Exhibit 10.30

SHARE PURCHASE AGREEMENT

by and among

NIGHTHAWK RADIOLOGY HOLDINGS, INC.

and

TELERADIOLOGY DIAGNOSTIC SERVICE, INC.

and

WILSON S. WONG, M.D., PROFESSIONAL CORP.

and

THE SHAREHOLDERS OF TELERADIOLOGY DIAGNOSTIC SERVICE, INC. and WILSON S.

WONG, M.D., PROFESSIONAL CORP.

and

WILSON WONG, M.D., as SHAREHOLDER REPRESENTATIVE

FEBRUARY 9, 2007

--------------------------------------------------------------------------------

TABLE OF CONTENTS

 

           Page

ARTICLE I DEFINITIONS

   1

1.1

   Capitalized Terms    1

1.2

   Construction    7

ARTICLE II SALE AND PURCHASE OF SHARES; CLOSING

   8

2.1

   Shares    8

2.2

   Consideration    8

2.3

   Closing.    8

2.4

   Withholding Rights    8

ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY

   8

3.1

   Organization    9

3.2

   Authority    9

3.3

   Capital Stock    9

3.4

   Conflict    10

3.5

   Acquired Company Financial Statements    10

3.6

   Indebtedness; Guaranties    11

3.7

   Accounts Receivable    11

3.8

   Cash Equivalents/Bank Accounts    11

3.9

   Absence of Changes    12

3.10

   Legal and Other Compliance    14

3.11

   Contracts    15

3.12

   Restrictions on Business Activities    16

3.13

   Governmental Approvals    16

3.14

   Title to Properties, Absence of Liens, Condition of Equipment    17

3.15

   Intellectual Property    18

3.16

   Litigation    20

3.17

   Insurance    20

3.18

   Tax Matters    21

3.19

   Environmental Matters    23

3.20

   Brokers’ and Finders’ Fees    24

3.21

   Employee and Contractor Matters    24

3.22

   Consents    28

3.23

   Government Contracts    28

3.24

   Books and Records    29

3.25

   Medical Liability    29

3.26

   Complete Copies of Materials    29

3.27

   Affiliate Transactions    29

3.28

   Customers and Suppliers    29

3.29

   Representations Complete    30

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER

   30

4.1

   Authority    30

4.2

   No Conflict    30

ARTICLE V ADDITIONAL AGREEMENTS

   31

5.1

   Access Pending the Closing    31

 

-i-

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(continued)

 

          Page

5.2

   Operation of the Business by the Acquired Companies    31

5.3

   Conduct Prior to Closing    32

5.4

   Confidentiality    33

5.5

   No Solicitation    33

5.6

   Notification of Certain Matters    34

5.7

   Public Disclosure    34

5.8

   Consents    34

5.9

   Legal Requirements    34

5.10

   Additional Documents and Further Assurances    34

5.11

   Tax Matters    35

5.12

   Merger of Acquired Companies    36

5.13

   Closing Balance Sheet    36

5.14

   Employee Plans    36

ARTICLE VI CONDITIONS TO THE CLOSING

   36

6.1

   Conditions to Obligations of Each Party    36

6.2

   Additional Conditions to the Obligations of Buyer    37

6.3

   Additional Conditions to Obligations of Acquired Companies and Sellers    38

ARTICLE VII ESCROW

   39

7.1

   Escrow Fund    39

7.2

   Escrow Period    39

7.3

   Distributions of Escrow Fund    39

7.4

   Treatment of the Escrow Fund    40

ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

   40

8.1

   Survival of Representations and Warranties    40

8.2

   Indemnification of Buyer    40

8.3

   Limitation on Claims    40

8.4

   Order of Claims    41

8.5

   Indemnification Procedure    41

8.6

   Resolution of Conflicts; Arbitration    41

8.7

   Third-Party Claims    42

8.8

   Shareholder Representative    42

8.9

   Indemnification of Sellers    43

ARTICLE IX TERMINATION, AMENDMENT AND WAIVER

   43

9.1

   Termination    43

9.2

   Effect of Termination    44

9.3

   Amendment    44

9.4

   Extension; Waiver    44

ARTICLE X GENERAL PROVISIONS

   44

10.1

   Notices    44

10.2

   Expenses    45

10.3

   Entire Agreement; Assignment    45

 

-ii-

--------------------------------------------------------------------------------

TABLE OF CONTENTS

(continued)

 

          Page

10.4

   Severability    45

10.5

   Other Remedies    45

10.6

   Rights Reservation    46

10.7

   Governing Law    46

10.8

   Specific Performance    46

10.9

   Waiver of Jury Trial    46

10.10

   Resolution of Conflicts; Arbitration    46

10.11

   Counterparts    47

10.12

   Representation by Counsel    47

 

-iii-

--------------------------------------------------------------------------------

SHARE PURCHASE AGREEMENT

This SHARE PURCHASE AGREEMENT (the “Agreement”) is made and entered into as of
February 9, 2007 among NightHawk Radiology Holdings, Inc., a Delaware
corporation (“Buyer”); Teleradiology Diagnostic Service, Inc., a California
corporation (“Management Company”); Wilson S. Wong, M.D., Professional Corp., a
California professional corporation (“Professional Company”); Wilson Wong, M.D.,
an individual, as Shareholder Representative; and the undersigned shareholders
of the Management Company and Professional Company (individually, a “Seller” and
collectively, “Sellers”).

RECITALS

A. Buyer desires to purchase from Sellers, and Sellers desire to sell to Buyer,
all of the issued and outstanding shares (the “Shares”) of the Acquired
Companies, for the consideration and on the terms set forth in this Agreement.

B. Concurrent with the execution and delivery of this Agreement, as a material
inducement to Buyer to enter into this Agreement, each of the Key Employees (as
defined below) shall execute and deliver to Buyer an employment offer letter in
form and substance satisfactory to Buyer and each such Key Employee (“Employment
Agreement”), which shall be conditioned on and effective upon the Closing.

C. Concurrent with the execution and delivery of this Agreement, as a material
inducement to Buyer to enter into this Agreement, each of the Sellers shall
execute and deliver to Buyer a non-competition agreement and a general release,
each in form and substance satisfactory to Buyer and each such Seller
(“Non-Competition Agreement” and “General Release,” respectively), which shall
be conditioned on and effective upon the Closing.

NOW, THEREFORE, in consideration of the covenants, promises and representations
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

ARTICLE I

DEFINITIONS

1.1 Capitalized Terms. The following capitalized terms shall have the meanings
set forth below:

(a) “Accounts Receivable” shall have the meaning set forth in Section 3.7.

(b) “Acquired Companies” shall mean the Management Company and the Professional
Company, including the Professional Company as the surviving corporation of the
Acquired Company Merger.

(c) “Acquired Company Contracts” shall have the meaning set forth in
Section 3.11.

(d) “Acquired Company Customers” shall have the meaning set forth in
Section 3.28.

(e) “Acquired Company Financial Statements” shall have the meaning set forth in
Section 3.5.

--------------------------------------------------------------------------------

(f) “Acquired Company Intellectual Property” shall mean Technology and
Intellectual Property Rights, including Acquired Company Registered Intellectual
Property Rights, that: (i) are embodied in, or are necessary to use, any service
of the Acquired Companies; (ii) were developed by or for an Acquired Company for
use in the conduct of the Business; (iii) are used in or necessary to the
conduct of the Business; or (iv) are owned or exclusively licensed by any of the
Acquired Companies.

(g) “Acquired Company Merger” shall have the meaning set forth in Section 5.12.

(h) “Acquired Company Registered Intellectual Property Rights” shall mean all
Registered Intellectual Property Rights at any time owned or controlled by or
for, filed in the name of or applied for, or otherwise held by or for the
benefit of either of the Acquired Companies.

(i) “Acquired Company Tax Return” shall mean any Tax Return filed by or on
behalf of either of the Acquired Companies.

(j) “Acquired Company Year-End Financials” shall have the meaning set forth in
Section 3.5.

(k) “Acquisition Proposal” shall have the meaning set forth in Section 5.5.

(l) “Agreement” shall have the meaning set forth in the preamble above, together
with all exhibits and schedules hereto.

(m) “Books and Records” shall mean all papers and records (in paper or
electronic format) in the care, custody or control of the Acquired Companies
including, without limitation, all purchasing and sales records, stock records,
minutes of meetings and other actions of the board of directors and shareholders
of the Acquired Companies, customer and vendor lists, accounting and financial
records, product documentation and specifications, and marketing documents.

(n) “Business” shall mean all of the operations, activities, services and
products of the Acquired Companies as currently conducted and as proposed to be
conducted, including without limitation the marketing and performance of
professional teleradiology services.

(o) “Charter Documents” shall have the meaning set forth in Section 3.1(b).

(p) “Chemical Substance” shall mean any chemical substance which is identified
or regulated under any Environmental Law.

(q) “Closing” shall have the meaning set forth in Section 2.3.

(r) “Closing Adjustment Amount” shall mean the amount, if any, that the Acquired
Companies’ total liabilities exceed their current assets as of the Closing Date,
as reflected on the Closing Balance Sheet (as defined in Section 6.18);
provided, however, that the Closing Adjustment Amount shall not be less than
zero.

(s) “Closing Date” shall have the meaning set forth in Section 2.3.

(t) “COBRA” shall mean the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended and as codified in Section 4980B of the Code and Section 601
et. seq. of ERISA.

 

-2-

--------------------------------------------------------------------------------

(u) “Code” shall mean the United States Internal Revenue Code of 1986, as
amended.

(v) “Collateral Agreements” shall mean the Employment Agreements, the
Non-Competition Agreements, and the General Releases.

(w) “Confidential Information” shall mean all Trade Secrets and other
confidential or proprietary information of a Person that such Person desires
remain secret or confidential, including information derived from reports,
investigations, research, work in progress, codes, marketing and sales programs,
financial projections, cost summaries, pricing formulas, contract analyses,
financial information, projections, confidential filings with any state or
federal agency, and all other confidential concepts, methods of doing business,
ideas, materials or information prepared or performed for, by or on behalf of
such Person by its employees, officers, directors, agents, representatives, or
consultants.

(x) “Conflict” shall mean any event that would constitute a conflict, breach,
violation or default (with or without notice or lapse of time, or both) or give
rise to a right of termination, cancellation, modification or acceleration of
any obligation or loss of any benefit.

(y) “Contract” shall mean any mortgage, indenture, lease, contract, covenant or
other agreement, instrument or commitment, permit, concession, franchise or
license, including any amendment or modifications made thereto.

(z) “Customer Information” shall have the meaning set forth in Section 3.14(e).

(aa) “Development Tools” shall mean development software, development
documentation, compilers, interpreters, system build software, test suites,
testing tools and documentation, support tools, revision control systems and
environments and other materials used in or necessary to the use, development,
testing, maintenance, support, modification or implementation of the products or
other development activities of the Business.

(bb) “Disclosure Letter” shall have the meaning set forth in the preamble to
Article III.

(cc) “DOL” shall mean the U.S. Department of Labor.

(dd) “Employee” shall mean any current or former or retired employee, consultant
or director of the Acquired Companies or any ERISA Affiliate.

(ee) “Employment Agreement” shall have the meaning set forth in Recital B.

(ff) “Employee Agreement” shall mean each management, employment, severance,
consulting, relocation, repatriation, expatriation, visas, work permit or other
agreement, contract or understanding between any Employee and the Acquired
Companies or any ERISA Affiliate.

(gg) “Employee Plan” shall mean any plan, program, policy, practice, contract,
agreement or other arrangement providing for compensation, severance,
termination pay, deferred compensation, performance awards, stock or
stock-related awards, fringe benefits, retention payments, incentive
compensation or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including, without
limitation, each “employee benefit plan” within the meaning of Section 3(3) of
ERISA, which, in each case, is or has been maintained, contributed to, or
required to be contributed to, by the Acquired Companies or any ERISA Affiliate
for the benefit of any Employee, or with respect to which the Acquired Companies
or any ERISA Affiliate has or may have any Liability.

 

-3-

--------------------------------------------------------------------------------

(hh) “Environment” shall mean real property and any improvements thereon, and
also includes, but is not limited to, ambient air, surface water, drinking
water, groundwater, land surface, subsurface strata and water body sediments.

(ii) “Environmental Laws” shall mean any applicable law, regulation or legal
requirement relating to pollution or protection or cleanup of the Environment.

(jj) “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.

(kk) “ERISA Affiliate” shall mean each Subsidiary of the Acquired Companies and
any other person or entity under common control with the Acquired Companies or
any of its Subsidiaries within the meaning of Section 414(b), (c), (m) or (o) of
the Code and the regulations issued thereunder.

(ll) “Escrow Amount” shall mean $1,150,000.

(mm) “Escrow Fund” shall have the meaning set forth in Section 7.1.

(nn) “Escrow Period” shall have the meaning set forth in Section 7.2.

(oo) “Extremely Hazardous Substance” shall have the meaning set forth in
Section 302 of the United States Emergency Planning and Community Right-to-Know
Act of 1986, as amended.

(pp) “FMLA” shall mean the Family Medical Leave Act of 1993, as amended.

(qq) “GAAP” shall mean United States generally accepted accounting principles.

(rr) “Governmental Approval” shall mean any: (i) permit, license, certificate,
concession, approval, consent, ratification, permission, clearance,
confirmation, exemption, waiver, franchise, certification, designation, rating,
registration, variance, qualification, accreditation or authorization issued,
granted, given, required by or otherwise made available by or under the
authority of any Governmental Entity or pursuant to any Legal Requirement; or
(ii) pending application or request for any of the foregoing in (i) above.

(ss) “Governmental Entity” shall mean any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission.

(tt) “Intellectual Property Rights” shall mean any or all of the following and
all statutory and/or common law rights throughout the world in, arising out of,
or associated therewith: (i) all patents and applications therefore, inventor’s
certificates and all reissues, divisions, renewals, extensions, provisionals,
continuations and continuations-in-part thereof (collectively, “Patents”);
(ii) all trade secrets, proprietary information, and know how (collectively,
“Trade Secrets”); (iii) copyrights, copyright registrations and applications,
including moral rights and rights in Software, documentation and databases and
data collections (including knowledge databases, customer lists and customer
databases) (“Copyrights”); (iv) all trade names, logos, trademarks and service
marks; trademark and service mark registrations and applications (collectively,
“Trademarks”); (v) all rights to Uniform Resource Locators, world wide web site
addresses and domain names (collectively, “Domain Rights”); (vi) any similar,
corresponding or equivalent rights to any of the foregoing; and (vii) all
goodwill associated with any of the foregoing.

 

-4-

--------------------------------------------------------------------------------

(uu) “Interim Balance Sheet” shall have the meaning set forth in Section 3.5.

(vv) “International Employee Plan” shall mean each Employee Plan that has been
adopted or maintained by the Acquired Companies or any ERISA Affiliate, whether
informally or formally, or with respect to which the Acquired Companies or any
ERISA Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States.

(ww) “IRS” shall mean the Internal Revenue Service.

(xx) “Key Employees” shall mean Wilson Wong, M.D., Debrey Miao, and Raymond Loh.

(yy) “Legal Requirement” shall mean any federal, state, local, municipal,
foreign or other law, statute, legislation, constitution, ordinance, code,
order, edict, decree, proclamation, treaty, convention, rule, regulation,
permit, ruling, directive, requirement (licensing or otherwise), specification,
determination, decision, opinion or interpretation that is or has been issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Entity.

(zz) “Liability” shall mean any debt, duty, liability or obligation (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
whether incurred or consequential and whether due or to become due), including
any liability for Taxes.

(aaa) “Lien” shall mean any mortgage, pledge, lien, security interest, charge,
claim, equity, encumbrance, restriction on transfer, conditional sale or other
title retention device or arrangement (including, without limitation, a capital
lease), transfer for the purpose of subjection to the payment of any
indebtedness, or restriction on the creation of any of the foregoing, whether
relating to any property or right or the income or profits therefrom.

(bbb) “Loss” and “Losses” shall have the meanings set forth in Section 8.2.

(ccc) “Material Adverse Effect” shall mean any (i) change, event, violation,
inaccuracy, circumstance or effect, individually or when aggregated with such
other changes, events, violations, inaccuracies, circumstances or effects, that
is materially adverse to the Business, assets, products, liabilities, financial
condition, results of operations or prospects of Acquired Companies and their
subsidiaries and affiliates, or (ii) circumstance, change or event that
materially impairs Buyer’s ability to use, sell, license, market, modify, and
operate the assets of the Acquired Companies or operate the Business in
substantially the same manner as the Acquired Companies prior to the date of
this Agreement.

(ddd) “Multiemployer Plan” shall mean any “Pension Plan” which is a
“multiemployer plan,” as defined in Section 3(37) of ERISA.

(eee) “Nondisclosure Agreement” shall have the meaning set forth in Section 5.4.

(fff) “Object Code” shall mean computer software, substantially or entirely in
binary form, which is intended to be directly executable by a computer after
suitable processing and linking but without the intervening steps of compilation
or assembly.

(ggg) “Officer’s Certificate” shall have the meaning set forth in Section 8.5.

 

-5-

--------------------------------------------------------------------------------

(hhh) “Ordinary Course of Business” shall mean the ordinary course of business,
consistent with past practice (including with respect to quantity and
frequency).

(iii) “PBGC” shall mean the Pension Benefit Guaranty Corporation.

(jjj) “Pension Plan” shall mean each Employee Plan which is an “employee pension
benefit plan,” within the meaning of Section 3(2) of ERISA.

(kkk) “Person” shall mean any individual, partnership, firm, corporation,
association, trust, unincorporated organization or other entity, as well as any
syndicate or group of any of the foregoing.

(lll) “Proceeding” shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation that is, has been or may in the future be
commenced, brought, conducted or heard at law or in equity or before any
Governmental Entity.

(mmm) “PTO” shall mean the United States Patent and Trademark Office.

(nnn) “Registered Intellectual Property Rights” shall mean all United States,
international and foreign: (i) Patents and Patent applications (including
provisional applications); (ii) registered Trademarks and applications for
Trademarks, including intent-to-use applications, or other registrations or
applications related to Trademarks; (iii) registered Copyrights and applications
for Copyrights; (iv) domain name registrations; and (v) any other Intellectual
Property Rights that are the subject of an application, certificate, filing,
registration or other document issued, filed with or recorded by any
Governmental Entity.

(ooo) “Release” shall mean any actual or alleged spilling, leaking, pumping,
pouring, emitting, dispersing, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of any Chemical Substance or Extremely Hazardous
Substance into the Environment that would cause an Environmental Liability or
Costs (including the abandonment or discarding of barrels, containers, tanks or
other receptacles containing or previously containing any Chemical Substance).

(ppp) “Shares” shall have the meaning set forth in Recital A.

(qqq) “Software” shall mean any and all computer software and code, including
assemblers, applets, compilers, Source Code, Object Code, data (including image
and sound data), Development Tools, design tools and user interfaces, in any
form or format, however fixed. Software shall include Source Code listings, file
listings, functionality descriptions and documentation.

(rrr) “Source Code” shall mean computer software and code, in form other than
Object Code form, including related programmer comments and annotations, help
text, data and data structures, instructions and procedural, object-oriented and
other code, which may be printed out or displayed in human readable form.

(sss) “Subsidiary” shall mean, with respect to any Person, any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at any time directly or indirectly owned by such Person.

(ttt) “Tax” or “Taxes” shall mean (i) any and all U.S. federal, state, local and
non-U.S. taxes, assessments, and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,

 

-6-

--------------------------------------------------------------------------------

transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts, (ii) any liability for the payment of any amounts of
the type described in clause (i) of this Section 1.1(ttt) as a result of being a
member of an affiliated, consolidated, combined or unitary group for any period
(including any arrangement for group or consortium relief or similar
arrangement), and (iii) any liability for the payment of any amounts of the type
described in clause (i) or (ii) of this Section 1.1(ttt) as a result of any
express or implied obligation to indemnify any other person or as a result of
any obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.

(uuu) “Tax Return” shall mean any U.S. federal, state, local or non-U.S. return,
estimate, declaration, report, claim for refund or information return or
statement relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.

(vvv) “Technology” shall mean all technology, technical and business information
and all tangible embodiments of Intellectual Property Rights, including
Software, Development Tools, systems, files, records, databases, drawings,
artwork, designs, displays, audio-visual works, devices, hardware, apparatuses,
documentation, manuals, specifications, flow charts, web pages, customer lists,
electronic and other data, and other tangible embodiments of, or materials
describing or disclosing, technical or business data, concepts, know-how,
show-how, techniques, Trade Secrets, inventions (whether patentable or
unpatentable), algorithms, formulae, processes, routines, databases, works of
authorship and the like.

(www) “Transaction Expenses” shall have the meaning set forth in Section 10.2.

1.2 Construction.

(a) For purposes of this Agreement, whenever the context requires: the singular
number will include the plural, and vice versa; the masculine gender will
include the feminine and neuter genders; the feminine gender will include the
masculine and neuter genders; and the neuter gender will include the masculine
and feminine genders.

(b) As used in this Agreement, the words “include” and “including” and
variations thereof will not be deemed to be terms of limitation, but rather will
be deemed to be followed by the words “without limitation.”

(c) Except as otherwise indicated, all references in this Agreement to
“Articles,” “Schedules,” “Sections” and “Exhibits” are intended to refer to
Articles, Schedules, Sections and Exhibits to this Agreement.

(d) The headings in this Agreement are for convenience of reference only, will
not be deemed to be a part of this Agreement, and will not be referred to in
connection with the construction or interpretation of this Agreement.

(e) For purposes of this Agreement, the term “knowledge” means with respect to
the Acquired Companies, the actual knowledge of the Key Employees; provided,
that such persons shall have made due and diligent investigation and inquiry of
those employees, consultants, advisors, and other representatives of the
Acquired Companies who have or who would reasonably be expected to have
knowledge of such fact or matter.

 

-7-

--------------------------------------------------------------------------------

ARTICLE II

SALE AND PURCHASE OF SHARES; CLOSING

2.1 Shares. Subject to the terms and conditions of this Agreement, at the
Closing, Sellers will sell and transfer the Shares to Buyer, and Buyer will
purchase the Shares from Sellers.

2.2 Consideration. Subject to the escrow provisions of Article VII, the
aggregate purchase price for the Shares will be $23.0 million less the Closing
Adjustment Amount (the “Purchase Price”), such amount to be divided among the
Sellers in proportion to the number of Shares held by each.

2.3 Closing. The closing of the transactions contemplated by this Agreement (the
“Closing”) will take place at the offices of Buyer at 250 Northwest Boulevard,
Suite 202, Coeur d’Alene, Idaho commencing at 12:00 p.m., Pacific time, two
business days following the satisfaction or written waiver of the last of the
conditions of Closing as set forth in Article VI hereof, or on such other date
as the parties may determine (the “Closing Date”). At the closing, each Seller
will deliver to Buyer executed stock transfer forms accompanied by
certificate(s) representing the Shares held by such Seller (as set forth on
Exhibit A), in each case against payment of the purchase price therefor by
(i) check payable to such Seller or (ii) wire transfer pursuant to wire transfer
instructions provided to Buyer at least two business days prior to the Closing
Date.

2.4 Withholding Rights. Buyer and the Acquired Companies shall be entitled to
deduct and withhold from any amounts otherwise payable pursuant to this
Agreement such amounts as are required to be deducted and withheld with respect
to the making of such payments under the provisions of any applicable Tax laws.
Any such withheld amounts shall be treated for all purposes of this Agreement as
having been paid to the person in respect of which such deduction and
withholding was made.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF COMPANY

The Acquired Companies and the Sellers hereby represent and warrant to Buyer,
subject to the specific exceptions disclosed in the disclosure letter and
schedules thereto dated as of the date hereof (the “Disclosure Letter”), on the
date hereof, and as of the Closing as though made at the Closing, as follows
below. The Disclosure Letter shall be deemed to qualify and to be a part of the
representations and warranties in this Article III, shall be arranged in
sections corresponding to the numbered sections of this Article III, and each
disclosure item in the Disclosure Letter shall reference the specific section
and paragraph numbers of this Agreement to which such disclosure applies.

 

-8-

--------------------------------------------------------------------------------

3.1 Organization.

(a) The Management Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California. The Professional
Company is a professional corporation duly organized, validly existing and in
good standing under the laws of the State of California. Each Acquired Company
has the power and authority to own, lease and operate its assets and properties
and to carry on its business as currently conducted and as currently
contemplated to be conducted. Each Acquired Company is duly qualified or
licensed to do business, to perform its obligations under all Contracts by which
it is bound and is in good standing in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary.

(b) The Acquired Companies have made available to Buyer true and correct copies
of each Acquired Company’s articles of incorporation and bylaws, in each case as
amended through the date hereof (collectively, the “Charter Documents”), and
each such instrument is in full force and effect. Neither Acquired Company is in
violation of any of the provisions of its respective Charter Documents. The
operations now being conducted by the Acquired Companies have not now and have
never been conducted under any other name.

(c) Section 3.1(c) of the Disclosure Letter lists the directors and officers of
each Acquired Company as of the date hereof.

(d) Section 3.1(d) of the Disclosure Letter lists every state or foreign
jurisdiction in which either Acquired Company has employees or facilities or
otherwise carries on business.

(e) The Acquired Companies have no Subsidiaries and have never otherwise owned
any shares of capital stock or any interest in, or had the power to direct the
business and policies of, directly or indirectly, any other corporation, limited
liability company, partnership, association, joint venture or other business
entity.

3.2 Authority. Each of the Acquired Companies and Sellers has all requisite
corporate or other legal power and authority to enter into this Agreement and
the Collateral Agreements required to be executed by it and to consummate the
transactions contemplated hereby and thereby, including without limitation the
Acquired Company Merger. The execution and delivery of this Agreement and the
Collateral Agreements and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of each of the Acquired Companies, and no further action is required
on the part of either Acquired Company, its board of directors or its
shareholders to approve the Agreement and the transactions contemplated hereby.
This Agreement and the Collateral Agreements required to be executed by it has
been duly executed and delivered by each of the Acquired Companies and Sellers
and constitute legal, valid and binding obligations of such Acquired Company or
Seller, enforceable against such Acquired Company or Seller in accordance with
its terms.

3.3 Capital Stock. Immediately prior to the Acquired Company Merger, the
authorized capital stock of the Management Company consisted of 100,000 shares
of Series I Common Stock and 100,000 shares of Series II Common Stock, of which
100,000 shares of Series I Common Stock and 100,000 shares of Series II Common
Stock were issued and outstanding. Immediately prior to the Acquired Company
Merger, the authorized capital stock of the Professional Company consisted of
1,000,000 shares of Common Stock, of which 40,000 shares were issued and
outstanding. Immediately following the Acquired Company Merger and immediately
prior to the Closing, the authorized capital stock of the Professional Company,
the surviving

 

-9-

--------------------------------------------------------------------------------

corporation of the Acquired Company Merger, consisted of 1,000,000 shares of
Common Stock, of which 200,000 shares were issued and outstanding. Section 3.3
of the Disclosure Letter sets forth the outstanding capital stock of (i) each
Acquired Company on a stockholder-by-stockholder basis as of immediately prior
to the Acquired Company Merger, and (ii) the Professional Company, as the
surviving corporation of the Acquired Company Merger, as of immediately prior to
the Closing. All issued and outstanding shares of the capital stock of each
Acquired Company, including the Professional Company following the Acquired
Company Merger, have been or were duly authorized and validly issued, are or
were fully paid and nonassessible, and have been or were issued in compliance
with all applicable laws. There are no options, warrants or rights of conversion
or other rights, agreements, arrangements or commitments obligating the Acquired
Companies, including the Professional Company following the Acquired Company
Merger, to purchase, issue, sell, deliver or transfer any of its shares of
capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or other similar rights with respect to the
Acquired Companies, including the Professional Company following the Acquired
Company Merger. There are no voting trusts, stockholder agreements, proxies or
other agreements in effect with respect to the voting or transfer of the capital
stock of the Acquired Companies, including the Professional Company following
the Acquired Company Merger.

3.4 Conflict. The execution and delivery of this Agreement and the Collateral
Agreements to which it is party by each Acquired Company and Seller does not and
the performance by each Acquired Company and Seller of its obligations hereunder
and thereunder (including effecting the Acquired Company Merger) will not (with
or without the lapse of time) (a) conflict with or violate the Charter
Documents, (b) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to the Sellers or Acquired Companies or by which
any of their assets or properties are bound or affected or give any Governmental
Entity or other person the right to challenge the transactions contemplated
hereby, (c) result in any breach of or constitute a default (or an event that
with notice or lapse of time or both would become a default) under, or impair
the rights of the Acquired Companies or alter the rights or obligations of any
third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a Lien on any of
the assets or properties of the Acquired Companies pursuant to, any note, bond,
mortgage, indenture, Contract, agreement, lease, license, permit, franchise,
concession or other instrument or obligation to which the Sellers or Acquired
Companies are party or by which the Business or the assets or properties of the
Acquired Companies are bound or affected, (d) cause the Acquired Companies or
Buyer to become subject to, or to become liable for the payment of, any Tax, or
(e) give any third party the right to any payment by the Acquired Companies or
give rise to any acceleration or change in the award, grant, vesting or
determination of options, warrants, rights, bonuses, severance payments or other
contingent obligations of any nature whatsoever of the Acquired Companies.
Section 3.4 of the Disclosure Letter lists all consents, waivers and approvals
under any Contracts to which the Acquired Companies or Sellers are parties that
are required to be obtained in connection with the consummation of the
transactions contemplated hereby.

3.5 Acquired Company Financial Statements.

(a) Section 3.5(a) of the Disclosure Letter sets forth true and correct copies
of Acquired Companies’ audited consolidated balance sheets as of December 31,
2004 and December 31, 2005, and December 31, 2006 and the related audited
statements of income and cash flows for the respective twelve-month periods then
ended (the “Acquired Company Financial Statements”). The Acquired Company
Financial Statements are complete and correct in all material respects and have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods indicated, and consistent with each other. The Acquired Company
Financial Statements present fairly the financial condition and operating
results of the Acquired Companies as of the respective dates and for the periods
indicated therein. The Acquired Companies’ consolidated balance sheet as of
December 31, 2006 is referred to herein as the “Interim Balance Sheet.”

 

-10-

--------------------------------------------------------------------------------

(b) Except as set forth on the Interim Balance Sheet, the Acquired Companies
have no Liabilities (whether or not required to be reflected in financial
statements in accordance with GAAP).

(c) Section 3.5(c) of the Disclosure Letter separately identifies any liability,
indebtedness, obligation, expense, claim, deficiency, guarantee or endorsement
of any type, whether accrued, absolute, contingent, matured, unmatured or
otherwise, greater than $25,000, whether or not reflected in the Acquired
Company Financial Statements.

(d) When delivered, the Closing Balance Sheet will be complete and correct in
all material respects and will be prepared in accordance with GAAP applied on a
consistent basis with past periods.

3.6 Indebtedness; Guaranties. The Acquired Companies have no indebtedness for
money borrowed or for the deferred purchase price of property or services,
capital lease obligations, conditional sale or other title retention agreements.
The Acquired Companies are not guarantors or otherwise liable for any Liability
or obligation of any other person or entity for any matter.

3.7 Accounts Receivable.

(a) Section 3.7 of the Disclosure Letter sets forth an accurate and complete
breakdown and aging of all accounts receivable, notes receivable and other
receivables of the Acquired Companies (collectively, “Accounts Receivable”) as
of the date of the Interim Balance Sheet.

(b) All Accounts Receivable of the Acquired Companies (including those Accounts
Receivable reflected on the Interim Balance Sheet that have not yet been
collected and those Accounts Receivable that have arisen since the date of the
Interim Balance Sheet and have not yet been collected) (i) represent valid and
enforceable obligations of customers of the Acquired Companies arising from bona
fide transactions entered into in the Ordinary Course of Business; (ii) will be
collected in accordance with their terms at their recorded amounts, and
(iii) are free and clear of all Liens.

3.8 Cash Equivalents/Bank Accounts.

(a) Section 3.8 of the Disclosure Letter accurately sets forth, with respect to
each account maintained by or for the benefit of the Acquired Companies at any
bank or other financial institution:

(i) the name and location of the institution at which such account is
maintained;

(ii) the name in which such account is maintained and the account number of such
account; and

(iii) the names of all individuals authorized to draw on or make withdrawals
from such account.

(b) The Acquired Companies have full legal and beneficial interest in all cash,
cash equivalents and other financial assets deposited in such accounts, free and
clear of any Liens.

 

-11-

--------------------------------------------------------------------------------

3.9 Absence of Changes. Except as set forth in Section 3.9 of the Disclosure
Letter or in the footnotes to the Acquired Companies’ audited consolidated
balance sheet as of December 31, 2006 and the related audited statements of
income and cash flows for the twelve-month period (the “2006 Financial
Statements”), since January 1, 2006 and except as contemplated by this
Agreement, the Acquired Companies have conducted the Business only in the
Ordinary Course of Business and there has been no occurrence, event, incident,
action, failure to act or transaction outside the Ordinary Course of Business.
Without limiting the generality of the foregoing, and except as set forth in
Section 3.9 of the Disclosure Letter or in the footnotes to the 2006 Financial
Statements:

(a) There have been no events or changes in the condition (financial or
otherwise), business, net worth, assets, properties, operations, obligations or
liabilities of the Acquired Companies which, individually or in the aggregate,
have had or would be reasonably expected to have a Material Adverse Effect;

(b) The Acquired Companies have not mortgaged, pledged or otherwise encumbered
any of their assets or properties;

(c) The Acquired Companies have not sold, assigned, licensed, leased,
transferred or conveyed, or committed themselves to sell, assign, license,
lease, transfer or convey, any of their assets or properties;

(d) There has been no destruction of, damage to or loss of any of the Acquired
Companies’ assets or properties;

(e) The Acquired Companies have not accelerated, terminated, modified or
cancelled any agreement, contract, lease or license (or series of related
agreements, contracts, leases, and licenses);

(f) The Acquired Companies have not delayed or postponed the payment of material
accounts payable or other Liabilities;

(g) The Acquired Companies have not cancelled, compromised, waived or released
any right or claim (or series of related rights and claims);

(h) The Acquired Companies have not entered into any capital commitments;

(i) No litigation has been commenced or threatened and, to the knowledge of the
Acquired Companies, no reasonable basis exists for any litigation, proceeding or
investigation against the Acquired Companies, any officer, director, employee or
contractor of the Acquired Companies or the assets or properties of the Acquired
Companies;

(j) The Acquired Companies have not (i) sold or otherwise issued (or granted any
warrants, options or other rights to purchase) any shares of capital stock or
other equity securities, (ii) declared, accrued, set aside or paid any dividend
or made any other distribution in respect of any shares of capital stock, or
(iii) repurchased, redeemed or otherwise reacquired any shares of capital stock
or other securities, or split, combined or reclassified any of their capital
stock or issued or authorized the issuance of any other securities in respect
of, in lieu of or in substitution for shares of their capital stock;

 

-12-

--------------------------------------------------------------------------------

(k) The Acquired Companies have not violated any Legal Requirement applicable to
them;

(l) There has not been any change by the Acquired Companies in their accounting
principles, practices or methods, in their Tax principles or practices or in the
practices and standards used to maintain the Books and Records;

(m) The Acquired Companies have not violated, entered into, terminated or
modified any of the Acquired Company Contracts or approvals or permits of
Governmental Entities, and no Governmental Entity or other Person has amended,
accelerated, terminated or modified any such Contracts, approvals or permits;

(n) The Acquired Companies have not (i) failed to maintain their assets or
properties in good repair, order or condition, reasonable wear and tear
excepted, (ii) accelerated the collection of any Accounts Receivable or any
accrual of liabilities, written off any Accounts Receivable or established any
extraordinary reserve with respect thereto;

(o) The Acquired Companies have not assigned, nor granted any license or
sublicense of any rights under or with respect to, any of the Acquired Company
Intellectual Property;

(p) The Acquired Companies have not made any material gifts or sold, transferred
or exchanged any material property on a non-arm’s length basis;

(q) The Acquired Companies have not forgiven any debt or otherwise released or
waived any right or claim nor discharged any lien nor paid any obligation or
Liability other than in the Ordinary Course of Business;

(r) To the knowledge of the Acquired Companies, the Acquired Companies have not
suffered any loss or harm to any relationship with any Person material to the
Business or to any customer;

(s) The Acquired Companies have not received notice of any claim or potential
claim, and to the knowledge of the Acquired Companies no basis exists for any
claim or potential claim that the Acquired Companies have infringed the
Intellectual Property Rights of any person or entity;

(t) There has been no (1) increase in or other change to the salary or other
compensation (including equity based compensation) payable or to become payable
by the Acquired Companies to any of their respective officers, directors,
employees or consultants, or (2) declaration, payment or commitment or
obligation of any kind for the payment (whether in cash, equity or otherwise) by
the Acquired Companies of a severance payment, termination payment, bonus,
special remuneration or other additional salary or compensation (including
equity based compensation), in each case to any of their respective officers,
directors, employees or consultants; and

(u) There has been no agreement by the Acquired Companies, or any employees,
contractors, agents or affiliates of Company, to do any of the things described
in the preceding clauses (a) through (t).

 

-13-

--------------------------------------------------------------------------------

3.10 Legal and Other Compliance.

(a) The Acquired Companies are in full compliance with all Legal Requirements
that are applicable to them or to the conduct of the Business or the ownership
or use of any of their assets or properties.

(b) No event has occurred, and no condition or circumstance exists, that (with
or without notice or lapse of time) constitutes or is reasonably likely to
result directly or indirectly in a violation by the Acquired Companies, or a
failure on the part of the Acquired Companies to comply with, any Legal
Requirement.

(c) No action, suit, proceeding, hearing, investigation, charge, complaint,
claim, demand or notice has been filed or commenced or, to the knowledge of the
Acquired Companies threatened against the Acquired Companies alleging any
failure to comply with any Legal Requirement, nor, to the knowledge of the
Acquired Companies is there any reasonable basis therefor.

(d) To the knowledge of the Acquired Companies, no Governmental Entity is
considering any Legal Requirement that, if adopted or otherwise put into
effect, would prevent, delay, make illegal or otherwise interfere with the
transactions contemplated by this Agreement.

(e) Neither of the Acquired Companies is a “covered entity” as that term is
defined by 45 C.F.R. § 160.103 nor is subject as a “covered entity” to the
Standards for Privacy of Individually Identifiable Health Information
promulgated by the U.S. Department of Health and Human Services in accordance
with the Administration Simplification provisions of the Health Insurance
Portability and Accountability Act of 1996. The Acquired Companies are either
not subject to or are in compliance in all respects with any similar privacy
laws in existence in any state or foreign jurisdiction.

(f) The Acquired Companies (and each of the physicians that provides radiology
or other services on behalf of the Acquired Companies) hold all permits,
licenses, certificates, accreditations and other authorizations of foreign,
federal, state and local governmental agencies required for the conduct of the
Business, as the case may be, and Section 3.10(f) of the Disclosure Letter sets
forth a list of all such permits, licenses, certificates, accreditations, and
other authorizations, and the Acquired Companies and each of the physicians that
provides teleradiology or other services on behalf of the Acquired Companies are
in compliance with all terms and conditions of any such required permits,
licenses, certificates, accreditations and authorizations.

(g) The Acquired Companies’ services meet or exceed the standards for radiology
established by the American College of Radiology, including but not limited to
the Technical Standard for Teleradiology, the Technical Standard for Digital
Image Data Management and the Practice Guideline for Communication: Diagnostic
Radiology.

(h) Each of the physicians who provide reading services on behalf of the
Acquired Companies (a) meets all qualifications for readers under any agreement
for services pursuant to which such physician provides services on behalf of the
Acquired Companies, (b) is licensed to practice medicine in each of the states
in which the patients are located for which such physician provides radiology
interpretations, (c) has obtained medical staff privileges at any hospitals for
which such physician provides radiology interpretations, (d) is an independent
contractor or an independent licensed practitioner for all purposes including,
without limitation, all tax purposes and for the Joint Commission on
Accreditation of Health Organizations (“JCAHO”) standards set forth in the 2004
JCAHO Comprehensive Accreditation Manual for Hospitals, (e) does not review
mammograms or participate in interventional radiology and (f) provides only
“preliminary” interpretations for the customers of the Acquired Companies and
does not provide “final” interpretations for these customers.

 

-14-

--------------------------------------------------------------------------------

(i) Neither the Acquired Companies nor any physician who provides readings on
behalf of the Acquired Companies submits any claims for reimbursement for such
readings to any third-party payor, including, without limitation, Medicare,
Medicaid or any private insurance plan.

(j) The Acquired Companies are accredited by JCAHO.

3.11 Contracts.

(a) The Contracts listed on Section 3.11 of the Disclosure Letter are all of the
Contracts between either Acquired Company and any third party, including
amendments thereto (the “Acquired Company Contracts”). Section 3.11 of the
Disclosure Letter also sets forth all fees, royalties, license payments or other
consideration due, or that may become due, under such Acquired Company Contracts
and except as set forth under Section 3.11 of the Disclosure Letter there are no
present, past or future obligations due or owing under such Acquired Company
Contracts.

(b) Neither of the Acquired Companies nor any ERISA Affiliate is a party to any
unwritten commitment, understanding, contract, covenant or agreement with any
third party (including any Employee), including with respect to any matter
related to the Business, assets or properties of the Acquired Companies,
Acquired Company Intellectual Property, Acquired Company Contracts, Employee
Plans, Employee compensation arrangements or employment arrangements.

(c) Each Acquired Company Contract is in full force and effect and is valid and
enforceable in accordance with its terms. The Acquired Companies have neither
breached, violated or defaulted under, nor received notice that the Acquired
Companies have or may have breached, violated or defaulted under, any of the
terms or conditions of any Acquired Company Contract. To the knowledge of the
Acquired Companies, no third party obligated to the Acquired Companies pursuant
to any Acquired Company Contract has breached, violated or defaulted under any
of the terms or conditions of any Acquired Company Contract. The Acquired
Companies have obtained, or will obtain prior to the Closing, all necessary
consents, waivers or approvals of parties to any Acquired Company Contract in
order for such Acquired Company Contract to remain in full force and effect
without limitation, modification or alteration after the Closing. Following the
Closing, the Acquired Companies will continue to be permitted to exercise all of
their rights under the Acquired Company Contracts (without the payment of any
additional amounts or consideration other than ongoing fees, royalties or
payments which the Acquired Companies would otherwise be required to pay
pursuant to the terms of such Acquired Company Contracts) had the transactions
contemplated by this Agreement and the Collateral Agreements not occurred. There
does not exist any agreement, contract, or other arrangement entered into by or
on behalf of Seller that alters the term of an Acquired Company Contract. The
Acquired Companies do not have knowledge of (i) any notice of intent,
negotiations, discussions or other indications of interest on the part of the
third parties to the Acquired Company Contracts to terminate, modify, amend,
waive or alter any of the terms and conditions of the Acquired Company
Contracts, or (ii) any change of control transactions or insolvency events
pending with respect to the third parties to the Acquired Company Contracts.

(d) Except as set forth in Section 3.11(d) of the Disclosure Letter, the
Acquired Companies have provided Buyer true, accurate and complete copies of all
Acquired Company Contracts, and there are no oral or written amendments,
modifications, side letters, supplements or other arrangements or agreements in
existence with respect to the Acquired Company Contracts which have not been
provided to Buyer.

 

-15-

--------------------------------------------------------------------------------

(e) To the knowledge of the Acquired Companies, no audit or similar review or
investigation has been or is being conducted by any party to an Acquired Company
Contract. The Acquired Companies have no knowledge of, and have not received any
written notice or written request with respect to, any such audit, review or
investigation, and the Acquired Companies have no knowledge of any facts that
are reasonably likely to lead to the commencement of any such audit, review or
investigation. No party to an Acquired Company Contract (i) is renegotiating, or
(ii) has requested a renegotiation of any amount paid or payable or other term
or provision of any Acquired Company Contract. The Acquired Companies have not
waived any of their rights under any Acquired Company Contract. Performance by
the Acquired Companies of their obligations under the Acquired Company Contracts
will not result in any violation of or failure to comply with any Legal
Requirement.

3.12 Restrictions on Business Activities. There is no agreement
(non-competition, field of use, most favored nation or otherwise), commitment,
judgment, injunction, order or decree to which the Acquired Companies are party
or which is otherwise binding upon the Acquired Companies which has or would
reasonably be expected to have the effect of prohibiting, restricting or
impairing (a) the conduct of the Business, (b) any acquisition of assets or
property (tangible or intangible) by Buyer, (c) any disposition of the Acquired
Companies’ assets or properties by Buyer following the Closing Date, or (d) the
transactions contemplated by this Agreement and the Collateral Agreements.

3.13 Governmental Approvals.

(a) Section 3.13(a) of the Disclosure Letter identifies each Governmental
Approval held by the Company the failure of which to hold would or could
reasonably be expected to have a Material Adverse Effect.

(b) The Acquired Companies have delivered or made available to Buyer accurate
and complete copies of all such Governmental Approvals, including all renewals
thereof and all amendments thereto. Each Governmental Approval identified or
required to be identified in Section 3.13(a) of the Disclosure Letter is valid
and in full force and effect, the Acquired Companies are in material compliance
with such Governmental Approvals, and no fines or penalties are owed by the
Acquired Companies in respect of such Governmental Approvals or the failure to
obtain or maintain any such Governmental Approvals. The Acquired Companies have
received no written notice of any, and there is no pending, or to the knowledge
of the Acquired Companies, there is no threatened, Proceeding which could result
in the suspension, termination, revocation, cancellation, limitation or
impairment of any such Governmental Approval. To the knowledge of the Acquired
Companies, (i) no event or circumstance exists that would cause the Acquired
Companies to be deemed to be out of compliance with, or would cause the
suspension, termination, revocation, cancellation, limitation or impairment of,
any such Governmental Approval and (ii) the Acquired Companies have not received
any notice of any of the foregoing.

(c) The Governmental Approvals identified in Section 3.13(a) of the Disclosure
Letter constitute all the Governmental Approvals necessary (i) to enable the
Acquired Companies to conduct the Business in the manner in which the Business
is currently being conducted and as has been conducted in the past year, and
(ii) to permit the Acquired Companies to own and use its assets in the manner in
which they are currently owned and used.

 

-16-

--------------------------------------------------------------------------------

3.14 Title to Properties, Absence of Liens, Condition of Equipment.

(a) The Acquired Companies do not own any real property. Section 3.14(a) of the
Disclosure Letter sets forth a list of all real property currently leased by the
Acquired Companies, the name of the lessor, the date of the lease and each
amendment thereto and the aggregate annual rental and/or other fees payable
under any such lease. The Acquired Companies have delivered to Buyer a true and
correct copy of each lease of real property. Such leases are in full force and
effect, are valid and effective in accordance with their respective terms, and
there is not, under any of such leases, any existing default or event of default
(or event which with notice or lapse of time, or both, would constitute a
default). The business operations conducted on the real property subject to such
leases do not violate any applicable law, building code, zoning requirement or
classification, or pollution control ordinance or statute relating to the
particular property or such operations, and such non-violation is not dependent,
in any instance, on so-called non-conforming use exceptions. The Acquired
Companies have not caused any damage to the leased premises and will have no
liability to the lessors thereof upon vacating such premises. All approvals of
Governmental Entities (including licenses and permits) required in connection
with the operation of the Business on such real property have been obtained.

(b) The Acquired Companies have good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of the assets
and properties purported to be owned by them or used in the Business, free and
clear of any Liens (including any Liens created as a result of the consummation
of the transactions contemplated hereby). To the knowledge of the Acquired
Companies, no basis exists for the assertion of any claim that, if adversely
determined, would result in a Lien on any asset or property of the Acquired
Companies or otherwise affect the Business, any asset or property of the
Acquired Companies, Buyer’s conduct of the Business subsequent to the Closing or
Buyer’s use of any of the Acquired Companies’ assets or properties.

(c) Section 3.14(c) of the Disclosure Letter lists all equipment, furniture,
fixtures, improvements and other tangible assets owned or leased by the Acquired
Companies, and such assets are (i) all the assets required for the conduct of
the Business by the Acquired Companies as currently conducted and as currently
contemplated to be conducted, (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear and (iii) adequate for the
uses to which they are being put. Section 3.14(c) of the Disclosure Letter
identifies where each of such tangible assets is located and whether such
tangible assets are leased to the Acquired Companies (and, if so, by which
lessor). The Acquired Companies are in custody and control of all of such
tangible assets.

(d) Following the Closing, the Acquired Companies shall continue to be able to
use the assets and properties of the Acquired Companies, and enjoy the benefits
of, the licensed rights, in substantially the same manner as the Acquired
Companies prior to the Closing, without infringing the rights of any third
party.

(e) The Acquired Companies have sole and exclusive ownership, free and clear of
any Liens, of all customer lists, customer contact information, customer
correspondence and customer licensing and purchasing and service histories
relating to their current and former customers (the “Customer Information”). No
Person other than the Acquired Companies possesses any claims or rights with
respect to use of the Customer Information.

 

-17-

--------------------------------------------------------------------------------

3.15 Intellectual Property.

(a) Section 3.15(a) of the Disclosure Letter lists all Acquired Company
Registered Intellectual Property Rights owned or controlled by or for, filed in
the name of or for, licensed to, or otherwise held by or for the benefit of the
Acquired Companies, and lists any actual or threatened proceedings or actions
before any court, tribunal (including the PTO or equivalent authority anywhere
in the world) related to any of the Acquired Company Registered Intellectual
Property Rights. For each item of Acquired Company Registered Intellectual
Property Rights, Section 3.15(a) of the Disclosure Letter identifies if the item
of Acquired Company Registered Intellectual Property Rights is not owned
exclusively by any of the Acquired Companies.

(b) Each item of Acquired Company Registered Intellectual Property Rights (i) is
valid, subsisting and in full force and effect, (ii) has not been abandoned,
withdrawn, permitted to lapse or passed into the public domain and (iii) is free
and clear of any Liens. No item of Acquired Company Registered Intellectual
Property Rights that consists of a pending Patent application fails to identify
all pertinent inventors. All necessary registration, maintenance, and renewal
fees in connection with Acquired Company Registered Intellectual Property Rights
have been paid and all necessary documents and certificates in connection with
Acquired Company Registered Intellectual Property Rights have been filed with
the relevant patent, copyright, trademark, or other authorities in the United
States or foreign jurisdictions, as the case may be, for the purposes of
maintaining the Acquired Company Registered Intellectual Property Rights. There
are no actions that must be taken by any of the Acquired Companies within one
hundred eighty (180) days of the date of this Agreement for the purposes of
obtaining, maintaining, perfecting, or preserving or renewing any Acquired
Company Registered Intellectual Property Rights.

(c) The Acquired Company Intellectual Property constitutes all the Technology
and Intellectual Property Rights used in and/or necessary to the conduct of its
Business as it is currently conducted and as it is currently planned to be
conducted.

(d) Each item of Acquired Company Intellectual Property (i) is free and clear of
any Liens, and (ii) is exclusively owned by one of the Acquired Companies and
was written and created solely by employees of one of the Acquired Companies
acting within the scope of their employment or by third parties, all of which
employees and third parties have validly and irrevocably assigned all of their
rights, including Intellectual Property Rights therein, to the Acquired
Companies, and no third party owns or has any rights to any such Acquired
Company Intellectual Property. Section 3.15(d) of the Company Letter lists all
Acquired Company Intellectual Property that the Acquired Companies expect to be
used in or necessary to the conduct of the Business as currently contemplated to
be conducted by the Acquired Companies within the six (6) month period
immediately following the date of this Agreement, but that is not owned or
licensed by the Acquired Companies as of the date of this Agreement.

(e) In each case in which the Acquired Companies have acquired ownership to any
Technology or Intellectual Property Rights from any Person, the Acquired
Companies have obtained a valid and enforceable assignment sufficient to
irrevocably transfer all rights in such Technology or Intellectual Property
Rights (including the right to seek past and future damages with respect
thereto) to the Acquired Companies. No Person who has licensed Technology or
Intellectual Property Rights to the Acquired Companies has ownership rights or
license rights to improvements made by the Acquired Companies in such Technology
or Intellectual Property Rights. The Acquired Companies have not transferred
ownership of, or granted any exclusive license of or right to use, or authorized
the retention of any exclusive rights to use or joint ownership of, any
Technology or Intellectual Property Rights that are or were Acquired Company
Intellectual Property to any Person.

 

-18-

--------------------------------------------------------------------------------

(f) The Acquired Companies have no knowledge of any facts, circumstances or
information that (i) would render any Acquired Company Intellectual Property
invalid or unenforceable, (ii) would constitute prior art or that would
adversely affect any pending application for any Acquired Company Registered
Intellectual Property Right, or (iii) would adversely affect or impede the
ability of the Acquired Companies to use any Acquired Company Intellectual
Property in the conduct of the Business as it is currently conducted or as it is
currently planned to be conducted by the Acquired Companies. The Acquired
Companies have not misrepresented, or failed to disclose, and have no knowledge
of any misrepresentation or failure to disclose, any fact or circumstances in
any application for any Acquired Company Registered Intellectual Property Right
that would constitute fraud or a misrepresentation with respect to such
application or that would otherwise affect the validity or enforceability of any
Acquired Company Registered Intellectual Property Right.

(g) The Acquired Companies have taken all necessary action to maintain and
protect (i) the Acquired Company Intellectual Property, and (ii) the secrecy,
confidentiality, value and the Acquired Companies’ rights in the Confidential
Information and Trade Secrets of the Acquired Companies and those provided by
any Person to the Acquired Companies, including by having and enforcing a policy
requiring all current and former employees, consultants and contractors of the
Acquired Companies to execute appropriate confidentiality and assignment
agreements. Such agreements are sufficient to vest in an Acquired Company title
to all Technology and related Intellectual Property Rights created by an
employee within the scope of employment with the Acquired Company, and all
copies thereof have been delivered to Buyer. No Acquired Company is in material
breach of the terms of any of the foregoing agreements and, to the knowledge of
the Acquired Companies, no other party to any such agreement is in material
breach of any such agreements. The Acquired Companies have no knowledge of any
violation or unauthorized disclosure of any Trade Secret or Confidential
Information related to its business or obligations of confidentiality with
respect to its business.

(h) The operation of the Business as it is currently conducted, or as it is
currently planned to be conducted by the Acquired Companies, does not and will
not, and will not when operated by Buyer or the Acquired Companies substantially
in the same manner following the Closing, violate, infringe or misappropriate
any Intellectual Property Rights of any Person. No Acquired Company has received
notice of any claim, or any basis for any claims, that the operation of the
Business infringes or misappropriates any Intellectual Property Right of any
Person or constitutes unfair competition or trade practices under the laws of
any jurisdiction.

(i) To the knowledge of the Acquired Companies, no Person is violating,
infringing or misappropriating any Acquired Company Intellectual Property Right.

(j) To the knowledge of the Acquired Companies, there are no Proceedings before
any Governmental Entity (including before the PTO) anywhere in the world related
to any of the Acquired Company Intellectual Property, including any Acquired
Company Registered Intellectual Property Rights.

(k) No Acquired Company Intellectual Property is subject to any Proceeding or
any outstanding decree, order, judgment, office action or settlement agreement
or stipulation that restricts in any manner the use, transfer or licensing
thereof by the Acquired Companies or, to the knowledge of the Acquired
Companies, that may affect the validity, use or enforceability of such Acquired
Company Intellectual Property

 

-19-

--------------------------------------------------------------------------------

(l) Section 3.15(n) of the Disclosure Letter lists all Contracts under which the
Acquired Companies have agreed to, or assumed, any obligation or duty to
warrant, indemnify, reimburse, hold harmless, guaranty or otherwise assume or
incur any obligation or liability, or provide a right of rescission, with
respect to the infringement or misappropriation by the Acquired Companies or
such other person of the Intellectual Property Rights of any Person other than
the Acquired Companies.

(m) There is no Contract affecting any Acquired Company Intellectual Property
under which there is any dispute regarding the scope of such Contract, or
performance under such Contract, including with respect to any payments to be
made or received by the Acquired Companies thereunder.

(n) All Acquired Company Intellectual Property owned by the Acquired Companies
will be fully transferable, alienable or licensable by Buyer without restriction
(other than restrictions on sublicensing that exist as of the Closing) and
without payment of any kind to any third party. The consummation of the
transaction as contemplated hereby will not result in any loss of any Acquired
Company Intellectual Property or the right to use any Acquired Company
Intellectual Property

(o) Neither this Agreement nor the transactions contemplated herein, including
the assignment to Buyer, by operation of law or otherwise, of any Contracts will
result in (i) Buyer granting to any third party any right to, or with respect
to, any Acquired Company Intellectual Property; (ii) Buyer being bound by, or
subject to, any non-compete or other restriction on the operation or scope of
its businesses; or (iii) Buyer being obligated to pay any royalties or other
amounts to any third party.

(p) No “open source software” is used by the Acquired Companies in the conduct
of the Business or has been incorporated or combined with any Acquired Company
Intellectual Property.

3.16 Litigation. Except as set forth in Section 3.16(a) of the Disclosure
Letter, there is no action, suit, proceeding, claim, arbitration or any
investigation pending before any court or administrative agency or threatened
against the Acquired Companies (or any affiliate of the Acquired Companies or
any officer, director or shareholder of the Acquired Companies), any assets or
properties of the Acquired Companies or any Employee, and the Acquired Companies
have no knowledge of any reasonable basis for any such action, suit, proceeding,
claim, arbitration or investigation. There are no judgments, orders, decrees,
citations, fines or penalties heretofore assessed against the Acquired
Companies, any assets or properties of the Acquired Companies or any Employee
under any federal, state, local or foreign law. No Governmental Entity has at
any time challenged or questioned in writing or otherwise challenged or
questioned, the legal right of the Acquired Companies to conduct the Business as
currently conducted or as proposed to be conducted. The Acquired Companies (or
any affiliate of the Acquired Companies or any officer, director or shareholder
of the Acquired Companies) have not initiated or threatened to initiate any
action, suit, proceeding, claim, arbitration or any investigation against any
Third Party and the Acquired Companies have no knowledge of any reasonable basis
for any such action, suit, proceeding, claim, arbitration or investigation.

3.17 Insurance.

(a) Section 3.17 of the Disclosure Letter sets forth, with respect to each
insurance policy maintained by or at the expense of, or for the direct or
indirect benefit of, the Acquired Companies: the name of the insurance carrier
that issued such policy and the policy number of such policy; a description of
the coverage provided by such policy; the annual premium payable with respect to
such policy; and a description of any claims pending, and any claims that have
been asserted in the past, with respect to such policy.

 

-20-

--------------------------------------------------------------------------------

(b) The Acquired Companies have delivered to Buyer accurate and complete copies
of each of the insurance policies identified in Section 3.17 of Disclosure
Letter (including all renewals thereof and endorsements thereto) and binders
relating thereto, and all of the pending applications identified in Section 3.17
of Disclosure Letter. The Acquired Companies do not have any self-insurance or
risk sharing arrangement affecting the Acquired Companies or any of its assets.

(c) Each of the policies identified in Section 3.17 of Disclosure Letter is
valid, enforceable and in full force and effect. All of the information
contained in the applications submitted in connection with said policies was (at
the times said applications were submitted) accurate and complete in all
material respects, and all premiums and other amounts owing with respect to said
policies have been paid in full. Each of the policies identified in Section 3.17
of Disclosure Letter will continue in full force and effect following the
Closing, and the Acquired Companies have paid all premiums due, and have
otherwise performed in all material respects all of their respective
obligations, under each policy to which it is a party or that provides coverage
to it or any of its directors, officers or contractors in connection with their
performance of services to the Acquired Companies.

(d) There is no pending claim under or based upon any of the policies identified
in Section 3.17 of the Disclosure Letter, and, to the knowledge of the Acquired
Companies, no event has occurred and no condition or circumstance exists that
would (with or without notice or lapse of time) directly or indirectly give rise
to or serve as a reasonable basis for any such claim.

(e) The Acquired Companies have not received: (i) any notice regarding the
actual or possible cancellation or invalidation of any of the policies
identified in Section 3.17 of Disclosure Letter or regarding any actual or
possible adjustment in the amount of the premiums payable with respect to any of
said policies; or (ii) any notice regarding any actual or possible refusal of
coverage under, or any actual or possible rejection of any claim under, any of
the policies identified in Section 3.17 of Disclosure Letter.

3.18 Tax Matters.

(a) All Taxes required to have been paid by the Acquired Companies (whether
pursuant to any Tax Return or otherwise) have been duly paid in full on a timely
basis. Each Acquired Company has timely paid or withheld with respect to its
Employees (and paid any withheld amounts over to the appropriate Taxing
authority) all federal and state income taxes, Federal Insurance Contribution
Act, Federal Unemployment Tax Act and other Taxes required to be paid or
withheld.

(b) The Acquired Companies have filed all Tax Returns required to be filed. All
Acquired Company Tax Returns (i) have been filed when due, and (ii) are true and
correct and completed in accordance with applicable law. The Company has
(i) delivered to Buyer accurate and complete copies of all Acquired Company Tax
Returns pertaining to state and federal income taxes and payroll taxes filed for
the fiscal periods ended December 31, 2005, 2004 and 2003, and (ii) and has made
available to Buyer accurate and complete copies of all other Acquired Company
Tax Returns.

(c) The Acquired Companies’ Liability for unpaid Taxes for all periods ending on
or before the date of the Interim Balance Sheet, including any Liability for
Taxes assumed under contract, does not, in the aggregate, exceed the amount of
the current Liability accruals for Taxes (excluding

 

-21-

--------------------------------------------------------------------------------

reserves for deferred taxes established to reflect timing differences between
book and Tax treatment) reported on the Interim Balance Sheet. The Acquired
Companies have incurred no liability for Taxes since the date of the Interim
Balance Sheet other than in the Ordinary Course of Business. The Acquired
Companies will establish, in the Ordinary Course of Business, reserves adequate
for the payment of all Taxes for the period from the date of the Interim Balance
Sheet through the Closing Date, and the Acquired Companies will disclose the
dollar amount of such reserves to Buyer on or prior to the Closing Date.

(d) The Acquired Companies have delivered to Buyer accurate and complete copies
of all audit reports and similar documents relating to any Acquired Company Tax
Returns. No extension or waiver of the limitation period applicable to any of
the Acquired Company Tax Returns has been granted (by the Acquired Companies or
any other Person), and no such extension or waiver has been requested from the
Acquired Companies.

(e) No claim or other Proceeding is pending or, to the knowledge of the Acquired
Companies, has been threatened in writing against or with respect to the
Acquired Companies in respect of any Tax. There are no unsatisfied Liabilities
for Taxes with respect to any notice of deficiency or similar document received
by the Acquired Companies. The Acquired Companies have not been, and will not
be, required to include any material adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of transactions
or events occurring, or accounting methods employed, prior to the Closing. No
claim has ever been made by an authority in a jurisdiction where the Acquired
Companies do not file Returns that they are or may be subject to taxation by
that jurisdiction.

(f) The Acquired Companies have never been in a “consolidated group” within the
meaning of Treasury Regulations Section 1.1502-1(h), and are not liable for
Taxes incurred by any person pursuant to Treasury Regulations Section 1.1502-6
(or pursuant to any other provision of federal, territorial, state, local or
foreign law or regulations, and including any arrangement for group or
consortium relief or any similar arrangement), as transferee or successor, by
contract or otherwise. The Acquired Companies are not a party to any joint
venture, partnership or other arrangement or contract that to the knowledge of
the Acquired Companies, could be treated as a partnership for United States
Federal income tax purposes. The Acquired Companies are not, and have never
been, a party to or bound by any Tax indemnity agreement, Tax sharing agreement,
Tax allocation agreement or similar contract, and have not otherwise assumed the
Tax Liability of any other Person under contract.

(g) The Acquired Companies have complied with all information reporting and
back-up withholding requirements, including maintenance of required records with
respect thereto, in connection with amounts paid or owing to any employee,
creditor, independent contractor or third party.

(h) Neither of the Acquired Companies is a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code and neither has
been a United States real property holding corporation within the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.

(i) Neither of the Acquired Companies has been a “distributing corporation” or a
“controlled corporation” in a transaction intended to qualify under Section 355
of the Code.

(j) The Acquired Companies have disclosed on their federal income Tax Returns,
in accordance with applicable disclosure procedures under Sections 6662 and 6664
of the Code, all

 

-22-

--------------------------------------------------------------------------------

positions taken thereon that could give rise to a substantial understatement
penalty within the meaning of Section 6662 of the Code. Neither Acquired Company
has engaged in a “reportable transaction,” as set forth in Treas. Reg. §
1.6011-4(b), including any transaction that is the same as or substantially
similar to one of the types of transactions that the Internal Revenue Service
has determined to be a tax avoidance transaction and identified by notice,
regulation, or other form of published guidance as a “listed transaction,” as
set forth in Treas. Reg. § 1.6011-4(b)(2).

(k) There are (and immediately following the Closing Date there will be) no
Liens on the assets of either Acquired Company relating to or attributable to
Taxes other than Liens for Taxes not yet due and payable. There is no basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien for Taxes on the assets of either Acquired
Company.

(l) The Acquired Companies are not subject to Tax in any jurisdiction other than
its state of incorporation or formation by virtue of having a permanent
establishment or other place of business or by virtue of having a source of
income in that jurisdiction.

(m) The Professional Company uses the accrual method of accounting for income
Tax purposes.

(n) For federal and applicable state and local income Tax purposes, the
Professional Company has properly qualified as, and has made valid and timely
elections to be treated as, an “S corporation,” within the meaning of
Section 1361(a) of the Code and within the meaning of analogous state or local
laws in all jurisdictions in which it is subject to Tax, since its incorporation
and through the date of this Agreement, and will properly qualify as an S
corporation through and until the Closing Date in all jurisdictions in which it
is subject to Tax. Since its incorporation, the Professional Company has neve
(i) been subject to income Tax as a “C corporation” within the meaning of
Section 1361(a) of the Code or within the meaning of analogous state or local
laws, and (ii) made any distributions with respect to its capital stock.

(o) The Professional Company will not be obligated to pay Tax under Section 1374
of the Code in connection with the transactions contemplated by this Agreement.

(p) The Professional Company has not, in the past ten years, acquired assets
from another corporation in a transaction in which its Tax basis for the
acquired assets was determined, in whole or in part, by reference to the Tax
basis for the acquired assets (or any other property) in the hands of the
transferor.

3.19 Environmental Matters. The Acquired Companies are in compliance in all
material respects with all Environmental Laws or contained in any regulation,
code, plan, order, decree, judgment, notice or demand letter issued, entered,
promulgated or approved thereunder and which relate to the Acquired Companies,
the operation of the Business or any assets or properties of the Acquired
Companies. The Acquired Companies have not received any written notice and there
is no past or present condition or practice of the Business which forms or would
be reasonably expected to form the basis of any material claim, action, suit,
proceeding, hearing or investigation against the Acquired Companies or any
assets or properties of the Acquired Companies, arising out of the manufacture,
processing, distribution, use, treatment, storage, transport, or handling, or
the Release or threatened Release into the Environment, of any Chemical
Substance or Extremely Hazardous Substance by the Acquired Companies or any
assets or properties of the Acquired Companies.

 

-23-

--------------------------------------------------------------------------------

3.20 Brokers’ and Finders’ Fees. The Acquired Companies have not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders’
fees or agents’ commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.

3.21 Employee and Contractor Matters.

(a) Non-Physician Employees and Contractors. Section 3.21(a) of the Disclosure
Letter contains a complete and accurate list of the non-physician Employees of
the Acquired Companies showing for each such non-physician Employee: (i) all
remuneration payable and other benefits provided that the Acquired Companies are
bound to provide (whether at present or in the future) to such individual, or
any person connected with any such Employee, and includes, if any, aggregate
annual compensation and particulars of all profit sharing, incentive and bonus
arrangements to which the Acquired Companies are party, whether legally binding
or not, (ii) the date of hire, (iii) leave status (including type of leave),
(iv) visa status, (v) the number of hours per week worked by such Employee, and
(v) whether such Employee is an independent contractor or employee of the
Acquired Companies. The employment of each of the Acquired Companies’
non-physician Employees is terminable by the Acquired Companies at will, and no
Employee has any agreement or contract, written or verbal, regarding his or her
employment other than an employment offer letter in the Acquired Companies’
standard form, a copy of which has been provided to Buyer. The Acquired
Companies have delivered to Buyer accurate and complete copies of all employee
manuals and handbooks, disclosure materials, policy statements, employment
agreements and other materials relating to the employment of their Employees. To
the knowledge of the Acquired Companies, no Employee is in violation of any term
of any employment contract, proprietary information agreement or other agreement
relating to the right of such individual to be employed by or contract with the
Acquired Companies, and the continued employment with or service to the Acquired
Companies by such Employees will not result in any such violation. The Acquired
Companies have not received any notice alleging that any such violation has
occurred. No Employee has been granted the right to continued employment with or
service to the Acquired Companies or to any compensation following termination
of employment or service. To the knowledge of the Acquired Companies, no officer
or present Employee intends to terminate his or her employment with or service
to the Acquired Companies. The Acquired Companies do not have any present
intention to terminate the employment or service of any present Employee.

(b) Physician Contractors. Section 3.21(b) of the Disclosure Letter contains a
list of (i) physicians who are currently providing radiological interpretations
to or on behalf of the Acquired Companies, (ii) agreed compensation paid to each
such physician, including any compensation that may become due as a result of
the achievement of certain milestones reached by the Acquired Companies or other
event agreed to by the parties, (ii) the states in which each such physician is
licensed to practice medicine, by physician and (iv) the hospitals at which each
such physician has staff privileges, by physician. Each physician Employee of
the Acquired Companies is an “independent contractor” under applicable law and
regulations.

(c) Schedule. Section 3.21(c) of the Disclosure Letter contains an accurate and
complete list of each Employee Plan and each Employee Agreement. Except as set
forth in Section 3.21(c) of the Disclosure Letter, neither the Acquired
Companies nor any ERISA Affiliate have any plan or commitment to establish any
new Employee Plan or Employee Agreement, to modify any Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Buyer in writing, or as required by this
Agreement), or to adopt or enter into any Employee Plan or Employee Agreement.

 

-24-

--------------------------------------------------------------------------------

(d) Documents. The Acquired Companies have provided to Buyer correct and
complete copies of: (i) all documents embodying each Employee Plan and each
Employee Agreement including (without limitation) all amendments thereto and all
related trust documents, administrative service agreements, group annuity
contracts, group insurance contracts, and policies pertaining to fiduciary
liability insurance covering the fiduciaries for each Employee Plan; (ii) the
most recent annual actuarial valuations, if any, prepared for each Employee
Plan; (iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Employee Plan; (iv) if the Employee
Plan is funded, the most recent annual and periodic accounting of Employee Plan
assets; (v) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to or
from the IRS or the DOL with respect to any such application or letter;
(vii) all communications material to any Employee or Employees relating to any
Employee Plan and any proposed Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would result
in any material liability to the Acquired Companies; (viii) all correspondence
to or from any governmental agency relating to any Employee Plan; (ix) all COBRA
forms and related notices (or such forms and notices as required under
comparable law); (x) the three (3) most recent plan years discrimination tests
for each Employee Plan; and (xi) all registration statements, annual reports
(Form 11-K and all attachments thereto) and prospectuses prepared in connection
with each Employee Plan.

(e) Employee Plan Compliance. The Acquired Companies and their ERISA Affiliates
have performed in all material respects all obligations required to be performed
by them under, are not in default or violation of, and have no knowledge of any
default or violation by any other party to each Employee Plan, and each Employee
Plan has been established and maintained in all material respects in accordance
with its terms and in compliance with all applicable laws, statutes, orders,
rules and regulations, including but not limited to ERISA or the Code. Any
Employee Plan intended to be qualified under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code (i) has either
applied for, prior to the expiration of the requisite period under applicable
Treasury Regulations or IRS pronouncements, or obtained a favorable
determination, notification, advisory and/or opinion letter, as applicable, as
to its qualified status from the IRS or still has a remaining period of time
under applicable Treasury Regulations or IRS pronouncements in which to apply
for such letter and to make any amendments necessary to obtain a favorable
determination, and (ii) incorporates or has been amended to incorporate all
provisions required to comply with the Tax Reform Act of 1986 and subsequent
legislation. For each Employee Plan that is intended to be qualified under
Section 401(a) of the Code there has been no event, condition or circumstance
that has adversely affected or is likely to adversely affect such qualified
status. No “prohibited transaction,” within the meaning of Section 4975 of the
Code or Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Employee Plan. There are
no actions, suits or claims pending, or, to the knowledge of the Acquired
Companies, threatened or reasonably anticipated (other than routine claims for
benefits) against any Employee Plan or against the assets of any Employee Plan.
Each Employee Plan can be amended, terminated or otherwise discontinued after
the Closing Date in accordance with its terms, without liability to Buyer, the
Acquired Companies or any of their ERISA Affiliates (other than ordinary
administration expenses). There are no audits, inquiries or proceedings pending
or, to the knowledge of the Acquired Companies or any ERISA Affiliates,
threatened by the IRS or DOL, or any other governmental entity with respect to
any Employee Plan. Neither the Acquired Companies nor any ERISA Affiliate are
subject to any penalty or tax with respect to any Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980 of the Code. The Acquired
Companies and each ERISA Affiliate have timely made all contributions and other
payments required by and due under the terms of each Employee Plan.

 

-25-

--------------------------------------------------------------------------------

(f) Pension Plan and Welfare Plans. The Acquired Companies or an ERISA Affiliate
has previously or currently maintains, sponsors, participates in or contributes
to a Pension Plan which is subject to Title IV of ERISA or Section 412 of the
Code (each, an “Acquired Companies Pension Plan”) and which are listed on
Section 3.21(f) of the Disclosure Letter. As of the Closing Date: (i) no legal
or administrative action has been taken by the Pension Benefit Guaranty
Corporation (the “PBGC”) to terminate or to appoint a trustee to administer the
Acquired Companies Pension Plan; (ii) no liability to the PBGC under Title IV of
ERISA has been incurred by the Acquired Companies or an ERISA Affiliate that has
not been satisfied in full; (iii) no Acquired Companies Pension Plan has a
reportable event within the meaning of Section 4043 of ERISA and the regulations
thereunder; and (iv) no Acquired Companies Pension Plan has incurred any event
described in Section 4041, 4062 or 4063 of ERISA. No complete or partial
termination of any Employee Plan subject to Title IV of ERISA has occurred or is
expected to occur and no proceedings have been instituted and, to the knowledge
of the Acquired Companies, no condition exists and no event has occurred that
could constitute grounds under Title IV of ERISA to terminate or appoint a
trustee to administer any Employee Plan. Each Acquired Companies Pension Plan
has been maintained in compliance with the minimum funding standards of ERISA
and the Code where applicable and no Employee Plan subject to Section 412 or
418B of the Code or Section 302 of ERISA has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code or Section 302
of ERISA, respectively, or has applied for or obtained a waiver from the
Internal Revenue Service of any minimum funding requirement or an extension of
any amortization period under Section 412 of the Code or Section 303 or 304 of
ERISA. Except for payments of premiums to the PBGC, which have been paid in
full, the Acquired Companies have not incurred any liability (including any
indirect, contingent or secondary liability) to the PBGC in connection with any
Employee Plan covering any active, retired or former employees or directors of
the Acquired Companies, including any liability under Sections 4069 or 4212(c)
of ERISA or any penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility or withdrawn from any such Employee Plan in a manner
which could subject it to liability under Sections 4062, 4063 or 4064 of ERISA,
or know of any facts or circumstances that might give rise to any liability of
the Acquired Companies or any ERISA Affiliate to the PBGC under Title IV of
ERISA that could reasonably be anticipated to result in any claims being made
against Buyer by the PBGC (“PBGC Claims”). Section 3.21(f) of the Disclosure
Letter details the approximate liability for any Acquired Companies Pension Plan
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code or Section 302 of ERISA and any liability for any Acquired Companies
Pension Plan as determined on a termination basis. As of the date of this
Agreement, the current value of the accumulated benefit obligations (based upon
actuarial assumptions which have been furnished) under each Acquired Companies
Pension Plan did not exceed the current fair value of the assets of each such
Acquired Companies Pension Plan allocable to such accrued benefits. Neither the
Acquired Companies nor any ERISA Affiliate has ever maintained, established,
sponsored, participated in, or contributed to, any (i) Multiemployer Plan,
(ii) “multiple employer plan” as defined in ERISA or the Code, or (iii) a
“funded welfare plan” within the meaning of Section 419 of the Code. No Employee
Plan provides health benefits that are not fully insured through an insurance
contract. Each Acquired Companies Pension Plan was terminated on or prior to the
Closing Date. Section 3.21(f) of the Disclosure Letter sets forth, by
participant, a schedule of distributions made, or to be made, in connection with
the termination of each such plan. Except for such distributions, the Acquired
Companies have no Liabilities pursuant to the Acquired Companies Pension Plans.

(g) No Post-Employment Obligations. Except as set forth in Section 3.21(g) of
the Disclosure Letter, no Employee Plan provides, or reflects or represents any
liability to provide post-termination or retiree welfare benefits to any person
for any reason, except as may be required by COBRA or other applicable statute,
and neither the Acquired Companies nor any ERISA Affiliate have ever
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) or any other person
that such Employee(s) or other person would be provided with post-termination or
retiree welfare benefits, except to the extent required by statute.

 

-26-

--------------------------------------------------------------------------------

(h) Health Care Compliance. Neither the Acquired Companies nor any ERISA
Affiliate have, prior to the Closing Date and in any material respect, violated
any of the health care continuation requirements of COBRA, the requirements of
FMLA, the requirements of the Health Insurance Portability and Accountability
Act of 1996, the requirements of the Women’s Health and Cancer Rights Act of
1998, the requirements of the Newborns’ and Mothers’ Health Protection Act of
1996, or any amendment to each such act, or any similar provisions of state law
applicable to its employees.

(i) Past Acquisitions. Neither the Acquired Companies nor any ERISA Affiliate
are currently obligated to provide an Employee with any compensation or benefits
pursuant to an agreement (e.g., an acquisition agreement) with a former employer
of such Employee.

(j) Executive Loans. Neither the Acquired Companies nor any ERISA Affiliate have
violated Section 402 of Sarbanes-Oxley Act of 2002 and the execution of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the knowledge of the Acquired Companies, cause such a violation.

(k) Effect of Transaction.

(i) Except as set forth on Section 3.21(k)(i) of the Disclosure Letter, the
execution of this Agreement and the consummation of the transactions
contemplated hereby will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Employee Plan,
Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any Employee.

(ii) Except as set forth on Section 3.21(k)(ii) of the Disclosure Letter, no
payment or benefit which will or may be made by the Acquired Companies or their
ERISA Affiliates with respect to any Employee or any other “disqualified
individual” (as defined in Code Section 280G and the regulations thereunder)
will be characterized as a “parachute payment,” within the meaning of
Section 280G(b)(2) of the Code. There is no contract, agreement, plan or
arrangement to which the Acquired Companies or any ERISA Affiliates is a party
or by which it is bound to compensate any Employee for excise taxes paid
pursuant to Section 4999 of the Code. Section 3.21(k)(ii) of the Disclosure
Letter lists all persons who are “disqualified individuals” (within the meaning
of Section 280G of the Code and the regulations promulgated thereunder) as
determined as of the date hereof.

(l) Employment Matters. The Acquired Companies: (i) are in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) have withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) are not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and
(iv) are not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending,
threatened or reasonably anticipated claims or actions against the Acquired
Companies under any worker’s compensation policy or long-term disability policy.
Neither the Acquired Companies nor any ERISA Affiliate have direct or indirect
liability with respect to any misclassification of any person as an independent
contractor rather than as an employee, or with respect to any employee leased
from another employer.

 

-27-

--------------------------------------------------------------------------------

(m) Labor. No work stoppage or labor strike against the Acquired Companies or
any ERISA Affiliate is pending, threatened or reasonably anticipated. The
Acquired Companies do not know of any activities or proceedings of any labor
union to organize any Employees. Except as set forth in Section 3.21(m) of the
Disclosure Letter, there are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of the Acquired Companies, threatened
or reasonably anticipated relating to any labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of unfair
labor practices or discrimination complaints, which, if adversely determined,
would, individually or in the aggregate, result in any material liability to the
Acquired Companies. Neither the Acquired Companies nor any of their subsidiaries
have engaged in any unfair labor practices within the meaning of the National
Labor Relations Act. Except as set forth in Section 3.21(m) of the Disclosure
Letter, the Acquired Companies are not presently, nor have been in the past, a
party to, or bound by, any collective bargaining agreement or union contract
with respect to Employees and no collective bargaining agreement is being
negotiated with respect to Employees. Neither the Acquired Companies nor any of
their Subsidiaries have incurred any material liability or material obligation
under the Worker Adjustment and Retraining Notification Act or any similar state
or local law which remains unsatisfied.

(n) International Employee Plan. Neither the Acquired Companies nor any ERISA
Affiliate currently, nor has they ever had the obligation to, maintain,
establish, sponsor, participate in, or contribute to any International Employee
Plan.

(o) Section 409A. Each Employee Plan which is a “nonqualified deferred
compensation plan” (as defined in Section 409A(d)(1) of the Code) has been
operated since January 1, 2005 in good faith compliance with Section 409A of the
Code and IRS Notice 2005-1. No nonqualified deferred compensation plan has been
“materially modified” (within the meaning of IRS Notice 2005-1) at any time
after October 3, 2004.

3.22 Consents. No consent, waiver, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity or any third
party, including a party to any agreement with the Acquired Companies (so as not
to trigger a Conflict), is required by or with respect to the Acquired Companies
in connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for the consents,
waivers, approvals, orders, authorizations, registrations, declarations or
filings listed in Section 3.4 of the Disclosure Letter.

3.23 Government Contracts.

(a) The Acquired Companies have not been suspended or debarred from bidding on
contracts or subcontracts for any Government Authority, nor, to the knowledge of
the Acquired Companies, has any suspension or debarment action been commenced.
There is no valid basis for the Acquired Companies’ suspension or debarment from
bidding on contracts or subcontracts for any Government Authority.

(b) The Acquired Companies have not within the preceding three (3) years been,
nor are they now being, audited or, to the knowledge of the Acquired Companies,
investigated by any Government Authority, including without limitation the
Government Accountability Office, the Defense Contract Audit Agency, the Defense
Contract Administrative Service, the Department of Labor, the Department of
Health and Human Services, the Environmental Protection Agency, the General
Services Administration, or the inspector general or auditor general or similar
functionary of any agency or instrumentality, nor, to the knowledge of the
Acquired Companies, is any such audit or investigation threatened.

 

-28-

--------------------------------------------------------------------------------

(c) No material cost incurred by the Acquired Companies pertaining to any
contracts or subcontracts for any Government Authority has been questioned or
challenged by representatives of a Government Authority, or is, to the knowledge
of Acquired Companies, the subject of any investigation, or have been disallowed
by the United States Government, and no amount of money due to the Acquired
Companies pertaining to any contracts or subcontracts for any Government
Authority has been withheld or set off nor has any claim been made to withhold
or set off money and the Acquired Companies are entitled to all progress
payments received with respect thereto; and all amounts previously charged or at
present carried as chargeable by the Acquired Companies to any contracts or
subcontracts for any Government Authority have been or will be reasonable,
allowable and allocable to each such contracts or subcontracts for any
Government Authority.

(d) The operation of the Business by the Acquired Companies, as it relates to
the contracts or subcontracts for any Government Authority, has been conducted
in all material respects in accordance with all applicable laws, regulations,
and other requirements of all Government Authorities.

3.24 Books and Records. The Books and Records (a) are complete, up-to-date and
accurate in all material respects, (b) have been maintained in accordance with
applicable laws and with generally accepted practices and standards in the
jurisdiction(s) in which the Acquired Companies operate and (c) are in the
Acquired Companies’ possession or under their control.

3.25 Medical Liability. The Acquired Companies are not subject to any Liability
arising from any injury to Person or property or as a result of any claim of
medical malpractice or similar circumstance. Except as set forth in Section 3.25
of the Disclosure Letter, there are no pending claims, and within the last five
(5) years there have not been any claims involving any of the Acquired
Companies’ physicians.

3.26 Complete Copies of Materials. The Acquired Companies have delivered true
and complete copies of each existing document that has been requested by Buyer
or its counsel pursuant to Buyer’s due diligence requests, this Agreement and
the transactions contemplated hereby.

3.27 Affiliate Transactions. Except as set forth on Section 3.27 of the
Disclosure Letter, no director or officer or former director or officer of the
Acquired Companies (a) owns, directly or indirectly, on an individual or joint
basis (i) any interest in any assets or properties of the the Acquired Companies
or (ii) any claim or right against or interest (other than a passive investment
in less than one percent (1%) of the outstanding voting securities of a company
that is required to file reports pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended) in any Person that is a supplier,
customer or competitor of the Acquired Companies, (b) serves as an officer,
director or employee of any person that is a supplier, customer or competitor of
the Acquired Companies or (c) has received any loan from or is otherwise a
debtor of or has made any loan to or is otherwise a creditor of, the Acquired
Companies.

3.28 Customers and Suppliers.

(a) Section 3.28 of the Disclosure Letter contains an accurate and complete list
of each customer, prospect and supplier of the Acquired Companies as of the date
of this Agreement (the “Acquired Company Customers”).

(b) Except as set forth in Section 3.28 of the Disclosure Letter, since
January 1, 2006, none of the customers or suppliers of the Acquired Companies
have given notice or otherwise indicated to the Acquired Companies that (i) it
will or intends to terminate or not renew its Contract

 

-29-

--------------------------------------------------------------------------------

with the Acquired Companies, (ii) it will reduce the volume of business
transacted with the Acquired Companies below historical levels, (iii) it is
otherwise dissatisfied with the services that the Acquired Companies provide
such Person or with its relationship with the Acquired Companies or (iv) is
threatened with bankruptcy or insolvency; and no customer has made a complaint
to the Acquired Companies in connection with the provision of the Acquired
Companies’ services. The relationship of the Acquired Companies with its
customers and suppliers is currently on a good and normal basis, and the
Acquired Companies have not experienced any problems with customers or suppliers
since January 1, 2006. Except as set forth in Section 3.28 of the Disclosure
Letter, the transactions contemplated hereby will not adversely affect the
relationships between Buyer and the Acquired Companies’ customers or suppliers.

(c) Except as set forth on Section 3.28 of the Disclosure Letter, there are no
currently outstanding proposals or offers submitted by the Acquired Companies to
any customer, prospect, supplier or other person which, if accepted, would
result in a legally binding Contract involving an amount or commitment exceeding
$10,000 in any single case or an aggregate amount or commitment exceeding
$25,000 in the aggregate.

3.29 Representations Complete. None of the representations or warranties made by
the Acquired Companies or Sellers (as modified by the Disclosure Letter), nor
any statement made in any Schedule, Collateral Agreement or certificate
furnished by the Acquired Companies or Sellers pursuant to this Agreement
contains or will contain at the Closing any untrue statement of a material fact
or omits or will omit at the Closing to state any material fact necessary in
order to make the statements contained herein or therein, in light of the
circumstances under which made, not misleading.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Sellers that on the date hereof and as
of the Closing, as though made at the Closing, as follows:

4.1 Authority. Buyer has all requisite corporate power and authority to enter
into this Agreement and the Collateral Agreements required to be executed by it
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes a valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms.

4.2 No Conflict. Neither the execution and delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will conflict with or
result in any violation of, or default under (with or without notice or lapse of
time, or both) (a) any provision of the Certificate of Incorporation and Bylaws,
each as amended through the date hereof, of Buyer or (b) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Buyer or their
properties or assets, except in each case where such conflict, violation or
default will not have a material adverse effect on the legality, validity or
enforceability of Buyer’s obligations under this Agreement.

 

-30-

--------------------------------------------------------------------------------

ARTICLE V

ADDITIONAL AGREEMENTS

5.1 Access Pending the Closing. During the period commencing on the date of this
Agreement and continuing through the Closing Date, the Acquired Companies, upon
reasonable prior notice from Buyer to the Acquired Companies, will (a) afford to
Buyer and its representatives, at all reasonable times during normal business
hours, full and complete access to the Acquired Companies’ personnel,
professional advisors, properties, contracts, Books and Records and other
documents and data, (b) furnish Buyer and its representatives with copies of all
such Contracts, Books and Records, and other existing documents and data as
Buyer may request, (c) furnish Buyer and their representatives with such
additional financial, operating, and other data and information as Buyer may
request and (d) otherwise cooperate with Buyer’s investigation into the Acquired
Companies and the Business. No information or knowledge obtained in any
investigation pursuant to this Section 5.1 or otherwise shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties hereto to consummate the
transactions contemplated hereby.

5.2 Operation of the Business by the Acquired Companies. Between the date of
this Agreement and the Closing Date, unless otherwise agreed in writing by
Buyer, the Acquired Companies will:

(a) conduct the Business in the Ordinary Course of Business (including
maintaining all Acquired Company Contracts in full force and effect);

(b) pay their Liabilities when due;

(c) pay or perform their other obligations when due;

(d) preserve intact the current business organization of the Acquired Companies,
keep available the services of the Employees, and maintain the relations and
goodwill with the suppliers, customers, licensors, landlords, employees,
contractors, and others having business relationships with the Acquired
Companies, with the goal of preserving unimpaired the goodwill and ongoing
business of the Acquired Companies as of the Closing;

(e) confer with Buyer concerning business or operational matters of a material
nature;

(f) maintain the assets or properties of the Acquired Companies in their current
condition, ordinary wear and tear excepted;

(g) maintain the Books and Records in the usual, regular and ordinary manner, on
a basis consistent with prior years;

(h) continue to sell its services consistent with past practice in the Ordinary
Course of Business;

(i) introduce Buyer to their customers and cooperate with Buyer’s efforts to
retain their customers;

 

-31-

--------------------------------------------------------------------------------

(j) report to Buyer concerning any event or occurrence not in the Ordinary
Course of Business or any material event involving the Acquired Companies, the
assets or properties of the Acquired Companies or any Employee;

(k) use commercially reasonable efforts to collect all of their accounts
receivable in the Ordinary Course of Business; and

(l) maintain insurance coverage consistent with past practice.

5.3 Conduct Prior to Closing. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the Acquired
Companies will not take any action, or fail to take any action, as a result of
which any of the changes or events described in Section 3.9 of this Agreement
would occur. In addition, the Acquired Companies will not, without the prior
written consent of Buyer:

(a) take any action to impair, encumber, create a Lien against or otherwise
adversely affect the assets or properties of the Acquired Companies;

(b) enter into, amend or violate the terms of any Acquired Company Contract;

(c) change pricing charged to customers;

(d) enter into any strategic arrangement or relationship, joint venture,
development or joint marketing arrangement or agreement;

(e) terminate, or give notice of termination to, any customer or Employee;

(f) hire any Employees;

(g) change, increase or amend the rate of remuneration or amount of bonuses or
other benefits or any other terms of employment of any Employee (whether payable
in cash, equity compensation or otherwise);

(h) grant any severance or termination pay to any Employee (whether payable in
cash, equity compensation or otherwise), or adopt any new severance plan, amend
or modify or alter in any manner any severance plan, agreement or arrangement
relating to any Employee on the date hereof;

(i) adopt or amend or enter into any Employee Plan or Employee Agreement;

(j) revalue any of the assets or properties of the Acquired Companies;

(k) make or change any election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, enter into any closing agreement, settle
any claim or assessment in respect of Taxes, consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect of
Taxes or file any Tax Return unless such Tax Return has been provided to Parent
for review within a reasonable period prior to the due date for filing and
Parent has consented to such filing;

 

-32-

--------------------------------------------------------------------------------

(l) commence or settle any action, suit, proceeding, claim, arbitration or
investigation before any court or administrative agency or obtain any releases
of any such action, suit, proceeding, claim, arbitration or investigation that
is threatened;

(m) take any action, or fail to take any action, which would result in any of
the representations and warranties set forth in Article III not being true and
correct on and as of the Closing Date with the same force and effect as if such
representations and warranties had been made on and as of the Closing Date;

(n) issue, grant, deliver or sell or authorize, pledge or otherwise encumber, or
propose the issuance, grant, delivery, sale, pledge or encumbrance of, or
purchase or propose the purchase of, any shares of capital stock of the Acquired
Companies or securities convertible into, or subscriptions, rights, warrants or
options to acquire, or other agreements or commitments of any character
obligating either entity to issue any such shares or other convertible
securities;

(o) declare, set aside or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock, or repurchase, redeem or otherwise acquire,
directly or indirectly, any shares of its capital stock (or options, warrants or
other rights exercisable therefor); or

(p) take, or agree in writing or otherwise to take, any of the actions described
in Sections 5.3(a) through (o) above, or any other action that would prevent the
Acquired Companies from performing or cause the Acquired Companies not to
perform its covenants hereunder.

5.4 Confidentiality. Each of the parties hereto hereby agrees that the
information obtained in any investigation pursuant to Section 5.1 hereof, or
pursuant to the negotiation and execution of this Agreement or the effectuation
of the transactions contemplated hereby, shall be governed by the terms of the
Nondisclosure Agreement between Buyer and Management Company dated on or about
May 15, 2006 (the “Nondisclosure Agreement”). Each Seller agrees to be bound by
the Nondisclosure Agreement as if he or she were a party thereto.

5.5 No Solicitation. From and after the date of this Agreement until the earlier
to occur of the Closing or termination of this Agreement pursuant to its terms,
the Sellers and the Acquired Companies will not, and the Sellers and the
Acquired Companies will cause its respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly (a) solicit or encourage submission of any Acquisition Proposal (as
defined herein) by any person, entity, or group (other than Buyer and its
affiliates, agents and representatives) or (b) participate in any discussions or
negotiations with, or disclose any information concerning the Acquired Companies
to, or afford access to the properties, books or records of the Acquired
Companies, or otherwise assist or facilitate, or enter into any agreement or
understanding with, any person, entity or group (other than Buyer and its
affiliates, agents, and representatives) in connection with any Acquisition
Proposal with respect to the Acquired Companies. For purposes of this Agreement,
an “Acquisition Proposal” means any proposal or offer relating to (i) the
acquisition of any of the assets or properties of the Acquired Companies,
(ii) any merger, consolidation, sale or license of substantial assets or similar
transactions involving the Acquired Companies or (iii) sales by the Acquired
Companies of any capital stock of the Acquired Companies. The Acquired Companies
will immediately cease any and all existing activities, discussion, or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Acquired Companies will promptly (A) notify Buyer if it receives
any proposal or written inquiry or written request for information in connection
with an Acquisition

 

-33-

--------------------------------------------------------------------------------

Proposal or potential Acquisition Proposal and (B) notify Buyer of the terms and
conditions of any such Acquisition Proposal including the identity of the party
making an Acquisition Proposal. In addition, from and after the date of this
Agreement, until the earlier to occur of the Closing Date or termination of this
Agreement pursuant to its terms, the Acquired Companies will not, and the
Acquired Companies will cause its directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than Buyer).

5.6 Notification of Certain Matters. The Acquired Companies shall give prompt
notice to Buyer of (a) the Acquired Companies becoming aware of the occurrence
or non-occurrence of any event that is likely to cause any representation or
warranty of the Acquired Companies contained in this Agreement to be untrue or
inaccurate at or prior to the Closing, (b) any failure of the Acquired Companies
to comply with or satisfy any covenant, condition or agreement to be complied
with or satisfied by it hereunder, and (c) any action taken by the Acquired
Companies not in the Ordinary Course of Business and any circumstance or effect
that would reasonably be expected to have a Material Adverse Effect on the
Acquired Companies; provided, however, that the delivery of any notice pursuant
to this Section 5.6 shall not (i) limit or otherwise affect any remedies
available to the party receiving such notice, (ii) constitute an acknowledgment
or admission of a breach of this Agreement, or (iii) be deemed to amend or
supplement the Disclosure Letter or prevent or cure any misrepresentations,
breach of warranty or breach of covenant.

5.7 Public Disclosure. The Acquired Companies shall not issue any statement or
communication to any third party (whether or not in response to an inquiry)
regarding, or discuss with any third party, the subject matter of this Agreement
or the transactions contemplated hereby, including, if applicable, the
negotiation, execution or termination of this Agreement and the reasons
therefor, without the written consent of Buyer. Following the execution of this
Agreement and the Closing, Buyer may issue a press release or otherwise make
public announcements or communications pertaining to the Agreement and the
transactions contemplated hereby.

5.8 Consents. The Acquired Companies shall use all commercially reasonable
efforts to obtain the consents, waivers and approvals under any of the Acquired
Company Contracts or under any contractual restrictions relating to the assets
or properties of the Acquired Companies that are necessary to permit the
transactions contemplated by this Agreement.

5.9 Legal Requirements. Each of Buyer, the Sellers and the Acquired Companies
will take all commercially reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on such party with respect to this
Agreement and the Collateral Agreements and the transactions contemplated hereby
and thereby and will promptly cooperate with and furnish information to any
other party hereto in connection with any such requirements imposed upon such
other party in connection herewith or therewith. Each party will take all
reasonable actions to obtain (and will cooperate with the other parties in
obtaining) any consent, authorization, order or approval of, or any
registration, declaration, or filing with, or an exemption by, any Governmental
Entity, or other third party, required to be obtained or made by such party or
its Subsidiaries in connection with this Agreement and the Collateral Agreements
and consummating the transactions contemplated hereby and thereby or the taking
of any action contemplated by this Agreement or the Collateral Agreements.

5.10 Additional Documents and Further Assurances. At any time or from time to
time after the Closing, at Buyer’s request and without any further
consideration, the Acquired Companies and the Sellers shall take such other
actions as Buyer may deem necessary or desirable in order to effect the
transactions contemplated by this Agreement and the Collateral Agreements, to
confirm Buyer’s title to, and, to the full

 

-34-

--------------------------------------------------------------------------------

extent permitted by law, to put Buyer in actual possession and operating control
of, the assets and properties of the Acquired Companies and to assist Buyer in
exercising all rights with respect thereto, and otherwise to cause the Acquired
Companies to fulfill its obligations under this Agreement and the Collateral
Agreements.

5.11 Tax Matters.

(a) Liability for Taxes. Each Seller shall be liable for and shall indemnify and
hold Buyer harmless for (i) all Taxes payable by the Acquired Companies or
relating to either Acquired Company’s operations and attributable to any taxable
period or portion of a period that ends on or before the Closing Date; and
(ii) any Taxes imposed in connection with the change from the cash method to the
accrual method of accounting of the Professional Company. Each Seller shall
reimburse Buyer for such Seller’s proportionate share of such Taxes within 10
days of receipt of notice from Buyer of the amount of such Taxes. For purposes
hereof, Taxes with respect to any taxable period that includes (but does not end
on) the Closing Date (a “Straddle Period”) shall be apportioned to the period
ending on or before the Closing Date (the “Pre-Closing Period”) as follows:
(i) the portion of any real, personal and intangible property Taxes (“Property
Taxes”) equal to the amount of such Property Taxes for the entire Straddle
Period multiplied by a fraction, the numerator of which is the number of days
during the Straddle Period that are in the Pre-Closing Period and the
denominator of which is the number of days in the Straddle Period; and (ii) any
Taxes other than Property Taxes computed as if such Straddle Period ended on the
Closing Date; provided that exemptions, allowances or deductions that are
calculated on an annual basis (including depreciation and amortization
deductions), other than with respect to property placed in service after the
Closing, shall be allocated between the period ending on the Closing Date and
the period after the Closing Date in proportion to the number of days in each
period.

(b) Maintenance of S Corporation Status; No Distributions. The Professional
Company shall be a valid electing S corporation (within the meaning of Sections
1361 and 1362 of the Code and for state Tax law purposes) up to and including
the Closing Date. The Professional Company and the Shareholder Agent (on behalf
of each Seller) shall take all necessary actions, and shall not omit to take any
action, which action or omission could result in the Company’s loss of S
Corporation status prior to the Closing. The Professional Company shall not make
any distributions with respect to its capital stock prior to the Closing.

(c) Preparation of Returns for Periods Ending on or Before the Closing Date. The
Shareholder Agent shall prepare or cause to be prepared and file or cause to be
filed (i) any Tax Returns of the Acquired Companies relating to state or federal
income Taxes that include any period ending on or prior to the Closing and that
are required to be filed after the Closing Date and (ii) any Tax Return required
to be filed on or prior to the Closing Date. Such Returns shall be prepared in
accordance with applicable law and past practices consistently applied and shall
be subject to the review and approval of Buyer, which approval shall not be
unreasonably withheld, conditioned or delayed. Such Returns, in substantially
final form, shall be provided to Buyer at least 30 days prior to filing of such
Returns.

(d) Cooperation on Tax Matters. Buyer, the Acquired Companies and the
Shareholder Agent (on behalf of each Seller) shall cooperate fully, as and to
the extent reasonably requested by the other party, in connection with the
filing of any Tax Returns pursuant to this Section 5.11 and any audit,
litigation or other proceeding with respect to Taxes of the Acquired Companies.
Such cooperation shall include the retention and (upon the other party’s
request) the provision of records and information that are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis.

 

-35-

--------------------------------------------------------------------------------

(e) Taxable Transaction. The Parties acknowledge and agree that the sale and
purchase of the Shares will be a taxable transaction, and agree to report the
sale and purchase as a taxable transaction for all tax purposes.

5.12 Merger of Acquired Companies. Immediately prior to the Closing, the
Management Company shall be merged with and into the Professional Company (the
“Acquired Company Merger”). The surviving corporation of the Acquired Company
Merger shall be a corporation organized under the General Corporation Law of the
State of California and shall retain the name of the Management Company. The
shareholders of the surviving corporation immediately following such merger
shall consist solely of the shareholders of the Management Company immediately
prior to such merger and with the same proportional equity interests. The
Sellers shall use their best efforts to effect the Acquired Company Merger in
accordance with the foregoing.

5.13 Closing Balance Sheet. At least three (3) business days prior to Closing,
the Acquired Companies shall prepare and deliver to Buyer a consolidated balance
sheet as of the Closing Date (the “Closing Balance Sheet”) prepared in
accordance with GAAP applied on a consistent basis with past periods.

5.14 Employee Plans. Effective no later than the day immediately preceding the
Closing Date, the Acquired Companies and their ERISA Affiliates, as applicable,
shall each terminate any and all group severance, separation or salary
continuation plans, programs or arrangements and any and all plans intended to
qualify under Code Section 401(a) arrangement (unless Buyer provides written
notice to the Acquired Companies that such 401(a) plans shall not be terminated)
(collectively, “Terminating Employee Plans”). Unless Buyer provides such written
notice to the Acquired Companies, no later than five business days prior to the
Closing Date, the Acquired Companies shall provide Buyer with evidence that such
Terminating Employee Plan(s) have been terminated (effective no later than the
day immediately preceding the Closing Date) pursuant to resolutions of the
Acquired Companies’ Board of Directors. The form and substance of such
resolutions shall be subject to review and approval of Buyer. The Acquired
Companies also shall take such other actions in furtherance of terminating such
Employee Plan(s) as Buyer may reasonably require.

ARTICLE VI

CONDITIONS TO THE CLOSING

6.1 Conditions to Obligations of Each Party. The respective obligations of
Buyer, the Acquired Companies and Sellers to effect the transactions
contemplated hereby shall be subject to the satisfaction, at or prior to the
Closing, of the following conditions, any of which may be waived in writing
executed by each of Buyer and the Acquired Companies:

(a) No Order. No Governmental Entity shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
in effect and which has the effect of making the transactions contemplated
hereby illegal or otherwise prohibiting the consummation of the transactions
contemplated hereby.

(b) No Injunctions or Restraints; Illegality. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the transactions contemplated hereby shall be in effect, nor
shall any proceeding brought by a Governmental Entity seeking any of the
foregoing be pending.

 

-36-

--------------------------------------------------------------------------------

6.2 Additional Conditions to the Obligations of Buyer. The obligation of Buyer
to effect the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the Closing of each of the following conditions, any
of which may be waived in writing executed by Buyer:

(a) Representations, Warranties and Covenants. (i) The representations and
warranties of Acquired Companies and Sellers in this Agreement were true and
correct on the date they were made and shall be true and correct on and as of
the Closing Date as though such representations and warranties were made on and
as of such time, and (ii) the Acquired Companies and Sellers shall have
performed and complied in all material respects with all covenants and
obligations under this Agreement required to be performed and complied with by
the Acquired Companies and Sellers as of the Closing.

(b) Corporate Approval. All requisite approvals of the boards of directors and
shareholders of the Acquired Companies of this Agreement and the transactions
contemplated hereby (including the Acquired Company Merger) shall have been
obtained, and such approvals shall be fully effective at Closing.

(c) Acquired Company Merger. Articles of Merger, together with any other
required certificates or other documents, all in form and substance satisfactory
to Buyer, necessary to consummate the Acquired Company Merger shall have been
filed with the Secretary of State of the State of California, and such filing
shall have been accepted. Evidence of such acceptance shall have been delivered
to Buyer.

(d) Governmental Approval. Approvals from any court, administrative agency,
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission (if any) deemed appropriate or
necessary by Buyer shall have been timely obtained.

(e) Litigation. There shall be no action, claim or proceeding in any court or
before any Governmental Entity of any nature pending or threatened against
(i) the Acquired Companies, or their assets or properties or any of their
officers, directors, shareholders or Employees, arising out of, or in any way
connected with, the transactions contemplated hereby, or (ii) the Acquired
Companies, the assets or properties of the Acquired Companies or the Employees.

(f) Third Party Consents. Buyer shall have received all consents, waivers,
approvals, licenses and assignments required by or with regard to all Acquired
Company Contracts in connection with the Acquired Company’s performance under
this Agreement and the Collateral Agreements and the consummation of the
transactions contemplated hereby or thereby, each in form acceptable to Buyer.

(g) Release of Liens. Buyer shall have received from the Acquired Companies a
duly and validly executed copy of all agreements, instruments, certificates and
other documents, in form and substance satisfactory to Buyer, that are necessary
or appropriate to evidence the release of all Liens set forth in Section 6.2(g)
of the Disclosure Letter.

(h) No Material Adverse Effect. There shall not have occurred any event or
condition of any character (including without limitation any bankruptcy or
similar legal or equitable proceeding) that has had or is reasonably likely to
have a Material Adverse Effect since the date of this Agreement.

 

-37-

--------------------------------------------------------------------------------

(i) Certificate of the Acquired Companies. Buyer shall have received a
certificate, validly executed by the Chief Executive Officer of the Acquired
Companies for and on the Acquired Companies’ behalf, to the effect that, as of
the Closing, each of the conditions to the obligations of the Acquired Companies
set forth in Section 6.2(a), (e), and (h) have been satisfied (unless otherwise
waived by Buyer in accordance with the terms hereof).

(j) Certificate of Secretaries of the Acquired Companies. Buyer shall have
received a certificate, validly executed by the Secretaries of the Acquired
Companies, certifying as to (i) the terms and effectiveness of the Charter
Documents, (ii) the valid adoption of resolutions of the Boards of Directors of
the Acquired Companies approving this Agreement and the consummation of the
transactions contemplated hereby, and (iii) the valid receipt of approval by the
shareholders of the Acquired Companies of this Agreement and the transactions
contemplated hereby;

(k) Termination of Pension Plan(s). The Terminating Employee Plans shall have
been terminated.

(l) Employment Agreements. Each of the Key Employees shall have delivered to
Buyer an executed Employment Agreement in form and substance satisfactory to
Buyer and each such agreement will be in full force and effect.

(m) General Release. Each of the Sellers shall have delivered to Buyer an
executed General Release in form and substance satisfactory to Buyer and each
such release will continue to be in full force and effect.

(n) Non-Competition Agreements. Each of the Sellers shall have delivered to
Buyer an executed Non-Competition Agreement in form and substance satisfactory
to Buyer and each such agreement will continue to be in full force and effect.

(o) Acquired Company Contracts. Buyer shall have received from the Acquired
Companies true and complete copies of the Acquired Company Contracts.

(p) [reserved]

(q) Legal Opinion. Buyer shall have received from Buchalter Nemer, A
Professional Law Corporation, counsel to Sellers and the Acquired Companies, a
legal opinion in form and substance satisfactory to Buyer.

(r) Closing Balance Sheet. At least three (3) business days prior to Closing,
Buyer shall have received from the Acquired Companies a Closing Balance Sheet
prepared in accordance with GAAP applied on a consistent basis with past period.

6.3 Additional Conditions to Obligations of Acquired Companies and Sellers. The
obligations of the Acquired Companies and the Sellers to consummate and effect
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may be
waived, in writing, exclusively by the Acquired Companies and Sellers:

(a) Representations, Warranties and Covenants. (i) The representations and
warranties of Buyer in this Agreement were true and correct when made and shall
be true and correct on and as of the Closing Date as though such representations
and warranties were made on and as of such time, except as would not
individually or in the aggregate (without giving effect to any limitation as to
“materiality,” “material adverse effect” or similar qualifications set forth
therein) have a material adverse effect on the legality, validity or
enforceability of Buyer’s obligations under this Agreement, and (ii) Buyer shall
have performed and complied in all material respects with all covenants and
obligations under this Agreement required to be performed and complied with by
Buyer as of the Closing.

 

-38-

--------------------------------------------------------------------------------

(b) Collateral Agreements. Buyer shall have delivered to the Acquired Companies
executed copies of each Collateral Agreement required to be executed by it.

(c) Certificate of Buyer. The Acquired Companies shall have received a
certificate, validly executed by an officer of each of Buyer for and on their
behalf, to the effect that, as of the Closing, each of the conditions to the
obligations of Buyer set forth under Section 6.3(a) has been satisfied (unless
otherwise waived by the Acquired Companies in accordance with the terms hereof).

ARTICLE VII

ESCROW

7.1 Escrow Fund. At the Closing, by virtue of this Agreement and as partial
security for indemnity obligations provided for in Article VIII hereof, Buyer
shall retain a portion of the Purchase Price equal to the Escrow Amount, which
amount will constitute an escrow fund (the “Escrow Fund”) to be governed by the
terms set forth herein. The Escrow Fund shall be available to compensate Buyer
for any Losses incurred by Buyer, and each of Buyer’s officers, directors,
employees, contractors, agents, successors, stockholders, assigns and affiliates
pursuant to the indemnification provisions set forth in Article VIII hereof.
Buyer shall not be entitled to deduct any Losses from the Escrow Fund unless and
until an Officer’s Certificate identifying such Loss has been delivered to the
Shareholder Representative as provided in Section 8.5 hereof, and either there
is no objection thereto or any objection has been resolved in accordance with
the provisions of Section 8.6 hereof. In such case, Buyer may deduct from the
Escrow Fund all Losses for which there is no objection or any objection has been
resolved in accordance with the provisions of Section 8.6.

7.2 Escrow Period. Subject to the following requirements, the Escrow Fund shall
be in existence immediately after the Closing and shall terminate at 5:00 p.m.
(Pacific Time) on that date which is eighteen (18) months after the Closing (the
“Escrow Period”), except as provided in Section 7.3 below.

7.3 Distributions of Escrow Fund. If no Officer’s Certificate pertaining to
unsatisfied claims is delivered to the Shareholder Representative at or prior to
the termination of the Escrow Period, upon termination of the Escrow Period,
Buyer shall distribute the remainder of the Escrow Fund to the Sellers in
proportion to the number of Shares held by each immediately prior to the
Closing; provided, however, that such amount (or the portion thereof) that is
necessary in the judgment of Buyer, subject to the objection of the Shareholder
Representative and the subsequent arbitration of the matter in the manner
provided in Section 8.6 hereof, to satisfy any unsatisfied claims concerning
facts and circumstances existing prior to the termination of the Escrow Period
and as are specified in an Officer’s Certificate delivered to the Shareholder
Representative within ten (10) business days following the termination of such
Escrow Period, may be retained in the Escrow Fund after termination of the
Escrow Period. As soon as any or all such claims have

 

-39-

--------------------------------------------------------------------------------

been resolved as evidenced by written notice delivered by Buyer to the
Shareholder Representative, Buyer shall deliver to the Sellers the remaining
portion of the Escrow Fund that is not required to satisfy such claims.

7.4 Treatment of the Escrow Fund. No interest shall accrue on the Escrow Fund
while held by Buyer. Until distributed to the Sellers in accordance with this
Article VII, the Escrow Fund shall remain the property of Buyer. A portion of
any cash distributed to the Sellers shall be treated as interest under the
imputed interest rules of the Code.

ARTICLE VIII

SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

8.1 Survival of Representations and Warranties. The representations and
warranties of the Acquired Companies and Sellers contained in this Agreement, or
in any certificate or other instrument delivered pursuant to this Agreement,
shall terminate on the 18-month anniversary of the Closing Date, provided,
however, that the representations and warranties contained in Section 3.3
(Capital Stock) and Section 3.18 (Tax Matters) shall survive until 90 days after
the expiration of the applicable statute of limitations period, and that any
breach of a representation or warranty resulting from fraud, intentional
misrepresentation or willful misconduct shall survive indefinitely. The
representations and warranties of Buyer contained in this Agreement, or in any
certificate or other instrument delivered pursuant to this Agreement, shall
terminate at the Closing. The covenants and agreements of the parties shall
survive the Closing and any investigation at any time made and the consummation
of the transactions contemplated hereby until fully performed, unless limited by
their terms or purposes.

8.2 Indemnification of Buyer. The Sellers hereby agree to jointly and severally
indemnify and hold harmless Buyer, the Acquired Companies (following the
Closing) and each of their respective officers, directors, employees,
contractors, agents, successors, stockholders, assigns and affiliates
(collectively, the “Indemnified Parties”), against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys’ fees and expenses of investigation and defense (hereinafter
individually a “Loss” and collectively “Losses”) incurred or sustained by such
Persons, directly or indirectly, arising out of, relating to or resulting from
(a) any breach or inaccuracy of a representation or warranty of the Acquired
Companies and Sellers contained in this Agreement, the Collateral Agreements or
in any certificate, instrument, or other document delivered by the Acquired
Companies or Sellers pursuant to this Agreement or the Collateral Agreements
(without giving effect to any limitation as to “materiality,” “material adverse
effect,” “Material Adverse Effect” or similar qualifications set forth therein),
(b) any failure by the Acquired Companies or Sellers to perform or comply with
any covenant applicable to them contained in this Agreement or the Collateral
Agreements, (c) any inaccuracy in the Closing Balance Sheet or (d) any
Transaction Expenses of the Acquired Companies not paid by the Acquired
Companies at or prior to the Closing (“Excess Transaction Expenses”).

8.3 Limitation on Claims. Buyer shall not be entitled to seek recovery of Losses
under this Article VIII unless and until Buyer has paid or incurred Losses in
excess of $25,000 in the aggregate (the “Basket Amount”), in which case Buyer
shall be entitled to recover all Losses so identified including the Basket
Amount; provided however that claims for recovery of Losses in respect of any
inaccuracy in the Closing Balance Sheet or for Excess Transaction Expenses shall
not be subject to the Basket Amount limitation, and such claims shall not count
toward satisfaction of the Basket Amount for purposes of other claims for
recovery of Losses.

 

-40-

--------------------------------------------------------------------------------

8.4 Order of Claims. The amount of any Losses (except in the case of fraud,
intentional misrepresentation or willful misconduct) shall be recoverable by
Buyer first through recourse to the Escrow Fund and, if the Escrow Fund is
exhausted, second through recourse to the Sellers; provided, however, that the
Sellers’ aggregate indemnification obligations hereunder shall be capped at the
Purchase Price. In the case of fraud, intentional misrepresentation or willful
misconduct, Buyer may seek any remedy to which it is entitled under law or
equity.

8.5 Indemnification Procedure. If Buyer seeks indemnification under this
Article VIII, Buyer shall deliver an Officer’s Certificate to the Shareholder
Representative. The Shareholder Representative may object to such claim by
delivering written notice to Buyer specifying the basis for such objection
within fifteen (15) days following receipt by the Shareholder Representative of
notice from Buyer regarding such claim. If no such objection is made within the
15-day period, Buyer may recover Losses without further consent or approval
required of Shareholder Representative. For the purposes hereof, “Officer’s
Certificate” shall mean a certificate signed by any officer of Buyer (a) stating
that Buyer has paid, sustained, incurred, or properly accrued, or reasonably
anticipates that it will have to pay, sustain, incur, or accrue Losses, and
(b) specifying in reasonable detail the individual items of Losses included in
the amount so stated, the date each such item was paid, sustained, incurred or
properly accrued, or the basis for such anticipated liability,.

8.6 Resolution of Conflicts; Arbitration.

(a) In case the Shareholder Representative shall object in writing to any claim
or claims made in any Officer’s Certificate to recover Losses within fifteen
(15) days after delivery of such Officer’s Certificate, the Shareholder
Representative and Buyer shall attempt in good faith to agree upon the rights of
the respective parties with respect to each of such claims. If the Shareholder
Representative and Buyer should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties, at which time the claim
shall be promptly paid or expensed, as the case may be.

(b) If no such agreement can be reached after good faith negotiation and prior
to 60 days after delivery of an Officer’s Certificate, Buyer or the Shareholder
Representative may demand arbitration of the matter unless the amount of the
Loss is at issue in pending litigation with a third party, in which event
arbitration shall not be commenced until such amount is ascertained or both
parties agree to arbitration, and in either such event the matter shall be
settled by arbitration conducted by one arbitrator chosen by Buyer and the
Shareholder Representative from the panel provided by the American Arbitration
Association.

(c) Any such arbitration shall be held in Kootenai County, Idaho, under the
rules then in effect of the American Arbitration Association. The arbitrator
shall determine how all expenses relating to the arbitration shall be paid,
including without limitation, the respective expenses of each party, the fees of
the arbitrator and the administrative fee of the American Arbitration
Association. The arbitrator shall set a limited time period and establish
procedures designed to reduce the cost and time for discovery while allowing the
parties an opportunity, adequate in the sole judgment of the arbitrator to
discover relevant information from the opposing parties about the subject matter
of the dispute. The arbitrator shall rule upon motions to compel or limit
discovery and shall have the authority to impose sanctions, including attorneys’
fees and costs, to the same extent as a competent court of law or equity, should
the arbitrator determine that discovery was sought without substantial
justification or that discovery was refused or objected to without substantial
justification. The decision of the arbitrator as to the validity and amount of
any claim in such Officer’s Certificate shall be final, binding, and conclusive
upon the parties to this Agreement. Such decision shall be written and shall be
supported by written findings of fact and conclusions that shall set forth the
award, judgment, decree or order awarded by the arbitrator. Within 30 days of a
decision of the arbitrator requiring payment by one party to another, such party
shall make the payment to such other party.

 

-41-

--------------------------------------------------------------------------------

(d) Judgment upon any award rendered by the arbitrator may be entered in any
court having jurisdiction.

8.7 Third-Party Claims. In the event Buyer becomes aware of a third-party claim
that Buyer believes may result in a demand for indemnification pursuant to this
Article VIII, Buyer shall notify the Shareholder Representative of such claim,
and the Shareholder Representative shall be entitled, at its expense, to
participate in, but not to determine or conduct, the defense of such claim.
Buyer shall have the right, in its sole discretion, to conduct the defense of
and settle any such claim; provided, however, that except with the consent of
the Shareholder Representative, no settlement of any such claim with third-party
claimants shall be determinative of the amount of Losses relating to such
matter. In the event that the Shareholder Representative has consented to any
such settlement, the Shareholder Representative shall have no power or authority
to object under any provision of this Article VIII to the amount of any claim by
Buyer against the Shareholder Representative with respect to such settlement.

8.8 Shareholder Representative.

(a) Each of the Sellers hereby appoints Wilson Wong, M.D., his or her agent and
attorney-in-fact, as the Shareholder Representative for and on behalf of the
Sellers, to give and receive notices and communications, to authorize the
payment of Losses from the Escrow Fund, to object to any claim set forth in an
Officer’s Certificate, to agree to, negotiate, enter into settlements and
compromises of, and comply with orders of courts with respect to such claims,
and to take all other actions that are either (i) necessary or appropriate in
the judgment of the Shareholder Representative for the accomplishment of the
foregoing or (ii) specifically mandated by the terms of this Agreement. Such
agency may be changed by the Sellers from time to time upon not less than thirty
(30) days prior written notice to the Shareholder Representative and the Buyer;
provided, however, that the Shareholder Representative may not be removed unless
holders of a two-thirds of the shares of capital stock of the Management Company
issued and outstanding immediately prior to the Closing agree to such removal
and to the identity of the substituted agent. Upon any change in the Shareholder
Representative, such successor Shareholder Representative shall promptly provide
the Buyer with a signature specimen. Any vacancy in the position of Shareholder
Representative may be filled by the holders of a majority in interest of the
capital stock of the Management Company issued and outstanding immediately prior
to the Closing. No bond shall be required of the Shareholder Representative, and
the Shareholder Representative shall not receive compensation for its services.
Notices or communications to or from the Shareholder Representative shall
constitute notice to or from the Sellers.

(b) The Shareholder Representative shall not be liable for any act done or
omitted hereunder as the Shareholder Representative while acting in good faith
and in the exercise of reasonable judgment. The Sellers shall indemnify the
Shareholder Representative and hold the Shareholder Representative harmless
against any loss, liability or expense incurred without negligence or bad faith
on the part of the Shareholder Representative and arising out of or in
connection with the acceptance or administration of the Shareholder
Representative’s duties hereunder, including the reasonable fees and expenses of
any legal counsel retained by the Shareholder Representative

(c) A decision, act, consent or instruction of the Shareholder Representative
pursuant to this Agreement shall constitute a decision of the Sellers and shall
be final, binding and conclusive upon the Sellers, and the Indemnified Parties
may rely upon any such decision, act, consent or

 

-42-

--------------------------------------------------------------------------------

instruction of the Shareholder Representative as being the decision, act,
consent or instruction of the Sellers. In addition, the Shareholder
Representative may agree to the amendment, extension or waiver of this Agreement
pursuant to Section 9.3 hereof. The Indemnified Parties are hereby relieved from
any liability to any Person for any acts done by them in accordance with such
decision, act, consent or instruction of the Shareholder Representative.

8.9 Indemnification of Sellers. The Buyer hereby agrees to indemnify and hold
harmless the Sellers against any Losses incurred or sustained by such Sellers,
directly or indirectly, arising out of, relating to or resulting from (a) any
breach or inaccuracy of a representation or warranty of the Buyer contained in
this Agreement, the Collateral Agreements or in any certificate, instrument, or
other document delivered by the Buyer pursuant to this Agreement or the
Collateral Agreements (without giving effect to any limitation as to
“materiality,” “material adverse effect,” “Material Adverse Effect” or similar
qualifications set forth therein), and (b) any failure by the Buyer to perform
or comply with any covenant applicable to it contained in this Agreement or the
Collateral Agreements. Sellers shall not be entitled to seek recovery of Losses
under this Section 8.9 unless and until Sellers have paid or incurred Losses in
excess of the Basket Amount in aggregate, in which case Sellers shall be
entitled to recover all Losses so identified including the Basket Amount.

ARTICLE IX

TERMINATION, AMENDMENT AND WAIVER

9.1 Termination. Except as provided in Section 9.2, this Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing:

(a) By the mutual written agreement of Buyer and the Acquired Companies;

(b) By either Buyer or the Acquired Companies, if (i) the Closing has not
occurred by March 31, 2007; provided, however, that the right to terminate this
Agreement under this Section 9.1(b)(i) shall not be available to any party whose
willful failure to fulfill any obligation hereunder or other breach of this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before such date; (ii) there shall be in effect a final
nonappealable order of a federal or state court preventing consummation of the
transactions contemplated hereby; or (iii) there shall be any legal requirement
enacted, promulgated or issued or deemed applicable to the transactions
contemplated hereby by any Governmental Entity that would make consummation of
the transactions contemplated hereby illegal;

(c) By Buyer, if Buyer is not in material breach of its obligations under this
Agreement and there has been a breach of any representation, warranty, covenant
or agreement contained in this Agreement on the part of the Acquired Companies
and (i) the Acquired Companies have not cured such breach within 15 days after
notice of such breach has been given by Buyer to the Acquired Companies in
accordance with Section 10.1; provided, however, that, no cure period shall be
required for any such breach which by its nature cannot be cured and (ii) as a
result of such breach, one or more of the conditions set forth in Section 6.1 or
Section 6.2 would not be satisfied at or prior to the Closing;

(d) By the Acquired Companies, if it is not in material breach of its
obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Buyer and (i) Buyer has not cured such breach within 15 days after
notice of such breach has been given by the Acquired Companies to Buyer in
accordance with

 

-43-

--------------------------------------------------------------------------------

Section 10.1; provided, however, that, no cure period shall be required for any
such breach which by its nature cannot be cured and (ii) as a result of such
breach, one or more of the conditions set forth in Section 6.1 or Section 6.3
would not be satisfied at or prior to the Closing;

(e) By Buyer, if there shall have occurred any event or condition of any
character that has had or is reasonably likely to have a Material Adverse
Effect; or

(f) By Buyer, if there shall be any action taken, or any legal requirement
enacted, promulgated or issued after the date of this Agreement by any
Governmental Entity, which would (i) prohibit or materially and adversely
restrict Buyer’s ownership of the Acquired Companies or operation of any portion
of the Business or the assets or properties of the Acquired Companies or
(ii) compel Buyer to dispose of all or any portion of the assets or properties
of the Acquired Companies as a result of the transactions contemplated by this
Agreement.

9.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 9.1, this Agreement shall forthwith become void and there
shall be no liability or obligation on the part of any party hereto, or its
affiliates, officers, directors or stockholders; provided that each party shall
remain liable for any knowing or willful breaches of this Agreement prior to its
termination; and provided further that, the provisions of Section 5.4
(confidentiality), Section 5.7 (public disclosure), Article X and this
Section 9.2 of this Agreement shall remain in full force and effect and survive
any termination of this Agreement. No termination of this Agreement shall affect
the obligations of the parties contained in the Nondisclosure Agreement, all of
which obligations shall survive termination of this Agreement.

9.3 Amendment. This Agreement may be amended by the parties hereto at any time
by execution of an instrument in writing signed on behalf of each of the parties
against whom enforcement is sought.

9.4 Extension; Waiver. At any time prior to the Closing, Buyer, on the one hand,
and the Acquired Companies, on the other hand, may, to the extent legally
allowed, (a) extend the time for the performance of any of the obligations of
the other party hereto, (b) waive any inaccuracies in the representations and
warranties made to such party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for the benefit of such party contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of the party against whom
enforcement is sought.

ARTICLE X

GENERAL PROVISIONS

10.1 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given upon receipt if delivered personally, or upon receipt
or refusal of delivery if delivered by commercial delivery service or if mailed
by registered or certified mail (return receipt requested) or sent via facsimile
(with acknowledgment of complete transmission from the recipient of such
facsimile) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

 

-44-

--------------------------------------------------------------------------------

(a) if to Buyer, to:

NightHawk Radiology Holdings, Inc.

250 Northwest Boulevard, Suite 202

Coeur d’Alene, Idaho 83814

Attention: General Counsel

Facsimile: (208) 292-2825

(b) if to the Acquired Companies, to:

Teleradiology Diagnostic Service, Inc.

126 East Joseph Street, Suite A

Arcadia, California 91006

Attn: Chief Executive Officer

Facsimile: (626) 821-5911

(c) if to the Shareholder Representative, to:

Wilson Wong, M.D.

1419 San Carlos Road

Arcadia, California 91006

Facsimile: 866-446-8014

10.2 Expenses. All fees and expenses incurred in connection with this Agreement
and the Collateral Agreements including, without limitation, all legal,
accounting, financial advisory, consulting and all other fees and expenses of
third parties incurred by a party hereto, in connection with the negotiation and
effectuation of the terms and conditions of this Agreement, the Collateral
Agreements and the transactions contemplated hereby and thereby (“Transaction
Expenses”), shall be the obligation of the respective party incurring such fees
and expenses.

10.3 Entire Agreement; Assignment. This Agreement, the Exhibits hereto, the
Collateral Agreements, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings both written and oral, among
the parties with respect to the subject matter hereof and thereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder; and
(c) shall not be assigned by operation of law or otherwise.

10.4 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.

10.5 Other Remedies. Any and all remedies herein expressly conferred upon a
party will be deemed cumulative with and not exclusive of any other remedy
conferred hereby, or by law or equity upon such party, and the exercise by a
party of any one remedy will not preclude the exercise of any other remedy.

 

-45-

--------------------------------------------------------------------------------

10.6 Rights Reservation. Notwithstanding anything to the contrary set forth in
this Agreement, the representations and warranties made by the Acquired
Companies under this Agreement or in any certificate, instrument, or other
document delivered by the Acquired Companies pursuant to this Agreement, and any
obligation of the Acquired Companies to indemnify the Indemnified Parties for
breaches thereof under Section 8.2 above, will not be affected by any
investigation of Buyer or by Buyer’s knowledge that any such representation or
warranty is or may be untrue or inaccurate. Furthermore and without limiting the
foregoing, any waiver of the rights of Buyer under this Agreement must be
express and in writing.

10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Idaho, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction and venue of any court within Kootenai County, Idaho, in connection
with any matter based upon or arising out of this Agreement, and agrees that
process may be served upon them in any manner authorized by the laws of the
State of Idaho for such persons and waives and covenants not to assert or plead
any objection which they might otherwise have to such jurisdiction, venue and
such process.

10.8 Specific Performance. The parties hereto agree that irreparable damage will
occur in the event that any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.

10.9 Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO TRIAL BY JURY AND ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER
BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE ACTIONS OF ANY PARTY HERETO IN NEGOTIATION, ADMINISTRATION,
PERFORMANCE OR ENFORCEMENT HEREOF.

10.10 Resolution of Conflicts; Arbitration.

(a) In the event a dispute between Buyer (or after the Closing, the Acquired
Companies), on the one hand, and the Shareholder Representative or the Sellers
(or prior to the Closing, the Acquired Companies), on the other hand, arises out
of or in connection with any claims for indemnification made pursuant to Article
VIII (other than Section 8.9), including any claim with respect to the Escrow
Fund, the Parties shall comply with the dispute resolution and arbitration
procedures set forth in Article VIII.

(b) In the event a dispute arises out of, or in connection with, this Agreement
(other than with respect to a dispute described in the preceding clause (a))
(each, a “Dispute”), the Parties agree to use the procedures set forth in this
Section 10.10(b) to resolve such Dispute, as follows:

(i) The Party seeking to raise such Dispute shall give written notice thereof
(which notice shall describe in reasonable detail the nature of such Dispute) to
the other Party.

(ii) Within fifteen (15) days following delivery of such notice, the opposing
Parties shall meet (either in-person or via teleconference) to attempt in good
faith to negotiate a resolution of such Dispute.

 

-46-

--------------------------------------------------------------------------------

(iii) If the opposing Parties are unable to resolve such Dispute within sixty
(60) days of such meeting, either Party may, by written notice to the other,
demand arbitration of the Dispute to be conducted by one arbitrator chosen by
such Parties from the panel provided by the American Arbitration Association.
Such arbitration shall comply with the provisions set forth in Sections 8.6(c)
and (d) of this Agreement.

(c) Notwithstanding the provisions of Section 10.10(b), any Party may seek from
any court having jurisdiction pursuant to the provisions of Section 10.7 any
interim, provisional or injunctive relief that may be necessary to protect the
rights or property of any Party or maintain the status quo before, during or
after the commencement of the arbitration process set forth in Section 10.10(b).

10.11 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that all parties need not
sign the same counterpart.

10.12 Representation by Counsel. Each party hereto represents and agrees that it
has been represented by counsel of its own choosing during the negotiation and
execution of this Agreement and, therefore, waives the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or documents. The authorized officers of each party have carefully
read and fully understand this Agreement in its entirety, have had it fully
explained to them by such party’s respective counsel, and are fully aware of the
contents and meaning, intent and legal effect of this Agreement.

 

-47-

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, the parties set forth below have caused this Share Purchase
Agreement to be signed as of the date first written above.

 

“BUYER”   NIGHTHAWK RADIOLOGY HOLDINGS, INC.   a Delaware corporation   By:  

/s/ Timothy M. Mayleben

    Timothy M. Mayleben     Executive Vice President & Chief Operating Officer
“MANAGEMENT COMPANY”   TELERADIOLOGY DIAGNOSTIC SERVICE, INC.   a California
corporation   By:  

/s/ Wilson Wong, M.D.

    Wilson Wong, M.D.     Chief Executive Officer “PROFESSIONAL COMPANY”  
WILSON S. WONG, M.D., P.C.   a California professional corporation   By:  

/s/ Wilson Wong, M.D.

    Wilson Wong, M.D.     Chief Executive Officer “SHAREHOLDER REPRESENTATIVE”  
 

/s/ Wilson Wong, M.D.

    Wilson Wong, M.D. “SELLER”    

/s/ Wilson Wong, M.D.

    Wilson Wong, M.D. “SELLER”    

/s/ Debrey Miao

    Debrey Miao “SELLER”    

/s/ Raymond Loh

    Raymond Loh

--------------------------------------------------------------------------------

“SELLER”    

/s/ David Jackson, M.D.

    David Jackson, M.D. “SELLER”    

/s/ William Paik, M.D.

    William Paik, M.D. “SELLER”    

/s/ Ivan Roubal, M.D.

    Ivan Roubal, M.D.

[signature page to Share Purchase Agreement]

 

-ii-