SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
____________________________________________________________
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) April 17, 1997
DIAGNOSTIC IMAGING SERVICES, INC.
[Exact Name of Registrant as specified in its Charter]
Delaware 33-37418 33-0443404
[state or other [Commission File No.] [IRS Employer
jurisdiction of Identification No.]
incorporation]
1516 Cotner Avenue, Los Angeles, CA 90025-3303
[Address of principal executive offices; ZIP Code]
Registrant's Telephone No., including Area Code: (310) 479-0399
Former address, if changed since last report
Page 1 of 2 Pages
<PAGE>Item 2. Acquisition or Disposition of Assets.
On April 17, 1997, Registrant concluded the previously reported sale of
its wholly-owned subsidiary, which owns and operates four magnetic resonance
imaging centers located on or adjacent to hospital sites in the Los Angeles
area, for Sixteen Million Dollars (including assumption of approximately Six
Million Dollars of debt). The four centers presently provide approximately
$6.5 Million Dollars of net annual revenue to the Registrant.
The sale will permit Registrant to reduce its outstanding debt while
permitting it to concentrate on its eight remaining free standing diagnostic
imaging centers, most of which are multi-modality and its one radiation
oncology center.
Item 7. Financial Statements and Exhibits
(c) Exhibits
10. Attached hereto is the Asset Purchase Agreement marked
Exhibit 10A.
Attached hereto is the Stock Purchase Agreement marked Exhibit
10B.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIAGNOSTIC IMAGING SERVICES, INC.
Dated: April 21, 1997 By: _____________________________________
Norman Hames, President
M:\EXECADMIN\JLL\DOCS\8K-0497<PAGE>
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), entered into this 21st day
of March, 1997, by and among DIAGNOSTIC HEALTH SERVICES, INC., a Delaware
corporation ("DHS"), DHS MANAGEMENT SERVICES, INC., a Texas corporation and a
wholly-owned subsidiary of DHS (the "Buyer"), and DIAGNOSTIC IMAGING SERVICES,
INC., a Delaware corporation (the "Stockholder");
W I T N E S S E T H:
WHEREAS, Diagnostic Imaging Services, Inc., a California corporation (the
"Company"), itself and through its subsidiaries, is engaged, among other
things, in the ownership and operation of four (4) magnetic resonance imaging
(MRI) centers consisting of the Chino Valley MRI Center, the San Gabriel
Valley MRI Center, the Tarzana Regional Medical Center and the Santa Monica
Imaging Center (collectively referred to as the "Imaging Centers" and/or the
"Business"); and
WHEREAS, the Stockholder is the record and beneficial owner of all of the
issued and outstanding capital stock of the Company (the "Stock"); and
WHEREAS, the Buyer desires to purchase from the Stockholder and the
Stockholder desires to sell to the Buyer, all upon and subject to the terms
and conditions of this Agreement, all (and not less than all) of the Stock,
and the Business as a going concern;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and
agree as follows:
1. ACQUISITION OF THE STOCK.
1.1 Purchase and Sale. Subject to the terms and conditions
of this Agreement, on the Closing Date (as such term is hereinafter defined),
the Buyer shall purchase and acquire from the Stockholder, and the Stockholder
shall sell and transfer to the Buyer, all (and not less than all) of the
Stock, against payment of the Consideration set forth in Section 2.1 below.
In furtherance thereof, the Stockholder shall, on the Closing Date, deliver to
the Buyer the certificates representing all of the Stock, duly endorsed for
transfer or accompanied by stock powers executed in blank for transfer,
against payment of the Consideration pursuant to Section 2.1 below.
2. PURCHASE PRICE.
2.1 Closing Date Payment. On the Closing Date, against
delivery of the certificates representing the Stock (endorsed or with executed
stock powers as hereinabove provided), the Buyer shall pay to the Stockholder,
by wire transfer of immediately available funds to the Stockholder's
designated account or, at the Stockholder's option, by certified or bank
cashier's check, an amount equal to the sum of (a) the difference of (i)
$13,500,000, minus (ii) an amount equal to the aggregate outstanding balance
(principal, accrued interest and any other charges) as of and through the
Closing Date of all capital lease obligations and other liabilities of the
Companies (as defined in Section 4.5(b) below) determined in accordance with
generally accepted accounting principles (collectively, the "Debt"), plus (b)
simple interest on the amount calculated under clause (a) of this Section 2.1
at the rate of 12% per annum from March 1, 1997 through and including the
Closing Date. In furtherance hereof, the parties will cooperate to prepare a
schedule of the Debt as of the Closing Date, so as to enable the calculation
and payment of the amount payable pursuant to this Section 2.1.
2.2 Post-Closing Payments.
(a) On each of the first, second and third
anniversaries of the Closing Date, as additional consideration for the Stock,
the Buyer shall pay to the Stockholder, or shall cause DHS to issue to the
Stockholder (as the case may be), the sum of $500,000 payable either in the
form of immediately available funds or, at the Stockholder's option (which
must be exercised, if at all, by written notice given to DHS not later than
five (5) days prior to the subject anniversary of the Closing Date), in the
form of common stock of DHS ("Common Stock") valued, for purposes hereof, at
the mean average of the reported closing price of such Common Stock as
reported on the NASDAQ National Market for the five (5) consecutive trading
days ending on the third day immediately prior to the Closing Date (the
"Agreed Value"). On the Closing Date, the parties shall execute and deliver a
valuation letter in respect of the Common Stock, setting forth the calculation
of the Agreed Value, in substantially the form of Exhibit A annexed hereto
(the "Valuation Letter"). Unless, in any instance, the Stockholder
affirmatively elects to receive payment under this Section 2.2(a) in the form
of Common Stock by means of timely notice of such election as provided herein,
the Buyer shall make the required payment hereunder on the subject anniversary
of the Closing Date in the form of immediately available funds. In the event
that the Stockholder elects, in any instance, to be paid in the form of Common
Stock, then DHS shall cause the certificate representing such Common Stock to
be delivered to the Stockholder within five (5) business days following the
subject anniversary of the Closing Date.
(b) In the event that, at any time and from to time
from and after the Closing Date, there shall occur any stock split,
recapitalization or other subdivision of the outstanding Common Stock, or the
payment of a stock dividend in respect of the outstanding Common Stock, or any
combination, consolidation, reverse stock split or other such event relating
to the outstanding Common Stock, then the Agreed Value as in effect
immediately prior to such event shall be proportionately adjusted (on an
arithmetic basis) to correspond to the increase or decrease in the number of
outstanding shares of Common Stock arising by reason of such event. Further,
in the event of any merger, consolidation or other such transaction in which
DHS (or any successor thereto) is not the surviving corporation, the
Stockholder shall thereafter be entitled to receive, in the event of any
election to be paid under this Section 2.2 other than in immediately available
funds, the amount of securities or other property which the Stockholder would
have been entitled to receive upon such merger, consolidation or other such
transaction had the Stockholder been paid in Common Stock hereunder
immediately prior to the effective date of such merger, consolidation or other
transaction.
2.3 Total Consideration. The consideration payable
pursuant to Sections 2.1 and 2.2 above is hereinafter collectively referred to
as the "Consideration".
3. BOOKS AND RECORDS.
3.1 Delivery of Records. On the Closing Date, in addition
to the delivery and transfer of the Stock to the Buyer, the Stockholder shall
deliver, and shall cause the Company and its subsidiaries to deliver, to the
Buyer all of the stock books, records and minute books of the Company and its
subsidiaries, all financial and accounting books and records of the Company
and its subsidiaries, and all referral, client, customer and sales records of
the Company and its subsidiaries, all after giving effect to the transactions
contemplated by Section 7.3 below.
4. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER.
In connection with the sale of the Stock to the Buyer, the
Stockholder hereby represents and warrants to the Buyer as follows:
4.1 Title to the Stock. The Stockholder is the valid and lawful
record and beneficial owner of all of the Stock, all of which has been duly
authorized and validly issued and is fully paid and non-assessable, and is
free and clear of all pledges, liens, claims, charges, options, calls,
encumbrances, restrictions and assessments whatsoever (except any restrictions
which may be created by operation of state or federal securities laws). On
the Closing Date, the Buyer shall receive from the Stockholder good, valid and
marketable title to all of the Stock, free and clear of all pledges, liens,
claims, charges, options, calls, encumbrances, restrictions and assessments
whatsoever (except any restrictions which may be created by operation of state
or federal securities laws).
4.2 Valid and Binding Agreement; No Breach.
(a) The Stockholder has full legal right, power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement and, when executed and
delivered by the Stockholder, the Non-Competition Agreement (as such term is
hereinafter defined), constitute and will constitute the legal, valid and
binding obligations of the Stockholder, enforceable against the Stockholder in
accordance with their respective terms, except to the extent that such
enforceability may be limited by bankruptcy, insolvency, reorganization and
other laws affecting creditors' rights generally, and except that the remedy
of specific performance or similar equitable relief is available only at the
discretion of the court before which enforcement is sought.
(b) Neither the execution and delivery of this Agreement or
the Non-Competition Agreement by the Stockholder, nor compliance with the
terms and provisions of this Agreement or the Non-Competition Agreement on the
part of the Stockholder, will: (i) violate any statute or regulation of any
governmental authority, domestic or foreign, affecting the Company, any of its
subsidiaries or the Stockholder; (ii) require the issuance of any
authorization, license, consent or approval of any federal or state
governmental agency; or (iii) conflict with or result in a breach of any of
the terms, conditions or provisions of the Articles of Incorporation or
By-Laws of the Company, any of its subsidiaries or the Stockholder, or any
judgment, order, injunction, decree, note, indenture, loan agreement, lease or
other agreement or instrument to which the Company, any of its subsidiaries or
the Stockholder is a party, or by which the Company, any of its subsidiaries
or the Stockholder is bound, or constitute a default thereunder.
4.3 Organization, Good Standing and Qualification. The
Stockholder is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with full corporate power
and authority to own its assets and conduct its business, and to sell and
transfer the Stock to the Buyer hereunder. Each of the Company and the
Corporate Subsidiary (as such term is hereinafter defined) is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California, with full corporate power and authority to own its assets
and conduct its business as owned and conducted on the date hereof. Neither
the Company nor the Corporate Subsidiary is required to be qualified as a
foreign corporation under the laws of any jurisdiction. True and complete
copies of the Articles of Incorporation and By-Laws of the Company and the
Corporate Subsidiary (including all amendments thereto), and a correct and
complete list of the officers and directors of the Company and the Corporate
Subsidiary, are annexed hereto as Schedule 4.3.
4.4 Capital Structure; Equity Ownership.
(a) The authorized capital stock of the Company is as set
forth in its Articles of Incorporation as included in Schedule 4.3, and the
Stock (consisting of 1,000 shares of common stock) constitutes and represents
all of the outstanding capital stock of the Company.
(b) The authorized capital stock of the Corporate
Subsidiary is as set forth in its Articles of Incorporation as included in
Schedule 4.3, and the outstanding capital stock of the Corporate Subsidiary
consists of 1,000 shares of common stock, all of which are owned beneficially
and of record by the Company and all of which has been duly authorized and
validly issued and is fully paid and non-assessable, and is free and clear of
all pledges, liens, claims, charges, options, calls, encumbrances,
restrictions and assessments whatsoever (except any restrictions which may be
created by operation of state or federal securities laws).
(c) There are no outstanding subscriptions, options,
rights, warrants, convertible securities or other agreements or calls, demands
or commitments obligating the Company or the Corporate Subsidiary to issue,
transfer or purchase any shares of its capital stock, or obligating the
Stockholder to transfer any shares of the Stock, or obligating the Company to
transfer any shares of capital stock of the Corporate Subsidiary. No shares
are held in the Company's or the Corporate Subsidiary's treasury, and no
shares of capital stock of the Company or the Corporate Subsidiary are
reserved for issuance pursuant to stock options, warrants, agreements or other
rights to purchase capital stock.
4.5 Subsidiaries and Investments.
(a) Except for (i) the Company's ownership of all of the
issued and outstanding capital stock of Diagnostic Imaging Services, Inc. I, a
California corporation (the "Corporate Subsidiary"), and (ii) the Company's
and the Corporate Subsidiary's interest in the general and limited partnership
interests in the Santa Monica Imaging Center (including an option in favor of
the Company to acquire the remaining equity interests not presently owned by
the Company or the Corporate Subsidiary, which option shall remain with the
Company after giving effect to the transactions contemplated by Section 7.3
below), and subject to the transactions contemplated by Section 7.3 below,
neither the Company nor the Corporate Subsidiary owns, directly or indirectly,
any stock or other equity securities of any corporation or entity, or has any
direct or indirect equity or ownership interest in any person, firm,
partnership, corporation, venture or business other than the business
conducted by such entity.
(b) The limited partnership which owns and operates the
Santa Monica Imaging Center is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of California, with
full power and authority to own its assets and conduct its business as
presently conducted. True and complete copies of all limited partnership
documents and option agreements relating to the Santa Monica Imaging Center,
and a list of all equity owners therein (including the percentage ownership of
each such person), are annexed hereto as Schedule 4.5. With respect to the
further representations and warranties in this Section 4 (other than with
respect to the financial statements provided pursuant to Section 4.6(a) below,
as to which the disclosure and presentation regarding the Company's and the
Corporate Subsidiary's interest in the Santa Monica Imaging Center is made in
accordance with generally accepted accounting principles), and with respect to
Sections 6, 7, 8, 11, 12, 13.2, 13.3 and 13.4 below, except as the context may
otherwise require, all references to the "Company" or "Companies" shall
include the Corporate Subsidiary and shall also be deemed to include the Santa
Monica Imaging Center and the Company's and the Corporate Subsidiary's
interest therein.
4.6 Financial Information.
(a) Annexed hereto as Schedule 4.6(a) are: (i) the
audited financial statements of the Chino Valley MRI Center (f/k/a Inland
Community MRI Center), the San Gabriel Valley MRI Center and the Tarzana
Regional Medical Center (collectively, the "Three Centers") as of December 31,
1993 and for the fiscal year then ended, including balance sheets, statements
of operations, statements of partners' equity, and statements of cash flow, as
reported on by Coopers & Lybrand (the "Three Centers Audited Financial
Statements"), (ii) the unaudited statements of operations and general ledgers
of the Three Centers as of December 31, 1994, December 31, 1995 and December
31, 1996, and for each of the fiscal years then ended, as prepared by
management of the Companies (the "Three Centers Unaudited Financial
Statements"), and (iii) the unaudited financial statements of the Santa Monica
Imaging Center as of December 31, 1995 and for the ten months then ended, and
as of December 31, 1996 and for the fiscal year then ended, including balance
sheets and statements of operations (the "Santa Monica Unaudited Financial
Statements"). The Three Centers Audited Financial Statements, the Three
Centers Unaudited Financial Statements and the Santa Monica Unaudited
Financial Statements are herein collectively referred to as the "Imaging
Centers Financial Statements".
(b) The Imaging Centers Financial Statements are true,
complete and accurate in all material respects, and fairly present the
financial condition and results of operations of each of the Imaging Centers
as of the dates thereof and for the periods covered thereby, in accordance
with generally accepted accounting principles consistently applied (subject,
in the case of unaudited financial statements, to the absence of full footnote
disclosures, and to normal audit adjustments which will not, individually or
in the aggregate, be material). The Imaging Centers Financial Statements were
prepared from the books and records of the Imaging Centers, which accurately
and consistently reflect all transactions to which the Imaging Centers were
and are a party. The foregoing representation and warranty is qualified by
noting that the Santa Monica Unaudited Financial Statements for all periods
through the second quarter of 1996 include the operations of the Santa Monica
Imaging Center while such facility operated all modalities including MRI, CT,
mammography, ultrasound and x-ray, and that, since the second quarter of 1996,
the Santa Monica Imaging Center has operated only MRI.
(c) Except as expressly set forth in the Imaging
Centers Financial Statements as of December 31, 1996 (collectively, the "1996
Financial Statements") and/or in the Schedules to this Agreement, or arising
in the normal course of the Business since December 31, 1996, there are, as at
the date hereof, no liabilities or obligations (including, without limitation,
any tax liabilities or accruals) of the Business, including any contingent
liabilities, that are, in the aggregate, material.
(d) Schedule 4.6(d) annexed hereto contains: (i) an
aging schedule of the accounts receivable of the Three Centers as of December
31, 1996 and an aging schedule of the accounts receivable of the Santa Monica
Imaging Center as of February 28, 1997, in summary form; (ii) an accrued
payables listing (unaged) as of December 31, 1996 for the Three Centers and
the Santa Monica Imaging Center, and an accounts payable distribution report
for the six months ending February 28, 1997 for the Three Centers and the
Santa Monica Imaging Center; (iii) a list of the outstanding principal balance
of and approximate accrued interest on all indebtedness (other than accounts
payable), loans and/or notes payable of the Companies as of December 31, 1996;
(iv) a list of any leasehold or other contractual obligations of the Companies
to the Stockholder and/or any of its Affiliates on the date hereof; (v) a list
of all obligations of the Business guaranteed by the Stockholder and/or any of
its Affiliates on the date hereof, and the terms of such guarantees; (vi) a
list reflecting the nature and amount of all obligations owed to the Companies
on the date hereof by the Stockholder and/or any of its Affiliates; and (vii)
a list reflecting the nature and amount of all obligations owed by the
Companies on the date hereof to the Stockholder and/or any of its Affiliates.
Wherever used in this Agreement, the term "Affiliate" means, as respects any
person or entity, any other person or entity that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with the first person or entity.
4.7 No Material Changes. Except as and
to the extent described in Schedule 4.7 annexed hereto (which Schedule may
make reference to any other Schedule hereto) and/or in the 1996 Financial
Statements, since December 31, 1996, the Business has been operated only in
the ordinary course, and there has not been:
(a) any material change in the financial condition,
operations or business of the Business from that shown in the 1996 Financial
Statements and for the period then ended, any material acquisition or
disposition of assets in the Business, or any other material transaction or
commitment effected or entered into outside of the normal course of the
Business;
(b) any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, financial condition or prospects of the Business taken as
a whole;
(c) any declaration, payment or setting aside of any
dividend or other distribution (other than in cash) of any assets or property
of any Company to the Stockholder or any of its Affiliates;
(d) any material increase in the rate of salary or
compensation paid or payable to any employee, consultant or other person
performing services in the Business; or
(e) any other event or condition arising from or out of the
operation of the Companies or the Stockholder which has or will materially and
adversely affect the business, financial condition, results of operations or
prospects of the Business.
4.8 Tax Returns and Tax Audits.
(a) Except as and to the extent disclosed in Schedule
4.8(a) annexed hereto: (i) on the date hereof and on the Closing Date, all
federal, state and local tax returns and tax reports required to be filed by
any of the Companies on or before the date of this Agreement or the Closing
Date, as the case may be, have been and will have been timely filed with the
appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed; (ii) all federal, state and local
income, franchise, sales, use, property, excise, unemployment, payroll
withholding and other taxes (including interest and penalties and including
estimated tax installments where required to be filed and paid) due from or
with respect to any of the Companies as of the date hereof and as of the
Closing Date have been and will have been fully paid, and appropriate accruals
shall have been made on the Companies' books for taxes not yet due and
payable; (iii) as of the Closing Date, all taxes and other assessments and
levies which any of the Companies is required by law to withhold or to collect
on or before the Closing Date will have been duly withheld and collected, and
will have been paid over to the proper governmental authorities to the extent
due and payable on or before the Closing Date; and (iv) there are no
outstanding or pending claims, deficiencies or assessments for taxes, interest
or penalties with respect to any taxable period of any of the Companies.
(b) Except as set forth in Schedule 4.8(b) annexed hereto,
there are no audits pending with respect to any federal, state or local tax
returns of any of the Companies, and no waivers of statutes of limitations
have been given or requested with respect to any tax years or tax filings of
any of the Companies.
4.9 Personal Property; Liens. The Companies have and own good
and indefeasible title to all of the personal property utilized in the
Business (subject to any required transfer of assets pursuant to Section 7.3
below), free and clear of all liens, pledges, claims, security interests and
encumbrances whatsoever, except for: (a) rights of lessors in respect of any
fixed assets which are leased by any of the Companies; (b) liens which solely
secure the deferred purchase price of machinery, equipment, vehicles and/or
other fixed assets, as indicated on Schedule 4.9; (c) liens for current taxes
of the Companies which are not yet due and payable or which are being
contested in good faith by appropriate proceedings and for which proper
reserves have been established by the Companies; and (d) liens, pledges,
claims, security interests, encumbrances, conditions or restrictions which are
not, individually or in the aggregate, material in character or amount and do
not interfere with the use made or presently proposed to be made of any such
property (collectively, "Permitted Liens"). All material items of machinery,
equipment, vehicles and other fixed assets owned or leased by the Companies
and utilized in the Business are listed in Schedule 4.9 annexed hereto, and,
except as and to the extent disclosed in Schedule 4.9, all of such fixed
assets are in good operating condition and repair (reasonable wear and tear
excepted) and are adequate for their use in the Business as presently
conducted, and are sufficient for the continued conduct of the Business.
4.10 Real Property.
(a) None of the Companies owns or has any interest of any
kind (whether ownership, lease or otherwise) in any real property except (i)
the Companies' ownership interests in certain of the land and buildings on
which or in which the Business is presently conducted as set forth and
described in Schedule 4.10 annexed hereto, and (ii) the Companies' leasehold
interests under leases for business premises occupied by the Companies, true
and complete copies of which are included within Schedule 4.10 (the "Leases").
(b) The Companies (and, to the best of the Stockholder's
knowledge, the landlords thereunder) are presently in compliance with all of
their obligations under the Leases, and the premises leased thereunder are in
good condition (reasonable wear and tear excepted) and are adequate for the
operation of the Business as presently conducted therefrom.
(c) None of the Leases will be voided, revoked or
terminated, or will be voidable, revocable or terminable, upon and by reason
of the change of ownership of the Companies pursuant to this Agreement.
4.11 Inventories. All supplies and other inventories shown on
the balance sheets included in the 1996 Financial Statements, and all
inventories thereafter acquired in the Business, have been and are valued at
cost, and consisted or consist of items which are of a quality and quantity
which are usable in the ordinary course of the Business.
4.12 Insurance Policies. Schedule 4.12 annexed hereto contains
a true and correct schedule of all insurance coverages held by the Companies
concerning the Business and the Companies' assets and properties (including
but not limited to professional liability insurance and a statement, as to all
professional liability insurance, of whether such insurance is on an
"occurrence" or a "claims made" basis). Each Company has paid all premiums
due and payable to the date hereof in respect of such insurance coverages, and
all of such coverages are presently in full force and effect. The Stockholder
is not aware of any grounds upon which any insurer might properly cancel or
refuse to renew any of the Companies' existing insurance coverages. Nothing
herein contained shall be deemed to constitute a representation, warranty or
assurance as to the transference with the Companies of any of the insurance
coverages listed on Schedule 4.12, except as and to the extent provided in
Section 13.4 below.
4.13 Permits and Licenses. Each Company possesses all required
permits, licenses and/or franchises, from whatever governmental authorities or
agencies (domestic and/or foreign) requiring the same and having jurisdiction
over such Company, necessary in order to operate the Business in the manner
presently conducted, all of which permits, licenses and/or franchises are
valid, current and in full force and effect, except where the failure to have
or maintain any such permit, license and/or franchise would not have a
material adverse effect on the subject Company or the Business. Each Company
has heretofore conducted the Business in compliance with the requirements of
such permits, licenses and/or franchises, and none of the Companies has
received written notice of any default or violation in respect of or under any
of such permits, licenses and/or franchises except where such default would
not have a material adverse effect on the subject Company or the Business.
None of such permits, franchises or licenses will be voided, revoked or
terminated, or be voidable, revocable or terminable, upon and by reason of the
change of ownership of the Companies pursuant to this Agreement.
4.14 Contracts and Commitments.
(a) Schedule 4.14 annexed hereto lists all material
contracts, leases, commitments, indentures and other agreements relating to
the Business to which any Company is a party (collectively, "Material
Contracts"), except that Schedule 4.14 need not list any such agreement that
is listed on any other Schedule hereto, or was entered into in the ordinary
course of the Business and that, in any case: (i) is for the purchase of
supplies or other inventory items in the ordinary course of the Business; (ii)
is related to the purchase or lease of any capital asset involving aggregate
payments of less than $25,000 per annum; or (iii) may be terminated by the
subject Company without penalty, premium or liability on not more than thirty
(30) days' prior written notice; provided, however, that Schedule 4.14 shall
list any agreement or arrangement (written or verbal) between any Company (on
the one hand) and any physicians or persons known to any Company or the
Stockholder to be Affiliates of any physicians (on the other hand), regardless
of the amount of payments called for, required or made thereunder.
(b) To the best of the Stockholder's knowledge, except as
set forth in Schedule 4.14: (i) all Material Contracts are in full force and
effect; (ii) the subject Company is in compliance in all material respects
with all of its obligations under the Material Contracts, and has not received
any written notice that any party to any Material Contract is in material
breach or default of such Material Contract or is now subject to any condition
or event which has occurred and which, after notice or lapse of time or both,
would constitute a material default by any party under any such contract,
lease, agreement or commitment; and (iii) none of the Material Contracts will
be voided, revoked or terminated, or voidable, revocable or terminable, upon
and by reason of the change of ownership of the Companies pursuant to this
Agreement.
(c) To the best of the Stockholder's knowledge, no
outstanding purchase commitment relating to the Business is materially in
excess of the normal, ordinary and usual requirements of the Business.
(d) Except as set forth in Schedule 4.14, none of the
Companies has any outstanding contracts with or commitments to officers,
employees, physicians, technicians, agents, consultants or advisors relating
to the Business that are not cancelable by such Company without penalty,
premium or liability (for severance or otherwise) on less than thirty (30)
days' prior written notice.
4.15 Customers and Suppliers. None of the Companies or the
Stockholder (a) has received any written notice of any existing, announced or
anticipated changes in the policies of any material clients, customers,
referral sources or suppliers of any of the Companies which will materially
adversely affect the Business as presently conducted, or (b) has actual
knowledge of any bankruptcy, insolvency or other such proceeding or condition
relating to any material clients or customers of the Business.
4.16 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 4.16 annexed hereto,
none of the Companies is a party to or has any commitment or obligation in
respect of (i) any collective bargaining agreement or other labor agreement,
or (ii) any agreement with respect to the employment or compensation of any
non-hourly and/or non-union employee(s) of the Business. Schedule 4.16 sets
forth the amount of all compensation or remuneration (including any
discretionary bonuses) paid by the Companies during the 1996 calendar year to
employees or consultants of the Business who then received or presently
receive aggregate compensation or remuneration at an annual rate in excess of
$35,000.
(b) No union is now certified or, to the best of the
Stockholder's knowledge, claims to be certified as a collective bargaining
agent to represent any employees of the Business, and there are no labor
disputes existing or, to the best of the Stockholder's knowledge, threatened,
involving strikes, slowdowns, work stoppages, job actions or lockouts of any
employees of the Business.
(c) There are no unfair labor practice charges or petitions
for election pending or being litigated before the National Labor Relations
Board or any other federal or state labor commission relating to any employees
of the Business. None of the Companies or the Stockholder has received any
written notice of any actual or alleged violation by any Company of any law,
regulation, order or contract term affecting the collective bargaining rights
of employees, equal opportunity in employment, or employee health, safety,
welfare, or wages and hours.
(d) With respect to any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) to which any Company or any of its Affiliates has at any
time been required to make contributions, none of the Companies nor any of its
Affiliates has, at any time on or after April 29, 1980, suffered or caused any
"complete withdrawal" or "partial withdrawal" (as such terms are respectively
defined in Sections 4203 and 4205 of ERISA) therefrom on its part.
(e) Except as disclosed in Schedule 4.16, none of the
Companies maintains, or has any liabilities or obligations of any kind with
respect to, any bonus, deferred compensation, pension, profit sharing,
retirement or other such benefit plan, or any potential or contingent
liability in respect of any actions or transactions relating to any such plan
other than to make contributions thereto if, as and when due in respect of
periods subsequent to the date hereof. Without limitation of the foregoing,
(i) each Company has made all required contributions to or in respect of any
and all such benefit plans, (ii) no "accumulated funding deficiency" (as
defined in Section 412 of the Internal Revenue Code of 1986, as amended (the
"Code")) has been incurred in respect of any of such benefit plans, and the
present value of all vested accrued benefits thereunder does not, on the date
hereof, exceed the assets of any such plan allocable to the vested accrued
benefits thereunder, (iii) there has been no "prohibited transaction" (as
defined in Section 4975 of the Code) with respect to any such plan, and no
transaction which could give rise to any tax or penalty under Section 4975 of
the Code or Section 502 of ERISA, and (iv) there has been no "reportable
event" (within the meaning of Section 4043(b) of ERISA) with respect to any
such plan. All of such plans which constitute, are intended to constitute, or
have been treated by any of the Companies as "employee pension benefit plans"
or other plans within Section 3 of ERISA have been determined by the Internal
Revenue Service to be "qualified" under Section 401(a) of the Code, and have
been administered and are in compliance with ERISA and the Code; and none of
the Companies or the Stockholder has any knowledge of any state of facts,
conditions or occurrences such as would impair the "qualified" status of any
of such plans.
(f) Except for the group insurance programs listed in
Schedule 4.16, none of the Companies maintains any medical, health, life or
other employee benefit insurance programs or any welfare plans (within the
meaning of Section 3(1) of ERISA) for the benefit of any current or former
employees, and, except as required by statutory law, none of the Companies has
any liability, fixed or contingent, for health or medical benefits to any
former employee.
4.17 Compliance with Laws.
(a) Each of the Companies is in compliance in all material
respects with all laws, statutes, regulations, rules and ordinances applicable
to the conduct of its business as presently constituted; and none of the
Companies or the Stockholder has received written notice of any default or
violation under or in respect of any of the foregoing. None of the Companies
is presently in material violation of any requirements of any its insurance
carriers.
(b) Without limitation of Section 4.17(a) above, none of
the Companies has, at any time during the three (3) year period prior to the
date hereof, (i) handled, stored, generated, processed, released or disposed
of any hazardous substances in violation of any federal, state or local
environmental laws or regulations, or (ii) otherwise committed any material
violation of any federal, state or local environmental laws or regulations
(including, without limitation, the provisions of the Environmental Protection
Act, the Comprehensive Environmental Responsibility and Cleanup Act, and other
applicable environmental statutes and regulations) or any material violation
of the Occupational Safety and Health Act.
(c) None of the Companies or, to the best of Stockholder's
knowledge, any of the Companies' respective directors, officers or employees
has received any written notice of default or violation, nor, to the best of
the Stockholder's knowledge, is any of the Companies or any of their
respective directors, officers or employees in default or violation, with
respect to any judgment, order, writ, injunction, decree, demand or assessment
issued by any court or any federal, state, local, municipal or other
governmental agency, board, commission, bureau, instrumentality or department,
domestic or foreign, relating to any aspect of such Company's business,
affairs, properties or assets. None of the Companies or, to the best of the
Stockholder's knowledge, any of the Companies or any of their respective
directors, officers or employees, has received written notice of, been charged
with, or is under investigation with respect to, any violation of any
provision of any federal, state, local, municipal or other law or
administrative rule or regulation, domestic or foreign, relating to any aspect
of any Company's business, affairs, properties or assets, which violation
would have a material adverse effect on any Company or the Business.
(d) Schedule 4.17 sets forth the date(s) of the last known
audits or inspections (if any) of any of the Companies conducted by or on
behalf of the Environmental Protection Agency, the Occupational Safety and
Health Administration, the federal Department of Health and Human Services
and/or any agency thereof (including, without limitation, the Healthcare
Financing Administration) or intermediary acting on its behalf, any
corresponding or comparable state or local governmental department, agency or
authority, and any other governmental and/or quasi-governmental agency
(federal, state and/or local).
4.18 Litigation. Except as disclosed in Schedule 4.18 annexed
hereto, there is no suit, action, arbitration, or legal, administrative or
other proceeding, or governmental investigation (including, without
limitation, any claim alleging the invalidity, infringement or interference of
any patent, patent application, or rights thereunder owned or licensed by any
of the Companies) pending, or to the best knowledge of the Stockholder,
threatened, by or against any of the Companies. The Stockholder is not aware
of any state of facts, events, conditions or occurrences which might properly
constitute grounds for or the basis of any suit, action, arbitration,
proceeding or investigation against or with respect to any of the Companies
which, if adversely determined, would have a material adverse effect on any of
the Companies or on the Business.
4.19 Patents, Licenses and Trademarks. Schedule 4.19 annexed
hereto correctly sets forth a list and brief description of the nature and
ownership of: (a) all patents, patent applications, copyright registrations
and applications, registered trade names, and trademark registrations and
applications, both domestic and foreign, which are presently owned, filed or
held by any of the Companies, any of their Affiliates, and/or any of their
respective directors, officers or employees and which in any way relate to or
are used in the Business; (b) all licenses, both domestic and foreign, which
are owned or controlled by any of the Companies, any of their Affiliates,
and/or any of their respective directors, officers or employees and which in
any way relate to or are used in the Business; and (c) all franchises,
licenses and/or similar arrangements granted to any Company by others and/or
to others by any Company. None of the patents, patent applications, copyright
registrations or applications, registered trade names, trademark registrations
or applications, franchises, licenses or other arrangements set forth or
required to be set forth in Schedule 4.19 is subject to any pending challenge
known to the Stockholder. Each of the Companies has the valid right to
utilize all trade names and other intellectual property utilized in the
Business, and none of the Companies has received any written notice of any
claimed infringement of any such intellectual property with the right or
property of any other person.
4.20 Transactions with Affiliates. Except for the provision by
Primedex Health Systems, Inc. ("Primedex") to the Companies of services of the
type contemplated by the Facilities Services Agreement (as such term is
hereinafter defined), no material asset utilized in the Business is owned by,
leased from or leased to the Stockholder or any of its Affiliates (other than
the Companies).
4.21 Sensitive Payments. None of the Companies has any reason
to believe that any of them has (a) made any contributions, payments or gifts
to or for the private use of any governmental official, employee or agent
where either the payment or the purpose of such contribution, payment or gift
is illegal under the laws of the United States or the jurisdiction in which
made, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false or artificial entries on its or their books, (c)
given or received any payments or other forms of remuneration in connection
with the referral of patients which would violate the Medicare/Medicaid
Anti-Kickback Law, Section 1128(b) of the Social Security Act, 42 U.S.C.
§ 1320a-7b(b), or any analogous state statute, or (d) made any payments
to any person with the intention that any part of such payment was to be used
for any purpose other than that described in the documents supporting the
payment.
4.22 Going Concern. The Stockholder does not have any knowledge
of any fact, event, circumstance or condition (including, without limitation,
any announced or anticipated changes in the policies of any material client or
customer) that would materially impair the ability of the Companies, from and
after the Closing, to continue the Business in substantially the manner
heretofore conducted, other than general, industry-wide conditions.
4.23 Restricted Securities. The Stockholder is an "accredited
investor" within the meaning thereof under Rule 506 promulgated under the
Securities Act of 1933, as amended. The Stockholder acknowledges that any and
all shares of Common Stock or other securities which may be issued pursuant to
Section 2.2 above will constitute "restricted securities" within the meaning
of federal and state securities laws, which the Stockholder will acquire for
its own account for investment (and not with a view to the resale or
distribution thereof in violation of any applicable securities laws), and
which the Stockholder may be required to hold indefinitely or until an
exemption from registration requirements is available for the resale or
disposition thereof.
4.24 Hart-Scott-Rodino. Primedex is the "ultimate parent
entity" of the Stockholder and the Companies within the meaning of such term
as set forth in the regulations promulgated under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the "net
sales" of Primedex, within the meaning of the regulations under the HSR Act,
were less than $100,000,000 in the fiscal year of Primedex ended October 31,
1996.
4.25 Disclosure and Duty of Inquiry. Neither DHS nor the Buyer
is or will be required to undertake any independent investigation to determine
the truth, accuracy and completeness of the representations and warranties
made by the Stockholder in this Agreement.
5. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND DHS.
In connection with the purchase of the Stock from the Stockholder
hereunder, the Buyer and DHS hereby jointly and severally represent and
warrant to the Stockholder as follows:
5.1 Organization, Good Standing and Qualification. The Buyer is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Texas, and DHS is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, each
with all necessary power and authority to execute and deliver this Agreement,
to perform its obligations hereunder, and to consummate the transactions
contemplated hereby.
5.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer and DHS have been duly and validly authorized
by the Board of Directors and sole stockholder of the Buyer, and by the Board
of Directors of DHS; and the Buyer and DHS have the full legal right, power
and authority to execute and deliver this Agreement, to perform their
respective obligations hereunder, and to consummate the transactions
contemplated hereby. No further corporate authorization is necessary on the
part of the Buyer or DHS to consummate the transactions contemplated hereby.
5.3 Valid and Binding Agreement. This Agreement and, when
executed and delivered, the Non-Competition Agreement (as such term is
hereinafter defined), constitutes and will constitute the legal, valid and
binding obligations of the Buyer and DHS (to the extent a party thereto),
enforceable against the Buyer and DHS in accordance with their respective
terms, except, in each case, to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and
except that the remedy of specific performance or similar equitable relief is
available only at the discretion of the court before which enforcement is
sought.
5.4 No Breach of Statute or Contract. Neither the execution and
delivery of this Agreement or the Non-Competition Agreement by the Buyer or
DHS nor compliance with the terms and provisions of this Agreement or the
Non-Competition Agreement on the part of the Buyer or DHS, will: (a) violate
any statute or regulation of any governmental authority, domestic or foreign,
affecting the Buyer or DHS; (b) require the issuance to the Buyer or DHS of
any authorization, license, consent or approval of any federal or state
governmental agency; or (c) except for the required consent of DHS' lender
contemplated by Section 8.12 below, conflict with or result in a breach of any
of the terms, conditions or provisions of any judgment, order, injunction,
decree, note, indenture, loan agreement or other agreement or instrument to
which the Buyer or DHS is a party, or by which the Buyer or DHS is bound, or
constitute a default thereunder.
5.5 Investment. The Buyer will be purchasing the Stock for its
own account for investment, and not with a view to the resale or distribution
thereof in violation of any applicable securities laws.
5.6 DHS Shares. If, as and when issued and delivered pursuant
to Section 2.2 above, all shares of Common Stock so issued shall have been
duly authorized and validly issued, and shall be fully paid and
non-assessable.
5.7 Disclosure and Duty of Inquiry. The Stockholder is not and
will not be required to undertake any independent investigation to determine
the truth, accuracy and completeness of the representations and warranties
made by the Buyer and DHS in this Agreement.
6. THE STOCKHOLDER'S OBLIGATIONS BEFORE THE CLOSING DATE.
The Stockholder covenants and agrees that, from the date hereof
until the Closing Date:
6.1 Access to Information.
(a) In addition to the rights of DHS and the Buyer under
Section 6.6 below, the Stockholder shall permit DHS, the Buyer and their
counsel, accountants and other representatives, and DHS' lenders and their
representatives, upon reasonable advance notice to the Companies, during
normal business hours and without undue disruption of the business of the
Companies, to have reasonable access to all properties, books, accounts,
records, contracts, documents and information relating to the Business and, to
the extent reasonably required by the Buyer for its due diligence, the
Companies. DHS, the Buyer and their representatives shall also be permitted
to freely consult with the Companies' counsel and accountants concerning the
Business.
(b) The Stockholder will make available to the Buyer and
its accountants, and DHS' lenders and their representatives, all financial
records relating to the Companies and the Business, and shall cause the
Companies' accountants to cooperate with the Buyer's accountants and make
available to the Buyer's accountants all work papers and other materials
developed by or in the possession of the Companies' accountants, for the
purpose of assisting the Buyer's accountants in the performance of an audit of
the Business for all periods subsequent to January 1, 1994.
6.2 Conduct of Business in Normal Course. The Stockholder shall
cause the Companies to carry on their business activities in substantially the
same manner as heretofore conducted, and shall not permit any Company, except
as otherwise required or permitted by Section 7.3 below, to make or institute
any unusual or novel methods of service, sale, purchase, lease, management,
accounting or operation that will vary materially from those methods used by
the Companies as of the date hereof, without in each instance obtaining the
prior written consent of DHS.
6.3 Preservation of Business and Relationships. The Stockholder
shall cause the Companies, without making or incurring any unusual commitments
or expenditures, to use all reasonable efforts to preserve their business
organization intact, and preserve their present relationships with referral
sources, clients, customers, suppliers and others having business
relationships with the Companies.
6.4 Maintenance of Insurance. The Stockholder shall cause each
Company to continue to carry its existing insurance, to the extent obtainable
upon reasonable terms.
6.5 Corporate Matters. The Stockholder shall not permit any
Company, without the prior written consent of DHS, to:
(a) amend its Articles of Incorporation or By-Laws or its
limited partnership agreement or certificate of limited partnership, or issue
any shares of its capital stock, or issue or create any warrants, commitments,
obligations, subscriptions, options, convertible securities or other
arrangements under which any additional shares of its capital stock or equity
interests might be directly or indirectly issued;
(b) amend, cancel or modify any Material Contract or enter
into any material new agreement, commitment or transaction except, in each
instance, in the ordinary course of business;
(c) pay, grant or authorize any material salary increases
or bonuses except in the ordinary course of business and consistent with past
practice, or enter into any employment, consulting or management agreements;
(d) modify in any material respect any material agreement
relating to the Business to which such Company is a party or by which it may
be bound, except in the ordinary course of business, and except to the extent
necessary to implement the transactions contemplated by Section 7.3 below;
(e) make any change in management personnel;
(f) except pursuant to commitments in effect on the date
hereof (to the extent disclosed in this Agreement or in any Schedule hereto),
make any capital expenditure(s) or commitment(s), whether by means of
purchase, lease or otherwise, or any operating lease commitment(s), in excess
of $50,000 in the aggregate;
(g) except as otherwise permitted pursuant to Section 7.3
below, dispose of or transfer any asset outside of the ordinary course of
business, or sell, assign or dispose of any capital asset(s) with a net book
value in excess of $10,000 as to any one item or $25,000 in the aggregate;
(h) materially change its method of collection of accounts
or notes receivable, accelerate or slow in any material respect its payment of
accounts payable, or prepay any of its obligations or liabilities, other than
prepayments to take advantage of trade discounts not otherwise inconsistent
with or in excess of historical prepayment practices;
(i) declare, pay, set aside or make any dividend or other
distribution (other than in cash) of any assets or property; or, except as
otherwise permitted pursuant to Section 7.3 below, make any other transfer of
any assets or property to the Stockholder or any of its Affiliates;
(j) incur any material liability or indebtedness except, in
each instance, in the ordinary course of business;
(k) subject any of the assets or properties of the Business
to any further material liens or encumbrances, other than Permitted Liens; or
(l) agree to do, or take any action in furtherance of, any
of the foregoing.
6.6 Management Participation. The parties hereby confirm that
representatives of DHS and the Buyer have been actively involved in the
management of the Business at all times since March 1, 1997, and DHS and the
Buyer (through their employees working in the Business) will have the right to
continue to manage and participate in all aspects of the Business at all times
from the date hereof through the Closing or any termination of this
Agreement. Such participation shall include matters of the type described in
Section 6.5 above, as well as all other material decisions relating to the
business and affairs of the Business.
7. ADDITIONAL AGREEMENTS OF THE PARTIES.
7.1 Confidentiality. Notwithstanding anything to the contrary
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon any party under applicable state or federal
securities or antitrust laws, it is expressly understood and agreed by the
parties that, except with respect to matters or information which are publicly
available other than by reason of a breach of this Section 7.1, (i) this
Agreement, the Schedules hereto, and the conversations, negotiations and
transactions relating hereto and/or contemplated hereby, and (ii) all
financial information, business records and other non-public information
concerning either party which the other party or its representatives has
received or may hereafter receive, shall be maintained in the strictest
confidence by the recipient and its representatives, and shall not be
disclosed to any person that is not associated or affiliated with the
recipient and involved in the transactions contemplated hereby, without the
prior written approval of the party which provided the information. The
parties hereto shall use their best efforts to avoid disclosure of any of the
foregoing or undue disruption of any of the business operations or personnel
of the parties, and no party shall issue any press release or other public
announcement regarding the transactions contemplated hereby without the prior
approval of each other party (such approval not to be unreasonably withheld or
delayed) unless compelled to do so upon advice of counsel and there is
insufficient time to practicably obtain approval hereunder. In the event that
the transactions contemplated hereby shall not be consummated for any reason,
each party covenants and agrees that neither it nor any of its representatives
shall retain (other than information which is publicly available other than by
reason of a breach of this Section 7.1) any documents, lists or other writings
of any other party which it may have received or obtained in connection
herewith or any documents incorporating any of the information contained in
any of the same (all of which, and all copies thereof in the possession or
control of the recipient or its representatives, shall be returned to the
party which provided the information).
7.2 Exclusivity. From the date hereof through any termination
of this Agreement in accordance with Section 11 below, the Stockholder shall
not (and shall not permit any of its stockholders, directors, officers or
Affiliates to) negotiate with or enter into any other commitments, agreements
or understandings with any person, firm or corporation (other than DHS and its
Affiliates) in respect of any sale of capital stock or any material portion of
the assets of any of the Companies, any merger, consolidation or corporate
reorganization, or any other such transaction relating to the Companies or the
Business.
7.3 Reconfiguration.
(a) To the extent that any of the Companies owns any
tangible assets that are not utilized in the Business, or owns or holds any
cash (other than amounts representing payment for goods sold and/or services
rendered in the Business from and after March 1, 1997) or accounts receivable
(other than accounts receivable in respect of goods sold and/or services
rendered in the Business from and after March 1, 1997), or is obligated in
respect of any accounts payable, or any liabilities or obligations (including,
without limitation, accruals and contractual commitments and obligations, but
expressly excluding liabilities or obligations for goods or services acquired
in the Business from and after March 1, 1997) that were not incurred in the
ordinary course of the Business, the Stockholder shall cause the subject
Company to (i) transfer all such cash (other than amounts representing payment
for goods sold and/or services rendered in the Business from and after March
1, 1997), accounts receivable (other than accounts receivable in respect of
goods sold and/or services rendered in the Business from and after March 1,
1997) and non-Business assets to the Stockholder or an Affiliate of the
Stockholder (other than another Company), and (ii) assign to the Stockholder
or an Affiliate of the Stockholder (other than another Company), and cause to
be assumed by the Stockholder or such Affiliate, all of such accounts payable
and non-Business liabilities and obligations (including, without limitation,
accruals and contractual commitments and obligations, but excluding
liabilities and obligations for goods or services acquired in the Business
from and after March 31, 1997); provided, however, that the assets transferred
hereunder shall not include the outstanding option in favor of the Company to
purchase limited partnership interests in the Santa Monica Imaging Center.
Such transfers of assets and assumptions of liabilities shall take place prior
to the Closing, without payment or receipt (or requirement of future payment
or receipt) by any Company of any consideration in respect thereof, and as a
result thereof, on the Closing Date, (A) the Companies shall have no accounts
receivable or accounts payable (except for post-March 1, 1997 items as herein
provided), (B) none of the Companies shall be indebted to the Stockholder or
any of its Affiliates in any manner whatsoever, and (C) neither the
Stockholder nor any of its affiliates shall be indebted to any of the
Companies in any manner whatsoever.
(b) To the extent that, on the Closing Date, any assets
utilized in the Business are owned or leased by the Stockholder or any of its
Affiliates (other than the Companies), and/or any contract rights relating to
the Business are in the name of or held by the Stockholder or any of its
Affiliates (other than the Companies), then, immediately prior to the Closing,
title to such assets (or the leases therefor, as the case may be) and contract
rights shall be transferred to the Company utilizing such assets and contract
rights, without requirement of any payment or other consideration by either
Company to effect such transfer. To the extent that any contracts are
included in such transfer, all obligations of the Business thereunder shall be
current as of the time of transfer, and without any continuing default
thereunder.
(c) At the time of the Closing, the Stockholder shall
deliver to the Buyer (i) a true and complete copy of the General Instrument of
Conveyance, Transfer and Assignment (which shall include a general description
of the subject assets, liabilities and obligations in sufficient detail to
permit the Buyer to identify or quantify same) whereby all assets, liabilities
and obligations were transferred or assigned by the Companies to and assumed
by the Stockholder and its Affiliates pursuant to this Section 7.3, subject to
the Buyer's rights to verify and otherwise be satisfied with such asset and
liability transfer and assumption and the compliance thereof with the
requirements of this Section 7.3, and (ii) true and complete copies of all
instruments of assignment (which shall include reasonably specific detail as
aforesaid) of all assets and contract rights transferred to the Companies in
accordance with Section 7.3(b) above, subject to the Buyer's rights to verify
and otherwise be satisfied with such transfers and the Stockholder's
compliance with the requirements of Section 7.3(b) above.
7.4 Non-Competition Agreement. On the Closing Date, Primedex,
the Stockholder, the Buyer, DHS, the Company and the Corporate Subsidiary
shall execute and deliver to one another a non-competition and non-disclosure
agreement in substantially the form of Exhibit B annexed hereto (the
"Non-Competition Agreement").
7.5 Valuation Letter. On the Closing Date, the Stockholder, the
Buyer and DHS shall execute and deliver to one another the Valuation Letter in
respect of the Common Stock (as contemplated by Section 2.2 above) in
substantially the form of Exhibit A annexed hereto.
7.6 Facilities Services Agreement. On the Closing Date,
Primedex, the Company and the Corporate Subsidiary shall execute and deliver
to one another a Facilities Services Agreement in substantially the form of
Exhibit C annexed hereto (the "Facilities Services Agreement").
7.7 Company Name Changes. On the Closing Date, each of the
Company and the Corporate Subsidiary shall execute and deliver for filing with
the California Secretary of State a certificate of amendment pursuant to which
the corporate name of such Company will be changed to a name not confusingly
similar to "Diagnostic Imaging Services" (the "Articles of Amendment").
7.8 Additional Agreements and Instruments. On or before the
Closing Date, the Stockholder, the Companies, the Buyer and DHS shall execute,
deliver and file all exhibits, agreements, certificates, instruments and other
documents, not inconsistent with the provisions of this Agreement, which, in
the opinion of counsel to the parties hereto, shall reasonably be required to
be executed, delivered and filed in order to consummate the transactions
contemplated by this Agreement.
7.9 Non-Interference. Neither the Buyer, DHS nor the
Stockholder shall cause to occur any act, event or condition which would cause
any of their respective representations and warranties made in this Agreement
to be or become untrue or incorrect in any material respect as of the Closing
Date, or would interfere with, frustrate or render unreasonably expensive the
satisfaction by the other party or parties of any of the conditions precedent
set forth in Sections 8 and 9 below.
8. CONDITIONS PRECEDENT TO THE BUYER'S AND DHS' PERFORMANCE.
In addition to the fulfillment of the parties' agreements in Section
7 above, the obligations of the Buyer and DHS to consummate the transactions
contemplated by this Agreement are further subject to the satisfaction, at or
before the Closing Date, of all the following conditions, any one or more of
which may be waived in writing by the Buyer and DHS:
8.1 Accuracy of Representations and Warranties. All
representations and warranties made by the Stockholder in this Agreement shall
be true and correct in all material respects on and as of the Closing Date as
though such representations and warranties were made on and as of that date.
8.2 Performance. The Stockholder shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by the Stockholder on or before the Closing Date.
8.3 Certification. The Buyer and DHS shall have received a
certificate, dated the Closing Date, signed by the Stockholder, certifying, in
such detail as the Buyer, DHS and their counsel may reasonably request, that
the conditions specified in Sections 8.1 and 8.2 above have been
fulfilled.
8.4 Opinion of Counsel. The Buyer and DHS shall have received
an opinion, dated the Closing Date, of Jeffrey L. Linden, Esq., inside general
counsel to the Stockholder and the Companies, with respect to such matters
incident to the transactions contemplated hereby as shall reasonably be
requested by the Buyer, DHS and their counsel.
8.5 Resolutions. The Buyer and DHS shall have received
certified resolutions of the Board of Directors of the Stockholder, in form
reasonably satisfactory to counsel for the Buyer and DHS, authorizing the
Stockholder's execution, delivery and performance of this Agreement and all
actions to be taken by the Stockholder hereunder.
8.6 Good Standing Certificates. DHS and the Buyer shall have
received good standing certificates issued by the Secretary of State of
Delaware with respect to the Stockholder, and the California Secretary of
State in respect of the Companies (including the Corporate Subsidiary and the
Santa Monica Imaging Center limited partnership), each dated as of a date
reasonably prior to the Closing Date.
8.7 Resignations. The Stockholder shall have delivered to the
Buyer the written resignations, dated and effective on the Closing Date, of
all of the officers and directors of the Companies.
8.8 Absence of Litigation. No action, suit or proceeding by or
before any court or any governmental body or authority, against any of the
Companies or the Stockholder or pertaining to the transactions contemplated by
this Agreement or their consummation, shall have been instituted on or before
the Closing Date, which action, suit or proceeding would, if determined
adversely, have a material adverse effect on the Business.
8.9 Condition of Property. Between the date of this Agreement
and the Closing Date, assets of the Companies having an aggregate fair market
value of $50,000 or more shall not have been lost, destroyed or irreparably
damaged by fire, flood, explosion, theft or any other cause, whether or not
covered by insurance.
8.10 No Material Adverse Change. On the Closing Date, there
shall not have occurred any event or condition materially and adversely
affecting the financial condition, results of operations or business prospects
of the Business from those reflected in the 1996 Financial Statements or
disclosed in this Agreement or the Schedules hereto, except for matters
resulting from adverse changes in economic conditions affecting businesses
generally.
8.11 Financing. DHS and the Buyer shall have entered into
binding agreements for, and shall have received the full proceeds of, debt
and/or equity financing in a principal amount equal to not less than the sum
of $10,000,000 plus the amount of the Debt, on terms and conditions
satisfactory to DHS and the Buyer in their sole and absolute discretion; and
the lenders or equity purchasers (as the case may be) shall have consented to
the use of the proceeds of such debt and/or equity financing in furtherance of
the consummation of the transactions contemplated by this Agreement.
8.12 Consents.
(a) All necessary and legally required disclosures to and
agreements and consents of (i) any parties to any Material Contracts, any
landlords under any of the Leases, and/or any licensing authorities which are
material to the Business, and (ii) any governmental authorities or agencies to
the extent required to be obtained prior to the Closing in connection with the
transactions contemplated by this Agreement, shall have been obtained and true
and complete copies thereof delivered to the Buyer. Any such consents must be
obtained without imposing any unreasonable burden or obligation on DHS, the
Buyer or the Business from and after the Closing Date.
(b) DHS and the Buyer shall have obtained, and there shall
be in full force and effect, the consent of DHS' existing lender (i) for the
use of up to $2,500,000 in principal amount of loans under DHS' loan agreement
with such lender in respect of the Consideration pursuant to Section 2.1
above, (ii) with respect to the subordination provisions to be applicable to
any debt financing pursuant to Section 8.11 above, and (iii) with respect to
the consummation of the transactions contemplated hereby.
8.13 Completion of Audit. DHS' accountants shall have completed
their audit of the Business as contemplated by Section 6.1(b) above.
8.14 Execution and Delivery of Exhibits. On or before the
Closing Date, (a) Primedex and the Stockholder shall have executed and
delivered the Non-Competition Agreement to the Buyer, DHS, the Company and the
Corporate Subsidiary, (b) the Stockholder shall have executed and delivered to
the Buyer and DHS the Valuation Letter, and (c) Primedex shall have executed
and delivered to the Company and the Corporate Subsidiary the Facilities
Services Agreement.
8.15 Proceedings and Instruments Satisfactory. All
proceedings, corporate or other, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incidental thereto, shall
be reasonably satisfactory in form and substance to the Buyer, DHS and their
counsel. The Stockholder shall have submitted to the Buyer or its
representatives for examination the originals or true and correct copies of
all records and documents relating to the Business which the Buyer may have
requested in connection with said transactions.
8.16 Non-Abandonment. The Buyer and DHS shall not have elected
to abandon the transactions contemplated by this Agreement (any such
abandonment to be evidenced by written notice thereof to the Stockholder).
9. CONDITIONS PRECEDENT TO THE STOCKHOLDER'S
PERFORMANCE.
In addition to the fulfillment of the parties' agreements in Section
7 above, the obligations of the Stockholder to consummate the transactions
contemplated by this Agreement are further subject to the satisfaction, at or
before the Closing Date, of all of the following conditions, any one or more
of which may be waived in writing by the Stockholder:
9.1 Accuracy of Representations and Warranties. All
representations and warranties made by the Buyer and DHS in this Agreement
shall be true and correct in all material respects on and as of the Closing
Date as though such representations and warranties were made on and as of that
date.
9.2 Performance. The Buyer and DHS shall have performed,
satisfied and complied in all material respects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or
complied with by the Buyer and DHS on or before the Closing Date.
9.3 Certification. The Stockholder shall have received a
certificate, dated the Closing Date, signed by the Buyer and DHS, certifying,
in such detail as the Stockholder and its counsel may reasonably request, that
the conditions specified in Sections 9.1 and 9.2 above have been fulfilled.
9.4 Opinion of Counsel. The Stockholder shall have received an
opinion, dated the Closing Date, of Greenberg, Traurig, Hoffman, Lipoff, Rosen
& Quentel, counsel to the Buyer and DHS, with respect to such matters incident
to the transactions contemplated hereby as shall reasonably be requested by
the Stockholder and its counsel.
9.5 Resolutions. The Stockholder shall have received certified
resolutions of the Board of Directors and sole stockholder of the Buyer and of
the Board of Directors of DHS, in form reasonably satisfactory to counsel for
the Stockholder, authorizing the Buyer's and DHS' execution, delivery and
performance of this Agreement and all actions to be taken by the Buyer and DHS
hereunder.
9.6 Good Standing Certificates. The Stockholder shall have
received good standing certificates issued by the Secretary of State of
Delaware with respect to DHS and the Secretary of State of Texas with respect
to the Buyer, each dated as of a date reasonably prior to the Closing Date.
9.7 Consents. The Stockholder shall have received any and all
agreements and consents of any governmental authorities and agencies, and any
parties to any material contracts or agreements of the Stockholder, to the
extent required in connection with the transactions contemplated by this
Agreement.
9.8 Execution and Delivery of Exhibits. On or before the
Closing Date, (a) the Buyer, DHS, the Company and the Corporate Subsidiary
shall have executed and delivered to the Stockholder and Primedex the
Non-Competition Agreement, (b) the Buyer and DHS shall have executed and
delivered to the Stockholder the Valuation Letter, (c) the Company and the
Corporate Subsidiary shall have executed and delivered to Primedex the
Facilities Services Agreement, and (d) the Company and the Corporate
Subsidiary shall have executed and delivered for filing with the California
Secretary of State the Articles of Amendment.
9.9 Proceedings and Instruments Satisfactory. All proceedings
to be taken in connection with the transactions contemplated by this
Agreement, and all documents incidental thereto, shall be reasonably
satisfactory in form and substance to the Stockholder and its counsel.
10. CLOSING.
10.1 Place and Date of Closing. Unless this Agreement shall be
terminated pursuant to Section 11 below, the consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of the Stockholder located at 1516 Cotner Avenue, Los Angeles, California
90025-3303, or such other location as is agreed to between the parties or as
may be required by the Buyer's financing sources, at 9:00 A.M. local time on
March 31, 1997 or such later date (not later than April 30, 1997) as may be
reasonably agreeable to all parties (the date of the Closing being referred
to in this Agreement as the "Closing Date").
10.2 Actions at Closing. At the Closing, there shall be made,
by all necessary and appropriate persons, all payments and deliveries stated
in this Agreement to be made at the Closing and/or on or prior to the Closing
Date.
11. TERMINATION OF AGREEMENT.
11.1 General. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned at any time prior to the
Closing: (a) by the mutual written consent of the Stockholder, the Buyer and
DHS; (b) by the Buyer and DHS, or the Stockholder, if: (i) a material breach
shall exist with respect to the written representations and warranties made by
the other party or parties, as the case may be, (ii) the other party or
parties, as the case may be, shall take any action prohibited by this
Agreement, if such actions shall or may have a material adverse effect on the
Business and/or the transactions contemplated hereby, (iii) the other party or
parties, as the case may be, shall not have furnished, upon reasonable notice
therefor, such certificates and documents required in connection with the
transactions contemplated hereby and matters incidental thereto as it or they
shall have agreed to furnish, and it is reasonably unlikely that the other
party or parties will be able to furnish such item(s) prior to the Outside
Closing Date specified below, or (iv) any consent of any third party to the
transactions contemplated hereby (whether or not the necessity of which is
disclosed herein or in any Schedule hereto) is reasonably necessary to prevent
a default under any outstanding material obligation of the Buyer, DHS, the
Stockholder or the Companies, and such consent is not obtainable without
material cost or penalty (unless the party or parties not seeking to terminate
this Agreement agrees or agree to pay such cost or penalty); (c) by the Buyer
and DHS by means of notice of abandonment pursuant to Section 8.16 above; or
(d) by the Buyer and DHS, or by the Stockholder, at any time on or after April
30, 1997 (the "Outside Closing Date"), if the transactions contemplated hereby
shall not have been consummated prior thereto, and the party directing
termination shall not then be in breach or default of any obligations imposed
upon such party by this Agreement.
11.2 Effect of Termination. In the event of termination by
either party as above provided in this Section 11, prompt written notice shall
be given to the other party. Termination of this Agreement shall not relieve
any party of any of its obligations pursuant to Section 7.1 above, and shall
not relieve any breaching party from liability for any breach of this
Agreement. Abandonment of this Agreement by the Buyer and DHS shall not be
deemed a breach of this Agreement (provided that such abandonment shall not
constitute a release of the Buyer or DHS in respect of any other action
constituting a breach of this Agreement).
12. INDEMNIFICATION.
12.1 General.
(a) From and after the Closing Date, the Stockholder shall
defend, indemnify and hold harmless the Buyer and DHS from, against and in
respect of any and all claims, losses, costs, expenses, obligations,
liabilities, damages, recoveries and deficiencies, including interest,
penalties and reasonable attorneys' fees, that the Buyer and/or DHS may incur,
sustain or suffer ("Losses") as a result of (i) any breach of, or failure by
the Stockholder to perform, any of the representations, warranties, covenants
or agreements of the Stockholder contained in this Agreement, (ii) any
liabilities or obligations of the Companies incurred prior to the Closing Date
which are not reflected in the schedule of the Debt pursuant to Section 2.1
above but which should have been so reflected in accordance with generally
accepted accounting principles ("Unscheduled Liabilities"), (iii) any failure
by the Stockholder and/or its Affiliates to pay or perform when due any of the
liabilities and obligations transferred to the Stockholder and/or any of such
Affiliates pursuant to Section 7.3 above ("Transferred Liabilities"), and/or
(iv) any pending or threatened litigation or proceedings against any of the
Companies, whether or not disclosed in Schedule 4.18 ("Litigation").
(b) From and after the Closing Date, the Buyer and DHS
shall jointly and severally defend, indemnify and hold harmless the
Stockholder from, against and in respect of any and all claims, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and reasonable attorneys' fees, that the
Stockholder may incur, sustain or suffer as a result of any breach of, or
failure by the Buyer or DHS to perform, any of the representations,
warranties, covenants or agreements of the Buyer or DHS contained in this
Agreement.
12.2 Limitations on Certain Indemnity.
(a) Notwithstanding any other provision of this Agreement
to the contrary, except for (i) Losses arising out of claims for breach of any
of the warranties made under Sections 4.1, 4.2, 4.4, 4.5, 4.8 and/or 4.20
above, (ii) Losses arising out of Unscheduled Liabilities, (iii) Losses
arising out of Transferred Liabilities, (iv) Losses arising out of Litigation,
and/or (v) Losses involving proven fraud by the Stockholder, the Stockholder
shall not be liable to the Buyer or DHS with respect to Losses unless and
until, and then only to the extent that, the aggregate amount of all Losses
incurred by the Buyer or DHS shall exceed the sum of $50,000 (the "Basket").
The Stockholder shall thereafter be liable for all Losses in excess of the
Basket, provided that the Stockholder's maximum aggregate liability in respect
of all Losses shall not, in the absence of proven fraud by the Stockholder in
respect of any particular Losses, in any event exceed the limitations set
forth in Section 12.2(b) below.
(b) Except with respect to any Losses involving proven
fraud by the Stockholder, the Stockholder shall only be required, in the
aggregate, to pay indemnification hereunder, after application of the Basket,
up to a maximum amount equal to the Consideration.
(c) Except with respect to (i) Losses arising under Section
4.1, 4.2, 4.4 or 4.5 above, (ii) Losses arising out of Unscheduled
Liabilities, Transferred Liabilities or Litigation, or (iii) any particular
Losses the non-discovery of which is attributable in whole or significant part
to any proven fraud by the Stockholder (as to which Losses claims may be made
hereunder within the applicable statute of limitations), the Buyer and DHS
shall be entitled to indemnification by the Stockholder for Losses only in
respect of claims for which notice of claim shall have been given to the
Stockholder on or before March 31, 1998, or, with respect to Losses relating
to a breach of any warranties under Section 4.8 above, the expiration of the
final statute of limitations for those tax returns covered by the warranties
under Section 4.8 above; provided, however, that neither the Buyer nor DHS
shall be entitled to indemnification from the Stockholder in the event that
the subject claim for indemnification relates to a third-party claim and the
Buyer or DHS (as the case may be) delayed giving notice thereof to the
Stockholder to such an extent as to cause material prejudice to the defense of
such third-party claim.
(d) In the event and to the extent that, on the scheduled
payment date for any payments pursuant to Section 2.2 above, there shall be
pending any claim for indemnification against the Stockholder hereunder, DHS
and/or the Buyer shall be entitled to (i) set off against the payment due to
the Stockholder hereunder the amount of such claim for indemnification, to the
extent that such claim has been established by an arbitration award or a court
judgment, and (ii) hold back from any payment otherwise to be made under
Section 2.2 above, the amount of any such pending claim which has not been
finally determined by arbitration award or court judgment. With respect to
any amounts held back pursuant to the foregoing clause (ii), upon the final
resolution of the subject claim, the Buyer or DHS (as the case may be) shall
promptly pay to the Stockholder any portion of the amount held back hereunder
to the extent that the subject claim is not determined in favor of the Buyer
or DHS, together with interest (at a rate equal to the publicly announced
prime rate of interest of Citibank, N.A. in New York, New York as of the date
the subject payment was originally due under Section 2.2 above) on the net
amount required to be paid to the Stockholder hereunder accrued from the date
originally due under Section 2.2 above to the date finally paid under this
Section 12.2(d).
12.3 Claims for Indemnity. Whenever a claim shall arise for
which any party shall be entitled to indemnification hereunder, the
indemnified party shall notify the indemnifying party in writing within ten
(10) business days of the indemnified party's first receipt of notice of, or
the indemnified party's obtaining actual knowledge of, such claim, and in any
event within such shorter period as may be necessary for the indemnifying
party or parties to take appropriate action to resist such claim. Such notice
shall specify all facts known to the indemnified party giving rise to such
indemnity rights and shall estimate (to the extent reasonably possible) the
amount of potential liability arising therefrom. If the indemnifying party
shall be duly notified of such dispute, the parties shall attempt to settle
and compromise the same or may agree to submit the same to arbitration or, if
unable or unwilling to do any of the foregoing, such dispute shall be settled
by appropriate litigation, and any rights of indemnification established by
reason of such settlement, compromise, arbitration or litigation shall
promptly thereafter be paid and satisfied by those indemnifying parties
obligated to make indemnification hereunder.
12.4 Right to Defend. If the facts giving rise to any claim
for indemnification shall involve any actual or threatened action or demand by
any third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through counsel of their own choosing,
to defend or prosecute such claim in the name of the indemnifying party or
parties, or any of them, or if necessary, in the name of the indemnified
party. In any event, the indemnified party shall give the indemnifying party
advance written notice of any proposed compromise or settlement of any such
claim. If the remedy sought in any such action or demand is solely money
damages, the indemnifying party shall have fifteen (15) days after receipt of
such notice of settlement to object to the proposed compromise or settlement,
and if it does so object, the indemnifying party shall be required to
undertake, conduct and control, though counsel of its own choosing and at its
sole expense, the settlement or defense thereof, and the indemnified party
shall cooperate with the indemnifying party in connection therewith.
13. POST-CLOSING EVENTS.
The parties hereby further agree that, from and after the Closing:
13.1 Books and Records. At any time and from time to time from
and after the Closing Date, the Buyer shall permit the Stockholder to have
access, during normal business hours and without undue disruption of the
Companies' business, to those books and records of the Companies relating to
periods prior to the Closing Date, for purposes of preparing any tax filings
or any other legitimate purpose of the Stockholder. Such books and records
may be made available at any location where the subject Company maintains
same, and all costs and expenses relating to such access and inspection shall
be the responsibility of the Stockholder. In the event that, at any time and
from time to time after the Closing Date, the Buyer shall determine to destroy
or dispose of any such books and records, the Buyer shall give notice thereof
to the Stockholder not less than thirty (30) days prior to such disposition,
and the Stockholder shall have the right, at its own cost and expense, to take
possession of such books and records prior to their disposition.
13.2 Employee Matters; Benefit Plan Matters.
(a) The Buyer shall cause the Companies to honor all
accrued benefits owed to employees of the Business, to the extent reflected in
the schedule of the Debt pursuant to Section 2.1 above. In the event that any
of the Companies shall determine to terminate the employment of any such
employees subsequent to the Closing Date, then all severance payments (if any)
arising from such termination shall be the responsibility of the subject
Company, except to the extent that any such benefits relate to accruals that
should, in accordance with Section 2.1 above, have been reflected in the
schedule of the Debt thereunder. Nothing contained in this Section 13.2(a)
shall be deemed to constitute any assurance or guaranty of employment to any
employees of the Business.
(b) Except with respect to any employees of the Business
who do not remain employed with the Companies from and after the Closing Date,
the Stockholder shall comply with all requirements of law in order to permit
the employees of the Companies to withdraw the amounts in their respective
accounts in the Stockholder's 401(k) plan and any other employee benefit
plan(s) covering employees of one or more Stockholder-affiliated or
Primedex-affiliated entities in addition to the Companies.
(c) Nothing contained in this Agreement shall be deemed to
abrogate or impair the right of the Buyer to determine which employees will be
retained by the Companies from and after the Closing Date, and/or the
compensation and benefits to be paid from and after the Closing Date to those
employees retained in the Companies; provided, however, that, subject to any
required waiting periods and eligibility criteria, the Buyer will cause all
employees retained in the Companies on and after the Closing Date to be
offered the opportunity to participate in the group health programs generally
offered to employees of DHS and its subsidiaries.
13.3 Accounts Receivable. In the event and to the extent that
any of the Companies shall, from and after the Closing Date, receive payment
of any accounts receivable transferred to the Stockholder or its Affiliates in
accordance with Section 7.3 above, the subject Company shall be deemed to have
received such payment in trust for the benefit of the Stockholder or its
Affiliate, and the Buyer shall cause such Company to immediately turn over any
payments so received in the form received (subject to any necessary
endorsement).
13.4 Professional Liability Insurance. To the extent that any
of the professional liability insurance currently maintained by or for the
benefit of the Companies shall be on a "claims made" basis, and the Buyer is
unable to obtain professional liability insurance covering claims made against
any Company subsequent to the Closing Date but in respect of events or
occurrences which took place on or prior to the Closing Date, the Stockholder
shall obtain for the Buyer, subject to the Buyer's payment of the applicable
premium therefor, "tail" coverage in respect of any such claims.
13.5 Interim Period Collections and Expenditures. The parties
hereby confirm their intention that, subject to the Closing, all revenues and
expenses of the Business shall be accounted for and treated separate and apart
from all other businesses of the Company and the Stockholder. In order to
give effect thereto, the parties hereby agree as follows:
(a) All collections made in respect of goods sold and/or
services rendered in the Business from and after March 1, 1997 shall be
retained in the Company (and not distributed or transferred under Section 7.3
above or otherwise), and shall be utilized solely to pay expenses or current
obligations of the Business in respect of periods from and after March 1,
1997.
(b) Within sixty (60) days after the Closing Date, the
Stockholder and the Buyer shall reconcile in good faith the amount (if any) by
which the cash expenditures in the Business for periods from and after March
1, 1997 exceeded the cash receipts of the Business in respect of goods sold
and/or services rendered in the Business from and after March 1, 1997; and to
the extent of any such excess of payments over receipts, the Company shall
reimburse the Stockholder therefor within sixty (60) days after the Closing
Date.
(c) To the extent that any taxes shall be payable on or in
respect of the net income of the Business for periods from and after March 1,
1997, (i) such taxes shall, subject to the Closing, constitute the sole
responsibility of the Company (subject to any consolidation effected by DHS),
and (ii) subject to the Closing, such net income and taxes thereon shall not
be reported or payable by the Stockholder or any member of its consolidated
tax group.
13.6 Further Assurances. From time to time from and after the
Closing Date, the parties will take any and all such action and execute and
deliver to one another any and all further agreements, instruments,
certificates and other documents, as may reasonably be requested by any other
party in order more fully to consummate the transactions contemplated hereby,
and to effect an orderly transition of the ownership and operations of the
Business.
14. COSTS.
14.1 Finder's or Broker's Fees. Each of the Buyer and DHS (on
the one hand) and the Stockholder (on the other hand) represents and warrants
that neither they nor any of their respective Affiliates have dealt with any
broker or finder in connection with any of the transactions contemplated by
this Agreement, and no broker or other person is entitled to any commission or
finder's fee in connection with any of these transactions.
14.2 Expenses. The Buyer, DHS and the Stockholder shall each
pay all of their own respective costs and expenses incurred or to be incurred
by them, respectively, in negotiating and preparing this Agreement and in
closing and carrying out the transactions contemplated by this Agreement.
15. FORM OF AGREEMENT.
15.1 Effect of Headings. The Section headings used in this
Agreement and the titles of the Schedules hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of the provisions hereof or of the information set forth in such
Schedules.
15.2 Entire Agreement; Waivers. This Agreement (including the
Schedules and Exhibits hereto) constitutes the entire agreement between the
parties pertaining to the subject matter hereof, and supersedes all prior
agreements or understandings as to such subject matter. No party hereto has
made any representation or warranty or given any covenant to the other except
as set forth in this Agreement and the Schedules and Exhibits hereto. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
15.3 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.
16. PARTIES.
16.1 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligations or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
16.2 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on or
telecopied to the party to whom notice is to be given, one day after being
deposited for overnight delivery with a recognized overnight courier service
in a properly addressed package with all charges prepaid or billed to the
account of the sender, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
(a) If to the Stockholder:
Diagnostic Imaging Services, Inc.
1516 Cotner Avenue
Los Angeles, California 90025-3303
Attn: Howard G. Berger, M.D.
Fax No. (310) 478-5810
(b) If to the Buyer or DHS:
Diagnostic Health Services, Inc.
2777 Stemmons Freeway, Suite 1525
Dallas Texas 75207
Attn: Mr. Brad A. Hummel
Fax No. (214) 689-6459
with a copy sent concurrently to:
Greenberg Traurig Hoffman et al.
153 East 53rd Street, 35th Floor
New York, New York 10022
Attn: Shahe Sinanian, Esq.
Fax No. (212) 223-7161
or to such other address or telecopier number as any party shall have
specified by notice in writing given to all other parties.
17. MISCELLANEOUS.
17.1 Amendments and Modifications. No amendment or
modification of this Agreement or any Exhibit or Schedule hereto shall be
valid unless made in writing and signed by the party to be charged therewith.
17.2 Non-Assignability; Binding Effect. Neither this Agreement,
nor any of the rights or obligations of the parties hereunder, shall be
assignable by any party hereto without the prior written consent of all other
parties hereto, except that (a) the Buyer may, at the time of the Closing,
assign its rights to acquire the Stock to SoCal Diagnostic Services, Inc.
("SoCal") (provided that any such assignment shall not relieve DHS or the
Buyer from any of their obligations hereunder), and (b) DHS, the Buyer and
SoCal may, without requirement of any consent of the Stockholder, assign their
rights to indemnification hereunder to any secured lender to DHS, the Buyer
and/or SoCal from time to time. Otherwise, this Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
17.3 Governing Law; Jurisdiction. This Agreement shall be
construed and interpreted and the rights granted herein governed in accordance
with the laws of the State of Texas applicable to contracts made and to be
performed wholly within such State. Except as otherwise provided in Section
12.3 above, any claim, dispute or controversy arising under or in connection
with this Agreement or any actual or alleged breach hereof shall be settled
exclusively by arbitration in Dallas, Texas in accordance with the commercial
arbitration rules of the American Arbitration Association then obtaining. As
part of his or her award, the arbitrator shall make a fair allocation of the
fee of the American Arbitration Association, the cost of any transcript, and
the parties' reasonable attorneys' fees, taking into account the merits and
good faith of the parties' claims and defenses. Judgment may be entered on
the award so rendered in any court having jurisdiction. Any process or other
papers hereunder may be served by registered or certified mail, return receipt
requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
DIAGNOSTIC HEALTH SERVICES, INC
By:
DHS MANAGEMENT SERVICES, INC.
By:
DIAGNOSTIC IMAGING SERVICES,
INC., a Delaware corporation
By:
<PAGE>
Exhibits
A - Valuation Letter
B - Non-Competition Agreement
C - Facilities Services Agreement<PAGE>ASSET PURCHASE
AGREEMENT
ASSET PURCHASE AGREEMENT (this "Agreement"), executed this 21st day of
March, 1997 (but as of an effective date of March 1, 1997), by and among
DIAGNOSTIC HEALTH SERVICES, INC., a Delaware corporation ("DHS"), SOCAL
DIAGNOSTIC SERVICES, INC., a California corporation and a second-tier indirect
wholly-owned subsidiary of DHS (the "Buyer"), DIAGNOSTIC IMAGING SERVICES,
INC., a California corporation (the "Seller"), and DIAGNOSTIC IMAGING
SERVICES, INC., a Delaware corporation (the "Stockholder");
W I T N E S S E T H:
WHEREAS, the Seller is engaged, among other things, in a business
consisting of the provision of non-invasive ultrasound diagnostic testing
services on a shared (mobile) and in-house (fixed-site) basis (the "Ultrasound
Business"), and in connection therewith, is the owner and lessee of certain
assets and properties; and
WHEREAS, the Stockholder is the sole stockholder of the Seller; and
WHEREAS, the Buyer desires to purchase from the Seller and the Seller
desires to sell to the Buyer, all upon and subject to the terms and conditions
of this Agreement, the fixed assets and leasehold rights utilized in the
Ultrasound Business, and the Ultrasound Business as a going concern;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein set forth, the parties hereby covenant and
agree as follows:
18. ASSETS
18.1 Acquired Assets. Subject to the terms and conditions of
this Agreement, effective as of March 1, 1997, the Seller is selling,
transferring and delivering to the Buyer, and the Buyer is purchasing and
receiving from the Seller, all of the assets, properties, improvements and
business owned or leased by the Seller and utilized in and/or relating to the
Ultrasound Business other than the Excluded Assets (as such term is
hereinafter defined), as same are constituted on and as of March 1, 1997
(collectively, the "Assets"), including, but not limited to, the following:
(a) All tangible fixed assets, furniture, fixtures,
machinery, equipment, computers, computer systems and vehicles utilized in
and/or related to the Ultrasound Business (the "Fixed Assets");
(b) All accounts receivable and other rights to receive
payment for services rendered in the Ultrasound Business from and after March
1, 1997;
(c) All inventory and supplies utilized in and/or relating
to the Ultrasound Business;
(d) Any and all prepaid expenses (including, without
limitation, prepaid rentals under the Assumed Property Leases (as such term is
hereinafter defined) and the equipment leases being assumed by the Buyer) of
the Ultrasound Business;
(e) All customer lists, supplier lists, trade secrets,
technical information, and other such knowledge and information constituting
the "know-how" used or usable in the Ultrasound Business (other than the name
"Diagnostic Imaging Services"), and the good will of the Ultrasound Business;
(f) All contract rights, commitments and claims of the
Ultrasound Business (exclusive of rights under any employment agreements,
consulting agreements, management agreements or other such agreements which
are disclaimed by the Buyer hereunder, and any real property leases to the
extent not listed in Schedule 4.10 annexed hereto), including rights under the
two real property leases listed on Schedule 4.10 (the "Assumed Property
Leases"), and all customer contracts, equipment leases, vehicle leases,
manufacturer's warranties and any licenses or license agreements relating to
patents, trademarks or other intangibles utilized in the Ultrasound Business,
and any security deposits under any of the foregoing;
(g) All licenses and permits utilized in the Ultrasound
Business;
(h) All books, records, software programs, printouts,
drawings, data, files, notes, notebooks, accounts, invoices, correspondence
and memoranda relating to the Assets and/or the Ultrasound Business; and
(i) All other rights and assets of any kind, tangible or
intangible, utilized in and/or relating to the Ultrasound Business, whether or
not reflected in the Seller's financial statements or on its books and
records.
18.2 Excluded Assets. Notwithstanding anything in this
Agreement to the contrary, the Assets shall not include, and the Seller shall
retain, the following assets (the "Excluded Assets"):
(a) All cash, marketable securities, accounts receivable
and notes receivable of the Seller;
(b) All assets of any kind and description relating to any
businesses of the Seller other than the Ultrasound Business (collectively, the
"Excluded Businesses"), including but not limited to those assets utilized in
the Seller's MRI centers;
(c) All books, records, software programs, printouts,
drawings, data, files, notebooks, accounts, invoices, correspondence and
memoranda relating to the Excluded Assets and/or the Excluded Businesses;
(d) The Seller's stock record books, tax returns and minute
books;
(e) The name "Diagnostic Imaging Services";
(f) All of the Seller's rights under this Agreement,
including, without limitation, the right of the Seller to receive the
Consideration (as such term is hereinafter defined); and
(g) All bank accounts of the Seller.
19. LIABILITIES.
19.1 Assumed Liabilities. Subject to the terms and conditions
of this Agreement, as of March 1, 1997, the Seller is assigning to the Buyer,
and the Buyer is assuming and agreeing to pay and perform when due, the
following liabilities and obligations of the Ultrasound Business, as same are
constituted on March 1, 1997 (collectively, the "Assumed Liabilities"):
(a) All payroll and related federal and state withholding
taxes for employees of the Ultrasound Business for the Seller's current
payroll remittance period (appropriately prorated) as of March 1, 1997 (to the
extent not theretofore remitted by the Seller to the applicable taxing
authority);
(b) All accrued vacation pay (paid time off), wellness pay,
sick days and other such items relating to employees of the Ultrasound
Business accrued and outstanding as of March 1, 1997;
(c) All liabilities of the Seller from and after March 1,
1997 under outstanding vehicle and equipment leases or financing agreements
relating to the Fixed Assets;
(d) All liabilities of the Seller from and after March 1,
1997 under the Assumed Property Leases as and to the extent set forth on
Schedule 4.10;
(e) All other executory contracts, service contracts,
orders and commitments which in any case are for the purchase of inventory
and/or supplies for the Ultrasound Business, or the rendition of services in
the Ultrasound Business, which have been entered into by the Seller in the
normal course of the Ultrasound Business;
(f) All accounts payable and other liabilities of the
Ultrasound Business incurred in the normal course of the Ultrasound Business
from and after March 1, 1997; and
(g) Sales taxes (if any) payable in respect of the transfer
of the Assets to the Buyer pursuant to this Agreement.
19.2 Excluded Liabilities. Notwithstanding anything to the
contrary contained in Section 2.1 above, the Buyer does not assume, or become
in any way liable for, the payment or performance of any debts, liabilities or
obligations (absolute or contingent) of the Seller (a) constituting or
consisting of trade accounts payable, except to the extent arising in the
normal course of the Ultrasound Business from and after March 1, 1997, (b) in
respect of any indebtedness for money borrowed, (c) under or in respect of any
equipment leases or other financing agreements other than in respect of the
Fixed Assets, (d) under any employment agreements, consulting agreements,
management agreements or other such agreements (other than "at will"
agreements with technicians and other personnel of the Ultrasound Business),
or in respect of employee severance benefits not accounted for in the
adjustment pursuant to Section 9.6 below, (e) arising out of or relating to
any diagnostic tests or other services rendered by the Seller prior to March
1, 1997, including any claims for professional liability arising therefrom,
(f) relating to any lease obligations of any kind relating to real property,
other than the Assumed Property Leases from and after March 1, 1997, (g)
relating to any federal, state or local income taxes or sales, transfer or
other taxes (other than those described in Sections 2.1(a) and 2.1(g) above)
payable by or in respect of the Seller, including but not limited to any
income or income-based taxes which may be assessable against the Seller
arising out of, in connection with or as a result of the transactions
contemplated by this Agreement and/or the consummation thereof, (h) relating
to or arising out of any pending claims, actions, arbitrations and/or other
proceedings against the Seller, (i) relating to recapture of any depreciation
deduction or investment tax credit of the Seller, (j) in respect of any
unfunded pension or retirement benefits, or in respect of any funding
obligations to, or transactions in or relating to any trust funds under, any
pension, employee benefit or retirement plans now or heretofore maintained by
or on behalf of the Seller for the benefit of any past or present employees,
(k) relating to any claims, obligations or liabilities in respect of
environmental remediation or any violation of any environmental laws or
regulations, or any other violation or alleged violation of applicable law or
regulations by the Seller, (l) relating to any business operations other than
the Ultrasound Business, or (m) not specifically assumed by the Buyer pursuant
to Section 2.1 above (collectively, the "Excluded Liabilities").
20. PURCHASE PRICE.
20.1 Fixed Consideration. Upon the execution and delivery of
this Agreement, and against the execution and delivery by the Seller and the
Stockholder of those agreements and instruments pursuant to Section 7.2 below,
the Buyer is paying to the Seller, by wire transfer of immediately available
funds to the account designated by the Seller on the date hereof, an amount
equal to the difference of (i) $8,038,736, minus (ii) an amount equal to the
aggregate outstanding balance (principal, accrued interest and any other
charges) as of and through March 1, 1997 of all capital lease obligations,
financing agreements and other commitments in respect of the Fixed Assets, all
as determined in accordance with generally accepted accounting principles
(collectively, the "Debt"). In furtherance hereof, the Seller has prepared,
and the Buyer has verified, a schedule of the Debt as of March 1, 1997,
indicating aggregate Debt of $1,519,261 as of March 1, 1997, thereby yielding
a payment to the Seller of $6,519,475 pursuant to this Section 3.1.
20.2 Contingent Consideration.
(a) As additional consideration for the Assets, in the
event that, on or before September 21, 1997, the Buyer or any subsidiary of
the Buyer, in its sole and absolute discretion, enters into a binding
agreement (the "Scripps Agreement") to provide ultrasound and non-invasive
cardiovascular procedures to Scripps Health System ("Scripps"), the Buyer
shall cause DHS, and DHS hereby agrees, to issue to the Seller (or, if the
transactions contemplated by that certain Stock Purchase Agreement of even
date herewith by and among DHS, DHS Management Services, Inc., and the
Stockholder (the "Stock Purchase Agreement") have been consummated, then to
the Stockholder), within thirty (30) days after the execution and delivery of
the Scripps Agreement by all parties thereto, a warrant to purchase a number
of shares of common stock of DHS ("Warrant Shares") equal to 10% of the number
of dollars that the Buyer and the Stockholder agree in good faith to be the
estimated gross revenues to be received by the Buyer and/or its subsidiaries
under the Scripps Agreement during the first twelve months of the Scripps
Agreement. The exercise price for the Warrant Shares under any warrant
hereunder shall, subject to adjustment as provided in the warrant, be equal to
the last reported sale price of the common stock of DHS ("Common Stock") on
the date on which the Scripps Agreement is fully executed and delivered, and
the warrant shall be in substantially the form of Exhibit A annexed hereto
(with all blanks appropriately completed). In the event and to the extent
that the actual gross revenues received by the Buyer and its subsidiaries
under the Scripps Agreement during the first twelve months of the Scripps
Agreement are greater or less than the estimated gross revenues utilized to
calculate the initial number of Warrant Shares, then the parties shall, in
good faith, within ninety (90) days after the close of the first twelve months
under the Scripps Agreement, adjust the number of Warrant Shares (up or down)
by a number equal to 10% (or such adjusted percentage, in accordance with
Section 3.2(b) below, as was originally utilized to calculate the number of
Warrant Shares) of the dollar difference between such actual gross revenues
and the estimated gross revenues.
(b) In the event that, at any time and from to time from
and after the date hereof, there shall occur any stock split, recapitalization
or other subdivision of the outstanding Common Stock, or the payment of a
stock dividend in respect of the outstanding Common Stock, or any combination,
consolidation, reverse stock split or other such event relating to the
outstanding Common Stock, then the 10% number set forth in Section 3.2(a)
above shall be proportionately adjusted (on an arithmetic basis) to correspond
to the increase or decrease in the number of outstanding shares of Common
Stock arising by reason of such event. Further, in the event of any merger,
consolidation or other such transaction in which DHS (or any successor
thereto) is not the surviving corporation, then the warrant hereunder shall be
with respect to an amount of securities or other property which the
warrantholder would have been entitled to receive upon such merger,
consolidation or other such transaction had the warrant been exercised in full
immediately prior to the effective date of such merger, consolidation or other
transaction.
20.3 Total Consideration. The consideration payable pursuant to
Section 3.1 above is hereinafter referred to as the "Fixed Consideration", and
the consideration payable pursuant to Sections 3.1 and 3.2 above is
hereinafter referred to (singly and collectively) as "Consideration".
20.4 Allocation of Consideration. The Fixed Consideration shall
be allocated, as among the Assets, in accordance with Schedule 3.4 annexed
hereto. Any value which, in accordance with generally accepted accounting
principles, is required to be ascribed to that portion of the Consideration
under Section 3.2 above, shall be allocated to good will.
21. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER.
In connection with the sale of the Assets to the Buyer, the Seller
and the Stockholder hereby jointly and severally represent and warrant to the
Buyer as follows:
21.1 Organization, Good Standing and Qualification. The Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of California, and the Stockholder is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, each with full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby,
and to own its assets and conduct its business as owned and conducted on the
date hereof. The Seller is not required to be qualified to do business as a
foreign corporation under the laws of any jurisdiction.
21.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Seller and the Stockholder have been duly and
validly authorized by the Board of Directors of the Seller, and by the
Stockholder (as the sole stockholder of the Seller). No further corporate
authorization is required on the part of the Seller or the Stockholder to
consummate the transactions contemplated hereby.
21.3 Valid and Binding Agreements. This Agreement and the Bill
of Sale, the Assumption Agreement and the Non-Competition Agreement (as such
terms are hereinafter defined), constitute the legal, valid and binding
obligations of the Seller and the Stockholder (to the extent a party thereto),
enforceable against the Seller and the Stockholder in accordance with their
respective terms, except to the extent limited by bankruptcy, insolvency,
reorganization and other laws affecting creditors' rights generally, and
except that the remedy of specific performance or similar equitable relief is
available only at the discretion of the court before which enforcement is
sought.
21.4 No Breach of Statute or Contract. Neither the execution
and delivery of this Agreement, the Bill of Sale, the Assumption Agreement or
the Non-Competition Agreement by the Seller and the Stockholder (to the extent
a party thereto), nor compliance with the terms and provisions of this
Agreement, the Bill of Sale, the Assumption Agreement and the Non-Competition
Agreement on the part of the Seller and the Stockholder (to the extent a party
thereto), will: (a) violate any statute or regulation of any governmental
authority, domestic or foreign, affecting the Seller or the Stockholder (b)
require the issuance of any authorization, license, consent or approval of any
federal or state governmental agency or any other person; or (c) conflict with
or result in a breach of any of the terms, conditions or provisions of the
articles or certificate of incorporation or by-laws of the Seller or the
Stockholder or any judgment, order, injunction, decree, agreement or
instrument to which the Seller or the Stockholder is a party, or by which the
Seller or the Stockholder is bound, or constitute a default thereunder.
Except as set forth in Schedule 4.4 annexed hereto, the Seller has obtained,
and there is in full force and effect, all consents of lessors and other
persons which may be required in order to effect the transfer and assignment
to the Buyer of all leases and other contractual rights included in the
Assets.
21.5 Ownership of Ultrasound Business. No portion of the
Ultrasound Business is owned or operated by any person or entity other than
the Seller, and none of the assets or properties (other than those leased by
the Seller as lessee) utilized in the Ultrasound Business is owned by any
person or entity other than the Seller.
21.6 Financial Information.
(a) Annexed hereto as Schedule 4.6(a) are the unaudited
statements of operations and general ledgers of the Ultrasound Business as of
December 31, 1993, December 31, 1994, December 31, 1995, and December 31,
1996, and for the fiscal years then ended, as prepared by management of the
Seller (the "Ultrasound Business Financial Statements").
(b) The Ultrasound Business Financial Statements represent
the Seller's best estimate, on a pro forma basis, of the separate financial
position and results of operations of the Ultrasound Business as of the dates
thereof and for the periods reflected therein. The foregoing representation
and warranty is qualified by noting that, included within the Ultrasound
Business Financial Statements are the results of operations for the Scripps
Chula Vista MRI (which are primarily included in miscellaneous income,
equipment, rental, moving, salaries, and repairs and maintenance), as to which
the Seller has made available to the Buyer the appropriate books and records
required to make the necessary eliminations in the review of the Ultrasound
Business Financial Statements.
(c) Except as expressly set forth in the Ultrasound
Business Financial Statements as of December 31, 1996 (the "1996 Financial
Statements") and/or in the Schedules to this Agreement, or arising in the
normal course of the Ultrasound Business since December 31, 1996, there are,
as at the date hereof, no liabilities or obligations (including, without
limitation, any tax liabilities or accruals) of the Ultrasound Business,
including any contingent liabilities, that are, in the aggregate, material.
(d) Schedule 4.6(d) annexed hereto contains: (i) an aging
schedule of the accounts receivable of the Ultrasound Business as of February
28, 1997, in summary form; (ii) an accrued payables listing (unaged) as of
December 31, 1996 for the Ultrasound Business; (iii) a list of the outstanding
principal balance of and approximate accrued interest on all indebtedness
(other than accounts payable), loans and/or notes payable of the Seller as of
December 31, 1996; (iv) a list of any leasehold or other contractual
obligations of the Seller to the Stockholder and/or any of its Affiliates on
the date hereof; (v) a list of all obligations of the Ultrasound Business
guaranteed by the Stockholder and/or any of its Affiliates on the date hereof,
and the terms of such guarantees; (vi) a list reflecting the nature and amount
of all obligations owed to the Seller on the date hereof by the Stockholder
and/or any of its Affiliates; and (vii) a list reflecting the nature and
amount of all obligations owed by the Seller on the date hereof to the
Stockholder and/or any of its Affiliates. Wherever used in this Agreement,
the term "Affiliate" means, as respects any person or entity, any other person
or entity that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with the first person
or entity.
21.7 No Material Changes. Except as
and to the extent described in Schedule 4.7 annexed hereto (which Schedule may
make reference to any other Schedule hereto) and/or in the 1996 Financial
Statements, since December 31, 1996, the Ultrasound Business has been operated
only in the ordinary course, and there has not been:
(a) any material change in the financial condition,
operations or business of the Ultrasound Business from that shown in the 1996
Financial Statements and for the period then ended, any material acquisition
or disposition of assets in the Ultrasound Business, or any other material
transaction or commitment relating to the Ultrasound Business which was
effected or entered into outside of the normal course of the Ultrasound
Business;
(b) any damage, destruction or loss, whether covered by
insurance or not, materially and adversely affecting the business, operations,
assets, properties, financial condition or prospects of the Ultrasound
Business;
(c) any declaration, payment or setting aside of any
dividend or other distribution (other than in cash) of any assets or property
utilized in the Ultrasound Business to the Stockholder or any of its
Affiliates;
(d) any material increase in the rate of salary or
compensation paid or payable to any employee, consultant or other person
performing services in the Ultrasound Business; or
(e) any other event or condition arising from or out of the
operations of the Seller or the Stockholder which has or will materially and
adversely affect the business, financial condition, results of operations or
prospects of the Ultrasound Business.
21.8 Tax Returns and Tax Audits.
(a) Except as and to the extent disclosed in Schedule
4.8(a) annexed hereto: (i) all federal, state and local tax returns and tax
reports required to be filed by the Seller on or before the date of this
Agreement have been timely filed with the appropriate governmental agencies in
all jurisdictions in which such returns and reports are required to be filed;
(ii) all federal, state and local income, franchise, sales, use, property,
excise, unemployment, payroll withholding and other taxes (including interest
and penalties and including estimated tax installments where required to be
filed and paid) due from or with respect to the Seller as of the date of this
Agreement have been fully paid, and appropriate accruals have been made on the
Seller's books for taxes not yet due and payable; (iii) all taxes and other
assessments and levies which the Seller is required by law to withhold or to
collect have been duly withheld and collected, and have been paid over to the
proper governmental authorities to the extent due and payable on or before the
date of this Agreement; and (iv) there are no outstanding or pending claims,
deficiencies or assessments for taxes, interest or penalties with respect to
any taxable period of the Seller.
(b) Except as set forth in Schedule 4.8(b) annexed hereto,
there are no audits pending with respect to any federal, state or local tax
returns of the Seller, and no waivers of statutes of limitations have been
given or requested with respect to any tax years or tax filings of the Seller.
21.9 Personal Property; Liens. The Seller has and owns good and
indefeasible title to all of the personal property utilized in the Ultrasound
Business, free and clear of all liens, pledges, claims, security interests and
encumbrances whatsoever, except for: (a) rights of lessors in respect of
those Fixed Assets which are leased by the Seller; (b) liens which solely
secure the deferred purchase price of machinery, equipment, vehicles and/or
other fixed assets, as indicated on Schedule 4.9; (c) liens for current taxes
of the Seller which are not yet due and payable or which are being contested
in good faith by appropriate proceedings and for which proper reserves have
been established by the Seller; and (d) liens, pledges, claims, security
interests, encumbrances, conditions or restrictions which are not,
individually or in the aggregate, material in character or amount and do not
interfere with the use made or presently proposed to be made of any such
property (collectively, "Permitted Liens"). All material items of machinery,
equipment, vehicles and other Fixed Assets owned or leased by the Seller and
utilized in the Ultrasound Business are listed in Schedule 4.9 annexed hereto,
and, except as and to the extent disclosed in Schedule 4.9, all of such Fixed
Assets are in good operating condition and repair (reasonable wear and tear
excepted) and are adequate for their use in the Ultrasound Business as
presently conducted, and are sufficient for the continued conduct of the
Ultrasound Business.
21.10 Real Property.
(a) The Seller does not own or have any interest of any
kind (whether ownership, lease or otherwise) in any real property utilized in
the Ultrasound Business except the Seller's leasehold interests under the
leases for the business premises (in Los Angeles and San Diego) occupied by
the Seller and utilized in the Ultrasound Business, true and complete copies
of which are included within Schedule 4.10 (the "Leases").
(b) The Seller (and, to the best of the Seller's and the
Stockholder's knowledge, the landlords thereunder) are presently in compliance
with all of their obligations under the Leases, and the premises leased
thereunder are in good condition (reasonable wear and tear excepted) and are
adequate for the operation of the Ultrasound Business as presently conducted
therefrom.
21.11 Inventories. All supplies and other inventories shown on
the balance sheets included in the 1996 Financial Statements, and all
inventories thereafter acquired in the Ultrasound Business, have been and are
valued at cost, and consisted or consist of items which are of a quality and
quantity which are usable in the ordinary course of the Ultrasound Business.
21.12 Insurance Policies. Schedule 4.12 annexed hereto
contains a true and correct schedule of all insurance coverages held by the
Seller concerning the Ultrasound Business and the Seller's assets and
properties (including but not limited to professional liability insurance and
a statement, as to all professional liability insurance, of whether such
insurance is on an "occurrence" or a "claims made" basis). All premiums due
and payable to the date hereof in respect of such insurance coverages have
been paid, and all of such coverages are presently in full force and effect.
Neither the Seller nor the Stockholder is aware of any grounds upon which any
insurer might properly cancel or refuse to renew any of the Seller's existing
insurance coverages. Nothing herein contained shall be deemed to constitute a
representation, warranty or assurance as to the transference with the Assets
of any of the insurance coverages listed on Schedule 4.12, except as and to
the extent provided in Section 9.5 below.
21.13 Permits and Licenses. The Seller possesses all required
permits, licenses and/or franchises, from whatever governmental authorities or
agencies (domestic and/or foreign) requiring the same and having jurisdiction
over the Seller, necessary in order to operate the Ultrasound Business in the
manner presently conducted, all of which permits, licenses and/or franchises
are valid, current and in full force and effect, except where the failure to
have or maintain any such permit, license and/or franchise would not have a
material adverse effect on the Seller or the Ultrasound Business. The Seller
has heretofore conducted the Ultrasound Business in compliance with the
requirements of such permits, licenses and/or franchises, and the Seller has
not received written notice of any default or violation in respect of or under
any of such permits, licenses and/or franchises except where such default
would not have a material adverse effect on the Seller or the Ultrasound
Business.
21.14 Contracts and Commitments.
(a) Schedule 4.14 annexed hereto lists all material
contracts, leases, commitments, indentures and other agreements relating to
the Ultrasound Business to which the Seller is a party (collectively,
"Material Contracts"), except that Schedule 4.14 need not list any such
agreement that is listed on any other Schedule hereto, or was entered into in
the ordinary course of the Ultrasound Business and that, in any case: (i) is
for the purchase of supplies or other inventory items in the ordinary course
of the Ultrasound Business; (ii) is related to the purchase or lease of any
capital asset involving aggregate payments of less than $25,000 per annum; or
(iii) may be terminated by the Seller without penalty, premium or liability on
not more than thirty (30) days' prior written notice; provided, however, that
Schedule 4.14 shall list any agreement or arrangement (written or verbal)
between the Seller (on the one hand) and any physicians or persons known to
the Seller or the Stockholder to be Affiliates of any physicians (on the other
hand), regardless of the amount of payments called for, required or made
thereunder.
(b) To the best of the Seller's and the Stockholder's
knowledge, except as set forth in Schedule 4.14: (i) all Material Contracts
are in full force and effect; (ii) the Seller is in compliance in all material
respects with all of its obligations under the Material Contracts, and has not
received any written notice that any party to any Material Contract is in
material breach or default of such Material Contract or is now subject to any
condition or event which has occurred and which, after notice or lapse of time
or both, would constitute a material default by any party under any such
contract, lease, agreement or commitment; and (iii) none of the Material
Contracts will be voided, revoked or terminated, or voidable, revocable or
terminable, upon and by reason of the assignment thereof to the Buyer pursuant
to this Agreement.
(c) To the best of the Seller's and the Stockholder's
knowledge, no outstanding purchase commitment relating to the Ultrasound
Business is materially in excess of the normal, ordinary and usual
requirements of the Ultrasound Business.
(d) Except as set forth in Schedule 4.14, the Seller does
not have any outstanding contracts with or commitments to officers, employees,
physicians, technicians, agents, consultants or advisors relating to the
Ultrasound Business that are not cancelable by the Seller without penalty,
premium or liability (for severance or otherwise) on less than thirty (30)
days' prior written notice.
21.15 Customers and Suppliers. Neither the Seller nor the
Stockholder (a) has received any written notice of any existing, announced or
anticipated changes in the policies of any material clients, customers,
referral sources or suppliers of the Seller which will materially adversely
affect the Ultrasound Business as presently conducted, or (b) has actual
knowledge of any bankruptcy, insolvency or other such proceeding or condition
relating to any material clients or customers of the Ultrasound Business.
21.16 Labor, Benefit and Employment Agreements.
(a) Except as set forth in Schedule 4.16 annexed hereto,
the Seller is not a party to and has no commitment or obligation in respect of
(i) any collective bargaining agreement or other labor agreement, or (ii) any
agreement with respect to the employment or compensation of any non-hourly
and/or non-union employee(s) of the Ultrasound Business. Schedule 4.16 sets
forth the amount of all compensation or remuneration (including any
discretionary bonuses) paid by the Seller during the 1996 calendar year to
employees or consultants of the Ultrasound Business who then received or
presently receive aggregate compensation or remuneration at an annual rate in
excess of $35,000.
(b) No union is now certified or, to the best of the
Seller's and the Stockholder's knowledge, claims to be certified as a
collective bargaining agent to represent any employees of the Ultrasound
Business, and there are no labor disputes existing or, to the best of the
Seller's and the Stockholder's knowledge, threatened, involving strikes,
slowdowns, work stoppages, job actions or lockouts of any employees of the
Ultrasound Business.
(c) There are no unfair labor practice charges or petitions
for election pending or being litigated before the National Labor Relations
Board or any other federal or state labor commission relating to any employees
of the Ultrasound Business. Neither the Seller nor the Stockholder has
received any written notice of any actual or alleged violation by the Seller
of any law, regulation, order or contract term affecting the collective
bargaining rights of employees, equal opportunity in employment, or employee
health, safety, welfare, or wages and hours.
(d) With respect to any "multiemployer plan" (as defined in
Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) to which the Seller or any of its Affiliates has at any
time been required to make contributions, neither the Seller nor any of its
Affiliates has, at any time on or after April 29, 1980, suffered or caused any
"complete withdrawal" or "partial withdrawal" (as such terms are respectively
defined in Sections 4203 and 4205 of ERISA) therefrom on its part.
(e) Except as disclosed in Schedule 4.16, the Seller does
not maintain, or have any liabilities or obligations of any kind with respect
to, any bonus, deferred compensation, pension, profit sharing, retirement or
other such benefit plan, or any potential or contingent liability in respect
of any actions or transactions relating to any such plan other than to make
contributions thereto if, as and when due in respect of periods subsequent to
the date hereof. Without limitation of the foregoing, (i) the Seller has made
all required contributions to or in respect of any and all such benefit plans,
(ii) no "accumulated funding deficiency" (as defined in Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code")) has been incurred in
respect of any of such benefit plans, and the present value of all vested
accrued benefits thereunder does not, on the date hereof, exceed the assets of
any such plan allocable to the vested accrued benefits thereunder, (iii) there
has been no "prohibited transaction" (as defined in Section 4975 of the Code)
with respect to any such plan, and no transaction which could give rise to any
tax or penalty under Section 4975 of the Code or Section 502 of ERISA, and
(iv) there has been no "reportable event" (within the meaning of Section
4043(b) of ERISA) with respect to any such plan. All of such plans which
constitute, are intended to constitute, or have been treated by the Seller as
"employee pension benefit plans" or other plans within Section 3 of ERISA have
been determined by the Internal Revenue Service to be "qualified" under
Section 401(a) of the Code, and have been administered and are in compliance
with ERISA and the Code; and neither the Seller nor the Stockholder has any
knowledge of any state of facts, conditions or occurrences such as would
impair the "qualified" status of any of such plans.
(f) Except for the group insurance programs listed in
Schedule 4.16, the Seller does not maintain any medical, health, life or other
employee benefit insurance programs or any welfare plans (within the meaning
of Section 3(1) of ERISA) for the benefit of any current or former employees,
and, except as required by statutory law, the Seller does not have any
liability, fixed or contingent, for health or medical benefits to any former
employee.
21.17 Compliance with Laws.
(a) The Seller is in compliance in all material respects
with all laws, statutes, regulations, rules and ordinances applicable to the
conduct of its business as presently constituted; and neither the Seller nor
the Stockholder has received written notice of any default or violation under
or in respect of any of the foregoing. The Seller is not presently in
material violation of any requirements of any its insurance carriers.
(b) Without limitation of Section 4.17(a) above, the Seller
has not, at any time during the three (3) year period prior to the effective
date hereof, (i) handled, stored, generated, processed, released or disposed
of any hazardous substances in violation of any federal, state or local
environmental laws or regulations, or (ii) otherwise committed any material
violation of any federal, state or local environmental laws or regulations
(including, without limitation, the provisions of the Environmental Protection
Act, the Comprehensive Environmental Responsibility and Cleanup Act, and other
applicable environmental statutes and regulations) or any material violation
of the Occupational Safety and Health Act.
(c) Neither the Seller nor, to the best of the Seller's and
the Stockholder's knowledge, any of the Seller's directors, officers or
employees has received any written notice of default or violation, nor, to the
best of the Seller's and the Stockholder's knowledge, is the Seller or any of
its directors, officers or employees in default or violation, with respect to
any judgment, order, writ, injunction, decree, demand or assessment issued by
any court or any federal, state, local, municipal or other governmental
agency, board, commission, bureau, instrumentality or department, domestic or
foreign, relating to any aspect of the Seller's business, affairs, properties
or assets. Neither of the Seller nor, to the best of the Seller's and the
Stockholder's knowledge, any of the Seller's directors, officers or employees,
has received written notice of, been charged with, or is under investigation
with respect to, any violation of any provision of any federal, state, local,
municipal or other law or administrative rule or regulation, domestic or
foreign, relating to any aspect of the Seller's business, affairs, properties
or assets, which violation would have a material adverse effect on the Seller
or the Ultrasound Business.
(d) Schedule 4.17 sets forth the date(s) of the last known
audits or inspections (if any) of the Seller conducted by or on behalf of the
Environmental Protection Agency, the Occupational Safety and Health
Administration, the federal Department of Health and Human Services and/or any
agency thereof (including, without limitation, the Healthcare Financing
Administration) or intermediary acting on its behalf, any corresponding or
comparable state or local governmental department, agency or authority, and
any other governmental and/or quasi-governmental agency (federal, state and/or
local).
21.18 Litigation. Except as disclosed in Schedule 4.18 annexed
hereto, there is no suit, action, arbitration, or legal, administrative or
other proceeding, or governmental investigation (including, without
limitation, any claim alleging the invalidity, infringement or interference of
any patent, patent application, or rights thereunder owned or licensed by the
Seller) pending, or to the best knowledge of the Seller and the Stockholder,
threatened, by or against the Seller. Neither the Seller nor the Stockholder
is aware of any state of facts, events, conditions or occurrences which might
properly constitute grounds for or the basis of any suit, action, arbitration,
proceeding or investigation against or with respect to the Seller which, if
adversely determined, would have a material adverse effect on the Ultrasound
Business.
21.19 Patents, Licenses and Trademarks. Schedule 4.19 annexed
hereto correctly sets forth a list and brief description of the nature and
ownership of: (a) all patents, patent applications, copyright registrations
and applications, registered trade names, and trademark registrations and
applications, both domestic and foreign, which are presently owned, filed or
held by the Seller, any of its Affiliates, and/or any of their respective
directors, officers or employees and which in any way relate to or are used in
the Ultrasound Business; (b) all licenses, both domestic and foreign, which
are owned or controlled by the Seller, any of its Affiliates, and/or any of
its directors, officers or employees and which in any way relate to or are
used in the Ultrasound Business; and (c) all franchises, licenses and/or
similar arrangements granted to the Seller by others and/or to others by any
Seller. None of the patents, patent applications, copyright registrations or
applications, registered trade names, trademark registrations or applications,
franchises, licenses or other arrangements set forth or required to be set
forth in Schedule 4.19 is subject to any pending challenge known to the Seller
or the Stockholder. The Seller has the valid right to utilize all trade names
and other intellectual property utilized in the Ultrasound Business, and the
Seller has not received any written notice of any claimed infringement of any
such intellectual property with the right or property of any other person.
Nothing herein contained shall be deemed to constitute a representation,
warranty or assurance as to the transference with the Assets of the name
"Diagnostic Imaging Services".
21.20 Transactions with Affiliates. No material asset utilized
in the Ultrasound Business is owned by, leased from or leased to the
Stockholder or any of its Affiliates (other than the Seller).
21.21 Sensitive Payments. Neither the Seller nor the
Stockholder has any reason to believe that the Seller has (a) made any
contributions, payments or gifts to or for the private use of any governmental
official, employee or agent where either the payment or the purpose of such
contribution, payment or gift is illegal under the laws of the United States
or the jurisdiction in which made, (b) established or maintained any
unrecorded fund or asset for any purpose or made any false or artificial
entries on its or their books, (c) given or received any payments or other
forms of remuneration in connection with the referral of patients which would
violate the Medicare/Medicaid Anti-Kickback Law, Section 1128(b) of the Social
Security Act, 42 U.S.C. § 1320a-7b(b), or any analogous state statute, or
(d) made any payments to any person with the intention that any part of such
payment was to be used for any purpose other than that described in the
documents supporting the payment.
21.22 Going Concern. Neither the Seller nor the Stockholder has
any knowledge of any fact, event, circumstance or condition (including,
without limitation, any announced or anticipated changes in the policies of
any material client or customer) that would materially impair the ability of
the Buyer, from and after the Closing (as such term is hereinafter defined),
to continue the Ultrasound Business in substantially the manner heretofore
conducted, other than general, industry-wide conditions.
21.23 Hart-Scott-Rodino. Primedex Health Systems, Inc.
("Primedex") is the "ultimate parent entity" of the Stockholder and the Seller
within the meaning of such term as set forth in the regulations promulgated
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the "net sales" of Primedex, within the meaning of the
regulations under the HSR Act, were less than $100,000,000 in the fiscal year
of Primedex ended October 31, 1996.
21.24 Disclosure and Duty of Inquiry. Neither DHS nor the Buyer
is or will be required to undertake any independent investigation to determine
the truth, accuracy and completeness of the representations and warranties
made by the Seller and the Stockholder in this Agreement.
22. REPRESENTATIONS AND WARRANTIES OF THE BUYER AND DHS.
In connection with the purchase of the Assets from the Seller
hereunder, the Buyer and DHS hereby jointly and severally represent and
warrant to the Seller as follows:
22.1 Organization, Good Standing and Qualification. The Buyer
is a corporation duly organized, validly existing and in good standing under
the laws of the State of California, and DHS is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
each with all necessary power and authority to execute and deliver this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby.
22.2 Authorization of Agreement. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by the Buyer and DHS have been duly and validly authorized
by the Board of Directors and sole stockholder of the Buyer, and by the Board
of Directors of DHS; and the Buyer and DHS have the full legal right, power
and authority to execute and deliver this Agreement, to perform their
respective obligations hereunder, and to consummate the transactions
contemplated hereby. No further corporate authorization is necessary on the
part of the Buyer or DHS to consummate the transactions contemplated hereby.
22.3 Valid and Binding Agreement. This Agreement and the
Non-Competition Agreement constitute the legal, valid and binding obligations
of the Buyer and DHS (to the extent a party thereto), enforceable against the
Buyer and DHS in accordance with their respective terms, except, in each case,
to the extent limited by bankruptcy, insolvency, reorganization and other laws
affecting creditors' rights generally, and except that the remedy of specific
performance or similar equitable relief is available only at the discretion of
the court before which enforcement is sought.
22.4 No Breach of Statute or Contract. Neither the execution
and delivery of this Agreement or the Non-Competition Agreement by the Buyer
or DHS nor compliance with the terms and provisions of this Agreement or the
Non-Competition Agreement on the part of the Buyer or DHS, will: (a) violate
any statute or regulation of any governmental authority, domestic or foreign,
affecting the Buyer or DHS; (b) require the issuance to the Buyer or DHS of
any authorization, license, consent or approval of any federal or state
governmental agency; or (c) conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree,
note, indenture, loan agreement or other agreement or instrument to which the
Buyer or DHS is a party, or by which the Buyer or DHS is bound, or constitute
a default thereunder.
22.5 Warrant Authorization; DHS Shares. The issuance of the
warrant pursuant to Section 3.2 above has been authorized by all necessary
corporate action on the part of DHS; upon any issuance of such warrant, all
shares of Common Stock purchasable upon exercise thereof shall have been duly
reserved for issuance upon such exercise; and, if, as and when issued upon
exercise of such warrant, all shares of Common Stock so issued shall have been
duly authorized and validly issued, and shall be fully paid and
non-assessable.
22.6 Disclosure and Duty of Inquiry. The Seller is not and will
not be required to undertake any independent investigation to determine the
truth, accuracy and completeness of the representations and warranties made by
the Buyer and DHS in this Agreement.
23. ADDITIONAL AGREEMENTS OF THE PARTIES.
23.1 Confidentiality. Notwithstanding anything to the contrary
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon any party under applicable state or federal
securities or antitrust laws, it is expressly understood and agreed by the
parties that, except with respect to matters or information which are publicly
available other than by reason of a breach of this Section 6.1, (i) this
Agreement, the Schedules hereto, and the conversations, negotiations and
transactions relating hereto and/or contemplated hereby, and (ii) all
financial information, business records and other non-public information
concerning either party which the other party or its representatives has
received, shall be maintained in the strictest confidence by the recipient and
its representatives, and shall not be disclosed to any person that is not
associated or affiliated with the recipient and involved in the transactions
contemplated hereby, without the prior written approval of the party which
provided the information. The parties hereto shall use their best efforts to
avoid disclosure of any of the foregoing or undue disruption of any of the
business operations or personnel of the parties, and no party shall issue any
press release or other public announcement regarding the transactions
contemplated hereby without the prior approval of each other party (such
approval not to be unreasonably withheld or delayed) unless compelled to do so
upon advice of counsel and there is insufficient time to practicably obtain
approval hereunder.
24. CLOSING.
24.1 Place and Date of Closing. The consummation of the
transactions contemplated by this Agreement (the "Closing") is taking place at
the offices of the Stockholder located at 1516 Cotner Avenue, Los Angeles,
California 90025-3303, simultaneously with the execution and delivery of this
Agreement, but all effective as of March 1, 1997.
24.2 Actions at Closing. At the Closing, the parties and their
Affiliates are taking the following actions:
(a) The Buyer is wire transferring to the Seller the Fixed
Consideration;
(b) The Seller is executing and delivering to the Buyer a
bill of sale in respect of the Assets (the "Bill of Sale");
(c) The Buyer and the Seller are executing and delivering
to each other an assignment and assumption agreement in respect of the Assumed
Liabilities (the "Assumption Agreement");
(d) DHS, the Buyer, Primedex, the Stockholder and the
Seller are executing and delivering to one another a Non-Competition and
Non-Disclosure Agreement (the "Non-Competition Agreement"), and the Buyer is
causing the "Non-Competition Payment" thereunder to be paid to the Stockholder
and Primedex;
(e) The parties are taking such further action and making
such further deliveries as they deem necessary and appropriate in order to
consummate the transactions contemplated by this Agreement; and
(f) DHS, DHS Management Services, Inc. ("DHSMS"), and the
Stockholder are executing and delivering to one another a Stock Purchase
Agreement of even date herewith, pursuant to which DHSMS will have the right
and option, subject to the terms and conditions thereof, to purchase all of
the issued and outstanding capital stock of the Seller (subject to a prior
reconfiguration of the Seller's business as provided in such Stock Purchase
Agreement).
25. INDEMNIFICATION.
25.1 General.
(a) From and after the effective date hereof, the Seller
and the Stockholder shall jointly and severally defend, indemnify and hold
harmless the Buyer and DHS from, against and in respect of any and all claims,
losses, costs, expenses, obligations, liabilities, damages, recoveries and
deficiencies, including interest, penalties and reasonable attorneys' fees,
that the Buyer and/or DHS may incur, sustain or suffer ("Losses") as a result
of (i) any breach of, or failure by the Seller or the Stockholder to perform,
any of the representations, warranties, covenants or agreements of the Seller
and/or the Stockholder contained in this Agreement, and/or (ii) any failure by
the Seller to pay or perform when due any of the Excluded Liabilities from and
after March 1, 1997.
(b) From and after the effective date hereof, the Buyer and
DHS shall jointly and severally defend, indemnify and hold harmless the Seller
from, against and in respect of any and all claims, losses, costs, expenses,
obligations, liabilities, damages, recoveries and deficiencies, including
interest, penalties and reasonable attorneys' fees, that the Seller may incur,
sustain or suffer as a result of (i) any breach of, or failure by the Buyer or
DHS to perform, any of the representations, warranties, covenants or
agreements of the Buyer or DHS contained in this Agreement, and/or (ii) any
failure by the Buyer to pay or perform when due any of the Assumed
Liabilities.
25.2 Limitations on Certain Indemnity.
(a) Notwithstanding any other provision of this Agreement
to the contrary, except for Losses arising out of claims for breach of any of
the warranties made under Sections 4.1, 4.2, 4.4, 4.5, 4.8 and/or 4.20 above,
or any Losses described in Section 8.1(a)(ii) above, or any Losses involving
proven fraud by the Seller or the Stockholder, neither the Seller nor the
Stockholder shall not be liable to the Buyer or DHS with respect to Losses
unless and until, and then only to the extent that, the aggregate amount of
all Losses incurred by the Buyer or DHS shall exceed the sum of $50,000 (the
"Basket"). The Seller and the Stockholder shall thereafter be liable for all
Losses in excess of the Basket, provided that the Seller's and the
Stockholder's maximum aggregate liability in respect of all Losses shall not,
in the absence of proven fraud by the Seller or the Stockholder in respect of
any particular Losses, in any event exceed the limitations set forth in
Section 8.2(b) below.
(b) Except with respect to any Losses involving proven
fraud by the Seller or the Stockholder, or any Losses of the type described in
Section 8.1(a)(ii) above, the Seller and the Stockholder shall only be
required, in the aggregate, to pay indemnification hereunder, after
application of the Basket, up to a maximum amount equal to the Fixed
Consideration.
(c) Except with respect to (i) Losses arising under Section
4.1, 4.2, 4.4 or 4.5 above, (ii) Losses of the type described in Section
8.1(a)(ii) above, or (iii) any particular Losses the non-discovery of which is
attributable in whole or significant part to any proven fraud by the Seller or
the Stockholder (as to which Losses claims may be made hereunder within the
applicable statute of limitations), the Buyer and DHS shall be entitled to
indemnification by the Seller and the Stockholder for Losses only in respect
of claims for which notice of claim shall have been given to the Seller and
the Stockholder on or before March 31, 1998, or, with respect to Losses
relating to a breach of any warranties under Section 4.8 above, the expiration
of the final statute of limitations for those tax returns covered by the
warranties under Section 4.8 above; provided, however, that neither the Buyer
nor DHS shall be entitled to indemnification from the Seller or the
Stockholder in the event that the subject claim for indemnification relates to
a third-party claim and the Buyer or DHS (as the case may be) delayed giving
notice thereof to the Seller and the Stockholder to such an extent as to cause
material prejudice to the defense of such third-party claim.
(d) Anything elsewhere contained in this Agreement to the
contrary notwithstanding, upon the consummation of the transactions
contemplated by the Stock Purchase Agreement, the Seller shall be relieved of
all indemnification obligations under this Agreement (including but not
limited to (i) liabilities for any pending claims, and (ii) liability to the
Stockholder for contribution in respect of claims previously paid), and all
liability for indemnification which may be payable to the Buyer or DHS
pursuant to this Agreement shall thereafter constitute the sole obligation of
the Stockholder.
25.3 Claims for Indemnity. Whenever a claim shall arise for
which any party shall be entitled to indemnification hereunder, the
indemnified party shall notify the indemnifying party in writing within ten
(10) business days of the indemnified party's first receipt of notice of, or
the indemnified party's obtaining actual knowledge of, such claim, and in any
event within such shorter period as may be necessary for the indemnifying
party or parties to take appropriate action to resist such claim. Such notice
shall specify all facts known to the indemnified party giving rise to such
indemnity rights and shall estimate (to the extent reasonably possible) the
amount of potential liability arising therefrom. If the indemnifying party
shall be duly notified of such dispute, the parties shall attempt to settle
and compromise the same or may agree to submit the same to arbitration or, if
unable or unwilling to do any of the foregoing, such dispute shall be settled
by appropriate litigation, and any rights of indemnification established by
reason of such settlement, compromise, arbitration or litigation shall
promptly thereafter be paid and satisfied by those indemnifying parties
obligated to make indemnification hereunder.
25.4 Right to Defend. If the facts giving rise to any claim
for indemnification shall involve any actual or threatened action or demand by
any third party against the indemnified party or any of its Affiliates, the
indemnifying party or parties shall be entitled (without prejudice to the
indemnified party's right to participate at its own expense through counsel of
its own choosing), at their expense and through counsel of their own choosing,
to defend or prosecute such claim in the name of the indemnifying party or
parties, or any of them, or if necessary, in the name of the indemnified
party. In any event, the indemnified party shall give the indemnifying party
advance written notice of any proposed compromise or settlement of any such
claim. If the remedy sought in any such action or demand is solely money
damages, the indemnifying party shall have fifteen (15) days after receipt of
such notice of settlement to object to the proposed compromise or settlement,
and if it does so object, the indemnifying party shall be required to
undertake, conduct and control, though counsel of its own choosing and at its
sole expense, the settlement or defense thereof, and the indemnified party
shall cooperate with the indemnifying party in connection therewith.
26. POST-CLOSING EVENTS.
The parties hereby further agree that, from and after the Closing:
26.1 Books and Records. At any time and from time to time from
and after the Closing, the Buyer shall permit the Seller and the Stockholder
to have access, during normal business hours and without undue disruption of
the Buyer's business, to those books and records included in the Assets, for
purposes of preparing any tax filings or any other legitimate purpose of the
Seller or the Stockholder. Such books and records may be made available at
any location where the Buyer maintains same, and all costs and expenses
relating to such access and inspection shall be the responsibility of the
Stockholder. In the event that, at any time and from time to time after the
Closing, the Buyer shall determine to destroy or dispose of any such books and
records, the Buyer shall give notice thereof to the Stockholder not less than
thirty (30) days prior to such disposition, and the Stockholder shall have the
right, at its own cost and expense, to take possession of such books and
records prior to their disposition.
26.2 Employee Matters; Benefit Plan Matters.
(a) The Buyer shall honor all accrued benefits owed to
employees of the Ultrasound Business, to the extent accounted for in the price
adjustment pursuant to Section 9.6 below. In the event that the Buyer shall
determine to terminate the employment of any such employees subsequent to the
date hereof, then all severance payments (if any) arising from such
termination shall be the responsibility of the Buyer, except to the extent
that any such benefits relate to accruals which should have been but were not
accounted for in the price adjustment pursuant to Section 9.6 below. Nothing
contained in this Section 9.2(a) shall be deemed to constitute any assurance
or guaranty of employment to any employees of the Ultrasound Business.
(b) The Stockholder shall comply with all requirements of
law in order to permit the employees of the Ultrasound Business to withdraw
the amounts in their respective accounts in the Stockholder's 401(k) plan and
any other employee benefit plan(s) covering employees of one or more
Stockholder-affiliated or Primedex-affiliated entities in addition to the
Seller.
(c) Nothing contained in this Agreement shall be deemed to
abrogate or impair the right of the Buyer to determine which employees will be
retained in the Ultrasound Business from and after the date hereof, and/or the
compensation and benefits to be paid to those employees retained in the
Ultrasound Business from and after the date hereof; provided, however, that,
subject to any required waiting periods and eligibility criteria, the Buyer
will cause all employees retained in the Ultrasound Business from and after
the date hereof to be offered the opportunity to participate in the group
health programs generally offered to employees of DHS and its subsidiaries.
26.3 Lessor Consents. To the extent that, at any time from and
after the execution and delivery of this Agreement, the Seller has not
obtained any required consent of any lessor in respect of either of the
Assumed Property Leases and/or any of the Assets for the assignment and
assumption of the subject lease to and by the Buyer pursuant to this
Agreement, then (a) the Seller shall use its best efforts to obtain such
consent as promptly as practicable, without undue expense or the creation of
any obligation which may thereafter be binding on the Buyer, and (b) pending
the Seller's obtaining of any such consent, the Seller shall make the subject
properties or assets available for use by the Buyer in the Ultrasound
Business, in consideration of the Buyer's payment to the Seller of the
corresponding payment required under the subject lease.
26.4 Accounts Receivable.
(a) In the event and to the extent that the Buyer shall,
from and after the Closing, receive payment of any accounts receivable of the
Seller (which accounts receivable shall expressly exclude any rights to
payment for services rendered in the Ultrasound Business from and after March
1, 1997), the Buyer shall be deemed to have received such payment in trust for
the benefit of the Seller, and the Buyer shall immediately turn over to the
Seller any payments so received in the form received (subject to any necessary
endorsement).
(b) In the event and to the extent that the Seller shall,
from and after the Closing, receive payment of any accounts receivable or
other rights to payment in respect of goods sold and/or services rendered in
the Ultrasound Business from and after March 1, 1997, the Seller shall be
deemed to have received such payment in trust for the benefit of the Buyer,
and the Seller shall immediately turn over to the Buyer any payments so
received in the form received (subject to any necessary endorsement).
26.5 Professional Liability Insurance. To the extent that any
of the professional liability insurance currently maintained by or for the
benefit of the Ultrasound Business shall be on a "claims made" basis, and the
Buyer is unable to obtain professional liability insurance covering claims
made against the Ultrasound Business subsequent to the date hereof but in
respect of events or occurrences which took place on or prior to the date
hereof, the Stockholder shall obtain for the Buyer, subject to the Buyer's
payment of the applicable premium therefor, "tail" coverage in respect of any
such claims.
26.6 Price Adjustment. On or before May 31, 1997, the Buyer and
the Seller shall agree in good faith on the amount of all accrued vacation pay
(paid time off), wellness pay, sick days and other such items relating to
employees of the Ultrasound Business accrued and outstanding as of March 1,
1997, and the aggregate amount thereof (a) shall constitute an adjustment to
the Fixed Consideration for all purposes of this Agreement, and (b) shall be
paid by the Seller to the Buyer on or before May 31, 1997.
26.7 Interim Period Revenues and Expenses.
(a) Within thirty (30) days following the execution and
delivery of this Agreement, (i) to the extent not previously invoiced, the
Seller shall render, in the name of the Buyer, to the appropriate clients and
customers, invoices for all goods sold and/or services rendered in the
Ultrasound Business during the period from March 1, 1997 through and including
March 21, 1997, all of which invoices (and the accounts receivable thereby
represented) shall constitute part of the Assets, and (ii) the Seller shall
deliver to the Buyer a written schedule indicating the dates, amounts and
invoice numbers of all such invoices. To the extent that the Seller has
received payment of any of such accounts receivable (including payments
received prior to the execution and delivery of this Agreement) and has not
turned same over to the Buyer pursuant to Section 9.4(b) at the time of
delivery of such schedule, the Seller shall effect delivery and/or payment
thereof to the Buyer concurrently with the delivery of the schedule of the
accounts receivable. Nothing contained in this Section 9.7(a) shall be deemed
to abrogate or impair the Seller's obligations pursuant to Section 9.4(b)
above, both before and after the required delivery of the accounts receivable
schedule.
(b) On or before May 31, 1997, the Buyer and the Seller
shall agree in good faith on the amount of any and all cash expenditures made
by the Seller in the Ultrasound Business with respect to the period from March
1, 1997 through and including March 21, 1997, and the Buyer shall reimburse
the Seller for any and all such expenditures on or before May 31, 1997.
(c) The parties hereby confirm their intention that all
revenues and expenses of the Ultrasound Business from and after March 1, 1997
are for the account of the Buyer, and to the extent that any taxes shall be
payable on or in respect of the net income of the Ultrasound Business for
periods from and after March 1, 1997, such taxes shall, as between the Buyer
and the Seller, constitute the sole responsibility of the Buyer; and the Buyer
shall defend, indemnify and hold harmless the Seller and the Stockholder from
and in respect of any and all such tax obligations.
26.8 Removal of MRI Unit. The Seller shall, as soon as
reasonably practicable but in any event on or before August 31, 1997, remove
from the Los Angeles office of the Ultrasound Business the MRI system and
associated peripherals currently maintained by the Seller in such office, and
relocate such MRI system and associated peripherals to the Seller's Parkside
MRI facility or such other facility as the Sellere may determine.
26.9 Further Assurances. From time to time from and after the
Closing, the parties will take any and all such action and execute and deliver
to one another any and all further agreements, instruments, certificates and
other documents, as may reasonably be requested by any other party in order
more fully to consummate the transactions contemplated hereby, and to effect
an orderly transition of the ownership and operations of the Ultrasound
Business.
27. COSTS.
27.1 Finder's or Broker's Fees. Each of the Buyer and DHS (on
the one hand) and the Seller and Stockholder (on the other hand) represents
and warrants that neither they nor any of their respective Affiliates have
dealt with any broker or finder in connection with any of the transactions
contemplated by this Agreement, and no broker or other person is entitled to
any commission or finder's fee in connection with any of these transactions.
27.2 Expenses. The Buyer, DHS, the Seller and the Stockholder
shall each pay all of their own respective costs and expenses incurred or to
be incurred by them, respectively, in negotiating and preparing this Agreement
and in closing and carrying out the transactions contemplated by this
Agreement.
28. FORM OF AGREEMENT.
28.1 Effect of Headings. The Section headings used in this
Agreement and the titles of the Schedules hereto are included for purposes of
convenience only, and shall not affect the construction or interpretation of
any of the provisions hereof or of the information set forth in such
Schedules.
28.2 Entire Agreement; Waivers. This Agreement (including the
Schedules and Exhibits hereto) constitutes the entire agreement between the
parties pertaining to the subject matter hereof, and supersedes all prior
agreements or understandings as to such subject matter. No party hereto has
made any representation or warranty or given any covenant to the other except
as set forth in this Agreement and the Schedules and Exhibits hereto. No
waiver of any of the provisions of this Agreement shall be deemed, or shall
constitute, a waiver of any other provisions, whether or not similar, nor
shall any waiver constitute a continuing waiver. No waiver shall be binding
unless executed in writing by the party making the waiver.
28.3 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.
29. PARTIES.
29.1 Parties in Interest. Nothing in this Agreement, whether
expressed or implied, is intended to confer any rights or remedies under or by
reason of this Agreement on any persons other than the parties to it and their
respective successors and permitted assigns, nor is anything in this Agreement
intended to relieve or discharge the obligations or liability of any third
persons to any party to this Agreement, nor shall any provision give any third
persons any right of subrogation or action over or against any party to this
Agreement.
29.2 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given on the date of service if served personally on or
telecopied to the party to whom notice is to be given, one day after being
deposited for overnight delivery with a recognized overnight courier service
in a properly addressed package with all charges prepaid or billed to the
account of the sender, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed as follows:
(a) If to the Seller or the Stockholder:
c/o Diagnostic Imaging Services, Inc.
1516 Cotner Avenue
Los Angeles, California 90025-3303
Attn: Howard G. Berger, M.D.
Fax No. (310) 478-5810
(b) If to the Buyer or DHS:
c/o Diagnostic Health Services, Inc.
2777 Stemmons Freeway, Suite 1525
Dallas Texas 75207
Attn: Mr. Brad A. Hummel
Fax No. (214) 689-6459
with a copy sent concurrently to:
Greenberg Traurig Hoffman et al.
153 East 53rd Street, 35th Floor
New York, New York 10022
Attn: Shahe Sinanian, Esq.
Fax No. (212) 223-7161
or to such other address or telecopier number as any party shall have
specified by notice in writing given to all other parties.
30. MISCELLANEOUS.
30.1 Amendments and Modifications. No amendment or
modification of this Agreement or any Exhibit or Schedule hereto shall be
valid unless made in writing and signed by the party to be charged therewith.
30.2 Non-Assignability; Binding Effect. Neither this Agreement,
nor any of the rights or obligations of the parties hereunder, shall be
assignable by any party hereto without the prior written consent of all other
parties hereto, except that (a) DHS and the Buyer may, without requirement of
any consent of the Seller or the Stockholder, assign DHS' and the Buyer's
rights to indemnification hereunder to any secured lender to DHS and/or the
Buyer from time to time, and (b) subsequent to the Closing, the Seller may,
without requirement of any consent of the Buyer or DHS, assign any or all of
the Seller's rights (including, without limitation, rights to indemnification)
hereunder to the Stockholder or any Affiliate of the Stockholder. Otherwise,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
30.3 Governing Law; Jurisdiction. This Agreement shall be
construed and interpreted and the rights granted herein governed in accordance
with the laws of the State of Texas applicable to contracts made and to be
performed wholly within such State. Except as otherwise provided in Section
8.3 above, any claim, dispute or controversy arising under or in connection
with this Agreement or any actual or alleged breach hereof shall be settled
exclusively by arbitration in Dallas, Texas in accordance with the commercial
arbitration rules of the American Arbitration Association then obtaining. As
part of his or her award, the arbitrator shall make a fair allocation of the
fee of the American Arbitration Association, the cost of any transcript, and
the parties' reasonable attorneys' fees, taking into account the merits and
good faith of the parties' claims and defenses. Judgment may be entered on
the award so rendered in any court having jurisdiction. Any process or other
papers hereunder may be served by registered or certified mail, return receipt
requested, or by personal service, provided that a reasonable time for
appearance or response is allowed.
IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
DIAGNOSTIC HEALTH SERVICES, INC
By:
SOCAL DIAGNOSTIC SERVICES, INC.
By:
DIAGNOSTIC IMAGING SERVICES, INC., a California corporation
By:
DIAGNOSTIC IMAGING SERVICES,
INC., a Delaware corporation
By:
