UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
---------
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 4, 1995
PRIMEDEX HEALTH SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
New York 13-3326724
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1516 Cotner Avenue
Los Angeles, California 90025
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (310) 445-5666
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC.
(the "Registrant")
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Form 8-K
Item 2. Acquisition or Disposition of Assets
On August 4, 1995 [the "Closing Date"] pursuant to a Medical Receivables
Purchase and Sale Agreement dated as of July 31, 1995 [the "Agreement"], the
Registrant's Primedex Corporation subsidiary ["Primedex"] sold the bulk of its
portfolio of medical receivables [the "Portfolio"] to an unaffiliated third
party, Bristol A/R Inc, ["Bristol"] for a cash purchase price of $9,448,061 paid
in full on the Closing Date. The purchase price was established in arms-length
negotiations between management of both companies and represented 19% of the
face amount of the Portfolio of receivables being sold. At July 31, 1995 after
allowances for doubtful accounts, the net carrying value of the Portfolio as
stated on Primedex's financial statements was approximately $22,087,072. The
sale was made to Bristol without recourse to Primedex except in the event of
breach of Primedex's representations and warranties concerning the Portfolio
made pursuant to the Agreement. The bulk of such representations and warranties
concerning the Portfolio were made "to the best of Seller's knowledge after
reasonable inquiry and investigation." Primedex agreed to indemnify Bristol for
any damages suffered based upon any misrepresentation or breach of warranty
concerning the Portfolio. However, with respect to the pending investigations of
Primedex's operations by the Los Angeles District Attorney's office and by other
governmental agencies, such indemnification is limited to damages arising from
any indictment and conviction for criminal violations of the matters under
investigation. Primedex's obligations to Bristol have been guaranteed by the
Registrant and by its RadNet Management, Inc, subsidiary,
In July 1993, the Registrant determined to restructure its Primedex subsidiary
and to wind down itsinvolvement in the California workers compensation industry.
Primedex Corporation is treated on the Registrant's Consolidated Financial
Statements as a "Discontinued Operation."
Item 7. Financial Statements and Exhibits
(b) Pro Forma Consolidated Financial Statements [Unaudited] reflecting the
sale of the Portfolio.
(c) Exhibits - Medical Receivables Purchase and Sale Agreement.
<PAGE>
SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PRIMEDEX HEALTH SYSTEMS, INC,
(Registrant)
Dated: August 17, 1995
By: /s/ Herman Roseman
Herman Rosenman, Principal Executive
Officer
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS [UNAUDITED]
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The following pro forma consolidated balance sheet as of April 30, 1995, and the
pro forma consolidated statements of operations for the year ended October 31,
1994 and the six months ended April 30, 1995 gives effect to Primedex Health
Systems, Inc. [the "Company"] sale of certain accounts receivable as of July 31,
1995 for a cash purchase price of $9,448,061, without recourse, to an
unaffiliated third party, Bristol A/R, Inc.. The Company effected this
transaction on August 4, 1995.
The pro forma information is based on the historical financial statements of
Primedex Health Systems, Inc. giving effect to the assumptions and adjustments
in the accompanying notes to the pro forma consolidated financial statements.
The pro forma consolidated balance sheet assumes the transaction was effective
on the balance sheet date. The pro forma statements of operations give effect to
these transactions as if they had occurred on November 1, 1993. The historical
statements of operations will reflect the effects of the sale of the accounts
receivable portfolio from the date on which it occurred. The pro forma
consolidated statements are based on the historical financial statements of
Primedex Health Systems, Inc. They should be read in conjunction with the
historical financial statements as filed under Forms 10K and 10Q.
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
[UNAUDITED]
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[A] To record the sale of the receivable portfolio of the discontinued
operation as of July 31, 1995 for cash of $9,448,061. The net carrying
value of these receivables as of April 30, 1995 was $25,336,744 of which
approximately $3,250,000 was collected after April 30, 1995.
[B] To remove assets and liabilities of the discontinued operation resulting
from the sale of the receivable portfolio of the discontinued operation.
The discontinued operation was the result of a restructuring plan entered
into on July 29, 1993.
[C] To adjust the accrued estimated closing costs to $2,569,601 as of April 30,
1995 as a result of the sale of the receivable portfolio of the
discontinued operation.
[D] The estimated loss of approximately $4,351,000 is a material nonrecurring
charge which results directly from the transaction and which will be
included in the historical statement of operations of the Company within
the twelve months succeeding the transaction. Such charge was not
considered in the pro forma statements of operations.
. . . . . . . . . . . . . .
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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PRO FORMA CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1995 [UNAUDITED]
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<TABLE>
Pro Forma Pro Forma as
Historical Adjustments Adjusted
<S> <C> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 2,488,984 $ 9,448,061 [A] $11,937,045
Accounts Receivable - Net 15,709,322 -- 15,709,322
Accounts Receivable - Net - Discontinued
Operation 13,044,819 (9,795,146) [A] 3,249,673
Accrued Revenue 675,165 -- 675,165
Prepaid and Other Current Assets 283,323 -- 283,323
------------ ----------- -----------
Total Current Assets 32,201,613 (347,085) 31,854,528
------------ ----------- -----------
Property, Plant and Equipment - Net 25,123,954 -- 25,123,954
------------ ----------- -----------
Property, Plant and Equipment -
Net - Discontinued Operation 676,512 (676,512) [B] --
------------ ----------- -----------
Other Assets:
Accounts Receivable - Net 6,332,662 -- 6,332,662
Accounts Receivable - Net - Discontinued
Operation 12,291,925 (12,291,925) [A] --
Due from Related Parties 2,592,007 -- 2,592,007
Goodwill - Net 57,115,800 -- 57,115,800
Other Assets 5,441,809 (1,122) [B] 5,440,687
------------ ----------- -----------
Total Other Assets 83,774,203 (12,293,047) 71,481,156
------------ ----------- -----------
Total Assets $141,776,282 $(13,316,644) $128,459,638
============ ============ ============
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
</TABLE>
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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PRO FORMA CONSOLIDATED BALANCE SHEET AS OF APRIL 30, 1995 [UNAUDITED]
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<TABLE>
Pro Forma Pro Forma as
Historical Adjustments Adjusted
<S> <C> <C> <C>
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable $ 2,939,638 $ -- $ 2,939,638
Notes Payable - Stockholders' -- -- --
Accrued Expenses 4,620,169 (152,853) [B] 4,467,316
Notes and Leases Payable - Current 18,065,202 (14,492) [B] 18,050,710
Other Current Liabilities 932,400 -- 932,400
Accrued Estimated Closing Costs 5,926,828 (3,357,227) [C] 2,569,601
Accrued Restructuring Costs 901,443 -- 901,443
------------ ----------- -----------
Total Current Liabilities 33,385,680 (3,524,572) 29,861,108
------------ ----------- -----------
Long-Term Liabilities:
Subordinated Debentures Payable 25,875,000 -- 25,875,000
Notes and Leases Payable 32,281,540 (18,325) [B] 32,263,215
Accrued Estimated Closing Costs 5,422,736 (5,422,736) [C] --
Accrued Expenses 1,378,533 -- 1,378,533
------------ ----------- -----------
Total Long-Term Liabilities 64,957,809 (5,441,061) 59,516,748
------------ ----------- -----------
Commitments and Contingencies -- -- --
------------ ----------- -----------
Minority Interest 1,038,665 -- 1,038,665
------------ ----------- -----------
Stockholders' Equity:
Common Stock - $.01 Par Value, 100,000,000
Shares Authorized; 40,026,510 Shares Issued
and Outstanding 400,265 -- 400,265
Paid-in Capital 100,800,059 -- 100,800,059
Retained Earnings [Deficit] (58,806,196) (4,351,011) [D] (63,157,207)
------------ ----------- -----------
Total Stockholders' Equity 42,394,128 (4,351,011) 38,043,117
------------ ----------- -----------
Total Liabilities and Stockholders' Equity141,776,282$(13,316,644) $128,459,638
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
<PAGE>
</TABLE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS
ENDED APRIL 30, 1995 [UNAUDITED]
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<TABLE>
Pro Forma Pro Forma as
Historical Adjustments Adjusted
<S> <C> <C> <C>
Revenue:
Revenue $42,869,684 $ -- $42,869,684
Less: Allowances 18,803,235 -- 18,803,235
----------- ----------- -----------
Net Revenue 24,066,449 -- 24,066,449
----------- ----------- -----------
Operating Expenses:
Operating Expenses 21,296,415 -- 21,296,415
Depreciation and Amortization 4,646,128 -- 4,646,128
Provision for Bad Debts 1,626,521 -- 1,626,521
----------- ----------- -----------
Total Operating Expenses 27,569,064 -- 27,569,064
----------- ----------- -----------
[Loss] from Operations (3,502,615) -- (3,502,615)
------------ ----------- -----------
Other Revenue and [Expenses]:
Interest Expense (2,887,413) -- (2,887,413)
Interest Income 138,326 -- 138,326
Other Income 1,074,963 -- 1,074,963
----------- ----------- -----------
Total Other Revenue [Expenses] (1,674,124) -- (1,674,124)
----------- ----------- -----------
[Loss] Income Before Income
Taxes, Minority Interest in
Income of Subsidiaries, and
Equity in Loss of Investees (5,176,739) -- (5,176,739)
Minority Interest in Income of Subsidiaries (14,298) -- (14,298)
----------- ----------- -----------
[Loss] from Continuing Operations $(5,191,037) $ -- $(5,191,037)
=========== =========== ===========
[Loss] Per Share $ (.13) $ (.13)
=========== ===========
Weighted Average Common
Shares Outstanding 40,026,510 40,026,510
=========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
</TABLE>
<PAGE>
PRIMEDEX HEALTH SYSTEMS, INC. AND AFFILIATES
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PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
OCTOBER 31, 1994 [UNAUDITED]
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<TABLE>
Pro Forma Pro Forma as
Historical Adjustments Adjusted
<S> <C> <C> <C>
Revenue:
Revenue $69,942,395 $ -- $69,942,395
Less: Allowances 35,503,124 -- 35,503,124
----------- ----------- -----------
Net Revenue 34,439,271 -- 34,439,271
----------- ----------- -----------
Operating Expenses:
Operating Expenses 37,277,623 -- 37,277,623
Research and Development -- -- --
Depreciation and Amortization 7,012,087 -- 7,012,087
Provision for Bad Debts 2,669,914 -- 2,669,914
Provision for Closed and Restructured
Imaging Centers 3,329,516 -- 3,329,516
----------- ----------- -----------
Total Operating Expenses 50,289,140 -- 50,289,140
----------- ----------- -----------
[Loss] Income from Operations (15,849,869) -- (15,849,869)
----------- ----------- -----------
Other Revenue and [Expenses]:
Interest Expense (6,057,769) -- (6,057,769)
Interest Income 243,733 -- 243,733
Other Income 487,226 -- 487,226
Non-Operating Income 2,934,504 -- 2,934,504
----------- ----------- -----------
Total Other Revenue [Expenses] (2,392,306) -- (2,392,306)
----------- ----------- -----------
[Loss] Income Before Income Taxes, Minority
Interest in Income of Subsidiaries, and
Equity in Loss of Investees (18,242,175) -- (18,242,175)
Minority Interest in Income of Subsidiaries 726,740 -- 726,740
Equity in Loss of Investees (25,847) -- (25,847)
----------- ----------- -----------
[Loss] from Continuing Operations $(17,541,282)$ -- $(17,541,282)
============ =========== ============
Earnings per Share:
[Loss] from Continuing Operations $ (.44) $ (.44)
=========== ===========
Weighted Average Common Shares
Outstanding 40,026,510 40,026,510
=========== ===========
See Notes to Unaudited Pro Forma Consolidated Financial Statements.
</TABLE>
<PAGE>
MEDICAL RECEIVABLES
PURCHASE AND SALE AGREEMENT
This Agreement is made as of July 31, 1995 by and between Bristol A/R,
Inc., a Delaware corporation ("Purchaser") and PriMedex Corporation, a
California corporation ("Seller").
WHEREAS, Seller has acquired certain medical accounts receivable
(individually, an "Account", and collectively, the "Accounts") pursuant to those
certain Assignment Agreements, dated as of February 11, 1992 and as of the date
hereof, respectively between Seller and each of Crown Imaging Associates Medical
Group, Inc., Gardner Medical Group, Inc., Gardner Neurological Orthopedic
Medical Group, Inc. and Orthoneurosurgery Medical Group, Inc.; and
WHEREAS, Seller wishes to sell and Purchaser wishes to purchase, the
Accounts.
NOW THEREFORE, the parties hereto agree as follows:
1. Purchase of the Accounts.
1.1 Purchase and Sale. Subject to the terms and conditions set forth in
this Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to
purchase from Seller, at the Closing (as defined below), all of Purchaser's
right, title and interest in the Accounts set forth on Schedule 1 hereto.
1.2 Purchase Price. The purchase price (the "Purchase Price") for the
Accounts is Nine Million Four Hundred Forty-Eight Thousand Sixty-One Dollars
($9,448,061.00) which Purchase Price represents nineteen (19%) percent of Forty
Nine Million Seven Hundred Twenty-Six Thousand Six Hundred Thirty-Nine Dollars
($49,726,639.00) , the aggregate face amount of the Accounts set forth on
Schedule 1 (the "Stated Face Amount"). To the extent the actual aggregate face
amount of the Accounts set forth on Schedule 1 hereto is not more than five (5%)
percent greater or less than the Stated Face Amount, no adjustment shall be made
in the Purchase Price. If the actual aggregate face amount of the Accounts set
forth on Schedule 1 hereto is more than five (5%) percent greater or less than
the Stated Face Amount, the Purchase Price shall be adjusted on a pro rata basis
for the full amount by which the actual aggregate face amount of the Accounts
varies from the Stated Face Amount, All settlements between Seller and Purchaser
for any adjustments to the Purchase Price shall be done on a quarterly basis, in
good funds. Purchaser shall provide to Seller all supporting documentation in
connection with the calculation by Purchaser of any adjustments in the Purchase
Price. If the Purchase Price is to be reduced, Seller shall pay such reduction
to Purchaser. If the Purchase Price is to be increased, Purchaser shall pay such
increase to Seller. Purchaser shall have the right to offset any adjustments in
the Purchase Price against any sums owing by Seller to Purchaser under the terms
of this Agreement.
1.3 Subsequent Adjustments to Stated Face Amount. Events causing
an adjustment in theStated Face Amount for certain Accounts listed on Schedule
1 hereto, consist of the following:
(a) Duplicate Accounts which are listed on Schedule 1 hereto
(i.e., the same Accounts listed on Schedule 1 hereto in two (2) places);
(b) Accounts listed on Schedule 1 hereto which are determined to
be for patients who
were never treated by a Practitioner; or
(c) Accounts which were paid in full or in part prior to the
Closing but which were erroneously included on the Accounts listed on Schedule 1
hereto pursuant to prior settlement agreement and withdrawal of balance of lien,
prior to the Closing but which were erroneously included in the Accounts listed
on Schedule 1 hereto.
<PAGE>
1.4 No Adjustment to Stated Face Amount. Except as otherwise provided
in Section 1.3 above, there shall be no adjustment to the Stated Face Amount of
the Accounts listed on Schedule 1 hereto. Examples of events which will not
cause an adjustment in the Stated Face Amount include but are not limited to the
following:
(a) Write-offs of Accounts listed on Schedule 1 hereto occurring
from and after the Closing, as a result of discovery and\or litigation, and\or
for which the lien is determined to be noncollectible, on the grounds that a
legal determination is made that the lien claimants are not entitled to payment
for treatment. The grounds include, but are not limited to the following: (i)
there was no industrial injury to the applicant; (ii) medical-legal costs are
not compensable due to a violation of Del Rio; (iii) there was false and
inaccurate history, under Penny\Guerro standards; or (iv) for Accounts in which
the Purchaser decides not to pursue the claim, including not filing or pursuing
a Petition for Reconsideration or Writ to the Court of Appeal;
(b) Write-offs of Accounts listed on Schedule 1 hereto for which,
due to the availability of staffing and personnel, the Purchaser does not pursue
;
(c) In the event that a file is found wherein there has been
sufficient prior payment, and there is insufficient law or facts which justify
seeking additional payments and the Purchaser determined to write-off the
balance of such Account;
(d) Should there be an en banc WCAB decision, appellate court
decision, or a retroactive enactment of law, which would require Purchaser to
re-evaluate its position on certain cases, and a write-off is or may be
required; or
(e) Personal injury or worker's compensation cases where the
attorney drops the case or in which there was no attorney to begin with (the
claimant was in Pro Per) .
1.5 Closing. Subject to the terms and conditions of this Agreement, the
closing (the "Closing") shall take place when Buchalter, Nemer, Fields & Younger
shall have received fully executed and completed copies of each of the
agreements and documents contemplated by this Agreement. At Closing, Seller
shall convey and deliver to Purchaser all of its right, title and interest in
and to the Accounts, and Purchaser shall deliver the Purchase Price to Seller by
certified or cashier's check or at Purchaser's sole option, by wire transfer to
a bank designated by Seller.
1.6 Files and Records. As of the date of Closing, Seller shall deliver
to Purchaser all files and records presently maintained at its general offices
related to the Accounts, which are within its possession, custody and control,
and which have not been previously delivered to Purchaser, and shall use its
reasonable best efforts to locate any missing files identified by Purchaser in
writing after the Closing and to deliver such files to Purchaser (at Seller' s
own cost and expense). Purchaser shall, within ninety (90) days of the Closing,
review all files maintained by Seller at its warehouse repository, and select
those files it deems appropriate for inclusion in the portfolio acquired hereby.
Notwithstanding the foregoing, Seller shall provide access to such other files
as may be reasonably requested that are not included in the files selected
during ninety (90) day period. Purchaser shall provide Seller, as soon as
practicable, but no later than one hundred eighty (180) days after the Closing,
a listing of the files and records so received and shall, during that one
hundred eighty (180) day period, give an interim listing sixty (60) days and one
hundred twenty (120) days after the Closing. Purchaser shall endeavor to retain
such files and records in the same manner as such files were maintained by
Seller, and shall maintain said files at a location selected by Purchaser for so
long as Purchaser is required to maintain said Accounts in accordance with the
terms of this Agreement, Purchaser shall preserve all files and documents
related to each Account until at least one (1) year has expired since Purchaser
deems such Account has been collected or closed, or it has received settlement
satisfactory to Purchaser. Purchaser may, every six (6) months, return such
files and records it no longer deems necessary or appropriate for it to maintain
at its offices to a repository designated by Seller. Said files shall be
delivered by Purchaser to the repository in the condition delivered to it, along
with an inventory of the files and records so returned. Purchaser may, at the
expiration of five (5) years from the date on which Purchaser deems the Account
to which any specific file pertains to be closed, destroy any such file that has
not been accepted for return by the Seller.
<PAGE>
1.7 Transfer of Rights; No Assumption of Liabilities. Effective as
of the Closing:
(a) clear title in and to the Accounts shall be transferred to
Purchaser, free and clear
of the claims of any entity;
(b) Purchaser will become the absolute owner thereof and shall
have the right to receive all proceeds of all payments on the Accounts directly
from Third Party Obligers (as defined below) except (i) any right of Philip A.
Sobol to receive 50% of the surgical receipts of (A) Philip A. Sobol for
surgeries performed after February 1, 1992, and (B) Cathy Capps, and (ii) the
right of Samir Mikhail to receive 50% of the surgical receipts for all surgeries
performed by him. Purchaser is not assuming any debt, liability or obligation of
Seller, whether known or unknown, fixed or contingent, matured or unmatured,
except as set forth herein.
1.8 No Recourse. Except for Purchaser's rights against Seller for
breach of the representations, warranties and covenants of Seller contained in
this Agreement, Purchaser's purchase of the Accounts shall be without recourse
to Seller. Except as set forth in Section 6, Seller shall have no responsibility
to Purchaser for collecting the Accounts.
2. Representations and Warranties of Seller.
2.1 Representations and Warranties Relating to the Accounts. Seller
represents and warrants to Purchaser, with respect to each Account, that:
(a) To the best of Seller's knowledge after reasonable inquiry
and investigation, such Account is based on an actual and bona fide rendition of
medical services and/or treatment of a patient who requested such service in the
ordinary course of business of the practitioner rendering such service (the
"Practitioner") and that payment is being sought, in whole or in part, from a
governmental entity (including any agency or instrumentality of a governmental
entity), an insurance company or other third party payer or entity (each a
"Third Party Obligor,");
(b) Seller has all right, title and interest in and to the
Accounts and such Accounts are Seller's exclusive property. The Accounts are not
subject to any prior sale, lien, security interest, or financing statement which
has not been previously satisfied;
(c) To the best of Seller's knowledge after reasonable inquiry
and investigation, the Practitioner delivered the services to a patient and the
patient has received the services represented by such Account. The Practitioner
reasonably and in good faith believed that the services reflected in such
Account were medically necessary for the treatment of the patient based upon all
of the facts and circumstances provided to the practitioner. The fees charged
for such services were the usual, customary and reasonable fees charged by the
Practitioner to its patients which fees to the best of the Seller's knowledge
after reasonable inquiry and investigation were the usual, customary and
reasonable fees charged by other providers within acceptable standards in the
community for the same or similar services;
(d) To the best of Seller's knowledge after reasonable inquiry
and investigation, there are no express written contracts for reimbursement to
Third Party Obligors with respect to any of the Accounts by any of the
Practitioners rendering the services;
(e) Seller has no express contract, providing for any
reimbursement to Third Party Obligors with respect to any of the Accounts,
except for the rights described in Section 1.5(b) hereof;
(f) To the best of Seller's knowledge after reasonable inquiry
and investigation, the Practitioner rendering the services possessed all
appropriate licenses and approvals and otherwise satisfies any and all
conditions imposed for providing all of the services reflected in and giving
rise to such Accounts;
<PAGE>
(g) The Accounts are Payable only in lawful currency of the
United States of
America;
(h) Seller's sale of the Accounts pursuant to this Agreement will
not violate any federal, state or local law, rule or regulation, court or other
governmental order or decree or terms of any contract relating to any Account or
by which Seller may be bound;
(i) Seller maintains all licenses necessary and appropriate
for the conduct of its business;
(j) To the best of Seller's knowledge after reasonable inquiry
and investigation, all documents necessary or helpful to obtain payment from
Third Party Obligors with respect to the Accounts, including the applicable
uniform billing form, are in Seller's possession and will have been delivered to
Purchaser on or before the Closing;
(k) Except as set forth herein and in Section 4 hereof, to the
best of Seller's knowledge after reasonable inquiry and investigation, there are
no defenses, counterclaims or set-offs that may be asserted against the
collection of the Accounts. Notwithstanding the foregoing, Purchaser
acknowledges that Seller has advised it that all liens, claims and accounts,
including worker's compensation liens, are or may be subject to separate fee
schedules, court orders, or negotiation and/or various other defenses, demands
for restitution or reimbursement, and claims of offset which are typically
asserted by insurance carriers in order to avoid payment of such liens and/or to
negotiate the amount of the liens downward, and Purchaser assumes such risks
herein;
(l) To the best of Seller's knowledge after reasonable
investigation and inquiry, all records, data and information about the Accounts
are true, correct and complete, and all of Seller's records and all documents
relating to the Accounts are genuine, true, complete, and accurate;
(m) Neither this Agreement nor any schedule or exhibit hereto and
no certificate, reports statement or other document or information furnished to
Purchaser in connection herewith or with the consummation of the transactions
contemplated hereby, contains any material misstatement of fact or omits to
state a material fact or any fact necessary to make the statements contained
herein or therein not misleading;
(n) To the best of Seller's knowledge after reasonable inquiry
and investigation, the Seller has complied with, and is not in violation of any
law, ordinance, or governmental or regulatory rule or regulation, whether
federal, state, local, or foreign, including, without limitation, applicable
provisions of the California Business and Professional Code, Insurance Code,
Labor Code and Penal Code, to which Seller's business, operations, assets or
properties is or has been subject;
(o) Seller has not engaged in any activities known by Seller to
be prohibited under federal or state healthcare reimbursement laws, regulations,
rules, or guidelines or that would serve as the basis for mandatory or
permissive exclusion from participation in any healthcare reimbursement program
or other sanction or penalty, nor engaged in similar activities with respect to
third party insurers, self-insurers or self-insured plans, including, without
limitation (i) making or causing to be made any false statement or
representation of a material fact in any application for any benefit or payment,
(ii) making or causing to be made any false statement or representation of a
material fact in connection with determining rights to any benefit or payment,
(iii) failing to disclose the occurrence of any event affecting the initial or
continued right to any benefit or payment, or (iv) offering, paying, soliciting
or receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (A) in return
for referring an individual to a person for the furnishing or arranging of any
item or service for which payment may be made in whole or in part by any
healthcare reimbursement program, or (B) in return for purchasing, leasing,
ordering or arranging for or recommending purchasing, leasing or ordering any
good, facility, service or item for which payment may be made in whole or in
part by any healthcare reimbursement;
14380EKD.LFO
<PAGE>
(p) Seller has provided Purchaser or its representative full
and complete access to any and all documents or other information pertaining
to the Accounts or to Seller; and
(q) The Accounts sold to Purchaser hereunder do not include any
Accounts involving personal injury actions in which Bruce Stuart is the attorney
of record.
2.2 Representations and Warranties Relating to Seller.
Seller further represents and warrants to Purchaser that:
(a) Seller is duly organized, validly existing and in good
standing under the laws of the State of California and is duly qualified to do
business and in good standing in each state in which the nature of its business
requires it to be qualified;
(b) Seller has full power, authority and legal right to execute,
deliver and perform this Agreement, and the execution, delivery and performance
hereof have been duly authorized by all necessary corporate action;
(c) This Agreement has been duly executed and delivered by Seller
and constitutes a legal, valid and binding obligation of Seller enforceable in
accordance with its terms;
(d) The execution, delivery and performance of this Agreement (i)
do not contravene, or result in a breach of, or constitute a default or require
any consent under, any agreement or indenture by which Seller is bound or by
which Seller's properties may be affected, (ii) do not require any stockholder
approval or any approval or consent of, or filing or registration with, any
governmental body or regulatory authority or agency, or any approval or consent
of any trustees or holders of any indebtedness or obligations of Seller, and
(iii) do not contravene Seller's articles of incorporation or by-laws or any
law, regulation, judgment or decree applicable to Seller;
(e) Purchaser has been advised of the pending investigations by
governmental entities, which investigations are described in the documents
attached hereto as Exhibit A hereto, which documents accurately describe the
status of the investigation as of the date hereof. Except as set forth in
Exhibit B hereto and as described in Sections 2.1(k) and 3(g) hereof, no other
litigation is pending, or, to Seller's knowledge, threatened against Seller
which, if adversely determined, would have a material adverse effect on the
Accounts;
(f) The Seller has, since August 1994, collected the Accounts in
the normal course and has not materially altered the overall collectability or
types of accounts included in the Accounts, other than as such collectability
may have been affected by collections in the ordinary course, it being
acknowledged by Purchaser that collectability is adversely affected by the
passage of time; and
(g) Seller represents and warrants that neither Gary S. Pagar
("Pagar"), Medfirst Capital Resources, Inc. ("Medfirst") nor any affiliated or
related entity or individual shall have any involvement in or participate in any
matter in the business of Seller relating to the Accounts being sold herein.
Seller acknowledges that this is a material term of this agreement and hereby
acknowledges and agrees that the remedy at law for any violation of this
provision will be inadequate and Purchaser will be entitled to temporary and
permanent injunctive relief, without the necessity of proving actual changes or
the posting of a bond, and that a restraining order and injunction may issue
against Seller, Pagar and/or Medfirst, or any related entity of Pagar and/or
Medfirst, in addition to any other remedies and rights that Purchaser may have.
3. Representations and Warranties of Purchaser. Purchaser represents and
warrants to Seller as follows:
(a) Purchaser is duly organized, validly existing corporation and in
good standing under the laws of the State of Delaware and is duly qualified to
do business and in good standing in each state in which the nature of its
business requires it to be qualified;
<PAGE>
(b) Purchaser has full power, authority and legal right to execute,
deliver and perform this Agreement, and the execution, delivery and performance
hereof have been duly authorized by all necessary corporate action;
(c) The execution, delivery and performance of this Agreement by
Purchaser does not and will not violate, conflict with or result in the breach
of any term, condition or provision of, or require the consent of any other
party to, (a) any existing law, ordinance, or governmental rule or regulation to
which Purchaser is subject, (b) any judgment, order, writ, injunction, decree or
award of any court, arbitrator or governmental or regulatory official, body or
authority which is applicable to Purchaser, (c) the charter documents or any
securities issued by, Purchaser, or (d) any mortgage, indenture, agreement,
contract, commitment, lease, plan or other instrument, document or
understanding, oral or written, to which Purchaser is a party or by which
Purchaser is otherwise bound. Except as aforesaid, no authorization, approval or
consent of, and no registration or filing with, any governmental or regulatory
official, body or authority is required in connection with the execution,
delivery and performance of this Agreement by Purchaser. Purchaser is not
required to report under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 or any other antitrust law in respect of any action pursuant to or
contemplated by this Agreement;
(d) Purchaser acknowledges and agrees with Seller that the
representations and warranties of Seller set forth in Section 2.1 and 2.2 shall
not be applicable, after the Closing, to any future legislation or government
action (other than governmental action related to the pending investigation by
the office of the Los Angeles District Attorney and other governmental agencies)
with respect to the business previously operated by Seller. Purchaser further
acknowledges and agrees that, Seller does not warrant the collectability of the
Accounts being sold herein;
(e) After the Closing, Purchaser shall fully cooperate with the Seller,
the Practitioners and their physicians and chiropractors in connection with the
pending investigation by the Los Angeles District Attorney and related
government agencies; provided, that, all out of pocket costs incurred by Seller,
the Practitioners and their physicians in connection therewith shall be borne
entirely by such parties;
(f) Purchaser will, after the Closing, deal with all claims for
overpayments, reimbursement or other restitution requested to be made to Third
Party Obligors in a manner consistent with Seller's practice as it has
heretofore existed, as described in Exhibit C hereto, in order to endeavor to
minimize such claims; provided, however, that nothing contained in this
sub-paragraph shall be construed so as to prevent Purchaser, in good faith, from
changing the manner in which it deals with such requests if such change is
reasonably calculated to minimize the amount of such claims or if such change is
otherwise dictated by a change in circumstances;
(g) Purchaser shall (i) manage, administer and service the Accounts in
accordance with prudent servicing practice, (ii) comply at all times with good
business policies, practices, procedures and internal controls applicable to the
management, administration and servicing of similar assets, and (iii) create and
administer policies and practices (including those with respect to reserves and
write-offs) consistent with the policies and practices applied by it in handling
similar matters for its own account. without limiting the generality of the
foregoing, Purchaser shall verify the appropriateness of reimbursement from
insurance carriers, and governmental programs and, when necessary and
economically reasonable initiate an appeals process with the workers
compensation appeals board to seek to ensure prompt corrective action, and
provide summary reports to track and analyze the Accounts in a variety of
formats including age, type of service, specific insurance carrier;
(h) Without limiting the generality of any other provision of this
Agreement, Purchaser shall be obligated to perform all duties of the holder or
other obligee in any proceeding brought in connection with the enforcement of
any other Accounts;
<PAGE>
(i) Purchaser shall maintain (or cause to be maintained) (i) an
electronic ledger as a master record of the Accounts (together with the
outstanding balances thereof), (ii) adequate records and books of account with
complete entries made in accordance with generally accepted accounting
principals, consistently applied, reflecting all payments to and other financial
transactions involving the Purchaser and (iii) retain copies of the Accounts an
all other documents relating thereto;
(j) Purchaser shall, upon reasonable notice, permit the Seller or any
agent or representative of the Seller to have full and free access during normal
business hours to all the books, correspondence and records of Purchaser insofar
as they relate to the pending investigation by the office of the Los Angeles
District Attorney; and the Seller and such agents and representatives may
examine the same, take extracts therefrom and make photocopies thereof, and
Purchaser agrees to render to the Seller and such agents and representatives
such clerical and other assistance as may be reasonably requested with regard
thereto;
(k) Purchaser shall comply in all material respects with all applicable
laws, rules, regulations and orders such compliance to include, without
limitations, the appropriate handling and application of all prepayments of
principal on the Accounts;
(l) Purchaser shall be obligated to pay all expenses, costs and fees
incurred by it in connection with the servicing of the Accounts and the
performance of its other duties hereunder and any and all administrative and
legal costs incurred by Purchaser from and after the Closing;
(m) All negotiations have been carried on by Purchaser directly without
the intervention of any person who may be entitled to any brokerage (other than
insurance brokerage) or finder's fee or other commission in respect of this
Agreement or the consummation of the transactions contemplated hereby and
Purchaser agrees to indemnify and hold Seller harmless against any and all
claims, losses, liabilities, and expenses which may be asserted against or
incurred by Seller as a result of Purchaser's dealings, arrangements or
agreements with any such person or entity; and
(n) Except as set forth in the Settlement Agreement attached hereto as
Exhibit D, Purchaser represents and warrants that neither Pagar, Medfirst nor
any affiliated or related entity or individual shall have any involvement in or
participate in any matter in the business of Bristol in connection with its
acquisition, ownership and/or servicing of the accounts being acquired from
Primedex pursuant to this Agreement. Purchaser acknowledges that this is a
material term of this Agreement and hereby acknowledges and agrees that the
remedy at law for any violation of this provision will be inadequate and Seller
will be entitled to temporary and permanent injunctive relief, without the
necessity of proving actual changes or the posting of a bond, and that a
restraining order and injunction may issue against Purchasers Pagar and/or
Medfirst, or any related entity of Pagar and/or Medfirst, in addition to any
other remedies and rights that Seller may have.
4. Payment Mistakes and Offsets.
4.1 (a) Seller represents that from time to time it and/or Third Party
Obligors discover that duplicate payments (e.g. two payments for same patient on
same bill and/or payment mistakes (e.g. a check for $10,000.00 instead of
$1,000.00) have been made by Third Party Obligors. It is expressly understood
and agreed that Purchaser assumes the obligation to reimburse said Third Party
Obligors on account of any such duplicate payments and/or payment mistakes
received by Seller and/or Practitioners for the period prior to the date hereof.
(b) Seller represents that duplicate payments and/or payment
mistakes have historically reduced the collections of the Accounts by $6,000 to
$10,000 per month. Seller has accrued a contingent liability of approximately
$150,000 for potential future claims of duplicate payments and/or payment
mistakes, but has not segregated any funds with which to satisfy such claims. In
April, 1993, Seller adopted a policy of returning duplicate checks as they are
received and has continued that policy thereafter.
<PAGE>
4.2 It is expressly understood and agreed that the Purchaser assumes
all liability, including any judgments, awards and cost of defense and/or
attorneys' fees, for any claims or demands whereby Third-Party Obligors seek
restitution, reimbursement, and/or assert claims of offsets (either offensively
or defensively) and/or affirmative defenses against Seller and/or Practitioners,
which may be utilized by such Third-Party Obligors in matters involving either
open and/or closed Accounts in which a payment was previously made by such
Third-Party Obligor. The types of petitions and/or claims may include, but are
not limited to, situations where (a) the Third-Party Obligor will raise payments
previously made in other actions as a defense to payment requested in an open
action, (b) where the Third-Party Obligor has previously made a payment in the
action, and now requests an offset of the remaining balance for having
"overpaid" on general unspecified other claims, (c) where the Third-Party
Obligor has previously made a payment in an action, and now request
reimbursement or all or part of said payment, (d) on closed cases with zero
balances remaining on Seller's books and the Third-Party Obligors seek
reimbursement of all or part of said payment, and (e) on closed cases with
remaining balances on Seller's books and the Third Party Obligors seek
reimbursement of all or part of any prior payments, Purchaser acknowledges that
Third-Party Obligors have certain rights to seek to reopen closed files and to
petition and/or claim subsequent to the date of judgment by the worker's
compensation appeals board that they are entitled to a refund in return of
payments previously made. Purchaser hereby assumes the liability, including any
judgments, awards and cost of defense and/or attorneys fees, for such claims
and/or petitions. Seller has advised Purchaser that the amount of such claims,
offsets, and petitions for reimbursement or restitution may vary and depend in
substantial part on the manner and method how such claims are defended by
Purchaser.
4.3 (a) In the twelve (12) months ended January 31, 1995, the total
amount paid by Seller and the Practitioners to Third Party Obligors on account
of demands for restitution or reimbursement relating to the Accounts or to
closed Accounts of the Seller or the Practitioners, excluding any amounts paid
on account of duplicate payments and/or payment mistakes as defined in Section
4.1 hereof, has been less than $10,000. It is expressly understood that such
amount does not include amounts paid for costs of defense and/or attorneys fees.
(b) Notwithstanding any demands or requests for restitution or
reimbursements made to the Seller or the Practitioners by Third Party Obligors,
in the past twelve (12) months, no Third Party Obligor has obtained an award in
its favor requiring Seller or Practitioner to refund and payments made
previously with respect to a separate account in any instance in which Seller
has opposed such claim.
(c) There are currently no cases now pending against Seller by
any Third-Party Obligor in which reimbursement of monies paid by Seller in an
amount that may be deemed to be material to the transaction contemplated hereby
is sought.
5. Conditions to the Closing.
5.1 Obligations of Purchaser. The obligation of Purchaser to purchase
the Accounts under this Agreement is subject to the satisfaction, at or before
the Closing, of all the conditions set out below in this Section 5. Purchaser
may waive any or all of these conditions:
(a) Survival of Representation and Warranties. No representations
or warranties whatever are made by any party, except as specifically set forth
in this Agreement, or in an instrument, certificate, opinion or other writing
provided for in this Agreement. The representations, warranties and indemnities
made by the parties in this Agreement or instrument, certificates, opinion or
other writings provided for in this Agreement to be performed or complied with
by the respective parties on or before the Closing, shall be deemed to be
continuing and shall survive the Closing. Seller shall have no liability to the
Purchaser for any breaches or defaults concerning any of the representations,
warranties or indemnities made in this Agreement or instruments, certificates,
opinions or other writings provided for in this Agreement, unless a specific
claim in writing with respect to these matters shall have been made, or an
action at law or in equity shall have been commenced or filed. Nothing in this
paragraph shall affect the obligations and indemnities of the parties with
respect to covenants and agreements contained in this Agreement that are
permitted to be performed, in whole or in part, after the closing date.
<PAGE>
(b) Financing Statements. Purchaser shall have received one or
more UCC-1 Financing Statements, each in form and substance satisfactory to
Purchaser, duly executed by Seller as shall be necessary or desirable to
effectuate the transactions contemplated hereby.
(c) Purchaser's Acknowledgment of Performance of Due Diligence.
Purchaser acknowledges that, to the best of its knowledge it and/or its
representatives have been afforded the opportunity for full and complete access
to all documents of Seller, and that it has retained such persons as it deems
necessary to act on its behalf, in the performance of any and all due diligence
which may or might be necessary to satisfy Purchaser in entering into this
Agreement. Purchaser hereby acknowledges that it is not relying on Seller, or
its officers, directors, agents, attorneys, accountants or employees to perform
any of the due diligence which may be required, necessary or contemplated by
Purchaser or its agents. Purchaser further acknowledges that it has not relied
upon any oral representations of Seller, its officers, directors, agents,
attorneys, accountant or employee in the performance of its due diligence
concerning any and all representations, warranties and indemnities of the Seller
relating to this Agreement, or which may be contained or referred to in any
instrument, certificate, opinion or other writing provided for in this
Agreement.
(d) Guarantee of Obligations of Seller. Purchaser shall have
received, in form and content acceptable to Purchaser, a guarantee of the
obligations of Seller under this Agreement by PriMedex Health Systems, Inc., and
Radnet Management, Inc.
(e) Opinion of Seller's Counsel. Purchaser shall have received
an opinion of Stern
& Goldberg addressed to Purchaser, in the form annexed hereto as Exhibit E.
5.2 Obligations of Seller. The obligations of Seller to sell the
Accounts hereunder is subject to Purchaser's delivery of the following to Seller
at or before Closing:
(a) the Purchase Price;
(b) Certified copies of resolutions of the board of directors of
Purchaser approving
the transactions contemplated by this Agreement;
(c) the execution by Purchaser and Elias Munoz ("Munoz") of an
employment
agreement on terms and conditions satisfactory to Munoz;
(d) an option of Buchalter, Nemer, Fields & Younger, addressed to
Seller, in the form annexed hereto as Exhibit F; and
(e) the execution by Purchaser and Seller of a sublease and
consent to sublease in the form attached hereto as Exhibit G and Exhibit H,
respectively, for the sublease of approximately 12,000 square feet of office
space located at 6167 Bristol Parkway, Culver City, California, which is
presently being utilized by Seller.
6. Collection and Administration.
<PAGE>
6.1 Notification of Third Party Obligors; Endorsement. After the
Closing, any checks, cash, notes or other instruments or property received by
Seller from any Third Party Obligor shall be deemed to have been received by
Seller on account of the Accounts, whether or not the payment so received has
been designated as a payment on or against any Account, and such payment shall
immediately be delivered to Purchaser in kind in accordance with Section 6.3.
Any payment not so delivered shall accrue interest at twenty-four percent (24%)
per annum from the date of receipt by Seller to the date of payment by Seller to
Purchaser. Purchaser may, on reasonable notice to Seller, inspect Seller's
books, including bank accounts, to verify compliance with this Paragraph.
Purchaser or its agent may endorse or sign Seller's or Purchaser's name on any
checks or other instruments which come into Purchaser's possession with respect
to the Accounts and negotiate, transfer, deposit and otherwise deal with such
checks or other instruments as the sole owner thereof. At Purchaser's request,
Seller shall cooperate with Purchaser in establishing bank accounts in the name
of the Purchaser or its agents and making such other arrangements as Purchaser
may reasonably require to enable Purchaser to cash or otherwise realize any
checks or other forms of payment made payable to Seller.
6.2 Billing and Collection. Purchaser shall have the right, authority
and discretion to take whatever actions, at its own expense, necessary or
desirable to collect the Accounts, including, without limitation, retaining an
attorney or other collection specialist, entering into agreements for discounted
bulk settlements for all or a portion of the Accounts, and outsourcing all or a
portion of the Accounts to a collection agency. However, such agreements or
outsourcing shall not relieve Purchaser of its duties and obligations under the
terms of this Agreement. Purchaser represents that it shall use its best efforts
to conduct its business of collection of the Accounts.
6.3 Remittances. On and after the Closing, Seller shall, within three
(3) business days of receipt, forward in kind to Purchaser one hundred (100%)
percent of any proceeds of Accounts which it receives (with any necessary
endorsement) and will provide monthly summaries to Purchaser on or before the
fifteenth (15th) day of each calendar month itemizing all payments received, if
any, during the most recently ended calendar month. If Purchaser at any time
believes that a payment made directly to Seller after the Closing has been
retained by Seller in contravention of this Agreement, Purchaser shall so notify
Seller. If Seller disputes having received such payment, Purchaser and Seller
shall negotiate to resolve the dispute in good faith; provided, however, that a
canceled check from a Third Party Obligor bearing Seller's endorsement shall
conclusively evidence Seller's receipt and retention of the payment in question.
If Seller acknowledges that it has retained any payment in contravention of this
Agreement, or if any dispute regarding such payment shall be resolved in favor
of Purchaser,
Seller shall remit the amount of such payment to Purchaser, together with
interest at the rate of 1.5% per month (computed on the basis of actual days
elapsed) from the date Seller received such payment through the date such
remittance is paid to Purchaser.
7. Additional Covenant of Purchaser.
7.1 Purchaser shall enter into a three (3) year employment contract
with Munoz on terms and conditions satisfactory to Munoz.
7.2 Purchaser will execute a sublease, in the form annexed hereto as
Exhibit G, for approximately 12,000 square feet of the office space located at
6167 Bristol Parkway, Culver City, California previously utilized by Seller, and
Purchaser and Seller will use their beat efforts to obtain the consent of the
Landlord to the sublease.
7.3 Purchaser will not sell, transfer or assign, all or any portion of
the Accounts to any third party without the prior written consent of Seller,
which shall not be withheld so long as any such sale, transfer, or assignment
does not materially and adversely affect Seller's rights hereunder.
7.4 Purchaser will not make any transfer of its assets in violation
of Sections 3439 et. seq
of the California Civil Code.
<PAGE>
8. Additional Covenants of Seller.
8.1 Treatment of Accounts. Seller shall (a) treat the transfer of the
Accounts to Purchaser hereunder as a sale for all purposes, including tax and
accounting, (b) not include any Account as Seller's assets on Seller's books and
records, (c) make a notation on Seller's computer files and other books and
records to indicate the sale of the Accounts to Purchaser, (d) pay all taxes
relating to the sale of the Accounts pursuant to this Agreement, (e) do nothing
to impair Purchaser's right in any Account, and (f) make all payments to Third
Party Obligors necessary to prevent such Third Party Obligors from offsetting an
earlier overpayment to Seller against any amounts such Third Party Obligor owes
on any Account.
8.2 Financing Statements; Power of Attorney. Seller agrees to execute
and deliver to Purchaser any financing statement and such additional documents
as Purchaser may require to perfect or evidence Purchaser's ownership interest
in the Accounts, Seller hereby grants to Purchaser an irrevocable power of
attorney (a) to execute and file any financing statements or other instruments
to perfect Purchaser's ownership interest in the Accounts, and (b) to collect
the Accounts and otherwise to effectuate the rights and remedies of Purchaser
hereunder. Notwithstanding the grant of this power of attorney, Purchaser shall
not owe any fiduciary duties to Seller. If. contrary to the parties' intentions
hereunder, the sale and assignment of the Accounts under this Agreement is
construed or asserted to be a secured financing this Agreement shall serve as a
Security Agreement, and Seller hereby grants to Purchaser a first priority
perfected security interest in all of the Accounts and all proceeds thereof,
including insurance proceeds and any and all other rights of Seller in and to
the Accounts.
8.3 Current Information. Seller agrees that it will keep Purchaser
advised regarding those items which are the subject of Seller's indemnification
of Purchaser under Section 9.1 of this Agreement, including any material
information or changes regarding the status of any investigations by any
governmental agencies.
9. Indemnification.
9.1 Indemnification by Seller. Notwithstanding anything to the contrary
contained in this Agreement, from and after the Closing, Seller will reimburse,
indemnify, defend, protect and hold harmless Purchaser, its controlling persons
and agents thereof, and each of their successors and assigns against and in
respect of any and all damages, losses, deficiencies, liabilities, costs and
expenses incurred or suffered that result from, relate to or arise out of:
(a) The conduct by Seller of its business or acts performed or
not performed in connection with the collection of Accounts prior to the
Closing, except for (i) those liabilities, risks and obligations of Seller which
Purchaser assumes pursuant to this Agreement, and (ii) any matters relating to
the pending investigation by the office of the Los Angeles District Attorney and
other governmental agencies, for which there shall be indemnification only under
Section 9.1(d), if at all, and not under this Section 9.1(a);
(b) Any misrepresentation, breach of warranty or nonfulfillment
of any agreement or covenant on the part of Seller under this Agreement, or any
misrepresentation in or omission from any certificate, schedule, statement,
document or instrument furnished to Purchaser pursuant hereto or in connection
with the negotiation, execution or performance of this Agreement;
(c) Any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses incident to or arising out of either of the foregoing Sections 9.1(a)
or 9.1(b);
(d) With respect to the pending investigation by the office of
the Los Angeles District Attorney and other governmental agencies, Seller shall
indemnify Purchaser for any losses, damages, deficiencies, forfeitures, claims,
liabilities, and costs and other expenses to the extent that any of the
foregoing arise from an indictment and conviction for any of the matters
described in Section 2.2(e) hereof; and
<PAGE>
(e) Any claims asserted against Purchaser by former employees of
Seller for Seller's actions prior to Closing.
It is expressly understood and agreed that nothing contained in this
Section 9.1 shall require Seller to indemnify Purchaser on account of any
claims, demands or offsets of the type described in Sections 4.1 or 4.2 hereof.
9.2 Forfeiture Claims. In connection with any claim by any governmental
agency asserting civil or criminal forfeiture against any of the Accounts or
proceeds thereof ("Forfeiture Claims"), Seller agrees that:
(a) Purchaser shall have the right to select legal counsel
satisfactory to Purchaser in its sole discretion to defend against such
Forfeiture Claims;
(b) Seller shall have no control over any decisions made by
Purchaser or its legal counsel in defending such Forfeiture Claims, including
any settlement decisions; provided, however, that, without Seller's prior
written consent, and so long as Seller has provided cash collateral or the
equivalent in an amount equal to one hundred (100%) percent of the amount of any
Forfeiture Claims asserted, there cannot be any settlement of any such
Forfeiture Claims for which Seller must indemnify Purchaser in whole or in part;
(c) In any event, Purchaser shall use its best efforts to keep
Seller apprised of all significant developments in all Forfeiture Claims
proceedings, and will accept advice from Seller in connection therewith, but
shall be under no duty whatsoever to follow such advice;
(d) Seller shall pay all legal bills (covering legal fees and
expenses) rendered to Seller by Purchaser's legal counsel upon receipt thereof,
and Seller's promise to so pay shall be for the specific benefit of Purchaser's
counsel, in addition to Purchaser; and
(e) Seller's obligation to pay all legal bills (covering legal
fees and expenses) submitted to Seller shall be predicted upon Purchaser's legal
counsel's billing at its usual and customary hourly rates for similar matters.
9.3 Indemnification by Purchaser. From and after the Closing, Purchaser
will reimburse, indemnify and hold harmless Seller, its controlling persons and
agents thereof, and each of their successors and assigns against and in respect
of any and all damages, losses, deficiencies, liabilities, costs and expenses
incurred or suffered that result from, relate to or arise out of:
(a) Any and all liabilities and obligations of any nature
whatsoever relating to the collection of the Accounts after the Closing, except
for the existing liabilities and obligations of Seller which are not being
assumed by Purchaser herein;
(b) Any and all liabilities and obligations of Seller and/or
Practitioners which have been specifically assumed by Purchaser pursuant to this
Agreement, including, without limitation, the claims, demands or liabilities
described in Sections 4.1 and 4.2 hereof;
(c) Any misrepresentation, breach of warranty or non-fulfillment
of any agreement or covenant on the part of Purchaser under this Agreement, or
from any misrepresentation in or omission from any certificate, schedule,
statement, document or instrument furnished to Seller pursuant hereto or in
connection with the negotiation, execution or performance of this Agreement;
(d) Any claims asserted against Seller by former employees of
Seller which directly result from Purchaser's hiring and subsequent termination
of such employees; and
(e) Any and all actions, suits, claims, proceeding,
investigations, demands, assessments, audits, fines, judgment, costs and other
expenses incident to or arising out of any of the foregoing or the enforcement
of this Section 9.3.
<PAGE>
9.4 Governmental Investigation. Seller shall promptly notify
Purchaser of any and all
material developments regarding current and potential governmental
investigations.
9.5 Settlements. From and after the Closing, Seller shall not enter
into any settlement with any party with respect to the Accounts set forth in
Schedule 1 hereto.
9.6 Method of Asserting Claims. In the event that any claim or demand
for which either Seller or Purchaser, as the case may be, would be liable to the
other hereunder is asserted against or sought to be collected from an
indemnified party by a third party, the indemnified party shall promptly notify
the other party of such claim or demand, specifying the nature of such claim or
demand and the amount or the estimated amount thereof to the extent then
feasible which estimate shall not be conclusive of the final amount of such
claim and demand. Such party shall have ten (10) days from the date notice is
given of the, demand or claim (the "Notice Period") to notify the indemnified
party, (a) whether or not the party disputes its liability to the indemnified
party hereunder with respect to such claim or demand and (b) notwithstanding any
such dispute, whether or not such party desires, at its sole cost and expense,
to defend the indemnified party against such claim or demand.
9.7 Procedures on Resolution of Claims, Disputes and Indemnification.
(a) If Seller or Purchaser, as the case may be, disputes its
liability with respect to such claim or demand or the amount thereof (whether or
not such party desires to defend the indemnified party against such claim or
demand as provided in Section (b) below), such dispute shall be resolved in a
court of competent jurisdiction in accordance with Section 11 hereof. Pending
the resolution of any dispute with respect to any claim or demand, such claim or
demand shall not be settled without the prior written consent of the indemnified
party.
(b) In the event that Seller or Purchaser, as the case may be,
notifies the indemnified party within the Notice Period that it desires to
defend and/or indemnify the indemnified party against such claim or demand
except as hereinafter provided, Seller or Purchaser, as the case may be, shall
have the right to defend the indemnified party by appropriate proceedings, which
proceedings shall be promptly settled or prosecuted by it to a final conclusion
in such a manner as to avoid any risk of the indemnified party becoming subject
to liability for any other matter; provided, however, that the indemnifying
party shall not, without the prior written consent of the indemnified party,
consent to the entry of any judgment against the indemnified party or enter not
any settlement or compromise which does not include, as an unconditional term
thereof, the giving by the claimant or plaintiff to the indemnified party of a
release, in form and substance satisfactory to the indemnified party, from all
liability in respect of such claim or litigation. If any indemnified party
desires to participate in, but not control, any such defense or settlement, it
may do so at its sole cost and expense.
(c) In the event that Seller or Purchaser, as the case may be,
notifies the indemnified party within the Notice Period that it does not desire
to defend and/or indemnify the indemnified party against such claim or demand,
the party claiming indemnity shall have the right, at its sole election, to
declare a default under this Agreement, and pursue such claim for default in a
court of competent jurisdiction in accordance with Section 11 hereof.
(d) Notwithstanding anything to the contrary contained herein, a
default by Purchaser under this Agreement shall exist, if after ten (10) days
written notice and opportunity to cure the Purchaser fails to defend and/or
indemnify Seller against any of the claims, demands or offsets of the types
described in Sections 4.1, 4.2, or 9.3 hereof.
9.8 Period During Which Claims May be Asserted. All of the indemnity
obligations herein shall survive the Closing for a period of years equal to the
period of limitations applicable, under California law, for claims alleging a
breach of contract, and shall apply to all notices or claims and/or liabilities
for which a party is put on notice in accordance with the terms of this
Agreement on or before the expiration of such applicable period, regardless of
whether the actual costs and expenses are incurred or assessed after such
period.
<PAGE>
9.9 Minimum Threshold to Assert Claims. Notwithstanding anything to the
contrary herein, the indemnification hereunder shall not be required unless the
aggregate amount of claims, losses, liabilities, damages, costs and expenses
(including attorneys' fees) for which a claim hereunder is made exceeds
$10,000.00 (the "Basket"), At such time, the indemnification obligation
hereunder shall encompass the full amount of such claim, as determined in
accordance herewith, including the foregoing Basket (i.e., such Basket shall not
be deemed or construed to be a deductible amount, but rather an aggregate
minimum threshold in order to assert claims). The provisions of this Section 9.9
shall not apply to any of the claims, demands, petitions, offsets or liabilities
referred to in Sections 4.2 or 9.3(a).
9.10 Event of Default. Except as otherwise provided herein, in the
event of an alleged breach of any of the terms or conditions of this Agreement,
the parties shall conduct themselves in accordance with the terms and conditions
Sections 9.6 and 9.7 above (e.g. specifying the nature of the claimed breach, a
ten (10) day period for the breaching party to notify the non-breaching party of
its position, and the procedures on resolution of claims, disputes and
indemnification). Notwithstanding anything to the contrary contained herein, in
the event that the Purchaser fails to cure any claimed breach or satisfy any
monetary obligation within ten (10) days after receipt of written notice of the
existence of a claimed duty to defend or liability arising out of the breach of
any obligation by Purchaser to defend and/or indemnify Seller, and/or
Practitioner of the claims, demands or offsets of the types described in
Sections 4.1, 4.2 or 9,3 hereof, then a default by Purchaser shall exist under
this Agreement.
9.11 Compliance with Bulk Sales Laws. Purchaser and Seller hereby waive
compliance by Purchaser and Seller with the bulk sales laws and any other
similar laws in an applicable jurisdiction in respect of the transactions
contemplated by this Agreement.
10. Confidentiality. Purchaser acknowledges and agrees that the files,
records and other information delivered to Purchaser relating to the Accounts
contain patient information that are subject to the confidentiality and
disclosure provisions of applicable ethical guidelines, federal and state
statutes and regulations adopted pursuant thereto. Purchaser agrees that it will
keep such information confidential and will utilize such information solely in
connection with its collection of the Accounts.
11. Jurisdiction and Place of Performance. The parties hereby declare that
this Agreement is made and is to be performed in the County of Los Angeles,
State of California. The parties hereby consent to the exclusive jurisdiction in
a court in Los Angeles, California for any controversy relating to or arising
out of this Agreement.
12. Remedies Not Exclusive. Except as otherwise expressly provided for
herein, no remedy under this Agreement is intended to be exclusive of any other
right or remedy that any party may have against any other party, and each and
every right and/or remedy shall be cumulative and in addition to any and every
other right and/or remedy given hereunder or those provided by law or in equity.
13. Miscellaneous.
13.1 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof, and supersedes
all prior agreements, whether oral or written, regarding the same. This
Agreement may not be changed, modified, amended or supplemented except by a
written executed by Seller and Purchaser.
13.2 Assignment. This Agreement may not be assigned by either party
without obtaining the express prior written consent of the other party, which
consent shall not be unreasonably withheld.
13.3 Survival. All covenants, representations, warranties and
indemnities contained in this Agreement (and any and each other agreement or
instrument delivered pursuant hereto) shall survive (a) the execution and
delivery of this Agreement, and (b) the consummation of the transactions
contemplated hereby.
<PAGE>
13.4 Waiver. No waiver of any of the provisions or conditions of this
Agreement or of any of the rights of a party hereto shall be effective or
binding unless such waiver shall be in writing and signed by the party claimed
to have given or consented thereto. No waiver of any condition or breach
hereunder shall be deemed to be a waiver of any other condition or breach.
13.5 Severability. Every section, paragraph, clause and sub-clause of
this Agreement shall as far as possible be deemed to be severable from every
other section, paragraph, clause and sub-clause. If any provision of this
Agreement shall be held to be invalid, illegal, or unenforceable for any reason
whatsoever, such holding shall not render any other provision of this Agreement
unenforceable or invalid.
13.6 Successors, Assigns, Etc. This Agreement shall be binding
upon and inure to the
benefit of the parties and their successors and permitted assigns.
13.7 Controlling Law. This Agreement shall be governed by and
construed in accordance
with the laws of the State of California without regard to the conflicts of
law provisions thereof.
13.8 Notice. All notices, requests, consents or other communications
required or permitted to be given under this Agreement shall be in writing and
will be deemed effective when delivered in person, or sent by certified or
registered mail, postage prepaid, by the United States Postal Service or by
reputable overnight courier service, or by facsimile to Purchaser at 950 Third
Avenue, 20th Floor, New York, New York 10022, Telefacsimile: (212) 421-2947; and
to Seller at 1516 Cotner Avenue, Los Angeles, California 90025-3303, attention
Howard C. Berger M.D., Facsimile Number (310) 478-5810 with a copy to Alan N.
Goldberg, Stern & Goldberg, 9150 Wilshire Boulevard, Suite 100, Beverly Hills,
California 90212, Facsimile Number (310) 278-5248.
13.9 Attorneys' Fees. The party Prevailing in any litigation or other
proceeding arising out of or in connection with this Agreement shall be
entitled, in addition to such other relief as may be granted, to reasonable
attorneys' fees.
13.10 Rights Cumulative. All rights, remedies and powers granted to
Purchaser hereunder are cumulative and shall be in addition to all other rights,
remedies and powers given hereunder, or in or by any other instrument, or
available in law or equity.
13.11 Public Announcements. Purchaser shall have the sole right,
subject to Seller's consent, which shall not be unreasonably withheld, to make
any public announcement of the transaction contemplated hereby in a form
satisfactory to Purchaser.
13.12 Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original and all of which,
when taken together, shall constitute one and the same
agreement or instrument,
PRIMEDEX CORPORATION BRISTOL A/R. INC.
By: ____________________________ By: _____________________________
Title: ___________________________ Title: ____________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>this schedule contains financial information extracted from the
consolidated balance sheet and the consolidated statement of operations and
is qualified in its entirety by reference to such financial statemenents.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> oct-31-1995
<PERIOD-END> oct-31-1995
<CASH> 11,937,045
<SECURITIES> 0
<RECEIVABLES> 18,958,995
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,854,528
<PP&E> 25,123,954
<DEPRECIATION> 0
<TOTAL-ASSETS> 128,459,638
<CURRENT-LIABILITIES> 29,861,108
<BONDS> 0
0
0
<COMMON> 400,625
<OTHER-SE> 37,642,852
<TOTAL-LIABILITY-AND-EQUITY> 128,459,638
<SALES> 69,942,395
<TOTAL-REVENUES> 69,942,395
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> (3,665,463)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,057,769
<INCOME-PRETAX> (17,541,282)
<INCOME-TAX> 0
<INCOME-CONTINUING> (17,541,282)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,541,282)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
