Document:

Exhibit 10.1

 

EXECUTION VERSION

 

 

MEMBERSHIP
INTEREST PURCHASE AGREEMENT

 

 

among

 

DIAGNA
RADIOLOGY, LLC

 

THE
MEMBERS OF DIAGNA RADIOLOGY, LLC,

 

MONTE
ZARLINGO, M.D.,

 

and

 

VIRTUAL
RADIOLOGIC CORPORATION

 

dated
as of April 14, 2008

 

 

TABLE
OF CONTENTS

 

	
  ARTICLE I DEFINITIONS

  	
  1

  
	
  Section 1.01

  	
  Certain
  Defined Terms

  	
  1

  
	
  Section 1.02

  	
  Definitions

  	
  6

  
	
  Section 1.03

  	
  Interpretation
  and Rules of Construction

  	
  8

  
	
   

  	
   

  	
   

  
	
  ARTICLE II PURCHASE AND SALE 

  	
  9

  
	
  Section 2.01

  	
  Purchase
  and Sale of Membership Interests

  	
  9

  
	
  Section 2.02

  	
  Purchase
  Price

  	
  9

  
	
  Section 2.03

  	
  Earn-Out

  	
  9

  
	
  Section 2.04

  	
  Adjustment
  to Purchase Price Based on Adjusted Working Capital

  	
  12

  
	
  Section 2.05

  	
  Closing

  	
  14

  
	
  Section 2.06

  	
  Events
  of Closing

  	
  15

  
	
  Section 2.07

  	
  Sellers’
  Representative

  	
  15

  
	
   

  	
   

  	
   

  
	
  ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLERS

  	
  16

  
	
  Section 3.01

  	
  Authority
  of the Sellers and Enforceability

  	
  16

  
	
  Section 3.02

  	
  Governmental
  Consents and Approvals

  	
  17

  
	
  Section 3.03

  	
  No
  Conflict

  	
  17

  
	
  Section 3.04

  	
  Ownership
  of Membership Interests

  	
  17

  
	
  Section 3.05

  	
  Brokers

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY

  	
  18

  
	
  Section 4.01

  	
  Organization,
  Authority and Qualification of the Company

  	
  18

  
	
  Section 4.02

  	
  Capitalization

  	
  18

  
	
  Section 4.03

  	
  No
  Conflict

  	
  18

  
	
  Section 4.04

  	
  Financial
  Information

  	
  19

  
	
  Section 4.05

  	
  Absence
  of Undisclosed Liabilities

  	
  19

  
	
  Section 4.06

  	
  Conduct
  in the Ordinary Course

  	
  19

  
	
  Section 4.07

  	
  Litigation

  	
  21

  
	
  Section 4.08

  	
  Compliance
  with Laws

  	
  21

  
	
  Section 4.09

  	
  Environmental
  Matters

  	
  22

  
	
  Section 4.10

  	
  Intellectual
  Property

  	
  22

  
	
  Section 4.11

  	
  Real
  Property

  	
  26

  
	
  Section 4.12

  	
  Employee
  Benefit Matters; Labor

  	
  27

  
	
  Section 4.13

  	
  Taxes

  	
  29

  
	
  Section 4.14

  	
  Material
  Contracts

  	
  31

  
	
  Section 4.15

  	
  Brokers

  	
  32

  
	
  Section 4.16

  	
  Title
  to and Sufficiency of Assets

  	
  32

  
	
  Section 4.17

  	
  Notes
  and Accounts Receivable

  	
  32

  
	
  Section 4.18

  	
  Powers
  of Attorney

  	
  33

  
	
  Section 4.19

  	
  Insurance

  	
  33

  
	
  Section 4.20

  	
  Customers

  	
  33

  
	
  Section 4.21

  	
  Bank
  Accounts and Safe Deposit Boxes

  	
  33

  
				

 

i

 

	
  ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER

  	
  33

  
	
  Section 5.01

  	
  Organization
  and Authority of the Purchaser

  	
  33

  
	
  Section 5.02

  	
  No
  Conflict

  	
  34

  
	
  Section 5.03

  	
  Governmental
  Consents and Approvals

  	
  34

  
	
  Section 5.04

  	
  Litigation

  	
  34

  
	
  Section 5.05

  	
  Brokers

  	
  34

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI ADDITIONAL AGREEMENTS

  	
  35

  
	
  Section 6.01

  	
  Conduct
  of Business

  	
  35

  
	
  Section 6.02

  	
  Books
  and Records

  	
  36

  
	
  Section 6.03

  	
  Confidentiality

  	
  36

  
	
  Section 6.04

  	
  Further
  Action

  	
  36

  
	
  Section 6.05

  	
  Non-Competition; Non-Solicitation

  	
  36

  
	
  Section 6.06

  	
  Litigation
  Support

  	
  38

  
	
  Section 6.07

  	
  Transition

  	
  38

  
	
  Section 6.08

  	
  Access
  to Properties, Books and Records

  	
  38

  
	
  Section 6.09

  	
  Public
  Announcements

  	
  38

  
	
  Section 6.10

  	
  Notices
  and Consents

  	
  39

  
	
  Section 6.11

  	
  Notice
  of Breach

  	
  39

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII CONDITIONS PRECEDENT

  	
  39

  
	
  Section 7.01

  	
  Conditions
  to Obligations of the Sellers

  	
  39

  
	
  Section 7.02

  	
  Conditions
  to Obligations of Purchaser

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII INDEMNIFICATION

  	
  42

  
	
  Section 8.01

  	
  Survival

  	
  42

  
	
  Section 8.02

  	
  Indemnification
  by the Sellers

  	
  42

  
	
  Section 8.03

  	
  Indemnification
  by the Purchaser

  	
  43

  
	
  Section 8.04

  	
  Limits
  on Indemnification

  	
  43

  
	
  Section 8.05

  	
  Notice
  of Loss; Third Party Claims

  	
  44

  
	
  Section 8.06

  	
  Remedies

  	
  45

  
	
  Section 8.07

  	
  Right
  to Set-Off

  	
  45

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX TAX MATTERS

  	
  46

  
	
  Section 9.01

  	
  Tax
  Return Filing

  	
  46

  
	
  Section 9.02

  	
  Allocation
  for Straddle Period

  	
  46

  
	
  Section 9.03

  	
  Indemnification

  	
  46

  
	
  Section 9.04

  	
  Survival

  	
  47

  
	
  Section 9.05

  	
  Transfer
  Taxes

  	
  47

  
	
  Section 9.06

  	
  Character
  of Payments

  	
  47

  
	
  Section 9.07

  	
  Termination
  of Existing Tax-Sharing Agreements

  	
  47

  
	
  Section 9.08

  	
  Tax
  Treatment; Allocation

  	
  47

  
	
  Section 9.09

  	
  Sole
  Tax Provision

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE X TERMINATION

  	
  48

  

 

ii

 

	
  Section 10.01

  	
  Right
  of Parties to Terminate

  	
  48

  
	
  Section 10.02

  	
  Effect
  of Termination

  	
  48

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI GENERAL PROVISIONS

  	
  49

  
	
  Section 11.01

  	
  Dispute
  Resolution

  	
  49

  
	
  Section 11.02

  	
  Expenses

  	
  50

  
	
  Section 11.03

  	
  Notices

  	
  50

  
	
  Section 11.04

  	
  Severability

  	
  51

  
	
  Section 11.05

  	
  Entire
  Agreement

  	
  52

  
	
  Section 11.06

  	
  Assignment

  	
  52

  
	
  Section 11.07

  	
  Amendment

  	
  52

  
	
  Section 11.08

  	
  Waiver

  	
  52

  
	
  Section 11.09

  	
  No
  Third Party Beneficiaries

  	
  52

  
	
  Section 11.10

  	
  Governing
  Law

  	
  53

  
	
  Section 11.11

  	
  [Reserved]

  	
  53

  
	
  Section 11.12

  	
  Counterparts

  	
  53

  

 

ANNEX I – Members of the
Company

ANNEX II – Adjusted
Working Capital Benchmark Calculation

ANNEX III – 2009 Earn-Out
Payment

ANNEX IV – 2010 Earn-Out
Payment

 

EXHIBIT A –Diagna
Radiologists

EXHIBIT B – Escrow
Agreement

 

iii

 

THIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”)
is made and entered into as of April 14, 2008, by and among, Diagna
Radiology, LLC, a Delaware limited liability company (the “Company”), the
members of the Company set forth on Annex I hereto (the “Sellers”),
Monte Zarlingo, M.D. (“Zarlingo”), as the Sellers’ Representative, and
Virtual Radiologic Corporation, a Delaware corporation (the “Purchaser”).

 

RECITALS

 

The Sellers own all the issued and outstanding
membership interests (the “Membership Interests”) of the Company.

 

The Company is engaged in the business of providing
remote diagnostic image interpretation, or teleradiology, services (the “Business”).

 

This Agreement contemplates a transaction in which the
Sellers will sell to the Purchaser all of the issued and outstanding Membership
Interests on the terms and subject to the conditions set forth in this
Agreement in exchange for cash.

 

The Sellers have requested that the Sellers’ Representative
act as a representative of the Sellers under this Agreement and the other
agreements and documents contemplated hereby, and the Sellers’ Representative
has agreed to act in such capacity.

 

AGREEMENTS

 

NOW, THEREFORE, in consideration of the promises and
the mutual agreements and covenants hereinafter set forth, and intending to be
legally bound, the Company, the Sellers and the Purchaser hereby agree as
follows:

 

ARTICLE I 

 

DEFINITIONS

 

Section 1.01                                Certain Defined
Terms.  For purposes of this Agreement:

 

“Action” means any claim, action, suit,
arbitration, inquiry, proceeding or investigation by or before any Governmental
Authority.

 

“Adjusted Working Capital” means, with respect
to the Company, the net book value of those current assets of the Company that
are included in the line item categories of current assets specifically
identified on Annex II hereto, less the net book value of the line item
categories of current liabilities specifically identified on Annex II
hereto, including the Change of Control Payments, in each case as of the close
of business on the Closing Date and determined in accordance with GAAP applied
on a basis consistent with that used in calculating the Adjusted Working
Capital Benchmark as set forth on Annex II; provided, however,
that the Provident Fee, attorneys’ fees, any Change of Control Escrow Cash and
any other amounts paid by the Company and/or the Sellers at the Closing out of
the proceeds of the Initial Purchase Price pursuant to Section 2.02 shall
not be recognized in the calculation of either the Adjusted Working Capital or
the Adjusted Working Capital Benchmark.

 

 

“Adjusted Working Capital Benchmark” means one
dollar ($1), calculated as set forth on Annex II hereto.

 

“Affiliate” means, with respect to any specified
Person, any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.

 

“Affiliated Medical Practice” means each of
Virtual Radiologic Professionals, LLC, a Delaware limited liability company (“VR
Professionals”), Virtual Radiologic Professionals of California, P.A.,
Virtual Radiologic Professionals of Illinois, S.C., Virtual Radiologic
Professionals of Michigan, P.C., Virtual Radiologic Professionals of Minnesota,
P.A., Virtual Radiologic Professionals of New York, P.A., and Virtual
Radiologic Professionals of Texas, P.A., together with any other current or
future Subsidiary of Purchaser or any of the foregoing entities and any
physician-owned medical practice with which Purchaser or any of the foregoing may
contract for the provision of professional medical or practice management
services in the future.

 

“Ancillary Agreements” means the Executive
Services Agreement, the Independent Physician Agreement, the Escrow Agreement,
the Release and Assumption Agreement (if executed and delivered pursuant to Section 7.02(l) below),
and all other agreements and documents executed in connection herewith.

 

“Applicable Percentage” means with respect to
each Seller the percentage set forth on Annex I hereto with respect to
such Seller.

 

“Arbitrator” means the arbitrator(s) selected
in accordance with the provisions of Section 11.01 hereof.

 

“Assets” means the assets and properties of the
Company.

 

“Business Day” means any day that is not a
Saturday, a Sunday or other day on which banks are required or authorized by
Law to be closed in Minneapolis, Minnesota.

 

“Cap Amount” means Four Hundred Fifty Thousand
Dollars ($450,000).

 

“Change of Control
Payments” means, collectively, the payments due and payable by the Company
at the Closing to the Persons and in the amounts set forth on Section 1.01(a) of
the Disclosure Schedule.

 

“Code” means the Internal Revenue Code of 1986,
as amended.

 

“Confidential Information” means any confidential
information concerning the Business or the Company.

 

“Control” (including the terms “controlled
by” and “under common control with”), with respect to the
relationship between or among two or more Persons, means the possession, 

 

2

 

directly or indirectly or
as trustee, personal representative or executor, of the power to direct or
cause the direction of the affairs or management of a Person, whether through
the ownership of voting securities, as trustee, personal representative or
executor, by contract, credit arrangement or otherwise.

 

“Covenant Period” means with respect to
Zarlingo, five (5) years after the Closing Date, and with respect to the
other Sellers, three (3) years after the Closing Date.

 

“Deductible Amount” means Sixty Thousand
Dollars ($60,000).

 

“Diagna Compensation” means an amount, for the
relevant Earn-Out Period, equal to (i) the average compensation per Study
paid to Diagna Radiologists (i.e., the total compensation paid to all Diagna
Radiologists divided by total Studies read by Diagna Radiologists for all
customers of the Purchaser and the Affiliated Medical Practices (including
Diagna Studies) during such Earn-Out Period) multiplied  by (ii) the
number of Diagna Studies read by all radiologists of the Purchaser and the Affiliated Medical
Practices during such Earn-Out Period.

 

“Diagna Customers”
means, collectively, (i) the customers of the Company as of the Closing
Date and (ii) the prospective customers of the Company as agreed to in
writing by the Purchaser and the Sellers’ Representative.

 

“Diagna Radiologists” means the radiologists
currently performing teleradiology services for the Company including the
employees and/or independent physicians of the Company set forth on Exhibit A
hereto.

 

“Diagna Studies” means, collectively, all
Studies ordered by Diagna Customers.

 

“Disclosure Schedule” means the Disclosure
Schedule, dated as of the date hereof, delivered by the Sellers to the
Purchaser in connection with this Agreement.

 

“Escrow Agent” means Wells Fargo Bank, N.A.

 

“Escrow Agreement” means the Escrow Agreement
substantially in the form attached as Exhibit B hereto.

 

“Escrow Cash” means Six Hundred Thousand
Dollars ($600,000).

 

“Encumbrance” means any security interest,
pledge, hypothecation, mortgage, lien or encumbrance.

 

“Environmental Law” means any federal, state,
local or foreign statute, law, ordinance, regulation, rule, code, order,
consent decree or judgment relating to pollution or protection of the
environment.

 

“Environmental Permits” means any permit,
approval, identification number, license and other authorization required under
or issued pursuant to any applicable Environmental Law.

 

3

 

“GAAP” means United States generally accepted
accounting principles and practices in effect from time to time applied
consistently throughout the periods involved.

 

“Governmental Authority” means any federal,
state, provincial, local or other government, governmental, regulatory or
administrative authority, official, agency or commission, or any court,
tribunal, or judicial or arbitral body.

 

“Governmental Order” means any order, writ,
judgment, injunction, decree, stipulation, determination or award entered by or
with any Governmental Authority.

 

“Gross Profit” means gross revenue earned by
Purchaser, the Company, or any Affiliated Medical Practice or any successors or
assigns of any of the foregoing for any products or services provided to Diagna
Customers, including without limitation fees for radiology interpretation
services provided to Diagna Customers, coverage fees (such as surcharges or fee
increases for holiday coverage or additional off-hour coverage), information
technology service fees, and billing fees, less Diagna Compensation.

 

“False Claims Act Claim” means a claim for
indemnification by a Purchaser Indemnified Party pursuant to Section 8.02(c)
for Losses arising out of or resulting from a direct or indirect violation by
the Company on or prior to the Closing Date of the False Claims Act.

 

“Hazardous Material” means any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant, contaminant or waste under any Environmental Law.

 

“Health Care Laws” means any federal, state,
provincial, local, or similar statute, law, ordinance, regulation, rule, code,
order, requirement or rule of law (including common law) relating to
individual physician licensure, medical practice licensure, medical practices
acts and/or the corporate practice of medicine, and shall specifically include (i) the
Health Insurance Portability and Accountability Act of 1996 and similar laws
relating to protected health information, and (ii) the Federal False
Claims Act (31 USC § 3729 et seq) (the “False Claims Act”).

 

“Indemnified Party” means a Purchaser
Indemnified Party or a Seller Indemnified Party, as the case may be.

 

“Indemnifying Party” means the Sellers pursuant
to Sections 8.02 and 9.03 and the Purchaser pursuant to Section 8.03, as
the case may be.

 

“Independent Accountant” means an independent
certified public accounting firm of recognized national or regional standing
which has not provided any services for the Company, Sellers, or Purchaser
within the previous two years.

 

“IRS” means the Internal Revenue Service of the
United States.

 

4

 

“Knowledge of the Sellers” or similar terms
used in this Agreement means the actual (but not constructive or imputed)
knowledge of each of the Sellers, in each case after reasonable investigation.

 

“Law” means any federal, state, provincial,
local, or similar statute, law, ordinance, regulation, rule, code, order,
requirement or rule of law.

 

“Leased Real Property” means the real property
leased by the Company as tenant together with, to the extent leased by the
Company, all buildings and other structures, facilities or improvements
currently or hereafter located thereon, all fixtures, systems, equipment and
items of personal property of the Company attached or appurtenant thereto and
all easements, licenses, rights and appurtenances relating to the foregoing.

 

“Liabilities” means any and all debts,
liabilities and obligations, whether accrued or fixed, absolute or contingent,
matured or unmatured or determined or determinable, including those arising
under any Law (other than Health Care Laws), Action or Governmental Order and
those arising under any contract, agreement, arrangement, commitment or
undertaking.

 

“Material Adverse Effect” means any
circumstance, change in or effect on the Company that is materially adverse to
the results of operations, financial condition, business or assets of the
Company.

 

“Person” means any individual, partnership,
firm, corporation, limited liability company, association, trust,
unincorporated organization or other entity, as well as any syndicate or group
that would be deemed to be a person under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended.

 

“Purchase Price Bank Account” means the bank
account as the Sellers’ Representative may designate to the Purchaser by
written notice.

 

“Reference Balance Sheet” means the unaudited
balance sheet of the Company as of March 31, 2008.

 

“Securities Act” means the Securities Act of
1933, as amended, and the rules and regulations promulgated thereunder.

 

“Special Cap Amount” means Six Hundred Thousand
Dollars ($600,000).

 

“Study” means a group of related Radiologic
images and patient information necessary for a radiologist to provide an
interpretative report.

 

“Subsidiary” means any corporation or other
legal entity of which the Company owns, directly or indirectly, 50% or more of
the outstanding common stock or other equity interests, the holders of which
are entitled to vote for the election of the board of directors or other
governing body of such corporation or other legal entity.

 

5

 

“Tax” or “Taxes” means any federal,
state, local, or foreign income, gross receipts, license, payroll, employment,
excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Sec. 59A), customs duties, capital stock,
franchise, profits, withholding, social security (or similar), unemployment,
disability, real property, personal property, sales, use, transfer, registration,
value added, alternative or add-on minimum, estimated, or other tax of any kind
whatsoever, including any interest, penalty, or addition thereto, whether
disputed or not.

 

“Tax Returns” means any and all returns,
reports and forms (including elections, declarations, amendments, schedules,
information returns or attachments thereto) required to be filed with a taxing
authority with respect to Taxes.

 

Section 1.02                                Definitions.  The following terms have the meanings set
forth in the Sections set forth below:

 

	
  Definition

  	
   

  	
  Location

  	
   

  
	
  “2009 Earn-Out Payment”

  	
   

  	
  2.03(d)

  	
   

  
	
  “2009 Earn-Out Period”

  	
   

  	
  2.03(a)

  	
   

  
	
  “2009 Final Earn-Out
  Statement”

  	
   

  	
  2.03(c)

  	
   

  
	
  “2010 Earn-Out Payment”

  	
   

  	
  2.03(e)

  	
   

  
	
  “2010 Earn-Out Period”

  	
   

  	
  2.03(a)

  	
   

  
	
  “2010 Final Earn-Out
  Statement”

  	
   

  	
  2.03(c)

  	
   

  
	
  “Actual Adjusted
  Working Capital”

  	
   

  	
  2.04(c)

  	
   

  
	
  “Actual Adjusted
  Working Capital Report”

  	
   

  	
  2.04(c)

  	
   

  
	
  “Adjusted Working
  Capital Report”

  	
   

  	
  2.04(a)

  	
   

  
	
  “Adjusted Working
  Capital Objection Notice”

  	
   

  	
  2.04(d)

  	
   

  
	
  “Adjusted Working
  Capital Objection Period”

  	
   

  	
  2.04(d)

  	
   

  
	
  “Agreement”

  	
   

  	
  Recitals

  	
   

  
	
  “Audited Financial
  Statements”

  	
   

  	
  4.04(c)

  	
   

  
	
  “Business”

  	
   

  	
  Recitals

  	
   

  
	
  “Business Trade
  Secrets”

  	
   

  	
  4.10(m)

  	
   

  
	
  “Change Fee”

  	
   

  	
  7.02(l)

  	
   

  
	
  “Change of Control
  Escrow Cash”

  	
   

  	
  2.02

  	
   

  
	
  “Closing”

  	
   

  	
  2.05

  	
   

  
	
  “Closing Date”

  	
   

  	
  2.05

  	
   

  
	
  “Closing Date Cash
  Consideration”

  	
   

  	
  2.02

  	
   

  
	
  “Company”

  	
   

  	
  Recitals

  	
   

  
	
  “Company Intellectual
  Property”

  	
   

  	
  4.10(d)

  	
   

  
	
  “Company Registered
  Items”

  	
   

  	
  4.10(e)

  	
   

  
	
  “Confidentiality
  Agreements”

  	
   

  	
  4.10(i)

  	
   

  
	
  “Copyrights”

  	
   

  	
  4.10(a)

  	
   

  
	
  “Davae Services
  Agreement”

  	
   

  	
  7.02(l)

  	
   

  
	
  “Dispute Subject to
  Resolution”

  	
   

  	
  11.01

  	
   

  
	
  “Earn-Out Objection
  Period”

  	
   

  	
  2.03(b)

  	
   

  
	
  “Earn-Out Objection
  Notice”

  	
   

  	
  2.03(b)

  	
   

  

 

6

 

	
  “Earn-Out Payments

  	
   

  	
  2.03(f)

  	
   

  
	
  “Earn-Out Period”

  	
   

  	
  2.03(a)

  	
   

  
	
  “Earn-Out Statement”

  	
   

  	
  2.03(a)

  	
   

  
	
  “Employee”

  	
   

  	
  6.11(a)

  	
   

  
	
  “Executive Services
  Agreement

  	
   

  	
  7.02(c)

  	
   

  
	
  “ERISA”

  	
   

  	
  4.12(a)

  	
   

  
	
  “ERISA Affiliate”

  	
   

  	
  4.12(a)

  	
   

  
	
  “Estimated Adjusted
  Working Capital “

  	
   

  	
  2.04(a)

  	
   

  
	
  “Estimated Adjusted
  Working Capital Report”

  	
   

  	
  2.04(a)

  	
   

  
	
  “False Claims Act”

  	
   

  	
  1.01

  	
   

  
	
  “Final Adjusted Working
  Capital”

  	
   

  	
  2.04(e)

  	
   

  
	
  “Final Earn-Out
  Statement”

  	
   

  	
  2.03(c)

  	
   

  
	
  “Financial Statements”

  	
   

  	
  4.04(a)

  	
   

  
	
  “In-Bound Licenses”

  	
   

  	
  4.10(c)

  	
   

  
	
  “Independent Physician
  Agreement”

  	
   

  	
  7.02(d)

  	
   

  
	
  “Initial Purchase
  Price”

  	
   

  	
  2.02

  	
   

  
	
  “Intellectual Property”

  	
   

  	
  4.10(a)

  	
   

  
	
  “Intellectual Property
  Rights”

  	
   

  	
  4.10(a)

  	
   

  
	
  “Interim Financial
  Statements”

  	
   

  	
  4.04(a)

  	
   

  
	
  “Loss”

  	
   

  	
  8.02

  	
   

  
	
  “Marks”

  	
   

  	
  4.10(a)

  	
   

  
	
  “Material Contracts”

  	
   

  	
  4.14(a)

  	
   

  
	
  “Membership Interest”

  	
   

  	
  Recitals

  	
   

  
	
  “Misdirected Funds”

  	
   

  	
  6.07

  	
   

  
	
  “Nondisclosure
  Agreements”

  	
   

  	
  4.10(h)

  	
   

  
	
  “Notice of Breach”

  	
   

  	
  11.01(a)

  	
   

  
	
  “Opt-Out Notifications”

  	
   

  	
  4.10(n)

  	
   

  
	
  “Out-Bound Licenses”

  	
   

  	
  4.10(c)

  	
   

  
	
  “Owned Intellectual
  Property”

  	
   

  	
  4.10(b)

  	
   

  
	
  “Patents”

  	
   

  	
  4.10(a)

  	
   

  
	
  “Permit”

  	
   

  	
  4.08(b)

  	
   

  
	
  “Plans”

  	
   

  	
  4.12(a)

  	
   

  
	
  “Pre-Closing Period”

  	
   

  	
  10.01(a)

  	
   

  
	
  “Proprietary
  Information

  	
   

  	
  4.10(a)

  	
   

  
	
  “Provident Fee”

  	
   

  	
  3.05

  	
   

  
	
  “Purchase Price”

  	
   

  	
  2.02

  	
   

  
	
  “Purchase Price
  Allocation”

  	
   

  	
  9.08

  	
   

  
	
  “Purchaser”

  	
   

  	
  Recitals

  	
   

  
	
  “Purchaser Benefit
  Plans”

  	
   

  	
  6.11(c)

  	
   

  
	
  “Purchaser Indemnified
  Party”

  	
   

  	
  8.02

  	
   

  
	
  “Release and Assumption
  Agreement”

  	
   

  	
  7.02(l)

  	
   

  
	
  “Request for Mediation”

  	
   

  	
  11.01(b)

  	
   

  
	
  “Response to Notice of
  Breach

  	
   

  	
  11.01(a)

  	
   

  
	
  “Seller Indemnified
  Party”

  	
   

  	
  8.03

  	
   

  

 

7

 

	
  “Sellers”

  	
   

  	
  Recitals

  	
   

  
	
  “Seller Payment”

  	
   

  	
  2.05

  	
   

  
	
  “Sellers’
  Representative”

  	
   

  	
  2.07

  	
   

  
	
  “Software”

  	
   

  	
  4.10(a)

  	
   

  
	
  “Special
  Representations and Warranties”

  	
   

  	
  8.01

  	
   

  
	
  “TA Agreement”

  	
   

  	
  4.14(c)

  	
   

  
	
  “Third Party Claim”

  	
   

  	
  8.05(b)

  	
   

  
	
  “VR Professionals”

  	
   

  	
  1.02

  	
   

  
	
  “Work Product Agreements”

  	
   

  	
  4.10(i)

  	
   

  
	
  “Zarlingo”

  	
   

  	
  Recitals

  	
   

  

 

Section 1.03           Interpretation and Rules of
Construction.  In this Agreement,
except to the extent otherwise provided or that the context otherwise requires:

 

(a)           when a reference is made in this
Agreement to an Article, Section, Annex, Exhibit or Schedule, such
reference is to an Article or Section of, or an Annex, Exhibit or
Schedule to, this Agreement unless otherwise indicated;

 

(b)           the table of contents and headings
for this Agreement are for reference purposes only and do not affect in any way
the meaning or interpretation of this Agreement;

 

(c)           whenever the words “include”, “includes”
or “including” are used in this Agreement, they are deemed to be followed by
the words “without limitation”;

 

(d)           the words “hereof”, “herein” and “hereunder”
and words of similar import, when used in this Agreement, refer to this
Agreement as a whole and not to any particular provision of this Agreement;

 

(e)           all terms defined in this Agreement
have the defined meanings when used in any certificate or other document made
or delivered pursuant hereto, unless otherwise defined therein;

 

(f)            the definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such
terms;

 

(g)           references to a Person are also to
its successors and permitted assigns; and

 

(h)           the use of “or” is not intended to be
exclusive unless expressly indicated otherwise.

 

8

 

ARTICLE II 

 

PURCHASE AND SALE

 

Section 2.01           Purchase
and Sale of Membership Interests. 
Upon the terms and subject to the conditions of this Agreement, at the
Closing, the Sellers shall sell to the Purchaser, and the Purchaser shall
purchase from the Sellers, the Membership Interests.

 

Section 2.02           Purchase
Price.  Each of the Sellers agree
that at the Closing such Seller shall transfer, convey and deliver to the
Purchaser free and clear of all Encumbrances, all right, title, and interest of
such Seller in and to the Membership Interests owned by such Seller.  At the Closing, the Purchaser shall deliver
to the Sellers, as consideration for the sale of the Membership Interests, Six
Million Dollars ($6,000,000.00), as adjusted pursuant to Section 2.04(b) (the
“Initial Purchase Price”). 
Following the Closing, such Initial Purchase Price shall be subject to
adjustment as provided in Sections 2.03 and 2.04 (the Initial Purchase Price,
so adjusted, the “Purchase Price”). 
At the Closing, the Initial Purchase Price shall be paid by Purchaser as
follows:  (i) an amount equal to the
Escrow Cash shall be deposited with the Escrow Agent to be held in escrow
pursuant to the terms of the Escrow Agreement; (ii) if a Release and
Assumption Agreement is not delivered on or prior to Closing in accordance with
Section 7.02(l), an amount equal to One Hundred Fifty Thousand Dollars
($150,000) (the “Change of Control Escrow Cash”) shall be deposited with
the Escrow Agent to be held in escrow pursuant to the terms of the Escrow
Agreement; (iii) an amount equal to any brokers fees or commissions
payable by the Company or Sellers and professional fees and expenses incurred
by the Company or Sellers relating to the transaction contemplated by this
Agreement to be paid by the Company that shall at such time remain unpaid shall
be paid as directed by the Sellers prior to the Closing; and (iv) the
balance of such Initial Purchase Price (the “Closing Date Cash Consideration”)
shall be paid to the Sellers.  Closing
Date Cash Consideration will be payable by wire transfer of immediately
available funds to the Purchase Price Bank Account.  Subject to any amounts held back to fund
future costs and expenses as may be agreed to among the Sellers, the Closing
Date Cash Consideration shall be distributed by the Sellers’ Representative
among the Sellers according to each such Seller’s Applicable Percentage of such
Closing Date Cash Consideration.  The
Purchaser agrees to deposit with the Escrow Agent at the Closing the Escrow
Cash and the Change of Control Escrow Cash (if applicable) in cash payable by
wire transfer or delivery of other immediately available funds (with the Escrow
Cash consisting of that portion of the cash otherwise payable to each Seller
based upon the Applicable Percentages) to be available to satisfy amounts owed
by the Sellers to the Purchaser under this Agreement, if any, in accordance
with the terms of this Agreement and the Escrow Agreement.

 

Section 2.03           Earn-Out.

 

(a)           As promptly as practicable after the
first and second anniversaries of the last day of the calendar month that includes
the Closing Date (each 12-month period immediately prior to each such date
being herein referred to as an “Earn-Out Period,” the Earn-Out Period
ending on such first anniversary being herein referred to as the “2009
Earn-Out Period” and the Earn-Out Period ending on such second anniversary
being 

 

9

 

herein referred to as the “2010
Earn-Out Period”), but in no event later than thirty (30) Business Days
thereafter, the Purchaser shall deliver to the Sellers’ Representative a
certificate signed by the Chief Financial Officer or similar officer of the
Purchaser setting forth the Gross Profit with respect to the Diagna Customers
for the relevant Earn-Out Period (the “Earn-Out Statement”).  Each respective Earn-Out Statement shall be
prepared based upon amounts used in preparation of the unaudited income
statement of the Purchaser as of the last day of the appropriate Earn-Out
Period, which such unaudited income statement shall be prepared in accordance
with GAAP (as in effect on the Closing Date) applied consistently with the
unaudited income statement of the Company for the period ending March 31,
2008.

 

(b)           Within thirty (30) days after receipt
of each Earn-Out Statement (the “Earn-Out Objection Period”), the
Sellers’ Representative by written notice to the Purchaser may object to any
items shown thereon, setting forth in such notice (the “Earn-Out Objection
Notice”) the Sellers’ Representative’s objection in reasonable detail and the
Sellers’ Representative’s proposal or proposals with respect to the calculation
of any items shown thereon.  Within
twenty (20) days following timely delivery of the Earn-Out Objection Notice,
the Purchaser and the Sellers’ Representative shall attempt, in good faith, to
resolve all disputes between them concerning the Earn-Out Objection
Notice.  If the Purchaser and the Sellers’
Representative cannot resolve such disputes within such twenty (20) day period,
then all disagreements will be submitted for resolution to the Independent
Accountant.  Promptly, but not later than
twenty (20) days after the dispute has been submitted to the Independent
Accountant, the Independent Accountant shall determine (based solely on
presentations by the Sellers’ Representative and the Purchaser to the
Independent Accountant, and not by independent review) only those items in
dispute and will render its report as to its resolution of such terms and
resulting calculations of the items set forth in such Earn-Out Statement.  In determining each disputed item, the
Independent Accountant may not assign a value to such item greater than the
greatest value for such item claimed by either party or less than the lowest
value for such term claimed by either party. 
For the purposes of the Independent Accountant’s calculation of the
Gross Profit, the amounts to be included shall be the appropriate amounts from
such Earn Out Statement as to items that are not in dispute, and the amounts
determined by the Independent Accountant as to items from the Earn-Out Objection
Notice that are submitted for resolution by the Independent Accountant.  The Sellers’ Representative and the Purchaser
shall cooperate with the Independent Accountant in making its determination and
such determination shall be conclusive and binding upon the parties
hereto.  The costs and fees related to
such determination by the Independent Accountant, including the costs relating
to any negotiations with the Independent Accountant with respect to the terms
and conditions of such Independent Accountant’s engagement, will be paid by the
Purchaser and the Sellers on an inversely proportional basis, based upon the
relative portions of the amounts in dispute that have been submitted to the
Independent Accountant for resolution that ultimately are awarded to each of
the Purchaser and the Sellers (e.g., if $100,000 is in dispute, and of that
amount the Independent Accountant awards $75,000 to the Purchaser and $25,000
to the Sellers,

 

10

 

then
the Purchaser will be responsible for 25%, and the Sellers 75%, of the costs
and fees of the Independent Accountant).

 

(c)           If the Sellers’ Representative does
not deliver an Earn-Out Objection Notice during the Earn-Out Objection Period,
then the Sellers shall be deemed to have accepted the Earn-Out Statement for
the relevant Earn-Out Period.  The
Earn-Out Statement, either (i) as accepted by the Sellers’ Representative
pursuant to the preceding sentence, (ii) as agreed to by the Purchaser and
the Sellers’ Representative, or (iii) as adjusted by the Independent
Accountant pursuant to the Section 2.03(b), will be final and binding and
will be referred to as the “Final Earn-Out Statement” for the relevant
Earn-Out Period (the Final Earn-Out Statement for the 2009 Earn-Out Period
being herein referred to as the “2009 Final Earn-Out Statement” and the
Final Earn-Out Statement for the 2010 Earn-Out Period being herein referred to
as the “2010 Final Earn-Out Statement”).

 

(d)           For the 2009 Earn-Out Period, within
fifteen (15) days following the delivery of the 2009 Final Earn-Out Statement,
the Purchaser will pay to the Sellers, as an adjustment to the Purchase Price,
the amount, if any, payable based on the 2009 Gross Profit as set forth in the
2009 Final Earn-Out Statement determined in accordance with Annex III
attached hereto (the “2009 Earn-Out Payment”).

 

(e)           For the 2010 Earn-Out Period, within
fifteen (15) days following the delivery of the 2010 Final Earn-Out Statement,
the Purchaser will pay to the Sellers, as an adjustment to the Purchase Price,
the amount, if any, payable based on the 2010 Gross Profit as set forth in the
2010 Final Earn-Out Statement determined in accordance with Annex IV
attached hereto (the “2010 Earn-Out Payment”).

 

(f)            All payments made to the Sellers by
the Purchaser pursuant to Section 2.03(d) and Section 2.03(e) (collectively,
the “Earn Out Payments”) shall be made by wire transfer of immediately
available funds to the Purchase Price Bank Account (to be distributed by the
Sellers’ Representative among the Sellers in accordance with each such Seller’s
Applicable Percentage of such amount).

 

(g)           Notwithstanding anything else herein
to the contrary, in no event shall the aggregate payments by the Purchaser
pursuant to this Section 2.03 exceed a maximum of $1,100,000.00 for any
Earn-Out Period or $2,200,000.00 in the aggregate for both Earn-Out Periods.

 

(h)           During the Earn-Out Objection Period
and while any dispute that is the subject of an Earn-Out Objection Notice is
pending, the Purchaser shall (i) provide to the Sellers’ Representative
and his authorized representatives reasonable access during normal business
hours to the books, records and employees of the Company, the Purchaser, and
each Affiliated Medical Practice and (ii) cooperate with reasonable
requests of the Sellers’ Representative and/or his authorized representatives
with respect to information requested by them in connection with their review
of the amounts set forth

 

11

 

in the Earn-Out Statements
(including, without limitation, by providing on a timely basis copies of the
Purchaser’s work papers used in the calculation of the amounts set forth on the
Earn-Out Statement).

 

(i)            Within fifteen (15) days after the
end of each calendar month during the 2009 Earn-Out Period and the 2010
Earn-Out Period, Purchaser shall provide Sellers’  Representative with a statement showing a good
faith estimate of (i) the amount of Gross Profit earned during the prior
month and (ii) the cumulative Gross Profit earned during the applicable
Earn-Out Period.  Such statement shall be
provided for informational purposes only, and shall not be deemed an
acknowledgment or admission of the accuracy of the calculations set forth
thereon or otherwise be construed as a waiver of the Purchaser’s right to
deliver an Earn-Out Statement that differs from such statement or the Sellers’
Representative’s right to object to the calculation of the amounts set forth in
any Earn-Out Statement or any other rights of the Purchaser or the Sellers’
Representative.

 

Section 2.04           Adjustment to Purchase Price Based
on Adjusted Working Capital.

 

(a)           Not earlier than three (3) days
prior to the Closing Date, and prior to Closing, the Sellers’ Representative
shall prepare and deliver to the Purchaser a report (the “Estimated Adjusted
Working Capital Report”) showing in reasonable detail its computation of
the Adjusted Working Capital estimated as of Closing Date and which, for the
avoidance of doubt, shall give effect to any distributions of cash and cash
equivalents that the Sellers will cause the Company to distribute to the
Sellers prior to the Closing Date (the “Estimated Adjusted Working Capital”).  Each Seller covenants that the Estimated
Adjusted Working Capital Report will be prepared in good faith by the Sellers’
Representative in accordance with GAAP applied on a basis consistent with that
used in the preparation of the Adjusted Working Capital Benchmark.

 

(b)           At the Closing, the Initial Purchase
Price shall be subject to an adjustment, if any, as follows:  (i) if the Estimated Adjusted Working
Capital is greater than the Adjusted Working Capital Benchmark, then the amount
in excess shall be payable by the Purchaser to the Sellers by increasing the
amount of the Initial Purchase Price by such excess, or (ii) if the
Adjusted Working Capital Benchmark is greater than the Estimated Adjusted
Working Capital, then the amount in excess shall be payable by the Sellers to
the Purchaser by decreasing the amount of the Initial Purchase Price by such
excess.

 

(c)           As soon as is reasonably practicable
after the Closing Date, but in any event not more than forty-five (45) days
thereafter, the Purchaser shall prepare and deliver to the Sellers’
Representative a certificate signed by the Chief Financial Officer or similar
officer of the Purchaser (the “Actual Adjusted Working Capital Report”)
showing in reasonable detail its computation of the actual Adjusted Working
Capital (the “Actual Adjusted Working Capital”).  The Purchaser covenants that the Actual
Adjusted Working Capital Report will be prepared in good faith by the Purchaser
in accordance with GAAP applied on a basis consistent with that used in the
preparation of the Adjusted Working Capital Benchmark.

 

12

 

(d)           Within thirty (30) days after receipt
of the Actual Adjusted Working Capital Report (the “Adjusted Working Capital
Objection Period”), the Sellers’ Representative by written notice to the
Purchaser may object to the Actual Adjusted Working Capital as set forth in the
Actual Adjusted Working Capital Report, setting forth in such notice (the “Adjusted
Working Capital Objection Notice”) the Sellers’ Representative’s objection
in reasonable detail and the Sellers’ Representative’s proposal or proposals
with respect to the calculation of Actual Adjusted Working Capital.  Within  twenty
(20) days following timely delivery of the Adjusted Working Capital Objection
Notice, the Purchaser and the Sellers’ Representative shall attempt, in good
faith, to resolve all disputes between them concerning the Adjusted Working
Capital Objection Notice.  If the
Purchaser and the Sellers’ Representative cannot resolve such disputes within
such twenty (20) day period, then all disagreements will be submitted for resolution
to the Independent Accountant.  Promptly,
but not later than twenty (20) days after the dispute has been submitted to the
Independent Accountant, the Independent Accountant shall determine only those
items in dispute and will render its report as to its resolution of such terms
and resulting calculations of the Actual Adjusted Working Capital.  In determining each disputed item, the
Independent Accountant may not assign a value to such item greater than the greatest
value for such item claimed by either party or less than the lowest value for
such term claimed by either party.  For
the purposes of the Independent Accountant’s calculation of the Actual Adjusted
Working Capital, the amounts to be included shall be the amounts stated in the
Actual Adjusted Working Capital Report as to items that are not in dispute, and
the amounts determined by the Independent Accountant as to items from the
Adjusted Working Capital Objection Notice that are submitted for resolution by
the Independent Accountant.  The Sellers’
Representative and the Purchaser shall cooperate with the Independent
Accountant in making its determination and such determination shall be
conclusive and binding upon the parties hereto. 
The costs and fees related to such determination by the Independent
Accountant, including the costs relating to any negotiations with the
Independent Accountant with respect to the terms and conditions of such
Independent Accountant’s engagement, will be paid by the Purchaser and the
Sellers on an inversely proportional basis, based upon the relative portions of
the amounts in dispute that have been submitted to the Independent Accountant
for resolution that ultimately are awarded to each of the Purchaser and the
Sellers (e.g., if $100,000 is in dispute, and of that amount the Independent
Accountant awards $75,000 to the Purchaser and $25,000 to the Sellers, then the
Purchaser will be responsible for 25%, and the Sellers 75%, of the costs and
fees of the Independent Accountant).

 

(e)           If the Sellers’ Representative does
not deliver an Adjusted Working Capital Objection Notice during the Adjusted
Working Capital Objection Period, then the Sellers shall be deemed to have
accepted the calculation of the Actual Adjusted Working Capital as set forth in
the Actual Adjusted Working Capital Report. 
The term “Final Adjusted Working Capital” shall mean (i) the
Actual Adjusted Working Capital as set forth in the Actual Adjusted Working
Capital Report if the Sellers’ Representative accepts the Actual Adjusted
Working Capital Report as delivered or does not deliver a Adjusted Working
Capital Objection Notice during the Adjusted Working Capital

 

13

 

Objection Period, or (ii) the
Actual Adjusted Working Capital determined pursuant to Section 2.04(d), if
the Sellers’ Representative delivers an Adjusted Working Capital Objection
Notice during the Adjusted Working Capital Objection Period.

 

(f)            If the Estimated Adjusted Working
Capital  is greater than the Final
Adjusted Working Capital, then the amount in excess shall be payable by the
Sellers to the Purchaser within five (5) days after the Final Adjusted
Working Capital is determined as provided in Section 2.04(e).  Subject to the requirement of Section 8.07
that the Purchaser proceed first against the Escrow Cash, each of the Sellers
shall pay their pro rata share of any remaining amounts (based on each Seller’s
percentage ownership of Membership Interests) and each Seller shall be liable
for all costs and expenses of collection from such Seller.

 

(g)           If the Final Adjusted Working Capital
is greater than the Estimated Adjusted Working Capital, then the amount in
excess shall be payable by the Purchaser to the Sellers in cash, to be paid to
the Sellers’ Representative, by wire transfer to the Purchase Price Bank
Account, for further distribution to the Sellers in accordance with the
Applicable Percentages, within five (5) days after the Final Adjusted
Working Capital is determined as provided in Section 2.04(e) above.  If the payment provided for in this Section 2.04(g) is
not paid by the Purchaser when due, the Sellers may proceed against the
Purchaser for payment, in which event the Purchaser shall be liable for all
costs and expenses of collection including reasonable attorney’s fees.

 

(h)           During the Adjusted Working Capital
Objection Period and while any dispute that is the subject of an Adjusted
Working Capital Objection Notice is pending, the Purchaser shall (i) provide
to the Sellers’ Representative and his authorized representatives reasonable
access during normal business hours to the books, records and employees of the
Company, the Purchaser, and each Affiliated Medical Practice and (ii) cooperate
with reasonable requests of the Sellers’ Representative or his authorized
representatives with respect to information necessary in the determination of
the Actual Adjusted Working Capital (including, without limitation, by
providing on a timely basis copies of the Purchaser’s work papers used in the
calculation of the Actual Adjusted Working Capital).

 

Section 2.05           Closing.  Subject to the terms and conditions of this
Agreement, the sale and purchase of the Membership Interests contemplated by
this Agreement shall take place at a closing (the “Closing”) to be held
on April 14, 2008 or, if later, on the third business day following the
satisfaction or waiver of the conditions set forth in Article VII, or at
such other place or on such other date as is mutually acceptable to the
Purchaser and the Sellers’ Representative (the “Closing Date”).  The transactions described herein shall be
deemed effective as of 11:59 p.m. on the Closing Date.  The parties will exchange signatures on this
Agreement, the Ancillary Agreements and other closing documents by facsimile,
email or other means of electronic transmission, and each agrees to provide
original signatures on all Ancillary Agreements and other closing documents by
FedEx or similar overnight courier service as soon as practicable following the
Closing Date.

 

14

 

Section 2.06                                Events of Closing.  At the
Closing the following events shall occur simultaneously:

 

(a)                                  The Purchaser shall (i) pay the Closing Date Cash
Consideration to the Sellers, (ii) deposit the Escrow Cash and Change of
Control Escrow Cash (if applicable) with the Escrow Agent and (iii) pay
any brokers fees or commissions payable by the Company or Sellers and
professional fees and expenses to be paid by the Company as directed by the
Sellers prior to the Closing;

 

(b)                                 Sellers shall transfer the Membership Interests to the
Purchaser, free of any Encumbrances;

 

(c)                                  Each Seller shall deliver an affidavit from such Seller
stating, under penalty of perjury, such Seller’s United States taxpayer
identification number and that such Seller is not a foreign person, pursuant to
Section 1445(b)(2) of the Code; and

 

(d)                                 Each Seller shall deliver to the Purchaser the instruments
and documents referred to in Section 7.02 below and the Purchaser shall
deliver to the Sellers the instruments and documents referred to in Section 7.01
below.

 

Section 2.07                                Sellers’ Representative.

 

(a)                                  From and after the Closing Date, Zarlingo (the “Sellers’
Representative”), or such Person who may be appointed by the Sellers in a
written notice delivered to the Purchaser to replace Zarlingo, shall act as the
representative of the Sellers, and shall be authorized to act on behalf of the
Sellers and to take any and all actions required or permitted to be taken by
the Sellers or the Sellers’ Representative under this Agreement and the
Ancillary Agreements, including without limitation any actions with respect to (i) any
adjustments to the Purchase Price as contemplated by Sections 2.03 and 2.04, (ii) claims
for indemnification pursuant to Articles VIII or IX of this Agreement, and (iii) any
actions to be taken by the Sellers’ Representative pursuant to the terms of the
Escrow Agreement  (including, without
limitation, the exercise of the power to (A) authorize or dispute the
basis for the delivery of all or any portion of the Escrow Cash or Change of
Control Escrow Cash (if applicable) to the Purchaser in satisfaction of the
obligations of the Sellers under this Agreement, (B) agree to, negotiate,
enter into settlements and compromises of, and comply with orders of courts
with respect to any claims for indemnification, (C) engage counsel and/or
other professionals to provide assistance in connection with the performance of
the Sellers’ Representative’s functions as the Sellers’ Representative (which
engagement may include representative of the Sellers individually), including
the right to expend such sums as the Sellers’ Representative shall deem
reasonable in exchange for services provided, and (D) take all actions
necessary in the judgment of the Sellers’ Representative to accomplish any of
the foregoing tasks).  The execution of
this Agreement by the Sellers shall constitute approval of the appointment of
the Sellers’ Representative and all actions of such Sellers’ Representative
pursuant to this Agreement and the Ancillary Agreements, including authorizing
the

 

15

 

Sellers’ Representative to enter
into the Escrow Agreement on behalf of the Sellers.  In all matters relating to Articles VIII and
IX, the Sellers’ Representative shall be the only party entitled to assert the
rights of the Sellers, and the Sellers’ Representative shall have the authority
to exercise any rights of the Sellers and to perform any of the obligations of
the Sellers under this Agreement and the Ancillary Agreements.  The Purchaser and any Purchaser Indemnified
Party shall be entitled to rely on all statements, representations and
decisions of the Sellers’ Representative.

 

(b)           The Sellers shall be bound by all
actions or inactions taken by the Sellers’ Representative in his capacity as
the Sellers’ Representative. The Sellers’ Representative shall not be liable to
any Seller for any error of judgment, or any action taken, suffered or omitted
to be taken under this Agreement in his capacity as the Sellers’ Representative,
except in the case of his gross negligence, bad faith or willful
misconduct.  The Sellers’ Representative
may consult with legal counsel, accountants and other experts selected by him,
the reasonable fees and expenses of which shall be paid by the Sellers.  The Sellers’ Representative, solely in his
capacity as such, shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the Ancillary Agreements.

 

(c)           Each Seller, severally, but not
jointly, shall indemnify and hold harmless and reimburse the Sellers’
Representative from and against such Seller’s Applicable Percentage of any and
all liabilities, losses, damages, claims, costs or expenses suffered or incurred
by the Sellers’ Representative arising out of or resulting from any action
taken or omitted to be taken by the Sellers’ Representative, solely in his
capacity as such, under this Agreement and the Ancillary Agreements, other than
such liabilities, losses, damages, claims, costs or expenses arising out of or
resulting from the Sellers’ Representative’s gross negligence, bad faith or
willful misconduct.

 

ARTICLE III 

REPRESENTATIONS AND WARRANTIES

 

OF THE SELLERS

 

Except as set forth in Section 3 of the
Disclosure Schedule in a numbered paragraph that corresponds to the section for
which such disclosure is made, each Seller, severally and not jointly, hereby
represents and warrants to the Purchaser, as of the date hereof or, if a
representation or warranty is made as of a specified date, as of such date as
follows:

 

Section 3.01           Authority
of the Sellers and Enforceability. 
This Agreement has been, and upon their execution, the Ancillary
Agreements to which such Seller is a Party shall have been, duly executed and
delivered by such Seller; and (assuming due authorization, execution and
delivery by the other parties thereto) this Agreement constitutes, and upon
their execution, the Ancillary Agreements to which such Seller is a party shall
constitute, legal, valid and binding obligations of such Seller, enforceable
against such Seller in accordance with their respective

 

16

 

terms, subject to the
effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar Laws relating to or affecting creditors’ rights
generally, and general equitable principles (whether considered in a proceeding
in equity or at Law).

 

Section 3.02           Governmental
Consents and Approvals.  The execution,
delivery and performance by such Seller of this Agreement and each Ancillary
Agreement to which such Seller is a party do not and will not require any
consent, approval, authorization or other order of, action by, filing with or
notification to, any Governmental Authority, except where the failure to obtain
such consent, approval, authorization or action, or to make such filing or
notification, would not prevent or materially delay the consummation by the
Company or the Sellers of the transactions contemplated by this Agreement and
the Ancillary Agreements.

 

Section 3.03           No
Conflict.  The execution, delivery
and performance of this Agreement and the Ancillary Agreements by such Seller
do not and will not (a) to the extent applicable, violate, conflict with
or result in the breach of the organizational documents of such Seller, (b) conflict
with or violate any Law or Governmental Order applicable to such Seller, or (c) conflict
with, result in any breach of, constitute a default (or event which with the giving
of notice or lapse of time, or both, would become a default) under, require any
consent under, or give to others any rights of termination, acceleration or
cancellation of, any material note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, Permit, franchise or other instrument or
arrangement to which such Seller is a party, except, in the case of clause (b),
as would not prevent or materially delay the consummation by the Company or the
Sellers of the transactions contemplated by this Agreement and the Ancillary
Agreements to which such Seller is a party and would not have a Material
Adverse Effect on the Business.

 

Section 3.04           Ownership
of Membership Interests.  The
Membership Interests set forth on Annex I hereto with respect to such
Seller are owned of record and beneficially by such Seller, free and clear of
all Encumbrances.  Except as set forth in
the Company’s limited liability company agreement, such Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that
could require such Seller to sell, transfer, or otherwise dispose of any
Membership Interests.  Except as set
forth in the Company’s limited liability company agreement, as amended, such
Seller is not and has not been a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of any Membership
Interests, or any restrictions on transfer. 
Upon delivery to the Purchaser of the Agreement and payment by the
Purchaser of the Purchase Price, good and valid title to such Seller’s
Membership Interests will pass to the Purchaser, free and clear of all
Encumbrances.

 

Section 3.05           Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement or the Ancillary
Agreements to which such Seller is a party based upon arrangements made by or
on behalf of the Company or such Seller, other than a fee or commission payable
by the Company or Sellers to Provident Health Care Partners, LLC, which shall
be deducted at the Closing from the Initial Purchase Price and delivered to
Provident against receipt and release (the “Provident Fee”).

 

17

 

ARTICLE IV 

REPRESENTATIONS AND WARRANTIES

REGARDING THE COMPANY

 

Except as set forth in Section 4 of the
Disclosure Schedule in a numbered paragraph that corresponds to the section for
which such disclosure is made, the Company hereby represents and warrants to
the Purchaser, as of the date hereof or, if a representation or warranty is
made as of a specified date, as of such date, as follows:

 

Section 4.01           Organization,
Authority and Qualification of the Company. 
The Company is a limited liability company duly organized, validly
existing and in good standing under the Laws of Delaware and has all necessary
limited liability company power and authority to own, operate or lease the
properties and assets now owned, operated or leased by it and to carry on its
business as it has been and is currently conducted.  The Company is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the failure
to be so licensed or qualified would have a Material Adverse Effect.  True and correct copies of the certificate of
formation and limited liability company agreement of the Company have been made
available to the Purchaser.  The Company
has all necessary power and authority to enter into this Agreement and any
Ancillary Agreements to which it is a party, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.  The execution and delivery
of this Agreement the performance of its obligations hereunder and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all requisite action on the part of the Company.  This Agreement has been duly executed and
delivered by the Company, and (assuming due authorization, execution and
delivery by the other parties thereto) this Agreement constitutes a legal,
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, subject to the effects of bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar Laws
relating to or affecting creditors’ rights generally, and general equitable
principles (whether considered in a proceeding in equity or at Law).

 

Section 4.02           Capitalization.  The Membership Interests constitute all of
the issued and outstanding equity in the Company and the Sellers constitute all
of the members of the Company.  There are
no options, warrants, convertible securities or other rights, agreements,
arrangements or commitments relating to (or having a value determined by reference
to) the Membership Interests or obligating the Company to issue or sell (or
provide any value determined by reference to) any membership interests or any
other interest in the Company.  The
Company has no Subsidiaries or any investments in any other Person or any
rights to acquire any outstanding equity interests in any Person.  The Company has not offered Membership
Interests to or accepted as a member anyone other than the Sellers and the
persons listed on Section 4.02 of the Disclosure Schedule.

 

Section 4.03           No
Conflict.  Except as set forth in Section 4.03
of the Disclosure Schedule, the execution, delivery and performance of this
Agreement and the Ancillary

 

18

 

Agreements by the Company
do not and will not (a) violate, conflict with or result in the breach of
the certificate of formation or limited liability company agreement of the
Company, (b) conflict with or violate any Law or Governmental Order
applicable to the Company that is material to the Business or (c) conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
acceleration or cancellation of, any note, bond, mortgage or indenture,
contract, agreement, lease, sublease, license, Permit, franchise or other
instrument or arrangement to which the Company is a party that is material to the
Business (or result in the imposition of any Encumbrance upon any of its
assets, other than Encumbrances that do not materially detract from the value
of such assets or materially interfere with the present use of such assets).

 

Section 4.04                                Financial Information.

 

(a)                                  True and complete copies of (i) the audited balance
sheet of the Company as of December 31, 2006, and the related audited
statements of income and cash flows of the Company for the year then ended
(collectively, the “Audited Financial Statements”), (ii) the
unaudited balance sheet of the Company for the fiscal year ended as of December 31,
2007, and the related unaudited statements of income and cash flows of the
Company (collectively, the “Unaudited Financial Statements”) and (iii) the
unaudited balance sheet of the Company as of March 31, 2008, and the
related unaudited statements of income and cash flows of the Company have been
delivered by the Sellers to the Purchaser (the “Interim Financial Statements”
and together with the Audited Financial Statements and the Unaudited Financial
Statements, the “Financial Statements”).

 

(b)                                 The Financial Statements (i) were prepared in
accordance with the books of account and other financial records of the Company
(except as may be indicated in the notes thereto), (ii) present fairly in
all material respects the consolidated financial condition and results of
operations of the Company as of the dates thereof or for the periods covered
thereby and (iii) were prepared in accordance with GAAP applied on a basis
consistent with the past practices of the Company, clauses (ii) and (iii) above
being subject, in the case of the Interim Financial Statements, to normal
recurring year-end adjustments, and in the case of the Interim Financial
Statements and the Unaudited Financial Statements, to the absence of notes, the
effect of which are not, individually or in the aggregate, material.

 

Section 4.05                                Absence of Undisclosed Liabilities.  Except as set forth in Section 4.05 of
the Disclosure Schedule, there are no individual Liabilities of the Company, or
series of related Liabilities aggregating, in excess of $25,000, other than
Liabilities (a) reflected or reserved against on the Financial Statements
or the notes thereto, or (b) incurred since the date of the Interim
Financial Statements in the ordinary course of business consistent with past
practices of the Company.

 

19

 

Section 4.06                                Conduct in the Ordinary Course.

 

(a)                                  Since December 31, 2006, the Company has conducted the
Business in the ordinary course consistent with past practices, and there has
not occurred any Material Adverse Effect.

 

(b)                                 Without limiting the generality of the foregoing, since December 31,
2006 the Company has not:

 

(i)                                     other than the contracts
listed on Section 4.14 of the Disclosure Schedule, entered into any
agreement, commitment, contract, lease, or license, either involving more than
$25,000, other than in the ordinary course of business consistent with past
practices or as contemplated by this Agreement;

 

(ii)                                  accelerated, terminated,
materially modified, or cancelled any agreement, contract, lease, or license to
which the Company is a party or by which it is bound involving more than
$25,000 per annum;

 

(iii)                               made any capital investment
in, any loan to, or any acquisition of the securities or assets of, any other
Person;

 

(iv)                              issued any note, bond, or
other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation;

 

(v)                                 transferred, assigned, or
granted any license or sublicense of any rights under or with respect to any
Company Intellectual Property;

 

(vi)                              amended or otherwise
modified its certificate of formation or limited liability company agreement;

 

(vii)                           entered into any collective
bargaining agreement, written or oral, or modified the terms of any existing
such contract or agreement;

 

(viii)                        adopted, amended, modified,
or terminated any Plan or granted or announced any increase in the salaries,
bonuses or other compensation or benefits payable by the Company to any of the
current or former directors, managers, officers, employees or independent
contractors of the Company, other than as required by Law, pursuant to any
plans, programs or agreements existing on the date of this Agreement and
disclosed to the Purchaser or, solely in the case of salaries and bonuses,
other ordinary increases consistent with the past practices of the Company;

 

(ix)                                delayed or postponed the
payment of accounts payable and other Liabilities or the purchase of inventory;

 

(x)                                   changed any method of
accounting or accounting practice or policy used by the Company, other than
such changes required by GAAP;

 

20

 

(xi)                                made or modified any Tax
election or agreement in respect of Taxes by the Company; or

 

(xii)                             entered into any legally
binding agreement, whether oral or written, to do any of the foregoing.

 

The Purchaser
acknowledges that the Sellers intend to cause the Company to distribute cash
and cash equivalents to the Sellers prior to the Closing Date to the extent not
required to meet the Adjusted Working Capital Benchmark and agrees that any
such distribution alone will not be deemed to violate the representations and
warranties set forth in this Section 4.06.

 

Section 4.07                                Litigation.

 

(a)                                  Section 4.07(a) of the Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any
Governmental Order or (ii) is a party or, to the Knowledge of Sellers, is
threatened to be made a party to any Action.

 

(b)                                 Except as set forth in Section 4.07(b) of the
Disclosure Schedule, the Company has given timely notice to the appropriate
insurance carrier with respect to each item listed in Section 4.07(a) of
the Disclosure Schedule that may be covered by insurance, and except as set
forth in Section 4.07(b) of the Disclosure Schedule,

 

(i)                                     No dispute with any
insurance carrier exists with respect to the scope of any such insurance
coverage;

 

(ii)                                  the Company has not received
any refusal of coverage or any notice that a defense will be afforded with a
reservation of rights; and

 

(iii)                               with respect to those items
set forth on Schedule 4.07(b) of the Disclosure Schedule with respect to
which no notice has been given to the insurance carrier, no Seller has reason
to believe that coverage would be denied if a claim was made.

 

(c)                                  Section 4.07(c) of the Disclosure Schedule sets
forth each incident not listed in Section 4.07(a) of the Disclosure
Schedule that to the Knowledge of Sellers has occurred that as of the date
hereof could reasonably be expected to form the basis for an Action which could
reasonably be expected to result in damages in excess of $100,000.  Except as set forth in Section 4.07(c) of
the Disclosure Schedule, all such incidents have been reported to the
appropriate insurance carrier.

 

Section 4.08                                Compliance with Laws.

 

(a)                                  The Company has conducted and, during any period between the
date of this Agreement and the Closing Date, will continue to conduct the
Business in all material respects in accordance with all Laws and Governmental
Orders applicable to the Company and the Company is not in violation in any
material respect of any such Law or 

 

21

 

Governmental Order; provided,
however, that the foregoing representations and warranties shall not be
deemed to be made with respect to Health Care Laws.

 

(b)                                 The Company has all authorizations, approvals, consents,
licenses, registrations, or permits issued by a governmental authority or pursuant
to any legal requirement, other than Environmental Permits (each, a “Permit”)
required by any Governmental Authority for the conduct of its Business as
currently conducted, and its employees and agents (including each radiologist
employed or under contract to perform professional services on behalf of the
Company) have all licenses necessary to conduct the Business as currently
conducted by the Company, all of which are in full force and effect and will
remain in effect following the Closing; provided, however, that no
representation or warranty is made regarding Permits required pursuant to
Health Care Laws or the Company’s qualification to conduct business as a
foreign entity in any jurisdiction.  To
the Knowledge of the Sellers, the Company and its employees are not in
violation of any such Permit.

 

(c)                                  Section 4.08(c) of the Disclosure Schedule sets
forth for each radiologist currently employed by or under contract to perform
professional services on behalf of the Company and each State in which each
such radiologist is licensed to practice medicine.

 

Section 4.09                                Environmental Matters.  (a) The
Company is in material compliance with all applicable Environmental Laws and
has obtained and is in material compliance with all Environmental Permits, (b) the
Company has not received any written claims pursuant to any Environmental Law
pending and, to the Knowledge of the Sellers, no such claims have been
threatened against the Company, (c) copies of any and all environmental
assessments or audit reports or other similar studies or analyses that relate
to the Assets, have been provided to the Purchaser, (d) the Company is not
currently conducting any investigation, response, remedial action, cleanup or
other corrective action pursuant to any Environmental Laws at any site or
facility, nor a party to any contract, agreement, order, judgment or decree
which obligates it to conduct any such actions, (e) no Hazardous Materials
have been brought to or released to the surface or subsurface by the Company
at, on or under any site or facility currently owned, operated or leased by the
Company that would result in a requirement to undertake any notification,
investigation, response, remedial action, cleanup or other corrective action
under any Environmental Laws nor were any Hazardous Materials brought to or
released to the surface or subsurface by the Company at, on or under any site
or facility previously owned, operated or leased by the Company at the time of
the Company’s ownership, operation or leasehold other than in compliance with
Environmental Laws, and (f) to the Knowledge of the Sellers, the Company
does not have any liability with respect to the storage, treatment, disposal or
release of any Hazardous Materials at, on or under any site or facility not
owned, operated or leased by it.

 

Section 4.10                                Intellectual Property.

 

(a)                                  As used in this Agreement, “Intellectual Property”
means: (i) inventions (whether or not patentable), trade secrets,
technical data, databases, customer lists, designs, tools, methods, processes,
technology, ideas, know-how, source code, product 

 

22

 

road maps and other proprietary
information and materials (“Proprietary Information”); (ii) trademarks
and service marks (whether or not registered), trade names, logos, trade dress
and other proprietary indicia and all goodwill associated therewith; (iii) documentation,
advertising copy, marketing materials, web-sites, specifications, mask works,
drawings, graphics, databases, recordings and other works of authorship,
whether or not protected by Copyright; (iv) computer programs, including
any and all software implementations of algorithms, models and methodologies,
whether in source code or object code, design documents, flow-charts, user
manuals and training materials relating thereto and any translations thereof
(collectively, “Software”); and (v) all forms of legal rights and
protections that may be obtained for, or may pertain to, the Intellectual
Property set forth in clauses (i) through (iv) in the United States
of America (“Intellectual Property Rights”), including all letters
patent, patent applications, provisional patents, design patents, PCT filings,
invention disclosures and other rights to inventions or designs (“Patents”),
all registered and unregistered copyrights in both published and unpublished
works (“Copyrights”), all trademarks, service marks and other
proprietary indicia (whether or not registered) (“Marks”), trade secret
rights, mask works, moral rights or other literary property or authors rights,
and all applications, registrations, issuances, divisions, continuations,
renewals, reissuances and extensions of the foregoing.

 

(b)                                 Section 4.10(b) of the Disclosure Schedule lists
(by name, owner and, where applicable, registration number and jurisdiction of
registration, application, certification or filing) all computer programs and
associated teleradiology workflow processes, Marks, and domain names that are
owned by the Company (whether exclusively, jointly with another Person or
otherwise) and which are material to the conduct and operation of the Business
as of the Closing (“Owned Intellectual Property”).  Except as described on Section 4.10(b) of
the Disclosure Schedule, the Company owns the entire right, title and interest
to all Owned Intellectual Property free and clear of all Encumbrances.

 

(c)                                  Section 4.10(c) of the Disclosure Schedule lists (i) all
licenses, sublicenses and other agreements (“In-Bound Licenses”)
pursuant to which a third party authorizes the Company to use, practice any
rights under, or grant sublicenses with respect to, any Intellectual Property
owned by such third party other than In-Bound Licenses that consist solely of “shrink-wrap”
and similar commercially available end-user licenses, including the incorporation
of any such Intellectual Property into the Company’s products and, with respect
to each In-Bound License, whether the In-Bound License is exclusive or
non-exclusive and (ii) all licenses, sublicenses and other agreements (“Out-Bound
Licenses”) pursuant to which the Company authorizes a third party to use,
practice any rights under, or grant sublicenses with respect to, any Owned
Intellectual Property or pursuant to which the Company grants rights to use or
practice any rights under any Intellectual Property owned by a third party and,
with respect to each Out-Bound License, whether the Out-Bound License is
exclusive or non-exclusive.

 

(d)                                 The Company (i) exclusively owns the entire right,
interest and title to all Intellectual Property that is used in or necessary
for the business of the Company as it is 

 

23

 

currently conducted free and
clear of Encumbrances, or (ii) otherwise rightfully uses or otherwise
enjoys such Intellectual Property pursuant to the terms of a valid and
enforceable In-Bound License that is listed on Section 4.10(c) of the
Disclosure Schedule or that is a “shrink-wrap” or similar commercially
available end-user license.  The Owned
Intellectual Property, together with the rights under the In-Bound Licenses
listed on Section 4.10(c) of the Disclosure Schedule or that are “shrink-wrap”
or similar commercially available end-user licenses (collectively, the “Company
Intellectual Property”), constitutes all the material Intellectual Property
used in or necessary for the operation of Company’s business as currently
conducted and as proposed to be conducted.

 

(e)                                  The Company does not own any registered Patents, Marks,
Copyrights or similar certifications, (“Company Registered Items”) and has
not filed any applications therefor.

 

(f)                                    The Company has not been given notice of any challenges
(and, to the Knowledge of the Sellers, there exists no basis for a challenge)
with respect to the validity or enforceability of any Company Intellectual Property.  Neither the Sellers, nor the Company have
taken any action or failed to take any action that could reasonably be expected
to result in the abandonment, cancellation, forfeiture, relinquishment,
invalidation, waiver or unenforceability of any Company Intellectual Property.

 

(g)                                 To the Knowledge of the Sellers, none of the services
currently or formerly provided by the Company, has infringed or infringes upon,
or otherwise unlawfully used or uses, the Intellectual Property Rights of any
third party.  To the Knowledge of the
Sellers, the Company, by conducting its business as currently conducted or as
proposed to be conducted, has not infringed and does not infringe upon, and has
not otherwise unlawfully used, any Intellectual Property Rights of a third
party.  Neither Sellers, nor the Company
have received any communication alleging that the Company or any of its
products, services, activities or operations infringe upon or otherwise
unlawfully use any Intellectual Property Rights of a third party nor, to the
Knowledge of the Sellers, is there any basis therefor.  No Action has been instituted, or, to the
Knowledge of the Sellers, threatened, relating to any Intellectual Property
formerly or currently used by the Company and none of the Company Intellectual
Property is subject to any outstanding Governmental Order.  To the Knowledge of Sellers, no Person has
infringed or is infringing any Intellectual Property Rights of the Company or
has otherwise misappropriated or is otherwise misappropriating any Company
Intellectual Property.

 

(h)                                 The Proprietary Information of the Company (other than
Proprietary Information that is covered by an issued Patent) is not part of the
public knowledge and to the Knowledge of the Sellers has not been used or
divulged for the benefit of any Person other than the Company.  Any receipt or use by, or disclosure to, a
third party of Proprietary Information owned by the Company has been pursuant
to the terms of binding written confidentiality agreement between the Company
and such third party 

 

24

 

(“Nondisclosure Agreements”).  The Company is, and to Knowledge of the
Company, all other parties thereto are, in compliance with the provisions of
the Nondisclosure Agreements.  The Company
is in compliance with the terms of all agreements pursuant to which a third
party has disclosed to, or authorized the Company to use, Proprietary
Information owned by such third party.

 

(i)                                     Section 4.10(i) of the Disclosure Schedule
includes a list of (i) confidentiality and/or nondisclosure agreements or
other agreements regarding the protection of Proprietary Information (“Confidentiality
Agreements”) (ii) and written assignments of Intellectual Property
conceived or developed by employees, consultants or contractors in connection
with their service to the Company (“Work Product Agreements”).  True and complete copies of the
Confidentiality Agreements and Work Product Agreements have been provided to
the Purchaser.  To the Knowledge of the
Sellers, no current or former employee, consultant or contractor or any other
Person has any right, claim or interest to any of the Company Intellectual
Property.

 

(j)                                     To the Knowledge of the Sellers, no employee, consultant or
contractor of the Company has been, is or will be, by performing services for
the Company, in violation of any term of any employment, invention disclosure
or assignment, confidentiality, noncompetition agreement or other restrictive
covenant or any Governmental Order as a result of such employee’s, consultant’s
or independent contractor’s employment by the Company or any services rendered
by such employee, consultant or independent contractor.

 

(k)                                  The Company has taken all reasonable measures to protect the
secrecy and confidentiality of all trade secrets used in the conduct of its
business the disclosure of which would have a Materially Adverse Effect
(collectively, “Business Trade Secrets”), including, but not limited to,
entering into appropriate confidentiality agreements listed in Section 4.10(k) of
the Disclosure Schedule.  None of the
Business Trade Secrets has, to the Knowledge of the Sellers, been disclosed or
has been authorized to be disclosed to any Person other than to employees or
agents of the Company for use in connection with the business or pursuant to a
confidentiality or non-disclosure agreement that reasonably protects the
interests of the Company in and to such matters.  To the Knowledge of the Company, no
unauthorized disclosure of any Business Trade Secrets has been made.

 

(l)                                     All material Software that is used in or held for use in the
Business is in machine readable form and is in good working condition
sufficient to perform the data processing and telecommunications functions for
the operation of the Business in the ordinary course.  To the Knowledge of the Sellers, such
Software (i) contains no disabling devices; (ii) other than those
errors and defects inherent in Software that are generally known within the
information technology industry, has not suffered from any material and
recurring malfunctions since January 1, 2006 that has not been remedied in
all material respects; and (iii) does not contain any open source
programming code.

 

25

 

(m)                               The execution and delivery of this Agreement by Sellers does
not, and the consummation of the transactions contemplated by this Agreement
(in each case, with or without the giving of notice or lapse of time, or both),
will not, directly or indirectly, result in the loss or impairment of any
Company Intellectual Property, or give rise to any right of any third party to
terminate or reprise or otherwise renegotiate any of the Company’s rights to
own any of its Intellectual Property or rights under any Out-Bound License or
In-Bound License, nor require the consent of any Governmental Authority or
other third party in respect of any such Intellectual Property.

 

Section 4.11                                Real Property.

 

(a)                                  The Company owns no real property.  Section 4.11 of the Disclosure Schedule
lists the street address of each parcel of Leased Real Property and the
identity of the lessor, lessee and current occupant (if different from lessee)
of each such parcel of Leased Real Property. 
The Company has made available to the Purchaser, true and complete
copies of the leases, subleases, licenses or assignment agreements and any and
all amendments, modifications, supplements, exhibits and restatements thereto
and thereof in effect as of the date of this Agreement relating to the Leased
Real Property.

 

(b)                                 Except as set forth in Section 4.11 of the Disclosure
Schedule, as to each real property lease: (i) the transactions
contemplated by the Agreement do not require the consent of any other party to
any such lease, will not result in a breach of or default under any such lease,
do not create a right to accelerate the termination date, terminate such lease
or recapture the leased premises on the part of any other party to such lease,
or otherwise cause any such lease to cease to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing; (ii) the Company is not, and to the Knowledge of the Sellers, the
landlord is not in breach or default under any such lease, and no event has
occurred or circumstance exists which, with the delivery of notice, the passage
of time or both, would constitute such a breach or default, or permit the
termination, modification or acceleration or offset of rent under any such
lease; (iii) no security deposit or portion thereof deposited with respect
to any such lease has been applied in respect of a breach or default under any
such lease which has not been redeposited in full; (iv) the Company does
not owe, or will not owe in the future, any brokerage commissions or finder’s
fees with respect to any such lease; (v) the other party to any such lease
is not an affiliate of, and otherwise does not have any economic interest in,
the Sellers, the Company or their respective Affiliates except as set forth in
the applicable lease; (vi) the Company has not assigned, subleased,
licensed or otherwise granted any person the right to use or occupy the
premises subject to any such lease or any portion thereof; (vii) the
Company has not collaterally assigned or granted any other security interest in
any such lease or any interest therein and no party to any such lease has a
security interest in such lease or any personal property or trade fixtures
located at the leased premises; (viii) no such lease contains a clause
permitting the landlord to terminate such lease prior to the end of the stated
lease term except in the event of a default; (ix) the Company enjoys
peaceful and undisturbed possession under such leases; (x) all work
required to be done under such leases to prepare the subject premises for 

 

26

 

occupancy has been completed and
paid for; and (xi) no such lease has been amended or otherwise modified.

 

(c)                                  The leased properties and the leasehold improvements
comprise all of the real property used or intended to be used in, or otherwise
related to, the Business as currently conducted.

 

Section 4.12                                Employee Benefit Matters; Labor.

 

(a)                                  Section 4.12(a) of the Disclosure Schedule lists
each “employee benefit plan” (within the meaning of Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
whether or not subject to ERISA, and each employment, consulting, independent
contractor, bonus, incentive, equity purchase, option or other equity-based,
deferred compensation, loan, severance, termination, retention, change of
control, collective bargaining or other agreement with any works council or
association, fringe benefit and any other employee or retiree benefit or
compensation plan, funding mechanism, agreement, program, policy or other arrangement,
whether or not subject to ERISA or written or unwritten or legally binding or
not, and (i) that is maintained, sponsored or contributed to by the
Company or any ERISA Affiliate for the benefit of any current or former
employee, officer, director or independent contractor of the Company, or the
beneficiaries or dependents of any such individual, or (ii) under which
the Company may have any material outstanding liability.  For purposes of this Agreement, “ERISA
Affiliate” means any trade or business, whether or not incorporated, that,
together with the Company, is or would have been at any date of determination
occurring within the preceding six years, treated as a single employer within
the meaning of Section 414 of the Code (collectively, the “Plans”).

 

(b)                                 The Company has made available to the Purchaser a true and
complete copy of each Plan and, to the extent applicable to such Plan:  all trust agreements, insurance contracts or
other funding arrangements; the three most recent Forms 5500 required to have
been filed with the IRS and all schedules thereto; the most recent IRS
determination letter, all current summary plan descriptions, all material
communications received from or sent to the IRS or the Department of Labor
(including a written description of any oral communication); and all amendments
and modifications to any such document.

 

(c)                                  Each Plan has been operated and administered in all material
respects in accordance with its terms and the requirements of all applicable
Laws.  The Company has performed all
material obligations required to be performed by it under, is not in any
material respect in default under or in material violation of, and the Sellers
have no Knowledge of any material default or violation by any party to, any
Plan.  No Action is pending or, to the
Knowledge of the Sellers, threatened with respect to any Plan or the assets of
any Plan (other than claims for benefits in the ordinary course consistent with
past practices), and no fact or event exists that could give rise to any such
Action.  None of the Plans is subject to Section 302
or Title IV of ERISA or Section 412 of the Code, 

 

27

 

and no Plan is a “multiple
employer plan” for purposes of sections 4063, 4064 or 4066 of ERISA, a “multiemployer
plan” within the meaning of sections 3(37) or 4001(a)(3) of ERISA, or a “multiple
employer welfare arrangement” as defined in section 3(40) of ERISA.  Neither the Company nor any ERISA Affiliate
has incurred any material liability (including as a result of any
indemnification obligation) under Title I or Title IV of ERISA for which the
Company could be liable, and no condition exists that would subject the
Company, either directly or by reason of affiliation with an ERISA Affiliate,
to any material Tax, fine, encumbrance, or other liability imposed by ERISA,
the Code or other applicable Law.  No
asset of the Company is subject to any lien under ERISA or the Code.

 

(d)                                 Each Plan that is intended to be qualified under Section 401(a) of
the Code or Section 401(k) of the Code is so qualified and has timely
received a favorable determination letter from the IRS covering all of the
provisions applicable to the Plan for which determination letters are currently
available that the Plan is so qualified. 
Each trust established in connection with any Plan which is intended to
be exempt from federal income taxation under Section 501(a) of the
Code is so qualified and has received a determination letter from the IRS that
it is so exempt.  No fact or event has
occurred since the date of such determination letter or letters from the IRS
that would be reasonably likely to materially and adversely affect the
qualified status of any such Plan or the exempt status of any such trust.  All amendments and actions required to bring
each Plan into conformity with applicable provisions of all applicable Laws,
including, without limitation, ERISA and the Code have been made or taken,
except to the extent that such amendments or actions are not required by Law to
be made or taken until after the Closing Date. 
All contributions and premiums required to have been paid by the Company
to any Plan under the terms of any such Plan or its related trust, insurance
contract or other funding arrangement, or pursuant to any applicable Law have
been paid within the time prescribed by any such Plan, arrangement or
applicable law.

 

(e)                                  Except as set forth in Section 4.12(e) of the
Disclosure Schedules, all officers, employees, directors or independent
contractors of the Company are terminable at will by the Company without cost
to the Company, and the consummation of the transactions contemplated hereby
will not, either alone or in combination with another event, (i) entitle
any current or former employee, officer, director or independent contractor of
the Company to severance pay or any other payment or (ii) accelerate the
time of payment or vesting, or increase the amount of compensation due any such
individual.  The consummation of the
transactions contemplated hereby (either alone or in combination with any other
event or events) will not give rise to any payment (or acceleration of vesting
of any amounts or benefits) that will be an “excess parachute payment” as
defined in section 280G of the Code.

 

(f)                                    The Company does not have any legally binding plan or
commitment to create any additional Plan or modify or change any existing Plan
that could be reasonably expected to result in material liabilities to the
Company, except as may be required by applicable Law.  No current or former employee, officer,
director or independent

 

28

 

contractor of the Company is or will become entitled
to death or post-employment medical benefits by reason of service to the
Company, other than coverage mandated by Section 4890B of the Code.

 

(g)           The Company is not a
party to or bound by any collective bargaining agreement or other similar
agreement, and there are no labor unions or other organizations representing,
purporting to represent or attempting to represent any employees employed by
the Company.  Since January 1, 2006,
there has not occurred or been threatened any strike, slowdown, picketing, work
stoppage, concerted refusal to work overtime, or other similar labor activity
with respect to any employee of the Company, no event has occurred or
circumstance exists that may provide the basis of any strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime, or other similar
labor activity.  There are no material
employment disputes currently subject to any grievance procedure, arbitration, litigation
or other proceeding.  The Company has
complied in all material respects with all applicable Laws pertaining to the
employment or termination of employment of its employees, including all such
Laws relating to labor relations, equal employment opportunities, fair
employment practices, prohibited discrimination and other similar employment
activities.  Each current independent
contractor or consultant of the Company is and has been properly characterized
as an independent contractor or consultant based on the applicable standards
under applicable Law.

 

Section 4.13           Taxes.

 

(a)           All Tax Returns
required to have been filed by or with respect to the Company have been timely
filed (taking into account any extension of time to file granted or obtained); (ii) all
Taxes of the Company required to be paid before the Closing Date have been paid
or will be timely paid; and (iii) no deficiency for any Tax has been
asserted or assessed by a Governmental Authority in writing against the Company
that has not been satisfied by payment, settled or withdrawn.

 

(b)           All Tax Returns
filed by or with respect to the Company were correct and complete in all
material respects.  The Company currently
is not the beneficiary of any extension of time within which to file any Tax
Return.

 

(c)           To the Knowledge of
the Sellers, no taxing authority is expected to assess any additional Taxes for
any period for which Tax Returns have been filed.  There is no dispute or claim concerning any
Tax Liability of the Company either (i) claimed or raised by any authority
in writing or (ii) as to which the Sellers have Knowledge.

 

(d)           The Company is not
obligated to pay the Taxes of another person by contract, as transferee, as
successor, or otherwise.

 

(e)           The Company (i) is
currently treated and properly classified as a partnership for all relevant
income tax purposes, (ii) has never filed, or had filed on its

 

29

 

behalf, any election
to be treated as an association taxable as a corporation for income Tax
purposes, (iii) has never been a “publicly traded partnership” within the
meaning of Section 7704 of the Code, and (iv) has never made any
election to be excluded from all or any part of Subtitle A, Chapter 1,
Subchapter K of the Code.

 

(f)            None of the assets
of the Company is (i) treated as owned by any other person under Section 168
of the Code; (ii) tax exempt use property under Section 168(h) of
the Code; (iii) located in a country outside the Company’s country of
incorporation or formation.

 

(g)           The Company does not
have a material item of income or gain that is required to be included in
taxable income for a post-closing period and arises from events or transactions
occurring prior to the Closing, excluding accounts receivable arising in the
ordinary course of business.

 

(h)           The Company has not
waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.

 

(i)            No claim has ever
been made in writing by a Governmental Authority in a jurisdiction where the
Company does not file Tax Returns that the Company is or may be subject to
taxation by that jurisdiction.

 

(j)            There are no
Encumbrances on any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax.

 

(k)           The Company has
withheld and paid all Taxes (and timely filed Forms W-2 and 1099) required to
have been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.

 

(l)            The Company is not
currently a party to any Tax allocation or Tax sharing agreement or has an
obligation to make a payment under such an agreement.

 

(m)          The Company does not
have a permanent establishment or office or fixed place of business outside the
Company’s country of formation.

 

(n)           The unpaid Taxes of
the Company (i) did not, as of the date of the most recent balance sheet,
exceed the reserve for Tax liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
set forth on the face of such balance sheet (rather than in any notes thereto)
and (ii) do not exceed that reserve as adjusted for the passage of time
through the Closing Date in accordance with the past custom and practice of the
Company.

 

(o)           The Company has not
participated in a Tax shelter or listed transaction within the meaning of
Treasury Regulation Section 1.6011-4(c)(3)(i)(A).

 

30

 

Section 4.14                                Material Contracts.

 

(a)           Section 4.14(a) of
the Disclosure Schedule lists all contracts or agreements that are material to
the Company or the Business (other than In-Bound Licenses and Out-Bound
Licenses listed in Section 4.10(c) of the Disclosure Schedule),
including each of the following contracts and agreements, to which the Company
is a party as of the date of this Agreement (such contracts and agreements
being “Material Contracts”):

 

(i)                all contracts and agreements with any customer of the
Business pursuant to which payments in excess of $50,000 in the aggregate were
made to the Company during the year ended December 31, 2007;

 

(ii)               all contracts and agreements for the supply of
materials or services to the Business pursuant to which payments in excess of
$50,000 in the aggregate were made by the Company during the year ended December 31,
2007;

 

(iii)              all distributor or sales agency contracts or agreements
of the Company;

 

(iv)             all material management contracts and contracts with
independent contractors or consultants (or similar arrangements);

 

(v)              all contracts and agreements that limit or purport to
limit the ability of the Company to compete in any line of business or with any
Person or in any geographic area or during any period of time;

 

(vi)             all joint venture contracts or partnership arrangements
between the Company and a third party;

 

(vii)            all contracts and agreements requiring payments to or
from the Company in excess of $50,000 in the aggregate during any twelve-month
period;

 

(viii)           any contract or agreement for the employment of any Person
or engagement of any Person as an independent contractor;

 

(ix)              any contract or agreement granting registration rights
to any Person;

 

(x)               any confidentiality or similar agreement or any
agreement or contracts containing confidentiality provisions, other than such
agreements or contracts entered into in the ordinary course of business
consistent with past practices;

 

(xi)              any contract or agreement for the purchase or sale of
real property;

 

31

 

(xii)             any contract or agreement for the purchase or sale of
any equity interest in any Person;

 

(xiii)            any (a) contract or agreement to create, incur,
assume or guarantee any indebtedness for borrowed money or (b) capitalized
lease obligation in excess of $50,000;

 

(xiv)            any contract or agreement to advance or loan in excess of
$50,000; and

 

(xv)             any other contract or agreement not
covered by clauses (i) through (xiv) above under which the consequences of
a default or termination could have a Material Adverse Effect.

 

(b)           Each Material
Contract (i) is valid and binding on the Company and, to the Knowledge of
the Sellers, the counterparties thereto, and is in full force and effect as of
the date of this Agreement and (ii) upon consummation of the transactions
contemplated by this Agreement, shall continue in full force and effect without
penalty or other adverse consequence in accordance with their terms.  The Company is not in breach of, or default
under, any Material Contract to which it is a party where the consequences of
such breach or default could reasonably be expected to result in a Material
Adverse Effect.  To the Knowledge of the
Sellers, no other party is in breach of or has repudiated any Material
Contract.

 

(c)           With respect to the
Material Contract set forth in paragraph (109(a)) of Section 4.14 of the
Disclosure Schedule, the Company began performing services under such Material
Contract during April 2004 and stopped performing services under such
Material Contract during March 2006 and the hospitals set forth in
paragraph (109(b)) of Section 4.14 of the Disclosure Schedule are the only
Persons that the Company provided services to under such Material Contract.

 

Section 4.15             Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement or the Ancillary
Agreements based upon arrangements made by or on behalf of the Company, other
than the Provident Fee.

 

Section 4.16             Title to and Sufficiency of
Assets.  The Company has good title
to, or a valid leasehold interest in, the Assets (other than the Company
Intellectual Property, which is addressed in Section 4.10) used by it
and/or shown on the Reference Balance Sheet or acquired after the date thereof,
free and clear of all Encumbrances, except for Assets disposed of in the
ordinary course of business consistent with past practices since the date of
the Reference Balance Sheet and accounts or notes receivable paid in the
ordinary course of business consistent with past practices since the date of
the Reference Balance Sheet.

 

Section 4.17             Notes and Accounts Receivable.  The notes and accounts receivable of the
Company as reflected in the Financial Statements, to the extent uncollected,
and the accounts

 

32

 

receivable
reflected on the books of the Company: (i) represent monies due, and the
Company has made reserves, which are reflected in the Financial Statements,
that are reasonably considered adequate (subject to adjustment for operations
and transactions through the Closing Date in the ordinary course of business
consistent with past practices) for receivables not collectible in the ordinary
course of business consistent with past practices; and (ii) are subject to
no refund, defenses, rights of set-off, assignments, restrictions or
Encumbrances other than in the ordinary course of business consistent with past
practices, or other adjustments (other than the aforementioned reserves).

 

Section 4.18             Powers of Attorney.  There are no outstanding powers of attorney
executed on behalf of the Company.

 

Section 4.19             Insurance.  Section 4.19 of the Disclosure Schedule
sets forth a list of all insurance policies covering the property and
activities of the Company.  With respect
to each such insurance policy:  (i) the
policy is legal, valid, binding, enforceable, and in full force and effect; (ii) to
the Knowledge of the Sellers the policy will continue to be legal, valid,
binding, enforceable and in full force and effect on identical terms through
the Closing Date; (iii) neither the Company, nor, to the Knowledge of the
Sellers, any other party to the policy, is in breach or default (including with
respect to the payment of premiums or the giving of notices), and no event has
occurred which, with notice or the lapse of time, would constitute such a
breach or default, or permit termination, modification, or acceleration, under
the policy; and (iv) neither the Company nor, to the Knowledge of the
Sellers, any other party to the policy has, repudiated any provision
thereof.  Section 4.19 of the
Disclosure Schedule describes any self-insurance arrangements of the Company.

 

Section 4.20             Customers.  Section 4.20 of the Disclosure Schedule
lists the ten (10) largest customers of the Company for each of the two
most recent fiscal years and sets forth opposite the name of each such customer
the approximate dollar amounts and percentages of consolidated net sales
attributable to each such customer.

 

Section 4.21             Bank Accounts and Safe Deposit
Boxes.  Section 4.21 of the
Disclosure Schedule lists the title of each bank account of the Company, the
bank at which that account is maintained and the names of the persons
authorized to draw against the account or otherwise have access to it.  The Company does not lease any safe deposit
boxes.

 

ARTICLE V

 

REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER

 

The Purchaser hereby
represents and warrants to the Sellers as follows:

 

Section 5.01             Organization and Authority of
the Purchaser.  The Purchaser is a
corporation duly organized, validly existing and in good standing under the
Laws of Delaware and has all necessary power and authority to enter into this
Agreement and the Ancillary Agreements to which it is a party, to carry out its
obligations hereunder and thereunder and to 

 

33

 

consummate the
transactions contemplated hereby and thereby. 
The execution and delivery by the Purchaser of this Agreement and the
Ancillary Agreements to which it is a party, the performance by the Purchaser
of its obligations hereunder and thereunder and the consummation by the
Purchaser of the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of the Purchaser.  This Agreement has been, and upon their
execution the Ancillary Agreements to which the Purchaser is a party shall have
been, duly executed and delivered by the Purchaser, and (assuming due authorization,
execution and delivery by the Sellers) this Agreement constitutes, and upon
their execution the Ancillary Agreements to which the Purchaser is a party
shall constitute, legal, valid and binding obligations of the Purchaser,
enforceable against the Purchaser in accordance with their respective terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws relating to or affecting
creditors’ rights generally, and general equitable principles (whether
considered in a proceeding in equity or at Law).

 

Section 5.02             No Conflict.  The execution, delivery and performance by
the Purchaser of this Agreement and the Ancillary Agreements to which it is a
party do not and will not (a) violate, conflict with or result in the
breach of any provision of the certificate of incorporation or bylaws (or
similar organizational documents) of the Purchaser, (b) conflict with or
violate any Law or Governmental Order applicable to the Purchaser or its
assets, properties or businesses that is material to the Purchaser or its
assets, properties or businesses or (c) conflict with, result in any
breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment, acceleration,
suspension, revocation or cancellation of, any note, bond, mortgage or
indenture, contract, agreement, lease, sublease, license, permit, franchise or
other instrument or arrangement to which the Purchaser is a party that is
material to the Purchaser or its assets, properties or businesses.

 

Section 5.03             Governmental Consents and
Approvals.  The execution, delivery
and performance by the Purchaser of this Agreement and each Ancillary Agreement
to which the Purchaser is a party do not and will not require any consent,
approval, authorization or other order of, action by, filing with, or
notification to, any Governmental Authority except where the failure to obtain
such consent, approval, authorization or action, or to make such filing or
notification, would not prevent or materially delay the consummation by the
Purchaser of the transactions contemplated by this Agreement and the Ancillary
Agreements.

 

Section 5.04             Litigation.  No Action by or against the Purchaser or any
of its Affiliates is pending or, to the best knowledge of the Purchaser,
threatened, which could affect the legality, validity or enforceability of this
Agreement, any Ancillary Agreement or the consummation of the transactions
contemplated hereby or thereby.

 

Section 5.05             Brokers.  No broker, finder or investment banker is
entitled to any brokerage, finder’s or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements made
by or on behalf of the Purchaser.

 

34

 

ARTICLE VI 

 

ADDITIONAL AGREEMENTS

 

Section 6.01      Conduct of Business.

 

(a)          From the date of this Agreement
through the Closing Date, except as otherwise permitted by this Agreement or
with the prior written consent of the Purchaser (which consent shall not be
unreasonably withheld, conditioned, or delayed by the Purchaser), the Sellers
shall cause the Company to:

 

(i)            operate the Business as presently operated and only in
the ordinary course and in accordance with applicable Law (other than Health
Care Laws);

 

(ii)           use commercially reasonable efforts to maintain all of the
tangible assets of the Business in good operating condition, reasonable wear
and tear excepted, and take all steps reasonably necessary to maintain the
intangible assets of the Business;

 

(iii)          use commercially reasonable efforts to keep available the
services of the Company’s officers and employees;

 

(iv)          not take any action or enter into any agreement of the type
described in Section 4.06(b); and

 

(v)           use commercially reasonable efforts to maintain
satisfactory relationships with its customers, suppliers and others having
commercially beneficial relationships with the Business.

 

The Purchaser acknowledges
that the Sellers intend to cause the Company to distribute cash and cash
equivalents to the Sellers prior to the Closing Date to the extent not required
to meet the Adjusted Working Capital Benchmark and agrees that any such
distribution will not be deemed to violate the covenant set forth in Section 6.01(a).

 

(b)       The Sellers shall cause
the Company not to, without the Purchaser’s prior written consent, (i) make
any change (or file any such change) in any material method of Tax accounting, (ii) make,
change or rescind any material Tax election, (iii) settle or compromise
any material Tax liability, (iv) file any material amended Tax Return, (v) knowingly
surrender any right to a material Tax refund claim, (vi) enter into any
closing agreement relating to a material amount of Taxes, or (vii) waive
or extend the statute of limitations in respect of any material amount of Taxes
(other than pursuant to extensions of time to file Tax Returns obtained in the
ordinary course of business).

 

(c)       Between the date hereof
and the Closing Date, to the extent the Seller has Knowledge of the
commencement or scheduling of any Tax audit, the assessment of any Tax, the
issuance of any notice of Tax due or any bill for collection of any Tax due or
the 

 

35

 

commencement or
scheduling of any other administrative or judicial proceeding with respect to
the determination, assessment or collection of any Tax of the Company, the
Seller shall provide prompt notice to the Purchaser of such matter, setting
forth information (to the extent known) describing any asserted Tax liability
in reasonable detail and including copies of any notice or other documentation
received from the applicable Tax authority with respect to such matter.

 

Section 6.02             Books and Records.  At the Closing, the Sellers shall cause the
Company to deliver to the Purchaser any books and records of the Company
relating to the Business.  The Purchaser
shall retain all of those books and records for a period of at least seven (7) years
following the Closing Date and shall not destroy or discard any of those books
or records following such period without giving the Sellers’ Representative at
least thirty (30) days prior written notice. 
Upon prior written request from the Sellers’ Representative, the
Purchaser shall provide the Sellers’ Representative reasonable access to such
books and records, provided that such access may not unreasonably interfere
with the business of the Purchaser.  The
Sellers and the Sellers’ Representative shall treat, and shall cause their
respective agents, attorneys, accountants, consultants and other authorized
representatives to treat, all information obtained pursuant to this Section 6.02
as confidential.

 

Section 6.03             Confidentiality.  Each of the Sellers will treat and hold as
confidential all of the Confidential Information and refrain from using any of
the Confidential Information except in connection with this Agreement.  In the event that any Seller is requested or
required pursuant to written or oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative
demand, or similar process to disclose any Confidential Information, the
Sellers will notify the Purchaser promptly of the request or requirement so
that the Purchaser may seek an appropriate protective order or waive compliance
with the provisions of this Section 6.03. 
If, in the absence of a protective order or the receipt of a waiver
hereunder, any Seller is, compelled to disclose any Confidential Information to
any tribunal or else stand liable for contempt, such Seller may disclose the
Confidential Information to the tribunal; provided, however, that
such Seller shall use commercially reasonable efforts to assist the Purchaser,
at the Purchaser’s sole cost and expense, to obtain an order or other assurance
that confidential treatment will be accorded to such portion of the
Confidential Information required to be disclosed as the Purchaser shall
designate.  Notwithstanding the foregoing
or anything else in this Agreement to the contrary, the Sellers shall have the
right to use Confidential Information regarding the Company and the Business
for tax purposes and for the purpose of asserting or defending claims,
including without limitation malpractice claims.

 

Section 6.04             Further Action.  The parties hereto shall use all reasonable
efforts to take, or cause to be taken, all appropriate action, to do or cause
to be done all things necessary, proper or advisable under applicable Law, and
to execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective
the transactions contemplated by this Agreement.

 

36

 

Section 6.05           Non-Competition;
Non-Solicitation.

 

(a)           Each Seller agrees
that during the Covenant Period, he shall not, without the prior written
consent of the Purchaser, directly or indirectly, own an interest in, manage,
operate, or control any Person that is engaged in a competing Business; provided
that the restrictions set forth in this Section 6.05(a) shall not be
construed to prohibit or restrict any Seller from owning securities which are
listed on any national securities exchange having no more than 5% percent of
the outstanding voting power of any Person engaged in a competing Business as
long as such Seller is not an employee, officer, director, manager, agent,
independent contractor, or consultant of such competitor.

 

(b)           Subject to the provision of Section 6.05(a),
Zarlingo agrees that so long as he is an employee or independent contractor of
the Purchaser, its Affiliates or an Affiliated Medical Practice and for a
period of two (2) years thereafter he will not engage, directly or indirectly,
in a competing Business, including providing any teleradiology services for any
practice group, hospital, or educational institution; provided that the
foregoing restrictions shall not restrict Zarlingo from (i) providing
teleradiology services to any practice group, hospital or other image
origination site that is located less than seventy-five (75) miles from the
site where Zarlingo performs such teleradiology services (including reading and
interpreting or issuing an interpretative report with respect to a medical
image); (ii) providing teleradiology services incidentally to Zarlingo’s
full time employment by a radiology group or practice that is the exclusive
on-site provider of radiology services to, and maintains on-site radiology
staff coverage at least five days per week at, the medical facility originating
the medical image Zarlingo reviews regardless of the location of that medical
facility; or; (iii) providing teleradiology services as may be incident to
an academic appointment at a school of medicine provided that teleradiology
services shall not constitute more than 25% of Physician’s overall activities
in connection with such appointment; or (iv) providing teleradiology
services in connection with any academic fellowship in which Zarlingo is
enrolled and provided that Zarlingo receives no separate compensation beyond
standard fellow salary.

 

(c)           Each Seller agrees
that (i) the covenants set forth in this Section 6.05 are reasonable
and (ii) the covenants contained herein have been made in order to induce
the Purchaser to enter into this Agreement. 
The Purchaser and the Sellers agree that the consideration paid to the
Sellers is adequate consideration for the covenants, agreements and obligations
contained in this Section 6.05.  The
Purchaser and the Sellers intend that the covenants of this Section 6.05
shall be deemed to be a series of separate covenants, one for each county or
province of each and every state, territory or jurisdiction within the United
States and one for each month of the applicable restrictive period.

 

(d)           If, at the time of
enforcement of this Section 6.05, a court shall hold that the duration or
scope stated herein are unreasonable under circumstances then existing, the
parties agree that the maximum duration or scope under such circumstances shall
be substituted for the stated duration or scope and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period
and scope permitted by law.

 

37

 

(e)           Each Seller
recognizes and affirms that in the event of his breach of any provision of this
Section 6.05, money damages would be inadequate and the Purchaser would
not have adequate remedy at law or equity. 
Accordingly, each Seller agrees that in the event of a breach of any of
the provisions of this Section 6.05, the Purchaser, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions hereof.

 

Section 6.06             Litigation Support.  In the event and for so long as any party
hereto actively is contesting or defending against any action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand in
connection with (i) any transactions contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, the other parties will reasonably
cooperate with such party and its counsel in the contest or defense, make
available its personnel, and provide such testimony and access to their books
and records as shall reasonably be necessary in connection with the contest or
defense, all at the sole cost and expense of the contesting or defending party
including a reasonable hourly fee, which in the case of Zarlingo shall be $400
per hour (unless the contesting or defending party is entitled to
indemnification therefor pursuant to this Agreement).

 

Section 6.07             Transition.  The Sellers will (i) refer all customer
inquiries relating to the Company to the Purchaser, and (ii) segregate any
funds received by the Sellers that are properly payable to the Company (“Misdirected
Funds”), hold those Misdirected Funds in trust for the benefit of the
Company, immediately notify the Purchaser of the receipt of such Misdirected Funds,
and promptly (but in any event within ten (10) Business Days following
receipt thereof) pay such Misdirected Funds as instructed by the
Purchaser.  It is understood and agreed
by the parties hereto that any Misdirected Funds are not property of any kind
of the Sellers or their respective estates.

 

Section 6.08             Access to Properties, Books and
Records.  Prior to the Closing Date,
the Sellers shall cause the Company to, at the Purchaser’s request, afford or
cause to be afforded to the agents, attorneys, accountants, consultants and
employees of the Purchaser reasonable access during normal business hours to
all properties, books and records relating to the Company and permit such
persons, at the Purchaser’s expense and subject to the provisions of Section 6.02,
to make copies of such books and records, provided that such access may not
unreasonably interfere with the Business. 
The Purchaser shall not contact any customers or employees of the
Company without the Sellers’ Representatives’ prior consent.

 

Section 6.09             Public Announcements.  The Purchaser and the Sellers’ Representative
will consult with each other and will mutually agree (the agreement of each
party not to be unreasonably withheld) upon the content and timing of any press
release or other public statements with respect to the transactions
contemplated by this Agreement and the parties hereto shall not and the Sellers
shall cause the Company not to issue any such press release or make any such
public statement prior to such consultation and agreement, except as may be
required by

 

38

 

applicable law; provided, however, that the Person
required by law to make such press release or other public statement will give
(or, where it is the Company required by law to make such press release or
other public statement, the Sellers shall cause the Company to give) prior
notice to the Purchaser and the Sellers’ Representative, as the case may be, of
the content and timing of any such press release or other public statement
required by applicable law or by obligations pursuant to any listing agreement
with any securities exchange or any stock exchange regulations.

 

Section 6.10           Notices and Consents.  The Sellers shall cause the Company to give
any notices to third parties and obtain the third party consents listed on Section 7.02(b) of
the Disclosure Schedule.

 

Section 6.11           Notice of Breach.  The Sellers shall give and the Sellers shall
cause the Company to give the Purchaser prompt written notice if a material
breach of any of the representations and warranties in Article III and Article IV
above is discovered prior to the Closing. 
The Sellers shall have fifteen (15) days following such notice to cure
such breach or to cause the Company to cure such breach.  If the breach remains uncured after such
fifteen (15) day period and the Closing occurs despite such uncured breach, the
Purchaser shall be fully indemnified by the Sellers for any Loss by reason of
or arising out of or in connection with the breach described in such notice,
subject to the limitations on indemnification set forth in Article VIII.  The Purchaser shall give the Company written
notice if it is aware of any breach of any of the representations and
warranties in Article III or IV.

 

ARTICLE VII

 

CONDITIONS PRECEDENT

 

Section 7.01          Conditions
to Obligations of the Sellers.  The
obligations of the Sellers to consummate the transactions contemplated by this
Agreement are, at their option, subject to satisfaction, at or prior to the
Closing, of each of the following conditions:

 

(a)           No Adverse
Proceedings.  No order, decree or
judgment of any Governmental Authority, against which there is no right or
further right to appeal, shall have been rendered against the Purchaser to
restrain or prohibit this Agreement or the transactions contemplated by this
Agreement.

 

(b)           Representations,
Warranties and Covenants.

 

(i)                All the
representations and warranties of the Purchaser contained in this Agreement (A) that
are not qualified as to “materiality” or “Material Adverse Effect” shall be
true and correct in all material respects as of the Closing and (B) that
are qualified as to “materiality” or “Material Adverse Effect” shall be true
and correct as of the Closing, in each case except to the extent such
representations and warranties are made as of another date, in which case such
representations and warranties are true and correct in all material respects or
true and correct, as the case may be, as of such other date, and the Sellers
shall have

 

39

 

received a certificate or certificates to such effect
signed on behalf of the Purchaser by a duly authorized officer or officers of
the Purchaser.

 

(ii)               All covenants and
agreements contained in this Agreement to be complied with by the Purchaser on
or before the Closing shall have been complied with in all material respects
and the Sellers shall have received a certificate or certificates to such
effect signed on behalf of the Purchaser by a duly authorized officer or
officers of the Purchaser.

 

(c)           Payment of Initial
Purchase Price.  The Purchaser shall
have paid the Initial Purchase Price in the amounts and to the Persons set
forth in Section 2.02.

 

(d)           Delivery of
Ancillary Agreements.  The Purchaser
shall have delivered executed counterparts of each Ancillary Agreement to which
the Purchaser, an Affiliate Medical Practice or their respective Affiliates are
party.

 

Section 7.02          Conditions
to Obligations of Purchaser.  The
obligations of the Purchaser to consummate the transactions contemplated by
this Agreement are, at its option, subject to satisfaction, at or prior to the
Closing, of each of the following conditions:

 

(a)           No Adverse
Proceedings.  No order, decree or
judgment of any Governmental Authority, against which there is no right or
further right to appeal, shall have been rendered against the Sellers or any of
them to restrain or prohibit this Agreement or the transactions contemplated by
this Agreement.

 

(b)           Contractual Consents.  The parties shall have received consents from
third parties with respect to those agreements listed on Section 7.02(b) of
the Disclosure Schedule.

 

(c)           Executive Services
Agreement.  Zarlingo shall have
entered into an Executive Services Agreement with the Purchaser in form and
substance acceptable to the Purchaser (the “Executive Services Agreement”).

 

(d)           Independent Physician
Agreement.  Zarlingo shall have
entered into an Independent Physician Agreement with VR Professionals or an
Affiliated Medical Practice in form and substance acceptable to the Purchaser
(the “Independent Physician Agreement”).

 

(e)           Representations, Warranties
and Covenants.

 

(i)                All the
representations and warranties of the Sellers contained in this Agreement (A) that
are not qualified as to “materiality” or “Material Adverse Effect” shall be
true and correct in all material respects as of the Closing and (B) that
are qualified as to “materiality” or “Material Adverse Effect” are true and
correct as of the Closing, in each case other than such representations and
warranties that are made as of another date, in which case such representations

 

40

 

and warranties shall be true and correct in all
material respects or true and correct, as the case may be, as of such other
date, and the Purchaser shall have received a certificate or certificates from
the Sellers to such effect signed by the Sellers.

 

(ii)               All covenants and
agreements contained in this Agreement to be complied with by the Sellers, as
the case may be, at or before the Closing shall have been complied with in all
material respects and the Purchaser shall have received a certificate or
certificates from Sellers to such effect signed by the Sellers.

 

(f)            Good Standing and
Foreign Qualification.  Certificates
of good standing of a recent date by the Secretary of State (or other State
office) certifying to (i) the legal existence and good standing of the
Company in the State of Delaware and (ii) the foreign qualification in
each jurisdiction in which the properties owned or leased by the Company or the
operation of its business makes such qualification necessary.

 

(g)           Manager’s
Certificate.  A certificate of the
Manager or other appropriate officer of the Company, dated the Closing Date, in
form and substance reasonably satisfactory to the Purchaser (i) attaching
copies of the Company’s certificate of formation and limited liability company
agreement and (ii) certifying that there are no proceedings for the
dissolution or liquidation of the Company.

 

(h)           Instruments of
Conveyance and Transfer.  Each Seller
shall have executed and delivered to the Purchaser all applicable instruments
of conveyance and transfer with respect to the sale to Purchaser of such Seller’s
Membership Interests.

 

(i)            Delivery of
Ancillary Agreements.  Executed
counterparts to each of the Ancillary Agreement to which each Seller and the Sellers’
Representative is a party.

 

(j)            Resignations.  The resignations, effective as of the
Closing, of each manager of the Company, other than those specified by the
Purchaser.

 

(k)           Change of Control
Payments.  At the Closing, the
Sellers shall have delivered to the Purchaser evidence satisfactory to the
Purchaser that all Change of Control Payments have been paid by the Company
prior to the Closing or adequately reserved for in the liabilities of the
Estimated Adjusted Working Capital Report.

 

(l)            Change of Control
Escrow Cash; Release and Assumption Agreement.  At the Closing the Sellers shall have
delivered to the Purchaser evidence satisfactory in form and substance to the
Purchaser (the “Release and Assumption Agreement”) that (i) Ketan
C. Davae has released the Company from its obligations under the Professional
Services Agreement, effective as of October 23, 2006, by and between Ketan
C. Davae and the Company (the “Davae Services Agreement”) to pay the “Change
Fee” (as defined in the Davae Services Agreement) and (ii) Zarlingo has
assumed to the obligation to pay such Change Fee.  In the event that Sellers have not delivered
the Release and Assumption

 

41

 

Agreement as provided above, the Change of Control
Escrow Cash shall be paid by Purchaser into an escrow account as provided in Section 2.02
above.

 

ARTICLE VIII

 

INDEMNIFICATION

 

Section 8.01           Survival.  The representations and warranties of the
parties hereto contained in this Agreement shall survive for a period of
eighteen (18) months following the Closing Date; provided, however,
that (a) the representations and warranties contained in Sections 3.01
(Authority of the Sellers and Enforceability), 3.04 (Ownership of Membership
Interests), 3.05 (Brokers), 4.01 (Organization, Authority and Qualification of
the Company, exclusive of the second and third sentence thereof), 4.02
(Capitalization), 4.15 (Brokers), 5.01 (Organization and Authority of the
Purchaser), and 5.05 (Brokers) shall survive the Closing indefinitely and (b) the
representations and warranties contained in Sections 4.09 (Environmental
Matters) 4.12 (Employee Benefit Matters; Labor) and 4.13 (Taxes) shall survive
until three (3) months after the expiration of the applicable statute of
limitations (the representations and warranties set forth in subclause (a) and
(b) of this Section 8.01 are, collectively, referred to herein as the
“Special Representations and Warranties”); provided, further,
that any claim made with reasonable specificity by the party seeking to be
indemnified within the time periods set forth in this Section 8.01 shall
survive until such claim is finally and fully resolved.  All covenants of the parties hereto shall
survive the Closing indefinitely, or for such shorter period as shall apply in
accordance with their terms.

 

Section 8.02           Indemnification by the Sellers.  The Sellers shall severally, and Zarlingo
shall jointly, indemnify and hold harmless the Purchaser and its Affiliates
(including the Company), and their respective officers, directors, employees,
agents, successors and assigns (each, a “Purchaser Indemnified Party”)
from and against any and all losses, damages, claims, costs and expenses,
interest, awards, judgments and penalties (including reasonable attorneys’ fees
and expenses) actually suffered or incurred by them (hereinafter, a “Loss”),
arising out of or resulting from:  (a) the
breach of any representation or warranty made by any of the Sellers or the
Company contained in this Agreement or any Ancillary Agreement, other than any
representation or warranty contained in Section 4.14 (Taxes), which is the
subject of Article IX; (b) the breach of any covenant or agreement by
the Sellers contained in this Agreement (other than any covenant or agreement
contained in Article IX) or in any Ancillary Agreement, or any covenant or
agreement contained in Section 6.05, with respect to which each Seller
shall be solely liable for any Losses resulting from any breach by such Seller,
(c) any violation of any Health Care Law by the Company occurring on or
prior to the Closing Date or (d) any claim relating to or arising out of
any obligation to pay the Change Fee under the Davae Services Agreement or, if
delivered, with respect to the Release and Assumption Agreement; provided,
however, that, in the case of any representation, warranty, covenant or
agreement that is limited by “material,” “Material Adverse Effect” or by any
similar term or limitation, the occurrence of a breach or inaccuracy of such
representation, warranty, covenant or agreement, as the case may be, and the
amount Losses subject to indemnification hereunder shall be determined as if

 

42

 

“material,” “Material Adverse Effect” or by any similar term or
limitation were not included therein.

 

Section 8.03           Indemnification by the Purchaser.  The Purchaser shall indemnify and hold
harmless the Sellers and their respective Affiliates, trustees, employees,
agents, successors and assigns (each, a “Seller Indemnified Party”) from
and against any and all Losses, arising out of or resulting from:  (a) the breach of any representation or
warranty made by the Purchaser contained in this Agreement or any Ancillary
Agreement; or (b) the breach of any covenant or agreement by the Purchaser
or (after the Closing) the Company contained in this Agreement or in any
Ancillary Agreement; provided, however, that, in the case of any
representation, warranty, covenant or agreement that is limited by “material,” “Material
Adverse Effect” or by any similar term or limitation, the occurrence of a
breach or inaccuracy of such representation, warranty, covenant or agreement,
as the case may be, and the amount Losses subject to indemnification hereunder
shall be determined as if “material,” “Material Adverse Effect” or by any
similar term or limitation were not included therein.

 

Section 8.04           Limits on Indemnification.

 

(a)           No claim may be
asserted nor may any Action be commenced against either party for breach of any
representation, warranty, covenant or agreement contained herein, unless
written notice of such claim or action is received by such party describing in
reasonable detail the facts and circumstances with respect to the subject
matter of such claim or Action on or prior to the date on which the
representation or warranty on which such claim or Action is based ceases to
survive as set forth in Section 8.01, irrespective of whether the subject
matter of such claim or action shall have occurred before or after such date.

 

(b)           Notwithstanding anything
to the contrary contained in this Agreement, (i) an Indemnifying Party
shall not be liable for any claim for indemnification pursuant to Sections 8.02(a) or
8.03(a), unless and until the aggregate amount of indemnifiable Losses that may
be recovered from the Indemnifying Party equals or exceeds the Deductible
Amount, after which the Indemnifying Party shall be liable for all Losses of
the Indemnified Party; (ii) the maximum amount of indemnifiable Losses
which may be recovered from an Indemnifying Party for claims for
indemnification pursuant to Sections 8.02(a) or 8.03(a) shall be an
amount equal to the Cap Amount; (iii) the maximum aggregate amount of
indemnifiable Losses which may be recovered from an Indemnifying Party (x) arising
out of or resulting from any breach of the Special Representations and
Warranties or any representation or warranty set forth in Section 4.14(c) pursuant
to Sections 8.02(a) or 8.03(a), or (y) for claims for indemnification
pursuant to Sections 8.02(b), 8.02(c) or 8.03(b) shall be an amount
not to exceed the Special Cap Amount, less any amounts previously paid by such
Indemnifying Party pursuant to Sections 8.02 (other than for False Claims Act
Claims or for breaches of any representation or warranty contained in Sections
3.04 (Ownership of Membership Interests), 4.02 (Capitalization), or 4.14
(Taxes)) or 8.03; and (iv) no party hereto shall have any liability under
any provision of this Agreement for any punitive, incidental,

 

43

 

consequential, special or indirect damages, including
loss of future revenue or income or loss of business reputation or opportunity
relating to the breach or alleged breach of this Agreement or any Ancillary
Agreement, except to the extent that such punitive, incidental, consequential,
special or indirect damages are awarded by a court of competent jurisdiction to
a third party in connection with a Third Party Claim that is in compliance with
the procedures set forth in Section 8.05; provided that claims made
under Section 8.02(d) or for indemnification for Losses resulting
from (x) False Claims Act Claims, (y) breaches of any representation
or warranty contained in Sections 3.04 (Ownership of Membership Interests) and
4.02 (Capitalization), or (z) Purchaser’s failure to fulfill its
obligations to pay Sellers all or any part of the Purchase Price or Earn-Out
Payments as and when due under this Agreement, shall not be subject to the
limitations of clauses (i), (ii), (iii) or (iv) of this Section 8.04(b);
and provided, further, that claims for indemnification for Losses
resulting from fraud or breaches of any representation or warranty contained in
Section 4.14 (Taxes) shall not be subject to the limitations of clauses (i) or
(ii) or (iii) of this Section 8.04(b) and the maximum
aggregate amount of indemnifiable Losses which may be recovered from an
Indemnifying Party for such claims shall not exceed one-half of the Purchase
Price, less any amounts previously paid by the Sellers under Section 8.02
for claims for indemnification for Losses resulting from fraud and Article IX
for claims for indemnification for Losses described therein; and provided,
further, that breaches of the Special Representations and Warranties or
any representation or warranty set forth in Section 4.14(c) shall not
be subject to the limitations of clauses (i) or (ii) of this Section 8.04(b).

 

(c)           For all purposes of
this Article VIII, Losses shall be calculated net of any insurance or
other recoveries actually received by the Indemnified Party or its Affiliates
in connection with the facts giving rise to the right of indemnification.

 

Section 8.05           Notice of Loss; Third Party Claims.

 

(a)           An Indemnified Party
shall give the Indemnifying Party notice of any matter which an Indemnified Party
has determined has given or could give rise to a right of indemnification under
this Agreement, within sixty (60) days of such determination, stating the
amount of the Loss, if known, and method of computation thereof, and containing
a reference to the provisions of this Agreement in respect of which such right
of indemnification is claimed or arises; provided, however, that
the failure to provide such notice shall not release the Indemnifying Party
from any of its obligations under this Article VIII except to the extent
that the Indemnifying Party is materially prejudiced by such failure.

 

(b)           If an Indemnified Party
shall receive notice of any Action, audit, claim, demand or assessment (each, a
“Third Party Claim”) against it which may give rise to a claim for Loss
under this Article VIII, within thirty (30) days of the receipt of such
notice, the Indemnified Party shall give the Indemnifying Party and the Company
notice of such Third Party Claim; provided, however, that the
failure to provide such notice shall not release the Indemnifying Party from
any of its obligations under this Article

 

44

 

VIII except to the extent that the Indemnifying Party
is materially prejudiced by such failure. 
The Indemnifying Party shall be entitled to assume and control the
defense of such Third Party Claim at its expense and through counsel of its
choice if (i) it gives notice of its intention to do so to the Indemnified
Party within fifteen (15) days of the receipt of such notice from the
Indemnified Party and agrees in advance that it will indemnify the Indemnified
Party from and against all Losses the Indemnified Party may suffer arising out
of or resulting from the Third Party Claim, and (ii) the Third Party Claim
involves only monetary damages.  If the
Indemnifying Party elects to undertake any such defense against a Third Party
Claim, the Indemnified Party may participate in such defense at its own
expense; provided, that, if in the reasonable opinion of counsel to the
Indemnified Party, a conflict exists between the Indemnified Party and the
Indemnifying Party that would make separate representation advisable, the
Indemnified Party may retain separate counsel at the expense of the
Indemnifying Party.  The Indemnified Party
shall cooperate with the Indemnifying Party in such defense and make available
to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses,
pertinent records, materials and information in the Indemnified Party’s
possession or under the Indemnified Party’s control relating thereto as is
reasonably required by the Indemnifying Party. 
The Indemnified Party shall not pay, or permit to be paid, any part of
such Third Party Claim unless the Indemnifying Party consents in writing to
such payment or unless a final judgment from which no appeal may be taken by or
on behalf of the Indemnifying Party is entered against the Indemnified Party
for such Third Party Claim.  If the
Indemnified Party assumes the defense of any such claims or proceeding pursuant
to this Section 8.05(b) and proposes to settle such claims or
proceeding prior to a final judgment thereon or to forgo any appeal with
respect thereto, then the Indemnified Party shall give the Indemnifying Party
prompt written notice thereof and the Indemnifying Party shall have the right
to participate in the settlement or assume or reassume the defense of such
claims or proceeding.

 

Section 8.06           Remedies.  The Purchaser and the Sellers acknowledge and
agree that following the Closing, the indemnification provisions of Article VIII
and Article IX and the provisions of any Ancillary Document shall be the
sole and exclusive remedies of the Purchaser and the Sellers for any breach by
the other party of the representations and warranties in this Agreement or in
any Ancillary Agreement and for any failure by the other party to perform and
comply with any covenants and agreements in this Agreement or in any Ancillary
Agreement, except that if any of the provisions of this Agreement are not
performed in accordance with their terms or are otherwise breached, the parties
hereto shall be entitled to specific performance of the terms thereof in
addition to any other remedy at law or equity.

 

Section 8.07           Right to Set-Off.  Any indemnification amount payable under this
Article VIII by the Sellers shall be, to the extent permitted by Law, an
adjustment to the Purchase Price.  The
indemnification obligations of the Sellers set forth in this Article VIII
and the payment obligations of Seller set forth in Section 2.04(f) arising
at any time shall be satisfied, in whole or in part, first, from the
Escrow Cash, in accordance with the terms of the Escrow Agreement and, second,
at the option of the Purchaser, by offset against any portion of the Earn-Out
Payments 

 

45

 

not yet paid to the Sellers at the time such indemnification obligation
or payment obligation becomes due and payable.

 

ARTICLE IX 

 

TAX MATTERS

 

Section 9.01           Tax Return Filing.

 

(a)           The Sellers shall
prepare, and with the Purchaser’s cooperation, timely file all Tax Returns of
the Company for all taxable periods ending on or before the Closing Date (“Pre-Closing
Periods”) which Tax Returns have not been filed as of the Closing
Date.  The Purchaser shall have a reasonable
opportunity to review all such Pre-Closing Period Tax Returns relating solely
to the Company.  The Sellers shall pay
and discharge all Taxes shown to be due on such Pre-Closing Period Tax Returns
before the same shall become delinquent and before penalties accrue
thereon.  The Purchaser shall prepare and
timely file all Tax Returns of the Company for the Straddle Period.  The Sellers shall have a reasonable
opportunity to review and comment upon all such Tax Returns prior to their
filing.  The Purchaser shall pay and
discharge all Taxes shown to be due on such Tax Returns.  No later than ten (10) business days
prior to the due date of such return, the Sellers shall pay to the Company the
amount of Taxes attributable to the pre-Closing portion of the Straddle Period
in accordance with Section 9.03(a).

 

(b)           The Company will not
file an amended Tax Return or make an election with respect to periods or
portions thereof ending on or before the Closing without the written consent of
the Purchaser if the amendment or election adversely affects the Purchaser, the
Assets, or the business conducted by the Company.

 

Section 9.02           Allocation for Straddle Period.  For purposes of this Agreement, the amount of
Taxes of the Company attributable to the pre-Closing portion of any taxable
period beginning before and ending after the Closing Date (the “Straddle
Period”) shall be determined based upon a hypothetical closing of the
taxable year on such Closing Date with the Closing Date being included in the
pre-Closing portion of such Straddle Period; provided, however,
real and personal property Taxes (which are not based on income) shall be
determined by reference to the relative number of days in the pre-Closing and
post-Closing portions of such Straddle Period.

 

Section 9.03           Indemnification.  Zarlingo, jointly and severally, and the
other Sellers, severally, agree to indemnify, defend and hold harmless the
Purchaser, its Affiliates (including the Company) and the successors to the
foregoing (and their respective shareholders, officers, directors, employees
and agents) against (i) all Taxes imposed on the Company or asserted
against the properties, income or operations of the Company for any taxable
period of the Company or portion thereof ending on or prior to the Closing Date
including the pre-Closing portion of any Straddle Period; (ii) Taxes of
any member of a consolidated group of which the Company (or any predecessor of
any of the foregoing) is or was a member on or prior to the

 

46

 

Closing Date pursuant to Treasury Regulation Section 1.1502-6 or
any similar state, local, or foreign law; (iii) Taxes of any Person (other
than the Company) imposed on the Company as a transferee, successor, by
contract, or otherwise; and (iv) any Losses arising out of or resulting
from a breach of any representation or warranty contained in Section 4.13;
provided, however, the Sellers shall not be liable to the extent
of Taxes specifically identified and included in the Final Working Capital, and
provided, further, that the maximum aggregate amount which may be
recovered from the Sellers under this Article IX shall not exceed one-half
of the Purchase Price, less any amounts previously paid by the Sellers under
this Article IX or under Section 8.02 for claims for indemnification
for Losses resulting from fraud.

 

Section 9.04           Survival.  This Article IX shall survive until
three (3) months after the expiration of the statute of limitations with
respect to the applicable Tax.

 

Section 9.05           Transfer Taxes.  The Sellers shall be responsible for the
preparation of Tax Returns (including any documentation) with respect to all
transfer, documentation, sales, use, stamp, registration, and similar Taxes
incurred in connection with this Agreement or any transaction contemplated
thereby and shall be responsible for the payment of such Taxes.  The Sellers shall file with the Purchaser’s
cooperation all necessary documentation and Tax Returns with respect to such
Taxes.

 

Section 9.06           Character of Payments.  To the extent permitted by applicable law,
the parties agree that any indemnification payments (and/or payments or
adjustments) made with respect to this Agreement shall be treated for all Tax
purposes as an adjustment to the Purchase Price.

 

Section 9.07           Termination of Existing Tax-Sharing
Agreements.  All Tax-sharing
agreements or similar arrangements with respect to or involving the Company
shall be terminated with respect to the Company diaries prior to the Closing
Date, and, after the Closing Date, neither the Sellers and their Affiliates, on
the one hand, nor the Company, on the other, shall be bound thereby or have any
liability thereunder to the other party for amounts due in respect of such
agreements and arrangements.

 

Section 9.08           Tax Treatment; Allocation.  Except as otherwise provided by Law, the
parties intend to treat the transactions contemplated by this Agreement as a
transaction described by Situation Two of IRS Revenue Ruling 99-6, 1999-1 C.B.
432.  The parties acknowledge that the
Purchase Price shall be allocated among the assets of the Company (the “Purchase
Price Allocation”) as agreed by the Purchaser and the Sellers’
Representative in writing after Closing, provided that such allocation shall be
consistent with the principles set forth in Section 9.08 of the Disclosure
Schedule.  Each of the parties hereto
will not take a position on any Tax Return, before any governmental agency
charged with the collection of any Tax, or in any judicial proceeding, that is
in any way inconsistent with the Purchase Price Allocation.  Notwithstanding the tax treatment of the
transactions contemplated by this Agreement under such IRS Revenue Ruling, the
Parties each agree that the transaction contemplated by this Agreement
constitutes a sale of membership interests by the Sellers to the Purchaser.

 

47

 

Section 9.09           Sole Tax Provision.  This Article IX shall be the sole
provision governing indemnities for Taxes under this Agreement.

 

ARTICLE X

 

TERMINATION

 

Section 10.01         Right of Parties to Terminate.  This Agreement may be terminated:

 

(a)           by
mutual written agreement of the Purchaser and the Sellers; or

 

(b)           by the Purchaser, if
any of the Sellers shall have breached any of their representations and
warranties hereunder and shall not have cured such breach within fifteen (15)
days following notice of such breach by the Purchaser, provided that
such breach would reasonably be expected to result in damages in excess of
$100,000; or

 

(c)           by the Purchaser, if
any of the Sellers shall have breached any of their covenants or agreements
hereunder in any material respect and shall not have cured such breach within
fifteen (15) days following notice of such breach by the Purchaser; or

 

(d)           by the Sellers, if the
Purchaser shall have breached any of its representations and warranties
hereunder in any material respect and shall not have cured such breach within
fifteen (15) days following notice of such breach by the Sellers; or

 

(e)           by the Sellers, if the
Purchaser shall have breached any of its covenants or agreements hereunder in
any material respect and shall not have cured such breach within fifteen (15)
days following notice of such breach by the Sellers; or

 

(f)            by either the
Purchaser or the Sellers, by written notice to the other party, if the Closing
shall not have occurred on or prior to May 14, 2008; provided, however,
that the right to terminate this Agreement under this Section 10.01(f) shall
not be available to any party whose failure to fulfill or perform any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Closing to occur on or before such date.

 

Section 10.02         Effect of Termination.  If either the Purchaser or the Sellers decide
to terminate this Agreement pursuant to Section 10.01, such party shall
promptly give written notice to the other party of such decision.  In the event of a proper termination pursuant
to Section 10.01, the parties hereto shall be released from all
liabilities and obligations arising under this Agreement with respect to the
matters contemplated by this Agreement, except that nothing in this Section 10.02
shall be deemed to release any party from any liability for any breach by such
party of the terms and provisions of this Agreement or to impair the right of
any party to compel specific performance by any other party of its obligations
under this Agreement.

 

48

 

ARTICLE XI

 

GENERAL PROVISIONS

 

Section 11.01         Dispute Resolution.Anything else in this Agreement, or any
other document or instrument to the contrary notwithstanding and with the
exception of any dispute(s) which may arise under Sections 2.03 and 2.04
(which disputes, if any, shall be resolved in the manner set forth therein),
any controversy, claim, dispute, question or disagreement arising out of or
relating to this Agreement or the breach thereof, or any Ancillary Agreement or
other agreements or instruments relating hereto or delivered in connection
herewith, including but not limited to a claim based on or arising from an
alleged tort (any of the foregoing, a “Dispute Subject to Resolution”),
shall be settled by use of the dispute resolution process set forth in this Section 11.01.  In the event of a Dispute Subject to
Resolution, the parties shall use their best efforts to settle the same.  To this effect, they shall consult and
negotiate with each other in good faith and, recognizing their mutual interests,
attempt to reach a solution satisfactory to all parties.

 

(a)           Mediation.  The complaining party shall have the option
of pursuing non-binding mediation or arbitration.  In the event the complaining party chooses
the option of non-binding mediation, the complaining party shall send a written
notice in accordance with Section 11.03 to the other party requesting
mediation of the matter to be administered by JAMS in a proceeding held in
Chicago, Illinois (“Request for Mediation”).  In such Request, the complaining party may
propose a timeframe for the mediation. 
Within seven (7) business days after the date of the Request for
Mediation, the responding party shall advise the complaining party in writing
whether or not the responding party would agree to submit the dispute for
non-binding mediation.  The parties agree
that the sending of the Request for Mediation as set forth above shall
constitute submission of the claims for mediation, and that such submission of
claims to a mediator appointed mutually by the parties; provided that such
mediator shall have significant experience as professional in the Business or
similar field.  In the event the parties
decide not to engage in mediation or are unable to resolve their disputes
through such non-binding mediation, either party shall have the right to
initiate arbitration of the matter.

 

(b)           Arbitration (which may include mediation during the
arbitration).  If the parties are unable to reach agreement
through voluntary non-binding mediation or if the parties have not agreed to
submit the matter to mediation before arbitration, upon notice by either party
to the other, all Disputes Subject to Resolution shall be finally settled by
arbitration administered by JAMS in accordance with its Comprehensive
Arbitration Rules and Procedures. 
The arbitration proceeding shall be held in Chicago, Illinois before a
single arbitrator knowledgeable in health care matters mutually agreeable to
the Sellers’ Representative and the Purchaser, or if the Sellers’
Representative and the Purchaser are unable to agree on a single arbitrator, by
a panel of three arbitrators, one selected by each party and the other chosen
by agreement of the other two arbitrators or failing such selection appointment
by JAMS.  Any party may seek a preliminary
injunction or other preliminary judicial relief or any interim or provisional
relief in any

 

49

 

federal court sitting in the
city of Chicago, Illinois (or if such federal court does not have jurisdiction
over such Action, such Action shall be heard and determined exclusively in any
Illinois state court sitting in the city of Chicago, Illinois) that such party
believes is necessary to protect the rights or property of such party, pending
the arbitral tribunal’s determination of the merits of the controversy, and the
Parties each hereby irrevocably submit to the jurisdiction of such courts for
the purpose of any such action.  The
institution and maintenance of an Action for judicial relief or pursuit of a
provisional or ancillary remedy shall not constitute a waiver of the right of
any party, including the plaintiff/claimant, to submit the controversy or claim
to arbitration if the other party contests such action for judicial relief.  The Federal Rules of Civil Procedure and
not JAMS’ Comprehensive Arbitration Rules and Procedures, shall govern the
discovery process.  All discovery shall be completed no later than
fifteen (15) days prior to the final arbitration hearing.  Unless otherwise agreed by the parties, the
final arbitration hearing shall be held within sixty (60) days following the
appointment of the arbitrators.  The
arbitrators may grant any remedy or relief that the arbitrator deems just and
equitable.  The award shall be in
writing, accompanied by written conclusions and findings, and shall be signed
by a majority of the arbitrators.  The
arbitrators may, in the award, allocate all or part of the costs of the
arbitration, including the fees of the arbitrator and the reasonable attorneys’
fees of the prevailing party.  Judgment
on the award may be entered in any court having jurisdiction.  The non-prevailing party shall be entitled to
appeal such award in any federal district court sitting in the city of
Chicago, Illinois (or if such federal court does not have jurisdiction over
such Action, such Action shall be heard and determined exclusively in any
Illinois state court sitting in the city of Chicago, Illinois).

 

Section 11.02         Expenses.  Except as
otherwise specified in this Agreement and the Company’s legal counsel which
shall be borne by the Company and paid in full on or prior to the Closing, all
costs and expenses incurred in connection with this Agreement and the
transactions contemplated by this Agreement shall be borne by the party incurring
such costs and expenses, whether or not the Closing shall have occurred.

 

Section 11.03         Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by an internationally recognized overnight courier service, by
facsimile or registered or certified mail (postage prepaid, return receipt
requested) to the respective parties hereto at the following addresses (or at
such other address for a party as shall be specified in a notice given in
accordance with this Section 11.03):

 

(a)           if
to the Sellers’ Representative:

 

Monte Zarlingo, M.D.

700 West 7th
Avenue, Unit 808

Spokane, WA  99204

Telecopy: (415) 366-1930

 

50

 

with a copy (which shall not constitute notice) to:

 

Krendl Krendl Sachnoff & Way, Professional
Corporation

370 17th Street, Suite 5350

Denver, CO 80202

Telecopy: (303) 629-2606

Attention: Sherri D. Way, Esq.

 

(b)           if to a Seller, then to such Seller:

 

c/o Monte Zarlingo, M.D.

700 West 7th
Avenue, Unit 808

Spokane, WA  99204

Telecopy: (415) 366-1930

 

with a copy (which shall not constitute notice) to:

 

Krendl Krendl Sachnoff & Way, Professional
Corporation

370 17th Street, Suite 5350

Denver, CO 80202

Telecopy: (303) 629-2606

Attention: Sherri D. Way, Esq.

 

(c)           if to the Purchaser:

 

Virtual Radiologic
Corporation

5995 Opus Parkway, Suite 200

Minnetonka, MN  55343

Telecopy:  (952) 938-1662

Attention:  Sean Casey, M.D., Chief Executive Officer

 George H. Frisch, Secretary and General
Counsel

 

with a copy (which shall
not constitute notice) to:

 

Morrison Cohen LLP

909 Third Avenue

New York, NY  10022

Telecopy:  (212) 735-8708

Attention:  David A. Scherl, Esq.

                  Jack Levy, Esq.

 

Section 11.04         Severability. 
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any Law or public policy, all other terms and
provisions of this Agreement shall nevertheless remain in full force and effect
for so long as the economic or legal substance of the transactions contemplated
by this Agreement is not affected in any

 

51

 

manner materially adverse
to either party hereto.  Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties hereto as closely
as possible in an acceptable manner in order that the transactions contemplated
by this Agreement are consummated as originally contemplated to the greatest
extent possible.

 

Section 11.05         Entire
Agreement.  This Agreement and the
Ancillary Agreements constitute the entire agreement of the parties hereto and
their respective Affiliates with respect to the subject matter hereof and
thereof and supersede all prior agreements and undertakings, both written and
oral, among the Company, the Sellers, the Purchaser, and their respective
Affiliates with respect to the subject matter hereof and thereof.

 

Section 11.06         Assignment.  This Agreement may not be assigned without
the express written consent of the Sellers’ Representative and the Purchaser
(which consent may be granted or withheld in the sole discretion of the Sellers’
Representative or the Purchaser), as the case may be; provided, that the
Purchaser may assign all of its rights and interests hereunder (i) to one
or more of its Affiliates or Affiliated Medical Practices, (ii) to any
bank or lender of the Purchaser or the Company for collateral purposes, or (iii) in
connection with the merger or consolidation of, or sale, transfer or other
disposition of all or substantially all of the equity interests or assets of
the Purchaser or the Company; provided, that in the case of clauses (i) and
(iii) such assignee agrees to assume the obligations of the Purchaser
under this Agreement and provided, further, that no assignment
shall relieve Purchaser of its obligations hereunder unless Sellers’
Representative agrees to release Purchaser in writing.

 

Section 11.07         Amendment.  This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the
Company, the Sellers and the Purchaser or (b) by a waiver in accordance
with Section 11.08.

 

Section 11.08         Waiver.  Any party to this Agreement may (a) extend
the time for the performance of any of the obligations or other acts of another
party, (b) waive any inaccuracies in the representations and warranties of
another party contained herein or in any document delivered by such other party
pursuant hereto or (c) waive compliance with any of the agreements of
another party or conditions to such party’s obligations contained herein.  Any such extension or waiver shall be valid
only if set forth in an instrument in writing signed by the party to be bound
thereby.  Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition of this Agreement.  The
failure of any party hereto to assert any of its rights hereunder shall not
constitute a waiver of any of such rights.

 

Section 11.09         No
Third Party Beneficiaries.  This
Agreement shall be binding upon and inure solely to the benefit of the parties
hereto and their respective successors and permitted assigns and nothing
herein, express or implied (including the provisions of Articles VIII and IX
relating to indemnified parties), is intended to or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any nature
whatsoever, including any rights of employment for any specified period, under
or by reason of this Agreement.

 

52

 

Section 11.10         Governing Law. 
This Agreement shall be governed by, and construed in accordance with,
the Laws of the State of Delaware. 
Subject to the provisions of Section 11.01, all Actions arising out
of or relating to this Agreement shall be heard and determined exclusively in
any Minnesota federal court sitting in the city of Minneapolis, Minnesota;
provided, however, that if such federal court does not have jurisdiction over
such Action, such Action shall be heard and determined exclusively in any
Minnesota state court sitting in the city of Minneapolis, Minnesota.  Consistent with the preceding sentence and
subject to provisions of Section 11.01, the parties hereto hereby (a) submit
to the exclusive jurisdiction of any federal or state court sitting in the city
of Minneapolis, Minnesota for the purpose of any Action arising out of or
relating to this Agreement brought by any party hereto and (b) irrevocably
waive, and agree not to assert by way of motion, defense, or otherwise, in any
such Action, any claim that it is not subject personally to the jurisdiction of
the above-named courts, that its property is exempt or immune from attachment
or execution, that the Action is brought in an inconvenient forum, that the
venue of the Action is improper, or that this Agreement or the transactions
contemplated by this Agreement may not be enforced in or by any of the
above-named courts.

 

Section 11.11         [Reserved]

 

Section 11.12         Counterparts. 
This Agreement may be executed and delivered (including by facsimile
transmission) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
agreement.

 

[Signatures
to follow on next page]

 

53

 

IN WITNESS WHEREOF, the Company, the Sellers, the
Sellers’ Representative and the Purchaser have caused this Agreement to be duly
executed as of the date first written above.

 

	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
  Diagna Radiology, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Monte Zarlingo, M.D.

  
	
   

  	
   

  	
  Monte Zarlingo, M.D.,
  Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLERS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Monte Zarlingo, M.D.

  
	
   

  	
  Monte Zarlingo, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Jon Schadow

  
	
   

  	
  Jon Schadow

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Steve Sipprell

  
	
   

  	
  Steve Sipprell

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SELLERS’ REPRESENTATIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Monte Zarlingo, M.D.

  
	
   

  	
  Monte Zarlingo, M.D.

  
	
   

  	
   

  
	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  Virtual Radiologic
  Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rob Kill

  
	
   

  	
  Rob Kill, President and
  Chief Operating Officer

  

 

[Signature page to Membership Interest
Purchase Agreement]

 

54

 

ANNEX I

 

MEMBERS OF THE
COMPANY

 

	
  Name of Member

  	
   

  	
  Applicable Percentage

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Monte Zarlingo,
  M.D.

  	
   

  	
  86.48

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Jon Schadow

  	
   

  	
  8.19

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Steve Sipprell

  	
   

  	
  5.33

  	
  %

  

 

 

ANNEX II

 

ADJUSTED WORKING
CAPITAL BENCHMARK CALCULATION

 

See attached

 

 

ANNEX III

 

2009 EARN-OUT
PAYMENT

 

The 2009 Earn-Out Payment, if any, shall be an amount
equal to (i) the 2009 Base Earn-Out Payment set forth opposite the 2009
Gross Profit Range that includes the Gross Profit set forth in the 2009 Final
Earn-Out Statement plus (ii) an
amount equal to $11,000 multiplied by a
fraction, the numerator of which is the amount by which the Gross Profit set
forth in the 2009 Final Earn-Out Statement exceeds the amount stated in the “Equal
to or More Than” column for the applicable 2009 Gross Profit Range and the
denominator of which is $4,999.

 

	
  2009 Gross Profit Range

  	
   

  	
  2009 Base Earn-Out 

  	
   

  
	
  Equal to or More Than

  	
   

  	
  But Less Than

  	
   

  	
  Payment

  	
   

  
	
  $

  	
  0.00

  	
   

  	
  $

  	
  2,399,999.00

  	
   

  	
  $

  	
  0.00

  	
   

  
	
  $

  	
  2,400,000.00

  	
   

  	
  $

  	
  2,404,999.00

  	
   

  	
  $

  	
  220,000.00

  	
   

  
	
  $

  	
  2,405,000.00

  	
   

  	
  $

  	
  2,409,999.00

  	
   

  	
  $

  	
  231,000.00

  	
   

  
	
  $

  	
  2,410,000.00

  	
   

  	
  $

  	
  2,414,999.00

  	
   

  	
  $

  	
  242,000.00

  	
   

  
	
  $

  	
  2,415,000.00

  	
   

  	
  $

  	
  2,419,999.00

  	
   

  	
  $

  	
  253,000.00

  	
   

  
	
  $

  	
  2,420,000.00

  	
   

  	
  $

  	
  2,424,999.00

  	
   

  	
  $

  	
  264,000.00

  	
   

  
	
  $

  	
  2,425,000.00

  	
   

  	
  $

  	
  2,429,999.00

  	
   

  	
  $

  	
  275,000.00

  	
   

  
	
  $

  	
  2,430,000.00

  	
   

  	
  $

  	
  2,434,999.00

  	
   

  	
  $

  	
  286,000.00

  	
   

  
	
  $

  	
  2,435,000.00

  	
   

  	
  $

  	
  2,439,999.00

  	
   

  	
  $

  	
  297,000.00

  	
   

  
	
  $

  	
  2,440,000.00

  	
   

  	
  $

  	
  2,444,999.00

  	
   

  	
  $

  	
  308,000.00

  	
   

  
	
  $

  	
  2,445,000.00

  	
   

  	
  $

  	
  2,449,999.00

  	
   

  	
  $

  	
  319,000.00

  	
   

  
	
  $

  	
  2,450,000.00

  	
   

  	
  $

  	
  2,454,999.00

  	
   

  	
  $

  	
  330,000.00

  	
   

  
	
  $

  	
  2,455,000.00

  	
   

  	
  $

  	
  2,459,999.00

  	
   

  	
  $

  	
  341,000.00

  	
   

  
	
  $

  	
  2,460,000.00

  	
   

  	
  $

  	
  2,464,999.00

  	
   

  	
  $

  	
  352,000.00

  	
   

  
	
  $

  	
  2,465,000.00

  	
   

  	
  $

  	
  2,469,999.00

  	
   

  	
  $

  	
  363,000.00

  	
   

  
	
  $

  	
  2,470,000.00

  	
   

  	
  $

  	
  2,474,999.00

  	
   

  	
  $

  	
  374,000.00

  	
   

  
	
  $

  	
  2,475,000.00

  	
   

  	
  $

  	
  2,479,999.00

  	
   

  	
  $

  	
  385,000.00

  	
   

  
	
  $

  	
  2,480,000.00

  	
   

  	
  $

  	
  2,484,999.00

  	
   

  	
  $

  	
  396,000.00

  	
   

  
	
  $

  	
  2,485,000.00

  	
   

  	
  $

  	
  2,489,999.00

  	
   

  	
  $

  	
  407,000.00

  	
   

  
	
  $

  	
  2,490,000.00

  	
   

  	
  $

  	
  2,494,999.00

  	
   

  	
  $

  	
  418,000.00

  	
   

  
	
  $

  	
  2,495,000.00

  	
   

  	
  $

  	
  2,499,999.00

  	
   

  	
  $

  	
  429,000.00

  	
   

  
	
  $

  	
  2,500,000.00

  	
   

  	
  $

  	
  2,504,999.00

  	
   

  	
  $

  	
  440,000.00

  	
   

  
	
  $

  	
  2,505,000.00

  	
   

  	
  $

  	
  2,509,999.00

  	
   

  	
  $

  	
  451,000.00

  	
   

  
	
  $

  	
  2,510,000.00

  	
   

  	
  $

  	
  2,514,999.00

  	
   

  	
  $

  	
  462,000.00

  	
   

  
	
  $

  	
  2,515,000.00

  	
   

  	
  $

  	
  2,519,999.00

  	
   

  	
  $

  	
  473,000.00

  	
   

  
	
  $

  	
  2,520,000.00

  	
   

  	
  $

  	
  2,524,999.00

  	
   

  	
  $

  	
  484,000.00

  	
   

  
	
  $

  	
  2,525,000.00

  	
   

  	
  $

  	
  2,529,999.00

  	
   

  	
  $

  	
  495,000.00

  	
   

  
	
  $

  	
  2,530,000.00

  	
   

  	
  $

  	
  2,534,999.00

  	
   

  	
  $

  	
  506,000.00

  	
   

  
	
  $

  	
  2,535,000.00

  	
   

  	
  $

  	
  2,539,999.00

  	
   

  	
  $

  	
  517,000.00

  	
   

  
	
  $

  	
  2,540,000.00

  	
   

  	
  $

  	
  2,544,999.00

  	
   

  	
  $

  	
  528,000.00

  	
   

  
	
  $

  	
  2,545,000.00

  	
   

  	
  $

  	
  2,549,999.00

  	
   

  	
  $

  	
  539,000.00

  	
   

  
	
  $

  	
  2,550,000.00

  	
   

  	
  $

  	
  2,554,999.00

  	
   

  	
  $

  	
  550,000.00

  	
   

  
	
  $

  	
  2,555,000.00

  	
   

  	
  $

  	
  2,559,999.00

  	
   

  	
  $

  	
  561,000.00

  	
   

  
	
  $

  	
  2,560,000.00

  	
   

  	
  $

  	
  2,564,999.00

  	
   

  	
  $

  	
  572,000.00

  	
   

  
	
  $

  	
  2,565,000.00

  	
   

  	
  $

  	
  2,569,999.00

  	
   

  	
  $

  	
  583,000.00

  	
   

  
	
  $

  	
  2,570,000.00

  	
   

  	
  $

  	
  2,574,999.00

  	
   

  	
  $

  	
  594,000.00

  	
   

  

 

 

	
  2009 Gross Profit Range

  	
   

  	
  2009 Base Earn-Out 

  	
   

  
	
  Equal to or More Than

  	
   

  	
  But Less Than

  	
   

  	
  Payment

  	
   

  
	
  $

  	
  2,575,000.00

  	
   

  	
  $

  	
  2,579,999.00

  	
   

  	
  $

  	
  605,000.00

  	
   

  
	
  $

  	
  2,580,000.00

  	
   

  	
  $

  	
  2,584,999.00

  	
   

  	
  $

  	
  616,000.00

  	
   

  
	
  $

  	
  2,585,000.00

  	
   

  	
  $

  	
  2,589,999.00

  	
   

  	
  $

  	
  627,000.00

  	
   

  
	
  $

  	
  2,590,000.00

  	
   

  	
  $

  	
  2,594,999.00

  	
   

  	
  $

  	
  638,000.00

  	
   

  
	
  $

  	
  2,595,000.00

  	
   

  	
  $

  	
  2,599,999.00

  	
   

  	
  $

  	
  649,000.00

  	
   

  
	
  $

  	
  2,600,000.00

  	
   

  	
  $

  	
  2,604,999.00

  	
   

  	
  $

  	
  660,000.00

  	
   

  
	
  $

  	
  2,605,000.00

  	
   

  	
  $

  	
  2,609,999.00

  	
   

  	
  $

  	
  671,000.00

  	
   

  
	
  $

  	
  2,610,000.00

  	
   

  	
  $

  	
  2,614,999.00

  	
   

  	
  $

  	
  682,000.00

  	
   

  
	
  $

  	
  2,615,000.00

  	
   

  	
  $

  	
  2,619,999.00

  	
   

  	
  $

  	
  693,000.00

  	
   

  
	
  $

  	
  2,620,000.00

  	
   

  	
  $

  	
  2,624,999.00

  	
   

  	
  $

  	
  704,000.00

  	
   

  
	
  $

  	
  2,625,000.00

  	
   

  	
  $

  	
  2,629,999.00

  	
   

  	
  $

  	
  715,000.00

  	
   

  
	
  $

  	
  2,630,000.00

  	
   

  	
  $

  	
  2,634,999.00

  	
   

  	
  $

  	
  726,000.00

  	
   

  
	
  $

  	
  2,635,000.00

  	
   

  	
  $

  	
  2,639,999.00

  	
   

  	
  $

  	
  737,000.00

  	
   

  
	
  $

  	
  2,640,000.00

  	
   

  	
  $

  	
  2,644,999.00

  	
   

  	
  $

  	
  748,000.00

  	
   

  
	
  $

  	
  2,645,000.00

  	
   

  	
  $

  	
  2,649,999.00

  	
   

  	
  $

  	
  759,000.00

  	
   

  
	
  $

  	
  2,650,000.00

  	
   

  	
  $

  	
  2,654,999.00

  	
   

  	
  $

  	
  770,000.00

  	
   

  
	
  $

  	
  2,655,000.00

  	
   

  	
  $

  	
  2,659,999.00

  	
   

  	
  $

  	
  781,000.00

  	
   

  
	
  $

  	
  2,660,000.00

  	
   

  	
  $

  	
  2,664,999.00

  	
   

  	
  $

  	
  792,000.00

  	
   

  
	
  $

  	
  2,665,000.00

  	
   

  	
  $

  	
  2,669,999.00

  	
   

  	
  $

  	
  803,000.00

  	
   

  
	
  $

  	
  2,670,000.00

  	
   

  	
  $

  	
  2,674,999.00

  	
   

  	
  $

  	
  814,000.00

  	
   

  
	
  $

  	
  2,675,000.00

  	
   

  	
  $

  	
  2,679,999.00

  	
   

  	
  $

  	
  825,000.00

  	
   

  
	
  $

  	
  2,680,000.00

  	
   

  	
  $

  	
  2,684,999.00

  	
   

  	
  $

  	
  836,000.00

  	
   

  
	
  $

  	
  2,685,000.00

  	
   

  	
  $

  	
  2,689,999.00

  	
   

  	
  $

  	
  847,000.00

  	
   

  
	
  $

  	
  2,690,000.00

  	
   

  	
  $

  	
  2,694,999.00

  	
   

  	
  $

  	
  858,000.00

  	
   

  
	
  $

  	
  2,695,000.00

  	
   

  	
  $

  	
  2,699,999.00

  	
   

  	
  $

  	
  869,000.00

  	
   

  
	
  $

  	
  2,700,000.00

  	
   

  	
  $

  	
  2,704,999.00

  	
   

  	
  $

  	
  880,000.00

  	
   

  
	
  $

  	
  2,705,000.00

  	
   

  	
  $

  	
  2,709,999.00

  	
   

  	
  $

  	
  891,000.00

  	
   

  
	
  $

  	
  2,710,000.00

  	
   

  	
  $

  	
  2,714,999.00

  	
   

  	
  $

  	
  902,000.00

  	
   

  
	
  $

  	
  2,715,000.00

  	
   

  	
  $

  	
  2,719,999.00

  	
   

  	
  $

  	
  913,000.00

  	
   

  
	
  $

  	
  2,720,000.00

  	
   

  	
  $

  	
  2,724,999.00

  	
   

  	
  $

  	
  924,000.00

  	
   

  
	
  $

  	
  2,725,000.00

  	
   

  	
  $

  	
  2,729,999.00

  	
   

  	
  $

  	
  935,000.00

  	
   

  
	
  $

  	
  2,730,000.00

  	
   

  	
  $

  	
  2,734,999.00

  	
   

  	
  $

  	
  946,000.00

  	
   

  
	
  $

  	
  2,735,000.00

  	
   

  	
  $

  	
  2,739,999.00

  	
   

  	
  $

  	
  957,000.00

  	
   

  
	
  $

  	
  2,740,000.00

  	
   

  	
  $

  	
  2,744,999.00

  	
   

  	
  $

  	
  968,000.00

  	
   

  
	
  $

  	
  2,745,000.00

  	
   

  	
  $

  	
  2,749,999.00

  	
   

  	
  $

  	
  979,000.00

  	
   

  
	
  $

  	
  2,750,000.00

  	
   

  	
  $

  	
  2,754,999.00

  	
   

  	
  $

  	
  990,000.00

  	
   

  
	
  $

  	
  2,755,000.00

  	
   

  	
  $

  	
  2,759,999.00

  	
   

  	
  $

  	
  1,001,000.00

  	
   

  
	
  $

  	
  2,760,000.00

  	
   

  	
  $

  	
  2,764,999.00

  	
   

  	
  $

  	
  1,012,000.00

  	
   

  
	
  $

  	
  2,765,000.00

  	
   

  	
  $

  	
  2,769,999.00

  	
   

  	
  $

  	
  1,023,000.00

  	
   

  
	
  $

  	
  2,770,000.00

  	
   

  	
  $

  	
  2,774,999.00

  	
   

  	
  $

  	
  1,034,000.00

  	
   

  
	
  $

  	
  2,775,000.00

  	
   

  	
  $

  	
  2,779,999.00

  	
   

  	
  $

  	
  1,045,000.00

  	
   

  
	
  $

  	
  2,780,000.00

  	
   

  	
  $

  	
  2,784,999.00

  	
   

  	
  $

  	
  1,056,000.00

  	
   

  
	
  $

  	
  2,785,000.00

  	
   

  	
  $

  	
  2,789,999.00

  	
   

  	
  $

  	
  1,067,000.00

  	
   

  
	
  $

  	
  2,790,000.00

  	
   

  	
  $

  	
  2,794,999.00

  	
   

  	
  $

  	
  1,078,000.00

  	
   

  
	
  $

  	
  2,795,000.00

  	
   

  	
  $

  	
  2,799,999.00

  	
   

  	
  $

  	
  1,089,000.00

  	
   

  
	
  $

  	
  2,800,000.00

  	
   

  	
  $

  	
   

  	
   

  	
  1,100,000.00

  	
   

  

 

2

 

ANNEX IV

 

2010
EARN-OUT PAYMENT

 

The 2010 Earn-Out Payment, if any, shall be an amount
equal to (i) the 2010 Base Earn-Out Payment set forth opposite the 2010
Gross Profit Range that includes the Gross Profit set forth in the 2010 Final
Earn-Out Statement plus (ii) an
amount equal to $11,000 multiplied by a
fraction, the numerator of which is the amount by which the Gross Profit set
forth in the 2010 Final Earn-Out Statement exceeds the amount stated in the “Equal
to or More Than” column for the applicable 2010 Gross Profit Range and the
denominator of which is $4,999.

 

	
  2010 Gross Profit Range

  	
   

  	
  2010 Base Earn-Out

  	
   

  
	
  Equal to or More Than

  	
   

  	
  But Less Than

  	
   

  	
  Payment

  	
   

  
	
  $

  	
  0.00 

  	
   

  	
  $

  	
  2,599,999.00 

  	
   

  	
  $

  	
  0.00

  	
   

  
	
  $

  	
  2,600,000.00 

  	
   

  	
  $

  	
  2,604,999.00 

  	
   

  	
  $

  	
  220,000.00

  	
   

  
	
  $

  	
  2,605,000.00 

  	
   

  	
  $

  	
  2,609,999.00 

  	
   

  	
  $

  	
  231,000.00

  	
   

  
	
  $

  	
  2,610,000.00 

  	
   

  	
  $

  	
  2,614,999.00 

  	
   

  	
  $

  	
  242,000.00

  	
   

  
	
  $

  	
  2,615,000.00 

  	
   

  	
  $

  	
  2,619,999.00 

  	
   

  	
  $

  	
  253,000.00

  	
   

  
	
  $

  	
  2,620,000.00 

  	
   

  	
  $

  	
  2,624,999.00 

  	
   

  	
  $

  	
  264,000.00

  	
   

  
	
  $

  	
  2,625,000.00 

  	
   

  	
  $

  	
  2,629,999.00 

  	
   

  	
  $

  	
  275,000.00

  	
   

  
	
  $

  	
  2,630,000.00 

  	
   

  	
  $

  	
  2,634,999.00 

  	
   

  	
  $

  	
  286,000.00

  	
   

  
	
  $

  	
  2,635,000.00 

  	
   

  	
  $

  	
  2,639,999.00 

  	
   

  	
  $

  	
  297,000.00

  	
   

  
	
  $

  	
  2,640,000.00 

  	
   

  	
  $

  	
  2,644,999.00 

  	
   

  	
  $

  	
  308,000.00

  	
   

  
	
  $

  	
  2,645,000.00 

  	
   

  	
  $

  	
  2,649,999.00 

  	
   

  	
  $

  	
  319,000.00

  	
   

  
	
  $

  	
  2,650,000.00 

  	
   

  	
  $

  	
  2,654,999.00 

  	
   

  	
  $

  	
  330,000.00

  	
   

  
	
  $

  	
  2,655,000.00 

  	
   

  	
  $

  	
  2,659,999.00 

  	
   

  	
  $

  	
  341,000.00

  	
   

  
	
  $

  	
  2,660,000.00 

  	
   

  	
  $

  	
  2,664,999.00 

  	
   

  	
  $

  	
  352,000.00

  	
   

  
	
  $

  	
  2,665,000.00 

  	
   

  	
  $

  	
  2,669,999.00 

  	
   

  	
  $

  	
  363,000.00

  	
   

  
	
  $

  	
  2,670,000.00 

  	
   

  	
  $

  	
  2,674,999.00 

  	
   

  	
  $

  	
  374,000.00

  	
   

  
	
  $

  	
  2,675,000.00 

  	
   

  	
  $

  	
  2,679,999.00 

  	
   

  	
  $

  	
  385,000.00

  	
   

  
	
  $

  	
  2,680,000.00 

  	
   

  	
  $

  	
  2,684,999.00 

  	
   

  	
  $

  	
  396,000.00

  	
   

  
	
  $

  	
  2,685,000.00 

  	
   

  	
  $

  	
  2,689,999.00 

  	
   

  	
  $

  	
  407,000.00

  	
   

  
	
  $

  	
  2,690,000.00 

  	
   

  	
  $

  	
  2,694,999.00 

  	
   

  	
  $

  	
  418,000.00

  	
   

  
	
  $

  	
  2,695,000.00 

  	
   

  	
  $

  	
  2,699,999.00 

  	
   

  	
  $

  	
  429,000.00

  	
   

  
	
  $

  	
  2,700,000.00 

  	
   

  	
  $

  	
  2,704,999.00 

  	
   

  	
  $

  	
  440,000.00

  	
   

  
	
  $

  	
  2,705,000.00 

  	
   

  	
  $

  	
  2,709,999.00 

  	
   

  	
  $

  	
  451,000.00

  	
   

  
	
  $

  	
  2,710,000.00 

  	
   

  	
  $

  	
  2,714,999.00 

  	
   

  	
  $

  	
  462,000.00

  	
   

  
	
  $

  	
  2,715,000.00 

  	
   

  	
  $

  	
  2,719,999.00 

  	
   

  	
  $

  	
  473,000.00

  	
   

  
	
  $

  	
  2,720,000.00 

  	
   

  	
  $

  	
  2,724,999.00 

  	
   

  	
  $

  	
  484,000.00

  	
   

  
	
  $

  	
  2,725,000.00 

  	
   

  	
  $

  	
  2,729,999.00 

  	
   

  	
  $

  	
  495,000.00

  	
   

  
	
  $

  	
  2,730,000.00 

  	
   

  	
  $

  	
  2,734,999.00 

  	
   

  	
  $

  	
  506,000.00

  	
   

  
	
  $

  	
  2,735,000.00 

  	
   

  	
  $

  	
  2,739,999.00 

  	
   

  	
  $

  	
  517,000.00

  	
   

  
	
  $

  	
  2,740,000.00 

  	
   

  	
  $

  	
  2,744,999.00 

  	
   

  	
  $

  	
  528,000.00

  	
   

  
	
  $

  	
  2,745,000.00 

  	
   

  	
  $

  	
  2,749,999.00 

  	
   

  	
  $

  	
  539,000.00

  	
   

  
	
  $

  	
  2,750,000.00 

  	
   

  	
  $

  	
  2,754,999.00 

  	
   

  	
  $

  	
  550,000.00

  	
   

  
	
  $

  	
  2,755,000.00 

  	
   

  	
  $

  	
  2,759,999.00 

  	
   

  	
  $

  	
  561,000.00

  	
   

  
	
  $

  	
  2,760,000.00 

  	
   

  	
  $

  	
  2,764,999.00 

  	
   

  	
  $

  	
  572,000.00

  	
   

  
	
  $

  	
  2,765,000.00 

  	
   

  	
  $

  	
  2,769,999.00 

  	
   

  	
  $

  	
  583,000.00

  	
   

  
	
  $

  	
  2,770,000.00 

  	
   

  	
  $

  	
  2,774,999.00 

  	
   

  	
  $

  	
  594,000.00

  	
   

  

 

 

	
  2010 Gross Profit Range

  	
   

  	
  2010 Base Earn-Out

  	
   

  
	
  Equal to or More Than

  	
   

  	
  But Less Than

  	
   

  	
  Payment

  	
   

  
	
  $

  	
  2,775,000.00 

  	
   

  	
  $

  	
  2,779,999.00 

  	
   

  	
  $

  	
  605,000.00

  	
   

  
	
  $

  	
  2,780,000.00 

  	
   

  	
  $

  	
  2,784,999.00 

  	
   

  	
  $

  	
  616,000.00

  	
   

  
	
  $

  	
  2,785,000.00 

  	
   

  	
  $

  	
  2,789,999.00 

  	
   

  	
  $

  	
  627,000.00

  	
   

  
	
  $

  	
  2,790,000.00 

  	
   

  	
  $

  	
  2,794,999.00 

  	
   

  	
  $

  	
  638,000.00

  	
   

  
	
  $

  	
  2,795,000.00 

  	
   

  	
  $

  	
  2,799,999.00 

  	
   

  	
  $

  	
  649,000.00

  	
   

  
	
  $

  	
  2,800,000.00 

  	
   

  	
  $

  	
  2,804,999.00 

  	
   

  	
  $

  	
  660,000.00

  	
   

  
	
  $

  	
  2,805,000.00 

  	
   

  	
  $

  	
  2,809,999.00 

  	
   

  	
  $

  	
  671,000.00

  	
   

  
	
  $

  	
  2,810,000.00 

  	
   

  	
  $

  	
  2,814,999.00 

  	
   

  	
  $

  	
  682,000.00

  	
   

  
	
  $

  	
  2,815,000.00 

  	
   

  	
  $

  	
  2,819,999.00 

  	
   

  	
  $

  	
  693,000.00

  	
   

  
	
  $

  	
  2,820,000.00 

  	
   

  	
  $

  	
  2,824,999.00 

  	
   

  	
  $

  	
  704,000.00

  	
   

  
	
  $

  	
  2,825,000.00 

  	
   

  	
  $

  	
  2,829,999.00 

  	
   

  	
  $

  	
  715,000.00

  	
   

  
	
  $

  	
  2,830,000.00 

  	
   

  	
  $

  	
  2,834,999.00 

  	
   

  	
  $

  	
  726,000.00

  	
   

  
	
  $

  	
  2,835,000.00 

  	
   

  	
  $

  	
  2,839,999.00 

  	
   

  	
  $

  	
  737,000.00

  	
   

  
	
  $

  	
  2,840,000.00 

  	
   

  	
  $

  	
  2,844,999.00 

  	
   

  	
  $

  	
  748,000.00

  	
   

  
	
  $

  	
  2,845,000.00 

  	
   

  	
  $

  	
  2,849,999.00 

  	
   

  	
  $

  	
  759,000.00

  	
   

  
	
  $

  	
  2,850,000.00 

  	
   

  	
  $

  	
  2,854,999.00 

  	
   

  	
  $

  	
  770,000.00

  	
   

  
	
  $

  	
  2,855,000.00 

  	
   

  	
  $

  	
  2,859,999.00 

  	
   

  	
  $

  	
  781,000.00

  	
   

  
	
  $

  	
  2,860,000.00 

  	
   

  	
  $

  	
  2,864,999.00 

  	
   

  	
  $

  	
  792,000.00

  	
   

  
	
  $

  	
  2,865,000.00 

  	
   

  	
  $

  	
  2,869,999.00 

  	
   

  	
  $

  	
  803,000.00

  	
   

  
	
  $

  	
  2,870,000.00 

  	
   

  	
  $

  	
  2,874,999.00 

  	
   

  	
  $

  	
  814,000.00

  	
   

  
	
  $

  	
  2,875,000.00 

  	
   

  	
  $

  	
  2,879,999.00 

  	
   

  	
  $

  	
  825,000.00

  	
   

  
	
  $

  	
  2,880,000.00 

  	
   

  	
  $

  	
  2,884,999.00 

  	
   

  	
  $

  	
  836,000.00

  	
   

  
	
  $

  	
  2,885,000.00 

  	
   

  	
  $

  	
  2,889,999.00 

  	
   

  	
  $

  	
  847,000.00

  	
   

  
	
  $

  	
  2,890,000.00 

  	
   

  	
  $

  	
  2,894,999.00 

  	
   

  	
  $

  	
  858,000.00

  	
   

  
	
  $

  	
  2,895,000.00 

  	
   

  	
  $

  	
  2,899,999.00 

  	
   

  	
  $

  	
  869,000.00

  	
   

  
	
  $

  	
  2,900,000.00 

  	
   

  	
  $

  	
  2,904,999.00 

  	
   

  	
  $

  	
  880,000.00

  	
   

  
	
  $

  	
  2,905,000.00 

  	
   

  	
  $

  	
  2,909,999.00 

  	
   

  	
  $

  	
  891,000.00

  	
   

  
	
  $

  	
  2,910,000.00 

  	
   

  	
  $

  	
  2,914,999.00 

  	
   

  	
  $

  	
  902,000.00

  	
   

  
	
  $

  	
  2,915,000.00 

  	
   

  	
  $

  	
  2,919,999.00 

  	
   

  	
  $

  	
  913,000.00

  	
   

  
	
  $

  	
  2,920,000.00 

  	
   

  	
  $

  	
  2,924,999.00 

  	
   

  	
  $

  	
  924,000.00

  	
   

  
	
  $

  	
  2,925,000.00 

  	
   

  	
  $

  	
  2,929,999.00 

  	
   

  	
  $

  	
  935,000.00

  	
   

  
	
  $

  	
  2,930,000.00 

  	
   

  	
  $

  	
  2,934,999.00 

  	
   

  	
  $

  	
  946,000.00

  	
   

  
	
  $

  	
  2,935,000.00 

  	
   

  	
  $

  	
  2,939,999.00 

  	
   

  	
  $

  	
  957,000.00

  	
   

  
	
  $

  	
  2,940,000.00 

  	
   

  	
  $

  	
  2,944,999.00 

  	
   

  	
  $

  	
  968,000.00

  	
   

  
	
  $

  	
  2,945,000.00 

  	
   

  	
  $

  	
  2,949,999.00 

  	
   

  	
  $

  	
  979,000.00

  	
   

  
	
  $

  	
  2,950,000.00 

  	
   

  	
  $

  	
  2,954,999.00 

  	
   

  	
  $

  	
  990,000.00

  	
   

  
	
  $

  	
  2,955,000.00 

  	
   

  	
  $

  	
  2,959,999.00 

  	
   

  	
  $

  	
  1,001,000.00

  	
   

  
	
  $

  	
  2,960,000.00 

  	
   

  	
  $

  	
  2,964,999.00 

  	
   

  	
  $

  	
  1,012,000.00

  	
   

  
	
  $

  	
  2,965,000.00 

  	
   

  	
  $

  	
  2,969,999.00 

  	
   

  	
  $

  	
  1,023,000.00

  	
   

  
	
  $

  	
  2,970,000.00 

  	
   

  	
  $

  	
  2,974,999.00 

  	
   

  	
  $

  	
  1,034,000.00

  	
   

  
	
  $

  	
  2,975,000.00 

  	
   

  	
  $

  	
  2,979,999.00 

  	
   

  	
  $

  	
  1,045,000.00

  	
   

  
	
  $

  	
  2,980,000.00 

  	
   

  	
  $

  	
  2,984,999.00 

  	
   

  	
  $

  	
  1,056,000.00

  	
   

  
	
  $

  	
  2,985,000.00 

  	
   

  	
  $

  	
  2,989,999.00 

  	
   

  	
  $

  	
  1,067,000.00

  	
   

  
	
  $

  	
  2,990,000.00 

  	
   

  	
  $

  	
  2,994,999.00 

  	
   

  	
  $

  	
  1,078,000.00

  	
   

  
	
  $

  	
  2,995,000.00 

  	
   

  	
  $

  	
  2,999,999.00 

  	
   

  	
  $

  	
  1,089,000.00

  	
   

  
	
  $

  	
  3,000,000.00 

  	
   

  	
   

  	
   

  	
  $

  	
  1,100,000.00

  	
   

  

 

2

 

EXHIBIT A

 

DIAGNA
RADIOLOGISTS

 

	
   

  	
  Steven
  Archibald, M.D.

  
	
   

  	
  Ketan C. Davae, M.D.

  
	
   

  	
  Jon Foral, M.D.

  
	
   

  	
  Julia Lee, M.D.

  
	
   

  	
  Anna Morales, M.D.

  
	
   

  	
  Virginia
  Schreiner, M.D.

  
	
   

  	
  Monte Zarlingo, M.D.

  

 

A-1

 

EXHIBIT B

 

ESCROW AGREEMENT

 

See attached.

 

B-1

 

ESCROW
AGREEMENT

 

                This Escrow Agreement (this “Escrow Agreement”)
dated this 14th day of April, 2008 (the “Effective Date”), is entered
into by and among Monte Zarlingo, M.D., as the Sellers’ Representative, and
Virtual Radiologic Corporation, a Delaware 
corporation (the “Purchaser”) (collectively, the “Parties”),
and Wells Fargo Bank, National Association (the “Escrow Agent”).

 

RECITALS

 

                A.            The
Parties, Diagna Radiology, LLC, a Delaware limited liability company (the “Company”)
and Monte Zarlingo, M.D., Jon Schadow, and Steve Sipprell (collectively, the “Sellers”),
have entered into that certain Membership Interest Purchase Agreement dated as
of the Effective Date (the “Purchase Agreement”).  Terms not otherwise defined herein shall have
the meanings assigned to them in the Purchase Agreement.

 

                B.            Pursuant
to the Purchase Agreement, the Parties agreed to place in escrow a portion of
the Purchase Price, and the Escrow Agent agrees to hold and distribute such
funds in accordance with the terms of this Escrow Agreement.

 

                C.  Pursuant to
the Purchase Agreement, the Sellers appointed the Sellers’ Representative to
represent the Sellers with respect to matters under and in connection with this
Escrow Agreement and the Purchase Agreement.

 

                In consideration of the foregoing promises and
agreements of the Parties and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the Parties and the
Escrow Agent agree as follows:

 

ARTICLE 1

ESCROW
DEPOSIT

 

                Section 1.01 Receipt
of Escrow Property.  At the
Closing, in accordance with Section 2.02 of the Purchase Agreement, the
Purchaser shall deliver to the Escrow Agent the aggregate sum of Seven Hundred
Fifty Thousand & 00/100 Dollars ($750,000) (the “Escrow Property”),
consisting of Six Hundred Thousand & 00/100 Dollars ($600,000) (the “General
Indemnity and Working Capital Escrow Amount”) and One Hundred Fifty
Thousand & 00/100 Dollars ($150,000) (the “Change Fee Payment
Escrow Amount”).  Escrow Agent shall
hold these amounts in separate subaccounts within the escrow account, as
further described in Sections 1.02 and 1.03(d) below.

 

                Section 1.02
Investments.  The Escrow Agent
shall be permitted, and is hereby directed to deposit, transfer, hold, and
invest all funds received under this Escrow Agreement, including principal and
interest, in such investment funds set forth on Exhibit A hereto or
successor funds comparable to the foregoing (the “Permitted Investments”).  The Escrow Agent shall invest the Escrow
Property in the Permitted Investments in accordance with the written
instructions of the Sellers’ Representative substantially in the form of Exhibit A,
attached hereto, as may from time 

 

B-2

 

to time be provided to
the Escrow Agent.  In the absence of such
direction, the Escrow Agent is hereby directed to invest the Escrow Property in
the Wells Fargo Advantage Funds, Government Money Market Fund, Service Class Shares.  Any interest or investment earnings on the
Escrow Property shall become part of the Escrow Property and added to the
applicable deposits into the subaccounts based on the purposes in Section 1.01
and 1.03(d), and shall be disbursed in accordance with Section 1.03 of
this Escrow Agreement.

 

                The Escrow Agent shall be entitled to sell or redeem
any such investments as necessary to make any payments or distributions
required under this Escrow Agreement. 
The Escrow Agent shall have no responsibility or liability for any loss
which may result from any investment made pursuant to this Escrow Agreement, or
for any loss resulting from the sale of such investment.  The Parties acknowledge that the Escrow Agent
is not providing investment supervision, recommendations, or advice.

 

                Investments in the Permitted Investments are not
obligations of, or endorsed or guaranteed by, the Escrow Agent or its
affiliates and are not insured by the Federal Deposit Insurance
Corporation.  The Escrow Agent and its affiliates
provide various services for the Permitted Investments and are paid fees for
such services.  Proceeds of the sale of
investments will be delivered on the Business Day on which the appropriate
instructions are received by the Escrow Agent if received prior to the deadline
for same day sale of such Permitted Investments.  If such instructions are received after the
applicable deadline, proceeds will be delivered on the next succeeding Business
Day.

 

                Investments will be made promptly following the
delivery of the Escrow Property to the Escrow Agent taking into consideration
the regulations and requirements (including investment cut-off times) of the
Federal Reserve wire system, any investment provider and the Escrow Agent.

 

Section 1.03  Disbursement of Escrow Property.  The Escrow Agent shall
disburse the Escrow Property as provided in this Section 1.03.

 

(a)           Disbursement of General Indemnity
and Working Capital Escrow Amount For Indemnification Purposes.  The General Indemnity and Working Capital
Escrow Amount, including the Income and Investment Proceeds (as defined in Section 1.03(d) below)
attributable thereto, shall be disbursed as set forth in this Section 1.03(a) or
in Section 1.03(b) below.  The
Purchaser may, from time to time, deliver to the Sellers’ Representative and
the Escrow Agent a written notice of a claim for indemnification under Article VIII
of the Purchase Agreement (an “Indemnity Claim Notice”), including a
description and the amount of the claim and a request for disbursement from the
General Indemnity and Working Capital Escrow Amount in the amount claimed.  On or before the twentieth (20th)
Business Day after receipt by the Escrow Agent of the Indemnity Claim Notice,
the Sellers’ Representative may provide the Escrow Agent and the Purchaser with
written notice that the Sellers’ Representative disputes all or a portion of
the claim as set forth in the Indemnity Claim Notice (“Indemnity Claim
Dispute Notice”), which shall set forth a description and the amount of the
claim in dispute (a “Disputed Claim Amount”) and the amount of the
claim, if any, that is not disputed by Sellers’ Representative (the “Undisputed
Claim Amount”).

 

B-3

 

(i)            If the Escrow Agent receives an
Indemnity Claim Notice from the Purchaser and (A) the Sellers’
Representative timely notifies the Escrow Agent that it does not dispute the
claim set forth in the Indemnity Claim Notice or (B) the Sellers’
Representative fails to provide the Escrow Agent with a timely Indemnity Claim
Dispute Notice, then the Escrow Agent shall disburse to the Purchaser the
amount stated in the Indemnity Claim Notice in accordance with the instructions
contained in the Indemnity Claim Notice.

 

(ii)           If
the Escrow Agent receives an Indemnity Claim Notice from the Purchaser and the
Sellers’ Representative provides Escrow Agent with a timely Indemnity Claim
Dispute Notice, then the Escrow Agent shall (A) retain the Disputed Claim
Amount in escrow and (B) disburse to the Purchaser from the General
Indemnity and Working Capital Escrow Amount an amount equal to the Undisputed
Claim Amount, if any.  The Escrow Agent
shall not disburse a Disputed Claim Amount until the earliest to occur of the
following:  (X) the Sellers’
Representative provides Escrow Agent with written notice stating it has
withdrawn its Indemnity Claim Dispute Notice, in which case Escrow Agent
will disburse to the Purchaser the Disputed Claim Amount in accordance with the instructions provided in
the Indemnity Claim Notice, (Y) the Purchaser and the Sellers’
Representative execute and deliver to Escrow Agent joint written instructions
specifying the amount of any disbursement to be made with respect to the
Indemnity Claim Notice, in which case Escrow Agent shall make a disbursement
from the General Indemnity and Working Capital Escrow Amount as directed in
such joint written instructions; or (Z) the Purchaser or the Sellers’
Representative provides to the Escrow Agent either a final certified copy of an
order from JAMS or a final judgment from a court of competent jurisdiction
setting forth the amount, if any, to be disbursed in satisfaction of the claim
described in the Indemnity Claim Notice, in which case the Escrow Agent shall
make a disbursement to the Purchaser from the General Indemnity and Working
Capital Escrow Amount in the amount specified in such order or final judgment;
less any Undisputed Claim Amount previously distributed to Purchaser with
respect to the applicable claim.

 

(iii)          The Escrow Agent shall distribute the
General Indemnity and Working Capital Escrow Amount to the Seller’s
Representative as follows:

 

                                                                (A)          On the six (6) month anniversary of the Effective
Date, Escrow Agent will disburse to Seller’s Representative an amount equal to
One Hundred Twenty-Five Thousand & 00/100 Dollars ($125,000) of the General Indemnity and Working Capital
Escrow Amount (or if less, the General Indemnity and Working Capital Escrow
Amount then remaining) including all Income and Investment Proceeds
attributable thereto through the date of distribution less
an amount sufficient to fully satisfy any pending claims set forth in an
Indemnity Claim Notice which was delivered prior to the date of distribution;

 

                                                                (B)           On the twelve (12) month anniversary of the Effective
Date, Escrow Agent will disburse to Seller’s Representative an amount equal to
Two Hundred Thousand & 00/100 Dollars ($200,000) of the General Indemnity and Working Capital
Escrow Amount (or if less, the General Indemnity and Working Capital Escrow
Amount then remaining) including all Income and Investment Proceeds
attributable thereto through the date of distribution less
an amount sufficient to fully satisfy any pending claims set forth in an
Indemnity Claim Notice(s) which were 

 

B-4

 

delivered
prior to the date of distribution (reduced by any amounts previously retained
under Section 1.03(a)(iii)(A) above); and

 

                                                                (C)           On the eighteen (18) month anniversary of the Effective
Date, Escrow Agent will disburse to Seller’s Representative the remaining
balance of the General Indemnity and Working Capital Escrow Amount including
all Income and Investment Proceeds attributable thereto through the date of
distribution less an amount sufficient to
fully satisfy any pending claims set forth in an Indemnity Claim Notice(s) which
were delivered prior to the date of distribution (reduced by any amounts
previously retained under Sections 1.03(a)(iii)(A) or (B) above).

 

Any
amounts retained pursuant to Sections 1.03(a)(iii)(A), (B), or (C) above
with respect to any timely Indemnity Claim Notice(s) received by Escrow
Agent (collectively, the  “Pending
Dispute Reserve”) will be retained by the Escrow Agent until instructions
to disburse the Pending Dispute Reserve are delivered to the Escrow Agent in
accordance with the procedures set forth in Section 1.03(a)(ii) above.

 

(iv)          Notwithstanding the above, Escrow
Agent shall not make any distributions of the Change Fee Payment Escrow Amount
to a party, except pursuant to the terms of Section 1.03(c) below.  In addition, the Parties may cause the
distribution at any time of all or a portion of the General Indemnity and
Working Capital Escrow Amount pursuant to joint written instructions of the Purchaser
and the Sellers’ Representative.

 

(b)           Disbursement of General Indemnity
and Working Capital Escrow Amount for Adjusted Working Capital Adjustment.  In addition to the purpose set forth in Section 1.03(a) above,
the Purchase Agreement requires the General Indemnity and Working Capital
Escrow Amount to be held as security for any adjustment based on the Company’s
Adjusted Working Capital, as set forth in Section 2.04 of the Purchase
Agreement.  Accordingly, in addition to
the terms of Section 1.03(a) above, the General Indemnity and Working
Capital Escrow Amount shall be distributed in accordance with the joint written
instructions of the Sellers’ Representative and the Purchaser.  Promptly following the determination of the
Final Adjusted Working Capital, if any amounts are payable to Purchaser under Section 2.04(f) of
the Purchase Agreement, the Sellers’ Representative and the Purchaser agree to
deliver joint written instructions to the Escrow Agent, in accordance with Section 2.04(e) of
the Purchase Agreement and clearly marked as such, to cause the timely delivery
of an amount of the General Indemnity and Working Capital Escrow Amount equal
to the amount payable to the Purchaser under Section 2.04(f) of the
Purchase Agreement.

 

(c)           Disbursement of Change Fee
Payment Escrow Amount.

 

                                                (i)            The Parties acknowledge that Ketan
Davae, M.D. (“Dr. Davae”) may become entitled to a “Change Fee”, as
defined in, and pursuant to the terms of that certain Professional Services
Agreement dated October 23, 2006, between the Company and Dr. Davae
(“Services Agreement”) in the amount of One Hundred Fifty Thousand &
00/100 Dollars ($150,000) (the “Change
Fee Amount”) and that the Change Fee Payment Escrow Amount is intended to
provide funds to satisfy any claim made by Dr. Davae with respect thereto.

 

B-5

 

                                                (ii)           At any time after the Effective Date,
including following the delivery of a Change Fee Dispute and Indemnity Notice
(as defined below) pursuant to Section 1.03(c)(iii), upon delivery by the
Sellers’ Representative to the Purchaser of an agreement executed by Dr. Davae
releasing the Company and the Purchaser of all obligations under the Services
Agreement relating to the Change Fee Amount, such agreement to be in form and
substance satisfactory to the Purchaser, then the Sellers’ Representative and
the Purchaser agree to give joint written instructions for the distribution of
the Change Fee Amount to the Sellers’ Representative.

 

                                                (iii)          Following a demand from Dr. Davae
for payment of the Change Fee under the Services Agreement, the Purchaser may
deliver to the Sellers’ Representative and the Escrow Agent a written request
to disburse the Change Fee Amount (or portion thereof) to the Company for
payment to Dr. Davae (a “Change Fee Disbursement Request”).  On or before the fifteenth (15th)
Business Day after receipt by the Escrow Agent of the Change Fee Disbursement
Request, the Sellers’ Representative may provide the Escrow Agent and the
Purchaser with written notice that the Sellers’ Representative disputes Dr. Davae’s
right to receive the Change Fee (or portion thereof) and that Sellers’
Representative acknowledges and confirms the indemnification obligations with
respect to any claim by Dr. Davae as set forth in the Purchase Agreement
(a “Change Fee Dispute and Indemnity Notice”).

 

                                                                (A)          If the Escrow Agent receives a Change
Fee Disbursement Request from the Purchaser and (1) the Sellers’
Representative timely  notifies the
Escrow Agent that it does not dispute Dr. Davae’s right to receive the
Change Fee (or portion thereof) or (2) the Sellers’ Representative fails
to provide the Escrow Agent with a timely Change Fee Dispute and Indemnity
Notice, then the Escrow Agent shall disburse the Change Fee Escrow Payment
Amount (or portion thereof) (but not any Interest and Investment Fees accrued
with respect thereto) and to the Company in accordance with the instructions
contained in the Change Fee Disbursement Request, and the Purchaser shall cause
the amount so distributed to be paid to Dr. Davae.

 

                                                                (B)           If the Escrow Agent receives a Change
Fee Disbursement Request from the Purchaser and the Sellers’ Representative
provides Escrow Agent with a timely Change Fee Dispute and Indemnity Notice,
then the Escrow Agent shall retain the Change Fee Escrow Payment Amount in
escrow until it may be disbursed in accordance with the provisions set forth
below in this Section 1.03(c)(iii)(B). 
The Parties agree that following receipt of any timely Change Fee
Dispute and Indemnity Notice, the Escrow Agent shall release all or a portion
of the Change Fee Payment Escrow Amount (1) in accordance with the joint
written instructions of the Sellers’ Representative and Purchaser, as they may
deliver from time to time; (2) in accordance with the terms of a final
non-appealable written order from a court of competent jurisdiction directing
the Escrow Agent to disburse all or a portion of the Change Fee Escrow Payment
Amount, accompanied by a legal opinion, reasonably satisfactory to the Escrow
Agent and the Purchaser, to the effect that the order is final and
non-appealable or that the time for appeal has lapsed, or (2) in
accordance with the terms of any settlement agreement executed by Dr. Davae
settling the dispute that may be delivered by the Sellers’
Representative.  For purposes of clarity, the settlement referenced in
clause (2) of the preceding sentence shall mean a settlement agreement
with respect to the dispute that includes a full release of the Company and the
Purchaser with respect to the dispute.  Upon settlement of all outstanding
matters relating to the dispute, any portion of Change Fee Payment Escrow
Amount not used to satisfy Change Fee 

 

B-6

 

Dispute Losses shall be
distributed to the Sellers’ Representative, and the Sellers’ Representative and
the Purchaser agree to promptly deliver joint written instructions to the
Escrow Agent to cause the distribution to the Sellers’ Representative of such
excess amount.

 

                                                (iv)          If the Change Fee Escrow Payment
Amount has not been previously distributed pursuant to this Section 1.03(c),
on the nine (9) month anniversary of the Effective Date, the Escrow Agent
shall distribute to the Sellers’ Representative the Change Fee Payment Escrow
Amount.

 

                                                (v)           The Parties agree that the
indemnification obligation of the Sellers pursuant to Section 8.02(d) of
the Purchase Agreement shall remain in full force and effect notwithstanding
any release of the Change Fee Amount in accordance with the provisions of this
Agreement.

 

                                                (vi)          Simultaneously with the disbursement
of any portion of the Change Fee Payment Escrow Amount to the Purchaser or the
Sellers’ Representative pursuant to this Section 1.03(c), the Escrow Agent
shall disburse to the Sellers’ Representative all accrued Income and Investment
Proceeds attributable to the Change Fee Payment Escrow Amount pursuant to Section 1.03(d) below.

 

                                                (vi)          Notwithstanding the foregoing, the
Change Fee Payment Escrow Amount may otherwise be distributed:  (i) in accordance with any joint written
instructions of the Sellers’ Representative and the Purchaser with respect to
the Change Fee Payment Escrow Amount; or (ii) in accordance with either
a final certified copy of an order from JAMS or a final non-appealable order of a court of competent jurisdiction.

 

                                (d)           Income
and Investment Proceeds.  As used
herein, the term “Income and Investment Proceeds” shall mean the aggregate
amount of dividends or interest paid and/or gain realized on the investments
made with respect to the Escrow Property. 
The Parties agree that all of the Escrow Property shall be invested in
the same manner and that the General Indemnity and Working Capital Escrow
Amount and the Change Fee Payment Escrow Amount shall be deposited in separate
accounts, but shall not be allocated to different investments and that any
Income and Investment Proceeds shall be respectively allocated to (and treated
as part of and additions to) the General Indemnity and Working Capital Escrow
Amount and the Change Fee Payment Escrow Amount, as applicable, consistent with
the terms of this Section 1.03(d).

 

Section 1.04
Income Tax Allocation and Reporting.

 

                                (a)           Tax Allocation and Reporting.  The Parties agree that, for tax reporting
purposes, all interest or other income from investment of the Escrow Property
shall, as of the end of each calendar year and to the extent required by the
Internal Revenue Service be reported as having been earned by the Sellers, in
accordance with their respective Applicable Percentage as set forth on Exhibit D,
whether or not income was disbursed during a particular year.

 

(b)           Certification of Tax
Identification Number.  Prior to
closing, the Parties and the Sellers shall provide the Escrow Agent with
certified tax identification numbers by 

 

B-7

 

furnishing
appropriate forms W-9 or W-8 and such other forms and documents that the Escrow
Agent may request.   The Parties
understand that if such tax reporting documentation is not provided and
certified to the Escrow Agent, the Escrow Agent may be required by the Internal
Revenue Code of 1986, as amended, and the Regulations promulgated thereunder,
to withhold a portion of any interest or other income earned on the investment
of monies or other property held by the Escrow Agent pursuant to this Escrow
Agreement.

 

                (c)           Tax Liability of the Escrow Agent.  To the extent that the Escrow Agent becomes
liable for the payment of any taxes in respect of income derived from the
investment of the Escrow Property, the Escrow Agent shall satisfy such
liability to the extent possible from the Escrow Property.  The Parties agree, jointly and severally, to
indemnify, defend and hold the Escrow Agent harmless from and against any tax,
late payment, interest, penalty or other cost or expense that may be assessed
against the Escrow Agent on or with respect to the Escrow Property and the
investment thereof unless any such tax, late payment, interest, penalty or
other expense was caused by the gross negligence or willful misconduct of the
Escrow Agent.  The indemnification provided
by this Section 1.04(c) is in addition to the indemnification
provided in Section 3.01 and shall survive the resignation or removal of
the Escrow Agent and the termination of this Escrow Agreement.

 

Section 1.05  Termination.  Upon the disbursement of all of the Escrow
Property, including any Income and Investment Proceeds, this Escrow Agreement
shall terminate and be of no further force and effect except that the
obligations of Sections 1.04(c), 3.01 and 3.02 hereof shall survive
termination.

 

ARTICLE 2

DUTIES OF
THE ESCROW AGENT

 

Section 2.01
Standard of Care.  The Escrow Agent shall be obligated only to
perform the duties specifically set forth in this Escrow Agreement, which shall
be deemed purely ministerial in nature, and shall under no circumstances be
deemed to be a fiduciary to any Party or any other person.  The Parties agree that the Escrow Agent shall
not assume any responsibility for the failure of the Parties to perform in
accordance with this Escrow Agreement, the Purchase Agreement or any other
agreement.  This Escrow Agreement sets
forth all matters pertinent to the escrow contemplated hereunder, and no
additional obligations of the Escrow Agent shall be inferred from the terms of
this Escrow Agreement or any other agreement. 
In no event shall the escrow agent be liable, directly or indirectly,
for any (i) damages or expenses arising out of the services provided
hereunder, other than damages which result from the Escrow Agent’s gross
negligence or willful misconduct, or (ii) special or consequential
damages, even if the Escrow Agent has been advised of the possibility of such
damages.

 

Section 2.02
Attorneys and Agents.   The Escrow Agent
shall have the right, but not the obligation, to consult with counsel or other
such professionals of choice and shall not be liable for action taken or
omitted to be taken by Escrow Agent in accordance with the advice of such
counsel or other such professionals.  The
Escrow Agent may in all cases pay such compensation to such counsel and shall
be entitled to reimbursement as set forth in Section 3.01 for all such 

 

B-8

 

compensation paid.  The Escrow Agent may perform its duties
through its agents, attorneys, custodians or nominees.

 

Section 2.03
Reliance.  The Escrow
Agent shall be protected in acting or refraining from acting upon any notice,
request, consent, direction, requisition, certificate, order, affidavit,
letter, or other paper or document believed by it to be genuine and correct and
to have been signed or sent by the proper person or persons.  Concurrent with the execution of this Escrow
Agreement, the Purchaser shall deliver to the Escrow Agent an authorized
signers form in the form of Exhibit B hereto.

 

Section 2.04
Right Not Duty Undertaken. 
The permissive right of the Escrow Agent to do things enumerated in this
Escrow Agreement shall not be construed as duties.

 

Section 2.05
No Financial Obligation. 
No provision of this Escrow Agreement shall require the Escrow Agent to
risk or advance its own funds or otherwise incur any financial liability in the
performance of its duties or the exercise of its rights under this Escrow
Agreement.

 

Section 2.06
No Liability for Directions.  The Escrow Agent will not be liable for any
action taken or not taken by it in accordance with the direction or consent of
the Purchaser and Sellers’ Representative, or their respective successors
and/or assigns.

 

ARTICLE 3

PROVISIONS
CONCERNING THE ESCROW AGENT

 

Section 3.01  Indemnification.  The  Purchaser and Sellers’
Representative jointly and severally,
hereby agree to indemnify and hold harmless the Escrow Agent from and against,
any and all loss, liability, cost, damage and expense, including, without
limitation, counsel fees, which the Escrow Agent may suffer or incur by reason
of any action, claim or proceeding brought against the Escrow Agent arising out
of or relating in any way to this Escrow Agreement or any transaction to which
this Escrow Agreement relates unless such losses, liabilities, costs
damages and expenses shall have been finally adjudicated to have resulted from
the willful misconduct or gross negligence of the Escrow Agent.  The
Escrow Agent may consult counsel of its choice with respect to any question
arising under this Escrow Agreement, and the Escrow Agent shall not be liable
for any action taken or omitted in good faith upon advice of such counsel.  The provisions of this Section 3.01
shall survive the resignation or removal of the Escrow Agent and the
termination of this Escrow Agreement.

 

Section 3.02  Limitation of Liability.  The Escrow Agent shall not be liable for any
act or omission unless the Escrow Agent shall have been finally adjudicated to
have been guilty of willful misconduct or gross negligence.   The Escrow Agent shall not be liable for the
alteration, modification or elimination of any right permitted or given under
any instructions and/or in any document deposited under this Escrow Agreement
due to any delay, any statute of limitations or due to any other reason.  The Escrow Agent shall have no further
responsibility or liability whatsoever to the Purchaser and/or Sellers’
Representative following a partial or complete distribution of the Escrow
Property pursuant to this Escrow Agreement. 
The Escrow Agent shall 

 

B-9

 

not incur any liability
with respect to any act or omission in reliance upon any document, including
any written notice or instruction, provided for in this Escrow Agreement. In
performing its obligations hereunder, the Escrow Agent shall be entitled to
presume, without investigation or inquiry, the due execution, validity,
effectiveness and enforceability of all documents it receives and shall be
entitled to rely upon the genuineness of the signatures of the signatories of
such documents, and also the truth and accuracy of any information contained
therein.  The Escrow Agent assumes no
responsibility for the validity or sufficiency of any instrument held as Escrow
Property.

 

                Section 3.03
Resignation or Removal of the Escrow Agent.  The Escrow Agent may resign at any time by
furnishing written notice of its resignation to the Purchaser and Sellers’
Representative.  The Purchaser and
Sellers’ Representative may remove the Escrow Agent at any time by furnishing
to the Escrow Agent a joint written notice of its removal along with payment of
all fees and expenses to which it is entitled through the date of
termination.  Such resignation or
removal, as the case may be, shall be effective on the date specified in such
notice and the Escrow Agent’s sole responsibility thereafter shall be to safely
keep the Escrow Property and to deliver the same to a successor escrow agent as
shall be appointed by the Purchaser and/or Sellers’ Representative as evidenced
by a joint written notice filed with the Escrow Agent or in accordance with a
court order.  If the Purchaser and
Sellers’ Representative have failed to appoint a successor prior to the
expiration of thirty (30) days following receipt of the notice of resignation
or removal, the Escrow Agent may petition any court of competent jurisdiction
for the appointment of a successor Escrow Agent or for other appropriate
relief, and any such resulting appointment shall be binding upon all of the
Parties.

 

                Section 3.04
Compensation.  The Escrow Agent shall be entitled to
compensation for its services as stated in the fee schedule attached hereto as Exhibit C,
which compensation shall be paid 50% by Purchaser and 50% by Sellers’
Representative.  The fee agreed upon for
the services rendered hereunder is intended as full compensation for the Escrow
Agent’s services as contemplated by this Escrow Agreement; provided, however,
that in the event that the conditions for the disbursement of funds under this
Escrow Agreement are not fulfilled, or the Escrow Agent renders any material
service not contemplated in this Escrow Agreement, or there is any assignment
of interest in the subject matter of this Escrow Agreement, or any material
modification hereof, or if any material controversy arises hereunder, or the
Escrow Agent is made a party to any litigation pertaining to this Escrow
Agreement, or the subject matter hereof, then the Escrow Agent shall be
reasonably compensated for such extraordinary services and reimbursed for all
reasonable out-of-pocket costs and expenses, including reasonable attorney’s
fees, occasioned by any delay, controversy, litigation or event, and the same
shall be recoverable from 50% from the Purchaser and 50% by the Sellers’
Representative.  If the fees described
above are not paid within 30 days of the date due pursuant to an invoice sent
to the Parties, the Escrow Agent in its sole discretion may deduct the amount
owed it without any further notice to the Parties, all pursuant to this Section 3.04.  The Escrow Agent shall have, and is
hereby granted, a prior lien upon the Escrow Property, with respect to its
unpaid fees, non-reimbursed expenses and unsatisfied indemnification rights
described above, superior to the interests of any other persons or entities and
is hereby granted the right to set off and deduct any unpaid fees,
non-reimbursed expenses and unsatisfied indemnification rights from the Escrow
Property.

 

B-10

 

                Section 3.05  Disagreements.  If any disagreement or
dispute arises between the Purchaser and Sellers’ Representative, concerning
the meaning or validity of any provision hereunder or concerning any other
matter relating to this Escrow Agreement, the Escrow Agent:

 

                (a)           shall
be under no obligation to act, except under process or order of court or JAMS,
or until it has been adequately indemnified and held harmless to its full
satisfaction, and shall sustain no liability for its failure to act pending
such process, order or indemnification; and

 

                (b)           may,
in its sole and absolute discretion, interplead any portion of Escrow Property
it then holds with any court of competent jurisdiction, and name the Purchaser
and Sellers’ Representative as parties in such interpleader action.  Upon filing the interpleader action, the
Escrow Agent shall be relieved of all liability as to the Escrow Property and
shall be entitled to recover from the Purchaser and Sellers’ Representative its
reasonable attorneys’ fees and other costs incurred in commencing and
maintaining such action.  In no event
shall the institution of such interpleader action impair the rights of the
Escrow Agent described elsewhere in this Escrow Agreement.

 

The Parties other than
the Escrow Agent further agree to pursue any redress or recourse in connection
with such a dispute, without making the Escrow Agent a party to same.

 

                Section 3.06         Authority of Parties.  The Escrow Agent shall be
under no duty or obligation to ascertain the identity, authority, and/or rights
of the Purchaser or Sellers’ Representative, or their agents.  Should it be necessary for the Escrow Agent
to act upon any instructions, directions, documents or instruments issued or
signed by or on behalf of any corporation, partnership, fiduciary or individual
acting on behalf of another party hereto, it shall not be necessary for the
Escrow Agent to inquire into such corporation’s, partnership’s, fiduciary’s or
individual’s authority.  The Escrow Agent
is also relieved from the necessity of satisfying itself as to the authority of
the persons executing this Escrow Agreement in a representative capacity on
behalf of any of the Parties.

 

 

                Section 3.07         Other Agreements.  The Escrow Agent shall
neither be responsible for, nor chargeable with, knowledge of the terms and
conditions of any other agreement, instrument or document other than this
Escrow Agreement, including specifically but not limited to the Purchase
Agreement whether or not a copy and/or original of such agreement is held as
Escrow Property, and the Escrow Agent shall have no duty to know or inquire as
to the performance or nonperformance of any provision of any such agreement,
instrument or document.  This Escrow
Agreement sets forth all matters pertinent to the escrow contemplated
hereunder, and no additional obligations of the Escrow Agent shall be inferred
from the terms of this Escrow Agreement or any other agreement, instrument or
document.  All references in this Escrow
Agreement to any other agreement are for the convenience of the Parties other
than the Escrow Agent, and the Escrow Agent has no duties or obligations with
respect thereto

 

                Section 3.08  Merger or Consolidation.  Any corporation or association into which the
Escrow Agent may be converted or merged, or with which it may be consolidated,
or to which it may sell or transfer all or substantially all of its corporate
trust business and assets as a whole or 

 

B-11

 

substantially as a whole,
or any corporation or association resulting from any such conversion, sale,
merger, consolidation or transfer to which the Escrow Agent is a party, shall
be and become the successor Escrow Agent under this Escrow Agreement and shall
have and succeed to the rights, powers, duties, immunities and privileges as
its predecessor, without the execution or filing of any instrument or paper or
the performance any further act.

 

                Section 3.09  Attachment of Escrow Property; Compliance
with Legal Orders.  In
the event that any Escrow Property shall be attached, garnished or levied upon
by any order issued by JAMS or a court, or the delivery thereof shall be stayed
or enjoined by an order of a court, or any order, judgment or decree shall be
made or entered by any order by JAMS or a court affecting the property
deposited under this Escrow Agreement, the Escrow Agent is hereby expressly
authorized, in its sole discretion, to obey and comply with all writs, orders
or decrees so entered or issued, which it is advised by legal counsel of its
own choosing is binding upon it, whether with or without jurisdiction, and in
the event that the Escrow Agent obeys or complies with any such writ, order or
decree it shall not be liable to any of the Parties or to any other person,
firm or corporation, by reason of such compliance notwithstanding such writ,
order or decree be subsequently reversed, modified, annulled, set aside or
vacated.

 

ARTICLE 4

MISCELLANEOUS

 

                Section 4.01
Successors and Assigns.   This Escrow Agreement shall be binding on and
inure to the benefit of the Parties and their respective successors and
assigns. No other persons shall have any rights under this Escrow
Agreement.  No assignment of the interest
of any of the Parties shall be binding upon the Escrow Agent unless and until
written evidence of such assignment in form satisfactory to the Escrow Agent
shall be filed and accepted by the Escrow Agent.

 

                Section 4.02  [Reserved]

 

                Section 4.03
Notices.   All notices, requests, demands, and other
communications required under this Escrow Agreement shall be in writing and
shall be deemed to have been duly given if delivered personally by facsimile
transmission immediately followed by a written or verbal confirmation of
receipt from the receiving Party(s), by electronic image via electronic mail
immediately followed by written or verbal confirmation of receipt from the
receiving Party(s), courier delivery service, by mail or by certified mail,
return receipt requested, and postage prepaid. 
If any notice is mailed, it shall be deemed given on the date such
notice is deposited in the United States mail. 
If any notice is personally delivered, it shall be deemed given upon the
date of such delivery.  If any notice is
sent by facsimile or by courier delivery service, it shall be deemed given upon
the date of such delivery.  If notice is
given to a party, it shall be mailed or delivered to the addresses set forth
below, provided that notice will be deemed to have been given to the Escrow
Agent only on the actual date received. 
It shall be the responsibility of the Purchaser and Sellers’
Representative to notify the Escrow Agent and the other Parties in writing of
any name or address changes.

 

B-12

 

If to the Sellers’
Representative:

 

Monte Zarlingo, M.D.

700 West 7th
Avenue, Unit 808

Spokane, WA  99204

Telecopy: (415) 366-1930

 

with a courtesy copy to:

 

Krendl Krendl Sachnoff &
Way, P.C.

370 17th
Street, Suite 5350

Denver, Colorado  80202

Attn:  Sherri D. Way, Esq.

Phone:  303.629.2600

Fax:  303.629.2606

Email:  sdw@krendl.com

 

If to the Purchaser:

 

Virtual Radiologic
Corporation

5995 Opus Parkway, Suite 200

Minnetonka, MN  55343

Telecopy:  (952) 938-1662

Attention:  Sean Casey, M.D., Chief Executive Officer

                 George
H. Frisch, Secretary and General Counsel

 

with a copy (which shall
not constitute notice) to:

 

Morrison Cohen LLP

909 Third Avenue

New York, NY  10022

Telecopy:  (212) 735-8708

Attention:  David A. Scherl, Esq.

                  Jack
Levy, Esq.

 

B-13

 

If
to the Escrow Agent:

 

Wells Fargo Bank,
National Association

Corporate Trust &
Escrow Services

Attn: Bruce F. Lewis

1700 Broadway, 10th
floor

MAC C7300-107

Denver, CO 80203-4500

Phone:  303-863-4944

Fax: 303-863-5645

Email:
bruce.f.lewis@wellsfargo.com

 

                Section 4.04         Governing Law.  This Escrow Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.

 

                Section 4.05         Entire Agreement.  This Escrow Agreement sets
forth the entire agreement and understanding of the Parties related to the
escrow of the Escrow Property.

 

                Section 4.06         Amendment.  This Escrow Agreement may
be amended, modified, superseded, rescinded, or canceled only by a written
instrument executed by the Purchaser and Sellers’ Representative, and the
Escrow Agent.

 

                Section 4.07         Waivers.  The failure on any party to
this Escrow Agreement at any time or times to require performance of any
provision under this Escrow Agreement shall in no manner affect the right at a
later time to enforce the same performance. 
A waiver by any party to this Escrow Agreement of any such condition or
breach of any term, covenant, representation, or warranty contained in this
Escrow Agreement, in any one or more instances, shall neither be construed as a
further or continuing waiver of any such condition or breach nor a waiver of
any other condition or breach of any other term, covenant, representation, or
warranty contained in this Escrow Agreement.

 

                Section 4.08         Headings.  Section headings of
this Escrow Agreement have been inserted for convenience of reference only and
shall in no way restrict or otherwise modify any of the terms or provisions of
this Escrow Agreement.

 

                Section 4.09         Counterparts. This
Escrow Agreement may be executed in one or more counterparts, each of which
when executed shall be deemed to be an original, and such counterparts shall
together constitute one and the same instrument.

 

                Section 4.10  Business Days.  As used in this Escrow
Agreement, the term “Business Day” shall mean any
day excluding Saturday, Sunday and any day which is a legal holiday under the
laws of the State of Colorado or is a day on which banking institutions located
in such state are authorized or required by law or other governmental action to
close.  Any actions, including
disbursements by the Escrow Agent, that are scheduled for or fall on a day that
is not a Business Day shall be made on the next succeeding day that is a
Business Day.

 

B-14

 

[Signature
Page Follows.]

 

B-15

 

IN WITNESS WHEREOF, this
Escrow Agreement has been duly executed as of the date first written above.

 

 

	
   

  	
  SELLERS’ REPRESENTATIVE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Monte Zarlingo, M.D.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PURCHASER

  
	
   

  	
   

  
	
   

  	
  VIRTUAL RADIOLOGIC
  CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  ESCROW AGENT:

  
	
   

  	
   

  
	
   

  	
  WELLS FARGO BANK,
  NATIONAL 

  
	
   

  	
  ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

B-16

 

EXHIBIT A

 

Agency
and Custody Account Direction

For Cash
Balances

 

Direction to use Wells
Fargo Advantage Funds for Cash Balances for the following account(s):

 

Account Name:

 

Account Number(s):

 

You are hereby directed
to invest, as indicated below or as I shall direct further from time to time,
all cash in the Account in the following money market portfolio of Wells Fargo
Advantage Funds (the “Fund”) or another permitted investment described below of
my choice (Check One):

 

o
Wells Fargo Advantage Funds, Government Money Market Fund

o
Wells Fargo Advantage Funds, Cash Investment Money Market Fund

o
Wells Fargo Advantage Funds, Prime Investment Money Market Fund

o
Wells Fargo Advantage Funds, Treasury Plus Money Market Fund

 

I acknowledge that I have
received, at my request, and reviewed the Fund’s prospectus and have determined
that the Fund is an appropriate investment for the Account.  Each Fund’s prospectus can be downloaded from
the Wells Fargo website at http://www.wellsfargo.com/funds/fmg_fund/fund_type/fundtype.jhtml?fundType=MoneyMarket&tab=literature

 

I understand from reading
the Fund’s prospectus that Wells Fargo Funds Management, LLC, (“Wells Fargo
Bank”), a wholly-owned subsidiary of Wells Fargo & Company, provides
investment advisory and other administrative services for the Wells Fargo Advantage Funds. 
Other affiliates of Wells Fargo & Company provide sub-advisory
and other services for the Funds.  Boston
Financial Data Services serves as transfer agent for the Funds.  The Funds are distributed by Stephens Inc.,
Member NYSE/SIPC.  Wells Fargo &
Company and its affiliates are not affiliated with Stephens Inc.  I also understand that Wells Fargo &
Company will be paid, and its bank affiliates may be paid, fees for services to
the Funds and that those fees may include Processing Organization fees as
described in the Fund’s prospectus.

 

I understand that you
will not exclude amounts invested in the Fund from Account assets subject to
fees under the Account agreement between us.

 

I understand that
investments in the Fund are not obligations of, or endorsed or guaranteed by,
Wells Fargo Bank or its affiliates and are not insured by the Federal Deposit
Insurance Corporation.

 

I acknowledge that I have
full power to direct investments of the Account.

 

I understand that I may
change this direction at any time and that it shall continue in effect until
revoked or modified by me by written notice to you.

 

I understand that if I
choose to communicate this investment direction solely via facsimile, then the
investment direction will be understood to be enforceable and binding.

 

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Date

  

 

B-17

 

EXHIBIT B

CERTIFICATE AS TO AUTHORIZED SIGNATURES

 

      Account Name:

 

      Account Number:

 

The specimen signatures shown below are the
specimen signatures of the individuals who have been designated as Authorized
Representatives of Virtual Radiologic
Corporation and are authorized to initiate and approve transactions
of all types for the above-mentioned account on behalf of Virtual
Radiologic Corporation.

 

	
  Name /
  Title

  	
   

  	
  Specimen
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Signature

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
   

  

 

B-18

 

EXHIBIT C

FEES OF ESCROW
AGENT

 

WELLS FARGO BANK,  N.A.

Schedule of Fees for Services as

Escrow Agent

DIAGNA RADIOLOGY, LLC/VIRTUAL RADIOLOGIC CORPORATION ESCROW

 

	
  ACCEPTANCE
  FEE:

  	
  $500.00

  
	
  A one-time charge covering review and negotiation of documents with
  various parties to the agreement(s) and account(s) set up. Payable
  upon execution of final agreement. Assumes normal Agent duties under the
  final agreement. Our acceptance of the appointment of Escrow Agent is subject
  to the terms of the final agreement and our duties and responsibilities
  therein.

  	
   

  
	
   

  	
   

  	
   

  
	
  ADMINISTRATION FEE:

  	
  $2,500.00

  
	
  Compensates Wells Fargo Bank for normal agent administrative duties
  including daily routine account management, monitoring of claim notices;
  disbursement of funds in accordance with the agreement; delivery of trust
  statements. Payable at closing and annually thereafter on each anniversary of
  execution of the agreement; not prorated in the case of early termination.

  	
   

  
	
   

  	
   

  	
   

  
	
  TRANSACTION FEES (if
  applicable — waived if funds invested in
  Wells Fargo Advantage

  	
   

  	
   

  
	
  Funds or MMDA):

  	
   

  	
   

  
	
  Open
  Market Investment Trades (each):

  	
  $25.00

  	
   

  	
   

  
	
  Disbursement
  in excess of one per month (each):

  	
  $25.00

  	
   

  	
   

  
	
  Tax
  Reporting, if required (each):

  	
  $25.00

  	
   

  	
   

  

 

	
  Out-of-Pocket
  Expense:

  	
  AT COST

  
	
  Wells Fargo Bank
  reserves the right to bill at cost for
  out-of-pocket expenses such as express mail, wire charges or additional postage,
  if deemed excessive. Fees for extraordinary service, such as amendments to
  the documents or default administration, will be billed at our then-current
  rate.  Fees are subject to periodic
  review and adjustment

  	
   

  
			

 

NOTE:   The transaction underlying this proposal, and
all related legal documentation, is subject to review and acceptance by Wells
Fargo Bank in accordance with industry standards.  Should the actual transaction materially
differ from the assumptions used herein, Wells Fargo Bank reserves the right to
modify this proposal.  This fee schedule
is specifically based on the assumption that all funds are invested in the
Wells Fargo Advantage Funds (Service Class) or Money Market Demand Account; if
invested otherwise, we reserve the right to adjust this fee. Acceptance of the
appointment as Escrow Agent is subject to the receipt of requested Due
Diligence information on each of the signing parties to the agreement as
required by the USA Patriot Act.  All
funds will be received from or distributed to a domestic or an approved foreign
entity.  If the account does not open
within three (3) months of the date shown below, this fee proposal will be
deemed to be null and void.

 

B-19

 

EXHIBIT D

SELLERS’ APPLICABLE
PERCENTAGE

 

	
  Seller

  	
   

  	
  Applicable

  Percentage

  	
   

  
	
  Monte Zarlingo, M.D.

  	
   

  	
  86.48

  	
  %

  
	
  Jon Schadow

  	
   

  	
  8.19

  	
  %

  
	
  Steve Sipprell

  	
   

  	
  5.33

  	
  %

  
	
  Total

  	
   

  	
  100.00

  	
  %

  

 

B-20Exhibit 10.39

 

11
May 2007

 

Mr John Braddon

Financial Controller

Centro Properties USA

Santa Monica Office

2716 Ocean Park Boulevard

Santa Monica CA 90405

USA

 

Dear
John,

 

I
am pleased to advise you that, on appointment to your new role as Executive
Vice President, Chief Financial Officer, Centro Properties, USA, and your
relocation to the New York office, your remuneration will be reviewed with
effect from 30 April, 2007.

 

	
  Based
  on this review, your Australian remuneration details are as follows:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  current base remuneration package is:

  	
   

  	
  A$170,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  increase is:

  	
   

  	
  A$50,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  new base remuneration package is:

  	
   

  	
  A$220,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  US remuneration is as follows:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  current base remuneration package is:

  	
   

  	
  US$132,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  increase is:

  	
   

  	
  US$50,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  new base remuneration package is:

  	
   

  	
  US$182,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  Market Allowance will increase to

  	
   

  	
  US$64,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  International Location Allowance will increase to

  	
   

  	
  US$36,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  You
  will also receive a Position Allowance of

  	
   

  	
  US$49,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Your
  assignment salary will total

  	
   

  	
  US$331,000

  	
   

  

 

 

Your
Bonus arrangements will be:

 

	
  Target
  Bonus

  	
   

  	
  25%
  of US base remuneration plus Market Allowance and Position Allowance

  
	
   

  	
   

  	
   

  
	
  Maximum
  Bonus

  	
   

  	
  50%
  of US base remuneration plus Market Allowance and Position Allowance

  

 

In
addition, with effect from 1 July 2007, you will be eligible to receive a
further bonus up to a maximum of 35% of your US Base Remuneration plus the
Market Allowance and Position Allowance ie US$295,000. The award of this bonus
will be assessed against the achievement of targets to be agreed.

 

Your
existing eligibility to receive a further bonus will continue up to a maximum
of 30% until 30 June 2007.

 

Your
remuneration charge will be paid from the first available US payroll run, along
with appropriate retrospective adjustments.

 

Your
next review will be effective on 1 July 2008. However you will be
considered for a grant of contingent securities during the 1 July 2007
review.

 

The
Board and Executive Committee would like to thank you for your ongoing contribution
to Centro Properties Group. Your efforts have played a significant part in our
continued success.

 

Yours
sincerely,

 

	
  /s/
  Andrew T. Scott

  	
   

  
	
   

  
	
  Andrew
  T. Scott

  
	
  Chief
  Executive Officer

  

 

2

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