss, Esq.
or to such other address as may be furnished in writing by either
party to the other party in accordance with this section.
19. Captions. Captions used in this Agreement are for convenience
--------
only and shall not affect the construction or interpretation of any
section or subsection.
20. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original without
production of the others.
21. Schedules and Exhibits; Recitals. All schedules and exhibits
---------------------------------
attached to this Agreement and referred to herein, and the recitals in
this Agreement, are hereby incorporated into and made an integral part
of this Agreement.
22. Invalidity; Severability. In the event any provision or
------------------------
portion of any provision of this Agreement is held invalid or
unenforceable by a court of competent jurisdiction as applied to any
fact or circumstance, the remaining provisions and portions of this
Agreement and the same provision as applied to any other fact or
circumstance shall not be affected or impaired thereby, and shall
remain valid and enforceable.
23. No Third Party Beneficiaries. Any agreement to pay or perform
----------------------------
an obligation contained in this Agreement, express or implied, shall
be only for the benefit of the parties
-27-
<PAGE>
hereto entitled to such payment or performance hereunder and their
respective successors and permitted assigns, and such agreement shall
not inure to the benefit of any other party, it being the intention of
the parties hereto that no one will be deemed a third party
beneficiary of this Agreement.
24. Waiver. No failure of any party to exercise any right or
------
remedy given such party under this Agreement or otherwise available to
such party or to insist upon strict compliance by any other party with
its obligations hereunder, and no custom or practice of the parties in
variance with the terms hereof, shall constitute a waiver of any
party's right to demand exact compliance with the terms hereof, unless
such waiver is set forth in writing and executed by such party.
25. Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the internal laws and judicial decisions
of the State of Illinois, without regard to conflicts of laws
principles.
26. Entire Agreement; Amendments. Except for any other agreements
----------------------------
entered into on the date hereof among the parties hereto, this
Agreement contains the entire agreement and understanding between the
parties hereto relating to the subject matter hereof, and supersedes
all previous written or oral negotiations, commitments and writings
with respect to the subject matter hereof. This Agreement may be
amended only by a written instrument signed by each party hereto.
27. Assignments. No party may assign its rights or delegate
-----------
its obligations hereunder without the consent of the other party;
provided, however, that Buyer may assign its rights and delegate its
obligations to one or more subsidiaries or affiliated entities without
the consent of Seller. Subject to the foregoing, this Agreement shall
inure to the benefit of and be binding upon the parties hereto and
their respective successors and assigns.
28. Construction. As used herein, where appropriate, each gender
------------
noun or pronoun shall be deemed to include all other genders, the
singular shall be deemed to include the plural, and vice versa, and
the use of specific language shall not limit or restrict provisions
using general language. This Agreement has been prepared in
collaboration with counsel for all parties and shall not be strictly
construed against any party.
-28-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed the day and year first above written.
SHIRAZI:
---------
/s/ Parvez H. Shirazi
-----------------------
Parvez H. Shirazi, M.D.
GENERAL PARTNER:
----------------
GOLF WESTERN IMAGING CORPORATION
By: /s/ Parvez H. Shirazi
---------------------
Its: President
---------------------
BUYER:
------
IMAGING NETWORKS, INC.
By: /s/ Joseph Guy Dasti
---------------------
Its: President and CEO
---------------------
-29-
<PAGE>
EXHIBITS AND SCHEDULES
Exhibits
--------
Exhibit A DIC Restated Partnership Agreement
Exhibit B Golf Restated Partnership Agreement
Exhibit C Purchase Shares
Exhibit D Purchase Share Letter Agreement
Exhibit E Radiology Services Agreement
Exhibit F Medical Administrative Services Agreement
Exhibit G Tenant Estoppels
Exhibit H Opinion of Counsel of Maynard Jaffe, Esq.
Exhibit I Opinion of Counsel of Katten Muchin & Zavis
Exhibit J Management Services Agreement
Exhibit 2 Allocation of Purchase Consideration
Exhibit 4(e) Balance Sheets
Schedule
--------
Schedule 1 Previous DIC Partners
Schedule 2 Remaining DIC Partners
Schedule 3 Previous Golf Partners
Schedule 4 Remaining Golf Partners
Schedule 4(a) Organization and Good Standing
Schedule 4(c) Certificate of Limited Partnership and Partnership
Agreement
Schedule 4(d) Fixed Assets
Schedule 4(e) Liens
Schedule 4(f) Financial Statements
Schedule 4(g) Adverse Changes
Schedule 4(h) Contracts
Schedule 4(i) Permits
Schedule 4(j) Required Consents
Schedule 4(l) Litigation
Schedule 4(m) Labor Matters
Schedule 4(n)(i) Employee Benefit Plans
Schedule 4(n)(iii) Unwritten Employee Benefit Plans
Schedule 4(o) Environmental Compliance
Schedule 4(p) Insurance Policies
Schedule 4(r) Employee Salaries
Schedule 4(u) Leased Real Property
Schedule 4(v) Intellectual Property
Schedule 4(w) Other Liabilities
Schedule 4(y) Affiliated Transactions
Schedule 4(aa) Deficiencies
Schedule 4(ad) Related Party Transactions
-30-
EXHIBIT 2 (b)
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This Asset Purchase Agreement (this "Agreement") is made and
entered into on January 5, 1995, by and between Advanced Specialty
Imaging, L.P., an Illinois limited partnership ("Seller"), and Imaging
Networks, Inc., a Delaware corporation ("Purchaser").
WITNESSETH
----------
WHEREAS, Seller operates a magnetic resonance imaging ("MRI")
center in Libertyville, Illinois (the "Center") and provides MRI
services on an outpatient basis; and
WHEREAS, Seller desires to sell and Purchaser desires to
purchase substantially of the Seller's assets used in connection
with its business, wherever located, on the terms and conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises and understandings of the parties hereto set forth
herein, and other good and valuable consideration, the receipt and
sufficiency of such consideration is hereby acknowledged, the
parties hereto hereby agree as set forth in this Agreement.
1. Purchase and Sale of Assets.
----------------------------
A. At the "Closing" (hereinafter defined), Seller shall
sell, transfer and assign to Purchaser all of Seller's right,
title and interest in and to all of Seller's assets, whether real,
personal or mixed, tangible or intangible, used in connection with
Seller's business, wherever located (collectively the "Assets").
The Assets shall include, but shall not be limited to, Seller's
machinery and equipment set forth on Exhibit "A" attached hereto,
Seller's leasehold interest in and to that certain Peterson
Shopping Center, Libertyville, Illinois Lease dated April 1, 1992,
by and between William M. Graham and Michael R. Graham, as
beneficiaries under a Land Trust of which Chicago Title and Trust
Company is Trustee, d/b/a Peterson Properties, as landlord (the
"Landlord"), and Professional Imaging Corporation, as tenant (the
"Shopping Center Lease"), which assignment shall be subject to the
Landlord's prior written consent, leasehold improvements,
inventory, furniture, cash, cash equivalents and accounts
receivable existing as the "Closing Date" (hereinafter defined),
such books and records as are reasonably required by Purchaser to
operate the Center and all manufacturer's warranties, if any,
relating to Seller's equipment or equipment leased by Seller.
B. Seller is selling and Purchaser is purchasing the Assets
"AS IS," "WHERE IS" and "WITH ALL FAULTS," and Seller disclaims
all warranties of every kind, nature and description whatsoever,
express or implied, including, without limitation, the warranties
of merchantability and fitness for any particular purpose as
defined in the Uniform Commercial Code of Illinois.
<PAGE>
2. Purchase Price and Assumption of Liabilities.
---------------------------------------------
A. As and for the purchase price for the Assets, Purchaser
agrees to assume, be liable and pay the "Assumed Liabilities"
(hereinafter defined).
B. The "Assumed Liabilities" shall include (i) all of Seller's
normal and usual operating expenses incurred by Seller within sixty
(60) days prior to the "Closing Date" (hereinafter defined), including,
without limitation, payroll and payroll taxes, but excluding all legal,
accounting and other professional fees; (ii) all of Seller's
liabilities, obligations and debts under the lease agreements and
service contracts set forth on Exhibit "B" attached hereto; (iii)
Seller's indebtedness to Medcon Specialists, Inc. and the claims of
Medcon's subcontractors; and (iv) all of Seller's liabilities,
obligations and debts under the Shopping Center Lease.
C. Purchaser shall prepare or cause to be prepared, at
Purchaser's expense, Seller's compilation report, K-1s and tax filings
for 1994 and 1995.
D. If Purchaser expends more than $50,000.00 for the settlement
of the Assumed Liabilities incurred, accrued or relating to or arising
out of events or circumstances prior to December 31, 1994, or for costs
directly relating thereto, excluding, however, any sums paid by
Purchaser on account of Seller's liabilities to 3M and for a buyout, if
any, of the Shopping Center Lease ("Excess Expenditure"), Purchaser
may, upon providing to Seller written verification for such
expenditures, offset the amount of the Excess Expenditure against any
amounts due to Seller as a Deferred Purchase Price as set forth in
Section 3(A) hereinafter. The parties hereto acknowledge and agree that
the offset by Purchaser of the Excess Expenditure against the Deferred
Purchase Price shall be Purchaser's sole recourse against Seller for
recovery of the Excess Expenditure.
3. Deferred Purchase Price.
------------------------
A. In addition to the purchase price set forth in Section 2
hereinabove, Purchaser shall pay Seller the amount set forth opposite
the total amount of Billed Revenues by Purchaser for services performed
at the Center during the period January 2, 1995 through December 31,
1995 (the "Period"). Such consideration, if any (the "Deferred Purchase
Price"), shall be paid to Seller in cash on December 31, 1995 or as
soon as practicable thereafter.
Billed Revenues(1) Consideration
---------------- -------------
$1,806,000 or more $300,000
$1,580,000 to $1,805,999 $100,000
$1,354,000 to $1,579,999 $50,000
$ 0 to $1,353,999 $ -0-
- -----------------------
(1) Based upon 258 work days during the Period and $875 per MRI procedure.
If the total number of work days or the cost per MRI procedure changes
significantly during the Period, the parties acknowledge and agree that
they shall negotiate in good faith revised threshold amounts of Billed
Revenues to be used in determining the additional consideration to be
paid by Purchaser to Seller as a Deferred Purchase Price.
2
<PAGE>
B. "Billed Revenues" shall, for purposes herein, mean the
full amount of charges billed (which charges shall not be adjusted
to reflect bad debt, contractual allowances, self pay write downs,
indigent care reserves or any other similar deductions), whether
or not collected from patients or payors, and shall further
include all charges relating to patient services rendered during
the Period, whether or not Purchaser actually billed for such
services in the Period.
C. "Net Revenues" shall, for purposes herein, mean the net
amount of Billed Revenues adjusted to reflect contractual
allowances, self pay write downs, indigent care reserves or any
other similar deductions for Billed Revenues and shall be
determined on an accrual basis rather than a cash basis. If the
Center's Net Revenues are less than 85% of the applicable Billed
Revenues amount during the period, the Purchaser is relieved from
its obligation to pay the consideration set forth opposite such
level of Billed Revenues.
D. The parties hereto hereby acknowledge and agree that
Seller shall not refer patients to the Center for services which
will be reimbursed by the federal Medicare program or any
federally funded State health care programs, including the
Medicaid program. No payments made to Seller under this Agreement
shall be in return for the referral of Medicare, Medicaid or other
State health care program patients.
E. If, during any consecutive forty (40) work days during
the Period, the Center averages less than five (5) MRI procedures
per day, Purchaser shall have the option to cease operations at
the Center; provided, however, that such cessation of operations
at the Center shall not, in any respect, relieve Purchaser from:
(i) its obligation to pay the Assumed Liabilities; and/or (ii) its
obligation to pay Seller additional consideration as a Deferred
Purchase Price in accordance with Section 3(A) hereinabove,
provided the Center has achieved the applicable levels of Billed
Revenues and Net Revenues.
F. Purchaser shall provide Seller and its authorized agents
with access to Purchaser's books and records in order to allow
Seller to review, among other things, the calculations relating to
the Deferred Purchase Price, the Billed Revenues, the Net Revenues
and Purchaser's decision, if any, to cease operations at the
Center as set forth in Section 3(E) hereinabove.
4. Closing. The closing of the transaction contemplated by
-------
this Agreement (the "Closing") shall occur on January 6, 1995 at
2:00 p.m. (the "Closing Date") at the offices of Katten, Muchin &
Zavis, Chicago, Illinois or on such other date and at such other
place as the parties may agree in writing. The Closing shall be
effective as of January 1, 1995.
5. Seller's Closing Documents. At the Closing, Seller shall
--------------------------
deliver to Purchaser the following documents, in form and
substance acceptable to Purchaser:
A. A Bill of Sale in the form attached hereto as Exhibit "C";
B. Subject to the Landlord's written consent, an Assignment of
Lease in the form attached hereto as Exhibit "D";
3
<PAGE>
C. An opinion of counsel from Seller's attorneys;
D. An estoppel certificate from the landlord for the Shopping
Center Lease;
E. A Release in the form attached hereto as Exhibit "E"; and
F. Such other documents, instruments and agreements as Purchaser
may reasonably request for the purposes of closing the transactions
contemplated by this Agreement and transferring the Assets to
Purchaser.
6. Purchaser's Closing Documents. At the Closing,
-------------------------------
Purchaser shall deliver to Seller the following documents, in form
and substance acceptable to Seller:
A. A General Release in the form attached hereto as Exhibit "F";
B. A Stipulation of Dismissal With Prejudice of Case No. 94
L 1274, pending in the Circuit Court of the Nineteenth Judicial
Court, Lake County, Illinois;
C. An opinion of counsel from Purchaser's attorneys; and
D. Such other documents, instruments and agreements as
Seller may reasonably request for the purposes of closing the
transactions contemplated by this Agreement.
7. Sales and Transfer Taxes. All applicable sales,
--------------------------
transfer, documentary, use and filing taxes and fees that may be
levied on the sale, transfer and assignment to Purchaser of the
Assets, whether levied on Seller or Purchaser, shall be paid for
and shall be the sole responsibility of Purchaser. Purchaser shall
indemnify, defend and hold Seller and its partners harmless from
and against any such taxes and fees levied on Seller in connection
with the sale, transfer and assignment to Purchaser of the Assets.
8. Seller's Representations and Warranties. Seller hereby
---------------------------------------
represents, warrants and covenants unto Purchaser as follows:
A. Seller is a limited partnership, duly organized, validly
existing and in good standing under the laws of the State of
Illinois.
B. The Agreement is duly authorized, executed and delivered
by Seller and constitutes a legal, valid and binding obligation of
Seller, enforceable in accordance with its terms, subject to
Seller obtaining written consents from a requisite number of its
limited partners. Seller and its general partner are duly
authorized to execute all necessary documents pursuant to this
Agreement for the sale of the Assets to Purchaser.
C. The execution, delivery and performance by Seller of
this Agreement, and any documents, instruments and agreements
which may from time to time hereafter be executed
4
<PAGE>
and delivered by Seller to Purchaser, shall not constitute a
breach of any provision of applicable law or contained in any
agreement to which Seller is a party, provided that Seller obtains
written consents from a requisite number of its limited partners.
D. Seller has good and marketable right, title and interest
in and to the Assets, subject to the superior rights, if any, of
any of Seller's equipment lessors or contract suppliers.
9. Purchaser's Representations and Warranties. Purchaser
------------------------------------------
hereby represents, warrants and covenants unto Seller as follows:
A. Purchaser is a Delaware corporation, duly organized,
validly existing and in good standing under the laws of the State
of Delaware and authorized to do business in the State of
Illinois.
B. This Agreement is duly authorized, executed and
delivered by Purchaser and constitutes a legal, valid and binding
obligation of Purchaser, enforceable in accordance with its terms.
C. The execution, delivery and performance by Purchaser of
this Agreement, and any documents, instruments and agreements
which may from time to time hereafter be executed and delivered
by Purchaser to Seller, shall not constitute a breach of any
provision of applicable law or contained in any agreement to which
Purchaser is a party.
10. Covenant Not To Sue. Purchaser, on behalf of itself and
--------------------
its partners, agents, representatives, attorneys, successors and
assigns, hereby covenants not to sue Seller and its partners,
agents, representatives, attorneys, successors and assigns for any
amounts owed by Seller under that certain Master Lease Agreement
dated June 25, 1992, by and between U.S. Concord, Inc., as lessor,
and Seller, as lessee, and all schedules, riders, addendums,
amendments, modifications, substitutions and renewals thereof.
11. Brokers. The parties hereto hereby represent, warrant and
-------
covenant unto each other that no agent, broker or other similar
party was used by either party hereto and no person or entity is
entitled to a commission or fee as a result of or in connection
with the introduction of the parties, the preparation and
negotiation of this Agreement or the consummation of the
transactions contemplated herein. The parties agree to indemnify,
defend and hold each other harmless from and against any claim for
any commission or fee demanded by any person or entity.
12. Covenant Not to Compete.
------------------------
A. For a period of thirty-six (36) months from and after
the Closing Date, or for such lesser time as shall be determined
reasonable by a court of competent jurisdiction, Seller shall
cause each of the shareholders of Seller's general partner,
Professional Imaging Corporation, an Illinois corporation, to not
directly or indirectly own, manage, operate, join, be employed by,
provide services for, control or participate in the ownership,
management, operation,
5
<PAGE>
control or financing of any MRI facility located within a twenty (20)
mile radius of the Center, or such lesser area as may be determined
reasonable by a court of competent jurisdiction, which is competitive
with the business operations of the Center (collectively the "Covenant
Not To Compete").
B. The Covenant Not To Compete shall not apply to and shall not
prevent any of the Shareholders of the Seller's general partner from
continuing to own their respective limited partnership interests in any
MRI facility which existed as of the Closing Date. The Covenant Not To
Compete shall only prevent any of the shareholders of Seller's general
partner from acquiring or obtaining any interests in an MRI facility
subsequent to the Closing Date.
C. If, at any time prior to the expiration of the Covenant Not
To Compete, Purchaser ceases operations at the Center, the Covenant Not
To Compete shall immediately become void and of no further force and
effect.
13. Indemnifications and Compromise of Assumed Liabilities.
-------------------------------------------------------
A. Purchaser shall indemnify, defend and hold Seller and its
partners harmless from and against any and all costs, damages, awards,
causes of action, losses and fees, including, but not limited to,
attorneys' fees, arising out of or in connection with (a) Assumed
Liabilities; (b) that certain Master Lease Agreement dated June 25,
1992, by and between U.S. Concord, Inc. and Seller, together with all
schedules, riders, addendums, amendments, modifications,
substitutions, and renewals thereof; and (c) any property damage,
bodily injury, death or any other liability or damage arising
subsequent to Closing and incurred as a result of the use and
possession by Purchaser of any of the Assets.
B. Seller shall indemnify, defend and hold Purchaser and
its partners harmless from and against all costs, damages, awards,
causes of action, losses and fees, including, but not limited to,
attorney's fees, arising out of or in connection with any property
damage, bodily injury, death or any other liability or damage
arising prior to Closing and incurred as a result of the use and
possession by Seller or any of the Assets.
C. Purchaser shall not compromise or settle any of the
Assumed Liabilities for less than the full amount claimed to be
due to such creditor of Seller unless (i) prior thereto, Purchaser
has obtained from such creditor a written release of Seller, its
partners, officers and directors; or (ii) Purchaser has obtained
Seller's prior written consent to such compromise or settlement.
D. On or before the fifteenth (15th) day of each month
following the Closing Date, Purchaser shall provide Seller with a
written reconciliation of the status of the Assumed Liabilities
for the previous month. Upon Seller's request, Purchaser shall
provide Seller with verification of the status of the Assumed
Liabilities, as set forth in the monthly reconciliation. When all
of the Assumed Liabilities have been satisfied by Purchaser,
Purchaser shall provide Seller with a notice stating that all the
Assumed Liabilities have been satisfied and shall provide Seller
with verification thereof.
6
<PAGE>
14. Notice. Any and all notices, demands, requests, consents,
------
designations, waivers and other communications required or desired
hereunder shall be in writing and shall be deemed effective upon
personal delivery, upon receipted delivery by Federal Express or
another overnight carrier, or three (3) days after mailing if mailed by
certified mail, return receipt requested, to Seller or Purchaser at the
following address or such other address as Seller or Purchaser may
specify:
If to Seller, then to:
Advanced Specialty Imaging, L.P.
105 North Greenleaf
Gurnee, Illinois 60031
Attention: Thomas E. Baier, M.D.
With a copy to:
R. Scott Alsterda, Esq.
Coffield, Ungaretti & Harris
3500 Three First National Plaza
Chicago, Illinois 60602
If to Purchaser, then to:
Imaging Networks, Inc.
c/o NMR of America, Inc.
430 Mountain Avenue
Murray Hill, New Jersey 07974-2732
Attention: John P. O'Malley, III
With a copy to:
Thomas J. McFadden, Esq.
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661
15. Miscellaneous.
-------------
A. This Agreement shall be interpreted, construed and
governed by and under the laws of the State of Illinois.
B. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be valid and enforceable
under applicable law, but if any provision of this
7
<PAGE>
Agreement is held to be invalid or unenforceable by a court of
competent jurisdiction, such provision shall be severed herefrom and
such invalidity or unenforceability shall not affect any other
provision of this Agreement, the balance of which shall remain in and
have its intended full force and effect. Provided, however, if such
provision may be modified so as to be valid and enforceable as a matter
of law, such provision shall be modified so as to be valid and
enforceable to the maximum extent permitted by law.
C. The paragraph headings contained in this Agreement are solely
for the purpose of reference, are not part of the Agreement between
Seller and Purchaser with regard to the subject matter hereof and shall
not in any way affect the meaning or interpretation of this Agreement
or any paragraph.
D. This Agreement shall be binding on an inure to the benefit of
Seller's and Purchaser's respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first set forth above.
ADVANCED SPECIALTY IMAGING, L.P.,
an Illinois limited partnership
By: Professional Imaging Corporation, an
Illinois corporation, its General Partner
By: /s/ Thomas E. Baier, M.D.
-----------------------------------
Thomas E. Baier, M.D., President
IMAGING NETWORKS, INC., a Delaware
corporation,
By: /s/ Joseph Guy Dasti
-----------------------------------
Joseph Guy Dasti, President and CEO
8
<PAGE>
EXHIBIT "A" TO ASSET PURCHASE AGREEMENT DATED JANUARY 5, 1995, BY AND
BETWEEN ADVANCED SPECIALTY IMAGING, L.P., AN ILLINOIS LIMITED PARTNERSHIP,
AND IMAGING NETWORKS, INC., A DELAWARE CORPORATION
--------------------------------------------------
EQUIPMENT OWNED BY ADVANCED SPECIALTY IMAGING
---------------------------------------------
COMPUTER EQUIPMENT
Dalcon
COMPUTER PRINTERS (4)
Solution Systems, Inc.
MOTORIZED VIEWER
Quality X-Ray
X-RAY EQUIPMENT
L & L X-Ray
MRI MUSIC SYSTEM
Pneusound
GURNEY & WHEELCHAIR
GE Medical Systems
REFRIGERATOR
ABT TV & Appliance
COPIER
Cannon
TELEVISION (2) & MICROWAVE
Fretter Superstores
OFFICE FURNISHINGS
Nelco Interiors
EQUIPMENT LEASED BY ADVANCED SPECIALTY IMAGING
----------------------------------------------
TELEPHONE SYSTEMS MOBILE PAGERS
AT&T Credit Corp. Ameritech
TRANSCRIPTION SYSTEM POSTAGE EQUIPMENT
Pitney Bowes Pitney Bowes. D. President
<PAGE>
EXHIBIT "B" TO ASSET PURCHASE AGREEMENT DATED JANUARY 5, 1995, BY AND
BETWEEN ADVANCED SPECIALTY IMAGING, L.P., AN ILLINOIS LIMITED PARTNERSHIP,
AND IMAGING NETWORKS, INC., A DELAWARE CORPORATION
--------------------------------------------------
1. Pitney Bowes Credit Corp.
201 Merritt Seven
P.O. Box 5151
Norwalk, Connecticut 06856
Dictaphone Lease
2. AT&T Credit Corp.
P.O. Box 827
Parsippany, New Jersey 07054
3. AT&T Lake County 02120
1842 Centre Point Drive
Naperville, Illinois 60563
Telephone Maintenance
4. Pitney Bowes
47 Park Place
Appleton, Wisconsin 54915
Postage Equipment Maintenance
5. Pitney Bowes Credit Corp.
P.O. Box 5151
Norwalk, Connecticut 06856
Postage Equipment Rental
6. Peterson Properties
c/o Mike Graham P.O. Box U
Libertyville, Illinois 60048
7. 3M Medical Imaging Systems Division
3M Imaging Systems Group
3M Center Bldg. 223-2S-03
St. Paul, MN 55144-1000
8. Philips Medical Systems
P.O. Box 95914
Chicago, Illinois 60694
Service Contract for MRI Equipment
<PAGE>
9. Quality X Rays
P.O. Box 284
South Beloit, Illinois 61080
X-Ray Film Supplier
10. Ameritech Paging
P.O. Box 0076
Cincinnati, Ohio 45274
Pager Rental
11. General Telecommunications
69 West Washington Street
Chicago, Illinois 60304
Answering Service
12. Automatic Data Processing
7350 West Lawrence Avenue
Harwood Heights, Illinois 60656
Payroll Processing
13. R.P.C. Service, Inc.
835 West Higgins
Schaumburg, Illinois 60195
Cleaning Service
14. Unitog Rental Service
1050 Villa Avenue
Villa Park, Illinois 60181
Door Mat Service
15. Anderson Pest Control
219 West Diversey
Elmhurst, Illinois 60126
Exterminator
16. Hinkley & Schmitt
6055 South Harlem Avenue
Chicago, Illinois 60638
Coffee/Water Supply
17. Ken Houseman
1771 Yale
Mundelein, Illinois 60060
Management Consulting
<PAGE>
18. U.S. Concord, Inc.
40 Richards Avenue
One Norwalk West
Norwalk, CT 06856
MRI Lease
<PAGE>
BILL OF SALE
------------
In consideration of the assumption by Imaging Networks, Inc., a
Delaware corporation ("Purchaser"), of certain liabilities, debts and
obligations of Advanced Specialty Imaging, L.P., an Illinois limited
partnership ("Seller"), Purchaser's payment to Seller of such
additional consideration on December 31, 1995, both pursuant to that
certain Asset Purchase Agreement of even date herewith by and between
Purchaser and Seller (the "Agreement"), and such other good and
valuable consideration, the receipt and sufficiency of such
consideration is hereby acknowledged, Seller hereby sells, assigns and
transfers to Purchaser all of Seller's right, title and interest in and
to the "Assets," as defined in the Agreement.
Seller is selling and Purchaser is purchasing the Assets "AS IS",
"WHERE IS" and "WITH ALL FAULTS," and Seller hereby disclaims all
warranties of every kind, nature and description whatsoever, express or
implied, including, without limitation, the warranties of
merchantability and fitness for any particular purpose as defined in
the Uniform Commercial Code of Illinois.
Dated: January 5, 1995
ADVANCED SPECIALTY IMAGING, L.P.,
an Illinois limited partnership
By: Professional Imaging Corporation,
an Illinois corporation, its
General Partner
By:
------------------------------------
Thomas E. Baier, M.D., President
<PAGE>
ASSIGNMENT OF LEASE
-------------------
FOR VALUE RECEIVED, Professional Imaging Corporation, an Illinois
corporation ("PIC"), and Advanced Specialty Imaging, L.P., an Illinois
limited partnership ("ASI")[PIC and ASI are collectively "Assignors"],
as tenants, subtenants or as their respective interests may be, hereby
sell, assign, transfer and set over to Imaging Networks, Inc., a
Delaware corporation ("Assignee"), all of Assignors' right, title and
interest in and to that certain Peterson Shopping Center, Libertyville,
Illinois Lease dated April 1, 1992, by and between William M. Graham
and Michael R. Graham, as beneficiaries under a Land Trust of which
Chicago Title and Trust Company is Trustee under Trust No. 1065799
dated April 4, 1975, d/b/a Peterson Properties, as landlord, and PIC,
as tenant, together with all schedules, riders, addendums, amendments,
modifications, substitutions and renewals thereof (collectively the
"Lease"). A true and correct copy of the Lease is attached hereto as
Exhibit "A".
IN WITNESS WHEREOF, Assignors have executed and delivered this
Assignment to Assignee on January 5, 1995.
ASSIGNOR:
ADVANCED SPECIALTY IMAGING, L.P.,
an Illinois limited partnership
By: Professional Imaging Corporation,
an Illinois corporation, its General
Partner
By:
--------------------------------------
Thomas E. Baier, M.D., President
ASSIGNOR:
PROFESSIONAL IMAGING CORPORATION,
an Illinois corporation
By:
--------------------------------------
Thomas E. Baier, M.D., President
ACCEPTANCE
----------
Imaging Networks, Inc., a Delaware corporation, hereby accepts the
foregoing Assignment of Lease and agrees to perform all terms and
provisions of the Lease.
ASSIGNEE:
IMAGING NETWORKS, INC.,
a Delaware corporation
By: /s/ Joseph Guy Dasti
-----------------------------
Title: President and CEO
--------------------------
EXHIBIT D
<PAGE>
RELEASE
-------
This Release is executed and delivered on January 5, 1995, by
Advanced Specialty Imaging, L.P., an Illinois limited partnership
("ASI"), to Imaging Networks, Inc., a Delaware corporation ("INI").
1. Release. In consideration of the purchase by INI of
-------
substantially all of ASI's assets pursuant to that certain Asset
Purchase Agreement of even date herewith by and between ASI and INI,
and other good and valuable consideration, the receipt and sufficiency
of such consideration is hereby acknowledged, ASI, its partners,
employees, agents and attorneys, do hereby fully remise, release and
forever discharge INI, its officers, directors, shareholders,
employees, agents, attorneys, successors and assigns of and from any
and all claims, demands, actions, causes of action, debts, covenants,
controversies, agreements, promises, damages, judgments, executions,
costs and expenses whatsoever, at law or in equity, existing as of the
date hereof or hereafter arising, both known and suspected, liquidated
or unliquidated, insured or uninsured (collectively "Claims"), which
ASI has or hereafter may have against INI arising out of or in
connection with (a) that certain Master Lease Agreement dated June 25,
1992, by and between U.S. Concord ("Concord") and ASI, and all
schedules, riders, addendums, amendments, modifications, substitutions
and renewals thereof; (b) that certain Agreement dated October 31,
1994, by and between Concord and INI; and (c) that certain Assignment
dated October 31, 1994, executed and delivered by Concord to INI;
provided, however, that this Release shall not release any Claims which
ASI has or hereafter may have against INI arising out of, from or in
connection with any obligations, duties, representations and warranties
of INI in that certain Asset Purchase Agreement of even date herewith
by and between ASI and INI.
2. Acknowledgment. ASI acknowledges that it has carefully read this
--------------
Release, it has had an opportunity to review this Release with its
attorney, it fully understands that this Release is final and binding,
this Release is intended, in part, to release all Claims which ASI may
have against INI and its officers, directors, shareholders, employees,
agents, attorneys, successors and assigns as set forth herein, this
Release is fair, and it is duly authorized to and is voluntarily
executing and delivering this Release.
3. Governing Law. This Release shall be governed by and construed in
-------------
accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, Advanced Specialty Imaging, L.P. has executed
and delivered this Release on the date first set forth above.
ADVANCED SPECIALTY IMAGING, L.P.,
an Illinois limited partnership
By: Professional Imaging Corporation, an
Illinois corporation, its General Partner
By:
---------------------------------
Thomas E. Baier, M.D., President
EXHIBIT E
<PAGE>
GENERAL RELEASE
---------------
This General Release is executed and delivered on January 5, 1995,
by Imaging Networks, Inc., a Delaware corporation ("INI"), to Advanced
Specialty Imaging, L.P., an Illinois limited partnership ("ASI").
1. General Release. In consideration of the sale by ASI to INI
---------------
of substantially all of ASI's assets pursuant to that certain Asset
Purchase Agreement of even date herewith by and between ASI and INI,
and other good and valuable consideration, the receipt and sufficiency
of such consideration is hereby acknowledged, INI, its officers,
directors, shareholders, employees, agents, attorneys, successors and
assigns, do hereby fully remise, release and forever discharge ASI and
its partners, employees, agents and attorneys of and from any and all
claims, demands, actions, causes of action, debts, covenants,
controversies, agreements, promises, damages, judgments, executions,
costs and expenses whatsoever, at law or in equity, existing as of the
date hereof or hereafter arising, both known and suspected, liquidated
or unliquidated, insured or uninsured (collectively "Claims"), which
INI has or hereafter may have against ASI, including, without
limitation, any and all Claims arising out of or in connection with (a)
that certain Master Lease Agreement dated June 25, 1992, by and between
U.S. Concord ("Concord") and ASI, and all schedules, riders, addendums,
amendments, modifications, substitutions and renewals thereof; (b) that
certain Agreement dated October 31, 1994, by and between Concord and
INI; and (c) that certain Assignment dated October 31, 1994, executed
and delivered by Concord to INI; provided, however, that this General
Release shall not release any Claims which INI has or hereafter may
have against ASI arising out of, from or in connection with any
obligations, duties, representations and warranties of ASI in that
certain Asset Purchase Agreement of even date herewith by and between
ASI and INI.
2. Acknowledgment. INI acknowledges that it has carefully read this
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General Release, it has had an opportunity to review this General
Release with its attorney, it fully understands that this General
Release is final and binding, this General Release is intended, in
part, to release all Claims which INI may have against ASI and its
partners, employees, agents and attorneys as set forth herein, this
General Release is fair, and it is duly authorized to and is
voluntarily executing and delivering this General Release.
3. Governing Law. This General Release shall be governed by and
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construed in accordance with the laws of the State of Illinois.
IN WITNESS WHEREOF, Imaging Networks, Inc. has executed and
delivered this General Release on the date first set forth above.
IMAGING NETWORKS, INC.
By: /s/ Joseph Guy Dasti
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Title: President and CEO
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EXHIBIT F
