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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):
May 30, 1997
MEDICAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20440 13-3584552
(State or other (Commission (I.R.S. Employer
jurisdiction) File Number) Identification No.)
155 State Street, Hackensack, New Jersey 07601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 488-6230
N/A
(Former name and former address, if changed since last report)
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Item 5. Other Events.
On May 30, 1997, Medical Resources, Inc., a Delaware
corporation (the "Registrant"), through its indirect wholly-owned
subsidiary, MRI Capstone Resources, Inc. ("Capstone Sub"),
consummated the acquisition (the "Capstone Acquisition") of (i)
substantially all of the Business Assets of Capstone Management
Group, Inc. ("CMG") with respect to four diagnostic imaging centers
located respectively in Baltimore, Maryland, Parlin, New Jersey,
Springfield, Pennsylvania and Langhorne, Pennsylvania; (ii) the
rights of CMG to manage and operate two diagnostic imaging centers
located respectively in Ocala, Florida and Monticello, Arkansas;
(iii) certain membership interests owned by CMG in an Ohio limited
liability company that owns and operates one diagnostic imaging
center located in Centerville, Ohio; (iv) certain general
partnership interests and limited partnership interests owned by
CMG in a Pennsylvania limited partnership that owns and operates
one diagnostic imaging center located in Philadelphia,
Pennsylvania; (v) certain general partnership interests owned by
CMG in a Pennsylvania limited partnership that owns and operates
one diagnostic imaging center located in Broomall, Pennsylvania;
(vi) certain general partnership interests owned by Albany MRI
Management, Inc. ("Albany") in a New York limited partnership that
owns and operates one diagnostic imaging center located in Albany,
New York; (vii) certain general partnership interests owned by
Bensalem MRI Management, Inc. ("Bensalem") in a Pennsylvania
limited partnership that owns and operates one diagnostic imaging
center located in Trevose, Pennsylvania and (viii) certain general
partnership interests owned by Syracuse MRI Management, Inc.
("Syracuse", and collectively with CMG, Albany and Bensalem, the
"Capstone Sellers") in a New York limited partnership that owns and
operates one diagnostic imaging center located in Syracuse, New
York. The Capstone Acquisition was consummated pursuant to an
Asset Purchase Agreement (the "Capstone Agreement"), dated as of
May 9, 1997, by and among the Registrant, Capstone Sub, the
Capstone Sellers, James A. Domesek, M.D., Robert D. Baca, Lynne A.
Fox, Robert Maskulyak, Darryl Johnson, John Wisdo and Christine
Rawski. Pursuant to the Capstone Agreement, Capstone Sub acquired
substantially all of the business assets, rights to manage,
membership interests and partnership interests owned by the
Capstone Sellers for $5,000,000 in cash and 397,204 shares of the
Registrant's common stock, $0.01 par value.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The Registrant anticipates filing certain financial statements
complying with Rule 3-05(b)(2)(ii) of Regulation S-X, insofar as
the Registrant has acquired individually insignificant businesses
since December 31, 1996, which when considered together with the
acquisition of the businesses described in Item 5 herein, exceeds
certain financial thresholds.
(b) Pro Forma Financial Information.
The Registrant anticipates filing certain pro forma financial
information complying with Rule 3-05(b)(3) of Regulation S-X,
insofar as the Registrant has acquired individually insignificant
businesses since December 31, 1996, which when considered together
with the acquisition of the businesses described in Item 5 herein,
exceeds certain financial thresholds.
(c) Exhibits.
Exhibit No. Description
99(a) Asset Purchase Agreement, dated as of May 9, 1997,
between Capstone Management Group, Inc., Albany MRI
Management, Inc., Bensalem MRI Management, Inc.,
Syracuse MRI Management, Inc., James M. Domesek,
M.D., Robert D. Baca, Lynne A. Fox, Robert
Maskulyak, Darryl Johnson, John Wisdo, Christine
Rawski, MRI Capstone Resources, Inc. and the
Registrant.
99(b) Press Release issued May 30, 1997.
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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.
MEDICAL RESOURCES, INC.
By: /s/ John P. O'Malley III
------------------------------------
Name: John P. O'Malley III
Title: Executive Vice President - Finance
Dated: June 12, 1997
98207
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<ex.99(a)>
EXECUTION COPY
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of May 9, 1997, between CAPSTONE
MANAGEMENT GROUP, INC., a Pennsylvania corporation ("Capstone"),
ALBANY MRI MANAGEMENT, INC., a Delaware corporation ("Albany")
BENSALEM MRI MANAGEMENT, INC., a Delaware corporation ("Bensalem"),
SYRACUSE MRI MANAGEMENT, INC., a Delaware corporation ("Syracuse"
and collectively with Albany, Bensalem and Pennsylvania,
"Affiliates", and together with Capstone, "Sellers"), each with a
mailing address at 4622 Street Road, Trevose, Pennsylvania 19053,
James M. Domesek, M.D. ("Domesek"), Robert D. Baca ("Baca"), Lynne
A. Fox ("Fox", and collectively with Domesek and Baca, the
"Majority Stockholders"), Robert Maskulyak ("Maskulyak"), Darryl
Johnson ("Johnson"), John Wisdo ("Wisdo"), Christine Rawski
("Rawski", and collectively with Maskulyak, Johnson Wisdo and the
Majority Stockholders, the "Stockholders"), MRI CAPSTONE RESOURCES,
INC., a Delaware corporation with a mailing address at 155 State
Street, Hackensack, New Jersey 07601 ("Buyer") and solely with
respect to Sections 1.3 and 1.8 and Articles 3, 6, 8 and 9 hereof,
Medical Resources, Inc., a Delaware corporation ("MRI").
WITNESSETH:
WHEREAS, Capstone has entered into an agreement with
U.S. Radiology Associates, P.C., a Florida professional services
corporation ("USRA") respecting a Radiology Services Agreement (the
"Advanced Agreement"), dated August 28, 1996 between USRA and
Advanced Imaging Center, Inc. providing for radiology services at
Advanced Imaging Center, located at 2300 S.E. 17th Street, Suite
302, Ocala, FL 34471 ("Advanced Center"); and
WHEREAS, Capstone has entered into an agreement with USRA
respecting an Agreement (the "Arkansas Agreement"), dated December
26, 1995, between USRA and Drew Memorial Hospital providing for
radiology services at Drew Memorial Hospital, located at c/o Bishop
Neurological Clinic, 771 H.L. Ross Drive, Monticello, AR 71655
("Arkansas Center"); and
WHEREAS, Capstone owns and operates the following imaging
centers: Baltimore Open MRI, located at 40 S. Eutaw Street,
Baltimore, MD 21201 ("Baltimore Center"); Parlin Diagnostic Center,
located at 236 Ernston Road, Parlin, N.J. 08859 ("Parlin Center");
Springfield Diagnostic Imaging Center, located at 891 Baltimore
Pike, Springfield PA 19064 ("Springfield Center"); and Oxford
Valley Imaging Center, located at 330 Middletown Blvd., Langhorne,
PA 19047 ("Langhorne Center"); and
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WHEREAS, Capstone owns ninety (90%) percent of the
outstanding membership interests in Dayton Open MRI Ltd. ("Dayton
L.L.C."), an Ohio limited liability corporation which owns and
operates an imaging center d/b/a Dayton Open MRI Center, located at
2591 Miamisburg Centersville, Road, Centerville OH 45459 ("Dayton
Center"); and
WHEREAS, Capstone owns forty-eight (48%) percent of the
outstanding partnership interests in, and is the general partner
of, Callowhill Open MRI, L.P. ("Callowhill L.P.") a Pennsylvania
limited partnership which owns and operates an imaging center d/b/a
Callowhill Open MRI Center, located at 417 N. 8th Street, Suite
501, Philadelphia, PA 19123 ("Callowhill Center"); and
WHEREAS, Capstone owns thirty (30%) percent of the
outstanding partnership interests in, and is the general partner
of, Haverford Open MRI Associates, L.P. ("Haverford L.P."), a
Pennsylvania limited partnership which owns and operates an imaging
center d/b/a Mainline Open MRI Center, located at 590 Reed Road,
Suite 2, Broomall, PA 19008 ("Mainline Center"); and
WHEREAS, Albany, a corporation wholly owned by Domesek,
owns sixty-two and one-half (62.5%) percent of the outstanding
partnership interests in Albany MRI Open, L.P. ("Albany L.P."), a
Delaware limited partnership which owns and operates an imaging
center d/b/a Albany Open MRI Center, located at 199 Wolf Road,
Albany NY 12205 ("Albany Center"); and
WHEREAS, Syracuse, a corporation wholly owned by Domesek,
owns sixty-two and one-half (62.5%) percent of the outstanding
partnership interests in Syracuse Open MRI, L.P. ("Syracuse L.P."),
a Delaware limited partnership which owns and operates an imaging
center d/b/a Syracuse Open MRI Center, located at 1226 East Water
Street, Syracuse NY 13210 ("Syracuse Center"); and
WHEREAS, Albany is the general partner of Albany L.P.,
and Syracuse is the general partner of Syracuse L.P., and
WHEREAS, Bensalem, a corporation wholly owned by Domesek
owns fifty-one (51%) percent of the outstanding partnership
interests in, and is the general partner of, Bensalem Open MRI,
L.P. ("Bensalem L.P.", and collectively with Callowhill L.P.,
Haverford L.P., Pennsylvania L.P., Albany L.P. and Syracuse L.P.,
the "Limited Partnership Affiliates"), a Pennsylvania limited
partnership which owns and operates an imaging center d/b/a
Bensalem Open MRI Center, located at 4630 Street Road, Trevose, PA,
19053 ("Bensalem Center", and collectively with Advanced Center,
Arkansas Center, Baltimore Center, Springfield Center, Langhorne
Center, Dayton Center, Callowhill Center, Mainline Center, Albany
Center, Syracuse Center, Parlin Center, the "Centers"); and
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WHEREAS, Sellers, as set forth in the preceding
introductory clauses, own or have the right to use certain of the
assets, properties, business and goodwill relating to the Centers
(the "Business"); and
WHEREAS, Buyer desires to acquire the Business and
substantially all of the properties and assets of Sellers used or
held for use in connection with the Business, and Sellers desire to
sell the Business and transfer such properties and assets to Buyer,
upon the terms and subject to the conditions hereinafter set forth;
and
WHEREAS, the Stockholders own the outstanding common
stock of Capstone, and Domesek owns all of the outstanding common
stock of each Affiliate.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, Sellers, Stockholders, Buyer
and MRI agree as follows:
ARTICLE 1.
SALE OF ASSETS AND PURCHASE PRICE
1.1 Sale and Purchase of Assets. On the basis of the
representations, warranties, covenants and agreements contained in
this Agreement and subject to the terms and conditions set forth in
this Agreement, on the Closing Date (as defined in Section 1.2
hereof), Sellers shall sell, assign, transfer and deliver to Buyer,
and Buyer shall purchase and acquire from Sellers, free and clear
of all Liens (as defined in Section 2.5(b) hereof) except as
otherwise contemplated by Section 2.5(b) hereof, all of the assets
of the Business associated with the Centers, other than the assets
listed on Schedule 1.1 (the "Excluded Assets" which term shall
include all of the issued and outstanding capital stock of each
Affiliate and cash of Sellers, other than cash at or attributable
to the Langhorne Center and the Dayton Center (which such cash at
or attributable to the Langhorne Center and the Dayton Center is
hereinafter referred to as the "Included Cash")), including,
without limitation, all machinery, real property interests,
equipment and furnishings used or held for use exclusively or
primarily in the Business, as set forth on Schedule 2.5(A) hereto
(the Business and all of the foregoing, excepting only the Excluded
Assets, being hereinafter referred to as the "Purchased Assets").
As used herein, the term "Purchased Assets" shall also include,
without limitation of the foregoing:
(a) all warranties and claims or potential claims
against Sellers' suppliers or lessors with respect to any assets
included in the Purchased Assets to the extent said warranties and
claims may be assignable; and<PAGE>
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(b) all names, trademarks, contractual rights, telephone
numbers, Licenses (as defined in Section 2.6), books and records,
business and good will of each Seller relating to the Business and
the Purchased Assets; and
(c) all of Sellers' accounts receivable arising out of
services performed by Sellers on or prior to the business day
immediately preceding the Closing Date at the Center (including any
related claims in respect of the collection thereof) (the "Accounts
Receivable") and all collections with respect thereto (to the
extent that Sellers are prohibited from assigning certain Accounts
Receivable to Buyer, Buyer shall be entitled to the benefit of the
bargain by receiving all collections with respect thereto); and
(d) the rights to any and all contracts and agreements
(the "Assumed Contracts") which Buyer elects to assume and have the
Sellers assign to it (including, without limitation, (i) the rights
to any payments or fees (management or otherwise) relating to each
of the Advanced Agreement and the Arkansas Agreement and (ii) all
of the rights and obligations under the Agreements For Sale of Real
Estate between 402 Courtyard Associates and Capstone and 401
Courtyard Associates and Capstone) by notifying Sellers in writing
and identifying such contracts and agreements no less than five
business days prior to Closing (any agreement not so identified by
Buyer shall be retained by Sellers and no obligation thereof will
be assumed by Buyer); and
(e) to the extent owned by Capstone, all of the issued
and outstanding membership interests of Dayton L.L.C.;
(f) to the extent owned by any Seller, all of the
outstanding partnership interests (both general and limited) of
each Limited Partnership Affiliate;
(g) the Included Cash; and
(h) in addition, as an integral part of the Purchased
Assets and which Buyer is relying on in entering into this
Agreement, the restrictive agreements that Sellers and Stockholders
shall herein agree to in Article 8.
1.2 Closing Date. The purchase and sale of the Business
and the Purchased Assets (the "Closing") shall take place on April
30, 1997 at the offices of Werbel & Carnelutti, 711 Fifth Avenue,
New York, New York 10022 at 10:00 a.m. New York City time or as
soon thereafter as all of the conditions specified in Articles 5
and 6 of this Agreement shall be satisfied or waived, or at such
other place or time or on such other date as Sellers and Buyer may
agree upon in writing (such date and time being hereinafter called
the "Closing Date").
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1.3 (a) Purchase Price. As consideration for the
Purchased Assets, Buyer shall pay to or as directed in writing by
Sellers $10,000,000 (the "Purchase Price") (subject to adjustment
pursuant to clause (b) below) as follows:
(i) $5,000,000 to Sellers in cash by bank check,
certified check, cashier's check or wire transfer as instructed by
Sellers on the Closing Date, (the "Closing Date Amount"); and
(ii) Buyer shall deliver to Sellers on the Closing
Date a stock certificate evidencing the number of shares (the
"Closing Shares") of common stock of MRI (the "MRI Common Stock"),
par value $.01 per share, which equals the quotient obtained by
dividing $5,000,000 by the Market Value (as defined in Section
10.15) of the MRI Common Stock on the trading day immediately
preceding the date of this Agreement, provided, however, that if
the Closing Shares are not registered with the Securities and
Exchange Commission (the "SEC") in accordance with Section 1.8
hereof by September 1, 1997, Buyer shall, at Sellers' option, buy
back from Sellers on September 2, 1997, in cash by wire transfer as
instructed by Capstone by the close of business on September 2,
1997, the number of Closing Shares as specified in writing by
Sellers (the "September Closing Shares"), which number of September
Closing Shares so specified shall in no event be greater than a
fraction, the numerator of which is $1,000,000 and the denominator
of which is the Market Value of the MRI Common Stock on the trading
day immediately preceding September 1, 1997, for an amount equal to
the Market Value of the MRI Common Stock as of the trading day
immediately preceding September 1, 1997 times the number of
September Closing Shares so bought back (for purposes of this
Agreement, the term "Remaining Closing Shares" shall mean the
number of shares of MRI Common Stock held by Sellers equal to the
number of Closing Shares less the number of September Closing
Shares); provided, further, however, that if the Remaining Closing
Shares are not so registered by October 31, 1997, Buyer shall, at
Sellers' option, buy back from Sellers on November 3, 1997, in cash
by wire transfer as instructed by Capstone by the close of business
on November 3, 1997, the number of Remaining Closing Shares as
specified in writing by Sellers, for an amount equal to the Market
Value of the MRI Common Stock as the trading day immediately
preceding November 3, 1997 times the number of Remaining Closing
Shares so bought back.
(b) Post Closing Date Adjustments.
Buyer shall pay to Sellers an additional amount (the
"Capstone Consideration") based upon the Profits of the Business
acquired by Buyer for all of the Centers and the Limited
Partnership Affiliates as well as, if acquired by Buyer, Swathmore
MRI Associates (the "Acquired Business"). The Capstone
Consideration shall be an amount equal to (A) four (4) times the
Profits of the Acquired Business for the twelve-month period<PAGE>
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commencing on July 1, 1997 and ending on June 30, 1998 (the
"Acquired Earnout Period") in excess of $2,000,000 less, and in the
event that Buyer acquires from Swathmore MRI Associates through the
direct efforts of Capstone the business assets of the diagnostic
imaging facility located in Swathmore, Pennsylvania,
(B) $1,000,000. Buyer shall provide Sellers, within ninety (90)
days following the last day of the Acquired Business Earnout
Period, a written calculation (the "Capstone Consideration
Calculation") of the Capstone Consideration (computed in accordance
with the books and records of the Business and certified as true
and correct by the Chief Financial Officer of Buyer). Subject to
Section 1.3(e) hereof, the Capstone Consideration, if any, shall be
payable within ten (10) business days after receipt by Sellers of
the Capstone Consideration Calculation as follows: (a) a payment
to Sellers in cash by wire transfer or certified check of an amount
equal to one-half of the total Capstone Consideration and (b) by
delivery to Sellers of a stock certificate evidencing the number of
shares of MRI Common Stock (the "Capstone Shares") equal to the
quotient obtained by dividing an amount equal to one-half of the
total Capstone Consideration by the Market Value of the MRI Common
Stock as of the trading day immediately preceding June 30, 1998.
(c) "Profits" shall mean the Accrual Based Profits of
Buyer before taxes, plus depreciation and amortization of Buyer's
tangible assets, less Buyer's principal payments and other debt
service, net working capital funded by MRI or its Affiliates,
leasehold improvements and other capital expenditures (which in the
case of medical equipment and the costs relating to the
installation of such medical equipment, shall include only the
amortized portion thereof based on a straightline five-year life).
"Accrual Based Profits" with respect to the Acquired Business shall
mean the net income of Buyer, less deductions for direct general
and administrative overhead allocations incurred in the ordinary
course of business consistent with MRI's current practice relating
to its other diagnostic imaging centers, determined in accordance
with generally accepted accounting principles and as set forth in
the calculations prepared by Buyer, which such allocations shall in
no event exceed $300,000.
(d) Allocation of Purchase Price. Sellers and Buyer
agree to allocate the Purchase Price in accordance with IRC Section
1060. Such allocation shall be agreed to by Sellers and Buyer
prior to the Closing Date. In addition, Sellers and Buyer hereby
agree to file timely any information that may be required to be
filed pursuant to Treasury Regulations promulgated under IRC
Section 1060. Notwithstanding the foregoing, an allocation of
forty percent (40%) of the total Purchase Price shall be made to
the restrictive agreements set forth in Article 8 hereof - thirty-
three percent (33%) to the Stockholders and seven percent (7%) to
Sellers.
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(e) Right to Audit. Capstone will notify Buyer of any
objection to the calculation of the Capstone Consideration
Calculation, within fifteen (15) days of receipt of any such
calculation. The failure by Capstone to provide Buyer with notice
of such objection within such fifteen 15-day period shall be deemed
an acceptance by Capstone of any such calculation. Any controversy
among Capstone and Buyer relating to the calculation of the
Capstone Consideration Calculation pursuant to the provisions of
this Section 1.3, shall be resolved by presenting the dispute for
review by a "Big Six" accounting firm or other firm of certified
public accountants mutually agreed upon by Capstone and Buyer.
Such accounting review shall be only of such scope as shall be
necessary, in the opinion of the selected firm of accountants, to
resolve such dispute and the decision of such firm shall be final
and binding on Capstone and Buyer. Capstone and Buyer agree to
provide any books and records in their possession which, in the
opinion of such firm, is necessary for their review. Any such
review shall be at the expense of Capstone; provided, however, that
if such review discloses a shortage in the Capstone Consideration
Calculation in excess of five percent (5%), then within ten (10)
days of written notice from Capstone informing Buyer of said
shortage and the cost of such review, Buyer shall make full payment
to Sellers of the review costs. Any review hereunder shall be
final and if such review discloses a shortage in appropriate
payment, then Buyer shall pay to Seller, or if such review
discloses an excess of appropriate payment, then Sellers shall pay
to Buyer, in either case, within ten (10) days of the review, the
amount of such shortage or excess, as appropriate.
1.4 Liabilities. Buyer shall not assume or be bound by
any duties, responsibilities, obligations or liabilities of
Sellers, the Stockholders, the Business or any Center of any kind
or nature, known, unknown, contingent or otherwise (including,
without limitation, any benefit plan maintained by Buyer, any trade
payables or any professional fees), except as specifically set
forth on Schedule 1.4 annexed hereto, which Schedule is intended to
reflect all liabilities of Sellers incurred in the ordinary course
of business. Such liabilities retained by Sellers and Stockholders
are herein referred to as "Retained Liabilities" and such
liabilities expressly assumed by Buyer in Schedule 1.4 are herein
referred to as "Assumed Liabilities." Sellers and Stockholders
hereby agree to indemnify and hold Buyer harmless against all
Retained Liabilities. Notwithstanding anything to the contrary
contained in this Agreement, solely with respect to the operations
of the Business in the ordinary course, Buyer shall assume the
liabilities for payables incurred prior to the Closing, which
payables could not reasonably be expected to be listed on Schedule
1.4 hereto (i.e. because an invoice requesting payment for such
payable had not yet been received), and provided that such payables
are of the same or similar level as the payables listed on Schedule
4.2 hereto.
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1.5 Additional Closing Date Deliveries and Actions.
(a) On the Closing Date, Sellers shall (i) deliver, or
execute and deliver, to Buyer (w) a Bill of Sale, Assignment and
Assumption Agreement in substantially the form annexed hereto as
Exhibit A with respect to the Purchased Assets, (x) all evidences
of consent, waiver or approval obtained by Sellers in respect of
the Purchased Assets or the consummation of the transactions
contemplated by this Agreement, (y) all of the documents,
instruments and opinions contemplated to be delivered by Sellers to
Buyer on the Closing Date pursuant to Article 5 hereof, and (z) all
such other bills of sale, assignments and other instruments of
transfer or conveyances as Buyer may reasonably request or as may
otherwise be necessary to evidence and effect the sale, assignment,
transfer, conveyance and delivery of the Purchased Assets to Buyer
and the retention by Sellers and the Stockholders of the Retained
Liabilities and (ii) take all steps and actions as Buyer may
reasonably request or as may otherwise be necessary to put Buyer in
actual possession and control and provide Buyer with the benefits
of the Purchased Assets and the Business. All of the documents
described in (w) through (z) hereof are hereinafter referred to as
"Sellers' Closing Documents".
(b) On the Closing Date, Buyer shall (i) deliver, or
execute and deliver, to Sellers (x) the Closing Date Amount, (y) a
Bill of Sale, Assignment and Assumption Agreement in substantially
the form annexed hereto as Exhibit A with respect to the Purchased
Assets, and (z) all of the documents, instruments and opinions
contemplated to be delivered by Buyer to Sellers on the Closing
Date pursuant to Article 6 hereof, and (ii) take all steps and
actions as may be reasonably necessary to effectuate the
transactions contemplated hereby. All of the documents described
in (x) through (z) hereof are hereinafter referred to as "Buyer's
Closing Documents" and, collectively with Sellers' Closing
Documents, the "Closing Documents".
1.6 Consents, Waivers and Further Assurances. (a) From
time to time following the Closing, Sellers shall execute and
deliver, or cause to be executed and delivered to Buyer such other
instruments of assignment, conveyance and transfer as Buyer may
reasonably request or as may be otherwise necessary more
effectively to convey and transfer to, and vest in, Buyer and put
Buyer in possession of, any part of the Purchased Assets.
(b) With respect to any properties or assets sold
hereunder that cannot be physically delivered to Buyer because they
are in the possession of third parties, or otherwise, Sellers and
Stockholders shall give irrevocable instructions to the party in
possession thereof, if such be the case, with copies to Buyer, that
all right, title, and interest therein have been vested in Buyer
and that the same are to be held for Buyers' exclusive use and<PAGE>
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benefit and the parties shall take whatever actions are deemed
reasonable and necessary to convey the benefits of Purchased Assets
to Buyer.
1.7 Termination. Anything contained in this Agreement
to the contrary notwithstanding, this Agreement may be terminated
and the transactions contemplated herein abandoned at any time
prior to the Closing Date: (a) by the mutual written agreement of
Buyer and Sellers; or (b) by Buyer or Sellers in the event of any
material breach by the other party of any of its agreements,
representations or warranties contained herein; or (c) subject to
the provisions of Section 4.3 hereof, by either Buyer or Sellers
if the Closing has not occurred on or before June 30, 1997
(provided, however, that if the party seeking to terminate this
Agreement pursuant to this clause (c) has failed to use good faith
and best efforts to bring about the Closing, that party shall not
have the right to terminate the Agreement pursuant to this clause),
or such later date as may be agreed upon in writing by Sellers and
Buyer or may result from the operation of the provisions of Section
4.3 (the "Termination Date"). Notwithstanding any such
termination, the provisions of Section 8.1 of this Agreement shall
remain in full force and effect and no such termination shall be
deemed to constitute a release or waiver by either party of any
claim against the other party hereto based on any breach by such
party of its agreements or its representations and warranties
contained herein.
1.8 Registration of MRI Common Stock. (a) At any time
during the one-year following (i) the Closing Date and (ii) the
date immediately following receipt by Sellers of the Capstone
Consideration Calculation, when MRI proposes to file a registration
statement (other than a registration statement on Form S-8 or Form
S-4, or their successor forms) with the SEC, it will, prior to such
filing, give written notice to Sellers of its intention to do so
and, upon the written request of Sellers given within five (5) days
after MRI provides such notice (which request shall state the
intended method of disposition of any such shares of MRI Common
Stock issued hereunder (the "Registration Shares"), MRI shall use
its best efforts to cause all Registration Shares that MRI has been
requested by Sellers to register under the Securities Act to the
extent necessary to permit their sale or other disposition in
accordance with the intended methods of distribution specified in
the request of Sellers; provided that MRI shall have the right to
postpone or withdraw any registration effected pursuant to this
Section 1.8 without obligation to the Sellers.
(b) In connection with any offering under this
Section 1.8 involving an underwriting, MRI shall not be required to
include any Registration Shares in such offering unless the holders
thereof accept the terms of the underwriting as agreed upon between
MRI and the underwriters selected by it (provided that such terms<PAGE>
<PAGE>
must be consistent with this Asset Purchase Agreement), and then
only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by MRI. If in
the opinion of the managing underwriter, the registration of all,
or part of, the Registration Shares that the Sellers has requested
to be included would materially and adversely affect such public
offering, then MRI shall be required to include in the underwriting
only that number of Registration Shares that the managing
underwriter believes may be sold without causing such adverse
effect; provided that no persons or entities other than MRI and
persons or entities holding registration rights shall be permitted
to include securities in the offering. If the number of
Registration Shares to be included in the underwriting in
accordance with the foregoing is less than the total number of
shares that Sellers has requested to be included, then Sellers and
other holders of shares of MRI Common Stock entitled to include
shares of MRI Common Stock in such registration shall participate
in the underwriting pro rata based upon their total ownership of
shares of MRI Common Stock (giving effect to the conversion into
MRI Common Stock of all securities convertible thereinto). If any
holder would thus be entitled to include more shares than such
holder requested to be registered, the excess shall be allocated
among other requesting holders pro rata based upon their total
ownership of shares of MRI Common Stock. The Company shall also
use its best efforts to keep any such registration statement, and
the accompanying prospectus, effective and current under the
Securities Act at its expense for a period ending on the date on
which Sellers has completed its disposition of such shares pursuant
to the registration statement.
(c) In connection with any registration of any
Registration Shares pursuant to this Section 1.8:
(i) Sellers will cooperate in furnishing promptly to MRI in
writing any information reasonably requested by MRI in connection
with the preparation, filing and processing of such registration
statement;
(ii) MRI shall use reasonably diligent efforts to have any
Registration Shares qualified for listing on The Nasdaq Stock
Market;
(iii) MRI will prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus
used in connection therewith as may be necessary to keep such
registration statement effective and current for the period
required herein and use reasonably diligent efforts to comply with
the provisions of the Securities Act and the rules and regulations
of the SEC with respect to the sale or disposition of shares
covered by such registration statement;
<PAGE>
<PAGE>
(iv) MRI will furnish to Sellers such number of prospectuses or
other documents incident to such registration as may from time to
time be reasonably requested, and cause its shares to be qualified
under the blue-sky laws of those states reasonably requested by the
Sellers (provided that MRI will not be required to (A) qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify, (B) subject itself to taxation in
any such jurisdiction or (C) consent to general service of process
in any such jurisdiction);
(v) MRI shall notify Sellers, at any time when a prospectus
relating to any Registration Shares is required to be delivered
under the Securities Act, of the happening of any event as a result
of which the prospectus included in the registration statement
contains an untrue statement of material fact or omits any fact
necessary to make the statements therein not misleading and MRI
shall take such steps at it shall deem necessary to correct such
prospectus;
(vi) MRI shall use reasonably diligent efforts to obtain the
withdrawal of any order suspending the effectiveness of the
registration statement, suspending or preventing the use of any
related prospectus or suspending the qualification in any
jurisdiction in which the sale of any Registration Shares has been
qualified;
(vii) Except as set forth in subsection (viii) below, MRI shall
bear all costs and expenses incident to any registration pursuant
to this Section 1.8; and
(viii) Sellers shall pay any and all brokerage fees and transfer
taxes incident to the sale of any share of MRI Common Stock sold by
Sellers pursuant to any registration effected pursuant to this
Section 1.8, and shall pay the fees and expenses of any special
attorneys or accountants retained by it.
(ix) MRI represents and warrants that the MRI Common Stock is
registered under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and for so long as MRI is subject to
the reporting requirements of the Exchange Act, MRI shall use its
best efforts to take all actions necessary to enable Sellers to
sell any Registration Shares received by them hereunder without
registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such
Rule 144 may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC, including filing, on a
timely basis, all reports required to be so filed.
(x) In the event that Sellers wish to sell publicly in a block
transaction any Registration Shares through a broker, MRI will
assist Sellers with such sale.
<PAGE>
<PAGE>
(d) In the event that any Capstone Shares are not
registered within four months from the date of their issuance (the
"Registration Termination Date"), Buyer shall, at Sellers' option,
buy back from Sellers the number of Capstone Shares so designated
in writing by Sellers for an amount equal to such number of
Capstone Shares times the Market Value of the MRI Common Stock as
of the trading day immediately preceding the Registration
Termination Date, and such amount shall be payable in cash by wire
transfer as instructed by Capstone by the close of business on the
day after receipt of the exercise by Seller of such election.
Sellers shall exercise such election by notifying Buyer in writing
of their election by the close of business on the business day
following the Registration Termination Date, with time of the
essence.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLERS AND MAJORITY STOCKHOLDERS
As an inducement to Buyer to enter into this Agreement
and to consummate the transactions contemplated hereby, Sellers and
Majority Stockholders represent and warrant to Buyer and agree as
follows:
2.1 Organization and Qualification. Capstone is a
corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania, and is duly
qualified as a foreign corporation in the states listed on Schedule
2.1 hereto. Each Affiliate is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware, and is duly qualified as a foreign corporation in the
states listed on Schedule 2.1 hereto. The Stockholders are the
owners of the number of outstanding shares of common stock of
Capstone listed on Schedule 2.1 hereto. There are no holders of
any shares of capital stock of Capstone other than the
Stockholders. There are no holders of any shares of capital stock
of each Affiliate other than Domesek. Sellers have all requisite
corporate power and authority to own or lease their properties and
assets and to conduct their business as presently conducted. Set
forth on Schedule 2.1 hereof is a list of all stockholders of
Sellers and their percentage of ownership interest therein and no
other person or entity has an equity interest in Sellers or any
right with respect to an equity interest in Sellers.
2.2 Authority to Effect Transactions. (a) Sellers and
Stockholders have all requisite power and authority to execute,
deliver and perform this Agreement and all of Sellers' Closing
Documents. All necessary corporate action (including, without
limitation, action by Stockholders) on the part of Sellers has been<PAGE>
<PAGE>
duly taken to authorize the execution, delivery and performance by
Sellers of this Agreement and all of Sellers' Closing Documents.
This Agreement has been duly authorized, executed and delivered by
Sellers, has been duly executed and delivered by Stockholders, and
is the legal, valid and binding obligation of Sellers and
Stockholders, enforceable against Sellers and Stockholders in
accordance with its terms. Each of Sellers' Closing Documents has
been duly authorized by Sellers and, upon execution and delivery by
Sellers, as contemplated hereby, will be the legal, valid and
binding obligation of Sellers, enforceable against Sellers in
accordance with its terms.
(b) Except as set forth in Schedule 2.2(B) hereto,
neither the execution, delivery or performance of this Agreement or
any of Sellers' Closing Documents nor the consummation of the
transactions contemplated hereby or thereby (v) conflicts with or
will conflict with, or (with or without the giving of notice or the
passage of time or both) results or will result in a breach of the
terms, conditions or provisions of, (w) constitutes or will
constitute a default under, (x) results or will result in the
creation of any Lien except for Permitted Liens (as defined in
Section 2.5(b) hereof) upon the Purchased Assets pursuant to, (y)
constitutes or will constitute an event creating rights of
acceleration, termination or cancellation, or loss of rights under,
or (z) results or will result in a violation of, (A) Sellers'
organizational documents and agreements, each as amended to date,
(B) any law, statute, rule, regulation, order, award, judgment or
decree to which Sellers, any Stockholder or any of the Purchased
Assets is subject or (C) any contract, agreement, instrument, lease
or License to which Sellers or any Stockholder is a party or by
which it is bound.
2.3 Financial Statements. Set forth in Schedule 2.3 are
the unaudited balance sheets of Sellers and of each Center as of
December 31, 1996 and of the Langhorne Center as of April 7, 1997;
and the unaudited statement of revenue and expenses of Sellers and
each Center for the year ended December 31, 1996. Each such
balance sheet presents fairly the financial condition, assets,
liabilities and stockholder's equity of Sellers and each Center as
of its date; each such statement of revenue and expenses presents
fairly the results of operations of Sellers and each Center for the
period indicated and the information purported to be shown therein.
The financial statements referred to in this Section 2.3 are
correct and complete in all material respects, and are in
accordance with the books and records of Sellers and each Center.
Except as set forth in Schedule 2.3 hereto, Sellers and each Center
are not subject to any liability (including, without limitation,
unasserted material claims whether known or unknown and liabilities
for federal, state or local income tax), whether absolute,
contingent, accrued or otherwise, which is not shown or which is in
excess of the amount shown or reserved for on the balance sheets,
other than liabilities of the same nature as those set forth on the<PAGE>
<PAGE>
balance sheets and reasonably incurred after the Balance Sheet Date
(as defined below) in amount and in the ordinary course of business
consistent with past practice and are not material in amount.
2.4 Absence of Certain Developments. Except as contem-
plated by this Agreement or as otherwise set forth on Schedule 2.4
hereto, since December 31, 1996 (the "Balance Sheet Date"), the
Business has been conducted in all respects only in the ordinary
course of business of each Center consistent with past practice.
Except as set forth on Schedule 2.4 hereto, since the Balance Sheet
Date, there has been (a) no material adverse change in the
Purchased Assets or in the business, liabilities, operations,
profits, condition (financial or otherwise) of the Centers, and (b)
no damage, destruction, loss or claim or condemnation or other
taking materially adversely affecting any Purchased Asset.
2.5 Tangible Personal Property; Title and Liens.
(a) Set forth on Schedule 2.5(A) hereto is a list of all of the
tangible personal property included in the Purchased Assets.
(b) Sellers have good title to all of the Purchased
Assets, free and clear of all mortgages, liens, security interests,
easements, encumbrances, equities, claims and obligations to other
Persons (as such term and all other defined terms used herein and
not otherwise defined are defined in Section 10.15) of every kind
and character (any of the foregoing, a "Lien"), other than as set
forth on Schedule 2.5(B)(1) hereto. Upon delivery to Buyer on the
Closing Date of the instruments of assignment and transfer
contemplated by this Agreement, Sellers will thereby transfer to
and vest in Buyer good and marketable title to the Purchased
Assets, free and clear of all Liens other than Liens, if any,
created by Buyer and Liens set forth on Schedule 2.5(B)(1)
(collectively, "Permitted Liens"). Except as set forth on Schedule
1.1 hereto, the Purchased Assets constitute all assets and
properties presently used in the operation of the Business as it is
currently being operated.
(c) Except as set forth in Schedule 2.5(C) hereto, no
real property owned by Sellers is used in the conduct of the
Business.
2.6 Licenses and Authorizations; Compliance with Laws.
Sellers own, hold or possess all material foreign, federal, state
or local governmental licenses, franchises, permits, privileges,
approvals and other authorizations and licenses which are necessary
to entitle it to own or lease the Purchased Assets and to operate
and use the Purchased Assets to conduct and carry on the Business
as presently conducted at each Center (the "Licenses"). Set forth
on Schedule 2.6 hereto is a list and brief description of each of
the Licenses. To the best of Sellers' and Stockholders' knowledge,
each of the Licenses is valid and in full force and effect and,
except as disclosed in Schedule 2.6, may be assigned and
transferred to Buyer in accordance with this Agreement and will<PAGE>
<PAGE>
continue in full force and effect thereafter, without default or
forfeiture of any rights thereunder. Sellers are unaware of any
notice of cancellation, default or breach of or any dispute
concerning any of the Licenses owned, possessed or held by Sellers
or of any event or condition or state of facts described in the
next following sentence has been received by Sellers with respect
to any of such Licenses. To the knowledge of Sellers, there is not
now pending or threatened, any action to revoke, cancel, rescind,
modify or refuse to renew in the ordinary course any of the
Licenses. The Purchased Assets and their uses comply with, and
Sellers with respect to the Purchased Assets and the operation of
the Business and each Center is in compliance with, all applicable
laws, regulations, rules, or ordinances of, and all applicable
judgments, writs, decrees, injunctions and orders of, any foreign,
federal, state, local or other governments or court or governmental
departments, commissions, bureaus, agencies or instrumentalities
where any such non-compliance would have a material adverse effect
on the business operations of each such Center.
2.7 Contracts and Other Instruments. (a) Schedule
2.7(A) hereto sets forth a list of all contracts, agreements,
instruments and leases to which Sellers or any Stockholder is a
party or by which it is bound, relating to the Business or the
Purchased Assets or to which any of the Purchased Assets is subject
which require the payment by or to any Seller or any Stockholder in
excess of $10,000 per annum (collectively, together with any
contracts, agreements, instruments and leases entered into by
Sellers with respect to the Business or the Purchased Assets
between the date hereof and the Closing Date consistent with the
terms of this Agreement, being herein called the "Contracts").
Sellers have provided Buyer with a true and complete copy of each
Contract.
(b) Each of the Contracts constitutes the valid and
binding obligation of Sellers and, to the best of Sellers' and the
Stockholders' knowledge, the other party thereto, and is in full
force and effect. Sellers have performed and fulfilled all of its
obligations under each of such Contracts required to be performed
as of the date hereof, is not in default or breach thereunder, and,
to the knowledge of Sellers and the Stockholders, no other party is
in default or breach thereunder.
2.8 Employees. Schedule 2.8A hereto contains (i) a list
of the names and relationships with Sellers of all employees of
Sellers at each Center as of March 31, 1997, (ii) a description of
all agreements (oral or written) with such employees, (iii) the
dates on which such employees commenced working for Sellers, (iv)
any increase in such employee's compensation since January 1, 1997,
and (v) the compensation of such employees. Except as set forth on
Schedule 2.8B hereto, Sellers are not a party to any collective
bargaining agreement, employment agreement, retirement plans
(whether qualified or non-qualified), deferred compensation or<PAGE>
<PAGE>
severance (except to the extent that accrued vacation and accrued
sick days may be deemed to be severance under applicable law)
agreement, consulting or advisory agreement, confidentiality
agreement or covenant not to compete (except as set forth in this
Agreement) relating to the employees or otherwise relating to the
Business.
2.9 Litigation. Sellers are not, with respect to the
Business, the Centers or the Purchased Assets, subject to any
judgments, writs, decrees, injunctions or orders of any foreign,
federal, state or local government or court or governmental
department, commission, bureau, agency or instrumentality. Except
as set forth on Schedule 2.9 hereto, to the best of Sellers'
knowledge, there is no suit, action, administrative proceeding,
arbitration or other proceeding or governmental investigation,
including any medical board or similar professional body
proceeding, involving Sellers, the Stockholders or the Centers
(including any medical professionals practicing at the Centers,
whether or not the proceeding involves activities performed at the
Centers) pending or threatened against Sellers or the Stockholders
or otherwise with respect to the Business, the Centers or the
Purchased Assets (including, without limitation, any claim for
malpractice), and to the best of Seller's knowledge, there are no
suits, actions, administrative proceedings, arbitrations or other
proceedings or investigations pending in which Sellers or any
Stockholder is the plaintiff or claimant relating to the Purchased
Assets, the Business or the Centers. To the best of Sellers' and
Stockholders' knowledge there is no suit, action, administrative
proceeding, arbitration or governmental investigation involving
Sellers, the Stockholders, or the Centers pending or threatened,
which questions the legality, validity or propriety of the
transactions contemplated by this Agreement.
2.10 Machinery, Equipment and Supplies. Except as set
forth on Schedule 2.10 hereof, all machinery, equipment and
supplies of Sellers included in the Purchased Assets are in usable
condition, ordinary wear and tear excepted. Notwithstanding the
foregoing, Buyer agrees and acknowledges that it is purchasing the
Purchased Assets as is, where is, and that Sellers have not and
shall not be deemed to have made or given, and Buyer expressly
disclaims any representation, warranty or covenant, express or
implied, as to the value, quality, durability, compliance with
specifications, conditions, designs, operations, merchantability,
or fitness for use, or suitability of the Purchased Assets for any
particular purpose.
2.11 Insurance. Schedule 2.11 hereto sets forth a list
of all policies of insurance in force with respect to the Purchased
Assets, each Center and the Business. Sellers have received no
notices of any pending or threatened terminations with respect to
such policies and to the best of Seller's knowledge, Sellers are in
compliance with all conditions contained therein. All such<PAGE>
<PAGE>
policies are valid and enforceable and in full force and effect and
are sufficient for all applicable requirements of law. All such
policies will remain in full force and effect through the Closing
Date.
2.12 Environmental Matters. No Seller has been
identified in any litigation, administrative proceeding or
investigation as a responsible party for any liability under any
federal, state or local law, rule, regulation, administrative
order, or decree relating to pollution or protection of the
environment ("Environmental Law") nor to any Seller's knowledge is
it in violation of any Environmental Law, nor to any Seller's
knowledge is any property leased by any Seller the site of any
containments, hazardous substances, regulated substances, or
hazardous wastes, other than medical waste, which may be the
subject or liability pursuant to any Environmental Law.
2.13 Accounts Receivable. Sellers have good title, free
and clear of all Liens except Permitted Liens, to the receivables
reflected on its balance sheets (the "Accounts Receivable"). The
Accounts Receivable have arisen from bona fide transactions entered
into in the ordinary course of business, are collectible at their
historical collection ratio or historical valuation method and are
not in dispute or subject to defense, counterclaim or set-off.
2.14 Brokers. Neither Sellers, Stockholders nor any
Affiliate of Sellers or the Stockholders have incurred any
liability or obligation to any broker, finder or agent for any
brokerage fees, finder's fees or commissions with respect to the
transactions contemplated by this Agreement.
2.15 Disclosure. All representations and warranties made
by Sellers or Stockholders to Buyer, whether or not in writing, are
and when made were true, accurate and complete.
2.16 Investment Intent. Sellers and Stockholders are
acquiring the Closing Shares which are issuable under this
Agreement for investment for their own account, not as a nominee or
agent, and not with the view to, or for resale in connection with,
any distribution thereof and understands that the Closing Shares
are being offered under an exemption in Section 4(2) of the
Securities Act upon reliance on such representation. Sellers and
Majority Stockholders are "accredited investors" as such term is
defined in Rule 501(a) under the Securities Act. Sellers and
Stockholders understand that the Closing Shares representing the
MRI Common Stock which are issuable hereunder, have not been, and
will not as of the Closing Date be, registered under the Securities
Act. The Sellers and Stockholders acknowledge that the Closing
Shares which are issuable hereunder must be held indefinitely until
subsequently registered under the Securities Act as provided for
herein or any such shares are bought back pursuant to the terms of
this Agreement or unless an exemption from such registration is<PAGE>
<PAGE>
available. Sellers and Stockholders are aware of the provisions of
Rule 144 promulgated under the Securities Act which permit limited
resale of shares subject to the satisfaction of the requirements
set forth therein.
2.17 Taxes. (a) To the best of Sellers' knowledge,
Sellers have timely filed or will timely file all returns and
reports required to be filed by it with any taxing authority with
respect to Taxes (as hereinafter defined) (as for any period ending
on or before the Closing Date), taking into account any extension
of time to file granted to or obtained on behalf of Sellers, (b)
all Taxes shown to be payable on such returns or reports that are
due prior to the Closing Date have been paid or will be paid when
due, (c) as of the date hereof, no deficiency for any material
amount of tax has been asserted or assessed by a taxing authority
against Sellers, (d) all liability for Taxes of Sellers that are or
will become due or payable with respect to periods covered by the
financial statements referred to in Section 2.3 hereof have been
paid or adequately reserved for on such financial statements, and
(e) to the best of Sellers' knowledge, no Tax return or reports of
Sellers are under examination. As used herein, "Tax" or "Taxes"
shall mean any and all taxes, charges, fees, or levies payable to
any federal, state, local or foreign taxing authority or agency,
including, without limitation, (i) income, franchise, profits,
gross receipts, minimum, alternative minimum, estimated, ad
valorem, value added, sales, use, service, real or personal
property, capital stock, license, payroll, withholding disability,
employment, social security, workers compensation, unemployment
compensation, utility, severance, excise, stamp, windfall profits,
transfer and gains taxes, (ii) customs duties, imposts, charges,
levies or other similar assessments of any kind, and (iii)
interest, penalties and additions to tax imposed with respect
thereto.
2.18 No Referrals by Interested Parties. From and after
January 1, 1995 and through the Closing Date, there have been no
referrals (as defined under the United States Federal Stock II self
referral law) of Medicare or medicaid patients to the Sellers by
physicians owning equity interests in the Sellers or any Center or
having any financial relationship with the Sellers or any Center,
except that ownership by one or more radiologists who provide
professional services at any Center shall not be in violation of
this Section 2.18 provided that such ownership is in conformance
with the applicable exceptions to the United States Federal Stock
II self referral law.
2.19 Related Party Transactions. Schedule 2.19 hereto
specifies all entities that have transacted business with (a) the
Sellers or with respect to any Center or (b) patients of Sellers or
any Center, that are "related" through common ownership or control
to Sellers or any Center under the Medicare definition of such
term, or the definition of such term under the Medicaid program of<PAGE>
<PAGE>
any State. For each such entity, Schedule 2.19 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 2.19
are all contracts or written agreements between such entities and
the Sellers or any Center.
2.20 Capitalization; Affiliates. (a) Schedule 2.20(A)
hereto sets forth the following information with respect to
Capstone and each Affiliate: (i) a description of its issued and
outstanding capital stock (and the holders of any such issued and
outstanding capital stock); and (ii) listed by Center, with respect
to each Center which is owned by a Limited Partnership Affiliate
(a) a description of, including a listing of the name and limited
partnership interests held by each limited partner, the number of
units of limited partnership interests (and what percentage of all
partnership interests of such Limited Partnership Affiliate such
number of units of limited partnership interests constitute) and
the number of general partnership interests and (b) the percentage
of its entire partnership interest therein (broken down into total
percentage interest, general partnership percentage interest and
limited partnership percentage interest). Except as set forth on
Schedule 2.20(A), all issued and outstanding partnership interests
listed on Schedule 2.20(A) are validly issued. Capstone and each
Affiliate beneficially own the partnership interests in the amounts
listed on Schedule 2.20(A) free and clear of all liens, security
interests and encumbrances and upon delivery of the applicable
appropriate instruments of transfer, Buyer will receive good title
to the partnership interests listed on Schedule 2.20(A), free and
clear of all security interests, liens and encumbrances.
(b) Schedule 2.20(B) hereto sets forth the following
information with respect to Dayton L.L.C.: (i) a description of its
issued and outstanding membership interests (and the holders of any
such issued and outstanding membership interests). Except as set
forth on Schedule 2.20(B), (x) all of the issued and outstanding
membership interests listed on Schedule 2.20(B) are duly and
validly authorized and issued, fully paid and nonassessable.
Capstone owns the membership interests in the denominations listed
on Schedule 2.20(B) free and clear of all liens, security interests
and encumbrances and upon delivery of the applicable instruments of
transfer duly endorsed for transfer, Buyer will receive good title
to the membership interests listed on Schedule 2.20(B), free and
clear of all security interests, liens and encumbrances.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND MRI
As an inducement to Sellers and the Stockholders to enter
into this Agreement and to consummate the transactions contemplated<PAGE>
<PAGE>
hereby, Buyer and MRI represent and warrant to Sellers and the
Stockholders and agree as follows:
3.1 Organization. Each of Buyer and MRI is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Buyer has all requisite
corporate power and authority to own or lease its properties and
assets and to conduct its business as presently conducted. Buyer
is a wholly-owned indirect subsidiary of MRI.
3.2 Authority to Effect Transactions. (a) Each of Buyer
and MRI has all requisite corporate power and authority to execute,
deliver and perform this Agreement and Buyer's Closing Documents.
All necessary corporate action on the part of Buyer and MRI has
been duly taken to authorize the execution, delivery and
performance of this Agreement and Buyer's Closing Documents. This
Agreement has been duly authorized, executed and delivered by Buyer
and MRI, and is the legal, valid and binding obligation of Buyer
and MRI enforceable against Buyer and MRI in accordance with its
terms. Buyer's Closing Documents have been duly authorized by
Buyer and, upon execution and delivery by Buyer as contemplated
hereby, will be the legal, valid and binding obligations of Buyer,
enforceable against Buyer in accordance with their terms.
(b) Except as set forth in Schedule 3.2 hereto, (i) no
consent, authorization, approval, order, license, certificate or
permit of or from, or declaration or filing with, any foreign,
federal, state, local or other governmental authority or regulating
body or any court or other tribunal or any party to any contract,
agreement, instrument, lease or license to which Buyer is a party
or by which it is bound, is required for the execution, delivery or
performance by Buyer of this Agreement or any of Buyer's Closing
Documents or in connection therewith or for consummation of the
transactions contemplated hereby or thereby and (ii) neither the
execution, delivery or performance by Buyer of this Agreement or
any of Buyer's Closing Documents, nor the consummation of the
transactions contemplated hereby or thereby (w) conflicts with or
will conflict with or (with or without the giving of notice or the
passage of time or both) results or will result in a breach of the
terms, conditions or provisions of, (x) constitutes or will
constitute a default under, (y) constitutes or will constitute an
event creating rights of acceleration, termination or cancellation,
or loss of rights under, or (z) results or will result in a
violation of, (A) the certificate of incorporation or by-laws, each
as amended to date, of Buyer, (B) any law, statute, rule, regula-
tion, order, award, judgment or decree to which Buyer is subject,
or (c) any contract, agreement, instrument, lease or license to
which Buyer is a party or by which it is bound.
3.3 Litigation. Except as set forth on Schedule 3.3
hereto, there is no suit, action, administrative proceeding,
arbitration or other proceeding or governmental investigation<PAGE>
<PAGE>
pending or, to the best knowledge of Buyer, threatened against
Buyer, MRI or any MRI Group Entity, which questions the legality,
validity or propriety of the transactions contemplated by this
Agreement.
3.4 Closing Shares. MRI covenants that all of the
Closing Shares issuable hereunder to Sellers shall, when so issued,
be duly and validly issued and fully paid and non-assessable and
free from all taxes, liens and charges with respect to the issue
thereof.
3.5 Brokers. Neither Buyer, MRI nor any Affiliate of
Buyer or MRI have incurred any liability or obligation to any
broker, finder or agent for any brokerage fees, finder's fees or
commissions with respect to the transactions contemplated by this
Agreement.
3.6 Removal of Guaranties. MRI and Buyer covenant to
use their best efforts to have removed any guaranties of any
Stockholder or Seller in place with respect to any of the Purchased
Assets or any Assumed Liabilities listed on Schedule 1.4 hereto
(the "Guaranties") and, or as otherwise listed on Schedule 3.6
hereto. For purposes of this Section 3.6, "best efforts" shall
mean MRI offering to, on the same terms and conditions, guaranty
such obligations in place of the current guarantor.
3.7 Annual Report on Form 10-K. Buyer has delivered to
Capstone MRI's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "10-K"). The 10-K did not at the time it
was filed contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
4.1 Access. Sellers shall (a) afford to the officers,
stockholders, employees, consultants, attorneys, agents, engineers,
accountants and other representatives ("Agents") of Buyer and of
any prospective lenders or to investors in Buyer or its Affiliates
(the "Buyer's Lenders and Investors"), during normal business
hours, access to the properties, assets, books and records of
Sellers relating exclusively or primarily to the Purchased Assets,
(b) permit them to make extracts from and copies of such books and
records and (c) from time to time furnish to Buyer, Buyer's Agents
or Buyer's Lenders and Investors such financial and operating data
and other information concerning the results of operations of the<PAGE>
<PAGE>
Centers and the Business as Buyer may reasonably request including
all interim financial statements with respect to the Centers. No
investigation by or on behalf of Buyer shall affect the
representations and warranties of Sellers hereunder. Buyer shall
use reasonable efforts to conduct its investigation of the Business
in such manner as to prevent disruption of relations with the
employees, patients, creditors and suppliers relating to the
Business.
4.2 Conduct of Business. Sellers and Buyer shall
refrain from taking any action which would render any of their
respective representations and warranties inaccurate as of the
Closing Date, except for changes therein permitted by this
Agreement or resulting from transactions carried out pursuant to
this Agreement. Each party shall promptly notify the other of any
action, suit, proceeding or investigation that may be threatened,
brought, asserted or commenced of which it becomes aware that would
have been listed, in the case of Sellers, on Schedule 2.9 hereto
or, in the case of Buyer, on Schedule 3.3 hereof, if such action,
suit, proceeding or investigation had arisen or were in existence
on or prior to the date hereof. Sellers shall act diligently and
reasonably, if consistent with the operation of the Business in the
usual and ordinary manner, (a) to preserve the Purchased Assets
intact, (b) to keep available, if so requested by Buyer, the
services of the present personnel of the Centers and (c) to
preserve the goodwill of suppliers and customers of the Center and
others having business relations therewith. Except as otherwise
contemplated by this Agreement or consented to in writing by Buyer,
Sellers shall conduct the business and operations of each Center in
all respects only in the ordinary course and substantially as
presently operated. Notwithstanding the foregoing, except as
otherwise contemplated by this Agreement or consented to in writing
by Buyer, Sellers shall not, with respect to the Purchased Assets,
sell, lease, transfer or otherwise dispose of (including transfers
to any Affiliates of Sellers), or mortgage or pledge, or impose or
suffer to be imposed any Lien on, any Purchased Assets. In
addition, Sellers shall ensure that all liabilities and obligations
to vendors, lenders and other creditors are maintained at the same
levels as the listing provided as of December 31, 1996 as updated
as of April 30, 1997, which listing is annexed hereto as Schedule
4.2, and are not past due (i.e., paid in full pursuant to the terms
of the applicable invoice), and Sellers and Stockholders shall
indemnify and hold Buyer harmless against all past due obligations
of each Center as of the Closing incurred prior to Closing.
Additionally, pending the Closing, and except as otherwise
specifically contemplated by this Agreement, Sellers:
(i) shall not declare, pay or set aside for payment any
dividend or other distribution in respect to any of its securities
or directly or indirectly redeem, purchase or otherwise acquire any
shares of its securities if the result thereof is to reduce the
amount of Included Cash;<PAGE>
<PAGE>
(ii) shall not enter into contracts or commitments
involving, individually, in excess of $5,000 (or $25,000 in the
aggregate);
(iii) will not grant any increase in compensation to any
officer, employee or agent or enter into or amend any stock option
plan or any employment or consulting agreement if the result
thereof is to reduce the amount of Included Cash;
(iv) shall not dispose of or encumber any of its
properties and assets;
(v) shall not merge or consolidate with any other
corporation, or acquire any stock, business, or substantially all
of the property or assets of any other person, firm, association,
corporation or other business organization; and
(vi) shall not do any act or omit to do any act which
with or without the giving of notice or the passage of time, or
both, would result in a material breach of or default under any
contract, commitment or obligation of the Sellers.
4.3 Maintenance. Sellers shall act reasonably and in
accordance with its prior practice with respect to the Business to
preserve, maintain in good and usable condition and insure and
repair the Purchased Assets and the Centers in the ordinary course.
4.4 Consents and Approvals. Sellers shall act
diligently and reasonably to secure the consents and approvals of
any governmental agencies and authorities and any other Persons
(and Buyer shall assist Sellers to obtain any such consents and
approvals), as set forth on Schedule 2.2(B) annexed hereto,
required to be obtained in order to assign or transfer to Buyer,
any contract or License included within the Purchased Assets or to
otherwise satisfy the conditions set forth in Sections 5.4 and 5.7
hereof, provided, that Sellers shall not make any agreement or
understanding affecting the Purchased Assets, the Centers or the
Business as a condition for obtaining any such consent or waiver
except with the prior written consent of Buyer. Buyer shall act
diligently and reasonably to cooperate with Sellers to obtain the
consents or approvals contemplated by this Section 4.4.
4.5 Renewal of Contracts. Sellers shall consult with
Buyer fully with respect to the renewal of any Contracts that are
scheduled to expire between the date hereof and the Termination
Date and will not enter into any such renewals without the prior
written consent of the Buyer.
4.6 Stockholder Covenants. Insofar as the Stockholders
control Sellers, any covenant contained herein requiring action on
the part of Sellers shall require the Stockholders to cause Sellers
to take such action.<PAGE>
<PAGE>
4.7 Financing Arrangement. Sellers shall provide Buyer
with information concerning all oral and written financing
arrangements to which Sellers are a party relating to the Purchased
Assets. Sellers shall permit Buyer to renegotiate the terms and
conditions of any such financing arrangement which Buyer
determines, in its sole discretion, should be renegotiated.
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall be
subject, at the option of Buyer, to the fulfillment of each of the
following conditions as of the Closing Date:
5.1 Accuracy of Representations and Compliance With
Conditions. All representations and warranties of Sellers and the
Stockholders contained in this Agreement shall be true and accurate
when made and, except (a) as a result of the taking of any action
contemplated hereby or (b) insofar as any representation or
warranty relates to any specified earlier date, shall be true and
accurate as of the Closing Date, as though such representations and
warranties were then made by Sellers and the Stockholders; and
Sellers and the Stockholders shall have performed and complied with
all of their covenants and agreements set forth in this Agreement
to be performed or complied with at or before the Closing.
5.2 No Changes; Destruction of Property. Between the
date hereof and the Closing Date, there shall have been (a) no
material adverse change in the Business or any of the Purchased
Assets; (b) no federal, state or local legislative or regulatory
change materially and adversely affecting the Business or the
Purchased Assets; (c) no damage, destruction, loss or claim or
condemnation or other taking materially and adversely affecting the
Business or the Purchased Assets that has not been repaired or
replaced; and (d) no lawsuit, proceeding or claim filed or asserted
against Sellers that, if adversely determined, may have a material
adverse effect on the Business or the Purchased Assets.
5.3 Opinion of Counsel for Sellers. Buyer shall have
received from counsel to Sellers and the Stockholders, an opinion
dated the Closing Date in the form set forth in Exhibit B hereto.
5.6 Necessary Government Approvals. The parties shall
have received all governmental and regulatory approvals, actions
and consents, if any, necessary to consummate the transactions
contemplated hereby.
5.7 Assumption of Leases and Assumed Contracts. The
landlord of each Center shall have agreed to the assumption by
Buyer of the lease for such Center (the "Leases") and the Assumed<PAGE>
<PAGE>
Contracts shall be assigned to Buyer, in each case, on terms no
less favorable to Buyer than the current terms thereof.
5.8 Necessary Consents. The parties shall have received
written consents, in form and substance reasonably satisfactory to
Buyer, to the transactions contemplated hereby from all Persons
whose consent is required therefor, as set forth on Schedule
2.2(B).
5.7 Review of Proceedings. All actions, proceedings,
instruments and documents required to carry out the transactions
contemplated by this Agreement or any other agreement to be
executed and delivered by any of the parties hereunder or in
connection herewith shall be subject to the reasonable approval of
Buyer's counsel, and Sellers shall have furnished to such counsel
such documents as such counsel may have reasonably requested for
the purpose of enabling such counsel to pass upon legal matters
incidental thereto.
5.8 Threatened or Pending Proceedings. No proceedings
shall have been initiated or threatened by any governmental
department, commission, bureau, board, agency or instrumentality
seeking to enjoin or otherwise restrain the consummation of the
transactions contemplated hereby.
5.9 Authorization to Endorse Certain Checks. Buyer
shall have received a duly executed letter from Sellers in the form
of Exhibit C annexed hereto, dated the Closing Date, authorizing
Buyer to endorse certain checks made payable to Sellers.
5.10 Deliveries Complete. All documents required to
have been delivered by Sellers to Buyer, including each of the
certificates, instruments and documents listed on Schedule 5.10
hereto, and all actions required under this Agreement to have been
taken by Sellers, at or prior to the Closing shall have been
delivered or taken.
5.11 Accounts Payable. All trade and lender accounts
payable relating to the Business shall, as of the Closing Date, be
current in accordance with Section 4.2.
5.12 Closing Certificate. On the Closing Date, Sellers
and each Stockholder shall deliver to Buyer a certificate signed by
the President of Sellers or such Stockholder to the effect that:
(a) all representations and warranties of Sellers and Stockholders
contained in this Agreement are true and correct as if made on and
as of such date, except (i) as a result of the taking of any action
contemplated hereby, (ii) insofar as any such representation or
warranty relates to a specified earlier date; (b) Sellers have, in
all material respects, performed and complied with all of its
covenants and agreements set forth in this Agreement to be<PAGE>
<PAGE>
performed or complied with at or before the Closing; and (c) each
of the other conditions precedent to Buyer's obligations to close
under this Agreement has, in all material respects, been fulfilled.
5.13 Employees. Subject to Buyer's normal recruiting
standards, anticipated needs and wage scale and fringe benefit
program, Buyer shall consider each of Sellers' employees employed
at the Center (the "Employees") for possible employment by Buyer at
the Center from and after the Closing Date, it being agreed,
however, that Buyer shall have no obligation to employ any such
person. At least five business days prior to the Closing Date,
Buyer shall deliver to Sellers a list of those Employees that Buyer
wishes to so employ and Sellers shall use its best efforts to cause
each such designated Employee to accept such employment. As to any
Employees not entering into Buyer's employ on the Closing Date,
Sellers shall be solely responsible for (i) properly notifying such
Employees of their termination to the extent required, and (ii)
making all severance and related payments, including but not
limited to payments for accrued vacation and accrued sick days, if
any.
5.14 Radiology Agreement. Buyer and USRA will enter
into a Radiology Agreement substantially in the form of Exhibit E
hereto.
5.15 Consulting Agreement. Buyer and Domesek will enter
into a Consulting Agreement substantially in the form of Exhibit F
hereto.
5.16 Offers of Employment. (i) Buyer shall have offered
(the "Baca Offer") an employment opportunity to Baca as follows:
(a) the responsibilities of Baca would include a dedicated effort
with respect to MRI business development, acquisitions, and
hospital delivery systems, in addition to supporting the transition
of financial functions relating to the Centers to MRI's corporate
headquarters located in Hackensack, New Jersey; (b) Baca will be
entitled to compensation of $85,000 per year with the opportunity
to make an additional $20,000 per year based upon an incentive plan
as mutually agreed between Baca and MRI; and (c) Baca will be
entitled to receive the benefits associated with the standard MRI
benefit package.
(ii) Buyer shall have offered (the "Fox Offer") an
employment opportunity to Fox as follows: (a) the responsibilities
of Fox would be commensurate with other regional operations
managers of MRI; (b) Fox will be entitled to compensation of
$75,000 per year with an opportunity to make up to an additional
$20,000 per year based upon participation in the applicable MRI
area manager bonus plan; and (c) Fox will be entitled to receive
the benefits associated with the standard MRI benefit package.
<PAGE>
<PAGE>
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLERS
AND THE STOCKHOLDERS
The obligations of Sellers and the Stockholders under
this Agreement shall be subject, at the option of Sellers, to the
fulfillment of each of the following conditions as of the Closing
Date:
6.1 Accuracy of Representations and Compliance With
Conditions. All representations and warranties of Buyer and MRI
contained in this Agreement shall be true and accurate when made
and, except (a) as a result of the taking of any action
contemplated hereby or (b) insofar as any representation or
warranty relates to any specified earlier date, shall be true and
accurate as of the Closing Date, as though such representations and
warranties were then made by Buyer; and Buyer shall have performed
and complied with all of its covenants and agreements set forth in
this Agreement to be performed or complied with at or before the
Closing.
6.2 Orders. No proceedings shall have been initiated or
threatened by any governmental department, commission, bureau,
board, agency or instrumentality seeking to enjoin or otherwise
restrain the consummation of the transactions contemplated hereby.
6.3 Opinion of Counsel to Buyer. Sellers shall have
received from Werbel & Carnelutti, counsel for Buyer and MRI, an
opinion dated the Closing Date in the form set forth in Exhibit D
hereto.
6.4 Deliveries Complete. All documents required to have
been delivered by Buyer and MRI to Sellers, including each of the
certificates, instruments and documents listed on Schedule 6.5
hereto, and all actions required under this Agreement to have been
taken by Buyer or MRI, at or prior to the Closing shall have been
delivered or taken.
6.5 Closing Certificate. On the Closing Date, Buyer
shall deliver to Sellers a certificate signed by the President (or
a Vice President) of Buyer to the effect that: (a) all representa-
tions and warranties of Buyer contained in this Agreement are true
and correct as if made on and as of such date, except (i) as a
result of the taking of any action contemplated hereby, (ii)
insofar as any such representation or warranty relates to a
specified earlier date; (b) Buyer has, in all material respects,
performed and complied with all of its covenants and agreements set
forth in this Agreement to be performed or complied with at or
before the Closing; and (c) each of the other conditions precedent
to Sellers' obligations to close under this Agreement has, in all
material respects, been fulfilled.<PAGE>
<PAGE>
6.6 Other Conditions. Each of the USR Radiology
Agreement and Consulting Agreement have been entered into and each
of the Baca Offer and Fox Offer have been made.
6.7 Necessary Government Approvals. The parties shall
have received all governmental and regulatory approvals, actions
and consents, if any, necessary to consummate the transactions
contemplated hereby.
6.8 Assumption of Lease and Assumed Contracts. The
landlord of each Center shall have agreed to the assumption by
Buyer of the Leases. The Assumed Contracts shall be assigned to
Buyer on terms satisfactory to Buyer or, at the sole option of MRI,
MRI shall indemnify Sellers and the Stockholders for any losses
resulting to them therefrom.
6.9 Necessary Consents. The parties shall have received
written consents, in form and substance reasonably satisfactory to
Buyer, to the transactions contemplated hereby from all Persons
whose consent is required therefor, as set forth on Schedule 2.2(B)
or, at the sole option of MRI, MRI shall indemnify Sellers and the
Stockholders for any losses resulting to them therefrom.
ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. (a) Buyer shall retain
the books and records of each Center and the Purchased Assets
(except for tax records relating thereto, which shall be retained
by Sellers and to which Buyer shall have access to such tax records
on the same terms and conditions set forth in Section 7.1(b)
hereof) transferred to it hereunder for a period of not less than
seven (7) years; provided, however that Buyer shall have the right
to dispose of or destroy any such books and records at any earlier
time upon giving Sellers reasonable notice of such intent and the
right to obtain from Buyer those books and records which it intends
to dispose of or destroy. Sellers shall have the right, at the
expense of Sellers, (i) of reasonable access to and examination of
such records and books for a period of seven (7) years from and
after the Closing Date upon reasonable notice to Buyer and during
normal business hours and (ii) to make copies of such of the books,
contracts and records included in the Purchased Assets as are in
Buyer's possession which relate to any period prior to the Closing.
With the approval of Buyer, which approval shall not be unreason-
ably withheld or delayed, Sellers may remove from Buyer's
possession the originals of such of the books and records included
in the Purchased Assets as Sellers may require, for use in
litigation, provided that Sellers shall indemnify Buyer against
losses, expenses, or damages resulting from the loss, destruction
or non-return of such books and records. At the end of such seven
year period, Sellers may receive, and Buyer shall relinquish
possession to Sellers of, such books and records.<PAGE>
<PAGE>
(b) Sellers shall retain the books and records of each
Center not transferred to Buyer hereunder for a period of not less
than seven (7) years; provided, however that Sellers shall have the
right to dispose of or destroy any such books and records at any
earlier time upon giving Buyer reasonable notice of such intent and
the right to obtain from Sellers those books and records which it
intends to dispose of or destroy. Buyer shall have the right at
the expense of Buyer, (i) of reasonable access to and examination
of such records and books for a period of seven (7) years from and
after the Closing Date upon reasonable notice to Sellers and during
normal business hours, and (ii) to make copies of such books,
contracts and records as are in Sellers' possession. With the
approval of Sellers, which approval shall not be unreasonably
withheld, Buyer may remove from Sellers' possession the originals
of such books and records as Buyer may require, for use in
litigation, provided that Buyer shall indemnify Sellers against any
losses, expenses or damages resulting from the loss, destruction or
non-return of the same. At the end of such seven year period,
Buyer may receive, and Sellers shall relinquish possession to Buyer
of, such books and records.
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and after the
Closing, no party to this Agreement (including MRI) shall directly
or indirectly make or cause to be made any public announcement or
disclosure, or issue any notice with respect to this Agreement or
the transactions contemplated hereby without the prior consent of
the other parties hereto, which consent shall not be unreasonably
withheld; provided, however that Buyer and/or MRI may make any
disclosure which, in the opinion of counsel to Buyer and MRI, is
required under federal securities laws with prior notice to
Capstone. In the event this Agreement terminates without the
purchase and sale of the Purchased Assets having taken place, the
parties and their respective Affiliates and Agents will (i) hold in
confidence and refrain from using all non-public information
received in connection with the transactions contemplated in this
Agreement, and (ii) promptly return all such non-public information
and any and all copies thereof to the party to which such informa-
tion relates. Sellers and the Stockholders acknowledge that the
common stock of Buyer's parent, MRI, is publicly traded and agree
to refrain from using non-public information regarding this
transaction in connection with the purchase or sale of such
securities.
(b) During the period commencing on the date hereof and
ending five years from the date hereof, neither the Stockholders,
Sellers nor any Affiliate of Sellers or Stockholders, shall
disclose intentionally to anyone, or use or otherwise exploit for<PAGE>
<PAGE>
the Stockholders', Sellers' or any Affiliate's of Sellers or
Stockholders benefit, or for the benefit of anyone other than Buyer
or MRI Group Entities, (i) any confidential information of Buyer or
MRI Group Entities relating to the Business or the Centers,
including, without limitation, any trade secrets, customer lists,
details of client or consultant contracts, marketing plans, product
or service development plans, business acquisition plans of the
Buyer or MRI Group Entities related to the Business, or (ii) any
portion or phase of any technical information, ideas, "know-how",
discoveries, product designs, computer programs (including source
or object codes), processes, procedures, formulae or improvements
relating to the Centers that is valuable, and whether or not in
written or tangible form, and including all memoranda, notes,
plans, reports, records, documents and other evidence thereof (all
such information, documents and materials being hereinafter called
"Confidential Information"). Buyer and MRI agree to comply with
the same confidentiality provisions with respect to Sellers in the
event this Agreement is terminated prior to Closing.
(c) The foregoing notwithstanding, the term
"Confidential Information" does not include, and there shall be no
obligation hereunder with respect to, (i) information that becomes
generally available to the public, other than as a result of a
disclosure by Stockholders, Sellers or any Affiliate of Sellers or
Stockholders or any agent or other representative thereof, and (ii)
business and technical methods applicable to diagnostic imaging
businesses generally. Neither the Stockholders, Sellers nor any
Affiliate of Sellers shall have any obligation hereunder to keep
confidential any Confidential Information if and to the extent
disclosure of any thereof is required by law, and the Stockholders,
Sellers or any Affiliate of Sellers or Stockholders concerned shall
provide Buyer with prompt notice of such requirement, prior to
making any disclosure, so that the Buyer may seek an appropriate
protective or restrictive order.
(d) At the request of Buyer, Stockholders and Sellers
agree to deliver to Buyer, at any time during the term of this
Agreement, all Confidential Information which any of them may
possess or control.
8.2 Non-Competition/Noninterference. During the period
commencing on the date hereof and ending five (5) years from the
date hereof, none of the Majority Stockholders, Sellers nor any
Affiliate of Sellers or the Majority Stockholders shall, directly
or indirectly:
(a) anywhere within a fifteen (15) mile radius from any
diagnostic imaging center then owned or operated by MRI or any
Affiliate thereof own, manage, operate, advise (whether or not for
compensation), control, or invest or acquire an interest in any
business, or otherwise engage or participate in, whether as a
proprietor, partner, stockholder, director, officer, Key Employee,<PAGE>
<PAGE>
joint venturer, lender, advisor, consultant, investor or other
participant, any business which offers diagnostic imaging services
(a "Competitive Business") provided, however that USRA shall be
entitled to perform radiology reading services for those hospitals
and primary care physicians it currently performs such services for
and listed on Schedule 8.2 or to provide services for any business
which provides diagnostic imaging services solely as an incidental
part of its business (such as a primary care physician practice)
or, subject to the terms of the Radiology Agreement, to be employed
as a radiologist or other clinical position in a hospital or health
system, and provided, further, however, that the restrictive
covenants set forth in this Section 8.2 shall not apply to any
Majority Stockholder with respect to any hospital, health system,
MSO, PPO (or other similar entity) so long as the Majority
Stockholder is not directly involved in any aspect of the
diagnostic imaging services (e.g., Department of Radiology)
provided by such entity or with respect to any business which
provides diagnostic imaging services solely as an incidental part
of its business (e.g., a primary care physician practice or
cardiology practice), and in either case, for which USRA or such
Majority Stockholder receives prior written consent from Buyers or
MRI, which consent shall not be unreasonably withheld;
(b) solicit, induce or influence any customer, supplier,
or any other person or entity which has a business relationship
with Buyer or any MRI Group Entity to discontinue or reduce the
extent of such relationship with Buyer or any MRI Group Entity; or
(c) (i) recruit, solicit, or otherwise induce or
influence any employee of Buyer or any MRI Group Entity to
discontinue such employment with Buyer or any MRI Group Entity or
any radiologist who, at the time has a business relationship with
Buyer or any MRI Group Entity, from discontinuing such relationship
with Buyer or an MRI Group Entity, or (ii) employ or seek to
employ, or cause any Competitive Business or permit any Competitive
Business to employ or seek to employ any person who is then (or was
at any time within six months prior to the date either
Stockholders, Sellers, or Stockholders' Affiliate or the
Competitive Business employs or seeks to employ such person)
employed by Buyer or any MRI Group Entity.
(d) Notwithstanding the foregoing, the provisions of
this Section 8.2 will not be deemed breached merely because either
Stockholders or Sellers beneficially own, in the aggregate, not
more than 5% of the outstanding common stock of a corporation, if,
at the time of its acquisition by either Sellers or Stockholders,
such stock is listed on a national securities exchange, is reported
on Nasdaq, or is regularly traded in the over-the-counter market by
a member of a national securities exchange.
<PAGE>
<PAGE>
(e) Sellers and Stockholders acknowledge and agree that
in the event of any breach or likely breach of any of the covenants
of Article 8 herein, the Buyer and any relevant Affiliate would
incur damages in an amount difficult to ascertain and/or be
irreparably harmed and could not be made whole solely by monetary
damages. It is accordingly agreed that such persons, in addition
to any other remedy to which they may be entitled at law or in
equity, shall be entitled to injunctive relief in respect of such
breach or likely breach as may be ordered by any court of competent
jurisdiction including, but not limited to, an injunction
restraining any violation of Article 8 herein and without the proof
of actual damages. It is intended that full third party rights are
granted under this provision.
(f) Sellers and Stockholders acknowledge and agree that
the covenants and other provisions set forth in Article 8 herein
are reasonable, including with respect to duration and subject
matter, and that they are receiving valuable and adequate
consideration for such covenants under this Agreement. The parties
acknowledge that it is their intention that all such covenants and
provisions be enforceable to the fullest extent possible under
applicable law. If any of the provisions set forth in this Article
8 are found to be unenforceable in any instance, such finding or
invalidity shall not effect the enforceability of any remaining
provision and such unenforceable provision to the specific extent
that it is unenforceable, shall be interpreted to extend only over
the maximum period of time and to the maximum extent as to the
which it is enforceable, in order to effectuate the parties'
intention, as represented hereby, to the greatest extent possible.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnity by Sellers and the Majority Stockholders.
Subject to Section 10.5 hereof, each of Sellers and each Majority
Stockholder, jointly and severally, agrees to indemnify and hold
harmless Buyer and its successors and assigns and its and their
respective officers, directors, controlling Persons (if any),
employees, attorneys, agents, Affiliates, partners and stockhold-
ers, in each case past, present, or as they may exist at any time
after the date of this Agreement (including Buyer, the "Buyer
Indemnities") against and in respect of any and all:
(a) claims, suits, actions, proceedings (formal and
informal), investigations, judgments, deficiencies, damages,
settlements, liabilities, losses, costs and legal and other
expenses arising out of or based upon (i) any breach of any
representation, warranty, covenant or agreement of Sellers or the
Stockholders contained in this Agreement or in any other agreement
executed and delivered by Sellers or the Stockholders hereunder or<PAGE>
<PAGE>
in connection herewith (ii) any obligation or liability of any
nature, accrued or contingent, not assumed by Buyer in accordance
with Section 1.4 of this Agreement, including but not limited to
any trade and lender payable obligations incurred prior to the
Closing Date, (iii) the waiver by Buyer of compliance by Sellers
with the provisions of applicable bulk sales laws, (iv) the
application of appropriate health care laws as they pertain to the
provision of services by the Center prior to the Closing Date and
(v) any action by any stockholder of the Sellers relating to the
transaction contemplated hereby; and
(b) claims, suits, actions and proceedings, including
but not limited to professional liability claims, (formal and
informal) of Persons not a party to this Agreement and related
investigations, judgments, deficiencies, damages, settlements,
liabilities, losses, costs and legal and other expenses arising
from events occurring on or prior to the Closing Date relating to
the Purchased Assets or the operation or conduct of the Business,
all to the extent that MRI Indemnities have suffered Adverse
Consequences (as defined in Section 10.15 hereof) by reason of any
of the foregoing described in Section 9.1 (a) hereof and in this
Section 9.1 (b) in excess of a $25,000 aggregate deductible.
; provided, however, that the maximum amount to be paid pursuant to
this Article 9 shall not exceed the total Purchase Price (including
the Capstone Consideration) which Buyer pays pursuant to the terms
hereof.
9.2 Indemnity by Buyer and MRI. Subject to Section 10.5
hereof, Buyer and MRI, jointly and severally, agree to indemnify
and hold harmless Sellers and the Stockholders and their successors
and assigns and their respective partners, controlling Persons (if
any), employees, attorneys, agents, Affiliates, partners and
stockholders (including Sellers, the "Sellers Indemnities") against
and in respect of any and all:
(a) claims, suits, actions, proceedings (formal and
informal), investigations, judgments, deficiencies, damages,
settlements, liabilities, losses, costs and legal and other
expenses arising out of or based upon (i) any breach of any
representation, warranty, covenant or agreement of Buyer contained
in this Agreement, or in any other agreement executed and delivered
by Buyer hereunder or in connection herewith, (ii) the liabilities
assumed by Buyer pursuant to Section 1.4 of this Agreement and
(iii) the Guaranties; and
(b) claims, suits, actions and proceedings (formal and
informal) of Persons not a party to this Agreement and related
investigations, judgments, deficiencies, damages, settlements, lia-
bilities, losses, costs and legal and other expenses arising from
events occurring after the Closing Date relating to the Purchased
Assets or the operation or conduct of the Business except to the<PAGE>
<PAGE>
extent that same results from the breach of any representation or
warranty of Sellers hereunder, all to the extent that Sellers
Indemnitees have suffered adverse consequences by reason of any of
the foregoing described in Section 9.2(a) hereof and this Section
9.2(b) in excess of a $25,000 aggregate deductible.
9.3 Defense of Claims. Any Buyer Indemnitee or Sellers
Indemnitee (the "Indemnified Party") seeking indemnification under
this Agreement shall give to the party obligated to provide
indemnification to such Indemnified Party (the "Indemnitor") a
notice (a "Claim Notice") describing in reasonable detail the facts
giving rise to any claim for indemnification hereunder promptly
upon learning of the existence of such claim. Upon receipt by the
Indemnitor of a Claim Notice from an Indemnified Party with respect
to any claim of a third party, such Indemnitor may assume the
defense thereof with counsel reasonably satisfactory to the
Indemnified Party and, in such event, shall agree to pay and
otherwise discharge with the Indemnitor's own assets all judgments,
deficiencies, damages, settlements, liabilities, losses, costs and
legal and other expenses related thereto; and the Indemnified Party
shall cooperate in the defense or prosecution thereof and shall
furnish such records, information and testimony and attend all such
conferences, discovery proceedings, hearings, trials and appeals as
may be reasonably requested in connection therewith. If the
Indemnitor does not assume the defense thereof, the Indemnitor
shall similarly cooperate with the Indemnified Party in such
defense or prosecution. The Indemnified Party shall have the right
to participate in the defense or prosecution of any lawsuit with
respect to which the Indemnitor has assumed the defense and to
employ its own counsel therein, but the fees and expenses of such
counsel shall be at the expense of the Indemnified Party unless (i)
the Indemnitor shall not have promptly employed counsel reasonably
satisfactory to such Indemnified Party to take charge of the
defense of such action or (ii) such Indemnified Party shall have
reasonably concluded that there exists a significant conflict of
interest with respect to the conduct of such Indemnified Party's
defense by the Indemnitor, in either of which events such fees and
expenses shall be borne by the Indemnitor and the Indemnitor shall
not have the right to direct the defense of any such action on
behalf of the Indemnified Party. The Indemnitor shall have the
right, in its sole discretion, to settle any claim solely for
monetary damages for which indemnification has been sought and is
available hereunder, provided that the Indemnitor shall not agree
to the settlement of any claim which constitutes the subject of a
Claim Notice which settlement in the reasonable opinion of the
Indemnified Party would have an adverse continuing effect on the
business of the Indemnified Party without the prior written consent
of the Indemnified Party. The Indemnified Party shall give written
notice to the Indemnitor of any proposed settlement of any suit,
which settlement the Indemnitor may, if it shall have assumed the
defense of the suit, reject in its reasonable judgment within 10
days of receipt of such notice. Notwithstanding the foregoing the<PAGE>
<PAGE>
Indemnified Party shall have the right to pay or settle any suit
for which indemnification has been sought and is available
hereunder, provided that, if the defense of such claim shall have
been assumed by the Indemnitor, the Indemnified Party shall
automatically be deemed to have waived any right to indemnification
hereunder.
ARTICLE 10
MISCELLANEOUS
10.1 Bulk Sales Laws. Buyer waives compliance by Sellers with
any applicable bulk sales law and Sellers hereby agrees to
indemnify buyer from any liability thereunder.
10.2 Payment of Sales, Use and Similar Taxes. Sellers shall
be responsible for, and shall pay when due, all taxes (but
excluding any income taxes), of any nature whatsoever, applicable
to, or resulting from, the sale and purchase of the Purchased
Assets hereunder.
10.3 Expenses. Each party hereto shall pay its own expenses
incident to the negotiation, preparation and consummation of this
Agreement and all other agreements, instruments and documents
executed and delivered by it hereunder or in connection herewith,
including all fees and expenses of its or their respective counsel
and accountants, whether or not the transactions contemplated
hereby or thereby are consummated.
10.4 Further Actions. At any time and from time to time after
the Closing, each party hereto agrees, at its own expense (except
as otherwise provided herein), to take such actions and to execute
and deliver such documents as may be reasonably necessary to
effectuate the purposes of this Agreement.
10.5 Survival. The representations, warranties, covenants and
agreements contained in or made pursuant to this Agreement shall
survive the Closing for a period of two (2) years, except to the
extent that they relate to a specified earlier date or that they
relate to taxes or professional liability claims, which
representations shall survive for the relevant statute of
limitations.
10.6 Entire Agreement; Modification. This Agreement (includ-
ing the Schedules and Exhibits hereto) sets forth the entire
understanding of the parties with respect to the subject matter
hereof, supersedes all existing agreements among them concerning
such subject matter and may be modified only by a written
instrument duly executed by each party hereto.
<PAGE>
<PAGE>
10.7 Notices. Any notice given pursuant to this Agreement to
any party hereto shall be deemed to have been duly given when
telecopied followed by registered or certified mail, return receipt
requested, or when hand delivered as follows:
If to Sellers or Stockholders:
CAPSTONE MANAGEMENT GROUP
4622 Street Road
Trevose, PA 19053
Attention: James M. Domesek, M.D.
Telecopy No.: (215) 396-1535
with a copy to:
Wade, Goldstein, Landau, Abruzzo,
MacKarey & Davidson, P.C.
Maschellmac Business Center
1060 First Avenue,Suite 200
King of Prussia, Pennsylvania 19406
Attention: Judith A. MacKarey, Esq.
Telecopy No.: (610) 265-7845
If to Buyer:
MRI CAPSTONE RESOURCES, INC.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
Telecopy No.: (201) 487-1194
with a copy to:
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
Telecopy No.: (212) 832-3353
or at such other address as either such party shall from time to
time designate by written notice, in the manner provided herein, to
the other party hereto. All references to days in this Agreement
shall be deemed to refer to calendar days, unless otherwise
specified.
<PAGE>
<PAGE>
10.8 Waiver. Any waiver must be in writing, and any waiver by
any party of a breach of any provision of this Agreement shall not
operate as or be construed to be a waiver of any other breach of
that provision or of any breach of any other provision of this
Agreement. The failure of a party to insist upon strict adherence
to any term of this Agreement on one or more occasions will not be
considered a waiver or deprive that party of the right thereafter
to insist upon strict adherence to that term or any other term of
this Agreement.
10.9 Binding Effect; Assignment. (a) Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be
assigned by either of the parties hereto without the prior written
consent of the other party, and any purported assignment without
such consent shall be void.
(b) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
10.10 Separability. If any provision of this Agreement is
invalid, illegal or unenforceable, such provision shall be ineffec-
tive to the extent, but only to the extent of, such invalidity,
illegality or unenforceability, without invalidating the remainder
of such provision or the remaining provisions of this Agreement,
unless such a construction would be unreasonable.
10.11 Headings. The headings in this Agreement are solely
for convenience of reference and shall be given no effect in the
construction and interpretation of this Agreement.
10.12 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
10.13 Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Pennsylvania,
without giving effect to conflict of laws.
10.14 Incorporation by Reference. The Schedules and Exhibits
attached hereto and the letters referred to herein as having been
executed or delivered concurrently with the execution of this
Agreement are an integral part of this Agreement and are incorpora-
ted herein by reference.
10.15 Definitions. As used herein, the following terms shall
have the meanings herein specified unless the context otherwise
requires. Defined terms in this Agreement shall include in the
singular number the plural and in the plural number the singular.
<PAGE>
<PAGE>
"Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings, damages, dues,
penalties, fines, costs, liabilities, obligations, taxes, liens,
losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses.
"Affiliate" of a Person shall mean any other Person control-
ling, controlled by or under common control with such Person.
"Key Employee" shall mean any person who is employed in a
management, executive, supervisory, marketing or sales capacity for
another person.
"Market Value" shall mean, with respect to any trading day,
the average of the closing price per share of the MRI Common Stock
on the five consecutive trading days ending on such date. The
closing price for each such day shall be the last sale price
regular way or, in case no such sale takes place on such day, the
average of the closing bid and asked prices of such MRI Common
Stock, in either case on The Nasdaq Stock Market or the principal
securities exchange on which the shares of MRI Common Stock are
listed or admitted to trading.
"MRI Group Entity" shall mean any entity in which the Buyer,
MRI, any direct or indirect subsidiary of MRI, or any such other
entity has a significant direct or indirect equity or financial
interest at any time during the term of this Agreement.
"Person" shall mean and include any individual, partnership,
firm, corporation, association, joint venture, trust or other
entity, or any government or political subdivision or agency,
department or instrumentality thereof.
10.16 Disclosure Schedules. Sellers shall deliver their
Schedules to the Buyer within five business days from the date of
execution of this Agreement. Buyer may terminate this Agreement by
written notice delivered to Sellers within three business days
after receipt of Sellers' Schedules if, as a result of information
disclosed in Sellers' Schedules, Buyer determines, in its sole
discretion, that it is inadvisable to proceed with the transaction
contemplated herein.
10.17 Relation Back. It is expressly agreed that for the
period commencing on May 1, 1997 and ending on the Closing Date,
(i) all revenues attributed to the operations of the Business,
shall accrue for the benefit of Buyer and (ii) all expenses
incurred in the operation of the Business shall be borne by Buyer,
Buyer and Seller to make appropriate adjustment at or as soon after
the Closing as practicable.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Asset Purchase Agreement as of the date first written above.
STOCKHOLDERS CAPSTONE MANAGEMENT GROUP, INC.
- --------------------------- -------------------------------
Name: James M. Domesek, M.D. By:
Name:
Title:
ALBANY MRI MANAGEMENT, INC.
- --------------------------- -------------------------------
Name: Robert Baca By:
Name:
Title:
BENSALEM MRI MANAGEMENT, INC.
- --------------------------- -------------------------------
Name: Lynne Fox By:
Name:
Title:
- ---------------------------
Name: Robert Maskulyak
SYRACUSE MRI MANAGEMENT, INC.
- --------------------------- -------------------------------
Name: Darryl Johnson By:
Name:
Title:
- ---------------------------
Name: John Wisdo
MRI CAPSTONE RESOURCES, INC.
- --------------------------- -------------------------------
Name: Christine Rawski By:
Name:
Title:<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Asset Purchase Agreement as of the date first written above.
STOCKHOLDERS CAPSTONE MANAGEMENT GROUP, INC.
/s/ James M. Domesek, M.D. By: /s/ James M. Domesek, M.D.
- --------------------------- -------------------------------
Name: James M. Domesek, M.D. Name: James M. Domesek, M.D.
Title: President
ALBANY MRI MANAGEMENT, INC.
/s/ Robert Baca By: /s/ James M. Domesek, M.D.
- --------------------------- -------------------------------
Name: Robert Baca Name: James M. Domesek, M.D.
Title: President
BENSALEM MRI MANAGEMENT, INC.
/s/ Lynne Fox By: /s/ James M. Domesek, M.D.
- --------------------------- -------------------------------
Name: Lynne Fox Name: James M. Domesek, M.D.
Title: President
/s/ Robert Maskulyak
- ---------------------------
Name: Robert Maskulyak
SYRACUSE MRI MANAGEMENT, INC.
/s/ Darryl Johnson By: /s/ James M. Domesek, M.D.
- --------------------------- -------------------------------
Name: Darryl Johnson Name: James M. Domesek, M.D.
Title: President
/s/ John Wisdo
- ---------------------------
Name: John Wisdo
MRI CAPSTONE RESOURCES, INC.
/s/ Christine Rawski By: /s/ William Farrell
- --------------------------- -------------------------------
Name: Christine Rawski Name: William Farrell
Title: President
98207<PAGE>
<PAGE>
<ex.99(b)>
Medical Resources, Inc. Closes the Acquisition of
Ten Imaging Centers from Capstone Management, Inc.
HACKENSACK, N.J., June 2/PRNewswire/ -- Medical
Resources, Inc. (Nasdaq: MRII) announced today that it completed
the acquisition of the assets of Capstone Management Group, Inc.
which owns and operates ten diagnostic imaging centers, nine of
which are located in the Northeast and one of which is located in
Ohio. This acquisition increases the Company's total number of
imaging centers to 76. Medical Resources purchased the Capstone
centers for $10 million in cash and Medical Resources' common stock
plus the assumption of certain indebtedness and additional
contingent consideration based on the centers' performance.
Capstone's annual revenues approximate $12 million. The Company
expects the transaction to be immediately accretive to earnings per
share.
William D. Farrell, President and Chief Operating Officer
of Medical Resources, stated, "Coupled with the recent ATI and
Accessible MRI acquisitions, the Capstone transaction provides us
with a dominant presence in Pennsylvania, New Jersey and Maryland
and is an important step towards our goal of creating a national
network of imaging centers. The Company will also benefit from the
quality of the Capstone management team which is joining Medical
Resources."
Medical Resources specializes in the operation of
acquisition of diagnostic imaging centers. The Company operates 76
imaging centers in the Northeast (51), Florida (15), the Midwest
(7) and California (3) and provides network management services to
managed care organization in these regions. Also, through it
subsidiary StarMed Staffing, the Company provides temporary
healthcare staffing to acute and sub-acute care facilities
nationwide.
Statements in this press release, other than statements
of historical information, are forward-looking statements that are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Company's actual results
in future periods to differ materially from expected acquisition of
existing imaging centers, management of growth, limitations and
risks. Those and other risks are described in the Company's
filings with the Securities and Exchange Commission (SEC) over the
last 12 months, copies of which are available from the SEC or may
be obtained upon request from the Company.
98207
