STOCK PURCHASE AGREEMENT Exhibit 1
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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:
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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 ▇▇▇▇▇▇▇ Valley MRI
Center, the Tarzana Regional Medical Center and the Santa ▇▇▇▇▇▇ 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.
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1.1 Purchase and Sale. Subject to the terms and conditions of this
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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.
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2. PURCHASE PRICE.
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2.1 Closing Date Payment. On the Closing Date, against delivery of
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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.
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(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
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A annexed hereto (the "Valuation Letter"). Unless, in any instance, the
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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.
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(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
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Sections 2.1 and 2.2 above is hereinafter collectively referred to as the
"Consideration".
3. BOOKS AND RECORDS.
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3.1 Delivery of Records. On the Closing Date, in addition to the
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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.
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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
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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
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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.
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(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
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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
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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.
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4.4 Capital Structure; Equity Ownership.
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(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
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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
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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.
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(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 ▇▇▇▇▇▇ 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
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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 ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ 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
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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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Imaging Center and the Company's and
the Corporate Subsidiary's interest therein.
4.6 Financial Information.
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(a) Annexed hereto as Schedule 4.6(a) are: (i) the audited financial
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statements of the Chino Valley MRI Center (f/k/a Inland Community MRI Center),
the San ▇▇▇▇▇▇▇ 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 &
▇▇▇▇▇▇▇ (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 ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇
Unaudited Financial Statements"). The Three Centers Audited Financial
Statements, the Three Centers Unaudited Financial Statements and the Santa
▇▇▇▇▇▇ Unaudited Financial Statements are herein collectively referred to as the
"Imaging Centers Financial Statements".
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(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
▇▇▇▇▇▇ Unaudited Financial Statements for all periods through the second quarter
of 1996 include the operations of the Santa ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ 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
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the accounts receivable of the Three Centers as of December 31, 1996 and an
aging schedule of the accounts receivable of the Santa ▇▇▇▇▇▇ 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 ▇▇▇▇▇▇ Imaging
Center, and an accounts payable distribution report for the six months ending
February 28, 1997 for the Three Centers and the Santa ▇▇▇▇▇▇ 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
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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 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.
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(a) Except as and to the extent disclosed in Schedule 4.8(a) annexed
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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
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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
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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
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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
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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
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the extent disclosed in Schedule 4.9, all of such fixed assets are in good
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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.
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(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
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leases for business premises occupied by the Companies, true and
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complete copies of which are included within Schedule 4.10 (the "Leases").
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(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
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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
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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
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below.
4.13 Permits and Licenses. Each Company 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 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
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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.
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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 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
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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
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(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)
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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.
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(d) Except as set forth in Schedule 4.14, none of the Companies has
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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
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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 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
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Agreements.
(a) Except as set forth in Schedule 4.16 annexed hereto, none of the
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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
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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,
- 12 -
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.
- 13 -
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
- 14 -
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).
- 15 -
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. (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. 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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. 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 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ 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.
- 16 -
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
- 17 -
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.
- 18 -
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
- 19 -
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
- 20 -
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
- 21 -
(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 ▇▇▇▇▇▇ 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
- 22 -
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
- 23 -
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 ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, 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
▇▇▇▇▇▇ Imaging
- 24 -
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
- 25 -
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:
- 26 -
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, ▇▇▇▇▇ &
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
- 27 -
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 ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇-▇▇▇▇, 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
- 28 -
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
- 29 -
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
- 30 -
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
- 31 -
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
- 32 -
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
- 33 -
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
- 34 -
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.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, M.D.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
- 35 -
(b) If to the Buyer or DHS:
Diagnostic Health Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
with a copy sent concurrently to:
▇▇▇▇▇▇▇▇▇ Traurig ▇▇▇▇▇▇▇ et al.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
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
- 36 -
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:___________________________
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Exhibits
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A - Valuation Letter
B - Non-Competition Agreement
C - Facilities Services Agreement
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