Membership Interest Purchase Agreement

Exhibit 10.37

MEMBERSHIP INTEREST PURCHASE AGREEMENT

BY AND AMONG NIGHTHAWK RADIOLOGY HOLDINGS, INC.

AND

MIDWEST PHYSICIANS SERVICES, LLC

AND

EMERGENCY RADIOLOGY SERVICES, LLC AND

SPR HOLDINGS II, LLC

JULY 16, 2007

TABLE OF CONTENTS

Page ARTICLE I DEFINITIONS 1 1.1

Capitalized Terms 1 1.2

Construction 10 ARTICLE II SALE AND PURCHASE OF INTERESTS; CLOSING 10 2.1

Interests 10 2.2

Consideration 10 2.3

Closing 10 2.4

Purchase Price Allocation 11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND ACQUIRED COMPANIES 11 3.1

Organization 11 3.2

Authority 12 3.3

Capital Structure 12 3.4

Conflict 13 3.5

Financial Statements 13 3.6

Indebtedness; Guaranties 15 3.7

Accounts Receivable 15 3.8

Cash Equivalents/Bank Accounts 15 3.9

Absence of Changes 16 3.10

Legal and Other Compliance 18 3.11

Contracts 19 3.12

Restrictions on Business Activities 21 3.13

Governmental Approvals 21 3.14

Title to Properties, Absence of Liens, Condition of Equipment 21 3.15

Intellectual Property 22 3.16

Litigation 25 13.17

Insurance 25 3.18

Tax Matters 26 3.19

Environmental Matters 28 13.20

Brokers' and Finders' Fees 29 3.21

Employee and Contractor Matters 29 3.22

Employee Plans 31 3.23

Consents 33 3.24

Government Contracts 33 3.25

Books and Records 34 3.26

Medical Liability 34 3.27

Complete Copies of Materials 34 3.28

Affiliate Transactions 34


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Customers and Suppliers 35 3.30

Reorganization 35 3.31

Representations Complete 35

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER 36 4.1

Authority 36 4.2

No Conflict 36 4.3

Investment Representation 36 4.4

Organization 36 4.5

HSR Act 36

ARTICLE V ADDITIONAL AGREEMENTS 36 5.1

Access Pending the Closing 36 5.2

Satisfaction of Conditions 37 5.3

Intentionally Omitted 37 5.4

Operation of the Business by the Acquired Companies 37 5.5

Conduct Prior to Closing 38 5.6

Confidentiality 40 5.7

No Solicitation 40 5.8

Notification of Certain Matters 40 5.9

Public Disclosure 41 5.10

Consents 41 5.11

Legal Requirements 41 5.12

Additional Documents and Further Assurances 41 5.13

Tax Matters 42 5.14

Non-Competition 42 5.15

Employee and Employee Plan Matters 43

ARTICLE VI CLOSING CONDITIONS 45 6.1

Conditions to Obligations of Each Party 45 6.2

Additional Conditions to the Obligations of Buyer 45 6.3

Additional Conditions to Obligations of Acquired Companies and Seller 47

ARTICLE VII ESCROW 48 7.1

Escrow Fund 48

ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 48 8.1

Survival of Representations and Warranties 48 8.2

General Indemnification 49 8.3

Limitation on Claims 50 8.4

Tax Indemnification 50 8.5

Order of Claims 51


ii 8.6

Indemnification Procedure 51 8.7

Resolution of Conflicts 52 8.8

Third-Party Claims 52 8.9

Subrogation 53 8.10

Exclusive Remedy 53

ARTICLE IX TERM AND TERMINATION 54 9.1

Termination 54 9.2

Effect of Termination 55 9.3

Amendment 55 9.4

Extension; Waiver 55

ARTICLE X GENERAL PROVISIONS 55 10.1

Notices 55 10.2

Expenses 56 10.3

Entire Agreement; Assignment 56 10.4

Severability 56 10.5

Rights Reservation 56 10.6

Governing Law 57 10.7

Specific Performance 57 10.8

Waiver of Jury Trial 57 10.9

Counterparts 57 10.10

Representation by Counsel 57 10.11

Amendment 57 10.12

No Third Party Beneficiaries 58 10.13

Disclosure Letter 58


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MEMBERSHIP INTEREST PURCHASE AGREEMENT This MEMBERSHIP INTEREST PURCHASE AGREEMENT (the " Agreement" ) is made and entered into as of July 16, 2007 among Nighthawk Radiology Holdings, Inc., a Delaware corporation (" Buyer" ); Midwest Physicians Services, LLC, a Minnesota limited liability company (" Support Services Company" ); Emergency Radiology Services, LLC, a Minnesota limited liability company (" ERS" ); SPR Holdings II, LLC, a Minnesota limited liability company (" Seller" ). Support Services Company and ERS are together referred to herein as the " Acquired Companies ."

RECITALS

Seller owns all of the outstanding equity interests in the Acquired Companies, and the Acquired Companies are each considered to be an entity " disregarded as an entity separate from its owner" pursuant to Treasury Regulations a7301.7701-3(b)(1)(ii) (a " Disregarded Entity" ). Buyer desires to purchase from Seller, and Seller desires to sell to Buyer, all of the membership interests, including all financial, voting and equity interests (the " Interests" ) of the Acquired Companies for the consideration and on the terms and subject to the conditions set forth in this Agreement. As the acquisition of Disregarded Entities, the parties will treat the transactions contemplated hereunder as the acquisition of all of the assets and liabilities of the Acquired Companies for federal and state income tax purposes.

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

ARTICLE I

DEFINITIONS

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

(a) " Accounts Receivable" shall have the meaning set forth in Section 3.7 . (b) " Acquired Companies" shall have the meaning set forth in the preamble above. (c) " Acquired Company Contracts" shall have the meaning set forth in Section 3.11 . (d) " Acquired Company Audited Year-End Financials" shall have the meaning set forth in Section 3.5 .

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


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(f) " Acquired Company Intellectual Property" shall mean Technology and Intellectual Property Rights, including Acquired Company Registered Intellectual Property Rights, that are owned or licensed by any of the Acquired Companies. (g) " Acquired Company Interim Financials" shall have the meaning set forth in Section 3.5 . (h) " Acquired Company Registered Intellectual Property Rights" shall mean all Registered Intellectual Property Rights owned or otherwise held by or for the benefit of either of the Acquired Companies.

(i) " Acquired Company Tax Return" shall mean any Tax Return filed by or on behalf of either of the Acquired Companies or a Tax Return of Seller in which operations of the Acquired Companies are included. (j) " Acquisition Proposal" shall have the meaning set forth in Section 5.7 . (k) " Administrative Support Services Agreement" shall have the meaning set forth in Section 6.2 .

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

(m) " Audited Financial Statements" shall mean the consolidated balance sheets as of December 31, 2005 and December 31, 2006 and the related statements of income, changes in member equity and cash flows for the respective twelve-month periods then ended (the " Acquired Company Audited Year-End Financials" ) for the Acquired Companies that have been audited by Deloitte & Touche LLP and for which such accounting firm has issued an unqualified opinion that each of such financial statements have been prepared in accordance with GAAP applied on a consistent basis and present fairly the financial condition and operating results of the Acquired Companies as of the respective dates and for the periods indicated therein. (n) " Basket Amount" shall have the meaning set forth in Section 8.3 . (o) " Books and Records" shall mean all papers and records (in paper or electronic format) in the care, custody or control of the Acquired Companies pertaining to the Acquired Companies including, without limitation, all purchasing and sales records, stock records, minutes of meetings and other actions of the board of directors and shareholders of the Acquired Companies, customer and vendor lists, accounting and financial records, product documentation and specifications, and marketing documents.

(p) " Business" shall mean all of the operations, activities, services and products of the Acquired Companies and the other SPR Companies as currently conducted, including without limitation the marketing and performance of professional teleradiology services.


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(q) " Buyer" means Nighthawk Radiology Holdings, Inc., a Delaware corporation.

(r) " Charter Documents" shall have the meaning set forth in Section 3.1(b) .

(s) " Chemical Substance" shall mean any chemical substance which is identified or regulated under any Environmental Law.

(t) " Closing" shall have the meaning set forth in Section 2.3 .

(u) " Closing Date" shall have the meaning set forth in Section 2.3 . (v) " COBRA" shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and as codified in Section 4980B of the Code and Section 601 et. seq. of ERISA.

(w) " Code" shall mean the United States Internal Revenue Code of 1986, as amended.

(x) " Collateral Agreements" shall mean the Escrow Agreement, the Non-Competition Affirmation Agreement, the Administrative Support Services Agreements, the Professional Services Agreements, the Data License Agreement and the lease and sublease agreements referred to in Section 6.2(f)(ix) .

(y) " Confidential Information" shall mean all Trade Secrets and other confidential or proprietary information of a Person that such Person desires remain secret or confidential, including information derived from reports, investigations, research, work in progress, codes, marketing and sales programs, financial projections, cost summaries, pricing formulas, contract analyses, financial information, projections, confidential filings with any state or federal agency, and all other confidential concepts, methods of doing business, ideas, materials or information prepared or performed for, by or on behalf of such Person by its employees, officers, directors, agents, representatives, or consultants. Confidential Information shall not include information pertaining to the Acquired Companies and/or the Business that is publicly available or that becomes publicly available other than through a wrongful act by Seller or one of its Affiliates.

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

(aa) " Contract" shall mean any mortgage, indenture, lease, contract, covenant or other agreement, instrument or commitment, permit, concession, franchise or license, including any amendment or modifications made thereto. (bb) " Customer Information" shall have the meaning set forth in Section 3.14(f) . (cc) " Data License Agreement" shall have the meaning set forth in Section 6.2 .

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

(ee) " Disregarded Entity" has the meaning set forth in Recital A .

(ff) " Disclosure Letter" shall have the meaning set forth in the preamble to Article III.

(gg) " Employee" shall mean any current employee, director or governor of an Acquired Company.

(hh) " Employee Contract" shall mean each management, employment, severance, consulting, relocation, repatriation, expatriation, visas, work permit or other agreement, contract or understanding between any Employee or former employee of either of the Acquired Companies and either of the Acquired Companies or any ERISA Affiliate.

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

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

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

(ll) " ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended.

(mm) " ERISA Affiliate" shall mean the Seller or any other " person," within the meaning of Section 7701(a)(1) of the Code, that together with an Acquired Company is considered a single employer pursuant to Section 414(b), (c), (m) or (o) of the Code or Section 3(5) or 4001(b)(1) of ERISA.

(nn) " ERS" means Emergency Radiology Services, LLC, a Minnesota limited liability company.


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(oo) " Escrow Agent" means U.S. Bank National Association, a national banking association.

(pp) " Escrow Agreement" means the Escrow Agreement between the Buyer, Seller and the Escrow Agent in the form attached hereto as Exhibit A .

(qq) " Escrow Amount" shall mean $5,000,000 in cash.

(rr) " Escrow Fund" shall have the meaning set forth in Section 7.1 . (ss) " Escrow Period" shall have the meaning set forth in Section 7.2 . (tt) " Extremely Hazardous Substance" shall have the meaning set forth in Section 302 of the United States Emergency Planning and Community Right-to-Know Act of 1986, as amended.

(uu) " Federal Health Care Program" shall mean any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government, or any state health care program either approved under the Social Security Act or receiving federal funds.

(vv) " GAAP" shall mean United States generally accepted accounting principles.

(ww) " Governmental Approval" shall mean any: (i) permit, license, certificate, concession, approval, consent, ratification, permission, clearance, exemption, waiver, certification, designation, registration, variance, qualification, accreditation or authorization issued, granted, given, required by or otherwise made available by or under the authority of any Governmental Entity or pursuant to any Legal Requirement; or (ii) pending application or request for any of the foregoing in (i) above. (xx) " Governmental Entity" or " Government Authority" shall mean any court, administrative agency or commission or other federal, state, county, local or foreign governmental authority, instrumentality, agency or commission.

(yy) " HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, Pub. L. No. 94-435, 90 Stat. 1390, and rules promulgated thereunder. (zz) " Interests" shall have the meaning set forth in Recital A . (aaa) " Intellectual Property Rights" shall mean any or all of the following and all statutory and/or common law rights throughout the world in, arising out of, or associated therewith: (i) all patents and applications therefore, inventor' s certificates and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof (collectively, " Patents" ); (ii) all trade secrets, proprietary information, and know how (collectively, " Trade Secrets" ); (iii) copyrights, copyright registrations and applications, including moral rights and rights in Software, (" Copyrights" ); (iv) all trade names, logos, trademarks and service marks; trademark and service mark registrations and applications


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(collectively, " Trademarks" ); (v) all rights to Uniform Resource Locators, world wide web site addresses and domain names (collectively, " Domain Rights" ); (vi) databases and data collections (including patient and billing data, knowledge databases, customer lists and customer databases); (vii) any similar, corresponding or equivalent rights to any of the foregoing; and (viii) all goodwill associated with any of the foregoing.

(bbb) " Interim Balance Sheet" shall have the meaning set forth in Section 3.5(c) .

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

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

(eee) " Lien" shall mean any mortgage, pledge, lien, security interest, charge, encumbrance, restriction on transfer, conditional sale or other title retention device or arrangement (including, without limitation, a capital lease), transfer for the purpose of subjection to the payment of any indebtedness, or restriction on the creation of any of the foregoing, whether relating to any property or right or the income or profits therefrom; provided that the rights of parties under equipment leases, consignment arrangements and licenses shall not constitute Liens. (fff) " Loss" and " Losses" shall have the meanings set forth in Section 8.2 . (ggg) " Material Adverse Effect" shall mean any (i) change, event, inaccuracy, circumstance or effect, individually or when aggregated with other changes, events, violations, inaccuracies, circumstances or effects, that is materially adverse to the Business, assets, products, liabilities, financial condition, results of operations or prospects of any of the SPR Companies, or (ii) circumstance, change or event that materially impairs Buyer' s ability to use, sell, license, market, modify, and operate the assets of the Acquired Companies or operate the Business of the Acquired Companies in substantially the same manner as the Acquired Companies prior to the date of this Agreement.

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

(iii) " MWR" shall mean Midwest Radiology LLC, an affiliate of Seller.

(jjj) " Nondisclosure Agreement" shall have the meaning set forth in Section 5.1 .


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(kkk) " Noncompetition Affirmation Agreement" shall have the meaning set forth in Section 6.2 .

(lll) " Object Code" shall mean computer software, substantially or entirely in binary form, which is intended to be directly executable by a computer after suitable processing and linking but without the intervening steps of compilation or assembly. (mmm) " Officer' s Certificate" shall have the meaning set forth in Section 8.6(a) . (nnn) " Ordinary Course of Business" shall mean the ordinary course of business, consistent with past practice (including with respect to quantity and frequency).

(ooo) " Other SPR Companies Interim Financials" has the meaning set forth in Section 3.5(b) .

(ppp) " Other SPR Companies Unaudited Financial Statements" has the meaning set forth in Section 3.5(b) .

(qqq) " Other SPR Companies Unaudited Year-End Financials" has the meaning set forth in Section 3.5(b) .

(rrr) " PBGC" shall mean the Pension Benefit Guaranty Corporation.

(sss) " Pension Plan" means each Employee Plan that is an " employee pension benefit plan," within the meaning of Section 3(2) of ERISA.

(ttt) " Person" shall mean any individual, partnership, firm, corporation, association, trust, unincorporated organization or other entity, as well as any syndicate or group of any of the foregoing. (uuu) " Physician Members" shall mean each of the persons listed on Schedule A , each of whom holds an equity, profits or other ownership interest in the Seller and SPRPA.

(vvv) " Pre-Closing Period" shall have the meaning set forth in Section 8.4 .

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

(xxx) " Professional Services Agreement" means the Professional Services Agreement referred to in Section 6.2(e)(viii) . (yyy) " Property Taxes" shall have the meaning set forth in Section 8.4 . (zzz) " PTO" shall mean the United States Patent and Trademark Office.

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

(bbbb) " Release" shall mean any actual spilling, leaking, pumping, pouring, emitting, dispersing, emptying, discharging, injecting, leaching, dumping or disposing of any Chemical Substance or Extremely Hazardous Substance into the Environment that would cause an Environmental Liability or Costs (including the abandonment or discarding of barrels, containers, tanks or other receptacles containing or previously containing any Chemical Substance). (cccc) " Rep Indemnity Cap" shall have the meaning set forth in Section 8.3 . (dddd) " Seller" means SPR Holdings, LLC, a Minnesota limited liability company. (eeee) " Seller Indemnifying Party" shall have the meaning set forth in Section 8.2 . (ffff) " Software" shall mean any and all computer software and code, including assemblers, applets, compilers, Source Code, Object Code, data (including image and sound data), Development Tools, design tools and user interfaces, in any form or format, however fixed. Software shall include Source Code listings, file listings, functionality descriptions and documentation.

(gggg) " Source Code" shall mean computer software and code, in form other than Object Code form, including related programmer comments and annotations, help text, data and data structures, instructions and procedural, object-oriented and other code, which may be printed out or displayed in human readable form. (hhhh) " SPR Companies" means each of Seller, MWR, ERS, Support Services Company and SPRPA. (iiii) " SPR Company Customers" shall have the meaning set forth in Section 3.29(a). (jjjj) " SPR Company Customer Contracts" shall have the meaning set forth in Section 3.11 . (kkkk) " SPRPA" shall mean St. Paul Radiology, P.A, an affiliate of Seller. (llll) " Straddle Period" shall have the meaning set forth in Section 8.4 .

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(mmmm) " Subsidiary" shall mean, with respect to any Person, any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are at any time directly or indirectly owned by such Person. (nnnn) " Support Services Company" means Midwest Physicians Services, LLC, a Minnesota limited liability company.

(oooo) " Tax" or " Taxes" shall mean (i) any and all U.S. federal, state, local and non-U.S. taxes, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts, (ii) any liability for the payment of any amounts of the type described in clause (i) of this Section 1.1(oooo) as a result of being a member of an affiliated, consolidated, combined or unitary group for any period (including any arrangement for group or consortium relief or similar arrangement), and (iii) any liability for the payment of any amounts of the type described in clause (i) or (ii) of this Section 1.1(oooo) as a result of any express or implied obligation to indemnify any other person or as a result of any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity.

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

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

(rrrr) " Transaction Expenses" shall have the meaning set forth in Section 9.2 .

(ssss) " Treasury Regulations" means the Treasury Regulations ...