<PAGE>
Registration No. 333-24865
As filed with the Securities and Exchange Commission on June __, 1997
_________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
_________________________
MEDICAL RESOURCES, INC.
Delaware 13-3584552
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
William D. Farrell
President and Chief Operating Officer
155 State Street, 155 State Street,
Hackensack, New Jersey 07601 Hackensack, New Jersey 07601
(201) 488-6230 (201) 488-6230
(Address, including zip code and (Address, including zip code and
telephone number, including area telephone number, including area
code, of registrant's principal code, of agent for service)
executive offices)
__________________________
Copies of communications to:
STEPHEN M. DAVIS, ESQ.
Werbel & Carnelutti
A Professional Corporation
711 Fifth Avenue
New York, New York 10022
(212) 832-8300
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. /x /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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Pursuant to Rule 429 under the Securities Act, the form of Prospectus
included herein also relates to the securities registered under the Registrant's
Registration Statement on Form S-2 (file No. 333-4056) declared effective on
April 29, 1996, is intended for use therewith, and constitutes a post-effective
amendment thereto.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Each Maximum Maximum
Class of Offering Aggregate Amount of
Securities Amount to be Price Per Offering Registration
to be Registered Registered (1) Unit (2) Price (2) Fee (1)(2)
----------------- -------------- --------- ---------- ------------
<S> <C> <C> <C> <C>
Common Stock, 1,036,161 $10.63 $11,014,391 $3,337
$.01 par value shares
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</TABLE>
(1) $13,396 has previously been paid in connection with this filing. Insofar as
the number of shares of Common Stock proposed to be registered hereunder
has been reduced, no additional filing fee need be made.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION DATED JUNE __, 1997
Prospectus
----------
3,528,550 SHARES
MEDICAL RESOURCES, INC.
COMMON STOCK
($.01 PAR VALUE)
The shares offered hereby (the "Shares") consist of 3,528,550 shares
of common stock, par value $.01 per share (the "Common Stock"), of
Medical Resources, Inc., a Delaware corporation (the "Company"). The
Shares may be offered from time to time by certain stockholders (the
"Selling Stockholders") identified herein. See "Selling Stockholders."
The Company will not receive any part of the proceeds from the sales of
the Shares. All expenses of registration incurred in connection herewith
are being borne by the Company, but all selling and other expenses
incurred by the Selling Stockholders will be borne by the Selling
Stockholders.
The Selling Stockholders have not advised the Company of any
specific plans for the distribution of the Shares covered by this
Prospectus, but it is anticipated that the Shares will be sold from time
to time primarily in transactions (which may include block transactions)
on the National Association of Securities Dealers Automated Quotation
("NASDAQ") System at the market price then prevailing or at prices
related to prevailing prices, although sales may also be made in
negotiated transactions at negotiated prices or otherwise. See "Plan of
Distribution."
The Company's Common Stock is traded and quoted on the Nasdaq
National Market under the symbol MRII. On June __, 1997, the closing
sale price of the Common Stock was $_____ per share.
THE PURCHASE OF THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGES 6-14.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS _______ __, 1997
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No dealer, salesperson or other person has been authorized to
give any information or to make any representations, other than those
contained or incorporated by reference in this Prospectus, in connection
with the offering contained herein and, if given or made, such
information must not be relied upon as having been authorized by the
Company or the Selling Stockholders. This Prospectus does not constitute
an offer to sell or a solicitation of an offer to buy any of the
securities offered hereby in any jurisdiction to any person to whom it is
unlawful to make such offer in such jurisdiction. Neither the delivery
of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). Such reports, proxy and information statements filed by
the Company may be inspected and copied at the Public Reference Section
of the Commission at 450 Fifth Street, N.W. Washington, D.C. 20549, and
at the Commission's Regional Offices at 7 World Trade Center, 13th Floor,
New York, New York 10048 and Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street N.W.,
Washington D.C. 20549 at prescribed rates. The Commission maintains a
Web site that contains reports, proxy and information statements and
other information regarding the Company; the address of such site is
http://www.sec.gov.
The Company has filed with the Commission a Registration
Statement on Form S-3 (the "Registration Statement"), under the
Securities Act of 1933, as amended (the "Act"), with respect to the
Common Stock offered hereby. This Prospectus, which constitutes a part
of the Registration Statement, does not contain all of the information
set forth in the Registration Statement certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Copies of the Registration Statement, including all exhibits thereto, may
be obtained from the Commission's principal office in Washington D.C.
upon payment of the fees prescribed by the Commission or may be examined
without charge at the offices of the Commission as described above.
The Company's securities are quoted on the Nasdaq National
Market. Reports and other information about the Company may be inspected
at the offices maintained by the National Association of Securities
Dealers, Inc., NASDAQ Reports Section, 1735 K Street, N.W., Washington,
D.C. 20006.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or portions of documents filed by the
Company with the Commission are incorporated by reference in this
Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended on Form 10-K/A filed on April 9, 1997
and Form 10-K/A filed on June 27, 1997, which contains consolidated
financial statements of the Company and certain other information
regarding the Company.
(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1997.
(c) The Company's Current Reports on Form 8-K dated February 5, 1997,
February 11, 1997, February 12, 1997, March 4, 1997, April 3, 1997
and May 30, 1997.
(d) The Company's Registration Statement on Form 10 filed under the
Exchange Act, File No. 0-20440, which contains a description of the
Company's Common Stock.
(e) The description of certain rights attaching to the Common Stock to
purchase Series C Junior Participating Preferred Stock contained in
the Company's Registration Statement on Form 8-A, filed with the
Commission on September 13, 1996.
(f) All other reports pursuant to Section 13(a) or 15(d) of the Exchange
Act since the end of the Company's fiscal year ended December 31,
1996.
Each document filed subsequent to the date of this Prospectus
by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act, prior to the filing of a post-effective amendment which
indicates that all securities offered hereby have been sold or which
deregisters all securities remaining unsold, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of
the filing of such reports and documents. Any statement contained in a
document, all or a portion of which is incorporated by reference herein,
shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained or incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each
person to whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any or all such
documents which are incorporated herein by reference (other than exhibits
to such documents unless such exhibits are specifically incorporated by
reference into the documents that this Prospectus incorporates). Written
or oral requests for copies should be directed to: Investor Relations,
Medical Resources, Inc., 155 State Street, Hackensack, New Jersey, 07601,
telephone number: 201/488-6230.
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THE COMPANY
The Company specializes in the operation and management of
diagnostic imaging centers. The Company currently operates 76 outpatient
diagnostic imaging centers located in the Northeast (51), Florida (15),
the Midwest (7) and California (3), and provides network management
services to managed care organizations. The Company is rapidly growing
and has increased the number of diagnostic imaging centers it operates
from 11 at December 31, 1995 to 76 at June 17, 1997 through acquisitions,
including 18 imaging centers resulting from the Company's acquisition on
August 30, 1996 of NMR of America, Inc.. In addition, through the Per
Diem and Travel Nursing divisions of its wholly-owned subsidiary, StarMed
Staffing, Inc. ("StarMed"), the Company provides temporary healthcare
staffing to acute and sub-acute care facilities nationwide.
The Company's diagnostic imaging centers provide diagnostic
imaging services to patients referred by physicians in a comfortable,
service-oriented environment located mainly in an outpatient setting. Of
the Company's 76 centers, 67 provide magnetic resonance imaging, which
accounts for a majority of the Company's imaging revenues. Many of the
Company's centers also provide some or all of the following services:
computerized tomography, ultrasound, nuclear medicine, general radiology
and fluoroscopy and mammography.
At each of its centers, the Company provides administrative,
marketing and technical services, as well as equipment and facilities,
provided to physicians who interpret diagnostic imaging procedures
performed on a referral physician's patients at the center. The Company
does not believe that it engages in the practice of medicine in
jurisdictions which prohibit the corporate practice of medicine and the
Company does not employ any physicians to provide medical services. All
medical services at the centers are provided by and are under the full
control and supervision of interpreting physicians, generally
radiologists, who are independent contractors and with whom the Company
enters into written agreements. Medical aspects of services overseen by
physicians include supervision of medical technicians and all aspects of
medical services provided at the centers, analysis of diagnostic
information, preparation and retention of medical reports, care of
patients while at the center, review of bills submitted to third party
payors and communications with referring physicians. The Company's
obligations generally include the administrative, marketing and financial
management of the centers as well as providing necessary medical imaging
equipment and leasehold improvements to the interpreting physicians.
Pursuant to its agreements with interpreting physicians, the Company
typically bills and collects on behalf of the interpreting physicians
amounts charged to patients. The Company receives a pre-negotiated fee
for the services that it provides to the interpreting physicians. The
agreements generally have terms ranging between one and ten years.
The Company has a successful record of acquiring imaging
centers and integrating and improving their operations. Since the
beginning of 1996, the Company has acquired 66 imaging centers through 18
acquisitions. When the Company acquires an imaging center, the Company
acquires assets relating to the provision of technical, financial,
administrative and marketing services which support the provision of
medical services performed by the interpreting
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physicians. Such assets typically include equipment, furnishings,
supplies, tradenames of the center, books and records, contractual rights
with respect to leases and other agreements and, in most instances,
accounts receivable. In connection with an acquisition of a center, the
Company will generally enter into an agreement, as described above, with
an interpreting physician or physician group for that physician or
physician group as an independent contractor to perform medical services
at the center.
The Company was incorporated in Delaware in August 1990 and has
its principal executive offices at 155 State Street, Hackensack, New
Jersey 07601 (telephone no.: (201) 488-6230). Prior to the Company's
incorporation, the Company's operations, which commenced in 1979, were
conducted by subsidiary corporations.
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RISK FACTORS
In addition to the other information contained or incorporated
by reference in this Prospectus, prospective investors should carefully
consider the following matters in evaluating the Company and its business
before purchasing the shares of Common Stock offered hereby.
ACQUISITION STRATEGY; MANAGEMENT OF GROWTH
One of the Company's key objectives is to continue to acquire
diagnostic imaging centers and temporary healthcare staffing businesses
and integrate them into the Company's operations. Successfully
accomplishing this goal depends upon a number of factors, including the
Company's ability to find suitable acquisition candidates, negotiate
acquisitions on acceptable terms, obtain necessary financing on
acceptable terms, retain key personnel of the acquired entities, hire and
train other competent managers, and effectively and profitably integrate
the operations of the acquired businesses into the Company's existing
operations. The process of integrating acquired businesses may require a
significant amount of resources and management attention which will
temporarily detract from attention to the day-to-day business of the
Company and may be prolonged due to unforeseen circumstances. The
Company's ability to manage its growth effectively will require it to
continue to improve its operational, financial and management information
systems and controls, and to attract, retain, motivate and manage
employees effectively. The failure of the Company to manage growth in
its business effectively would have a material adverse effect on its
results of operations. Future acquisitions may be financed through the
incurrence of additional indebtedness or the issuance of equity
securities. The issuance by the Company of additional Common Stock in
connection with acquisitions could be dilutive to Company stockholders.
Competition for suitable acquisition candidates is expected to be intense
and, in addition to local hospital and physician groups, to include
regional and national diagnostic imaging service companies, regional and
national staffing companies and other medical services companies, many of
which have greater financial resources than the Company.
DEVELOPMENT OF NEW CENTERS
Although the primary focus of the Company's growth strategy is
on acquisitions of existing centers rather than developing new centers,
the Company may also, from time to time, pursue the development of new
centers. Developing new centers entails the same risks as establishing a
new business. The likelihood of success of a newly developed center must
therefore be considered in light of the initial development and operating
complexities, expenses, difficulties, and delays frequently encountered
by a new business and the competitive environment in which the new
business will operate. In addition, new centers may incur significant
operating losses during their initial operations, which could materially
adversely affect the Company's operating results and financial condition.
LIMITATIONS AND DELAYS IN REIMBURSEMENT
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Third-party payors, including Medicare, Medicaid, managed
care/HMO providers and certain commercial payors have taken extensive
steps to contain or reduce the costs of healthcare. In certain areas,
the payors are subject to regulations which limit the amount of payments.
Discussions within the Federal government regarding national healthcare
reform are emphasizing containment of healthcare costs. In addition,
certain managed care organizations have negotiated capitated payment
arrangements for imaging services. Under capitation, diagnostic imaging
service providers are compensated using a fixed rate per member of the
managed care organization regardless of the total cost, including the
numbers of procedures performed, of rendering diagnostic services to the
members. Services provided under these contracts are expected to become
an increasingly significant part of the Company's business. The
inability of the Company to properly manage the administration of
capitated contracts could materially adversely effect the Company.
Although patients are ultimately responsible for payment for services
rendered, substantially all of the Company's imaging centers' revenues
are derived from third-party payors. Successful reduction of
reimbursement amounts and rates, changes in services covered, delays or
denials of reimbursement claims, negotiated or discounted pricing and
other similar measures could materially adversely affect the Company's
respective imaging centers' revenues, profitability and cash flow.
The Company's management believes that reimbursement rates will
continue to decline due to factors such as the expansion of managed care
providers and continued national healthcare reform efforts. The Company
enters into contractual arrangements with managed care organizations
which, due to the size of their membership, are able to command reduced
rates for services. These agreements are expected to increase the number
of procedures performed due to the additional referrals from these
managed care arrangements. However, there can be no assurance that the
increased volume of procedures associated with these contractual
arrangements will offset the reduction in reimbursement rate per
procedure.
In addition, a significant percentage of the Company's net
service revenues from imaging centers are derived through physicians
providing imaging services to patients involved in personal injury
claims. Receivables relating to personal injury claims require more
extensive documentation than other procedures. In addition, those
individuals with obligations to the Company in excess of insurance
coverage or those who do not have insurance coverage tend to delay
payment until legal claims are resolved, which may result in significant
collection delays. Due to the greater complexity in processing
receivables relating to personal injury claims, as well as increased
information requirements from third-party payors, such receivables
typically require a longer period of time to collect compared to other
receivables and, in the experience of the Company, incur a higher bad
debt expense. The Company believes that providing imaging services to
patients involved in personal injury claims is an attractive revenue
source because of (i) the significantly higher reimbursement rates
typically realized in such cases as compared to payors such as Medicare,
Medicaid and managed care providers and (ii) this business enables the
Company to maximize its equipment utilization and provides incremental
cash flow to support fixed operating costs. Based on the Company's
experience, the net revenue, per procedure, from personal injury cases
generally exceeds that of all other payor sources, excluding commercial
insurance companies. Therefore, the Company
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expects new centers which it has recently acquired and centers which it
may acquire in the future to actively target such personal injury cases,
which may increase such centers' bad debt expense levels. Significant
delays in the collection or the inability to collect receivables relating
to personal injury claims could have an adverse effect on the Company's
diagnostic imaging operations.
RESTRICTIONS IMPOSED BY GOVERNMENT REGULATION
The healthcare industry is highly regulated. The ownership,
construction, operation, expansion and acquisition of outpatient
diagnostic imaging centers are subject to various federal and state laws,
regulations and approvals concerning such matters as physician referrals,
licensing of facilities and personnel, and Certificates of Need and other
required certificates for certain types of healthcare facilities and
major medical equipment. Among other penalties, violations of these laws
can result in the shutdown of a company's facilities and loss of Medicare
and Medicaid reimbursement for patient services. The Federal Anti-
Kickback Act of 1977, as amended (the "Anti-Kickback Act") prohibits the
offer, payment, solicitation or receipt of any form of remuneration in
return for referring Medicare or Medicaid patients or purchasing,
leasing, ordering or arranging for any item or service that is covered by
Medicare or Medicaid. The law provides several penalties for engaging in
prohibited acts, including criminal sanctions and exclusion from the
Medicare and Medicaid programs. Although the Company does not believe
that it is operating in violation of this law, the scope of the law
remains somewhat unclear and there is no assurance that the Company would
prevail in its position. In addition, in 1991 and subsequently, the
Office of the Inspector General of the Department of Health and Human
Services promulgated "safe harbor" regulations specifying activities that
will be protected from criminal and civil investigation and prosecution
under the Anti-Kickback Act. The Office of the Inspector General has
stated that failure to satisfy the conditions of an applicable "safe
harbor" does not necessarily indicate that the arrangement in question
violates the Anti-Kickback Act, but means that the arrangement is not
among those that the "safe harbor" regulations protect from criminal and
civil investigation and prosecution under that law. The finding of a
violation must still be determined based upon the precise language of the
Anti-Kickback Act.
The Federal Omnibus Budget Reconciliation Act of 1989, as
amended by the Federal Omnibus Budget Reconciliation Act of 1993,
contains provisions that, unless an exception applies, restrict
physicians from making referrals to, among others, providers of MR and
other radiological services for services to be rendered to Medicare or
Medicaid patients in which the physicians have a "financial relationship"
or an ownership interest or with which they have a compensation
arrangement (the so-called "Stark Law"). The Stark Law provides
exceptions for certain types of employment and contractual relationships.
The Company believes that it is in compliance with the Stark Law, but
there is no assurance that the Company will prevail in its position if
challenged.
The State of Florida also enacted in 1992 an anti-kickback
statute substantially similar in scope to the Anti-Kickback Act.
Although the Company does not believe that it is
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operating in violation of this law, as with its Federal counterpart, the
scope of the Florida law remains unclear and there is no assurance that
the Company would prevail in its position.
The States of Florida, Illinois, New Jersey, New York, Maryland
and Pennsylvania in which the Company currently operates centers have
enacted laws that restrict or prohibit physicians from referring patients
to healthcare facilities in which such physicians have a financial
interest. Although the Company does not believe that these laws will
have a material adverse effect on its operations in these states, there
is no assurance that these laws will not be interpreted or applied in
such a way as to create such a material adverse effect, or that these
states, or other states in which the Company does business, will not
adopt similar or more restrictive laws or regulations that could have
such a material adverse effect.
All states where the Company has imaging centers have enacted
Certificate of Need laws to facilitate healthcare planning by placing
limitations on the purchase of certain major medical equipment and
certain other capital expenditures. These statutes, together with their
implementing regulations, could limit the Company's ability to acquire
new imaging facilities and imaging equipment or expand or replace its
equipment at existing centers, and no assurances can be given that the
required regulatory approvals for any future acquisitions, expansions or
replacements will be granted to the Company.
The Company continues to review all aspects of its operations
and believes that it complies in all material respects with applicable
provisions of the Anti-Kickback Act, the Stark Law and applicable state
laws governing fraud and abuse as well as licensing and certification,
although because of the broad and sometimes vague nature of these laws
and requirements, there can be no assurance that an enforcement action
will not be brought against the Company or that the Company will not be
found to be in violation of one or more of these regulatory provisions.
Further, there can be no assurance that new laws or regulations will not
be enacted, or existing laws or regulations interpreted or applied in the
future in such a way as to have a material adverse impact on the Company,
or that Federal or state governments will not impose additional
restrictions upon all or a portion of the Company's activities, which
might adversely affect the Company's business.
CORPORATE PRACTICE OF MEDICINE AND FEE SPLITTING
The laws of many states prohibit unlicensed, non-physician-
owned entities or corporations (such as the Company) from performing
medical services or physicians from splitting fees with non-physicians.
The Company does not believe that it engages in the unlawful practice of
medicine or the delivery of medical services in any state where it is
prohibited, and is not licensed to practice medicine in states which
permit such licensure. Professional medical services, such as the
interpretation of MRI scans, are separately provided by licensed
interpreting physicians, as independent contractors, pursuant to
agreements with the Company. The Company performs only administrative
and technical services and does not exercise control over the practice of
medicine by physicians or employ physicians to provide medical services.
However, in many jurisdictions, the laws restricting the corporate
practice of medicine and fee-splitting have been
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subject to limited judicial and regulatory interpretation and, therefore,
there is no assurance that, upon review, some of the Company's activities
would not be found to be in violation of such laws. If such a claim were
successfully asserted against it, the Company could be subject to civil
and criminal penalties and could be required to restructure its
contractual relationships. In addition, certain provisions of its
contracts with interpreting physicians, including the payment of fees and
restrictive covenants could be held to be unenforceable. Such results or
the inability of the Company to restructure its contractual relationships
could have a material adverse effect upon the Company.
POTENTIAL ADVERSE EFFECT OF CAPITATION CONTRACTS
Some third-party payors seek to provide incentives to reduce
utilization of healthcare services by their enrollees by paying a fixed
capitation fee to healthcare providers for patients covered by their
plans or programs. Capitation contracts typically provide for payment to
a healthcare provider of a fixed fee per month on a per member basis for
certain designated healthcare procedures, without regard to the amount or
scope of services actually rendered. Because the obligations to perform
services are not related to the amount of the payments, it is possible
that either the cost or the value of the services performed by the
healthcare provider may significantly exceed the fees received, and there
may be a significant period between the time the services are rendered
and payment is received. Because the risk of loss is borne, at least in
part, by the healthcare provider and not the third-party payor, it is
possible that the healthcare provider may sustain a significant loss on
the performance of services pursuant to a capitation contract.
Approximately 2% of the Company's revenues in 1996 were derived from
capitation contracts. While the Company carefully analyzes the potential
risks of capitation arrangements, there can be no assurances that any
capitation contracts which the Company is a party or which it may enter
into in the future will not generate significant losses to the Company.
In addition, certain types of capitation agreements, may be
deemed a form of risk contracting. Many states limit the extent to which
any person that is not appropriately licensed in the state, can engage in
risk contracting, which involves the assumption of a financial risk with
respect to providing services to a patient. If the fees received by the
Company are less than the cost of providing the services, the Company may
be deemed to be acting as a de facto insurer. In some states, only
certain entities, such as insurance companies, HMO providers and
independent practice associations, are permitted to contract for the
financial risk of patient care. In such states, risk contracting in
certain cases has been deemed to be engaging in the business of
insurance. The Company believes that it is not in violation of any
restrictions on risk bearing or engaging in the business of insurance.
If the Company is held to be unlawfully engaged in the business of
insurance, such a finding could result in civil or criminal penalties or
require the restructuring of some or all of the Company's operations,
which could have a material adverse effect upon the Company's business.
SIGNIFICANT LONG-TERM DEBT, INCLUDING CAPITALIZED LEASE OBLIGATIONS
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The Company has significant outstanding debt, including
capitalized lease obligations relating to equipment at its centers. The
Company has financed the acquisition of substantially all of the
diagnostic imaging equipment used at its centers (typically with terms
ranging from five to seven years) from lenders and lessors, with the
equipment and other assets serving as collateral for the loans. A
significant portion of the of the Company's assets have been pledged as
collateral for its capitalized lease obligations, as well as other
indebtedness. In certain cases, the center leasing the equipment and the
subsidiary which operates the center are the only obligors under the
capitalized leases. A default under an equipment lease or certain other
indebtedness of the Company could materially adversely affect the
operations of the Company. See "Recent Developments."
COMPETITION; RELIANCE ON REFERRALS
The outpatient diagnostic imaging industry is highly
competitive. Competition focuses primarily on attracting physician
referrals, including referrals through relationships with managed care
organizations, at the local market level. The Company believes that
principal competitors in each of its markets are hospitals and
independent or management company owned imaging centers, some of which
are owned with physician investors. Some of these competitors have
greater financial and other resources than the Company. Principal
competitive factors include facility location, type and quality of
equipment, quality and timeliness of test results, ability to develop and
maintain relationships with referring physicians, convenience of
scheduling and availability of patient appointment times and the pricing
of services. Competition for physician referrals can also be affected by
the ownership or affiliation of competing centers or hospitals, with
certain of the Company's competitors having historically derived a
significant portion of their revenues from referrals by physicians who
are also investors and have a financial interest in, or are otherwise
affiliated with, the competing center or hospital. In addition, managed
care has affected the availability of referrals by approving only a
certain number of centers in a given geographic region. The competitive
environment which the Company faces result in lower patient volume or an
adverse change in payor mix.
The temporary healthcare staffing business is also very
competitive. StarMed competes for clients' business with other providers
of travel nurse temporary staffing and with other staffing companies that
provide per diem staffing services. StarMed also competes for the
limited number of available qualified staff. StarMed competes with
several companies which are larger and may possess greater financial and
other resources.
DEPENDENCE ON QUALIFIED INTERPRETING PHYSICIANS
The Company's strategy of maintaining the high quality of its
services is dependent upon its ability to obtain and maintain
arrangements with qualified interpreting physicians at each of its
centers. No assurance can be given that the Company's contractual
arrangements with interpreting physician groups at each of the Company's
centers can be maintained on terms advantageous to the Company. No
assurance can be given that the interpreting physicians with whom the
Company has contracts will perform satisfactorily or continue to practice
in the
-11-
<PAGE>
markets served by its imaging centers. In addition, with respect to the
development of new centers, there can be no assurance that arrangements
can be entered into with interpreting physicians on acceptable terms or
that such physicians will be successful in such centers. The Company's
success is significantly dependent on the ability of these physicians to
attract patient referrals, thereby enabling the Company's centers to
operate profitably. Agreements with interpreting physicians generally
range from one to ten years and permit termination only for cause. Many
agreements prohibit the interpreting physician from performing
professional interpreting services for a competitor within a defined
geographic distance from the Company's center. The inability of these
physicians to attract sufficient referrals, the termination of their
agreements with the Company or the inability of the Company to enforce
the restrictive covenants contained in the agreements could have a
material adverse effect on the Company's financial condition and
operating results, although the Company believes that there is a base of
qualified interpreting physicians in each of its geographic areas of
operations in the event an agreement with an interpreting physician is
terminated.
TECHNOLOGICAL OBSOLESCENCE
There have been rapid technological advancements made in the
software and, to a lesser extent, hardware in the diagnostic imaging
industry. Although the Company believes that its equipment can generally
be upgraded as necessary, the development of new technologies or
refinements of existing technologies might make existing equipment
technologically or economically obsolete. If such obsolescence were to
occur, the Company may be compelled to acquire new equipment, which could
have a material adverse effect on its financial condition, results from
operations and cash flow. In addition,certain of the Company's centers
compete against local centers which contain more advanced imaging
equipment or provide additional modalities.
LIABILITY CLAIMS AND INSURANCE
Although the Company provides administrative, financial and
technical services and is not engaged in the practice of medicine, the
diagnostic imaging and temporary staffing businesses entail the risk of
professional liability claims. The Company's exposure to such liability
is reduced for its imaging centers because interpreting physicians are
required to carry their own medical malpractice insurance. Similarly,
the Company's nursing personnel perform services in accordance with
treatments prescribed by third-party physicians or under hospital
supervision. Nevertheless, the Company maintains general liability
insurance and professional liability insurance for both its diagnostic
imaging business and its temporary staffing business in amounts deemed
adequate by management of the Company. Present claims against the
Company are in excess of the Company's insurance coverage limits.
Adverse determinations against the Company with respect to all such
claims could have a material adverse effect on the Company's financial
condition.
LOSSES FROM CERTAIN CENTERS
-12-
<PAGE>
Certain centers of which the Company has acquired since January 1996
have generated losses. With respect to these centers, the Company has
utilized, and, in most circumstances, will continue to utilize, working
capital to fund the operations of such centers. The Company cannot
determine if or when such centers will become profitable, or if or when
the centers will generate positive operating cash flows. In the event
that the Company determines to close any such center, the Company would
expect to incur a loss in connection with such closure.
ABSENCE OF DIVIDENDS
The Company has never paid cash dividends and has no present
plans to pay cash dividends to its stockholders and, for the foreseeable
future, intends to retain all of its earnings, if any, for use in its
business. The declaration of any future dividends by the Company is
within the discretion of its Board of Directors and will be dependent on
the earnings, financial condition and capital requirements of the
Company, as well as any other factors deemed relevant by its Board of
Directors.
CERTAIN ANTI-TAKEOVER MEASURES
Certain provisions of the Company's Certificate of
Incorporation, as well as Delaware corporate law and the Company's
Stockholder Rights Plan (the "Rights Plan"), may be deemed to have anti-
takeover effects and may delay, defer or prevent a takeover attempt that
a stockholder might consider in its best interest. Such provisions also
may adversely affect prevailing market prices for the Common Stock.
Certain of such provisions allow the Company's Board of Directors to
issue, without additional stockholder approval, preferred stock having
rights senior to those of the Common Stock. In addition, the Company is
subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became
an interested stockholder, unless the business combination is approved in
a prescribed matter. In September 1996, the Company adopted the Rights
Plan, pursuant to which holders of the Common Stock received a
distribution of rights to purchase additional shares of Common Stock,
which rights become exercisable upon the occurrence of certain events.
Although the Rights Plan was adopted by the Company to give its Board of
Directors significantly more time to properly consider and to respond to
an acquisition proposal, it could have the effect of discouraging or
hindering an unsolicited offer to acquire the Company at effective
valuations which are above the current market capitalization of the
Company.
VOLATILITY OF STOCK PRICE
The market price of the Common Stock has been and may continue
to be volatile. Recently, the stock market in general and the shares of
healthcare and diagnostic imaging services companies in particular have
experienced significant price fluctuations. These broad market and
industry fluctuations may adversely affect the market price of the Common
Stock. Factors such as quarterly fluctuations in results of operations,
the timing and terms of future acquisitions and general conditions in the
healthcare industry may have a significant impact on the market price of
the Common Stock.
-13-
<PAGE>
SALES BY SELLING STOCKHOLDERS
All of the Shares being offered hereby are offered solely by
the Selling Stockholders who are not restricted as to the prices at which
they may sell the Shares. Shares sold below the then current level at
which the shares of Common Stock are trading may adversely affect the
market price of the Common Stock.
RECENT DEVELOPMENTS
The Company has a successful record of acquiring imaging
centers and integrating and improving their operations. Since the
beginning of 1996, the Company has acquired 66 imaging centers through 18
acquisitions. When the Company acquires an imaging center, the Company
does not acquire any medical practice assets. The Company acquires
assets relating to the provision of technical, financial, administrative
and marketing services which support the provision of medical services
performed by the interpreting physicians. Such assets typically include
equipment, furnishings, supplies, tradenames of the center, books and
records, contractual rights with respect to leases and other agreements
and, in most instances, accounts receivable ("Business Assets"). In
connection with an acquisition of a center, the Company will generally
enter into an agreement, as described above, with an interpreting
physician or physician group for that physician or physician group as an
independent contractor to perform medical services at the center.
On January 16, 1997, the Company, through its indirect wholly-
owned subsidiary, Melbourne Resources, Inc. ("Melbourne Sub"),
consummated the acquisition (the "Melbourne Acquisition") of
substantially all of the Business Assets of Melbourne Neurologic, P.A.
("Melbourne Seller") with respect to one diagnostic imaging center
located in Melbourne, Florida. The Melbourne Acquisition was consummated
pursuant to an Asset Purchase Agreement (the "Melbourne Agreement") dated
as of January 16, 1997, by and among the Company, Melbourne Sub,
Melbourne Seller, Thomas G. Hoffman, Scott L. Gold and Eugene M.
Shephard. Pursuant to the Melbourne Agreement, Melbourne Sub acquired
substantially all of the Business Assets of Melbourne Seller for
$1,125,000 in cash.
On January 28, 1997, the Company, through its indirect wholly-
owned subsidiaries, San Clemente Resources, Inc. and Long Beach
Resources, Inc. (collectively, "San Clemente Subs"), consummated the
acquisition (the "San Clemente Acquisition") of substantially all of the
Business Assets of Dedicated Medical Imaging, San Clemente, Inc., and
Long Beach Radiology Center, Ltd. (collectively, "San Clemente Sellers"),
with respect to one diagnostic imaging center located in San Clemente,
California and one diagnostic imaging center located in Long Beach,
California. The San Clemente Acquisition was consummated pursuant to an
Asset Purchase Agreement (the "San Clemente Agreement") dated as of
January 27, 1997, by and among the Company, San Clemente Subs, San
Clemente Sellers and Mr. Joseph Payne. Pursuant to the San Clemente
Agreement, San Clemente Subs acquired substantially all of the Business
Assets of San Clemente Sellers for $1,030,000 in cash.
On February 20, 1997, the Company completed a $52,000,000
private placement of Senior Notes (the "Notes") to a group of insurance
companies. The Notes bear interest at an
-14-
<PAGE>
annual rate of 7.77%, are subject to equal annual sinking fund payments
commencing in February 2001 and have a final maturity in February 2005.
The terms of the agreement pursuant to which the Notes were issued
contain, among other provisions, certain financial covenants, including
net worth and debt covenants, and certain dividend limitations. In
addition, the Notes are collateralized by the guaranty of certain of the
Company's subsidiaries and the pledge of certain partnership interests.
On February 28, 1997, the Company, through its indirect wholly-
owned subsidiary, Jacksonville Resources, Inc. ("Jacksonville Sub"),
consummated the acquisition (the "Jacksonville Acquisition") of
substantially all of the Business Assets of The MRI Center of
Jacksonville Inc. ("Jacksonville Seller") with respect to one diagnostic
imaging center located in Jacksonville, Florida. The Jacksonville
Acquisition was consummated pursuant to an Asset Purchase Agreement (the
"Jacksonville Agreement") dated as of January 31, 1997, by and among the
Company, Jacksonville Sub, Jacksonville Seller and Francis D. Hussey.
Pursuant to the Jacksonville Agreement, Jacksonville Sub acquired
substantially all of the Business Assets of Jacksonville Seller for
215,000 shares of Common Stock.
On March 10, 1997, the Company, through its indirect wholly-
owned subsidiary, West Palm Beach Resources, Inc. ("West Palm Beach
Sub"), consummated the acquisition (the "West Palm Beach Acquisition") of
substantially all of the Business Assets of The Magnet of Palm Beach,
Ltd. ("West Palm Beach Seller") with respect to one diagnostic imaging
center located in West Palm Beach, Florida. The West Palm Beach
Acquisition was consummated pursuant to an Asset Purchase Agreement (the
"West Palm Beach Agreement") dated as of March 10, 1997, by and among the
Company, West Palm Beach Sub, West Palm Beach Seller and MRI of Palm
Beach, Inc. Pursuant to the West Palm Beach Agreement, West Palm Beach
Sub acquired substantially all of the Business Assets of West Palm Beach
Seller for $2,000,000 in cash and 56,670 shares of Common Stock.
On March 10, 1997, the Company consummated the acquisition (the
"ADI Acquisition") of the capital stock of Advance Diagnostic Imaging,
Inc. ("ADI Seller"). The business assets of ADI Seller consist of
ownership interests in nine diagnostic imaging centers located in New
Jersey (6) and Massachusetts (3). The ADI Acquisition was consummated
pursuant to a Stock Purchase Agreement (the "ADI Agreement") dated as of
February 27, 1997, by and among the Company, ADI Seller, Drew M. Netter
and William Lehn. Pursuant to the ADI Agreement, the Company acquired
all of the issued and outstanding capital stock of ADI Seller for
$6,637,344 in cash, an $825,000 deferred payment and $3,200,000 payable
in connection with the assumption of certain long-term indebtedness.
Additionally, pursuant to the ADI Agreement, the Company acquired an
option to purchase one additional diagnostic imaging center located in
the Northeast owned by an affiliate of a former stockholder of ADI
Seller.
On March 14, 1997, the Company, through its indirect wholly-
owned subsidiary, Rancho Cucamonga Resources, Inc. ("Rancho Cucamonga
Sub"), consummated the acquisition (the "Rancho Cucamonga Acquisition")
substantially all of the Business Assets of Grove Diagnostic Imaging
Center, Inc. ("Rancho Cucamonga Seller") with respect to one diagnostic
imaging center located in Rancho Cucamonga, California. The Rancho
Cucamonga Acquisition was consummated pursuant to an Asset Purchase
Agreement (the "Rancho Cucamonga Agreement") dated as of March 14, 1997,
by and among the Company, Rancho Cucamonga Sub,
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<PAGE>
Rancho Cucamonga Seller, J. Kenneth Luke and J.M. Benesky. Pursuant to
the Rancho Cucamonga Agreement, Rancho Cucamonga Sub acquired
substantially all of the Business Assets of Rancho Cucamonga Seller for
$2,500,000 in cash and 44,016 shares of Common Stock.
On May 7, 1997, the Company, through its indirect wholly-owned
subsidiary, ATI Resources, Inc. ("ATI Sub"), consummated the acquisition
(the "ATI Acquisition") of substantially all of the Business Assets of
ATI Centers, Inc. ("ATI Seller"), with respect to eleven diagnostic
imaging centers located in New Jersey and Pennsylvania. The ATI
Acquisition was consummated pursuant to an Asset Purchase Agreement (the
"ATI Agreement") dated as of March 7, 1997, by and among the Company, ATI
Sub, ATI Seller, Americare Health Services, Inc., John A. Bennett, M.D.
and Nancy DiRocco. Pursuant to the ATI Agreement, ATI Sub acquired
substantially all of the Business Assets of ATI Seller for $12,900,000 in
cash.
On May 9, 1997, the Company, through its indirect wholly-owned
subsidiary, Accessible Resources, Inc. ("Accessible Sub"), consummated
the acquisition (the "Accessible Acquisition") of substantially all of
the Business Assets of Accessible MRI of Baltimore County, Inc. and
Accessible MRI of Montgomery County, Inc. (collectively, the "Accessible
Sellers") with respect to one diagnostic imaging center located in
Towson, Maryland and one diagnostic imaging center located in Silver
Spring, Maryland. The Accessible Acquisition was consummated pursuant to
an Asset Purchase Agreement (the "Accessible Agreement") dated as of May
7, 1997, by and among the Company, Accessible Sub, the Accessible
Sellers, Ross H. Taber, and Phyllis S. Taber. Pursuant to the Accessible
Agreement, Accessible Sub acquired substantially all of the Business
Assets of the Accessible Sellers for $2,828,872 in cash and 119,166
shares of Common Stock.
On May 30, 1997, the Company, 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
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<PAGE>
the Company, 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 Common Stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the
Shares by the Selling Stockholders.
SELLING STOCKHOLDERS
The Shares offered hereby consist of (i) 116,666 outstanding
shares of Common Stock which were issued upon conversion of certain
convertible debentures sold by the Company in a February 1996 private
placement, and (ii) 50,000 shares of Common Stock which may be issued
upon conversion of certain convertible debentures sold by the Company in
a June 1995 private placement, (iii) 18,868 shares of Common Stock issued
in connection with the acquisition of the business assets of NMR
Associates 1983-I, Ltd., consisting primarily of one diagnostic imaging
center located in Newark, New Jersey, (iv) 56,670 shares of Common Stock
issued in connection with the West Palm Beach Acquisition, (v) 44,016
shares of Common Stock issued in connection with the Rancho Cucamonga
Acquisition, (vi) 228,571 shares of Common Stock issued in connection
with the Company's acquisition of three imaging centers located in Tampa,
Florida and Tarpon Springs, Florida in May 1996 from Americare Imaging
Centers, Inc. and Tarpon Springs, Inc., (vii) 119,166 outstanding shares
of Common Stock issued in connection with the Accessible Acquisition, and
(viii) 397,204 outstanding shares of Common Stock issued in connection
with the Capstone Acquisition.
The following table sets forth as of March 31, 1996,
information regarding the beneficial ownership of the Company's Common
Stock held by each Selling Stockholder who may sell the Shares pursuant
to this Prospectus as of such date, the number of Shares offered
hereunder by each such Selling Stockholder and the net ownership of
shares of Common Stock, if all such Shares so offered are sold by each
Selling Stockholder.
-17-
<PAGE>
<TABLE>
<CAPTION>
TOTAL NUMBER
OF
SHARES TO BE
OFFERED FOR
SHARES OWNED SELLING
PRIOR TO THIS STOCKHOLDER'S TOTAL SHARES TO BE OWNED UPON
NAME OF SELLING STOCKHOLDER OFFERING/(1)/ ACCOUNT/(2)/ COMPLETION OF THIS OFFERING/(2)/
- --------------------------- ------------- ------------- --------------------------------
NUMBER PERCENT
--------------------- -----------
<S> <C> <C> <C> <C>
Siegler, Collery & Co. 12,500 12,500 0 0%
Profit Sharing Plan
The SC Fundamental
Value Fund, L.P. 401,690 65,000 336,690 1.7%
SC Fundamental Value BVI, Ltd. 195,710 35,000 160,710 *
Gary L. Fuhrman/(3)/ 147,591/(4)/ 41,666 105,925/(4)/ *
Peter M. Collery/(5)/ 3,233,493/(6)//(7)/ 6,250 3,227,243/(6)//(7)/ 16.7%
Gary N. Siegler/(8)/ 4,461,608/(6)//(9)/ 6,250 4,445,358/(6)//(9)/ 21.7%
NMR Associates 1983-I, Ltd. 18,868 18,868 0 9%
The Magnet of Palm Beach, Ltd. 56,670 56,670 0 0%
Grove Diagnostic Imaging Center, Inc. 44,016 44,016 0 0%
Americare Imaging Centers, Inc. 228,571 228,571 0 0%
Accessible MRI of Baltimore County 119,166 119,166 0 0%
Inc.
John Wisdo 5,958 5,958 0 0%
Christine T. Rawski 5,958 5,958 0 0%
Darryl Johnson 9,930 9,930 0 0%
Robert J. Maskulyak 19,860 19,860 0 0%
Lynne A. Fox 49,651 49,651 0 0%
Robert D. Baca 79,441 79,441 0 0%
James M. Domesek 226,406 226,406 0 0%
Robert Wasserman 5,000 5,000 0 0%
</TABLE>
- ---------------------------------
* Less than 1 percent.
/(1)/ Except as otherwise noted, all shares or rights to these shares are
beneficially owned and sole voting and investment power is held by
the party named.
/(2)/ Assumes the conversion of all the 11% Convertible Debentures and the
10.5% Convertible Debentures into shares of Common Stock and the
sale of all shares listed in the "Total Number of Shares to be
Offered for the Selling Stockholder's Account" column. Also assumes
that none of the Selling Stockholders sells shares of Common Stock
not being offered hereunder or purchases additional shares of Common
Stock.
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<PAGE>
/(3)/ Mr. Fuhrman is a Director of the Company and is a Director and
Senior Vice President of A&SB.
/(4)/ Includes 71,000 shares underlying outstanding options which are
exercisable immediately or within 60 days.
/(5)/ Mr. Collery is a former Director of the Company.
/(6)/ Messrs. Siegler and Collery, due to their joint control of Siegler
Collery and other affiliates, including the Siegler, Collery & Co.
Profit Sharing Plan, which control certain entities which
beneficially own an aggregate of 3,074,037 shares of Common Stock,
are each deemed to beneficially own all of the shares of Common
Stock owned of record by all such entities.
/(7)/ Includes 51,000 shares underlying outstanding options which are
exercisable immediately or within 60 days.
/(8)/ Mr. Siegler is Chairman of the Board of Directors of the Company.
/(9)/ Includes 608,666 shares underlying outstanding options which are
exercisable immediately or within 60 days and 569,000 shares
underlying outstanding warrants which Mr. Siegler is deemed to
beneficially own.
-19-
<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders may sell some or all of the Shares in
transactions involving broker/dealers, who may act as agent or acquire
the Shares as principal. Any broker/dealer participating in such
transactions as agent may receive a commission from the Selling
Stockholders (and, if they act as agent for the purchaser of such Shares,
from such purchaser). Usual and customary brokerage fees will be paid by
the Selling Stockholders. Broker/dealers may agree with the Selling
Stockholders to sell a specified number of Shares at a stipulated price
per Share and, to the extent such broker/dealer is unable to do so acting
as agent for the Selling Stockholders, to purchase as principal any
unsold Shares at the price required to fulfill the respective
broker/dealer's commitment to the Selling Stockholders. Broker/dealers
who acquire Shares as principals may thereafter resell such Shares from
time to time in transactions (which may involve cross and block
transactions and which may involve sales to and through other
broker/dealers, including transactions of the nature described above) in
the over-the-counter market, in negotiated transactions or otherwise, at
market prices prevailing at the time of sale or at negotiated prices, and
in connection which such resales may pay to or receive commissions from
the purchasers of such Shares. The Selling Stockholders also may sell
some or all of the Shares directly to purchasers without the assistance
of any broker/dealer or if applicable, have distributed or may distribute
such Shares to one or more of their limited partners which are
unaffiliated with the Company; such limited partners may, in turn,
distribute such shares as described above.
The Company is bearing all costs relating to the registration
of the Shares, provided that, any commissions or other fees payable to
broker/dealers in connection with any sale of the Shares will be borne by
the Selling Stockholders or other party selling such Shares.
The Selling Stockholders must comply with the requirements of
the Act and the Exchange Act and the rules and regulations thereunder in
the offer and sale of the Shares. In particular, during such times as
the Selling Stockholders may be deemed to be engaged in a distribution of
the Common Stock, and therefore be deemed to be an underwriter under the
Act, it must comply with Rules 10b-6 and 10b-7 under the Exchange Act, as
amended, and will, among other things:
(a) not engage in any stabilization activities in connection with
the Company's securities;
(b) furnish each broker/dealer through which Shares may be offered
such copies of this Prospectus, as amended from time to time,
as may be required by such broker/dealer; and
(c) not bid for or purchase any securities of the Company or
attempt to induce any person to purchase any securities of the
Company other than as permitted under the Exchange Act.
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<PAGE>
LEGAL MATTERS
The validity of the shares of the Company's Common Stock
offered hereby will be passed upon for the Company by Werbel &
Carnelutti, A Professional Corporation, New York, New York.
EXPERTS
The consolidated balance sheet of the Company as of December
31, 1996 and the consolidated statement of operations, stockholders'
equity, and cash flows and the financial statement schedule listed in the
index at Item 14(a) for the year ended December 31, 1996, and
incorporated by reference in the Prospectus and Registration Statement,
have been incorporated in reliance on the report of Coopers & Lybrand
L.L.P., given on the authority of said firm as experts in accounting and
auditing.
The consolidated balance sheet of the Company as of December
31, 1995 and the related consolidated statements of operations, cash
flows and changes in stockholders' equity for the years ended December
31, 1995 and 1994 and the financial statement schedule listed in the
index at Item 14(a), incorporated by reference in this Prospectus and
Registration Statement, have been audited by Ernst & Young LLP,
independent certified public accountants as set forth in their report
thereon and incorporated by reference herein which, as to the year ended
December 31, 1994, is based in part on the reports of Dixon, Odom & Co.,
L.L.P., independent auditors, and Kempisty & Company, Certified Public
Accountants, P.C., independent auditors. The consolidated financial
statements referred to above are incorporated by reference herein in
reliance upon such reports given upon the authority of such firms as
experts in accounting and auditing.
The consolidated balance sheets of NMR of America, Inc. at
March 31, 1996 and 1995 and consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the
period ended March 31, 1996 and included in this Prospectus and
Registration Statement, have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., given on the authority of said firm
as experts in accounting and auditing.
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<PAGE>
CERTAIN UNAUDITED PRO FORMA INFORMATION
NMR of America, Inc. Acquisition:
The Company's consolidated financial statements for the year ended
December 31, 1996, include the results of NMR from the effective date of
the acquisition, August 30, 1996. The following unaudited pro forma
combined results of operations for the year ended December 31, 1996, have
been prepared assuming the NMR Acquisition occured on January 1, 1996.
This unaudited Pro Forma Combined Statement of Operations does not
purport to be indicative of the actual results of operations had the NMR
Acquisition been consummated on January 1, 1996, nor does it purport to
be indicative of future operating results of the combined entity.
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<PAGE>
MEDICAL RESOURCES, INC.
Pro Forma Combined Statement of Operations
For the year Ended December 31, 1996
(in thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Medical NMR Medical
Resources Eight Months Resources
Year ended Ended and NMR
December 31, August 30, Pro Forma Pro Forma
1996 1996 Adjustments Combined
---------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Net service revenues $93,785 $19,070 ($47)(a) $112,808
Center operating costs:
Payroll and related expenses 36,031 3,544 (71)(a) 39,504
Operating costs 9,699 5,472 (61)(a) 15,110
Administrative expenses 11,937 717 (33)(a) 12,621
Other costs 1,397 37 1,434
Provision for uncollectible accounts receivable 4,783 4,783
Corporate general and administrative 7,780 2,622 187 (b) 10,589
Depreciation and amortization 7,465 2,312 (13)(a) 10,204
(429)(c)
1,176 (d)
(64)(e)
(242)(f)
---------------- ---------------- ------------ ---------------
Operating income 14,693 4,366 (495) 18,563
Interest expense 2,968 1,153 (1)(a) 4,120
---------------- ---------------- ------------ ---------------
Income from continuing operations
before minority interest and taxes 11,725 3,213 (494) 14,444
Minority interest 308 312 620
---------------- ---------------- ------------ ---------------
Income from continuing operations
before income taxes 11,417 2,901 (494) 13,824
Income taxes 4,162 988 190 (g) 5,340
---------------- ---------------- ------------ ---------------
Income from continuing operations $7,255 $1,913 ($684) $8,484
================ ================ ============ ===============
Earnings per share:
Primary $ 0.62 $ 0.58
================ ===============
Fully diluted $ 0.59 $ 0.56
================ ===============
Weighted average shares outstanding
Primary 11,667 2,971 (h) 14,638
Fully diluted 12,903 2,971 (h) 15,874
</TABLE>
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<PAGE>
Notes to Pro Forma Consolidated Financial Statements
(a) To eliminate the operations of NMR's Elgin center location which Medical
Resources closed effective October 1996. The unaudited historical
operating results of the center is as follows:
Net service revenue $ 47
Center operating costs:
Payroll and related expenses 71
Operating costs 61
Administrative expenses 33
Depreciation and amortization 13
--------------
Operating loss (132)
Interest expense 1
--------------
Net loss $ (131)
==============
(b) To reflect the increase in corporate and administrative expense resulting
from non-competition and consulting agreements entered into in connection
with the NMR Acquisition offset by the elimination of the related
historical compensation.
Executive compensation (1) $ (363)
Non competition and consulting (2) 549
-----------
Net increase in corporate general and administrative $ 187
===========
(1) Represents the elimination of certain historical
compensation as discussed above.
(2) Represents the expenses to be incurred during the
pro forma period relating to the non competition
and consulting agreements entered into in
connection with the NMR Acquisition.
(c) To eliminate amortization expense relating to NMR's historical goodwill.
(d) To reflect the amortization of the approximate $35,286,000 of goodwill
that results from the NMR Acquistion using the straight line method over
20 years.
(e) To eliminate amortization expense relating to NMR's intangible assets
(f) To reflect the decrease in derpreciation of fixed assets (not including
land) based upon adjustments to record the assets at the estimated fair
value as determined by independent appraisal, depreciated over an estimated
weighted average remaining useful life of eight years.
<TABLE>
<S> <C>
Adjustment to decrease fixed asets to independent appraisal of fair value $ (2,908)
Weighted average depreciable life (years) 8
-------------
Pro forma decrease in depreciation expense (364)
Eight months expense 8
-------------
Pro forma decrease in depreciation expense $ (242)
=============
</TABLE>
(g) To reflect pro forma income taxes calculated at statutory rates.
(h) To adjust weighted average shares outstanding for the shares issued in
conjunction with the NMR Acquisition.
-24-
<PAGE>
CERTAIN PRO FORMA INFORMATION
March 1997 Debt Refinancing:
The following unaudited pro forma combined financial statements of the Company
include an "unaudited Pro Forma Combined Balance Sheet of the Company as of
December 31, 1996 and an" "unaudited Pro Forma Combined Statement of Operations
for the year ended December 31, 1996. " These pro forma statements included the
audited amounts of the Company as of and for the year ended December 31, 1996
and the effect of the Senior Note private placement if it had occurred on
January 1, 1996.
These unaudited pro forma combined financial statements do not purport to be
indicative of the actual financial position or results of operations that would
have been achieved had the transaction been consummated on January 1, 1996, nor
do they purport to be indicative of future operating results or financial
position of the combined entity.
-25-
<PAGE>
MEDICAL RESOURCES, INC.
Pro Forma Combined Statement of Operations
For the year Ended December 31, 1996
(in thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Medical Medical
Resources Resources
Year ended Senior and Senior
December 31, Notes Notes Pro Forma
1996 Pro Forma Combined
------------ ---------- ---------------
<S> <C> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 15,346 52,000 (A) $ 56,724
(887) (B)
(9,735) (C)
(5,675) (D)
Short-term investments 1,663 1,663
Restricted short-term investments 4,500 4,500
Accounts receivable, net 39,878 39,878
Other receivables 2,291 2,291
Prepaid expenses 3,715 3,715
Deferred tax assets, net 3,354 3,354
------------ ---------- --------------
Total current assets 70,747 35,703 112,125
Medical diagnostic and office equipment, net 24,397 1,461 (C) 25,858
Goodwill, net 62,639 62,639
Other assets 3,171 887 (B) 4,058
Deferred tax assets, net 2,351 2,351
Restricted cash 1,045 1,045
Value of venture contracts 164 164
------------ ---------- --------------
Total assets $164,514 $38,051 $208,240
============ ========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes and mortgage payable $ 6,729 $ 6,729
Current portion of obligations under capital lease 5,991 5,991
Accounts payable and accrued expenses 13,070 13,070
Other current liabilities 117 117
Income tax payable 2,064 2,064
------------ --------------
Total current liabilities 27,971 27,971
Senior notes payable 52,000 (A) 52,000
Notes and mortgage payable 12,638 (5,490) (D) 7,148
Obligations under capital lease 8,374 (8,274) (C) 100
Convertible debentures 6,988 6,988
Other long term liabilities 2,159 2,159
------------ ---------- --------------
Total liabilities 58,130 38,236 96,366
------------ ---------- --------------
Common stock 186 186
Common stock to be issued 1,721 1,721
Additional paid in capital 102,928 102,928
Unrealized appreciation of investments 26 26
Retained earnings 2,956 (185) (D) 2,771
Treasury stock (1,433) (1,433)
------------ ---------- --------------
Total stockholder's equity 106,384 (185) 106,199
------------ ---------- --------------
Total liabilities and stockholders' equity $164,514 $38,051 $202,565
============ ========== ==============
</TABLE>
-26-
<PAGE>
MEDICAL RESOURCES, INC.
Pro Forma Combined Statement of Operations
For the year Ended December 31, 1996
(in thousands, except for per share data)
(Unaudited)
<TABLE>
<CAPTION>
Medical Medical
Resources Resources
Year ended Senior and Senior
December 31, Notes Notes Pro Forma
1996 Pro Forma Combined
------------- --------------- ---------------------
<S> <C> <C> <C>
Net service revenues $93,785 $93,785
Center operating costs:
Payroll and related expenses 36,031 36,031
Operating costs 9,699 9,699
Administrative expenses 11,937 11,937
Other costs 1,397 1,397
Provision for uncollectible accounts receivable 4,783 4,783
Corporate general and administrative 7,780 7,780
Depreciation and amortization 7,465 487 (E) 7,952
------------ --------------- ---------------------
Operating income 14,693 (487) 14,206
Interest expense 2,968 (1,376)(F) 5,632
4,040 (G)
------------ --------------- ---------------------
Income from continuing operations
before minority interest and taxes 11,725 (3,151) 8,574
Minority interest 308 308
------------ --------------- ---------------------
Income from continuing operations
before income taxes 11,417 (3,151) 8,266
Income taxes 4,162 (1,229)(H) 2,933
------------ --------------- ---------------------
Income from continuing operations $7,255 ($1,922) $5,333
============ =============== =====================
Earnings per share:
Primary $ 0.62 $ 0.46
============ =====================
Fully diluted $ 0.59 $ 0.44
============ =====================
Weighted average shares outstanding
Primary 11,667 11,667
Fully diluted 12,903 12,903
</TABLE>
-27-
<PAGE>
Notes to Pro Forma Consolidated Financial Statements
(A) To record the $52,000,000 private placement of Senior Notes.
(B) To record the costs associated with the private placement to be amortized
over 8 years which coincides with the term of the Senior Notes.
(C) To reflect an adjustment to medical diagnostic and office equipment, net in
connection with the retirement of certain capital lease obligations in
accordance with Financial Accounting Standards Board Interpretation No. 26.
(D) To reflect the charge in earnings in conjunction with the retirement of
notes and mortgage payable in accordance with Accounting Principles Board
Opinion No. 26.
(E) To reflect the increase in amortization expense for the adjustment to the
carrying value of medical diagnostic and office equipment, net recorded in
connection with the retirement of certain capital lease obligations.
(F) To reflect the reduction in interest expense associated with debt
obligations which were retired.
(G) To reflect the interest expense associated with the Senior Notes.
(H) To reflect pro forma income taxes calculated at statutory rates.
-28-
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
- ---------------------------------
The Shareholders of NMR of America, Inc.
We have audited the accompanying consolidated balance sheets of NMR of America,
Inc., and Subsidiaries as of March 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended March 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of NMR of America,
Inc., and Subsidiaries as of March 31, 1996 and 1995, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
June 21, 1996
F-1
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ---------------------------
<S> <C> <C> <C>
MARCH 31, MARCH 31, JUNE 30,
1995 1996 1996
(unaudited)
- ------------------------------------------------------------------------
ASSETS
Current Assets:
Cash and cash equivalents $ 3,966,804 $ 3,782,315 $ 2,072,925
Marketable securities 1,125,643 289,125
Short-term investments 886,609 663,660 2,022,405
Due from affiliated physician
associations and patient
receivables, net 9,498,268 14,182,008 14,946,978
Other current assets 903,373 1,442,394 1,301,461
- ------------------------------------------------------------------------
Total current assets 16,380,697 20,070,377 20,632,894
- ------------------------------------------------------------------------
Land, buildings and equipment 31,360,133 31,832,051 32,037,838
Less, accumulated depreciation
and amortization 19,580,504 17,381,581 18,030,369
- ------------------------------------------------------------------------
11,779,629 14,450,470 14,007,469
Long-term investments 192,000
Cost in excess of net assets
acquired 4,497,974 10,804,971 10,660,167
Deferred income taxes 1,099,000 109,000
Other assets 1,571,547 1,446,868 1,231,880
- ------------------------------------------------------------------------
Total assets $35,328,847 $47,073,686 $46,532,410
========================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
- ---------------------------
MARCH 31, MARCH 31, JUNE 30,
1995 1996 1996
(unaudited)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and
accrued expenses $ 3,098,931 $ 4,276,846 $ 4,448,686
Current installments on capital
lease obligation 286,263 612,985 604,644
Current installments on notes and
mortgage payable 2,769,098 4,911,031 4,591,221
- --------------------------------------------------------------------------------
Total current liabilities 6,154,292 9,800,862 9,644,551
- --------------------------------------------------------------------------------
Deferred tax liability 90,000
Convertible subordinated debt, net 2,056,417 1,975,752 1,890,835
Obligations under capital leases,
less current installments 481,518 1,152,455 1,009,479
Notes and mortgage payable,
less current installments 10,451,119 11,028,647 10,012,109
Minority interest in limited
partnerships 2,155,665 2,126,708 2,237,382
Commitments and contingencies
Shareholders' Equity:
Common Stock, $.01 par value;
authorized 30,000,000 shares,
5,416,967, 6,705,143 and 6,715,143
shares issued and outstanding at
March 31, 1995 and March 31 and
June 30, 1996, respectively 54,169 67,051 67,151
Additional paid-in capital 11,570,401 17,027,890 17,072,790
Unrealized gains and (losses) 14,208
Retained earnings 3,854,255 5,631,632 6,220,272
Less, 364,958 and 437,712 and
430,797 common shares in Treasury
at March 31, 1995 and March 31,
and June 30, 1996, respectively (1,463,197) (1,737,311) (1,712,159)
- --------------------------------------------------------------------------------
Shareholders' equity 14,029,836 20,989,262 21,648,054
- --------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $35,328,847 $47,073,686 $46,532,410
- --------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
- ---------------------------------
<TABLE>
<CAPTION>
Quarter Ended
Years Ended March 31, June 30,
1994 1995 1996 1996
(unaudited)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue, net $15,597,260 $17,987,824 $23,833,897 $7,263,367
- -------------------------------------------------------------------------------------------
Costs and Expenses:
Payroll and related costs 3,957,626 4,780,025 6,442,710 1,788,463
Depreciation and amortization 2,545,108 2,951,400 3,093,616 796,530
Medical supplies and other
operating costs 5,186,883 6,048,762 8,834,668 2,776,614
Non-recurring write-down of
center equipment 560,091
Transaction costs 301,140
Other general and administrative 689,347 553,422 763,662 219,927
- -------------------------------------------------------------------------------------------
12,378,964 14,893,700 19,134,656 5,882,674
- -------------------------------------------------------------------------------------------
Operating income 3,218,296 3,094,124 4,699,241 1,380,693
Interest expense 824,420 1,186,811 1,677,698 447,048
Other income,net (130,694) (24,546) (122,805) (39,810)
- -------------------------------------------------------------------------------------------
Income before minority
interest and income taxes 2,524,570 1,931,859 3,144,348 973,455
Minority interest in income of
limited partnerships 1,049,070 527,663 410,550 120,815
- -------------------------------------------------------------------------------------------
Income before income taxes 1,475,500 1,404,196 2,733,798 852,640
Provision for (benefit from)
income taxes 108,000 (1,029,716) 956,421 264,000
- -------------------------------------------------------------------------------------------
Net income $ 1,367,500 $ 2,433,912 $ 1,777,377 $ 588,640
===========================================================================================
PER SHARE DATA:
PRIMARY:
Net income per share $ .29 $ .49 $ .30 $ .09
===========================================================================================
FULLY DILUTED:
Net income per share $ .29 $ .47 $ .30 $ .09
===========================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
<TABLE>
<CAPTION>
Quarter Ended
Years Ended March 31, June 30,
1994 1995 1996 1996
(unaudited)
- ------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S> <C> <C> <C> <C>
Net income $1,367,500 $ 2,433,912 $1,777,377 $ 588,640
- ----------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 2,545,108 2,951,400 3,093,616 796,530
Minority interest in income of
limited partnerships 1,049,070 527,663 410,550 120,815
Deferred income taxes (1,099,000) 1,016,918 199,000
Equity in loss (income) from
unconsolidated partnership (53,067) 68,770 171,085
Contractor reimbursement for lost (91,620) (175,000)
revenues
(Gain) loss on disposition of
center assets 47,021 12,084 (62,443)
Non-recurring write-down of center
equipment 560,091
Proceeds from sale of marketable
securities - trading 411,270
Unrealized gain on
marketable securities (9,464)
Changes in assets and liabilities,
net of acquired centers:
Increase in amount due from
affiliated physician
associations and patient
receivables, net (2,196,385) (965,897) (3,546,074) (764,970)
Decrease (increase) in other
current assets 188,810 (130,104) 236,999 140,933
(Increase) decrease in
other assets 159,969 (92,931) 103,147 172,133
(Decrease) increase in accounts
payable and accrued expenses 531,966 (198,210) (80,001) 196,992
Decrease in other liabilities (222,079)
Other 14,483
- ----------------------------------------------------------------------------------------------------------------
Total adjustments 2,040,949 1,953,516 1,183,280 861,433
- ----------------------------------------------------------------------------------------------------------------
Net cash provided by operating
activities 3,408,449 4,387,428 2,960,657 1,450,073
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
<TABLE>
<CAPTION>
QUARTER
ENDED
YEARS ENDED MARCH 31, JUNE 30,
1994 1995 1996 1996
(unaudited)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from investing
activities:
<S> <C> <C> <C> <C>
Purchase of equipment ($ 338,080) ($1,705,020) ($1,411,389) ($ 205,787)
Purchase of short-term
investments (869,000) (2,814,660) (1,495,745)
Purchase of marketable
securities (1,201,839) (1,111,435) (300,000) (289,125)
Purchase of long-term
investments (192,000)
Purchase of limited
partnership interests (2,185,005) (48,800)
Acquisition of purchase
option (200,000)
Acquisition of centers,
net of cash acquired (325,000) (976,794) 371,905
Proceeds from sale of
marketable securities 600,000 205,000 1,435,438
Proceeds from sale of
short-term investments 3,070,449 329,000
Proceeds from disposition
of center assets 6,250
Other (11,014) (15,350) (2,716)
- ------------------------------------------------------------------------------------------------------------------
Net cash provided by (used
in) investing activities (3,660,938) (4,515,149) 159,743 (1,664,373)
- ------------------------------------------------------------------------------------------------------------------
Cash flows from financing
activities:
Repayments of debt, including
capital lease obligations (1,587,922) (2,134,292) (3,669,129) (1,487,665)
Distributions to limited
partners (683,067) (135,656) (232,283) (7,425)
Proceeds from borrowing 2,319,500 2,617,683 912,686
Purchase of common stock
warrants (12,000)
Proceeds from stock
issuance and exercise of
stock options 27,812 36,844
Purchases of treasury stock (353,007)
- ------------------------------------------------------------------------------------------------------------------
Net cash (used in)
provided by
financing activities 36,511 375,547 (3,304,889) (1,495,090)
- ------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in
cash and cash equivalents (215,978) 247,826 (184,489) (1,709,390)
Cash and cash equivalents
at April 1, 3,934,956 3,718,978 3,966,804 3,782,315
- ------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents
at March 31,(or June 30) $ 3,718,978 $ 3,966,804 $ 3,782,315 $ 2,072,925
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
NMR OF AMERICA, INC., AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED
YEARS ENDED MARCH 31, JUNE 30,
1994 1995 1996 1996
(unaudited)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Income Taxes, net of refunds
totaling $46,052 in 1996,
$26,474 in 1995 and $155,676
in 1994 ($ 131,237) $ 69,345 ($ 13,320) $ 26,925
Interest 829,419 1,187,160 1,680,158 402,488
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
Capital lease obligations incurred
for use of equipment 591,517
Capital lease obligations assumed
in connection with acquisition of centers 1,444,779
Notes payable obligation assumed in connection
with acquisition of center 1,475,000 1,982,617 4,690,296
Stock issued in connection with
acquisition of centers 487,500 500,000 5,224,320
Notes payable issued in
connection with acquisition of
center 435,000
Note payable obligation
incurred in connection with
acquisition of purchase option 593,000
Note payable obligation incurred in
connection with refinancing of Bel
Air, Maryland center debt 2,493,683
Additions to fixed assets included
in accounts payable and accrued
expenses 214,410
Conversion of subordinated debebtures
to common stock 111,999 123,000
Unrealized gain on marketable
securities available-for-sale 14,208
Contribution to 401(k) plan 10,061 36,098
Note payable incurred in connection
with financing annual insurance
premium 278,488
Note payable incurred in
connection with equipment upgrade
financing 60,000
Issuance of restricted
stock over two year vesting period 94,800
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
NMR of America, Inc. and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
Shares Amount Capital
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances at March 31, 1993 5,107,080 51,071 10,449,047
- ------------------------------------------------------------------------------
Purchase of warrants (12,000)
Issuance of common stock 150,000 1,500 486,000
Net income for fiscal 1994
- ------------------------------------------------------------------------------
Balances at March 31, 1994 5,257,080 52,571 10,923,047
- ------------------------------------------------------------------------------
Issuance of common stock 135,000 1,350 528,650
Conversion of subordinated
debentures to common stock 24,887 248 111,751
Exercise of employee
stock options 2,187
401(k) plan contributions 4,766
Unrealized gain on securities
held for sale
Net income for fiscal 1995
- ------------------------------------------------------------------------------
Balances at March 31, 1995 5,416,967 $ 54,169 $ 11,570,401
- ------------------------------------------------------------------------------
Purchase of common stock
Issuance of common stock 1,260,848 12,609 5,319,120
Conversion of subordinated
debentures to common stock 27,328 273 122,727
Exercise of employee
stock options 5,906
401(k) plan contributions 9,736
Unrealized gain on securities
held for sale
Net income for fiscal 1996
- ------------------------------------------------------------------------------
Balances at March 31, 1996 6,705,143 67,051 17,027,890
- ------------------------------------------------------------------------------
Conversion of subordinated
debentures to common stock 10,000 100 44,900
401(k) plan contributions
Net income for quarter ended
June 30, 1996
- ------------------------------------------------------------------------------
Balances at June 30, 1996 6,715,143 $ 67,151 $ 17,072,790
============================= ============ ============ ============
<CAPTION>
Unrealized Retained Total
Treasury Stock Gains Earnings Shareholders'
Shares Amount (losses) (Deficit) Equity
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balances at March 31, 1993 (377,326) (1,494,117) 52,843 9,058,844
- ----------------------------------------------------------------------------------
Purchase of warrants (12,000)
Issuance of common stock 487,500
Net income for fiscal 1994 1,367,500 1,367,500
- ----------------------------------------------------------------------------------
Balances at March 31, 1994 (377,326) (1,494,117) 0 1,420,343 10,901,844
- ----------------------------------------------------------------------------------
Issuance of common stock 530,000
Conversion of subordinated
debentures to common stock 111,999
Exercise of employee
stock options 10,250 25,625 27,812
401(k) plan contributions 2,118 5,295 10,061
Unrealized gain on securities
held for sale 14,208 14,208
Net income for fiscal 1995 2,433,912 2,433,912
- ----------------------------------------------------------------------------------
Balances at March 31, 1995 (364,958)($1,463,197) $14,208 $3,854,255 $14,029,836
- ----------------------------------------------------------------------------------
Purchase of common stock (99,650) (353,007) (353,007)
Issuance of common stock 5,331,729
Conversion of subordinated
debentures to common stock 123,000
Exercise of employee
stock options 12,375 30,938 36,844
401(k) plan contributions 14,521 47,955 57,691
Unrealized gain on securities
held for sale (14,208) (14,208)
Net income for fiscal 1996 1,777,377 1,777,377
- ----------------------------------------------------------------------------------
Balances at March 31, 1996 (437,712) (1,737,311) 0 5,631,632 20,989,262
- ----------------------------------------------------------------------------------
Conversion of subordinated
debentures to common stock 45,000
401(k) plan contributions 6,915 25,152 25,152
Net income for quarter ended
June 30, 1996 588,640 588,640
- ----------------------------------------------------------------------------------
Balances at June 30, 1996 (430,797)($1,712,159) $0 $6,220,272 $21,648,054
==================================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-8
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. The Company and Its Significant Accounting Policies
The Company - NMR of America, Inc., and Subsidiaries (the "Company") is engaged
- -----------
in installing and maintaining imaging systems used for diagnostic purposes in
offices operated by private physicians.
Consolidation - The accompanying consolidated financial statements include the
- -------------
accounts of NMR of America, Inc., its wholly-owned subsidiaries and certain
limited partnerships in which the Company is a general partner. All material
intercompany balances and transactions have been eliminated. As general
partner, the Company is subject to all the liabilities of a general partner and
as of June 30, 1996, is entitled to share in partnership profits, losses and
distributable cash as follows:
Company Share of
Profits, Losses and
Partnership Distributions
----------- -------------
NMR Associates I (Union, New Jersey) 64%
MR Associates I (Philadelphia, Pennsylvania) 98%
MR Associates of Allentown (Allentown, Pennsylvania) 96%
MR Associates of Morristown (Morristown, New Jersey) 94%
MR Partners of Greenbelt (Seabrook, Maryland) 87%
MR Associates of Chicago (Chicago, Illinois) 87%
Garden State Imaging Partners (Marlton, New Jersey) 91%
Harford County Imaging Partners (Bel Air, Maryland) 63%
Accessible MRI (Chicago, Illinois) 80%
Golf MRI Center (Des Plaines, Illinois) 75%
Diagnostic Imaging Center (Des Plaines, Illinois) 75%
The Company owns a 100% interest in imaging centers located in Chicago, Elgin,
Libertyville, and Oak Lawn, Illinois as well as Cape Coral, Naples, Sarasota and
Titusville, Florida. The Company owns a 38% interest in an Austin, Texas
limited partnership, which is accounted for using the equity method (See Note
13). The Company is also paid a monthly management fee based on patient cash
collections and/or patient volume under management agreements with certain of
the partnerships.
During the second quarter of the fiscal year ended March 31, 1993, accumulated
losses, from inception, of the Company's Harford County, Maryland limited
partnership fully offset the capital contributed by its limited partners.
Accordingly, losses incurred in excess of such limited partnership capital have
been charged, in full, to the Company as general partner. Future profits, if
any, in the Harford County partnership will be allocated, in full, to the
Company as general partner until such profits equal the Company's excess share
of allocable losses. Thereafter, future profits and losses will be allocated in
accordance with the parties respective ownership interests.
F-9
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. The Company and Its Significant Accounting Policies (continued)
Reclassification - Certain prior year items have been reclassified to conform to
- ----------------
the current year presentation.
Use of Estimates - The preparation of the consolidated financial statements in
- ----------------
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities in the
consolidated financial statements and accompanying notes. The most significant
estimates relate to contractual and other allowances, income taxes,
contingencies and the useful lives of equipment. Actual results could differ
from those estimates. In addition, healthcare industry reforms and
reimbursement practices will continue to impact the Company's operations.
Cash and Cash Equivalents - For financial statement purposes cash equivalents
- -------------------------
include short-term investments with an original maturity of ninety days or less.
At June 30 and March 31, 1996 and March 31, 1995, respectively, the Company had
investments in money market accounts and certificates of deposit of $333,523,
$1,792,251 and $729,759. Cash and cash equivalents includes $723,270, $571,477
and $1,673,598 as of June 30 and March 31, 1996 and March 31, 1995,
respectively, representing funds of the various partnerships.
Marketable Securities - The Company adopted effective April 1, 1994, Statement
- ---------------------
of Financial Accounting Standards No. 115, ("SFAS 115") "Accounting for Certain
Investments in Debt and Equity Securities". SFAS 115 requires a more detailed
disclosure of debt and equity securities held for investment, the methods to be
used in determining fair value and when to record unrealized holding gains and
losses in earnings or in a separate component of shareholders' equity. Debt
securities for which the Company does not have the intent or the ability to hold
to maturity are classified as available-for-sale along with the Company's
investments in equity securities. Securities available for sale are carried at
fair value with unrealized gains and losses, net of tax, reported as a separate
component of shareholders' equity. Any realized gains and losses are determined
on the specific identification method. In accordance with SFAS 115, prior year
financial statements have not been restated to reflect the change in accounting
method. The cumulative effect as a result of adopting SFAS 115 in fiscal 1995
was not material.
Property and Equipment - Property and equipment are being depreciated for
- ----------------------
financial accounting purposes using the straight-line method over their
respective estimated useful lives ranging from three to ten years. Leasehold
improvements are being amortized over the shorter of the useful life or the
remaining lease term, typically 10 years. Upon
F-10
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. The Company and Its Significant Accounting Policies (continued)
retirement or other disposition of these assets, the cost and related
accumulated depreciation are removed from the accounts and the resulting gains
or losses are reflected in the results of operations. Expenditures for
maintenance and repairs are charged to operations. Renewals and betterments are
capitalized.
Organizational Costs - The Company capitalizes costs associated with the
- --------------------
organization of the various limited partnerships and Company-owned centers.
Such costs are amortized on a straight-line basis over a five-year period
beginning with the commencement of operations at each location.
Cost in Excess of Net Assets Acquired - The excess of the purchase price over
- -------------------------------------
the fair market value of net assets acquired is being amortized using the
straight-line method over 20 years. As of June 30 and March 31, 1996 and March
31, 1995, accumulated amortization amounted to $839,923, $694,783 and $274,544,
respectively.
The Company periodically reviews goodwill to assess recoverability based upon
expectations of undiscounted cash flows and operating income of each
consolidated entity having a material goodwill balance. An impairment would be
recognized in operating results, based upon the difference between each
consolidated entities' respective undiscounted cash flows and the carrying value
of the related costs in excess of net assets acquired, if a permanent diminution
in value were to occur.
401(k) Plan - The Company maintains a 401(k) savings plan under which the
- -----------
Company matches one-half of employee contributions to purchase the Company's
common stock and one-quarter of employee contributions to purchase other plan
investments, up to 6% of qualified earnings and subject to Internal Revenue
Service limitations. Company matching contributions for fiscal 1996 have
utilized treasury stock. Plan expense amounted to $36,098 and $10,061 in fiscal
1996 and 1995, respectively.
Earnings Per Share - Earnings per share is computed on the basis of the weighted
- ------------------
average number of common shares outstanding and dilutive common stock
equivalents. Common stock equivalents consist of stock options and warrants.
For the year ended March 31, 1994, earnings per share is computed on the basis
of the weighted average number of common shares outstanding during each year as
the Company's common stock equivalents had an anti-dilutive effect. The shares
issued by the Company in connection with the purchases of Oak Lawn Imaging
Center, Golf MRI Center, Diagnostic Imaging Center, Morgan Medical Holdings,
Inc. and Central Diversey MRI Center were considered outstanding from the date
of acquisition.
F-11
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. The Company and Its Significant Accounting Policies (continued)
The Convertible Subordinated Debentures are not common stock equivalents and are
not included in the calculation of primary earnings per share. The debentures
were also not assumed converted for purposes of calculating fully diluted
earnings per share for the year ended March 31, 1994, as such conversion would
have been antidilutive for such year.
The number of common shares used to compute primary and fully diluted net income
per share are as follows:
Quarter Ended
Fiscal Years Ended March 31, June 30,
1994 1995 1996 1996
--------- --------- --------- ---------
Primary 4,757,102 5,017,952 5,870,494 6,539,912
Fully Diluted 4,757,102 5,589,900 6,324,716 7,141,089
New Accounting Standards - Statement of Financial Accounting Standards No. 121
- ------------------------
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" ("SFAS 121") is effective for the Company's year ending March
31, 1997. The Company believes that the adoption of SFAS 121 will not have a
material effect on the Company's financial position or results of operations.
Statement of Financial Accounting Standards No. 123 "Accounting and Disclosure
of Stock-Based Compensation" ("SFAS 123") encourages but does not require
companies to recognize stock awards based on their fair value at the date of
grant. The Company currently follows, and expects to continue to follow, the
provisions of Accounting Principle Board Opinion No. 25 "Accounting for Stock
Issued to Employees" ("APB 25"), and related interpretations to account for its
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized. Although the
Company is permitted to continue to follow the provisions of APB 25 under SFAS
123, certain pro forma disclosure, to reflect the impact on reported earnings,
will be required beginning with the Company's fiscal year ending March 31, 1997,
as if the Company has accounted for its stock options in accordance with the
fair value method under SFAS 123.
2. Due from Affiliated Physician Associations
For consolidated centers which the Company developed, it has entered into
agreements with physicians engaging in business as professional associations
("Physicians") pursuant to which the Company maintains and operates imaging
systems in offices operated by the Physicians. The agreements have terms of up
to six years and are renewable at the option of the Company. The Physicians'
principal, Dr. David L. Bloom, is a
F-12
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
2. Due from Affiliated Physician Associations (continued)
director of the Company. Under the agreements, Physicians has agreed to be
obligated to contract for radiological services at the centers and to sublease
each facility. The Company is obligated to make necessary leasehold
improvements, provide furniture and fixtures and perform certain administrative
functions relating to the provision of technical aspects of the centers
operations for which Physicians pays a quarterly fee composed of a fixed sum
based on the cost of the respective imaging system installed, including the
related financing costs, a charge per invoice processed and a charge based upon
system usage for each Company-installed imaging system in operation. These fees,
net of a contractual allowance based upon Physicians ability to pay after
physicians have fulfilled their obligations under facility subleases and
radiological service contracts as set forth above, constitute the Company's
revenue, net for developed sites.
For consolidated centers which the Company has acquired, subsidiaries of the
Company have entered into agreements with unaffiliated professional corporations
to provide radiological services under Dr. Bloom's administration. Accordingly,
revenue, net for acquired centers consists of patient billings adjusted for
contractual and other allowances which have been negotiated with various third-
party payers. Fees paid to radiologists at these centers are reflected as a
component of medical supplies and other operating expense in the accompanying
statements of income.
Certain revenues are subject to audit and retroactive adjustment by third party
payers. The Company is aware of no pending audits or proposed adjustments and
no provisions for estimated retroactive adjustments have been provided.
3. Short-term Investments
Short-term investments at June 30 and March 31, 1996 are stated at cost plus
accrued interest and consist of certificates of deposit having original
maturities of greater than three months but not in excess of one year.
F-13
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
4. Marketable Securities
Marketable securities classified as available-for-sale are as follows:
Gross Fair
June 30, 1996 unrealized market
Cost gains value
--------- ---------- ---------
Available-For-Sale:
U.S. Government obligations $ 298,125 $ -- $ 298,125
========== ========== ==========
March 31, 1995
Available-For-Sale:
U.S. Government obligations $ 1,111,435 $ 14,208 $ 1,125,643
=========== =========== ===========
At March 31, 1995, all investments in debt securities had maturities of
less than one year.
5. Property and Equipment
Property and equipment stated at cost are set forth below:
March 31, June 30,
1995 1996 1996
- -------------------------------------------------------------------------------
Diagnostic equipment $19,260,564 $18,328,154 $18,408,355
Diagnostic equipment under capital
leases 1,402,367 2,272,367 2,272,367
Leasehold improvements 4,486,404 4,978,901 4,994,926
Leasehold improvements under capital
leases 210,000 210,000
Land and buildings 1,353,569 1,353,569 1,353,569
Equipment 3,600,164 3,766,268 3,874,203
Equipment under capital leases 290,000 290,000
Furniture and fixtures 616,519 632,792 634,418
Construction in progress 640,546 --- ---
- -------------------------------------------------------------------------------
$31,360,133 $31,832,051 $32,037,838
===============================================================================
Depreciation expense for the quarter ended June 30, 1996 and the years ended
March 31, 1996, 1995 and 1994 amounted to $648,788, $2,444,896, $2,527,773 and
$2,197,181, respectively.
Accumulated amortization relating to property and equipment under capital leases
at June 30, and March 31, 1996 and March 31, 1995 was $989,789, $881,674 and
$510,570, respectively.
F-14
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
5. Property and Equipment (continued)
The following is a schedule by fiscal year of the minimum future lease payments
under capital leases as of March 31, 1996:
Year ending March 31,
1997 $ 731,728
1998 601,886
1999 487,624
2000 176,043
2001 ---
thereafter ---
- --------------------------------------------------------------------------------
Total minimum lease payments 1,997,281
Less: amount representing
interest (imputed at an average
rate of 7.9%) 231,841
- --------------------------------------------------------------------------------
Present value of
minimum lease payments 1,765,440
Less current installments 612,985
- --------------------------------------------------------------------------------
Obligations under capital leases,
less current installments $1,152,455
================================================================================
6. Long-term Investments
Long-term investments at June 30 and March 31, 1996 are stated at cost plus
accrued interest and consist of certificates of deposit maturing in April and
May 1997.
7. Convertible Subordinated Debentures
In July 1986, the Company completed a public offering of 8% Convertible
Subordinated Debentures of $4,000,000 due 2001 and received $3,365,000, net of
underwriting discount and other expenses. The debentures are redeemable at a
declining premium after July 1988, contain a mandatory sinking fund provision
calculated to retire 90% of the debentures before maturity at a rate of 10% per
year commencing in July 1992, and are convertible into the Company's common
stock at any time prior to maturity at $4.50 per share. As of June 30, 1996,
$1,999,000 of the debentures have been converted into the Company's common
stock. Under the provisions of the indenture, the Company has not been required
to meet its sinking fund requirement as a result of the cumulative debenture
conversions and does not expect to make a sinking fund payment until July of
1997.
F-15
<PAGE>
NMR OF AMERICA, INC, AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
8. Notes and Mortgage Payable
Notes and mortgage payable consist of the following:
<TABLE>
<CAPTION>
March 31, March 31, June 30,
1995 1996 1996
--------------- --------------- -----------
<S> <C> <C> <C>
Mortgage payable to bank (A) $ 524,065 $ 517,169 $ 514,920
Allentown equipment note payable to bank (B) 1,980,952 1,561,907 1,371,428
Note payable for acquisition of limited
partnership interests (C) 1,861,835 1,029,343 800,555
Oak Lawn equipment note payable to bank (D) 1,334,594 1,218,476 1,184,805
Bel Air equipment note payable (E) 2,705,136 2,520,116 2,470,531
Notes payable from Morgan acquisition (F) 3,612,007 3,240,104
Notes payable from other acquisitions (G) 2,455,856 2,637,360 2,488,756
Other notes payable for equipment, equipment
upgrades and leasehold improvements (H) 2,357,779 2,843,300 2,532,231
- ---------------------------------------------------------------------------------------------------------
13,220,217 15,939,678 14,603,330
Total
Less, current installments 2,769,098 4,911,031 4,591,221
- ---------------------------------------------------------------------------------------------------------
Notes and mortgage payable less current
installments $ 10,451,119 $ 11,028,647 $ 10,012,109
=========================================================================================================
</TABLE>
(A) The Company has a thirty-year mortgage collateralized by the Union, New
Jersey imaging center land and building. The mortgage bears interest at a
variable rate, adjusted annually based on the one-year Treasury bill rate
plus 2.75% (8.5% at June 30, 1996) and matures October 2019. The current
monthly payments are $4,310, including interest.
(B) During the year ended March 31, 1992, the Company completed an upgrade at
its Allentown, Pennsylvania center which included both new imaging
equipment, related leasehold improvements and a five year prepaid equipment
maintenance agreement aggregating approximately $3,200,000. The Company
financed these amounts using a note payable (the "Note") over a five year
term which commenced in August 1992. The Note requires monthly installments
of $38,095 plus interest and a balloon payment of $952,395 due in July
1997. The Note bears interest at a variable rate equal to the bank's
prevailing prime rate plus one-half percent (8.75% at June 30, 1996),
however, the Note provides an option to fix the interest rate at any time
during the term. The Note is collateralized by substantially all of the
assets of the MR Associates of Allentown partnership. Effective for fiscal
1994, the Note's financial covenants were modified requiring the
Partnership to meet two debt coverage ratios, as defined, as of March 31 of
each fiscal year through the expiration of the Note.
F-16
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
8. Notes and Mortgage Payable (continued)
(C) In March 1994, the Company financed the acquisition of limited partnership
interests using a $2,240,000 three year note payable which bears interest
at a rate of 8.9% and requires monthly payments of $49,830, including
interest through April 1995 and $83,378, including interest per month
thereafter. The note is collateralized by the imaging equipment and
receivables of certain of the limited partnerships in which additional
interests were acquired.
(D) In January 1994, the Company assumed a five year $1,475,000 note payable to
a bank which bears interest at a variable rate equal to the bank's
prevailing prime rate plus one percent (9.25% at June 30, 1996). Monthly
payments, including principal and interest, for the first three years of
the note are fixed at $20,000, and $45,894 thereafter. The note is
collateralized by substantially all of the equipment of the Oak Lawn
Imaging Center.
(E) In December 1994, the Company refinanced the imaging equipment and
leasehold improvement debt of its Bel Air, Maryland center with a remaining
principal balance of $2,493,683 as of the date of the refinancing. In
conjunction with the refinancing, the Company also financed the cost of
upgrades to its MR and nuclear medicine equipment with an aggregate cost of
$238,614. The Company incurred a prepayment penalty of $15,945 in
conjunction with the refinancing, which was included as a component of
other expense (income), net in the accompanying statement of income for the
year ended March 31, 1995. The note payable obligation, aggregating
$2,748,242 of principal is payable over a seven year term due January 2001,
bears interest at 11.25% and requires fixed monthly payments of $40,000,
including interest, during the first 24 months and $61,465, including
interest, for the remaining term. The note is collateralized by the related
imaging equipment.
(F) In September 1995, in connection debt with the acquisition of Morgan
Medical Holdings, Inc ("Morgan") the Company assumed Morgan's existing
equipment debt obligations, aggregating $4,018,574. These notes bear
interest at rates ranging from 7.36% to 11.5% and require monthly payments
ranging from $623 to $33,335, including interest. The notes are payable
over varying terms with the last note due in September 1999. One of the
notes restricts the Company's ability to pay dividends. The foregoing notes
are collateralized by the respective centers' imaging equipment.
(G) In January 1995, in connection with the acquisition of Golf MRI L.P. and
Diagnostic Imaging Center L.P. the Company consolidated and refinanced the
centers' existing equipment debt obligations,
F-17
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
8. Notes and Mortgage Payable (continued)
aggregating $1,823,167, using a five year bank term note bearing interest
at a variable rate equal to the bank's prevailing prime rate plus one
percent (9.25% at June 30, 1996). The note requires monthly installments of
$37,708, including interest, and is due on March 31, 2000. In addition, the
Company assumed $34,450 of notes payable to former limited partners of
Diagnostic Imaging Center which bear interest at a rate of 10%, require
quarterly payments of $8,612 plus interest which were paid in December
1995, and a $125,000 two year note payable to the former general partner,
which does not bear interest. The Company financed $550,000 of the cash
portion of the acquisition price with a bank using a five year term note
bearing interest at a variable rate equal to the bank's prevailing prime
rate plus one percent (9.25% at June 30, 1996). The note requires monthly
installments of $11,721, including interest, and is due on March 31, 2000.
The note agreement requires the Company to meet certain financial ratios as
of March 31 of each year the agreement is in effect. The foregoing bank
notes are collateralized by the center's imaging equipment.
In January 1996, in connection with the acquisition of the assets of
Central Diversey MRI Center, Inc. the Company assumed a $631,784 note
payable bearing interest at 10% due September 1999. The note is
collateralized by cash deposits totaling $120,000 (included in other
assets) and the center's diagnostic equipment and requires monthly
installments of $16,894, including interest.
(H) Included in other debt obligations is $1,960,467, $2,091,274 and $1,312,046
at June 30 and March 31, 1996 and March 31, 1995, respectively, of various
notes payable relating to the purchase of equipment, equipment upgrades and
leasehold improvements. These notes bear interest at rates ranging from
8.9% to 11.8% and require monthly payments ranging from $1,106 to $18,082,
including interest. The notes are payable over varying terms of four and
five years with the last note due September 2000. The notes are primarily
collateralized by the related imaging equipment.
Included in other debt obligations is $571,764, $664,161 and $1,045,733 at
June 30 and March 31, 1996 and March 31, 1995, respectively of various
notes payable relating to the acquisition of the Des Plaines, Oak Lawn and
Libertyville, Illinois imaging centers and a purchase option related to the
general partner interest in MR Associates of Chicago. These notes bear
interest at rates ranging from 7.0% to 9.0%, and have varying terms of two
to five years. The payment
F-18
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
8. Notes and Mortgage Payable (continued)
terms are primarily monthly and range from $3,554 to $13,294,
including interest.
As of June 30, 1996, the Company has $5,890,951 outstanding obligations with
certain financial institutions under agreements which include a material adverse
change in financial condition or other similar subjective acceleration clauses.
Aggregate maturities of the Company's notes and mortgage payable for
fiscal years 1997 through 2001 and thereafter are as follows: 1997 -
$4,911,031; 1998 - $4,763,865; 1999 - $3,459,298; 2000 - $1,684,933; 2001 -
$648,838; thereafter $471,713.
9. Shareholders' Equity
AUTHORIZED STOCK
The Board of Directors is authorized to issue, without further action by the
shareholders, 500,000 shares of preferred stock, par value $.05, and to fix and
alter the rights related to such stock. The Company has a Shareholders' Rights
Plan (described below) which may require the issuance of Series A Preferred
Stock, $.05 par value, in connection with the exercise of certain stock purchase
rights. At March 31, 1996, there were no shares of preferred stock issued or
outstanding.
On October 25, 1995 the Board of Directors authorized a common stock repurchase
program whereby the Company can purchase up to $1,000,000 of its outstanding
common stock from time to time in the open market. The shares will be held as
treasury shares for reissuance upon the exercise of employee stock options,
warrants and other convertible securities. The timing of purchases and the
number of shares purchased will depend upon prevailing market prices and other
market conditions. As of June 30, 1996 the Company's cumulative stock purchases,
net of reissuance of 46,529 shares, amounted to 430,797 shares with an
aggregated cost of $1,712,159.
SHAREHOLDERS' RIGHTS PLAN
Under the Shareholders' Rights Plan each outstanding share of the Company's
common stock has attached to it one stock purchase right.
These rights will continue to be represented by and trade with the
F-19
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
9. Shareholders' Equity (continued)
Company's common stock certificates unless and until certain takeover-related
events occur. Following such events, each right will become exercisable to
purchase one one-hundredth of a share of Series A Preferred Stock, par value
$.05, at an exercise price of $15 per one one-hundredth share subject to
adjustment. In the event any person acquires beneficial ownership of 15% or more
of the outstanding common shares, (i) each right will be exercisable, for a
sixty-day period following the announcement of such acquisition, to purchase the
Company's common stock or common stock equivalent having a market value equal to
two times the exercise price and (ii) prior to such exercise the Company's Board
of Directors, may, at its option exchange outstanding rights to shares of common
stock at an exchange ratio of one share for each right. The Shareholders' Rights
Plan further provides that if, after the occurrence of such an acquisition, the
Company is merged into any other corporation or 50% or more of the Company's
assets are sold, each right will be exercisable to purchase common shares of the
acquiring corporation having a market value equal to two times the exercise
price. The rights expire on December 23, 2002, and are subject to redemption by
the Company's Board of Directors at $.01 per right at any time prior to the
first date upon which they become exercisable to purchase common shares.
STOCK OPTIONS AND EMPLOYEE STOCK GRANTS
The Company maintains an Incentive Stock Option and Non-Statutory Option Plan
(the "Plan") for employees of the Company. Under the Plan, established in 1986,
up to 1,000,000 shares of common stock of the Company may be issued upon the
exercise of options to be granted during the ten-year term of the Plan. The
exercise price of options granted is equal to the fair market value of the
Company's common shares on the date of grant. Options with respect to 572,409
shares were outstanding at June 30, 1996, at an exercise price ranging from
$2.25 to $6.38 per share for terms of five and ten years. As of June 30, 1996,
options with respect to 218,475 shares were exercisable. During the quarter
ended June 30, 1996, no options were exercised.
In September 1995, the Company granted 10,000 unregistered shares of common
stock to each of its two officers. The shares vest ratably on a quarterly basis
over two years from the date of grant.
F-20
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
9. Shareholders' Equity (continued)
STOCK PURCHASE WARRANTS
As of June 30, 1996, the Company had granted warrants to purchase its common
stock with the following terms:
Number
of Exercise Expiration
shares price date
- ----------- -------- ------------------
50,000 $7.00 September 26, 1996
50,000 $8.00 September 26, 1996
50,000 $3.00 August 2, 1996
50,000 $3.50 August 2, 1996
100,000 $8.00 February 6, 1997
7,000 $5.00 March 30, 1997
75,000 $3.00 November 5, 1998
35,000 $3.00 January 20, 1999
25,000 $3.09 February 23, 1999
100,000 $3.92 May 18, 1999
25,000 $5.00 September 30, 1999
190,000 $6.38 December 18, 2001
- -----------
757,000
===========
In October 1994, the Company issued warrants to purchase 25,000 shares of the
Company's common stock at an exercise price of $5.00 per share to a radiology
group providing services to one of its centers. These warrants have a term of
five years and are exercisable from the date of grant.
In May 1994, the Company entered into an agreement with Ehrenkrantz King
Nussbaum, Inc. ("EKN") under which EKN will provide financial consulting
services to the Company for a term of two years. Pursuant to this agreement, EKN
received warrants to purchase 100,000 shares of the Company's common stock;
50,000 warrants with an exercise price of $3.00 per share and 50,000 warrants
with an exercise price of $3.50 per share. These warrants had an initial term of
two years and are exercisable from the date of grant. During May 1996, the
Company extended the term of the EKN financial consulting agreement and warrants
for a period of three months to August 2, 1996.
In January 1994, the Company entered into a three year administrative services
agreement with Radiology Business Management Inc. ("RBM") to provide office and
clerical services to the Oak Lawn Imaging Center, pursuant to which the Company
issued RBM warrants to purchase 35,000 shares of the Company's common stock at
an exercise price of $3.00 per share. These warrants have a term of five years
and are exercisable from the date of grant.
F-21
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
9. Shareholders' Equity (continued)
In connection with the Company's fiscal 1992 stock purchase warrant redemption
offer, the Company issued Strategic Growth International warrants to purchase
100,000 shares of the Company's common stock; 50,000 warrants with an exercise
price of $7.00 per share and 50,000 warrants with an exercise price of $8.00 per
share. These warrants have a term of five years and are exercisable from the
date of grant. In March 1992, the Company issued warrants to purchase 7,000
shares of common stock at an exercise price of $5.00 per share in connection
with the execution of a ground lease for one of its facilities. The warrants
have a term of five years and are exercisable from the date of grant.
In February 1992, the Company entered into an agreement with Seaboard
Securities, Inc. ("Seaboard") under which Seaboard will provide financial
consulting services for a term of three years. Pursuant to the agreement,
Seaboard received warrants to acquire 100,000 shares of the Company's common
stock at $8.00 per share. The warrants have a term of five years and vest as
services are provided. A member of the Company's board of directors is an
officer of Seaboard.
On December 19, 1991, the non-employee Directors of the Company were each
granted warrants to purchase 20,000 shares (an aggregate of 140,000 shares) of
common stock at $6.38 per share. These warrants have a term of ten years and
are exercisable from date of the grant.
On November 6, 1990, the Board of Directors granted an officer and director of
the Company warrants to acquire 75,000 shares of common stock at $3.00 per
share. The warrants vested over a three year period from the date of the grant
and have a term of eight years. During the year ended March 31, 1992, the
Company granted the same officer and director warrants to acquire 50,000 shares
of the Company's common stock with an exercise price of $6.38 per share. These
warrants are exercisable from date of grant and have a term of ten years.
In May 1989, the Company issued warrants to purchase 100,000 shares of common
stock at an exercise price of $3.92 per share to a non-employee director of the
Company. These warrants have a term of ten years and are exercisable from the
date of grant.
In February 1989, the Company issued warrants to purchase 25,000 shares of
common stock at an exercise price of $3.09 per share to a professional
corporation providing legal services to the Company. These warrants have a term
of ten years and are exercisable from the date of grant.
F-22
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
10. Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, ("SFAS No. 109") "Accounting for Income Taxes.",
which requires an asset and liability approach. The asset and liability approach
requires the recognition of deferred tax liabilities and assets for the expected
future tax consequences of temporary differences between the financial reporting
basis and tax basis of the Company's assets and liabilities.
As of March 31, 1996, the Company for Federal income tax purposes, has net
operating loss carryforwards which begin to expire in the year 2000, of
approximately $6,389,000, of which approximately $3,390,000 represent net
operating losses of acquired companies. Under Section 382 of the Internal
Revenue Code, the Company's acquired operating losses are subject to an annual
utilization limitation of approximately $520,000.
Any unutilized annual limitation may be carried forward to available future
carryforward years.
Future changes in the ownership of the Company could result in additional
limitations on the utilization of its net operating loss carryovers. The state
tax jurisdictions in which the Company operates do not permit the carryback of
net operating losses to prior years in which taxes were paid. Such state tax
net operating losses were utilized to reduce the Company's fiscal 1996, 1995 and
1994 state income tax liability. For Federal income tax purposes, the Company
also has investment and alternative minimum tax credits of $386,000 and $81,000,
respectively, of which approximately $74,000 represents investment tax credits
of an acquired company. The Company's investment tax credits begin to expire in
the year 1999 and are accounted for under the flow through method. Alternative
minimum tax credits do not expire.
F-23
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
10. Income Taxes (continued)
Significant components, tax effected, of the Company's deferred tax assets and
(liabilities) at March 31, 1996 and 1995 are as follows (in thousands):
March 31, March 31, June 30,
1996 1996 1996
---------- ---------- ---------
Deferred tax liabilities:
Fixed assets $(1,123) $(1,794) $(1,780)
Purchase option (273) (249) (244)
Cash to accrual basis -- (784) (784)
------- ------- -------
Deferred tax liabilities (1,396) (2,827) (2,808)
------- ------- -------
Deferred tax assets:
Net operating losses 1,527 2,332 2,116
Excess financial reporting
partnership losses 466 -- --
Tax credits 491 466 466
Accrued liabilities -- 82 80
Other 11 56 56
------- ------- -------
Deferred tax assets 2,495 2,936 2,718
Valuation allowance -- -- --
------- ------- -------
Net deferred tax asset $ 1,099 $ 109 $ (90)
======= ======= =======
The net decrease in the Company's valuation allowance on deferred tax assets
during the year ended March 31, 1995 totaled $1,304,000.
Components of the provision for (benefit from) income taxes are as follows:
March 31, March 31, March 31, June 30,
1994 1995 1996 1996
------------ ------------ --------- --------
Current:
Federal $ 12,000 $ 25,000 $ 10,000 $ 25,000
State 96,000 44,284 29,421 40,000
----------- ----------- -------- --------
108,000 69,284 39,421 65,000
----------- ----------- -------- --------
Deferred:
Federal --- (1,142,000) 847,000 184,000
State --- 43,000 70,000 15,000
----------- ----------- -------- --------
--- (1,099,000) 917,000 199,000
----------- ----------- -------- --------
$ 108,000 $(1,029,716) $ 956,421 $264,000
=========== =========== ======== ========
F-24
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
10. Income Taxes (continued)
A reconciliation of the Federal statutory income tax rate to the Company's
effective tax rate as reported is as follows:
Years Ended March 31, June 30,
1994 1995 1996 1996
---- ---- ---- ----
Expected Federal income tax rate 34.0% 34.0% 34.0% 34.0%
State income taxes, net of
Federal benefit 5.4% 6.2% 3.9% 3.9%
Net operating loss carryforwards (33.2%) (32.2%)
Recognition of net deferred tax asset (82.4%)
Other 1.1% 1.1% (2.9%) (6.9%)
------ ------ ---- ----
Effective income tax rate 7.3% (73.3%) 35.0% 31.0%
====== ====== ===== =====
11. Commitments and Contingencies
As of June 30, 1996, the Company has entered into noncancelable leases for
eighteen offices that have imaging systems in current operation as well as
operating leases for magnetic resonance imaging equipment installed in its
Philadelphia, Pennsylvania and Seabrook, Maryland imaging centers and computed
axial tomography equipment installed in the Seabrook, Maryland imaging center.
Ten of the offices are subleased to affiliated Physicians. The office leases are
generally for terms of five and ten years and include rent escalation clauses
generally tied to the consumer price index and contain provisions for additional
terms at the option of the tenant. By reason of the sublease arrangements, if
the respective Physicians should be unable to pay the rental on the site, the
Company would be contingently liable. As of June 30, 1996, the Company has
subleased the operating sites to the Physicians for the base rental as
stipulated in the original lease. For the quarter ended June 30, 1996 and the
years ended March 31, 1996, 1995 and 1994 the related sublease income has been
offset by the lease rent expense.
The following summary of non-cancelable obligations includes the sublease
arrangements described above, certain equipment leases and the Company's
corporate rentals. As of March 31, 1996, the aggregate future minimum lease
payments and sublease rentals are as follows:
Original
Year ended March 31, Leases Subleases Net
- ---------------------- ---------- ---------- ----------
1997 $2,146,015 $ 848,226 $1,297,789
1998 1,706,451 649,482 1,056,969
1999 1,118,892 529,929 588,963
2000 689,964 507,098 182,866
2001 459,330 322,617 136,713
thereafter 315,292 99,795 215,497
- ---------------------- ---------- ---------- ----------
$6,435,944 $2,957,147 $3,478,797
========== ========== ==========
F-25
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
11. Commitments and Contingencies (continued)
Effective May 31, 1993, the Company terminated its leases for corporate
headquarters in Morristown, New Jersey. The Company entered into a lease
agreement for new executive and administrative office space under a 66 month
lease which commenced on May 19, 1993. The base agreement contains two five
year renewal options. Corporate rent expense for the quarter ended June 30,
1996 and the years ended March 31, 1996, 1995 and 1994 amounted to $30,231,
$116,318, $114,035, and $123,061, respectively.
During August, 1993, the Board of Directors authorized the Company to guarantee
personal loans made by a bank to an officer of the Company for the purpose of
purchasing the Company's common stock in the open market. The guarantee was
provided to the bank in the form of certificates of deposit aggregating $75,000.
The shares of common stock purchased by the officer are pledged to the Company
as collateral for the continuing guarantee of the related loan.
The Company is from time to time involved in litigation incidental to the
conduct of its business. Management and its counsel believe that such pending
litigation will not have a material adverse effect on the Company's results of
operations, cash flows or financial condition.
12. Related Parties
During the quarter ended June 30, 1996 and the years ended March 31, 1996, 1995
and 1994, the Company, in accordance with the related partnership agreements,
allocated certain corporate overhead costs to the limited partnerships which
resulted in $1,845, $7,230, $7,865 and $19,982, respectively, of such costs
being attributed to the minority interests.
As of March 31, 1996, the Company has notes receivable from two former officers
of Morgan Medical Holdings, Inc. in the amounts of $315,625 and $35,366,
including accrued interest thereon, which are included as a component of other
current assets and other assets in the Company's March 31, 1996 balance sheet.
The notes bear interest at prime and are payable in eight equal semi-annual
principal installments, plus interest, commencing March 15, 1996. The notes are
collateralized by a pledge of the Company's common stock which is owned by the
individuals, one of whom now is an employee of the Company. Subsequent to March
31, 1996, the loan for $315,625 plus interest was paid in full.
The Company has a consulting agreement with a member of the Board of Directors.
The consulting agreement has a one year term expiring on December 31, 1996, and
provides compensation of $77,000 per annum.
F-26
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
13. Imaging Center Matters
During the first quarter of fiscal 1996 the Company temporarily ceased
operations at its Union, New Jersey facility in order to replace the center's
existing magnetic resonance imaging equipment, which was installed in 1984. The
new system was installed during June 1995 and became operational in early July
1995. The project was completed for an aggregate cost of approximately $910,000,
which includes the cost of related leasehold improvements, diagnostic imaging
equipment and related upgrades. The Company financed the equipment and related
leasehold improvements in the form of a five year note payable.
The Company's Greenbelt, Maryland magnetic resonance imaging center facility
lease expired on January 31, 1995. The Company constructed a new center offering
both magnetic resonance and CT imaging which opened April 1995. The Company
financed the cost of equipment, totaling $918,750, using an operating lease and
financed the $672,546 cost of related leasehold improvements using a term note.
The Greenbelt lease required the Company to repair damage caused by the removal
of equipment at that location. In lieu of performing such repairs, the Company
paid $51,600 to obtain the landlord's full release from such obligations. This
amount is reflected in the fiscal 1995 statement of income as a component of
other income, net.
The Company's Austin, Texas center was closed during December 1995. The center
operated pursuant to a limited partnership agreement (the "Austin Partnership")
which was scheduled to expire on January 31, 1996, but was extended by the
governing board of the partnership for the purpose of liquidating and
distributing the remaining assets of the Austin Partnership. It is anticipated
that such liquidation will be completed during fiscal 1997 and will not have a
material impact on the results of operations or liquidity of the Company.
On May 15, 1996, effective January 1, 1996, the Company acquired the remaining
10% ownership interest in Oak Lawn Imaging Center which increased the Company's
ownership percentage to 100%. As consideration for the acquisition, the Company
issued 35,000 unregistered shares of its common stock.
F-27
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
14. Quarterly Consolidated Financial Information (Unaudited)
The following is a summary of unaudited quarterly consolidated financial
results for the years ended March 31:
(000's omitted, except for per share
amounts)
1996 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr
-------- ------- ------- -------
Revenue, net $4,771 $5,289 $6,754 $7,020
Operating income 771 1,068 1,378 1,544
Net income 238 355 554 630
Per fully diluted
common share (1):
Net income .05 .07 .09 .10
1995 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr(2)
------- ------- ------- -------
Revenue, net $4,437 $4,299 $4,376 $4,875
Operating income 1,082 920 865 227
Net income 622 501 382 929
Per fully diluted
common share (1):
Net income .13 .10 .08 .18
(1) Quarterly income per fully diluted common share does not equal the
annual amount due to changes in the common and equivalent shares
outstanding.
(2) The Company's fourth quarter consolidated financial results include (i)
a non-recurring $560,000 adjustment to write-down the carrying value of
certain fixed assets (see Note 15) and (ii) the recognition of the
Company's net deferred tax asset in the amount of $1,099,000 (see Note
10).
Quarterly results are generally effected by the timing of acquisitions,
including limited partner interests, and the number of operating days in the
quarter.
F-28
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
15. Acquisitions
Effective January 1, 1996, the Company completed its acquisition of
substantially all of the operating assets of Central Diversey MRI Center, Inc.
("CD MRI") which operates a magnetic resonance imaging center located in
Chicago, Illinois. As consideration for the acquisition, NMR paid $80,000 in
cash at closing to the selling shareholders and issued 10,000 unregistered
shares of NMR common stock which are subject to a two-year holding period
restriction. In conjunction with the transaction, NMR acquired substantially
all of CD MRI's operating assets, which consist primarily of magnetic resonance
imaging equipment, related leasehold improvements, office equipment and deposits
on the MRI related equipment aggregating $120,000 which are pledged as
collateral therefor. In addition, NMR assumed certain trade accounts payable of
Central Diversey aggregating $90,000 and MRI related equipment debt, subject to
existing collateral, totaling approximately $632,000 of outstanding principal as
of January 1, 1996. The acquisition has been accounted for as a purchase and,
accordingly, the acquired assets and liabilities were recorded at the fair value
at the date of acquisition. The Company recorded $429,333 of excess cost over
fair value of the assets which is being amortized over twenty years on a
straight line basis.
On March 13, 1995, the Company announced that its Board of Directors had
approved an agreement, providing for the acquisition of Morgan Medical Holdings,
Inc. ("Morgan"). A definitive merger agreement was executed on April 11, 1995.
The transaction was approved by the shareholders of Morgan and the Company on
September 14, 1995 and became effective September 15, 1995. Morgan provides
diagnostic imaging equipment, facilities and management services to physicians
through four outpatient centers located in the Florida cities of Cape Coral,
Naples, Sarasota and Titusville. Pursuant to the terms of the acquisition,
Morgan shareholders received 1,195,848 shares of the Company's common stock in
the transaction. Under the terms of the merger agreement, the Company exercises
control over the voting rights of Morgan's largest shareholder for a period of
three years. The Company accounted for the transaction as a purchase and,
accordingly, the acquired assets and liabilities were recorded at their fair
values at the date of acquisition. In conjunction with the transaction, the
Company recorded $6,356,132 of costs in excess of fair value which will be
amortized over twenty years on a straight line basis.
Effective January 1, 1995, the Company acquired, approximately 75% of the
general and limited partnership interests of Diagnostic Imaging Center, L.P.
("DIC") and Golf MRI Center, L.P. ("Golf MRI")(collectively the "Centers").
These limited partnerships collectively operate a multi-modality imaging center
located in Des Plaines, Illinois. As
F-29
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
15. Acquisitions (continued)
consideration for the acquisition, the Company paid $1,050,000 in cash and
issued 125,000 unregistered shares of the common stock of the Company and
assigned a fair value of $500,000. In conjunction with the acquisition, the
Company entered into agreements with the Center's radiologist to provide
radiologic and other administrative services to the Centers for three year
terms. In addition, the Company consolidated and refinanced the Centers'
existing debt obligations, aggregating $1,823,167. The acquisitions have been
accounted for as purchases and, accordingly, the acquired assets and liabilities
have been recorded at their fair value at the date of acquisition. The excess
of the cost over the fair value of the net assets acquired of $2,114,693 is
being amortized over twenty years on a straight line basis.
Effective January 1, 1995, the Company acquired the operations of a magnetic
resonance imaging center located in Libertyville, Illinois ("Libertyville"). As
consideration for the acquisition, the Company acquired certain of the seller's
assets and assumed certain liabilities. In addition, the Company agreed to pay
deferred consideration of up to $300,000 which was conditioned upon the center
achieving certain levels of revenue during calendar 1995 which were not attained
resulting in no additional consideration being payable. The acquisition has been
accounted for as a purchase and, accordingly, the acquired assets and
liabilities have been recorded at their fair value at the date of acquisition.
The excess of the cost over the fair value of the net assets acquired was not
material.
The Company's consolidated financial statements for the year ended March 31,
1996 include the results of operations of Morgan and CD MRI from the September
15, 1995 and January 1, 1996 effective dates of such transactions, respectively.
The Company's consolidated financial statements for the year ended March 31,
1995, do not include the results of operations of Morgan or CD MRI and include
the results of operations of Golf MRI, DIC and Libertyville ("Historical
Acquisitions") from the January 1, 1995 effective date of such transactions. The
following summarizes the unaudited proforma results of operations for the years
ended March 31, 1996 and 1995, assuming all of the foregoing acquisitions had
occurred on April 1, 1995 and 1994 (in thousands, except per share data):
F-30
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
15. Acquisitions (continued)
Fiscal 1996
------------------------------
(unaudited)
NMR
Including
NMR Including Historical
Including Historical Acquisitions,
Historical Acquisitions Morgan and
Acquisitions and Morgan CD MRI
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- ------------
Revenue, net $ 21,844 $ 26,435 $ 27,300
Operating income $ 3,903 $ 5,437 $ 5,773
Income before
income taxes $ 2,080 $ 3,189 $ 3,452
Income before extraordinary
item and cumulative effect
of change in accounting
principle $ 1,342 $ 2,033 $ 2,257
Fully diluted net
income per share $ .21 $ .31 $ .35
Fiscal 1995 (1)
--------------------------------------
(unaudited)
NMR
Including
NMR Including Historical
Including Historical Acquisitions,
Historical Acquisitions Morgan and
Acquisitions and Morgan CD MRI
(Unaudited) (Unaudited) (Unaudited)
----------- ----------- ------------
Revenue, net $20,707 $25,962 $26,550
Operating income $ 3,637 $ 5,336 $ 5,647
Income before
income taxes $ 1,673 $ 2,934 $ 3,086
Income before extraordinary
item and cumulative effect
of change in accounting
principle $ 2,716 $ 3,806 $ 3,936
Fully diluted net
income per share $ .51 $ .58 $ .60
(1) The Company's fiscal 1995 pro forma financial results include (i) a non-
recurring $560,000 adjustment to write-down the carrying value of
certain fixed assets (see Note 16) and (ii) the recognition of the
Company's net deferred tax asset in the amount of $1,099,000 (see Note
10).
F-31
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
16. Asset Write-down
The Company's results of operations for the fourth quarter of fiscal 1995
includes a charge to expense of approximately $560,000 representing the
remaining net book value of the diagnostic imaging equipment of the Company's
Elgin, Illinois imaging center which are no longer believed to be recoverable
from the center's future operations. The center has operated at a loss since it
opened in May 1992. The impact of this charge on fiscal 1995 and fourth quarter
net income, net of the related tax benefit, was approximately ($338,000) or
($.06) per share. The Company intends to utilize the facility to perform
certain regional administrative functions and to perform limited diagnostic
imaging procedures at reduced staffing levels in the future.
17. Fair Value of Financial Instruments
The following estimated fair value amounts have been determined using available
market information and appropriate valuation methodologies. However,
considerable judgement is necessarily required in interpreting market data to
develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated fair
value amounts.
March 31, 1996
--------------------------
Carrying
Amount Fair Value
-------------- -----------
Assets:
Cash and cash equivalents $ 3,782,315 $ 3,782,315
Short-term investments 663,660 663,660
Long-term investments 192,000 192,000
Due from affiliated physician
associations and patient
receivables, net 14,182,008 14,182,008
Liabilities:
Notes payable $15,939,678 15,977,899
Capital lease obligations 1,765,440 1,765,541
Convertible debentures 1,975,752 1,849,578
The carrying amounts of cash and cash equivalents, short-term investments, long-
term investments and due from affiliated physician associations and patient
receivables, net are a reasonable estimate of their fair value. The fair value
of the Company's notes payable, capital lease obligations and convertible
debentures are based upon a discounted cash flow calculation utilizing rates
under which similar borrowing arrangements can be entered into.
F-32
<PAGE>
NMR OF AMERICA, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
18. Subsequent Event
On May 7, 1996, the Company announced that it was in negotiations regarding a
possible business combination with Medical Resources, Inc. ("Medical
Resources"). A definitive merger agreement was executed on May 20, 1996 which is
the subject to the merger conditions set forth below. Medical Resources provides
diagnostic imaging equipment, facilities and management services to physicians
through nineteen outpatient centers located in New York, New Jersey and Florida.
Pursuant to the terms of the acquisition, 0.6875 shares of Medical Resources
common stock would be issued for each outstanding share of NMR. The merger is
subject to certain conditions including shareholder and regulatory approval and
certain third party consents. Senior management of the combined company would be
composed of the current executives of Medical Resources with NMR's current
executive officers, Joseph G. Dasti and John P. O'Malley III serving as
consultants to the combined company. The closing of the merger is anticipated to
occur in the third quarter of fiscal 1997, although there can be no assurance
that the transactions will be completed as contemplated or that it will occur
when anticipated.
In June 1996, the Company entered into a line of credit agreement with a lender
for an amount up to $4,000,000. Borrowing under the line of credit will bear
interest at a rate of one and one-half percent over the lender's prime rate and
will be collateralized by the Company's receivables.
F-33
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution *
-----------------------------------------------------
Securities and Exchange Commission registration fee $ 6,404
Accounting fees and expenses 10,000
Legal fees and expenses 12,000
Blue Sky fees and expenses 2,000
Miscellaneous 2,000
Total $32,404
=======
* All amounts are estimates other than the Commission's registration
fee. No portion of these expenses will be borne by the Selling
Stockholders.
Item 15. Indemnification of Directors and Officers
---------------------------------------------------
Section 145 of the General Corporation Law of the State of
Delaware ("DGCL") empowers the Company to, and the Certificate of
Incorporation of the Company provides that it shall, indemnify any person
who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding by any reason
of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, judgments,
fines and amounts paid in settlement actually and reasonably incurred by
him in connection with such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful; except that, in the case of an action or suit by or
in the right of the Company, no indemnification may be made in respect of
any claim, issue or matter as to which such person shall have been
adjudged to be liable for negligence or misconduct in the performance of
his duty to the Company unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall
determine that such person is fairly and reasonably entitled to indemnity
for such expenses which the Court of Chancery or such other court shall
deem proper.
II-1
<PAGE>
The Company's Certificate of Incorporation provides, pursuant
to Section 145 of the DGCL, for indemnification of officers, directors,
employees and agents of the Company and persons serving at the request of
the Company in such capacities within other business organizations
against certain losses, costs, liabilities and expenses incurred by
reason of their position with the Company or such other business
organizations.
Article Ninth of the Company's Certificate of Incorporation
limits a director's liability in accordance with Section 102(b) of the
DGCL. Specifically, Article Ninth provides that no director of the
Company shall be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the DGCL, or (iv) for any transaction
from which the director derived an improper personal benefit. Article
Ninth also provides that if the DGCL is further amended to authorize
corporate action further eliminating or limiting the personal liability
of directors, the liability of a director of the Company shall be
eliminated or limited to the fullest extent permitted by the DGCL.
ITEM 16. EXHIBITS.
-------------------
EXHIBIT
NUMBER DESCRIPTION
------ -----------------------------------
5.1 Opinion of Werbel & Carnelutti, a Professional Corporation/1/
23.1 Consent of Werbel & Carnelutti (included in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Dixon, Odom & Co., LLP.
23.4 Consent of Kempisty & Company, Certified Public Accountants,
P.C.
23.5 Consent of Coopers & Lybrand L.L.P.
23.6 Consent of Coopers & Lybrand, L.L.P.
24.1 Power of Attorney (Reference is made to the signature page of
the Registration Statement).
99.1 Important Factors Regarding Forward-Looking Statements.
II-2
<PAGE>
99.2 Asset Purchase Agreement, dated as of January 16, 1997, between
Melbourne Neurologic, P.A., Thomas G. Hoffman, Scott L. Gold,
Eugene M. Shepherd, Melbourne Resources, Inc. and the Company.
99.3 Asset Purchase Agreement, dated as of January 27, 1997, among
Dedicated Medical Imaging, San Clemente, Inc., Long Beach
Radiology Center, Ltd., Mr. Joseph Payne, San Clemente
Resources, Inc., Long Beach Resources, Inc. and the Company
99.4 Asset Purchase Agreement, dated as of January 31, 1997, by and
among The MRI Center of Jacksonville Inc., Mr. Francis D.
Hussey, Jacksonville Resources, Inc. and the Company.
99.5 Stock Purchase Agreement, dated as of February 27, 1997, by and
among Advanced Diagnostic Imaging, Inc., Drew M. Netter,
William Lehn and the Company
99.6 Asset Purchase Agreement, dated as of March 10, 1997, between
MRI of Palm Beach, Inc., The Magnet of Palm Beach, Ltd., West
Palm Beach Resources, Inc. and the Company.
99.7 Asset Purchase Agreement, dated as of March 14, 1997, between
Grove Diagnostic Imaging Center Inc., J. Kenneth Luke, J.M.
Venesky, Rancho Cucamonga Resources, Inc. and the Company.
99.8 Asset Purchase Agreement, dated as of May 7, 1997, among
Accessible MRI of Baltimore County, Inc., Accessible MRI of
Montgomery County, Inc., Ross H. Taber, Phyllis S. Taber,
Accessible Resources, Inc., and the Company
99.9 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 Company.*
99.10 Asset Purchase Agreement, dated as of March 7, 1997 by and
among the Company, ATI Resources, Inc., ATI Centers, Inc.,
Americare Health Services Inc., John A. Bennet, M.D. and
Nancy D. Rocco.
- ---------------------------
/1/ Previously filed.
* Incorporated by reference from the Company's Current Report on Form 8-K
filed with the Commission on June 16, 1997.
II-3
<PAGE>
99.10 Asset Purchase Agreement, dated as of March 7, 1997 by and
among the Company, ATI Resources, Inc., ATI Centers, Inc.,
Americare Health Services Inc., John A. Bennet, M.D. and Nancy
D. Rocco.
ITEM 17. UNDERTAKING.
----------------------
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement
(or most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
Registration Statement or any material change to such
information in the Registration Statement; provided,
however, that the undertakings set forth in paragraphs (i)
and (ii) above do not apply if the information required to
be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act") that are incorporated by reference in this
Registration Statement.
2. That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
---- ----
3. To remove from registration by means of a post-effective
amendment any of the securities being registered hereby which remain
unsold at the termination of the offering.
4. That, for the purpose of determining any liability under
the Securities Act each filing of the registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the
II-4
<PAGE>
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
---- ----
offering thereof.
Insofar as indemnifications for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the registrant pursuant to the provisions described under Item
15 above, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act, and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of
expenses incurred or paid by a director, officer, or controlling person
of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act, and will be governed by the final
adjudication of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1933, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing Form S-3 and has duly
caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized in the City of
Hackensack, State of New Jersey on June 23, 1997.
MEDICAL RESOURCES, INC.
By: /s/ William D. Farrell
----------------------------------
William D. Farrell, President
and Chief Operating Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints William D. Farrell and
Stephen M. Davis, or either of them, his true and lawful attorney-in-fact
and agent with full power of substitution and resubstitution, for him and
in his name, place and stead, in any and all capacities to sign any or
all amendments (including post-effective amendments) to this registration
statements and any related registration statement filed under Rule
462(b), and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, each acting
alone, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as
fully for all intents and purposes as he might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and
agents, each acting along, or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons in the capacities and on June 23, 1997.
Signature Capacity in Which Signed
--------- ------------------------
/s/ Gary N. Siegler Chairman of the
--------------------- Board of Directors
Gary N. Siegler
<PAGE>
/s/ Neil H. Koffler Director
---------------------
Neil H. Koffler
/s/ Stephen M. Davis Director
---------------------
Stephen M. Davis
/s/ Gary Fuhrman Director
---------------------
Gary Fuhrman
/s/ John Josephson Director
---------------------
John Josephson
/s/ William D. Farrell President (Principal Executive
---------------------- Officer), Chief Operating
William D. Farrell Officer and Director
/s/ John P. O'Malley III Executive Vice President- Finance
------------------------ and Chief Financial Officer
John P. O'Malley III (Principal Financial/Accounting
Officer)
91306
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3 No. 333-24865) of
Medical Resources, Inc. for the registration of 1,036,161 shares of its
common stock and to the incorporation by reference therein of our report
dated February 29, 1996, with respect to the consolidated financial
statements and schedule of Medical Resources, Inc. included in its Annual
Report (Form 10-K/A) for the year ended December 31, 1996, filed with the
Securities and Exchange Commission.
/s/ ERNST & YOUNG LLP
Tampa, Florida
June 25, 1997
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the references to our firm under the caption "Experts" in
the Amendment to the Registration Statement (Form S-3) and related
Prospectus of Medical Resources, Inc. for the registration of 3,528,550
shares of its common stock and to the incorporation by reference therein
of our reports dated February 21, 1995 with respect to the financial
statements of Kik Kin, L.P. for the years ended December 31, 1994 and
January 1, 1994.
/s/ DIXON, ODOM & CO., L.L.P.
Greensboro, North Carolina
June 26, 1997
<PAGE>
Exhibit 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 9, 1996, which appears
in the annual report on Form 10-K/A of Medical Resources, Inc. for the
year ended December 31, 1996, and to the reference to our Firm under the
caption "Experts" in the Prospectus.
/s/ KEMPISTY & COMPANY
Certified Public Accountants, PC.
New York, New York
June 26, 1997
<PAGE>
Exhibit 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration
statement of Medical Resources, Inc. on Form S-3 of our report dated
March 28, 1997, on our audit of the consolidated financial statements and
financial statement schedule of Medical Resources, Inc. and Subsidiaries
(the "Company") as of December 31, 1996 and for the year ended December
31, 1996, which report is included in the Company's Annual Report on
Form 10-K/A. We also consent to the reference to our firm under the
caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
Parsippany, New Jersey
June 26, 1997
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the registration statement of Medical Resources,
Inc. on Form S-3 of our report dated June 21, 1996, on our audit of the
consolidated financial statements of NMR of America, Inc. and Subsidiaries
("NMR") as of March 31, 1996 and 1995 and for each of the three years in the
period ended March 31, 1996, which report is included in NMR's Annual Report on
Form 10-KSB/A. We also consent to the reference to our firm under the caption
"Experts".
/s/ Coopers & Lybrand
Parsippany, New Jersey
June 26, 1997
<PAGE>
Exhibit 99.1
IMPORTANT FACTORS REGARDING FORWARD - LOOKING STATEMENTS
--------------------------------------------------------
The Company may occasionally make forward-looking statements
and estimates, such as forecasts and projections of the Company's future
performance or statements of management's plans and objectives. These
forward-looking statements may be contained in SEC filings, Annual
Reports to Stockholders, press releases and oral statements, among
others, made by the Company. Actual results could differ materially from
those in such forward-looking statements. Therefore, no assurances can
be given that the results in such forward-looking statements will be
achieved. Important factors that could cause the Company's actual
results to differ from those contained in such forward-looking statements
include, among other matters, the factors mentioned below.
Acquisition Strategy; Management of Growth
------------------------------------------
One of the Company's key objectives is to continue to acquire
diagnostic imaging centers and temporary healthcare staffing businesses
and integrate them into the Company's operations. Successfully
accomplishing this goal depends upon a number of factors, including the
Company's ability to find suitable acquisition candidates, negotiate
acquisitions on acceptable terms, obtain necessary financing on
acceptable terms, retain key personnel of the acquired entities, hire and
train other competent managers, and effectively and profitably integrate
the operations of the acquired businesses into the Company's existing
operations. The process of integrating acquired businesses may require a
significant amount of resources and management attention which will
temporarily detract from attention to the day-to-day business of the
Company and may be prolonged due to unforeseen circumstances.The
Company's ability to manage its growth effectively will require it to
continue to improve its operational, financial and management information
systems and controls, and to attract, retain, motivate and manage
employees effectively. The failure of the Company to manage growth in
its business effectively would have a material adverse effect on its
results of operations. Future acquisitions may be financed through the
incurrence of additional indebtedness or the issuance of equity
securities. The issuance by the Company of additional Common Stock in
connection with acquisitions could be dilutive to Company stockholders.
Competition for suitable acquisition candidates is expected to be intense
and, in addition to local hospital and physician groups, to include
regional and national diagnostic imaging service companies, regional and
national staffing companies and other medical services companies, many of
which have greater financial resources than the Company.
Development of New Centers
--------------------------
Although the primary focus of the Company's growth strategy is
on acquisitions of existing centers rather than developing new centers,
the Company may also, from time to time, pursue the development of new
centers. Developing new centers entails the same risks as establishing a
new business. The likelihood of success of a newly developed center must
therefore be considered in light of the initial development and operating
complexities, expenses, difficulties, and delays frequently encountered
by a new
<PAGE>
business and the competitive environment in which the new business will
operate. In addition, new centers may incur significant operating losses
during their initial operations which could materially adversely affect
the Company's operating results and financial condition.
Limitations and Delays in Reimbursement
---------------------------------------
Third-party payors, including Medicare, Medicaid, managed
care/HMO providers and certain commercial payors have taken extensive
steps to contain or reduce the costs of healthcare. In certain areas,
the payors are subject to regulations which limit the amount of payments.
Discussions within the Federal government regarding national healthcare
reform are emphasizing containment of healthcare costs. In addition,
certain managed care organizations have negotiated capitated payment
arrangements for imaging services. Under capitation, diagnostic imaging
service providers are compensated using a fixed rate per member of the
managed care organization regardless of the total cost of rendering
diagnostic services to the members. Services provided under these
contracts are expected to become an increasingly significant part of the
Company's business. The inability of the Company to properly manage the
administration of capitated contracts could materially adversely effect
the Company. Although patients are ultimately responsible for payment
for services rendered, substantially all of the Company's imaging
centers' revenues are derived from third-party payors. Successful
reduction of reimbursement amounts and rates, changes in services
covered, delays or denials of reimbursement claims, negotiated or
discounted pricing and other similar measures could materially adversely
affect the Company's respective imaging centers' revenues, profitability
and cash flow.
The Company's management believes that reimbursement rates will
continue to decline due to factors such as the expansion of managed care
providers and continued national healthcare reform efforts. The Company
enters into contractual arrangements with managed care organizations
which, due to the size of their membership, are able to command reduced
rates for services. These agreements are expected to increase the number
of procedures performed due to the additional referrals from these
managed care arrangements. However, there can be no assurance that the
increased volume of procedures associated with these contractual
arrangements will offset the reduction in reimbursement rate per
procedure.
In addition, a significant percentage of the Company's net
service revenues from imaging centers are derived through physicians
providing imaging services to patients involved in personal injury
claims. Receivables relating to personal injury claims require more
extensive documentation than other procedures. In addition, those
individuals with obligations to the Company in excess of insurance
coverage or those who do not have insurance coverage tend to delay
payment until legal claims are resolved, which may result in significant
collection delays. Due to the greater complexity in processing
receivables relating to personal injury claims, as well as increased
information requirements from third-party payors, such receivables
typically require a longer period of time to collect compared to other
receivables and, in the experience of the Company, incur a higher bad
debt expense. The Company believes that providing imaging services to
patients involved in personal injury claims is an attractive revenue
source because of (i) the significantly higher reimbursement rates
typically realized in such cases as compared to payors such as Medicare,
Medicaid and managed care providers and (ii) this business enables the
Company to maximize its equipment utilization and provides incremental
cash flow to support fixed operating costs. Based on the Company's
experience, the discounted present value of the anticipated net
-2-
<PAGE>
revenue, per procedure, from personal injury cases generally exceeds that
of all other payor sources, excluding commercial insurance companies.
Therefore, the Company expects new centers which it has recently acquired
and centers which it may acquire in the future to target actively such
personal injury cases, which may increase such centers' bad debt expense
levels. Significant delays in the collection or the inability to collect
receivables relating to personal injury claims could have an adverse
effect on the Company's diagnostic imaging operations.
Restrictions Imposed by Government Regulation
---------------------------------------------
The healthcare industry is highly regulated. The ownership,
construction, operation, expansion and acquisition of outpatient
diagnostic imaging centers are subject to various federal and state laws,
regulations and approvals concerning such matters as physician referrals,
licensing of facilities and personnel, and Certificates of Need and other
required certificates for certain types of healthcare facilities and
major medical equipment. Among other penalties, violations of these laws
can result in the shutdown of a company's facilities and loss of Medicare
and Medicaid reimbursement for patient services. The Federal Anti-
Kickback Act of 1977, as amended (the "Anti-Kickback Act") prohibits the
offer, payment, solicitation or receipt of any form of remuneration in
return for referring Medicare or Medicaid patients or purchasing,
leasing, ordering or arranging for any item or service that is covered by
Medicare or Medicaid. The law provides several penalties for engaging in
prohibited acts, including criminal sanctions and exclusion from the
Medicare and Medicaid programs. Although the Company does not believe
that it is operating in violation of this law, the scope of the law
remains somewhat unclear and there is no assurance that the Company would
prevail in its position. In addition, in 1991 and subsequently, the
Office of the Inspector General of the Department of Health and Human
Services promulgated "safe harbor" regulations specifying activities that
will be protected from criminal and civil investigation and prosecution
under the Anti-Kickback Act. The Office of the Inspector General has
stated that failure to satisfy the conditions of an applicable "safe
harbor" does not necessarily indicate that the arrangement in question
violates the Anti-Kickback Act, but means that the arrangement is not
among those that the "safe harbor" regulations protect from criminal and
civil investigation and prosecution under that law. The finding of a
violation must still be determined based upon the precise language of the
Anti-Kickback Act.
The Federal Omnibus Budget Reconciliation Act of 1989, as
amended by the Federal Omnibus Budget Reconciliation Act of 1993 contains
provisions that, unless an exception applies, restrict physicians from
making referrals to, among others, providers of MR and other radiological
services for services to be rendered to Medicare or Medicaid patients in
which the physicians have a "financial relationship" or an ownership
interest or with which they have a compensation arrangement (the so-
called "Stark Law"). The Stark Law provides exceptions for certain types
of employment and contractual relationships. The Company believes that
it is in compliance with the Stark Law, but there is no assurance that
the Company will prevail in its position if challenged.
The State of Florida also enacted in 1992 an anti-kickback
statute substantially similar in scope to the Anti-Kickback Act.
Although the Company does not believe that it is operating in violation
of this law, as with its Federal counterpart, the scope of the Florida
law remains unclear and there is no assurance that the Company would
prevail in its position.
-3-
<PAGE>
The States of Florida, Illinois, New Jersey, New York, Maryland
and Pennsylvania in which the Company currently operates centers have
enacted laws that restrict or prohibit physicians from referring patients
to healthcare facilities in which such physicians have a financial
interest. Although the Company does not believe that these laws will
have a material adverse effect on its operations in these states, there
is no assurance that these laws will not be interpreted or applied in
such a way as to create such a material adverse effect, or that these
states, or other states in which the Company does business, will not
adopt similar or more restrictive laws or regulations that could have
such a material adverse effect.
All states where the Company has imaging centers have enacted
Certificate of Need laws to facilitate healthcare planning by placing
limitations on the purchase of certain major medical equipment and
certain other capital expenditures. These statutes, together with their
implementing regulations, could limit the Company's ability to acquire
new imaging facilities and imaging equipment or expand or replace its
equipment at existing centers, and no assurances can be given that the
required regulatory approvals for any future acquisitions, expansions or
replacements will be granted to the Company.
The Company continues to review all aspects of its operations
and believes that it complies in all material respects with applicable
provisions of the Anti-Kickback Act, the Stark Law and applicable state
laws governing fraud and abuse as well as licensing and certification,
although because of the broad and sometimes vague nature of these laws
and requirements, there can be no assurance that an enforcement action
will not be brought against the Company or that the Company will not be
found to be in violation of one or more of these regulatory provisions.
Further, there can be no assurance that new laws or regulations will not
be enacted, or existing laws or regulations interpreted or applied in the
future in such a way as to have a material adverse impact on the Company,
or that Federal or state governments will not impose additional
restrictions upon all or a portion of the Company's activities, which
might adversely affect the Company's business.
Corporate Practice Of Medicine And Fee Splitting
------------------------------------------------
The laws of many states prohibit unlicensed, non-physician-
owned entities or corporations (such as the Company) from performing
medical services or physicians from splitting fees with non-physicians.
The Company does not believe that it engages in the unlawful practice of
medicine or the delivery of medical services in any state where it is
prohibited, and is not licensed to practice medicine in states which
permit such licensure. Professional medical services, such as the
interpretation of MRI scans, are separately provided by licensed
interpreting physicians, as independent contractors, pursuant to
agreements with the Company. The Company performs only administrative
and technical services and does not exercise control over the practice of
medicine by physicians or employ physicians to provide medical services.
However, in many jurisdictions, the laws restricting the corporate
practice of medicine and fee-splitting have been subject to limited
judicial and regulatory interpretation and, therefore, there is no
assurance that, upon review, some of the Company's activities would not
be found to be in violation of such laws. If such a claim were
successfully asserted against it, the Company could be subject to civil
and criminal penalties and could be required to restructure its
contractual relationships. In addition, certain provisions of its
contracts with interpreting physicians, including the payment of fees and
restrictive covenants could be held to be unenforceable. Such results or
the inability of the Company to restructure its contractual relationships
could have a material adverse effect upon the Company.
-4-
<PAGE>
Potential Adverse Effect of Capitation Contracts
------------------------------------------------
Some third-party payors seek to provide incentives to reduce
utilization of healthcare services by their enrollees by paying a fixed
capitation fee to healthcare providers for patients covered by their
plans or programs. Capitation contracts typically provide for payment to
a healthcare provider of a fixed fee per month on a per member basis for
certain designated healthcare procedures, without regard to the amount or
scope of services actually rendered. Because the obligations to perform
services are not related to the amount of the payments, it is possible
that either the cost or the value of the services performed by the
healthcare provider may significantly exceed the fees received, and there
may be a significant period between the time the services are rendered
and payment is received. Because the risk of loss is borne, at least in
part, by the healthcare provider and not the third-party payor, it is
possible that the healthcare provider may sustain a significant loss on
the performance of services pursuant to a capitation contract.
Approximately 2% of the Company's revenues in 1996 were derived from
capitation contracts. While the Company carefully analyzes the potential
risks of capitation arrangements, there can be no assurances that any
capitation contracts which the Company is a party or which it may enter
into in the future will not generate significant losses to the Company.
In addition, certain types of capitation agreements, may be
deemed a form of risk contracting. Many states limit the extent to which
any person that is not appropriately licensed in the state, can engage in
risk contracting, which involves the assumption of a financial risk with
respect to providing services to a patient. If the fees received by the
Company are less than the cost of providing the services, the Company may
be deemed to be acting as a de facto insurer. In some states, only
certain entities, such as insurance companies, HMO providers and
independent practice associations, are permitted to contract for the
financial risk of patient care. In such states, risk contracting in
certain cases has been deemed to be engaging in the business of
insurance. The Company believes that it is not in violation of any
restrictions on risk bearing or engaging in the business of insurance.
If the Company is held to be unlawfully engaged in the business of
insurance, such a finding could result in civil or criminal penalties or
require the restructuring of some or all of the Company's operations,
which could have a material adverse effect upon the Company's business.
Significant Long-Term Debt, Including Capitalized Lease Obligations
-------------------------------------------------------------------
The Company has significant outstanding debt, including
capitalized lease obligations relating to equipment at its centers. The
Company has financed the acquisition of substantially all of the
diagnostic imaging equipment used at its centers (typically with terms
ranging from five to seven years) from lenders and lessors, with the
equipment and other assets serving as collateral for the loans.
Substantially all of the Company's assets have been pledged as collateral
for its capitalized lease obligations, as well as other indebtedness. In
certain cases, the center leasing the equipment and the subsidiary which
operates the center are the only obligors under the capitalized leases.
A default under an equipment lease or certain other indebtedness of the
Company could materially adversely affect the operations of the Company.
See "Recent Developments."
Competition; Reliance on Referrals
----------------------------------
-5-
<PAGE>
The outpatient diagnostic imaging industry is highly
competitive. Competition focuses primarily on attracting physician
referrals, including referrals through relationships with managed care
organizations, at the local market level. The Company believes that
principal competitors in each of its markets are hospitals and
independent or management company owned imaging centers, some of which
are owned with physician investors. Some of these competitors have
greater financial and other resources than the Company. Principal
competitive factors include facility location, type and quality of
equipment, quality and timeliness of test results, ability to develop and
maintain relationships with referring physicians, convenience of
scheduling and availability of patient appointment times and the pricing
of services. Competition for physician referrals can also be affected by
the ownership or affiliation of competing centers or hospitals, with
certain of the Company's competitors having historically derived a
significant portion of their revenues from referrals by physicians who
are also investors and have a financial interest in, or are otherwise
affiliated with, the competing center or hospital. In addition, managed
care has affected the availability of referrals by approving only a
certain number of centers in a given geographic region. The competitive
environment which the Company faces result in lower patient volume or an
adverse change in payor mix.
The temporary healthcare staffing business is also very
competitive. StarMed competes for clients' business with other providers
of travel nurse temporary staffing and with other staffing companies that
provide per diem staffing services. StarMed also competes for the
limited number of available qualified staff. StarMed competes with
several companies which are larger and may possess greater financial and
other resources.
Dependence on Qualified Interpreting Physicians
-----------------------------------------------
The Company's strategy of maintaining the high quality of its
services is dependent upon its ability to obtain and maintain
arrangements with qualified interpreting physicians at each of its
centers. No assurance can be given that the Company's contractual
arrangements with interpreting physician groups at each of the Company's
centers can be maintained on terms advantageous to the Company. No
assurance can be given that the interpreting physicians with whom the
Company has contracts will perform satisfactorily or continue to practice
in the markets served by its imaging centers. In addition, with respect
to the development of new centers, there can be no assurance that
arrangements can be entered into with interpreting physicians on
acceptable terms or that such physicians will be successful in such
centers. The Company's success is significantly dependent on the ability
of these physicians to attract patient referrals, thereby enabling the
Company's centers to operate profitably. Agreements with interpreting
physicians generally range from one to ten years and permit termination
only for just cause. Many agreements prohibit the interpreting physician
from performing professional interpreting services for a competitor
within a defined geographic distance from the Company's center. The
inability of these physicians to attract sufficient referrals, the
termination of their agreements with the Company or the inability of the
Company to enforce the restrictive covenants contained in the agreements
could have a material adverse effect on the Company's financial condition
and operating results, although the Company believes that there is a base
of qualified interpreting physicians in each of its geographic areas of
operations in the event an agreement with an interpreting physician is
terminated.
Technological Obsolescence
--------------------------
-6-
<PAGE>
There have been rapid technological advancements made in the
software and, to a lesser extent, hardware in the diagnostic imaging
industry. Although the Company believes that its equipment can generally
be upgraded as necessary, the development of new technologies or
refinements of existing technologies might make existing equipment
technologically or economically obsolete. If such obsolescence were to
occur, the Company may be compelled to acquire new equipment, which could
have a material adverse effect on its earnings and cash flow. In
addition, certain of the Company's centers compete against local centers
which contain more advanced imaging equipment or provide additional
modalities.
Liability Claims and Insurance
------------------------------
Although the Company provides administrative, financial and
technical services and is not engaged in the practice of medicine, the
diagnostic imaging and temporary staffing businesses entail the risk of
professional liability claims. The Company's exposure to such liability
is reduced for its imaging centers because interpreting physicians are
required to carry their own medical malpractice insurance. Similarly,
the Company's nursing personnel perform services in accordance with
treatments prescribed by third-party physicians or under hospital
supervision. Nevertheless, the Company maintains general liability
insurance and professional liability insurance for both its diagnostic
imaging business and its temporary staffing business in amounts deemed
adequate by management of the Company. Present claims against the
Company are in excess of the Company's insurance coverage limits.
Adverse determinations against the Company with respect to all such
claims could have a material adverse effect on the Company's financial
condition.
Losses from Certain Centers
---------------------------
Certain centers of which the Company has acquired since January
1996 have generated losses. With respect to these centers, the Company
has utilized, and, in most circumstances, will continue to utilize,
working capital to fund the operations of such centers. The Company
cannot determine if or when such centers will become profitable, or if or
when the centers' will generate positive operating cash flows. In the
event that the Company determines to close any such center, the Company
would expect to incur a loss in connection with such closure.
Certain Anti-Takeover Measures
------------------------------
Certain provisions of the Company's Certificate of
Incorporation, as well as Delaware corporate law and the Company's
Stockholder Rights Plan (the "Rights Plan"), may be deemed to have anti-
takeover effects and may delay, defer or prevent a takeover attempt that
a stockholder might consider in its best interest. Such provisions also
may adversely affect prevailing market prices for the Common Stock.
Certain of such provisions allow the Company's Board of Directors to
issue, without additional stockholder approval, preferred stock having
rights senior to those of the Common Stock. In addition, the Company is
subject to the anti-takeover provisions of Section 203 of the Delaware
General Corporation Law, which prohibits the Company from engaging in a
"business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became
an interested stockholder, unless the business combination is approved in
a prescribed matter. In September 1996, the Company adopted the Rights
Plan, pursuant to which holders of the Common Stock received a
distribution of rights to purchase
-7-
<PAGE>
additional shares of Common Stock, which rights become exercisable upon
the occurrence of certain events. Although the Rights Plan was adopted
by the Company to give its Board of Directors significantly more time to
properly consider and to respond to an acquisition proposal, it could
have the effect of discouraging or hindering an unsolicited offer to
acquire the Company at effective valuations which are above the current
market capitalization of the Company.
91306.5
-8-
<PAGE>
EXHIBIT 99.2
EXECUTION COPY
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of January __, 1997, between Melbourne Neurologic,
P.A., a Florida professional association with a mailing address at 1317 Oak
Street, Melbourne, Florida ("Seller"), the Principals (as defined below),
Melbourne Resources, Inc., a Delaware corporation with a mailing address at 155
State Street, Hackensack, New Jersey 07601 (the "Buyer") and, solely with
respect to Section 1.8, Article 3 and Article 9, Medical Resources, Inc., a
Delaware corporation ("Medical Resources").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Seller owns and operates a magnetic resonance imaging center
located at 1327 Oak Street, Melbourne, Florida (the "Center"), and owns or
leases the assets and properties, relating thereto, which Center provides
diagnostic imaging services to licensed physicians and other purchasers of
diagnostic imaging services (the "Business"); and
WHEREAS, Thomas G. Hoffman, Scott L. Gold and Eugene M. Shepherd are
the principals of the Seller (the "Principals"); and
WHEREAS, Buyer desires to acquire the Business and Seller desires to
sell the Business to Buyer upon the terms and subject to the conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and
<PAGE>
the mutual agreements herein contained, Seller and Buyer 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), Seller shall sell, assign, transfer and deliver
to Buyer, and Buyer shall purchase and acquire from Seller, free and clear of
all Liens (as defined in Section 2.5(b) hereof), except for Permitted Liens (as
defined in Section 2.5(b) hereof), all of the assets (or leases for leased
assets) of the Business owned or leased by Seller and used or held for use
exclusively in the Business as of the Closing Date (as defined below) other than
the assets listed on Schedule 1.1 (the "Excluded Assets"), including, without
limitation, the machinery, equipment, supplies and furnishings owned or leased
by Seller and used or held for use in the Business as set forth on Schedule
2.5(A) hereto (all of the foregoing, excepting only the Excluded Assets, being
hereinafter referred to as the "Purchased Assets"), including without limitation
(other than to the extent that such assets are specifically listed as Excluded
Assets) of the foregoing:
(a) all of Seller's accounts receivable and work-in-progress arising
from services rendered by the Center prior to the
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Closing Date (including any related claims in respect of the collection thereof
and all previously written-off accounts receivable, collectively, the "Accounts
Receivable");
(b) all leasehold improvements and tangible assets and properties of
the Seller, including machinery and equipment, tooling, tools, furniture, office
equipment, furnishings and fixtures used or held for use exclusively in the
Business, as of the Closing Date;
(c) all inventories, including finished products, work-in-process,
materials, parts, accessories and supplies of the Seller used or held for use
exclusively in the Business, as of the Closing Date;
(d) all rights of Seller arising from, in and to all Contracts (as
defined in Section 2.7) listed in Schedule 2.7 as Contracts to be assumed by
Buyer;
(e) all other assets reflected in the Financials (as defined in
Section 2.3) and all assets acquired by Seller since the latest date of the
Financials and which are owned or leased as of the Closing Date, to the extent
used or held for use exclusively in the Business;
(f) all security deposits and prepaid expenses;
(g) all warranties and claims or potential claims against Seller's
suppliers or lessors with respect to any assets included in the Purchased Assets
to the extent said warranties and claims may be assignable; and
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(h) all names, trademarks, contractual rights, telephone numbers,
Licenses (as defined in Section 2.6) to the extent assignable and other
intangible assets to the extent assignable, books and records, market
information, operational procedures, business and goodwill of Seller relating
solely to or used exclusively in the Business and the Purchased Assets.
Notwithstanding anything in this Agreement to the contrary, nothing in
this Agreement shall be construed as an attempt to assign or a requirement for
Seller to assign any Contract, license, certification, approval, consent,
Account Receivable or similar property or property right which are not
assignable, directly or indirectly, by matter of law (the "Non-Assignable
Property Rights"), or assign any Contract which is not assignable by agreement
without the consent of the other party or parties thereto, unless such consent
shall be received. In this regard, Seller shall use and, if so requested by
Buyer, shall continue to use after the Closing, its reasonable best efforts to
obtain all such necessary consents of the applicable parties to any such
Contracts otherwise to be assigned to Buyer hereunder; provided, however, that
the failure to obtain any such consents and the inability to assign any Non-
Assignable Property Rights shall not constitute a breach of this Agreement or of
any representation or warranty made by Seller hereunder.
Seller hereby agrees that in order for Buyer to obtain the full value
and benefits and obligations of any Accounts Receivable which are not otherwise
assignable by law, Seller
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agrees that, at the request and direction of Buyer, in the name of Seller, and
at Seller's expense, Seller shall take all reasonable actions and do or cause to
be done all such reasonable things as shall be necessary or proper in order that
the rights (and obligations) of Seller under such Accounts Receivable shall be
preserved for the benefit or account of Buyer and to facilitate the collection
of the monies due and payable and to become due and payable pursuant to such
Accounts Receivable on or after the Closing Date. Seller shall, on and after the
Closing Date, hold such Accounts Receivable for the benefit of Buyer and shall
pay Buyer any monies paid pursuant thereto promptly upon, but in any event, no
more than one business day after, receipt thereof.
In addition to the foregoing, with respect to any Contract of Seller
to be assumed by Buyer and which is not assignable without the consent of the
other party or parties thereto and with respect to which such consents are not
received as of the Closing Date, to the extent not in violation of law, Seller
agrees that in order for Buyer to obtain the full value and benefits of such
Contracts (subject to Buyer's performance of all obligations otherwise imposed
thereunder) Seller, at the request and direction of Buyer, in the name of Seller
(or otherwise as Buyer may specify and as shall be permitted by law), shall take
all reasonable actions and do or cause to be done all such reasonable
things as shall be necessary or proper in order that the rights (subject to
Buyer's performance of all obligations otherwise imposed thereunder) of Seller
under such Contracts shall
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<PAGE>
be preserved or conveyed for the full benefit or account of Buyer and to
facilitate the collection of monies due and payable and to become due and
payable thereunder, subject to Buyer's performance of all obligations otherwise
imposed thereunder, to the extent such obligations accrue or are attributable to
the period on or after the Closing Date.
1.2 Closing Date. The purchase and sale of the Business and the Purchased
------------
Assets (the "Closing") shall take place on the date hereof 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 Seller and Buyer may agree upon in
writing (such date and time being hereinafter called the "Closing Date").
1.3 (a) Purchase Price. As consideration for the Purchased Assets, on
--------------
the Closing Date, Buyer shall pay to Seller the sum of $1,125,000 (the "Purchase
Price") by wire transfer in immediately available funds.
(b) Allocation of Purchase Price. The Seller and the Buyer agree to
----------------------------
allocate the Purchase Price in accordance with IRC Section 1060. Buyer and
Seller shall use reasonably diligent efforts to agree to such allocation by the
Closing and, in any event, such allocation shall be agreed to by the Seller and
the Buyer within 30 days of the Closing Date. In addition, the Seller and the
Buyer hereby agree to file timely any information that may
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be required to be filed pursuant to Treasury Regulations promulgated under IRC
Section 1060.
1.4 Liabilities. Buyer shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of Seller, the Business or the
Center of any kind or nature, known, unknown, contingent or otherwise, except as
specifically set forth on Schedule 1.4 annexed hereto (the "Assumed
Liabilities"). Buyer, at Closing, shall assume the Assumed Liabilities;
provided that, with respect to the liability described in paragraph 1 of
Schedule 1.4, Buyer shall cause Seller and all Affiliates of Seller, along with
all of the assets of Seller and Seller's Affiliates not included within the
Purchased Assets, to be released from all liability thereunder, including any
liability imposed on Affiliates of Seller pursuant to any guarantees previously
executed and delivered in connection with such indebtedness. All liabilities
and obligations of Seller not set forth on Schedule 1.4 are referred to herein
as "Retained Liabilities." Buyer hereby expressly agrees to assume, pay and/or
perform each of the Assumed Liabilities, in accordance with the terms thereof,
and Seller hereby expressly agrees to assume, pay and/or perform each of the
Retained Liabilities, in accordance with the terms thereof, except, in each
case, as otherwise expressly provided herein to the contrary.
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<PAGE>
1.5 Closing Date Deliveries and Actions.
-----------------------------------
(a) At Closing Seller shall:
(i) deliver, or execute and deliver, to Buyer (v) a Bill of Sale,
Assignment and Assumption Agreement in substantially the form
annexed hereto as Exhibit B (the "Bill of Sale") with respect to
the Purchased Assets, including the Contracts, (w) all evidences
of consents, waivers or approvals, if any, obtained by Seller in
respect of the Purchased Assets or the consummation of the
transactions contemplated by this Agreement, (x) the Medical
Director Agreement (as defined in Section 1.9 hereof), (y) all of
the documents, instruments and opinions contemplated to be
delivered by Seller 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
(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 of the Purchased Assets at the locations where such
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Purchased Assets are held or maintained prior to Closing. All of
the documents described in (v) through (z) hereof are hereinafter
referred to as "Seller's Closing Documents".
(b) At Closing, Buyer shall:
(i) deliver, or execute and deliver, to Seller or to the trustee of
the CNS Trust, (u) a Bill of Sale, Assignment and Assumption
Agreement in substantially the form annexed hereto as Exhibit B
with respect to the Purchased Assets, including the Contracts and
the Assumed Liabilities (v) the Purchase Price, (w) the Medical
Director Agreement, (x) the Lease (as defined below), and Buyer
shall cause Medical Resources to execute and deliver the Guaranty
to Lease in the form attached to the Lease, (y) evidence that the
liability described in paragraph 1 of Schedule 1.4 payable to
Prime Bank of Central Florida has been paid in full and (z) all
of the documents, instruments and opinions contemplated to be
delivered by Buyer to Seller or the trustee of the CNS Trust 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 (u) through (z) hereof are
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<PAGE>
hereinafter referred to as "Buyer's Closing Documents" and
collectively with Seller's Closing Documents, the "Closing
Documents".
At Closing, Seller shall cause Eugene M. Shepherd as trustee of the CNS
Trust, to execute and deliver the lease for the Center, substantially in the
form attached hereto as Exhibit A-1.5 (the "Lease").
1.6 Consents, Waivers and Further Assurances. From time to time following
----------------------------------------
the Closing, Seller shall, at Seller's expense, 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. From time to time,
following the Closing, Buyer shall, at Buyer's expense, execute and deliver, or
cause to be executed and delivered to Seller, such other instruments of
assumption or assignment, as Seller may reasonably request, or as may be
otherwise necessary more effectively to evidence Buyer's assumption and
agreement to pay and perform the Assumed Liabilities.
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 Seller; or (b) by Buyer or Seller in the
event of any material
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breach by the other party of any of its agreements, representations or
warranties contained herein, which breach is not curable or, if curable, is not
cured to the reasonable satisfaction of the non-breaching party within five days
after written notice of such breach; or (c) subject to the provisions of Section
4.3 hereof by either Buyer or Seller, if the Closing has not occurred on or
before January 31, 1997 (provided, however, that if the party seeking to
terminate this Agreement pursuant to this clause has failed to use good faith
and best efforts to bring about the Closing or is in breach of any agreement,
representation or warranty herein, 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 Seller and Buyer or may result from the operation of
the provisions of Section 4.3 (the "Termination Date"). 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 Guarantee of Buyer's Obligations. To induce Seller (and/or its
--------------------------------
Affiliates) to execute and deliver this Agreement and the other agreements
contemplated hereby, by execution hereof, Medical Resources, the indirect owner
of all of the outstanding stock of Buyer, hereby absolutely and unconditionally
guarantees the full, prompt and faithful performance by Buyer of all covenants
and obligations to be performed by Buyer under this
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Agreement, including, but not limited to, the payment and performance of all
Assumed Liabilities and the payment of all sums to be paid to Seller pursuant to
this Agreement. If Buyer fails to fully perform any of such covenants and
obligations in accordance with their terms or to pay all or any part of any sums
due Seller hereunder when due, Medical Resources shall perform all such
covenants and obligations in accordance with their terms or immediately pay to
Seller the amounts due and unpaid by Buyer, it being understood that each such
covenant or obligation and each obligation to pay any such amount constitutes
the direct and primary obligation of Medical Resources. Medical Resources hereby
waives presentment, demand of payment, protest, dishonor, notice of protest or
dishonor, and notice of acceptance of this guarantee and all rights to require
Seller to proceed against Buyer, or pursue any other remedy it may have against
Buyer in the event of a breach by Buyer of any obligation or covenant contained
in this Agreement. If Buyer is not liable to perform any such obligation and
covenant because the act creating such obligation or covenant is ultra vires or
----- -----
unauthorized, and for such reason or any other reason such obligation
or covenant cannot be enforced against Buyer, such fact shall not effect Medical
Resource's liability under this Section 1.8. In the event of the termination,
liquidation or dissolution of Buyer, this unconditional guarantee of Medical
Resources shall continue in full force and effect.
1.9 Medical Director Agreement. As a material inducement to the parties
--------------------------
entering into this Agreement, at Closing, Buyer,
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<PAGE>
Seller and Principals shall enter into a Medical Director Agreement,
substantially in the form attached hereto as Exhibit 1.9 (the "Medical Director
Agreement"), on the terms and for the consideration set forth therein.
1.10 Lease. As a material inducement to the parties entering into this
-----
Agreement, at Closing, Seller shall cause Eugene M. Shepherd, as trustee of CNS
Trust to execute and deliver, and Buyer shall execute and deliver the Lease.
1.11 Phone System. For such period of time as Seller, in its sole
------------
discretion, shall maintain its present phone system, Seller shall make available
to Buyer that portion of the phone system owned by Seller and which is
physically located at the Center on the Closing Date. As consideration
therefor, Buyer shall, from time to time, within ten (10) days written notice
from Seller, pay Seller a prorata portion of Seller's costs and expenses to
operate and maintain such phone system; provided, that Buyer may, at any time,
install a new phone system, at Buyer's sole cost, in which event Buyer shall
return to Seller all of Seller's phone equipment and Buyer shall no longer be
responsible for any prorata payments to Seller; and provided further that Seller
shall have no obligation to Buyer to maintain or repair all or any portion of
its phone system and Seller, in its sole discretion, may modify or replace its
phone system as Seller shall determine.
1.12 Billing System. Seller agrees to lease to Buyer, for such period of
--------------
time following Closing as Seller shall maintain its
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current computers and billing system, that portion of Seller's computer
terminals physically located at the Center and a portion of Seller's hard drive
for the purpose of permitting Buyer to bill for services rendered by Buyer at
the Center on or after Closing; provided that Buyer shall be obligated to
modify, at Buyer's sole cost, as of the Closing Date, Seller's computer system
to allow Buyer to bill for services rendered by Buyer at the Center using
Buyer's personnel physically present at the Center; and provided further that
Seller shall have no obligation to maintain, retain or repair its current
computers or computer billing system, including the portion thereof leased to
Buyer hereunder. In return for the lease of Seller's terminals and hard drive to
Buyer as specified in this Section 1.12, Buyer shall, from time to time, within
ten (10) days of written notice from Seller, pay Seller a prorata portion of
Seller's costs and expenses to operate and maintain Seller's computer billing
system. Notwithstanding the foregoing, Buyer may at any time, at Buyer's sole
cost, install Buyer's own computer billing system, in which event Buyer shall
return to Seller all computer terminals and hard drives of Seller otherwise
leased to Buyer and Buyer shall no longer be responsible to reimburse Seller for
Buyer's prorata share of Seller's costs and expenses of maintaining its computer
billing system.
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<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER AND PRINCIPALS
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller and Principals, jointly and
severally, represent and warrant to Buyer and agree as follows:
2.1 Organization and Qualification. Seller is a professional association
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Florida. Seller has all requisite corporate power and authority to own
or lease its properties and assets and to conduct its business as presently
conducted.
2.2 Authority to Effect Transactions.
--------------------------------
(a) Seller has all requisite corporate power and authority to execute,
deliver and perform this Agreement and all of Seller's Closing Documents. All
necessary corporate action on the part of Seller has been duly taken to
authorize the execution, delivery and performance by Seller of this Agreement
and all of Seller's Closing Documents. This Agreement has been duly authorized,
executed and delivered by Seller and is the legal, valid and binding obligation
of Seller, enforceable against Seller in accordance with its terms. Each of
Seller's Closing Documents has been duly authorized by Seller and, upon
execution and delivery by Seller and the other parties thereto, as contemplated
hereby, will be the legal, valid and binding obligation of Seller, enforceable
against Seller in accordance with its terms.
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(b) Except as set forth in Schedule 2.2(B) hereto, to the best of Seller's
knowledge after due inquiry by Seller:
(i) no consent, authorization, approval, order, license, certificate,
permit or act of or from, or declaration or filing with, any
foreign, federal, state, local or other governmental authority or
regulatory body or any court or other tribunal or any party to
any contract, agreement, instrument, lease or License (as defined
in Section 2.6) to which Seller is a party or by which it is
bound or to which any of the Purchased Assets is subject, is
required for the execution, delivery or performance by Seller of
this Agreement or any of Seller's Closing Documents or the
consummation of the transactions contemplated to be taken by
Seller hereby or thereby and
(ii) neither the execution, delivery or performance of this Agreement
or any of Seller's Closing Documents nor the consummation of the
transactions contemplated to be taken by Seller 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
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of any Lien 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)
Seller's certificate of incorporation or bylaws, each as amended
to date, (B) any law, statute, rule, regulation, order, award,
judgment or decree to which Seller or any of the Purchased Assets
is subject or (C) any contract, agreement, instrument, loan
agreement, lease or License to which Seller is a party or by
which it is bound.
2.3 Financial Statements. Seller has delivered to Buyer true and correct
--------------------
copies of the following: an internally prepared, unaudited balance sheet of the
Business as of September 30, 1996; and an internally prepared, unaudited
statement of income, statement of retained earnings and statement of cash flows
of the Business for the two years ended December 31, 1995; and an internally
prepared unaudited statement of income, statement of retained earnings and
statement of cash flows for the Business for the nine months ended September 30,
1996, all of which have been prepared in accordance with the cash method of
accounting (collectively, the "Financials"). The balance sheets included in the
Financials fairly represent the financial position of the Business, on a cash
basis, as of the respective dates thereof, and the statements of revenues and
expenses included in the Financials
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(i) fairly presents the results of operations of the Business for the period
therein referred to, on a cash basis, except as stated therein or as noted in
any schedules thereto, applied on a consistent basis; (ii) fairly present the
financial condition of the Business, on a cash basis, at the respective date of
and for the period covered by such Financials; and (iii) are in accordance
with the books and records of Seller maintained with respect to the Business.
2.4 Absence of Certain Developments. Except as contemplated by this
-------------------------------
Agreement or as otherwise set forth on Schedule 2.4 hereto, since December 31,
1995 (the "Balance Sheet Date"), the Business has been conducted in all material
respects only in the ordinary course of business of the 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 or condition
(financial or otherwise) of the Center, and, to the knowledge of Seller, no fact
or condition exists or is contemplated or threatened affecting or relating to
the Business or the Purchased Assets (except for market and industry conditions
affecting providers of health care services generally) which might reasonably be
expected to cause such a change in the future, and (b) no damage, destruction,
loss or claim or condemnation or other taking materially and adversely affecting
the Purchased Assets.
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2.5 Tangible Personal Property: Title and Liens: Real Property Leases.
-----------------------------------------------------------------
(a) Set forth on Schedule 2.5(A) hereto is a list of all of the tangible
personal property included in the Purchased Assets owned or leased by Seller as
of the date of this Agreement.
(b) Seller has good title to all of the Purchased Assets, except as to
those assets leased, all of which leases are in good standing, which are owned
by Seller as of Closing 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 10.14 of every kind and character (any of the
foregoing, a "Lien"), other than: (i) statutory Liens for personal property
----
taxes not yet delinquent; (ii) such imperfections or irregularities of title,
liens, easements, charges or encumbrances as do not detract from or interfere
with the present use of such Purchased Assets subject thereto or affected
thereby and which do not otherwise impair the use of the Purchased Assets in the
Business or detract from the value of such Purchased Assets; or (iii) as set
forth on Schedule 2.5(B)(1) hereto. The Liens described in parts (i), (ii) and
(iii) above, along with Liens, if any, created by Buyer with respect to the
Purchased Assets, are referred to herein collectively as the "Permitted Liens".
Upon delivery to Buyer on the Closing Date of the instruments of assignment and
transfer contemplated by this Agreement, Seller will thereby transfer to
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and vest in Buyer good title to the Purchased Assets owned by Seller, free and
clear of all Liens other than the Permitted Liens, Seller shall discharge any
and all claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs and legal and other expenses resulting or arising from any Lien on
the Purchased Assets owned by Seller and existing on the Closing Date (whether
inchoate, or not, and whether perfected, or not) other than any Permitted Lien.
Except for the assets set forth on Schedule 1.1 hereto, the Purchased Assets
constitute all assets and properties presently used by Seller in the operation
of the Business as it is currently being operated.
(c) The real property leased by Seller and which is used in the conduct of
the Business is set forth on Schedule 2.5(B). No default or event of default
on the part of Seller, and no event which with the giving of notice or the
passage of time would constitute a default with respect to such leases, has
occurred and is continuing unremedied or unwaived.
2.6 Licenses and Authorizations. To the best of Seller's knowledge after
---------------------------
due inquiry by Seller, Seller has all 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 the Center (the "Licenses"),
except for such Licenses which if not
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<PAGE>
maintained, would not have a material adverse effect on the continuing operation
of the Business at the Center. Set forth on Schedule 2.6 hereto is a list and
brief description of each of the Licenses. Each of the Licenses is valid and in
full force and effect. No notice of cancellation, default or breach of or any
dispute concerning any of the Licenses owned, possessed or held by Seller or of
any event or condition or state of facts described in the next following
sentence has been received by Seller with respect to any of such Licenses. To
the best of Seller's knowledge after due inquiry, there is not now pending, or
to the knowledge of Seller threatened, any action to revoke, cancel, rescind,
modify or refuse to renew in the ordinary course any of the Licenses. Seller
and, to the best of its knowledge, its predecessors in interest have performed
and fulfilled in all material respects all of their respective obligations under
each of the Licenses, and Seller is not aware of any event or condition or state
of facts which constitutes or, after notice or lapse of time or both, would
constitute a breach or default under any of such Licenses, or which permits or,
after notice or lapse of time or both, would permit revocation or termination of
any of such Licenses, or which would materially adversely affect any of the
rights of Seller thereunder. Notwithstanding the foregoing, nothing in this
Agreement, including the foregoing representation, shall be construed as a
representation by Seller that any Licenses which are not assignable, directly or
indirectly, by matter of law, will be assigned or assignable to or will
otherwise inure to
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the benefit of Buyer as a result of the consummation of the transactions
contemplated by this Agreement, nor as an attempt to assign any such Licenses.
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 Seller is a party or by which it is bound as of
the date of this Agreement (to which Seller will promptly update by written
notice to Buyer) relating to the Business or the Purchased Assets or to which
any of the Purchased Assets is subject and which Buyer is to assume
(collectively, together with any contracts, agreements, instruments and leases
entered into by Seller 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"). The Seller has delivered to the
Buyer true, correct and complete copies of all Contracts.
(b) Each of the Contracts constitutes the valid and binding obligation of
Seller and, to the best of Seller's knowledge, the other party or parties
thereto, and is in full force and effect. Seller has performed and fulfilled
all of its material 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 Seller, no other party is in default or breach thereunder.
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2.8 Employees. (a) Schedule 2.8(A) hereto contains:
---------
(i) a list of the names of all employees (the "Employees") of the
Seller utilized solely with respect to the Business as of the date hereof;
(ii) a description of all agreements (oral or written) between Seller
and the Employees which are not terminable at will by Seller;
(iii) the compensation of such Employees (including paid or promised
bonuses); and
(iv) any increase in such Employee's compensation since January 1,
1996 in excess of 5%.
Seller is not a party to any collective bargaining agreement, (employment
agreement), retirement plans (whether qualified or non-qualified), deferred
compensation or severance 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
which would be binding on or inure to the benefit of Buyer on or after the
Closing Date.
(b) In connection with the operations or activities of the Business,
Seller has complied in all material respects with all applicable laws, rules and
regulations affecting the employment of labor, including, but not limited to,
those relating to wages, benefit plans, hours, discrimination and the payment of
social security, withholding and similar taxes, and is not liable for any
arrears of wages or any penalties for failure to comply
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<PAGE>
with any of the foregoing. There are no controversies pending or threatened
between Seller and any of its employees, or any labor unions or collective
bargaining unit representing or purporting to represent any of its employees.
2.9 Compliance With Laws; Litigation. The Purchased Assets and their uses
--------------------------------
comply with, and Seller with respect to the Purchased Assets 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 such non-compliance
would have a material adverse effect on the Business or the Purchase Assets.
Seller is not, with respect to the Business, the Center 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, there is no suit, action, administrative proceeding, arbitration or
other proceeding or governmental investigation pending, or to the best of
Seller's knowledge after due inquiry threatened against the Seller with respect
to the Business, the Center or the Purchased Assets (including, without
limitation, any claim for malpractice with respect to services rendered by the
Center) and to the best knowledge of Seller, there is no basis for any of the
same, and there are no suits, actions, administrative proceedings,
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<PAGE>
arbitrations or other proceedings or investigations pending in which Seller is
the plaintiff or claimant and which relate to the Purchased Assets or the
Business. There is no suit, action, administrative proceeding, arbitration or
governmental investigation involving the Seller or the Business pending or, to
the best knowledge of Seller after due inquiry threatened, which questions the
legality, validity or propriety of the transactions contemplated by this
Agreement.
2.10 Machinery Equipment and Supplies. All machinery, equipment and
--------------------------------
supplies of Seller included in the Purchased Assets are in a reasonable state of
repair (ordinary wear and tear excepted) and operating condition; provided that
no warranty or other representation is made by Seller or the Principals
regarding the tangible personal property comprising the Purchased Assets. All
such tangible personal property is conveyed hereunder AS IS, WHERE IS, WITH ALL
FAULTS AND DEFECTS.
2.11 Environmental Matters. To the best of Seller's knowledge after due
---------------------
inquiry by Seller, there has been:
(a) no release or threatened release of any hazardous substance,
pollutant or contaminant as each such term presently is defined by the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended, resulting from any activity by or on behalf of Seller or any
predecessor in interest with respect to the Business, including but not limited
to, the generation, handling, storage, treatment, transportation or disposal of
any hazardous substance, pollutant or contaminant at the premises on
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<PAGE>
which the Center is located (the "Premises");
(b) no past or future action taken or to be taken by any federal,
state or local entity or by any private party under any federal, state or local
statute, rule, regulation or guideline concerning the release of any hazardous
substance, pollutant or contaminant into the soil, air, surface or subsurface
waters or the environment in general from the Center; and
(c) no claims or actions brought or which may be brought by any third
party for damages occurring at or outside of the Center resulting from the
alleged release or threatened release of any hazardous substance, pollutant or
contaminant by Seller or any predecessor in interest in connection with the
Business, including but not limited to, claims for health effects to persons,
property damage and/or damage to natural resources; nor does Seller have any
knowledge of any basis for any of the foregoing.
2.12 Accounts Receivable. As of the Closing Date, Seller shall have good
-------------------
title, free and clear of all Liens except Permitted Liens, to the Accounts
Receivable. The Accounts Receivable shall have arisen from bona fide
transactions entered into in the ordinary course of business and, to the best
knowledge of Seller, are collectible in the ordinary course consistent with past
practice.
2.13 Taxes. There are no pending questions, nor claims asserted for, ad
----- --
valorem taxes or assessments upon the Purchased Assets nor are there any tax
- -------
Liens outstanding against any of the
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<PAGE>
Purchased Assets, except for statutory liens not yet due and payable. The Seller
has paid or caused to be paid to federal, state and local authorities all
amounts required to be paid by federal, state and local law or regulations with
respect to withholding from the wages of Seller's employees.
2.14 Brokers. Neither Seller nor any Affiliate of Seller has 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. No representation or warranty by Seller made herein or
----------
in any documents, instruments or agreements contemplated hereby contains, or on
the Closing Date will contain, any untrue statement of material fact or omits,
or on the Closing Date will omit to state, a material fact necessary to make
such statements not misleading.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer and Medical Resources hereby jointly
and severally represent and warrant to Seller and agree as follows:
3.1 Organization. Buyer is a corporation duly organized, validly existing
------------
and in good standing under the laws of the State of Delaware, and is qualified
to transact business in Florida as a foreign corporation under the laws of the
State of Florida. Buyer
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<PAGE>
has all requisite corporate power and authority to own or lease its properties
and assets and conduct its business as presently conducted and as contemplated
to be conducted hereby and under the Medical Director Agreement. Medical
Resources is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Medical Resources has all requisite
corporate power and authority to own or lease its properties and assets and
conduct its business as presently conducted.
3.2 Authority to Effect Transactions. (a) Each of Buyer and Medical
--------------------------------
Resources, to the extent applicable, has all requisite corporate power and
authority to execute, deliver and perform this Agreement and Buyer's Closing
Documents. All necessary corporate actions on the part of Buyer and Medical
Resources have 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 Medical Resources and
is the legal, valid and binding obligation each of Buyer and Medical Resources
enforceable against Buyer and Medical Resources in accordance with its terms.
Buyer's Closing Documents have been duly authorized by Buyer and, upon execution
and delivery by Buyer and the other parties thereto, 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, to the best of
Buyer's and Medical Resources' knowledge after due inquiry
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<PAGE>
by Buyer and Medical Resources:
(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 Buyer is bound, is required for the
execution, delivery or performance by Buyer or Medical Resources
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 or
Medical Resources 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
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<PAGE>
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 and Medical Resources, (B) any law, statute,
rule, regulation, order, award, judgment or decree to which Buyer
or Medical Resources is subject, or (c) any contract, agreement,
instrument, loan agreement, lease or license to which Buyer or
Medical Resources is a party or by which Buyer or Medical
Resources is bound.
3.3 Litigation. Except as set forth on Schedule 3.3 hereto, to the best
----------
of Buyer's knowledge, after due inquiry by Buyer and Medical Resources, there is
no suit, action, administrative proceeding, arbitration or other proceeding or
governmental investigation pending or, to the best knowledge of Buyer and
Medical Resources, threatened against Buyer or Medical Resources, which
questions the legality, validity or propriety of the transactions contemplated
by this Agreement or which would reasonably be expected to have a material
adverse effect on the business or financial condition of Buyer and Medical
Resources and its or their subsidiaries taken as whole.
3.4 Brokers. Neither Buyer, Medical Resources, nor any Affiliate of Buyer
-------
or Medical Resources has incurred any liability or obligation to any broker,
finder or agent for any brokerage fees, finders fees or commissions with respect
to the transactions contemplated by this Agreement.
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<PAGE>
3.5 Licenses. Buyer has all foreign, federal, state or local governmental
--------
licenses, franchises, permits, privileges, approvals and other authorizations
and licenses which are necessary to entitle it to own the Purchased Assets and
to operate and use the Purchased Assets to conduct and carry on the Business, on
and after the Closing Date, as conducted immediately prior to the Closing Date,
except for such licenses which if not maintained would not have a material
adverse effect on the continuing operations of the Business after Closing.
3.6 Disclosure. No representation or warranty by Buyer made herein or in
----------
any documents, instruments or agreements contemplated hereby contains, or on the
Closing Date will contain, any untrue statement of material fact or omits, or on
the Closing Date will omit to state, a material fact necessary to make such
statements not misleading.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
4.1 Access. Seller shall, following receipt of reasonable notice from
------
Buyer:
(a) afford to the officers, stockholders, employees, consultants,
attorneys, agents, engineers, accountants and other representatives ("Agents")
of Buyer and of any prospective lenders to or investors in Buyer or its
Affiliates (the "Buyer's Lenders and Investors") reasonable access, at all
reasonable times and
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<PAGE>
during normal business hours, to the properties, assets, books and records of
Seller relating exclusively or primarily to the Purchased Assets subject to
appropriate confidentiality restrictions relating to the medical records of
patients who have received medical services at the Center;
(b) permit them to make reasonable 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 Center as Buyer may reasonably
request including all interim financial statements with respect to the Center.
No investigation by or on behalf of Buyer shall affect the representations and
warranties of Seller hereunder.
4.2 Conduct of Business. Seller and Buyer shall refrain from taking any
-------------------
action which would render any of their respective representations and warranties
inaccurate in any material respect 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 Seller, 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.
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<PAGE>
Seller shall act diligently and reasonably (a) to preserve the Purchased Assets
intact, (b) to keep available, if so requested by Buyer, the services of the
present personnel of the Center 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, Seller shall conduct the business and operations of the 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, Seller shall not (i) incur any
obligation or liability (absolute, accrued, contingent or otherwise) or make any
capital expenditure which exceeds $2,500, (ii) grant any increase in the rate of
pay of any employee or an increase in salary payable or to become payable to any
officer, director, employee, consultant or agent of the Seller or increase the
compensation payable to any officer, director, employee, consultant or agent of
the Seller for any period before or after the Balance Sheet Date, or by means of
any bonus or pension plan, contract or other arrangement increase the
compensation of any officer, director, employee, consultant or agent, (iii)
assign, transfer, sell or factor any accounts receivable, (iv) enter into any
material equipment or service contract, (v) except in the ordinary course of
business, sell, lease, transfer or otherwise dispose of (including transfers to
any Affiliates of Seller), or mortgage or pledge, or impose or suffer to be
imposed any Lien on,
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<PAGE>
any Purchased Assets, or (vi) enter into any arrangement to do any of the
foregoing. The obligations of Seller set forth in subsection (v) of the
immediately preceding sentence shall survive any termination of this Agreement
until April 1, 1997.
4.3 Maintenance. Seller 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 Center in
the ordinary course. In the event of any material loss of, or material damage
to, tangible Purchased Assets or the Center prior to the Closing, Seller shall
either pay the lesser of the repair or replacement cost thereof to Buyer at the
Closing or, at the option of Buyer, promptly repair or replace the lost or
damaged Purchased Assets in order to minimize the interruption to the Business.
If, despite the best efforts of Seller to repair or replace such lost or damaged
Purchased Assets prior to the Closing Date, such repair or replacement is not
completed prior to the Closing Date, then, at the option of Buyer, (a) this
Agreement shall terminate, (b) the Closing Date shall be extended for one
additional period not to exceed ten days in order to allow Seller to repair or
replace such damaged Purchased Assets or (c) Seller shall pay to the Buyer on
the Closing Date the lesser of the repair or replacement cost of the lost or
damaged Purchased Assets.
4.4 Consents and Approvals. Prior to Closing, Seller shall act diligently
----------------------
and reasonably to secure the consents and approvals of any governmental agencies
and authorities and any other
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<PAGE>
Persons, 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 5.6 hereof, provided that Seller shall not make any agreement
or understanding affecting the Purchased Assets, the Center or the Business as a
condition for obtaining any such consent or waiver except with the prior written
consent of Buyer and except that Seller shall not be required to pay any
consideration, assume any additional obligations not otherwise required to be
assumed by Seller under this Agreement or remain liable under any Licenses,
Assumed Contracts or Assumed Liabilities in order to obtain a consent or a
waiver. Buyer shall act diligently and reasonably to cooperate with Seller to
obtain the consents or approvals contemplated by this Section 4.4, including
satisfying the requirement of Section 3.4 hereof.
4.5 Renewal of Assumed Contracts. Seller shall keep Buyer fully informed
----------------------------
of all significant developments with respect to the renewal of any Assumed
Contracts that are scheduled to expire between the date hereof and the Closing
Date and Seller shall act upon Buyer's instructions with respect to the renewal
of any such Contracts.
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<PAGE>
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 Seller 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
Seller; and Seller 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.
5.2 No Changes or 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 adversely affecting the Business or
the Purchased Assets; (c) no damage, destruction, loss or claim or condemnation
or other taking materially adversely affecting the Business or the Purchased
Assets that has not been repaired or replaced in accordance with Section 4.3
hereof; and (d) no lawsuit, proceeding or claim filed or asserted against Seller
that, if adversely
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<PAGE>
determined, may have a material adverse effect on the Business or the Purchased
Assets.
5.3 Opinion of Counsel for Seller. Buyer shall have received from Dean,
-----------------------------
Mead, Egerton, Bloodworth, Capouano & Bozarth, P.A., counsel to Seller, an
opinion dated the Closing Date in the form set forth in Exhibit C hereto.
5.4 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.
5.5 Assumption of Contracts. The Contracts are assigned to Buyer on terms
-----------------------
satisfactory to Buyer in its own discretion.
5.6 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 otherwise under any Contract.
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 Seller 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.
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<PAGE>
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 Radiology Contract. Buyer shall have entered into a radiology
------------------
agreement with a radiologist or radiologist group on terms satisfactory to
Buyer, which agreement shall contain provisions authorizing Buyer to endorse
certain checks made payable to such radiologist or radiologist group.
5.10 Deliveries Complete. All other documents reasonably required by
-------------------
Buyer shall have been delivered by Seller to Buyer.
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 their
terms.
5.12 Closing Certificate. On the Closing Date, Seller shall deliver to
-------------------
Buyer a certificate signed by the Secretary of Seller dated as of the Closing
Date to the effect that:
(a) all representations and warranties of Seller 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.
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<PAGE>
(b) Seller has 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 to Buyer's obligation to close under
this Agreement has been fulfilled.
5.13 Employees. Buyer agrees to use its best efforts to hire all of the
---------
Employees of Seller, subject to applicable policies and procedures of Buyer, on
terms comparable to those applicable to Seller's employment of the Employees,
including two weeks paid vacation and three one-day floating holidays. Buyer
shall credit each of such Employees with the period of time that such Employees
were employed by Seller for purposes of inclusion in Buyer's 401(k) Plan, and
shall cause the health insurance benefits of such employees not to be
interrupted. Seller shall remain liable and Buyer shall not be liable for
severance and related payments, relating to Employees, including but not limited
to payments for accrued vacation and accrued sick days, if any, for the period
up to and including the Closing Date unless any such obligation, or portion
thereof, is an Assumed Liability set forth on Schedule 1.4(B).
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement shall be subject, at the
option of Seller, to the fulfillment of each of the following conditions as of
the Closing
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<PAGE>
6.1 Accuracy of Representations and Compliance with Conditions. All
----------------------------------------------------------
representations and warranties of Buyer 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 their covenants
and agreements set forth in this Agreement to be performed or complied with at
or before the Closing.
6.2 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 Seller's counsel, and Buyer 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.
6.3 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.
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<PAGE>
6.4 Opinion of Counsel to Buyer. Seller shall have received an opinion
---------------------------
from Werbel & Carnelutti, counsel for Buyer, dated the Closing Date in the form
set forth in Exhibit E hereto.
6.5 Deliveries Complete. All other documents reasonably required by the
-------------------
Seller shall have been delivered by Buyer to Seller or to Eugene M. Shepherd, as
trustee of the Trust.
6.6 Necessary Government Approvals. The parties shall have received all
------------------------------
governmental and regulatory approvals, actions and consents necessary to
consummate the transactions contemplated hereby.
6.7 Closing Certificate. On the Closing Date, Buyer shall deliver to
-------------------
Seller a certificate signed by the President (or a Vice President) of Buyer and
Medical Resources dated as of the Closing Date, to the effect that:
(a) all representations 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; and
(ii) insofar as any such representation or warranty relates to a
specified earlier date; and
(b) Buyer or Medical Resources, as the case may be, has 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
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<PAGE>
(c) each of the other conditions precedent to Seller's obligation to
close under this Agreement has been fulfilled.
ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. Buyer shall retain the books and records of
------------------------
the Business and the Purchased Assets transferred to Buyer hereunder for a
period of not less than four (4) 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 Seller reasonable notice of such intent and the right to obtain
from Buyer those books and records which it intends to dispose of or destroy.
Seller shall have the right, at the expense of Seller:
(i) of reasonable access to and examination of such records and books
for a period of four (4) 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 or Affiliate's
possession or control which relate to any period prior to the
Closing. With the approval of Buyer, which approval shall not be
unreasonably withheld or delayed, Seller may remove from Buyer's
possession the originals of
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<PAGE>
such of the books and records included in the Purchased Assets as
Seller may require, for use in litigation, provided that Seller
shall indemnify Buyer against losses, expenses, or damages
resulting from the loss, destruction or nonreturn of such books
and records.
7.2 Power of Attorney. Effective upon Closing, the Seller constitutes and
-----------------
appoints the Buyer and its successors and assigns, the true and lawful attorneys
for the Seller, with full power of substitution, in the name of the Seller, but
on behalf of and for the benefit of and at the expense of the Buyer, to
institute and prosecute, in the name of the Seller or otherwise, all proceedings
which the Buyer may deem proper in order to collect, assert or enforce any
claim, right or title of any kind in or to the Purchased Assets, to defend and
compromise any and all actions, suits or proceedings in respect of any of such
Purchased Assets, and to do all such acts and things in relation thereto as the
Buyer shall deem advisable; provided that, if the breach, claim or other matter
at issue will give rise to a claim of indemnification by any of the Buyer
Indemnitees (as defined below), then, the provisions of Article 9 shall control
the defense, compromise or settlement thereof. Buyer shall use reasonably
diligent efforts to give Seller written notice of Buyer's exercise of the
foregoing power. The foregoing powers are and shall be coupled with an interest
and shall be irrevocable by the Seller or by the Seller's dissolution or in any
manner or for any reason. The Buyer shall
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<PAGE>
retain for its own account any amounts collected pursuant to the foregoing
powers, including any sums payable in respect thereof, and the Seller shall
promptly pay to the Buyer, when received, any amounts which shall be received by
the Seller on or after Closing in respect of the Purchased Assets as provided
herein.
7.3 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.
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) No party to this Agreement 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 party hereto, except for any
disclosure or notice required by law to be made by Buyer or Seller which
disclosure or notice of the disclosing party shall make available to the other
party for such party's review and comment before releasing and with respect to
which such other party shall respond to in a timely manner. 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:
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<PAGE>
(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 nonpublic information and any and all
copies thereof to the party to which such information relates.
(b) During the period commencing on the date hereof and ending ten
years from the date hereof, neither the Seller nor any Affiliate of Seller shall
disclose intentionally to anyone, or use or otherwise exploit for the Seller's
or any Affiliate of Seller's benefit, or for the benefit of anyone other than
the Buyer or Medical Resources Group Entities,
(i) any confidential information of the Buyer or Medical Resources
Group Entities relating to the Business of the Center, 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 Medical Resources 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
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<PAGE>
improvements relating to the Center 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").
(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 the Seller or any Affiliate of Seller or any
Agent or other representative thereof, and (ii) business and technical methods
applicable to diagnostic imaging businesses generally. Neither the Seller nor
any Affiliate of Seller 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 Seller or any Affiliate of Seller shall provide the Buyer
with prompt notice of such requirement, prior to making any disclosure, so that
the Buyer may decide whether to seek an appropriate protective or restrictive
order.
(d) At the request of the Buyer, the Seller agrees to deliver to the
Buyer, at any time during the term of this Agreement, all Confidential
Information which it may possess or control.
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<PAGE>
8.2 Non-Competition/Noninterference. During the period commencing on the
-------------------------------
date hereof and ending five years from the date hereof, neither the Seller, any
Principal nor any Affiliate of the Seller shall, directly or indirectly:
(a) anywhere within the State of Florida or any other state in which
an Medical Resources Group entity operates a diagnostic imaging center, directly
or indirectly, 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, joint venturer, lender, advisor, consultant, investor or
other participant, in any business in the diagnostic imaging field, industry or
business (a "Competitive Business"); provided that, subject to the terms of the
Medical Director Agreement, the foregoing shall not preclude Seller, any
Principal or any Affiliate of Seller from providing professional medical
services, including professional reading services, directly or indirectly, or
otherwise from owning, managing, operating, advising, controlling, investing in
or acquiring an interest in any business or otherwise engaging or participating
in, whether as a proprietor, partner, stockholder, director, officer or key
employee, joint venturer, lender, advisor, consultant, investor or other
participant in any business providing professional medical services, including
professional reading services.
- 47 -
<PAGE>
(b) solicit, induce or influence any customer, supplier, or any other
person or entity which has a business relationship with the Buyer or any Medical
Resources Group Entity to discontinue or reduce the extent of such relationship
with the Buyer or any Medical Resources Group Entity; or
(c) (i) recruit, solicit, or otherwise induce or influence any
employee of the Buyer or any Medical Resources Group Entity to discontinue such
employment with the Buyer or any Medical Resources Group Entity or any
radiologist who, at the time has a business relationship with the Buyer or any
Medical Resources Group Entity, from discontinuing such relationship with the
Buyer or Medical Resources 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 the Seller or the Competitive Business employs or seeks to
employ such person) employed by the Buyer or any Medical Resources Group Entity.
(d) Notwithstanding the foregoing, the provisions of this Section 8
will not be deemed breached merely because the Seller or any Affiliate of Seller
owns not more than 5% of the outstanding common stock or securities of a
corporation or other legal entity, if, at the time of its acquisition by the
Seller or an Affiliate of Seller, such stock or security is listed on a national
securities exchange, is reported on The Nasdaq Stock Market (National Market or
Small Cap Market), or is regularly
- 48 -
<PAGE>
traded in the over-the-counter market by a member of a national securities
exchange.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnity by Seller. Subject to the provision of Section 9.1(c),
-------------------
Seller and each Principal, jointly and severally, agrees to indemnify and hold
harmless Buyer and its successors and assigns and its and their respective
officers, directors, controlling Persons, employees, attorneys, agents,
Affiliates, partners and stockholders, in each case past, present, or as they
may exist at any time after the date of this Agreement (including the Buyer, the
"Buyer Indemnitees") against and in respect of any and all:
-----------------
(a) claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs (including reasonable legal fees and other expenses) arising out
of or based upon:
(i) any breach of any representation, warranty, covenant or agreement
of Seller or each Principal contained in this Agreement or the
Bill of Sale; or
(ii) all Retained Liabilities and any other obligation or liability of
Seller of any nature, accrued or contingent, not included as part
of the Assumed Liabilities, including, but not limited to, any
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<PAGE>
trade and lender payable obligations incurred prior to the
Closing Date and not listed on Schedule 1.4.
(b) claims, suits, actions and proceedings, including, but not
limited to, medical malpractice or 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 prior to the Closing Date
relating to the Purchased Assets or the operation or conduct of the Business
other than the Assumed Liabilities.
(c) It is expressly agreed that Principals shall only be subject to
this Article 9 with respect to the claims, suits, actions, proceedings,
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses and costs arising out of a breach of the representations or warranties
set forth in Article 2 and/or a breach of Article 8 of this Agreement.
9.2 Indemnity by Buyer. Buyer and Medical Resources, jointly and
------------------
severally, agree to indemnify and hold harmless Seller and its successors and
assigns and their respective partners, controlling Persons (if any), employees,
attorneys, agents, Affiliates, partners and stockholders (including the Seller,
the "Seller Indemnitees") against and in respect of any and all:
(a) claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs (including reasonable
- 50 -
<PAGE>
legal fees and other expenses) arising out of or based upon (i) any breach of
any representation, warranty, covenant or agreement (whether joint or several)
of Buyer or Medical Resources contained in this Agreement or the Bill of Sale,
or (ii) any of the Assumed Liabilities; 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, liabilities, losses, costs and legal and
other expenses arising from events occurring on or after the Closing Date
relating to the Purchased Assets or the operation or conduct of the Business by
Buyer except to the extent that the same results from the breach of any
representation or warranty of Seller hereunder.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller 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 and shall give the Indemnitor a copy of
any such claim, process and legal proceedings. 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
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<PAGE>
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, attend all such
conferences, discovery proceedings, hearings, trials and appeals and take such
other action and assign such other documents as may be reasonably requested in
connection therewith and as may be necessary to defend such claim or other
proceeding in a timely manner. 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 to take
charge of the defense of such action; or
(ii) such Indemnified Party, upon the reasonable advice of its
counsel, 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 any of
which events, such fees and expenses of not
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<PAGE>
more than one additional counsel for all of the Indemnified
Parties shall be borne by the Indemnitor, in any of which events,
such reasonable fees and expenses of not more than one additional
counsel for all of the Indemnified Parties 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.
Prior to paying or settling any claim against which an Indemnitor is, or may be,
obligated under this Agreement to indemnify the Indemnified Party, the
Indemnified Party must first supply the Indemnitor with a copy of a final court
judgment or decree holding the Indemnified Party liable on such claim, or
failing such judgment or decree, must first receive the written approval of the
terms and conditions of such settlement from the Indemnitor. The Indemnitor
shall have the right to settle any claim against it, subject to the prior
written approval of the Indemnified Party, which approval shall not be
unreasonably withheld.
9.4 Limitations on Indemnification. Notwithstanding anything in this
------------------------------
Article 9 to the contrary, Seller shall not be obligated to indemnify Buyer or
any other Person for any items otherwise subject to indemnification pursuant to
this Article 9 unless the aggregate indemnification obligation of Seller with
respect to all claims which Buyer and other Persons may have against it pursuant
to this Article 9 shall exceed $20,000
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<PAGE>
("Indemnification Threshold"). Notwithstanding the foregoing sentence, no claim
or claims which result from or are based on the Retained Liabilities, or
Seller's failure to pay the Retained Liabilities, shall at any time be subject
to Indemnification Threshold. Notwithstanding anything in this Article 9 to the
contrary, neither Buyer nor Medical Resources shall be obligated to indemnify
Seller or any other Person for any items otherwise subject to indemnification
pursuant to this Section 9, unless the aggregate indemnification obligation of
Buyer and Medical Resources with respect to all claims which Seller and other
Persons may have against Buyer and Medical Resources pursuant to this Section 9
shall exceed the Indemnification Threshold. To the extent that the
Indemnification Threshold is exceeded, the Indemnitor shall bear all Losses
(i.e., the Indemnification Threshold is not to be deemed a deductible
----
amount). Notwithstanding the foregoing, no claim or claims which result from or
are based on the Assumed Liabilities, or any breach by Buyer of its obligation
to pay or perform the Assumed Liabilities, shall at any time be subject to the
Indemnification Threshold.
ARTICLE 10
MISCELLANEOUS
10.1 Expenses. Except as otherwise expressly provided herein, 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
- 54 -
<PAGE>
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.
10.2 Survival. The representations, warranties, covenants and agreements
--------
contained in or made pursuant to this Agreement shall survive the Closing,
except to the extent that they relate to a specified earlier date.
10.3 Entire Agreement; Modification. This Agreement (including 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.
10.4 Notices. Any notice given pursuant to this Agreement to any party
-------
hereto shall be deemed to have been duly given three (3) days following deposit
in the U.S. mail if sent registered or certified mail, return receipt requested,
postage prepaid or when hand delivered as follows:
If to Seller:
Melbourne Neurologic, P.C.
1317 Oak Street,
Melbourne, Florida
Attention:
with a copy to:
Dean, Mead, Egerton, Bloodworth,
Capouano & Bozarth, P.A.
800 North Magnolia Avenue, Suite 1500
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<PAGE>
Orlando, Florida 32803
Attention: Alan H. Daniels, Esq.
If to Buyer:
Melbourne Resources, Inc.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
with a copy to:
Stephen M. Davis, Esq.
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
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. Notwithstanding the foregoing, any notice of
a change in address shall not be deemed to have been duly given until actual
receipt.
10.5 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.
- 56 -
<PAGE>
10.6 Binding Effect; Assignment. (a) Neither this Agreement nor any of
--------------------------
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other party or parties,,
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. 10.7 Separability. If
------------
any provision of this Agreement is invalid, illegal or unenforceable, such
provision shall be ineffective 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.
10.8 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.
10.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Governing Law. This Agreement shall be construed and enforced in
-------------
accordance with the laws of the State of Florida, without giving effect to
conflict of laws.
10.11 Incorporation by Reference. The Schedules and Exhibits attached
--------------------------
hereto and the letters referred to herein as
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<PAGE>
having been executed or delivered concurrently with the execution of this
Agreement are an integral part of this Agreement and are incorporated herein by
reference.
10.12 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. "Affiliate" of a Person shall mean any other
---------
Person controlling, controlled by or under common control with such Person.
"Business Day" shall mean any day other than a Saturday, Sunday or any
------------
other day on which commercial banks are authorized by law to be closed in
Hackensack, New Jersey.
"Key Employee" shall mean any person who is employed in a management,
------------
executive, supervisory, marketing or sales capacity for another person.
"Medical Resources Group Entity" any entity in which the Buyer,
-------------------------------
any direct or indirect subsidiary of Buyer, 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.
10.13 Attorneys' Fees. If any party to this Agreement seeks to interpret
---------------
rights hereunder or to enforce the terms and
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<PAGE>
provisions hereof, then the prevailing party in any such action shall be
entitled to recover from the non-prevailing party or parties, all costs incurred
in connection with such action, including, without limitation, reasonable
attorneys' fees, expenses and costs, whether incurred before or at trial and/or
during all appellate levels.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
PRINCIPALS MELBOURNE NEUROLOGIC, P.A.
___________________________ By:__________________________
Name: Thomas G. Hoffman Name:
Title:
___________________________
Name: Scott L. Gold
___________________________ MELBOURNE RESOURCES, INC.
Name: Eugene M. Shepherd
By:__________________________
Name: William D. Farrell
Title: President
By execution below, the undersigned hereby agrees to the provisions of
Section 1.8, Article 3 and Article 9 of the foregoing Agreement.
MEDICAL RESOURCES, INC.
By:___________________________
Name: William D. Farrell
Title: President
<PAGE>
EXHIBIT 99.3
EXECUTION COPY
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of January __, 1997, by and among Dedicated Medical
Imaging, San Clemente, Inc., a California corporation ("Dedicated"), Long Beach
Radiology Center, Ltd., a California limited liability company ("Long Beach",
and together with Dedicated, the "Sellers"), Mr. Joseph Payne (the
"Stockholder"), an individual residing in the State of California, on one hand,
and San Clemente Resources, Inc. ("SCRI") and Long Beach Resources, Inc.
("LBRI", and together with SCRI, the "Buyers"), each a Delaware corporation,
with a mailing address at 155 State Street, Hackensack, New Jersey 07601 and
Medical Resources, Inc. ("MRI").
W I T N E S S E T H:
-------------------
WHEREAS, Dedicated owns a diagnostic imaging facility operating as
Oceanview Radiology Center located at 675 Camino DeLos Mares #101, San Clemente,
California 92673 (the "San Clemente Center") and Long Beach owns a diagnostic
imaging facility operating as Long Beach Radiology Center located in 2776
Pacific Avenue, Long Beach, California 90806 (the "Long Beach Center", and
<PAGE>
together with the San Clemente Center, the "Centers") and the Sellers own or
have the right to use certain of the assets, properties, business and goodwill
relating thereto (the "Business"); and
WHEREAS, SCRI desires to acquire and Dedicated desires to sell the San
Clemente Center and the Business operated at such Center and LBRI desires to
acquire and Long Beach desires to sell the Long Beach Center and the Business
operated at such Center upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, the Stockholder owns all of the outstanding common stock of
Dedicated and 80% of the ownership interest in Long Beach and would derive
substantial benefit from the consummation of transactions contemplated by this
Agreement, which, among other things, includes his agreement not to compete with
the Business or the Buyers as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Sellers, Stockholder and Buyers agree as follows:
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<PAGE>
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), Dedicated and Long Beach shall sell, assign,
transfer and deliver to SCRI and LBRI, respectively, and SCRI and LBRI shall
purchase and acquire from Dedicated and Long Beach, respectively, free and clear
of all Liens (as defined in Section 2.6(b) hereof) except as otherwise
contemplated by Section 2.6 hereof, all of the assets of the Business associated
with the San Clemente Center and the Long Beach Center, respectively, other than
the assets listed on Schedule 1.1 (the "Excluded Assets"), including, without
------------ ---------------
limitation, all machinery, equipment, supplies and furnishings used or held for
use in the Business, as set forth on Schedule 2.6(A) hereto (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:
-3-
<PAGE>
(a) all of Long Beach's accounts receivable recorded as of the close of
business on the date immediately preceding the Closing Date (as hereinafter
defined) (including any related claims in respect of the collection thereof,
collectively, the "Accounts Receivable");
-------------------
(b) all leasehold improvements and tangible assets and properties of the
Sellers, including machinery and equipment, tooling, tools, furniture, office
equipment, furnishings and fixtures;
(c) all inventories, including finished products, work-in-process,
materials, parts, accessories and supplies of the Sellers;
(d) all rights of the Sellers arising from, in and to all Contracts (as
defined in Section 2.8) listed in Schedule 1.4(B) as Contracts to be assumed by
---------------
Buyers (the "Assumed Contracts").
-----------------
(e) all other assets reflected in the Balance Sheets (as defined in Section
2.4) and all assets acquired since the date of the Balance Sheets, but excluding
assets disposed of in the ordinary course of business since the date of the
Balance Sheets and cash distributed to stockholders of the Sellers, or assets
which have been abandoned by the Sellers since the date of the
-4-
<PAGE>
Balance Sheets, which assets are not, individually or in the aggregate, material
to the operation of the Business;
(f) all security deposits and prepaid expenses of the Sellers;
(g) all warranties and claims or potential claims against the 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
(h) all names (including the tradenames set forth in Schedule 2.6(D)),
---------------
Proprietary Rights (as defined in Section 10.13), contractual rights, telephone
numbers, Licenses (as defined in Section 2.7) which are capable of being
transferred pursuant to applicable law, books and records, business and goodwill
of the Sellers relating to the Business and the Purchased Assets.
1.2 Closing Date. The purchase and sale of the Business and Purchased
------------
Assets (the "Closing") shall take place on January __, 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 the Sellers and Buyers
-5-
<PAGE>
may agree upon in writing (such date and time being hereinafter called the
"Closing Date").
------------
1.3 Purchase Price. (a) As consideration for the Purchased Assets sold
--------------
by Dedicated and subject to the terms and provisions of this Agreement, SCRI
shall pay to Dedicated the purchase price (the "Dedicated Purchase Price") in
------------------------
the form and manner as follows, as follows:
(i) SCRI shall pay to Dedicated an aggregate of $1,030,000 by certified
check or wire transfer on the Closing Date (the "Closing Date Amount"); and
-------------------
(ii) SCRI shall also pay to Dedicated additional compensation (the
"Dedicated Additional Compensation") equal to the product of (x) 4.0 times (y)
- ----------------------------------
the excess, if any, of (I) the Defined Net Income (as defined below) of the San
Clemente Center for the annual period (the "Measurement Period") beginning with
------------------
the first day of the first month following the Closing Date to the date which is
the one year anniversary of such date (the "Anniversary Date") over (II)
----------------
$250,000; provided, that the maximum amount of Dedicated Additional Compensation
--------
payable to Dedicated hereunder shall be $2,000,000; provided further, that the
-------- -------
amount of Dedicated Additional Compensation shall be reduced by an amount equal
to the LB Loss Amount (as defined below) in accordance with Section
-6-
<PAGE>
1.3(b). As used in this Section 1.3(a), "Defined Net Income" shall mean, for any
------------------
period, net income of the San Clemente Center computed in accordance with
generally accepted accounting principles plus depreciation and amortization
----
during such period minus repayments of principal in respect of indebtedness for
-----
borrowed money for such period; provided that, no general corporate overhead
--------
expenses of MRI or any of its affiliates allocated to the San Clemente Center
(other than direct costs related to such Center, such as marketing expenses)
shall be deducted from the revenues of the San Clemente Center in calculating
Defined Net Income; and provided further, that any compensation paid to
-------- -------
Stockholder under the Consulting Agreement (as hereinafter defined) shall not be
included as an expense item in the calculation of Defined Net Income but such
Consulting Agreement compensation shall reduce, by a like amount, the amount of
Dedicated Additional Compensation, if any, payable to Dedicated. The Dedicated
Additional Compensation, if any, payable to Dedicated shall be paid in shares
(the "Dedicated Earnout Shares") of common stock (the "MRI Common Stock"), par
------------------------ ----------------
value $.01 per share, of MRI, registered under the Securities Act of 1933, as
amended (the "Securities Act"), for resale by Dedicated. With respect to any
--------------
Dedicated Additional Compensation so payable, SCRI shall issue such number of
-7-
<PAGE>
shares of MRI Common Stock as shall equal the quotient obtained by dividing such
Dedicated Additional Compensation by the Market Value (as defined below) of the
MRI Common Stock as of the third trading day immediately preceding the Dedicated
Payment Date (as defined below). Within 60 days of the Anniversary Date, SCRI
shall provide to Dedicated a written calculation of the Dedicated Additional
Compensation, if any, which is payable hereunder and shall certify as to the
Defined Net Income for such Measurement Period. Such shares of MRI Common Stock
shall be issued to Dedicated within 90 days of the Anniversary Date (such date
of issuance, the "Dedicated Payment Date").
----------------------
(b) As consideration for the Purchased Assets sold by Long Beach and
subject to the terms and provisions of this Agreement, LBRI shall pay to Long
Beach the purchase price in the form and manner set forth in this Section
1.3(b). LBRI shall pay to Long Beach an amount (the "Long Beach Compensation",
-----------------------
and together with the Dedicated Additional Compensation, the "Earnout
-------
Compensation") equal to the product of (x) 4.0 times (y) the LB Defined Net
- ------------
Income (as defined below) of the Long Beach Center, if any, for the annual
period (the "Annual Period") beginning with the first day of the first month
-------------
following the Closing Date to the date which is the one year anniversary of such
date (the "LB Anniversary
--------------
-8-
<PAGE>
Date"). As used in this Section 1.3(b), "LB Defined Net Income" shall mean, for
- ---- ---------------------
any period, net income of the Long Beach Center computed in accordance with
generally accepted accounting principles; provided that, no general corporate
--------
overhead expenses of MRI or any of its affiliates allocated to the Long Beach
Center (other than direct costs related to such Center, such as marketing
expenses) shall be deducted from the revenues of the Long Beach Center in
calculating LB Defined Net Income. Within 60 days of the LB Anniversary Date,
LBRI shall provide to Long Beach a written calculation of the Long Beach
Compensation, if any, which is payable hereunder and shall certify as to the LB
Defined Net Income for such Annual Period. LBRI shall pay 25% of the Long Beach
Compensation in cash to Long Beach within 90 days of the LB Anniversary Date
(such date of issuance, the "LB Payment Date") and shall pay the remaining 75%
---------------
of the Long Beach Compensation in three equal cash installments without interest
on the dates which are 3, 6 and 9 months from such LB Payment Date. To the
extent the operations of the Long Beach Center result in a net operating loss
for the Annual Period, the amount of Dedicated Additional Compensation, if any,
payable to Dedicated pursuant to Section 1.3(a)(ii) shall be reduced by an
amount equal to the amount of
-9-
<PAGE>
such net operating loss which is not reimbursed to LBRI under any guaranty of
Pacific Hospital of Long Beach (the "LB Loss Amount").
--------------
(c) Guaranty by MRI of Purchase Price. To induce Sellers to execute and
---------------------------------
deliver this Agreement and the other agreements contemplated hereby, by
execution hereof, MRI, the indirect owner of all of the outstanding stock of
Buyers, hereby absolutely and unconditionally guarantees the full, prompt and
faithful performance by Buyers of the payment of all sums to be paid to Sellers
and the issuance of all shares of MRI Common Stock to Sellers pursuant to this
Section 1.3. If Buyers fail to fully pay all or any part of any sums due
Sellers hereunder when due or deliver any shares of MRI Common Stock when due,
MRI shall immediately pay to Sellers the amounts due and unpaid by Buyers or
issue the shares then due, as the case may be, it being understood that each
obligation to pay any such amount or issue such shares constitutes the direct
and primary obligation of MRI.
(d) Resolution of Certain Disputes. Any controversy among Sellers and
------------------------------
Buyers relating to the calculation of Dedicated Additional Compensation and Long
Beach Compensation pursuant to the provisions of Sections 1.3(a)(ii) and Section
1.3(b) shall be resolved by presenting the dispute for review by a "Big Six" or
other firm of certified public accountants agreed upon by the
-10-
<PAGE>
parties. 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 the parties.
Sellers and Buyers agree to provide any books and records of the Business in
their possession which, in the opinion of such firm, is necessary for their
review. The parties shall share equally the costs of such an accounting review.
Dedicated or Long Beach, as applicable, shall notify the Buyers of any objection
to the calculation of its Earnout Compensation within 10 business days of
receipt of the calculation with respect its Earnout Compensation. The failure by
Dedicated or Seller to provide Buyers with notice of such objection within such
10-day period shall be deemed an acceptance by such Seller of the calculation of
its respective Earnout Compensation. Notwithstanding the existence of a dispute
regarding either Earnout Compensation, the undisputed portion of any such
Earnout Compensation shall be paid to the applicable Seller in accordance with
Section 1.3(a)(ii) or 1.3(b), as the case may be.
(e) Allocation of Purchase Price. Sellers and the Buyers agree to
----------------------------
allocate the Dedicated Purchase Price and the Long Beach Compensation in
accordance with IRC Section 1060. Buyers and Sellers shall use reasonably
diligent efforts to agree to such
-11-
<PAGE>
allocation by the Closing and, in any event, such allocation shall be agreed to
by Sellers and the Buyers within 30 days of the Closing Date or the date on
which such amounts are paid. In addition, Sellers and the Buyers hereby agree to
file timely any information that may be required to be filed pursuant to
Treasury Regulations promulgated under IRC Section 1060.
1.4 Liabilities. Buyers shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of the Sellers, the Business or the
Centers of any kind or nature, known, unknown, contingent or otherwise
(including, without limitation, any benefit plan maintained by the Sellers, any
professional fees or any liabilities set forth on Schedule 1.4(A)), except as
---------------
specifically set forth on Schedule 1.4(B) annexed hereto (the "Assumed
--------------- -------
Liabilities"), provided that, the Assumed Liabilities of Dedicated relating to
- ----------- --------
the San Clemente Center shall be assumed solely by SCRI and the Assumed
Liabilities of Long Beach relating to the Long Beach Center shall be assumed
solely by LBRI. All liabilities and obligations retained by the Sellers are
referred to herein as "Retained Liabilities."
--------------------
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<PAGE>
1.5 Additional Closing Date Deliveries and Actions.
----------------------------------------------
(a) On the Closing Date, the Sellers shall (i) deliver, or execute and
deliver, to the Buyers (w) a Bill of Sale, Assignment and Assumption Agreement
in substantially the form annexed hereto as Exhibit A with respect to the
Purchased Assets, including the Assumed Contracts, (x) all evidences of
consents, waivers or approvals obtained by the Sellers in respect of the
consummation of the transactions contemplated by this Agreement, (y) all of the
documents, instruments and opinions contemplated to be delivered by the Sellers
to Buyers 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 Buyers may reasonably request or as may otherwise be necessary to
evidence and effect the transactions contemplated hereby and (ii) take all steps
and actions as Buyers may reasonably request or as may otherwise be necessary to
put Buyers in actual possession and control of the Purchased Assets at the
locations where such Purchased Assets are held or maintained prior to Closing.
All of the documents described in (w) through (z) hereof are hereinafter
referred to as "Sellers' Closing Documents".
(b) On the Closing Date, Buyers or MRI, as applicable, shall (i) deliver,
or execute and deliver, to the Sellers (x) a
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<PAGE>
Bill of Sale, Assignment and Assumption Agreement in substantially the form
annexed hereto as Exhibit A with respect to the Purchased Assets, including the
Assumed Contracts, (y) the Closing Date Amount and (z) all of the documents,
instruments and opinions contemplated to be delivered by Buyers or MRI to the
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 "Buyers' Closing Documents" and, collectively
with Sellers' Closing Documents, the "Closing Documents".
1.6 Consents, Waivers and Further Assurances. From time to time following
----------------------------------------
the Closing, the Sellers and Stockholder shall execute and deliver, or cause to
be executed and delivered, to Buyers such other instruments of assignment,
conveyance and transfer as Buyers may reasonably request or as may be otherwise
necessary to effect the transactions contemplated hereby.
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 Buyers and the Sellers; (b) by Buyers or the Sellers
in the event
-14-
<PAGE>
of any material breach by the other party of any of its agreements,
representations or warranties contained herein; or (c) by either the Buyers or
the Sellers, if the Closing has not occurred on or before February 29, 1997
(provided, however, that if the party seeking to terminate this Agreement
pursuant to this clause has failed to use good faith and best efforts to bring
about the Closing, or is in breach of a representation, warranty or covenant
contained herein beyond any applicable grace period, 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 the Sellers and Buyers (the
"Termination Date"). Notwith standing 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.
-15-
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND STOCKHOLDER
As an inducement to Buyers to enter into this Agreement and to consummate
the transactions contemplated hereby, each Seller, severally with respect to the
Center and the Purchased Assets owned by it, and the Stockholder, jointly and
severally with each Seller with respect to the Center and the Purchased Assets
owned by such Seller, represent and warrant to Buyers and agree as follows:
2.1 Organization and Qualification. Each of the Sellers is a corporation
------------------------------
or limited liability company, as the case may be, organized, validly existing
and in good standing under the laws of the State of California, and is duly
qualified as a foreign corporation or limited liability company, as the case may
be, in all jurisdictions where the ownership of its property or conduct of its
business require it to so qualify. The Sellers have all requisite power and
authority to own or lease their properties and the Purchased Assets and to
conduct their business as presently conducted. Stockholder is the sole
shareholder of Dedicated and holds an 80% limited liability company interest in
Long Beach.
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<PAGE>
2.2 Authority to Effect Transactions. (a) Each of the Sellers and
--------------------------------
Stockholder has all requisite power and authority to execute, deliver and
perform this Agreement and all of Sellers' Closing Documents. All necessary
corporate or limited liability company action, as the case may be, on the part
of the Sellers has been or will be prior to the Closing Date duly taken to
authorize the execution, delivery and performance by the Sellers of this
Agreement and all of Sellers' Closing Documents. This Agreement has been duly
authorized, executed and delivered by the Sellers, has been duly executed and
delivered by Stockholder, and is the legal, valid and binding obligation of each
of the Sellers and Stockholder, enforceable against each of the Sellers and
Stockholder in accordance with its terms except (x) as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally, and (y)
to the extent that such enforceability is subject to general principles of
equity (regardless of whether such enforcement is considered in a proceeding in
equity or at law). Each of Sellers' Closing Documents has been duly authorized
by the Sellers or the Stockholder, as appropriate, and, upon execution and
delivery by the Sellers and Stockholder, as contemplated hereby, will be the
-17-
<PAGE>
legal, valid and binding obligations of each of the Sellers and Stockholder,
enforceable against each of the Sellers and Stockholder in accordance with its
terms except (x) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, and (y) to the extent that such enforceability
is subject to general principles of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law).
(b) Except as set forth in Schedule 2.2(B) hereto, (i) no consent,
---------------
authorization, approval, order, license, certifi cate, permit or act of or from,
or declaration or filing with, any foreign, federal, state, local or other
governmental authority or regulatory body or any court or other tribunal or any
party to any contract, agreement, instrument, lease or License (as defined in
Section 2.7) to which any of the Sellers or Stockholder is a party or by which
any of the Sellers or Stockholder is bound or to which any of the Purchased
Assets is subject, is required for the execution, delivery or performance by the
Sellers or Stockholder of this Agreement or any of Sellers' Closing Documents or
the consummation of the transactions contemplated hereby or thereby and (ii)
neither the execution, delivery or performance of this
-18-
<PAGE>
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 upon any of 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) the Sellers' organizational documents and
agreements, each as amended to date, (B) any law, statute, rule, regulation,
order, award, judgment or decree to which the Sellers, Stockholder or any of the
Purchased Assets is subject or (C) any contract, agreement, instrument, lease or
License to which any of the Sellers or Stockholder is a party or by which it is
bound.
2.3 Subsidiaries. The Sellers have no subsidiaries. The Sellers own no
------------
interest, directly or indirectly, and have no commitment to purchase any
interest, direct or indirect, in any other corporation, partnership or
enterprise.
2.4 Financial Statements and Liabilities. (a) The Sellers have delivered
------------------------------------
to Buyers true and correct copies of the
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<PAGE>
following: unaudited balance sheets of the Sellers as of November 30, 1996 (the
"Balance Sheets") and unaudited statements of operations (the "Statements of
Operations"; the Balance Sheets and Statements of Operations are herein referred
to as the "Financial Statements") of the Sellers. The Balance Sheets present
fairly the financial condition, assets, liabilities and stockholder's equity of
the Sellers as of their dates; the Statements of Operations present fairly the
results of operations of the Sellers for the period indicated and present fairly
the information purported to be shown therein. The Financial Statements are
correct and complete in all material respects and are in accordance with the
books and records of the Sellers.
(b) Except as set forth in Schedule 2.4(B) hereto, the Sellers are not
---------------
subject to any liability (including, without limitation, unasserted claims,
whether known or unknown, and liabilities for federal, state or local income
tax), whether absolute, contingent, accrued or otherwise, with respect to the
Purchased Assets, the Business or the Centers 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 class or category as those set forth on the face of the
Balance Sheets which were reasonably incurred in the ordinary course of business
of the
-20-
<PAGE>
Sellers consistent with past practice after the Balance Sheet Date (as defined
below). All information provided by Sellers to Buyer concerning Sellers'
accounts payable and accrued liabilities has been true and accurate in all
material respects as of the respective dates of such information.
2.5 Absence of Certain Developments. Except as contemplated by this
-------------------------------
Agreement, or as otherwise set forth on Schedule 2.5 hereto, since November 30,
------------
1996 (the "Balance Sheet Date"), the Business has been conducted in all material
respects only in the ordinary course of business consistent with past practice.
Except as set forth on Schedule 2.5 hereto, since the Balance Sheet Date, there
------------
has been (a) no material adverse change in the Purchased Assets, the Business,
the liabilities, operations, profits, condition (financial or otherwise) or
prospects of the Centers, and, to the best of the Sellers' and Stockholder's
knowledge, no fact or condition exists relating specifically to the Sellers
(except for market and industry conditions affecting providers of diagnostic
imaging services generally) or is contemplated or threatened which might
reasonably be expected to cause such a change in the future, and (b) no damage,
destruction, loss or claim or condemnation or other taking materially and
adversely affecting the Purchased Assets.
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<PAGE>
2.6 Tangible Personal Property; Title and Liens. (a) Set forth on
-------------------------------------------
Schedule 2.6(A) hereto is a list of all of the tangible personal property
- ---------------
included in the Purchased Assets, which list distinguishes between the property
of Dedicated and the property of Long Beach.
(b) The Sellers have good and marketable 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 10.13) of every kind and character (any of the foregoing, a "Lien"),
other than as set forth on Schedule 2.6(B) hereto (each Lien expressly set forth
---------------
on such Schedule is a "Permitted Lien"). Upon delivery to Buyers on the Closing
Date of the instruments of assignment and transfer contemplated by this
Agreement, the Sellers will thereby transfer to and vest in Buyers good and
marketable title to the Purchased Assets, free and clear of all Liens other than
Permitted Liens. The Sellers shall discharge and indemnify Buyers from and
against any and all claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs and legal and other expenses resulting or arising from any and all
-22-
<PAGE>
Liens existing on the Closing Date (whether inchoate, or not, and whether
perfected or not) on or with respect to any Purchased Assets, except 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) The real property owned or leased by the Sellers which is used in the
conduct of the Business is set forth on Schedule 2.6(C). No default or event
---------------
of default on the part of the Sellers, and no event which with the giving of
notice or the passage of time would constitute a default, with respect to such
leases, has occurred and is continuing unremedied or unwaived.
(d) (i) The Sellers have the right to use each Proprietary Right listed in
Schedule 2.6(D) in the manner and location now used, and except as otherwise set
- ---------------
forth therein, all of such Proprietary Rights are, and will be on the Closing
Date, free and clear of all royalty obligations and Liens. There are no claims
pending, or, to the Stockholder's or Sellers' best knowledge, threatened against
the Sellers that their use of any of the Proprietary Rights listed on Schedule
--------
2.6(D) infringes the rights of any Person. The Sellers and the Stockholder have
- ------
no knowledge of any conflicting use of any of such Proprietary Rights.
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<PAGE>
(ii) The Sellers have no trade name, service mark, patent, copyright or
trademark related to its Business, except those which are set forth in Schedule
--------
2.6(D), which are all those necessary for the operation of the Business as
- ------
presently conducted.
(iii) The Sellers are not a party in any capacity to any franchise,
license or royalty agreement respecting any Proprietary Rights and, there is no
conflict with the rights of others in respect to the Proprietary Rights now used
in the conduct of the Business and the Sellers and the Stockholder are unaware
of any facts of circumstances which might give rise to the foregoing.
2.7 Licenses and Authorizations; Third Party Payors. The Sellers own,
-----------------------------------------------
hold or possess all foreign, federal, state or local governmental licenses,
franchises, permits, privileges, approvals and other authorizations and licenses
which are necessary to entitle them to own or lease the Purchased Assets and to
conduct and carry on the Business substantially as presently conducted (the
"Licenses"), except for such Licenses which if not maintained would not have a
- ---------
material adverse effect on the continuing operation of the Business at any
Center. Set forth on Schedule 2.7 hereto is a list and brief description of
------------
each of the Licenses. Each of the Licenses is valid and in full force and
effect, and will continue
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<PAGE>
in full force and effect, without default or forfeiture of any rights thereunder
after the consummation of the transactions contemplated hereby. No notice of
cancellation, default or breach of or any dispute concerning any of the Licenses
owned, possessed or held by the Sellers or of any event or condition or state of
facts described in the next following sentence has been received by the Sellers
or Stockholder with respect to any of such Licenses. There is not now pending,
or to the knowledge of the Sellers or Stockholder threatened, any action to
revoke, cancel, rescind, modify or refuse to renew in the ordinary course any of
the Licenses. The Sellers and Stockholder have performed and fulfilled in all
material respects all of their respective obligations under each of the
Licenses, and none of the Sellers or the Stockholder is aware of any event or
condition or state of facts which constitutes or, after notice or lapse of time
or both, would constitute a breach or default under any of such Licenses or
which permits or, after notice or lapse of time or both, would permit revocation
or termination of any of such Licenses or which would materially adversely
affect any of the rights of the Sellers thereunder. Neither the Sellers nor the
Stockholder make any representation or warranty regarding the ability of the
Buyers or MRI to continue any relationship with third party payors of services
of the Centers.
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<PAGE>
2.8 Contracts and Other Instruments.
-------------------------------
(a) To the best of Sellers' and Stockholder's knowledge, Schedule 2.8
------------
hereto sets forth a list of all contracts, agreements, instruments and leases to
which the Sellers or Stockholder, on behalf or for the benefit of the Sellers,
are a party or by which they are bound, relating to the Business or to which any
of the Purchased Assets are subject (collectively, together with any contracts,
agreements, instruments and leases entered into by the Sellers or Stockholder
with respect to the Business between the date hereof and the Closing Date
consistent with the terms of this Agreement, being herein called the
"Contracts"). To the best of Sellers' and Stockholder's knowledge, the Sellers
---------
and Stockholder have provided Buyers with, or made available for review by
Buyers, a true and complete copy of each Contract.
(b) Each of the Contracts constitutes the valid and binding obligation of
the Sellers and/or Stockholder and, to the best of the Sellers' and
Stockholder's knowledge, the other party thereto, is in full force and effect.
The Sellers and/or Stockholder have performed and fulfilled all of their
material obligations under each of such Contracts required to be performed as of
the date hereof, are not in default or breach thereunder,
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<PAGE>
and, to the knowledge of the Sellers and Stockholder, no other party is in
default or breach thereunder.
2.9 Employees.
---------
(a) Schedule 2.9(A) hereto contains (i) a list of the names and
---------------
relationships with the Sellers of all employees of the Sellers as of the date
hereof, (ii) a description of all agreements (oral or written) with such
employees, (iii) the dates on which such employees commenced working for the
Sellers, (iv) any increase in such employee's compensation since January 1,
1996, and (v) the compensation of such employees. Except as set forth on
Schedule 2.9(B) hereto, the Sellers are not a party to any collective bargaining
- ---------------
agreement, employment agreement, retirement plans (whether qualified or non-
qualified), deferred compensation or severance 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.
(b) The Sellers have complied in all material respects with all applicable
laws, rules and regulations affecting the employment of labor, including, but
not limited to, those relating to wages, hours, discrimination and the payment
of social security, withholding and similar taxes, and is not liable for any
-27-
<PAGE>
arrears of wages or any penalties for failure to comply with any of the
foregoing. There are no controversies pending, or, to the best of the
Stockholder's or Sellers' knowledge, threatened between the Sellers and any of
its employees, or any labor unions or collective bargaining unit representing or
purporting to represent any of its employees.
2.10 Compliance with Laws; Litigation. The Purchased Assets and their
--------------------------------
uses comply with, and the Sellers with respect to the Purchased Assets and
Business are 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, including but not limited to, all healthcare and
environmental laws, except where noncompliance would not have a material adverse
effect on the continuing operation of the Business at any Center. The 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
--------
2.10 hereto, there is no suit, action, administrative
- ----
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<PAGE>
proceeding, arbitration or other proceeding or governmental investigation
involving the Sellers or Stockholder pending or, to the best knowledge of the
Sellers and Stockholder, threatened against the Sellers or Stockholder with
respect to the Business, the Centers or the Purchased Assets (including, without
limitation, any claim for medical malpractice), nor, to the best knowledge of
Stockholder or Sellers, is there any reasonable basis for any of the same, nor
has there been any at any time during the last five years, and there are no
suits, actions, administrative proceedings, arbitrations or other proceedings or
investigations pending in which the Sellers or Stockholder is the plaintiff or
claimant relating to the Business, the Centers or the Purchased Assets. There is
no suit, action, administrative proceeding, arbitration or governmental
investigation involving the Sellers or Stockholder, pending or, to the best
knowledge of the Sellers and Stockholder, threatened, which questions the
legality, validity or propriety of the transactions contemplated by this
Agreement.
2.11 Machinery, Equipment and Supplies. All machinery, equipment and
---------------------------------
supplies of the Sellers included in the Purchased Assets are in good and usable
condition, ordinary wear and tear excepted.
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<PAGE>
2.12 Insurance. Schedule 2.12 hereto sets forth a list of all policies of
--------- -------------
insurance in force with respect to the Purchased Assets, the Centers or the
Business. Other than the notice received on January 21, 1996 regarding the
general liability policy for the Long Beach Center, the Sellers have received no
notices of any pending or threatened terminations with respect to such policies
and the Sellers are in compliance with all material conditions contained
therein. All such 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.
2.13 Tax and Other Returns and Reports. There are no pending questions,
---------------------------------
nor claims asserted for, ad valorem taxes or assessments upon the Purchased
-- -------
Assets nor are there any tax Liens outstanding against any of the Purchased
Assets. The Sellers have paid or caused to be paid to Federal, state and local
authorities all amounts required to be paid by Federal, state and local law or
regulations with respect to withholding from the wages of the Sellers'
employees.
2.14 Accounts Receivable; Accounts Payable.
-------------------------------------
(a) The Sellers have good title, free and clear of all Liens except
Permitted Liens, to the receivables
-30-
<PAGE>
reflected on their balance sheets. Such accounts receivable have arisen from
bona fide transactions entered into in the ordinary course of business
(provided, however, that neither the Sellers nor the Stockholder guarantees
collection thereof) and are not in dispute or subject to defense, counterclaim
or set-off.
(b) Except as set forth on Schedule 2.14, all of the Sellers' trade and
-------------
lender accounts payable and any other obligation relating to the Business are,
and shall be at the Closing Date, current in accordance with their terms.
2.15 Environmental Matters. To the best of Sellers' and Stockholder's
---------------------
knowledge after due inquiry, there has been:
(a) no release or threatened release of any hazardous substance, pollutant
or contaminant as each such term presently is defined by the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, resulting
from any activity by or on behalf of the Sellers or any predecessor in interest,
including but not limited to, the generation, handling, storage, treatment,
transportation or disposal of any hazardous substance, pollutant or contaminant
at the premises on which the Centers are located (the "Premises");
--------
(b) past or future action taken or to be taken by any federal, state or
local entity or by any private party under
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<PAGE>
any federal, state or local statute, rule, regulation or guideline concerning
the release of any hazardous substance, pollutant or contaminant into the soil,
air, surface or subsurface waters or the environment in general from the
Premises; and
(c) claims or actions brought or which may be brought by any third party
for damages occurring at or outside of the Premises resulting from the alleged
release or threatened release of any hazardous substance, pollutant or
contaminant by the Sellers or any predecessor in interest, including but not
limited to, claims for health effects to persons, property damage and/or damage
to natural resources; nor do the Sellers have any knowledge of any basis for any
of the foregoing.
2.16 Brokers. Neither the Sellers, Stockholder nor any Affiliate of the
-------
Sellers or Stockholder has 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.
2.17 Disclosure. No representation or warranty by the Sellers or
----------
Stockholder contain, or on the Closing Date will contain, any untrue statement
of material fact or omits, or on the Closing Date will omit to state, a material
fact necessary to make the statements not misleading.
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<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYERS AND MRI
As an inducement to the Sellers and the Stockholder to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyers and MRI
jointly and severally represent and warrant to the Sellers and the Stockholder
and agree as follows:
3.1 Organization. Each of the Buyers and MRI is a corporation duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Buyers and MRI has all requisite corporate power and
authority to own or lease its properties and assets and to conduct its business
as presently conducted. Each Buyer is a wholly owned subsidiary of MRI.
3.2 Authority to Effect Transactions. (a) Each of the Buyers and MRI has
--------------------------------
all requisite corporate power and authority to execute, deliver and perform this
Agreement and Buyers' Closing Documents. All necessary corporate action on the
part of Buyers and MRI has been duly taken to authorize the execution, delivery
and performance of this Agreement and Buyers' Closing Documents. This Agreement
has been duly authorized, executed and delivered by
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<PAGE>
Buyers and MRI, and is the legal, valid and binding obligation of Buyers and MRI
enforceable against Buyers and MRI in accordance with its terms. Buyers' Closing
Documents have been duly authorized by Buyers and MRI, as the case may be, and,
upon execution and delivery by Buyers and MRI as contemplated hereby, will be
the legal, valid and binding obligations of Buyers and MRI, enforceable against
Buyers and MRI in accordance with their terms. The Dedicated Earnout Shares
delivered pursuant to the terms hereof, shall, when so delivered, 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.
(b) (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 either Buyer or MRI is a party or by which it is bound, is required for
the execution, delivery or performance by Buyers or MRI of this Agreement or any
of Buyers' 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 Buyers or MRI of this Agreement or any
-34-
<PAGE>
of Buyers' 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, by-laws or other constitutional documents, each as amended to
date, of Buyers or MRI, (B) any law, statute, rule, regulation, order, award,
judgment or decree to which either Buyer or MRI is subject, or (c) any contract,
agreement, instrument, lease or license to which either Buyer or MRI is a party
or by which it is bound.
3.3 Litigation. There is no suit, action, administrative proceeding,
----------
arbitration or other proceeding or governmental investigation (including by the
Securities and Exchange Commission ("SEC") or The Nasdaq Stock Market) pending
---
or, to the best knowledge of Buyers or MRI, threatened against Buyers or any MRI
Group Entity, which questions the legality, validity or propriety of the
transactions contemplated by this Agreement, which would reasonably be expected
to have a material adverse effect on
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<PAGE>
the business of MRI and its subsidiaries taken as whole, or which would suspend
or disqualify trading of the MRI Common Stock on The Nasdaq Stock Market.
3.4 SEC Reports. Since September 1, 1995, MRI and its subsidiaries have
-----------
timely filed (i) all forms, reports, statements and other documents required to
be filed with (A) the SEC, including, without limitation (1) all Annual Reports
on Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3) all proxy statements
relating to meetings of stockholders (whether annual or special), (4) all
Current Reports on Form 8-K, (5) all other reports or registration statements
and (6) all amendments and supplements to all such reports and registration
statements (collectively, the "SEC Reports"), (B) The Nasdaq Stock Market and
-----------
(C) any other applicable state securities authorities and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities, except where the failure to
file any such forms, reports, statements or other documents would not have an
material adverse
effect on MRI's or either Buyer's ability to perform the transactions
contemplated hereby (all such forms, reports, statements and other documents in
clauses (i) and (ii) of this Section 3.4 being referred to herein, collectively,
as the
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"Reports"). The Reports, including all Reports filed after the date of this
-------
Agreement and prior to the Closing Date (x) were or will be prepared in all
material respects in accordance with the requirements of applicable law
(including, with respect to the SEC Reports, the Securities Act and the
Securities Exchange Act of 1934, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Reports) and (y) did
not at the time they were filed, or will not at the time they are 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. The outstanding shares of MRI Common Stock are duly qualified for
listing on The Nasdaq Stock Market.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
4.1 Access. The Sellers shall (a) afford to the officers, stockholders,
------
employees, consultants, attorneys, agents, engineers, accountants and other
representatives ("Agents") of
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Buyers and of any prospective lenders or to investors in Buyers or its
Affiliates (the "Buyers' Lenders and Investors") free and full access to the
properties, assets, books and records of the Sellers relating 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 Buyers, Buyers' Agents or Buyers'
Lenders and Investors such financial and operating data and other information
concerning the results of operations of the Centers and the Business as Buyers
may reasonably request including all interim financial statements with respect
to the Centers. No investigation by or on behalf of Buyers shall affect the
representations and warranties of Stockholder and the Sellers hereunder.
4.2 Conduct of Business. The Sellers, Stockholder, Buyers and MRI shall
-------------------
refrain from taking any action which would render any of their respective
representations and warranties inaccurate in any material respect 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 required to be disclosed hereunder or listed, in the case
of the Sellers or
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the Stockholder, on Schedule 2.10 hereto, if such action, suit, proceeding or
-------------
investigation had arisen or were in existence on or prior to the date hereof.
The Sellers and Stockholder shall act diligently and reasonably (a) to preserve
the Purchased Assets, (b) to keep available, if so requested by Buyers, the
services of the present personnel of the Centers, (c) to preserve the goodwill
of suppliers and customers of the Centers and others having business relations
therewith, (d) to comply with all applicable laws, rules and regulations and (e)
to prepare and file all tax returns required to be filed. Except as otherwise
contemplated by this Agreement or consented to in writing by Buyers, the Sellers
shall conduct the Business and operations of the Centers in all material
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 Buyers, neither Seller shall, (i) except
in the ordinary course of business, sell, lease, transfer or otherwise dispose
of (including transfers to any Affiliates of the Sellers), or mortgage or
pledge, or impose or suffer to be imposed any Lien on, any Purchased Assets, or
enter into any arrangement to do any of the foregoing; (ii) increase the
compensation payable to any employee except raises in the ordinary course
consistent with past practice; (iii)
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enter into any material service or equipment contract; (iv) incur any material
loss of customers (defined as any customers, the revenues from which constituted
greater than 5% of the total 1995 or total 1996 revenues of either Seller); or
(v) take any action or fail to take any action which would cause any
representation made in Article Two not to be true and correct on the Closing
Date. Until February 29, 1997, Stockholder and the Sellers shall not (i) sell,
agree or offer to sell, or negotiate for the purpose of selling, to any person
other than Buyers any material asset of the Sellers, except in the ordinary
course of the Sellers' business, or (ii) enter into any joint venture, lease or
other agreement or transaction not in the ordinary course of business, or
negotiate for the purpose of entering into any such agreement or transaction, or
(iii) take any action which could have the effect of precluding the consummation
of the transaction contemplated hereby.
4.3 Maintenance. The Sellers shall act reasonably and in accordance with
-----------
their prior practice with respect to the Business to preserve, maintain in good
and usable condition and insure and repair the Purchased Assets in the ordinary
course. In the event of any material loss of, or material damage to, the
Purchased Assets prior to the Closing, the Sellers shall either pay the lesser
of the repair or replacement cost thereof to Buyers at
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the Closing or, at the option of Buyers, promptly repair or replace the lost or
damaged assets in order to minimize the interruption to the Business.
4.4 Consents and Approvals. Stockholder and the Sellers shall act
----------------------
diligently and reasonably to secure the consents and approvals of any
governmental agencies and authorities and any other Persons, as set forth on
Schedule 2.2(B) annexed hereto, required to be obtained to effect the
- ---------------
transactions contemplated hereby or to otherwise satisfy the conditions set
forth in Sections 5.4 and 5.5 hereof, provided that Stockholder and the Sellers
shall not make any agreement or understanding affecting the Centers or the
Business as a condition for obtaining any such consent or waiver except with the
prior written consent of Buyers. Buyers shall act diligently and reasonably to
cooperate with Stockholder and the Sellers to obtain the consents or approvals
contemplated by this Section 4.4.
4.5 Renewal of Assumed Contracts. The Sellers and Stockholder shall keep
----------------------------
Buyers fully informed of all significant developments with respect to the
renewal of any Assumed Contracts that are scheduled to expire between the date
hereof and the Termination Date. The Sellers shall use their best efforts to
renew any Assumed Contracts listed on Schedule 1.4(B) hereof that
---------------
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are scheduled to expire during such period on terms no less favorable than those
currently prevailing.
4.6 Retained Liabilities. The Sellers agree to pay all Retained
--------------------
Liabilities and to indemnify Buyers from any liability thereunder.
4.7 Employees. Each Buyer shall make an offer of employment to each of
---------
the Sellers' employees employed at the Center being purchased by such Buyer (the
"Employees") for employment by such Buyer at the Center from and after the
---------
Closing Date upon such employment terms as are initially no less favorable than
the terms of their employment by Sellers. As to any Employees which decide not
to enter into Buyers' employ on the Closing Date, the Sellers shall be solely
responsible for (i) properly notifying such Employees of their termination, and
(ii) making all severance and other related payments, including but not limited
to payments for accrued vacation and accrued sick days, if any.
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF BUYERS
The obligations of Buyers under this Agreement shall be subject, at
the option of Buyers, to the fulfillment of each of the
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following conditions as of the Closing Date:
5.1 Accuracy of Representations and Compliance with Conditions. All
----------------------------------------------------------
representations and warranties of Stockholder and the Sellers 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 Stockholder and the Sellers; and Stockholder or the
Sellers 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 or Destruction of Property. Between the date hereof
-------------------------------------
and the Closing Date, there shall have been (a) no material adverse change in
the Business or the Purchased Assets; (b) no federal, state or local legislative
or regulatory change materially adversely affecting the Business or the
Purchased Assets; (c) no damage, destruction, loss or claim or condemnation or
other taking materially adversely affecting the Business or the Purchased
Assets; and (d) no lawsuit, proceeding or claim filed or asserted against the
Stockholder or the Sellers that, if adversely
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determined, could reasonably be expected to have a material adverse effect on
the Business or the Purchased Assets.
5.3 Opinion of Counsel for Stockholder and the Sellers. Buyers shall
--------------------------------------------------
have received from counsel to Stockholder and the Sellers, an opinion dated the
Closing Date in the form set forth in Exhibit B hereto.
5.4 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.
5.5 Necessary Consents. The parties shall have received written
------------------
consents, in form and substance reasonably satisfactory to Buyers, to the
transactions contemplated hereby from all Persons whose consent is required
therefor, as set forth on Schedule 2.2(B) or otherwise under any Assumed
---------------
Contract.
5.6 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 Buyers' counsel, and Stockholder and the Sellers shall have furnished to such
counsel such documents as such counsel may have
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reasonably requested for the purpose of enabling such counsel to pass upon legal
matters incidental thereto.
5.7 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.
5.8 Deliveries Complete. All documents required to have been
-------------------
delivered by Stockholder and the Sellers to Buyers, including each of the
certificates, instruments and documents listed on Schedule 5.8 hereto, and all
------------
actions required under this Agreement to have been taken by Stockholder or the
Sellers, at or prior to the Closing shall have been delivered or taken.
5.9 Accounts Payable. Except for the trade and lender accounts
----------------
payable set forth on Schedule 2.14, all trade and lender accounts payable and
-------------
any other obligation relating to the Business shall, as of the Closing Date, be
current in accordance with their terms.
5.10 Closing Certificate. On the Closing Date, the Sellers and
-------------------
Stockholder shall deliver to Buyers a closing certificate in the form of Exhibit
C signed by the President of each Seller and the Stockholder to the effect that:
(a) all
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<PAGE>
representations and warranties of Stockholder and the Sellers 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 and (ii) insofar as any
such representation or warranty relates to a specified earlier date; (b) the
Stockholder and the Sellers 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; and (c) each of the other conditions precedent to
Buyers' obligations to close under this Agreement has been fulfilled.
5.11 Assumption of Leases. The landlords for the Premises on which
--------------------
the Centers are located shall have agreed to the assumption by Buyers of the
leases for such Premises.
5.12 Consulting Agreement. The Stockholder and Buyers shall have
--------------------
entered into a consulting agreement in the form attached hereto as Exhibit F
---------
(the "Consulting Agreement").
--------------------
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE SELLERS AND STOCKHOLDER
The obligations of the Sellers and Stockholder under this Agreement
shall be subject, at the option of the Sellers and
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<PAGE>
Stockholder, 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 Buyers 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 Buyers and MRI; and Buyers and MRI 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.
6.2 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 the Sellers' counsel, and Buyers 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.
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<PAGE>
6.3 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.
6.4 Opinion of Counsel to Buyers and MRI. Sellers shall have
------------------------------------
received from Werbel & Carnelutti, counsel for Buyers and MRI, an opinion dated
the Closing Date in the form set forth in Exhibit D hereto.
6.5 Deliveries Complete. All documents required to have been
-------------------
delivered by Buyers and MRI to the Sellers and Stockholder, 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 Buyers and MRI,
at or prior to the Closing shall have been delivered or taken.
6.6 Necessary Government Approvals. The parties shall have received
------------------------------
all governmental and regulatory approvals, actions and consents necessary to
consummate the transactions contemplated hereby.
6.7 Closing Certificate. On the Closing Date, Buyers and MRI shall
-------------------
deliver to the Sellers a certificate in the form of Exhibit E signed by the
President (or a Vice President) of each
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Buyer and MRI to the effect that: (a) all representations and warranties of
Buyers and MRI 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 and (ii) insofar as any such representation or warranty
relates to a specified earlier date; (b) Buyers and MRI 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; and (c) each of the
other conditions precedent to Sellers' obligations to close under this Agreement
has been fulfilled.
6.8 Necessary Consents. The parties shall have received written
------------------
consents from all Persons whose consent is required therefor for the assignment
and assumption of any Assumed Contract as set forth on Schedule 2.2(B) and the
---------------
Sellers shall have obtained releases with respect to such Assumed Contracts.
6.9 Consulting Agreement. The Stockholder and Buyers shall have
--------------------
entered into the Consulting Agreement.
6.10 Offers to Employees. The Buyers shall have made the employment
-------------------
offers to the Employees pursuant to Section 4.7.
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ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. Buyers shall retain the books and
------------------------
records of the Centers and the Purchased Assets transferred to Buyers hereunder
for a period of not less than seven (7) years; provided, however, that Buyers
shall have the right to dispose of or destroy any such books and records at any
earlier time upon giving the Sellers reasonable notice of such intent and the
right to obtain from Buyers those books and records which it intends to dispose
of or destroy. The Sellers shall have the right, at the expense of the 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 Buyers 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 Buyers' possession which relate to any
period prior to the Closing, to the Measurement Period and the Annual
Period. With the approval of Buyers, which approval shall not be
unreasonably withheld or delayed, the Sellers may remove from Buyers'
possession the originals
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of such of the books and records included in the Purchased Assets as
the Sellers may require, for use in litigation, provided that the
Sellers shall indemnify Buyers against losses, expenses, or damages
resulting from the loss, destruction or nonreturn of such books and
records.
7.2 Power of Attorney. Effective upon Closing, the Sellers
-----------------
constitute and appoint the Buyers and their respective suc cessors and assigns,
the true and lawful attorneys for the Sellers, with full power of substitution,
in the name of the Sellers, but on behalf of and for the benefit of and at the
expense of the Buyers, to institute and prosecute, in the name of the Sellers or
otherwise, all proceedings which the Buyers may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Purchased
Assets, to defend and compromise any and all actions, suits or proceedings and
to endorse for deposit and collection any and all bank checks, drafts or other
orders or instruments for the payment of money, drawn upon the Sellers in
respect of any of such Purchased Assets, and to do all such acts and things in
relation thereto as the Buyers shall deem advisable. The foregoing powers are
and shall be coupled with an interest and shall be irrevocable by the Sellers or
by the Sellers'
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dissolution or in any manner or for any reason. The Buyers shall retain for
their own account any amounts collected pursuant to the foregoing powers,
including any sums payable in respect thereof, and the Sellers shall promptly
pay to the Buyers, when received, any amounts which shall be received by the
Sellers in respect of the Purchased Assets as provided herein.
7.3 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.
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and immediately after the
---------------
Closing, no party to this Agreement 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, except for any disclosure or notice
required pursuant to applicable securities laws, based upon the
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advice of MRI's counsel, to be made by MRI, including, but not limited to a
press release announcing the transaction contemplated by this Agreement. 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 contem plated in this
Agreement, and (ii) promptly return all such non-public information and any and
all copies thereof to the party to which such information relates. The Sellers
and the Stockholder acknowledge that the MRI Common Stock 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 Sellers or Stockholder nor any Affiliate
of the Sellers or Stockholder shall disclose intentionally to anyone, or use or
otherwise exploit for the benefit of the Sellers or Stockholder or any Affiliate
of the Sellers or Stockholder, or for the benefit of anyone other than Buyers or
MRI Group Entities, (i) any confidential information of Buyers or MRI Group
Entities relating to the Business or the
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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 Buyers 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").
(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 the Sellers or Stockholder or any
Affiliate of the Sellers or Stockholder or any agent or other representative
thereof, and (ii) business know-how, marketing and development techniques and
technical methods applicable to diagnostic imaging businesses generally. Neither
the Sellers or Stockholder nor any Affiliate of the Sellers or Stockholder shall
have any obligation
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hereunder to keep confidential any Confidential Information if and to the extent
disclosure of any thereof is required by law, and the Sellers or Stockholder or
any Affiliate of the Sellers or Stockholder concerned shall provide Buyers with
prompt notice of such requirement, prior to making any disclosure, so that the
Buyers may seek an appropriate protective or restrictive order.
(d) At the request of Buyers, the Sellers and Stockholder agree to
deliver to Buyers, at any time during the term of this Agreement, all
Confidential Information which any of them may possess or control.
(e) During the period commencing on the date hereof and ending five
years from the date hereof, neither the Buyers or MRI shall disclose
intentionally to anyone, or use or otherwise exploit for the benefit of Buyers
or MRI or any Affiliate of Buyers or MRI, or for the benefit of anyone other
than Sellers or Stockholder, any confidential information of Sellers or
Stockholder other than information relating to the operations or ownership of
the Business or the Centers (all such information, documents and materials being
hereinafter called "Sellers Confidential Information"). The foregoing
notwithstanding, the term " Sellers Confidential Information" does not include,
and there shall be no obligation hereunder with respect to, (i) information that
becomes generally
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available to the public, other than as a result of a disclosure by the Buyers or
MRI or any Affiliate of Buyer or MRI or any agent or other representative
thereof, and (ii) business know-how, marketing and development techniques and
technical methods applicable to diagnostic imaging businesses generally. Neither
the Buyers or MRI nor any Affiliate of Buyers or MRI 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 Buyers or MRI or any
Affiliate of Buyers or MRI concerned shall provide Sellers with prompt notice of
such requirement, prior to making any disclosure, so that the Sellers may seek
an appropriate protective or restrictive order.
8.2 Non-Competition/Noninterference. During the period commencing on
-------------------------------
the date hereof and ending five years from the date hereof, neither the Sellers
or Stockholder nor any Affiliate of the Sellers or Stockholder shall, directly
or indirectly:
(a) anywhere within a ten (10) mile radius of the Centers 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,
joint venturer, lender, advisor, consultant, investor or other
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participant, in any business (a "Competitive Business") which competes, directly
or indirectly, with the Business of the Centers.
(b) solicit, induce or influence any customer, supplier, or any other
person or entity which has a business relationship with Buyers or any MRI Group
Entity to discontinue or reduce the extent of such relationship with Buyers or
any MRI Group Entity; or
(c) (i) recruit, solicit or otherwise induce or influence any
employee of Buyers or any MRI Group Entity to discontinue such employment with
Buyers or any MRI Group Entity or any radiologist who, at the time has a
business relationship with Buyers or any MRI Group Entity, from discontinuing
such relationship with Buyers 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 any Seller, the Stockholder or any Affiliate of Sellers
or Stockholder or the Competitive Business employs or seeks to employ such
person) employed by Buyers or any MRI Group Entity.
(d) Notwithstanding the foregoing, the provisions of this Section 8.2
will not be deemed breached because any Seller or the Stockholder or any
Affiliate of Sellers or Stockholder beneficially owns, in the aggregate, not
more than 5% of the
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outstanding common stock of a corporation, if, at the time of its acquisition by
such Seller, Stockholder or Affiliate, 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.
8.3 Breaches of Article 8. In the event that any party or parties
---------------------
hereto shall breach any of the provisions of this Article 8, or in the event
that any such breach is threatened by such parties, in addition to and without
limiting or waiving any other remedies available to the other parties at law or
in equity, the other parties shall be entitled to immediate injunctive relief in
any courts having the capacity to grant such relief, to restrain any such breach
or threatened breach and to enforce the provisions of this Article 8. The
parties hereto acknowledge and agree that there is no adequate remedy at law for
any such breach or threatened breach and, in the event that any action or
proceeding is brought seeking injunctive relief, the parties shall not use as a
defense thereto that there is an adequate remedy at law.
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ARTICLE 9
INDEMNIFICATION
9.1 Indemnity by the Sellers and Stockholder. Each Seller, severally
----------------------------------------
with respect to the Center and Purchased Assets owned by it, and Stockholder,
jointly and severally with each Seller with respect to the Center and Purchased
Assets owned by such Seller, agree to indemnify and hold harmless Buyers and
their successors and assigns and Buyers' and their respective officers,
directors, controlling Persons (if any), employees, attorneys, agents,
Affiliates, partners and stockholders, in each case past, present, or as they
may exist at any time after the date of this Agreement (including Buyers, the
"Buyer Indemnitees") 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 either Seller or the
Stockholder contained in this Agreement or in any other agreement
executed and delivered by either Seller or the Stockholder
hereunder or in connection herewith, (ii) all Retained
Liabilities and any other obligation or liability of the Sellers
of any nature, accrued or contingent, not assumed by Buyers in
accordance with Section 1.4 of this Agreement; and
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(b) claims, suits, actions and proceedings, including, but not
limited to, professional liability claims of Persons not a party
to this Agreement and related investigations, judgments,
deficiencies, damages, settlements, liabilities, losses, costs
and legal and other expenses arising therefrom and from events
occurring on or prior to the Closing Date relating to the
Purchased Assets or the operation or conduct of the Business
other than the Assumed Liabilities.
Notwithstanding the foregoing, Buyers shall not be entitled to indemnification
for any amounts with respect to which Buyers are actually reimbursed under an
insurance policy.
9.2 Indemnity by Buyers and MRI. Each Buyer, severally with respect
---------------------------
to the Center and Purchased Assets being purchased by it, and MRI, jointly and
severally with each Seller, agree to indemnify and hold harmless the Sellers and
Stockholder and their successors and assigns and its partners, controlling
Persons (if any), employees, attorneys, agents, Affiliates, partners (including
the Sellers and Stockholder, the "Seller Indemnitees") 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 Buyers or MRI contained in
this Agreement, or in any other agreement executed and delivered
by Buyers or MRI hereunder or in connection herewith and (ii) the
Assumed Liabilities pursuant to Section 1.4 of this Agreement;
and
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(b) claims, suits, actions and proceedings (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 after the Closing Date relating to the Purchased Assets
or the operation or conduct of the Business except to the extent
that same results from the breach of any representation or
warranty of Stockholder or the Sellers hereunder.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller 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
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<PAGE>
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
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<PAGE>
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 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 Indemni fied Party shall automatically be deemed to have
waived any right to indemnification hereunder.
ARTICLE 10
MISCELLANEOUS
10.1 Bulk Sales Laws. Buyers and MRI waive compliance by the Sellers
---------------
with any applicable bulk sales law and Sellers and Stockholder hereby agree to
indemnify Buyers and MRI from any liability thereunder.
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<PAGE>
10.2 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 contempla
ted hereby or thereby are consummated.
10.3 Survival. The representations, warranties, covenants and
--------
agreements contained in or made pursuant to this Agreement shall survive the
Closing, except to the extent that they relate to a specified earlier date.
10.4 Entire Agreement; Modification. This Agreement (including 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.
10.5 Notices. Any notice given pursuant to this Agreement to any
-------
party hereto shall be deemed to have been duly given when mailed by registered
or certified mail, return receipt requested or by national overnight courier, or
when hand delivered as follows:
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<PAGE>
If to any Seller or the Stockholder:
675 Camino DeLos Mares #101
San Clemente, CA 92673
Attention: Mr. Joseph Payne
If to Buyers or MRI:
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
with a copy to:
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
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.
10.6 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
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<PAGE>
thereafter to insist upon strict adherence to that term or any other term of
this Agreement.
10.7 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.
10.8 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.
10.9 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.
10.10 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.
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<PAGE>
10.11 Governing Law. This Agreement shall be construed and enforced
-------------
in accordance with the laws of the State of California, without giving effect to
conflict of laws.
10.12 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 incorporated herein by reference.
10.13 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.
"Affiliate" of a Person shall mean any other Person controlling,
---------
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.
"Knowledge of the Sellers" shall mean the knowledge actually possessed
------------------------
by a person in an executive or management capacity of the Sellers.
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<PAGE>
"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" - Medical Resources, Inc., a Delaware corporation.
---
"MRI Group Entity" - any entity in which the Buyers, 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, partner ship, firm,
------
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proprietary Rights" means any copyrights, trademark, trade name,
------------------
service mark, service name, trade secret, know-how, confidential information or
other intellectual property.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
DEDICATED MEDICAL IMAGING,
SAN CLEMENTE, INC.
By:_____________________________
Name:
Title:
LONG BEACH RADIOLOGY CENTER, LTD.
By:_____________________________
Name:
Title:
________________________________
STOCKHOLDER: Joseph Payne
SAN CLEMENTE RESOURCES, INC.
By:_____________________________
Name:
Title:
LONG BEACH RESOURCES, INC.
By:_____________________________
Name:
Title:
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<PAGE>
MEDICAL RESOURCES, INC.
By:_____________________________
Name:
Title:
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<PAGE>
EXIHIBIT 99.4
EXECUTION COPY
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of January 31, 1997, by and among The MRI Center of
Jacksonville Inc. (the "Seller"), a Florida corporation, Mr. Francis D. Hussey
(the "Stockholder"), an individual residing in the State of Florida, on one
hand, and Jacksonville 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, 1.5(b), 1.8 and 3.1 through 3.5 and Article 9,
Medical Resources, Inc., a Delaware corporation ("MRI").
W I T N E S E T H:
-----------------
WHEREAS, the Seller owns a diagnostic imaging facility operating as The MRI
Center of Jacksonville located at Jacksonville, Florida (the "Center") and the
Seller owns or has the right to use certain of the assets, properties, business
and goodwill relating thereto (the "Business"); and
WHEREAS, Buyer desires to acquire and the Seller desires to sell the
Business and the Center upon the terms and subject to the conditions hereinafter
set forth;
WHEREAS, the Stockholder and his immediate family own all of the
outstanding common stock of the Seller and Stockholder would derive substantial
benefit from the consummation of transactions contemplated by this Agreement,
which, among other things, includes his agreement not to compete with the
Business or the Buyer as set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, the Seller, Stockholder and Buyer agree as follows:
<PAGE>
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), the Seller shall sell, assign, transfer and
deliver to Buyer, and Buyer shall purchase and acquire from the Seller, free and
clear of all Liens (as defined in Section 2.6(b) hereof) except as otherwise
contemplated by Section 2.6 hereof, all of the assets of the Business associated
with the Center, other than the assets
listed on Schedule 1.1 (the "Excluded Assets"), including, without limitation,
------------ ---------------
all machinery, equipment, supplies and furnishings used or held for use in the
Business, as set forth on Schedule 2.6(A) hereto (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 of the Seller's accounts receivable, including past due Medicare
receivables recorded as of the close of business on the date immediately
preceding the Closing Date (as hereinafter defined) (it being understood that
the obligation to collect the Medicare Receivables shall rest solely with Buyer)
(including any related claims in respect of the collection thereof,
collectively, the "Accounts Receivable");
-------------------
(b) all leasehold improvements and tangible assets and properties of the
Seller, including machinery and equipment, tooling, tools, furniture, office
equipment, furnishings and fixtures;
(c) all inventories, including finished products, work-in-process,
materials, parts, accessories and supplies of the Seller;
(d) all rights of the Seller arising from, in and to all Contracts (as
defined in Section 2.8) listed in Schedule
-2-
<PAGE>
1.4(B) as Contracts to be assumed by Buyer (the "Assumed Contracts").
-----------------
(e) all other assets reflected in the Balance Sheets (as defined in Section
2.4) and all assets acquired since the date of the Balance Sheets, but excluding
assets disposed of in the ordinary course of business since the date of the
Balance Sheets and cash distributed to stockholders of the Seller, or assets
which have been abandoned by the Seller since the date of the Balance Sheets,
which assets are not, individually or in the aggregate, material to the
operation of the Business;
(f) all security deposits and prepaid expenses of the Seller;
(g) all warranties and claims or potential claims against the Seller's
suppliers or lessors with respect to any assets included in the Purchased Assets
to the extent said warranties and claims may be assignable; and
(h) all names (including the tradenames set forth in Schedule 2.6(D)),
---------------
Proprietary Rights (as defined in Section 10.13), contractual rights, telephone
numbers, Licenses (as defined in Section 2.7) which are capable of being
transferred pursuant to
applicable law, books and records, business and goodwill of the Seller relating
to the Business and the Purchased Assets.
1.2 Closing Date. The purchase and sale of the Business and Purchased
------------
Assets (the "Closing") shall take place on January 31, 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 the Seller and Buyer may agree upon
in writing (such date and time being hereinafter called the "Closing Date").
------------
1.3 Purchase Price. (a) Closing Shares. As consideration for the
-------------- --------------
Purchased Assets sold by the Seller and subject to the terms and provisions of
this Agreement, Buyer shall pay to the Seller (subject to adjustment pursuant to
clause (b) of this Section 1.3) by delivery to the Seller on the Closing Date of
stock certificates evidencing 215,000 shares (the "Closing Shares")
--------------
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<PAGE>
of common stock, par value $.01 per share of MRI ("MRI Common Stock").
----------------
(b) Additional Consideration. During the first year commencing on the
------------------------
first day of the first month following the Closing Date (the "Measurement
Period"), the Seller may earn, in addition to the Closing Shares referenced in
Section 1.3(a) and calculated in accordance with the provisions set forth below,
additional shares of MRI Common Stock (the "Additional Shares" and together with
-----------------
the Closing Shares, the "Shares") upon the attainment by the Center of targeted
------
net income on an accrual basis. If net income (as determined by Buyer's
independent auditors in accordance with generally accepted accounting principles
(with the modifications set forth hereinbelow, "Net Income" and "GAAP,"
---------- ----
respectively) does not equal or exceed $450,000, no Additional Shares will be
earned. If Net Income during the Measurement Period equals or exceeds $450,000,
then Buyer shall pay to Seller the number of Additional Shares equal to the
quotient obtained by dividing the product of (x) 3.65 times (y) the excess, if
any, of (I) the Net Income of the Center for the Measurement Period greater than
(II) $450,000 divided by the Market Value (as hereinafter defined in Section
10.13) of the MRI Common Stock as of the trading day ending on, or if not a
trading day, the trading day immediately preceding, the last day of the
Measurement Period (the "Additional Shares Market Value"); provided, that the
--------
maximum number of Additional Shares payable to the Seller hereunder shall be the
number of Additional Shares equal to the quotient obtained by dividing
$1,850,000 by the Additional Shares Market Value. In the event any Additional
Shares are earned during the Measurement Period, a certificate for such
Additional Shares will be delivered to the Seller within 90 days of the last day
of the Measurement Period; provided further, that in the event the Additional
-------- -------
Shares Market Value is greater than $14.00 then Seller may at its sole
option receive either (A) the number of Additional Shares calculated as provided
herein or (B) an amount in cash (the "Cash Additional Consideration") equal to
(x) 3.65 times (y) the excess, if any, of (I) the Net Income of the Center for
the Measurement Period greater than (II) $450,000, such cash Additional
Consideration not to exceed $1,850,000. Solely for the purposes of calculating
Net Income hereunder and notwithstanding GAAP to the contrary, (i) only the
revenues of and expenses properly allocated to the Center will be included in
the calculation provided that, no general corporate overhead expenses of MRI
--------
shall be deducted from
-4-
<PAGE>
the revenues of the Center in calculating Net Income (it being understood that,
for this calculation only, those expenses that exceed by more than ten percent
comparable expenses at the diagnostic imaging center operated by Buyer's
affiliate in St. Petersburg, Florida will not be deemed to be properly
allocated), (ii) goodwill in the amount of $2,000,000 associated with the Center
will be amortized over a period of twenty years, (iii) the calculation shall be
made without giving effect to any subsequent refinancing of any equipment and
leasehold improvement loan (iv) if the Buyer should at any time purchase the
imaging scanner, the imaging scanner shall be evenly depreciated at such
purchase price over a five year period.
(c) Guaranty by MRI of Purchase Price. To induce the Seller to execute
---------------------------------
and deliver this Agreement and the other agreements contemplated hereby, by
execution hereof, MRI, the indirect owner of all of the outstanding stock of
Buyer, hereby absolutely and unconditionally guarantees the full, prompt and
faithful performance by Buyer of the payment of all sums to be paid to the
Seller pursuant to this Section 1.3. Seller, in its discretion, shall have the
right to assign fifteen (15%) percent of Additional Cash Consideration, as
applicable to the Employees (as hereinafter defined) provided, that Seller shall
--------
not, unless authorized to do so in writing by Buyer, disclose to any Employee
any such assignment anytime before the last day of the Measurement Period. If
Buyer fails to fully pay all or any part of any sums due the Seller hereunder
when due, MRI shall immediately pay to the Seller the amounts due and unpaid by
Buyer, it being understood that each obligation to pay any such amount
constitutes the direct and primary obligation of MRI.
(d) Allocation of Purchase Price. The Seller and Buyer agree to allocate
----------------------------
the consideration paid hereunder in accordance with IRC Section 1060. Buyer and
the Seller shall use reasonably diligent efforts to agree to such allocation by
the Closing and, in any event, such allocation shall be agreed to by the Seller
and Buyer within 30 days of the Closing Date or the date on which such amounts
are paid. In addition, the Seller 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.
-5-
<PAGE>
1.4 Liabilities. Buyer shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of the Seller, the Business or the
Center of any kind or nature, known, unknown, contingent or otherwise
(including, without limitation, any benefit plan maintained by the Seller, any
professional fees or any liabilities set forth on Schedule 1.4(A)), except as
---------------
specifically set forth on Schedule 1.4(B) annexed hereto (the "Assumed
--------------- -------
Liabilities"). All liabilities and obligations retained by the Seller are
- -----------
referred to herein as "Retained Liabilities."
--------------------
1.5 Additional Closing Date Deliveries and Actions.
----------------------------------------------
(a) On the Closing Date, the Seller 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, including the Assumed Contracts, (x) all evidences of consents, waivers
or approvals obtained by the Seller in respect of the consummation of the
transactions contemplated by this Agreement, (y) all of the documents,
instruments and opinions contemplated to be delivered by the Seller 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
transactions contemplated hereby 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 of the Purchased Assets at the locations where such
Purchased Assets are held or maintained prior to Closing. All of the documents
described in (w) through (z) hereof are hereinafter referred to as the "Seller's
--------
Closing Documents".
- -----------------
(b) On the Closing Date, Buyer or MRI, as applicable, shall (i) deliver, or
execute and deliver, to the Seller (x) a Bill of Sale, Assignment and Assumption
Agreement in substantially the form annexed hereto as Exhibit A with respect to
the Purchased Assets, including the Assumed Contracts, (y) the Closing Shares
pursuant to Section 1.3(a) hereof and (z) all of the documents, instruments and
opinions contemplated to be delivered by Buyer or MRI to the Seller 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,
-------------------------
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<PAGE>
collectively with the Seller's Closing Documents, the "Closing Documents".
-----------------
1.6 Consents, Waivers and Further Assurances. From time to time following
----------------------------------------
the Closing, the Seller and Stockholder 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 to effect the transactions contemplated hereby.
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 the Seller; (b) by Buyer or the Seller in
the event of any material breach by the other party of any of its agreements,
representations or warranties contained herein; or (c) by either the Buyer or
the Seller, if the Closing has not occurred on or before February 29, 1997
(provided, however, that if the party seeking to terminate this Agreement
pursuant to this clause has failed to use good faith and best efforts to bring
about the Closing, or is in breach of a representation, warranty or covenant
contained herein beyond any applicable grace period, 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 the Seller and Buyer (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) MRI agrees to prepare and file
--------------------------------
with, and use its best efforts to cause to be declared effective by, the
Securities and Exchange Commission (the "SEC"), within 120 days of the issuance
of any Closing Shares, a registration statement under the Securities Act of
1933, as amended (the "Securities Act"), covering the resale by the Seller in a
public distribution of fifty (50%) percent of the Closing Shares, (it being
understood that the other fifty (50%) percent of the Closing Shares shall not be
included in any such registration statement filed with the SEC and shall be not
be registered under
-7-
<PAGE>
the Securities Act). The date such registration statement is declared effective
by the SEC is referred to herein as the "Effective Date." MRI 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 earlier to occur of (i) six months from the Effective Date
or (ii) the date on which the Seller has completed its disposition of such
shares pursuant to the registration statement, provided, that such six-month
--------
period shall be extended for a period equal to the number of days during such
six-month period with respect to which trading in the MRI Common Stock is
suspended on The Nasdaq Stock Market or such registration statement is not
effective and current other than as a result of any action or inaction by the
Seller.
(b) In connection with the registration of the Closing Shares and pursuant
to subsection (a) above:
(i) The Seller 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,
provided the Seller and the Stockholder shall not be required to
--------
prepare or bear the expense of an audit of the Seller's financial
statements;
(ii) Prior to filing a registration statement or prospectus or any
amendments or supplements thereto, MRI will furnish to the Seller
copies of such documents proposed to be filed in advance of filing and
provide the Seller with a reasonable opportunity to review such
documents and comment thereon;
(iii) MRI shall use reasonably diligent efforts to have the Closing Shares
qualified for listing on The Nasdaq Stock Market;
(iv) 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
-8-
<PAGE>
the SEC with respect to the sale or disposition of shares covered by
such registration statement;
(v) MRI will furnish to the Seller 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 Seller
(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);
(vi) MRI shall notify the Seller, at any time when a prospectus relating to
the Closing 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;
(vii) 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 the Closing Shares has been qualified;
(viii) Except as set forth in subsection (ix) below, MRI shall bear all
costs and expenses incident to any registration pursuant to this
Section 1.8; and
(ix) The Seller shall pay any and all brokerage fees and transfer taxes
incident to the sale of any shares of MRI Common Stock sold by the
Seller pursuant to the registration effected pursuant to this Section
1.8, and shall pay the fees and expenses of any special attorneys or
accountants retained by it.
-9-
<PAGE>
(c) MRI shall resolve the issues regarding the assumption of the EAP
balance with 3M with respect to both the Ft. Myers Center and the Center within
forty-five days of Closing.
1.9 Covenant of Seller Regarding Closing Shares. The Seller hereby
-------------------------------------------
covenants and agrees to not sell more than twenty-five (25%) percent of the
Closing Shares registered under the Securities Act in accordance with the
provisions set forth in Section 1.8 of this Agreement during any fiscal quarter
of MRI after the Closing Date provided that shares of MRI Common Stock held by
--------
affiliates of Stockholder (other than the Seller) shall not be subject to the
restrictions of this Section 1.9.
1.10 Buyer and Seller each intends for this transaction to qualify as a
tax-free reorganization to the extent allowable by law.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF THE SELLER AND THE STOCKHOLDER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, the Seller, and the Stockholder, jointly
and severally, represent and warrant to Buyer and agree as follows:
2.1 Organization and Qualification. The Seller is a corporation
------------------------------
organized, validly existing and in good standing under the laws of the State of
Florida, and is duly qualified as a foreign corporation, in all jurisdictions
where the ownership of its property or conduct of its business require it to so
qualify. The Seller has all requisite power and authority to own or lease
its properties and the Purchased Assets and to conduct its business as presently
conducted. Stockholder is the sole shareholder of the Seller.
2.2 Authority to Effect Transactions. (a) Each of the Seller and
--------------------------------
Stockholder has all requisite power and authority to execute, deliver and
perform this Agreement and all of the Seller's Closing Documents. All necessary
corporate action on the part of
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<PAGE>
the Seller has been or will be prior to the Closing Date duly taken to authorize
the execution, delivery and performance by the Seller of this Agreement and all
of the Seller's Closing Documents. This Agreement has been duly authorized,
executed and delivered by the Seller, has been duly executed and delivered by
Stockholder, and is the legal, valid and binding obligation of each of the
Seller and Stockholder, enforceable against each of the Seller and Stockholder
in accordance with its terms except (x) as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and (y) to the extent
that such enforceability is subject to general principles of equity (regardless
of whether such enforcement is considered in a proceeding in equity or at law).
Each of the Seller's Closing Documents has been duly authorized by the Seller or
the Stockholder, as appropriate, and, upon execution and delivery by the Seller
and Stockholder, as contemplated hereby, will be the legal, valid and binding
obligations of each of the Seller and Stockholder, enforceable against each of
the Seller and Stockholder in accordance with its terms except (x) as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally, and (y) to the extent that such enforceability is
subject to general principles of equity (regardless of whether such enforcement
is considered in a proceeding in equity or at law).
(b) Except as set forth in Schedule 2.2(B) hereto, (i) no consent,
---------------
authorization, approval, order, license, certifi cate, permit or act of or from,
or declaration or filing with, any foreign, federal, state, local or other
governmental authority or regulatory body or any court or other tribunal or any
party to any contract, agreement, instrument, lease or License (as defined in
Section 2.7) to which any of the Seller or Stockholder is a party or by which
any of the Seller or Stockholder is bound or to which any of the Purchased
Assets is subject, is required for the execution, delivery or performance by the
Seller or Stockholder of this Agreement or any of the Seller's Closing Documents
or the consummation of the transactions contemplated hereby or thereby and (ii)
neither the execution, delivery or performance of this Agreement or any of the
Seller's 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
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<PAGE>
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 upon any of 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) the Seller's certificate of incorporation or by-laws, each as
amended to date, (B) any law, statute, rule, regulation, order, award, judgment
or decree to which the Seller, Stockholder or any of the Purchased Assets is
subject or (C) any contract, agreement, instrument, lease or License to which
any of the Seller or Stockholder is a party or by which it is bound.
2.3 Subsidiaries. The Seller has no subsidiaries. The Seller owns no
------------
interest, directly or indirectly, and has no commitment to purchase any
interest, direct or indirect, in any other corporation, partnership or
enterprise.
2.4 Financial Statements and Liabilities. (a) The Seller has delivered
------------------------------------
to Buyer true and correct copies of the following: unaudited balance sheets of
the Seller as of December 31, 1996 (the "Balance Sheets") and unaudited
statements of operations (the "Statements of Operations"; the Balance Sheets and
Statements of Operations are herein referred to as the "Financial Statements")
of the Seller. The Balance Sheets present fairly the financial condition,
assets, liabilities and stockholder's equity of the Seller as of their dates;
the Statements of Operations present fairly the results of operations of the
Seller for the period indicated and present fairly the information purported to
be shown therein. The Financial Statements are correct and complete in all
material respects and are in accordance with the books and records of the
Seller.
(b) Except as set forth in Schedule 2.4(B) hereto, the Seller is not
---------------
subject to any liability (including, without limitation, unasserted claims,
whether known or unknown, and liabilities for federal, state or local income
tax), whether absolute, contingent, accrued or otherwise, with respect to the
Purchased Assets, the Business or the Center 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 class or category as those set forth on the face of the
Balance Sheets which were reasonably incurred in the ordinary course of business
of the
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<PAGE>
Seller consistent with past practice after the Balance Sheet Date (as
defined below). Schedule 2.4(B) hereto also sets forth a true and accurate list
---------------
of all accounts payable and accrued liabilities existing as of the date hereof
and specifying any obligations required to be paid during the next three months
in the amount of $10,000 or greater, singularly or in the aggregate.
2.5 Absence of Certain Developments. Except as contemplated by this
-------------------------------
Agreement, or as otherwise set forth on Schedule 2.5 hereto, since December 31,
------------
1996 (the "Balance Sheet Date"), the Business has been conducted in all material
respects only in the ordinary course of business consistent with past practice.
Except as set forth on Schedule 2.5 hereto, since the Balance Sheet Date,
------------
there has been (a) no material adverse change in the Purchased Assets, the
Business, the liabilities, operations, profits, condition (financial or
otherwise) or prospects of the Center, and, to the best of the Seller's and
Stockholder's knowledge, no fact or condition exists relating specifically to
the Seller (except for market and industry conditions affecting providers of
diagnostic imaging services generally) or is contemplated or threatened which
might reasonably be expected to cause such a change in the future, and (b) no
damage, destruction, loss or claim or condemnation or other taking materially
and adversely affecting the Purchased Assets.
2.6 Tangible Personal Property; Title and Liens. (a) Set forth on
-------------------------------------------
Schedule 2.6(A) hereto is a list of all of the tangible personal property
- ---------------
included in the Purchased Assets.
(b) The Seller has good and marketable 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 10.13) of every kind and character (any of the foregoing, a "Lien"),
other than as set forth on Schedule 2.6(B) hereto (each Lien expressly set forth
---------------
on such Schedule is a "Permitted Lien"). Upon delivery to Buyer on the Closing
Date of the instruments of assignment and transfer contemplated by this
Agreement, the Seller will thereby transfer to and vest in Buyer good and
marketable title to the Purchased Assets, free and clear of all Liens other than
Permitted Liens. The Seller shall discharge and indemnify Buyer from and
against any and all claims, suits, actions,
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<PAGE>
proceedings (formal and informal), investigations, judgments, deficiencies,
damages, settlements, liabilities, losses, costs and legal and other expenses
resulting or arising from any and all Liens existing on the Closing Date
(whether inchoate, or not, and whether perfected or not) on or with respect to
any Purchased Assets, except 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) The real property owned or leased by the Seller which is used in the
conduct of the Business is set forth on Schedule 2.6(C). No default or event of
---------------
default on the part of the Seller, and no event which with the giving of notice
or the passage of time would constitute a default, with respect to such leases,
has occurred and is continuing unremedied or unwaived.
(d) (i) The Seller has the right to use each Proprietary Right listed in
Schedule 2.6(D) in the manner and location now used, and except as otherwise set
- ---------------
forth therein, all of such Proprietary Rights are, and will be on the Closing
Date, free and clear of all royalty obligations and Liens. There are no claims
pending, or, to the Stockholder's or Seller's best knowledge, threatened against
the Seller that its use of any of the Proprietary Rights listed on Schedule
--------
2.6(D) infringes the rights of any Person. The Seller and the Stockholder has no
- ------
knowledge of any conflicting use of any of such Proprietary Rights.
(ii) The Seller has no trade name, service mark, patent, copyright or
trademark related to its Business, except those which are set forth in Schedule
--------
2.6(D), which are all those necessary for the operation of the Business as
- ------
presently conducted.
(iii) The Seller is not a party in any capacity to any franchise, license
or royalty agreement respecting any Proprietary Rights and, there is no conflict
with the rights of others in respect to the Proprietary Rights now used in the
conduct of the Business and the Seller and the Stockholder are unaware of any
facts of circumstances which might give rise to the foregoing.
2.7 Licenses and Authorizations; Third Party Payors. The Seller owns,
-----------------------------------------------
holds or possesses all foreign, federal, state or local governmental licenses,
franchises, permits, privileges,
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<PAGE>
approvals and other authorizations and licenses which are necessary to entitle
it to own or lease the Purchased Assets and to conduct and carry on the Business
substantially as presently conducted (the "Licenses"), except for such Licenses
--------
which if not maintained would not have a material adverse effect on the
continuing operation of the Business at the Center. Set forth on Schedule 2.7
------------
hereto is a list and brief description of each of the Licenses. Each of the
Licenses is valid and in full force and effect, and will continue in full force
and effect, without default or forfeiture of any rights thereunder after the
consummation of the transactions contemplated hereby. No notice of cancellation,
default or breach of or any dispute concerning any of the Licenses owned,
possessed or held by the Seller or of any event or condition or state of facts
described in the next following sentence has been received by the Seller or
Stockholder with respect to any of such Licenses. There is not now pending, or
to the knowledge of the Seller or Stockholder threatened, any action to revoke,
cancel, rescind, modify or refuse to renew in the ordinary course any of the
Licenses. The Seller and Stockholder have performed and fulfilled in all
material respects all of their respective obligations under each of the
Licenses, and none of the Seller or the Stockholder is aware of any event or
condition or state of facts which constitutes or, after notice or lapse of time
or both, would constitute a breach or default under any of such Licenses or
which permits or, after notice or lapse of time or both, would permit revocation
or termination of any of such Licenses or which would materially adversely
affect any of the rights of the Seller thereunder.
2.8 Contracts and Other Instruments.
-------------------------------
(a) Schedule 2.8 hereto sets forth a list of all contracts, agreements,
------------
instruments and leases to which the Seller or Stockholder, on behalf or for the
benefit of the Seller, are a party or by which they are bound, relating to the
Business or to which any of the Purchased Assets are subject (collectively,
together with any contracts, agreements, instruments and leases entered into by
the Seller or Stockholder with respect to the Business between the date hereof
and the Closing Date consistent with the terms of this Agreement, being herein
called the "Contracts"). The Seller and Stockholder have provided Buyer with a
---------
true and complete copy of each Contract.
(b) Each of the Contracts constitutes the valid and binding obligation of
the Seller and/or Stockholder and, to the
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<PAGE>
best of the Seller's and Stockholder's knowledge, the other party thereto, is in
full force and effect. The Seller and/or Stockholder have performed and
fulfilled all of their material obligations under each of such Contracts
required to be performed as of the date hereof, are not in default or breach
thereunder, and, to the knowledge of the Seller and Stockholder, no other party
is in default or breach thereunder.
2.9 Employees. (a) Schedule 2.9(A) hereto contains (i) a list of the
--------- ---------------
names and relationships with the Seller of all employees of the Seller as of the
date hereof, (ii) a description of all agreements (oral or written) with such
employees, (iii) the dates on which such employees commenced working for the
Seller, (iv) any increase in such employee's compensation since January 1, 1996,
and (v) the compensation of such employees. Except as set forth on Schedule
--------
2.9(B) hereto, the Seller is not a party to any collective bargaining agreement,
- ------
employment agreement, retirement plans (whether qualified or non-qualified),
deferred compensation or severance 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.
(b) The Seller has complied in all material respects with all applicable
laws, rules and regulations affecting the employment of labor, including, but
not limited to, those relating to wages, hours, discrimination and the payment
of social security, withholding and similar taxes, and is not liable for any
arrears of wages or any penalties for failure to comply with any of the
foregoing. There are no controversies pending, or, to the best of the
Stockholder's or the Seller's knowledge, threatened between the Seller and any
of its employees, or any labor unions or collective bargaining unit representing
or purporting to represent any of its employees.
2.10 Compliance with Laws; Litigation. The Purchased Assets and their
--------------------------------
uses comply with, and the Seller with respect to the Purchased Assets and
Business 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,
including but not limited to, all healthcare and
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<PAGE>
environmental laws, except where noncompliance would not have a material adverse
effect on the continuing operation of the Business at the Center. The Seller is
not, with respect to the Business, the Center 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 2.10 hereto,
-------------
there is no suit, action, administrative proceeding, arbitration or other
proceeding or governmental investigation involving the Seller or Stockholder
pending or, to the best knowledge of the Seller and Stockholder, threatened
against the Seller or Stockholder with respect to the Business, the Center or
the Purchased Assets (including, without limitation, any claim for medical
malpractice), nor, to the best knowledge of Stockholder or the Seller, is there
any reasonable basis for any of the same, nor has there been any at any time
during the last five years, and there are no suits, actions, administrative
proceedings, arbitra tions or other proceedings or investigations pending in
which the Seller or Stockholder is the plaintiff or claimant relating to the
Business, the Center or the Purchased Assets. There is no suit, action,
administrative proceeding, arbitration or governmental investigation involving
the Seller or Stockholder, pending or, to the best knowledge of the Seller and
Stockholder, threatened, which questions the legality, validity or propriety of
the transactions contemplated by this Agreement.
2.11 Machinery, Equipment and Supplies. All machinery, equipment and
---------------------------------
supplies of the Seller included in the Purchased Assets are in good and usable
condition, ordinary wear and tear excepted.
2.12 Insurance. Schedule 2.12 hereto sets forth a list of all policies of
--------- -------------
insurance in force with respect to the Purchased Assets, the Center or the
Business. The Seller has received no notices of any pending or threatened
terminations with respect to such policies and the Seller is in compliance with
all material conditions contained therein. All such 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.
2.13 Tax and Other Returns and Reports. There are no pending questions,
---------------------------------
nor claims asserted for, ad valorem taxes or
-- -------
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<PAGE>
assessments upon the Purchased Assets nor are there any tax Liens outstanding
against any of the Purchased Assets. The Seller has paid or caused to be paid to
Federal, state and local authorities all amounts required to be paid by Federal,
state and local law or regulations with respect to withholding from the wages of
the Seller's employees.
2.14 Accounts Receivable; Accounts Payable. (a) The Seller has good
-------------------------------------
title, free and clear of all Liens except Permitted Liens, to the receivables
reflected on its balance sheets. Such accounts receivable have arisen from bona
fide transactions entered into in the ordinary course of business (provided,
however, that neither the Seller nor the Stockholder guarantees collection
thereof) and are not in dispute or subject to defense, counterclaim or set-off.
(b) Except as set forth on Schedule 2.14, all of the Seller's trade and
-------------
lender accounts payable and any other obligation relating to the Business are,
and shall be at the Closing Date, current in accordance with their terms.
2.15 Environmental Matters. To the best of Seller's and Stockholder's
---------------------
knowledge after due inquiry, there has been:
(a) no release or threatened release of any hazardous substance, pollutant
or contaminant as each such term presently is defined by the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, resulting
from any activity by or on behalf of the Seller or any predecessor in interest,
including but not limited to, the generation, handling, storage, treatment,
transportation or disposal of any hazardous substance, pollutant or contaminant
at the premises on which the Center are located (the "Premises");
--------
(b) past or future action taken or to be taken by any federal, state or
local entity or by any private party under any federal, state or local statute,
rule, regulation or guideline concerning the release of any hazardous substance,
pollutant or contaminant into the soil, air, surface or subsurface waters or the
environment in general from the Premises; and
(c) claims or actions brought or which may be brought by any third party
for damages occurring at or outside of
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<PAGE>
the Premises resulting from the alleged release or threatened release of any
hazardous substance, pollutant or contaminant by the Seller or any predecessor
in interest, including but not limited to, claims for health effects to persons,
property damage and/or damage to natural resources; nor do the Seller have any
knowledge of any basis for any of the foregoing.
2.16 Brokers. Neither the Seller, Stockholder nor any Affiliate of the
-------
Seller or Stockholder has 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.
2.17 Disclosure. No representation or warranty by the Seller or
----------
Stockholder contain, or on the Closing Date will contain, any untrue statement
of material fact or omits, or on the Closing Date will omit to state, a material
fact necessary to make the statements not misleading.
2.18 Investment Intent. The Seller is acquiring the Shares which are
-----------------
issuable under this Agreement for investment for its 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 Shares are being offered under
an exemption in Section 4(2) of the Securities Act upon reliance on such
representation. The Seller is an "accredited investor" as such term is defined
in Rule 501(a) under the Securities Act. The Seller understands that the Shares
which are issuable hereunder, have not been, and will not as of the Closing Date
be, registered under the Securities Act. The Seller acknowledges that the
Shares which are issuable hereunder must be held indefinitely until subsequently
registered under the Securities Act or unless an exemption from such
registration is available. The Seller is 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND MRI
As an inducement to the Seller and the Stockholder to enter into this
Agreement and to consummate the transactions
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<PAGE>
contemplated hereby, Buyer and MRI, jointly and severally, represent and warrant
to the Seller and the Stockholder 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.
Each of Buyer and MRI 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 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) (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 either Buyer or MRI is a party or by which it is bound, is required for
the execution, delivery or performance by Buyer or MRI 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 or MRI 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
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<PAGE>
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 or MRI, (B) any law,
statute, rule, regulation, order, award, judgment or decree to which either
Buyer or MRI is subject, or (c) any contract, agreement, instrument, lease or
license to which either Buyer or MRI is a party or by which it is bound.
3.3 Litigation. There is no suit, action, administrative proceeding,
----------
arbitration or other proceeding or governmental investigation (including by the
SEC or The Nasdaq Stock Market) pending or, to the best knowledge of Buyer or
MRI, threatened against Buyer or any MRI Group Entity, which questions the
legality, validity or propriety of the transactions contemplated by this
Agreement, which would reasonably be expected to have a material adverse effect
on the business of MRI and its subsidiaries taken as whole, which would suspend
or disqualify trading of the MRI Common Stock on The Nasdaq Stock Market or
which would cause the SEC to refuse to review the registration statement to be
filed pursuant to Section 1.8.
3.4 SEC Reports. Since September 1, 1995, MRI and its subsidiaries have
-----------
timely filed (i) all forms, reports, statements and other documents required to
be filed with (A) the SEC, including, without limitation (1) all Annual Reports
on Form 10-K, (2) all Quarterly Reports on Form 10-Q, (3) all proxy statements
relating to meetings of stockholders (whether annual or special), (4) all
Current Reports on Form 8-K, (5) all other reports or registration statements
and (6) all amendments and supplements to all such reports and registration
statements (collectively, the "SEC Reports"), (B) The Nasdaq Stock Market
-----------
and (C) any other applicable state securities authorities and (ii) all forms,
reports, statements and other documents required to be filed with any other
applicable federal or state regulatory authorities, except where the failure to
file any such forms, reports, statements or other documents would not have an
material adverse effect on MRI's or either Buyer's ability to perform the
transactions contemplated hereby (all such forms, reports, statements and other
documents in clauses (i) and (ii) of this Section 3.4 being referred to herein,
collectively, as the "Reports"). The Reports, including all Reports filed after
-------
the date of this Agreement and prior to the Closing Date (x) were or
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<PAGE>
will be prepared in all material respects in accordance with the requirements of
applicable law (including, with respect to the SEC Reports, the Securities Act
and the Securities Exchange Act of 1934, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Reports) and (y) did
not at the time they were filed, or will not at the time they are 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. The outstanding shares of MRI Common Stock are duly qualified for
listing on The Nasdaq Stock Market.
3.5 Shares. All of the Shares issuable hereunder to the Seller 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.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
4.1 Access. The Seller 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") free
and full access to the properties, assets, books and records of the Seller
relating 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 Center
and the Business as Buyer may reasonably request including all interim financial
statements with respect to the Center. No investigation by or on behalf of
Buyer shall affect the representations and warranties of Stockholder and the
Seller hereunder.
4.2 Conduct of Business. The Seller, Stockholder, Buyer and MRI shall
-------------------
refrain from taking any action which would render any of their respective
representations and warranties
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<PAGE>
inaccurate in any material respect 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 required to
be disclosed hereunder or listed, in the case of the Seller or the Stockholder,
on Schedule 2.10 hereto, if such action, suit, proceeding or investigation
-------------
had arisen or were in existence on or prior to the date hereof. The Seller and
Stockholder shall act diligently and reasonably (a) to preserve the Purchased
Assets, (b) to keep available, if so requested by Buyer, the services of the
present personnel of the Center, (c) to preserve the goodwill of suppliers and
customers of the Center and others having business relations therewith, (d) to
comply with all applicable laws, rules and regulations and (e) to prepare and
file all tax returns required to be filed. Except as otherwise contemplated by
this Agreement or consented to in writing by Buyer, the Seller shall conduct the
Business and operations of the Center in all material 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, Seller shall not, (i) except in the ordinary course of
business, sell, lease, transfer or otherwise dispose of (including transfers to
any Affiliates of the Seller), or mortgage or pledge, or impose or suffer to be
imposed any Lien on, any Purchased Assets, or enter into any arrangement to do
any of the foregoing; (ii) increase the compensation payable to any employee
except raises in the ordinary course consistent with past practice; (iii) enter
into any material service or equipment contract; (iv) incur any material loss of
customers (defined as any customers, the revenues from which constituted greater
than 5% of the total 1995 or total 1996 revenues of the Seller); or (v) take any
action or fail to take any action which would cause any representation made in
Article Two not to be true and correct on the Closing Date. Until February 29,
1997, Stockholder and the Seller shall not (i) sell, agree or offer to sell, or
negotiate for the purpose of selling, to any person other than Buyer any
material asset of the Seller, except in the ordinary course of the Seller's
business, or (ii) enter into any joint venture, lease or other agreement or
transaction not in the ordinary course of business, or negotiate for the purpose
of entering into any such agreement or transaction, or (iii) take any
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<PAGE>
action which could have the effect of precluding the consummation of the
transactions contemplated hereby.
4.3 Maintenance. The Seller 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 in the ordinary
course. In the event of any material loss of, or material damage to, the
Purchased Assets prior to the Closing, the Seller shall either pay the lesser of
the repair or replacement cost thereof to Buyer at the Closing or, at the option
of Buyer, promptly repair or replace the lost or damaged assets in order to
minimize the interruption to the Business.
4.4 Consents and Approvals. Stockholder and the Seller shall act
----------------------
diligently and reasonably to secure the consents and approvals of any
governmental agencies and authorities and any other Persons, as set forth on
Schedule 2.2(B) annexed hereto, required to be obtained to effect the
- ---------------
transactions contemplated hereby or to otherwise satisfy the conditions set
forth in Sections 5.4 and 5.5 hereof, provided that Stockholder and the Seller
shall not make any agreement or understanding affecting the Center 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 Stockholder and the Seller to obtain the consents or approvals
contemplated by this Section 4.4.
4.5 Renewal of Assumed Contracts. The Seller and Stockholder shall keep
----------------------------
Buyer fully informed of all significant developments with respect to the renewal
of any Assumed Contracts that are scheduled to expire between the date hereof
and the Termination Date. The Seller shall use its best efforts to renew any
Assumed Contracts listed on Schedule 1.4(B) hereof that are scheduled to expire
---------------
during such period on terms no less favorable than those currently prevailing.
4.6 Retained Liabilities. The Seller agrees to pay all Retained
--------------------
Liabilities and to indemnify Buyer from any liability thereunder.
4.7 Employees. The Buyer shall make an offer of employment to each of the
---------
Seller's employees employed at the Center
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being purchased by such Buyer (the "Employees") for employment by such Buyer at
---------
the Center from and after the Closing Date upon such employment terms as such
Buyer shall determine in its sole discretion. As to any Employees which decide
not to enter into Buyer's employ on the Closing Date, the Seller shall be solely
responsible for (i) properly notifying such Employees of their termination, and
(ii) making all severance and other related payments, including but not limited
to payments for accrued vacation and accrued sick days, if any. With respect to
Employees which become employees of Buyer on the Closing Date, Seller shall
remain liable and Buyer shall not be liable for severance and related payments,
including but not limited to payments for accrued vacation and accrued sick
days, if any, for the period up to and including the Closing Date unless any
such obligation, or portion thereof, is an Assumed Liability set forth on
Schedule 1.4(B).
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 Stockholder and the Seller 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 Stockholder and the Seller; and Stockholder or the
Seller 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 or Destruction of Property. Between the date hereof and
-------------------------------------
the Closing Date, there shall have been (a) no material adverse change in the
Business or the Purchased Assets; (b) no federal, state or local legislative or
regulatory change materially adversely affecting the Business or the Purchased
Assets; (c) no damage, destruction, loss or claim or condemnation
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<PAGE>
or other taking materially adversely affecting the Business or the Purchased
Assets; and (d) no lawsuit, proceeding or claim filed or asserted against the
Stockholder or the Seller that, if adversely determined, could reasonably be
expected to have a material adverse effect on the Business or the Purchased
Assets.
5.3 Opinion of Counsel for Stockholder and the Seller. Buyer shall have
-------------------------------------------------
received from Vega, Stanley, Zelman and Hanlon counsel to Stockholder and the
Seller, an opinion dated the Closing Date in the form set forth in Exhibit B
hereto.
5.4 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.
5.5 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 otherwise under any Assumed Contract.
---------------
5.6 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 Stockholder and the Seller 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.
5.7 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.
5.8 Deliveries Complete. All documents required to have been delivered by
-------------------
Stockholder and the Seller to Buyer, including each of the certificates,
instruments and documents listed on Schedule 5.8 hereto, and all actions
------------
required under this Agreement
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<PAGE>
to have been taken by Stockholder or the Seller, at or prior to the Closing
shall have been delivered or taken.
5.9 Accounts Payable. Except for the trade and lender accounts payable
----------------
set forth on Schedule 2.14, all trade and lender accounts payable and any other
-------------
obligation relating to the Business shall, as of the Closing Date, be current in
accordance with their terms.
5.10 Closing Certificate. On the Closing Date, the Seller and Stockholder
-------------------
shall deliver to Buyer a closing certificate in the form of Exhibit C signed by
the President of the Seller and the Stockholder to the effect that: (a) all
representations and warranties of Stockholder and the Seller 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 and (ii) insofar as any
such representation or warranty relates to a specified earlier date; (b) the
Stockholder and the Seller 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; and (c) each of the other conditions precedent to
Buyer's obligations to close under this Agreement has been fulfilled.
5.11 Assumption of Leases. The landlord for the Premises on which the
--------------------
Center is located shall have agreed to the assumption by Buyer of the lease for
such Premises.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF THE SELLER AND STOCKHOLDER
The obligations of the Seller and Stockholder under this Agreement shall be
subject, at the option of the Seller and Stockholder, 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 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
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<PAGE>
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 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 the Seller's counsel, and Buyer 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.
6.3 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.
6.4 Opinion of Counsel to Buyer. The Seller shall have received from
---------------------------
Werbel & Carnelutti, counsel for Buyer, an opinion dated the Closing Date in the
form set forth in Exhibit D hereto.
6.5 Deliveries Complete. All documents required to have been delivered by
-------------------
Buyer to the Seller and Stockholder, 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, at or prior to the
Closing shall have been delivered or taken.
6.6 Necessary Government Approvals. The parties shall have received all
------------------------------
governmental and regulatory approvals, actions and consents necessary to
consummate the transactions contemplated hereby.
6.7 Closing Certificate. On the Closing Date, Buyer and MRI shall deliver
-------------------
to the Seller a certificate in the form of Exhibit E signed by the President (or
a Vice President) of each Buyer and MRI to the effect that: (a) all
representations and
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warranties of Buyer and MRI 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 and (ii) insofar as any such representation or
warranty relates to a specified earlier date; (b) Buyer and MRI 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; and (c)
each of the other conditions precedent to the Seller's obligations to close
under this Agreement has been fulfilled.
6.8 Necessary Consents. The parties shall have received written consents
------------------
from all Persons whose consent is required therefor for the assignment and
assumption of any Assumed Contract as set forth on Schedule 2.2(B) and the
---------------
Seller shall have obtained releases with respect to such Assumed Contracts.
6.9 Offers to Employees. The Buyer shall have made the employment offers
-------------------
to the Employees pursuant to Section 4.7.
ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. Buyer shall retain the books and records of
------------------------
the Center and the Purchased Assets transferred to Buyer 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 the Seller reasonable notice of such intent and the right to obtain
from Buyer those books and records which it intends to dispose of or destroy.
The Seller shall have the right, at the expense of the Seller,
(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
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<PAGE>
the Closing and the Measurement Period. With the approval of Buyer,
which approval shall not be unreasonably withheld or delayed, the
Seller may remove from Buyer's possession the originals of such of the
books and records included in the Purchased Assets as the Seller may
require, for use in litigation, provided that the Seller shall
indemnify Buyer against losses, expenses, or damages resulting from
the loss, destruction or nonreturn of such books and records.
7.2 Power of Attorney. Effective upon Closing, the Seller
-----------------
constitutes and appoints the Buyer and its respective suc cessors and assigns,
the true and lawful attorneys for the Seller, with full power of substitution,
in the name of the Seller, but on behalf of and for the benefit of and at the
expense of the Buyer, to institute and prosecute, in the name of the Seller or
otherwise, all proceedings which the Buyer may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Purchased
Assets, to defend and compromise any and all actions, suits or proceedings and
to endorse for deposit and collection any and all bank checks, drafts or other
orders or instruments for the payment of money, drawn upon the Seller in respect
of any of such Purchased Assets, and to do all such acts and things in relation
thereto as the Buyer shall deem advisable. The foregoing powers are and shall be
coupled with an interest and shall be irrevocable by the Seller or by the
Seller's dissolution or in any manner or for any reason. The Buyer shall retain
for their own account any amounts collected pursuant to the foregoing powers,
including any sums payable in respect thereof, and the Seller shall promptly pay
to the Buyer, when received, any amounts which shall be received by the Seller
in respect of the Purchased Assets as provided herein.
7.3 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.
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<PAGE>
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and immediately after the Closing, no
---------------
party to this Agreement 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, except for any disclosure or notice required, based
upon the advice of MRI's counsel, to be made by MRI, including, but not limited
to a press release announcing the transaction contemplated by this Agreement.
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 information relates. The Seller
and the Stockholder acknowledge that the MRI Common Stock 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 Seller or Stockholder nor any Affiliate of the
Seller or Stockholder shall disclose intentionally to anyone, or use or
otherwise exploit for the benefit of the Seller or Stockholder or any Affiliate
of the Seller or Stockholder, 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 Center, 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 Center that is
valuable, and whether or not in
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<PAGE>
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").
------------------------
(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 the Seller or Stockholder or any Affiliate of the
Seller or Stockholder or any agent or other representative thereof, and (ii)
business know-how, marketing and development techniques and technical methods
applicable to diagnostic imaging businesses generally. Neither the Seller or
Stockholder nor any Affiliate of the Seller or Stockholder 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 Seller or
Stockholder or any Affiliate of the Seller or Stockholder 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, the Seller and Stockholder 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 years from the date hereof, neither the Seller or
Stockholder nor any Affiliate of the Seller or Stockholder shall, directly or
indirectly:
(a) anywhere within a twenty-five (25) mile radius of the Center 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,
joint venturer, lender, advisor, consultant, investor or other participant, in
any business (a "Competitive Business") which competes, directly or indirectly,
with the Business of the Center; or
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<PAGE>
(b) solicit, induce or influence any customer, supplier, or any other
person or entity which has a business relationship with Buyer to discontinue or
reduce the extent of such relationship with Buyer; or
(c) (i) recruit, solicit or otherwise induce or influence any employee of
Buyer to discontinue such employment with Buyer or any radiologist who, at the
time has a business relationship with Buyer, from discontinuing such
relationship with Buyer, 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 the Seller, the Stockholder or any Affiliate of Seller or Stockholder
or the Competitive Business employs or seeks to employ such person) employed by
Buyer.
(d) Notwithstanding the foregoing, the provisions of this Section 8.2 will
not be deemed breached because the Seller or the Stockholder or any Affiliate of
the Seller or Stockholder beneficially owns, in the aggregate, not more than 5%
of the outstanding common stock of a corporation, if, at the time of its
acquisition by the Seller, Stockholder or Affiliate, 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.
8.3 Breaches of Article 8. In the event that the Seller, Stockholder or
---------------------
any Affiliate of the Seller or Stockholder shall breach any of the provisions of
this Article 8, or in the event that any such breach is threatened by such
parties, in addition to and without limiting or waiving any other remedies
available to Buyer at law or in equity, Buyer shall be entitled to immediate
injunctive relief in any courts having the capacity to grant such relief, to
restrain any such breach or threatened breach and to enforce the provisions of
this Article 8. The Seller and Stockholder acknowledge and agree that there is
no adequate remedy at law for any such breach or threatened breach and, in the
event that any action or proceeding is brought seeking injunctive relief, the
Seller and the Stockholder shall not use as a defense thereto that there is an
adequate remedy at law.
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ARTICLE 9
INDEMNIFICATION
9.1 Indemnity by the Seller and Stockholder. The Seller and the
---------------------------------------
Stockholder, jointly and severally, agree to indemnify and hold harmless Buyer
and its successors and assigns and Buyer's and its 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 Indemnitees") 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 the Seller or
the Stockholder contained in this Agreement or in any other agreement executed
and delivered by the Seller or the Stockholder hereunder or in connection
herewith, (ii) all Retained Liabilities and any other obligation or liability of
the Seller of any nature, accrued or contingent, not assumed by Buyer in
accordance with Section 1.4 of this Agreement; and
(b) claims, suits, actions and proceedings, including, but not limited to,
professional liability claims of Persons not a party to this Agreement and
related investigations, judgments, deficiencies, damages, settlements,
liabilities, losses, costs and legal and other expenses arising therefrom and
from events occurring on or prior to the Closing Date relating to the Purchased
Assets or the operation or conduct of the Business other than the Assumed
Liabilities.
Notwithstanding the foregoing, Buyer shall not be entitled to indemnification
for any amounts with respect to which Buyer are actually reimbursed under an
insurance policy.
9.2 Indemnity by Buyers and MRI. Buyer and MRI, jointly and severally,
---------------------------
agree to indemnify and hold harmless the Seller and Stockholder and their
successors and assigns and its partners, controlling Persons (if any),
employees, attorneys, agents,
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Affiliates, partners (including the Seller and Stockholder, the "Seller
Indemnitees") against and in respect of any and all:
(a) claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settle ments, 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 or MRI
contained in this Agreement, or in any other agreement executed and delivered by
Buyer or MRI hereunder or in connection herewith and (ii) the Assumed
Liabilities pursuant to Section 1.4 of this Agreement; 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
extent that same results from the breach of any representation or warranty of
Stockholder or the Seller hereunder.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller 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
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<PAGE>
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 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 Indemni fied Party shall automatically be deemed to have
waived any right to indemnification hereunder.
9.4 Right of Buyer to Setoff Future Payments. Without limiting such other
----------------------------------------
rights as the Buyer Indemnitees may have, if, after the Closing Date but prior
to the time the entire Seller Additional Compensation, if any, is delivered to
the Seller, Buyer has learned of a breach of any representation, warranty,
covenant, or agreement of the Seller contained in this Agreement, Buyer in its
discretion may upon prior written notice to the Seller, set-off from that
portion of the balance of the Seller Additional Compensation, if any, then due,
the amount subject to indemnification by the Seller, provided, that any such
--------
setoff shall not affect the Seller's right to contest the basis for such setoff.
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ARTICLE 10
MISCELLANEOUS
Bulk Sales Laws. Buyer waives compliance by the Seller with any
---------------
applicable bulk sales law and the Seller and Stockholder hereby agree to
indemnify Buyer from any liability thereunder.
10.1 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.
10.2 Survival. The representations, warranties, covenants and agreements
--------
contained in or made pursuant to this Agreement shall survive the Closing,
except to the extent that they relate to a specified earlier date.
10.3 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.
10.4 Notices. Any notice given pursuant to this Agreement to any party
-------
hereto shall be deemed to have been duly given when mailed by registered or
certified mail, return receipt requested or by national overnight courier, or
when hand delivered as follows:
If to the Seller or the Stockholder:
Naples Medical Center
400 Eighth Street North
Naples, Florida 34102
Attention: Mr. Francis D. Hussey
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<PAGE>
With a copy to:
Vega, Stanley, Zelman and Hanlon
2660 Airport Road South
Naples, Florida 34112
Attention: John Vega, Esq.
If to Buyer or MRI:
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
With a copy to:
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
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.
10.5 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.
10.6 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.
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(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and assigns.
10.7 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.
10.8 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.
10.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.10 Governing Law. This Agreement shall be construed and enforced
-------------
in accordance with the laws of the State of Florida, without giving effect to
conflict of laws.
10.11 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 incorporated herein by reference.
10.12 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.
"Affiliate" of a Person shall mean any other Person controlling,
---------
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.
-39-
<PAGE>
"Knowledge of the Seller" shall mean the knowledge actually possessed
-----------------------
by a person in an executive or management capacity of the Seller.
"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 twenty
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.
"Person" shall mean and include any individual, partner ship, firm,
------
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
"Proprietary Rights" shall mean any copyrights, trademark, trade name,
------------------
service mark, service name, trade secret, know-how, confidential information or
other intellectual property.
-40-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
THE MRI CENTER OF JACKSONVILLE INC.
By:_____________________________
Name: Francis D. Hussey
Title: President
________________________________
STOCKHOLDER: Francis D. Hussey
JACKSONVILLE RESOURCES, INC.
By:_____________________________
Name: William D. Farrell
Title: President
Solely with respect to the issuance of
the Shares and Sections 1.3, 1.5(b),
1.8 and 3.1 through 3.5 and Article 9 hereof:
MEDICAL RESOURCES, INC.
By:_____________________________
Name: William D. Farrell
Title: President
<PAGE>
EXHIBIT 99.5
DRAFT
02/27/97
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of February 27, 1997, by and among
ADVANCED DIAGNOSTIC IMAGING, INC., a Delaware corporation ("ADI"), DREW M.
---
NETTER AND WILLIAM LEHN, the stockholders of ADI ("Stockholders"), and MEDICAL
------------
RESOURCES, INC., a Delaware corporation ("Purchaser").
---------
W I T N E S S E T H:
-------------------
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of Suffolk, Inc., a Delaware corporation ("Suffolk GP") and the general partner
----------
of Central Suffolk MRI Associates (a Limited Partnership), a Connecticut limited
partnership ("Suffolk LP");
----------
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of Mass., Inc., a Delaware corporation ("Mass GP") and a 70% general partner of
-------
Dedham MRI Associates (a Limited Partnership), a Delaware limited partnership
("Mass LP");
- ---------
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of Central New Jersey, Inc., a Delaware corporation ("Cranford GP") and the
-----------
general partner of Cranford Medical Imaging Associates (a Limited Partnership),
a Delaware limited partnership ("Cranford LP");
-----------
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of Northern New Jersey, Inc., a Delaware corporation ("Montvale, Inc.") and the
general partner of Montvale Diagnostic Imaging Associates (a Limited
Partnership), a Connecticut limited partnership ("Montvale GP"), which, in turn,
is the general partner of Montvale Medical Imaging Associates (a Limited
Partnership), a New Jersey limited partnership ("Montvale LP");
-----------
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of Mid-New Jersey, Inc., a Delaware corporation ("Mid-New Jersey GP") and the
-----------------
general partner of (i) Passaic Valley MRI Associates (a Limited Partnership), a
Connecticut limited partnership ("Passaic LP"), and (ii) North Bergen MRI
----------
Associates (a Limited Partnership), a Connecticut limited partnership ("North
-----
Bergen LP");
- ---------
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of Rockaway, Inc., a Delaware corporation ("Rockaway GP") and the general
-----------
partner of (i) West Hudson MRI Associates (a Limited Partnership), a Delaware
limited partnership ("West Hudson LP"), and (ii) MRI of Rockaway Associates (a
--------------
Limited Partnership), a Delaware limited partnership ("Rockaway LP");
-----------
WHEREAS, ADI owns 65% of the issued and outstanding capital stock of ADI of
Chelmsford, Inc., a Delaware corporation ("Chelmsford. Inc.") which owns and
----------------
operates a diagnostic imaging center in Chelmsford, Massachusetts;
<PAGE>
WHEREAS, ADI owns 100% of the issued and outstanding capital stock of ADI
of RI-Mass, Inc., a Delaware corporation ("RI-Mass GP" and, together with
----------
Suffolk GP, Mass GP, Cranford GP, Montvale, Inc., Mid-New Jersey GP, Rockaway GP
-------------
and Chelmsford, Inc., the "Subsidiaries") and the general partner of RI-Mass MRI
------------
Associates (a Limited Partnership), a Delaware limited partnership ("RI-Mass LP"
----------
and, together with Suffolk LP, Mass LP, Cranford LP, Passaic LP, North Bergen
LP, Rockaway LP, West Hudson LP and Montvale LP, the "LP's");
----
WHEREAS, Purchaser desires to purchase 100% (the "Purchased Shares") of the
----------------
outstanding capital stock of ADI (the "ADI Stock");
---------
WHEREAS, subject to the limitations and exclusions contained in this
Agreement and on the terms and conditions hereinafter set forth, Stockholders
desire to sell and Purchaser desires to purchase the ADI Stock and all rights
appurtenant thereto, including, without limitation, ownership of the
Subsidiaries and their general partnership interest in the LP's (the
"Acquisition");
- ------------
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements herein contained, the
parties hereto do hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF ADI STOCK
------------------------------
1.0 Agreement to Purchase. At the Closing, Purchaser shall purchase the
---------------------
Purchased Shares of ADI Stock from Stockholders, upon and subject to the terms
and conditions of this Agreement, in exchange for the Purchase Price (as defined
in Section 1.02 hereof).
1.0 Purchase Price.
--------------
(a) Subject to the terms and conditions of this Agreement, in reliance on
the representations, warranties and agreements of Stockholders and ADI contained
herein, and in consideration of the sale, assignment, transfer and delivery of
the Purchased Shares of ADI Stock, the purchase price (the "Purchase Price") for
--------------
the Purchased Shares of ADI Stock shall be payable at the Closing by wire
transfer of immediately available funds in the amount of $6,412,344 plus the
amount of cash still held by ADI at Closing (the "Payment").
-------
(b) In consideration of the sale, assignment, transfer and delivery of the
Purchased Shares of ADI Stock, Purchaser shall also pay to Stockholders an
amount equal to $825,000 (the "Additional Payment"). Such payment shall be made
at the earlier of (i) in the event Purchaser elects to purchase all of the
interests of the limited partners of any LP, upon the closing of the fifth such
purchase, and (ii) one year after the Closing Date.
- 2 -
<PAGE>
1.03 Closing. The closing of the transactions contemplated by this
-------
Agreement (the "Closing") will take place at the offices of Squadron, Ellenoff,
-------
Plesent & Sheinfeld LLP, 551 Fifth Avenue, New York, New York 10176 on March 10,
1997 at 10:00 A.M., or at such other place, date and time as the parties may
agree in writing. The date of the Closing is herein referred to as the "Closing
Date."
1.04 Further Assurances. After the Closing, Stockholders and ADI shall
------------------
from time to time, at the request of Purchaser and without further cost or
expense to Purchaser, execute and deliver such other instruments of conveyance
and transfer and take such other actions as Purchaser may reasonably request, in
order to more effectively consummate the transactions contemplated hereby and to
vest in Purchaser good and marketable title to the Purchased Shares of ADI Stock
being transferred hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ADI AND STOCKHOLDERS
------------------------------------------------------
Each of ADI and each Stockholder hereby represents, covenants and warrants
to Purchaser as follows:
2.01 Organization; Good Standing.
---------------------------
(a) ADI is a corporation organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority to carry on its business as it is now being conducted and to own the
properties and assets it now owns. ADI has delivered to Purchaser complete and
correct copies of its charter documents as currently in effect.
(b) Each Subsidiary is a corporation organized, validly existing and in
good standing under the laws of the state of its incorporation and has full
corporate power and authority to carry on its business as it is now being
conducted and to own the properties and assets it now owns. ADI has delivered to
Purchaser complete and correct copies of the charter documents of each
Subsidiary as currently in effect.
(c) Each LP and Montvale GP is a limited partnership organized, validly
existing and in good standing under the laws of the state of its organization
and has full partnership power and authority to carry on its business as it is
now being conducted and to own the properties and assets it now owns. ADI has
delivered to Purchaser complete and correct copies of the agreements of limited
partnership and certificates of limited partnership of each LP and Montvale GP
as currently in effect.
2.02 Capitalization; Subsidiaries.
----------------------------
- 3 -
<PAGE>
(a) The authorized capital stock of ADI consists of 3,000 shares of common
stock, without par value, of which 963.40 shares are issued and outstanding.
All issued and outstanding shares of capital stock of ADI are duly and validly
authorized and issued, fully paid and nonassessable. There are no outstanding
(i) securities convertible into or exchangeable for capital stock of ADI; (ii)
options, warrants or other rights to purchase or subscribe for shares of the
capital stock of ADI or securities convertible into or exchangeable for capital
stock of ADI; or (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of ADI,
any such convertible or exchangeable securities or any such options, warrants or
rights. The Stockholders own the ADI Stock in the denominations set forth on
Schedule 2.02(a) hereto free and clear of all liens, security interests and
encumbrances and upon delivery of the certificates duly endorsed for transfer in
accordance with this Agreement, Purchaser will receive good title to the
Purchased Shares of ADI Stock, free and clear of all security interests, liens
and encumbrances.
(b) ADI owns all of the issued and outstanding capital stock of each
Subsidiary other than Chelmsford, Inc. (of which ADI owns 65% of the issued and
outstanding capital stock) free and clear of all liens, security interests and
encumbrances. Except for the Subsidiaries and the LPS, and except as set forth
on Schedule 2.02(b), ADI does not own any direct or indirect interest in any
other corporation, partnership or other entity.
(c) The authorized capital stock of RI-Mass GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of RI-Mass GP
are duly and validly authorized and issued, fully paid and nonassessable. There
are no outstanding (i) securities convertible into or exchangeable for capital
stock of RI-Mass GP; (ii) options, warrants or other rights to purchase or
subscribe for shares of the capital stock of RI-Mass GP or securities
convertible into or exchangeable for capital stock of RI-Mass GP; or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of RI-Mass GP, any such
convertible or exchangeable securities or any such options, warrants or rights.
(d) The authorized capital stock of Suffolk GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of Suffolk GP
are duly and validly authorized and issued, fully paid and nonassessable. There
are no outstanding (i) securities convertible into or exchangeable for capital
stock of Suffolk GP; (ii) options, warrants or other rights to purchase or
subscribe for shares of the capital stock of Suffolk GP or securities
convertible into or exchangeable for capital stock of Suffolk GP; or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of Suffolk GP, any such
convertible or exchangeable securities or any such options, warrants or rights.
(e) The authorized capital stock of Mass GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of Mass GP are
duly and validly authorized and issued, fully paid and nonassessable. There are
no outstanding (i) securities convertible into or exchangeable for capital stock
of Mass GP; (ii) options, warrants or other rights to purchase or subscribe for
shares of the
- 4 -
<PAGE>
capital stock of Mass GP or securities convertible into or exchangeable for
capital stock of Mass GP; or (iii) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance of any
capital stock of Mass GP, any such convertible or exchangeable securities or any
such options, warrants or rights.
(f) The authorized capital stock of Cranford GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of Cranford GP
are duly and validly authorized and issued, fully paid and nonassessable. There
are no outstanding (i) securities convertible into or exchangeable for capital
stock of Cranford GP; (ii) options, warrants or other rights to purchase or
subscribe for shares of the capital stock of Cranford GP or securities
convertible into or exchangeable for capital stock of Cranford GP; or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of Cranford GP, any such
convertible or exchangeable securities or any such options, warrants or rights.
(g) The authorized capital stock of Mid-New Jersey GP consists of 3,000
shares of common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of Mid-New
Jersey GP are duly and validly authorized and issued, fully paid and
nonassessable. There are no outstanding (i) securities convertible into or
exchangeable for capital stock of Mid-New Jersey GP; (ii) options, warrants or
other rights to purchase or subscribe for shares of the capital stock of Mid-New
Jersey GP or securities convertible into or exchangeable for capital stock of
Mid-New Jersey GP; or (iii) contracts, commitments, agreements, understandings
or arrangements of any kind relating to the issuance of any capital stock of
Mid-New Jersey GP, any such convertible or exchangeable securities or any such
options, warrants or rights.
(h) The authorized capital stock of Rockaway GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of Rockaway GP
are duly and validly authorized and issued, fully paid and nonassessable. There
are no outstanding (i) securities convertible into or exchangeable for capital
stock of Rockaway GP; (ii) options, warrants or other rights to purchase or
subscribe for shares of the capital stock of Rockaway GP or securities
convertible into or exchangeable for capital stock of Rockaway GP; or (iii)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of Rockaway GP, any such
convertible or exchangeable securities or any such options, warrants or rights.
(i) The authorized capital stock of Montvale, Inc. consists of 3,000 shares
of common stock, without par value, of which 1,000 shares are issued and
outstanding. All issued and outstanding shares of capital stock of Montvale,
Inc. are duly and validly authorized and issued, fully paid and nonassessable.
There are no outstanding (i) securities convertible into or exchangeable for
capital stock of Montvale, Inc.; (ii) options, warrants or other rights to
purchase or subscribe for shares of the capital stock of Montvale, Inc. or
securities convertible into or exchangeable for capital stock of Montvale, Inc.;
or (iii) contracts, commitments, agreements, understandings or arrangements of
any kind relating to the issuance of any capital stock of
- 5 -
<PAGE>
Montvale, Inc., any such convertible or exchangeable securities or any such
options, warrants or rights.
(j) The authorized capital stock of Chelmsford, Inc. consists of 3,000
shares of common stock, without par value, all of which are issued and
outstanding. All issued and outstanding shares of capital stock of Chelmsford,
Inc. are duly and validly authorized and issued, fully paid and nonassessable.
There are no outstanding (i) securities convertible into or exchangeable for
capital stock of Chelmsford, Inc.; (ii) options, warrants or other rights to
purchase or subscribe for shares of the capital stock of Chelmsford, Inc. or
securities convertible into or exchangeable for capital stock of Chelmsford,
Inc.; or (iii) contracts, commitments, agreements, understandings or
arrangements of any kind relating to the issuance of any capital stock of
Chelmsford, Inc., any such convertible or exchangeable securities or any such
options, warrants or rights, except in the case of clause (ii) and (iii) above
for an agreement between Marcap Corporation ("Marcap") and ADI pursuant to which
------
Marcap has the right to maintain its relative equity interest in Chelmsford,
Inc.
(k) Each Subsidiary (other than Chelmsford, Inc. which is not the general
partner of any limited partnership, Mass GP which owns 70% of the general
partnership interest of Mass LP and Montvale, Inc which is the general partner
of Montvale GP) and Montvale GP owns 100% of the general partnership interest in
the LP or LP's of which it is general partner (with respect to each Subsidiary,
its "Related LP"), and Montvale, Inc. owns 100% of the general partnership
----------
interest of Montvale GP, free and clear of all liens, security interests and
encumbrances, other than (A) the security interest of Marine Midland Bank
("Marine Midland") in the assets of (i) Cranford LP to secure approximately
- ----------------
$4,013,869.62 of indebtedness owed to Marine Midland, (ii) RI-Mass LP to secure
approximately $2,719,520.16 of indebtedness owed to Marine Midland, (iii)
Montvale LP to secure approximately $2,465,449.03 of indebtedness owed to Marine
Midland (the indebtedness described in the foregoing clauses (i), (ii) and (ii)
being hereinafter referred to as the "Marine Debt"), which security interest
shall be released upon fulfillment of the conditions set forth in the
Stipulation and Order executed on behalf of the debtors and Marine Midland in
December 1996, a copy of which has been provided to Purchaser (the "Stipulation
-----------
and Order") in In re Cranford Medical Imaging Associates, L.P., RI-Mass MRI
- ---------
Associates, L.P. and Montvale Medical Imaging Associates, L.P. (Case Nos. 96 B
21991 (ASH), 96 B 21992 (ASH), 96 B 21993 (ASH) (Jointly Administered),
hereinafter referred to as the "LP Bankruptcy Case") currently pending in the
------------------
United States Bankruptcy Court for the Southern District of New York, the order
approving which shall be entered on or prior to the Closing and (B) in the case
of Mass GP, the security interest of Marcap in certain assets of Mass LP to
secure the obligations of Mass LP pursuant to the Security Agreement, dated
March 30, 1993, by and between Mass LP, as debtor, and Marcap, as secured party,
which security interest shall continue as security for such obligation after the
Closing Date. Chelmsford, Inc. owns all of its assets free and clear of all
liens, security interests and encumbrances, other than the security interest of
Marcap in certain assets of Chelmsford, Inc. to secure the obligations of
Chelmsford, Inc. pursuant to the Loan and Security Agreement, dated March 25,
1992, by and between Chelmsford, Inc., as debtor, and Marcap, as secured party,
which security interest shall continue as security for such obligation after the
Closing Date. Except for its Related LP (or, in the case of Montvale, Inc.,
except for its interest in Montvale GP), no Subsidiary or Montvale GP owns any
capital stock or other equity securities of any corporation, partnership or
other entity or any rights to acquire any equity or ownership interest in any
business. The sole
- 6 -
<PAGE>
business of each Subsidiary other than Chelmsford, Inc. consists of acting as
general partner of its Related LP (or, in the case of Montvale, Inc., acting as
the general partner of Montvale GP). The sole business of Chelmsford, Inc.
consists of owning and operating a diagnostic imaging center in Chelmsford,
Massachusetts.
(l) The outstanding partnership interests of Suffolk LP consist of 20 units
of limited partnership interests (constituting 85% of all partnership interests
in Suffolk LP) and one general partnership interest. All issued and outstanding
partnership interests of Suffolk LP are validly issued. There are no outstanding
(i) securities convertible into or exchangeable for any Suffolk LP securities;
or (ii) options, warrants or other rights to purchase or subscribe for
securities of Suffolk LP or securities convertible into or exchangeable for
securities of Suffolk LP. The name of each partner of Suffolk LP and the
percentage interest of Suffolk LP owned beneficially or of record, or both, by
each such partner are as set forth in such partner's Schedule K-1 (Partner's
Share of Income, Credits, Deductions, etc.) relating to Suffolk LP for the year
ended December 31, 1995.
(m) The outstanding partnership interests of Mass LP consist of 48 units of
limited partnership interests (constituting 50% of all partnership interests in
Mass LP) and one general partnership interest. All issued and outstanding
partnership interests of Mass LP are validly issued. There are no outstanding
(i) securities convertible into or exchangeable for any Mass LP securities; or
(ii) options, warrants or other rights to purchase or subscribe for securities
of Mass LP or securities convertible into or exchangeable for securities of Mass
LP, except in the case of clause (ii) above for an agreement between Marcap and
ADI pursuant to which Marcap has the right to maintain its relative equity
interest in Mass LP. The name of each partner of Mass LP and the percentage
interest of Mass LP owned beneficially or of record, or both, by each such
partner are as set forth in such partner's Schedule K-1 (Partner's Share of
Income, Credits, Deductions, etc.) relating to Mass LP for the year ended
December 31, 1995.
(n) The outstanding partnership interests of Cranford LP consist of 10.67
units of limited partnership interests (constituting 25% of all partnership
interests in Cranford LP) and one general partnership interest. All issued and
outstanding partnership interests of Cranford LP are validly issued. There are
no outstanding (i) securities convertible into or exchangeable for any Cranford
LP securities; or (ii) options, warrants or other rights to purchase or
subscribe for securities of Cranford LP or securities convertible into or
exchangeable for securities of Cranford LP. The name of each partner of Cranford
LP and the percentage interest of Cranford LP owned beneficially or of record,
or both, by each such partner are as set forth in such partner's Schedule K-1
(Partner's Share of Income, Credits, Deductions, etc.) relating to Cranford LP
for the year ended December 31, 1995.
(o) The outstanding partnership interests of Passaic LP consist of 38 units
of limited partnership interests (constituting 85% of all partnership interests
in Passaic LP) and one general partnership interest. All issued and outstanding
partnership interests of Passaic LP are validly issued. There are no outstanding
(i) securities convertible into or exchangeable for any Passaic LP securities;
or (ii) options, warrants or other rights to purchase or subscribe for
securities of Passaic LP or securities convertible into or exchangeable for
securities of Passaic LP. The name of each partner of Passaic LP and the
percentage interest of Passaic LP owned beneficially or of record, or
- 7 -
<PAGE>
both, by each such partner are as set forth in such partner's Schedule K-1
(Partner's Share of Income, Credits, Deductions, etc.) relating to Passaic LP
for the year ended December 31, 1995.
(p) The outstanding partnership interests of North Bergen LP consist of 42
units of limited partnership interests (constituting 85% of all partnership
interests in North Bergen LP) and one general partnership interest. All issued
and outstanding partnership interests of North Bergen LP are validly issued.
There are no outstanding (i) securities convertible into or exchangeable for any
North Bergen LP securities; or (ii) options, warrants or other rights to
purchase or subscribe for securities of North Bergen LP or securities
convertible into or exchangeable for securities of North Bergen LP. The name of
each partner of North Bergen LP and the percentage interest of North Bergen LP
owned beneficially or of record, or both, by each such partner are as set forth
in such partner's Schedule K-1 (Partner's Share of Income, Credits, Deductions,
etc.) relating to North Bergen LP for the year ended December 31, 1995.
(q) The outstanding partnership interests of Rockaway LP consist of 40
units of limited partnership interests (constituting 80% of all partnership
interests in Rockaway LP) and one general partnership interest. All issued and
outstanding partnership interests of Rockaway LP are validly issued. There are
no outstanding (i) securities convertible into or exchangeable for any Rockaway
LP securities; or (ii) options, warrants or other rights to purchase or
subscribe for securities of Rockaway LP or securities convertible into or
exchangeable for securities of Rockaway LP. The name of each partner of Rockaway
LP and the percentage interest of Rockaway LP owned beneficially or of record,
or both, by each such partner are as set forth in such partner's Schedule K-1
(Partner's Share of Income, Credits, Deductions, etc.) relating to Rockaway LP
for the year ended December 31, 1995.
(r) The outstanding partnership interests of West Hudson LP consist of 42
units of limited partnership interests (constituting 31.25% of all partnership
interests in West Hudson LP) and one general partnership interest. All issued
and outstanding partnership interests of West Hudson LP are validly issued.
There are no outstanding (i) securities convertible into or exchangeable for any
West Hudson LP securities; or (ii) options, warrants or other rights to purchase
or subscribe for securities of West Hudson LP or securities convertible into or
exchangeable for securities of West Hudson LP. The name of each partner of West
Hudson LP and the percentage interest of West Hudson LP owned beneficially or of
record, or both, by each such partner are as set forth in such partner's
Schedule K-1 (Partner's Share of Income, Credits, Deductions, etc.) relating to
West Hudson LP for the year ended December 31, 1995.
(s) The outstanding partnership interests of Montvale LP consist of 48
units of limited partnership interests (constituting 15% of all partnership
interests in Montvale LP) and one general partnership interest. All issued and
outstanding partnership interests of Montvale LP are validly issued. There are
no outstanding (i) securities convertible into or exchangeable for any Montvale
LP securities; or (ii) options, warrants or other rights to purchase or
subscribe for securities of Montvale LP or securities convertible into or
exchangeable for securities of Montvale LP. The name of each partner of Montvale
LP and the percentage interest of Montvale LP owned beneficially or of record,
or both, by each such partner are as set forth in such partner's Schedule
- 8 -
<PAGE>
K-1 (Partner's Share of Income, Credits, Deductions, etc.) relating to Montvale
LP for the year ended December 31, 1995.
(t) The outstanding partnership interests of RI-Mass LP consist of 76 units
of limited partnership interests (constituting 95% of all partnership interests
in RI-Mass LP) and one general partnership interest. All issued and outstanding
partnership interests of RI-Mass LP are validly issued. There are no outstanding
(i) securities convertible into or exchangeable for any RI-Mass LP securities;
or (ii) options, warrants or other rights to purchase or subscribe for
securities of RI-Mass LP or securities convertible into or exchangeable for
securities of RI-Mass LP. The name of each partner of RI-Mass LP and the
percentage interest of RI-Mass LP owned beneficially or of record, or both, by
each such partner are as set forth in such partner's Schedule K-1 (Partner's
Share of Income, Credits, Deductions, etc.) relating to RI-Mass LP for the year
ended December 31, 1995.
(u) The outstanding partnership interests of Montvale GP consist of 48
units of limited partnership interest (constituting 85% of all partnership
interests in Montvale GP) and one general partnership interest. All issued and
outstanding partnership interests of Montvale GP are validly issued. There are
no outstanding (i) securities convertible into or exchangeable for any Montvale
GP securities; or (ii) options, warrants or other rights to purchase or
subscribe for securities of Montvale GP or securities convertible into or
exchangeable for securities of Montvale GP. The name of each partner of
Montvale GP and the percentage interest of Montvale GP owned beneficially or of
record, or both, by each such partner are as set forth in such partner's
Schedule K-1 (Partner's Share of Income, Credits, Deductions, etc.) relating to
Montvale GP for the year ended December 31, 1995.
2.03 Authorization, Etc. ADI has full corporate power and authority, and
-------------------
each Stockholder has full power and authority, to enter into this Agreement and
to carry out the transactions contemplated hereby. ADI has taken all action
required by law, its charter documents, or otherwise to be taken by it to
authorize the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and this Agreement is a valid and binding
agreement of ADI and each Stockholder enforceable against each of them in
accordance with its terms, except to the extent that such enforceability may be
limited by applicable bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting the enforceability of creditors' rights generally and by general
principles of equity.
2.04 No Violation. Assuming repayment of the Marine Debt, neither the
------------
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will violate any provision of the charter
documents of ADI, or be in conflict with, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or result in the termination of, or accelerate the performance required by, or
cause the acceleration of the maturity of any debt or obligation pursuant to, or
result in the creation or imposition of any security interest, lien or other
encumbrance upon any property or assets of ADI, any Subsidiary, Montvale GP, any
LP or any Stockholder under, any agreement or commitment to which ADI, such
Subsidiary, Montvale GP, such LP or such Stockholder is a party or by which ADI,
such Subsidiary, Montvale GP, such LP or such Stockholder is bound, or to which
the property of ADI, such Subsidiary, Montvale GP, such LP or such Stockholder
is subject, or violate any statute or law
- 9 -
<PAGE>
or any judgment, decree, order, regulation or rule of any court or governmental
authority applicable to ADI, such Subsidiary, Montvale GP, such LP or such
Stockholder.
2.05 Financial Statements.
--------------------
(a) ADI has heretofore delivered to Purchaser unaudited financial
statements as of and for the year ended December 31, 1995 (the "Year-End
--------
Financial Statements") and the unaudited financial statements as of and for the
- --------------------
nine months ended September 30, 1996 (the "Nine-Month Financial Statements" and
-------------------------------
together with the Year-End Financial Statements, the "Financial Statements").
--------------------
Such Financial Statements and the notes thereto fairly present the assets,
liabilities, financial condition and results of operations of ADI as at the
respective dates thereof and for the periods covered thereby, all in accordance
with generally accepted accounting principles consistently applied throughout
the periods involved, other than the omission of certain footnote disclosure
with respect to the Nine-Month Financial Statements.
(b) Each LP has heretofore delivered to Purchaser unaudited financial
statements as of and for the year ended December 31, 1995 (the "LP Year-End
-----------
Financial Statements") and the unaudited financial statements as of and for the
- --------------------
nine months ended September 30, 1996 (the "LP Nine-Month Financial Statements"
-----------------------------------
and together with the Year-End Financial Statements, the "LP Financial
-------------
Statements"). Such LP Financial Statements and the notes thereto fairly present
- ----------
the assets, liabilities, financial condition and results of operations of such
LP as at the respective dates thereof and for the periods covered thereby, all
in accordance with generally accepted accounting principles consistently applied
throughout the periods involved, other than the omission of certain footnote
disclosure with respect to the LP Nine-Month Financial Statements.
(c) Chelmsford, Inc. has heretofore delivered to Purchaser unaudited
financial statements as of and for the year ended December 31, 1995 (the
"Chelmsford Year-End Financial Statements") and the unaudited financial
- -----------------------------------------
statements as of and for the nine months ended September 30, 1996 (the
"Chelmsford Nine-Month Financial Statements" and together with the Year-End
- -------------------------------------------
Financial Statements, the "Chelmsford Financial Statements"). Such Chelmsford
-------------------------------
Financial Statements and the notes thereto fairly present the assets,
liabilities, financial condition and results of operations of Chelmsford, Inc.
as at the respective dates thereof and for the periods covered thereby, all in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, other than the omission of certain footnote
disclosure with respect to the Chelmsford Nine-Month Financial Statements.
2.06 No Undisclosed Liabilities; Etc. Except as set forth in Schedule 2.06,
--------------------------------
neither ADI, Chelmsford nor any LP has any liabilities or obligations of any
nature (absolute, accrued, contingent or otherwise) which were not fully
reflected or reserved against in the Financial Statements, the Chelmsford
Financial Statements or the LP Financial Statements, as applicable, except for
liabilities and obligations incurred in the ordinary course of business and
consistent with past practice since the date of the balance sheet included in
the Nine-Month Financial Statements, the Chelmsford Nine-Month Financial
Statements or the LP Nine-Month Financial Statements, as applicable; and, based
upon historical experience, the reserves reflected in the Financial Statements,
- 10 -
<PAGE>
the Chelmsford Nine-Month Financial Statements and the LP Nine-Month Financial
Statements are adequate, appropriate and reasonable.
2.07 Accounts Receivable. All accounts receivable of ADI, Chelmsford, Inc.
-------------------
and each LP, reflected in the Financial Statements, the Chelmsford Financial
Statements or the LP Financial Statements, as applicable, represent revenues
actually made in the ordinary course of business, and are current and
collectible net of any reserves shown on the Financial Statements, the
Chelmsford Financial Statements or the LP Financial Statements, as applicable
(which reserves were calculated in a manner consistent with past practice and,
based upon historical experience, should be adequate).
2.08 Absence of Certain Changes. Except as and to the extent set forth on
--------------------------
Schedule 2.08, since the date of the balance sheet included in the Nine-Month
Financial Statements, the Chelmsford Nine-Month Financial Statements or the LP
Nine-Month Financial Statements, neither ADI, Chelmsford, Inc. nor any LP has:
(a) suffered any material adverse change in its working capital, financial
condition, assets, liabilities (absolute, accrued, contingent or otherwise),
reserves, business, operations or prospects;
(b) incurred any liability or obligation (absolute, accrued, contingent or
otherwise) which exceeds $10,000 (counting obligations and liabilities arising
from one transaction or a series of similar transactions, and all periodic
installments or payments under any lease or other agreement providing for
periodic installments or payments, as a single obligation or liability), other
than liabilities and obligations incurred in the ordinary course of business and
consistent with past practice; or increased, or experienced any change in any
assumptions underlying, or methods of calculating, any bad debt, contingency or
other reserves;
(c) paid, discharged or satisfied any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) other than the payment, discharge
or satisfaction in the ordinary course of business and consistent with past
practice of liabilities and obligations reflected or reserved against in the
Financial Statements, the Chelmsford Financial Statements or the LP Financial
Statements, as applicable, or incurred in the ordinary course of business and
consistent with past practice since the date of the balance sheet included in
the Nine-Month Financial Statements, the Chelmsford Nine Month Financial
Statements or the LP Nine-Month Financial Statements, as applicable;
(d) permitted or allowed any of its property or assets (real, personal or
mixed, tangible or intangible) to be subjected to any mortgage, pledge, lien,
security interest, encumbrance, restriction or charge of any kind, except for
liens for current taxes not yet due;
(e) become aware of any fact or event which materially adversely affects or
may in the future materially adversely affect the financial condition, results
of operations, business, properties, assets, liabilities, or future prospects of
ADI, Chelmsford, Inc. or any LP;
- 11 -
<PAGE>
(f) canceled any debts, waived any claims or rights of substantial value or
accepted a purchase order, quotation, arrangement or understanding for future
sale of services of ADI, Chelmsford, Inc. or any LP which, at the time of its
acceptance, was not intended to result in a profit to ADI, Chelmsford, Inc. or
such LP;
(g) sold, transferred or otherwise disposed of any of its properties or
assets (real, personal or mixed, tangible or intangible), except in the ordinary
course of business and consistent with past practice;
(h) granted any general increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension, profit-
sharing or other plan or commitment) or any increase in the compensation payable
or to become payable to any officer or employee, except for customary annual
increases or increases required by written agreement;
(i) declared, paid or set aside for payment any dividend or other
distribution in respect of its capital stock or partnership interests, as the
case may be, or redeemed, purchased or otherwise acquired, directly or
indirectly, any its capital stock or partnership interests, as the case may be,
or other securities;
(j) made any change in any method of accounting or accounting practice;
(k) paid, loaned or advanced any amount to, or sold, transferred or leased
any properties or assets (real, personal or mixed, tangible or intangible) to,
or entered into any agreement or arrangement with, any of its officers or
directors or any affiliate or associate of any of its officers or directors,
other than regularly scheduled payments of salary or bonus or reimbursements of
expenses incurred on behalf of ADI, Chelmsford or the LP's, as the case may be;
or
(l) entered into any agreement or arrangement (oral or written) with
respect to any of the foregoing.
2.09 Litigation. Except as set forth in Schedule 2.09, (i) there is no
----------
pending or, to the knowledge of ADI or any Stockholder, threatened action, suit,
inquiry, proceeding or investigation by or before any court or governmental or
other regulatory or administrative agency or commission against or involving
ADI, any Subsidiary, Montvale GP, any LP or any Stockholder, or which questions
or challenges the validity of this Agreement or any action taken or to be taken
by ADI or any Stockholder pursuant to this Agreement or in connection with the
transactions contemplated hereby; nor, to the knowledge of ADI or any
Stockholder, is there any valid basis for any such action, proceeding or
investigation; (ii) assuming repayment of the Marine Debt on or before the
Closing Date, neither ADI, any Subsidiary, Montvale GP nor any LP is in default
under or in violation of, and there is no valid basis for any claim of default
under or violation of, any contract, commitment or restriction to which it is a
party or by which it is bound which is material to the business, financial
condition or operations of ADI, the Subsidiaries, Montvale GP or the LP's,
individually or taken as a whole; (iii) neither ADI, any Subsidiary, Montvale GP
nor any LP is in violation of, or in default with respect to, any order,
judgment, or decree; (iv) neither ADI, any Subsidiary, Montvale GP nor any LP is
in violation of, or in default with respect to, any law, rule
- 12 -
<PAGE>
or regulation the violation of or default under which would have a material
adverse effect on the business, financial condition or operations of ADI, the
Subsidiaries, Montvale GP or the LP's, individually or taken as a whole; nor is
it required to take any action in order to avoid such violation or default; and
(v) neither ADI, any Subsidiary, Montvale GP nor any LP is subject to any
judgment, order or decree entered in any lawsuit or proceeding which may have an
adverse effect on its business practices or on its ability to acquire any
property or conduct its business in any area.
2.10 Title to Properties; Encumbrances. Each of ADI, Chelmsford, Inc. and
---------------------------------
each LP has good and marketable title to all real property and good title to all
other properties and assets, real, personal and mixed, tangible and intangible,
which it purports to own and which are being transferred to Purchaser in
connection with the transactions contemplated hereby (except such properties and
assets as are held pursuant to leases or licenses described in Schedule 2.10),
including, without limitation, all the properties and assets reflected in the
Financial Statements, the Chelmsford Financial Statements and the LP Financial
Statements and all the properties and assets purchased by ADI, Chelmsford, Inc.
or such LP since the date of the Financial Statements, the Chelmsford Financial
Statements or the LP Financial Statements, as applicable. Except as may be
described in such Schedule 2.10, all properties and assets reflected in the
Financial Statements, the Chelmsford Financial Statements and the LP Financial
Statements are free and clear of all title defects or objections, liens, claims,
charges, security interests or other encumbrances of any nature
("Encumbrances"), including, without limitation, leases, chattel mortgages,
conditional sales contracts, collateral security arrangements and other title or
interest retention arrangements, and are not, in the case of real property,
subject to any rights of way, building use restrictions, exceptions, variances,
reservations or limitations of any nature whatsoever. The rights, properties and
other assets currently owned, leased or licensed by ADI, Chelmsford, Inc. or
such LP and described elsewhere in this Agreement include all rights, properties
and other assets necessary to permit each of them to conduct its business in all
material respects in the same manner as its business has been conducted prior to
the date hereof.
2.11 Contracts and Commitments. Schedule 2.11 contains a true, complete and
-------------------------
accurate list of all contracts, agreements, instruments, leases, licenses,
arrangements and understandings (whether written or oral) to which ADI, any
Subsidiary, Montvale GP or any LP is a party or by which any of its assets or
properties are bound (i) the remaining payments under which equal or exceed
$50,000, or (ii) which are otherwise material to the business or operations of
ADI, any Subsidiary or any LP (collectively, the "Material Contracts"). ADI has
------------------
furnished to the Purchaser (i) true and complete copies of all written Material
Contracts, and (ii) true and complete written descriptions of all supply,
distribution, agency financing, or other arrangements or understandings referred
to in Schedule 2.11 to the extent such Material Contracts have not been fully
reduced to writing. All Material Contracts are valid and in full force and
effect. Except as set forth in such Schedule 2.11:
(a) neither ADI, any Subsidiary, Montvale GP nor any LP has any outstanding
contracts with officers, employees, agents, consultants, advisors, salesmen,
sales representatives, distributors or dealers that are not cancelable by it on
notice of not longer than 30 days and without liability, penalty or premium or
any agreement or arrangement providing for the payment of any bonus or
commission based on sales or earnings;
- 13 -
<PAGE>
(b) neither ADI, any Subsidiary, Montvale GP nor any LP has any employment
agreement, or any other agreement that contains any severance or termination pay
liabilities or obligations;
(c) neither ADI, any Subsidiary, Montvale GP nor any LP has any collective
bargaining or union contracts or agreements;
(d) neither ADI, any Subsidiary, Montvale GP nor any LP is in default, nor,
to their knowledge, is there any basis for any valid claim of default, under any
Material Contract;
(e) neither ADI, any Subsidiary, Montvale GP nor any LP has any
indebtedness for borrowed money, including guarantees of or agreements to
acquire any such indebtedness of others;
(f) neither ADI, any Subsidiary, Montvale GP nor any LP has an outstanding
loan to any individual, corporation, partnership, joint venture, association,
organization, limited liability company or other entity (each a "Person"); and
------
(g) neither ADI, any Subsidiary, Montvale GP nor any LP has any power of
attorney outstanding or any obligations or liabilities (whether absolute,
accrued, contingent or otherwise), as guarantor, surety, co-signer, endorser,
co-maker, indemnitor or otherwise in respect to the obligation of any Person.
2.12 Facilities. The facilities and equipment of each LP and Chelmsford,
----------
Inc. are structurally sound with no material defects and are in good operating
condition and repair and are adequate for the uses to which they are being put.
To the knowledge of ADI, each LP and Chelmsford, Inc., no such facility or
equipment is in need of maintenance and repairs which are material in nature or
cost. Neither ADI, any LP nor Chelmsford, Inc. has received any notification
that it is in violation of any applicable building, zoning, environmental,
health or other law, ordinance or regulation in respect of its facilities or its
operations. There are no laws, statutes or ordinances, or building or use
restrictions applicable to the facilities owned or leased by ADI, any LP or
Chelmsford, Inc. which might prohibit or materially impair the uses presently
being made thereof by ADI, such LP or Chelmsford, Inc. No Subsidiary other than
Chelmsford, Inc. owns or leases any facilities or equipment.
2.13 Leases. Schedule 2.13 contains an accurate and complete list of all
------
leases pursuant to which ADI, any LP or Chelmsford, Inc. leases real or personal
property. All such leases are valid, binding and enforceable in accordance with
their terms, and are in full force and effect; except as set forth on Schedule
2.13, there are no existing defaults by ADI, Chelmsford, Inc. or any LP
thereunder; no event has occurred which (whether with or without notice, lapse
of time or the happening or occurrence of any other event) would constitute a
default thereunder; and all lessors under such leases have consented (to the
extent such consent is required) to the consummation of the transactions
contemplated by this Agreement without requiring modification in the rights or
obligations of the lessee under such leases. Executed counterpart copies of all
consents referred to in the preceding sentence will be delivered to Purchaser at
the Closing.
- 14 -
<PAGE>
2.14 Taxes. Each of ADI and each LP has delivered to Purchaser true,
-----
complete and correct copies of, and Schedule 2.14 lists, all of the tax returns
filed by ADI and each LP since January 1, 1994 (the "Tax Returns"). Each of ADI
-----------
and each LP has filed all tax reports and returns required to be filed by it and
has duly paid all taxes and other charges shown thereby to be due to any
federal, state, local or foreign taxing authorities (including, without
limitation, those due in respect of its properties, income, franchises,
licenses, sales or payroll); the reserves for taxes reflected in the Financial
Statements, the Chelmsford Financial Statements and the LP Financial Statements
are adequate; and there are no tax liens upon any property or assets of ADI,
Chelmsford, Inc. or any LP except liens for current taxes not yet due. No state
of fact exists or has existed which would constitute grounds for the assessment
of any tax liability by the Internal Revenue Service with respect to periods for
which Tax Returns have been filed. All Tax Returns filed by ADI, Chelmsford,
Inc. and each LP are true, correct and complete in all material respects. All
taxes that ADI, Chelmsford, Inc. or any LP is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the proper governmental body or other Person. Except as set
forth on Schedule 2.14, there is no claim, audit, action, suit, proceeding or
investigation with respect to taxes due or claimed to be due from ADI,
Chelmsford, Inc. or any LP or any Tax Return filed or required to be filed by
ADI, Chelmsford, Inc. or any LP pending or, to the knowledge of ADI, Chelmsford,
Inc. any LP or any Stockholder, threatened against or with respect to ADI,
Chelmsford, Inc. or any LP.
2.15 Insurance. Schedule 2.15 contains an accurate and complete list of all
---------
material policies of fire, liability, workers' compensation and other forms of
insurance owned or held by or for the benefit of ADI, Chelmsford, Inc. and any
LP. All such policies are in full force and effect, all premiums with respect
thereto which are required to have been paid have been paid and no notice of
cancellation or termination has been received with respect to any such policy.
Such policies are sufficient for compliance with all requirements of law and all
agreements to which ADI, Chelmsford, Inc. or any LP is a party; are valid,
outstanding and enforceable policies; provide customary insurance coverage for
the business, assets and operations of ADI, Chelmsford, Inc. and each LP; will,
except as set forth in Schedule 2.15, remain in full force and effect through
the respective dates set forth in Schedule 2.15; and will not in any way be
affected by or terminate or lapse by reason of the transactions contemplated by
this Agreement. Neither ADI, Chelmsford, Inc. nor any LP has been refused any
insurance with respect to its assets or operations, nor has its coverage been
limited, by any insurance carrier to which it has applied for any such insurance
or with which it has carried insurance during the last five years.
2.16 Labor Difficulties. (a) Each of ADI, Chelmsford, Inc. and each LP is
------------------
in compliance in all material respects with all applicable laws respecting
employment and employment practices, terms and conditions and wages and hours,
and is not engaged in any unfair labor practice; (b) there is no unfair labor
practice complaint against ADI, Chelmsford, Inc. or any LP pending before the
National Labor Relations Board; (c) there is no labor strike, dispute, slowdown
or stoppage actually pending or, to the knowledge of ADI, Chelmsford, Inc., any
LP or any Stockholder, threatened against or affecting ADI, Chelmsford, Inc. or
any LP; (d) no representation question exists respecting the employees of ADI ,
Chelmsford, Inc. or any LP; (e) no grievance or arbitration proceeding arising
out of or under collective bargaining agreements is pending and no claim
- 15 -
<PAGE>
therefor exists; and (f) neither ADI, Chelmsford, Inc. nor any LP has ever
experienced any work stoppage or other labor difficulty. The Subsidiaries other
than Chelmsford, Inc. have no employees.
2.17 Employee Benefit Plans. Except as set forth on Schedule 2.17, neither
----------------------
ADI, Chelmsford, Inc. nor any LP has, and none of the current or former
employees of ADI, Chelmsford, Inc. or any LP is covered (in respect of their
employment by ADI, Chelmsford, Inc. or such LP) by, any bonus, deferred
compensation, pension, profit-sharing, retirement, insurance, stock purchase,
stock option or other fringe benefit plans, arrangements or practices (other
than standard medical insurance), or any other employee benefit plans, as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), whether formal or informal, maintained by ADI, Chelmsford,
-----
Inc. or any LP or for the benefit of their respective employees or to which ADI,
Chelmsford, Inc. or any LP is or was required to contribute (collectively, the
"Plans"). Schedule 2.17 contains an accurate and complete description of, and
- ------
sets forth the annual amount payable pursuant to, each Plan. ADI, Chelmsford,
Inc. and each LP has performed and complied in all material respects with all of
its obligations under or with respect to each Plan and the Plans have operated
in all material respects in accordance with their terms and applicable law.
Neither ADI, Chelmsford, Inc. nor any LP has any commitment, whether formal or
informal and whether legally binding or not, to create any additional Plan.
2.18 Consents and Approvals of Governmental Authorities and Others. Except
-------------------------------------------------------------
as set forth in Schedule 2.18, no consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority is required in connection with the execution, delivery and performance
by ADI or any Stockholder of this Agreement or the consummation of the
transactions contemplated hereby; and no consent of any other Person is
necessary to the consummation by ADI or any Stockholder of the transactions
contemplated hereby.
2.19 Compliance with Law. The operations of ADI, Chelmsford, Inc. and each
-------------------
LP have been conducted in all material respects in accordance with all
applicable laws, regulations and other requirements of all national governmental
authorities and of all states, municipalities and other political subdivisions
and agencies thereof having jurisdiction over ADI, Chelmsford, Inc. or such LP,
including, without limitation, all such laws, regulations and requirements
relating to consumer protection, equal opportunity, health, occupational safety,
pension and securities matters. Neither ADI, Chelmsford, Inc. nor any LP has
received any notification of any asserted present or past failure by ADI,
Chelmsford, Inc. or such LP to comply with such laws, rules or regulations.
2.20 Environmental Protection. Each of ADI, Chelmsford, Inc. and each LP
------------------------
has obtained all material permits, licenses and other authorizations which are
required under federal, state and local laws relating to pollution or protection
of the environment, including laws relating to emissions, discharges, releases
or threatened releases of pollutants, contaminants, or hazardous or toxic
materials or wastes into ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes. ADI, Chelmsford, Inc. and each LP is in
compliance in all material respects with all terms and conditions of such
required permits, licenses and authorizations, and is also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations,
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<PAGE>
schedules and timetables contained in such laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder. Neither ADI, Chelmsford, Inc. nor any LP is
aware of, nor has ADI, Chelmsford, Inc. or any LP received notice of, any past,
present or future events, conditions, circumstances, activities, practices,
incidents, actions or plans which may interfere with or prevent continued
compliance, or which may give rise to any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation, based on or related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling, or the emission,
discharge, release or threatened release into the environment, of any pollutant,
contaminant, or hazardous or toxic material or waste.
2.21 Brokers and Finders. Neither any Stockholder nor ADI or any of its
-------------------
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated by this Agreement.
2.22 Personnel. Schedule 2.22 sets forth a true and complete list of:
---------
(a) the names and current salaries of all salaried employees and the wage
rates for non-salaried and non-executive salaried employees of ADI, Chelmsford,
Inc. and each LP who will continue to be employees of same immediately following
the Closing, by classification; and
(b) all group insurance programs in effect for employees of ADI,
Chelmsford, Inc. and each LP who will continue to be employees of same
immediately following the Closing.
2.23 Litigation and Investigations. There is no action, suit, inquiry,
-----------------------------
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or, to the knowledge
of ADI or any Stockholder, threatened against or involving ADI, Chelmsford, Inc.
or any LP relating to any service performed by ADI, Chelmsford, Inc. or any LP
or any of their respective employees, nor, to the knowledge of ADI, Chelmsford,
Inc. or any Stockholder, is there any valid basis for any such action,
proceeding or investigation.
2.24 Malpractice Liability. There is no action, suit, inquiry, proceeding
---------------------
or investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or threatened against or involving
ADI, Chelmsford, Inc. or any LP relating to any service performed by ADI,
Chelmsford, Inc. or any LP or any of their respective employees and alleged to
have resulted in any medical malpractice, nor, to the knowledge of ADI or any
Stockholder, is there any valid basis for any such action, proceeding or
investigation.
2.25 Referrals. ADI has provided to Purchaser a true and complete list of
---------
referral sources of Chelmsford, Inc. and each LP since January 1, 1995. Since
that date, there has been no material change in the pattern of referrals from
Chelmsford, Inc.'s and each LP's 25 largest referral sources, and, to the
knowledge of ADI or any Stockholder, no referral source has established a
competing diagnostic imaging facility since such date.
- 17 -
<PAGE>
2.26 Licenses and Permits. Each of ADI, Chelmsford, Inc. and each LP has
--------------------
all licenses, permits and other governmental authorizations required for the
conduct of its business and the ownership of its properties and is in compliance
therewith in all material respects except where the failure to obtain or comply
with any such licenses, permits and other governmental authorizations would not
have a material adverse effect on the financial condition, results of
operations, business or properties of ADI, Chelmsford, Inc. or any LP.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PURCHASER
-------------------------------------------
Purchaser represents and warrants to ADI and the Stockholders as follows:
3.01 Corporate Organization, Etc. Purchaser is a corporation duly
----------------------------
organized, validly existing and in good standing under the laws of the State of
[Delaware] and has the power and authority to carry on its business as now being
conducted and to own the properties and assets it now owns.
3.02 Authorization, Etc. Purchaser has full corporate power and authority
-------------------
to enter into this Agreement and to carry out the transactions contemplated
hereby. Purchaser has taken all action required by law, its Certificate of
Incorporation and By-Laws or otherwise to authorize the execution and delivery
of this Agreement and the transactions contemplated hereby, and this Agreement
is a valid and binding agreement of Purchaser enforceable against Purchaser in
accordance with its terms.
3.03 No Violation. Neither the execution and delivery of this Agreement nor
------------
the consummation of the transactions contemplated hereby will violate any
provisions of the Certificate of Incorporation or By-Laws of Purchaser, or
violate, or be in conflict with, or constitute a default under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, any
agreement or commitment to which Purchaser is a party or by which Purchaser is
bound, or violate any statute or law or any judgment, decree, order, regulation
or rule of any court or governmental authority applicable to Purchaser.
3.04 Licenses and Permits. Purchaser has all licenses, permits and other
--------------------
governmental authorizations required for the conduct of its business and the
ownership of its properties and is in compliance therewith in all material
respects except where the failure to obtain or comply with any such licenses,
permits and other governmental authorizations would not have a material adverse
effect on the financial condition, results of operations, business or properties
of Purchaser.
3.05 Litigation. There is no pending or threatened action, suit, inquiry,
----------
proceeding or investigation by or before any court or governmental or other
regulatory or administrative agency or commission pending or threatened against
or involving Purchaser, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by Purchaser pursuant
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<PAGE>
to this Agreement or in connection with the transactions contemplated hereby;
nor is there any valid basis for any such action, proceeding or investigation.
3.06 Consents and Approvals of Governmental Authorities and Others. No
-------------------------------------------------------------
consent, approval or authorization of, or declaration, filing or registration
with, any governmental or regulatory authority is required in connection with
the execution, delivery and performance by Purchaser of this Agreement or the
consummation of the transactions contemplated hereby. No consent of any other
Person is necessary to the consummation by Purchaser of the transactions
contemplated hereby.
3.07 No Financing. Purchaser has sufficient funds on hand to enable it to
------------
pay the Purchase Price, the Initial Payment (as defined in the Stipulation and
Order) and other amounts payable by it on the Closing Date.
ARTICLE IV
COVENANTS OF ADI AND AGREEMENTS
-------------------------------
Each of ADI and each Stockholder hereby covenants and agrees with Purchaser
and, where applicable, Purchaser hereby agrees with ADI and each Stockholder:
4.01 Access. Subject to Section 10.12 hereof, between the date of this
------
Agreement and the Closing Date, ADI and the Stockholders shall, and shall cause
Chelmsford, Inc. and each Subsidiary and Montvale GP to cause its Related LP to,
(a) give Purchaser and its authorized representatives full access to all offices
and other facilities and properties of ADI, Chelmsford, Inc. and each LP and to
the books and records of ADI, Chelmsford, Inc. and each LP (and permit Purchaser
to make copies thereof), (b) permit Purchaser to make inspections thereof, and
(c) cause their respective officers and advisers (including, without limitation,
auditors, attorneys, financial advisors and other consultants, agents and
advisors) to furnish Purchaser with such financial and operating data and other
information with respect to the business and properties of ADI, Chelmsford, Inc.
and each LP as Purchaser shall reasonably request.
4.02 Updating of Representations and Warranties. Between the date of this
------------------------------------------
Agreement and the Closing Date, the Stockholders and ADI shall give notice to
Purchaser promptly upon their becoming aware of (a) any inaccuracy of a
representation or warranty set forth in Article II or in the Schedules hereto,
or (b) any event or state of facts that, if it had occurred or existed on or
prior to the date of this Agreement, would have caused any such representation
and warranty to be inaccurate, any such notice to describe such inaccuracy,
event or state of facts in reasonable detail.
4.03 No Solicitation. Following the execution of this Agreement, neither
---------------
the Stockholders nor ADI nor any of their respective affiliates nor any of such
Persons' directors, officers, employees, agents or representatives will directly
or indirectly, (a) solicit or encourage any inquiries, discussions or proposals
for, (b) continue, propose or enter into negotiations or discussions with
respect to, or (c) enter into any agreement or understanding providing for, any
- 19 -
<PAGE>
acquisition of the capital stock, assets or business of ADI, any Subsidiary,
Montvale GP or any LP; nor shall any such Persons provide any information to any
Person (other than Purchaser and its representatives) for the purpose of
evaluating or determining whether to make or pursue any inquiries or proposal
with respect to any such transaction. Each of the Stockholders and ADI will
immediately advise Purchaser of, and communicate to Purchaser the terms of, any
such inquiry or proposal that any of such Persons may receive or of which any of
them may become aware, including the identity of the Person making such inquiry
or proposal.
4.04 Operation in Ordinary Course. Except as otherwise contemplated by this
----------------------------
Agreement, between the date of this Agreement and the Closing Date, ADI shall,
the Stockholders shall cause ADI to, and ADI shall cause Chelmsford, Inc. and
each other Subsidiary and Montvale GP to cause its Related LP to (a) conduct its
business only in the ordinary course and consistent with past practice, (b) use
or operate its assets only in a normal business manner, (c) maintain all its
assets and properties in good working order and condition, ordinary wear and
tear excepted, and (d) maintain in full force and effect all fire, liability and
other insurance policies.
4.05 Business Organization. Except as otherwise contemplated by this
---------------------
Agreement, between the date of this Agreement and the Closing Date, ADI shall,
the Stockholders shall cause ADI to, and ADI shall cause Chelmsford, Inc. and
each other Subsidiary and Montvale GP to cause its Related LP to (a) preserve
substantially intact its business organization and keep available the services
of its present officers and employees, (b) preserve in all material respects its
present business relationships, financing arrangements and goodwill, (c)
maintain its books, accounts and records in a manner consistent with past
practice, except as otherwise required by any statute, rule or regulation, (d)
maintain in full force and effect all its licenses and comply, in all material
respects, with all laws, statutes, ordinances, rules, regulations, orders,
writs, injunctions, decrees, awards or other requirements of any court or other
governmental body applicable to it or the conduct of its business, and (d)
perform all of its material obligations under all Material Contracts.
4.06 Corporate Organization. Except as otherwise contemplated by this
----------------------
Agreement, between the date of this Agreement and the Closing Date, ADI shall
not, the Stockholders shall cause ADI not to and each Subsidiary and Montvale GP
shall cause its Related LP not to (a) amend its Articles of Incorporation or By-
Laws or partnership agreement (or other governing instrument), as the case may
be, (b) issue, sell or otherwise dispose of any debentures, notes, stock or
other securities issued by it, create, sell or otherwise dispose of any options,
rights, conversion rights or other agreements or commitments of any kind
relating to the issuance, sale or disposition of any of such securities or
modify or amend any right of the holder of any such security; or create or
suffer to be created any lien or encumbrance thereon; (c) declare or pay any
dividends in cash, securities or other property, make any other distribution
with respect to its capital stock or partnership interests, as the case may be,
or acquire, directly or indirectly, by redemption or otherwise, any of its
capital stock or partnership interests, as the case may be; (d) make any other
payment (however characterized) to an affiliate other than salaries paid in the
ordinary course of business at rates previously in effect and accounts payable
by the LP's to ADI arising in the ordinary course of business; (e) reclassify,
split up or otherwise change any of its capital stock or partnership interests,
as the case may be; (f) be party to any merger, consolidation or other business
combination; (g) organize any new subsidiary or acquire any equity securities of
any Person or any
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<PAGE>
equity or ownership interest in any business; or (h) agree or otherwise commit,
whether in writing or otherwise, to do any of the foregoing.
4.07 Other Restrictions. Except as otherwise contemplated by this
------------------
Agreement, between the date of this Agreement and the Closing Date, ADI and
Chelmsford, Inc. shall not, the Stockholders shall cause ADI not to and each
Subsidiary and Montvale GP shall cause its Related LP not to:
(a) borrow any funds or otherwise become liable for, whether directly or by
way of guarantee or otherwise, any indebtedness for borrowed money other than
(i) the delivery of the promissory note in an original principal amount of
$500,000 by RI-Mass LP as contemplated by the Stipulation and Order, or (ii)
with the consent of Purchaser, which shall not unreasonably be withheld with
respect to purchases of equipment consistent with past practice;
(b) create or suffer to be created any lien or encumbrance on any of its
properties or assets other than purchase money liens in connection with the
purchase of equipment pursuant to Section 4.07(a), liens for taxes not yet
payable and other statutory liens not arising in connection with the borrowing
of money or the extension of credit;
(c) enter into or modify any employment agreement or commitment or increase
in any manner the compensation of any officer, director or employee who will
continue in the employ of ADI, Chelmsford, Inc. and the LP's following the
Closing, other than regularly scheduled annual increases in accordance with past
practice;
(d) create or modify any bonus, deferred compensation, pension, profit-
sharing, retirement, insurance, stock purchase, stock option, or other fringe
benefit plan, arrangement or practice or any other employee benefit plan (as
defined in section 3(3) of ERISA), whether formal or informal;
(e) incur or assume, whether directly or by way of guarantee or otherwise,
any obligation or liability (absolute or contingent), except obligations and
liabilities incurred in the ordinary course of business and consistent with past
practice;
(f) enter into or modify, or engage in any negotiations with respect to,
any collective bargaining or union agreement or commitment;
(g) make any capital expenditure other than (i) those set forth on Schedule
4.07(g), and (ii) with the prior written consent of Purchaser, which shall not
unreasonably be withheld with respect to those which are or become necessary to
permit ADI, Chelmsford, Inc. or any LP to continue to conduct business in the
ordinary course;
(h) enter into any agreement or commitment or engage in any activity or
transaction other than agreements, commitments and transactions in the ordinary
course of business and consistent with past practice;
- 21 -
<PAGE>
(i) pay, discharge or satisfy any claim, liability or obligation, absolute,
accrued, contingent or otherwise, other than the payment, discharge or
satisfaction in the ordinary course of business and consistent with past
practice of liabilities or obligations reflected in its September 30, 1996
balance sheet or incurred in the ordinary course of business and consistent with
past practice since September 30, 1996;
(j) except as contemplated by Section 6.16, cancel any debts owed to it or
waive any of its claims or rights or do any act or omit to do any act, which
causes a breach of any of its material contracts, commitments or obligations;
(k) enter into (other than the renewal of agreements on terms no less
favorable to it than the agreements in effect on the date hereof and the
entering into of contracts in the ordinary course of business), terminate or
modify any of its agreements, understandings or commitments;
(l) enter into any contract, agreement, commitment, understanding or
transaction with an affiliate; or
(m) agree or otherwise commit, whether in writing or otherwise, to do any
of the foregoing.
4.08 Transfer of Assets and Contracts. Prior to the Closing, ADI shall
--------------------------------
transfer to Stockholders or their designee(s) the properties and assets set
forth on Schedule 4.08, such transfer to take effect as of the Closing Date. In
addition, prior to the Closing, ADI shall either (a) attempt to cancel the
contracts and agreements set forth on Schedule 4.08 and to cause the other
parties to such contracts or agreements to enter into a similar contract or
agreement with OmniHealth Management Services, Inc. ("Omni") or another entity
designated by Stockholders, or (b) if appropriate, attempt to modify such
contracts or agreements to delete provisions applicable only to ADI's billing
and collection business and to enter into new contracts or agreements with Omni
or another entity designated by Stockholders with respect to such matters, any
such action to be effective as of the Closing Date. Any contract or agreement
which cannot be so canceled or modified but which, by its terms, may be assigned
shall be assigned to Omni or another entity designated by Stockholders. In the
event that the contracts and agreements set forth on Schedule 4.08 are not
canceled, modified or assigned as set forth above as of the Closing Date,
Stockholders and Purchaser shall use their collective best efforts to effect
such cancellation, modification or assignment as promptly as practicable after
the Closing Date. To the extent that any such contract or agreement is not so
canceled, modified or assigned prior to the Closing Date, Purchaser shall (i)
use its best efforts to provide to Omni or another entity designated by
Stockholders the benefits of such contract or agreement, (ii) cooperate in any
reasonable and lawful arrangement designed to provide such benefits to Omni or
such other entity, and (iii) enforce for the account of Omni or such other
entity any rights of Omni or such other entity arising in respect of such
contract or agreement against any third party (including the right to elect to
terminate any such contract or agreement in accordance with the terms thereof),
all at the expense of Omni or such other entity.
4.09 Consents. ADI will (a) obtain prior to the Closing all consents
--------
necessary in the opinion of Purchaser's counsel to the consummation of the
transactions contemplated hereby,
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<PAGE>
including, without limitation, (i) the consent of each Person holding a mortgage
or lien on real property or personal property owned or leased by ADI,
Chelmsford, Inc. or any LP to the change in ownership of ADI contemplated by
this Agreement, to the extent required by each such mortgage or the instrument
giving rise to each such lien, and (ii) the consent of each lessor of real or
personal property leased by ADI, Chelmsford, Inc. or any LP to the change in
ownership of ADI contemplated by this Agreement, to the extent required by each
such lease; and (b) use its best efforts to assist Purchaser in obtaining all
approvals from any governmental agencies or departments as may be necessary or
desirable in connection with the Acquisition. All such consents shall be in
writing and executed counterparts thereof will be delivered to Purchaser at or
prior to the Closing.
4.10 Non-Competition Agreements. ADI and each Stockholder shall enter into,
--------------------------
and shall cause each of Omni and Eastern Medical Distributors Inc. ("Eastern")
to enter into, a non-competition agreement with the Purchaser effective as of
the Closing Date and substantially in the form of Exhibit A hereto (the "Non-
---
Competition Agreements").
- ----------------------
4.11 Compliance with Stipulation and Order. Subject to Purchaser's
-------------------------------------
Compliance with Section 5.11, ADI shall cause Cranford LP, RI-Mass LP and
Montvale LP to take all actions required by the Stipulation and Order,
including, without limitation, making all adequate protection payments required
thereby. The Stipulation and Order shall not have been modified without the
written consent of Purchaser.
4.12 Omni and Mason Loans. The Stockholders shall cause Omni to repay in
--------------------
full the loans made to it by ADI and to remove the loan made by ADI to Mason
Equities from its balance sheet.
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<PAGE>
4.13 Employment Matters.
------------------
(a) On or before the Closing, ADI will transfer certain of its employees
set forth on Schedule 4.13 (the "Transferred Employees") to Omni, the majority
stockholders of which will be the Stockholders. The principal business of Omni
will be, among other things, providing billing and collection services, practice
management and related services. As soon as is practicable following the
Closing, ADI will cause the ADI 401(k) Profit Sharing Plan (the "Plan") to
transfer the accounts and funds of the Transferred Employees held by the Plan to
the tax-qualified defined contribution plan established by Omni.
(b) As of the Closing Date, the Transferred Employees shall be deemed to
have elected "continuation coverage" under Sections 601 et seq. of ERISA and
-- ---
shall be entitled to welfare benefits, elections and coverage as employees who
were terminated from the employ of ADI the Subsidiaries and the LPS ("COBRA
coverage"). Omni may pay the amounts chargeable by ADI, the Subsidiaries,
Montvale GP and the LPS with respect to the costs of COBRA coverage directly to
the respective payees. ADI will charge for COBRA coverage in the amount last
charged by ADI for such coverage; provided, however, that no such charges to
Omni or the Transferred Employees will be made for the month of March 1997 for
COBRA coverage. ADI, the Subsidiaries, Montvale GP and the LPS will not make
any material changes to the welfare plans (as such term is defined under ERISA)
sponsored by them for ninety days following the Closing Date. Within ninety
days of the Closing Date, Omni will adopt a medical plan for the benefit of its
employees.
(c) ADI and Omni will make available to each other such information and
documentation concerning the Transferred Employees and the Plan as may be
required by each in connection with and by reason of such transfers and in
connection with the welfare benefit plans of ADI.
ARTICLE V
CONDITIONS TO ADI'S AND STOCKHOLDERS' OBLIGATIONS
-------------------------------------------------
Each and every obligation of ADI and Stockholder under this Agreement to be
performed on or before the Closing shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions, unless waived in
writing by ADI and Stockholders:
5.01 Representations and Warranties True. The representations and
-----------------------------------
warranties of Purchaser contained herein shall be true and accurate in all
material respects as of the date when made and at and as of the Closing as
though such representations and warranties were made at and as of such date and
the Stockholders shall have received a certificate to that effect signed by
Purchaser.
5.02 Performance. Purchaser shall have performed and complied with all
-----------
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing and the Stockholders
shall have received a certificate to that effect signed by Purchaser.
5.03 No Governmental Proceeding or Litigation. No suit, action,
----------------------------------------
investigation, inquiry or other proceeding by any governmental body or other
Person or legal or administrative
- 24 -
<PAGE>
proceeding shall have been instituted or threatened which questions the validity
or legality of the transactions contemplated hereby.
5.04 Items to be Delivered at Closing by Purchaser. At the Closing,
---------------------------------------------
Purchaser shall deliver the Payment to Stockholders.
5.05 Opinion of Purchaser's Counsel. The Purchaser shall have delivered to
------------------------------
ADI and Stockholders an opinion of Werbel & Carnelutti, P.C., counsel to the
Purchaser, dated as of the Closing Date, in form and substance reasonably
satisfactory to ADI, to the effect that:
(a) Purchaser is a corporation organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power and
authority to own its properties and to engage in its business as presently
conducted or contemplated, and is duly qualified as a foreign corporation in
each jurisdiction where the corporation owns substantial assets or owns or
leases real property.
(b) Purchaser has full power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby.
(c) The execution, delivery and performance of the Agreement have been duly
authorized by all necessary corporate action of Purchaser. The Agreement has
been duly executed and delivered by Purchaser and constitutes a valid and
binding obligation of Purchaser, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization and similar
laws affecting the enforcement of creditors' rights generally and to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or an action at law).
5.06 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits, delays or conditions
consummation of the Acquisition.
5.07 Litigation. No action or proceeding shall be pending or threatened by
----------
or before any Person, court or other governmental body seeking to restrain or
prohibit or to recover damages in respect of the Acquisition or to revoke or
suspend any license, permit, order or approval by reason of the Acquisition; nor
shall there be any other action or proceeding pending or threatened which action
or other proceeding may, in the reasonable opinion of the Stockholders, result
in a decision, ruling, or finding that individually or in the aggregate has or
may reasonably be expected to have a material adverse effect on the validity or
enforceability of this Agreement, or on the ability of Purchaser to perform its
obligations under this Agreement.
5.08 Regulatory Approvals. All licenses, authorizations, consents, orders
--------------------
and regulatory approvals of governmental bodies necessary for the consummation
by Purchaser of the Acquisition shall have been obtained on terms satisfactory
to the Stockholders and shall be in full force and effect.
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<PAGE>
5.09 Other Consents. Consents or waivers from all parties that are required
--------------
in connection with the consummation of the Acquisition and the other
transactions contemplated hereby (including, without limitation, the consents
set forth on Schedule 2.18) shall have been obtained on terms reasonably
satisfactory to the Stockholders and shall be in full force and effect and
signed copies thereof shall have been delivered to the Stockholders.
5.10 Billing and Collection Services Agreement. Purchaser and Omni shall
-----------------------------------------
have entered into a Billing and Collection Services Agreement substantially in
the form of Exhibit B hereto (the "Billing and Collection Services Agreement").
-----------------------------------------
5.11 Funds for Stipulation and Order. Purchaser shall have provided to ADI
-------------------------------
the funds required to make the Initial Payment (as defined in the Stipulation
and Order) in accordance with the Stipulation and Order.
ARTICLE VI
CONDITIONS TO PURCHASER'S OBLIGATIONS
-------------------------------------
Each and every obligation of Purchaser under this Agreement to be performed
on or before the Closing shall be subject to the satisfaction, on or before the
Closing, of each of the following conditions, unless waived in writing by
Purchaser:
6.01 No Injunction. There shall not be in effect any injunction, order or
-------------
decree of a court of competent jurisdiction that prohibits, delays or conditions
consummation of the Acquisition.
6.02 Representations, Warranties and Agreements. (a) The representations
------------------------------------------
and warranties of ADI and the Stockholders set forth in this Agreement shall be
true and correct as of the date of this Agreement and as of the Closing Date
with the same force and effect as though made at such time (such representations
and warranties not being affected by any updating information furnished pursuant
to Section 4.02 or any other provision of this Agreement), (b) ADI and the
Stockholders shall have performed and complied with the agreements contained in
this Agreement required to be performed and complied with by them at or prior to
the Closing, and (c) Purchaser shall have received a certificate to that effect
signed by the Stockholders.
6.03 Legal Opinions. Purchaser shall have received opinions from Squadron,
--------------
Ellenoff, Plesent & Sheinfeld, LLP, special counsel to ADI and the Stockholders
(with respect to (a), (k), (l), (m) and (n) below), and Helene K. Netter,
Esq., general counsel to ADI (with respect to (b) through (j) below), dated the
Closing Date, to the effect that:
(a) Each of ADI and each Subsidiary is a corporation organized, validly
existing and in good standing under the laws of the state of its incorporation,
with full corporate power and authority to own its properties and to engage in
its business as presently conducted or
- 26 -
<PAGE>
contemplated, and is qualified as a foreign corporation in each jurisdiction
where the corporation owns substantial assets or owns or leases real property.
(b) The authorized capital stock of ADI consists of 3,000 shares of Common
Stock, without par value, of which 963.40 shares are validly issued and
outstanding and constitute the Purchased Shares. All of such issued and
outstanding shares are fully paid and non-assessable. The Stockholders own the
Purchased Shares of record. To the knowledge of such counsel after due inquiry,
there are no outstanding options, rights, conversion rights, agreements or
commitments of any kind relating to the issuance, sale or transfer of any equity
securities or other securities of ADI or any Subsidiary.
(c) The authorized capital stock of Suffolk GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are validly issued and
outstanding (the "Suffolk Shares"). All of such issued and outstanding shares
--------------
are fully paid and non-assessable. ADI owns the Suffolk Shares of record.
(d) The authorized capital stock of Mass GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are validly issued and
outstanding (the "Mass Shares"). All of such issued and outstanding shares are
-----------
fully paid and non-assessable. ADI owns the Mass Shares of record.
(e) The authorized capital stock of Cranford GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are validly issued and
outstanding (the "Cranford Shares"). All of such issued and outstanding shares
---------------
are fully paid and non-assessable. ADI owns the Cranford Shares of record.
(f) The authorized capital stock of Mid-New Jersey GP consists of 3,000
shares of common stock, without par value, of which 1,000 shares are validly
issued and outstanding (the "Mid-New Jersey Shares"). All of such issued and
---------------------
outstanding shares are fully paid and non-assessable. ADI owns the Mid-New
Jersey Shares of record.
(g) The authorized capital stock of Rockaway GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are validly issued and
outstanding (the "Rockaway Shares"). All of such issued and outstanding shares
---------------
are fully paid and non-assessable. ADI owns the Rockaway Shares of record.
(h) The authorized capital stock of RI-Mass GP consists of 3,000 shares of
common stock, without par value, of which 1,000 shares are validly issued and
outstanding (the "RI-Mass Shares"). All of such issued and outstanding shares
--------------
are fully paid and non-assessable. ADI owns the RI-Mass Shares of record.
(i) The authorized capital stock of Montvale, Inc. consists of 3,000 shares
of common stock, without par value, of which 1,000 shares are validly issued and
outstanding (the "Montvale Shares"). All of such issued and outstanding shares
are fully paid and non-assessable. ADI owns the Montvale Shares of record.
- 27 -
<PAGE>
(j) The authorized capital stock of Chelmsford, Inc. consists of 3,000
shares of common stock, without par value, all of which are validly issued and
outstanding (the "Chelmsford Shares"). All of such issued and outstanding shares
-----------------
are fully paid and non-assessable. ADI owns 1,950 of the Chelmsford Shares of
record.
(k) ADI has full corporate power and authority and each Stockholder has
full power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of the
Agreement have been duly authorized by all necessary corporate action of ADI.
The Agreement has been duly executed and delivered by ADI and the Stockholders
and constitutes a valid and binding obligation of each of them, enforceable
against each of them in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization and similar laws affecting the
enforcement of creditors' rights generally and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or an action at law).
(l) Neither the execution and delivery of the Agreement nor the
consummation of any or all of the transactions contemplated hereby (i) violates
any provision of the Articles of Incorporation or By-Laws (or other governing
instrument) of ADI or any Subsidiary or the partnership agreement of any LP,
(ii) violates or constitutes a default (or an event which, with notice or lapse
of time or both, would constitute a default) under any Material Contract
specifically listed on Schedule 2.11 or (iii) violates any statute, law,
regulation or rule, or any judgment, decree or order of which such counsel has
knowledge, of any court or other governmental body applicable to ADI or any
Stockholder.
(m) No consent, approval or authorization of, or declaration, filing or
registration with, any governmental body is required in connection with the
execution, delivery and performance by ADI or the Stockholders of the Agreement
or the consummation by ADI or the Stockholders of the transactions contemplated
thereby.
(n) To the knowledge of such counsel after due inquiry, there is no action,
suit, inquiry, proceeding or investigation by or before any court or
governmental body pending or threatened against or involving ADI, any Subsidiary
or any LP which questions or challenges the validity of the Agreement or any
action taken or to be taken by ADI or any Stockholder pursuant to the Agreement
or in connection with the transactions contemplated hereby, and to the knowledge
of such counsel after due inquiry, neither ADI nor any Stockholder is subject to
any judgment, order or decree except as disclosed in the Schedules to the
Agreement.
6.04 Litigation. No action or proceeding shall be pending or threatened by
----------
or before any Person, court or other governmental body seeking to restrain or
prohibit or to recover damages in respect of the Acquisition or to revoke or
suspend any license, permit, order or approval by reason of the Acquisition; nor
shall there be any other action or proceeding pending or threatened which action
or other proceeding may, in the reasonable opinion of Purchaser, result in a
decision, ruling, or finding that individually or in the aggregate has or may
reasonably be expected to have a
- 28 -
<PAGE>
material adverse effect on the validity or enforceability of this Agreement, or
on the ability of ADI or any Stockholder to perform its/his obligations under
this Agreement.
6.05 Regulatory Approvals. All licenses, authorizations, consents, orders
--------------------
and regulatory approvals of governmental bodies necessary for the consummation
by ADI and the Stockholders of the Acquisition shall have been obtained on terms
reasonably satisfactory to Purchaser and shall be in full force and effect.
6.06 Other Consents. Consents or waivers from all parties that are required
--------------
in connection with the consummation of the Acquisition and the other
transactions contemplated hereby (including, without limitation, the consents
set forth on Schedule 2.18) shall have been obtained on terms reasonably
satisfactory to Purchaser and shall be in full force and effect and signed
copies thereof shall have been delivered to Purchaser.
6.07 Secretary of State Certificates. Purchaser shall have received (a) a
-------------------------------
copy of the Certificate of Incorporation of each of ADI and each Subsidiary,
certified as of a recent date by the Secretary of State of the state of its
incorporation, and (b) a Certificate of the Secretary of State of the state of
its incorporation with respect to ADI and each Subsidiary as of a recent date
showing ADI and each Subsidiary to be validly existing in the state of its
incorporation and in good standing and that all franchise taxes required to be
paid and all reports required to be filed have been duly paid.
6.08 Compliance Evidence. Purchaser shall have received such certificates,
-------------------
opinions, documents and information as it may reasonably request in order to
establish satisfaction of the conditions set forth in this Section 6.
6.09 Material Change. From the date of the Nine-Month Financial Statements
---------------
to the Closing Date, ADI shall not have suffered any material adverse change
(whether or not such change is referred to or described in any supplement to the
Schedules) in its business, prospects, financial condition, working capital,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves or
operations.
6.10 Delivery of Closing Documents. At the Closing, ADI and Stockholders
-----------------------------
shall deliver to the Purchaser:
(i) certificates representing the Purchased Shares of ADI Stock, duly
endorsed for transfer to Purchaser;
(ii) certificates representing all of the issued and outstanding capital
stock of the Subsidiaries;
(iii) the Non-Competition Agreements, executed by each of Omni, Eastern,
Drew M. Netter and William Lehn; and
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<PAGE>
(iv) the original minute books of each of ADI and each Subsidiary,
including all unissued stock certificates and stock ledgers, and the partnership
records of each LP.
6.12 Resignations. On or prior to the Closing Date, ADI shall have received
------------
the written resignations of all officers and directors requested by Purchaser.
6.13 Billing and Collection Services Agreement. Purchaser and Omni shall
-----------------------------------------
have entered into the Billing and Collection Services Agreement.
6.14 Stipulation and Order. The Stipulation and Order shall not have been
---------------------
modified without the written consent of Purchaser. An order approving the
Stipulation and Order shall have been entered in the LP Bankruptcy Case and the
period within which to file an appeal from such order shall have expired without
such an appeal having been made.
6.15 Application of Funds. All funds received by ADI from Purchaser for
--------------------
the purpose of making the Initial Payment and the Final Payment (as such terms
are defined in the Stipulation and Order) shall have been applied to make such
payments.
6.16 Omni and Mason Loans. The loan made by ADI to Omni shall have been
--------------------
repaid in full and Purchaser shall have received satisfactory written evidence
of such repayment and the loan made by ADI to Mason Equities shall have been
removed from ADI's balance sheet and Purchaser shall have received satisfactory
written evidence of such removal.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
------------------------------------------
7.01 Investigations; Survival of Warranties. The representations,
--------------------------------------
warranties and agreements of ADI, Stockholders and Purchaser contained herein or
in any certificates or other documents delivered prior to or at the Closing
shall survive the Closing for a period of 18 calendar months and shall not be
deemed waived or otherwise affected by any investigation made by any party
hereto.
ARTICLE VII
TERMINATION AND ABANDONMENT
---------------------------
8.01 Methods of Termination. The transactions contemplated herein may be
----------------------
terminated and/or abandoned at any time prior to the Closing:
(a) by mutual and joint consent of the Purchaser and the Stockholders;
- 30 -
<PAGE>
(b) by Purchaser, (i) at any time if the representations and warranties of
ADI or any Stockholder contained in Article II hereof prove to have been
incorrect in any material respect when made or at any time thereafter, or (ii)
upon written notice to ADI and Stockholders at any time prior to the Closing
Date, if one or more of the conditions precedent to the obligations of Purchaser
set forth in this Agreement is not satisfied at the time at which the Closing
would otherwise occur or if satisfaction of such a condition is or becomes
impossible on or prior to the Closing Date;
(c) by a majority in interest of the Stockholders (i) at any time if the
representations and warranties of Purchaser contained in this Agreement prove to
have been incorrect in any material respect when made or at any time thereafter,
or (ii) upon written notice to Purchaser given at any time prior to the Closing
Date if one or more of the conditions precedent to the obligations of ADI set
forth in this Agreement is not satisfied at the time at which the Closing would
otherwise occur or if satisfaction of such a condition is or becomes impossible
on or prior to the Closing Date; or
(d) by any party, if the Closing does not occur on or prior to March 10,
1997.
8.02 Procedure Upon Termination. In the event of termination and
--------------------------
abandonment by Purchaser or Stockholders pursuant to Section 8.01 hereof, notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated and/or abandoned, without
further action by Purchaser or Stockholders. If the transactions contemplated by
this Agreement are terminated and/or abandoned as provided herein:
(a) each party will redeliver all documents, work papers and other material
of any other party relating to the transactions contemplated hereby, whether
obtained before or after the execution hereof, to the party furnishing the same,
without retaining copies thereof;
(b) all confidential information received by any party hereto with respect
to the business of any other party shall be treated in accordance with Section
10.12 hereof; and
(c) no party hereto shall have any liability or further obligation to any
other party to this Agreement except as stated in subparagraphs (a) and (b) of
this Section 8.02.
ARTICLE IX
INDEMNIFICATION
---------------
9.01 Indemnification By Stockholders. In the event that the transactions
-------------------------------
contemplated by this Agreement are consummated, Stockholders shall indemnify
Purchaser and each of its officers and directors and hold each of them harmless
from, against and in respect of and shall on demand reimburse such Persons for:
(i) all its losses, liabilities, damages, costs and expenses arising from any
misrepresentation or breach of any representation, warranty, covenant or
agreement on the part of any Stockholder or ADI under this Agreement; (ii) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any
- 31 -
<PAGE>
agreement or understanding alleged to have been made by any such Person with ADI
or any Stockholder (or any Person acting on behalf of ADI or any Stockholder) in
connection with the Acquisition; (iii) claims by any taxing authorities with
respect to taxes with respect to the period up to and including the Closing, and
(iv) any and all actions, suits, proceedings, elections, demands, assessments,
judgments, costs and expenses, including, without limitation, reasonable legal
fees and expenses, incident to any of the foregoing or incurred in investigating
or attempting to avoid same or to oppose the imposition thereof, or in enforcing
this indemnity. Notwithstanding the foregoing, in the event that a court of
competent jurisdiction having final adjudicative authority and from which no
appeal is available shall determine that Purchaser is not entitled to
indemnification then Purchaser shall not be entitled to recover its legal fees
with respect to such claim from Stockholders.
9.02 Indemnification by Purchaser. In the event that the transactions
----------------------------
contemplated by this Agreement are consummated, the Purchaser shall indemnify
each Stockholder and hold him harmless from, against and in respect of and shall
on demand reimburse each Stockholder for: (i) all his losses, liabilities,
damages, costs and expenses arising from or in connection with any
misrepresentation or breach of any representation, warranty, covenant or
agreement on the part of the Purchaser under this Agreement; (ii) any and all
actions, suits, claims, or legal, administrative, arbitration, governmental or
other proceedings or investigations against such Stockholder that relate to
Purchaser or the business of ADI in which the principal event giving rise
thereto occurred after the Closing Date or which result from or arise out of any
action or inaction after the Closing Date of Purchaser or ADI or any officer,
employee, agent, representative or subcontractor of Purchaser or ADI; (iii) any
claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
any such Person with Purchaser (or any Person acting on behalf of Purchaser) in
connection with the Acquisition; (iv) claims by any taxing authorities with
respect to taxes with respect to the period after the Closing; and (v) any and
all actions, suits, proceedings, elections, demands, assessments, judgments,
costs and expenses, including, without limitation, reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid same or to oppose the imposition thereof, or in enforcing
this indemnity. Notwithstanding the foregoing, in the event that a court of
competent jurisdiction having final adjudicative authority and from which no
appeal is available shall determine that such Stockholder is not entitled to
indemnification then such Stockholder shall not be entitled to recover its legal
fees with respect to such claim from Purchaser.
9.03 Procedures for Indemnification. Promptly after receipt by an
------------------------------
indemnified party under Section 9.01 or 9.02 of notice of the commencement of
any action for which indemnification is available under Section 9.01 or 9.02,
such indemnified party shall, if a claim in respect thereof is to be made
against an indemnifying party under such section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to an
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall elect, to
assume the defense thereof with counsel
- 32 -
<PAGE>
reasonably satisfactory to such indemnified party and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such section for any fees of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation and costs and
expenses of legal counsel, if the indemnified party and the indemnifying party
are both parties to the action and the indemnified party has been advised by
counsel that there may be a conflict of interest in one counsel's representing
both it and the indemnifying party. If an indemnifying party assumes the defense
of such an action, (a) no compromise or settlement thereof may be effected by
the indemnifying party without the indemnified party's consent (which shall not
be unreasonably withheld, delayed or conditioned) unless (i) there is no finding
or admission of any violation of law or any violation of the rights of any
Person and no effect on any other claims that may be made against the
indemnified party, and (ii) the sole relief provided is monetary damages that
are paid in full by the indemnifying party, and (b) the indemnifying party shall
have no liability with respect to any compromise or settlement thereof effected
without its consent (which shall not be unreasonably withheld, delayed or
conditioned). If notice is given by an indemnified party to an indemnifying
party of the commencement of any action and it does not, within ten days after
the indemnified party's notice is given, give notice to the indemnified party of
its election to assume the defense thereof, the indemnifying party shall be
bound by any determination made in such action or any compromise or settlement
thereof effected by the indemnified party. Notwithstanding the foregoing, if an
indemnified party determines in good faith that there is a reasonable
probability that an action may materially and adversely affect it or its
affiliates other than as a result of monetary damages, such indemnified party
may, by notice to the indemnifying party, assume the exclusive right to defend,
compromise or settle such action, but the indemnifying party shall have the
right to participate in such action and not be bound by any determination of an
action so defended or any compromise or settlement thereof effected without its
consent (which shall not be unreasonably withheld, delayed or conditioned).
9.04 Satisfaction of Indemnification Claims. All indemnification
--------------------------------------
obligations pursuant to Article X shall be paid within a reasonable period of
time after a claim for indemnification has been made and its validity finally
determined.
9.05 Limitation on Claims. All claims for indemnification under this
--------------------
Article IX must be brought within 18 calendar months after the Closing Date,
except for claims for indemnification under 9.01(iii), 9.02(ii) or 9.02(iv). In
the case of a claim for indemnification under 9.02(ii), such claim must be
brought within the period of the statute of limitations applicable to the type
of claim giving rise to such claim for indemnification. In the case of a claim
for indemnification under Section 9.01(iii) or 9.02(iv), such claim must be
brought within the period of the statute of limitations applicable to taxes
claimed to be due.
9.06 Indemnity Threshold and Cap. No claim for indemnification under this
---------------------------
Article IX may be asserted until such time as the amount claimed shall exceed
$50,000 in the aggregate. Notwithstanding anything to the contrary set forth
herein, the aggregate liability of the indemnifying party hereunder shall in no
event exceed $1,500,000.
- 33 -
<PAGE>
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.01 Amendment and Modification. This Agreement may not be amended,
--------------------------
modified or supplemented except by written agreement of ADI, Stockholders and
Purchaser at any time prior to the Closing with respect to any of the terms
contained herein.
10.02 Waiver of Compliance. Any failure of ADI and Stockholders, on the one
--------------------
hand, or Purchaser, on the other, to comply with any obligation, covenant,
agreement or condition herein may be expressly waived in writing by the Chairman
of the Board or President of Purchaser or by the Stockholders, but such waiver
or failure to insist upon strict compliance with such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent or other failure.
10.03 Expenses; Transfer Taxes. Etc. Whether or not the transactions
------------------------------
contemplated by this Agreement shall be consummated, ADI and Stockholders agree
that all fees and expenses incurred by them in connection with this Agreement
shall be borne by them and Purchaser agrees, that all fees and expenses incurred
by it in connection with this Agreement shall be borne by it, including, without
limitation, all fees of counsel and accountants. Stockholders agree that they
will pay all transfer or other taxes which may be payable in connection with the
transactions contemplated by this Agreement.
10.04 Notices. All notices, requests, demands and other communications
-------
required or permitted hereunder shall be in writing and delivered by either (i)
registered or certified U.S. mail, postage prepaid and return receipt requested,
(ii) personal delivery, (iii) delivery by Federal Express or other reputable
overnight courier service or (iv) telecopy. Any such notice shall be deemed to
have been duly given and made (a) in the case of delivery by mail pursuant to
clause (i), three days after deposit in the U.S. mail as aforesaid and (b) in
the case of delivery pursuant to clause (ii), (iii) or (iv), when received by
the addressee. Any such notice, request, demand or communication shall be
addressed, in the case of each party, at its address set forth below:
(a) If to Stockholders, to:
Drew M. Netter
William Lehn
c/o OmniHealth Management Services, Inc.
106 Corporate Park Drive, Suite 413
White Plains, New York 10604
Fax: (914) 642-9799
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Fax: (212) 697-6686
Attention: Stephen J. Gulotta, Jr., Esq.
- 34 -
<PAGE>
or to such other Person or address as Stockholders shall furnish to Purchaser in
writing.
(b)(i) If to ADI prior to Closing, to:
Advanced Diagnostic Imaging, Inc.
106 Corporate Park Drive, Suite 413
White Plains, New York 10604
Attention: Drew M. Netter, President
Fax: (914) 642-9799
with a copy to:
Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Fax: (212) 697-6686
Attention: Stephen J. Gulotta, Jr., Esq.
or to such other Person or address as ADI shall furnish to Purchaser in writing.
(b)(ii) If to ADI after Closing, to:
Advanced Diagnostic Imaging, Inc.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: William D. Farrell
Fax: (201) 488-8455
with a copy to:
Werbel & Carnelutti, P.C.
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
Fax: (212) 832-3353
or to such other Person or address as ADI shall furnish to the Stockholders in
writing.
(c) If to Purchaser, to:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: William D. Farrell
Fax: (201) 488-8455
- 35 -
<PAGE>
with a copy to:
Werbel & Carnelutti, P.C.
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
Fax: (212) 832-3353
or to such other Person or address as Purchaser shall furnish to ADI and the
Stockholders in writing.
10.05 Assignment. This Agreement and all of the provisions hereof shall be
----------
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by ADI or any
Stockholder without the prior written consent of Purchaser or by Purchaser
without the prior written consent of the Stockholders. Notwithstanding the
foregoing, Purchaser shall have the right to assign its right to purchase the
Purchased Shares to a wholly-owned subsidiary, provided that Purchaser shall
remain primarily liable for the performance of each and every obligation of
Purchaser hereunder (including, without limitation, the obligation to make the
Payment and the Additional Payment).
10.06 Publicity. Neither any Stockholder, ADI nor Purchaser shall make or
---------
issue, or cause to be made or issued, any announcement or written statement
concerning this Agreement or the transactions contemplated hereby for
dissemination to the general public without the prior consent of the other
party. This provision shall not apply, however, to any announcement or written
statement required to be made by law or the regulations of any federal or state
governmental agency or any stock exchange, except that the party required to
make such announcement shall, whenever practicable, consult with the other party
concerning the timing and content of such announcement before such announcement
is made.
10.07 Governing Law. This Agreement and the legal relations among the
-------------
parties hereto shall be governed by and construed in accordance with the laws of
the State of New York, without regard to its conflicts of law doctrine.
10.08 Counterparts. This Agreement may be executed simultaneously in two or
------------
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.09 Headings. The headings of the Sections and Articles of this Agreement
--------
are inserted for convenience only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement.
10.10 Entire Agreement. This Agreement, including the Schedules hereto, and
----------------
and the other documents and certificates delivered pursuant to the terms hereof,
set forth the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, and supersede
- 36 -
<PAGE>
all prior agreements, covenants, arrangements, communications, representations
or warranties, whether oral or written, by or on behalf of any party hereto.
10.11 Third Parties. Nothing herein expressed or implied is intended or
-------------
shall be construed to confer upon or give to any Person other than the parties
hereto and their successors or assigns, any rights or remedies under or by
reason of this Agreement.
10.12 Confidentiality. Each party hereto will hold and will cause its
---------------
consultants and advisors to hold in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all documents and information concerning
the other party furnished it by such other party or its representatives in
connection with the transactions contemplated by this Agreement (except to the
extent that such information can be shown to have been (a) known by the party to
which it was furnished prior to its receipt from the party hereto furnishing
same, or (b) later lawfully acquired from other sources by the party to which it
was furnished, which sources are not bound by an obligation of confidentiality
with respect to such information), and no party will release or disclose such
information to any other Person, except its auditors, attorneys, financial
advisors, bankers and other consultants and advisors in connection with this
Agreement. If the transactions contemplated by this Agreement are not
consummated, such confidence shall be maintained except to the extent such
information comes into the public domain through no fault of the party required
to hold it in confidence, and such information shall not be used by the
receiving party for any reason or in any manner and all such documents
(including copies thereof) shall be returned to the other party immediately upon
the written request of such other party. Unless this Agreement is terminated
pursuant to Article VIII hereof, prior to and following the Closing, the
Stockholders shall keep confidential and not disclose to any Person (other than
their respective employees, attorneys, accountants and advisers) or use (except
as required in the conduct of the business of ADI, Chelmsford, Inc. and each LP
in the ordinary course and consistent with past practice prior to the Closing)
any non-public information relating to ADI, Chelmsford, Inc. or any LP, whether
or not obtained in connection with the Acquisition. Each party shall be deemed
to have satisfied its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve the confidentiality of its own similar information. The parties hereto
shall, and ADI shall cause Chelmsford, Inc. and each other Subsidiary to cause
its Related LP to, use their best efforts to cause their respective
representatives, employees, attorneys, accountants and advisers to whom
information is disclosed in connection with the Acquisition to comply with the
provisions of this Section 10.12.
- 37 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
ADVANCED DIAGNOSTIC IMAGING, INC.
By:
-----------------------------------
Name: Drew M. Netter
Title: President
MEDICAL RESOURCES, INC.
By:
-------------------------------------
Name: Robert L. Farrell
Title: Vice President
STOCKHOLDERS
----------------------------------------
Drew M. Netter
----------------------------------------
William Lehn
- 38 -
<PAGE>
EXECUTION COPY
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of March 10, 1997, between MRI of Palm Beach,
Inc., a Florida corporation with a mailing address at 4332 Sherwood Forest
Court, Ann Arbor, Michigan 48103 ("General Partner"), The Magnet of Palm Beach,
---------------
Ltd., a Florida limited partnership ("Seller"), West Palm Beach 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 1.7 and
-----
Article 3 hereof, Medical Resources, Inc., a Delaware corporation ("MRI").
---
W I T N E S S E T H:
-------------------
WHEREAS, Seller owns and manages an imaging center ("Center") located
------
at 4477 Medical Center Way, West Palm Beach, Florida 33407 (the "Center"), and
------
owns or has the right to use certain of the assets, properties, business and
goodwill relating thereto (the "Business"); and
--------
WHEREAS, Buyer desires to acquire the Business and substantially all
of the properties and assets of Seller used or held for use in connection with
the Business, and Seller desires 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, General Partner is the general partner of Seller.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, Seller, General Partner, Buyer and MRI agree as
follows:
<PAGE>
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), Seller shall sell,
assign, transfer and deliver to Buyer, and Buyer shall purchase and acquire from
Seller, free and clear of all Liens (as defined in Section 2.5(b) hereof) except
as otherwise contemplated by Section 2.5 hereof, all of the assets of the
Business associated with the Center, other than the assets listed on Schedule
--------
1.1 (the "Excluded Assets")), including, without limitation, all machinery,
- --- ---------------
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 Seller's
suppliers or lessors with respect to any assets included in the Purchased Assets
to the extent said warranties and claims may be assignable; and
(b) all names, trademarks, contractual rights, telephone numbers,
Licenses (as defined in Section 2.6), books and records, business and good will
of Seller relating to the Business and the Purchased Assets; and
(c) all of Seller's accounts receivable arising out of services
performed by Seller 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
-------------------
(d) the rights to any and all contracts listed on Schedule 1.4 hereto
(the "Assumed Contracts") (any agreement not so listed on Schedule 1.4 hereto
-----------------
shall be retained by Seller and no obligation thereof will be assumed by Buyer);
-2-
<PAGE>
(e) all deposits (except as set forth on Schedule 1.1 hereto) and
prepaid items;
(f) the building and premises, to the extent owned by Seller, wherein
the Center is located; and
(g) 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 Seller shall herein agree to in Article 8.
1.2 (a) Closing Date. The purchase and sale of the Business and the
------------
Purchased Assets (the "Closing") shall take place on March 10, 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 Seller and Buyer may agree
upon in writing (such date and time being hereinafter called the "Closing
-------
Date").
(b) Relation Back. It is expressly agreed that for the period
-------------
commencing on March 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. Accordingly, the representations and warranties hereunder of (x)
Seller and General Partner with respect to matters detailed in Sections 2.3 -
2.13 hereof and (y) Buyer and MRI with respect to matters described in Section
3.3 hereof shall be made and be true and correct as of March 1, 1997.
1.3 (a) Purchase Price. As consideration for the Purchased Assets,
--------------
Buyer shall pay to Seller $2,600,000 (the "Purchase Price") as follows:
--------------
(i) $1,650,000 to Seller in cash by bank check, certified
check, cashier's check or wire transfer on the Closing Date
(the "Seller's Closing Date Amount");
----------------------------
-3-
<PAGE>
(ii) Buyer shall deliver to Seller 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 $600,000 (the "Threshold Amount") by
----------------
the Market Value (as defined in Section 10.15) of the MRI
Common Stock as of the trading day immediately preceding
the Closing Date (the "Closing Date Price"); and
------------------
(iii) Pursuant to the terms of an escrow agreement (the "Escrow
------
Agreement") in the form attached hereto as Exhibit E, at
---------
the Closing, Buyer agrees to remit to Jones, Foster,
Johnston & Stubbs, P.A., as escrow agent (a) $350,000 (the
"Escrow Amount", and together with the Seller's Closing
-------------
Date Amount, the "Closing Date Amount") and (b) the Closing
-------------------
Shares. It is expressly understood that Buyer will look to
such consideration held in escrow for satisfaction of any
indemnification liability incurred by Seller or General
Partner pursuant to Article 9 of this Agreement. It is
expressly agreed that (x) the Closing Shares shall be
released to Buyer on the date six months from the Closing
Date and (y) the Escrow Amount shall be released on the
date six months from the Closing Date, provided that no
--------
claims have been asserted in good faith by Buyer against
either Seller or General Partner under the provisions of
Article 9 hereof.
(b) Post Closing Adjustment of Closing Shares. In the event that on
-----------------------------------------
the Effective Date (as defined in Section 1.7) the Market Value as of the
Effective Date (the "Effective Date Price") is less than the Closing Date Price,
--------------------
Buyer shall issue to Seller promptly following the Effective Date (but in any
event not less than the third Business Day following the Effective Date) such
additional number of shares of MRI Common Stock (rounded to the
-4-
<PAGE>
nearest whole number) as shall equal a fraction, the numerator of which is an
amount equal to the difference between (1) the Threshold Amount and (2) the
product obtained by multiplying the Effective Date Price by the number of
Closing Shares, and the denominator of which is the Effective Date Price.
(c) Seller's Right to Return Closing Shares if Closing Shares Not
-------------------------------------------------------------
Registered Within 180 Days of Closing. In the event that the Effective Date
- -------------------------------------
does not occur within 180 days of the Closing Date (such 180th date, the
"Determination Date"), Seller shall have the right, exercisable at its sole
- -------------------
discretion, to return all of the Closing Shares to MRI within five (5) days of
the Determination Date and receive from MRI cash in the amount equal to the
Threshold Amount. Seller's right to return the Closing Shares pursuant to this
Section 1.3(c) shall be exercised by returning the Closing Shares to MRI at the
address set forth in Section 10.7 hereof, together with notice of such exercise,
and such right shall expire if the Closing Shares have not been so delivered to
MRI by the close of business on the fifth day following the Determination Date.
Upon exercise of such right of return by Seller, MRI shall, at Seller's request,
deliver to Seller by certified check or wire transfer an amount equal to the
Threshold Amount within two business days of its receipt of the stock
certificate for the Closing Shares.
(d) Allocation of Purchase Price. Seller and Buyer agree to allocate
----------------------------
the Purchase Price in accordance with IRC Section 1060. Such allocation shall
be agreed to by Seller and Buyer within 30 days of the Closing Date. In
addition, Seller 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.
1.4 Liabilities. Buyer shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of Seller, the Business or the
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. Such liabilities retained by Seller are herein referred to
- ---
as "Retained Liabilities" and such liabilities expressly assumed by Buyer in
Schedule 1.4 are herein referred to as "Assumed
-5-
<PAGE>
Liabilities." Seller and General Partner hereby agree to indemnify and hold
Buyer harmless against all Retained Liabilities.
1.5 Additional Closing Date Deliveries and Actions.
----------------------------------------------
(a) On the Closing Date, Seller 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 Seller in
respect of the Purchased Assets or the consummation of the transactions contem
plated by this Agreement, (y) all of the documents, instruments and opinions
contemplated to be delivered by Seller 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
Seller and General Partner 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 "Seller's Closing Documents".
--------------------------
(b) On the Closing Date, Buyer shall (i) deliver, or execute and
deliver, to Seller (w) the Closing Date Amount, (x) the Closing Shares, (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
Seller 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 (w) through (z) hereof
are hereinafter referred to as "Buyer's Closing Documents" and, collectively
-------------------------
with Seller's Closing Documents, the "Closing Documents".
-----------------
1.6 Consents, Waivers and Further Assurances. (a) From time to time
----------------------------------------
following the Closing, Seller shall execute and deliver, or cause to be executed
and delivered to Buyer such other
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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, Seller 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 Buyer's exclusive use and benefit.
1.7 Registration of MRI Common Stock. (a) MRI agrees to prepare and
--------------------------------
file, and furnish to Seller, within 30 days of the Closing Date, a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
with the Securities and Exchange Commission (the "SEC") covering the resale by
---
Seller in a public distribution of the Closing Shares and, to the extent
feasible, the Adjustment Shares (as defined below) and MRI shall be further
obligated to use its reasonable best efforts, including the filing of any
amendments or supplements thereto, to have such registration statement declared
effective under the Securities Act and the rules and regulations promulgated
thereunder within 120 days of the Closing Date, provided that, in any event, MRI
--------
shall be obligated to cause the Effective Date (as defined below) to occur
within 180 days of the Closing Date. MRI 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 commencing on
the date such registration is declared effective by the SEC (the "Effective
---------
Date") and ending on the earlier to occur of (i) the date on which Seller has
completed its disposition of such shares pursuant to the registration statement
or (ii) the date which is thirty days after the Shares (as defined in the Escrow
Agreement) have been released from escrow pursuant to Section 2 of the Escrow
Agreement. In addition to the Closing Shares, MRI shall use its reasonable best
efforts to register on such registration statement such indeterminate number of
shares of MRI Common Stock which may be issuable to Seller pursuant to Section
1.3(b) (the "Adjustment Shares"), provided that if the SEC does not permit the
----------------- --------
registration of the Adjustment Shares in such registration statement, MRI shall
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use its reasonable best efforts to register such Adjustment Shares promptly
following their issuance to Seller and perform such other obligations with
respect to such registration of the Adjustment Shares as it has hereunder with
respect to the registration of the Closing Shares.
(b) In connection with the registration of the Closing Shares and
any Adjustment Shares pursuant to this Section 1.7:
(i) Seller 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 the Closing Shares
and any Adjustment 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;
(iv) MRI will furnish to Seller 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 Seller
(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 Seller, at any time when a prospectus relating to the
Closing Shares and any Adjustment Shares
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<PAGE>
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
the Closing Shares and any Adjustment 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 1.7; and
(viii) Seller shall pay any and all brokerage fees and transfer taxes
incident to the sale of any share of MRI Common Stock sold by Seller
pursuant to the registration effected pursuant to this Section 1.7,
and shall pay the fees and expenses of any special attorneys or
accountants retained by it.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and General Partner,
jointly and severally, represent and warrant to Buyer and agree as follows:
2.1 Organization and Qualification. General Partner is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Florida. Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Florida. General
Partner is the
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<PAGE>
sole general partner of Seller. General Partner and Seller each have all
requisite corporate and/or partnership power and authority to own or lease their
properties and assets and to conduct their business as presently conducted.
2.2 Authority to Effect Transactions. (a) General Partner and
--------------------------------
Seller each has all requisite power and authority to execute, deliver and
perform this Agreement and all applicable Seller's Closing Documents. All
necessary action (including, without limitation, action by General Partner and
the partners of Seller) on the part of General Partner and Seller has been duly
taken to authorize the execution, delivery and performance by General Partner
and Seller of this Agreement and all of Seller's Closing Documents, including,
but not limited to, an appropriate notice to the stockholders or partners, as
appropriate, to the extent required by law, which contains a description of this
transaction and all material terms thereof, and the appropriate vote by
stockholders or partners, as appropriate and to the extent required by law.
This Agreement has been duly authorized, executed and delivered by General
Partner and Seller, its stockholders and/or partners, to the extent required by
law, and is the legal, valid and binding obligation of General Partner and
Seller, enforceable against General Partner and Seller in accordance with its
terms except (x) as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally, and (y) to the extent that such enforceability
is subject to general principals of equity (regardless of whether such
enforcement is considered in a proceeding in equity or at law). Seller's
Closing Documents have been duly authorized and, upon execution and delivery by
General Partner and Seller, as contemplated hereby, will be the legal, valid and
binding obligation of General Partner and Seller, enforceable against General
Partner and Seller in accordance with their terms.
(b) Except as set forth in Schedule 2.2(B) hereto, (i) no consent,
---------------
authorization, approval, order, license, certificate, permit or act of or from,
or declaration or filing with, any foreign, federal, state, local or other
governmental authority or regulatory body or any court or other tribunal or any
party to any contract, agreement, instrument, lease or License (as defined in
Section 2.6) to which Seller or General Partner is a party or by
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<PAGE>
which it is bound or to which any of the Purchased Assets is subject, is
required for the execution, delivery or performance by Seller or General Partner
of this Agreement or any of Seller's Closing Documents or the consummation of
the transactions contemplated hereby or thereby and (ii) neither the execution,
delivery or performance of this Agreement or any of Seller's 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) any of General Partner's or Seller's
organizational documents and agreements, each as amended to date, (B) any law,
statute, rule, regulation, order, award, judgment or decree to which Seller or
General Partner or any of the Purchased Assets is subject or (C) any contract,
agreement, instrument, lease or License to which Seller or General Partner is a
party or by which any of them is bound.
2.3 Financial Statements. Seller has delivered to Buyer true and
--------------------
correct copies of the following: (i) unaudited balance sheet, (ii) unaudited
statement of operations and (iii) unaudited statement of cash flows of the
Center for each of the three years ended December 31, 1994, 1995 and 1996.
Except to the extent that the General Partner and/or Seller contend that accrued
radiology fees owed to Robert Cooney M.D. and/or Robert Cooney M.D., P.A. are
overstated, each such balance sheet presents fairly the financial condition,
assets and liabilities the Center as of its date; each such statement of
operations presents fairly the results of operations of the Center for the
period indicated; and each such statement of cash flows presents fairly the
information purported to be shown therein. The financial statements referred to
in this Section 2.3 have been prepared in accordance with generally accepted
accounting principles, consistently applied throughout the periods involved, are
correct and complete, and are in accordance with the books and records of the
Center. Except as set forth in Schedule 2.3 hereto, the Center is not subject
------------
to any liability
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(including, without limitation, unasserted 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 balance sheets and reasonably
incurred after the Balance Sheet Date (as defined in Section 2.4 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 the Center consistent with past
practice. Except as set forth on Schedule 2.4 hereto, since the Balance Sheet
Date, there has been (a) no adverse change in the Purchased Assets or in the
business, liabilities, operations, profits, condition (financial or otherwise)
or prospects of the Center, and, no fact or condition exists or is contemplated
or threatened which might be expected to cause such a change in the future, and
(b) no damage, destruction, loss or claim or condemnation or other taking
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) Seller has 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, Seller 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"). Seller shall discharge and indemnify Buyer from and against
- ----------------
any and all claims, suits, actions, proceedings (formal
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<PAGE>
and informal), investigations, judgments, deficiencies, damages, settlements,
liabilities, losses, costs and legal and other expenses resulting or arising
from any Lien existing on the Closing Date (whether inchoate, or not, and
whether perfected or not) on or with respect to any of the Purchased Assets
other than any Permitted Lien. 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) Other than the building and premises wherein the Center is
located, no real property owned by General Partner or Seller is used in the
conduct of the Business.
2.6 Licenses and Authorizations. Seller owns, holds or possesses all
---------------------------
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
the Center (the "Licenses"). Set forth on Schedule 2.6 hereto is a list and
-------- ------------
brief description of each of the Licenses. 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. No notice of
cancellation, default or breach of or any dispute concerning any of the Licenses
owned, possessed or held by Seller or of any event or condition or state of
facts described in the next following sentence has been received by Seller with
respect to any of such Licenses. There is not now pending, or to the knowledge
of Seller threatened, any action to revoke, cancel, rescind, modify or refuse to
renew in the ordinary course any of the Licenses. Seller and, to the best of
its knowledge, its predecessors in interest have performed and fulfilled in all
respects all of their respective obligations under each of the Licenses, and
Seller is not aware of any event or condition or state of facts which
constitutes or, after notice or lapse of time or both, would constitute a breach
or default under any of such Licenses or which permits or, after notice or lapse
of time or both, would permit revocation or termination of any of such Licenses
or which would adversely affect any of the rights of Seller thereunder.
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<PAGE>
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
Seller or General Partner 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 whereby there is a payment obligation of Seller or General Partner in
excess of $300 per month (collectively, together with any contracts, agreements,
instruments and leases entered into by Seller 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"). Seller
---------
has provided Buyer with a true and complete copy of each Contract.
(b) Each of the Contracts constitutes the valid and binding obligation
of Seller and, to the best of Seller's and General Partner's knowledge, the
other party thereto, is in full force and effect. Seller has 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 Seller and General Partner, no other party is in default or
breach thereunder.
2.8 Employees. (a) Schedule 2.8(A) hereto contains (i) a list of the
--------- ---------------
names and relationships with Seller of all employees of Seller at the Center as
of March 1, 1997, (ii) a description of all agreements (oral or written) with
such employees, (iii) the dates on which such employees commenced working for
Seller, (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
--------
2.8(B) hereto, Seller is not a party to any collective bargaining agreement,
- ------
employment agreement, retirement plans (whether qualified or non-qualified),
deferred compensation or 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.
(b) Seller has complied in all material respects with all applicable
laws, rules and regulations affecting the employment of labor, including, but
not limited to, those relating
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to wages, hours, discrimination and the payment of social security, withholding
and similar taxes, and is not liable for any arrears of wages or any penalties
for failure to comply with any of the foregoing. There are no controversies
pending or threatened between Seller and any of its employees, or any labor
unions or collective bargaining unit representing or purporting to represent any
of its employees.
2.9 Compliance With Laws; Litigation. The Purchased Assets and their
--------------------------------
uses comply with, and Seller with respect to the Purchased Assets and the
operation of the Business and the 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. Seller is not, with respect to the Business, the Center
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 instru mentality. Except
as set forth on Schedule 2.9 hereto, there is no suit, action, administrative
------------
proceeding, arbitration or other proceeding or governmental investigation,
including any medical board or similar professional body proceeding, involving
Seller or General Partner or the Center (including any medical professionals
practicing at the Center, whether or not the proceeding involves activities
performed at the Center) pending or, to the best knowledge of Seller and General
Partner, threatened against Seller or General Partner or otherwise with respect
to the Business, the Center or the Purchased Assets (including, without
limitation, any claim for malpractice) nor, to the best knowledge of Seller and
General Partner, is there any basis for any of the same, and there are no suits,
actions, administrative proceedings, arbitrations or other proceedings or
investigations pending in which Seller or General Partner is the plaintiff or
claimant relating to the Purchased Assets, the Business or the Center. There is
no suit, action, administrative proceeding, arbitration or governmental
investigation involving Seller, General Partner, or the Center pending or, to
the best knowledge of Seller and General Partner, threatened, which questions
the legality, validity or propriety of the transactions contemplated by this
Agreement.
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<PAGE>
2.10 Machinery, Equipment and Supplies. All machinery, equipment and
---------------------------------
supplies of Seller included in the Purchased Assets are in good and usable
condition, ordinary wear and tear excepted.
2.11 Insurance. Schedule 2.11 hereto sets forth a list of all
--------- -------------
policies of insurance in force with respect to the Purchased Assets, the Center
and the Business. Seller has received no notices of any pending or threatened
terminations with respect to such policies and Seller is in compliance with all
conditions contained therein. All such 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. There has been no (a) release or
---------------------
threatened release of any hazardous substance, pollutant or contaminant as each
such term presently is defined by the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, resulting from any activity by or on
behalf of Seller, or any predecessor-in-interest, including but not limited to,
the generation, handling, storage, treatment, transportation or disposal of any
hazardous substance, pollutant or contaminant at the Center, which release has
not been, or threatened release would not have been, in compliance with all
applicable laws, rules and regulations; (b) past or future action taken or to be
taken by any federal, state or local entity or by any private party under any
federal, state or local statute, rule, regulation or guideline concerning the
release of any hazardous substance, pollutant or contaminant into the soil, air,
surface or subsurface waters or the environment in general from the Center; and
(c) claims or actions brought or which may be brought by any third party for
damages occurring at or outside of the Premises resulting from the alleged
release or threatened release of any hazardous substance, pollutant or
contaminant by Seller or any predecessor in interest, including but not limited
to, claims for health effects to persons, property damage and/or damage to
natural resources; nor does Seller have any knowledge of any basis for any of
the foregoing.
2.13 Accounts Receivable. Seller has good title, free and clear of
-------------------
all Liens, except Permitted Liens, to the receivables reflected on its balance
sheets ("Accounts Receivable"). The Accounts Receivable have arisen from bona
-------------------
fide transactions entered
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<PAGE>
into in the ordinary course of business and are not in dispute or subject to
defense, counterclaim or set-off.
2.14 Brokers. Neither Seller, nor any Affiliate of Seller has
-------
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, except for amounts owed to KPMG Peat Marwick LLP
which Seller covenants to pay and satisfy at Closing.
2.15 Disclosure. All representations made by Seller or General
----------
Partner to Buyer hereunder, are true, accurate and complete.
2.16 Investment Intent. Seller is acquiring the Closing Shares which
-----------------
are issuable under this Agreement for investment for its own account, and not
with the view to, or for resale in connection with, any distribution thereof
until such Closing Shares are registered under the Securities Act 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. Seller
is a sophisticated investor and understands 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. Seller
acknowledges that the Closing Shares which are issuable hereunder must be held
until subsequently registered under the Securities Act or unless an exemption
from such registration is available. Seller is 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and General Partner to enter into this
Agreement and to consummate the transactions contemplated hereby, each of Buyer
and MRI represents and warrants to Seller and General Partner and agrees as
follows:
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3.1 Organization. Each of MRI and Buyer 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 subsidiary of MRI.
3.2 Authority to Effect Transactions. (a) Each of MRI and Buyer 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 each of MRI and Buyer, to the extent applicable, has been duly taken to
authorize the execution, delivery and performance of this Agreement and Buyer's
Closing Documents. To the extent applicable, 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 either
MRI or Buyer is a party or by which it is bound, is required for the execution,
delivery or performance to the extent applicable, by either of MRI and 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 to the extent applicable, by
either MRI or 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
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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 either MRI or Buyer, (B) any law,
statute, rule, regulation, order, award, judgment or decree to which either MRI
or Buyer is subject, or (c) any contract, agreement, instrument, lease or
license to which either MRI or 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 pending or, to the best knowledge of either MRI or
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 Shares issuable
--------------
hereunder to Seller 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 issuance thereof.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
4.1 Access. Seller and General Partner 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") free and full access to the properties, assets, books and records of
- ---------
Seller and General Partner 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 Center and the Business as Buyer may
reasonably request including all interim financial statements with respect to
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the Center. No investigation by or on behalf of Buyer shall affect the
representations and warranties of Seller hereunder.
4.2 Conduct of Business. General Partner, Seller 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 Seller, 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. Seller and General
Partner shall act diligently and reasonably (a) to preserve the Purchased Assets
intact, (b) to keep available, if so requested by Buyer, the services of the
present personnel of the Center and (c) to preserve the goodwill of suppliers
and customers of the Center and others having business relations therewith.
Except as otherwise contem plated by this Agreement or consented to in writing
by Buyer, Seller and General Partner shall conduct the business and operations
of the 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, Seller and
General Partner shall not, with respect to the Purchased Assets, sell, lease,
transfer or otherwise dispose of (including transfers to any Affiliates of
Seller), or mortgage or pledge, or impose or suffer to be imposed any Lien on,
any Purchased Assets. In addition, Seller and General Partner shall ensure that
all liabilities and obligations to be assumed by Buyer pursuant to Section 1.4
to vendors, lenders and other creditors are current and not past due (i.e., paid
----
in full on or before the due date stated on any such invoice) and Seller and
General Partner shall indemnify and hold Buyer harmless to the extent any such
obligations are past due as of the Closing Date.
4.3 Maintenance. Seller and General Partner 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 Center in the
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ordinary course. In the event of any material loss of, or material damage to,
tangible Purchased Assets or the Center prior to the Closing, Seller and General
Partner shall either pay the lesser of the repair or replacement cost thereof to
Buyer at the Closing or, at the option of Buyer, promptly repair or replace the
lost or damaged Purchased Assets in order to minimize the interruption to the
Business.
4.4 Consents and Approvals. Seller and General Partner shall act
----------------------
diligently and reasonably to secure the consents and approvals of any
governmental agencies and authorities and any other Persons, 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 Seller and General Partner shall not make any agreement or
- --------
understanding affecting the Purchased Assets, the Center 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
Seller to obtain the consents or approvals contemplated by this Section 4.4.
4.5 Renewal of Contracts. Seller and General Partner shall consult
--------------------
with Buyer fully with respect to the renewal of any Contracts that are scheduled
to expire between March 1, 1997 and the Closing Date and will not enter into any
such renewals without the prior written consent of the Buyer.
4.6 General Partner Covenants. Insofar as General Partner controls
-------------------------
Seller, any covenant contained herein requiring action on the part of Seller
shall require General Partner to cause Seller to take such action.
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:
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5.1 Accuracy of Representations and Compliance With Conditions. All
----------------------------------------------------------
representations and warranties of Seller and General Partner 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 Seller and General Partner; and Seller and General
Partner 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 and Due Diligence. 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 adversely affecting the Business
or the Purchased Assets; (c) no damage, destruction, loss or claim or
condemnation or other taking adversely affecting the Business or the Purchased
Assets that has not been repaired or replaced in accordance with Section 4.3
hereof; (d) no lawsuit, proceeding or claim filed or asserted against Seller
that, if adversely determined, may have an adverse effect on the Business or the
Purchased Assets and (e) no event or fact concerning Seller, General Partner,
the Center or the Business shall have come to the attention of Buyer during
Buyer's due diligence investigation that would cause Buyer, in its reasonable
judgment, not to proceed with the Closing.
5.3 Opinion of Counsel for Seller. Buyer shall have received from
-----------------------------
Jones, Foster, Johnston & Stubbs, P.A., counsel to Seller and General Partner,
an opinion dated the Closing Date in the form set forth in Exhibit B hereto.
---------
5.4 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.
5.5 Assumed Contracts. The Assumed Contracts shall be assigned to
-----------------
Buyer on terms satisfactory to Buyer.
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5.6 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 otherwise under any Contract.
---------------
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 Seller 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 Seller in the form of Exhibit C annexed
---------
hereto, dated the Closing Date, authorizing Buyer to endorse certain checks made
payable to Seller.
5.10 Deliveries Complete. All documents required to have been
-------------------
delivered by Seller 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 Seller, 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, Seller and General
-------------------
Partner shall deliver to Buyer a certificate signed by the President of General
Partner and Seller to the effect that: (a) all representations and warranties of
Seller and General Partner
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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) Each of Seller and General Partner has 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 Buyer's obligations to close under this Agreement has
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 Seller's 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 three business days prior to the Closing Date, Buyer shall
deliver to Seller a list of those Employees that Buyer wishes to so employ and
Seller 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, Seller shall be solely responsible for (i) properly notifying
such Employees of their termination, 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 Interim Lease. Seller and Buyer shall enter into an interim
-------------
lease (the "Interim Lease"), in form and substance reasonably satisfactory to
-------------
the parties hereto with respect to the real property, more fully described on
Attachment 1 hereto, owned by Seller and used in connection with the operation
of the Business. The Interim Lease will provide for the lease by Buyer of such
property for which Buyer will pay Seller's carrying costs with respect to such
property until the property is conveyed to Buyer in accordance with the terms of
this Agreement.
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ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller and General Partner under this Agreement
shall be subject, at the option of Seller, 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 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 order shall have been rendered enjoining or otherwise
------
restraining the consummation of the transactions contemplated hereby.
6.3 Opinion of Counsel to Buyer. Seller shall have received from
---------------------------
Werbel & Carnelutti, counsel for Buyer, 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 to Seller, including each of the certifi cates, instruments
and documents listed on Schedule 6.5 hereto, and all actions required under this
------------
Agreement to have been taken by Buyer, at or prior to the Closing shall have
been delivered or taken.
6.5 Closing Certificate. On the Closing Date, Buyer shall deliver to
-------------------
Seller 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
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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
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 Seller's obligations to close
under this Agreement has been fulfilled.
6.6 Interim Lease. Seller and Buyer shall enter into the Interim
-------------
Lease, in form and substance reasonably satisfactory to the parties hereto with
respect to the real property, more fully described on Attachment 1 hereto, owned
by Seller and used in connection with the operation of the Business. The
Interim Lease will provide for the lease by the Buyer of such property for which
Buyer will pay Seller's carrying costs with respect to such property until the
property is conveyed to Buyer in accordance with the terms of this Agreement.
6.7 Debt Payoff. Buyer shall pay to each of the following the amount
-----------
necessary to pay and satisfy-in-full all obligations in satisfaction of the
Assumed Liabilities relating to such parties as listed on Schedule 1.4: (i)
Congress Crossings Medical Center, Inc., (ii) Great Southern Bank, (iii) Palm
Beach National Bank & Trust Company, (iv) Imations Enterprises and (v) GE
Medical Systems.
ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. (a) Buyer shall retain the books and
------------------------
records of the Center and the Purchased Assets transferred to it hereunder for a
period of not less than three (3) 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 Seller reasonable notice of such intent and the right to obtain
from Buyer those books and records which it intends to dispose of or destroy.
Seller shall have the right, at the expense of Seller, (i) of reasonable access
to and examination of such records and books for a period of three (3) years
from and after the Closing Date upon reasonable notice to Buyer and during
normal
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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, Seller may remove from
Buyer's possession the originals of such of the books and records included in
the Purchased Assets as Seller may require, for use in litigation, provided that
--------
Seller shall indemnify Buyer against losses, expenses, or damages resulting from
the loss, destruction or non-return of such books and records.
(b) Seller and General Partner shall retain the books and records of
the Center not transferred to Buyer hereunder for a period of not less than
three (3) years; provided, however that Seller and General Partner 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 Seller and General Partner 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 three (3) years from and after the Closing Date upon reasonable notice to
Seller and General Partner and during normal business hours, and (ii) to make
copies of such books, contracts and records as are in Seller's or General
Partner's possession. With the approval of Seller, which approval shall not be
unreasonably withheld, Buyer may remove from Seller's possession the originals
of such books and records as Buyer may require, for use in litigation, provided
--------
that Buyer shall indemnify Seller against any losses, expenses or damages
resulting from the loss, destruction or non-return of the same.
7.2 Special Covenants of Seller and Buyer Regarding Real Property.
-------------------------------------------------------------
Seller covenants and agrees with Buyer that Seller will take all necessary
action to expeditiously cause the proper and legal conveyance to Buyer of the
real property, as more fully described on Attachment 1 hereto, used in
connection with the operation of the Business, free and clear of any and all
liens and encumbrances other than as set forth on Schedule 7.2 hereto or as set
forth in the Commitment to Insure Title (Commitment No.: C-2191631) issued by
Jones, Foster, Johnston & Stubbs, P.A. effective on February 20, 1997 in an
amount of $1,133,711. Buyer covenants and agrees to assume any and all
obligations of Seller under the
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Mortgage, Note and Other Loan Documents Assumption, Modification and Extension
Agreement (the "Mortgage") dated December 22, 1995, in favor of The Independent
Order of Foresters (the "Foresters") relating thereto and obtain a release of
any and all obligations of Robert Cooney M.D., Robert Cooney M.D., P.A. or any
other obligor or guarantor under the Mortgage. In the event that such assumption
and releases are not obtained within the expeditious time period (in any event
not to exceed five months) in connection with such legal conveyance, Buyer shall
cause all obligations due and owing the Foresters to be satisfied-in-full.
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and after the Closing, no party
---------------
to this Agreement shall directly or indirectly make or cause to be made any
public announcement or disclosure, or issue any notice, except with respect to
any notice necessary to any limited partner of Seller, with respect to this
Agreement or the transactions contemplated hereby without the prior consent of
the other parties hereto, except for disclosures or notices, based upon the
advice of MRI's counsel, to be made by MRI as a result of its public status,
including, but not limited to a press release announcing the transaction
contemplated by this Agreement. 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 connec tion 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
information relates. Seller acknowledges 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 Seller nor any Affiliate of Seller, shall
disclose intentionally to anyone, or use or otherwise exploit for Seller's or
any Affiliate of Seller's benefit, or for the benefit of anyone other than Buyer
or MRI Group Entities, (i) any confidential information of Buyer or MRI Group
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Entities relating to the Business or the Center, 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 Center 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").
------------------------
(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 Seller or any Affiliate of Seller or
any agent or other representative thereof, and (ii) business and technical
methods applicable to diagnostic imaging businesses generally. Neither Seller
nor any Affiliate of Seller 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 Seller or any Affiliate of Seller concerned
shall provide Buyer with prompt notice of such requirement, prior to making any
disclosure, so that Buyer may seek an appropriate protective or restrictive
order.
(d) At the request of Buyer, Seller agrees to deliver to Buyer, at
any time during the term of this Agreement, all Confidential Information which
it 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, neither Seller
nor any Affiliate of Seller shall, directly or indirectly:
(a) anywhere within a twenty-five (25) 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,
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joint venturer, lender, advisor, consultant, investor or other participant, any
business which offers diagnostic imaging services (a "Competitive Business");
--------------------
(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 Seller, or Seller's 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 Seller beneficially owns, in the
aggregate, not more than 5% of the outstanding common stock of a corporation,
if, at the time of its acquisition by Seller, 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.
(e) Seller acknowledges and agrees that in the event of any breach or
likely breach of any of the covenants of Article 8 herein, 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
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<PAGE>
damages. It is intended that full third party rights are granted under this
provision.
(f) Seller acknowledges and agrees 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 Seller and General Partner. Each of Seller and
---------------------------------------
General Partner, 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 stockholders, in each case past, present, or as they
may exist at any time after the date of this Agreement (including Buyer, the
"Buyer Indemnitees") 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 Seller or General Partner
contained in this Agreement or in any other agreement executed
and delivered by
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Seller or General Partner hereunder or 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 Agree ment, 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 Seller with the
provisions of appli cable bulk sales laws and (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 General Partner 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.
9.2 Indemnity by Buyer. Buyer agrees to indemnify and hold harmless
------------------
Seller and General Partner and their successors and assigns and their respective
partners, controlling Persons (if any), employees, attorneys, agents,
Affiliates, partners and stockholders (including Seller, the "Seller
------
Indemnitees") against and in respect of any and all:
- ------------
(a) claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settle ments,
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 and (ii) the liabilities assumed by Buyer pursuant to Section
1.4 of this Agreement; and
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(b) claims, suits, actions and proceedings (formal and informal) of
Persons not a party to this Agreement and re lated investigations,
judgments, deficiencies, damages, settlements, liabilities, 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 extent that same results from
the breach of any representation or warranty of Seller hereunder.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller 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
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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 without the prior written consent of the Indemnified
Party unless such settlement includes an unconditional release of the
Indemnified Party from all liability arising out of such claim. 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 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 Indemni fied Party shall automatically
be deemed to have waived any right to indemnification hereunder.
9.4 Limits on Recovery. (a) Neither Seller and General Partner
------------------
(pursuant to Section 9.1) nor Buyer (pursuant to Section 9.2) shall be required
to indemnify the other party pursuant to such sections unless the aggregate
amount of damages, claims or other amounts for which the Indemnified Party is
entitled to indemnification pursuant to such sections (the "Damages") exceeds
-------
$10,000 (the "Indemnification Threshold"), provided that if such aggregate
------------------------- --------
amount of Damages exceeds the Indemnification Threshold, the Indemnitor shall
indemnify the Indemnified Party for the entire amount of Damages and not merely
for the amount of Damages which exceeds $10,000.
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ARTICLE 10
MISCELLANEOUS
10.1 Bulk Sales Laws. Buyer waives compliance by Seller with any
---------------
applicable bulk sales law and Seller hereby agrees to indemnify buyer from any
liability thereunder.
10.2 Payment of Sales, Use and Similar Taxes. Seller 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 contempla
ted 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, except to the extent that they relate to a specified earlier date.
10.6 Entire Agreement; Modification. This Agreement (including 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.
10.7 Notices. Any notice given pursuant to this Agreement to any
-------
party hereto shall be deemed to have been duly given when
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<PAGE>
mailed by registered or certified mail, return receipt requested, or when hand
delivered as follows:
If to Seller:
MRI of Palm Beach, Inc.
4332 Sherwood Forest Court
Ann Arbor, Michigan 48103
Attention: Ms. Patricia Sweeney
with a copy to:
Jones, Foster, Johnston & Stubbs, P.A.
505 South Flagler Drive, Suite 1100
West Palm Beach, FL 33401
Attention: John B. McCracken, Esq.
If to Buyer:
West Palm Beach Resources, Inc.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
with a copy to:
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
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.
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<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 ineffective to the extent, but
only to the extent of, such invali dity, 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 Florida, 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
-37-
<PAGE>
this Agreement are an integral part of this Agreement and are incorporated
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.
"Affiliate" of a Person shall mean any other Person (except Robert
---------
Cooney M.D. or Robert Cooney M.D., P.A.) controlling, 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, engaged primarily in the
----------------
provision of diagnostic imaging services, in which the Buyer, MRI, any direct or
indirect subsidiary of MRI, or any such other entity has a controlling interest
at any time during the term of this Agreement.
"Person" shall mean and include any individual, partner ship, firm,
------
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
-38-
<PAGE>
"Qualifying Accounts Receivable" shall mean Accounts Receivable of
------------------------------
Seller, billed and unbilled which have not been written-off on or prior to
February 28, 1997, factored or sold by Seller and with respect to which no other
Person shall have any rights therein or Liens thereon.
-39-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first written above.
MRI OF PALM BEACH, INC.
By:____________________________
Name:
Title:
THE MAGNET OF PALM BEACH, LTD.
By: MRI OF PALM BEACH, INC. (as
General Partner)
By:____________________________
Name:
Title:
WEST PALM BEACH RESOURCES, INC.
By:____________________________
Name: William D. Farrell
Title: President
Solely with respect to
Sections 1.3 and 1.7 and
Article 3 hereof:
MEDICAL RESOURCES, INC.
By: __________________________
Name: William D. Farrell
Title: President
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<PAGE>
The undersigned hereby (i) disclaims, title, to or any ownership
interest it may have in, the property listed on Schedule 2.5(A), a copy of which
Schedule the undersigned has received and reviewed, and (ii) agrees to be bound
by the provisions of Section 9.1(b) regarding the obligation to indemnify Buyer
from professional liability claims.
___________________________, P.A.
(doing business as
____________________)
By:_____________________________
-41-
<PAGE>
EXHIBIT 99.7
EXECUTION COPY
--------------
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of March 14, 1997, between Grove Diagnostic
Imaging Center, Inc., a California corporation with a mailing address at 8283
Grove Avenue, Suite 101, Rancho Cucamonga, California 91730 ("Seller"), J.
------
Kenneth Luke ("Luke") and J.M. Venesky ("Venesky", and together with Luke, the
---- -------
"Stockholders"), and Rancho Cucamonga Resources, Inc., a Delaware corporation
- -------------
with a mailing address at 155 State Street, Hackensack, New Jersey 07601
("Buyer") and, solely with respect to the Closing Shares (as herein defined) and
- -------
Sections 1.3, 1.8 and 3.1 through 3.3, Medical Resources, Inc. ("MRI"), of which
---
the Buyer is a wholly-owned subsidiary.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Seller owns and manages an imaging center located at 8283
Grove Avenue, Suite 101, Rancho Cucamonga, California 91730, Rancho Cucamonga,
California (the "Center"), and
------
<PAGE>
owns or has the right to use certain of the assets, properties, business and
goodwill relating thereto (the "Business"); and
--------
WHEREAS, Buyer desires to acquire the Business and substantially all
of the properties and assets of Seller used or held for use in connection with
the Business, and Seller desires 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 the
Seller.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, Seller, Stockholders and Buyer 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), Seller shall sell,
assign, transfer and deliver to Buyer,
-2-
<PAGE>
and Buyer shall purchase and acquire from Seller, 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
Center, other than the assets listed on Schedule 1.1 (the "Excluded Assets")),
------------ ---------------
including, without limitation, all machinery, 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 Seller's
suppliers or lessors with respect to any assets included in the Purchased Assets
to the extent said warranties and claims may be assignable; and
(b) all names, trademarks, contractual rights, telephone numbers,
Licenses (as defined in Section 2.6), books and records, business and good will
of Seller relating to the Business and the Purchased Assets; and
(c) all of Seller's accounts receivable arising out of services
performed by Seller on or prior to the business day
-3-
<PAGE>
immediately preceding the Closing Date at the Center (including any related
claims in respect of the collection thereof) (the "Accounts Receivable"); and
-------------------
(d) all rights of the Sellers arising from, in and to all Contracts
(as defined in Section 2.7) listed in Schedule 1.4 as Contracts to be assumed by
------------
Buyers (the "Assumed Contracts"); and
-----------------
(e) 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 the Seller and the 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 March 14, 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 Seller and Buyer may agree
upon in writing (such date and time being hereinafter called the "Closing
-------
Date").
- ----
1.3 (a) Purchase Price. As consideration for the Purchased Assets,
--------------
Buyer and MRI shall pay to Seller the purchase
-4-
<PAGE>
price (the "Purchase Price") (subject to adjustment pursuant to clauses (b) and
--------------
(c) below) in the form and manner as follows:
(i) $2,500,000 by wire transfer in immediately available funds
on the Closing Date (the "Closing Date Amount"); and
-------------------
(ii) MRI shall deliver to Seller a stock certificate evidencing
the number of shares (the "Closing Shares") of common stock
--------------
(the "MRI Common Stock"), par value $.01 per shares, of MRI
----------------
which equals the quotient obtained by dividing $500,000
(the "Threshold Amount") by the Market Value (as defined in
----------------
Section 10.15) of the MRI Common Stock as of the trading
day immediately preceding the Closing Date (the "Closing
-------
Date Price").
----------
(iii) Pursuant to the terms of an escrow agreement (the "Escrow
------
Agreement") in the form attached hereto as Exhibit E, at
---------
the Closing, Buyer agrees to remit the Closing Shares to
Werbel & Carnelutti, as escrow agent (the "Escrow Agent").
------------
It is expressly understood that
-5-
<PAGE>
such consideration shall be held in escrow for purposes of
satisfying any indemnification liability incurred by Seller
pursuant to Article 9 of this Agreement. It is expressly
agreed that the Closing Shares shall be released to Seller
pursuant to the terms of the Escrow Agreement.
(b) Post Closing Adjustment if Closing Shares Registered Within 180
---------------------------------------------------------------
Days of Closing. In the event that the Effective Date (as defined in Section
- ---------------
1.8) occurs within 180 days of the Closing Date and the Market Value as of the
Effective Date (the "Effective Date Price") is less than the Closing Date Price,
--------------------
MRI, at its option, shall either
(i) issue to Seller promptly following the Effective Date (but in any
event not less than the third Business Day following the Effective Date)
such additional number of shares of MRI Common Stock (rounded to the
nearest whole number) registered for resale under the Securities Act of
1933 (the "Securities Act") as shall equal a fraction, the numerator of
--------------
which is an amount (the "Deficiency Amount") equal to the difference
-----------------
between (1) the Threshold Amount and (2) the
-6-
<PAGE>
product obtained by multiplying the Effective Date Price by the number of
Closing Shares, and the denominator of which is the Effective Date Price,
or
(ii) deliver to Seller a certified check in the amount equal to the
Deficiency Amount.
(c) Seller's Right to Return Closing Shares if Closing Shares Not
-------------------------------------------------------------
Registered Within 180 Days of Closing. In the event that the Effective Date
- -------------------------------------
does not occur within 180 days of the Closing Date (such 180th date, the
"Determination Date"), Seller shall have the right, exercisable at its sole
- -------------------
discretion, to return all of the Closing Shares to MRI within twenty (20) days
of the later to occur of (i) the Determination Date and (ii) if the Seller is
entitled to the return of any Closing Shares pursuant to the Escrow Agreement,
the date Seller receive such Closing Shares from the Escrow Agent and Seller
shall receive from MRI cash in an amount equal to the Threshold Amount (or such
proportionate amount thereof if less than all the Closing Shares are released to
Seller pursuant to the Escrow Agreement). Seller's right to return the Closing
Shares pursuant to this Section 1.3(c) shall be exercised by returning the
Closing Shares to MRI at the address set forth in Section 10.7, together with
notice of such exercise, and such right
-7-
<PAGE>
shall expire if the Closing Shares have not been so delivered to MRI by the
close of business on the date specified in the immediately preceding sentence.
Upon exercise of such right of return by Seller, MRI shall issue to Seller a
certified check in an amount equal to the Threshold Amount (or such
proportionate amount thereof if less than all the Closing Shares are released to
Seller pursuant to the Escrow Agreement) within two business days of its receipt
of the stock certificate for the Closing Shares.
(d) Allocation of Purchase Price. The Seller and the Buyer agree to
----------------------------
allocate the Purchase Price in accordance with IRC Section 1060. Such
allocation shall be agreed to by the Seller and the Buyer prior to the Closing
Date. In addition, the Seller and the Buyer hereby agree to file timely any
information that may be required to be filed pursuant to Treasury Regulations
promulgated under IRC Section 1060.
1.4 Liabilities. Buyer shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of Seller, the Business or the
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
- ---
-8-
<PAGE>
hereto. Such liabilities retained by Seller 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." Seller hereby agree to indemnify
and hold Buyer harmless against all Retained Liabilities.
1.5 Additional Closing Date Deliveries and Actions.
----------------------------------------------
(a) On the Closing Date, Seller 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 Seller in
respect of the Purchased Assets or the consummation of the transactions contem
plated by this Agreement, (y) all of the documents, instruments and opinions
contemplated to be delivered by Seller 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
the Sellers of the Retained Liabilities and (ii) take all steps and actions as
Buyer may reasonably request or as may
-9-
<PAGE>
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 "Seller's Closing Documents".
--------------------------
(b) On the Closing Date, Buyer shall (i) deliver, or execute and
deliver, to Seller (w) the Closing Date Amount, (x) the Closing Shares, (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
Seller 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 (w) through (z) hereof
are hereinafter referred to as "Buyer's Closing Documents" and, collectively
-------------------------
with Seller's Closing Documents, the "Closing Documents".
-----------------
(c) On the Closing Date, Buyer and Seller shall apportion trade
payables, such as equipment lease payments and office lease payments, for the
month in which the Closing Date occurs based upon the number of days elapsed in
such month up to
-10-
<PAGE>
the Closing Date. Buyer shall pay to the Seller on a pro rata basis any net
credit owed to the Seller and Buyer shall deduct on a pro rata basis from the
Closing Date Amount payable to Seller any net credit owed to the Buyer.
1.6 Consents, Waivers and Further Assurances. (a) From time to time
----------------------------------------
following the Closing, Seller 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, Seller 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 benefit.
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
-11-
<PAGE>
prior to the Closing Date: (a) by the mutual written agreement of Buyer and
Seller; or (b) by Buyer or Seller 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 Seller if the Closing has not occurred on or before March 31,
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 Seller 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 180
--------------------------------
days following the Closing Date when MRI proposes to
-12-
<PAGE>
file a registration statement (other than a registration statement on Form S-8
or Form S-4, or their successor forms) with the Securities and Exchange
Commission (the "SEC"), it will, prior to such filing, give written notice to
---
Seller of its intention to do so and, upon the written request of Seller given
within five (5) days after MRI provides such notice (which request shall state
the intended method of disposition of such Closing Shares), MRI shall use its
best efforts to cause all Closing Shares that MRI has been requested by such
Seller 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 such Seller; provided that MRI shall
have the right to postpone or withdraw any registration effected pursuant to
this Section 1.8 without obligation to the Seller.
(b) In connection with any offering under this Section 1.8 involving
an underwriting, MRI shall not be required to include any Closing 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 must be consistent with this Agreement), and then only in such quantity as
will not, in the opinion of the underwriters,
-13-
<PAGE>
jeopardize the success of the offering by MRI. If in the opinion of the managing
underwriter the registration of all, or part of, the Closing Shares that the
Seller 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 Closing 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 Closing Shares
to be included in the underwriting in accordance with the foregoing is less than
the total number of shares that the Seller has requested to be included, then
the Seller 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
-14-
<PAGE>
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 earlier to occur of (i)
the date on which Seller has completed its disposition of such shares pursuant
to the registration statement or (ii) the date which is 60 days after the
Closing Shares have been released to the Seller pursuant to the Escrow
Agreement. The date such registration is declared effective by the SEC is
referred to herein as the "Effective Date."
--------------
(c) In connection with the registration of the Closing Shares
pursuant to this Section 1.8:
(i) The Seller 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 the Closing 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
-15-
<PAGE>
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;
(iv) MRI will furnish to the Seller 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 Seller
(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 Seller, at any time when a prospectus relating to the
Closing 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
-16-
<PAGE>
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
the Closing 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) The Seller shall pay any and all brokerage fees and transfer
taxes incident to the sale of any share of MRI Common Stock sold by
the Seller pursuant to the registration effected pursuant to this
Section 1.8, and shall pay the fees and expenses of any special
attorneys or accountants retained by it.
-17-
<PAGE>
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and, with respect to
Sections 2.1, 2.2 and 2.14 only, Stockholders represent and warrant to Buyer and
agree as follows:
2.1 Organization and Qualification. Seller is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
California. Seller has all requisite corporate power and authority to own or
lease its properties and assets and to conduct its business as presently
conducted. Other than the Stockholders no other person or entity has an equity
interest in the Seller or any right with respect to an equity interest in the
Seller.
2.2 Authority to Effect Transactions. (a) Seller and Stockholders
--------------------------------
have all requisite power and authority to execute, deliver and perform this
Agreement and all of Seller's Closing Documents. All necessary corporate action
(including, without limitation, action by Stockholders) on the part of Seller
has been duly taken to authorize the execution, delivery and performance by
-18-
<PAGE>
Seller of this Agreement and all of Seller's Closing Documents. This Agreement
has been duly authorized, executed and delivered by Seller, has been duly
executed and delivered by Stockholders, and is the legal, valid and binding
obligation of Seller and Stockholders, enforceable against Seller and
Stockholders in accordance with its terms. Each of Seller's Closing Documents
has been duly authorized by Seller and, upon execution and delivery by Seller,
as contemplated hereby, will be the legal, valid and binding obligation of
Seller, enforceable against Seller in accordance with its terms.
(b) Except as set forth in Schedule 2.2(B) hereto, (i) no consent,
---------------
authorization, approval, order, license, certificate, permit or act of or from,
or declaration or filing with, any foreign, federal, state, local or other
governmental authority or regulatory body or any court or other tribunal or any
party to any contract, agreement, instrument, lease or License (as defined in
Section 2.6) to which Seller or any Stockholder is a party or by which it is
bound or to which any of the Purchased Assets is subject, is required for the
execution, delivery or performance by Seller or Stockholders of this Agreement
or any of Seller's Closing Documents or the consummation of the transactions
contemplated hereby or thereby and (ii) neither the execution, delivery or
performance of this Agreement or any of Seller's Closing Documents nor the
consummation of the transactions contemplated
-19-
<PAGE>
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) Seller's
organizational documents and agreements, each as amended to date, (B) any law,
statute, rule, regulation, order, award, judgment or decree to which Seller, the
Stockholders or any of the Purchased Assets is subject or (C) any contract,
agreement, instrument, lease or License to which Seller or any Stockholder is a
party or by which it is bound.
2.3 Financial Statements. Seller has delivered to Buyer true and
--------------------
correct copies of the following: unaudited balance sheets of Seller as of
December 31, 1996 and December 31, 1995 and the
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<PAGE>
unaudited statements of operations for the years then ended. Each such balance
sheet presents fairly the financial condition, assets, liabilities and
stockholder's equity of Seller as of its date and each such statement of
operations presents fairly the results of operations of Seller for the period
indicated. The financial statements referred to in this Section 2.3 have been
prepared in accordance with generally accepted accounting principles,
consistently applied throughout the periods involved, are correct and complete,
and are in accordance with the books and records of Seller. Except as set forth
in Schedule 2.3 hereto, Seller is not subject to any liability (including,
------------
without limitation, unasserted 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 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
------------------
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<PAGE>
Business has been conducted in all respects only in the ordinary course of
business of the Center consistent with past practice. Except as set forth on
Schedule 2.4 hereto, since the Balance Sheet Date, there has been (a) no adverse
- ------------
change in the Purchased Assets or in the business, liabilities, operations,
profits, condition (financial or otherwise) or prospects of the Center, and, no
fact or condition exists or, to the best knowledge of Seller, is contemplated or
threatened which might be expected to cause such a change in the future, and (b)
no damage, destruction, loss or claim or condemnation or other taking 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) Seller has 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) hereto. Upon delivery to Buyer on the Closing
---------------
Date of the instruments of assignment and transfer
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<PAGE>
contemplated by this Agreement, Seller 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) (collectively, "Permitted Liens"). Seller shall discharge and indemnify
- ------ ---------------
Buyer from and against any and all claims, suits, actions, proceedings (formal
and informal), investigations, judgments, deficiencies, damages, settlements,
liabilities, losses, costs and legal and other expenses resulting or arising
from any Lien existing on the Closing Date (whether inchoate, or not, and
whether perfected or not) on or with respect to any of the Purchased Assets
other than any Permitted Lien. 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) No real property owned by Seller is used in the conduct of the
Business.
2.6 Licenses and Authorizations. Seller owns, holds or possesses all
---------------------------
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
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<PAGE>
Purchased Assets to conduct and carry on the Business as presently conducted at
the Center (the "Licenses"). Set forth on Schedule 2.6
-------- ------------
hereto is a list and brief description of each of the Licenses. 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 continue in full force and effect thereafter, without default
or forfeiture of any rights thereunder. No notice of cancellation, default or
breach of or any dispute concerning any of the Licenses owned, possessed or held
by Seller or of any event or condition or state of facts described in the next
following sentence has been received by Seller with respect to any of such
Licenses. There is not now pending, or to the knowledge of Seller threatened,
any action to revoke, cancel, rescind, modify or refuse to renew in the ordinary
course any of the Licenses. Seller and, to the best of its knowledge, its
predecessors in interest have performed and fulfilled in all respects all of
their respective obligations under each of the Licenses, and Seller is not aware
of any event or condition or state of facts which constitutes or, after notice
or lapse of time or both, would constitute a breach or default under any of such
Licenses or which permits or, after notice or lapse of
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<PAGE>
time or both, would permit revocation or termination of any of such Licenses or
which would adversely affect any of the rights of Seller thereunder.
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
Seller 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
(collectively, together with any contracts, agreements, instruments and leases
entered into by Seller 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"). Seller has provided Buyer with
---------
a true and complete copy of each Contract.
(b) Each of the Contracts constitutes the valid and binding obligation
of Seller and, to the best of Seller's knowledge, the other party thereto, is in
full force and effect. Seller has 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 Seller,
no other party is in default or breach thereunder.
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<PAGE>
2.8 Employees. (a) Schedule 2.8A hereto contains (i) a list of the
--------- -------------
names and relationships with Seller of all employees of Seller at the Center as
of the date hereof, (ii) a description of all agreements (oral or written) with
such employees, (iii) the dates on which such employees commenced working for
Seller, (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, Seller is not a party to any collective bargaining agreement,
- ----
employment agreement, retirement plans (whether qualified or non-qualified),
deferred compensation or 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.
(b) Seller has complied in all material respects with all applicable
laws, rules and regulations affecting the employment of labor, including, but
not limited to, those relating to wages, hours, discrimination and the payment
of social security, withholding and similar taxes, and is not liable for any
arrears of
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<PAGE>
wages or any penalties for failure to comply with any of the foregoing. There
are no controversies pending or threatened between Seller and any of its
employees, or any labor unions or collective bargaining unit representing or
purporting to represent any of its employees.
2.9 Compliance with Laws; Litigation. The Purchased Assets and their
--------------------------------
uses comply with, and Seller with respect to the Purchased Assets and the
operation of the Business and the 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. Seller is not, with respect to the Business, the Center
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 instru-mentality. Except
as set forth on Schedule 2.9 hereto, there is no suit, action, administrative
------------
proceeding, arbitration or other proceeding or governmental investigation,
including any medical board or similar professional body proceeding, involving
Seller,
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<PAGE>
the Stockholders or the Center (including any medical professionals practicing
at the Center, whether or not the proceeding involves activities performed at
the Center) pending or, to the best knowledge of Seller and Stockholders,
threatened against Seller or the Stockholders or otherwise with respect to the
Business, the Center or the Purchased Assets (including, without limitation, any
claim for malpractice) nor is there any basis for any of the same, and there are
no suits, actions, administrative proceedings, arbitrations or other proceedings
or investigations pending in which Seller or any Stockholder is the plaintiff or
claimant relating to the Purchased Assets, the Business or the Center. There is
no suit, action, administrative proceeding, arbitration or governmental
investigation involving Seller, the Stockholders, or the Center pending or, to
the best knowledge of Seller and the Stockholders, threatened, which questions
the legality, validity or propriety of the transactions contemplated by this
Agreement.
2.10 Machinery, Equipment and Supplies. All machinery, equipment and
---------------------------------
supplies of Seller included in the Purchased Assets are in good and usable
condition, ordinary wear and tear excepted.
2.11 Insurance. Schedule 2.11 hereto sets forth a list of all
--------- -------------
policies of insurance in force with respect to the Purchased
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<PAGE>
Assets, the Center and the Business. Seller has received no
notices of any pending or threatened terminations with respect to such policies
and Seller is in compliance with all conditions contained therein. All such
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. There has been no (a) release or
---------------------
threatened release of any hazardous substance, pollutant or contaminant as each
such term presently is defined by the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, resulting from any activity by or on
behalf of Seller, any Stockholder or, to the knowledge of Seller, any
predecessor in interest, including but not limited to, the generation, handling,
storage, treatment, transportation or disposal of any hazardous substance,
pollutant or contaminant at the Center; (b) past or future action taken or to be
taken by any federal, state or local entity or by any private party under any
federal, state or local statute, rule, regulation or guideline concerning the
release of any hazardous substance, pollutant or contaminant into the soil, air,
surface or subsurface waters or the
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<PAGE>
environment in general from the Center; and (c) claims or actions brought or
which may be brought by any third party for damages occurring at or outside of
the Premises resulting from the alleged release or threatened release of any
hazardous substance, pollutant or contaminant by Seller or, to the knowledge of
Seller, any predecessor in interest, including but not limited to, claims for
health effects to persons, property damage and/or damage to natural resources;
nor does Seller have any knowledge of any basis for any of the foregoing.
2.13 Accounts Receivable. Seller has 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 and are
not in dispute or subject to defense, counterclaim or set-off, except that they
may be subject to adjustments following the Closing Date occurring in the
ordinary course of business consistent with past practice.
2.14 Brokers. Neither Seller, the Stockholders nor any Affiliate of
-------
Seller or the Stockholders has incurred any liability or obligation to any
broker, finder or agent for any brokerage
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<PAGE>
fees, finder's fees or commissions with respect to the transactions contemplated
by this Agreement.
2.15 Investment Intent. The Seller is acquiring the Shares which are
-----------------
issuable under this Agreement for investment for its 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 Shares are being offered under
an exemption in Section 4(2) of the Securities Act upon reliance on such
representation. The Seller is an "accredited investors" as such term is defined
in Rule 501(a) under the Securities Act. Notwithstanding the obligations of MRI
and Buyer pursuant to Section 1.8, the Seller understands that the 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
Seller acknowledges that the Shares which are issuable hereunder must be held
indefinitely until subsequently registered under the Securities Act or unless an
exemption from such registration is available. The Seller is 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.
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<PAGE>
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND MRI
As an inducement to Seller and the Stockholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer and MRI
represent and warrant to Seller 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. Each of Buyer and MRI 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 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
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<PAGE>
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.
The Closing Shares, when issued pursuant to the terms hereof, shall 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.
(b) (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 or MRI is a party or by which it is bound, is
required for the execution, delivery or performance by Buyer or MRI 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 or MRI of this Agreement or any
of Buyer's Closing Documents, nor the consummation of the transactions contem-
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<PAGE>
plated 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, by-laws or other constitutional documents, each as amended to
date, of Buyer or MRI, (B) any law, statute, rule, regulation, order, award,
judgment or decree to which Buyer or MRI is subject, or (c) any contract,
agreement, instrument, lease or license to which Buyer or MRI is a party or by
which it is bound.
3.3 Litigation. Other than as set forth on Schedule 3.3, there is no
---------- ------------
suit, action, administrative proceeding, arbitration or other proceeding or
governmental investigation (including by the SEC or The Nasdaq Stock Market)
pending or, to the best knowledge of Buyer or MRI, threatened against Buyer or
any MRI Group Entity, which questions the legality, validity or propriety of the
transactions contemplated by this Agreement or
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<PAGE>
which would reasonably be expected to have a material adverse effect on the
business of MRI and its subsidiaries taken as whole.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
4.1 Access. Seller 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") free
-----------------------------
and full access to the properties, assets, books and records of Seller 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 Center and the Business as Buyer may reasonably request including all
interim financial statements with respect to the Center. No investigation by or
on behalf of Buyer shall affect the representations and warranties of Seller
hereunder.
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<PAGE>
4.2 Conduct of Business. Seller 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 Seller, 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. Seller shall act diligently and
reason ably (a) to preserve the Purchased Assets intact, (b) to keep available,
if so requested by Buyer, the services of the present personnel of the Center
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, Seller shall conduct the
business and operations of the Center in all respects only in the ordinary
course and substantially as presently operated. Notwithstanding the foregoing,
except as otherwise contemplated by
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<PAGE>
this Agreement or consented to in writing by Buyer, Seller shall not, with
respect to the Purchased Assets, sell, lease, transfer or otherwise dispose of
(including transfers to any Affiliates of Seller), or mortgage or pledge, or
impose or suffer to be imposed any Lien on, any Purchased Assets. In addition,
Seller shall ensure that all liabilities and obligations to vendors, lenders and
other creditors are current in accordance with their terms and not past due and
the Seller shall indemnify and hold Buyer harmless against all past due
obligations of the Center as of the Closing incurred prior to Closing.
Additionally, pending the Closing, and except as otherwise specifically
contemplated by this Agreement, Seller:
(i) shall not enter into contracts or commitments involving,
individually, in excess of $5,000 (or $25,000 in the aggregate);
(ii) 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;
(iii) shall not dispose of or encumber any of its properties and
assets;
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<PAGE>
(iv) 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
(v) 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 breach of or default under any contract, commitment
or obligation of the Seller.
4.3 Maintenance. Seller 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 Center
in the ordinary course. In the event of any material loss of, or material
damage to, tangible Purchased Assets or the Center prior to the Closing, Seller
shall either pay the lesser of the repair or replacement cost thereof to Buyer
at the Closing or, at the option of Buyer, promptly repair or replace the lost
or damaged Purchased Assets in order to minimize the interruption to the
Business. If, despite the best efforts of Seller to repair or replace such lost
or
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<PAGE>
damaged Purchased Assets prior to the Closing Date, such repair or replacement
is not completed prior to the Termination Date, then, at the option of Buyer,
(a) this Agreement shall terminate, (b) the Termination Date shall be extended
for an additional period not to exceed ten days or (c) Seller shall pay to the
Buyer on the Closing Date the lesser of the repair or replacement cost of the
lost or damaged Purchased Assets.
4.4 Consents and Approvals. Seller shall act diligently and
----------------------
reasonably to secure the consents and approvals of any govern mental agencies
and authorities and any other Persons, 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 5.6 hereof, provided, that Seller
--------
shall not make any agreement or understanding affecting the Purchased Assets,
the Center 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 Seller to obtain the consents or
approvals contem plated by this Section 4.4.
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<PAGE>
4.5 Renewal of Contracts. Seller 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 the
----------------------
Seller, any covenant contained herein requiring action on the part of the Seller
shall require the Stockholders to cause Seller to take such action.
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 Seller 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
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<PAGE>
accurate as of the Closing Date, as though such representations and warranties
were then made by Seller and the Stockholders; and Seller 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 and Due Diligence. 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 adversely affecting the Business
or the Purchased Assets; (c) no damage, destruction, loss or claim or
condemnation or other taking adversely affecting the Business or the Purchased
Assets that has not been repaired or replaced in accordance with Section 4.3
hereof; (d) no lawsuit, proceeding or claim filed or asserted against Seller
that, if adversely determined, may have an adverse effect on the Business or the
Purchased Assets and (e) no event or fact concerning the Seller, the Center or
the Business shall have come to the attention of the Buyer during Buyer's due
diligence investigation that would cause the Buyer, in its reasonable judgment,
not to proceed with the Closing.
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<PAGE>
5.3 Opinion of Counsel for Seller. Buyer shall have received from
-----------------------------
counsel to Seller and the Stockholders, an opinion dated the Closing Date in the
form set forth in Exhibit B hereto.
---------
5.4 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.
5.5 Assumption of Lease and Assumed Contracts. The landlord of the
-----------------------------------------
Center shall have agreed to the assumption by Buyer of the leases for the Center
(the "Leases"). The Assumed Contracts shall be
------
assigned to Buyer on terms satisfactory to Buyer.
5.6 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 otherwise under any Contract.
---------------
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
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<PAGE>
Buyer's counsel, and Seller 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 Seller in the form of Exhibit C annexed
---------
hereto, dated the Closing Date, authorizing Buyer to endorse certain checks made
payable to Seller.
5.10 Deliveries Complete. All documents required to have been
-------------------
delivered by Seller 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 Seller, at or prior to the Closing shall
have been delivered or taken.
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<PAGE>
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, Seller and each
-------------------
Stockholder shall deliver to Buyer a certificate signed by the President of
Seller or such Stockholder to the effect that: (a) all representations and
warranties of Seller and the 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) Seller has
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 Buyer's obligations to close under
this Agreement has 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 Seller's employees employed at the Center (the "Employees") for
---------
possible employment by Buyer at the Center from and after the Closing Date, it
being agreed,
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<PAGE>
however, that Buyer shall have no obligation to employ any such
person. Buyer will make available to the Employees employed by it the benefit
plans which are currently available to employees of MRI. At least three business
days prior to the Closing Date, Buyer shall deliver to Seller a list of those
Employees that Buyer wishes to so employ and Seller 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, Seller shall be
solely responsible for (i) properly notifying such Employees of their
termination, and (ii) making all severance and related payments, including but
not limited to payments for accrued vacation and accrued sick days, if any.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLER
AND THE STOCKHOLDERS
The obligations of Seller and the Stockholders under this Agreement
shall be subject, at the option of Seller, to the fulfillment of each of the
following conditions as of the Closing Date:
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<PAGE>
6.1 Accuracy of Representations and Compliance With Conditions. All
----------------------------------------------------------
representations and warranties of Buyer 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 order shall have been rendered enjoining or otherwise
------
restraining the consummation of the transactions contemplated hereby.
6.3 Opinion of Counsel to Buyer. Seller shall have received from
---------------------------
Werbel & Carnelutti, counsel for Buyer, 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 to Seller, including each of the certifi cates, instruments
and documents listed on Schedule 6.4 hereto, and all actions required under this
------------
Agreement to have been taken by
-46-
<PAGE>
Buyer, at or prior to the Closing shall have been delivered or taken.
6.5 Closing Certificate. On the Closing Date, Buyer shall deliver to
-------------------
Seller 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 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 Seller's obligations
to close under this Agreement has been fulfilled.
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<PAGE>
ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. (a) Buyer shall retain the books and
------------------------
records of the Center and the Purchased Assets transferred to it hereunder for a
period of not less than three (3) 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 Seller reasonable notice of such intent and the right to obtain
from Buyer those books and records which it intends to dispose of or destroy.
Seller shall have the right, at the expense of Seller, (i) of reasonable access
to and examination of such records and books for a period of three (3) 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, Seller may remove from
Buyer's possession the originals of such of the books and records included in
the Purchased Assets as Seller may require, for use in litigation,
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<PAGE>
provided that Seller shall indemnify Buyer against losses, expenses, or damages
- --------
resulting from the loss, destruction or non-return of such books and records.
(b) Seller shall retain the books and records of the Center not
transferred to Buyer hereunder for a period of not less than three (3) years;
provided, however that Seller 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 Seller 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 three (3) years from and after the Closing Date upon reasonable
notice to Seller and during normal business hours, and (ii) to make copies of
such books, contracts and records as are in Seller's possession. With the
approval of Seller, which approval shall not be unreasonably withheld, Buyer may
remove from Seller's possession the originals of such books and records as Buyer
may require, for use in litigation, provided that Buyer shall indemnify Seller
--------
against any losses, expenses or damages resulting from the loss, destruction or
non-return of the same.
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<PAGE>
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and after the Closing, no party
---------------
to this Agreement 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, except for disclosures or notices, (i) based upon the
advice of MRI's counsel, to be made by MRI as a result of its public status,
including, but not limited to a press release announcing the transaction
contemplated by this Agreement and (ii) which may be required in order to
consummate the transactions contemplated by this Agreement. Each party shall be
permitted to disclose non-public information received in connection with the
transactions contemplated in this Agreement from the other party to its
authorized representatives, including legal and accounting advisors, to the
extent such representatives retain the confidentiality of such information. 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
-50-
<PAGE>
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 information relates. Seller and
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 ten
years from the date hereof, neither the Stockholders, Seller nor any Affiliate
of Seller or Stockholders, shall disclose intentionally to anyone, or use or
otherwise exploit for the Stockholders', the Seller's or any Affiliate of Seller
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 Center, 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
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<PAGE>
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 Center 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").
(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, Seller or any Affiliate
of Seller or Stockholders or any agent or other representative thereof, and (ii)
business and technical methods applicable to diagnostic imaging businesses
generally. Neither the Stockholders, Seller nor any Affiliate of Seller 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, Seller or any Affiliate of Seller or Stockholders concerned shall
provide Buyer with prompt notice of such requirement, prior to
-52-
<PAGE>
making any disclosure, so that the Buyer may seek an appropriate protective or
restrictive order.
(d) At the request of Buyer, Stockholders and Seller 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. As long as the Buyer and MRI
-------------------------------
have not breached the provisions of Section 1.3(c), during the period commencing
on the date hereof and ending five (5) years from the date hereof, none of the
Stockholders, Seller nor any Affiliate of Seller or Stockholders shall, directly
or indirectly:
(a) anywhere within a ten (10) mile radius from the Center 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,
joint venturer, lender, advisor, consultant, investor or other participant, any
business which offers diagnostic imaging services (a "Competitive Business");
--------------------
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<PAGE>
(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, Seller, 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 Seller
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 Seller or
Stockholders, such
-54-
<PAGE>
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.
(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
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<PAGE>
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 Seller and the Stockholders. Seller agrees to
----------------------------------------
indemnify and hold harmless Buyer and its successors and assigns and its and
their respective officers, directors, control ling Persons (if any), employees,
attorneys, agents, Affiliates, partners and stockholders, in each case past,
present, or as they may exist at any time after the date of this Agreement
(including
-56-
<PAGE>
Buyer, the "Buyer Indemnitees") 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 Seller or the Stockholders
contained in this Agreement or in any other agreement executed
and delivered by Seller or the Stockholders hereunder or 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 Seller
with the provisions of applicable bulk sales laws, and (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
(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 prior to the Closing Date relating to the Purchased
Assets or the operation or conduct of the Business.
If the Seller breaches any provision of Section 9.4 hereof, the Stockholders
shall thereafter be jointly and severally liable with the Seller to the Buyer
Indemnitees pursuant to this Section 9.1.
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<PAGE>
9.2 Indemnity by Buyer. Buyer agrees to indemnify and hold harmless
------------------
Seller and their successors and assigns and their respective partners,
controlling Persons (if any), employees, attorneys, agents, Affiliates, partners
and stockholders (including Seller, the "Seller Indemnitees") 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 here with and (ii) the
liabilities assumed by Buyer pursuant to Section 1.4 of this
Agreement; 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, liabilities,
losses, costs and legal and other expenses arising from events
occur ring on and after the Closing Date relating to the
Purchased Assets or the operation or conduct of the
Business except to the extent that same results from the breach
of any representation or warranty of Seller hereunder.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller 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
----------
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<PAGE>
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)
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<PAGE>
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 Indemnified Party shall have the
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<PAGE>
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 Indemni-fied Party shall automatically be deemed
to have waived any right to indemnification hereunder.
9.4 Retention of Assets By Seller. The Seller covenants and agrees
-----------------------------
that during the one-year period beginning on the Closing Date (the "Restricted
----------
Period"), it will maintain ownership, at all times during such period, of at
- ------
least $1,000,000 of cash or other tangible assets, which cash or other assets
shall free and clear of all Liens, except for such Liens as may be incurred in
the ordinary course of the Seller's business. The Seller also covenants and
agrees that, during the Restricted Period, it will not, without the prior
written consent of Buyer, which consent shall not be unreasonably withheld, (i)
merge with or into or consolidate with any other corporation, (ii) sell, lease,
or otherwise dispose of all or substantially all of its properties or assets,
except that Seller may enter to leases upon fair market terms and Seller may
utilize $1,000,000 of the Closing Date Amount to purchase tangible assets, (iii)
dissolve itself, (iv) file a petition in voluntary bankruptcy or a petition or
answer seeking reorganization or arrangement under
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the Federal or state bankruptcy laws, and (v) be the subject of a filing of a
petition seeking a decree or order adjudicating the Seller a bankrupt or
appointing a receiver or a trustee of the major portion of the property to the
Seller upon the application of any creditor in an insolvency or bankruptcy
proceeding or other creditors' suit.
ARTICLE 10
MISCELLANEOUS
10.1 Bulk Sales Laws. Buyer waives compliance by Seller with any
---------------
applicable bulk sales law and Seller hereby agrees to indemnify buyer from any
liability thereunder.
10.2 Payment of Sales, Use and Similar Taxes. Seller 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
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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 one year from the Closing Date.
10.6 Entire Agreement; Modification. This Agreement (including
------------------------------
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.
10.7 Notices. Any notice given pursuant to this Agreement to any
-------
party hereto shall be deemed to have been duly given when mailed by registered
or certified mail, return receipt requested, or when hand delivered as follows:
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<PAGE>
If to Seller or the Stockholders:
c/o Mr. J. Kenneth Luke
Medquest Associates, Inc.
3295 Exchange Drive
Suite 275
Norcross, GA. 30092
with a copy to:
Brown, Massey, Evans & McLeod
106 Williams Street
Greenville, South Carolina 29602
Attention: Stanley McLeod, Esq.
If to Buyer:
Rancho Cucamonga Resources, Inc.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
with a copy to:
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
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.
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<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 ineffective to the extent, but
only to the extent of, such invalidity, illegality or unenforceability, without
invalidating the
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<PAGE>
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 New York, 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 incorporated 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
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in the singular number the plural and in the plural number the singular.
"Affiliate" of a Person shall mean any other Person controlling,
---------
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" shall mean Medical Resources, Inc., a Delaware corporation.
---
"MRI Group Entity" shall mean any entity in which the Buyer, MRI, any
----------------
direct or indirect subsidiary of MRI, or any such
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<PAGE>
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, partner ship, firm,
------
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first written above.
GROVE DIAGNOSTIC IMAGING CENTER, INC.
By:_____________________________
Name:
Title:
________________________________
Stockholder: J. Kenneth Luke
________________________________
Stockholder: J.M. Venesky
RANCHO CUCAMONGA RESOURCES, INC.
By:_____________________________
Name:
Title:
Solely with respect to the issuance of
the Closing Shares and Sections 1.3,
1.8 and 3.1 through 3.3 hereof:
MEDICAL RESOURCES, INC.
By:_____________________________
Name:
Title:
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<PAGE>
EXHIBIT 99.8
EXECUTION COPY
--------------
ASSET PURCHASE AGREEMENT
------------------------
AGREEMENT, dated as of May 7, 1997, between Accessible MRI of
Baltimore County, Inc., a Maryland corporation with a mailing address at 110
West Road, Suite 212, Towson, Maryland 21204 ("Accessible Towson"), Accessible
-----------------
MRI of Montgomery County, Inc., a Maryland corporation with a mailing address at
8830 Cameron Street, Suite 101, Silver Spring, Maryland 20910 ("Accessible
----------
Spring", and together with Accessible Towson, the "Sellers"), Ross H. Taber, the
- ------ -------
President of each Seller (the "Executive) and Phyllis S. Taber (the
---------
"Stockholder"), and Accessible Resources, Inc., a Delaware corporation with a
-----------
mailing address at 155 State Street, Hackensack, New Jersey 07601 ("Buyer")
-----
and, solely with respect to the Closing Shares (as herein defined) and Sections
1.3, 1.8, 3.1 through 3.3 and 9.2, Medical Resources, Inc., a Delaware
corporation ("MRI"), of which the Buyer is a wholly-owned subsidiary.
---
W I T N E S S E T H:
-------------------
<PAGE>
WHEREAS, Accessible Towson owns and manages an imaging center which is
operating as Accessible MRI and is located at 110 West Road, Suite 212, Towson,
Maryland 21204 (the "Towson Center") and Accessible Spring owns and manages an
-------------
imaging center which is operating as Accessible MRI and is located at 8830
Cameron Street, Suite 101, Silver Spring, Maryland 20910 (the "Silver Spring
-------------
Center", and together with the Towson Center, the "Centers"), and Sellers own or
- ------ -------
have the right to use certain of the assets, properties, business and goodwill
relating thereto (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 desires 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 Stockholder owns a majority of the outstanding common
stock of each Seller.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, Sellers and Buyer agree as follows:
<PAGE>
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")), including, without limitation,
------------ ---------------
all machinery, 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
-3-
<PAGE>
included in the Purchased Assets to the extent said warranties and claims may be
assignable; and
(b) all names, trademarks, contractual rights, telephone numbers,
assignable Licenses (as defined in Section 2.6), books and records, business and
good will of Sellers 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 Centers (including any related claims in respect of the
collection thereof) (the "Accounts Receivable"); and
-------------------
(d) the rights to any and all Contracts (as defined in Section 2.7)
listed in Schedule 1.4 as Contracts to be assumed by Buyer (the "Assumed
------------ -------
Contracts"); and
- ---------
(e) 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 the Sellers, the Stockholder and Executive 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 May 8, 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
-4-
<PAGE>
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").
------------
1.3 (a) Purchase Price. As consideration for the Purchased Assets,
--------------
Buyer shall pay to Sellers $4,328,872 (the "Purchase Price") (subject to
--------------
adjustment pursuant to clause (b) below) in the form and manner as follows:
(i) $2,828,872 by wire transfer in immediately available funds
on the Closing Date (the "Closing Date Amount"); and
-------------------
(ii) MRI shall deliver to Sellers a stock certificate evidencing
the number of shares (the "Closing Shares") of common stock
--------------
(the "MRI Common Stock"), par value $.01 per shares, of MRI
----------------
which equals the quotient obtained by dividing $1,500,000
(the "Threshold Amount") by the Market Value (as defined in
----------------
Section 10.15) of the MRI Common Stock as of the trading
day immediately
-5-
<PAGE>
preceding the Closing Date (the "Closing Date Price").
------------------
(b) Post Closing Adjustment if Effective Date Price is Less Than the
----------------------------------------------------------------
Closing Date Price. In the event that the Market Value of the MRI Common Stock
- ------------------
as of the Effective Date (as defined in Section 1.8) (the "Effective Date
--------------
Price") is less than the Closing Date Price, MRI, at its option, shall either
(i) issue to Sellers promptly following the Effective Date (but in any
event not less than the third Business Day following the Effective Date)
such additional number of shares of MRI Common Stock (rounded to the
nearest whole number) as shall equal a fraction, the numerator of which is
an amount (the "Deficiency Amount") equal to the difference between (1) the
-----------------
Threshold Amount and (2) the product obtained by multiplying the Effective
Date Price by the number of Closing Shares, and the denominator of which is
the Effective Date Price, or
(ii) deliver to Sellers a certified check in the amount equal to the
Deficiency Amount.
(c) Allocation of Purchase Price. The Sellers and the Buyer agree to
----------------------------
allocate the Purchase Price in accordance with IRC
-6-
<PAGE>
Section 1060. Such allocation shall be agreed to by the Sellers and the Buyer
within 30 days of the Closing Date. In addition, the Sellers and the Buyer
hereby agree to file timely any information that may be required to be filed
pursuant to Treasury Regulations promulgated under IRC Section 1060.
1.4 Liabilities. Buyer shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of Sellers, the Business or the
Centers 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. Such liabilities retained by Sellers 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."
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
-7-
<PAGE>
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 the Sellers
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 (w) the Closing Date Amount, (x) the Closing Shares, (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
-8-
<PAGE>
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 (w) through (z) hereof
are hereinafter referred to as "Buyer's Closing Documents" and, collectively
-------------------------
with Sellers' Closing Documents, the "Closing Documents".
-----------------
(c) On the Closing Date, Buyer and Sellers shall apportion trade
payables relating to the Business, such as equipment lease payments and office
lease payments, for the month in which the Closing Date occurs based upon the
number of days elapsed in such month up to the Closing Date. Buyer shall pay to
the Sellers on a pro rata basis any net credit owed to the Sellers and Buyer
shall deduct on a pro rata basis from the Closing Date Amount payable to Sellers
any net credit owed to the Buyer.
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.
-9-
<PAGE>
(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 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 benefit.
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) by either Buyer or
Sellers if the Closing has not occurred on or before May 16, 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
-10-
<PAGE>
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) MRI agrees to prepare and
--------------------------------
file with, and use its best efforts to cause to be declared effective by, the
Securities and Exchange Commission (the "SEC"), as soon as practicable following
the Closing Date but in any event within six months thereof, a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
covering the resale by the Sellers in a public distribution of the Closing
Shares. The date such registration statement is declared effective by the SEC
is referred to herein as the "Effective Date." MRI 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 earlier to occur of two years from the Effective Date or
the date on which Sellers have completed their disposition of such shares
-11-
<PAGE>
pursuant to the registration statement, provided that such two year period shall
--------
be extended for a period equal to the number of days during such two year period
with respect to which trading in the MRI Common Stock is suspended on The Nasdaq
Stock Market or such registration statement is not effective and current other
than as a result of any action or inaction by Sellers.
(b) In connection with the registration of the Closing Shares
pursuant to this Section 1.8:
(i) The 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 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;
-12-
<PAGE>
(iii) MRI shall use reasonably diligent efforts to have the Closing
Shares qualified for listing on The Nasdaq Stock Market;
(iv) MRI shall maintain American Stock Transfer & Trust Company, or a
comparable entity, as the transfer agent for the MRI Common Stock,
including the Closing Shares;
(v) MRI will furnish to the 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);
(vi) Except as set forth in subsection (vii) below, MRI shall bear all
costs and expenses incident to any registration pursuant to this
Section 1.8; and
-13-
<PAGE>
(vii) The Sellers shall pay any and all brokerage fees and transfer
taxes incident to the sale of any share of MRI Common Stock sold by
the Sellers pursuant to the registration effected pursuant to this
Section 1.8, and shall pay the fees and expenses of any special
attorneys or accountants retained by it.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLERS, STOCKHOLDER AND EXECUTIVE
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Sellers and Executive and,
solely with respect to Sections 2.2, 2.9 and 2.18, Stockholder represent and
warrant to Buyer and agree as follows:
2.1 Organization and Qualification. Each Seller is a corporation
------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Maryland. Each Seller has all requisite corporate power and authority
to own or lease its properties and assets and to conduct its business as
presently conducted. Other than the stockholders of Sellers listed on Schedule
2.1, no other person or entity has an equity interest in
-14-
<PAGE>
the Sellers or any right with respect to an equity interest in the Sellers.
2.2 Authority to Effect Transactions. (a) Sellers, Stockholder and
--------------------------------
Executive have all requisite power and authority to execute, deliver and perform
this Agreement and all of Sellers' Closing Documents to which they are a party.
All necessary corporate action (including, without limitation, all action by
stockholders) on the part of Sellers has been 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 Stockholder
and Executive, and is the legal, valid and binding obligation of Sellers,
Stockholder and Executive, enforceable against Sellers, Stockholder and
Executive 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, (i) no consent,
---------------
authorization, approval, order, license, certificate,
-15-
<PAGE>
permit or act of or from, or declaration or filing with, any foreign, federal,
state, local or other governmental authority or regulatory body or any court or
other tribunal or any party to any contract, agreement, instrument, lease or
License (as defined in Section 2.6) to which any Seller is a party or by which
it is bound or to which any of the Purchased Assets is subject, is required for
the execution, delivery or performance by Sellers, Stockholder or Executive of
this Agreement or any of Sellers' Closing Documents or the consummation of the
transactions contemplated hereby or thereby and (ii) 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) either
-16-
<PAGE>
Seller's certificate of incorporation and bylaws, each as amended to date, (B)
any law, statute, rule, regulation, order, award, judgment or decree to which
either Seller, Stockholder or Executive or any of the Purchased Assets is
subject or (C) any contract, agreement, instrument, lease or License to which
either Seller, Stockholder or Executive is a party or by which it is bound.
2.3 Financial Statements. Each Seller has delivered to Buyer true
--------------------
and correct copies of the following: unaudited balance sheets of Seller as of
the twelve months ended September 30, 1996 and the five months ended February
28, 1997; the unaudited statement of operations and statement of retained
earnings of Seller for the twelve months ended September 30, 1996; and the
unaudited statement of operations for the five months ended February 28, 1997.
Each such balance sheet presents fairly the financial condition, assets,
liabilities and stockholder's equity of each Seller as of its date; each such
statement of operations presents fairly the results of operations of each Seller
for the period indicated; and each such statement of retained earnings presents
fairly the information purported to be shown therein. The financial statements
referred to in this Section 2.3 have been prepared in accordance with generally
accepted accounting principles, consistently applied throughout the periods
involved,
-17-
<PAGE>
are correct and complete, and are in accordance with the books and records of
each Seller previously made available for Buyer's review. Except as set forth in
Schedule 2.3 hereto, Sellers are not subject to any liability (including,
- ------------
without limitation, known unasserted claims 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 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 February 28,
------------
1997 (the "Balance Sheet Date"), the Business has been conducted in all respects
------------------
only in the ordinary course of business of the Centers consistent with past
practice. Except as set forth on Schedule 2.4 hereto and except for general
economic and regulatory conditions affecting the medical diagnostic imaging
industry, since the Balance Sheet Date, there has been (a) no adverse change in
the Purchased Assets or in the business, liabilities, operations, profits,
condition (financial or
-18-
<PAGE>
otherwise) or prospects of the Centers, and, no fact or condition exists or is
contemplated or threatened which might be expected to cause such a change in the
future, and (b) no damage, destruction, loss or claim or condemnation or other
taking 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) 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)
---------------
(collectively, "Permitted Liens"). Sellers shall discharge and indemnify Buyer
---------------
from and against any and all claims, suits,
-19-
<PAGE>
actions, proceedings (formal and informal), investigations, judgments,
deficiencies, damages, settlements, liabilities, losses, costs and legal and
other expenses resulting or arising from any Lien existing on the Closing Date
(whether inchoate, or not, and whether perfected or not) on or with respect to
any of the Purchased Assets other than any Permitted Lien. 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) No real property owned by Sellers is used in the conduct of the
Business.
2.6 Licenses and Authorizations. Sellers own, hold or possess all
---------------------------
foreign, federal, state or local governmental licenses, franchises, permits,
privileges, approvals and other authorizations and licenses which are necessary
to entitle them 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
the Centers (the "Licenses"). Set forth on Schedule 2.6 hereto is a list and
-------- ------------
brief description of each of the Licenses. 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 survive the
Closing in
-20-
<PAGE>
full force and effect. No 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.
There is not now pending, or, to the knowledge of Sellers or Executive,
threatened, any action to revoke, cancel, rescind, modify or refuse to renew in
the ordinary course any of the Licenses. Sellers and, to the best of their
knowledge, their predecessors in interest, if any, have performed and fulfilled
in all respects all of their respective material obligations under each of the
Licenses, and Sellers are not aware of any event or condition or state of facts
which constitutes or, after notice or lapse of time or both, would constitute a
breach or default under any of such Licenses or which permits or, after notice
or lapse of time or both, would permit revocation or termination of any of such
Licenses or which would adversely affect any of the rights of Sellers
thereunder.
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, Stockholder or Executive is a party or by which it is bound, relating
to the Business or the
-21-
<PAGE>
Purchased Assets or to which any of the Purchased Assets is subject
(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 Executive's knowledge, the other
party thereto, and is in full force and effect. Sellers have performed and
fulfilled all of their material 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 Executive, no other party is in
default or breach thereunder.
2.8 Employees. (a) Schedule 2.8A hereto contains (i) a list of the
--------- -------------
names and relationships with Sellers of all employees of Sellers at the Centers
as of the date hereof, (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,
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<PAGE>
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 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.
(b) Sellers have complied in all material respects with all applicable
laws, rules and regulations affecting the employment of labor, including, but
not limited to, those relating to wages, hours, discrimination and the payment
of social security, withholding and similar taxes, and is not liable for any
arrears of wages or any penalties for failure to comply with any of the
foregoing. There are no controversies pending or, to Sellers' or Executive's
knowledge, threatened between Sellers and any of their employees, or any labor
unions or collective bargaining unit representing or purporting to represent any
of their employees.
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<PAGE>
2.9 Compliance with Laws; Litigation. The Purchased Assets and their
--------------------------------
uses comply with, and Sellers with respect to the Purchased Assets and the
operation of the Business and the Centers are 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, except for any noncompliance which would not have a
material adverse effect on either Seller, the Business, the Centers or the
Purchased Assets. 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
for any judgments, writs, decrees, injunctions or orders binding on the
diagnostic imaging industry generally. Except as set forth on Schedule 2.9
------------
hereto, 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, Stockholder, Executive
or the Centers (including, to the
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<PAGE>
knowledge of Sellers, Stockholder or Executive, any medical professionals
practicing at the Centers, whether or not the proceeding involves activities
performed at the Centers) served on Sellers or, to the knowledge of Sellers,
Stockholder and Executive, pending or threatened against Sellers, Stockholder or
Executive or otherwise with respect to the Business, the Centers or the
Purchased Assets (including, without limitation, any claim for malpractice) nor
is there any basis for any of the same, and there are no suits, actions,
administrative proceedings, arbitrations or other proceedings or investigations
pending in which either Seller, Stockholder or Executive is the plaintiff or
claimant relating to the Purchased Assets, the Business or the Centers. There is
no suit, action, administrative proceeding, arbitration or governmen tal
investigation involving Sellers, Stockholder, Executive or the Centers pending
or, to the knowledge of Seller, Stockholder and Executive, threatened, which
questions the legality, validity or propriety of the transactions contemplated
by this Agreement.
2.10 Taxes. (a) Sellers have timely filed or will timely file all
-----
returns and reports required to be filed by them with any taxing authority with
respect to Taxes (as hereinafter defined) (as for any period ending on or before
the Closing Date),
-25-
<PAGE>
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)
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)
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<PAGE>
interest, penalties and additions to tax imposed with respect thereto.
2.11 No Referrals by Interested Parties. From and after January 1,
----------------------------------
1995 and through the Closing Date, there have been no referrals of Medicare or
Medicaid patients to the Sellers by physicians owning equity interests in the
Sellers or any Centers or having any financial relationship with the Sellers or
any Centers.
2.12 Related Party Transactions. Schedule 2.12 specifies all entities
--------------------------
that have transacted business with the Sellers or any Center that are "related"
through common ownership or control to the Sellers or any Center under the
Medicare definition of such term, or the definition of such term under the
Medicaid program of any State. For each such entity, Schedule 2.12 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 2.12 are all contracts or written agreements
between such entities and the Sellers or any Center.
2.13 Machinery, Equipment and Supplies. All machinery, equipment and
---------------------------------
supplies of Sellers included in the Purchased Assets are in good and usable
condition, ordinary wear and tear excepted.
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<PAGE>
2.14 Insurance. Schedule 2.14 hereto sets forth a list of all
--------- -------------
policies of insurance in force with respect to the Purchased Assets, the Centers
and the Business. Sellers have received no notices of any pending or threatened
terminations with respect to such policies and Sellers are in compliance with
all conditions contained therein. All such 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.
2.15 Environmental Matters. There has been no (a) release or
---------------------
threatened release of any hazardous substance, pollutant or contaminant as each
such term presently is defined by the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, resulting from any activity by or on
behalf of Sellers or any predecessor in interest, including but not limited to,
the generation, handling, storage, treatment, transportation or disposal of any
hazardous substance, pollutant or contaminant at the Centers; (b) past or, to
the knowledge of Sellers or Executive, future action taken or, to the knowledge
of Sellers or Executive, to be taken by any federal, state or local entity or by
any private party under any federal, state or local statute, rule, regulation
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or guideline concerning the release of any hazardous substance, pollutant or
contaminant into the soil, air, surface or subsurface waters or the environment
in general from the Centers; and (c) claims or actions brought or, to the
knowledge of Sellers or Executive, which may be brought by any third party for
damages occurring at or outside of the Premises resulting from the alleged
release or threatened release of any hazardous substance, pollutant or
contaminant by Sellers or any predecessor in interest, including but not limited
to, claims for health effects to persons, property damage and/or damage to
natural resources; nor do Sellers or Executive have any knowledge of any basis
for any of the foregoing.
2.16 Accounts Receivable. Each Seller has good title, free and clear
-------------------
of all Liens except Permitted Liens, to the receivables reflected on its balance
sheets. Such accounts receivable have arisen from bona fide transactions
entered into in the ordinary course of business and are not in dispute or
subject to defense, counterclaim or set-off other than in the ordinary course of
business.
2.17 Brokers. Neither Sellers, Stockholder, Executive nor any
-------
Affiliate of Seller, Stockholder or Executive has incurred any liability or
obligation to any broker, finder or agent for any
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<PAGE>
brokerage fees, finder's fees or commissions with respect to the transactions
contemplated by this Agreement.
2.18 Disclosure. All representations and warranties made by Sellers,
----------
Stockholder and Executive to the Buyer, whether or not in writing, are and when
made were true, accurate and complete.
2.19 Investment Intent. The Sellers and the stockholders of Sellers
-----------------
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. The
Sellers and the stockholders of Sellers are "accredited investors" as such term
is defined in Rule 501(a) under the Securities Act. The Sellers and the
stockholders of Sellers 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 the
stockholders of Sellers acknowledge that the Closing Shares which are issuable
hereunder must be held indefinitely until subsequently registered under the
Securities Act
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<PAGE>
or unless an exemption from such registration is available. The Sellers and the
stockholders of Sellers 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.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER AND MRI
As an inducement to Sellers, Stockholder and Executive to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer and MRI
represent and warrant to Sellers, Stockholder and Executive 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. Each of Buyer and MRI 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 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.
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<PAGE>
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. The Closing Shares, when issued pursuant to the terms hereof, shall 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.
(b) (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 or MRI is a party or by which it is bound, is
required for the execution, delivery or performance by Buyer or MRI of this
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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 or MRI of this Agreement or any
of Buyer's Closing Documents, nor the consummation of the transactions contem
plated 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, by-laws or other constitutional documents, each as amended to
date, of Buyer or MRI, (B) any law, statute, rule, regulation, order, award,
judgment or decree to which Buyer or MRI is subject, or (c) any contract,
agreement, instrument, lease or license to which Buyer or MRI is a party or by
which it is bound.
3.3 Litigation. Other than as set forth on Schedule 3.3, there is no
---------- ------------
suit, action, administrative proceeding, arbitration or other proceeding or
governmental investigation
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(including by the SEC or The Nasdaq Stock Market) pending or, to the best
knowledge of Buyer or MRI, threatened against Buyer or any MRI Group Entity,
which questions the legality, validity or propriety of the transactions
contemplated by this Agreement or which would reasonably be expected to have a
material adverse effect on the business of MRI and its subsidiaries taken as
whole.
3.4 SEC Reports. Since January 1, 1997, MRI has timely filed all
-----------
forms, reports, statements and other documents required to be filed with the SEC
(collectively, the "SEC Reports"). The SEC Reports, including all SEC Reports
-----------
filed after the date of this Agreement and prior to the Closing Date (x) were or
will be prepared in all material respects in accordance with the requirements of
applicable law (including, with respect to the SEC Reports, the Securities Act
and the Securities Exchange Act of 1934, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such SEC Reports) and (y) did
not at the time they were filed, or will not at the time they are 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. Since the filing of
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<PAGE>
its most recent SEC Report, no material adverse change has occurred in the
financial condition of MRI and its subsidiaries, taken as a whole.
3.5 Brokers. Neither Buyer, MRI nor any Affiliate of Buyer or MRI
-------
has 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 Disclosure. All representations and warranties made by Buyer and
----------
MRI in this Agreement are and when made were true, accurate and complete.
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") free
-----------------------------
and full access to the properties, assets, books and records of Sellers relating
-35-
<PAGE>
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 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.
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
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<PAGE>
reasonably (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 Centers 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 the Centers 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 (including transfers to any Affiliates of Sellers) or otherwise dispose
of (other than in the ordinary course of business consistent with past
practice), 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 current and not past due
in accordance with their customary terms and the Sellers, Stockholder and
Executive shall indemnify and hold Buyer harmless against all past due
obligations of the Centers as of the Closing incurred prior to Closing and not
specifically assumed by
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<PAGE>
Buyer as an Assumed Liability. Additionally, pending the Closing, and except as
otherwise specifically contemplated by this Agreement, each Seller:
(i) shall not issue or sell rights (including, without limitation,
conversion rights), options, warrants to purchase or to subscribe
to, or enter into any arrangement or contract with respect to any
of it securities;
(ii) 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;
(iii) shall not enter into contracts or commitments involving,
individually, in excess of $5,000 (or $25,000 in the aggregate);
(iv) 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;
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<PAGE>
(v) shall not dispose of (other than in the ordinary course of
business consistent with past practice) or encumber any of its
properties and assets;
(vi) 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
(vii) 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 breach of or default under any contract, commitment
or obligation of the Seller.
4.3 Maintenance. Sellers shall act reasonably and in accordance with
-----------
their 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. In the event of any material loss of, or material
damage to, tangible Purchased Assets or the Centers prior to the Closing,
Sellers shall either pay the lesser of the repair or replacement cost thereof to
Buyer at the Closing or, at the option of Buyer,
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<PAGE>
promptly repair or replace the lost or damaged Purchased Assets in order to
minimize the interruption to the Business. If, despite the best efforts of
Sellers to repair or replace such lost or damaged Purchased Assets prior to the
Closing Date, such repair or replacement is not completed prior to the
Termination Date, then, at the option of Buyer, (a) this Agreement shall
terminate or (b) the Termination Date shall be extended for an additional period
not to exceed ten days or (c) Sellers shall assign to Buyer the rights to the
proceeds from any insurance policy covering the lost or damaged Purchased
Assets.
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, 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 5.6 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
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<PAGE>
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 Assumed 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 Stockholder control the
---------------------
Sellers, any covenant contained herein requiring action on the part of the
Sellers shall require the Stockholder to cause Sellers to take such action.
4.7 Financing Arrangement. Sellers shall provide Buyer with
---------------------
information concerning all oral and written financing arrangements to which
Sellers are a party. 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.
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<PAGE>
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, Stockholder and Executive 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, Stockholder and Executive; and Sellers,
Stockholder and Executive 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 and Due Diligence. Between
-----------------------------------------------------
the date hereof and the Closing Date, there shall have been (a) no material
adverse change in the Business or
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<PAGE>
any of the Purchased Assets; (b) no federal, state or local legislative or
regulatory change adversely affecting the Business or the Purchased Assets; (c)
no damage, destruction, loss or claim or condemnation or other taking adversely
affecting the Business or the Purchased Assets that has not been repaired or
replaced in accordance with Section 4.3 hereof; 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, Stockholder and Executive, an opinion dated the Closing Date
in the form set forth in Exhibit B hereto.
---------
5.4 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.
5.5 Assumption of Leases and Assumed Contracts. The landlord of the
------------------------------------------
premises on which the Centers are located shall have agreed to the assumption by
Buyer of the leases for the
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<PAGE>
Centers (the "Leases"). The Assumed Contracts shall be assigned to Buyer on
------
terms satisfactory to Buyer.
5.6 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 otherwise under any Contract.
---------------
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.
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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, Stockholder
-------------------
and Executive shall deliver to Buyer a certificate signed by the President of
Sellers, Stockholder and Executive to the effect that: (a) all representations
and warranties of Sellers, Stockholder and Executive 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
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<PAGE>
date; (b) Sellers, Stockholder and Executive 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; and (c) each of the other
conditions precedent to Buyer's obligations to close under this Agreement has
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 Centers other than Executive
(the "Employees") for possible employment by Buyer at the Centers from and after
---------
the Closing Date, it being agreed, however, that Buyer shall have no obligation
to employ any such person. At least three 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 their 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, and (ii) making all
severance and related payments, including but not limited to payments for
accrued vacation and accrued sick days, if any.
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<PAGE>
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLERS
THE STOCKHOLDER AND EXECUTIVE
The obligations of Sellers, Stockholder and Executive 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 MRI; and Buyer and MRI 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.
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6.2 Orders. No order shall have been rendered enjoining or otherwise
------
restraining the consummation of the transactions contemplated hereby.
6.3 Opinion of Counsel to Buyer and MRI. 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 6.4 hereto, and all actions
------------
required under this Agreement to have been taken by Buyer and MRI, at or prior
to the Closing shall have been delivered or taken.
6.5 Closing Certificate. On the Closing Date, Buyer and MRI shall
-------------------
deliver to Sellers a certificate signed by the President (or a Vice President)
of Buyer and MRI to the effect that: (a) all representations and warranties of
Buyer and MRI 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 and MRI have performed and
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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 been fulfilled.
6.6 Necessary Consents and Releases. The parties shall have received
-------------------------------
written consents from all Persons whose consent is required therefor for the
assignment and assumption of any Assumed Contract as set forth on Schedule
--------
2.2(B) and the Sellers, and to the extent they are guarantors thereto, Executive
- ------
and the stockholders of Sellers, shall have obtained releases, or alternatively
an indemnification from MRI, with respect to such Assumed Contracts.
ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. (a) Buyer shall retain the books and
------------------------
records of the Centers and the Purchased Assets transferred to it hereunder for
a period of not less than three (3) 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
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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
three (3) 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.
(b) Sellers shall retain the books and records of the Centers not
transferred to Buyer hereunder for a period of not less than three (3) 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
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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 three (3) 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.
ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and after the Closing, no party
---------------
to this Agreement 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, except for disclosures or notices, based upon the
advice of
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MRI's counsel, to be made by MRI as a result of its public status, including,
but not limited to a press release announcing the transaction contemplated by
this Agreement. 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
information relates. Sellers, Stockholder and Executive 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) In the event the Closing occurs, during the period commencing on
the date hereof and ending ten years from the date hereof (the "Confidentiality
Period"), neither the Sellers, Stockholder or Executive nor any Affiliate
thereof, shall disclose intentionally to anyone, or use or otherwise exploit for
the benefit of Sellers, Stockholder, Executive or any Affiliate thereof, or for
the benefit of anyone other than Buyer or MRI Group
-52-
<PAGE>
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").
(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 Sellers, Stockholder or Executive or
any Affiliate or Agent thereof, and (ii) business and technical methods
applicable to diagnostic imaging businesses generally. Neither the Sellers,
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<PAGE>
Stockholder or Executive nor any Affiliate thereof 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 Sellers, Stockholder,
Executive or any Affiliate thereof 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, Sellers, Stockholder and Executive agree
to deliver to Buyer, at any time during the Confidentiality Period, 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
Sellers, Stockholder, Executive nor any Affiliate thereof shall, directly or
indirectly:
(a) anywhere within a twenty-five (25) mile radius from either Center
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, joint venturer, lender, advisor, consultant, investor or
other
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participant, any business which provides diagnostic imaging services (a
"Competitive Business");
--------------------
(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 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 Seller, Stockholder or
Executive 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, Stockholder or Executive, such stock is listed on a national
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<PAGE>
securities exchange, is reported on Nasdaq, or is traded in the over-the-counter
market by a member of a national securities exchange.
(e) Sellers, Stockholder and Executive 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.
(f) Sellers, Stockholder and Executive 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
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<PAGE>
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, Stockholder and Executive. Effective as of
-----------------------------------------------
the Closing Date, each of Sellers, Stockholder and Executive, 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
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<PAGE>
after the date of this Agreement (including Buyer, the "Buyer Indemnitees")
-----------------
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, Stockholder or
Executive contained in this Agreement or in any other agreement
executed and delivered by Sellers, Stockholder or Executive
hereunder or in connection herewith (ii) any obli gation 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 Centers prior
to the Closing Date and (v) any action by any stockholder of the
Sellers relating to the transaction contemplated hereby;
(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 on
or prior to the Closing Date; and
(c) 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
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upon any untrue or alleged untrue statement of any material facts
contained in any registration statement filed pursuant Section
1.8 hereto, or any document relating thereto, including all
amendments, and supplements, or arising out of or based upon the
omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein contained not misleading; provided, however, that the
-------- -------
Sellers will be liable as aforesaid only to the extent that such
untrue or alleged untrue statement or omission or alleged
omission is based upon information furnished to the Buyer by or
on behalf of Sellers expressly for use therein, or as a result of
its failure to furnish the Buyer with information requested by
Buyer specifically for use therein.
9.2 Indemnity by Buyer and MRI. Effective as of the Closing Date,
--------------------------
Buyer and MRI agree to indemnify and hold harmless Sellers, Stockholder and
Executive and their successors and assigns and their respective partners,
controlling Persons (if any), employees, attorneys, agents, Affiliates, partners
and stockholders (including Sellers, the "Seller Indemnitees") 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 or MRI contained in this
Agreement, or in any other agreement executed and delivered by
Buyer or MRI hereunder or in connection herewith, (ii) the
liabilities assumed by Buyer pursuant to Section 1.4 of this
Agreement and (iii) the application of appropriate health care
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<PAGE>
laws as they pertain to the provision of services by the Centers
after the Closing Date;
(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 after the Closing Date relat ing to the Purchased
Assets or the operation or con duct of the Business after the
Closing Date except to the extent that same results from the
breach of any representation or warranty of Sellers, Stockholder
or Executive hereunder; and
(c) 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 any untrue or alleged untrue statement of
any material facts contained in any registration statement filed
pursuant Section 1.8 hereto, or any document relating thereto,
including all amendments, and supplements, or arising out of or
based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein contained not misleading; provided,
--------
however, that Buyer will not be liable where the untrue or
-------
alleged untrue statement or omission or alleged omission is based
upon information furnished to Buyer by or on behalf of Sellers
expressly for use therein, or as a result of the Sellers' failure
to furnish to the Buyer information requested by Buyer
specifically for use therein.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller Indemnitee
-----------------
(the "Indemnified Party") seeking indemnification under this Agreement shall
-----------------
give to the party obligated to provide
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
Notwithstanding the foregoing the 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 Indemni fied 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 agree to indemnify Buyer from any
liability thereunder.
10.2 Payment of Sales, Use and Similar Taxes. Buyer 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
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<PAGE>
herewith, including all fees and expenses of its or their respective counsel and
accountants, whether or not the transactions contempla ted 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, except to the extent that they relate to a specified earlier date, for
a period of eighteen (18) months following the Closing Date.
10.6 Entire Agreement; Modification. This Agreement (including 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.
10.7 Notices. Any notice given pursuant to this Agreement to any
-------
party hereto shall be deemed to have been duly given when
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<PAGE>
mailed by registered or certified mail, return receipt requested, or when hand
delivered as follows:
If to Sellers, Stockholder or Executive:
c/o Gordon, Feinlatt, Rothman, Hoffberger
& Hollander
The Garrett Building
233 East Redwood Street
Baltimore, Maryland 21202
Attention: Hillel Tendler, Esq.
with a copy to:
Gordon, Feinlatt, Rothman, Hoffberger
& Hollander
The Garrett Building
233 East Redwood Street
Baltimore, Maryland 21202
Attention: Hillel Tendler, Esq.
If to Buyer:
Accessible Resources, Inc.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
with a copy to:
Werbel & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Stephen M. Davis, Esq.
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<PAGE>
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.
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.
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<PAGE>
10.10 Separability. If any provision of this Agreement is invalid,
------------
illegal or unenforceable, such provision shall be ineffective to the extent, but
only to the extent of, such invali dity, 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 New York, 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 incorporated herein by reference.
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<PAGE>
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.
"Affiliate" of a Person shall mean any other Person controlling,
---------
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" shall mean Medical Resources, Inc., a Delaware corporation.
---
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<PAGE>
"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, partner ship, firm,
------
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first written above.
ACCESSIBLE MRI OF BALTIMORE
COUNTY, INC.
By:_____________________________
Name: Ross H. Taber
Title: President
ACCESSIBLE MRI OF MONTGOMERY
COUNTY, INC.
By:_____________________________
Name: Ross H. Taber
Title: President
________________________________
Executive: Ross H. Taber
________________________________
Stockholder: Phyllis S. Taber
ACCESSIBLE RESOURCES, INC.
By:_____________________________
Name: William D. Farrell
Title: President
Solely with respect to the issuance of
the Closing Shares and Sections 1.3,
1.8, 3.1 through 3.3 and 9.2 hereof:
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<PAGE>
MEDICAL RESOURCES, INC.
By:_____________________________
Name: William D. Farrell
Title: President
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<PAGE>
EXHIBIT 99.10
ASSET PURCHASE AGREEMENT
Between
ATI CENTERS, INC.
as Seller,
JOHN A. BENNETT, M.D.
and NANCE DIROCCO,
as Stockholders,
ATI RESOURCES, INC.
as Buyer,
AMERICARE HEALTH SERVICES, INC.
as Contractor,
and
MEDICAL RESOURCES, INC.
as Limited Guarantor
<PAGE>
dated as of
March 7, 1997
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
This ASSET PURCHASE AGREEMENT (hereinafter referred to as "Agreement")
is made and entered into this 7th day of March, 1997, between and among ATI
CENTERS, INC., a Pennsylvania corporation, with an office at 900 East 8th
Avenue, Suite 200, King of Prussia, Pennsylvania 19406 (hereinafter referred to
as "Seller"), JOHN A. BENNETT, M.D. and NANCE DIROCCO, his wife, residing at
1020 Indian Creek Road, Wynnewood, Pennsylvania 19096 (hereinafter referred to
as the "Stockholders"), ATI RESOURCES, INC., a Delaware corporation with an
office at 155 State Street, Hackensack, New Jersey 07601 (hereinafter referred
to as "Buyer"), AMERICARE HEALTH SERVICES, INC., a Pennsylvania corporation with
an office at 900 East 8th Avenue, Suite 200, King of Prussia, Pennsylvania 19406
(hereinafter referred to as the "Contractor") and MEDICAL RESOURCES, INC., a
Delaware corporation, with an office at 155 State Street, Hackensack, New Jersey
07601 (hereinafter referred to as the "Limited Guarantor").
R E C I T A L S
<PAGE>
WHEREAS, Seller owns and manages the diagnostic imaging centers (each a
"Center" and collectively "Centers") described in Schedule 1.0 annexed hereto,
------------
and Seller owns or has the right to use 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 Seller used or held for use in connection with the
Business, and Seller desires 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 all of the outstanding capital stock of the
Seller;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein contained, Seller and Buyer 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
2
<PAGE>
this Agreement, on the Closing Date (as defined in Section 1.2 hereof), Seller
shall sell, assign, transfer and deliver to Buyer, and Buyer shall purchase and
acquire from Seller, free and clear of all Liens (as defined in Section 2.5(b)
hereof) except as otherwise contemplated and stated herein in Section 2.5(b),
all of the assets of the Business associated with the Centers, other than the
assets listed on Schedule 1.1 (the "Excluded Assets")), including, without
------------
limitation, all machinery, equipment, furnishings and personal property (except
cash on hand) 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, the following:
(a) all warranties and claims or potential claims against Seller's
suppliers or lessors with respect to any assets included in the Purchased Assets
to the extent said warranties and claims may be assignable; and
(b) all names, trademarks, contractual rights, telephone numbers, Licenses
(as defined in Section 2.6), market information,
3
<PAGE>
operational procedures, books and records, business and good will of Seller
relating to the Business and the Purchased Assets; and
(c) the rights to any and all contracts and agreements which Buyer elects
to assume and have the Seller assign to it (the "Assumed Contracts") by
notifying the Seller in writing and identifying such contracts and agreements no
less than three days prior to Closing (any agreement not so identified by Buyer
shall be retained by Seller and no obligation thereof will be assumed by the
Buyer) and any of Seller's rights to any deposits and prepaid items associated
with such assigned contracts and agreements; and
(d) 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 Seller and the 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 or before April 9, 1997 at the
offices of McCarter & English, Four Gateway Center, 100 Mulberry Street, Newark,
New Jersey 07101 at 10:00 a.m. New Jersey 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
4
<PAGE>
Seller and Buyer may agree upon in writing (such date and time being hereinafter
called the "Closing Date").
1.3 (a) Purchase Price. As consideration for the Purchased Assets, Buyer
--------------
shall pay to Seller in immediately available funds the sum of Twelve Million
Nine Hundred Thousand Dollars ($12,900,000) (subject to clause (b) below) (the
"Purchase Price").
- ----------------
(b) Post-Closing Date Adjustments. The Purchase Price shall be
-----------------------------
subject to the following:
(i) Pre-Tax Net Income (other than Absecon).
---------------------------------------
(A) Within sixty (60) days after the twelve (12) month period following the
Closing Date, Buyer shall prepare a statement of Pre-Tax Net Income (as defined
in (iii) below) (the "Statement") attributable to the Centers other than the
Center located at Absecon, New Jersey ("Absecon Center").
(B) Buyer shall deliver promptly the Statement to the Seller. If Seller
shall not object to the Statement within thirty (30) days following receipt of
the Statement, the Statement shall be deemed accepted by Seller. If Seller shall
object to the Statement, such objection shall be made in writing and delivered
to Buyer no later than thirty (30) days following Seller's receipt of the
Statement. If such objection is made, an "agreed upon procedures" review of
5
<PAGE>
the Statement shall be conducted and completed by Coopers & Lybrand, LLP
("Coopers & Lybrand") no later than thirty (30) days following Coopers &
Lybrand's receipt of such Statement. If Coopers & Lybrand determines, following
completion of its review, that the Statement should be adjusted, the Statement
shall be so adjusted and shall be deemed accepted by both parties, as adjusted.
The cost of Coopers & Lybrand's review shall be borne by Buyer if Coopers &
Lybrand determines that the Statement should be adjusted by more than 10%. The
cost of Coopers & Lybrand's review shall be borne by Seller if Coopers & Lybrand
determines that the Statement should be adjusted by less than 10%.
(C) In the event Pre-Tax Net Income attributable to the Centers other than
the Absecon Center as reflected on the Statement (as adjusted, if applicable)
exceeds $2.5 million, Buyer shall pay to Seller within thirty (30) days
following final completion of the Statement (as adjusted, if applicable)
additional cash consideration as follows:
(i) If Pre-Tax Net Income is more than $2.5 million but not more
than $2.6 million, Buyer shall pay to Seller $250,000;
(ii) if Pre-Tax Net Income is more than $2.6 but not more than
$2.7 million, Buyer shall pay to Seller $500,000;
6
<PAGE>
(iii) if Pre-Tax Net Income is more than $2.7 million but not
more than $2.8 million, Buyer shall pay to Seller $750,000;
(iv) if Pre-Tax Net Income is more than $2.8 million but not
more than $2.9 million, Buyer shall pay to Seller $1,000,000;
(v) if Pre-Tax Net Income is more than $2.9 million but not more
than $3.0 million, Buyer shall pay to Seller $1,250,000; and
(vi) if Pre-Tax Net Income is more than $3.0 million, Buyer shall
pay to Seller $1.5 million.
(D) No Purchase Price adjustment shall be required if Pre-Tax
Net Income is less than $2.5 million.
(ii) Absecon Center.
--------------
(A) Within sixty (60) days after the twelve (12) month period following
the date on which the Absecon Center becomes fully operational and continuously
open to the public for the performance of diagnostic imaging services, Buyer
shall prepare a statement of Annualized Pre-Tax Net Income (as defined in (iii)
below) attributable to the Absecon Center (the "Absecon Statement").
(B) Buyer shall deliver promptly the Absecon Statement to the Seller. If
Seller shall not object to the Absecon Statement within thirty (30) days
following receipt of the Absecon Statement, the Absecon Statement shall be
deemed accepted by Seller. If Seller shall object to the Absecon Statement,
such objection shall be made
7
<PAGE>
in writing and delivered to Buyer no later than thirty (30) days following
Seller's receipt of the Absecon Statement. If such objection is made, an "agreed
upon procedures" review of the Absecon Statement shall be conducted and
completed by Coopers & Lybrand no later than thirty (30)days following Coopers &
Lybrand's receipt of such statement. If Coopers & Lybrand determines, following
completion of its review, that the Absecon Statement should be adjusted, the
Absecon Statement shall be so adjusted and shall be deemed accepted by both
parties, as adjusted. The cost of Coopers & Lybrand's review shall be borne by
Buyer if Coopers & Lybrand determines that the Absecon Statement should be
adjusted by more than 10%. The cost of Coopers & Lybrand's review shall be borne
by Seller if Coopers & Lybrand determines that the Absecon Statement should be
adjusted by less than 10%.
(C) Within thirty (30) days following final completion of the Absecon
Statement (as adjusted, if applicable), Buyer shall pay to Seller additional
cash consideration in an amount equal to the product of (i) Annualized Pre-Tax
Net Income multiplied by (ii) 3.2.
(iii) Definition of Pre-Tax Net Income; Annualized Pre-Tax Net Income.
---------------------------------------------------------------
8
<PAGE>
(A) For purposes of this Agreement, "Pre-Tax Net Income" shall mean net
income before income taxes for the twelve (12) month period following the
Closing Date attributable to the Centers other than the Absecon Center, as
determined in accordance with generally accepted accounting principles ("GAAP"),
consistently applied; provided, however, that for purposes of determining Pre-
-------- -------
Tax Net Income, corporate overhead of Buyer allocated to the Centers other than
the Absecon Center shall not exceed six hundred thousand dollars ($600,000).
(B) For purposes of this Agreement, "Annualized Pre-Tax Net Income" shall
mean net income before income taxes attributable to the Absecon Center,
calculated on an annualized basis utilizing only the last six (6) months of the
twelve (12) month period following the date on which the Absecon Center becomes
fully operational and continuously open to the public for the performance of
diagnostic imaging services; provided, however, that for purposes of determining
-------- -------
Annualized Pre-Tax Net Income, corporate overhead of Buyer allocated to the
Absecon Center shall not exceed one hundred thousand dollars ($100,000).
(c) Allocation of Purchase Price. The Seller and the Buyer agree to
----------------------------
allocate the Purchase Price in accordance with IRC
9
<PAGE>
Section 1060. Such allocation shall be agreed to by the Seller and the Buyer
within 30 days of the Closing Date. In addition, the Seller and the Buyer hereby
agree to file timely any information that may be required to be filed pursuant
to Treasury Regulations promulgated under IRC Section 1060.
1.4 Liabilities. Buyer shall not assume or be bound by any duties,
-----------
responsibilities, obligations or liabilities of Seller, the Stockholders, the
Business or the Centers of any kind or nature, known, unknown, contingent or
otherwise (including, without limitation, any benefit plan maintained by Seller,
any trade payables, any professional fees, any malpractice, liability or other
claims, arising from any facts or circumstances or action or inaction occurring
prior to the Closing Date or any obligations relating to contracts or agreements
not assumed by Buyer), except as specifically set forth on Schedule 1.4 annexed
------------
hereto. Without limiting the generality of the foregoing, it is
expressly agreed that Buyer does not assume, undertake or accept any debts,
duties, obligations, responsibilities or liabilities of Seller, the
Stockholders, or any of their respective Affiliates with respect to: (a)
Seller's, the Stockholders', and/or any of their respective Affiliates' Provider
Participation Agreement(s) with the
10
<PAGE>
federal Medicare Program ("Participation Agreements"), including without
limitation, any debt, liability or obligation of Seller, the Stockholders,
and/or any of their respective Affiliates of any kind or nature, whether
absolute, accrued, contingent or otherwise, which arise under or in connection
with the Participation Agreements; and (b) any liability or obligation of
Seller, the Stockholders, and/or any of their respective Affiliates for any
overpayment, discount, refund, adjustment or penalties ("Overpayment") in
connection with Medicare, Medicaid or any other reimbursement program or third
party payer based upon or relating to services provided by the Seller, the
Stockholders, and/or any of their respective Affiliates on or before the Closing
Date. All of the foregoing liabilities retained by Seller and the 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." Seller and the Stockholders hereby agree to indemnify and hold
Buyer harmless against all Retained Liabilities.
11
<PAGE>
1.5 Additional Closing Date Deliveries and Actions.
----------------------------------------------
(a) On the Closing Date, Seller 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 Seller in
respect of the Purchased Assets or the consummation of the transactions contem-
plated by this Agreement, (y) all of the documents, instruments and opinions
contemplated to be delivered by Seller 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
Seller 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 "Seller's Closing Documents".
--------------------------
12
<PAGE>
(b) On the Closing Date, Buyer shall (i) deliver, or execute and
deliver, to Seller (x) the Purchase Price (without adjustment), (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
Seller 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 Seller's Closing Documents, the "Closing Documents".
-----------------
1.6 Consents, Waivers and Further Assurances.
----------------------------------------
(a) From time to time following the Closing, Seller 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
13
<PAGE>
are in the possession of third parties, or otherwise, Seller and the
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
Buyer's exclusive use and benefit.
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 Seller; or (b) by Buyer or Seller in the
event of any material breach by the other party of any of its agreements to be
performed prior to the Closing or of any representations or warranties contained
herein prior to Closing; or (c) subject to the provisions of Section 4.3 hereof,
by either Buyer or Seller if the Closing has not occurred on or before May 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 Seller and Buyer or
14
<PAGE>
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.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES
OF SELLER AND STOCKHOLDERS
As an inducement to Buyer to enter into this Agreement and to
consummate the transactions contemplated hereby, Seller and the Stockholders,
jointly and severally, represent and warrant to Buyer and agree as follows:
2.1 Organization and Qualification. Seller 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
all jurisdictions in which the ownership of its assets or the conduct of its
business makes such qualification necessary. Seller has all requisite corporate
15
<PAGE>
power and authority to own or lease its properties and assets and to conduct its
business as presently conducted. Seller has no subsidiaries.
2.2 Authority to Effect Transactions. (a) Seller and the
--------------------------------
Stockholders have all requisite power and authority to execute, deliver and
perform this Agreement and all of Seller's Closing Documents. All necessary
corporate action (including, without limitation, action by stockholders) on the
part of Seller has been duly taken to authorize the execution, delivery and
performance by Seller of this Agreement and all of Seller's Closing Documents.
This Agreement has been duly authorized, executed and delivered by Seller, has
been duly executed and delivered by the Stockholders, and is the legal, valid
and binding obligation of Seller and the Stockholders, enforceable against
Seller and the Stockholders in accordance with its terms. Each of Seller's
Closing Documents has been duly authorized by Seller and, upon execution and
delivery by Seller, as contemplated hereby, will be the legal, valid and binding
obligation of Seller, enforceable against Seller in accordance with its terms.
(b) Except as set forth in Schedule 2.2(B) hereto, (i) no consent,
---------------
authorization, approval, order, license, certificate,
16
<PAGE>
permit or act of or from, or declaration or filing with, any foreign, federal,
state, local or other governmental authority or regulatory body or any court or
other tribunal or any party to any contract, agreement, instrument, lease or
License (as defined in Section 2.6) to which Seller or the Stockholders are a
party or by which it or they are bound or to which any of the Purchased Assets
is subject, is required for the execution, delivery or performance by Seller or
the Stockholders of this Agreement or any of Seller's Closing Documents or the
consummation of the transactions contemplated hereby or thereby and (ii) neither
the execution, delivery or performance of this Agreement or any of Seller's
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)
17
<PAGE>
results or will result in a violation of, (A) Seller's organizational documents
and agreements, each as amended to date, (B) any law, statute, rule, regulation,
order, award, judgment or decree to which Seller, any of the Stockholders or any
of the Purchased Assets is subject or (C) any contract, agreement, instrument,
lease or License to which Seller or any of the Stockholders is a party or by
which it is bound.
2.3 Financial Statements. Seller has delivered to Buyer true and
--------------------
correct copies of the following: audited balance sheet of Seller and unaudited
balance sheets of each of the Centers as of December 31, 1994 and December 31,
1995; the unaudited balance sheet of Seller and each of the Centers as of
December 31, 1996; the audited statement of operations and statement of cash
flows of Seller and unaudited statements of operations and statements of cash
flows of each of the Centers for each of the last two fiscal years; and the
unaudited statement of operations and statement of cash flows of Seller and each
of the Centers for the year ended December 31, 1996. Each such balance sheet
presents fairly the financial condition, assets, liabilities and stockholder's
equity of Seller and each Center as of its date; each such statement of
operations presents fairly the results of operations of Seller and each Center
for the period indicated; and each such statement of
18
<PAGE>
cash flows presents fairly the information purported to be shown therein. The
financial statements referred to in this Section 2.3 have been prepared in
accordance with GAAP, consistently applied throughout the periods involved, are
correct and complete, and are in accordance with the books and records of Seller
and each of the Centers. Except as set forth in Schedule 2.3 hereto, neither
------------
Seller nor any Center is subject to any liability (including, without
limitation, unasserted 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 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 contemplated 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 the Centers consistent
with past practice. Except as set forth on Schedule 2.4 hereto, since the
------------
Balance Sheet
19
<PAGE>
Date, there has been (a) no adverse change in the Purchased Assets or in the
business, liabilities, operations, profits, condition (financial or otherwise)
or prospects of Seller or the Centers, and, no fact or condition exists or is
contemplated or threatened which might be expected to cause such a change in the
future, and (b) no damage, destruction, loss or claim or condemnation or other
taking 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) Seller has 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
10.14) 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, Seller 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,
------------------
20
<PAGE>
"Permitted Liens"). Seller shall discharge and indemnify Buyer from and against
- ----------------
any and all claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements, liabilities,
losses, costs and legal and other expenses resulting or arising from any Lien
existing on the Closing Date (whether inchoate, or not, and whether perfected or
not) on or with respect to any of the Purchased Assets other than any Permitted
Lien. 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) No real property owned by Seller is used in the conduct of the
Business, other than the property located at 1709 South Broad Street,
Philadelphia, Pennsylvania, which is an Excluded Asset.
2.6 Licenses and Authorizations. Seller owns, holds or possesses all
---------------------------
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
the Centers (the "Licenses"). Set forth on Schedule
-------- --------
21
<PAGE>
2.6 hereto is a list and brief description of each of the Licenses. Each of the
- ---
Licenses is valid and in 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 continue in full force and effect thereafter, without default
or forfeiture of any rights thereunder. No notice of cancellation, default or
breach of or any dispute concerning any of the Licenses owned, possessed or held
by Seller or of any event or condition or state of facts described in the next
following sentence has been received by Seller with respect to any of such
Licenses. There is not now pending, or to the knowledge of Seller threatened,
any action to revoke, cancel, rescind, modify or refuse to renew in the ordinary
course any of the Licenses. Seller and, to the best of its knowledge, its
predecessors in interest have performed and fulfilled in all respects all of
their respective obligations under each of the Licenses, and Seller is not aware
of any event or condition or state of facts which constitutes or, after notice
or lapse of time or both, would constitute a breach or default under any of such
Licenses or which permits or, after notice or lapse of time or both, would
permit revocation or termination of any of such
22
<PAGE>
Licenses or which would adversely affect any of the rights of Seller thereunder.
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
Seller or any of the Stockholders 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 (collectively, together with any contracts, agreements, instruments
and leases entered into by Seller 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"). Seller has provided Buyer
---------
with a true and complete copy of each Contract.
(b) Each of the Contracts constitutes the valid and binding obligation
of Seller and, to the best of Seller's and Stockholders' knowledge, the other
party thereto, is in full force and effect. Seller has 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 Seller and the Stockholders, no other party is in default or breach
thereunder.
23
<PAGE>
2.8 Employees. (a) Schedule 2.8(A) hereto contains (i) a list of the
--------- ---------------
names and relationships with Seller of all employees of Seller at each Center as
of February 28, 1997, (ii) a descriptiontion of all agreements (oral or written)
with such employees, (iii) the dates on which such employees commenced working
for Seller, (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 2.8(B) hereto, Seller is not a party to any collective
- ---------------
bargaining agreement, employment agreement, retirement plans (whether qualified
or non-qualified), deferred compensation or 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.
(b) Seller has complied in all material respects with all applicable
laws, rules and regulations affecting the employment of labor, including, but
not limited to, those relating to wages, hours, discrimination and the payment
of social security, withholding and similar taxes, and is not liable for any
arrears of
24
<PAGE>
wages or any penalties for failure to comply with any of the foregoing. There
are no controversies pending or threatened between Seller and any of its
employees, or any labor unions or collective bargaining unit representing or
purporting to represent any of its employees.
2.9 Compliance with Laws; Litigation. The Purchased Assets and their
--------------------------------
uses comply with, and Seller with respect to the Purchased Assets and the
operation of the Business and the Centers 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, including, without limitation, applicable Environmental
Laws (as hereinafter defined). Seller is 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, there is no suit, action,
------------
administrative proceeding, arbitration or other proceeding or
governmental investigation,
25
<PAGE>
including any medical board or similar professional body proceeding, involving
Seller, 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, to the best knowledge of Seller and the
Stockholders, threatened against Seller or the Stockholders or otherwise with
respect to the Business, the Centers or the Purchased Assets (including, without
limitation, any claim for malpractice) nor is there any basis for any of the
same, and there are no suits, actions, administrative proceedings, arbitrations
or other proceedings or investigations pending in which Seller or any of the
Stockholders is the plaintiff or claimant relating to the Purchased Assets, the
Business or the Centers. There is no suit, action, administrative proceeding,
arbitration or governmental investigation involving Seller, the Stockholders, or
the Centers pending or, to the best knowledge of Seller and the Stockholders,
threatened, which questions the legality, validity or propriety of the
transactions contemplated by this Agreement. As used herein, "Environmental
-------------
Laws" mean all federal, state or local statutes, laws, codes, rules,
- ----
regulations, ordinances, orders, standards, permits, licenses or requirements
(including consent decrees,
26
<PAGE>
judicial decisions and administrative orders), presently in force, as amended
or reauthorized, pertaining to the protection, preservation, conservation or
regulation of the environment, or imposing requirements relating to public
or employee health and safety, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
------
(S)9601 et seq., the Resource Conservation and Recovery Act of 1976 ("RCRA"), 42
------ ----
U.S.C. (S)6901 et seq., the Emergency Planning and Community Right to Know Act
-------------
("Right-to-Know Act"), 42 U.S.C. (S)11001 et seq., the Clean Air Act ("CAA"), 42
------ ---
U.S.C. (S)7401 et seq., the Federal Water Pollution Control Act ("Clean Water
------ -----------
Act"), 33 U.S.C. (S)1251 et seq., the Toxic Substances Control Act ("TSCA"), 15
- --- ------ ----
U.S.C. (S)2601 et seq., the Safe Drinking Water Act, 42 U.S.C. (S)300F et seq.,
------ ------
and the Occupational Safety and Health Act ("OSHA"), 29 U.S.C. (S)651 et seq.
---- ------
2.10 Machinery, Equipment and Supplies. All machinery, equipment and
---------------------------------
supplies of Seller included in the Purchased Assets are in good and usable
condition, ordinary wear and tear excepted.
2.11 Insurance. Schedule 2.11 hereto sets forth a list of all
--------- -------------
policies of insurance in force with respect to the Purchased Assets, the Centers
and the Business. Seller has received no
27
<PAGE>
notices of any pending or threatened terminations with respect to such policies
and Seller is in compliance with all conditions contained therein. All such
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. There has been no (a) release or
---------------------
threatened release of any hazardous substance, pollutant or contaminant as each
such term presently is defined by CERCLA, as amended, resulting from any
activity by or on behalf of Seller, the Stockholders or any predecessor in
interest, including but not limited to, the generation, handling, storage,
treatment, transportation or disposal of any hazardous substance, pollutant or
contaminant at the Centers; (b) past or future action taken or to be taken by
any federal, state or local entity or by any private party under any federal,
state or local statute, rule, regulation or guideline concerning the release of
any hazardous substance, pollutant or contaminant into the soil, air, surface or
subsurface waters or the environment in general from the Centers; and (c) claims
or actions brought or which may be brought by any third party for damages
occurring at or outside of the Premises resulting
28
<PAGE>
from the alleged release or threatened release of any hazardous substance,
pollutant or contaminant by Seller or any predecessor in interest, including but
not limited to, claims for health effects to persons, property damage and/or
damage to natural resources; nor does Seller have any knowledge of any basis for
any of the foregoing.
2.13 Accounts Receivable. Seller has 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 recorded amounts and are not in dispute or subject to
defense, counterclaim or set-off. The Accounts Receivable are an Excluded Asset
listed herein in Schedule 1.1.
2.14 Brokers. Neither Seller, the Stockholders nor any Affiliate of
-------
Seller or the Stockholders has 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 Capitalization. The authorized capital stock of Seller consists
--------------
of 1000 shares of common stock of which 100 shares
29
<PAGE>
are duly authorized, validly issued and outstanding, fully paid and
nonassessable and not subject to preemptive rights created by statute, common
law, Seller's Certificate of Incorporation or By-Laws, or any agreement to which
Seller is a party or is bound or otherwise. There are no options, warrants or
other rights to acquire shares or Seller's capital stock. Stockholders own
jointly, by the entireties, all of the outstanding 100 shares of common stock.
There are no holders of any shares of capital stock of Seller other than the
Stockholders.
2.16 Bulk Sales Laws. No bulk sales law under the Uniform Commercial
---------------
Code or similar law of any state is applicable to the transactions contemplated
by this Agreement.
2.17 Taxes. (a) Seller has 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 Seller, (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
30
<PAGE>
taxing authority against Seller, (d) all liability for Taxes of Seller 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) no Tax return or reports of
Seller are under examination. As used herein, "Tax" or "Taxes" shall mean any
and all taxes, charges, fees, 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 Certain Business Practices. As of the date hereof, neither
--------------------------
Seller nor, to the knowledge of Seller and the Stockholders, any directors,
officers, agents or employees of Seller has (i) used any funds for unlawful
contributions, gifts,
31
<PAGE>
entertainment or other unlawful expenses relating to political activity, (ii)
made any unlawful payment to government officials or employees, or (iii) made
any other unlawful payment.
2.19 No Referrals by Interested Parties. From and after January 1,
----------------------------------
1995 and through the Closing Date, there have been no referrals of Medicare or
Medicaid patients to the Seller by physicians owning equity interests in the
Seller or any Center or having any financial relationship with the Seller or any
Center.
2.20 Related Party Transactions. Schedule 2.20(A) specifies all
-------------------------- ----------------
entities that have transacted business with (a) the Seller or any Center or (b)
patients of the Seller or any Center, that are "related" through common
ownership or control to the Seller or any Center under the Medicare definition
of such term, or the definition of such term under the Medicaid program of any
State. For each such entity, Schedule 2.20(A) 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 2.20(A) are all contracts or written agreements between
such entities and the Seller or any Center.
32
<PAGE>
2.21 Books and Records. The books of account and other financial
-----------------
records of Seller and each Center are in all material respects complete and
correct, are maintained in accordance with good business practices and all laws
applicable to Seller, and are accurately reflected in the financial statements
of Seller and each Center. The minute books of Seller contain accurate records
of all meetings, and accurately reflect all other corporate action of the
shareholders and directors of Seller.
2.22 Intellectual Property. Schedule 2.22 lists or describes all
--------------------- -------------
patents, trademarks, service marks, trade names, copyrights and applications
therefor, inventions, discoveries, processes, technology, know-how, trade
secrets and other proprietary rights (collectively, "Intellectual Property
---------------------
Rights") owned or licensed by the Seller and used in, or otherwise necessary to
- ------
the conduct of, the Business as of the date hereof. The Seller owns or has the
right to use all Intellectual Property Rights, free of any Liens, such use does
not conflict with or violate any valid patent, trademark, service mark, trade
name or copyright of third parties, and the Seller has not received any notice
of a conflict with the asserted rights of others in connection with Intellectual
Property Rights. None of the Intellectual Property Rights is being
33
<PAGE>
infringed by any third parties. Except as set forth in Schedule 2.22, the Seller
is not obligated to pay any royalty or license fee to any Person in order to use
any of the Intellectual Property Rights.
2.23 Conditions of Participation. All claims for reimbursement for
---------------------------
services rendered by the Seller have been submitted to third parties in
compliance with applicable Laws and regulations. Seller, for all programs for
which it participates, has met and does meet, without material exception, the
requirements for participation in all Medicare and Medicaid programs in the
states in which the Business is conducted and are certified for participation in
such programs. To the best of Seller's and the Stockholders' knowledge, there
is not any pending or threatened proceeding or investigation under such programs
involving Seller. Neither Seller nor the Stockholders have knowledge of any
condition relating to Seller which constitutes a material deficiency under any
state Medicaid program or the Medicare program or any other state or Federal law
relating to the licensing or operation of the Seller. The Seller is in material
compliance, without obtaining waivers, variances or extensions, with the
standard requirements, conditions and regulations for participating in any state
Medicaid
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program and the federal Medicare program, and state licensure laws for
diagnostic imaging centers. All deficiency reports, inspection reports and
citations issued for the past three years are listed on Schedule 2.23, each of
-------------
which has been previously furnished to Buyer or will be furnished to the Buyer
prior to Closing.
2.24 Disclosure. All representations and warranties made by Seller
----------
or the Stockholders to the Buyer, whether or not in writing, are and when made
were true, accurate and complete.
2.25 Timely Filing of Reports. Seller and the Stockholders have
------------------------
timely filed, or caused to be filed, all requisite claims and other reports
required to be filed by Seller, the Stockholders and their Affiliates in
connection with all state and federal Medicare and Medicaid programs due on or
before the date of this Agreement, and said claims and reports are complete and
correct. Seller, the Stockholders and their Affiliates have met and continue to
meet the conditions for participation in the Medicare and Medicaid programs.
None of the Seller, the Stockholders or their respective Affiliates have been
subject to, or received written threats of, loss of waiver of liability for
utilization review denials with respect to any such program during the past
three (3) years nor has Seller, the Stockholders or any of
35
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their respective Affiliates received notice of pending or written threats of
investigation by, or loss of participation in, any such programs. There are no
claims, actions, payment reviews or appeals pending or threatened before any
commission, board or agency including without limitation any intermediary or
carrier, the administrator of the Department of Health and Human Services,
Health Care Financing Administration, or the Pennsylvania or New Jersey
Departments of Health or Human Services, with respect to any Medicare or
Medicaid claims filed by Seller, the Stockholders or any of their respective
Affiliates on or before the date of this Agreement concerning program compliance
matters, which would have a materially adverse effect on Seller, Buyer, the
Business, the Purchased Assets, the Centers, the operation thereof, or the
consummation of the transactions contemplated hereby. No validation review or
program integrity review relating to Seller, the Stockholders and/or any of
their respective Affiliates has been conducted by any commission, board or
agency in connection with the Medicare or Medicaid programs and no such reviews
are scheduled, pending, or threatened, and none of Seller, the Stockholders or
any of their respective Affiliates has received any written notice or threat of
any such action against or affecting Seller, the
36
<PAGE>
Stockholders, the Business, the Centers or the Purchased Assets, or the
consummation of the transactions contemplated hereby.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller and the Stockholders to enter into this
Agreement and to consummate the transactions contemplated hereby, Buyer
represents and warrants to Seller and the Stockholders and agrees as follows:
3.1 Organization. Buyer 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 an indirect
wholly-owned subsidiary of Medical Resources, Inc.
3.2 Authority to Effect Transactions. (a) Buyer 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
has been duly taken to authorize the execution, delivery and performance of this
Agreement and Buyer's Closing Documents. This Agreement has been
37
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duly authorized, executed and delivered by Buyer, and is the legal, valid and
binding obligation of Buyer enforceable against Buyer 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
38
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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, regulation, 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 pending or, to the best knowledge of Buyer,
threatened against Buyer, the Limited Guarantor or any MRI Group Entity, which
questions the legality, validity or propriety of the transactions contemplated
by this Agreement.
ARTICLE 4
CONDUCT OF BUSINESS AND TRANSACTIONS PRIOR TO CLOSING
Between the date hereof and the Closing Date:
39
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4.1 Access. Seller 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") free
-----------------------------
and full access to the properties, assets, books and records of Seller relating
exclusively or primarily to the Centers and 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 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 Seller hereunder.
4.2 Conduct of Business. Seller 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,
40
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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
Seller, 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. Seller shall act diligently and reason
ably (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 Centers and others
having business relations therewith. Except as otherwise contemplated by this
Agreement or consented to in writing by Buyer, Seller shall conduct the business
and operations of the Centers 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,
Seller shall not, with respect to the Purchased Assets, sell, lease, transfer or
otherwise dispose of (including transfers to any Affiliates of Seller), or
mortgage or pledge, or impose or suffer to be imposed any Lien on, any Purchased
Assets. In addition, Seller shall ensure that all liabilities and obligations to
vendors, lenders and other creditors are current and not past due (which shall
mean, in the case of trade payables incurred in the ordinary course of
41
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business as permitted by this Agreement, paid in full within seventy-five (75)
days of the date of invoice) and Seller and the Stockholders shall indemnify and
hold Buyer harmless against all past due obligations of the Centers as of the
Closing incurred prior to Closing. Additionally, pending the Closing, and
except as otherwise specifically contemplated by this Agreement or agreed to in
writing by Buyer, Seller:
(i) shall not issue or sell rights (including, without
limitation, conversion rights), options, warrants
42
<PAGE>
to purchase or to subscribe to, or enter into any arrangement or
contract with respect to any of it securities;
(ii) 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;
(iii) shall not enter into contracts or commitments involving in excess
of $10,000 in the aggregate;
(iv) 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;
(v) shall not dispose of or encumber any of its properties and
assets;
(vi) 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
43
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(vii) 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 breach of or default under any contract, commitment
or obligation of the Seller.
4.3 Maintenance. Seller 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. In the event of any material loss of, or material
damage to, tangible Purchased Assets or the Centers prior to the Closing, Seller
shall either pay the lesser of the repair or replacement cost thereof to Buyer
at the Closing or, at the option of Buyer, promptly repair or replace the lost
or damaged Purchased Assets in order to minimize the interruption to the
Business. If, despite the best efforts of Seller to repair or replace such lost
or damaged Purchased Assets prior to the Closing Date, such repair or
replacement is not completed prior to the Termination Date, then, at the option
of Buyer, (a) this Agreement shall terminate, (b) the Termination Date shall be
extended for an additional period not to exceed ten days or (c) Seller shall pay
to the Buyer on the Closing
44
<PAGE>
Date the lesser of the repair or replacement cost of the lost or damaged
Purchased Assets.
4.4 Consents and Approvals. Seller shall act diligently and
----------------------
reasonably to secure the consents and approvals of any govern mental agencies
and authorities and any other Persons, 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 5.6 hereof, provided, that Seller
--------
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 Seller to obtain the consents or
approvals contemplated plated by this Section 4.4.
4.5 Renewal of Contracts. Seller 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.
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4.6 Stockholders Covenants. Insofar as the Stockholders control the
-----------------------
Seller, any covenant contained herein requiring action on the part of the Seller
shall require the Stockholders to cause Seller to take such action.
4.7 Financing Arrangement. Seller shall provide Buyer with
----------------------
information concerning all oral and written financing arrangements to which
Seller is a party. Seller shall permit Buyer to renegotiate the terms and
conditions of any such financing arrangement which Buyer determines, in its sole
discretion, should be renegotiated.
4.8 Bulk Transfer Laws. Seller shall comply in all respects with the
-------------------
notification requirements with respect to a bulk transfer under Section 22(c) of
the New Jersey State Sales and Use Tax Act and Section 15 of the New Jersey
Business Personal Property Tax Act and any similar tax statute or law in any
other state or jurisdiction in which a Center is located to the extent
applicable to the transactions contemplated by this Agreement.
4.9 South Broad Street Lease. Seller shall enter into a written
------------------------
lease with Buyer in form acceptable to Buyer granting to Buyer, effective as of
the Closing, a leasehold tenancy in the property known as 1709 South Broad
Street, Philadelphia, for
46
<PAGE>
approximately ten thousand (10,000) square feet of the building but in no event
less space than that which is now occupied by Seller. Buyer and Seller agree
that such lease will (i) have a five (5) year term, (ii) during the first year
of the five year term, require Buyer to pay a monthly rent of $4,993 together
with customary "triple net" leasehold expenses, (iii) during the second through
fifth years of the five year term, require Buyer to pay monthly a "fair market
value" rent together with customary "triple net" leasehold expenses, as the
parties shall, in good faith agree, or, if the parties are unable to agree, as
determined by a majority of three M.A.I. real estate appraisers, one of which
shall be selected by the Buyer, one of which shall be selected by Seller and the
third of which shall be selected by the two appraisers selected by the Buyer and
Seller. The costs, expenses and fees paid to such appraisers shall be shared
equally by the Seller and Buyer. Annual rent following the second year of the
five year term shall be increased at the beginning of the third, fourth and
fifth years by a percentage of the prior year's annual rent based upon the
published Consumer Price Index.
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<PAGE>
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall be subject to the
fulfillment of each of the following conditions as of the Closing Date unless
otherwise waived by Buyer:
5.1 Accuracy of Representations and Compliance With Conditions. All
----------------------------------------------------------
representations and warranties of Seller and 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 Seller and the Stockholders; and Seller 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 and Due Diligence. 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
48
<PAGE>
legislative or regulatory change adversely affecting the Business or the
Purchased Assets; (c) no damage, destruction, loss or claim or condemnation or
other taking adversely affecting the Business or the Purchased Assets that has
not been repaired or replaced in accordance with Section 4.3 hereof; (d) no
lawsuit, proceeding or claim filed or asserted against Seller that, if adversely
determined, may have an adverse effect on the Business or the Purchased Assets
and (e) no event or fact concerning the Seller, the Stockholders, the Centers or
the Business shall have come to the attention of the Buyer during Buyer's and
Buyer's counsel's due diligence investigation of the Centers and the Business,
including, without limitation, any matters relating to, or arising out of, the
due diligence review of the items listed on any Schedule hereto, that would
cause the Buyer, in its reasonable judgment, not to proceed with the Closing.
5.3 Opinion of Counsel for Seller. Buyer shall have received from
-----------------------------
counsel to Seller and the Stockholders, an opinion dated the Closing Date in the
form set forth in Exhibit B hereto.
---------
5.4 Necessary Government Approvals. The parties shall have received
------------------------------
all governmental and regulatory approvals, actions
49
<PAGE>
and consents, if any, necessary to consummate the transactions contemplated
hereby.
5.5 Assumption of Lease and Assumed Contracts. The landlord of each
-----------------------------------------
Center shall have agreed to the assumption by Buyer of the lease for such Center
(collectively the "Leases"). The Assumed Contracts, including but not limited
------
to equipment leases and maintenance contracts at each Center and all managed
care contracts with the Contractor and others, shall be assigned to Buyer on
terms satisfactory to Buyer.
5.6 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 otherwise under any Contract.
---------------
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 Seller shall have furnished to such counsel such
documents as such counsel may have reasonably requested for
50
<PAGE>
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 Seller in the form of Exhibit C annexed
---------
hereto, dated the Closing Date, authorizing Buyer to endorse certain checks made
payable to Seller or any Center.
5.10 Deliveries Complete. All documents required to have been
-------------------
delivered by Seller 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 Seller, 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. Seller shall indemnify
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<PAGE>
Buyer for indebtedness on any accounts payable which are more than seventy-five
(75) days past due.
5.12 Closing Certificate. On the Closing Date, Seller and the
-------------------
Stockholders shall deliver to Buyer a certificate signed by the President of
Seller and the Stockholders to the effect that: (a) all representations and
warranties of Seller and the 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) Seller has
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 Buyer's obligations to close under
this Agreement has 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 Seller's employees employed at the Centers (the "Employees")
---------
for possible employment by Buyer at the applicable Center from and after the
Closing Date. At least three business days prior to the Closing Date, Buyer
shall deliver
52
<PAGE>
to Seller a list of those Employees that Buyer wishes to so employ and Seller
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, Seller shall be solely responsible for (i) properly notifying such
Employees of their termination, 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 Management/Radiology Agreements. The current radiologists at
-------------------------------
each Center shall have executed a management agreement or radiology agreement
with Buyer on terms and conditions satisfactory to the Buyer as of the Closing
Date and existing shared services agreements shall, in the discretion of Buyer,
either be assigned to Buyer or replaced by new agreements with the same parties
thereto.
5.15 Contractor Agreements. Contractor shall have entered into one
---------------------
or more managed care contracts with Buyer in form and substance satisfactory to
Buyer providing, among other things, that the Contractor shall utilize on an
exclusive basis the radiology and other diagnostic imaging services offered by
Buyer, the Limited Guarantor and their Affiliates at centers operating in
53
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the markets serviced by the Contractor which are currently owned or hereafter
acquired by any of Buyer, the Limited Guarantor and their respective Affiliates.
5.16 Satisfactory Completion of Legal Due Diligence. Buyer's counsel
----------------------------------------------
shall have completed a due diligence review of the Business and the Centers and
the results of such review shall be satisfactory to Buyer and its counsel.
5.17 South Broad Street Lease. Buyer and Seller shall have entered
------------------------
into the lease described in Section 4.9 hereof.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF SELLER
AND THE STOCKHOLDERS
The obligations of Seller and the Stockholders under this Agreement
shall be subject to the fulfillment of each of the following conditions as of
the Closing Date unless otherwise waived by Seller:
6.1 Accuracy of Representations and Compliance With Conditions. All
----------------------------------------------------------
representations and warranties of Buyer 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
54
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(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 order shall have been rendered enjoining or otherwise
------
restraining the consummation of the transactions contemplated hereby.
6.3 Opinion of Counsel to Buyer. Seller shall have received from
---------------------------
McCarter & English, counsel for Buyer, 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 to Seller, 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, at or prior to the Closing shall have
been delivered or taken.
6.5 Closing Certificate. On the Closing Date, Buyer shall deliver to
-------------------
Seller a certificate signed by the President (or
55
<PAGE>
a Vice President) of Buyer to the effect that: (a) all representations 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 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 Seller's obligations to close under this Agreement has been
fulfilled.
56
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ARTICLE 7
TRANSACTIONS SUBSEQUENT TO CLOSING
7.1 Record Retention; Access. (a) Buyer shall retain the books and
------------------------
records of the Centers and the Purchased Assets transferred to it hereunder for
a period of not less than three (3) 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 Seller reasonable notice of such intent and the right
to obtain from Buyer those books and records which it intends to dispose of or
destroy. Seller shall have the right, at the expense of Seller, (i) of
reasonable access to and examination of such records and books for a period of
three (3) 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, Seller may
remove from Buyer's possession the originals of such of the books and records
included in the Purchased Assets as Seller may require, for use in litigation,
provided that Seller shall indemnify Buyer against losses,
- --------
57
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expenses, or damages resulting from the loss, destruction or non-return
of such books and records.
(b) Seller shall retain the books and records of the Centers not
transferred to Buyer hereunder for a period of not less than three (3) years;
provided, however that Seller 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 Seller 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 three (3) years from and after the
Closing Date upon reasonable notice to Seller and during normal business hours,
and (ii) to make copies of such books, contracts and records as are in Seller's
possession. With the approval of Seller, which approval shall not be
unreasonably withheld, Buyer may remove from Seller's possession the originals
of such books and records as Buyer may require, for use in litigation, provided
--------
that Buyer shall indemnify Seller against any losses, expenses or damages
resulting from the loss, destruction or non-return of the same.
58
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ARTICLE 8
CONFIDENTIALITY AND NON-COMPETE
8.1 Confidentiality. (a) Prior to and after the Closing, no party
---------------
to this Agreement 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, except for disclosures or notices, based upon the
advice of counsel to the Limited Guarantor, to be made by the Limited Guarantor
as a result of its public status, including, but not limited to a press release
announcing the transaction contemplated by this Agreement. 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 information relates. Seller and the
Stockholders acknowledge that the common stock of Buyer's parent, the Limited
Guarantor, is publicly traded and agree to refrain from using non-
59
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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 ten
years from the date hereof, neither the Stockholders, Seller nor any Affiliate
of Seller or the Stockholders, shall disclose intentionally to anyone, or use or
otherwise exploit for the Stockholders', the Seller's or any Seller's or
Stockholders' Affiliate's 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
60
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such information, documents and materials being hereinafter called "Confidential
Information").
(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 the Stockholders, Seller or any
Affiliate of Seller or the Stockholders or any agent or other representative
thereof, and (ii) business and technical methods applicable to diagnostic
imaging businesses generally. Neither the Stockholders, Seller nor any
Affiliate of Seller 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, Seller or any Affiliate of Seller or the
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, the Stockholders and Seller 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.
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8.2 Non-Competition/Noninterference. During the period commencing on
-------------------------------
the Closing Date and ending five (5) years after the Closing Date, none of the
Stockholders, Seller or any Affiliate of Seller or the Stockholders shall,
directly or indirectly:
(a) anywhere within a fifteen (15) mile radius from any of the
Centers, the Seller or any Affiliate of the Limited Guarantor or the Seller,
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, joint venturer, lender, advisor, consultant, agent,
investor or other participant, any business which offers diagnostic imaging
services (a "Competitive Business");
--------------------
(b) solicit, induce or influence any customer, supplier, lender,
lessor, 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 (A) any
employee of Buyer or any MRI Group Entity to discontinue such employment with
Buyer or any MRI Group Entity or
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(B) any radiologist, who at the time has a business relationship with Buyer or
any MRI Group Entity, to discontinue 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 the
Stockholders, Seller, or Affiliate of Seller or the Stockholders 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 Seller
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 Seller or
the 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.
(e) Seller and the Stockholders each 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
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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) Seller and the Stockholders each 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
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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 Seller and Stockholders. Each of Seller and
------------------------------------
Stockholders, 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 stockholders, in each case past, present, or as they may exist at any time
after the date of this Agreement (including Buyer, the "Buyer Indemnitees")
-----------------
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 Seller or the Stockholders
contained in this Agreement or in any other agreement executed
and delivered by Seller or the Stockholders hereunder or 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
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payable obligations incurred prior to the
Closing Date, (iii) the application of appropriate health care
laws as they pertain to the provision of services by the Centers
prior to the Closing Date and (iv) any action by a stockholder of
the Seller 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.
9.2 Indemnity by Buyer. Buyer agrees to indemnify and hold harmless
------------------
Seller and the Stockholders and their successors and assigns and their
respective partners, controlling Persons (if any), employees, attorneys, agents,
Affiliates, partners and stockholders (including Seller, the "Seller
------
Indemnitees") 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 here with and
(ii) the liabilities assumed by Buyer pursuant to Section 1.4 of
this Agreement; and
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(b) claims, suits, actions and proceedings (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
occur ring after the Closing Date relating to the Purchase chased
Assets or the operation or conduct of the Business except to the
extent that same results from the breach of any representation or
warranty of Seller hereunder.
9.3 Defense of Claims. Any Buyer Indemnitee or Seller 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
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conferences, discovery proceedings, hearings, trials and appeals as may be
reasonably requested in connection therewith. Without in any way limiting its
obligations hereunder, 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
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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
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 9A
CONTRACTOR
9.1A Agreement of Contractor. Insofar as permitted by existing law,
-----------------------
Contractor hereby agrees that from and after the Closing Date, it shall utilize
on an exclusive basis the radiology and other diagnostic imaging services
offered by Buyer, the Limited
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Guarantor and their Affiliates at centers operating in markets serviced by
Contractor, currently owned or hereafter acquired by any of Buyer, the Limited
Guarantor or their respective Affiliates.
ARTICLE 10
MISCELLANEOUS
10.1 Payment of Sales, Use and Similar Taxes. Seller 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.
10.2 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.
10.3 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
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execute and deliver such documents as may be reasonably necessary to effectuate
the purposes of this Agreement.
10.4 Survival. The representations, warranties, covenants and
--------
agreements contained in or made pursuant to this Agreement shall survive the
Closing, except to the extent that they relate to a specified earlier date.
10.5 Entire Agreement; Modification. This Agreement (including 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.
10.6 Notices. Any notice given pursuant to this Agreement shall be in
-------
writing and mailed or delivered to the applicable party at the address indicated
below:
If to Seller:
ATI Centers, Inc.
900 East 8th Avenue
Suite 200
King of Prussia, PA 19406
Attn: Robert F. Carfagno
with a copy to:
Galen D. Hawk, Esq.
2 East Thompson Avenue
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Springfield, PA 19406
If to Stockholders:
John A. Bennett, M.D.
and Nance DiRocco
1020 Indian Creek Road
Wynnewood, PA 19096
with a copy to:
Galen D. Hawk, Esq.
2 East Thompson Avenue
Springfield, PA 19406
If to Buyer:
If to Contractor:
Americare Health Services, Inc.
900 East 8th Avenue
Suite 200
King of Prussia, PA 19406
Attn: John A. Bennett, M.D.
with a copy to:
Galen D. Hawk, Esq.
2 East Thomson Avenue
Springfield, PA 19406
If to Buyer:
ATI Resources, Inc.
c/o Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
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with a copy to:
McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07101
Attention: Peter S. Twombly, Esq.
If to Limited Guarantor:
Medical Resources, Inc.
155 State Street
Hackensack, New Jersey 07601
Attention: Mr. William D. Farrell
with a copy to:
McCarter & English
Four Gateway Center
100 Mulberry Street
Newark, New Jersey 07101
Attention: Peter S. Twombly, Esq.
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.
Unless this Agreement specifically provides otherwise, all such notices shall be
deemed effective (a) if given by mail, 3 days following the date such notice is
mailed by registered or certified mail, return receipt requested or (b) if
delivered in person, when so delivered at the aforesaid address. All references
to days in this Agreement shall be deemed to refer to calendar days, unless
otherwise specified.
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10.7 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.
10.8 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; provided, however, that
-------- -------
notwithstanding the foregoing, Buyer may, without the consent of Seller, assign
any or all of its rights hereunder, including, without limitation, its rights to
acquire any Center and the business and properties relating thereto, to any of
its Affiliates or assign, following the Closing, the business and properties of
any Center to any of its Affiliates.
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(b) This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and assigns.
10.9 Separability. If any provision of this Agreement is invalid,
------------
illegal or unenforceable, such provision shall be ineffective 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.
10.10 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.
10.11 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.
10.12 Governing Law. This Agreement shall be construed and enforced
-------------
in accordance with the laws of the Commonwealth of Pennsylvania, without giving
effect to conflict of laws.
10.13 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
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this Agreement are an integral part of this Agreement and are incorporated
herein by reference.
10.14 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.
"Affiliate" of a Person shall mean any other Person controlling,
---------
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.
"MRI Group Entity" shall mean any entity in which the Buyer, the
-----------------
Limited Guarantor, any direct or indirect subsidiary of the Limited Guarantor,
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, partner ship, firm,
------
corporation, association, joint venture, trust or other entity, or any
government or political subdivision or agency, department or instrumentality
thereof.
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"Stockholders" shall mean John A. Bennett, M.D. and Nance DiRocco, his
------------
wife.
"Transaction Documents" shall mean this Agreement, the Bill of Sale,
---------------------
Assignment and Assumption Agreement, and any other documents and certificates
delivered and executed in connection herewith and therewith.
ARTICLE 11
LIMITED GUARANTY
11.1 Limited Guaranty. The Limited Guarantor herewith unconditionally
----------------
guarantees Buyer's obligations of payment after Closing for the obligations
assumed by Buyer as set out in Article 1.3(b)(i) (entitled "Pre-Tax Net Income
(Other than Absecon)") including Subsections 1.3(b)(i)(A), 1.3(b)(i)(B),
1.3(b)(i)(C) and 1.3(b)(i)(D) contained therein; Subsection 1.3(b)(ii) (entitled
"Absecon Center") including Subsections 1.3(b)(ii)(A), 1.3(b)(ii)(B) and
1.3(b)(ii)(C) contained therein; and Subsection 1.3(b)(iii) (entitled "Pre-Tax
Net Income; Annualized Pre-Tax Net Income") including Subsections
1.3(b)(iii)(A),
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1.3(b)(iii)(B) and 1.3(b)(iii)(C) contained therein. This Article 11 is a
limited guaranty of payment and is limited to the obligation of the Limited
Guarantor to meet the obligations of payment which are set above and which
obligations the Buyer cannot or will not make after the Closing. This limited
guaranty will survive the insolvency of the Buyer and any involuntary or
voluntary bankruptcy, or like condition of insolvency or fiscal incapacity which
would otherwise prevent, delay or forestall the payments guaranteed in this
Article 11.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Asset
Purchase Agreement as of the date first written above.
ATI CENTERS, INC.
By:______________________________
John A. Bennett, M.D.
President
_________________________________
John A. Bennett, MD (Stockholder)
_________________________________
Nance DiRocco (Stockholder)
ATI RESOURCES, INC.
By:_____________________________
AMERICARE HEALTH SERVICES, INC.
By:_____________________________
John A. Bennett, M.D.
President
MEDICAL RESOURCES, INC.
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By:_____________________________
William D. Farrell
President and Chief Operating
Officer
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