ASSET PURCHASE AGREEMENT EXHIBIT 1
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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:
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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:
1. ASSETS
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1.1 Acquired Assets. Subject to the terms and conditions of this
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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
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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
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leases listed on Schedule 4.10 (the "Assumed Property Leases"), and all customer
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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.
1.2 Excluded Assets. Notwithstanding anything in this Agreement to
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the contrary, the Assets shall not include, and the Seller shall retain, the
following assets (the "Excluded Assets"):
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(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.
2. LIABILITIES.
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2.1 Assumed Liabilities. Subject to the terms and conditions of this
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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;
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(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.
2.2 Excluded Liabilities. Notwithstanding anything to the contrary
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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 ▇▇▇▇▇ ▇, ▇▇▇▇, (▇) 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
▇▇▇▇▇ ▇, ▇▇▇▇, (▇) 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
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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").
3. PURCHASE PRICE.
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3.1 Fixed Consideration. Upon the execution and delivery of this
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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.
3.2 Contingent Consideration.
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(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
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annexed hereto (with all blanks appropriately completed). In the event and to
the extent that the actual gross revenues
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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.
3.3 Total Consideration. The consideration payable pursuant to
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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".
3.4 Allocation of Consideration. The Fixed Consideration shall be
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allocated, as among the Assets, in accordance with Schedule 3.4 annexed hereto.
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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.
4. REPRESENTATIONS AND WARRANTIES OF THE SELLER AND THE STOCKHOLDER.
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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:
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4.1 Organization, Good Standing and Qualification. The Seller is a
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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.
4.2 Authorization of Agreement. The execution, delivery and
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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.
4.3 Valid and Binding Agreements. This Agreement and the ▇▇▇▇ of
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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.
4.4 No Breach of Statute or Contract. Neither the execution and
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delivery of this Agreement, the ▇▇▇▇ 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 ▇▇▇▇ 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
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annexed hereto, the Seller has obtained, and there is in full
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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.
4.5 Ownership of Ultrasound Business. No portion of the Ultrasound
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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.
4.6 Financial Information.
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(a) Annexed hereto as Schedule 4.6(a) are the unaudited statements of
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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
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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
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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.
4.7 No Material Changes. Except as and to the extent described in
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Schedule 4.7 annexed hereto (which Schedule may make reference to any other
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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.
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4.8 Tax Returns and Tax Audits.
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(a) Except as and to the extent disclosed in Schedule 4.8(a) annexed
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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
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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.
4.9 Personal Property; Liens. The Seller has and owns good and
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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
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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
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disclosed in Schedule 4.9, all of such Fixed Assets are in good operating
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condition and repair (reasonable wear and tear excepted) and are adequate for
their use in the Ultrasound Business
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as presently conducted, and are sufficient for the continued conduct of the
Ultrasound Business.
4.10 Real Property.
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(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").
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(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.
4.11 Inventories. All supplies and other inventories shown on the
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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.
4.12 Insurance Policies. Schedule 4.12 annexed hereto contains a
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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
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provided in Section 9.5 below.
4.13 Permits and Licenses. The Seller possesses all required
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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
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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.
4.14 Contracts and Commitments.
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(a) Schedule 4.14 annexed hereto lists all material contracts, leases,
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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
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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
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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
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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.
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(d) Except as set forth in Schedule 4.14, the Seller does not have any
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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.
4.15 Customers and Suppliers. Neither the Seller nor the
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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.
4.16 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.
-13-
(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.
-14-
4.17 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,
-15-
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 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.
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 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".
4.20 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).
4.21 Sensitive Payments. Neither the Seller nor the Stockholder has
------------------
any reason to believe that the Seller has (a) made
-16-
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. (S) 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. 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.
4.23 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. 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 ▇▇▇▇-
▇▇▇▇▇-▇▇▇▇▇▇ 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.
4.24 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.
5. 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:
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 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
-17-
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 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.
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) 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 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.
5.6 Disclosure and Duty of Inquiry. The Seller is not and will not
------------------------------
be required to undertake any independent investigation
-18-
to determine the truth, accuracy and completeness of the representations and
warranties made by the Buyer and DHS in this Agreement.
6. ADDITIONAL AGREEMENTS OF THE PARTIES.
------------------------------------
6.1 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.
7. CLOSING.
-------
7.1 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 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-
3303, simultaneously with the execution and delivery of this Agreement, but all
effective as of March 1, 1997.
7.2 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 ▇▇▇▇ of sale
in respect of the Assets (the "▇▇▇▇ of Sale");
-19-
(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).
8. INDEMNIFICATION.
---------------
8.1 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
-20-
Agreement, and/or (ii) any failure by the Buyer to pay or perform when due any
of the Assumed Liabilities.
8.2 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
-21-
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.
8.3 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.
8.4 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.
-22-
9. POST-CLOSING EVENTS.
-------------------
The parties hereby further agree that, from and after the Closing:
9.1 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.
9.2 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
-23-
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.
9.3 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.
9.4 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).
9.5 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.
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9.6 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.
9.7 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.
9.8 Removal of MRI Unit. The Seller shall, as soon as reasonably
-------------------
practicable but in any event on or before August 31,
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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 Seller may determine.
9.9 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.
10. COSTS.
-----
10.1 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.
10.2 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.
11. FORM OF AGREEMENT.
-----------------
11.1 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.
11.2 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.
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11.3 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.
12. PARTIES.
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12.1 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.
12.2 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.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to the Buyer or DHS:
c/o Diagnostic Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent concurrently to:
▇▇▇▇▇▇▇▇▇ Traurig ▇▇▇▇▇▇▇ et al.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
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or to such other address or telecopier number as any party shall have specified
by notice in writing given to all other parties.
13. MISCELLANEOUS.
-------------
13.1 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.
13.2 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.
13.3 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement on and as of
the date first set forth above.
DIAGNOSTIC HEALTH SERVICES, INC
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
------------------------------
SOCAL DIAGNOSTIC SERVICES, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇, President
------------------------------
DIAGNOSTIC IMAGING SERVICES, INC., A
CALIFORNIA CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
------------------------------
DIAGNOSTIC IMAGING SERVICES,
INC., A DELAWARE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
------------------------------
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