As filed with the Securities and Exchange Commission on August 22, 2006

 

Registration No. 333-

 

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM S-4

 

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

 


 

PRIMEDEX HEALTH SYSTEMS, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

New York

 

8071

 

13-3326724

(State or Other Jurisdiction of
Incorporation or Organization)

 

(Primary Standard Industrial
Classification Code Number)

 

(I.R.S. Employer
Identification Number)

 

1510 Cotner Avenue
Los Angeles, CA 90025
(310) 478-7808

(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

Howard G. Berger, M.D.
President, Chief Executive Officer and Director
Primedex Health Systems, Inc.
1510 Cotner Avenue
Los Angeles, CA 90025
(310) 478-7808

(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

Copies to:

 

Linda G. Michaelson, Esq.
C. Thomas Hopkins, Esq.
Sheppard, Mullin, Richter and Hampton LLP
1901 Avenue of the Stars, Suite 1600
Los Angeles, CA 90067
(310) 228-3700

 

Michael L. Silhol, Esq.
Senior Vice President, General Counsel
& Secretary

Radiologix, Inc.
3600 JPMorgan Chase Tower
2200 Ross Avenue Dallas, TX 75201-2776
(214) 303-2776

 

William R. Hays, III, Esq.
Brian D. Barnard, Esq.
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, TX 75202
(214) 651-5000

 

 

Approximate date of commencement of proposed sale to public: As soon as practicable following the effective date of this registration statement and the date on which all other conditions to the merger of PR Acquisition Corporation with and into Radiologix, Inc. pursuant to the merger agreement described in the enclosed document have been satisfied or waived.

 

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o

 

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

 



 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class

 

 

 

Proposed Maximum

 

Proposed Maximum

 

Amount of

 

of Securities to Be

 

Amount To Be

 

Offering Price Per

 

Aggregate Offering

 

Registration Fee

 

Registered

 

Registered(1)

 

Share(2)

 

Price(3)

 

(4)

 

Common shares, par value $.01 per share

 

22,621,922

 

Not applicable

 

$

28,761,493

 

$

3,126

 

 


(1)

 

The maximum number of shares of common stock of Primedex that may be registered is based on the maximum number of shares issuable upon consummation of the merger described in this joint proxy statement/prospectus.

 

 

 

(2)

 

Not included pursuant to Rule 457(o).

 

 

 

(3)

 

Based upon the average high and low sales prices of the common stock, par value $0.0001 per share, of Radiologix on the American Stock Exchange on August 16, 2006, multiplied by the maximum number of shares of common stock of Radiologix presently outstanding or issuable, less $42,950,000, which is the total cash consideration expected to be paid by Primedex for the outstanding common stock of Radiologix upon consummation of the merger described in this joint proxy statement/prospectus, in accordance with Rules 457(c) and (f), and estimated solely for the purpose of determining the amount of the registration fee pursuant to Rule 457.

 

 

 

(4)

 

This registrations fee assumes that Primedex has not exercised its option under the merger agreement to reduce the share consideration by up to 3.5 million shares and increase the cash consideration by $2 per share. In the event that Primedex elects to exercise this option, the registration fee will decrease.

 


 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 



 

The information in this joint proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

 

PRELIMINARY COPY
SUBJECT TO COMPLETION, DATED AUGUST 22, 2006

 

TO THE STOCKHOLDERS OF
PRIMEDEX HEALTH SYSTEMS, INC. AND
 RADIOLOGIX, INC.

 

Primedex Health Systems, Inc., which is referred to as “Primedex,” and Radiologix, Inc., which is referred to as “Radiologix,” have entered into an agreement and plan of merger for the acquisition of Radiologix by Primedex through the merger of a wholly-owned subsidiary of Primedex with and into Radiologix. Upon successful completion of the merger, Radiologix stockholders will receive a combination of cash and Primedex common stock in exchange for their shares of Radiologix common stock. Pursuant to the merger, Radiologix stockholders will receive aggregate consideration of 22,621,922 shares of Primedex common stock and $42,950,000 in cash. Based upon the [     ] closing price of Primedex common stock of [$     ], each Radiologix stockholder would receive [$     ] in cash for each Radiologix share, plus one share of Primedex common stock for total consideration valued at [$     ] per share. The merger agreement also provides Primedex the option to elect to reduce the share consideration by up to 3.5 million shares and to increase the cash consideration by $2 per share, provided that Primedex advises Radiologix of its election prior to the mailing of this proxy statement. Upon completion of the merger, we estimate that, subject to adjustment as described above, Radiologix’s former stockholders will own approximately [     %] of the then-outstanding shares of Primedex common stock, based on the number of shares of Radiologix and Primedex common stock outstanding on [    ], 2006. Primedex’s stockholders will continue to own their existing shares. In connection with the proposals set forth in this joint proxy statement/prospectus, Primedex stock may be subject to transfer restrictions which are necessary to preserve Primedex’s unrestricted use of its net operating loss carry-forwards.

 

Shares of Primedex common stock are currently traded on the Over-The-Counter Bulletin Board under the symbol “PMDX.OB.” Primedex intends to apply to have its shares of common stock listed on the American Stock Exchange upon completion of the merger or as soon as reasonably practicable thereafter. Upon completion of the merger, Radiologix common stock, which is currently traded on the American Stock Exchange under the symbol “RGX,” will be delisted.

 

The merger will be nontaxable for federal income tax purposes to Primedex and its stockholders. The merger will be taxable for federal income tax purposes to the stockholders of Radiologix.

 

We are each holding meetings of our stockholders in order to obtain those approvals necessary to consummate the merger and to approve other matters as described in this joint proxy statement/prospectus. At the Primedex annual meeting, Primedex will ask its common stockholders to adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of shares of Primedex common stock in connection with the merger and to approve other Primedex annual meeting matters described in this joint proxy statement/prospectus. At the Radiologix special meeting, Radiologix will ask its common stockholders to adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger, and to vote on the other Radiologix special meeting matters described in this joint proxy statement/prospectus. The obligations of Primedex and Radiologix to complete the merger are also subject to the satisfaction or waiver of several other conditions to the merger, including antitrust clearance. More information about Primedex, Radiologix and the proposed merger is contained in this joint proxy statement/prospectus. We urge you to read this joint proxy statement/prospectus, and the documents incorporated by reference into this joint proxy statement/prospectus, carefully and in their entirety, in particular, see “Risk Factors” beginning on page 41.

 

After careful consideration, each of our boards of directors has approved the merger agreement and has determined that the merger agreement and the merger are advisable and in the best interests of the stockholders of Primedex and Radiologix, respectively. Accordingly, the Radiologix board of directors recommends that the Radiologix stockholders vote FOR the adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and FOR the other Radiologix special meeting matters. The Primedex board of directors recommends that the Primedex stockholders vote FOR the adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of Primedex common stock to be issued in connection with the merger, and FOR the other Primedex annual meeting matters.

 

2



 

We are very excited about the opportunities the proposed merger brings to both Radiologix and Primedex stockholders, and we thank you for your consideration and continued support.

 

Howard G. Berger, M.D.
President and Chief Executive Officer

Primedex Health Systems, Inc.

 

Sami S. Abbasi
President and Chief Executive Officer

Radiologix, Inc.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this joint proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

This joint proxy statement/prospectus is dated [          ], 2006,
and is first being mailed to Radiologix and Primedex stockholders on or about [          ], 2006.

 

3



 

REFERENCES TO ADDITIONAL INFORMATION

 

Except where we indicate otherwise, as used in this joint proxy statement/prospectus, “Primedex” refers to Primedex and its consolidated subsidiaries and “Radiologix” refers to Radiologix and its consolidated subsidiaries. Primedex and Radiologix file annual, quarterly and special reports with the Securities and Exchange Commission, referred to as the “SEC,” that have not been included in or delivered with this joint proxy statement/prospectus. These annual, quarterly and special reports are available to you without charge upon your written or oral request. You can obtain Primedex’s and Radiologix’s reports filed with the SEC by accessing the SEC’s website maintained at “www.sec.gov.”

 

In addition, Primedex’s SEC filings are available to the public on Primedex’s website, www.radnetonline.com, and Radiologix’s SEC filings are available to the public on Radiologix’s website, www.radiologix.com. Information contained on Primedex’s website, Radiologix’s website or the website of any other person should not be considered by you as part of this joint proxy statement/prospectus.

 

Primedex will provide you with copies of this information relating to Primedex, without charge, if you request them in writing or by telephone from:

 

Primedex Health Systems, Inc.
1510 Cotner Avenue
Los Angeles, CA 90025
Attention: Investor Relations
(310) 478-7808

 

Radiologix will provide you with copies of this information relating to Radiologix, without charge, if you request them in writing or by telephone from:

 

Radiologix, Inc.

3600 JPMorgan Chase Tower

2200 Ross Avenue

Dallas, Texas 75201-2776

Attention: General Counsel

(214) 303-2776

 

If you would like to request documents, please do so by [     ], 2006, in order to receive them before the stockholder meetings.

 

Primedex has supplied all information contained in or incorporated by reference in this joint proxy statement/prospectus relating to Primedex, and Radiologix has supplied all information contained in or incorporated by reference in this joint proxy statement/prospectus relating to Radiologix.

 

4



 

RADIOLOGIX, INC.
3600 JPMorgan Chase Tower
2200 Ross Avenue
Dallas, Texas 75201-2776


NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [
          ], 2006

 

To the Stockholders of Radiologix, Inc.:

 

We will hold a special meeting of stockholders at 3900 JPMorgan Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201 at 9:00 a.m., Central Time, on [     ], 2006, unless postponed or adjourned to a later date. The Radiologix special meeting will be held for the following purposes:

 

1. To adopt the Agreement and Plan of Merger, dated as of July 6, 2006, by and among Radiologix, Inc., Primedex Health Systems, Inc., PR Acquisition Corporation, an indirect wholly-owned subsidiary of Primedex, and RadNet Management, Inc., a wholly-owned subsidiary of Primedex and sole stockholder of PR Acquisition Corporation, and the transactions contemplated by the merger agreement, including the merger, pursuant to which Primedex will acquire Radiologix through the merger of PR Acquisition Corporation with and into Radiologix, on the terms and subject to the conditions contained in the merger agreement, and Radiologix stockholders will receive aggregate consideration of 22,621,922 shares of Primedex common stock and $42,950,000 in cash. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus;

 

2. To approve adjournments or postponements of the Radiologix special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Radiologix special meeting to approve the above proposal; and

 

3. To consider and take action upon any other business that may properly come before the Radiologix special meeting or any reconvened meeting following an adjournment or postponement of the Radiologix special meeting.

 

These items of business are described in this joint proxy statement/prospectus. Only stockholders of record at the close of business on [     ], 2006, are entitled to notice of the Radiologix special meeting and to vote at the Radiologix special meeting and any adjournments or postponements of the Radiologix special meeting.

 

Radiologix’s board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, on July 6, 2006, and determined that the transactions contemplated by the merger agreement are advisable and fair to, and in the best interests of, Radiologix and its stockholders. Radiologix’s board of directors recommends that you vote FOR the adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger.

 

Radiologix’s board of directors also recommends that you vote FOR the other Radiologix special meeting proposals, all of which are described in detail in this joint proxy statement/prospectus. Approval of the other Radiologix special meeting proposals is not a condition to the merger.

 

Under Delaware law, appraisal rights will be available to Radiologix stockholders of record who vote against adoption of the merger agreement. To exercise your appraisal rights, you must strictly follow the procedures prescribed by Delaware law. These procedures are summarized in this joint proxy statement/prospectus.

 

Your vote is very important. Whether or not you plan to attend the Radiologix special meeting in person, please complete, sign and date the enclosed proxy card(s) or voting instruction card(s) as soon as possible and return it in the postage-prepaid envelope provided, as described in this joint proxy statement/prospectus. Completing a proxy now will not prevent you from being able to vote at the meeting by attending in person and casting a vote. However, if you do not return or submit the proxy or vote in person at the meeting, the effect will be the same as a vote AGAINST the proposal to adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger.

 

5



 

 

 

 

 

By order of the board of directors,

 

 

 

 

 

 

 

 

 

Michael L. Silhol
Senior Vice President, General Counsel and Secretary

 

Please vote your shares promptly. You can find instructions for voting on the enclosed proxy card or voting instruction card.

 

If you have questions, contact:

 

Radiologix, Inc.
3600 JPMorgan Chase Tower
2200 Ross Avenue
Dallas, Texas 75201-2776
Attention: General Counsel
(214) 303-2776

 

Dallas, Texas, [               ], 2006

 

Your vote is important. Please complete, date, sign and return your proxy
card(s) or voting instruction card(s), or vote your shares
at your earliest convenience so that your shares are represented at the meeting.

 

6



 

PRIMEDEX HEALTH SYSTEMS, INC.
1510 Cotner Avenue
Los Angeles, CA 90025

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON [
          ], 2006

 

To the Stockholders of Primedex Health Systems, Inc.:

 

The annual meeting of stockholders of Primedex Health Systems, Inc. (“Primedex”) will be held at [          ] at [9:00] a.m., Pacific Time, on [     ], 2006, unless postponed or adjourned to a later date. The Primedex annual meeting will be held for the following purposes:

 

1. To adopt the Agreement and Plan of Merger, dated as of July 6, 2006, by and among Radiologix, Inc., Primedex Health Systems, Inc., PR Acquisition Corporation, an indirect wholly-owned subsidiary of Primedex, and RadNet Management, Inc., a wholly-owned subsidiary of Primedex and sole stockholder of PR Acquisition Corporation, and the transactions contemplated by the merger agreement, including the merger and the issuance of shares of Primedex common stock in connection with the merger, pursuant to which PR Acquisition Corporation will merge with and into Radiologix, on the terms and subject to the conditions contained in the merger agreement, and Radiologix stockholders will receive aggregate consideration of 22,621,922 shares of Primedex common stock and $42,950,000 in cash. A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus;

 

2. To adopt an amendment to Primedex’s Certificate of Incorporation to change Primedex’s name to “RadNet, Inc.”;

 

3. To adopt an amendment to Primedex’s Certificate of Incorporation to (i) increase the number of authorized shares of Primedex common stock from 100,000,000 shares to 200,000,000 shares and reduce the par value of each share of common stock from $0.01 to $0.0001, (ii) undesignate all of Primedex’s preferred stock, and (iii) increase the authorized number of shares of Primedex preferred stock from 10,000,000 shares to 30,000,000 shares and reduce the par value of each share of preferred stock from $0.01 to $0.0001;

 

4. To adopt an amendment to Primedex’s Certificate of Incorporation to implement stock transfer restrictions to preserve Primedex’s unrestricted use of its net operating loss carry-forwards;

 

5. To adopt Primedex’s 2006 Stock Incentive Plan, substantially in the form attached hereto as Annex E;

 

6. To elect five directors to Primedex’s board of directors;

 

7. To ratify the appointment of Moss Adams LLP as Primedex’s independent registered public accounting firm for the fiscal year ending October 31, 2006;

 

8. To approve adjournments or postponements of the Primedex annual meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the Primedex annual meeting to approve the above proposals; and

 

9. To consider and take action upon any other business that may properly come before the Primedex annual meeting or any reconvened meeting following an adjournment or postponement of the Primedex annual meeting.

 

These items of business are described in this joint proxy statement/prospectus. Only stockholders of record at the close of business on [     ], 2006, are entitled to notice of the Primedex annual meeting and to vote at the Primedex annual meeting and any adjournments or postponements of the Primedex annual meeting.

 

Primedex’s board of directors unanimously approved the merger agreement and the transactions contemplated by the merger agreement, including the merger, on July 6, 2006, and determined that the transactions contemplated by the merger agreement are advisable and fair to, and in the best interests of, Primedex and its stockholders. Primedex’s board of directors recommends that you vote FOR the adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of Primedex common stock pursuant to the merger agreement.

 

7



 

Primedex’s board of directors also recommends that you vote FOR all of the other Primedex annual meeting proposals, all of which are described in detail in this joint proxy statement/prospectus. Approval of the other Primedex annual meeting proposals is not a condition to the merger.

 

If a class of equity securities of Primedex is not listed on the American Stock Exchange (or another applicable national securities exchange) at the time of the merger, under California law, any stockholder of Primedex will have the right to dissent from the merger by exercising dissenters’ rights. If a Primedex stockholder elects to exercise dissenters’ rights, the stockholder must precisely comply with all of the procedures set forth in Chapter 13 of the California General Corporation Law. These procedures are summarized in this joint proxy statement/prospectus.

 

Your vote is very important. Whether or not you plan to attend the Primedex annual meeting in person, please complete, sign and date the enclosed proxy card(s) or voting instruction card(s) as soon as possible and return it in the postage-prepaid envelope provided, or vote your shares by telephone or over the Internet as described in this joint proxy statement/prospectus. Completing a proxy now will not prevent you from being able to vote at the annual meeting by attending in person and casting a vote. However, if you do not return or submit the proxy or vote in person at the meeting, the effect will be the same as a vote AGAINST the proposal to adopt and approve the merger agreement and the transactions contemplated by the merger agreement, including the merger.

 

 

 

 

 

By order of the board of directors,

 

 

 

 

 

 

 

 

 

Norman R. Hames
Secretary and Vice President

 

Please vote your shares promptly. You can find instructions for voting on the enclosed proxy card or voting instruction card.

 

If you have questions, contact:

 

Primedex Health Systems, Inc.
1510 Cotner Avenue
Los Angeles, CA 90025
Attention: General Counsel
(310) 478-7808

 

Los Angeles, California, [     ], 2006

 

Your vote is important. Please complete, date, sign and return your proxy
card(s) or voting instruction card(s) or, if available, vote your shares by telephone or over the Internet
 at your earliest convenience so that your shares are represented at the meeting.

 

8



 

TABLE OF CONTENTS

 

SUMMARY

1

Information about Primedex

1

Information about Radiologix

1

Information about RadNet Management, Inc.

1

Information about PR Acquisition Corporation

1

The Merger

2

Financing of Merger

3

Fractional Shares

3

Radiologix Options and Unvested Shares

3

Recommendation of the Boards of Directors to Radiologix and Primedex Stockholders

4

Opinions of our Financial Advisors

4

Record Date; Outstanding Shares; Shares Entitled to Vote

5

Stock Ownership of Directors and Executive Officers

5

Ownership of Primedex After the Merger

5

Interests of Radiologix Directors and Executive Officers in the Merger

5

Primedex Board of Directors After the Merger

6

Listing of Primedex Common Stock and Delisting of Radiologix Common Stock

6

Appraisal and Dissenters’ Rights

6

Conditions to the Closing of the Merger

7

Termination of the Merger Agreement

9

Termination Fees and Expenses

11

Limitation on Considering Other Acquisition Proposals

13

Material United States Federal Income Tax Consequences

14

Accounting Treatment

15

Risks

15

Comparison of Rights of Stockholders

15

FINANCIAL SUMMARY

16

Primedex Market Price Data and Dividends

16

Radiologix Market Price Data and Dividends

16

Selected Historical Financial Data of Primedex

17

Selected Historical Financial Data of Radiologix

18

SELECTED CONSOLIDATED FINANCIAL DATA (in thousands, except per share data)

19

PRIMEDEX HEALTH SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

21

PRIMEDEX HEALTH SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET APRIL 30, 2006 (in thousands)

22

PRIMEDEX HEALTH SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the Six Months Ended April 30, 2006 (in thousands, except per share data)

23

PRIMEDEX HEALTH SYSTEMS, INC. UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS For the Twelve Months Ended October 31, 2005 (in thousands, except per share data)

24

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

25

QUESTIONS AND ANSWERS ABOUT THE STOCKHOLDER MEETINGS AND THE MERGER

30

The Merger

30

Other Primedex Annual Meeting Proposals

32

Other Radiologix Special Meeting Proposals

33

Procedures

34

COMPARATIVE PER SHARE INFORMATION

38

COMPARATIVE MARKET VALUE INFORMATION

39

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

40

RISK FACTORS

41

Risks Relating to the Merger

41

Risks Relating to Primedex’s Operations After the Consummation of the Merger

43

Risks Related to the Transfer Restrictions on Primedex Common Stock

52

Risks Related to Primedex’s Future use of NOLs

52

 

i



 

THE RADIOLOGIX SPECIAL MEETING

54

General

54

Date, Time and Place of the Radiologix Special Meeting

54

Purposes of the Radiologix Special Meeting

54

Record Date and Outstanding Voting Securities

54

Voting and Revocation of Proxies

54

Required Stockholder Vote

56

Recommendation of Board of Directors

56

Other Business; Adjournments or Postponements

56

Solicitation of Proxies

56

Voting Agreement

57

Security Ownership of Principal Stockholders, Directors and Executive Officers

57

Assistance

57

Appraisal and Dissenters’ Rights

57

Interest of Certain Persons in Matters to be Acted Upon

57

PROPOSAL NO. 1 ADOPTION OF THE MERGER AGREEMENT AND THE MERGER

58

Recommendation

58

PROPOSAL NO. 2 APPROVAL OF ADJOURNMENTS OR POSTPONEMENTS OF THE RADIOLOGIX SPECIAL MEETING

59

Recommendation

59

THE PRIMEDEX ANNUAL MEETING

60

General

60

Date, Time and Place of the Primedex Annual Meeting

60

Purposes of the Primedex Annual Meeting

60

Record Date and Outstanding Voting Securities

60

Voting and Revocation of Proxies

61

Required Stockholder Vote

62

Recommendation by the Board of Directors

63

Other Business; Adjournments or Postponements

63

Solicitation of Proxies

64

Security Ownership of Principal Stockholders, Directors and Executive Officers

64

Assistance

64

Appraisal and Dissenters’ Rights

64

Interest of Certain Persons in Matters to be Acted Upon

64

Stockholder Proposals and Nominations

64

PROPOSAL NO. 1 ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER AND ISSUANCE OF PRIMEDEX COMMON STOCK PURSUANT TO THE MERGER AGREEMENT

65

Recommendation

65

PROPOSAL NO. 2 AMENDMENT TO CERTIFICATE OF INCORPORATION TO CHANGE NAME TO “RADNET, INC.”

66

Purpose of Proposed Name Change

66

Restated Certificate of Incorporation

66

Effect of Name Change on Stockholders

66

New Trading Symbol

66

Recommendation

66

PROPOSAL NO. 3 — AMENDMENT TO CERTIFICATE OF INCORPORATION TO INCREASE AUTHORIZED NUMBER OF SHARES

67

Purpose and Effect of the Amendment

67

Existing Anti-Takeover Mechanisms

68

Recommendation

69

PROPOSAL NO. 4 — AMENDMENT TO CERTIFICATE OF INCORPORATION TO IMPLEMENT TRANSFER RESTRICTIONS

70

Introduction

70

Limitations on use of NOLs

70

Expiration of Transfer Restrictions

74

Reasons for Transfer Restrictions

74

Interests of Certain Persons

74

Recommendation

74

 

ii



 

PROPOSAL NO. 5 — APPROVAL OF THE 2006 STOCK INCENTIVE PLAN

75

Description of the Proposal

75

Description of the 2006 Equity Incentive Plan

75

Award Types

76

Other Provisions of the 2006 Plan

78

Certain Federal Income Tax Information

78

Plan Benefits

79

Amendment and Termination

79

PROPOSAL NO. 6 — ELECTION OF DIRECTORS

81

Recommendation

81

PROPOSAL NO. 7 — RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

82

Audit Committee Pre-Approval Policy

82

Recommendation

82

PROPOSAL NO. 8 – APPROVAL OF ADJOURNMENTS OR POSTPONEMENTS OF THE PRIMEDEX ANNUAL MEETING

83

Recommendation

83

THE MERGER

84

Background of the Merger

84

Radiologix’s Reasons for the Merger and Recommendation of Radiologix’s Board of Directors

88

Primedex’s Reasons for the Merger and Recommendation of Primedex’s Board of Directors

89

Opinions of Our Financial Advisors

91

Interests of Radiologix Directors and Executive Officers in the Merger

105

Primedex Board of Directors After the Merger

106

Employment, Change of Control and Severance Agreements

106

Employment Agreements

106

Change of Control Agreements

106

Settlement Payments to Executive Officers

107

Equity-Based Awards

107

Retirement Benefits; Profit Sharing Plan; Welfare Benefit Plan

108

Financing of the Merger

108

Accounting Treatment

108

Appraisal and Dissenters’ Rights

109

Appraisal Rights of Radiologix Stockholders

109

Appraisal Rights of Primedex Stockholders

111

Delisting and Deregistration of Radiologix Common Stock

113

Federal Securities Laws Consequences; Resale Restrictions; Transfer Restrictions

113

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

115

U.S. Holders

115

Non-U.S. Holders

116

THE MERGER AGREEMENT

118

The Merger

118

Parties to the Merger Agreement

118

Completion and Effectiveness of the Merger

118

Conversion of Shares; Procedures for Exchange of Certificates

118

Financing of the Merger

119

Fractional Shares

119

Radiologix Options and Unvested Shares

119

Voting Agreement

119

Representations and Warranties

119

Material Adverse Effect

120

Conduct of Business Pending the Merger

121

Limitation on Considering Other Acquisition Proposals

123

Conditions to the Closing of the Merger

125

Termination of the Merger Agreement

127

Termination Fees and Expenses

128

Indemnification and Insurance for Radiologix’s Directors and Officers

131

 

iii



 

Extension, Waiver and Amendment of the Merger Agreement

131

COMPARISON OF RIGHTS OF STOCKHOLDERS

132

Authorized Capital Stock

132

Voting Rights

132

Cumulative Voting

133

Stockholders Meetings

133

Matters Relating to the Board of Directors

135

Preemptive Rights

136

Dividends

136

Limitation of Personal Liability of Directors

137

Indemnification of Directors and Officers

137

Anti-Takeover Matters

138

Certain Business Combination Restrictions

138

Vote on Certain Fundamental Issues

138

Amendments to Constituent Documents

138

INFORMATION ABOUT PRIMEDEX

140

Business

140

General

140

Facilities

145

Diagnostic Imaging Equipment

145

Information Technology

145

Employees

146

Marketing

146

Suppliers

147

Competition

147

Insurance

147

Regulation

148

Environmental Matters

152

Properties

152

Legal Proceedings

153

Directors and Executive Officers of Primedex

154

Attendance at Board Meetings

155

Director Attendance at Annual Meetings

155

Communications with the Board

155

Committees of the Board

155

Director Nomination Procedures

156

Director Compensation

156

Compensation Committee Interlocks and Insider Participation

156

Compliance with Section 16(a) of the Exchange Act

157

Code of Ethics for Senior Financial Officers

157

Executive Compensation

157

SUMMARY COMPENSATION TABLE

157

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES

158

STOCK INCENTIVE PLAN

159

Administration

159

Eligibility

159

Amount of Awards

159

Stock Options

159

Other Awards

160

Performance Criteria

160

Amendments

160

Employment Agreements

161

Report of the Audit Committee

162

Report on Executive Compensation

163

Stock Performance Graph

164

Stock Ownership of Directors and Executive Officers

165

Securities Authorized for Issuance Under Equity Compensation Plans

165

EQUITY COMPENSATION PLAN INFORMATION

166

 

iv



 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF PRIMEDEX

167

Overview

167

Adoption of SFAS No. 123(R) and Equity-Based Compensation Expense

168

Primedex’s Relationship With BRMG

168

Results of Operations

169

Six Months Ended April 30, 2005 Compared To The Six Months Ended April 30, 2006

169

Year Ended October 31, 2005 Compared To The Year Ended October 31, 2004

172

Year Ended October 31, 2004 Compared To The Year Ended October 31, 2003

175

Financial Condition

178

Critical Accounting Estimates

180

Recent Events

182

Recent Accounting Pronouncements

182

Quantitative and Qualitative Disclosures About Market Risk

183

INFORMATION ABOUT RADIOLOGIX

184

Overview

184

Competitive Strengths/Business Strategy

184

Diagnostic Imaging Centers

185

Contracted Radiology Practices

187

Sales and Marketing

187

Government Regulation and Supervision

188

Competition

191

Corporate Liability and Insurance

192

Employees

193

Properties

193

Legal Proceedings

193

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF RADIOLOGIX

194

Restatement of Financial Statements

194

Overview

194

Results of Operations

195

Six Months Ended June 30, 2006 Compared to Six Months Ended June 30, 2005

196

Year Ended December 31, 2005 Compared to Year Ended December 31, 2004

198

Imaging Centers – Questar

198

Management Services Agreements

199

Mid-Atlantic Management Services Agreement

199

Other Charges

200

Operating Expenses

201

SUMMARY OF OPERATIONS BY QUARTER

203

LIQUIDITY AND CAPITAL RESOURCES

204

CRITICAL ACCOUNTING POLICIES

205

SECURITY OWNERSHIP OF CERTAIN OWNERS OF RADIOLOGIX

208

DESCRIPTION OF PRIMEDEX CAPITAL STOCK

210

LEGAL MATTERS

211

EXPERTS

211

SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS

211

WHERE YOU CAN FIND MORE INFORMATION

211

 

 

INDEX TO FINANCIAL STATEMENTS

 

Primedex:

 

Consolidated Financial Statements for the Years Ended October 31, 2003, 2004 and 2005

 

Consolidated Balance Sheets as of October 31, 2004 and 2005

F-3

Consolidated Statements of Operations for the Years Ended October 31, 2003, 2004 and 2005

F-4

Consolidated Statements of Stockholders’ Deficit for the Years Ended October 31, 2003, 2004 and 2005

F-5

Consolidated Statements of Cash Flows for the Years Ended October 31, 2003, 2004 and 2005

F-6

Notes to Consolidated Financial Statements

F-8

 

v



 

Consolidated Financial Statements for the Six Months Ended April 30, 2005 and 2006

 

Consolidated Balance Sheets as of April 30, 2006 (Unaudited) and October 31, 2005 (Audited)

F-26

Consolidated Statements of Operations (Unaudited) for the six months ended April 30, 2005 and 2006

F-27

Consolidated Statement of Stockholders’ Deficit Unaudited for the six months ended April 30, 2006

F-28

Consolidated Statements of Cash Flows (Unaudited) for the six months ended April 30, 2005 and 2006

F-29

Notes to Consolidated Financial Statements (Unaudited)

F-30

 

 

Radiologix:

 

Consolidated Financial Statements for the Years Ended December 31, 2005, 2004 and 2003

 

Consolidated Balance Sheets as of December 31, 2004 and 2005

F-39

Consolidated Statements of Operations for the Years Ended December 31, 2005, 2004 and 2003

F-40

Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2005, 2004 and 2003

F-41

Consolidated Statements of Cash Flows for the Years Ended December 31, 2005, 2004 and 2003

F-42

Notes to Consolidated Financial Statements

F-43

 

 

Consolidated Financial Statements for the Six Months Ended June 30, 2005 and 2006 (Unaudited)

 

Consolidated Balance Sheets as of June 30, 2006 (Unaudited) and December 31, 2005 (Audited)

F-77

Consolidated Statements of Operations (Unaudited) for the six months ended June 30, 2005 and 2006

F-78

Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2005 and 2006

F-79

Notes to Consolidated Financial Statements (Unaudited)

F-80

 

 

ANNEX A – Agreement and Plan of Merger

A-1

ANNEX B – Form of Amendment to Certificate of Incorporation

B-1

ANNEX C – Opinion of Bear, Stearns & Co. Inc.

C-1

ANNEX D – Opinion of Jefferies & Company, Inc.

D-1

ANNEX E – 2006 Equity Incentive Plan

E-1

ANNEX F – Selected Provisions of the Delaware General Corporation Law Regarding Appraisal Rights

F-1

ANNEX G – Selected Provisions of the California General Corporation Law Regarding Dissenters’ Rights

G-1

ANNEX H – Primedex Health Systems, Inc. Audit Committee Of The Board Of Directors Charter

H-1

ANNEX I – Form of Proxy Card for Radiologix Common Stockholder

I-1

ANNEX J – Form of Proxy Card for Primedex Common Stockholder

J-1

 

vi



 

SUMMARY

 

This summary of the material information contained in this joint proxy statement/prospectus may not include all the information that is important to you. To fully understand the proposed merger, and for a more detailed description of the terms and conditions of the merger and other matters being considered at your stockholder meeting, you should read this entire joint proxy statement/prospectus and the documents to which we have referred you. See “Where You Can Find More Information” beginning on page 211. We have included page references parenthetically in this summary to direct you to a more detailed description of each topic presented in this summary.

 

Information about Primedex (beginning on page 140)

 

Primedex, a New York corporation, through its subsidiaries, operates a group of regional networks comprised of 61 fixed-site, freestanding outpatient diagnostic imaging facilities in California. Primedex is headquartered in California and employs approximately 992 full-time, 65 part-time and 120 per-diem employees. Howard G. Berger, M.D. is Primedex’s President and Chief Executive Officer, a member of Primedex’s Board of Directors and owns approximately 30% of Primedex’s outstanding common stock. Dr. Berger also owns, indirectly, 99% of the equity interests in Beverly Radiology Medical Group III, or BRMG. BRMG provides all of the professional medical services at 46 of Primedex’s facilities under a management agreement with Primedex, and contracts with various other independent physicians and physician groups to provide the professional medical services at most of Primedex’s other facilities.

 

Primedex Health Systems, Inc.
1510 Cotner Avenue
Los Angeles, CA 90025
Attention: General Counsel
(310) 478-7808

 

Information about Radiologix (beginning on page 184)

 

Radiologix, a Delaware corporation, through its subsidiaries, is a national provider of diagnostic imaging services through the ownership and operation of freestanding, outpatient diagnostic imaging centers. Radiologix owns, operates and maintains equipment in 69 locations, with imaging centers located in 7 states, including primary operations in the Mid-Atlantic; the Bay Area, California; the Treasure Coast area, Florida; Northeast Kansas; and the Finger Lakes (Rochester) and Hudson Valley areas of New York state.

 

Radiologix, Inc.
3600 JPMorgan Chase Tower
2200 Ross Avenue
Dallas, Texas 75201-2776
Attention: General Counsel
(214) 303-2776

 

Information about RadNet Management, Inc.

 

RadNet Management, Inc., a Delaware corporation, and a wholly-owned subsidiary of Primedex, is the operating subsidiary through which Primedex conducts its operations.

 

RadNet Management, Inc.

1510 Cotner Avenue

Los Angeles, CA  90025

Attention:  General Counsel

(310) 478-7808

 

Information about PR Acquisition Corporation

 

PR Acquisition Corporation, a Delaware corporation, which is referred to as “Merger Sub,” is a direct wholly-owned subsidiary of RadNet Management, Inc. and an indirect wholly-owned subsidiary of Primedex. PR Acquisition Corporation has not engaged in any

 

1



 

business activity other than activities related to the purpose of merging with Radiologix. If the merger is completed, Merger Sub will cease to exist following its merger with and into Radiologix.

 

PR Acquisition Corporation

1510 Cotner Avenue

Los Angeles, CA  90025

Attention:  General Counsel

(310) 478-7808

 

The Merger (beginning on page 84)

 

General

 

On July 6, 2006, the boards of directors of Radiologix and Primedex each unanimously approved the merger of Radiologix with Merger Sub, a newly formed and wholly-owned indirect subsidiary of Primedex, upon the terms and subject to the conditions contained in the merger agreement. The surviving company of the merger will become a wholly-owned indirect subsidiary of Primedex.

 

We encourage you to read the merger agreement, which governs the merger and is attached as Annex A to this joint proxy statement/prospectus, because it sets forth the terms of the merger of Merger Sub with and into Radiologix.

 

Merger Consideration

 

If the merger is completed, holders of Radiologix common stock (other than dissenting Radiologix stockholders who properly exercise their appraisal rights) will be entitled to receive aggregate consideration of 22,621,922 shares of Primedex and $42,950,000 in cash (cash and stock together is referred to as the “merger consideration”). After the merger is completed, Radiologix stockholders will have the right to receive the merger consideration but they will no longer have any rights as Radiologix stockholders. Based upon the closing price of Primedex common stock on            , 2006, the record date, of $     , each Radiologix stockholder would receive $       in cash for each Radiologix share, plus one share of Primedex common stock for total consideration valued at $      per share. Based upon the closing price of Primedex common stock, on             , 2006, the record date, of $     , Radiologix stockholders will collectively own approximately      % of the Primedex shares on a fully diluted basis. The merger agreement also provides Primedex the option to elect to reduce the share consideration by up to 3.5 million shares and to increase the cash consideration by $2 per share, provided that Primedex advises Radiologix of its election prior to the mailing of this Proxy Statement. In connection with the proposals set forth in this proxy statement, Primedex’s common stock may be subject to transfer restrictions which are necessary to preserve Primedex’s unrestricted use of its net operating loss carry-forwards. Radiologix stockholders will receive the merger consideration after exchanging their Radiologix certificates in accordance with the instructions contained in the letter of transmittal to be sent to all Radiologix stockholders shortly after the closing of the merger.

 

The total value of the merger consideration that a Radiologix stockholder receives in the merger may vary. The value of the stock portion of the merger consideration is not fixed and will depend upon the value of Primedex common stock on the effective date of the merger. This value may be ascertained by multiplying the trading price of Primedex common stock by the number of shares of Primedex common stock received in the merger. The value of the cash portion of the merger consideration will depend on the amount of cash delivered to Radiologix option holders. As illustrated in the table below, the cash portion of the merger consideration decreases as the value of Primedex common stock on the effective date of the merger increases. This result occurs because additional Radiologix option holders will receive cash out of the merger consideration equal to the difference between the value of the per share merger consideration and the exercise price per share of their options, as the value of Primedex common stock becomes greater than the exercise price of the option holder’s option. As more Radiologix option holders hold options that are “in-the-money,” the amount of cash delivered to such option holders increases and the cash available to the Radiologix stockholders decreases.

 

Hypothetical Trading
Price of Primedex’s Common
Stock

 

Cash Consideration

 

Corresponding Value
of Merger
Consideration

 

$

1.50

 

$

1.85

 

$

3.35

 

$

1.55

 

$

1.85

 

$

3.40

 

$

1.60

 

$

1.85

 

$

3.45

 

$

1.65

 

$

1.85

 

$

3.50

 

$

1.70

 

$

1.85

 

$

3.55

 

$

1.75

 

$

1.84

 

$

3.59

 

$

1.80

 

$

1.84

 

$

3.64

 

$

1.85

 

$

1.84

 

$

3.69

 

$

1.90

 

$

1.84

 

$

3.74

 

$

1.95

 

$

1.83

 

$

3.78

 

$

2.00

 

$

1.83

 

$

3.83

 

 

2



 

The merger agreement also provides Primedex the option to elect to reduce the share consideration by up to 3.5 million shares and to increase the cash consideration by $2 per share for those shares, provided that Primedex advises Radiologix of its election prior to the mailing of this Proxy Statement. Assuming a hypothetical trading price of Primedex’s common stock of $2.00 on the effective date of the merger, the table below illustrates the corresponding value of the merger consideration that each Radiologix stockholder will receive based on the corresponding reduction in share consideration that Primedex elects.

 

 

 

 

 

 

 

Per share consideration

 

Hypothetical Reduction in
Share Consideration
Elected by Primedex

 

Hypothetical Trading
Price of Primedex’s
Common Stock

 

Exchange
Ratio

 

Stock
Consideration

 

Cash Consideration

 

Corresponding Value
of Merger
Consideration

 

500,000

 

$

2.00

 

.978

 

$

1.96

 

$

1.87

 

$

3.83

 

1,000,000

 

$

2.00

 

.956

 

$

1.91

 

$

1.92

 

$

3.83

 

1,500,000

 

$

2.00

 

.934

 

$

1.87

 

$

1.96

 

$

3.83

 

2,000,000

 

$

2.00

 

.911

 

$

1.82

 

$

2.01

 

$

3.83

 

2,500,000

 

$

2.00

 

.889

 

$

1.78

 

$

2.05

 

$

3.83

 

3,000,000

 

$

2.00

 

.867

 

$

1.73

 

$

2.10

 

$

3.83

 

3,500,000

 

$

2.00

 

.845

 

$

1.69

 

$

2.14

 

$

3.83

 

 

Financing of Merger

 

Primedex has signed a commitment letter with GE Commercial Finance Healthcare Financial Services for a $405 million senior secured credit facility. The facility is expected to be used to finance the merger, to refinance existing indebtedness, to pay transaction costs and expenses relating to the merger and the credit facility and to provide financing for working capital needs post-merger. Consummation of the financing is a condition to the closing of the merger.

 

Fractional Shares

 

No fractional Primedex common shares will be issued in the merger. Instead, holders who would otherwise be entitled to receive a fractional share of Primedex common stock will receive an amount in cash (without interest) determined by multiplying the fractional share interest by the average closing price for a share of Primedex common stock as reported on the Over-The-Counter Bulletin Board for the ten trading days prior to, but not including, the effective time of the merger.

 

Radiologix Options and Unvested Shares

 

Radiologix Stock Options

 

Holders of unvested options exercisable for Radiologix common stock will become vested in their options as a result of the merger. Holders of options exercisable for Radiologix common stock, whose exercise price per share is less than the value of the per share merger consideration, will receive for each share subject to such options an amount in cash out of the aggregate merger consideration equal to the difference between the value of the per share merger consideration and the exercise price per share of their options. Options exercisable for Radiologix common stock with an exercise price per share that is greater than the value of the per share merger consideration shall not be assumed or substituted by Primedex but shall vest upon the effective date of the merger and become fully exercisable to the holder of such option pursuant to the terms of the applicable option agreement. Any vested option that is not exercised prior to the effective time shall terminate and be void as of the effective time of the merger.

 

3



 

Unvested Shares of Radiologix Common Stock

 

Immediately prior to the effective time of the merger, Radiologix will have cancelled, repurchased, accelerated, vested or otherwise extinguished or awarded all shares of Radiologix common stock that are restricted, not fully vested or subject to any other restriction, and there will be no remaining unvested shares of Radiologix common stock at the effective time of the merger.

 

Recommendation of the Boards of Directors to Radiologix and Primedex Stockholders (beginning on page 88)

 

Radiologix Stockholders

 

The Radiologix board of directors believes that the merger agreement and the transactions contemplated by the merger agreement, including the merger, are advisable and fair to, and in the best interests of, Radiologix and its stockholders and has approved the merger agreement and the transactions contemplated by the merger agreement, including the merger. The Radiologix board of directors has unanimously resolved to recommend that Radiologix stockholders vote FOR the adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger.

 

Primedex Stockholders

 

The Primedex board of directors believes that the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of Primedex common stock pursuant to the merger agreement, are advisable and fair to, and in the best interests of, Primedex and its stockholders and has approved the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of shares of Primedex common stock pursuant to the merger agreement. The Primedex board of directors has unanimously resolved to recommend that Primedex stockholders vote FOR the approval and adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger and the issuance of Primedex common stock pursuant to the merger agreement.

 

Opinions of our Financial Advisors (beginning on page 91)

 

Opinion of Radiologix’s Financial Advisor

 

In deciding to approve the merger agreement, the Radiologix board of directors considered the opinion of Radiologix’s financial advisor, Bear, Stearns & Co. Inc., which is referred to as “Bear Stearns.” The Radiologix board of directors received a written opinion from Bear Stearns to the effect that, as of July 6, 2006, and based upon and subject to the various considerations, assumptions and limitations described in its opinion, the merger consideration to be received by holders of shares of Radiologix common stock pursuant to the merger agreement was fair, from a financial point of view, to such holders. The full text of Bear Stearns’ written opinion is attached to this joint proxy statement/prospectus as Annex C. Radiologix encourages you to read this opinion carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken. Bear Stearns’ opinion is addressed to the Radiologix board of directors and is one of many factors considered by the Radiologix board of directors in deciding to approve the merger. Bear Stearns’ opinion does not constitute a recommendation to any stockholder as to how such stockholder should vote or whether such stockholder should take any other action relating to the transaction. For its services, Bear Stearns will be entitled to receive a transaction fee equal to 1.10% of the total aggregate value of the merger consideration paid to Radiologix stockholders, currently estimated to be $2,200,000, the principal portion of which is payable upon the completion of the transaction.

 

Opinion of Primedex’s Financial Advisor

 

Jefferies & Company, Inc., which is referred to as “Jefferies,” served as Primedex’s financial advisor in connection with the merger. On July 6, 2006, Jefferies rendered to Primedex’s board of directors its opinion as investment bankers to the effect that, as of that date and based upon and subject to the various considerations and assumptions set forth therein, the aggregate merger consideration of 22,621,922 shares of Primedex common stock and $42.95 million in cash to be paid by Primedex pursuant to the merger was fair, from a financial point of view, to Primedex. The full text of the Jefferies opinion, which sets forth the assumptions made, matters considered and limitations on the scope of review undertaken by Jefferies in rendering its opinion, is attached to this joint proxy statement/prospectus as Annex D. The Jefferies opinion was provided to Primedex’s board of directors in connection with its consideration of the merger. The Jefferies opinion does not constitute a recommendation as to how any Primedex stockholder should vote on the merger or any other matter. For its services, Jefferies will be entitled to a transaction fee of $2,000,000, of which $500,000 was paid upon delivery of its opinion and the balance of which is payable upon the completion of the transaction.

 

4



 

Record Date; Outstanding Shares; Shares Entitled to Vote (beginning on page 60 for Primedex and 54 for Radiologix)

 

Radiologix Stockholders

 

The record date for the special meeting of Radiologix stockholders was [     ], 2006. This means that you must have been a stockholder of record of Radiologix’s common stock at the close of business on [     ], 2006, in order to vote at the special meeting. You are entitled to one vote for each share of common stock you own.

 

Contrarian Equity Fund, L.P., the largest single Radiologix stockholder, which owns approximately 16.4% of the outstanding shares of Radiologix common stock, is a party to a voting agreement with Primedex under which it is obligated to vote its shares in favor of adopting the merger agreement and the merger.

 

Primedex Stockholders

 

The record date for the annual meeting of Primedex stockholders was [     ], 2006. This means that you must have been a stockholder of record of Primedex’s common stock at the close of business on [     ], 2006, in order to vote at the annual meeting. You are entitled to one vote for each share of common stock you own.

 

Stock Ownership of Directors and Executive Officers

 

Radiologix

 

At the close of business on the record date for the Radiologix special meeting, directors and executive officers of Radiologix and their affiliates beneficially owned and were entitled to vote approximately 1,671,431 shares of Radiologix common stock, collectively representing 7.4% of the shares of Radiologix common stock outstanding on that date.

 

Primedex

 

At the close of business on the record date for the Primedex annual meeting, directors and executive officers of Primedex and their affiliates beneficially owned and were entitled to vote approximately 20,258,475 shares of Primedex common stock, collectively representing approximately 33% of the shares of Primedex common stock outstanding on that date.

 

Ownership of Primedex After the Merger

 

Based on the number of shares of Primedex and Radiologix common stock outstanding on their respective record dates, after completion of the merger, Primedex will issue 22,621,922 shares of Primedex common stock and former Radiologix stockholders will own approximately [       ]% of the then-outstanding shares of Primedex common stock. The merger agreement also provides Primedex the option to elect to reduce the share consideration by up to 3.5 million shares and to increase the cash consideration by $2 per share for those shares, provided that Primedex advises Radiologix of its election prior to the mailing of this Proxy Statement.

 

Interests of Radiologix Directors and Executive Officers in the Merger (beginning on page 105)

 

When considering the recommendation of its board of directors with respect to the merger agreement and the transactions contemplated by the merger agreement, including the merger, Radiologix stockholders should be aware that some directors and executive officers of Radiologix have interests in the transactions contemplated by the merger agreement that may be different from, or in addition to, their interests as stockholders and the interests of Radiologix stockholders. These interests include:

 

                  payments under employment agreements which are triggered in the event of a merger;

 

                  potential appointment to the Primedex board of directors following the merger;

 

                  potentially becoming executive officers, employees or consultants of Primedex after the transaction;

 

                  accelerated vesting and exercisability of Radiologix stock options, restricted stock and restricted stock units issued under Radiologix’s equity compensation plans;

 

5



 

                  with respect to certain Radiologix officers and employees who continue employment with Primedex immediately after the effective date of the merger, to the extent the closing of the merger occurs during the 2006 calendar year, continued benefits under Radiologix plans until December 31, 2006, and to the extent the closing of the merger occurs after the 2006 calendar year, continued benefits under Radiologix plans for six months after the closing or the end of the calendar year in which the closing of the merger occurs, whichever is earlier;

 

                  with respect to the Radiologix officers who do not continue employment with Primedex immediately after the effective date of the merger, payment of up to $1,000 per month to cover the medical insurance benefits described in such officer’s employment agreement until the earlier of (a) two years after the effective date of the merger or (b) the date on which such individual obtains substantially equivalent benefits from another party; and

 

                  Primedex’s agreement to indemnify each present and former Radiologix officer and director against liabilities arising out of that person’s services as an officer or director, and maintain directors’ and officers’ liability insurance for a period of six years after closing to cover Radiologix directors and officers, subject to various limitations.

 

The Radiologix board of directors was aware of these arrangements during its deliberations on the merits of the merger and in deciding to recommend that you vote for the adoption of the merger agreement and the transactions contemplated by the merger agreement, including the merger, at the Radiologix special meeting.

 

Primedex Board of Directors After the Merger

 

The members of the Primedex board of directors who are in office immediately prior to the merger are expected to remain as members of the Primedex board of directors following the merger if elected pursuant to Primedex’s proposal No. 5. Promptly after the effective date of the merger, Primedex shall use its reasonable best efforts to cause to be elected to its board of directors up to three persons designated by Radiologix and reasonably acceptable to Primedex, two of whom shall, no later than January 1, 2007, meet the independence requirements of the SEC and any applicable exchange on which Primedex’s common stock is then traded.

 

Listing of Primedex Common Stock and Delisting of Radiologix Common Stock

 

Application will be made to have the shares of Primedex common stock issued in the merger approved for listing on the Over-The-Counter Bulletin Board, where Primedex common stock currently is traded under the symbol “PMDX.OB.” If the merger is completed, Radiologix common stock will no longer be listed on the American Stock Exchange and will be deregistered under the Securities Exchange Act of 1934, as amended, which is referred to as the “Exchange Act,” and Radiologix will no longer file periodic reports with the SEC.

 

Primedex intends to apply to have its shares of common stock listed on the American Stock Exchange upon completion of the merger or as soon thereafter as reasonably practicable. Initial listing on the American Stock Exchange requires the satisfaction by Primedex of quantitative listing standards relating to stockholders’ equity, market capitalization, number of public stockholders, market value of public float and other criteria. Primedex does not currently qualify for listing under these criteria. After the filing of the Form S-4 registration statement of which this joint proxy statement/prospectus is a part, Primedex will work diligently to be listed on the American Stock Exchange immediately subsequent to the consummation of the merger but can give no assurance that such listing will occur during that time frame, or at all.

 

Appraisal and Dissenters’ Rights (beginning on page 109)

 

Radiologix

 

Holders of Radiologix common stock who do not wish to accept the consideration payable pursuant to the merger may seek, under Section 262 of the Delaware General Corporation Law, or DGCL, judicial appraisal of the fair value of their shares by the Delaware Court of Chancery. This value could be more than, less than or the same as the merger consideration for the Radiologix common stock. Failure to strictly comply with all the procedures required by Section 262 of the DGCL will result in a loss of the right to appraisal.

 

Annex F to this joint proxy statement/prospectus contains the full text of Section 262 of the DGCL, which relates to the rights of appraisal. We encourage you to read these provisions carefully and in their entirety.

 

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Merely voting against the merger will not preserve the right of Radiologix stockholders to appraisal under Delaware law. Also, because a submitted proxy not marked “against” or “abstain” will be voted “for” the proposal to adopt the merger agreement and the transactions contemplated by the merger agreement, including the merger, the submission of a proxy not marked “against” or “abstain” will result in the waiver of appraisal rights. Radiologix stockholders who hold shares in the name of a broker or other nominee must instruct their nominee to take the steps necessary to enable them to demand appraisal for their shares.

 

Holders of Radiologix common stock are not entitled to appraisal rights in connection with any other proposals to be voted on at the Radiologix special meeting.

 

Primedex

 

Under New York law, holders of Primedex common stock are not entitled to appraisal rights in connection with either the approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger, or the issuance of Primedex common stock in the merger or in connection with any other proposal to be voted on at the Primedex annual meeting.

 

Under California law, if a class of equity securities of Primedex is not listed on the American Stock Exchange (or another applicable national securities exchange) at the time of the merger, a holder of Primedex common stock may have the right to dissent from the merger by exercising dissenters’ rights. If a Primedex stockholder elects to exercise dissenters’ rights, the stockholder must precisely comply with all of the procedures set forth in Chapter 13 of the California General Corporation Law. Merely voting against the merger will not preserve the right of Primedex stockholders to appraisal under California law. Annex G to this joint proxy statement/prospectus sets forth the full text of Chapter 13 of the California General Corporation Law, which relates to rights of appraisal. We encourage you to read these provisions carefully and in their entirety.

 

Conditions to the Closing of the Merger (beginning on page 125)

 

The merger is subject to the satisfaction or waiver of various conditions, which include the following:

 

Primedex and Radiologix are not obligated to effect the merger unless the following conditions are satisfied or waived:

 

                                          the merger agreement is adopted by Primedex and Radiologix stockholders at the stockholder meetings of the companies;

 

                                          the shares of Primedex common stock issuable to Radiologix stockholders pursuant to the merger agreement are authorized for listing on the Over-The-Counter Bulletin Board;

 

                                          no governmental entity has obtained, enacted, issued, promulgated or enforced any statute, rule, regulation, executive order, decree, judgment, injunction, arbitration award, finding or other order (whether temporary, preliminary or permanent), in any case that is in effect and prevents or prohibits consummation of the merger;

 

                                          any applicable waiting periods, together with any extensions thereof, under the HSR Act (as defined herein) and other applicable antitrust laws required to consummate the merger shall have expired or been terminated;

 

                                          this joint proxy statement/prospectus has become effective under the Securities Act of 1933, as amended and there are no stop orders or proceedings initiated or threatened to suspend this joint proxy statement/prospectus; and

 

                                          there is no pending or threatened action, suit, proceeding, claim, arbitration or investigation in which any governmental entity is a party wherein an unfavorable injunction, judgment, order, decree, charge or ruling would:

 

                                          prevent, restrain or otherwise interfere with the consummation of the merger;

 

                                          adversely affect the right or powers of Primedex to own, operate or control Radiologix or any portion of the business or assets of Radiologix or Primedex; and

 

                                          no such injunction, judgment or ruling is in effect.

 

Primedex and Merger Sub are not obligated to effect the merger unless the following additional conditions are satisfied or waived:

 

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                                          the representations and warranties made by Radiologix in the merger agreement related to Radiologix’s organization, capitalization, authority to enter into the merger agreement and complete the merger, and its receipt of necessary consents and governmental approvals are true and correct in all material respects as of the date of the merger agreement and as of the effective time of the merger (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date);

 

                                          Radiologix’s remaining representations and warranties in the merger agreement and in any certificate or other writing delivered by Radiologix pursuant to the merger agreement, in each case disregarding all qualifications and exceptions contained therein relating to materiality or material adverse effect, are true and correct as of the date of the merger agreement and as of the effective time of the merger (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date), except where the failure of such representations and warranties to be so true and correct has not had and would not have a material adverse effect on Radiologix;

 

                                          Radiologix has performed or complied in all material respects with all agreements and covenants required by the merger agreement to be performed or complied with by Radiologix on or prior to the effective time of the merger;

 

                                          there has not occurred any material adverse effect with respect to Radiologix;

 

                                          Radiologix has obtained the consent or approval of each person or entity whose consent or approval is required under any contract to which Radiologix or any of its subsidiaries is a party, except where the failure to obtain any consent or approval would not have a material adverse effect on Radiologix;

 

                                          Radiologix has obtained and delivered to Primedex all consents, waivers and approvals required under all material real property and equipment leases to which Radiologix or any of its subsidiaries is a party, except where the failure to obtain any consent or approval would not have a material adverse effect on Radiologix;

 

                                          Radiologix has obtained all permits, authorizations, consents, and approvals required on its part to perform its obligations under and consummate the merger agreement, except where the failure to obtain such permits authorizations, consents and approval would not have a material adverse effect on Radiologix;

 

                                          Radiologix has delivered to Primedex a certificate, signed by Radiologix’s chief executive officer and dated as of the closing date, to the effect that the conditions set forth in the merger agreement have been satisfied;

 

                                          Primedex has consummated the financing described in the commitment letter from GE Commercial Finance Healthcare Financial Services dated June 27, 2006 with respect to a financing in the amount of $405 million;

 

                                          holders of no more than 10% of outstanding Radiologix common shares entitled to appraisal of their shares have properly demanded appraisal of their shares in accordance with applicable law;

 

                                          holders of no more than 10% of outstanding Primedex common shares have exercised or retain the unexpired right to exercise dissenters’ rights (or similar rights of dissent) in respect of the merger available under applicable law;

 

                                          Primedex has received all permits and approvals necessary under state securities laws to consummate the merger;

 

                                          Radiologix has cash (not including restricted cash) on its balance sheet of at least $32.6 million as of the closing date; and

 

                                          Primedex has received an affiliates letter from each of Radiologix ‘s directors and officers identified as an affiliate of Radiologix within the meaning of Rule 145 promulgated under the Securities Act of 1933.

 

Radiologix is not obligated to effect the merger unless the following additional conditions are satisfied or waived:

 

                                          Primedex’s and Merger Sub’s representations and warranties in the merger agreement related to Primedex’s and Merger Sub’s organization, capitalization, authority to enter into the merger agreement, necessary consents and governmental approvals are true and correct in all material respects as of the date of the merger agreement and as of

 

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the effective time of the merger (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date);

 

                                          Primedex’s and Merger Sub’s remaining representations and warranties in the merger agreement and in any certificate or other writing delivered by Primedex or Merger Sub pursuant to the merger agreement, in each case disregarding all qualifications and exceptions contained therein relating to materiality or material adverse effect on Primedex, are true and correct as of the date of the merger agreement and as of the effective time of the merger (except that those representations and warranties that address matters only as of a particular date need only be true and correct as of such date), except where the failure of such representations and warranties to be so true and correct has not had and would not have a material adverse effect on Primedex;

 

                                          Primedex has performed or complied with all agreements and covenants required by the merger agreement to be performed or complied with by Primedex on or prior to the effective time of the merger, except where the failure to perform or comply with agreements and covenants required by the merger agreement has not had and would not have a material adverse effect on Primedex;

 

                                          there has not occurred any material adverse effect with respect to Primedex; and

 

                                          Primedex has delivered to Radiologix a certificate, signed by an authorized officer of Primedex and dated as of the closing date, to the effect that the conditions set forth in the merger agreement have been satisfied.

 

Antitrust Clearance

 

The completion of the merger is subject to compliance with the Hart Scott Rodino Act, which we refer to as the “HSR Act.” The notifications required under the HSR Act to the U.S. Federal Trade Commission, or the FTC, and the Antitrust Division of the U.S. Department of Justice, or the Antitrust Division, were filed on July 21, 2006.

 

Primedex and Radiologix have agreed to use their reasonable best efforts to take, or cause to be taken, all actions necessary proper or advisable under applicable law and regulations, including the HSR Act, to complete the merger as promptly as practicable, but in no event later than April 30, 2007, which date may be extended to May 31, 2007, in circumstances described below, in “Summary – Termination of the Merger Agreement” beginning on page 9 and in “The Merger Agreement – Termination of the Merger Agreement” beginning on page 126.

 

Termination of the Merger Agreement (beginning on page 127)

 

Primedex and Radiologix can terminate the merger agreement before the effective date of the merger under enumerated circumstances, including:

 

                                          by mutual written consent of Primedex and Radiologix;

 

                                          by either Primedex or Radiologix, if the merger has not been completed before April 30, 2007, provided that such date may be extended by Primedex or Radiologix up to and including May 31, 2007 if all conditions to effect the merger other than one or more regulatory conditions have been or are capable of being satisfied at the time of such extension, and the regulatory conditions have been or are reasonably capable of being satisfied on or prior to May 31, 2007;

 

                                          by either Primedex or Radiologix, if any governmental entity has issued any statute, rule, regulation, executive order, decree, judgment, injunction, arbitration award, finding or other order (whether temporary, preliminary or permanent), that is in effect and that prevents or prohibits consummation of the merger;

 

                                          by either Primedex or Radiologix, if Radiologix stockholders do not adopt the merger agreement at the special meeting and, in the case of a termination by Radiologix, the failure to obtain stockholder approval is not the result of Radiologix’s violation of the merger agreement. If, at the time of such termination, Primedex was entitled to terminate pursuant to the following bullet, termination by Radiologix as a result of Radiologix stockholders’ non-adoption of the merger agreement is effective only if Radiologix fulfills any obligations Radiologix may have to pay a termination fee of $3 million to Primedex and to reimburse Primedex for up to $1 million for its fees and expenses incurred in connection with the transactions contemplated by the merger agreement;

 

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                                          by Primedex, if prior to the receipt of Radiologix stockholder approval:

 

                                          Radiologix’s board of directors withdraws, withholds, amends or modifies in a manner adverse to Primedex its recommendation to Radiologix’s stockholders in favor of adoption of the merger agreement;

 

                                          Radiologix fails to include such recommendation in this proxy statement;

 

                                          Radiologix’s board of directors approves or publicly recommends to its stockholders any other acquisition proposal;

 

                                          Radiologix enters into any letter of intent or other contract for any other acquisition proposal;

 

                                          Radiologix breaches any of its covenants relating to its obligation to hold the stockholder meeting, its board of directors’ obligation to recommend the adoption of the merger agreement or its obligation not to solicit other acquisition proposals; or

 

                                          Radiologix’s board of directors fails to make a statement recommending the rejection of a tender or exchange offer not made by Primedex or any of its affiliates for Radiologix common stock within 10 business days after such tender or exchange offer is first published or given.

 

                                          by either Primedex or Radiologix, if Primedex stockholders do not adopt the merger agreement at the annual meeting and, in the case of a termination by Primedex, the failure to obtain stockholder approval is not the result of Primedex’s violation of the merger agreement.

 

                                          by Primedex, if there is a material adverse effect with respect to Radiologix or if any of Radiologix’s covenants, agreements, representations or warranties are breached and not cured within 20 business days and, as a result of Radiologix’s breach or misrepresentation, the conditions to closing would not be satisfied;

 

                                          by Radiologix, if there is a material adverse effect with respect to Primedex, RadNet or Merger Sub or if any of the covenants, agreements, representations or warranties of Primedex or Merger Sub is breached and not cured within 20 business days and, as a result, the conditions to closing would not be satisfied; and

 

                                          by Radiologix, if prior to the receipt of Radiologix stockholder approval:

 

                                          Radiologix has not violated any of the covenants with respect to considering other acquisition proposals,

 

                                          a superior offer is made to Radiologix and is not withdrawn,

 

                                          Radiologix has promptly provided written notice to Primedex advising Primedex that Radiologix has received a superior offer and intends to change the recommendation of its board of directors with respect to the merger or to terminate the merger agreement and the manner and timing in which Radiologix intends to do so,

 

                                          Primedex has not, within five days after receipt of the notice of superior offer, made an offer that Radiologix’s board of directors determines in its good faith judgment (after consultation with a financial advisor) to be at least as favorable to Radiologix stockholders as such superior offer, and

 

                                          Radiologix’s board of directors concludes in good faith, after consultation with its outside legal counsel, that, in light of such superior offer and any offer made by Primedex within five days after receipt of the notice of superior offer, the Radiologix board is required to withdraw or modify its recommendation to Radiologix stockholders to vote in favor of the merger, or to terminate the merger agreement and pay to Primedex a termination fee of $3 million plus up to $1 million for fees and expenses incurred by Primedex in connection with the transactions contemplated by the merger agreement, to comply with its fiduciary obligations to Radiologix stockholders under applicable law.

 

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Termination Fees and Expenses (beginning on page 128)

 

Primedex

 

The merger agreement provides that Primedex will pay to Radiologix the sum of the fees and expenses Radiologix incurred in connection with the transactions contemplated by the merger agreement, in an amount up to $1 million, if the merger agreement is terminated by Radiologix under either of the following circumstances:

 

                                          any of Primedex’s, RadNet’s or Merger Sub’s representations or warranties set forth in the merger agreement have become untrue or incorrect, Primedex, RadNet or Merger Sub has not cured the misrepresentation within 20 business days after written notice of the misrepresentation, and the misrepresentation would cause conditions to the closing of the merger not to be satisfied; or

 

                                          Primedex, RadNet or Merger Sub has breached any of its covenants or agreements set forth in the merger agreement, has not cured the breach within 20 business days after written notice of the breach and the breach would cause conditions to the closing of the merger not to be satisfied.

 

Radiologix

 

The merger agreement provides that Radiologix will pay to Primedex the sum of the fees and expenses Primedex incurred in connection with the transactions contemplated by the merger agreement, in an amount up to $1 million, if the merger agreement is terminated under the following circumstances:

 

                                          by either Primedex or Radiologix, if Radiologix stockholders do not adopt the merger agreement at the special meeting of Radiologix stockholders and an alternative acquisition proposal is publicly announced at any time after the date of the merger agreement and before the vote on the merger agreement at the special meeting;

 

                                          by Primedex, if prior to the receipt of Radiologix stockholder approval:

 

                                          the Radiologix board of directors withdraws, withholds, amends or modifies in a manner adverse to Primedex its recommendation to Radiologix stockholders in favor of adoption of the merger agreement;

 

                                          Radiologix fails to include such recommendation in this proxy statement;

 

                                          the Radiologix board of directors approves or recommends to Radiologix stockholders any other acquisition proposal;

 

                                          Radiologix enters into any letter of intent or other contract for any other acquisition proposal;

 

                                          Radiologix breaches any of its covenants with respect to its obligation to hold the stockholder meeting, its board of director’s obligation to recommend to Radiologix stockholders the adoption of the merger agreement, or Radiologix’s obligation not to solicit other acquisition proposals; or

 

                                          Radiologix’s board of directors fails to make a statement recommending the rejection of a tender or exchange offer not made by Primedex or any of its affiliates for Radiologix common stock within 10 business days after such tender or exchange offer is first published or given;

 

                                          by Primedex, if:

 

                                          any of Radiologix’s representations or warranties set forth in the merger agreement have become untrue or incorrect, Radiologix has not cured the misrepresentation within 20 business days after written notice of the misrepresentation, and the misrepresentation would cause conditions to the closing of the merger not to be satisfied; or

 

                                          Radiologix has breached any of its covenants or agreements set forth in the merger agreement, has not cured the breach within 20 business days after written notice of the breach and the breach would cause conditions to the closing of the merger not to be satisfied;

 

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                                          by Radiologix, if prior to the receipt of Radiologix stockholder approval:

 

                                          Radiologix has not violated any of the covenants with respect to considering other acquisition proposals,

 

                                          a superior offer is made to Radiologix and is not withdrawn,

 

                                          Radiologix has promptly provided written notice to Primedex advising Primedex that Radiologix has received a superior offer and intends to change the recommendation of its board of directors with respect to the merger or to terminate the merger agreement and the manner and timing in which it intends to do so;

 

                                          Primedex has not, within five days after receipt of the notice of superior offer, made an offer that Radiologix’s board of directors determines in its good faith judgment (after consultation with a financial advisor) to be at least as favorable to Radiologix stockholders as such superior offer, and

 

                                          Radiologix’s board of directors concludes in good faith, after consultation with its outside legal counsel, that, in light of such superior offer and any offer made by Primedex within five days after receipt of the notice of superior offer, the Radiologix board is required to withdraw or modify its recommendation to Radiologix stockholders to vote in favor of the merger, or to terminate the merger agreement and pay to Primedex a termination fee of $3 million, to comply with its fiduciary obligations to Radiologix’s stockholders under applicable law.

 

In addition to payment of Primedex’s expenses, Radiologix must pay Primedex a termination fee of $3 million if the merger agreement is terminated:

 

                                          by Primedex, if prior to the receipt of Radiologix stockholder approval:

 

                                          the Radiologix board of directors withdraws, withholds, amends or modifies in a manner adverse to Primedex its recommendation to Radiologix stockholders in favor of adoption of the merger agreement;

 

                                          Radiologix fails to include such recommendation in this proxy statement;

 

                                          the Radiologix board of directors approves or recommends to Radiologix stockholders any other acquisition proposal;

 

                                          Radiologix enters into any letter of intent or other contract for any other acquisition proposal;

 

                                          Radiologix breaches any of its covenants with respect to its obligation to hold the stockholder meeting, its board of director’s obligation to recommend to Radiologix stockholders the adoption of the merger agreement, or Radiologix’s obligation not to solicit other acquisition proposals; or

 

                                          Radiologix’s board of directors fails to make a statement recommending the rejection of a tender or exchange offer not made by Primedex or any of its affiliates for Radiologix common stock within 10 business days after such tender or exchange offer is first published or given;

 

                                          by Radiologix, if its stockholders do not adopt the merger agreement at the special meeting, and if at such time Primedex was entitled to terminate pursuant to any of the circumstances described in the immediately preceding bullet points;

 

                                          by Radiologix or Primedex, if Radiologix stockholders do not adopt the merger as a result of Radiologix’s breach of the merger agreement, and an alternative acquisition proposal has been publicly announced at any time after the date of the merger agreement and before the vote on the merger agreement at the special meeting, and Radiologix enters into an alternative acquisition transaction involving at least 50% of its stock or assets within twelve months after the termination of the merger agreement; or

 

                                          by Radiologix, if prior to the receipt of Radiologix stockholder approval:

 

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                                          Radiologix has not violated any of the covenants with respect to considering other acquisition proposals;

 

                                          a superior offer is made to Radiologix and is not withdrawn;

 

                                          Radiologix has promptly provided written notice to Primedex advising Primedex that Radiologix has received a superior offer and intends to change the recommendation of its board of directors with respect to the merger or to terminate the merger agreement and the manner and timing in which it intends to do so;

 

                                          Primedex has not, within five days after receipt of the notice of superior offer, made an offer that Radiologix’s board of directors determines in its good faith judgment (after consultation with a financial advisor) to be at least as favorable to Radiologix stockholders as such superior offer; and

 

                                          Radiologix’s board of directors concludes in good faith, after consultation with its outside legal counsel, that, in light of such superior offer and any offer made by Primedex within five days after receipt of the notice of superior offer, the Radiologix board is required to withdraw or modify its recommendation to Radiologix stockholders to vote in favor of the merger, or to terminate the merger agreement and pay to Primedex a termination fee of $3 million, to comply with its fiduciary obligations to Radiologix’s stockholders under applicable law.

 

Limitation on Considering Other Acquisition Proposals (beginning on page 123)

 

Radiologix has agreed that it will not, and will not permit any of its subsidiaries to, and will use all reasonable efforts to ensure that Radiologix or its representatives do not, directly or indirectly:

 

                                          solicit, initiate, seek, entertain, encourage, facilitate, support or induce any acquisition proposal or the making of any inquiry or proposal that could reasonably be expected to lead to an acquisition proposal;

 

                                          enter into, participate in, maintain or continue any communications or negotiations regarding, or furnish to any person any non-public information in response to or in connection with, any acquisition proposal;

 

                                          agree to, accept, approve, endorse or recommend any acquisition proposal;

 

                                          enter into any letter of intent or any other contract relating to any acquisition proposal;

 

                                          submit any acquisition proposal to the vote of Radiologix stockholders;

 

                                          withhold, withdraw or modify, in a manner adverse to Primedex, the approval of the Radiologix board of directors of the merger agreement; or

 

                                          take any action or position that is inconsistent with, or withdraw or modify, in a manner adverse to Primedex, the unanimous recommendation of the board that Radiologix stockholders vote in favor of the adoption of the merger agreement.

 

An “acquisition proposal” means any agreement, offer, proposal or indication of interest (other than from Primedex) relating to, or involving: the acquisition by any person or group of more than a 10% interest in Radiologix’s total outstanding voting securities or more than a 5% interest in the total outstanding voting securities of any material company subsidiary or any tender or exchange offer that would result in any person beneficially owning 10% or more of Radiologix’s total outstanding voting securities or more than a 5% interest in the total outstanding voting securities of any material company subsidiary; any merger or other business combination involving Radiologix or its subsidiaries; or any sale, lease, mortgage, exchange, license, acquisition, transfer, pledge or disposition of 10% or more of Radiologix’s consolidated assets.

 

At any time prior to obtaining stockholder approval, subject to various restrictions, the Radiologix board of directors may nevertheless in response to an acquisition proposal that the Radiologix board of directors concludes in good faith (after consultation with outside legal and financial advisors) is, or is reasonably likely to become, a superior offer:

 

                                          enter into discussions with the person making the acquisition proposal; and

 

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                                          furnish to the person making the acquisition proposal information with respect to Radiologix and its subsidiaries pursuant to a confidentiality agreement which contains terms that are at least as restrictive as the terms of the confidentiality agreement that Radiologix and Primedex have executed in connection with the merger and provided that Radiologix furnishes Primedex with the same information it has furnished to the person making the acquisition proposal prior to or at the same time as the information is furnished to the person making the acquisition proposal.

 

However, in each case:

 

                                          neither Radiologix, its subsidiaries, nor any of Radiologix’s or its subsidiaries’ directors, officers, employees, affiliates, accountants, consultants, legal counsel, advisors, investment bankers, brokers, agents and other representatives will have violated the restrictions on considering other acquisition proposals set forth in the merger agreement and summarized in the preceding bullet points;

 

                                          the Radiologix board of directors must first conclude in good faith, after consultation with outside legal counsel, that such action is reasonably required for the Radiologix board to comply with its fiduciary obligations to Radiologix stockholders; and

 

                                          Radiologix must first notify Primedex in writing of the identity of the person making such acquisition proposal and the material terms and conditions of such acquisition proposal, and Radiologix’s intention to take actions in response to such acquisition proposal.

 

A “superior offer” means an unsolicited, bona fide written offer made by a third party for the acquisition by any person or group of more than a 50% interest in total outstanding Radiologix voting securities or any tender or exchange offer that would result in any person beneficially owning 50% or more of Radiologix’s total outstanding voting securities; any merger or other business combination involving Radiologix or its subsidiaries; or any sale, lease, transfer, pledge or disposition of 50% or more of its consolidated assets, on terms that the Radiologix board of directors has in good faith concluded (after consultation with outside legal counsel and financial advisor) to be more favorable, from a financial point of view, to Radiologix stockholders than the terms of the merger agreement and is reasonably capable of being consummated.

 

Radiologix has agreed to advise Primedex within twenty-four hours of the receipt of any acquisition proposal, of any inquiry or offer that contemplates an acquisition proposal, any other notice that any person is considering making an acquisition proposal, or any request for non-public information that could reasonably be expected to lead to an acquisition proposal:

 

                                          of the material terms and conditions of such acquisition proposal, inquiry or request, and

 

                                          the identity of the person making any such acquisition proposal, inquiry or request.

 

Nothing in the merger agreement prevents the Radiologix board of directors from withholding or modifying its unanimous recommendation to Radiologix stockholders in favor of adoption of the merger agreement, or terminating the merger agreement simultaneously with the payment of a termination fee to Primedex in the amount of $3 million plus up to $1 million for incurrence by Primedex of expenses in connection with the transactions contemplated by the merger agreement, if: Radiologix stockholders’ approval of the merger has not yet been obtained; Radiologix has not violated any of the restrictions on considering other acquisition proposals set forth in the merger agreement and summarized in the preceding paragraphs; a superior offer is made to Radiologix and is not withdrawn; Radiologix has promptly provided written notice to Primedex of the superior offer and the Radiologix board of directors’ intent to change its recommendation or to terminate the merger agreement; Primedex has not, within 5 business days after receipt of the written notice of a superior offer, made an offer to Radiologix that the Radiologix board of directors concludes in its good faith judgment after consultation with a financial advisor of national standing to be at least as favorable to Radiologix stockholders as such superior offer; and the Radiologix board of directors has concluded in good faith, after consultation with legal counsel, that, in light of such superior offer and any offer made by Primedex, it is required to withhold or modify such recommendation, or to terminate the merger agreement and pay to Primedex a termination fee in the amount of $3 million plus up to $1 million for incurrence by Primedex of expenses in connection with the transactions contemplated by the merger agreement, to comply with its fiduciary obligations to Radiologix stockholders under applicable legal requirements.

 

Material United States Federal Income Tax Consequences (beginning on page 115)

 

The merger will be taxable for U.S. federal income tax purposes to Radiologix stockholders. As a result, Radiologix stockholders will recognize gain or loss in respect of the merger equal to the difference between (i) the sum of the amount of cash received and the fair

 

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market value of the shares of Primedex common stock received as of the effective time of the merger and (ii) the stockholder’s adjusted tax basis in his or its shares of Radiologix common stock. Such gain or loss will be capital gain or loss if the stockholder held his or its shares of Radiologix common stock exchanged in the merger for more than one year.

 

Tax matters are complicated, and the tax consequences of the merger to each Radiologix stockholder will depend on the facts of each stockholder’s situation. Radiologix stockholders are urged to read carefully the discussion in the section entitled “Material United States Federal Income Tax Consequences” beginning on page 115 and to consult their own tax advisors for a full understanding of the tax consequences of their participation in the merger.

 

Accounting Treatment

 

The merger will be accounted for as a business combination using the “purchase” method of accounting. Primedex will be the acquirer for financial accounting purposes.

 

Risks (beginning on page 41)

 

In evaluating the merger you should carefully read this joint proxy statement/prospectus and especially consider the factors discussed in the section entitled “Risk Factors” beginning on page 41.

 

Comparison of Rights of Stockholders (beginning on page 132)

 

As a result of the merger, the holders of Radiologix common stock will become holders of Primedex common stock. Following the merger, Radiologix stockholders will have different rights as stockholders of Primedex than as stockholders of Radiologix due to differences among New York, California and Delaware law, and the difference between the certificates of incorporation and by-laws of Primedex and Radiologix.

 

For a summary of the material differences between the rights of Radiologix stockholders and Primedex stockholders, see “Comparison of Rights of Stockholders” beginning on page 132.

 

15



 

FINANCIAL SUMMARY

 

Primedex Market Price Data and Dividends

 

Primedex common stock trades on the Over-The-Counter Bulletin Board under the symbol “PMDX.OB.” The following table shows for the periods indicated the high and low sales prices for Primedex common stock as reported on the Over-The-Counter Bulletin Board.

 

 

 

Price Range of Common Stock

 

Fiscal Year Ended

 

High

 

Low

 

October 31, 2004:

 

 

 

 

 

First Quarter

 

$

.75

 

$

.38

 

Second Quarter

 

.72

 

.38

 

Third Quarter

 

.47

 

.27

 

Fourth Quarter

 

.70

 

.30

 

October 31, 2005:

 

 

 

 

 

First Quarter

 

$

.60

 

$

.41

 

Second Quarter

 

.49

 

.24

 

Third Quarter

 

.43

 

.26

 

Fourth Quarter

 

.43

 

.26

 

October 31, 2006:

 

 

 

 

 

First Quarter

 

$

.59

 

$

.25

 

Second Quarter

 

1.40

 

.35

 

Third Quarter (through August 18, 2006)

 

2.10

 

1.20

 

 

The last reported sales prices of Primedex common stock on the Over-The-Counter Bulletin Board on July 6, 2006, and August 17, 2006, were $1.75 and $1.57, respectively. July 6, 2006, was the last full trading day prior to the public announcement of the merger. August    , 2006, was the last full trading day prior to the filing of this joint proxy statement/prospectus with the SEC.

 

As of August 17, 2006, there were approximately 3,947 holders of record of Primedex common stock.

 

The Primedex board of directors has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on compliance with the New York Business Corporations Law, California General Corporation Law, compliance with agreements governing Primedex’s indebtedness, earnings, cash requirements, results of operations, cash flows, financial condition and other factors that the board of directors considers important.

 

Radiologix Market Price Data and Dividends

 

Radiologix common stock is traded on the American Stock Exchange under the symbol “RGX.” The following table shows for the periods indicated the high and low sales prices for Radiologix common stock on the American Stock Exchange.

 

 

 

Price Range of Common Stock

 

Fiscal Year Ended

 

High

 

Low

 

December 31, 2004:

 

 

 

 

 

First Quarter

 

$

4.25

 

$

3.25

 

Second Quarter

 

4.65

 

3.31

 

Third Quarter

 

4.68

 

3.30

 

Fourth Quarter

 

4.53

 

2.99

 

December 31, 2005:

 

 

 

 

 

First Quarter

 

$

4.98

 

$

4.08

 

Second Quarter

 

4.27

 

3.10

 

Third Quarter

 

4.55

 

3.15

 

Fourth Quarter

 

3.84

 

2.75

 

December 31, 2006:

 

 

 

 

 

First Quarter

 

$

3.03

 

$

1.47

 

Second Quarter

 

2.40

 

1.60

 

Third Quarter

 

[    

]

[    

]

 

16



 

The last reported sales prices of Radiologix common stock on the American Stock Exchange on July 6, 2006, and August 17, 2006, were $2.25 and $3.20, respectively. July 6, 2006, was the last full trading day prior to the public announcement of the merger. [         ], 2006, was the last full trading day prior to the filing of this joint proxy statement/prospectus with the SEC.

 

As of August 18, 2006, there were approximately 70 holders of record of Radiologix common stock.

 

The Radiologix board of directors has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether or not to pay dividends and the amount of any dividends are based on compliance with the DGCL, compliance with agreements governing Radiologix’s indebtedness, earnings, cash requirements, results of operations, cash flows, financial condition and other factors that the board of directors considers important.

 

Selected Historical Financial Data of Primedex

 

The following table shows selected historical financial data for Primedex. The data has been derived from Primedex’s audited consolidated financial statements for each of the five years ended October 31, 2005, and unaudited consolidated financial statements for the six months ended April 30, 2005 and 2006.

 

This information is only a summary. Detailed historical financial information is included in the audited consolidated balance sheets as of October 31, 2005, and October 31, 2004, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the three-year period ended October 31, 2005 included in Primedex’s Annual Report on Form 10-K for the fiscal year ended October 31, 2005, filed with the SEC on February 14, 2006. You should read the following selected financial data together with Primedex’s historical consolidated financial statements, including the related notes, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Primedex” and the other information contained or incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 213.

 

 

 

Years Ended October 31,

 

Six Months Ended
April 30,

 

(Amounts in thousands, except per share data) 

 

2005

 

2004

 

2003

 

2002

 

2001

 

2006

 

2005

 

 

 

 

 

 

 

 

 

 

 

 

 

(Unaudited)

 

Net Revenue

 

$

145,573

 

$

137,277

 

$

140,259

 

$

134,078

 

$

107,567

 

$

78,126

 

$

69,300

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

109,012

 

105,828

 

106,078

 

102,286

 

75,457

 

58,596

 

53,002

 

Depreciation and amortization

 

17,101

 

17,762

 

16,874

 

15,010

 

10,315

 

8,104

 

8,662

 

Provision for bad debts

 

4,929

 

3,911

 

4,944

 

6,892

 

3,851

 

2,739

 

1,843

 

Loss on disposal of equipment, net

 

696

 

 

 

 

 

(14

)

698

 

Total operating expenses

 

131,738

 

127,501

 

127,896

 

124,188

 

89,623

 

69,425

 

64,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from Operations

 

13,835

 

9,776

 

12,363

 

9,890

 

17,944

 

8,701

 

5,095

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

17,493

 

17,285

 

17,948

 

16,627

 

13,521

 

8,994

 

8,510

 

Loss (Gain) on debt extinguishment, net

 

 

 

 

 

 

 

 

 

 

 

2,097

 

(515

)

Other income

 

(872

)

(176

)

(556

)

(765

)

(4,817

)

 

 

(131

)

Other expense

 

349

 

1,657

 

334

 

552

 

563

 

788

 

25

 

Total other expense

 

16,970

 

18,766

 

17,726

 

16,414

 

9,267

 

11,879

 

7,889

 

Income (Loss) Before Income Taxes, Minority Interest and Discontinued Operation

 

(3,135

)

(8,990

)

(5,363

)

(6,524

)

8,677

 

(3,178

)

(2,794

)

Income Tax Provision (Benefit)

 

 

5,235

 

 

 

(5,110

)

 

 

Income (Loss) Before Minority Interest and Discontinued Operation

 

(3,135

)

(14,225

)

(5,363

)

(6,524

)

13,787

 

(3,178

)

(2,794

)

Minority Interest in Earnings (Loss) of Subsidiaries

 

 

351

 

101

 

(89

)

(26

)

 

 

Income (Loss) from Continuing Operations

 

(3,135

)

(14,576

)

(5,464

)

(6,435

)

13,813

 

(3,178

)

(2,794

)

Discontinued Operation:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operation of Westchester Imaging Group

 

 

 

255

 

884

 

688

 

 

 

Gain on sale of discontinued operation

 

 

 

2,942

 

 

 

 

 

Income from Discontinued Operation

 

 

 

3,197

 

884

 

688

 

 

 

Net Income (Loss)

 

$

(3,135

)

$

(14,576

)

$

(2,267

)

$

(5,551

)

$

14,501

 

(3,178

)

(2,794

)

Basic Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.08

)

$

(0.35

 

$

(0.13

)

$

(0.16

)

$

0.34

 

$

(0.08

)

$

(0.07

)

Income from discontinued operation

 

 

 

0.08

 

0.02

 

0.02

 

 

 

Basic Net Income (Loss) Per Share

 

$

(0.08

)

$

(0.35

)

$

(0.05

)

$

(0.14

)

$

0.36

 

$

(0.08

)

$

(0.07

)

Diluted Earnings Per Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations

 

$

(0.08

)

$

(0.35

)

$

(0.13

)

$

(0.16

)

$

0.31

 

$

(0.08

)

$

(0.07

)

Income from discontinued operation

 

 

 

0.08

 

0.02

 

0.02

 

 

 

Diluted Net Income (Loss) Per Share

 

$

(0.08

)

$

(0.35

)

$

(0.05

)

$

(0.14

)

$

0.33

 

$

(0.08

)

$

(0.07

)

Weighted Average Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

41,208

 

41,107

 

41,091

 

40,876

 

39,961

 

41,473

 

41,107

 

Diluted

 

41,208

 

41,107

 

41,091

 

40,876

 

44,171

 

41,473

 

41,107

 

 

17



 

 

 

As of October 31,

 

As of April 30,
(unaudited)

 

 

 

2005

 

2004

 

2003

 

2002

 

2001

 

2006

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

$

(143,430

)

$

(32,172

)

$

(44,615

)

$

(44,668

)

(26,987

)

(4,347

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

121,233

 

127,451

 

142,035

 

151,639

 

128,429

 

122,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Line of Credit, Notes Payable and Capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Obligations

 

149,794

 

153,142

 

149,534

 

158,587

 

131,190

 

153,334

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subordinated Bond Debentures

 

16,147

 

16,147

 

16,215

 

16,291

 

16,303

 

16,147

 

Stockholders’ Equity

 

(70,633

)

(67,555

)

(53,087

)

(50,921

)

(45,642

)

(73,464

)

 

Selected Historical Financial Data of Radiologix

 

The following table shows selected historical financial data for Radiologix. The data as of and for each of the five years ended December 31, 2005, were derived from Radiologix’s audited consolidated financial statements and the data for the six months ended June 30, 2005 and 2006 were derived from Radiologix’s unaudited consolidated financial statements.

 

This information is only a summary. Detailed historical financial information is included in the audited consolidated balance sheets as of December 31, 2005, and December 31, 2004, and the related consolidated statements of operations, stockholders’ equity and cash flows for each of the years in the three-year period ended December 31, 2005, included in Radiologix’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005, filed with the SEC on March 31, 2006. You should read the following selected financial data together with Radiologix’s historical consolidated financial statements, including the related notes, the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations of Radiologix” and the other information contained or incorporated by reference in this joint proxy statement/prospectus. See “Where You Can Find More Information” beginning on page 213.

 

18



 

SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)

 

 

 

YEAR ENDED DECEMBER 31,

 

For the Six Months
Ended June 30,
(unaudited)

 

 

 

2005

 

2004(a)(b)

 

2003(c)

 

2002

 

2001(d)

 

2006(e)

 

2005

 

 

 

 

 

(As
restated)

 

 

 

 

 

 

 

 

 

(As
restated)

 

SERVICE FEE REVENUE

 

$

251,440

 

$

251,291

 

$

242,038

 

$

256,344

 

$

256,334

 

$

130,246

 

$

127,062

 

COSTS OF OPERATIONS:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services

 

160,898

 

158,613

 

149,034

 

145,049

 

138,715

 

81,248

 

80,449

 

Equipment lease

 

13,035

 

17,660

 

17,230

 

15,653

 

18,357

 

7,642

 

6,037

 

Provision for doubtful accounts

 

19,033

 

22,337

 

20,228

 

21,540

 

22,877

 

10,887

 

9,126

 

Depreciation and amortization

 

23,430

 

22,999

 

23,926

 

24,568

 

22,037

 

12,024

 

11,502

 

Gross profit

 

35,044

 

29,682

 

31,620

 

49,534

 

54,348

 

18,445

 

19,948

 

Severance and Other Related Costs

 

670

 

405

 

1,568

 

978

 

 

 

 

Lease Termination Expense

 

 

13,948

 

 

 

 

 

 

Corporate General and Administrative

 

16,872

 

18,919

 

15,335

 

15,172

 

14,336

 

9,164

 

9,333

 

Impairment of Goodwill, Intangible and Long-lived Assets

 

2,241

 

14,558

 

523

 

794

 

 

 

 

Merger Related Costs

 

 

 

 

 

1,000

 

 

 

Supplemental Incentive Compensation

 

 

 

 

 

615

 

 

 

Loss on Early Extinguishment of Debt

 

 

 

 

 

4,730

 

 

 

Interest Expense, Net

 

18,295

 

18,596

 

19,281

 

18,388

 

14,911

 

8,803

 

9,241

 

Gain on Sale of Operations

 

 

(4,669

)

 

 

 

 

 

Income (loss) before Equity in Earnings of Unconsolidated Affiliates, Non-Operating Income, Minority Interest in Consolidated Subsidiaries, Income Taxes and Discontinued Operations

 

(3,034

)

(32,075

)

(5,087

)

14,202

 

18,756

 

478

 

1,374

 

Equity in Earnings of Unconsolidated Affiliates

 

3,928

 

2,865

 

4,082

 

4,568

 

5,017

 

2,070

 

1,661

 

Non-Operating Income

 

 

 

 

 

1,300

 

 

 

Minority Interests In Income of Consolidated Subsidiaries

 

(632

)

(791

)

(748

)

(1,185

)

(1,092

)

(378

)

(303

)

INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS

 

262

 

(30,001

)

(1,753

)

17,585

 

23,981

 

2,170

 

2,732

 

Income Tax Expense (Benefit)

 

662

 

(5,848

)

(701

)

7,034

 

9,592

 

170

 

169

 

INCOME (LOSS) FROM CONTINUING OPERATIONS

 

(400

)

(24,153

)

(1,052

)

10,551

 

14,389

 

2,000

 

2,563

 

Discontinued Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from discontinued operations before income taxes

 

(1,131

)

(13,128

)

(11,519

)

342

 

(931

)

277

 

(404

)

Income tax expense (benefit)

 

 

(5,426

)

(4,608

)

137

 

(372

)

 

 

Income (loss) from discontinued operations

 

(1,131

)

(7,702

)

(6,911

)

205

 

(559

)

277

 

(404

)

NET INCOME (LOSS)

 

$

(1,531

)

$

(31,855

)

$

(7,963

)

$

10,756

 

$

13,830

 

$

2,277

 

$

2,159

 

EARNINGS (LOSS) PER COMMON SHARE:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from continuing operations — basic

 

$

(0.02

)

$

(1.11

)

$

(0.05

)

$

0.50

 

$

0.74

 

0.09

 

0.12

 

Income (loss) from discontinued operations — basic

 

(0.05

)

(0.35

)

(0.32

)

0.01

 

(0.03

)

0.01

 

(0.02

)

Net income (loss)—basic

 

$

(0.07

)

$

(1.46

)

$

(0.37

)

$

0.51

 

$

0.71

 

$

0.10

 

$

0.10

 

Income (loss) from continuing operations—diluted

 

$

(0.02

)

$

(1.11

)

$

(0.05

)

$

0.47

 

$

0.68

 

$

0.09

 

$

0.11

 

Income (loss) from discontinued operations—diluted

 

(0.05

)

(0.35

)

(0.32

)

0.01

 

(0.02

)

0.01

 

(0.01

)

Net income (loss)—diluted

 

$

(0.07

)

$

(1.46

)

$

(0.37

)

$

0.48

 

$

0.66

 

$

0.10

 

$

0.10

 

WEIGHTED AVERAGE SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

22,067,445

 

21,789,517

 

21,724,165

 

20,957,026

 

19,559,185

 

22,242,417

 

22,128,425

 

Diluted

 

22,067,445

 

21,789,517

 

21,724,165

 

23,967,427

 

22,652,372

 

22,316,713

 

22,625,931

 

 

19



 


(a)

 

Service fee revenue and equity in earnings of unconsolidated affiliates were reduced by $9.1 million and $286,000, respectively, due to a change in estimating contractual adjustments, in the fourth quarter of 2004.

(b)

 

Cost of services for the year ended December 31, 2004 includes: (i) $315,000 for lease termination costs related to diagnostic equipment no longer in use; (ii) $200,000 to write-off software costs associated with canceling a software contract and (iii) $295,000 for a litigation settlement.

(c)

 

Cost of services for the year ended December 31, 2003 includes: (i) $546,000 to meet HIPAA compliance requirements, (ii) $775,000 associated with self reporting certain lease agreements terms to the U.S. Department of Health & Human Services’ Office of the Inspector General (OIG), (iii) $300,000 for a legal settlement, and (iv) $363,000 for financing costs related to an amendment of the credit facility.

(d)

 

Non-operating income in 2001 represents $1.3 million for partial consideration for an early termination of management services provided at certain imaging centers not owned or operated by Radiologix.

(e)

 

Cost of services for the six months-ended June 30, 2006, includes $245,000 for litigation expenses.

 

 

 

As of December 31,

 

As of June 30,
(unaudited)

 

 

 

2005

 

2004

 

2003

 

2002

 

2001

 

2006

 

 

 

 

 

(As
restated)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

$

70,509

 

$

72,644

 

$

74,050

 

$

60,450

 

$

55,214

 

$

76,049

 

Total assets

 

234,528

 

238,889

 

279,514

 

296,091

 

284,725

 

237,154

 

Long-term debt and capital lease obligations

 

158,364

 

158,519

 

162,075

 

166,249

 

172,947

 

158,348

 

Convertible debt

 

11,980

 

11,980

 

11,980

 

11,980

 

24,205

 

11,980

 

Stockholders’ equity

 

28,971

 

29,097

 

60,684

 

68,367

 

44,476

 

31,995

 

 

20



 

PRIMEDEX HEALTH SYSTEMS, INC.

 

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 

The unaudited pro forma condensed combined financial statements are based on the historical consolidated statements of Primedex after giving effect to the merger with Radiologix,, borrowings used to finance the merger and the assumptions and adjustments described in the attached notes to the unaudited pro forma condensed combined financial statements.

 

The unaudited pro forma condensed combined statement of operations is prepared using the historical consolidated statements of operations of Primedex for the year ended October 31, 2005 and the six months ended April 30, 2006 and the historical consolidated statements of operations of Radiologix for the year ended December 31, 2005 and the six months ended June 30, 2006 as if the merger and borrowings to finance the merger occurred on November 1, 2004. The unaudited pro forma condensed combined balance sheet is presented as if the merger and borrowings used to finance the merger occurred on April 30, 2006 and combines the unaudited condensed balance sheets of Primedex as of April 30, 2006 and Radiologix as of June 30, 2006.

 

The preliminary allocation of purchase price used in the unaudited pro forma condensed combined financial statements is based upon preliminary estimates. The estimates and assumptions are subject to change upon the effective date of the merger and finalization of the valuation of Radiologix’s assets and liabilities. The unaudited pro forma condensed combined financial statements do not include the effects of any anticipated operating efficiencies or cost savings upon the merger. The unaudited pro forma condensed combined financial statements are for illustrative purposes only, and are not necessarily indicative of the consolidated results of operations or financial position of Primedex that would have been reported had the merger and borrowings been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial position of Primedex. The pro forma adjustments are based on preliminary information available at the time of the preparation of this document. Estimated valuation of stock-based compensation included in the unaudited pro forma condensed combined financial statement for the year ended October 31, 2005 for Primedex and the year ended December 31, 2005 for Radiologix do not include the impact of SFAS No. 123 (revised 2004) Share-Based Payment (“SFAS No. 123R”).

 

GE Healthcare Financial Services has provided a commitment for a $405.0 million of senior debt financing, which includes a $45.0 million revolving credit facility for working capital and general corporate purposes that will be substantially undrawn and available to Primedex at the close of the transaction. The remaining $360.0 million will fund the cash purchase price of Radiologix and refinance substantially all of the existing debt of Primedex and Radiologix.

 

The unaudited pro forma condensed combined financial statements and the accompanying notes are based upon the respective historical consolidated financial statements of Primedex and Radiologix and should be read in conjunction with the historical consolidated financial statements and accompanying notes of Primedex and Radiologix included in this filing.

 

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PRIMEDEX HEALTH SYSTEMS, INC.

 

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
APRIL 30, 2006
(in thousands)