Exhibit 2.5
MANAGEMENT AGREEMENT
This Management Agreement (the "AGREEMENT") is entered into as of
October 17, 2001, by and among J.W. Childs Advisors II, L.P., a Delaware limited
partnership ("JWC"), Halifax Genpar, L.P., a Delaware limited partnership
("HALIFAX" and together with JWC, the "CONSULTANTS"), InSight Health Service
Holdings Corp., a Delaware corporation ("HOLDINGS"), and InSight Health Services
Corp, a Delaware corporation (the "COMPANY"), and is made effective as of the
Effective Time (as defined in the Merger Agreement (as defined below)).
Holdings and the Company and/or their direct or indirect subsidiaries
which receive the services performed by the Consultants, are hereinafter
referred to as the "CLIENTS". The Consultants, Holdings and the Company are
hereinafter jointly referred to as the "PARTIES".
RECITALS
A. The Consultants are specifically skilled in corporate finance,
strategic corporate planning and other management services.
B. Pursuant to that certain Agreement and Plan of Merger, dated
as of June 29, 2001 (the "MERGER AGREEMENT"), as amended, by and among Holdings,
InSight Health Services Acquisition Corp. (formerly known as JWCH Merger Corp.),
a Delaware corporation and wholly-owned subsidiary of Holdings ("ACQUISITION"),
and the Company, the Company will become the wholly-owned subsidiary of Holdings
as a result of the merger of Acquisition with and into the Company (together
with the other transactions contemplated by the Merger Agreement, the "MERGER").
C. Prior to the date hereof, the Consultants rendered substantial
and valuable services to the Company, Holdings and Acquisition in connection
with the Merger, including services regarding the planning and structuring of
the Merger.
D. The Clients will continue to require the Consultants' special
skills and management advisory services in connection with their general
business operations following the consummation of the Merger.
E. The Consultants are willing to make such skills available and
to provide such services to the Clients on the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the Clients and the Consultants,
intending to be legally bound, do hereby agree as follows:
1. Engagement. The Clients hereby engage the Consultants for the
Term (as hereinafter defined) and upon the terms and conditions herein set forth
to provide consulting and management advisory services to the Clients and/or any
of their subsidiaries, as requested from time to time by the Clients and/or any
of their subsidiaries. These services will be in the field of financial and
strategic corporate planning and such other management areas as the Consultants
and the Clients shall mutually agree. In consideration of the compensation to
the Consultants herein specified, the Consultants accept such engagement and
agree to perform the services specified herein.
2. Term. The engagement hereunder shall be for a term commencing
on the Effective Time and expiring on the fifth (5th) anniversary of such
Effective Time (the "INITIAL TERM") unless terminated earlier as provided below.
Upon expiration of the Initial Term, this Agreement shall automatically extend
for successive periods of one (1) year each, unless terminated earlier as
provided below or the Consultants or the Company shall give notice to the other
at least ninety (90) days prior to the end of the Initial Term (or any annual
extension thereof) indicating that it does not intend to extend the term of this
Agreement. The Initial Term, together with all such annual extensions of the
Initial Term, is referred to herein as the "TERM". Upon termination or final
expiration of the Term, all obligations as between the Parties shall be without
recourse to one another under this Agreement.
3. Services to be Performed. The Consultants shall devote
reasonable time and efforts to the performance of the consulting and management
advisory services contemplated by this Agreement. However, no precise number of
hours is to be devoted by the Consultants on a weekly or monthly basis. The
Consultants may perform services under this Agreement directly, through their
respective employees or agents, or with such outside consultants as the
Consultants may engage, with the consent of the board of directors of the
Company, for such purpose. Each Client acknowledges that such services to them
will not be exclusive, and that the Consultants and their affiliates will render
similar services to other persons.
4. Confidentiality. The Consultants shall hold in confidence all
proprietary and confidential information of the Clients and/or any of their
subsidiaries which may come into the Consultants' possession or knowledge as a
result of their performance of services hereunder, exercising a degree of care
in maintaining such confidence as is used by the respective Consultant to
protect its own proprietary or confidential information that it does not wish to
disclose. The Consultants shall use all reasonable efforts to ensure that their
respective employees, agents and outside consultants similarly maintain the
confidentiality of such proprietary and confidential information of the Clients
and/or any of their subsidiaries.
5. Compensation; Expense Reimbursement.
5.1 Closing Fee. In consideration of the Consultants'
provision of services regarding the planning and structuring of the Merger and
the other transactions contemplated by the Merger Agreement, and the
Consultant's execution and delivery of this Agreement, the Company shall pay (i)
JWC a fee in the amount of $4,500,000 and (ii) Halifax a fee in the amount of
$1,125,000, each of which shall be due and payable in immediately available
funds immediately upon consummation of the Merger.
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5.2 Management Fee. In consideration of the management
advisory services hereunder, (i) JWC shall be paid an aggregate annual fee
(hereinafter the "JWC MANAGEMENT FEE") equal to $240,000, which JWC Management
Fee shall be paid to JWC by the Clients (or any one of them) in equal monthly
installments of $20,000 per month, and (ii) Halifax shall be paid an aggregate
annual fee (hereinafter the "HALIFAX MANAGEMENT FEE") equal to $60,000, which
Halifax Management Fee shall be paid to Halifax by the Clients (or any one of
them) in equal monthly installments of $5,000 per month (the JWC Management Fee
and the Halifax Management Fee together, the "MANAGEMENT FEES"); provided that
the monthly installments due to JWC and Halifax in respect of any calendar month
during which the Term commences shall be appropriately pro-rated for the number
of days in such calendar month for which the Term was in effect. Such Management
Fees are to be paid monthly in arrears on the first day of each calendar month,
except for the installment which would otherwise be payable with respect to the
calendar month in which the Term commences, which shall instead be paid upon
consummation of the Merger. The Clients and/or any of their subsidiaries shall
allocate the Management Fees among themselves according to the services
received.
5.3 Expenses. The Clients shall reimburse the Consultants
for all reasonable out-of-pocket expenses incurred in connection with management
advisory services to be provided by the Consultants hereunder, including,
without limitation, costs in connection with agents or outside consultants
described in Section 3, reasonable travel, lodging and similar out-of-pocket
costs reasonably incurred by the Consultants in connection with or on account of
their performance of services for the Company hereunder. Reimbursement shall be
made only upon presentation to the Clients by the Consultants of reasonably
itemized documentation therefor.
6. Indemnification. In addition to their agreements and
obligations under this Agreement, the Clients agree, jointly and severally, to
indemnify and hold harmless the Consultants, and their affiliates, including
their officers, directors, stockholders, partners, members, employees and agents
(collectively, the "INDEMNITEES") from and against any and all claims,
liabilities, losses and damages or actions suits or proceedings in respect
thereof (collectively, the "OBLIGATIONS") as and when incurred by the
Indemnitees, in any way related to the Merger or arising out of the performance
by the Consultants of services under this Agreement, and to reimburse the
Indemnitees for reasonable out-of-pocket legal and other expenses ("EXPENSES")
as and when incurred by any of them in connection with or relating to
investigating, preparing to defend, or defending any actions, claims or other
proceedings (including any investigation or inquiry) arising in any manner out
of or in connection with the Merger or the Consultants' performance under this
Agreement (whether or not such Indemnitee is a named party in such proceeding);
provided, however, that the Clients shall not be responsible under this Section
6 for any Obligations or Expenses incurred by an Indemnitee to the extent that
it is finally judicially determined (in an action in which such Indemnitee is a
party) to result from actions taken by such Indemnitee due to such Indemnitee's
gross negligence or willful misconduct.
7. Contribution. If for any reason the indemnity provided for in
Section 6 is unavailable or is insufficient to hold harmless any Indemnitee from
any Obligations or Expenses, then the Clients shall contribute to the amount
paid or payable by such Indemnitees as a result of such Obligations or Expenses
in such proportion as is appropriate to reflect (i) the relative fault of the
Clients, on the
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one hand, and such Indemnitee, on the other, in connection with the state of
facts giving rise to such Obligations or Expenses, (ii) if such Obligations or
Expenses result from, arise out of, are based upon or relate to the Merger or
any transaction contemplated hereby, the relative benefits received by the
Clients, on the one hand, and such Indemnitee, on the other, from the Merger,
and (iii) if required by law, any other relevant equitable considerations. For
purposes of this Section 7, the relative fault of the Clients, on the one hand,
and of the Indemnitee, on the other, shall be determined by reference to, among
other things, their respective relative intent, knowledge, access to information
and opportunity to correct the state of facts giving rise to such Obligations or
Expenses. For purposes of this Section 7, the relative benefit of the Clients,
on the one hand, and of the Indemnitee, on the other, shall be determined by
weighing the direct monetary proceeds to the Clients, on the one hand, and such
Indemnitees, on the other, from the Merger or such transactions contemplated
hereby. The Parties hereto acknowledge and agree that it would not be just and
equitable if contributions pursuant to Section 7 were determined by pro rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to above. The Clients shall not be liable
under this Section 7 for contribution to the amount paid or payable by any
Indemnitee except to the extent and under such circumstances that the Clients
would have been liable to indemnify, defend and hold harmless such Indemnitee
under Section 6, if such indemnity were enforceable under applicable law. No
Indemnitee shall be entitled to contribution from the Clients with respect to
any Obligations or Expenses in the event that such Indemnitee is finally
determined to be guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act of 1933, as amended) in connection with such
Obligations or Expenses and the Clients are not guilty of such fraudulent
misrepresentation.
8. Third-Party Beneficiaries. All Indemnitees not signatory to
this Agreement are intended beneficiaries of Sections 6 and 7 of this Agreement.
9. Notice. All notices hereunder, to be effective, shall be in
writing and shall be mailed by first class certified mail, postage prepaid, as
follows:
(i) If to JWC, addressed to it at:
c/o J.W. Childs and Associates, L.P.
One Federal Street, 21st floor
Boston, Massachusetts 02110
Attention: Edward D. Yun
with a copy (which shall not constitute notice) to:
Kaye Scholer LLP
425 Park Avenue
New York, New York 10022
Attention: Stephen C. Koval, Esq.
(ii) If to Halifax, addressed to it at:
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c/o The Halifax Group, L.L.C.
1133 Connecticut Avenue
Washington, D.C. 20036
Attention: David W. Dupree
with a copy (which shall not constitute notice) to:
_________________________
_________________________
_________________________
Attention: _______________________
(iii) If to the Company, addressed to the Company at:
InSight Health Services Corp.
4400 MacArthur Boulevard
Suite 800
Newport Beach, California 92660
Attention: General Counsel
10. Modifications. This Agreement constitutes the entire agreement
among the Parties hereto with regard to the subject matter hereof, superseding
all prior understandings and agreements, whether written or oral. This Agreement
may not be amended or revised except by a writing signed by the Parties.
11. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the Parties and their respective successors and
permitted assigns, but may not be assigned by any Party without the prior
written consent of the other Parties hereto.
12. Captions. Captions have been inserted solely for the
convenience of reference and in no way define, limit or describe the scope or
substance of any provision and shall not affect the validity of any other
provision.
13. Governing Law; Jurisdiction; Service of Process. This
Agreement shall, in accordance with Section 5-1401 of the General Obligations
Law of the State of New York, be governed by the laws of the State of New York,
without regard to any conflicts of laws principles thereof that would call for
the application of the laws of any other jurisdiction. Any action or proceeding
seeking to enforce any provision of, or based on any right arising out of, this
Agreement may be brought against either of the Parties in the courts of the
State of New York, or if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of New York, and each of the
Parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in
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any action or proceeding referred to in the preceding sentence may be served on
any party anywhere in the world, whether within or without the State of New
York.
14. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby.
15. Counterparts. This Agreement may be executed in several
counterparts each of which shall be deemed an original and all of which shall
together constitute one and the same instrument.
[Remainder of Page Intentionally Blank]
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of
the date first above written.
J.W. CHILDS ADVISORS II, L.P. INSIGHT HEALTH SERVICES
HOLDINGS CORP.
By: J.W. Childs Associates, L.P.
By: J.W. Childs Associates, Inc.
By: /s/ Edward D. Yun By: /s/ Edward D. Yun
------------------------ ----------------------
Name: Edward D. Yun Name: Edward D. Yun
Title: Vice President Title: President
HALIFAX GENPAR, L.P. INSIGHT HEALTH SERVICES CORP.
By: The Halifax Group, L.L.C.
By: /s/ David W. Dupree By: /s/ Thomas V. Croal
------------------------ ------------------------
Name: David W. Dupree Name: Thomas V. Croal
Title: Managing Partner Title: Executive Vice President
& Chief Financial Officer