-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MasGsuP/7o3S9+ow3wa+q3qB8zVfryPfHwRd8GIDF9UHmfM898A4n1aCQ31DSGyQ L+9cabTu8tTPb6NQUkZomA== 0001019687-08-003498.txt : 20080811 0001019687-08-003498.hdr.sgml : 20080811 20080811145450 ACCESSION NUMBER: 0001019687-08-003498 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 20080630 FILED AS OF DATE: 20080811 DATE AS OF CHANGE: 20080811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RadNet, Inc. CENTRAL INDEX KEY: 0000790526 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MEDICAL LABORATORIES [8071] IRS NUMBER: 133326724 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-33307 FILM NUMBER: 081005722 BUSINESS ADDRESS: STREET 1: 1516 COTNER AVE CITY: LOS ANGELES STATE: CA ZIP: 90025 BUSINESS PHONE: 3104787808 MAIL ADDRESS: STREET 1: 1516 COTNER AVE CITY: LOS ANGELES STATE: CA ZIP: 90025 FORMER COMPANY: FORMER CONFORMED NAME: PRIMEDEX HEALTH SYSTEMS INC DATE OF NAME CHANGE: 19930518 FORMER COMPANY: FORMER CONFORMED NAME: CCC FRANCHISING CORP DATE OF NAME CHANGE: 19920703 10-Q 1 radnet_10q-063008.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2008 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-19019 RADNET, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) NEW YORK 13-3326724 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 1510 COTNER AVENUE LOS ANGELES, CALIFORNIA 90025 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 478-7808 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act: Large accelerated filer [ ] Accelerated Filer [X] Non-Accelerated Filer [ ] Smaller Reporting Company [ ] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes [ ] No [X] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes [X] No [ ] The number of shares of the registrant's common stock outstanding on August 7, 2008, was 35,786,474 shares. Table of Contents RADNET, INC. INDEX PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Consolidated Balance Sheets at June 30, 2008 (unaudited) and December 31, 2007 Consolidated Statements of Operations (unaudited) for the Three and Six Months ended June 30, 2008 and 2007 Consolidated Statement of Stockholders' Deficit (unaudited) for the Six Months ended June 30, 2008 Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended June 30, 2008 and 2007 Notes to Consolidated Financial Statements ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ITEM 3. Quantitative and Qualitative Disclosures About Market Risk ITEM 4. Controls and Procedures PART II - OTHER INFORMATION ITEM 1 Legal Proceedings ITEM 1A. Risk Factors ITEM 5 Other Information ITEM 6 Exhibits SIGNATURES INDEX TO EXHIBITS 2 PART 1 - FINANCIAL INFORMATION RADNET, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS EXCEPT SHARE DATA) June 30, December 31, 2008 2007 --------- --------- (unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents $ -- $ 18 Accounts receivable, net 100,754 87,285 Refundable income taxes 103 105 Prepaid expenses and other current assets 11,172 10,273 --------- --------- Total current assets 112,029 97,681 PROPERTY AND EQUIPMENT, NET 203,512 164,097 OTHER ASSETS Goodwill 102,101 84,395 Other intangible assets 57,971 58,908 Deferred financing costs, net 12,246 9,161 Investment in joint ventures 17,017 15,036 Deposits and other 4,952 4,342 --------- --------- Total other assets 194,287 171,842 --------- --------- Total assets $ 509,828 $ 433,620 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Accounts payable and accrued expenses $ 81,726 $ 59,965 Due to affiliates 2,255 1,350 Notes payable 5,244 3,536 Current portion of deferred rent 195 195 Obligations under capital leases 12,702 9,455 --------- --------- Total current liabilities 102,122 74,501 --------- --------- LONG-TERM LIABILITIES Line of credit 12,262 4,222 Deferred rent, net of current portion 7,195 4,394 Deferred taxes 277 277 Notes payable, net of current portion 421,752 382,064 Obligations under capital lease, net of current portion 26,010 22,527 Other non-current liabilities 16,774 15,259 --------- --------- Total long-term liabilities 484,270 428,743 --------- --------- COMMITMENTS AND CONTINGENCIES MINORITY INTERESTS 100 206 STOCKHOLDERS' DEFICIT Common stock - $.0001 par value, 200,000,000 shares authorized; 35,686,224 and 35,239,558 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively 4 4 Paid-in-capital 150,978 149,631 Accumulated other comprehensive loss (5,136) (4,579) Accumulated deficit (222,510) (214,886) --------- --------- Total stockholders' deficit (76,664) (69,830) --------- --------- Total liabilities and stockholders' deficit $ 509,828 $ 433,620 ========= ========= The accompanying notes are an integral part of these financial statements. 3 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS EXCEPT SHARE DATA) (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 2008 2007 2008 2007 ------------ ------------ ------------ ------------ NET REVENUE $ 127,446 $ 107,027 $ 242,144 $ 212,842 OPERATING EXPENSES Operating expenses 97,886 79,183 186,852 161,588 Depreciation and amortization 14,071 10,579 26,540 21,489 Provision for bad debts 7,088 6,862 13,575 14,415 Loss (gain) on sale of equipment (38) 4 (30) 4 Severance costs 4 247 35 785 ------------ ------------ ------------ ------------ Total operating expenses 119,011 96,875 226,972 198,281 INCOME FROM OPERATIONS 8,435 10,152 15,172 14,561 OTHER EXPENSES (INCOME) Interest expense 12,516 9,779 26,104 20,616 Other income (21) (51) (53) (51) ------------ ------------ ------------ ------------ Total other expense 12,495 9,728 26,051 20,565 INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTERESTS AND EARNINGS FROM JOINT VENTURES (4,060) 424 (10,879) (6,004) Provision for income taxes (14) (13) (137) (29) Minority interest in income of subsidiaries (25) (170) (49) (285) Equity in earnings of joint ventures 1,950 982 3,441 1,977 ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (2,149) $ 1,223 $ (7,624) $ (4,341) ============ ============ ============ ============ BASIC NET INCOME (LOSS) PER SHARE $ (0.06) $ 0.04 $ (0.21) $ (0.13) ============ ============ ============ ============ DILUTED NET INCOME (LOSS) PER SHARE $ (0.06) $ 0.03 $ (0.21) $ (0.13) ============ ============ ============ ============ WEIGHTED AVERAGE SHARES OUTSTANDING Basic 35,671,554 34,636,573 35,616,298 34,514,166 ============ ============ ============ ============ Diluted 35,671,554 36,989,320 35,616,298 34,514,166 ============ ============ ============ ============ The accompanying notes are an integral part of these financial statements. 4 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT SIX MONTHS ENDED JUNE 30, 2008 (unaudited) (IN THOUSANDS EXCEPT SHARE DATA) Accumulated Common Stock Other Total ----------------------- Paid-in Accumulated Comprehensive Stockholders' Shares Amount Capital Deficit Loss Deficit ---------- ---------- ---------- ---------- ---------- ---------- BALANCE - DECEMBER 31, 2007 35,239,558 $ 4 $ 149,631 $ (214,886) $ (4,579) $ (69,830) Issuance of common stock upon exercise of options/warrants 446,666 -- 291 -- -- 291 Share-based compensation -- -- 1,056 -- -- 1,056 Change in fair value of -- -- cash flow hedge -- -- -- -- (557) (557) Net loss -- -- -- (7,624) -- (7,624) ---------- Comprehensive loss -- -- -- -- -- (8,181) ---------- ---------- ---------- ---------- ---------- ---------- BALANCE - JUNE 30, 2008 35,686,224 $ 4 $ 150,978 $ (222,510) $ (5,136) $ (76,664) ========== ========== ========== ========== ========== ========== The accompanying notes are an integral part of these financial statements. 5 RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (unaudited) SIX MONTHS ENDED JUNE 30, 2008 2007 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (7,624) $ (4,341) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 26,540 21,489 Provision for bad debts 13,575 14,415 Minority interest in income of subsidiaries 49 285 Distributions to minority interests (155) (731) Equity in earnings of joint ventures (3,441) (1,977) Distributions from joint ventures 2,041 2,629 Deferred rent 2,801 697 Amortization of deferred financing costs 1,192 772 Net (gain) loss on sale of assets (30) 4 Share-based compensation 1,056 2,602 Changes in operating assets and liabilities, net of assets acquired and liabilities assumed in purchase transactions: Accounts receivable (23,697) (22,375) Refundable income taxes -- 6,359 Other current assets (458) (3,892) Other assets (369) 1,707 Accounts payable and accrued expenses (476) (5,817) -------- -------- Net cash provided by operating activities 11,004 11,826 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES Purchase of imaging facilities (23,528) (540) Purchase of property and equipment (18,190) (12,067) Purchase of Radiologix, net of cash acquired -- (370) Purchase of equity interest in joint ventures (728) -- Proceeds from sale of equipment 65 1,300 Purchase of covenant not to compete contract -- (250) Payments collected on notes receivable -- 111 -------- -------- Net cash used in investing activities (42,381) (11,816) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on notes and leases payable (9,104) (3,728) Proceeds from borrowings on credit facility 35,000 -- Proceeds from borrowings on notes and revolving credit facility 9,449 100 Deferred financing costs (4,277) -- Payments on line of credit -- (22) Proceeds from issuance of common stock 291 437 -------- -------- Net cash provided by (used in) financing activities 31,359 (3,213) -------- -------- NET DECREASE IN CASH (18) (3,203) CASH, BEGINNING OF PERIOD 18 3,221 -------- -------- CASH, END OF PERIOD $ -- $ 18 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the period for interest $ 23,787 $ 20,485 ======== ======== The accompanying notes are an integral part of these financial statements. 6
RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED) SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES We entered into capital leases for approximately $15.7 million and $9.0 million, excluding capital leases assumed in acquisitions, during the six months ended June 30, 2008 and 2007, respectively. We also acquired capital equipment for approximately $17.5 million during the six months ended June 30, 2008 that we had not paid for as of June 30, 2008. The offsetting amount due is recorded in our consolidated balance sheet under Accounts Payable and Accrued Expenses. Detail of non-cash investing and financing activity related to acquisitions can be found in Note 2. 7 RADNET, INC. AND AFFILIATES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - NATURE OF BUSINESS RadNet, Inc. or RadNet (formerly Primedex Health Systems, Inc.) ("we" or the "Company") was incorporated on October 21, 1985. We operate a group of regional networks comprised of 164 diagnostic imaging facilities located in seven states with operations primarily in California, the Mid-Atlantic, the Treasure Coast area of Florida, Kansas and the Finger Lakes (Rochester) and Hudson Valley areas of New York, providing diagnostic imaging services including magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology, or X-ray, and fluoroscopy. The Company's operations comprise a single segment for financial reporting purposes. The results of operations of Radiologix and its wholly-owned subsidiaries have been included in the consolidated financial statements from November 15, 2006, the date of the Company's acquisition of Radiologix. The consolidated financial statements also include the accounts of RadNet Management, Inc., or RadNet Management, and Beverly Radiology Medical Group III (BRMG), which is a professional partnership, all collectively referred to as "us" or "we". The consolidated financial statements also include RadNet Sub, Inc., RadNet Management I, Inc., RadNet Management II, Inc., SoCal MR Site Management, Inc., Radiologix, Inc., RadNet Management Imaging Services, Inc., Delaware Imaging Partners, Inc. and Diagnostic Imaging Services, Inc. (DIS), all wholly owned subsidiaries of RadNet Management. Howard G. Berger, M.D. is our President and Chief Executive Officer, a member of our Board of Directors and owns approximately 16% of our outstanding common stock. Dr. Berger also owns, indirectly, 99% of the equity interests in BRMG. BRMG provides all of the professional medical services at 84 of our facilities located in California under a management agreement with us, and contracts with various other independent physicians and physician groups to provide the professional medical services at most of our other California facilities. We generally obtain professional medical services from BRMG in California, rather than provide such services directly or through subsidiaries, in order to comply with California's prohibition against the corporate practice of medicine. However, as a result of our close relationship with Dr. Berger and BRMG, we believe that we are able to better ensure that medical service is provided at our California facilities in a manner consistent with our needs and expectations and those of our referring physicians, patients and payors than if we obtained these services from unaffiliated physician groups. At 15 centers in California and at all of the centers which are located outside of California, we have entered into long-term contracts with prominent radiology groups in the area to provide physician services at those facilities. The operations of BRMG are consolidated with the Company as a result of the contractual and operational relationship among BRMG, Dr. Berger, and us. We are considered to have a controlling financial interest in BRMG pursuant to the guidance in Emerging Issues Task Force Issue 97-2 (EITF 97-2). BRMG is a partnership of Pronet Imaging Medical Group, Inc. (99%), Breastlink Medical Group, Inc. (100%) and Beverly Radiology Medical Group, Inc. (99%), each of which are 99% or 100% - -owned by Dr. Berger. RadNet provides non-medical, technical and administrative services to BRMG for which it receives a management fee. Outside of California (and in 15 of our California facilities) we contract with third party radiology practices to provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our diagnostic imaging centers. The radiology practices maintain full control over the provision of professional services. The contracted radiology practices generally have: outstanding physician and practice credentials and reputations; strong competitive market positions; a broad sub-specialty mix of physicians; a history of growth and potential for continued growth. In these facilities we enter into long-term agreements with radiology practice groups (typically 40 years). Under these arrangements, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the practice group's professional revenue, including revenue derived outside of our diagnostic imaging centers. We own the diagnostic imaging equipment and, therefore, receive 100% of the technical reimbursements associated with imaging procedures. The radiology practice groups retain the professional reimbursements associated with imaging procedures after deducting management service fees. Our management service fees are included in net revenue in the consolidated statement of operations and totaled $7.9 million and $7.8 million, for the three months ended June 30, 2008 and 2007, respectively, and $16.2 and $15.6 for the six months ended June 30, 2008 and 2007, respectively. We have no financial controlling interest in the contracted radiology practices, as defined in EITF 97-2; accordingly, we do not consolidate the financial statements of those practices in our consolidated financial statements. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with U.S. generally accepted accounting principles complete financial statements; however, in the opinion of our management, all 8 adjustments consisting of normal recurring adjustments necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods ended June 30, 2008 and 2007 have been made. The results of operations for any interim period are not necessarily indicative of the results for a full year. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2007. LIQUIDITY AND CAPITAL RESOURCES We had a working capital balance of $9.9 million and $23.2 million at June 30, 2008 and December 31, 2007, respectively. We had net losses of $2.1 million and $7.6 million for the three and six months ended June 30, 2008, respectively. We had net income of $1.2 million and net losses of $4.3 million for the three and six months ended June 30, 2007, respectively. We also had a stockholders' deficit of $76.7 million and $69.8 million at June 30, 2008 and December 31, 2007, respectively. We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations. In addition to operations, we require a significant amount of capital for the initial start-up and development expense of new diagnostic imaging facilities, the acquisition of additional facilities and new diagnostic imaging equipment, and to service our existing debt and contractual obligations. Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties. Our business strategy with regard to operations focuses on the following: o Maximizing performance at our existing facilities; o Focusing on profitable contracting; o Expanding MRI, CT and PET applications; o Optimizing operating efficiencies; and o Expanding our networks. Our ability to generate sufficient cash flow from operations to make payments on our debt and other contractual obligations will depend on our future financial performance. A range of economic, competitive, regulatory, legislative and business factors, many of which are outside of our control, will affect our financial performance. Although no assurance can be given, taking these factors into account, including our historical experience, we believe that through implementing our strategic plans and continuing to restructure our financial obligations, we will obtain sufficient cash to satisfy our obligations as they become due in the next twelve months. On February 22, 2008, we secured a second incremental $35 million ("Second Incremental Facility") of capacity as part of our existing credit facilities with GE Commercial Finance Healthcare Financial Services. The Second Incremental Facility consists of an additional $35 million as part of our second lien term loan and the first lien term loan or revolving credit facility may be increased by up to an additional $40 million sometime in the future. As part of the transaction, partly due to the drop in LIBOR of over 2.00% since the credit facilities were established in November 2006, we increased the Applicable LIBOR Margin to 4.25% for the revolving credit facility and the term loan to 9% from 6% for the second lien term loan. The additions to our existing credit facilities are intended to provide capital for near-term opportunities and future expansion. NOTE 2 - FACILITY ACQUISITIONS AND DIVESTITURES ACQUISITIONS On June 18, 2008, we acquired the assets and business of Ellicott Open MRI for the assumption of approximately $181,000 of capital lease debt. We have made a preliminary purchase price allocation of the acquired assets and liabilities, and no goodwill was recorded with respect to this transaction. On June 2, 2008, we acquired the assets and business of Simi Valley Advanced Medical, a Southern California based multi-modality imaging center, for the assumption of capital lease debt of $1.7 million. We have made a preliminary purchase price allocation of the acquired assets and liabilities, and approximately $300,000 of goodwill was recorded with respect to this transaction. On April 15, 2008, we acquired the net assets of five Los Angeles area imaging centers from InSight Health Corp. We completed the purchase of a sixth center in Van Nuys, CA from Insight Health Corp. on June 2, 2008. The total purchase price for the six centers was $8.5 million in cash. The centers provide a combination of imaging modalities, including MRI, CT, X-ray, Ultrasound and Mammography. We have made a preliminary purchase price allocation of the acquired assets and liabilities, and approximately $5.2 million of goodwill was recorded with respect to this transaction. 9 On April 1, 2008, we acquired the net assets and business of BreastLink Medical Group, Inc., a prominent Southern California Breast Medical Oncology business and a leading breast surgery business, for the assumption of approximately $4.0 million of accrued liabilities and capital lease obligations. We have made a preliminary purchase price allocation of the acquired assets and liabilities, and approximately $2.1 million of goodwill was recorded with respect to this transaction. On March 12, 2008, we acquired the net assets and business of Papastavros Associates Medical Imaging for $9.0 million in cash and the assumption of capital leases of $337,000. Founded in 1958, Papastavros Associates Medical Imaging is one of the largest and most established outpatient imaging practices in Delaware. The 12 Papastavros centers offer a combination of MRI, CT, PET, nuclear medicine, mammography, bone densitometry, fluoroscopy, ultrasound and X-ray. We have made a preliminary purchase price allocation of the acquired assets and liabilities, and approximately $3.2 million of goodwill, and $1.2 million for covenants not to compete, was recorded with respect to this transaction. On February 1, 2008, we acquired the net assets and business of The Rolling Oaks Imaging Group, located in Westlake and Thousand Oaks, California, for $6.0 million in cash and the assumption of capital leases of $2.7 million. The practice consists of two centers, one of which is a dedicated women's center. The centers are multimodality and include a combination of MRI, CT, PET/CT, mammography, ultrasound and x-ray. The centers are positioned in the community as high-end, high-quality imaging facilities that employ state-of-the-art technology, including 3 Tesla MRI and 64 slice CT units. The facilities have been fixtures in the Westlake/Thousand Oaks market since 2003. We have made a preliminary purchase price allocation of the acquired assets and liabilities, and approximately $6.7 million of goodwill was recorded with respect to this transaction. On October 9, 2007, we acquired the assets and business of Liberty Pacific Imaging located in Encino, California for $2.8 million in cash. The center operates a successful MRI practice utilizing a 3T MRI unit, the strongest magnet strength commercially available at this time. The center was founded in 2003. The acquisition allows us to consolidate a portion of our Encino/Tarzana MRI volume onto the existing Liberty Pacific scanner. This consolidation allows us to move our existing 3T MRI unit in that market to our Squadron facility in Rockland County, New York. Approximately $1.1 million of goodwill was recorded with respect to this transaction. Also, $200,000 was recorded for the fair value of a covenant not to compete contract. In September 2007, we acquired the assets and business of three facilities comprising Valley Imaging Center, Inc. located in Victorville, CA for $3.3 million in cash plus the assumption of approximately $866,000 of debt. The acquired centers offer a combination of MRI, CT, X-ray, Mammography, Fluoroscopy and Ultrasound. The physician who provided the interpretive radiology services to these three locations joined BRMG. The leased facilities associated with these centers includes a total monthly rental of approximately $18,000. Approximately $2.8 million of goodwill was recorded with respect to this transaction. Also, $150,000 was recorded for the fair value of a covenant not to compete contract. In September 2007, we acquired the assets and business of Walnut Creek Open MRI located in Walnut Creek, CA for $225,000. The center provides MRI services. The leased facility associated with this center includes a monthly rental of approximately $6,800 per month. Approximately $50,000 of goodwill was recorded with respect to this transaction. In July 2007, we acquired the assets and business of Borg Imaging Group located in Rochester, NY for $11.6 million in cash plus the assumption of approximately $2.4 million of debt. Borg was the owner and operator of six imaging centers, five of which are multimodality, offering a combination of MRI, CT, X-ray, Mammography, Fluoroscopy and Ultrasound. After combining the Borg centers with RadNet's existing centers in Rochester, New York, RadNet has a total of 11 imaging centers in Rochester. The leased facilities associated with these centers includes a total monthly rental of approximately $71,000 per month. Approximately $9.2 million of goodwill was recorded with respect to this transaction. Also, $1.4 million was recorded for the fair value of covenant not to compete contracts. In March 2007, we acquired the assets and business of Rockville Open MRI, located in Rockville, Maryland, for $540,000 in cash and the assumption of a capital lease of $1.1 million. The center provides MRI services. The center is 3,500 square feet with a monthly rental of approximately $8,400 per month. Approximately $365,000 of goodwill was recorded with respect to this transaction. DIVESTITURES In December 2007, we sold 24% of a 73% investment in one of our consolidated joint ventures for approximately $2.3 million resulting in a revised ownership of 49%. As a result of this transaction, we no longer consolidate this joint venture. Accordingly, our consolidated balance sheet at 10 December 31, 2007 includes this 49% interest as a component of our total investment in non-consolidated joint ventures where it is accounted for under the equity method. The amounts eliminated from our consolidated balance sheet as a result of the deconsolidation were not material. Since the deconsolidation occurred at the end of 2007, no significant amounts were eliminated from our statement of operations. In October 2007 we divested a non-core center in Golden, Colorado for $325,000. In June 2007 we divested a non-core center in Duluth, Minnesota to a local multi-center operator for $1.3 million. NOTE 3 - INCOME (LOSS) PER SHARE Income (loss) per share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding, as follows (in thousands except share and per share data): THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ---------------------------- ---------------------------- 2008 2007 2008 2007 ------------ ------------ ------------ ------------ (unaudited) (unaudited) Net income (loss) $ (2,149) $ 1,223 $ (7,624) $ (4,341) BASIC INCOME (LOSS) PER SHARE Weighted average number of common shares outstanding during the period 35,671,554 34,636,573 35,616,298 34,514,166 ------------ ------------ ------------ ------------ Basic income (loss) per share $ (0.06) $ 0.04 $ (0.21) $ (0.13) ------------ ------------ ------------ ------------ DILUTED INCOME (LOSS) PER SHARE Weighted average number of common shares outstanding during the period 35,671,554 34,636,573 35,616,298 34,514,166 ------------ ------------ ------------ ------------ Add additional shares issuable upon exercise of stock options and warrants -- 2,352,747 -- -- ------------ ------------ ------------ ------------ Weighted average number of common shares used in calculating diluted earnings per share 35,671,554 36,989,320 35,616,298 34,514,166 ------------ ------------ ------------ ------------ Diluted income (loss) per share $ (0.06) $ 0.03 $ (0.21) $ (0.13) ------------ ------------ ------------ ------------
For the three and six months ended June 30, 2008 and the six months ended June 30, 2007, we excluded all options and warrants in the calculation of diluted loss per share because their effect is antidilutive. NOTE 4 - INVESTMENT IN JOINT VENTURES We have nine unconsolidated joint ventures with ownership interests ranging from 22% to 50%. These joint ventures represent partnerships with hospitals, health systems or radiology practices and were formed for the purpose of owning and operating diagnostic imaging centers. Professional services at the joint venture diagnostic imaging centers are performed by contracted radiology practices or a radiology practice that participates in the joint venture. Our investment in these joint ventures is accounted for under the equity method. Investment in joint ventures increased $2.0 million to $17.0 million at June 30, 2008 compared to $15.0 million at December 31, 2007. This increase is primarily related to our purchase of an additional $728,000 of share holdings in joint ventures that were existing as of December 31, 2007 as well as our equity earnings of $3.4 million for the six months ended June 30, 2008, offset by $2.0 of distributions received during the period. We received management service fees from the centers underlying these joint ventures of approximately $2.0 million and $1.2 million for the three months ended June 30, 2008 and 2007, respectively, and $3.8 million and $2.1 million for the six months ended June 30, 2008 and 2007, respectively. 11 The following table is a summary of key financial data for these joint ventures as of and for the six months ended June 30, 2008 and 2007 (in thousands): JUNE 30, -------------------- Balance Sheet Data: 2008 2007 -------- -------- Current assets $ 20,592 $ 15,304 Noncurrent assets 24,937 11,874 Current liabilities (4,661) (2,629) Noncurrent liabilities (10,136) (558) -------- -------- Total net assets $ 30,732 $ 23,991 ======== ======== Book value of Radnet joint venture interests $ 13,547 $ 9,473 Cost in excess of book value of acquired joint venture interests 3,470 -- -------- -------- Total value of Radnet joint venture interests $ 17,017 $ 9,473 ======== ======== Total book value of other joint venture partner interests $ 17,185 $ 14,518 ======== ======== Net revenue $ 40,341 $ 29,376 Net income $ 8,945 $ 6,217
NOTE 5 - SHARE BASED COMPENSATION We have three long-term incentive plans. We have not issued options under the 1992 plan since the inception of the 2000 plan and we have not issued options under the 2000 plan since the adoption of the 2006 plan. We have reserved for issuance under the 2006 plan 2,500,000 shares of common stock. Options granted under the 2006 plan to employees are intended to qualify as incentive stock options under existing tax regulations. In addition, we issue non-qualified stock options and warrants under the 2006 plan from time to time to non-employees, in connection with acquisitions and for other purposes and we may also issue stock under the plans. Stock options and warrants generally vest over three to five years and expire five to ten years from date of grant. As of June 30, 2008, 513,750, or approximately 33.3%, of all the outstanding stock options and warrants under the 2006 plan are fully vested. During the six months ended June 30, 2008, we granted options and warrants to acquire 445,000 shares of common stock. We have issued warrants outside the plan under various types of arrangements to employees, in conjunction with debt financing and in exchange for outside services. All warrants issued to employees, directors and consultants after our February 2007 listing on the NASDAQ Global Market have been characterized as awards under the 2006 plan. All warrants outside the plan are issued with an exercise price equal to the fair market value of the underlying common stock on the date of issuance. The warrants expire from five to seven years from the date of grant. Vesting terms are determined by the board of directors or the compensation committee of the board of directors at the date of issuance. As of June 30, 2008, 2,841,237, or approximately 81.0%, of all the outstanding warrants outside the 2006 plan are fully vested. During the six months ended June 30, 2008, we did not grant any warrants outside the 2006 plan. The compensation expense recognized for all equity-based awards is net of estimated forfeitures and is recognized over the awards' service period. In accordance with Staff Accounting Bulletin ("SAB") No. 107, we classified equity-based compensation in operating expenses with the same line item as the majority of the cash compensation paid to employees. The following tables illustrate the impact of equity-based compensation on reported amounts (in thousands except per share data): 12 FOR THE THREE MONTHS ENDED JUNE 30, ---------------------------------------------------------- 2008 2007 --------------------------- --------------------------- IMPACT OF EQUITY-BASED IMPACT OF EQUITY-BASED COMPENSATION COMPENSATION AS REPORTED COMPENSATION AS REPORTED COMPENSATION ----------- ------------ ----------- ------------ Income from operations $ 8,435 $ (602) $ 10,152 $ (382) Income (loss) before income tax $ (2,135) $ (602) $ 1,236 $ (382) Net income (loss) $ (2,149) $ (602) $ 1,223 $ (382) Net basic income (loss) per share $ (0.06) $ (0.02) $ 0.04 $ (0.01) Net diluted income (loss) per share $ (0.06) $ (0.02) $ 0.03 $ (0.01) FOR THE SIX MONTHS ENDED JUNE 30, ---------------------------------------------------------- 2008 2007 --------------------------- --------------------------- IMPACT OF EQUITY-BASED IMPACT OF EQUITY-BASED COMPENSATION COMPENSATION AS REPORTED COMPENSATION AS REPORTED COMPENSATION ----------- ------------ ----------- ------------ Income from operations $ 15,172 $ (1,056) $ 14,561 $ (2,602) Loss before income tax $ (7,487) $ (1,056) $ (4,312) $ (2,602) Net loss $ (7,624) $ (1,056) $ (4,341) $ (2,602) Net basic loss per share $ (0.21) $ (0.03) $ (0.13) $ (0.08) Net diluted loss per share $ (0.21) $ (0.03) $ (0.13) $ (0.08) The following summarizes all of our option and warrant activity for the six months ended June 30, 2008: WEIGHTED AVERAGE WEIGHTED AVERAGE REMAINING AGGREGATE OUTSTANDING OPTIONS AND WARRANTS EXERCISE PRICE CONTRACTUAL LIFE INTRINSIC UNDER THE 2006 PLAN SHARES PER COMMON SHARE (IN YEARS) VALUE - -------------------------------- ---------- -------------- -------------- -------------- Balance, December 31, 2007 1,165,250 $ 5.74 Granted 445,000 7.43 Exercised (50,000) 1.44 Canceled or expired (19,000) 7.69 ---------- Balance, June 30, 2008 1,541,250 $ 6.34 5.21 $ 1,012,250 ========== Exercisable at June 30, 2008 513,750 $ 4.80 1.33 $ 871,450 ========== WEIGHTED AVERAGE WEIGHTED AVERAGE REMAINING AGGREGATE NON-PLAN EXERCISE PRICE CONTRACTUAL LIFE INTRINSIC OUTSTANDING WARRANTS SHARES PER COMMON SHARE (IN YEARS) VALUE - -------------------------------- ---------- -------------- -------------- -------------- Balance, December 31, 2007 3,996,667 $ 1.85 Granted -- -- Exercised (396,666) 1.10 Canceled or expired (90,430) 1.42 ---------- Balance, June 30, 2008 3,509,571 $ 1.93 3.30 $ 14,968,820 ========== Exercisable at June 30, 2008 2,841,237 $ 1.36 2.64 $ 13,760,484 ==========
The aggregate intrinsic value in the table above represents the difference between our closing stock price on June 30, 2008 and the exercise price, multiplied by the number of in-the-money options and warrants on June 30, 2008. Total intrinsic value of options and warrants exercised during the six months ended June 30, 2008 was approximately $3.5 million. As of June 30, 2008, total unrecognized share-based compensation expense related to non-vested employee awards was approximately $6.2 million, which is expected to be recognized over a weighted-average period of approximately 3.8 years. 13 The fair value of each option/warrant granted is estimated on the grant date using the Black-Scholes option pricing model which takes into account as of the grant date the exercise price and expected life of the option/warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock and the risk-free interest rate for the term of the option/warrant. The following is the weighted average data used to calculate the fair value: RISK-FREE EXPECTED EXPECTED EXPECTED INTEREST RATE LIFE VOLATILITY DIVIDENDS ------------- ---- ---------- --------- June 30, 2008 2.63% 4.0 years 76.13% - June 30, 2007 4.57% 4.1 years 94.65% - We have determined the expected term assumption under the "Simplified Method" as defined in SAB 107, as amended by SAB 110. The expected stock price volatility is based on the historical volatility of our stock. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant with an equivalent remaining term. We have not paid dividends in the past and do not currently plan to pay any dividends in the near future. The weighted-average grant date fair value of stock options and warrants granted during the six months ended June 30, 2008 and 2007 was $4.25 and $3.34, respectively. NOTE 6 - FAIR VALUE MEASUREMENTS In September 2006, the FASB issued SFAS 157, FAIR VALUE MEASUREMENTS. SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. We have adopted the provisions of SFAS 157 as of January 1, 2008 for financial instruments. Although the adoption of SFAS 157 did not materially impact our financial position, results of operations, or cash flow, we are now required to provide additional disclosures as part of our financial statements. SFAS 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers are: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company maintains interest rate swaps which are required to be recorded at fair value on a recurring basis. At June, 30, 2008 the fair value of these swaps of $6.9 million was determined using Level 2 inputs and is included in other non-current liabilities. NOTE 7 - SUBSEQUENT EVENTS On July 23, 2008, we completed our purchase of the assets and business of NeuroSciences Imaging Center in Newark, Delaware for $4.5 million in cash. The center, which performs MRI, CT, Bone Density, X-ray, Fluoroscopy and other specialized procedures, is located in a highly specialized medical complex called the Neuroscience and Surgery Institute of Delaware. The acquisition complements our recent purchase of the Papastavros Associates Imaging centers completed in March, 2008. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements reflect, among other things, management's current expectations and anticipated results of operations, all of which are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to differ materially from those expressed or implied by such forward-looking statements. Therefore, any 14 statements contained herein that are not statements of historical fact may be forward-looking statements and should be evaluated as such. Without limiting the foregoing, the words "believes," "anticipates," "plans," "intends," "will," "expects," "should" and similar words and expressions are intended to identify forward-looking statements. Except as required under the federal securities laws or by the rules and regulations of the SEC, we assume no obligation to update any such forward-looking information to reflect actual results or changes in the factors affecting such forward-looking information. The factors included in "Risks Relating to Our Business," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2007, as amended or supplemented by the information if any, in Part II - Item 1A below, among others, could cause our actual results to differ materially from those expressed in, or implied by, the forward-looking statements. The Company intends that all forward-looking statements made will be subject to the safe harbor protection of the federal securities laws pursuant to Section 27A of the Securities Act and Section 21E of the Exchange Act. Forward-looking statements are based upon, among other things, the Company's assumptions with respect to: o future revenues; o expected performance and cash flows; o changes in regulations affecting the Company; o changes in third-party reimbursement rates; o the outcome of litigation; o the availability of radiologists at BRMG and our other contracted radiology practices; o competition; o acquisitions and divestitures of businesses; o joint ventures and other business arrangements; o access to capital and the terms relating thereto; o technological changes in our industry; o successful execution of internal plans; o compliance with our debt covenants; and o anticipated costs of capital investments. You should consider the limitations on, and risks associated with, forward-looking statements and not unduly rely on the accuracy of predictions contained in such forward-looking statements. As noted above, these forward-looking statements speak only as of the date when they are made. The Company does not undertake any obligation to update forward-looking statements to reflect events, circumstances, changes in expectations, or the occurrence of unanticipated events after the date of those statements. Moreover, in the future, the Company, through senior management, may make forward-looking statements that involve the risk factors and other matters described in this Form 10-Q as well as other risk factors subsequently identified, including, among others, those identified in the Company's filings with the SEC on Form 10-K, Form 10-Q and Form 8-K. OVERVIEW The following discussion should be read along with the unaudited consolidated condensed financial statements included in this Form 10-Q, as well as the Company's 2007 Annual Report on Form 10-K filed with the Securities and Exchange Commission, which provides a more thorough discussion of the Company's services, industry outlook, and business trends. We operate a group of regional networks comprised of 164 diagnostic imaging facilities located in seven states with operations primarily in California, the Mid-Atlantic, the Treasure Coast area of Florida, Kansas and the Finger Lakes (Rochester) and Hudson Valley areas of New York, providing diagnostic imaging services including magnetic resonance imaging (MRI), computed tomography (CT), positron emission tomography (PET), nuclear medicine, mammography, ultrasound, diagnostic radiology, or X-ray, and fluoroscopy. The Company's operations comprise a single segment for financial reporting purposes. The results of operations of Radiologix and its wholly-owned subsidiaries have been included in the consolidated financial statements from November 15, 2006, the date of the Company's acquisition of Radiologix. The consolidated financial statements also include the accounts of RadNet Management, Inc., or RadNet Management, and Beverly Radiology Medical Group III (BRMG), which is a professional partnership, all collectively referred to as "us" or "we". The consolidated financial statements also include RadNet Sub, Inc., RadNet Management I, Inc., RadNet Management II, Inc., SoCal MR Site Management, Inc., Radiologix, Inc., RadNet Management Imaging Services, Inc., Delaware Imaging Partners, Inc. and Diagnostic Imaging Services, Inc. (DIS), all wholly owned subsidiaries of RadNet Management. 15 Howard G. Berger, M.D. is our President and Chief Executive Officer, a member of our Board of Directors and owns approximately 16% of our outstanding common stock. Dr. Berger also owns, indirectly, 99% of the equity interests in BRMG. BRMG provides all of the professional medical services at 84 of our facilities located in California under a management agreement with us, and contracts with various other independent physicians and physician groups to provide the professional medical services at most of our other California facilities. We generally obtain professional medical services from BRMG in California, rather than provide such services directly or through subsidiaries, in order to comply with California's prohibition against the corporate practice of medicine. However, as a result of our close relationship with Dr. Berger and BRMG, we believe that we are able to better ensure that medical service is provided at our California facilities in a manner consistent with our needs and expectations and those of our referring physicians, patients and payors than if we obtained these services from unaffiliated physician groups. At 15 centers in California and at all of the centers which are located outside of California, we have entered into long-term contracts with prominent radiology groups in the area to provide physician services at those facilities. The operations of BRMG are consolidated with the Company as a result of the contractual and operational relationship among BRMG, Dr. Berger, and us. We are considered to have a controlling financial interest in BRMG pursuant to the guidance in Emerging Issues Task Force Issue 97-2 (EITF 97-2). BRMG is a partnership of Pronet Imaging Medical Group, Inc. (99%), Breastlink Medical Group, Inc. (100%) and Beverly Radiology Medical Group, Inc. (99%), each of which are 99% or 100% - -owned by Dr. Berger. RadNet provides non-medical, technical and administrative services to BRMG for which it receives a management fee. Outside of California we contract with radiology practices to provide professional services, including supervision and interpretation of diagnostic imaging procedures, in our non-California diagnostic imaging centers and 15 California centers. The radiology practices maintain full control over the provision of professional services. The contracted radiology practices generally have outstanding physician and practice credentials and reputations; strong competitive market positions; a broad sub-specialty mix of physicians; a history of growth and potential for continued growth. In these facilities we enter into long-term agreements with radiology practice groups (typically 40 years). Under these arrangements, in addition to obtaining technical fees for the use of our diagnostic imaging equipment and the provision of technical services, we provide management services and receive a fee based on the practice group's professional revenue, including revenue derived outside of our diagnostic imaging centers. We own the diagnostic imaging assets and, therefore, receive 100% of the technical reimbursements associated with imaging procedures. We have no financial controlling interest in the contracted radiology practices, as defined in EITF 97-2; accordingly, we do not consolidate the financial statements of those practices in our consolidated financial statements. CRITICAL ACCOUNTING ESTIMATES Our discussion and analysis of financial condition and results of operations are based on our consolidated financial statements that were prepared in accordance with U.S. generally accepted accounting principles, or GAAP. Management makes estimates and assumptions when preparing financial statements. These estimates and assumptions affect various matters, including: o Our reported amounts of assets and liabilities in our consolidated balance sheets at the dates of the financial statements; o Our disclosure of contingent assets and liabilities at the dates of the financial statements; and o Our reported amounts of net revenue and expenses in our consolidated statements of operations during the reporting periods. These estimates involve judgments with respect to numerous factors that are difficult to predict and are beyond management's control. As a result, actual amounts could materially differ from these estimates. The SEC, defines critical accounting estimates as those that are both most important to the portrayal of a company's financial condition and results of operations and require management's most difficult, subjective or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. As of the period covered in this report, there have been no material changes to the critical accounting estimates we use, and have explained, in our annual report on Form 10-K for the fiscal year ended December 31, 2007. 16 RESULTS OF OPERATIONS The following table sets forth, for the periods indicated, the percentage that certain items in the statement of operations bears to net revenue. RADNET, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, -------------------------- --------------------------- 2008 2007 2008 2007 ------------ ------------ ------------ ------------ NET REVENUE 100.0% 100.0% 100.0% 100.0% OPERATING EXPENSES Operating expenses 76.8% 74.0% 77.2% 75.9% Depreciation and amortization 11.0% 9.9% 11.0% 10.1% Provision for bad debts 5.6% 6.4% 5.6% 6.8% Loss (gain) on sale of equipment 0.0% 0.0% 0.0% 0.0% Severance costs 0.0% 0.2% 0.0% 0.4% ------------ ------------ ------------ ------------ Total operating expenses 93.4% 90.5% 93.7% 93.2% INCOME FROM OPERATIONS 6.6% 8.0% 11.9% 11.4% OTHER EXPENSES (INCOME) Interest expense 9.8% 9.1% 10.8% 9.7% Other income 0.0% 0.0% 0.0% 0.0% ------------ ------------ ------------ ------------ Total other expense 9.8% 9.1% 10.8% 9.7% INCOME (LOSS) BEFORE INCOME TAXES, MINORITY INTERESTS AND EARNINGS FROM JOINT VENTURES -3.2% 0.4% -4.5% -2.8% Provision for income taxes 0.0% 0.0% -0.1% 0.0% Minority interest in income of subsidiaries 0.0% -0.2% 0.0% -0.1% Equity in earnings of joint ventures 1.5% 0.9% 1.4% 0.9% ------------ ------------ ------------ ------------ NET INCOME (LOSS) -1.7% 1.0% -6.0% -3.4% ============ ============ ============ ============
THREE MONTHS ENDED JUNE 30, 2008 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2007 NET REVENUE Net revenue for the three months ended June 30, 2008 was $127.4 million compared to $107.0 million for the three months ended June 30, 2007, an increase of $20.4 million, or 19.1%. Net revenue, including only those centers which were in operation throughout the second quarters of both 2007 and 2008, increased $4.1 million, or 3.8%. This 3.8% increase is mainly due to an increase in procedure volumes. This comparison excludes revenue contributions from centers that were acquired or divested subsequent to March 31, 2007. For the three months ended June 30, 2008, net revenue from centers that were acquired subsequent to March 31, 2007 and excluded from the above comparison (see Note 2) was $19.7 million. Contributing to the net revenue of the second quarter ended June 30, 2007 and excluded from the above comparison was $3.4 million from centers that were divested and were not operational in the second quarter ended June 30, 2008. 17 OPERATING EXPENSES Operating expenses for the three months ended June 30, 2008 increased approximately $18.7 million, or 23.6%, from $79.2 million for the three months ended June 30, 2007 to $97.9 million for the three months ended June 30, 2008. The following table sets forth our operating expenses for the three months ended June 30, 2008 and 2007 (in thousands): THREE MONTHS ENDED JUNE 30, -------------------------- 2008 2007 --------- --------- Salaries and professional reading fees excluding stock compensation $ 53,677 $ 40,867 Share-based compensation 602 382 Building and equipment rental 10,636 10,044 General administrative expenses 32,971 27,890 --------- --------- Operating expenses 97,886 79,183 Depreciation and amortization 14,071 10,579 Provision for bad debts 7,088 6,862 Gain (loss) on sale of equipment, net (38) 4 Severance costs 4 247 --------- --------- Total operating expenses $ 119,011 $ 96,875 ========= ========= SALARIES AND PROFESSIONAL READING FEES, EXCLUDING STOCK COMPENSATION AND SEVERANCE Salaries and professional reading fees increased $12.8 million, or 31.4%, to $53.7 million for the three months ended June 30, 2008 compared to $40.9 million for the three months ended June 30, 2007. Salaries and professional reading fees, including only those centers which were in operation throughout the second quarters of both 2007 and 2008, increased $6.8 million, or 16.5%. This 16.5% increase is primarily due to increased salaries and staffing related to these existing imaging centers. This comparison excludes contributions from centers that were acquired or divested subsequent to March 31, 2007. For the three months ended June 30, 2008, salaries and professional reading fees from centers that were acquired subsequent to March 31, 2007 and excluded from the above comparison (see Note 2) was $7.0 million. Contributing to the salaries and professional reading fees of the second quarter ended June 30, 2007 and excluded from the above comparison was $1.0 million from centers that were divested and were not operational in the second quarter ended June 30, 2008. SHARE-BASED COMPENSATION Share-based compensation increased $220,000, or 57.6%, to $602,000 for the three months ended June 30, 2008 compared to $382,000 for the three months ended June 30, 2007. The increase is primarily due to additional options granted during the second half of 2007 and the first half of 2008. BUILDING AND EQUIPMENT RENTAL Building and equipment rental expenses increased $592,000, or 5.9%, to $10.6 million for the three months ended June 30, 2008 compared to $10.0 million for the three months ended June 30, 2007. Building and equipment rental expenses, including only those centers which were in operation throughout the second quarters of both 2007 and 2008, decreased $733,000, or 7.3%. This 7.3% decrease is primarily due to the conversion of certain equipment leases contracts from operating to capital leases. This comparison excludes contributions from centers that were acquired or divested subsequent to March 31, 2007. For the three months ended June 30, 2008, building and equipment rental expenses from centers that were acquired subsequent to March 31, 2007 and excluded from the above comparison (see Note 2) was $1.7 million. Contributing to the building and equipment rental expenses of the second quarter ended June 30, 2007 and excluded from the above comparison was $344,000 from centers that were divested and were not operational in the second quarter ended June 30, 2008. 18 GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses include billing fees, medical supplies, office supplies, repairs and maintenance, insurance, business tax and license, outside services, utilities, marketing, travel and other expenses. Many of these expenses are variable in nature including medical supplies and billing fees, which increase with volume and repairs and maintenance under our GE service agreement as a percentage of net revenue. Overall, general and administrative expenses increased $5.1 million, or 18.2%, for the three months ended June 30, 2008 compared to the previous period. The increase is in line with our increase in procedure volumes at both existing centers as well as newly acquired centers. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased $3.5 million, or 33.0%, to $14.1 million for the three months ended June 30, 2008 compared to the same period last year. The increase is primarily due to property and equipment additions for existing centers as well as newly acquired centers. PROVISION FOR BAD DEBTS Provision for bad debts increased $226,000, or 3.3%, to $7.1 million, or 5.5% of net revenue, for the three months ended June 30, 2008 compared to $6.9 million, or 6.4% of net revenue, for the three months ended June 30, 2007. The decrease in our provision for bad debts as a percentage of revenue is primarily due to an increase in collection performance and the completion of our billing system implementation which began in the first quarter of 2007. SEVERANCE COSTS During the three months ended June 30, 2008, we recorded severance costs of $4,000 compared to $247,000 recorded during the three months ended June 30, 2007. In each period, these costs were primarily associated with the integration of Radiologix. INTEREST EXPENSE Interest expense for the three months ended June 30, 2008 increased approximately $2.7 million, or 28.0%, from the same period in 2007. The increase is primarily due to the $60 million increase in Term Loans B & C and increased borrowing on the line of credit. Also included in interest expense for the three months ended June 30, 2008 and 2007 is amortization of deferred loan costs of $579,000 and 461,000, respectively as well as realized gains on our fair value hedges of 690,000 and 695,000, respectively. INCOME TAX EXPENSE For the three months ended June 30, 2008, we recorded $14,000 in income tax expense related to certain state tax obligations of Radiologix. EQUITY IN EARNINGS FROM UNCONSOLIDATED JOINT VENTURES For the three months ended June 30, 2008, we recognized equity in earnings from unconsolidated joint ventures of $2.0 million compared to $1.0 million for the three months ended June 30, 2007. This increase is due to our purchase of additional equity interests in certain existing joint ventures as well as the deconsolidation in the fourth quarter of 2007of a previously consolidated joint venture increasing the number of our consolidated joint ventures from eight to nine. SIX MONTHS ENDED JUNE 30, 2008 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2007 NET REVENUE Net revenue for the six months ended June 30, 2008 was $242.1 million compared to $212.8 million for the six months ended June 30, 2007, an increase of $29.3 million, or 13.8%. Net revenue, including only those centers which were in operation throughout the first six months of both 2007 and 2008, increased $7.5 million, or 3.5%. This 3.5% increase is mainly due to an increase in procedure volumes. This comparison excludes revenue contributions from centers that were acquired or divested subsequent to January 31, 2007. For the six months ended June 30, 2008, net revenue from centers that were acquired subsequent to January 31, 2007 and excluded from the above comparison (see Note 2) was $28.7 million. Contributing to the net revenue of the six months ended June 30, 2007 and excluded from the above comparison was $6.9 million from centers that were divested and were not operational in the six months ended June 30, 2008. 19 OPERATING EXPENSES Operating expenses for the six months ended June 30, 2008 increased approximately $25.3 million, or 15.6%, from $161.6 million for the six months ended June 30, 2007 to $186.9 million for the six months ended June 30, 2008. The following table sets forth our operating expenses for the six months ended June 30, 2008 and 2007 (in thousands): SIX MONTHS ENDED JUNE 30, -------------------------- 2008 2007 --------- --------- Salaries and professional reading fees, excluding stock compensation $ 103,062 $ 86,161 Share-based compensation 1,056 2,602 Building and equipment rental 20,892 20,106 General administrative expenses 61,842 52,599 NASDAQ one-time listing fee -- 120 --------- --------- Operating expenses 186,852 161,588 Depreciation and amortization 26,540 21,489 Provision for bad debts 13,575 14,415 Loss (gain) on sale of equipment, net (30) 4 Severance costs 35 785 --------- --------- Total operating expenses $ 226,972 $ 198,281 ========= ========= SALARIES AND PROFESSIONAL READING FEES, EXCLUDING STOCK COMPENSATION AND SEVERANCE Salaries and professional reading fees increased $16.9 million, or 19.6%, to $103.1 million for the six months ended June 30, 2008 compared to $86.2 million for the six months ended June 30, 2007. Salaries and professional reading fees, including only those centers which were in operation throughout the first six months of both 2007 and 2008, increased $8.4 million, or 9.7%. This 9.7% increase is primarily due to increased salaries and staffing related to these existing imaging centers. This comparison excludes contributions from centers that were acquired or divested subsequent to January 31, 2007. For the six months ended June 30, 2008, salaries and professional reading fees from centers that were acquired subsequent to January 31, 2007 and excluded from the above comparison (see Note 2) was $10.4 million. Contributing to the salaries and professional reading fees of the six months ended June 30, 2007 and excluded from the above comparison was $1.9 million from centers that were divested and were not operational in the six months ended June 30, 2008. SHARE-BASED COMPENSATION Share-based compensation decreased $1.5 million, or 59.4%, to $1.1 million for the six months ended June 30, 2008 compared to $2.6 million for the six months ended June 30, 2007. Stock compensation for the six months ended June 30, 2007 included $1.8 million of additional stock based compensation expense as a result of the acceleration of vesting of certain warrants. BUILDING AND EQUIPMENT RENTAL Building and equipment rental expenses increased $786,000, or 3.9%, to $20.9 million for the six months ended June 30, 2008 compared to $20.1 million for the six months ended June 30, 2007. 20 Building and equipment rental expenses, including only those centers which were in operation throughout the first six months of both 2007 and 2008, decreased $1.6 million, or 8.1%. This 8.1% decrease is primarily due to the conversion of certain equipment leases contracts from operating to capital leases. This comparison excludes contributions from centers that were acquired or divested subsequent to January 31, 2007. For the six months ended June 30, 2008, building and equipment rental expenses from centers that were acquired subsequent to January 31, 2007 and excluded from the above comparison (see Note 2) was $3.0 million. Contributing to the building and equipment rental expenses of the six months ended June 30, 2007 and excluded from the above comparison was $630,000 from centers that were divested and were not operational in the six months ended June 30, 2008. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses include billing fees, medical supplies, office supplies, repairs and maintenance, insurance, business tax and license, outside services, utilities, marketing, travel and other expenses. Many of these expenses are variable in nature including medical supplies and billing fees, which increase with volume and repairs and maintenance under our GE service agreement as a percentage of net revenue. Overall, general and administrative expenses increased $9.2 million, or 17.6%, for the six months ended June 30, 2008 compared to the previous period. The increase is in line with our increase in procedure volumes at both existing centers as well as newly acquired centers. DEPRECIATION AND AMORTIZATION Depreciation and amortization increased $5.1 million, or 23.5%, to $26.5 million for the six months ended June 30, 2008 when compared to the same period last year. The increase is primarily due to property and equipment additions for existing centers and newly acquired centers. PROVISION FOR BAD DEBTS Provision for bad debts decreased $840,000, or 5.8%, to $13.6 million, or 5.6% of net revenue, for the six months ended June 30, 2008 compared to $14.4 million, or 6.8% of net revenue, for the six months ended June 30, 2007. The decrease in our provision for bad debts as a percentage of revenue is primarily due to an increase in collection performance and the completion of our billing system implementation which began in the first quarter of 2007. SEVERANCE COSTS During the six months ended June 30, 2008, we recorded severance costs of $35,000 compared to $785,000 recorded during the six months ended June 30, 2007. In each period, these costs were primarily associated with the integration of Radiologix. INTEREST EXPENSE Interest expense for the six months ended June 30, 2008 increased approximately $5.5 million, or 26.6%, from the same period in 2007. The increase is primarily due to the $60 million increase in Term Loans B & C and increased borrowing on the line of credit. Also included in interest expense for the six months ended June 30, 2008 and 2007 is amortization of deferred loan costs of $1.2 million and 772,000, respectively, as well as realized losses of $261,000 and realized gains of $557,000 on our fair value hedges for the six months ended June 30, 2008 and 2007, respectively. INCOME TAX EXPENSE For the six months ended June 30, 2008 and 2007, we recorded $137,000 and $29,000, respectively, for income tax expense related to certain state tax obligations of Radiologix. EQUITY IN EARNINGS FROM UNCONSOLIDATED JOINT VENTURES For the six months ended June 30, 2008, we recognized equity in earnings from unconsolidated joint ventures of $3.4 million compared to $2.0 million for the six months ended June 30, 2007. This increase is due to our purchase of additional equity interests in certain existing joint ventures as well as the deconsolidation in the fourth quarter of 2007of a previously consolidated joint venture increasing the number of our consolidated joint ventures from eight to nine. LIQUIDITY AND CAPITAL RESOURCES On November 15, 2006, we entered into a $405 million senior secured credit facility with GE Commercial Finance Healthcare Financial Services (the "November 2006 Credit Facility"). This facility was used to finance our acquisition of Radiologix, refinance existing indebtedness, pay transaction costs and expenses relating to our acquisition of Radiologix, and provide 21 financing for working capital needs post-acquisition. The facility consists of a revolving credit facility of up to $45 million, a $225 million first lien Term Loan and a $135 million second lien Term Loan. The revolving credit facility has a term of five years, the term loan has a term of six years and the second lien term loan has a term of six and one-half years. Interest is payable on all loans initially at an Index Rate plus the Applicable Index Margin, as defined. The Index Rate is initially a floating rate equal to the higher of the rate quoted from time to time by The Wall Street Journal as the "base rate on corporate loans posted by at least 75% of the nation's largest 30 banks" or the Federal Funds Rate plus 50 basis points. The Applicable Index Margin on each of the revolving credit facility and the term loan is 2% and on the second lien term loan is 6%. We may request that the interest rate instead be based on LIBOR plus the Applicable LIBOR Margin, which is 3.5% for the revolving credit facility and the term loan and 7.5% for the second lien term loan. The credit facility includes customary covenants for a facility of this type, including minimum fixed charge coverage ratio, maximum total leverage ratio, maximum senior leverage ratio, limitations on indebtedness, contingent obligations, liens, capital expenditures, lease obligations, mergers and acquisitions, asset sales, dividends and distributions, redemption or repurchase of equity interests, subordinated debt payments and modifications, loans and investments, transactions with affiliates, changes of control, and payment of consulting and management fees. On August 23, 2007, we secured an incremental $35 million ("Incremental Facility") as part of our existing credit facilities with GE Commercial Finance Healthcare Financial Services. The Incremental Facility consists of an additional $25 million as part of our first lien Term Loan and $10 million of additional capacity under our existing revolving line of credit. The Incremental Facility will be used to fund certain identified strategic initiatives and for general corporate purposes. On February 22, 2008, we secured a second incremental $35 million ("Second Incremental Facility") of capacity as part of our existing credit facilities with GE Commercial Finance Healthcare Financial Services. The Second Incremental Facility consists of an additional $35 million as part of our second lien term loan and the first lien term loan or revolving credit facility may be increased by up to an additional $40 million sometime in the future. As part of the transaction, partly due to the drop in LIBOR of over 2.00% since the credit facilities were established in November 2006, we increased the Applicable LIBOR Margin to 4.25% for the revolving credit facility and the term loan and to 9.0% from 6.0% for the second lien term loan. The additions to our existing credit facilities are intended to provide capital for near-term opportunities and future expansion. As part of the senior secured credit facility financing, we swapped 50% of the aggregate principal amount of the facilities to a floating rate within 90 days of the closing. On April 11, 2006, effective April 28, 2006, we entered into an interest rate swap on $73.0 million fixing the LIBOR rate of interest at 5.47% for a period of three years. This swap was made in conjunction with the $161.0 million credit facility that closed on March 9, 2006. In addition, on November 15, 2006, we entered into an interest rate swap on $107.0 million fixing the LIBOR rate of interest at 5.02% for a period of three years, and on November 28, 2006, we entered into an interest rate swap on $90.0 million fixing the LIBOR rate of interest at 5.03% for a period of three years. Previously, the interest rate on the above $270.0 million portion of the credit facility was based upon a spread over LIBOR which floats with market conditions. The Company documents its risk management strategy and hedge effectiveness at the inception of the hedge, and, unless the instrument qualifies for the short-cut method of hedge accounting, over the term of each hedging relationship. The Company's use of derivative financial instruments is limited to interest rate swaps, the purpose of which is to hedge the cash flows of variable-rate indebtedness. The Company does not hold or issue derivative financial instruments for speculative purposes. In accordance with Statement of Financial Accounting Standards No. 133, derivatives that have been designated and qualify as cash flow hedging instruments are reported at fair value. The gain or loss on the effective portion of the hedge (i.e., change in fair value) is initially reported as a component of other comprehensive income in the Company's Consolidated Statement of Stockholders' Equity. The remaining gain or loss, if any, is recognized currently in earnings. Of the derivatives that were not designated as cash flow hedging instruments, we recorded an increase to interest expense of approximately $261,000, and a decrease to interest expense of $690,000 for the six months ended June 30, 2008 and 2007, respectively. The corresponding liability of approximately $1.8 million is included in the other non-current liabilities in the consolidated balance sheets at June 30, 2008. Of the derivatives that were designated as cash flow hedging instruments, we recorded $5.1 million to accumulated other comprehensive loss, and an offsetting liability of the same amount for the fair value of these hedging instruments at June 30, 2008. 22 We operate in a capital intensive, high fixed-cost industry that requires significant amounts of capital to fund operations. In addition to operations, we require significant amounts of capital for the initial start-up and development expense of new diagnostic imaging facilities, the acquisition of additional facilities and new diagnostic imaging equipment, and to service our existing debt and contractual obligations. Because our cash flows from operations have been insufficient to fund all of these capital requirements, we have depended on the availability of financing under credit arrangements with third parties. Our business strategy with regard to operations will focus on the following: o Maximizing performance at our existing facilities; o Focusing on profitable contracting; o Expanding MRI, CT and PET applications; o Optimizing operating efficiencies; and o Expanding our networks Our ability to generate sufficient cash flow from operations to make payments on our debt and other contractual obligations will depend on our future financial performance. A range of economic, competitive, regulatory, legislative and business factors, many of which are outside of our control, will affect our financial performance. Taking these factors into account, including our historical experience and our discussions with our lenders to date, although no assurance can be given, we believe that through implementing our strategic plans and continuing to restructure our financial obligations, we will obtain sufficient cash to satisfy our obligations as they become due in the next twelve months. SOURCES AND USES OF CASH Cash provided by operating activities was $11.0 million and $11.8 million for the six months ended June 30, 2008 and 2007, respectively. Cash used by investing activities was $42.4 million and $11.8 million for the six months ended June 30, 2008 and 2007, respectively. For the six months ended June 30, 2008, we purchased property and equipment for approximately $18.2 million and acquired the assets and businesses of additional imaging facilities for approximately $23.5 million (see Note 2). We also purchased additional equity interests in joint ventures of $728,000. Cash provided by financing activities was $31.4 million for the six months ended June 30, 2008 and cash used in financing activities was $3.2 million for the six months ended June 30, 2007. The cash provided by financing activities for the six months ended June 30, 2008 was primarily related to our borrowing of an additional $35 million as part of our second lien term loan with GE Commercial Healthcare Financial Services. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Foreign Currency. We sell our services exclusively in the United States and receive payment for our services exclusively in United States dollars. As a result, our financial results are unlikely to be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Interest Rates. A large portion of our interest expense is not sensitive to changes in the general level of interest in the United States because the majority of our indebtedness has interest rates that were fixed when we entered into the note payable or capital lease obligation. On November 15, 2006, we entered into a $405 million senior secured credit facility with GE Commercial Finance Healthcare Financial Services. The facility consists of a revolving credit facility of up to $45 million, a $225 million term loan and a $135 million second lien term loan. Interest is payable on all loans initially at an Index Rate plus the Applicable Index Margin, as defined. The Index Rate is initially a floating rate equal to the higher of the rate quoted from time to time by The Wall Street Journal as the "base rate on corporate loans posted by at least 75% of the nation's largest 30 banks" or the Federal Funds Rate plus 50 basis points. Until February 22, 2008, the Applicable Index Margin on each the revolving credit facility and the term loan was 2% and on the second lien term loan was 6%. We may request that the interest rate instead be based on LIBOR plus the Applicable LIBOR Margin, which was 3.5% for the revolving credit facility and the term loan and 7.5% for the second lien term loan. On February 22, 2008, we secured an incremental $35 million ("Second Incremental Facility") as part of our existing credit facilities with GE Commercial Finance Healthcare Financial Services. The Second Incremental Facility consists of an additional $35 million as part of our second lien term loan and the ability to further increase the second lien term loan by up to $25 million and the first line term loan or revolving credit facility by up to an additional $40 million sometime in the future. As part of the transaction, partly due to the drop in LIBOR of over 2.00% since the credit facilities were established in November 2006, we increased the Applicable LIBOR Margin to 4.25% for the revolving credit facility and the term loan and 9.0% for the second lien term loan. 23 Debentures. As part of the financing, we were required to swap at least 50% of the aggregate principal amount of the facilities to a floating rate within 90 days of the close of the agreement on November 15, 2006. On April 11, 2006, effective April 28, 2006, we entered into an interest rate swap on $73.0 million fixing the LIBOR rate of interest at 5.47% for a period of three years. This swap was made in conjunction with the $161.0 million credit facility closed on March 9, 2006. In addition, on November 15, 2006, we entered into an interest rate swap on $107.0 million fixing the LIBOR rate of interest at 5.02% for a period of three years, and on November 28, 2006, we entered into an interest rate swap on $90.0 million fixing the LIBOR rate of interest at 5.03% for a period of three years. Previously, the interest rate on the above $270.0 million portion of the credit facility was based upon a spread over LIBOR which floats with market conditions. ITEM 4. CONTROLS AND PROCEDURES DISCLOSURE CONTROLS AND PROCEDURES Our management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as defined under Rule l3a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2008, the end of the period covered by this quarterly report on Form 10-Q, due to the existence of the material weaknesses in our financial statement close process and our entity level controls. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING During the three months ended June 30, 2008, we implemented improvements to our internal controls as explained below: VALUATION OF ACCOUNTS RECEIVABLE - -------------------------------- We have formed a Revenue Committee, which includes the participation of the Chief Executive Officer, Chief Financial Officer, Director of Reimbursement Operations and other financial personnel. The Committee meets every month to review the collection statistics applied to monthly and year-to-date gross charges as well as review the collectability of accounts receivable balances as of the end of each month. The Committee has reviewed and analyzed collection run-out statistics and compared cash collections to historical data and trends during the six months ended June 30, 2008. We believe that the implementation of our Revenue Committee enhanced our controls and improved our ability to accurately value our accounts receivable balances. FIXED ASSET RECORDING - --------------------- We have assigned additional resources to track, record and depreciate fixed assets. We have scheduled monthly meetings with the purchasing department and monthly calls with the regional controllers and have identified assets when they were delivered to sites and have recorded correct in-service dates during the six months ended June 30, 2008. LIABILITY FOR MEDICAL MALPRACTICE EXPOSURE - ------------------------------------------ We have engaged a third-party actuary that assisted us in the determination of IBNR as of June 30, 2008 which we used to adjust our IBNR reserve as of June 30, 2008. PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS At June 30, 2008, the status of all current legal matters previously disclosed in Part 1, Item 3, of our Form 10-K for the year ended December 31, 2007 is unchanged except: In Re DVI, Inc. Securities Litigation. United States District Court, Eastern District of PA, Docket No. 2:03-CV-05336-LDD This is a class action securities fraud case under Section 10(b) of the Securities Exchange Act and Rule 10b-5. It was brought by shareholders of DVI, Inc. ("DVI"), one of our former major lenders, against DVI officers and directors and a number of third party defendants, including us. The case arises from bankruptcy proceedings instituted by DVI in August 2003. We were named as a defendant in the Third Amended Complaint filed in July 2004. 24 The putative plaintiff class consists of those persons who purchased or otherwise acquired DVI, Inc. securities between August of 1999 and August of 2003. Plaintiffs allege that in 2000, we acquired from a third party one or more unprofitable imaging centers in order to help DVI conceal the fact that existing DVI loans on the centers were delinquent. Plaintiffs argue that we should have known that DVI was engaging in fraudulent practices to conceal losses, and our alleged "lack of due diligence" in investigating DVI's finances in the course of these acquisitions amounted to complicity in deceptive and misleading practices. We denied all allegations. The plaintiff has sent to us a stipulation to dismiss us from the case in consideration of our agreement to waive our claim for costs against the plaintiff. The dismissal is subject to notice to the class and court approval. ITEM 1A RISK FACTORS In addition to the other information set forth in this report, we urge you to carefully consider the factors discussed in Part I, "Item 1A Risk Factors" in our Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition and results of operations. The risks described in our Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS None ITEM 3 DEFAULTS UPON SENIOR SECURITIES None ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At our annual meeting held on May 28, 2008 and adjourned until June 12, 2008 the following occurred: a) The following directors were elected: For Withheld ----------- ---------- Howard G. Berger, M.D. 26,238,386 5,351,710 Marvin S. Cadwell 30,887,830 702,266 John V. Crues, III, M.D. 26,501,020 5,089,076 Norman R. Hames 26,481,193 5,108,903 Lawrence L. Levitt 30,871,580 718,516 M.L. Sherman, M.D. 31,370,391 219,705 David L. Swartz 30,876,430 713,666 b) The proposal to reincorporate the Company in Delaware was approved: Abstentions & For Against Broker Non-votes ------------ ------------ ---------------- 25,009,048 57,690 16,447 c) In the approved proposal to ratify the appointment of independent accountants the vote was: Abstentions & For Against Broker Non-votes ------------ ------------ ---------------- 31,532,431 22,036 35,628 25 ITEM 5 OTHER INFORMATION From February 2007 to April 2008, we issued warrants to certain directors, officers and employees, and to a physician who performs professional services for BRMG, exercisable for an aggregate of 800,000 shares. These warrants have been characterized as nonstatutory stock options granted under our 2006 Equity Incentive Plan, or 2006 plan, in order to comply with the qualitative listing requirements of the NASDAQ Stock Market requiring stockholder approval of the establishment or material amendment of stock option or purchase plans pursuant to which stock may be acquired by officers, directors, employees or consultants. In general, the terms of these warrants are comparable to the terms of nonstatutory stock options granted under the 2006 plan. The 2006 plan at all times had sufficient shares reserved and available for issuance to accommodate these warrants as awards under the 2006 plan. The forms of these warrants are attached to this report as Exhibits 10.2 and 10.3. The 2006 plan provides a limit on the aggregate number of shares subject to awards granted during any calendar year to any one awardee. The sole purpose of this limit is to enable awards granted to "covered employees" (defined below) to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code. Section 162(m) of the Code places a limit of $1 million on the amount of compensation that we may deduct in any one year with respect to the "covered employees," which are the chief executive officer and the three other most highly paid executive officers (excluding the chief financial officer). Performance-based compensation, in which the material terms of the applicable performance goals have been approved by stockholders, is not subject to this deduction limit. Awards granted under the 2006 plan may constitute performance-based compensation not subject to the deduction limit of Section 162(m) of the Code. One of the requirements for gains on stock options to qualify as performance-based compensation is that there must be a limit to the number of shares granted to any one individual under the plan. Accordingly, the 2006 plan provides that the maximum number of shares for which awards may be made to any awardee in any calendar year is 125,000, except that in connection with his or her initial service, an awardee may be granted awards covering up to an additional 125,000 shares. We refer to this limit as the Section 162(m) share limit. The warrants discussed above were not intended to qualify as performance-based compensation under Section 162(m) of the Code, and two of the warrants granted were in excess of the Section 162(m) share limit. In order to address any ambiguity in the applicability of the Section 162(m) share limit, on August 11, 2008, our Compensation and Management Development Committee and Board approved an amendment to the 2006 plan to clarify that the 162(m) share limit does not apply to awards granted under the 2006 plan that are not intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Code. The amendment was retroactive to the effective date of the 2006 plan, and expressly applied to the two warrants granted in excess of the Section 162(m) limit. The amendment is attached to this report as Exhibit 10.1. The foregoing disclosure concerning the amendment to the 2006 plan is provided in lieu of disclosure in Item 1.01 of Form 8-K. Section 16(a) Beneficial Ownership Reporting and Compliance - ----------------------------------------------------------- In the course of our review of the warrants discussed above, we discovered certain filings required during 2006 and 2007 under Section 16(a) of the Exchange Act were filed late or filed on the incorrect form. Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our common stock to file reports of ownership and changes in ownership with the SEC. Directors Michael L. Sherman, M.D. and Marvin S. Cadwell each filed late a Form 3 disclosing his respective holdings upon being appointed a director of the Company in January 2007, and each disclosed the grant of a warrant on February 27, 2007 on such Form 3 rather than on a Form 4. Each of such Form 3s was however filed within the time permitted for disclosing such grant on Form 4. Stephen M. Forthuber, our Executive Vice President and Chief Operating Officer for Eastern Operations, filed late a Form 3 disclosing his holdings upon being appointed an executive officer of the Company in November 2006 upon our acquisition of Radiologix, and disclosed the grant of a warrant on April 3, 2007 on such Form 3 rather than on a Form 4. Such Form 3 was however filed within the time permitted for disclosing such grant on Form 4. Based solely on copies of these reports provided to us and written representations that no other reports were required, we believe that except as set forth above, our directors, executive officers and beneficial owners of more than 10% of our common stock met all of the applicable Section 16(a) filing requirements during 2007. ITEM 6 EXHIBITS The list of exhibits filed as part of this report is incorporated by reference to the Index to Exhibits at the end of this report. 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. RADNET, INC. ------------------------------------------------ (Registrant) Date: August 11, 2008 By /s/ Howard G. Berger, M.D. -------------------------------------------- Howard G. Berger, M.D., President and Chief Executive Officer (Principal Executive Officer) Date: August 11, 2008 By /s/ Mark D. Stolper -------------------------------------------- Mark D. Stolper, Chief Financial Officer (Principal Financial and Accounting Officer) 27 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION ------ ----------- 10.1 First amendment to the 2006 Equity Incentive Plan 10.2 Form of warrant recharacterized as under the 2006 Equity Incentive Plan - Form A 10.3 Form of warrant recharacterized as under the 2006 Equity Incentive Plan - Form B 10.4 Warrant To Purchase Shares Of Common Stock between RadNet, Inc. and Derek Bomar, dated January 8, 2007 10.5 Warrant To Purchase Shares Of Common Stock between Primedex Health Systems, Inc. ("Primedex") and Derek Bomar, dated October 20, 2005 10.6 Warrant To Purchase Shares Of Common Stock between Primedex and June W. Chen, dated March 14, 2006 10.7 Warrant To Purchase Shares Of Common Stock between Primedex and John V. Crues, dated June 7, 2005 10.8 Warrant To Purchase Shares Of Common Stock between Primedex and Lawrence L. Levitt, dated March 28, 2006 10.9 Warrant To Purchase Shares Of Common Stock between Primedex and Lawrence L. Levitt, dated March 14, 2005 10.10 Warrant To Purchase Shares Of Common Stock between Primedex and Jeffrey L. Linden, dated April 28, 2006 10.11 Warrant To Purchase Shares Of Common Stock between Primedex and Jeffrey L. Linden, dated July 30, 2004 10.12 Warrant To Purchase Shares Of Common Stock between Primedex and Judith G. Rose, dated June 7, 2005 10.13 Warrant To Purchase Shares Of Common Stock between Primedex and Mark Stolper, dated July 30, 2004 10.14 Warrant To Purchase Shares Of Common Stock between Primedex and Mark Stolper, dated July 30, 2004 10.15 Warrant To Purchase Shares Of Common Stock between Primedex and Mark Stolper, dated March 1, 2004 10.16 Warrant To Purchase Shares Of Common Stock between Primedex and Mark Stolper, dated July 11, 2006 10.17 Warrant To Purchase Shares Of Common Stock between Primedex and David L. Swartz, dated March 28, 2006 10.18 Warrant To Purchase Shares Of Common Stock between Primedex and David L. Swartz, dated July 8, 2005 10.19 Warrant To Purchase Shares Of Common Stock between Primedex and David L. Swartz, dated March 1, 2004 10.20 Warrant To Purchase Shares Of Common Stock between Primedex and Norman Hames, dated March 27, 2006 31.1 Certification of Howard G. Berger, M.D. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Mark D. Stolper pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 of Howard G. Berger, M.D. 32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002 of Mark D. Stolper 28 EX-10.1 2 radnet_10qex10-01.txt 1ST AMEND. TO 2006 EQUITY INCENTIVE PLAN EXHIBIT 10.1 AMENDMENT NO. 1 TO THE 2006 EQUITY INCENTIVE PLAN RadNet, Inc. (the "Company") hereby amends its 2006 Equity Incentive Plan (the "Plan"), retroactively effective as of the Plan's original adoption, as follows: The second sentence of Section 3(b) of the Plan is hereby amended in its entirety to read as follows: Notwithstanding anything to the contrary in the Plan, the limitations set forth in this Section 3(b) shall (i) not apply to any Award that is not intended to qualify as "performance-based compensation" within the meaning of Section 162(m) of the Code, or (ii) be subject to adjustment under Section 15 of the Plan only to the extent that such adjustment will not affect the status of any Award intended to qualify as "performance-based compensation" under Section 162(m) of the Code. * * * * * The Company has caused this Amendment No. 1 to be signed on the date indicated below, to be effective as indicated above. RADNET, INC. Dated: _____________, 2008 By: ----------------------------------- Its: ----------------------------------- EX-10.2 3 radnet_10qex10-02.txt FORM OF WARRANT RECHARACTERIZED AS UNDER THE 2006 EQUITY INCENTIVE PLAN - FORM EXHIBIT 10.2 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ACQUIRED HEREBY WILL BEAR THE SAME LEGEND. RADNET, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on _______________) THIS CERTIFICATE is issued in connection with the ___________________________ of ______________________, an individual (the "Holder"), and RADNET, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of ____________________________ or the date _______________________ (the "Expiration Date"), ____________________ (_________) shares ("Warrant Shares") of fully paid and non-assessable shares of common stock, par value $.0001 per share, of the Company ("Common Stock") at a price of $_________ per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Provided Holder shall continuously be _____________________ then and in that event Holder may exercise (a) ________________ (_______) shares from and after _______________, (b) ___________ (_____) shares from and after _________________, (c) _________________ (________) shares from and after ___________, (d) _______________ (________) shares from and after ___________, and (e) ________(_______) shares from and after ____________________, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) there shall be any capital reorganization of Company, any re-classification or re-capitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16. 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-1 at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, by cashiers check or by bank wire transfer, of an amount equal to the then current Warrant Price (as defined and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless the Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant, provided however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $_______ per share subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the Holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or Warrant price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In any case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage pre-paid, to the Holder notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage pre-paid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention President, or (b) to the Holder at 719 Scottish Mist Trail, Highland Village, TX 75077. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. CAPTIONS. The captions of the Sections and sub-sections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary, as of this _________ day of _______________. RADNET, INC. By: --------------------------------- Howard G. Berger, M.D., President 4 EXHIBIT A-1 RADNET, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ shares of the stock provided for therein and requests that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Tax payer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ___________________, 200___ Name of Warrantholder: __________________________________________ (Please Print) Address: Signature:________________________________________ Signature Guaranteed: NOTE: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 5 EX-10.3 4 radnet_10qex10-03.txt FORM OF WARRANT RECHARACTERIZED AS UNDER THE 2006 EQUITY INCENTIVE PLAN - FORM EXHIBIT 10.3 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. RADNET, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on ____________, ______) THIS CERTIFICATE is issued in connection with ______________ (the "Holder") having agreed to ___________________________________ of RADNET, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on ___________, _____ (the "Expiration Date"), ________________ (_______) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $_____ per share, of the Company ("Common Stock") at a price of $______ per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After ___________, ____ and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or 1 b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 2 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $_________ subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean 3 entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 10 Court Run, Malvern, PA 19355. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this ______ day of _________________. RADNET, INC. By: _____________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A RADNET, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.4 5 radnet_10qex10-04.txt WARRANT BETWEEN RADNET, INC. AND DEREK BOMAR DATED JANUARY 8, 2007 EXHIBIT 10.4 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ACQUIRED HEREBY WILL BEAR THE SAME LEGEND. RADNET, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on January 8, 2012) THIS CERTIFICATE is issued in connection with an agreement to continue employment with RADNET MANAGEMENT, INC., a California corporation ("Radnet"), by DEREK BOMAR, an individual residing in California, (the "Holder") and RADNET, INC., a New York corporation (the "Company"), and parent of Radnet and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of January 8, 2012, or 90-days after the date Holder ceases to be an employee of Radnet (the "Expiration Date"), Two Hundred Fifty Thousand (250,000) shares ("Warrant Shares") of fully paid and non-assessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $4.74 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Provided Holder shall continuously be an employee of Radnet then and in that event Holder may exercise (a) Fifty Thousand (50,000) shares from and after January 8, 2008, (b) Fifty Thousand (50,000) shares from and after January 8, 2009, (c) Fifty Thousand (50,000) shares from and after January 8, 2010, (d) Fifty Thousand (50,000) shares from and after January 8, 2011, and (e) Fifty Thousand (50,000) shares from and after January 1, 2012, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. THE COMPANY AGREES AT ALL TIMES TO RESERVE A sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) here shall be any capital reorganization of Company, any re-classification or re-capitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16. C:\Documents and Settings\Sheryl\Local Settings\Temporary Internet Files\OLK53\Radnet 10Q Q2 2008 v3.doc - 42 - 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-1 at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, by cashiers check or by bank wire transfer, of an amount equal to the then current Warrant Price (as defined and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless the Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant, provided however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $4.74 per share subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the Holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or Warrant price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In any case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage pre-paid, to the Holder notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage pre-paid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention President, or (b) to the Holder at 1510 Cotner Avenue, Los Angeles, California 90025-3303. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. CAPTIONS. The captions of the Sections and sub-sections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary, as of this 8th day of January, 2007. RADNET, INC. By:_________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A-1 RADNET, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ shares of the stock provided for therein and requests that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Tax payer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ___________________, 200___ Name of Warrantholder: __________________________________________ (Please Print) Address: Signature:________________________________________ Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.5 6 radnet_10qex10-05.txt WARRANT BETWEEN PRIMEDEX AND DEREK BOMAR DATED OCTOBER 20, 2005 EXHIBIT 10.5 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on October 20, 2010) THIS CERTIFICATE is issued in connection with extraordinary services rendered by Derek Bomar (the "Holder") for the benefit of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on October 20, 2010 or the date Holder ceases to be an employee of the Company or its subsidiaries, whichever first occurs (the "Expiration Date"), One-Hundred-Thousand (100,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.30 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After October 20, 2005 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or 6 b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. Payment of Taxes. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; PROVIDED, HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 7 6. Mutilated or Missing Warrant. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.30 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 8 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 1510 Cotner Avenue, Los Angeles, CA 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 15. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 16. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 20th day of October 2005. PRIMEDEX HEALTH SYSTEMS, INC. By: _____________________________________ Howard G. Berger, M.D., President 9 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 20____ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 10 EX-10.6 7 radnet_10qex10-06.txt WARRANT BETWEEN PRIMEDEX AND JUNE W. CHEN DATED MARCH 14, 2006 EXHIBIT 10.6 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ACQUIRED HEREBY WILL BEAR THE SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on March 14, 2011) THIS CERTIFICATE is issued in connection with entry into a Professional Imaging Services Agreement with BEVERLY RADIOLOGY MEDICAL GROUP ("BRMG") which benefits RADNET MANAGEMENT, INC., a California corporation ("Radnet") by providing continuity of quality professional services, by JUNE W. CHEN, M.D., an individual residing in California, (the "Holder") and PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and parent of Radnet and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of March 14, 2011, or the date Holder ceases to provide professional services to BRMG (the "Expiration Date"), Two Hundred Thousand (200,000) shares ("Warrant Shares") of fully paid and non-assessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $0.40 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Provided Holder shall continuously be providing professional services to BRMG then and in that event Holder may exercise (a) Forty Thousand (40,000) shares from and after March 14, 2007, (b) Forty Thousand (40,000) shares from and after March 14, 2008, (c) Forty Thousand (40,000) shares from and after March 14, 2009, (d) Forty Thousand (40,000) shares from and after March 14, 2010, and (e) Forty Thousand (40,000) shares from and after March 13, 2011, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) there shall be any capital reorganization of Company, any re-classification or re-capitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16. C:\Documents and Settings\Sheryl\Local Settings\Temporary Internet Files\OLK53\Radnet 10Q Q2 2008 v3.doc - 58 - 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-1 at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, by cashiers check or by bank wire transfer, of an amount equal to the then current Warrant Price (as defined and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless the Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant, provided however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $0.40 per share subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the Holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or Warrant price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In any case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage pre-paid, to the Holder notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage pre-paid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention President, or (b) to the Holder at 51 Robinson Dr., Irvine, California 92602. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. CAPTIONS. The captions of the Sections and sub-sections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary, as of this 14th day of March 2006. PRIMEDEX HEALTH SYSTEMS, INC. By:___________________________________ Howard G. Berger, M.D., President By:___________________________________ Norman Hames, Secretary 4 EXHIBIT A-1 PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ shares of the stock provided for therein and requests that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Tax payer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ___________________, 200_ Name of Warrantholder: __________________________________________ (Please Print) Address: Signature:________________________________________ Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.7 8 radnet_10qex10-07.txt WARRANT BETWEEN PRIMEDEX AND JOHN V. CRUES DATED JUNE 7, 2005 EXHIBIT 10.7 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ACQUIRED HEREBY WILL BEAR THE SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on June 7, 2010) THIS CERTIFICATE is issued in connection with the agreement to continue his employment with Beverly Radiology Medical Group ("BRMG") which benefits Radnet Management, Inc., a California corporation ("Radnet") by providing continuity of quality professional services, by John V. Crues, III, M.D., an individual residing in California, (the "Holder") and PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and parent of Radnet and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of June 7, 2010, or the date Holder ceases to be an employee of BRMG (the "Expiration Date"), Five Hundred Thousand (500,000) shares ("Warrant Shares") of fully paid and non-assessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $0.36 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Provided Holder shall continuously be employed by BRMG then and in that event Holder may exercise Five Hundred Thousand (500,000) shares from and after June 7, 2005, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) there shall be any capital reorganization of Company, any re-classification or re-capitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16. 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-1 at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, by cashiers check or by bank wire transfer, of an amount equal to the then current Warrant Price (as defined and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless the Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant, PROVIDED HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 2 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $0.36 per share subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the Holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or Warrant price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In any case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage pre-paid, to the Holder notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage pre-paid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention President, or (b) to the Holder at 1516 Cotner Avenue, Los Angeles, California 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. CAPTIONS. The captions of the Sections and sub-sections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary, as of this 7th day of June, 2005. PRIMEDEX HEALTH SYSTEMS, INC. By:__________________________________ Howard G. Berger, M.D., President By:________________________________ Norman Hames, Secretary 4 EXHIBIT A-1 PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ shares of the stock provided for therein and requests that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Tax payer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrant holder as below indicated and delivered to the address stated below. DATED: ___________________, 20__ Name of Warrantholder: _________________________________________________________ (Please Print) Address: Signature:________________________________________ Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.8 9 radnet_10qex10-08.txt WARRANT BETWEEN PRIMEDEX AND LAWRENCE L. LEVITT DATED MARCH 28, 2006 EXHIBIT 10.8 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on March 28, 2011) THIS CERTIFICATE is issued in connection with Lawrence L. Levitt (the "Holder") having agreed to serve as a director of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on March 28, 2011 (the "Expiration Date"), Fifty Thousand (50,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.50 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After March 28, 2006 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.50 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 9401 Wilshire Blvd., Suite 1122, Los Angeles, California 90212. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 28th day of March 2006. PRIMEDEX HEALTH SYSTEMS, INC. By: _____________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.9 10 radnet_10qex10-09.txt WARRANT BETWEEN PRIMEDEX AND LAWRENCE L. LEVITT DATED MARCH 14, 2005 EXHIBIT 10.9 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on March 14, 2010) THIS CERTIFICATE is issued in connection with Lawrence L. Levitt (the "Holder") having agreed to serve as a director of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on March 14, 2010 (the "Expiration Date"), Fifty Thousand (50,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.32 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After March 14, 2005 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.32 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 9401 Wilshire Blvd., Suite 1122, Los Angeles, California 90212. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 14th day of March, 2005. PRIMEDEX HEALTH SYSTEMS, INC. By: _____________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.10 11 radnet_10qex10-10.txt WARRANT BETWEEN PRIMEDEX AND JEFFREY L. LINDEN, DATED APRIL 28, 2006 EXHIBIT 10.10 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on April 28, 2012) THIS CERTIFICATE is issued in connection with the extension of the Employment Agreement between Jeffrey L. Linden (the "Holder") and Radnet Management, Inc., a California corporation, and wholly-owned subsidiary of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on April 28, 2012, or ninety (90) days after Holder ceases to be an employee of the Company, whichever first occurs (the "Expiration Date"), Five Hundred Thousand (500,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $1.26 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Holder may exercise (a) Eighty-Five Thousand (85,000) shares from and after April 28, 2007, (b) Eighty-Five Thousand (85,000) shares from and after April 28, 2008, (c) Eighty-Five Thousand (85,000) shares from and after April 28, 2009, (d) Eighty-Five Thousand (85,000) shares from and after April 28, 2010, (e) Eighty-Five Thousand (85,000) shares from and after April 28, 2011, (f) Seventy-Five Thousand (75,000) shares from and after March 1, 2012, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. Notwithstanding the foregoing, the vesting under this Warrant shall accelerate and become fully vested upon (i) a "change in control" of the Company or (ii) the closing price of the Company's Common Stock in the public market in which it trades averaging no less than $3.00 per share for thirty (30) consecutive days. A change of control is defined as: (a) any person or group of persons (within the meaning of the Securities Exchange Act of 1934) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 40% or more of the issued and outstanding shares of common stock of the Company having the right to vote for the election of directors of the Company under ordinary circumstances; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by the board of directors of the Company or whose nomination for election by the stockholders of the Company was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; or (c) the Company ceases to own and control all of the economic and voting rights associated with all of the outstanding stock of Radnet Management, Inc. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. 2 (a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). (b) As a complete alternative to an exercise of this Warrant pursuant to subsection (a) hereof, the Holder may elect to exercise this Warrant in whole, but not in part, without being required to pay the Aggregate Warrant Price (a "Cashless Exercise") in accordance with the terms of this subsection (the "Net Issuance Right"). Upon electing a Cashless Exercise, the Holder shall be entitled to receive that number of Warrant Shares equal to the quotient obtained as the result of dividing (1) the product of (A) the excess of (i) the Fair Market Value of a Warrant Share on such date over (ii) the then current Warrant Price (as deter (c) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 3 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $1.26 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. (a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. (b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. (c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 1510 Cotner Avenue, Los Angeles, CA 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 4 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 28th day of April 2006. PRIMEDEX HEALTH SYSTEMS, INC. By: _____________________________________ Howard G. Berger, M.D., President 5 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 20____ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 6 EX-10.11 12 radnet_10qex10-11.txt WARRANT BETWEEN PRIMEDEX AND JEFFREY L. LINDEN, DATED JULY 30, 2004 EXHIBIT 10.11 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on July 30, 2009) THIS CERTIFICATE is issued in connection with the entry into the Subordination Agreement dated July 30, 2004, between Jeffrey L. Linden (the "Holder"), WELLS FARGO FOOTHILL, INC. and a subsidiary and affiliate of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on July 30, 2009 (the "Expiration Date"), Two Hundred Thousand (200,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.30 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 18. EXERCISABILITY. After July 30, 2004, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 19. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 20. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to another corporation, or c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (1) at least thirty (30) days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (2) in the case of any such transfer, disposition, dissolution, liquidation or winding up at least thirty (30) days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify ii) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and iii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 11. 21. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-I at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash or by check (as defined in and determined in accordance with the provisions of Section 9 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). 2 b) As a complete alternative to an exercise of this Warrant pursuant to subsection (a) hereof, the Holder may elect to exercise this Warrant in whole, but not in part, without being required to pay the Aggregate Warrant Price (a "Cashless Exercise") in accordance with the terms of this subsection (the "Net Issuance Right"). Upon electing a Cashless Exercise, the Holder shall be entitled to receive that number of Warrant Shares equal to the quotient obtained as the result of dividing i) the product of (A) the excess of (1) the Fair Market Value of a Warrant Share on such date over (2) the then current Warrant Price (as determined in accordance with the provisions of Section 9 hereof) multiplied by (b) the number of Warrant Shares then issuable under this Warrant on such date (the "Purchasable Shares") by ii) the Fair Market Value of a Warrant Share on such date. An election to make a Cashless Exercise shall be made by surrender of this Warrant together with a duly executed Net Issuance Form in the form attached hereto as Exhibit A-2 in the manner specified in subsection (a) hereof. For the purpose of any computation under this subsection, the Fair Market Value of a Warrant Share shall be deemed to be the price determined pursuant to the first applicable of the methods set forth in subsection (b) (1), (b) (2) or (b) (3) hereof. i) If shares of Common Stock are traded on a national securities exchange, in the over-the-counter market, or on a foreign national exchange, the Fair Market Value of a Warrant Share shall be deemed to be an amount equal to the quotient determined by dividing (1) the sum of (x) an amount equal to the average of the daily closing market prices (i.e., the average of the closing bid and asked prices) for thirty (30) consecutive Trading Days prior to such determination multiplied by the then outstanding number of shares and (y) an amount equal to the then current Warrant Price (as determined in accordance with the provisions of Section 9 hereof) multiplied by the Purchasable Shares by (2) the sum of (a) the then outstanding number of shares and (b) the number of Purchasable Shares. ii) If the Company is subject to a "Material Transaction" (as defined below in this subsection), the Fair Market Value of a Warrant Share shall be deemed to be an amount equal to the quotient determined by dividing (1) the sum of (x) an amount equal to the then current Warrant Price (as determined in accordance which the provisions of Section 9 hereof) multiplied by the Purchasable Shares and (y) the total price or consideration to be paid in the Material Transaction (or in the case of a sale of all or substantially all of the Company's assets, all of the outstanding number of shares, on an as Converted basis, other than the Purchasable Shares) and (b) the number of Purchasable Shares. For purposes of this section, on, a "Material Transaction" shall include an initial public offering of Common Stock, a tender offer for shares of Common Stock, a merger, or a sale of all or substantially all of the Company's assets. 3 iii) If the Fair Market Value per share of Common Stock cannot be ascertained by any of the methods set forth in subsections b(1) or b(2) immediately above, the Fair Market Value per share of Outstanding Common Stock shall be the value determined by the Company's board of directors in its sole discretion. c) In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new warrant expressing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 22. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant shares are issued. 23. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 24. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 25. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 26. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.30 subject to adjustment pursuant to Section 10 hereof. 4 27. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalization, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with a merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 28. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage prepaid, or delivered a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90225-3303, Attention to President, or b) to the Holder at 17956 Lake Vista Drive, Encino, California 91316. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 29. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 5 30. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 31. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 32. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 33. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 34. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its President, as of this 30th day of July, 2004. PRIMEDEX HEALTH SYSTEMS, INC. By:_________________________________ Howard G. Berger, M.D., President 6 EXHIBIT A-1 PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ___________________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (PLEASE PRINT NAME, ADDRESS AND SOCIAL SECURITY NO. OR TAXPAYER IDENTIFICATION NO.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ________________________, 200_ Name of Warrantholder:____________________________________________ (Please Print) Address: Signature: Signature Guaranteed NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 7 PRIMEDEX HEALTH SYSTEMS, INC. NET ISSUANCE FORM The undersigned hereby irrevocably elects to exercise the Net Issuance Right represented by the within Warrant for, and to purchase thereunder, shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (PLEASE PRINT NAME, ADDRESS AND SOCIAL SECURITY NO. OR TAXPAYER IDENTIFICATION NO.) and authorizes the Company to calculate the number of shares issuable following such exercise, as determined in accordance within Section 4(b) of the within Warrant. DATED: ________________________, 200_ Name of Warrantholder:_____________________________________________ (Please Print) Address: Signature: Signature Guaranteed NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 8 EX-10.12 13 radnet_10qex10-12.txt WARRANT BETWEEN PRIMEDEX AND JUDITH G. ROSE, DATED JUNE 7, 2005 EXHIBIT 10.12 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ACQUIRED HEREBY WILL BEAR THE SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on June 7, 2010) THIS CERTIFICATE is issued in connection with the agreement to enter into a Nuclear Medicine Imaging Services Agreement with Beverly Radiology Medical Group ("BRMG") which benefits Radnet Management, Inc., a California corporation ("Radnet") by providing quality of professional services, by Judith G. Rose, M.D., an individual residing in California, (the "Holder") and PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and parent of Radnet and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of June 7, 2010, or the date Holder ceases to provide services to BRMG pursuant to the Nuclear Medicine Imaging Services Agreement (the "Agreement") (the "Expiration Date"), One Hundred Thousand (100,000) shares ("Warrant Shares") of fully paid and non-assessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $0.36 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Provided Holder shall continuously render services to BRMG pursuant to the Agreement then and in that event Holder may exercise One Hundred Thousand (100,000) shares from and after June 7, 2005, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a. the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b. there shall be any capital reorganization of Company, any re-classification or re-capitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or c. a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16. 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-1 at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, by cashiers check or by bank wire transfer, of an amount equal to the then current Warrant Price (as defined and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b. In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless the Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant, PROVIDED HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $0.36 per share subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the Holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. a. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or Warrant price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In any case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage pre-paid, to the Holder notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage pre-paid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention President, or (b) to the Holder at 246 North Saltair Ave., Los Angeles, California 90049. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim u of the Company and the Holder. 16. CAPTIONS. The captions of the Sections and sub-sections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary, as of this 7th day of June, 2005. PRIMEDEX HEALTH SYSTEMS, INC. By:_________________________________ Howard G. Berger, M.D., President By:_________________________________ Norman Hames, Secretary 4 EXHIBIT A-1 PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ shares of the stock provided for therein and requests that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrant holder as below indicated and delivered to the address stated below. DATED: ___________________, 20__ Name of Warrantholder: _________________________________________________________ (Please Print) Address: Signature:________________________________________ Signature Guaranteed NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.13 14 radnet_10qex10-13.txt WARRANT BETWEEN PRIMEDEX AND MARK STOLPER, DATED JULY 30, 2004 EXHIBIT 10.13 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on July 30, 2004) THIS CERTIFICATE is issued inconsideration of the services rendered by Mark Stolper (the "Holder") in assisting PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company") in refinancing its outstanding institutional debt, and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of July 30, 2009 or the date Holder ceases to be an employee of Radnet Management, Inc. (the "Expiration Date"), Two Hundred Thousand (200,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.30 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After July 30, 2004, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to another corporation, or c) a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (1) at least thirty (30) days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (2) in the case of any such transfer, disposition, dissolution, liquidation or winding up at least thirty (30) days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify ii) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and iii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 11. 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-I at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash or by check (as defined in and determined in accordance with the provisions of Section 9 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b) As a complete alternative to an exercise of this Warrant pursuant to subsection (a) hereof, the Holder may elect to exercise this Warrant in whole, but not in part, without being required to pay the Aggregate Warrant Price (a "Cashless Exercise") in accordance with the terms of this subsection (the "Net Issuance Right"). Upon electing a Cashless Exercise, the Holder shall be entitled to receive that number of Warrant Shares equal to the quotient obtained as the result of dividing i) the product of (A) the excess of (1) the Fair Market Value of a Warrant Share on such date over (2) the then current Warrant Price (as determined in accordance with the provisions of Section 9 hereof) multiplied by (b) the number of Warrant Shares then issuable under this Warrant on such date (the "Purchasable Shares") by ii) the Fair Market Value of a Warrant Share on such date. An election to make a Cashless Exercise shall be made by surrender of this Warrant together with a duly executed Net Issuance Form in the form attached hereto as Exhibit A-2 in the manner specified in subsection (a) hereof. For the purpose of any computation under this subsection, the Fair Market Value of a Warrant Share shall be deemed to be the price determined pursuant to the first applicable of the methods set forth in subsection (b) (1), (b) (2) or (b) (3) hereof. 2 i) If shares of Common Stock are traded on a national securities exchange, in the over-the-counter market, or on a foreign national exchange, the Fair Market Value of a Warrant Share shall be deemed to be an amount equal to the quotient determined by dividing (1) the sum of (x) an amount equal to the average of the daily closing market prices (i.e., the average of the closing bid and asked prices) for thirty (30) consecutive Trading Days prior to such determination multiplied by the then outstanding number of shares and (y) an amount equal to the then current Warrant Price (as determined in accordance with the provisions of Section 9 hereof) multiplied by the Purchasable Shares by (2) the sum of (a) the then outstanding number of shares and (b) the number of Purchasable Shares. ii) If the Company is subject to a "Material Transaction" (as defined below in this subsection), the Fair Market Value of a Warrant Share shall be deemed to be an amount equal to the quotient determined by dividing (1) the sum of (x) an amount equal to the then current Warrant Price (as determined in accordance which the provisions of Section 9 hereof) multiplied by the Purchasable Shares and (y) the total price or consideration to be paid in the Material Transaction (or in the case of a sale of all or substantially all of the Company's assets, all of the outstanding number of shares, on an as Converted basis, other than the Purchasable Shares) and (b) the number of Purchasable Shares. For purposes of this section, on, a "Material Transaction" shall include an initial public offering of Common Stock, a tender offer for shares of Common Stock, a merger, or a sale of all or substantially all of the Company's assets. iii) If the Fair Market Value per share of Common Stock cannot be ascertained by any of the methods set forth in subsections b(1) or b(2) immediately above, the Fair Market Value per share of Outstanding Common Stock shall be the value determined by the Company's board of directors in its sole discretion. c) In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new warrant expressing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 3 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.30 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalization, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a) NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with a merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 4 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage prepaid, or delivered a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90225-3303, Attention to President, or b) to the Holder at 850 Moraga Drive, Unit 1, Los Angeles, California 900049. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its President, as of this 30th day of July, 2004. PRIMEDEX HEALTH SYSTEMS, INC. By:__________________________________ Howard G. Berger, M.D., President 5 PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ___________________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (PLEASE PRINT NAME, ADDRESS AND SOCIAL SECURITY NO. OR TAXPAYER IDENTIFICATION NO.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ________________________, 200_ Name of Warrantholder:____________________________________________ (Please Print) Address: Signature: Signature Guaranteed NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 6 PRIMEDEX HEALTH SYSTEMS, INC. NET ISSUANCE FORM The undersigned hereby irrevocably elects to exercise the Net Issuance Right represented by the within Warrant for, and to purchase thereunder, shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (PLEASE PRINT NAME, ADDRESS AND SOCIAL SECURITY NO. OR TAXPAYER IDENTIFICATION NO.) and authorizes the Company to calculate the number of shares issuable following such exercise, as determined in accordance within Section 4(b) of the within Warrant. DATED: ________________________, 200_ Name of Warrantholder:_____________________________________________ (Please Print) Address: Signature: Signature Guaranteed NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 7 EX-10.14 15 radnet_10qex10-14.txt WARRANT BETWEEN PRIMEDEX AND MARK STOLPER, DATED JULY 30, 2004 EXHIBIT 10.14 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ACQUIRED HEREBY WILL BEAR THE SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 p.m. Pacific time, on July 30, 2009) THIS CERTIFICATE is issued in connection with entry into an Employment Agreement with Radnet Management, Inc., a California corporation ("Radnet") by Mark Stolper, an individual residing in California, (the "Holder") and PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and parent of Radnet and certifies that the Holder is entitled to purchase from the Company, prior to 5:00 p.m., Pacific time, on the earlier of July 30, 2009, or ninety (90) days after the date Holder ceases to be an employee of Radnet (the "Expiration Date"), Four Hundred Fifty Thousand (450,000) shares ("Warrant Shares") of fully paid and non-assessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $0.30 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Provided Holder shall continuously be employed by Radnet then and in that event Holder may exercise (a) One Hundred Fifty Thousand (150,000) shares from and after July 30, 2005, (b) One Hundred Fifty Thousand (150,000) shares from and after July 30, 2006, and (d) One Hundred Fifty Thousand (150,000) shares from and after July 30, 2007, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. Notwithstanding the foregoing, this Warrant shall fully vest upon the equity ownership of Howard G. Berger, M.D. in the Company being reduced below twenty percent (20%). 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a. the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b. there shall be any capital reorganization of Company, any re-classification or re-capitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to, another corporation, or c. a dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 16. 4. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT. a. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A-1 at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, by cashiers check or by bank wire transfer, of an amount equal to the then current Warrant Price (as defined and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b. In the event of any exercise of this Warrant, certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless the Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant, PROVIDED HOWEVER, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $0.30 per share subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the Holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment. a. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares purchasable upon the exercise of this Warrant or Warrant price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 c. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In any case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have been entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage pre-paid, to the Holder notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage pre-paid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention President, or (b) to the Holder at 850 Moraga Drive, Unit 1, Los Angeles, California 90049. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. CAPTIONS. The captions of the Sections and sub-sections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and attested by its Secretary or an Assistant Secretary, as of this 30th day of July, 2004. PRIMEDEX HEALTH SYSTEMS, INC. By:_________________________________ Howard G. Berger, M.D., President By:_________________________________ Norman Hames, Secretary 4 EX-10.15 16 radnet_10qex10-15.txt WARRANT BETWEEN PRIMEDEX AND MARK STOLPER, DATED MARCH 1, 2004 EXHIBIT 10.15 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on March 1, 2009) THIS CERTIFICATE is issued in connection with Mark D. Stolper (the "Holder") having agreed to serve as a director of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on March 1, 2009 (the "Expiration Date"), Fifty Thousand (50,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.60 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After March 1, 2004 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. (a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). (b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.60 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. (a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. (b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 (c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 850 Moraga Drive, Los Angeles, California 90049. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 1st day of March, 2004. PRIMEDEX HEALTH SYSTEMS, INC. By: ___________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.16 17 radnet_10qex10-16.txt WARRANT BETWEEN PRIMEDEX AND MARK STOLPER, DATED JULY 11, 2006 EXHIBIT 10.16 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on July 11, 2011) THIS CERTIFICATE is issued in connection with the performance of services pursuant to the Employment Agreement between Mark D. Stolper (the "Holder") and Radnet Management, Inc., a California corporation, and wholly-owned subsidiary of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on July 11, 2011, or ninety (90) days after Holder ceases to be an employee of the Company, whichever first occurs (the "Expiration Date"), Two Hundred Thousand (200,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $1.55 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Holder may exercise (a) Sixty-Six Thousand Six Hundred Sixty-Six (66,666) shares from and after July 11, 2007, (b) Sixty-Six Thousand Six Hundred Sixty-Six (66,666) shares from and after July 11, 2008, (c) Sixty-Six Thousand Six Hundred Sixty-Seven (66,667) shares from and after July 11, 2009, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. Notwithstanding the foregoing, the vesting under this Warrant shall accelerate and become fully vested upon (i) a "change in control" of the Company or (ii) the closing price of the Company's Common Stock in the public market in which it trades averaging no less than $3.00 per share for thirty (30) consecutive days. A change of control is defined as: (a) any person or group of persons (within the meaning of the Securities Exchange Act of 1934) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 40% or more of the issued and outstanding shares of common stock of the Company having the right to vote for the election of directors of the Company under ordinary circumstances; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by the board of directors of the Company or whose nomination for election by the stockholders of the Company was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; or (c) the Company ceases to own and control all of the economic and voting rights associated with all of the outstanding stock of Radnet Management, Inc. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: a. The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or b. There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or c. A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. 2 a. This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). b. As a complete alternative to an exercise of this Warrant pursuant to subsection (a) hereof, the Holder may elect to exercise this Warrant in whole, but not in part, without being required to pay the Aggregate Warrant Price (a "Cashless Exercise") in accordance with the terms of this subsection (the "Net Issuance Right"). Upon electing a Cashless Exercise, the Holder shall be entitled to receive that number of Warrant Shares equal to the quotient obtained as the result of dividing (1) the product of (A) the excess of (i) the Fair Market Value of a Warrant Share on such date over (ii) the then current Warrant Price (as deter c. In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $1.55 subject to adjustment pursuant to Section 10 hereof. 3 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. a. NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. b. NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. c. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 1510 Cotner Avenue, Los Angeles, CA 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 4 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 11th day of July 2006. PRIMEDEX HEALTH SYSTEMS, INC. By: ____________________________________ Howard G. Berger, M.D., President 5 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 20____ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 6 EX-10.17 18 radnet_10qex10-17.txt WARRANT BETWEEN PRIMEDEX AND DAVID L. SWARTZ, DATED MARCH 28, 2006 EXHIBIT 10.17 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on March 28, 2011) THIS CERTIFICATE is issued in connection with David L. Swartz (the "Holder") having agreed to serve as a director of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on March 28, 2011 (the "Expiration Date"), Fifty Thousand (50,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.50 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After March 28, 2006 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. (a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). (b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 2 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.50 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. (a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. 3 (b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. (c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 11755 Wilshire Boulevard, 17th Floor, Los Angeles, California 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 4 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 1st day of March, 2004. PRIMEDEX HEALTH SYSTEMS, INC. By: ____________________________________ Howard G. Berger, M.D., President 5 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 6 EXHIBIT A-1 PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ______________ shares of the stock provided for therein and requests that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ___________________, 200_ Name of Warrantholder: ____________________________________________ (Please Print) Address: Signature:________________________________________ Signature Guaranteed: NOTE: The above signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or any change whatever. 7 EX-10.18 19 radnet_10qex10-18.txt WARRANT BETWEEN PRIMEDEX AND DAVID L. SWARTZ, DATED JULY 8, 2005 EXHIBIT 10.18 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on July 8, 2010) THIS CERTIFICATE is issued in connection with David L. Swartz (the "Holder") having agreed to serve as a director of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on July 8, 2010 (the "Expiration Date"), Fifty Thousand (50,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.40 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After July 8, 2010 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. (a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). (b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 2 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.40 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. (a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. (b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 (c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 11755 Wilshire Boulevard, 17th Floor, Los Angeles, California 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 8th day of July, 2005. PRIMEDEX HEALTH SYSTEMS, INC. By: ____________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.19 20 radnet_10qex10-19.txt WARRANT BETWEEN PRIMEDEX AND DAVID L. SWARTZ, DATED MARCH 1, 2004 EXHIBIT 10.19 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on March 1, 2009) THIS CERTIFICATE is issued in connection with David L. Swartz (the "Holder") having agreed to serve as a director of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on March 1, 2009 (the "Expiration Date"), Fifty Thousand (50,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.60 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. After March 1, 2004 and until the Expiration Date, the purchase rights represented by this Warrant are exercisable at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. (a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). (b) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 2 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.60 subject to adjustment pursuant to Section 10 hereof. 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. (a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. (b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. 3 (c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 11755 Wilshire Boulevard, 17th Floor, Los Angeles, California 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 1st day of March, 2004. PRIMEDEX HEALTH SYSTEMS, INC. By: ____________________________________ Howard G. Berger, M.D., President 4 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 200__ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 5 EX-10.20 21 radnet_10qex10-20.txt WARRANT BETWEEN PRIMEDEX AND NORMAN HAMES, DATED MARCH 27, 2006 EXHIBIT 10.20 THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY ANALOGOUS STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR LAWS, THE RULES AND REGULATIONS THEREUNDER OR THE PROVISIONS OF THIS WARRANT. ANY SHARES ISSUED UNDER THIS WARRANT WILL CONTAIN THIS SAME LEGEND. PRIMEDEX HEALTH SYSTEMS, INC. WARRANT TO PURCHASE SHARES OF COMMON STOCK (Void after 5:00 pm. Pacific time, on March 27, 2013) THIS CERTIFICATE is issued in connection with the extension of the Employment Agreement between Norman Hames (the "Holder") and Radnet Management, Inc., a California corporation, and wholly-owned subsidiary of PRIMEDEX HEALTH SYSTEMS, INC., a New York corporation (the "Company"), and certifies that the Holder is entitled to purchase from the Company prior to 5:00 pm., Pacific time, on March 27, 2013, or ninety (90) days after Holder ceases to be an employee of the Company, whichever first occurs (the "Expiration Date"), Three Million (3,000,000) shares ("Warrant Shares") of fully paid and nonassessable shares of common stock, par value $.01 per share, of the Company ("Common Stock") at a price of $.56 per share (the "Warrant Price"), or as otherwise provided herein, subject to the provisions and upon the terms and conditions hereinafter set forth. This Warrant is subject to the following additional terms and conditions. 1. EXERCISABILITY. Holder may exercise (a) Four Hundred Fifty Thousand (450,000) shares from and after May 1, 2007, (b) Four Hundred Fifty Thousand (450,000) shares from and after May 1, 2008, (c) Four Hundred Fifty Thousand (450,000) shares from and after May 1, 2009, (d) Four Hundred Fifty Thousand (450,000) shares from and after May 1, 2010, (e) Four Hundred Fifty Thousand (450,000) shares from and after May 1, 2011, (f) Four Hundred Fifty Thousand (450,000) shares from and after March 1, 2012, (g) Three Hundred Thousand (300,000) shares from and after May 1, 2012, and until the Expiration Date, the purchase rights represented by this Warrant are exercisable after vesting at the option of the Holder, either as an entirety, or from time to time for any part of the Warrant Shares which may be purchased hereunder. Notwithstanding the foregoing, the vesting under this Warrant shall accelerate and become fully vested upon (i) a "change in control" of the Company or (ii) the closing price of the Company's Common Stock in the public market in which it trades averaging no less than $3.00 per share for thirty (30) consecutive days. A change of control is defined as: (a) any person or group of persons (within the meaning of the Securities Exchange Act of 1934) shall have acquired beneficial ownership (within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 40% or more of the issued and outstanding shares of common stock of the Company having the right to vote for the election of directors of the Company under ordinary circumstances; (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the board of directors of the Company (together with any new directors whose election by the board of directors of the Company or whose nomination for election by the stockholders of the Company was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office; or (c) the Company ceases to own and control all of the economic and voting rights associated with all of the outstanding stock of Radnet Management, Inc. 2. RESERVATION OF WARRANT SHARES. The Company agrees at all times to reserve a sufficient number of shares of authorized but unissued Common Stock, when and as required for the purpose of complying with the terms of this Warrant. 3. NO RIGHTS AS SHAREHOLDER; NOTICES TO HOLDER. Nothing contained in this Warrant shall be construed as conferring upon the Holder the right to vote or to receive dividends or to consent or to receive notice as a shareholder in respect of any meeting of shareholders for the election of directors of the Company or any other matter, or any rights whatsoever as a shareholder of the Company. If, however, at any time prior to the expiration of this Warrant and prior to its exercise, any of the following events shall occur: (a) The Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend (other than a cash dividend payable out of earnings or earned surplus legally available for the payment of dividends under the laws of the jurisdiction of incorporation of Company) or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or (b) There shall be any capital reorganization of Company, any reclassification or recapitalization of the capital stock of Company or any consolidation or merger of Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of Company to another corporation, or (c) A dissolution, liquidation or winding up of the Company (other than in connection with a consolidation, merger, or sale of all or substantially all of its property, assets and business as an entirety) shall be proposed, then in any one or more of said events, the Company shall give to the Holder (i) at least 30 days' prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, liquidation or winding up, and (ii) in the case of any such transfer, disposition, dissolution, liquidation or winding up, at least 30 days' prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, proposed dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reorganization, reclassification, merger, consolidation, sale, transfer, proposed disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to the Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 15. 4. METHOD OF EXERCISE; PAYMENT: ISSUANCE OF NEW WARRANT. 2 (a) This Warrant may be exercised by the Holder, in whole or in part, by the surrender of this Warrant together with a duly executed Purchase Form in the form attached hereto as Exhibit A at the principal office of the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, or at such other office designated by the Company in writing to the Holder, and by payment to the Company in cash, or by check, of an amount equal to the then current Warrant Price (as defined in and determined in accordance with the provisions of Section 10 hereof) multiplied by the number of Warrant Shares being purchased (the "Total Exercise Price"). (b) As a complete alternative to an exercise of this Warrant pursuant to subsection (a) hereof, the Holder may elect to exercise this Warrant in whole, but not in part, without being required to pay the Aggregate Warrant Price (a "Cashless Exercise") in accordance with the terms of this subsection (the "Net Issuance Right"). Upon electing a Cashless Exercise, the Holder shall be entitled to receive that number of Warrant Shares equal to the quotient obtained as the result of dividing (1) the product of (A) the excess of (i) the Fair Market Value of a Warrant Share on such date over (ii) the then current Warrant Price (as deter (c) In the event of any exercise of this Warrant, Certificates for the shares of the number of full Warrant Shares so purchased shall be in the name of, and delivered to, the Holder, or as the Holder may direct (subject to restrictions upon transfer contained herein or under federal or state securities laws). Such delivery shall be made within ten (10) days after exercise of this Warrant and at the Company's expense and, unless this Warrant has been fully exercised or has expired, a new Warrant representing the number of shares of Common Stock, if any, with respect to which this Warrant shall not then have been exercised shall also be issued to the Holder within ten (10) days after exercise of this Warrant. 5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes, if any, attributable to the initial issuance of Warrant Shares upon the exercise of this Warrant; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issuance or delivery of any certificates for Warrant Shares in a name other than that of the registered Holder of this Warrant in respect of which such Warrant Shares are issued. 6. MUTILATED OR MISSING WARRANT. In case the certificate evidencing this Warrant shall be mutilated, lost, stolen or destroyed, the Company may in its discretion issue, and deliver in exchange and substitution for and upon cancellation of the mutilated Warrant certificate, or in lieu of and in Substitution for this Warrant certificate lost, stolen or destroyed, a new Warrant certificate of like tenor and representing an equivalent right or interest; but only upon receipt of evidence satisfactory to the Company of such loss, theft or destruction of this Warrant and indemnity, if requested, also satisfactory to the Company. The Holder shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company may prescribe. 7. EXCHANGE OF WARRANT CERTIFICATES FOR OTHER WARRANTS. This Warrant certificate, when surrendered properly endorsed at the principal offices of the Company set forth in Section 4 hereof, or at such other office designated by the Company in writing to the Holder, may be exchanged for another certificate or certificates of different denominations, of like tenor and representing in the aggregate the right to Purchase a like number of Warrant Shares. 8. TRANSFERABILITY. This Warrant is not transferable or assignable, in whole or in part. 9. WARRANT PRICE. The price per share at which Warrant Shares shall be purchasable upon exercise of this Warrant (the "Warrant Price") shall be $.56 subject to adjustment pursuant to Section 10 hereof. 3 10. ADJUSTMENT IN WARRANT PRICE. In the event of changes in the outstanding Common Stock of the Company by reason of stock dividends, split-ups, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, the number and class of shares available under this Warrant in the aggregate and the Warrant Price, shall be correspondingly adjusted to give the holder of this Warrant, in exercises for the same aggregate Warrant Price, the total number, class, and kind of shares as the holder would have owned had this Warrant been exercised prior to the event and had the holder continued to hold such shares until after the event requiring adjustment. (a) NOTICE OF ADJUSTMENT. Whenever this number of Warrant Shares Purchasable upon the exercise of this Warrant or Warrant Price of such Warrant Shares is adjusted, as herein provided, the Company shall promptly mail by first-class mail, postage prepaid, to the Holder notice of such adjustment or adjustments and shall deliver to the Holder a certificate of a firm of independent public accountants selected by the Board of Directors of the Company (who may be the regular accountants employed by the Company) setting forth the number of Warrant Shares purchasable upon the exercise of this Warrant and the Call Price and Warrant Price of such Warrant Shares after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. Such certificate shall be conclusive evidence of the correctness of such adjustment. (b) NO ADJUSTMENT FOR DIVIDENDS. Except as provided in this Section 10 hereof, no adjustment in respect of any dividend shall be made during the term of a Warrant or upon the exercise of a Warrant. (c) PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION, CONSOLIDATION, ETC. In case of any consolidation of the Company with or merger of the Company into another corporation, such successor corporation shall execute with the Holder a Warrant providing that such Holder shall have the right thereafter upon payment of the Warrant Price in effect immediately prior to such action to purchase upon exercise of this Warrant the kind and amount of shares and/or other consideration which he would have owned or have bean entitled to receive after the happening of such consolidation, merger, sale or conveyance had such Warrant been exercised immediately prior to such action. The Company shall mail by first class mail, postage prepaid, to the Holder, notice of the execution of any such agreement. Such Warrant shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in Section 10 hereof. The provisions of this subsection 10(c) shall similarly apply to successive consolidations, mergers, sales or conveyances. 11. NOTICES. Any notice pursuant to this Warrant by the Company to the Holder or by the Holder to the Company, shall be in writing and shall be mailed first-class, postage Prepaid, or delivered (a) to the Company at 1510 Cotner Avenue, Los Angeles, California 90025-3303, Attention to President, or (b) to the Holder at 1510 Cotner Avenue, Los Angeles, CA 90025. Each party hereto may from time to time change the address to which notices to it are to be delivered or mailed hereunder by notice in writing to the other party. 12. SUCCESSORS. All the covenants and provisions of this Warrant by or for the benefit of the Company or the Holder shall bind and inure to the benefit of the Company and the Holder. 13. MERGER OR CONSOLIDATION OF THE COMPANY. The Company will not merge or consolidate with or into any other corporation unless the corporation resulting from such merger or consolidation (if not the Company) shall expressly assume by supplemental agreement satisfactory in form to the holder of record of this Warrant and executed and delivered to such holder, the due and punctual performance and observance of each and every covenant and condition of this Warrant to be performed and observed by the Company. 4 14. APPLICABLE LAW. This Warrant shall be governed by and construed in accordance with the laws of the State of California without giving effect to principles of conflict of laws. 15. BENEFITS OF THIS WARRANT. Nothing in this Warrant shall be construed to give to any person or corporation other than the Company and the Holder any legal or equitable right, remedy or claim under this Warrant; but this Warrant shall be for the sole and exclusive benefit of the Company and the Holder. 16. COUNTERPARTS. This Warrant may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 17. CAPTIONS. The captions of the Sections and subsections of this Warrant have been inserted for convenience only and shall have no substantive effect. IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary, as of this 27th day of March 2006. PRIMEDEX HEALTH SYSTEMS, INC. By: _____________________________________ Howard G. Berger, M.D., President 5 EXHIBIT A PRIMEDEX HEALTH SYSTEMS, INC. PURCHASE FORM The undersigned hereby irrevocably elects to exercise the right of purchase represented by the within Warrant for, and to purchase thereunder, ________ shares of the stock provided for therein and request that certificates for such shares be issued in the name of: (Please Print Name, Address and Social Security No. or Taxpayer Identification No.) and, if said number of shares shall not be all the shares purchasable thereunder, that a new Warrant Certificate for the balance remaining of the shares Purchasable under the within Warrant Certificate be registered in the name of the undersigned Warrantholder as below indicated and delivered to the address stated below. DATED: ____________________, 20____ Name of Warrantholder: __________________________________________________ (Please Print) Address: Signature: Signature Guaranteed: NOTE: The above Signature must correspond with the name as written upon the face of this Warrant Certificate in every particular, without alteration or enlargement or change whatever. 6 EX-31.01 22 radnet_10qex31-01.txt CERTIFICATION EXHIBIT 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Howard G. Berger, M.D., certify that: 1. I have reviewed this quarterly report on Form 10-Q of RadNet, Inc. for the period ended June 30, 2008. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial (as defined in Exchange Act Rules 13a-15(e) and 15(d) -15(e)) and internal control over reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of this period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 11, 2008 /s/ Howard G. Berger, M.D. -------------------------------------- Howard G. Berger, M.D. President, Chief Executive Officer and Chairman of the Board of Directors EX-31.02 23 radnet_10qex31-02.txt CERTIFICATION EXHIBIT 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Mark D. Stolper, certify that: 1. I have reviewed this quarterly report on Form 10-Q of RadNet, Inc. for the period ended June 30, 2008. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial (as defined in Exchange Act Rules 13a-15(e) and 15(d) -15(e)) and internal control over reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of this period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: August 11, 2008 /s/ Mark D. Stolper Mark D. Stolper Executive Vice President and Chief Financial Officer EX-32.01 24 radnet_10qex32-01.txt CERTIFICATION EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of RadNet, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2008, as filed with the Securities and Exchange Commission on August 11, 2008 (the "Report"), I, Howard G. Berger, M.D., Chairman of the Board of Directors and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in the Report. /s/ Howard G. Berger, M.D. --------------------------------------- Howard G. Berger, M.D. Chairman, President and Chief Executive Officer (Principal Executive Officer) August 11, 2008 A signed original of this written statemn 906 has been provided to the Company and will be furnished to the srz or its staff upon request. EX-32.02 25 radnet_10qex32-02.txt CERTIFICATION EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of RadNet, Inc. (the "Company") on Form 10-Q for the quarterly period ended June 30, 2008, as filed with the Securities and Exchange Commission on August 11, 2008 (the "Report"), I, Mark D. Stolper, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of, and for the periods presented in the Report. /s/ Mark D. Stolper ------------------------------------- Mark D. Stolper Chief Financial Officer (Principal Financial Officer) August 11, 2008 A signed original of this written statement required by Section 906 has been provided to the Company and will be furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----