SECURITIES PURCHASE AGREEMENT
BY AND AMONG
INSIGHT HEALTH SERVICES CORP.
AND
CARLYLE PARTNERS II, L.P.,
CARLYLE PARTNERS III, L.P.,
CARLYLE INTERNATIONAL PARTNERS II, L.P.,
CARLYLE INTERNATIONAL PARTNERS III, L.P.,
C/S INTERNATIONAL PARTNERS,
STATE BOARD OF ADMINISTRATION OF FLORIDA,
CARLYLE INVESTMENT GROUP, L.P.,
CARLYLE-INSIGHT INTERNATIONAL PARTNERS, L.P., AND
CARLYLE-INSIGHT PARTNERS, L.P.
OCTOBER 14, 1997
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II PURCHASE AND SALE OF SECURITIES . . . . . . . . . . . . . . . . 15
2.1 Purchase and Sale of Securities. . . . . . . . . . . . . . . . . . 15
2.2 Consideration for Securities.. . . . . . . . . . . . . . . . . . . 15
ARTICLE III CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.1 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Deliveries by the Company at the Closing.. . . . . . . . . . . . . 16
3.3 Deliveries by the Purchaser at the Closing.. . . . . . . . . . . . 16
3.4 Second Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.5 Form of Documents and Instruments. . . . . . . . . . . . . . . . . 17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . 17
4.1 Organization of the Company. . . . . . . . . . . . . . . . . . . . 17
4.2 Capitalization of the Company. . . . . . . . . . . . . . . . . . . 17
4.3 Authorization of Issuance. . . . . . . . . . . . . . . . . . . . . 19
4.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.5 Noncontravention.. . . . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Consents.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
4.7 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.8 Employee Benefit Plans and Other Agreements. . . . . . . . . . . . 22
4.9 Governmental Filings.. . . . . . . . . . . . . . . . . . . . . . . 25
4.10 Financial Statements and Reports. . . . . . . . . . . . . . . . . 25
4.11 Absence of Undisclosed Liabilities: Guarantees. . . . . . . . . . 26
4.12 Absence of Certain Changes. . . . . . . . . . . . . . . . . . . . 26
4.13 Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . . 27
4.14 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.15 True and Complete Disclosure. . . . . . . . . . . . . . . . . . . 29
4.16 Taxes.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.17 Environmental Matters.. . . . . . . . . . . . . . . . . . . . . . 31
4.18 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.19 Real Property and Leaseholds. . . . . . . . . . . . . . . . . . . 32
4.20 Tangible Assets.. . . . . . . . . . . . . . . . . . . . . . . . . 33
4.21 Contracts and Commitments.. . . . . . . . . . . . . . . . . . . . 34
4.22 Books and Records.. . . . . . . . . . . . . . . . . . . . . . . . 34
4.23 Labor Matters.. . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.24 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.25 Intellectual Property.. . . . . . . . . . . . . . . . . . . . . . 35
4.26 Securities Offerings. . . . . . . . . . . . . . . . . . . . . . . 36
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4.27 No Other Agreements to Sell the Assets or the Company.. . . . . . 36
4.28 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
4.29 Accounts and Notes Receivable.. . . . . . . . . . . . . . . . . . 37
4.30 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . . . . 37
4.31 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . 37
4.32 No Research Grants. . . . . . . . . . . . . . . . . . . . . . . . 37
4.33 Certain Regulatory Matters. . . . . . . . . . . . . . . . . . . . 37
4.34 Certain Additional Regulatory Matters.. . . . . . . . . . . . . . 38
4.35 Medicare/Medicaid Participation.. . . . . . . . . . . . . . . . . 39
4.36 Compliance with Medicare/Medicaid and Insurance Programs. . . . . 39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. . . . . . . . . 40
5.1 Organization of the Purchaser. . . . . . . . . . . . . . . . . . . 40
5.2 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3 Noncontravention.. . . . . . . . . . . . . . . . . . . . . . . . . 41
5.4 Consents and Appeals.. . . . . . . . . . . . . . . . . . . . . . . 41
5.5 Purchase for Investment. . . . . . . . . . . . . . . . . . . . . . 41
5.6 No Brokers.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.7 No Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE VI COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.1 Best Efforts.. . . . . . . . . . . . . . . . . . . . . . . . . . . 42
6.2 Restrictive Agreements Prohibited. . . . . . . . . . . . . . . . . 43
6.3 Continuing Operations. . . . . . . . . . . . . . . . . . . . . . . 43
6.4 Financial Statements and Information.. . . . . . . . . . . . . . . 43
6.5 Press Releases.. . . . . . . . . . . . . . . . . . . . . . . . . . 45
6.6 Notification of Certain Matters. . . . . . . . . . . . . . . . . . 45
6.7 Liability Insurance. . . . . . . . . . . . . . . . . . . . . . . . 45
6.8 Conversion Stock.. . . . . . . . . . . . . . . . . . . . . . . . . 46
6.9 Certain Regulatory Matters.. . . . . . . . . . . . . . . . . . . . 46
6.10 Employment Arrangements.. . . . . . . . . . . . . . . . . . . . . 47
6.11 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . 47
6.12 Stockholder Approval of Certain Actions.. . . . . . . . . . . . . 48
6.13 Board of Directors. . . . . . . . . . . . . . . . . . . . . . . . 51
6.14 Restrictions on Transfer of Capital Stock.. . . . . . . . . . . . 53
6.15 Expiration of Certain Covenants.. . . . . . . . . . . . . . . . . 56
ARTICLE VII CONDITIONS TO CLOSING. . . . . . . . . . . . . . . . . . . . . 56
7.1 Conditions to Each Party's Obligations.. . . . . . . . . . . . . . 56
7.2 Conditions to the Company's Obligations. . . . . . . . . . . . . . 57
7.3 Conditions to the Purchaser' Obligations.. . . . . . . . . . . . . 58
ARTICLE VIII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 59
8.1 Survival of Representations, Etc.. . . . . . . . . . . . . . . . . 59
8.2 Indemnification by the Company.. . . . . . . . . . . . . . . . . . 60
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8.3 Limitation on Indemnities. . . . . . . . . . . . . . . . . . . . . 60
8.4 Losses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
8.5 Defense of Claims. . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE IX MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.1 Fees and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . 62
9.2 Injunctive Relief. . . . . . . . . . . . . . . . . . . . . . . . . 62
9.3 Assignment.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
9.4 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
9.5 Choice of Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.6 Entire Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . 64
9.7 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . 64
9.8 Invalidity.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
9.9 Headings; Language.. . . . . . . . . . . . . . . . . . . . . . . . 65
9.10 Limitation of Liability.. . . . . . . . . . . . . . . . . . . . . 65
9.11 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . 65
EXHIBITS
EXHIBIT A: Form of Amended and Restated Bylaws
EXHIBIT B: Form of Registration Rights Agreement
EXHIBIT C: Form of Series B Certificate of Designation
EXHIBIT D: Form of Series C Certificate of Designation
EXHIBIT E: Form of Series D Certificate of Designation
EXHIBIT F: Form of Warrant Agreement
EXHIBIT G: Form of GE Warrant Agreement
EXHIBIT H: Form of Opinion of the Purchaser's Counsel
EXHIBIT I: Form of Opinion of the Company's Corporate Counsel
EXHIBIT J: Persons Whose Knowledge Is Attributed to the Company
EXHIBIT K: Center Operations
EXHIBIT L: Form of Supplemental Service Fee Termination Agreement
SCHEDULES
Schedule 4.1(b) Organization of the Company
Schedule 4.2 Capitalization of the Company
Schedule 4.6 Consents
Schedule 4.7 Subsidiaries
Schedule 4.8 Employee Benefit Plans and Other Agreements
Schedule 4.11 Absence of Undisclosed Liabilities: Guarantees
Schedule 4.12(x) Absence of Certain Changes
Schedule 4.13(a) Compliance With Laws
Schedule 4.14 Litigation
Schedule 4.16 Taxes
Schedule 4.17 Environmental Matters
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Schedule 4.19 Real Property and Leaseholds
Schedule 4.20 Tangible Assets
Schedule 4.21 Contracts and Commitments
Schedule 4.23 Labor Matters
Schedule 4.25 Intellectual Property
Schedule 4.26 Securities Offerings
Schedule 4.30 Indebtedness
Schedule 4.31 Transactions with Affiliates
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as
of October 14, 1997, is by and among INSIGHT HEALTH SERVICES CORP., a Delaware
corporation (the "Company"), and CARLYLE PARTNERS II, L.P., a Delaware limited
partnership, CARLYLE PARTNERS III, L.P., a Delaware limited partnership, CARLYLE
INTERNATIONAL PARTNERS II, L.P., a Cayman Islands exempted limited partnership,
CARLYLE INTERNATIONAL PARTNERS III, L.P., a Cayman Islands exempted limited
partnership, C/S INTERNATIONAL PARTNERS, a Cayman Islands general partnership,
STATE BOARD OF ADMINISTRATION OF FLORIDA, a separate account maintained pursuant
to an Investment Management Agreement dated as of September 6, 1996 between the
State Board of Administration of Florida, Carlyle Investment Group, L.P. and
Carlyle Investment Management, L.L.C., CARLYLE INVESTMENT GROUP, L.P., a
Delaware limited partnership, CARLYLE-INSIGHT INTERNATIONAL PARTNERS, L.P., a
Cayman Islands exempted limited partnership, and CARLYLE-INSIGHT PARTNERS, L.P.,
a Delaware limited partnership (collectively, the "Purchaser").
RECITALS
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, for the consideration set forth
in Section 2.2 hereof, (i) an aggregate of 25,000 shares (the "Preferred
Shares") of its newly issued Series B Preferred Stock, each share of which
Series B Preferred Stock shall be convertible (a) initially into one hundred
nineteen and four hundred three one-thousandths (119.403) shares of Common Stock
at an initial conversion price of $8.375 per share of such Common Stock (so that
all of the shares of Series B Preferred Stock purchased by the Purchaser shall
be convertible initially into an aggregate of 2,985,075 shares of such Common
Stock), having the rights, designations and preferences set forth in the Series
B Certificate of Designation or (b) after the Type B Trigger Date, into shares
of Series D Preferred Stock having the rights, designations
and preferences set forth in the Series D Certificate of Designation on the
terms set forth in the Series D Certificate of Designation and (ii) the
Warrants; and
WHEREAS, contemporaneously with the Purchaser's acquisition of
the Securities, and as a condition to such acquisition, General Electric
Company shall (i) acquire warrants (the "GE Warrants") initially to purchase
250,000 shares of Common Stock at an initial exercise price of $10.00 per
share and (ii) terminate the Supplemental Service Fee described in the Proxy
Statement in exchange for 7,000 shares of newly issued Series C Preferred
Stock, each share of which Series C Preferred Stock shall be convertible (a)
initially into one hundred nineteen and four hundred three one-thousandths
(119.403) shares of Common Stock at an initial conversion price of $8.375 per
share of Common Stock (so that such shares of Series C Preferred Stock
acquired in respect of such termination would be initially convertible into
an aggregate of 835,821 shares of Common Stock, at an initial conversion
price of $8.375 per share) or (b) after the Type B Trigger Date, into shares
of Series D Preferred Stock having the rights, designations and preferences
set forth in the Series D Certificate of Designation on the terms set forth
in the Series D Certificate of Designation; and
WHEREAS, contemporaneously with the Purchaser's acquisition of
the Securities, and as a condition to such acquisition, the Company shall
execute and deliver definitive documents with respect to the Credit Facility,
and funding shall occur upon filing by the lender under the Credit Facility
of appropriate UCC filings and certain other conditions set forth in the
documentation related to the Credit Facility, and upon such funding, certain
of the proceeds of the Credit Facility and the investment described herein
shall be used by the Company to repay (i) Seventy Million Seven Hundred One
Thousand Six Hundred Eleven Dollars and Seventy-Five Cents ($70,701,611.75)
in principal, interest and fees, plus additional accrued and unpaid interest
associated therewith at the rate of Nineteen Thousand, Two Hundred Ninety-Six
Dollars ($19,296) per day for each day after October 14, 1997, of
Indebtedness of the Company and certain of its Affiliates to GE pursuant to
the Master Debt Restructuring Agreement, and (ii) certain other Indebtedness;
and
WHEREAS, the parties contemplate that at the Second Closing, GE
shall convert all of its 2,501,760 shares of Series A Preferred Stock into
20,953 shares of newly issued Series C Preferred Stock.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and
premises contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS.
As used herein, the terms below shall have the following meanings:
"AFFILIATE" of any specified Person means (a) any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person or (b) the beneficial
owner of ten percent (10%) or more of the voting securities of such Person).
For purposes of this definition, "control" (including, with correlative
meanings, the terms: "controlling," "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of
voting securities, by agreement or otherwise.
"AGREEMENT" means this Securities Purchase Agreement, together
with all Schedules and Exhibits referenced herein, as the same hereinafter
may be amended from time to time.
2
"AMENDED BYLAWS" means the Amended and Restated Bylaws of the
Company, in the form attached hereto as Exhibit A.
"ANCILLARY AGREEMENTS" means the Warrant Agreement and the
Registration Rights Agreement, as each hereinafter may be amended from time to
time.
"APPLICABLE LAW" means any statute, law, rule or regulation or
any judgment, order, writ, injunction, decree or financial assessment
(subject, in the case of financial assessments, to the exhaustion of appeals)
of any Governmental Entity to which a specified Person or its properties or
assets, or its officers, directors, employees, consultants or agents (in
their capacities as such) is subject, including, without limitation, all such
statutes, laws, rules, regulations, judgments, orders, writs, injunctions,
decrees and financial assessments relating to, without limitation, energy
regulation, public utility regulation, securities regulation, consumer
protection, equal opportunity, health care industry regulation, public health
and safety, motor vehicle safety or standards, third party reimbursement
(including Medicare and Medicaid), environmental protection, fire, zoning,
building and occupational safety and health matters and laws respecting
employment practices, employee documentation, terms and conditions of
employment and wages and hours.
"APPROVALS" has the meaning set forth in Section 4.13 of this
Agreement.
"BENEFIT ARRANGEMENT" means any employment, consulting,
severance or other similar contract, arrangement or policy and each plan,
arrangement (written or oral), program, agreement or commitment providing for
insurance coverage (including without limitation any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, life, health
or accident benefits (including without limitation any "voluntary employees'
beneficiary association" as defined in Section 501(c)(9) of the Code
providing for the same or other benefits) or for deferred compensation,
profit-sharing bonuses, stock options, stock appreciation rights, stock
purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (a) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (b) is entered into, maintained, contributed to
or required to be contributed to, as the case may be, by the Company or an
ERISA Affiliate or under which the Company or any ERISA Affiliate may incur
any liability, and (c) covers any present or former employees, directors or
consultants of the Company (with respect to their relationship with such
entities).
"BOARD OF DIRECTORS" means the board of directors of the
Company as it is constituted from time to time in accordance with the terms
of this Agreement, the Certificate of Incorporation and the Amended Bylaws.
"BYLAWS" means the Bylaws of the Company as in effect on the
date hereof.
"BUSINESS" means the provision of diagnostic services to the
healthcare industry.
3
"CAPITAL BUDGET PLAN" means, for each Fiscal Year, the plan of
the Company for making Capital Expenditures for such Fiscal Year which has been
approved for such Fiscal Year by either the Executive Committee or a
Supermajority Vote of the Board of Directors.
"CAPITAL EXPENDITURES" means, for any period, expenditures made
by the Company or any of its Subsidiaries to acquire or construct fixed assets,
plant and Fixtures and Equipment (including additions, improvements, upgrades
and replacements, but excluding repairs) during such period calculated in
accordance with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CARLYLE AFFILIATES" means the Purchaser, TC Group, L.L.C., and
any investor in any entity comprising the Purchaser or TC Group, L.L.C. on the
date hereof.
"CARLYLE TRANSACTION EXPENSES" means the reasonable fees and
expenses incurred by the Purchaser and any Carlyle Affiliate (including, but not
limited to, reasonable fees and expenses of legal counsel, accountants,
consultants and travel expenses in connection with the preparation of this
Agreement and the Purchaser's due diligence examination) relating to this
Agreement and the Transaction, which, together with the GE Transaction Expenses
(as such term is defined in the GE Purchase Agreement) shall be in an amount not
to exceed $500,000.
"CENTER OPERATIONS" means the operations of the Company and its
Subsidiaries at the locations identified in Exhibit K hereto.
"CERTIFICATE OF INCORPORATION" means the certificate of
incorporation (as defined in Section 104 of the Delaware General Corporation
Law) of the Company in effect on the date hereof, including, without limitation,
the Series B, the Series C and the Series D Certificates of Designation.
"CHAMPUS" has the meaning set forth in Section 4.34 of this
Agreement.
"CHANGE OF CONTROL" shall be deemed to have occurred (i) at such
time as any person (as defined in Section 13(d)(3) of the Exchange Act but
excluding GE and the Purchaser, individually and collectively) at any time shall
directly or indirectly acquire more than 40% of the voting power of the Common
Stock of the Company, (ii) at such time as during any one (1) year period,
individuals who at the beginning of such period constitute the Company's Board
of Directors cease to constitute at least a majority of such Board of Directors
(provided, however,
4
that a change in directors upon a Type B Event Date shall not be deemed to
cause a Change of Control pursuant to this clause (ii)), (iii) upon
consummation of a merger or consolidation of the Company into or with another
Person in which the stockholders of the Company immediately prior to the
consummation of such transaction shall own fifty percent (50%) or less of the
voting securities of the surviving corporation (or the parent corporation of
the surviving corporation where the surviving corporation is wholly-owned by
the parent corporation) immediately following the consummation of such
transaction, or (iv) the sale, transfer or lease of all or substantially all
of the assets of the Company, in any of cases (i), (ii), (iii) or (iv) in a
single transaction or series of related transactions; PROVIDED, that no
Change of Control hereunder with respect to the Company shall be deemed to
occur solely by reason of (x) the ownership by Carlyle or any Carlyle
Affiliate thereof or GE or its Affiliates of the Series C Preferred Stock or
any Affiliate thereof of any Capital Stock of the Company or (y) the
conversion of shares of Series B Preferred Stock into either Series D
Preferred Stock (and any change in the Board of Directors incident thereto)
or Common Stock, or (z) the conversion of shares of Series D Preferred Stock
into Common Stock. .
"CLAIM" has the meaning set forth in Section 8.5 of this
Agreement.
"CLAIM NOTICE" has the meaning set forth in Section 8.5 of this
Agreement.
"CLOSING" means the time at which this Agreement is executed
and delivered by the parties, the Purchaser purchases the Securities and GE
purchases the GE Warrants and exchanges the Supplemental Service Fee for
Series C Preferred Stock.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as it may be
amended from time to time.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON EQUITY" means all shares now or hereafter authorized of
any class of common stock of the Company (including the Common Stock) and any
other stock of the Company, however designated, authorized after the date
hereof, which has the right (subject always to prior rights of any class or
series of preferred stock) to participate in any distribution of the assets
or earnings of the Company without limit as to per share amount, but shall
not include the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock or the Series D Preferred Stock.
"COMMON STOCK" has the meaning set forth in Section 4.2(a) of
this Agreement.
"COMMON STOCK DIRECTOR" has the meaning set forth in the
Certificate of Incorporation.
"COMPANY" has the meaning set forth in the Preamble to this
Agreement, and, in addition, with respect to past events, means the Company
and its predecessors.
5
"CONVERSION DIRECTOR" has the meaning set forth in the Amended
Bylaws.
"CONVERSION PRICE" means $8.375 per share of Common Stock,
subject to adjustment as set forth in the Series B Certificate of Designation.
"CONVERTIBLE SECURITIES" shall mean any stock or securities
directly or indirectly convertible into or exchangeable for Common Equity,
including, without limitation, any exchangeable debt securities.
"CREDIT FACILITY" means the credit facility provided to the
Company pursuant to the terms of the Credit Agreement dated as of October 14,
1997 among the Company, certain subsidiaries, as guarantors, certain
financial institutions party thereto and NationsBank, N.A., as Agent.
"CURRENT CUSTOMER" has the meaning set forth in Section 4.21 of
this Agreement.
"ELIGIBLE HOLDER" has the meaning set forth in Section 6.4 of
this Agreement.
"ELIGIBLE SECURITIES" means (i) the Series B Conversion Stock,
the Series C Conversion Stock and the Series D Conversion Stock, (ii) the
Warrants and (iii) any Common Stock of the Company issued or issuable in
respect of the Securities or other securities issued or issuable pursuant to
the conversion of the Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event. Securities shall
cease to constitute "Eligible Securities" at such time that they are sold or
transferred in a transaction wherein the transferee does not acquire
"restricted securities" within the meaning of Rule 144 promulgated under the
Securities Act.
"EMPLOYEE PLANS" means all Benefit Arrangements, Multiemployer
Plans, Pension Plans and Welfare Plans.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section
4.8 of this Agreement.
"ENCUMBRANCE" means any claim, lien, pledge, option, charge,
easement, security interest, right-of-way, encumbrance or other right of
third parties, and, with respect to any securities, any agreements,
understandings or restrictions affecting the voting rights or other incidents
of record or beneficial ownership pertaining to such securities.
"ENVIRONMENTAL CONDITION" means the Release or threatened
Release of any Hazardous Material (whether or not upon a Facility or any
former facility or other property and whether or not such Release constituted
at the time thereof a violation of any Environmental Law) as a result of
which the Company has or would reasonably be expected to become liable to any
Person or by reason of which any Facility, any former facility or any of the
assets of the Company may suffer or be subjected to any Encumbrances.
6
"ENVIRONMENTAL LAWS" means any and all foreign, federal, state,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, legally binding decrees or other requirements of any Governmental
Entity (including, without limitation, common law) regulating, relating to or
imposing liability or standards of conduct concerning protection of the
environment or of human health relating to exposure of any kind of Hazardous
Materials, as have been, are now or may at any time hereafter be in effect.
"ENVIRONMENTAL PERMITS" means any and all permits, licenses,
registrations, notifications, exemptions and any other authorizations
required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means any entity which is (or at any relevant
time was) a member of a "controlled group of corporations" with, under
"common control" with, a member of an "affiliated service group" with or
otherwise required to be aggregated with the Company, as set forth in Section
414(b), (c), (m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"FACILITY" or "FACILITIES" means one or more of the offices and
buildings and all other real property and related facilities which are owned,
leased or operated by the Company or any Subsidiary.
"FEDERAL HEALTH CARE PROGRAM" has the meaning set forth in
Section 4.35 hereof.
"FINANCIAL STATEMENTS" has the meaning set forth in Section
4.10 hereof.
"FISCAL YEAR" means each year ending June 30, or any other
fiscal year as approved by the Board of Directors.
"FIXTURES AND EQUIPMENT" means all of the furniture, fixtures,
furnishings, machinery, equipment and other tangible assets owned by the
Company or any Subsidiary that are material to the conduct of their
businesses as currently conducted.
"GAAP" means generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board, which are in
effect as of the date of this Agreement.
"GE" means General Electric Company, a New York corporation,
and its Affiliates.
"GE PURCHASE AGREEMENT" means that certain Securities Purchase
Agreement, of even date herewith, by and between the Company and GE in
respect of the Series C Preferred Stock and the GE Warrants.
7
"GE WARRANT AGREEMENT" means that certain Warrant Agreement by
and between the Company and GE substantially in the form attached hereto as
Exhibit G pursuant to which the Company shall issue the GE Warrants to GE.
"GE WARRANTS" means the warrants to purchase Common Stock to be
acquired by GE at the Closing.
"GE WARRANT SHARES" means the Common Stock issuable to GE upon
the exercise of the GE Warrants.
"GOVERNMENTAL ENTITY" means any court or tribunal in any
jurisdiction (domestic or foreign) or any federal, state or local public,
governmental or regulatory body, agency, department, commission, board,
bureau or other authority or instrumentality (domestic or foreign).
"HAZARDOUS MATERIALS" means any hazardous substance, gasoline
or petroleum (including crude oil or any fraction thereof) or petroleum
products, polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or
asbestos-containing materials, pollutants, contaminants, radioactivity and
any other materials or substances of any kind, whether solid, liquid or gas,
and whether or not any such substance is defined as hazardous under any
Environmental Law, that is regulated pursuant to any Environmental Law or
that could give rise to liability under any Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
"INDEBTEDNESS" means, as to any Person without duplication, (a)
all items which, in accordance with GAAP, would be included as a liability on
the balance sheet of such Person and its Subsidiaries (including any
obligation of such Person to the issuer of any letter of credit for
reimbursement in respect of any drafts drawn under such letter of credit),
excluding (i) obligations in respect of deferred taxes and deferred employee
compensation and benefits, and (ii) anything in the nature of Capital Stock,
surplus capital and retained earnings; (b) Capital Lease Obligations of such
Person; and (c) all obligations of other Persons that such Person has
guaranteed, including, without limitation, all obligations of such Person
consisting of recourse liabilities with respect to accounts receivable sold
or otherwise disposed of by such Person, PROVIDED, HOWEVER, that the term
Indebtedness shall not include trade accounts payable (other than for
borrowed money) arising in, and accrued expenses incurred in, the ordinary
course of business of such Person, provided the same are not more than sixty
(60) days overdue or are being contested in good faith.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.2 of
this Agreement.
"INDEPENDENT" means any person who is not an officer or
employee of the Company or any Subsidiary or other Affiliate of the Company
or otherwise paid any compensation or remuneration by the Company or any
Subsidiary or other Affiliate of the Company other than director's fees.
8
"JOINT DIRECTOR" has the meaning set forth in Section 6.13 of
this Agreement.
"LIABILITY" or "LIABILITIES" means, with respect to any Person,
any liability or obligation of such Person of any kind, character or
description, whether known or unknown, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, secured or unsecured, joint or
several, due or to become due, vested or unvested, executory, determined,
determinable or otherwise and whether or not the same is required to be
accrued on the financial statements of such Person.
"LIQUIDATING EVENT" means (i) the commencement by the Company
of a voluntary case under the bankruptcy laws of the United States, as now or
hereafter in effect, or, if an involuntary case against the Company has been
commenced, the decision by the Company not to timely controvert such petition
and seek its prompt dismissal; (ii) the commencement by the Company of any
proceeding under any reorganization, arrangement, adjustment of debt, relief
of debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or
the adoption of a plan of liquidation; (iii) if any proceeding set forth in
the preceding clause has been commenced against the Company, the decision by
the Company not to controvert such proceeding and seek its prompt dismissal;
or (iv) any Change of Control (A) pursuant to clauses (i) and (ii) of the
definition thereof if such Change of Control occurred in or as a result of a
transaction or series of related transactions approved by the Board of
Directors, or (B) pursuant to clauses (iii) or (iv) of the definition of
Change of Control; in any of cases (i) through (iv) above, in a single
transaction or series of related transactions.
"LOSSES" has the meaning set forth in Section 8.2 of this
Agreement.
"MARKET PRICE" means as to any security the average of the
closing prices of any such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if
on any day such security is not so listed, the average of the representative
bid and asked prices quoted in Nasdaq as of 4:00 P.M., New York time, on such
day, or, if on any day such security is not quoted in Nasdaq, the average of
the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau,
Incorporated, or any similar successor organization, in each such case
averaged over a period of twenty-one (21) business days consisting of the day
as of which "Market Price" is being determined and the twenty (20)
consecutive business days prior to such day; provided that if such security
is listed on any domestic securities exchange the term "business days" as
used in this sentence means business days on which such exchange is open for
trading. If at any time such security is not listed on any domestic
securities exchange or quoted in Nasdaq or the domestic over-the-counter
market, the "Market Price" shall be the fair value thereof determined by the
Company and approved by the Purchaser; provided that if such parties are
unable to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Purchaser. The determination of such appraiser shall be final and binding
9
on the Company and the Purchaser, and the fees and expenses of such appraiser
shall be paid by the Company.
"MASTER DEBT RESTRUCTURING AGREEMENT" means that certain Master
Debt Restructuring Agreement dated as of June 26, 1996 by and among GE,
General Electric Capital Corporation, the Company, American Health Services
Corp. Maxum Health Corp. and certain subsidiaries of Maxum Health Corp., as
amended through the date hereof.
"MATERIAL ADVERSE EFFECT" with respect to any Person means a
material adverse effect on the results of operations, condition (financial or
otherwise), assets, liabilities (whether absolute, accrued, contingent or
otherwise) or business of such Person and its Subsidiaries (if any), taken as
a whole.
"MATERIAL AGREEMENTS" has the meaning set forth in Section 4.21
of this Agreement.
"MERGER AGREEMENT" means that certain Agreement and Plan of
Merger dated as of February 26, 1996 by and among the Company, American
Health Services Corp., AHSC Acquisition Corp., Maxum Health Corp. and MXHC
Acquisition Corp.
"MOBILE OPERATIONS" means all operations of the Company and its
Subsidiaries other than Center Operations.
"MULTIEMPLOYER PLAN" means any "multiemployer plan," as defined
in Section 400l(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or any ERISA
Affiliate may incur any liability and (b) covers any employee or former
employee of the Company or any ERISA Affiliate (with respect to their
relationship with such Persons).
"OPERATING LEASE" shall mean any lease with respect to which
the obligations of the lessee thereunder are, at the time any determination
thereof is to be made, not required to be capitalized on the lessee's balance
sheet in accordance with GAAP.
"OPTION" shall mean any rights or options to subscribe for or
purchase Common Equity or Convertible Securities.
"ORDINARY COURSE OF BUSINESS," for purposes of Section 6.12(s)
of this Agreement, means the ordinary course of business for a company
engaged in the business of providing diagnostic services to the health care
industry; provided, however, that all sales by the Company or any Subsidiary,
as the case may be, of inventory and sales of Fixtures and Equipment no
longer used or useful in such business shall be deemed to be in the Ordinary
Course of Business.
"PARITY SECURITIES" has the meaning set forth in Section 2 of
the Series B Certificate of Designation.
10
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means any "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which (a)
the Company or any ERISA Affiliate maintains, administers, contributes to or
is required to contribute to, or, within the five (5) years prior to the
Closing Date, maintained, administered, contributed to or was required to
contribute to, or under which the Company or any ERISA Affiliate may incur
any liability and (b) covers any employee or former employee of the Company
or any ERISA Affiliate (with respect to their relationship with such Persons).
"PERMITS" means all licenses, permits, orders, consents,
approvals, registrations, authorizations, qualifications and filings required
by any federal, state, local or foreign law or regulation or governmental or
regulatory bodies and all industry or other non-governmental self-regulatory
organizations.
"PERMITTED ENCUMBRANCES" means (a) any mechanic's or
materialmen's lien or similar Encumbrances with respect to amounts not yet
due and payable or which are being contested in good faith by appropriate
proceedings and for which appropriate reserves have been established, (b)
Encumbrances for Taxes not yet due and payable or which are being contested
in good faith by appropriate proceedings, for which appropriate reserves have
been established, (c) easements, licenses, covenants, rights of way and
similar Encumbrances which, individually or in the aggregate, would not
materially and adversely affect the marketability or value of the property
encumbered thereby or materially interfere with the operations of the
Business and (d) Encumbrances arising under the Credit Facility.
"PERSON" means any individual, corporation, partnership,
limited partnership, limited liability partnership, joint venture,
association, limited liability company, joint-stock company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"PRE-CLOSING ENVIRONMENTAL CONDITIONS" means any Environmental
Condition occurring or in existence on or prior to the Closing Date.
"PREFERRED SHARES" has the meaning set forth in the Recitals to
this Agreement.
"PREFERRED STOCK DIRECTOR" has the meaning set forth in the
Amended Bylaws.
"PROCEEDING" means any action, suit, claim, litigation, legal
or other proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit, claim, litigation, legal
or other proceeding, and any investigation that could reasonably be expected
to lead to such an action, suit, claim, litigation, legal or other
proceeding, not including an audit other than an audit by a Governmental
Entity pursuant to any Applicable Laws relating to health care, the health
care industry and the provision of health care services, third party
reimbursement (including Medicare and Medicaid), public health and safety or
wrongful death and medical malpractice, which shall be included in this
definition of "Proceeding."
11
"PROPRIETARY RIGHTS" has the meaning set forth in Section 4.25 of
this Agreement.
"PROXY STATEMENT" means that certain Maxum Health Corp. and
American Health Services Corp. Joint Proxy Statement for Special Meeting of
Stockholders to be held June 25, 1996, dated May 9, 1996.
"PURCHASER" has the meaning set forth in the Preamble to this
Agreement, and shall include the Purchaser's successors and permitted assigns.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement by and among the Company and the Purchaser substantially in the
form attached hereto as Exhibit B.
"REGULATION D" has the meaning set forth in Section 4.26 of
this Agreement.
"RELEASE" means and includes any spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping, leaching,
dumping or disposing into the environment or the workplace of any Hazardous
Materials, and otherwise as defined in any Environmental Law.
"SEC FILINGS" has the meaning set forth in Section 4.9 of this
Agreement.
"SECOND CLOSING" means the time at which GE converts all of its
Series A Preferred Stock into Series C Preferred Stock.
"SECOND CLOSING DATE" means the business day after all waiting
periods with respect to GE's filing of a notification under the HSR Act with
respect to the transactions to occur at the Second Closing have expired or
have been terminated and neither the Federal Trade Commission nor the
Department of Justice shall have sent a letter giving notice of its intention
to initiate legal action to prevent such transactions or to seek further
information.
"SECURITIES" means the Preferred Shares and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR MANAGEMENT" means such members of the senior management
of the Company as are proposed by the President of the Company and accepted
by the Series B Directors and the Series C Director, which acceptance shall
not unreasonably be withheld.
"SENIOR SECURITIES" has the meaning set forth in Section 2 of
the Series B Certificate of Designation.
"SERIES A PREFERRED STOCK" means the Convertible Preferred
Stock, Series A, par value $0.001 per share, of the Company, all of the
outstanding shares of which as of the date of this Agreement are held by GE.
12
"SERIES B CERTIFICATE OF DESIGNATION" means the Certificate of
Designation, Preferences and Rights of the Series B Preferred Stock, in the
form attached hereto as Exhibit C.
"SERIES B CONVERSION SHARES" means the shares of Common Stock
issuable, upon certain conditions, by the Company to the Purchaser in respect
of the Series B Preferred Stock.
"SERIES B PREFERRED STOCK" means the Convertible Preferred
Stock, Series B, par value $0.001 per share, of the Company, with the rights,
preferences and privileges set forth in the Series B Certificate of
Designation.
"SERIES C CERTIFICATE OF DESIGNATION" means the Certificate of
Designation, Preferences and Rights of the Series C Preferred Stock, in the
form attached hereto as Exhibit D.
"SERIES C CONVERSION SHARES" means the shares of Common Stock
issuable, upon certain conditions, by the Company to GE in respect of the
Series C Preferred Stock.
"SERIES C PREFERRED STOCK" means the Convertible Preferred
Stock, Series C, par value $0.001 per share, of the Company, with the rights,
preferences and privileges set forth in the Series C Certificate of
Designation.
"SERIES D CERTIFICATE OF DESIGNATION" means the Certificate of
Designation, Preferences and Rights of the Series D Preferred Stock, in the
form attached hereto as Exhibit E.
"SERIES D CONVERSION SHARES" means the shares of Common Stock
issuable, upon certain conditions, by the Company to the Purchaser in respect
of the Series D Preferred Stock.
"SERIES D PREFERRED STOCK" means the Convertible Preferred
Stock, Series D, par value $0.001 per share, of the Company, with the rights,
preferences and privileges set forth in the Series D Certificate of
Designation.
"SPECIAL CORPORATE EVENT" shall be deemed to have occurred (i)
at such time as any person (as defined in Section 13(d)(3) of the Exchange
Act), except the Purchaser, any Carlyle Affiliate, GE and/or any Affiliate of
GE, at any time shall directly or indirectly acquire more than twenty percent
(20%) of the voting power of the Common Stock of the Company, (ii) at such
time as during any one (1) year period, individuals who at the beginning of
such period constitute the Company's Board of Directors cease to constitute
at least a majority of such Board (provided, however, that a change in
directors upon a Type B Event Date shall not be deemed to cause a Special
Corporate Event pursuant to this clause (ii)), (iii) upon consummation of a
merger or consolidation of the Company into or with another Person in which
the stockholders of the Company immediately prior to the consummation of such
transaction shall own fifty percent (50%) or less of the voting securities of
the surviving corporation (or the parent corporation of the surviving
corporation where the surviving corporation is wholly-owned by the parent
corporation) immediately following the consummation of such transaction, or
(iv) the sale, transfer or lease of all or substantially all of the assets of
the Company, in any of cases (i), (ii), (iii) or (iv) in a single transaction
or series of related transactions.
13
"SSA" has the meaning set forth in Section 4.34 of this Agreement.
"STATE HEALTH CARE PROGRAM" has the meaning set forth in Section
4.35 of this Agreement.
"SUBSIDIARY" means (a) any corporation of which at least a
majority in interest of the outstanding voting stock (having by the terms
thereof voting power under ordinary circumstances to elect a majority of the
directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might
have voting power by reason of the happening of any contingency) is at the
time, directly or indirectly, owned or controlled by the Company and/or by
one or more Subsidiaries of the Company, or (b) any corporate or
non-corporate entity in which the Company and/or one or more Subsidiaries of
the Company, directly or indirectly, at the date of determination thereof,
has an ownership interest and one hundred percent (100%) of the revenue of
which is included in the consolidated financial reports of the Company
consistent with GAAP. With respect to past events, a reference to a
Subsidiary shall be a reference to such Subsidiary and its predecessors.
"SUPERMAJORITY VOTE" means the affirmative vote of six (6)
directors of the Company with respect to the matter subject to such vote.
"SUPERVOTING SECURITIES" means any class or series of the
Company's Capital Stock the holders of which have the right to cast more than
one vote per share and/or have the right to elect one or more members of the
Board of Directors, voting as a class or series.
"SUPPLEMENTAL SERVICE FEE" has the meaning set forth in the
Recitals hereof.
"SUPPLEMENTAL SERVICE FEE TERMINATION AGREEMENT" means the
Supplemental Service Fee Termination Agreement between the Company and the
Purchaser substantially in the form attached hereto as Exhibit L.
"TAX" or "TAXES" means any federal, state, local or foreign net
or gross income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, (including taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property,
personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated or other tax, governmental fee or
like assessment or charge of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not, imposed by any
Governmental Entity or arising under any tax law or agreement, including,
without limitation, any joint venture or partnership agreement.
"TAX RETURN" means any return, declaration, report, claim for
refund or information or return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendments thereof.
"THIRD PARTY NOTICE" has the meaning set forth in Section 8.5
of this Agreement.
14
"TRANSACTION" means, taken together, the transactions
contemplated under this Agreement and the GE Purchase Agreement, including,
without limitation, the transactions that will occur at the Closing, the
initial funding of the Credit Facility and the Second Closing.
"TYPE B CONVERSION" has the meaning set forth in the Series B
Certificate of Designation and the Series C Certificate of Designation.
"TYPE B EVENT DATE" has the meaning set forth in the Series B
Certificate of Designation and the Series C Certificate of Designation.
"TYPE B TRIGGER DATE" means the date one year after the initial
borrowing of funds under the Credit Facility.
"WARRANT AGREEMENT" means that certain Warrant Agreement by and
between the Company and the Purchaser substantially in the form attached
hereto as Exhibit F pursuant to which the Company shall issue the Warrants to
the Purchaser.
"WARRANT CERTIFICATES" means one or more warrant certificates
evidencing the Warrants, in the form attached as an exhibit to the Warrant
Agreement.
"WARRANTS" means 250,000 warrants, issued pursuant to the
Warrant Agreement, to purchase, initially, an equivalent number of shares of
Common Stock at an initial exercise price of $10.00 per share, expiring on
the date that is the fifth anniversary of the Closing Date.
"WARRANT SHARES" means the Common Stock issuable upon the
exercise of the Warrants.
"WELFARE PLAN" means any "employee welfare benefit plan" as
defined in Section 3(1) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to
contribute to, or under which the Company or any ERISA Affiliate may incur
any liability and (b) covers any employee or former employee of the Company
or any ERISA Affiliate (with respect to their relationship with such
entities).
ARTICLE II
PURCHASE AND SALE OF SECURITIES
2.1 PURCHASE AND SALE OF SECURITIES.
Upon the terms and subject to the conditions contained herein, on
the Closing Date the Company shall sell to the Purchaser and the Purchaser shall
purchase from the Company all of the Securities.
2.2 CONSIDERATION FOR SECURITIES.
Upon the terms and subject to the conditions contained herein,
as consideration for the purchase of the Securities, on the Closing Date the
Purchaser shall pay to the Company an
15
aggregate purchase price in the amount of $25,000,000 minus the Carlyle
Transaction Expenses and minus a private placement fee of One Hundred Twenty
Five Thousand Dollars ($125,000), payable by wire transfer of immediately
available funds to an account designated by the Company at least 24 hours
before the Closing.
ARTICLE III
CLOSING
3.1 CLOSING.
The Closing shall be held at 10:00 a.m. Los Angeles time on the
Closing Date, at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand
Avenue, Los Angeles, CA 90071, unless the parties hereto otherwise agree.
3.2 DELIVERIES BY THE COMPANY AT THE CLOSING.
At the Closing, the Company shall issue and deliver to the
Purchaser:
(a) Certificates evidencing the Preferred Shares in the names of
the Persons comprising the Purchaser (or their assignees), in the respective
amounts as set forth in a written notice provided to the Company by the
Purchaser 24 hours in advance;
(b) The Warrant Certificates in the names of the Persons
comprising the Purchaser (or their assignees), in the respective amounts as set
forth in a written notice provided to the Company by the Purchaser;
(c) The Ancillary Agreements;
(d) The certificates, opinions of counsel and other documents
described in Article VII of this Agreement; and
(e) All such other documents and instruments as the Purchaser or
its counsel shall reasonably request to consummate the Closing.
3.3 DELIVERIES BY THE PURCHASER AT THE CLOSING.
At the Closing, the Purchaser shall deliver to the Company:
(a) Wire transfer of immediately available funds as provided in
Section 2.2;
(b) The Ancillary Agreements;
(c) The certificates, opinions of counsel and other documents
described in Article VII of this Agreement; and
(d) All such other documents and instruments as the Company or
its counsel shall reasonably request to consummate the Closing.
16
3.4 SECOND CLOSING.
The parties contemplate that the Second Closing shall occur on
the Second Closing Date. At the Second Closing, all of GE's shares of Series
A Preferred Stock shall be converted into Series C Preferred Stock.
3.5 FORM OF DOCUMENTS AND INSTRUMENTS.
All of the documents and instruments delivered at the Second
Closing shall be in form and substance, and shall be executed and delivered
in a manner, reasonably satisfactory to the respective counsel of the
Purchaser and the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
4.1 ORGANIZATION OF THE COMPANY.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as presently being
conducted and as proposed to be conducted. No actions or Proceedings to
dissolve the Company are pending or, to the Knowledge of the Company,
threatened. The copies of the Certificate of Incorporation and Amended
Bylaws heretofore delivered by the Company to TC Group, L.L.C. are accurate
and complete as of the date hereof. The Company is duly qualified or licensed
to do business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
conduct of its business requires such qualification or licensing, except
where the failure to do so taken in the aggregate would not have a Material
Adverse Effect on the Company. The Certificate of Incorporation and the
Amended Bylaws of the Company comply in all material respects with Delaware
law.
(b) Each Subsidiary is a corporation or other business entity
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all requisite power and authority to
own, lease and operate its properties and assets and to carry on its business
as presently being conducted and as proposed to be conducted. Except as set
forth in Schedule 4.1(b), each Subsidiary is duly qualified or licensed to do
business as a foreign corporation and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the
conduct of its business requires such qualification or licensing, except
where the failure to do so would not have a Material Adverse Effect on the
Company. The terms and provisions of the organizational documents of each
Subsidiary comply in all material respects with the laws of such Subsidiary's
jurisdiction of incorporation.
17
4.2 CAPITALIZATION OF THE COMPANY.
(a) The authorized Capital Stock of the Company consists of:
(i) Twenty-Five Million (25,000,000) shares of common stock, par value $0.001
per share (the "Common Stock"), Two Million Seven Hundred Fourteen Thousand
Seven Hundred Twenty Five (2,714,725) shares of which will be issued and
outstanding immediately after the Closing Date; (ii) Three Million Five
Hundred Thousand (3,500,000) shares of preferred stock, of which (A) Two
Million Five Hundred One Thousand Seven Hundred Sixty (2,501,760) shares of
Series A Preferred Stock are issued and outstanding as of the date hereof,
all of which shares are expected to be exchanged at the Second Closing for
shares of Series C Preferred Stock so that no shares of Series A Preferred
Stock are expected to be outstanding immediately after the Second Closing
Date; (B) Twenty Five Thousand (25,000) shares of Series B Preferred Stock
which will be designated and authorized as of the Closing Date, all of which
will be issued and outstanding immediately after the Closing Date; (C) Twenty
Seven Thousand Nine Hundred Fifty Three (27,953) shares of Series C Preferred
Stock which will be designated and authorized as of the Closing Date, Seven
Thousand (7,000) shares of which will be issued and outstanding immediately
after the Closing Date and all of which are expected to be issued and
outstanding immediately after the Second Closing Date; and (D) Six Hundred
Thirty Two Thousand Two Hundred Sixty Six (632,266) shares of Series D
Preferred Stock which will be designated and authorized as of the Closing
Date, no shares of which will be issued and outstanding immediately after the
Closing Date. All outstanding shares of Capital Stock of the Company are
fully paid, non-assessable, free and clear of all Encumbrances and have been
issued in compliance with all state and federal securities laws. Except for
the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock, none of such shares is subject to, nor has been issued in
violation of, any preemptive rights.
(b) The Company has not become subject to any commitment or
obligation, either absolute or conditional, matured or unmatured, vested or
not yet vested, to issue, deliver or sell, or cause to be issued, delivered
or sold, under offers, stock option agreements, stock bonus agreements, stock
purchase plans, incentive compensation plans, warrants, options, calls,
conversion rights or otherwise, any shares of the Capital Stock or other
securities of the Company including securities or obligations convertible
into or exchangeable for any shares of Capital Stock, other equity securities
or ownership interests, upon payment of any consideration or otherwise,
except for (i) the commitments and obligations of the Company pursuant to
this Agreement, the Warrant Agreement, the GE Purchase Agreement, the GE
Warrant Agreement, the Series B Certificate of Designation and the Series C
Certificate of Designation; (ii) the issuance, sale or grant of the options
outstanding on the date hereof to Senior Management and directors of the
Company set forth on SCHEDULE 4.2 hereto; (iii) the warrants outstanding on
the date hereof set forth on SCHEDULE 4.2 hereto; (iv) as set forth on
SCHEDULE 4.2 hereto, the number of shares of Capital Stock (all of which are
included in the Two Million Seven Hundred Fourteen Thousand Seven Hundred
Twenty Five (2,714,725) outstanding shares of Common Stock stated in Section
4.2(a)) as to which the Company would be required to issue new stock
certificates if all stock certificates were now surrendered that represented
shares of Capital Stock of American Health Services Corp. or Maxum Health
Corp. (constituent corporations in the mergers contemplated by the Merger
Agreement) that either were outstanding immediately prior to such
18
mergers or that were issuable pursuant to any commitment or obligation of
either of such constituent corporations, either absolute or conditional,
matured or unmatured, vested or not yet vested, to issue, deliver or sell, or
cause to be issued, delivered or sold, under offers, stock option agreements,
stock bonus agreements, stock purchase plans, incentive compensation plans,
warrants, options, calls, conversion rights or otherwise; and (v) as set
forth on SCHEDULE 4.2, and to the extent not otherwise described in clause
(iv) of this Section 4.2, the number of shares of Capital Stock of the
Company that would be required to be issued if the surviving corporations of
such mergers were to give their written approval (pursuant to Section 262(k)
of the Delaware General Corporation Law), to holders of shares of Capital
Stock of such constituent corporations who exercised their appraisal rights
with respect to such shares, to withdraw such holders' demands for appraisal
and accept such mergers. Except as provided in this Agreement, the Company
is not a party or subject to any agreement or understanding and, to the
Company's Knowledge, there is no agreement or understanding between any
Persons and/or entities, that affects or relates to the voting or giving of
written consents with respect to any of the Company's voting securities.
(c) Upon issuance to the Purchaser of the Twenty-Five Thousand
(25,000) shares of Series B Preferred Stock to be issued hereunder, if the
Purchaser were to immediately convert such shares into Common Stock, such
shares of Common Stock would represent Twenty Eight and Four-Tenths Percent
(28.4%) of the Common Stock of the Company on a fully diluted basis. Such
percentage shall equal one hundred (100) times the following quotient. The
numerator of such quotient shall be the number of shares of Common Stock that
the Purchaser would be entitled to receive if the Purchaser were to convert
into Common Stock, immediately following the Closing and pursuant to the
terms of the Series B Certificate of Designation, all of the shares of Series
B Preferred Stock the Purchaser is to receive at the Closing pursuant to the
terms of this Agreement. The denominator of such quotient shall equal the sum
of (1) such numerator, plus (2) the number of shares of Common Stock that
would need to be issued if all of the shares of Series C Preferred Stock to
be issued pursuant to the GE Purchase Agreement (whether issuable at the
Closing or at the Second Closing) were converted into Common Stock, pursuant
to the terms of the Series C Certificate of Designation, plus (3) the number
of shares of Common Stock that would need to be issued if the all of the
Warrants and GE Warrants were exercised in full, plus (4) the maximum number
of shares of Common Stock that would need to be issued if all of the
issuances of Capital Stock contemplated in clauses (ii), (iii), (iv) and (v)
of Section 4.2(b) were to occur immediately following the Closing plus (5)
all shares of Common Stock issued and outstanding on the Closing Date. The
calculation in the immediately preceding sentence shall be made as if all
issuances of Common Stock referred to in clauses (1), (2), (3), (4) and (5)
thereof were made immediately following the Closing, whether or not the
Company is or could be under any obligation to issue such shares of Common
Stock immediately following the Closing.
4.3 AUTHORIZATION OF ISSUANCE.
The rights, preferences, privileges and restrictions of the
Series B Preferred Stock are as stated in the Series B Certificate of
Designation. The rights, preferences, privileges and restrictions of the
Series C Preferred Stock are as stated in the Series C Certificate of
19
Designation. The rights, preferences, privileges and restrictions of the
Series D Preferred Stock are as stated in the Series D Certificate of
Designation. Upon consummation of the Transaction, the Securities acquired by
the Purchaser from the Company will be duly authorized and validly issued,
fully paid and non-assessable and not subject to any preemptive rights except
as set forth in the Series B Certificate of Designation, and the Purchaser
will have good and marketable title to such Securities, free and clear of any
Encumbrances or preemptive rights. Upon consummation of the Transaction, the
Series B Conversion Shares and the Series C Conversion Shares (and the Series
D Conversion Shares, which will not be issued to the extent that Series B
Conversion Shares and Series C Conversion Shares are issued) will be duly
authorized and reserved for issuance and upon conversion in accordance with
the terms of the Series B Preferred Stock and the Series C Preferred Stock
(and the Series D Preferred Stock), respectively, will be validly issued,
fully paid and non-assessable and not subject to any preemptive rights except
as set forth in the Series B Certificate of Designation and the Series C
Certificate of Designation (and the Series D Certificate of Designation),
respectively, and the Purchaser will have good and marketable title to the
Series B Conversion Shares (and the Series D Conversion Shares), free and
clear of any Encumbrances or preemptive rights. Upon consummation of the
Transaction, the Warrant Shares and the GE Warrant Shares will be duly
authorized and reserved for issuance and, upon exercise of the Warrants or
the GE Warrants, as the case may be, and when issued and paid for in
accordance with the terms of the Warrants or the GE Warrants, as the case may
be, will be validly issued, fully paid and non-assessable and not subject to
any preemptive rights, and the Purchaser will have good and marketable title
to the Warrant Shares, free and clear of any Encumbrances or preemptive
rights.
4.4 AUTHORIZATION.
The Company has full corporate power and authority to execute
and deliver this Agreement, the GE Purchase Agreement and the Ancillary
Agreements and to consummate the Transaction. The execution and delivery by
the Company of this Agreement, the GE Purchase Agreement and the Ancillary
Agreements and the consummation by it of the Transaction, have been duly
authorized by all necessary corporate action of the Company. This Agreement,
the GE Purchase Agreement and each Ancillary Agreement has been duly executed
and delivered by the Company and each constitutes a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except that such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally, and (ii) general equitable principles
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). No approval or consent of the Company's stockholders for
this Agreement, the GE Purchase Agreement, the Ancillary Agreements or the
consummation of the Transaction is required.
4.5 NONCONTRAVENTION.
The execution and delivery by the Company of this Agreement, the
GE Purchase Agreement and the Ancillary Agreements and the consummation by it of
the Transaction do not and will not (i) conflict with or result in a violation
of any provision of the Certificate of Incorporation or the Amended Bylaws, or
the charter, bylaws or other governing instruments of
20
any Subsidiary, (ii) materially conflict with or result in a material
violation of any provision of, constitute (with or without the giving of
notice or the passage of time or both) a material default under or give rise
(with or without the giving of notice or the passage of time or both) to any
loss of material benefit or of any right of termination, cancellation or
acceleration under, any Material Agreement, (iii) result in the creation or
imposition of any material Encumbrance upon the properties of the Company or
any Subsidiary, or (iv) violate in any material respect any Applicable Law
binding upon the Company or any Subsidiary.
4.6 CONSENTS.
No material consent, approval, order, authorization of or
declaration, filing or registration with any Governmental Entity is required
to be obtained or made by the Company or any Subsidiary in connection with
the execution and delivery by the Company of this Agreement, the GE Purchase
Agreement and the Ancillary Agreements or the consummation of the
Transaction, other than (a) compliance with any applicable requirements of
the Securities Act; (b) compliance with any applicable requirements of the
Exchange Act; (c) compliance with any applicable state securities laws and
(d) compliance with applicable provisions of the HSR Act. Except as set
forth on SCHEDULE 4.6, no material consent or approval of any Person is
required to be obtained or made by the Company or any Subsidiary in
connection with the execution and delivery by the Company of this Agreement,
the GE Purchase Agreement and the Ancillary Agreements or the consummation of
the Transaction.
In addition, no consent, approval, order, authorization of or
declaration, filing or registration with any Governmental Entity is required
to be obtained or made by the Company or any Subsidiary that could affect the
validity of the issuance of the Series B Preferred Stock, the Series C
Preferred Stock, the Series D Preferred Stock, the Warrants, the GE Warrants,
the Warrant Shares or the GE Warrant Shares, other than (a) compliance with
any applicable requirements of the Securities Act; (b) compliance with any
applicable requirements of the Exchange Act; and (c) compliance with any
applicable state securities laws; and (d) compliance with applicable
provisions of the HSR Act. Except as set forth on SCHEDULE 4.6, no consent or
approval of any Person is required to be obtained or made by the Company or
any Subsidiary that could affect the validity of the issuance of the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock,
the Warrants, the GE Warrants, the Warrant Shares or the GE Warrant Shares.
4.7 SUBSIDIARIES.
(a) Except as otherwise set forth on SCHEDULE 4.7, the Company
does not own, directly or indirectly, more than five percent (5%) of the
Capital Stock or other securities of any Person or have any direct or
indirect equity or ownership interest of more than five percent (5%) in any
other Person, other than its Subsidiaries. SCHEDULE 4.7 lists each
Subsidiary as of the date hereof, its respective jurisdiction of
incorporation and the jurisdictions in which it is qualified to do business,
the number of shares, partnership or other equity interests and the
percentage ownership interest held by the Company in each such Subsidiary.
Except as otherwise indicated on SCHEDULE 4.7, no actions or other
Proceedings to dissolve any Subsidiary are pending.
21
(b) Except as otherwise indicated on SCHEDULE 4.7, all the
outstanding Capital Stock or other equity interests of each Subsidiary is
owned directly or indirectly by the Company, free and clear of all
Encumbrances and restrictions on voting, sale or disposition. All
outstanding shares of Capital Stock of each Subsidiary have been validly
issued and are fully paid and non-assessable. No shares of Capital Stock or
other equity interests of any Subsidiary are subject to, nor have any been
issued in violation of, preemptive or similar rights.
(c) Except for shares of common stock owned by the Company or
any Subsidiary and as set forth on SCHEDULE 4.7, there are outstanding (i) no
shares of Capital Stock or other voting securities of any Subsidiary; (ii) no
securities of any Subsidiary convertible into or exchangeable for shares of
Capital Stock or other voting securities of any Subsidiary; (iii) no
subscriptions, options, warrants, calls, commitments, preemptive rights or
other rights of any kind to acquire Capital Stock or other voting securities
from any Subsidiary, and no obligation of any Subsidiary to issue or sell,
any shares of Capital Stock or other voting securities of any Subsidiary or
any securities of any Subsidiary convertible into or exchangeable for such
Capital Stock or voting securities; and (iv) no equity equivalents, interests
in the ownership or earnings or other similar rights of or with respect to
any Subsidiary to repurchase, redeem or otherwise acquire any shares of
Capital Stock or any other securities of the type described in clauses
(i)-(iv) above. No Subsidiary holds shares of its Capital Stock in its
treasury.
4.8 EMPLOYEE BENEFIT PLANS AND OTHER AGREEMENTS.
(a) SCHEDULE 4.8 contains a complete list of Employee Plans.
True and complete copies of each of the following Employee Plan documents
have been delivered or made available by the Company to the Purchaser: (i)
each Employee Plan document (and, if applicable, related trust agreements and
all annuity contracts or other funding instruments) and all amendments
thereto, all reasonably available written descriptions thereof which have
been distributed to the Company's employees and those of its ERISA Affiliates
during the last thirty-six (36) months and a reasonably detailed description
of any Employee Plan which is not in writing,, (ii) the most recent
determination or opinion letter issued by the Internal Revenue Service with
respect to each Pension Plan and each Welfare Plan (other than a
Multiemployer Plan), (iii) for the three (3) most recent plan years, Annual
Reports on Form 5500 Series required to be filed with any governmental agency
for each Pension Plan, (iv) a description setting forth the amount of any
liability of the Company as of the Closing Date for payments more than thirty
(30) calendar days past due with respect to each Welfare Plan.
(b) EMPLOYEE PLANS.
(i) PENSION PLANS.
(A) No Pension Plan is or has been subject to
Title IV of ERISA or Section 412 of the Code.
(B) Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument is qualified
and tax-exempt under the
22
provisions of Code Sections 401(a) (or 403(a), as appropriate) and
501(a) and has been so qualified during the period from its adoption
to date.
(C) Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument presently
complies and has been maintained in compliance, in all material
respects, with its terms and, both as to form and in operation, with
the requirements prescribed by any and all Applicable Laws, including
without limitation ERISA and the Code.
(ii) MULTIEMPLOYER PLANS.
(A) Neither the Company nor any ERISA Affiliate
has, at any time within the last seventy-two (72) months, maintained,
contributed to or been obligated to maintain or contribute to, or
withdrawn from, a Multiemployer Plan.
(iii) WELFARE PLANS.
(A) Each Welfare Plan presently complies and has
been maintained in compliance, in all material respects, with its
terms and, both as to form and operation, with the requirements
prescribed by any and all statutes, orders, rules and regulations
which are applicable to such Welfare Plan, including, without
limitation, ERISA and the Code.
(B) Except as disclosed on SCHEDULE 4.8, none of
the Company, any ERISA Affiliate or any Welfare Plan has any present
or future obligation to make any payment to, or with respect to any
present or former employee of the Company or any ERISA Affiliate
pursuant to, any retiree medical benefit plan or other retiree Welfare
Plan, and no condition exists which would prevent the Company from
amending or terminating any such benefit plan or Welfare Plan.
(C) Each Welfare Plan which is a "group health
plan," as defined in Section 607(1) of ERISA, has been operated in
compliance with provisions of Part 6 of Title I, Subtitle B of ERISA
and 4980B of the Code at all times. The Company is not obligated to
provide health care benefits of any kind to its retired or former
employees or their dependents pursuant to any agreement or
understanding.
(iv) BENEFIT ARRANGEMENTS. Each Benefit Arrangement has
been maintained in compliance, in all material respects, with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement, including
without limitation, the Code, and with all plan documents. Except as set
forth in SCHEDULE 4.8 and except as provided by law, the employment of all
persons presently employed or retained by the Company is terminable at
will.
23
(v) UNRELATED BUSINESS TAXABLE INCOME. No Employee
Plan (or trust or other funding vehicle pursuant thereto) is subject to any
Tax under Section 511 of the Code.
(vi) DEDUCTIBILITY OF PAYMENTS. Except as disclosed in
SCHEDULE 4.8, there is no contract, agreement, plan or arrangement covering
any present or former employee, director or consultant of the Company or
any of its ERISA Affiliates (with respect to his or her relationship with
such entities) that, individually or collectively, provides for the payment
by the Company of any amount (i) that is not deductible under
Section 162(a)(l) or 404 of the Code or (ii) that is an "excess parachute
payment" pursuant to Section 280G of the Code.
(vii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS.
Neither the Company nor any plan fiduciary of any Welfare Plan or Pension
Plan has engaged in any transaction in violation of Sections 404 or 406 of
ERISA or any "prohibited transaction," as defined in Section 4975(c)(1) of
the Code, for which no exemption exists under Section 408 of ERISA or
Section 4975(c)(2) or (d) of the Code, or has otherwise violated the
provisions of Part 4 of Title I, Subtitle B of ERISA. The Company has not
participated in a violation of Part 4 of Title I, Subtitle B of ERISA by
any plan fiduciary of any Welfare Plan or Pension Plan. The Company has
not been assessed any civil penalty under Section 502(1) of ERISA.
(viii) VALIDITY AND ENFORCEABILITY. Each Welfare Plan
related trust agreement, annuity contract or other funding instrument is
legally valid, binding, enforceable against the Company and in full force
and effect, except as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally, and (ii) general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ix) LITIGATION. There is no Proceeding relating to or
seeking benefits under any Employee Plan that is pending, or, to the
Knowledge of the Company, threatened against the Company, any ERISA
Affiliate or any Employee Plan other than routine claims for benefits.
(x) NO AMENDMENTS. Except as disclosed in Schedule
4.8, neither the Company nor any ERISA Affiliate has any announced plan or
legally binding commitment to create any additional Employee Plans which
are intended to cover present or former employees, directors or consultants
of the Company or any of its ERISA Affiliates (with respect to their
relationship with such Persons) or to amend or modify any existing Employee
Plan. Each Employee Plan can be amended or terminated at any time without
approval from any Person, without advance notice and without any liability
other than for benefits accrued prior to such amendments or termination.
(xi) NO OTHER MATERIAL LIABILITY. To the Knowledge of
the Company, no event has occurred in connection with which the Company or
any ERISA Affiliate or
24
any Employee Plan, directly or indirectly, could be subject to any material
liability (A) under any statute, regulation or governmental order
relating to any Employee Plan or (B) pursuant to any obligation of the
Company to indemnify any person against liability incurred under any such
statute, regulation or order as they relate to the Employee Plans.
(xii) INSURANCE CONTRACTS. Neither the Company nor any
Employee Plan (other than a Multiemployer Plan) holds as an asset of any
Employee Plan any interest in any annuity contract, guaranteed investment
contract or any other investment or insurance contract issued by an
insurance company that is the subject of bankruptcy, conservatorship or
rehabilitation proceedings.
(xiii) NO ACCELERATION OR CREATION OF RIGHTS. Except as
disclosed on Schedule 4.8, neither the execution and delivery of this
Agreement by the Company nor the consummation of all or any portion of the
Transaction will result in the acceleration or creation of any rights of
any person to benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting or exercisability of any stock
options, the acceleration of the vesting of any restricted stock, the
acceleration of the accrual or vesting of any benefits under any Pension
Plan or the acceleration or creation of any rights under any severance,
parachute or change in control agreement).
(c) There are no employment, consulting, change of control,
severance pay, continuation pay, termination pay, loans, guarantees or
indemnification agreements or other similar agreements of any nature whatsoever
(collectively, "Employment Agreements") between the Company, on the one hand,
and any current or former stockholder, officer, director, employee or Affiliate
of the Company or any consultant or agent of the Company, on the other hand,
that, as a direct result of the Transaction, (i) will require any payment by the
Company or any consent or waiver from any stockholder, officer, director,
employee or Affiliate of the Company or any consultant or agent of the Company,
or (ii) will result in any change in the nature of any rights of any
stockholder, officer, director, employee or Affiliate of the Company or any
consultant or agent of the Company under any such Employment Agreement or other
similar agreement (including, without limitation, any accelerated payments,
deemed satisfaction of goals or conditions, new or increased benefits or
additional or accelerated vesting).
4.9 GOVERNMENTAL FILINGS.
(a) Since June 30, 1994, the Company and each of its
Subsidiaries have filed with the Commission all forms, reports, schedules,
statements and other documents required to be filed by them under the Securities
Act, the Exchange Act and all other federal securities laws and the rules and
regulations promulgated thereunder (the "SEC Filings"). Each SEC Filing was
prepared in accordance with, and at the time of filing complied in all material
respects with, the requirements of the Securities Act, the Exchange Act or other
applicable federal securities law and the rules and regulations promulgated
thereunder, as the case may be, except as the same was corrected or superseded
in an amendment to such SEC Filing filed with the Commission. None of the SEC
Filings, including, without limitation, any financial statements or schedules
included therein, at the time filed, contained any untrue statement of a
material fact or omitted to state any
25
material fact required to be stated therein or necessary in order to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading, except as the same was corrected or superseded in
a subsequent document duly filed with the Commission. The Company has
heretofore furnished or made available to the Purchaser true, correct and
complete copies of all SEC Filings since June 30, 1996.
(b) Since June 30, 1992, all material reports, documents and
notices required to be filed, maintained or furnished to any Governmental
Entity (other than the Commission) by the Company or any Subsidiary have been
so filed, maintained or furnished. All such reports, documents and notices
were complete and correct in all material respects on the date filed (or were
corrected in or superseded by a subsequent filing) such that no Liabilities
exist with respect to such filing.
4.10 FINANCIAL STATEMENTS AND REPORTS.
(a) The financial statements contained in the SEC Filings
(collectively, the "Financial Statements") have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated and
with each other (except that the Financial Statements may not contain all
footnotes required by GAAP) and fairly present the consolidated financial
condition of the Company and the Subsidiaries and the consolidated results of
operations as of such dates and for such periods indicated. Since April 30,
1997, there has not been any change to the financial condition of the Company
or any Subsidiary as set forth in the Financial Statements that would have a
Material Adverse Effect on the Company. Except as reflected in the Financial
Statements, neither the Company nor any Subsidiary is a guarantor or
indemnitor of any Indebtedness of any other Person. The Company maintains a
standard system of accounting established and administered in accordance with
GAAP. The general ledger, accounts receivable, accounts payable, bank
reconciliations and payroll records of the Company have been maintained in
all material respects in the ordinary course and contain a materially correct
and complete record of the matters typically contained in records of such
nature.
(b) The Company has not received any management letters or
other letters (other than audit letters included in the SEC Filings) from the
Company's independent auditing firm(s) relating to the results of operations,
financial statements or internal controls of the Company or any Subsidiary
insofar as the same may pertain to the business or assets of the Company and
any Subsidiary during any period from and after June 30, 1994.
4.11 ABSENCE OF UNDISCLOSED LIABILITIES: GUARANTEES.
(a) Except as set forth in the Financial Statements or as set
forth on SCHEDULE 4.11: (i) as of April 30, 1997, neither the Company nor
any Subsidiary had any Liabilities or obligations (whether accrued, absolute,
contingent, unliquidated or otherwise) which are reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company,
and (ii) since April 30, 1997, the Company and its Subsidiaries, taken as a
whole, have not incurred any such Liabilities or obligations that have had a
Material Adverse Effect on the Company.
26
(b) Except as set forth on SCHEDULE 4.11, neither the Company
nor any Subsidiary is a party to (i) any Material Agreement relating to the
making of any advance to, or investment in, any Person, or (ii) any Material
Agreement providing for a guarantee or other contingent liability with
respect to any Indebtedness or similar obligation of any Person.
4.12 ABSENCE OF CERTAIN CHANGES.
Since April 30, 1997, except as reflected in the Financial
Statements or the SEC Filings, neither the Company nor any Subsidiary has (i)
declared or paid any dividends, or authorized or made any distribution upon
or with respect to any class or series of its Capital Stock; (ii) made
Capital Expenditures or commitments therefor, other than such Capital
Expenditures or commitments made in the ordinary course consistent with past
practice; (iii) made any loans or advances to any Person exceeding $5,000
individually or $25,000 in the aggregate (other than advances for business or
travel expenses) or guaranteed the obligations of any Person; (iv) sold,
exchanged or otherwise disposed of any of its assets or rights exceeding
$5,000 individually or $25,000 in the aggregate, other than the sale,
exchange or other disposition of its equipment and services in the ordinary
course of business consistent with past practice; (v) incurred any material
change in the assets, Liabilities, financial condition, operating results or
Business of the Company from that reflected in the Financial Statements,
except changes that have not, in the aggregate, had a Material Adverse Effect
on the Company; (vi) suffered any damage, destruction or loss, whether or not
covered by insurance, that had or would have a Material Adverse Effect on the
Company; (vii) waived a right or a debt owed to it exceeding $1,000
individually or $5,000 in the aggregate, except in the ordinary course of
business consistent with past practice; (viii) satisfied or discharged any
Encumbrance or payment of any obligation, except in the ordinary course of
business consistent with past practice and that has not had and is not
reasonably expected to have a Material Adverse Effect on the Company; (ix)
agreed to or made any material change or amendment to any Material Agreement,
except in the ordinary course of business consistent with past practice; (x)
except as set forth in SCHEDULE 4.12 (X), made any material change in any
compensation arrangement or agreement with any employee that would increase
such employees' compensation by more than ten percent (10%); (xi) permitted
or allowed any of its assets to be subjected to any material Encumbrance,
other than Encumbrances on equipment in the ordinary course of business
consistent with past practice; (xii) written up the value of any inventory,
notes or accounts receivable or other assets in any material respect; (xiii)
licensed, sold, transferred, pledged, modified, disclosed, disposed of or
permitted to lapse any right to the use of any Proprietary Rights; (xiv) made
any change in any method of accounting or accounting practice or any change
in depreciation or amortization policies or rates previously adopted; (xv)
paid, lent or advanced any amount to, sold, transferred or leased any assets
to or entered into any material agreement or material arrangement with any of
its Subsidiaries or GE (except for the GE Purchase Agreement, the GE
Registration Rights Agreement, the GE Warrant Agreement and related
documents) or entered into any agreement or arrangement whatsoever with any
of its Affiliates other than its Subsidiaries and GE, except for directors'
fees, travel expense advances and employment compensation to officers; or
(xvi) incurred or suffered any other event or condition of any character that
could reasonably be expected to have a Material Adverse Effect on the
Company.
27
4.13 COMPLIANCE WITH LAWS.
(a) The Company and its Subsidiaries are in compliance in all
material respects with all material Applicable Laws. Material Applicable
Laws includes, without limitation, all Applicable Laws relating to health
care, the health care industry and the provision of health care services,
third party reimbursement (including Medicare and Medicaid), public health
and safety and wrongful death and medical malpractice. Neither the Company
nor any of its Subsidiaries has received any notice of, nor does the Company
or any of its Subsidiaries have any Knowledge of, any violation (or of any
investigation, inspection, audit or other proceeding by any Governmental
Entity involving allegations of any violation) of any Applicable Law
involving or related to the Company or any of its Subsidiaries which has not
been dismissed or otherwise disposed of. Except as set forth in SCHEDULE
4.13(A), neither the Company nor any of its Subsidiaries has received notice
or otherwise has any Knowledge that the Company or any Subsidiary is charged
with, threatened with or under investigation with respect to, any violation
of any Applicable Law, or has any Knowledge of any proposed change in any
Applicable Law that would have a Material Adverse Effect on the Transaction
or the Company.
(b) Each of the Company and its Subsidiaries has, and all
professional employees or agents of each of the Company and its Subsidiaries
who are performing health care or health care related functions on behalf of
the Company or any of its Subsidiaries or joint ventures have, all material
licenses, franchises, permits, accreditations, provider numbers,
authorizations, including certificates of need, consents or orders of, or
filings with, or other approvals from all Governmental Entities ("Approvals")
necessary for the conduct of, or relating to the operation of, the business
of each of the Company and its Subsidiaries and the occupancy and operation,
for its present uses, of the real and personal property which each of the
Company and its Subsidiaries owns or leases, and neither the Company nor any
Subsidiary or the professional employees or agents of either (acting in such
capacities) is in violation of any such Approval in any material respect or
any terms or conditions thereof. All such Approvals are in full force and
effect, have been issued to and fully paid for by the holder thereof and no
notice or warning from any Governmental Entity with respect to the
suspension, revocation or termination of any Approval has been, to the
Knowledge of the Company, threatened by any Governmental Entity or issued or
given to the Company or any Subsidiary. No such Approvals will in any way be
affected by, terminate or lapse by reason of the consummation of all or any
portion of the Transaction. There are no physicians (other than radiologists
and radiation oncologists) owning Capital Stock in any Subsidiary, and no
physicians own stock in the Company, except for physician ownership of
publicly traded stock of the Company acquired on terms equally available to
the public through trading on the Nasdaq Stock Market, and no physician owns
5% or more of the outstanding shares of any class of securities issued by the
Company.
4.14 LITIGATION.
Except as set forth on SCHEDULE 4.14 hereto, there is no
Proceeding (by any Governmental Entity or otherwise) of which the Company has
received notice or of which the Company has Knowledge pending against or
affecting the Company, any Subsidiary or the assets, products or business of
any of them or, to the Knowledge of the Company, any basis
28
therefor or threat thereof. Except as set forth on SCHEDULE 4.14 hereto,
neither the Company nor any Subsidiary is a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
other Governmental Entity. Except as set forth on SCHEDULE 4.14 hereto, there
is no Proceeding by the Company or any Subsidiary currently pending or that
the Company or any Subsidiary currently intends to initiate. There are no
Proceedings pending or, to the Knowledge of the Company, threatened against
the Company, any Subsidiary or any of their respective businesses, assets or
products that seek to enjoin, question the validity of or rescind the
Transaction, the GE Purchase Agreement, the Ancillary Agreements or otherwise
prevent the Company from complying with the terms and provisions of this
Agreement, the GE Purchase Agreement, the Ancillary Agreements or any of such
other agreements. Any and all Liabilities of the Company and its
Subsidiaries under such Proceedings that are probable and subject to
reasonable estimation within the meaning of GAAP are adequately covered
(except for standard deductible amounts) by the existing insurance maintained
by the Company or estimates in accordance with GAAP for the uninsured costs
thereof are reflected in the Financial Statements. No holder of shares of
the Capital Stock of either American Health Services Corp. or Maxum Health
Corp. (constituent corporations in the mergers contemplated by the Merger
Agreement) that either were outstanding immediately prior to such mergers
made a demand for the appraisal of his shares pursuant to Section 262 of the
Delaware General Corporation Law.
4.15 TRUE AND COMPLETE DISCLOSURE.
Taken as a whole, this Agreement, the GE Purchase Agreement,
the Ancillary Agreements, the Exhibits, Schedules, statements and
certifications made or delivered in connection herewith or therewith, do not
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements herein or therein not misleading. All
financial projections reflected in the 1998 budget provided by the Company to
the Purchaser were prepared in good faith on the basis of assumptions
believed to be reasonable at the time such projections were prepared.
4.16 TAXES.
(a) All Company Tax Returns have been properly and timely
filed and all such Tax Returns are correct and complete in all material
respects. Each affiliated group with which any of the Company and its
Subsidiaries files a consolidated or combined Tax Return has filed all such
Tax Returns that it was required to file for each taxable period during which
any of the Company and its Subsidiaries was a member of the group. All such
consolidated and combined Tax Returns were correct and complete in all
material respects.
(b) All material Taxes due and payable by the Company and/or
its Subsidiaries (whether or not shown on any Tax Return) have been timely
paid in full. All material Taxes owed by any affiliated group with which any
of the Company and its Subsidiaries files a consolidated or combined Tax
Return (whether or not shown on any Tax Return) have been paid for each
taxable period during which any of the Company and the Subsidiaries was a
member of the group.
29
(c) There is no (nor is there any pending request for an)
agreement, waiver or consent providing for an extension of time with respect
to the assessment or collection of, or statute of limitations regarding, any
Taxes or the filing of any Tax Returns that is currently in effect and no
power of attorney granted by or with respect to the Company or any Subsidiary
with respect to any Tax matter is currently in force.
(d) To the Knowledge of the Company, there is no pending
audit, examination or investigation with respect to any Company Tax Returns,
nor to the Knowledge of the Company, is there pending any notice of the
initiation thereof; there is no Proceeding, claim, demand, deficiency or
additional assessment pending or threatened with respect to any Company Tax
Returns.
(e) To the Knowledge of the Company and its Subsidiaries, the
Company and its Subsidiaries have withheld all Taxes required to have been
withheld and paid by them on their behalf in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
related or unrelated third party, and such withheld Taxes have either been
duly paid to the proper Governmental Entity or set aside in accounts for such
purpose.
(f) None of the Company and its Subsidiaries (i) has been a
member of any affiliated group filing a consolidated federal income Tax
Return (other than a group the common parent of which is the Company) or (ii)
has any liability for the Taxes of any Person (other than the Company and its
Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any similar provision
of state, local or foreign law), as a transferee or successor, by contract or
otherwise.
(g) The charges, accruals and reserves for Taxes (including
deferred Taxes) currently reflected on the Financial Statements in accordance
with GAAP are adequate to cover all unpaid Taxes accruing or payable by the
Company and its Subsidiaries in respect of taxable periods that end on or
before the Closing Date and for any taxable periods that begin before the
Closing Date and end thereafter to the extent such Taxes are attributable to
the portion of such period ending on the Closing Date.
(h) Neither the Company nor any Subsidiary has agreed,
requested or been requested to make, or is required to make, any adjustment
to taxable income for any taxable period after the Closing under Sections
481(a) or 263A of the Code or any comparable provision of state or foreign
tax laws by reasons of a change in accounting method or otherwise.
(i) There are no Encumbrances (other than Permitted
Encumbrances) on any asset or property of the Company or any Subsidiary
arising out of, connected with or related to any Tax imposed on the Company,
its Subsidiaries or any of their businesses or properties.
(j) The Company is not a party to, is not bound by and has no
obligation (or potential obligation) under any Tax sharing or allocation
agreement.
(k) Neither the Company nor any Subsidiary is a party to any
agreement with an Affiliate relating to a foreign sales corporation (or "FSC")
within the meaning of Section 922
30
of the Code; or a domestic international sales corporation (or "DISC") within
the meaning of Section 992 of the Code.
(l) Other than the elections made in the Tax Returns provided
to or made available to the Purchaser, no agreement, consent or election for
foreign, federal, state or local tax purposes that would affect or be binding
on the Company or any Subsidiary after the Closing has been filed or entered
into by the Company or any Subsidiary. No consent has been filed with
respect to the Company or any Subsidiary under Section 341(f) of the Code.
(m) SCHEDULE 4.16 lists all federal, state, local and foreign
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit, other than (i) Tax Returns relating to
closed years, and (ii) Tax Returns that have been audited where such audit
did not result in any change in any tax due from the Company or any
Subsidiary to any Governmental Entity. Correct and complete copies of all
federal Tax Returns, examination reports and statements of deficiencies
assessed against or agreed to by the Company or any of its Subsidiaries since
June 30, 1996 have been delivered or made available to the Purchaser. Each
of the Company and its Subsidiaries has disclosed on its federal income Tax
Returns all positions taken therein that could reasonably be expected to give
rise to a substantial understatement of federal income Tax within the meaning
of Section 6662 of the Code.
4.17 ENVIRONMENTAL MATTERS.
(a) For purposes of this Section 4.17, the term "Company"
shall include (i) the Company, (ii) any Affiliates of the Company other than
GE, (iii) the Business, (iv) all partnerships, joint ventures and other
entities or organizations in which the Company or the Business was at any
time or is a partner, joint venturer, member or participant, and (v) all
predecessor or former corporations, partnerships, joint ventures,
organizations, businesses or other entities, whether in existence as of the
date hereof or at any time prior to the date hereof, the assets or
obligations of which have been acquired or assumed by the Company or the
Business or to which the Company or the Business has succeeded.
(b) The Company and its Subsidiaries: (i) are, and within the
period of all applicable statutes of limitation have been, in compliance in
all material respects with all applicable Environmental Laws PROVIDED, that
the representation and warranty contained in this clause (i) is limited to
the Knowledge of the Company to the extent (but only to the extent) that it
directly applies to real property that the Company has purchased or has
leased from another Person in a transaction other than the acquisition of
such Person (whether by merger or consolidation, stock purchase or exchange,
acquisition of all or substantially all of the assets of such Person or a
similar fundamental transaction); (ii) hold all Environmental Permits (each
of which is in full force and effect) required for any of their current or
intended operations or for any property owned, leased or otherwise operated
by any of them; (iii) are, and within the period of all applicable statutes
of limitation have been, in compliance with all of their Environmental
Permits; and (iv) reasonably believe that each of their Environmental Permits
currently in effect will be renewed effective prior to the expiration of such
Environmental Permit.
31
(c) Except as set forth on SCHEDULE 4.17, the Company and its
Subsidiaries have not received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, any
Environmental Condition. The Company has not received any notice of any
other claim, demand or action by any individual or entity alleging any actual
or threatened injury or damage to any person, property, natural resource or
the environment arising from or relating to any Release or threatened Release
of any Hazardous Materials at, on, under, in, to or from any Facility or any
former Facilities, or in connection with any operations or activities of the
Company or any of its Subsidiaries.
(d) Except as disclosed in SCHEDULE 4.17 or with respect to
such matters as have been fully and finally resolved and as to which there
are to the Knowledge of the Company, no remaining obligations, neither the
Company nor any of its Subsidiaries has entered into or agreed to or is
subject to any consent decree, order or settlement or other agreement in any
judicial, administrative, arbitral or other similar forum relating to
compliance with or Liability under any Environmental Law.
(e) Except as disclosed in SCHEDULE 4.17, Hazardous Materials
have not been transported, disposed of, emitted, discharged or otherwise
Released or threatened to be Released to or at any real property presently or
formerly owned or leased by the Company or any of its Subsidiaries, which
Hazardous Materials are reasonably expected to (i) give rise to Liability of
the Company or any Subsidiary under any applicable Environmental Law, (ii)
interfere with the Company's or any Subsidiary's continued operations or
(iii) materially impair the fair salable value of any real property owned or
leased by the Company or any Subsidiary.
(f) Except as disclosed in SCHEDULE 4.17, neither the Company
nor any of its Subsidiaries has assumed or retained, by contract or, to the
Knowledge of the Company, by operation of law in connection with the sale or
transfer of any assets or business, Liabilities arising from or associated
with or otherwise in connection with such assets or business of any kind,
fixed or contingent, known or not known, under any applicable Environmental
Law. Neither the Company nor any of its Subsidiaries, to the Knowledge of
the Company, is required to make any capital or other expenditures to comply
with any Environmental Law nor to the Knowledge of the Company is there any
reasonable basis on which any Governmental Entity could take any action that
would require any such capital expenditures.
(g) True, complete and correct copies of the written reports,
and all parts thereof, of all environmental audits or assessments which have
been conducted in respect of any Facility or any former Facility within the
past five (5) years, either by the Company or any attorney, environmental
consultant or engineer or other Person engaged by the Company or any of its
Subsidiaries for such purpose, have been delivered to the Purchaser and a
list of all such reports, audits and assessments and any other similar
report, audit or assessment of which the Company has Knowledge is included on
SCHEDULE 4.17.
4.18 INSURANCE.
Each insurance policy held by or for the benefit of the Company
or any of its Subsidiaries is in full force and effect. Each of the Company and
its Subsidiaries carries, and
32
will continue to carry, insurance with reputable insurers (except as to
self-insurance) with respect to such of their respective properties and
businesses, in such amounts and against such risks as is customarily
maintained by other entities of similar size engaged in similar businesses
(which may include self-insurance in amounts customarily maintained by
companies similarly situated or has been maintained in the past by the
Company and its Subsidiaries). None of such insurance was obtained through
the use of materially false or misleading information or the failure to
provide the insurer with all material information requested in order to
evaluate the liabilities and risks insured. Neither the Company nor any of
its Subsidiaries has received any notice of cancellation or non-renewal of
any insurance policies or binders.
4.19 REAL PROPERTY AND LEASEHOLDS.
(a) To the Knowledge of the Company, each lease agreement and
mortgage to which the Company or any Subsidiary is a party is in full force
and effect in accordance with its terms.
(b) With respect to each parcel of real property owned or leased
by the Company or any of its Subsidiaries:
(i) The Company or the relevant Subsidiary, as the case
may be, has good and valid title to and/or a valid and subsisting
leasehold interest in each item of real property and leasehold, as
appropriate, free and clear of all mortgages, liens, Encumbrances (except
Permitted Encumbrances), leases, equities, claims, charges, easements,
rights-of-way, covenants, conditions and restrictions, except for liens,
if any, for property taxes not due;
(ii) No officer, director or employee of the Company, of
any Subsidiary or of any Affiliate of the Company, nor any Subsidiary or
Affiliate of the Company, owns directly or indirectly in whole or in
part, any of such real properties or leaseholds;
(iii) Neither the Company nor any Subsidiary is in
default with respect to any material term or condition of any such
mortgage or lease, nor has any event occurred which, through the passage
of time or the giving of notice or both, would constitute a default
thereunder by the Company or any Subsidiary or would cause the
acceleration of any obligation of the Company or any Subsidiary or the
creation of a lien or encumbrance upon any asset of the Company or any
Subsidiary;
(iv) All of the buildings, fixtures and other
improvements described in SCHEDULE 4.19 are in reasonably good operating
condition, have been maintained in accordance with reasonable industry
practices and are adequate to conduct the business of the Company and its
Subsidiaries, as the case may be, as presently conducted; and
(v) Neither the Company nor any Subsidiary has received
any notice or otherwise has Knowledge that the Company or any such
Subsidiary, as the case may
33
be, is in violation of any applicable building code, zoning ordinance
or other law or regulation.
4.20 TANGIBLE ASSETS.
(a) The Company and its Subsidiaries have good and valid title
to or valid and subsisting leasehold interests in all Fixtures and Equipment
having original cost or fair market value in excess of Five Thousand Dollars
($5,000), including all such Fixtures and Equipment reflected in the
Company's most recent balance sheet included in the Financial Statements and
all such Fixtures and Equipment purchased or otherwise acquired by the
Company or any Subsidiary since the date of such Balance Sheet. Except as
set forth on SCHEDULE 4.20, none of such Fixtures and Equipment is subject to
any Encumbrance except for Permitted Encumbrances and Encumbrances which,
individually or in the aggregate, are not substantial in amount and do not
materially detract from the value of the property or assets of the Company
and its Subsidiaries taken as a whole or interfere with the present use of
such property or assets (taken as a whole). The Company and each Subsidiary
has in all material respects performed all the obligations required to be
performed by it with respect to all such Fixtures and Equipment leased by it
through the date hereof, except where the failure to perform would not have a
Material Adverse Effect on the Company and its Subsidiaries, taken as a
whole. All such leases are valid, binding and enforceable with respect to
the Company and its Subsidiaries in accordance with their terms and are in
full force and effect. No default has occurred thereunder on the part of the
Company, any Subsidiary or, to the Knowledge of the Company, any other party
which default would be reasonably likely to have a Material Adverse Effect on
the Company.
(b) The buildings and Fixtures and Equipment of the Company
and its Subsidiaries are in reasonably good operating condition and repair
(except for ordinary wear and tear), with no material defects, are sufficient
for the operation of the business of the Company and its Subsidiaries as
presently conducted and are in conformity, in all material respects, with all
Applicable Laws relating thereto currently in effect, except where the
failure to conform would not have a Material Adverse Effect on the Company.
4.21 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 4.21 contains a correct and complete list of all
agreements, contracts, Indebtedness, Liabilities and other obligations to
which the Company or any Subsidiary is a party or by which it is bound that
are material to the conduct and operations of its business and properties,
which provide for payments to or by the Company or any Subsidiary in excess
of Five Hundred Thousand Dollars ($500,000) annually, which obligate the
Company or any Subsidiary to share, license or develop any product or
technology or which involve transactions or proposed transactions between the
Company and any Subsidiary, on the one hand, and any officer, director or
Affiliate or Subsidiary, on the other hand (collectively, the "Material
Agreements").
(b) The Company and its Subsidiaries have in all material
respects performed, and are now performing in all material respects, the
obligations under, and are not in default (or by the lapse of time and/or the
giving of notice or otherwise be in default) in respect of, any of
34
the Material Agreements. Each of the Material Agreements is in full force
and effect and is a valid and enforceable obligation against the Company or a
Subsidiary, as applicable, and, to the Company's Knowledge, the other party
or parties thereto, in accordance with its terms.
(c) "Current Customer" means any Person from whom the Company
or any Subsidiary has recognized revenue since June 1, 1997 or to whom the
Company or any Subsidiary has any obligation to complete work or honor any
contractual warranty or has any obligation or Liabilities. Since June 1,
1997, no Current Customer with respect to a Center Operation has canceled or
terminated any Material Agreement or notified the Company or any Subsidiary
in writing or orally of its intent to cancel or terminate its contract, and
no Current Customer with respect to a Mobile Operation has canceled or
terminated any Material Agreement or notified the Company or any Subsidiary
in writing or orally of its intent to cancel or terminate its contract,
except any such cancellations, terminations or notifications from Current
Customers with respect to Mobile Operations that in the aggregate could not
have a Material Adverse Effect (taking into account revenue generated from
replacement customers) on the Company.
4.22 BOOKS AND RECORDS.
The Company has made and kept (and given the Purchaser access
to) books and records and accounts, which, in reasonable detail, accurately
and fairly reflect the activities of the Company and its Subsidiaries, taken
as a whole. The minute books of the Company and each such Subsidiary
previously made available to the Purchaser accurately and adequately reflect
all action previously taken by the stockholders, the Board of Directors and
committees of the Board of Directors and each of its Subsidiaries.
4.23 LABOR MATTERS.
(a) Since June 30, 1992, neither the Company nor any
Subsidiary has or has ever had any employees represented by collective
bargaining agreements. The Company and its Subsidiaries are in compliance in
all material respects with all material Applicable Laws respecting employment
practices, terms and conditions of employment and wages and hours and are not
engaged in any unfair labor practice. There is no unfair labor practice
charge or complaint against the Company or any Subsidiary pending before the
National Labor Relations Board or any other governmental agency arising out
of the activities of the Company or any of its Subsidiaries of which the
Company has received notice or of which the Company has Knowledge, and the
Company has no Knowledge of any facts or information which would give rise
thereto. There is no labor strike or labor disturbance pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries. There is no grievance currently being asserted and neither the
Company nor any Subsidiary has experienced since June 30, 1994 a work
stoppage or other labor difficulty which grievance, work stoppage or other
labor difficulty is reasonably likely to have a Material Adverse Effect on
the Company. No collective bargaining representation petition is pending or,
to the Knowledge of the Company, threatened against the Company or any
Subsidiary.
(b) SCHEDULE 4.23 lists those employees of the Company that
prior to the Closing Date had written employment agreements with the Company in
effect.
35
4.24 PAYMENTS.
Neither the Company nor any of its Subsidiaries has, directly
or indirectly, paid or delivered any fee, commission or other sum of money or
item of property, however characterized, to any finder, agent, government
official or other party, in the United States or any other country, which is
in any manner related to the business or operations of the Company or its
Subsidiaries and which the Company or any of its Subsidiaries knows or has
reason to believe to have been illegal under any federal, state or local laws
of the United States (including, without limitation the U.S. Foreign Corrupt
Practices Act) or any other country having jurisdiction. Neither the Company
nor any of its Subsidiaries has participated, directly or indirectly, in any
boycotts or other similar practices affecting any of its actual or potential
customers
4.25 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries either own or have valid
licenses or other rights to use all patents, copyrights, trademarks, service
marks, software, databases, data and other technical information used in
their businesses as presently conducted ("Proprietary Rights"), subject to
the limitations contained in the agreements governing the use of the same.
SCHEDULE 4.25 sets forth all such Proprietary Rights owned by, used by or
licensed to the Company or any Subsidiary. There are no limitations
contained in such agreements of the type described in the immediately
preceding sentence which, upon consummation of all or any portion of the
Transaction, will materially alter or materially impair any such rights,
breach any such material agreement with any third party vendor or require
payments of additional sums thereunder. The Company and its Subsidiaries are
in compliance in all material respects with such licenses and agreements.
Except as set forth on SCHEDULE 4.25, there are no pending or, to the
Knowledge of the Company, threatened Proceedings challenging or questioning
the validity or effectiveness of any license or agreement relating to such
property or the right of the Company or any Subsidiary to use, copy, modify
or distribute the same.
(b) No person has a right, other than those set forth on
SCHEDULE 4.25, to receive a royalty or similar payment in respect of any
material Proprietary Rights whether or not pursuant to any contractual
arrangements entered into by the Company or its Subsidiaries.
4.26 SECURITIES OFFERINGS.
(a) Except as set forth on SCHEDULE 4.26, since the
consummation of the merger pursuant to the Merger Agreement, the Company has
not sold any securities other than securities registered pursuant to the
Securities Act.
(b) Neither the Company nor any affiliate (as defined in Rule
501(b) of Regulation D under the Securities Act ("Regulation D")) of the Company
has, directly or through any agent (provided that no representation is made as
to the Purchaser or any person acting on their behalf), (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of any security
(as defined in the Securities Act) that is or will be integrated with the
offering and sale of the Securities in a manner that would require the
registration of the Securities under the
36
Securities Act or (ii) engaged in any form of general solicitation or general
advertising (within the meaning of Regulation D) in connection with the
offering of the Securities.
(c) Except as provided in Schedule 4.26(c), neither the
Company nor any Subsidiary is a party to any agreement or commitment that
obligates the Company to register under the Securities Act any of its
presently outstanding securities or any of its securities that hereafter may
be issued, except as contemplated hereby and by the Registration Rights
Agreement.
4.27 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY.
Except as contemplated by this Agreement, none of the Company
or any of its Subsidiaries have any legal obligation, absolute or contingent,
to any other person or firm to sell the Capital Stock, material assets or the
business of the Company or any Subsidiary or to effect any merger,
consolidation, liquidation, dissolution, recapitalization or other
reorganization of the Company or any Subsidiary or to enter into any
agreement with respect thereto.
4.28 NO BROKERS.
Except for Shattuck Hammond Partners Inc., the aggregate fees
of which are Five Hundred Thousand Dollars ($500,000) in connection with the
Transaction, all of which shall be paid by the Company, neither the Company
nor any Subsidiary has employed, nor is any of them subject to the known
claim of, any broker, finder, consultant or other intermediary in connection
with all or any portion of the Transaction (or the negotiations looking
toward the consummation of all or any portion of the Transaction) who might
be entitled to a fee or commission from the Company in connection with all or
any portion of the Transaction (or the negotiations looking toward the
consummation of all or any portion of the Transaction).
4.29 ACCOUNTS AND NOTES RECEIVABLE.
None of the accounts, notes and other receivables owed to the
Company or any Subsidiary as of the date hereof is pledged to any third
party. The reserve for doubtful accounts shown on the Company's most recent
balance sheet included in the Financial Statements is in accordance with GAAP.
4.30 INDEBTEDNESS.
SCHEDULE 4.30 sets forth a true and complete list of all
Indebtedness of the Company or any Subsidiary for borrowed money as of
September 30, 1997.
4.31 TRANSACTIONS WITH AFFILIATES.
Except as set forth in SCHEDULE 4.31 and for regular salary
payments and fringe benefits under an individual's compensation package with the
Company or any Subsidiary, none of the officers, employees, directors or other
Affiliates of the Company or any Subsidiary or members of their families is a
party to any agreement, understanding, Indebtedness or proposed
37
transaction with the Company or any Subsidiary or is directly interested in
any Material Agreement with the Company or any Subsidiary. Neither the
Company nor any Subsidiary has guaranteed or assumed any obligations of their
respective officers, directors, employees or other Affiliates or members of
any of their families. To the Company's Knowledge, none of such Persons has
any direct or indirect ownership interest in any Affiliate or Subsidiary,
with any Person with which the Company or any Subsidiary has a business
relationship or with any Person that competes with the Company or any
Subsidiary, other than an interest of less than five percent (5%) ownership
in any publicly traded company that may compete with the Company or any
Subsidiary. For purposes of this Section 4.31, the term "Affiliates" shall
not include GE.
4.32 NO RESEARCH GRANTS
Neither the Company nor any of its Subsidiaries since inception
has provided any research, educational or study grants of any kind to any
hospital, physician or health care provider.
4.33 CERTAIN REGULATORY MATTERS.
Neither the Company nor any of its Subsidiaries since inception
has received notice that the Company or any Subsidiary has been, or to the
Company's Knowledge has been, the subject of any investigative proceeding
before any federal or state regulatory authority or the agent of any such
authority, including, without limitation, federal and state health
authorities.
4.34 CERTAIN ADDITIONAL REGULATORY MATTERS.
Neither the Company nor any Subsidiary, nor the officers,
directors or managing employees, as that term is defined in 42 C.F.R. Section
1001.1001(a)(1), nor to the Knowledge of the Company or any Subsidiary, the
other employees or agents, of any of the Company or any Subsidiary have
engaged in any activities which are prohibited under criminal law, or are
cause for civil penalties or mandatory or permissive exclusion from Medicare
or Medicaid, or any other State Health Care Program or Federal Health Care
Program (as defined in Section 4.35 below) under Sections 1320a-7, 1320a-7a,
1320a-7b or 1395nn of Title 42 of the United States Code, the federal
Civilian Health and Medical Plan of the Uniformed Services statute
("CHAMPUS"), or the regulations promulgated pursuant to such statutes or
regulations or related state or local statutes or which are prohibited by any
private accrediting organization from which the Company or any of its
Subsidiaries seeks accreditation or by generally recognized professional
standards of care or conduct, including, but not limited to, the following
activities:
(a) Knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for
any benefit or payment;
(b) Knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment;
38
(c) Presenting or causing to be presented a claim for
reimbursement under CHAMPUS, Medicare, Medicaid or any other State Health
Care Program or Federal Health Care Program that is (i) for an item or
service that the Person presenting or causing to be presented knows or should
know was not provided as claimed, or (ii) for an item or service that the
Person presenting knows or should know that the claim is false or fraudulent;
(d) Knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (i) in return
for referring, or to induce the referral of, an individual to a Person for
the furnishing or arranging for the furnishing of any item or service for
which payment may be made in whole or in part by CHAMPUS, Medicare or
Medicaid or any other State Health Care Program or any Federal Health Care
Program, or (ii) in return for, or to induce the purchase, lease or order or
the arranging for or recommending of the purchase, lease or order of, any
good, facility, service or item for which payment may be made in whole or in
party by CHAMPUS, Medicare or Medicaid or any other State Health Care Program
or any Federal Health Care Program; or
(e) Knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be stated
therein or necessary to make the statements contained therein not misleading)
or a material fact with respect to (i) the conditions or operations of a
facility in order that the facility may qualify for CHAMPUS, Medicare,
Medicaid or any other State Health Care Program certification or any Federal
Health Care Program certification, or (ii) information required to be
provided under Section 1124(A) of the Social Security Act ("SSA") (42 U.S.C.
Section 1320a-3).
4.35 MEDICARE/MEDICAID PARTICIPATION.
Neither (a) the Company nor any other Person who after the
Closing will have a direct or indirect ownership interest of 5% or more (as
those terms are defined in 42 C.F.R. Section 1001.1001(a)(2)) in the Company or
any Subsidiary, or who will have an ownership or control interest (as defined in
SSA Section 1124(a)(3) or any regulations promulgated thereunder) in the Company
or any Subsidiary, or who will be an officer, director or managing employee (as
defined in 42 C.F.R. Section 1001.1001(a)(1)) of the Company or any Subsidiary,
or, to the Knowledge of the Company and any Subsidiary, any other employee or
agent thereof, nor (b) any Person with any relationship with such entity
(including, without limitation, a parent company of or partner in a Subsidiary)
who after the Closing will have an indirect ownership interest of 5% or more (as
that term is defined in 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any
Subsidiary: (i) has had a civil monetary penalty assessed against it under
Section 1128A of the SSA or any regulations promulgated thereunder; (ii) has
been excluded from participation under Medicare, Medicaid or a state health care
program as defined in SSA Section 1128(h) or any regulations promulgated
thereunder ("State Health Care Program") or a federal health care program as
defined in SSA Section 1128B(f) ("Federal Health Care Program"); or (iii) has
been convicted (as that term is defined in 42 C.F.R. Section 1001.2) of
39
any of the following categories of offenses as described in SSA Section
1128(a) and (b)(1), (2), (3) or any regulations promulgated thereunder:
(A) Criminal offenses relating to the delivery of an
item or service under Medicare, Medicaid or any other State Health Care
Program or Federal Health Care Program;
(B) Criminal offenses under federal or state law
relating to patient neglect or abuse in connection with the delivery of a
health care item or service;
(C) Criminal offenses under federal or state law
relating to fraud, theft, embezzlement, breach of fiduciary responsibility
or other financial misconduct in connection with the delivery of a health
care item or service or with respect to any act or omission in a program
operated by or financed in whole or in part by any federal, state or local
governmental agency;
(D) Federal or state laws relating to the interference
with or obstruction of any investigation into any criminal offense
described in (A) through (C) above; or
(E) criminal offenses under federal or state law
relating to the unlawful manufacture, distribution, prescription or
dispensing of a controlled substance.
4.36 COMPLIANCE WITH MEDICARE/MEDICAID AND INSURANCE PROGRAMS
(a) The Company and its subsidiaries are eligible to receive
payments with respect to operations of their respective business under Title
XVIII of the SSA and under Title XIX of the SSA. The Company and its
Subsidiaries have timely filed (except where the failure to timely file would
not reasonably be expected to have a Material Adverse Effect on the Company) all
claims and reports required to be filed with respect to the operations of their
respective businesses in connection with all state Medicaid and federal Medicare
programs, which claims and reports are complete and correct. The failure to
timely file a medical claim or report resulting only in a late payment will not
for these purposes be deemed adverse to the Company or its Subsidiaries. There
are no actions, appeals or investigations pending or, to the best of the
Company's and its Subsidiaries' Knowledge, threatened before any entity,
commission, board or agency, including an intermediary or carrier or the
administrator of the Health Care Financing Administration, with respect to any
Medicare or Medicaid claims or reports filed by the Company or its Subsidiaries
with respect to the operations of their respective businesses on or before the
date hereof or program compliance matters, which would reasonably be expected to
have a Material Adverse Effect on the Company.
(b) Other than regularly scheduled audits and reviews, no
validation review, peer review or program integrity review related to the
operations of the Company or its Subsidiaries' respective businesses has been
conducted by any entity, commission, board or agency in connection with the
Medicare or Medicaid program, and to the best of the Company's
40
and its Subsidiaries' Knowledge, no such reviews are scheduled, pending or
threatened against or affecting such businesses.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Person that is part of the Purchaser hereby represents and
warrants to the Company, with respect to itself only, as follows:
5.1 ORGANIZATION OF THE PURCHASER.
Such Person is duly formed and validly existing and in good
standing under the laws of its jurisdiction of formation and has full power
and authority to carry on its business as currently being conducted.
5.2 AUTHORIZATION.
Such Person has full power and authority to execute and deliver
this Agreement and the Ancillary Agreements and to consummate the
Transaction. The execution and delivery by such Person of this Agreement and
the Ancillary Agreements and the consummation by it of the Transaction have
been duly authorized by all necessary action of such Person. This Agreement
and each Ancillary Agreement has been duly executed and delivered by such
Person and constitutes a valid and legally binding obligation of such Person,
enforceable against such Person in accordance with its terms, except that
such enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
5.3 NONCONTRAVENTION.
The execution and delivery by such Person of this Agreement and
the Ancillary Agreements and the consummation by it of the Transaction do not
and will not (i) conflict with or result in a violation of any provision of
the operating agreement or any other governing agreement of such Person, (ii)
conflict with or result in a violation of any provision of, constitute (with
or without the giving of notice or the passage of time or both) a default
under or give rise (with or without the giving of notice or the passage of
time or both) to any right of termination, cancellation, or acceleration
under any bond, debenture, note, mortgage, indenture, lease, agreement or
other instrument or obligation to which such Person is a party or by which
such Person or any of its properties may be bound, (iii) result in the
creation or imposition of any Encumbrance upon the properties of such Person,
or (iv) violate any Applicable Law binding upon such Person, except, in the
case of clauses (ii), (iii) and (iv) above, for any such conflicts,
violations, defaults, terminations, cancellations, accelerations or
Encumbrances which would not, individually or in the aggregate, have a
material adverse effect on the ability of such Person to consummate the
Transaction.
41
5.4 CONSENTS AND APPEALS.
No consent, approval, order or authorization of or declaration,
filing or registration with any Governmental Entity is required to be
obtained or made by such Person in connection with the execution and delivery
by such Person of this Agreement and the Ancillary Agreements or the
consummation of the Transaction other than (i) any filings required under
Section 13 of the Exchange Act and Rule 13d-1 under the Exchange Act (ii)
compliance with applicable provisions of the HSR Act, as amended and (iii)
such consents, approvals, orders or authorization which, if not made, would
not, individually or in the aggregate, have a material adverse effect on the
ability of such Person to consummate the Transaction.
5.5 PURCHASE FOR INVESTMENT.
(a) Such Person and the Carlyle Affiliates have been furnished
with all information that it has requested for the purpose of evaluating the
proposed acquisition of the Securities pursuant hereto, and such Person and
the Carlyle Affiliates have had an opportunity to ask questions of and
receive answers from the Company regarding the Company and its Business,
assets, results of operations, financial condition and prospects and the
terms and conditions of the issuance of the Securities.
(b) Such Person is acquiring the Securities solely by and for
its own account, for investment purposes only and not for the purpose of
resale or distribution. Neither such Person nor any Carlyle Affiliate has
any contract, undertaking, agreement or arrangement with any Person to sell,
transfer or pledge to such Person or anyone else any Securities and such
Person has no present plans or intentions to enter into any such contract,
undertaking or arrangement.
(c) Such Person acknowledges and understands that (i) no
registration statement relating to the Securities, the Series B Conversion
Shares or the Warrant Shares has been or is to be filed with the Commission
under the Securities Act or pursuant to the securities laws of any state;
(ii) the Securities, the Series B Conversion Shares, the Series D Preferred
Stock, the Series D Conversion Shares and the Warrant Shares cannot be sold
or transferred without compliance with the registration provisions of the
Securities Act or compliance with exemptions, if any, available thereunder
and without the delivery to the Company by reputable counsel of such
counsel's opinion, in form and substance reasonably satisfactory to the
Company, to the effect that such sale or transfer is exempt from such
registration provisions; (iii) the certificates representing the respective
Securities will include a legend thereon that refers to the foregoing; and
(iv) the Company has no obligation or intention to register the Securities,
the Series B Conversion Shares, the Series D Preferred Stock, the Series D
Conversion Shares or the Warrant Shares under any federal or state securities
act or law, except to the extent, in each case, that the terms of the
Registration Rights Agreement shall otherwise provide.
(d) Such Person and each Carlyle Affiliate (i) is an "accredited
investor" as defined in Rule 501 of Regulation D under the Securities Act;
(ii) has such knowledge and experience in financial and business matters in
general that it has the capacity to evaluate the merits and risks of an
investment in the Securities and to protect its own interest in connection
42
with an investment in the Securities; (iii) has such a financial condition
that it has no need for liquidity with respect to its investment in the
Securities to satisfy any existing or contemplated undertaking, obligation or
Indebtedness; and (iv) is able to bear the economic risk of its investment in
the Securities for an indefinite period of time.
5.6 NO BROKERS.
Such Person has not employed, and is not subject to the known
claim of, any broker, finder, consultant or other intermediary in connection
with all or any portion of the Transaction (or the negotiations looking
toward the consummation of all or any portion of the Transaction) who might
be entitled to a fee or commission in connection with all or any portion of
the Transaction (or the negotiations looking toward the consummation of all
or any portion of the Transaction).
5.7 NO AGREEMENTS.
Such Person has not entered into any agreement or arrangement
with respect to the disposition or voting of or exercise of any other rights
with respect to any Capital Stock of the Company with any Person who is not
an Affiliate of such Person (which shall in no event include GE).
ARTICLE VI
COVENANTS
6.1 BEST EFFORTS.
The Company shall comply with the GE Purchase Agreement and the
Credit Facility through and including the Second Closing.
6.2 RESTRICTIVE AGREEMENTS PROHIBITED.
Through and including the Second Closing, the Company shall not
become a party to any agreement which by its terms violates the terms of the
GE Purchase Agreement, the terms of the Series B Preferred Stock as set forth
in the Series B Certificate of Designation, the terms of the Series C
Preferred Stock as set forth in the Series C Certificate of Designation, the
terms of the Series D Preferred Stock as set forth in the Series D
Certificate of Designation, or the terms of the GE Warrants. From and after
the Second Closing, the Company shall not become a party to any agreement
which by its terms violates the terms of the Series B Preferred Stock as set
forth in the Series B Certificate of Designation or the terms of the Series D
Preferred Stock as set forth in the Series D Certificate of Designation .
6.3 CONTINUING OPERATIONS.
From and after the Closing Date, the Company shall, and shall use
its best efforts to cause each Subsidiary to, use all commercially reasonable
efforts to operate its business in a prudent fashion and in such a fashion as is
not likely to result in a Material Adverse Effect on the
43
Company; PROVIDED, HOWEVER, that the Company shall not be liable to the
Purchaser for violation of this Section 6.3 in connection with any action or
operation of the Company that those members of the Board of Directors who
were elected by the Purchaser (as provided in Section 6.13 of this Agreement)
voted to approve, adopt or ratify (if such action or operation was voted upon
by the Board of Directors), unless the information provided to the Board of
Directors in connection with its vote upon such action or operation failed to
contain all information that a reasonable person would deem material in
considering such action or operation.
6.4 FINANCIAL STATEMENTS AND INFORMATION.
(a) For so long as the Purchaser and any Carlyle Affiliates
hold, in the aggregate, 25% or more of the shares of Series B Preferred Stock
issued to the Purchaser at the Closing, the Company shall furnish to the
Purchaser:
(i) MONTHLY REPORTS. Within thirty (30) days following the
end of each calendar month, a management report for the preceding calendar
month summarizing the Company's operating and financial performance during
such preceding calendar month and including, without limitation, an
unaudited income statement, an unaudited balance sheet and an unaudited
statement of cash flows for such preceding calendar month and a narrative
description of any event, condition or change in condition that had, or is
likely to have, a Material Adverse Effect on the Company (but such reports
need only be furnished if the Purchaser (and any Carlyle Affiliate who is
to receive such reports) shall have executed and delivered to the Company
an appropriate confidentiality agreement reasonably satisfactory to the
Company.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available
and in any event within sixty (60) days after the end of each of the first
three (3) fiscal quarterly periods of each Fiscal Year, the Company's
quarterly report on Form 10-Q as filed with the Commission.
(iii) ANNUAL FINANCIAL STATEMENTS. As soon as available
and in any event within one hundred twenty (120) days after the end of each
Fiscal Year, the Company's Annual Report on Form 10-K and related Annual
Report to Shareholders as filed with the Commission.
(iv) SEC REPORTS; MAILINGS TO STOCKHOLDERS. Promptly after
sending or making available or filing of the same, copies of all
registration statements, proxy statements, financial statements and reports
on Forms 10-K, 10-Q and 8-K (or any comparable successor form), if any,
which the Company or any of its Subsidiaries shall file with the Commission
or any national securities exchange. In addition, (A) at the same time
that the Company makes a mailing to its stockholders generally and (B)
promptly after the Company issues a press release, the Company shall
provide a copy of the same to the Purchaser.
(v) NOTICE OF DEFAULT OR CLAIMED DEFAULT. Promptly upon
(and in any event within five (5) business days following) any officer of
the Company obtaining
44
Knowledge (A) of any condition or event which constitutes an event of
default or default (including, without limitation, by way of
cross-default) under any Indebtedness having a principal amount of at
least $5 million, (B) that the holder of any Indebtedness has given any
written notice or taken any other action with respect to a claimed
condition or event which constitutes such an event of default or default
or (C) that any Person has given any written notice to the Company or any
of its Subsidiaries or taken any other action with respect to a claimed
default under an agreement (other than Indebtedness included in clause
(A) of this Section 6.4(a)(v)) or other obligation having total
consideration to the parties of at least $1 million, an officer's
certificate describing the same and the period of existence thereof and
what action the Company has taken, is taking and proposes to take with
respect thereto.
(vi) BANKRUPTCY. Promptly upon receiving notice of any
Person's seeking to obtain or threatening to seek to obtain a decree or
order for relief with respect to the Company or any of its Subsidiaries in
an involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, a written notice thereof specifying
what action the Company or such Subsidiary is taking or proposes to take
with respect thereto.
(vii) ADDITIONAL INFORMATION. With reasonable
promptness, such other information, including financial statements and
computations, relating to the performance of the provisions of this
Agreement or the affairs of the Company or any of its Subsidiaries as the
Purchaser may from time to time reasonably request.
(b) The Company will furnish to the Purchaser, at the time it
furnishes each set of financial statements pursuant to Section 6.4(a)(ii) or
(iii) above, an officer's certificate to the effect that no event of default
under any Indebtedness has occurred and is continuing (or, if any such event of
default has occurred and is continuing, describing the same in reasonable
detail, the period of existence thereof and the action that the Company has
taken and proposes to take with respect thereto).
(c) The Company will keep at its principal executive offices
the books, accounts and records of the Company and cause the same to be
available for inspection at said offices during normal business hours by the
Purchaser or by any prospective purchaser of any of the Securities from
either the Purchaser or any Carlyle Affiliate (other than such a purchaser
proposing to purchase pursuant to a valid registration statement or pursuant
to Rule 144 promulgated under the Securities Act). The Purchaser may, at its
option and its own expense, conduct internal audits of the books, records and
accounts of the Company. Audits may be on either a continuous or periodic
basis or both and may be conducted by employees of the Purchaser or by
independent auditors or other consultants retained by the Purchaser. The
Company shall make available to the Purchaser such information and financial
statements in addition to the foregoing as shall be required by the Purchaser
in connection with the preparation of registration statements, current and
periodic reports, proxy statements, Tax Returns and other documents required
to be filed under Applicable Law and shall cooperate in the preparation of
any such documents.
45
6.5 PRESS RELEASES.
Except as may be required by Applicable Law or by the rules of
any national securities exchange, neither the Purchaser nor the Company shall
issue any press release with respect to this Agreement or the Transaction
without the prior consent of the other party hereto (which consent shall not be
unreasonably withheld under the circumstances). Any such press release required
by Applicable Law or by the rules of any national securities exchange shall only
be made after reasonable notice to the other party as to the form and content of
such press release.
6.6 NOTIFICATION OF CERTAIN MATTERS.
The Company shall give prompt notice to the Purchaser, and the
Purchaser shall give prompt notice to the Company, of (i) the occurrence or
failure to occur of any event which occurrence or failure causes any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from and including the date
hereof through the time at which such representation or warranty ceases to
survive pursuant to Section 8.1 hereof, and (ii) any material failure of the
Company or the Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy such
failure. In addition, the Company shall give prompt notice to the Purchaser of
any developments that could reasonably be expected to have a Material Adverse
Effect on the Company.
6.7 LIABILITY INSURANCE.
For so long as the Purchaser and any Carlyle Affiliates hold, in
the aggregate, 25% or more of the shares of Series B Preferred Stock issued to
the Purchaser at Closing, the Company shall ensure that each person serving on
the Board of Directors on and after the Closing Date shall receive the same
liability insurance coverage as a member of the Board of Directors receives as
of the date hereof (including coverage for liabilities arising before the date
of taking office to the extent arising from such person's status as a
prospective member of the Board of Directors) and that such policies shall be in
full force and effect in accordance with their terms as of the Closing Date.
6.8 CONVERSION STOCK.
The Company shall at all times reserve and keep available out of
its authorized but unissued shares of Common Stock and preferred stock, par
value $.001 per share, solely for the purpose of effecting the conversion of
shares of Series B Preferred Stock and Series C Preferred Stock and the issuance
of Common Stock in respect of the Warrants and the GE Warrants, the full number
of whole shares of Common Stock and Series D Preferred Stock then deliverable
upon (a) the conversion of all shares of Series B Preferred Stock and Series C
Preferred Stock then outstanding, (b) the issuance of Common Stock in respect of
the Warrants and the GE Warrants, and (c) if any Series D Preferred Stock is
then outstanding, the full number of whole shares of Common Stock then
deliverable upon the conversion of all shares of Series D Preferred Stock then
outstanding. The Company shall take at all times such corporate action as
46
shall be necessary in order that the Company may validly and legally issue
fully paid and non-assessable shares of Common Stock or Series D Preferred
Stock (as the case may be) upon the conversion of shares of Series B
Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock and
the exercise of the then outstanding Warrants and GE Warrants. If at any
time the number of authorized but unissued shares of Common Stock or Series D
Preferred Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series B Preferred Stock, Series C Preferred Stock,
and Series D Preferred Stock and the exercise of all the then outstanding
Warrants and GE Warrants, in addition to such other remedies as shall be
available to the holders of the Series B Preferred Stock, Series C Preferred
Stock, and Series D Preferred Stock, the Company shall forthwith take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock or Series D Preferred Stock to such numbers of shares
as shall be sufficient for such purpose, including but not limited to
promptly calling and holding a meeting of the Company's stockholders, at
which the Company's stockholders shall vote on a proposed amendment to the
Certificate of Incorporation that would so increase the number of authorized
shares of Common Stock or preferred stock, par value $.001 per share, as
appropriate, a favorable vote for which amendment shall have been recommended
to the Company's stockholders by the Board of Directors, pursuant to a duly
and validly adopted resolution of the Board of Directors setting forth the
amendment proposed and declaring its advisability, all in accordance with
Section 242 of the Delaware General Corporation Law; and, in case of an
increase in the number of authorized shares of such preferred stock, the
Board of Directors shall promptly cause to become effective a certificate of
increase pursuant to Section 151 of the Delaware General Corporation Law.
6.9 CERTAIN REGULATORY MATTERS.
(a) The operations of the Company and its Subsidiaries will be
conducted in compliance with all material Applicable Laws (material
Applicable Laws includes, without limitation, all Applicable Laws relating to
health care, the health care industry and the provision of health care
services, third party reimbursement (including Medicare and Medicaid), public
health and safety and wrongful death and medical malpractice). In addition
to, and without limiting the generality of the foregoing, the Company shall
adopt and implement a compliance plan adequate to assure such compliance.
The compliance plan shall include all material elements of an effective
program to prevent and detect violations of law as defined in Commentary 3(k)
to Section 8A1.2 of the Federal Sentencing Guidelines.
(b) Without limiting the generality of the foregoing, the
Company and all Affiliates shall comply in all material respects with all
lawful directives, orders, instructions, bulletins and other announcements
received from third party payors and their agents (including, without
limitation, Medicare carriers and fiscal intermediaries) regarding
participation in third party payment programs, including, without limitation,
preparation and submission of claims for reimbursement. Nothing in this
Section 6.9 shall be construed as or is intended to create any third party
beneficiaries.
47
6.10 EMPLOYMENT ARRANGEMENTS.
(a) The Company will keep in effect following the Closing the
employment agreements with the employees set forth in SCHEDULE 4.23, on the
same terms and conditions contained in such employment agreements prior to
the Closing Date; provided, however, that such employment agreements shall be
modified so that none of (i) the Transaction, (ii) any conversion of Series B
Preferred Stock or Series C Preferred Stock acquired hereunder or under the
GE Purchase Agreement into shares of Series D Preferred Stock or Common Stock
, (iii) any conversion of shares of Series D Preferred Stock into Common
Stock, or (iv) any change in the membership, size or composition of the Board
of Directors incident to the transaction or such conversions, shall trigger
or constitute a change of control or otherwise give any party to such
employment agreements any right to receive any payment (or any acceleration
thereof) or protections whatsoever.
(b) Following the Closing, the Company and the Purchaser will
review the terms and conditions of the bonus plan currently in effect at the
Company to determine whether any changes should be made to such bonus plan.
6.11 TRANSACTIONS WITH AFFILIATES.
For so long as the Purchaser and any Carlyle Affiliates hold,
in the aggregate, 25% or more of the shares of Series B Preferred Stock
issued to the Purchaser at Closing, the Company covenants and agrees that it
will not, and will not permit any of its Subsidiaries to, directly or
indirectly, engage in any transaction with any Affiliate of the Company,
including, without limitation, the purchase, sale or exchange of assets or
the rendering of any service, except: (a) transactions with Affiliates of
the Company that involve consideration or payments in the aggregate of less
than $5,000; (b) transactions with Affiliates of the Company that are
approved by the Board of Directors; and (c) transactions with Affiliates of
the Company in the ordinary course of business and pursuant to the reasonable
requirements of the Company's or such Subsidiary's business and upon fair and
reasonable terms that are no less favorable to the Company or such
Subsidiary, as the case may be, than those which might be obtained in an
arm's-length transaction at the time from a Person which is not such an
Affiliate.
6.12 STOCKHOLDER APPROVAL OF CERTAIN ACTIONS.
Without limitation of the rights, restrictions and protections
contained in the Series B Certificate of Designation or otherwise available
to holders of shares of the Series B Preferred Stock, for so long as at least
thirty-three percent (33%) of the number of shares of the Series B Preferred
Stock originally issued to the Purchaser is outstanding, the Company shall
not take, and shall cause its Subsidiaries not to take, any of the following
actions without the affirmative vote of holders of at least sixty-seven
percent (67%) of the shares of the Series B Preferred Stock then outstanding:
(a) Alter, change or amend (by merger or otherwise) any of the
rights, preferences and privileges of the Series B Preferred Stock, the Series C
Preferred Stock or any other class of Capital Stock or the terms or provisions
of any Option or Convertible Security;
48
(b) Effect or enter into any transaction or event that results
or could reasonably be expected to result, directly or indirectly, in a Special
Corporate Event with respect to the Company or any Subsidiary;
(c) The occurrence of any Liquidating Event with respect to the
Company or any Subsidiary;
(d) Amend, restate, alter, modify or repeal (by merger or
otherwise) the Certificate of Incorporation or the Amended Bylaws of the
Company, including, without limitation, amending, restating, modifying or
repealing (by merger or otherwise) any certificate of designation or
preferences (as in effect from time to time) relating to the Series A
Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock
or the Series D Preferred Stock, including, without limitation, the filing by
the Company of a certificate with the Secretary of State of the State of
Delaware, pursuant to Section 151(g) of the Delaware General Corporation Law,
setting forth a resolution or resolutions adopted by the Board of Directors
of the Company that none of the authorized shares of Series D Preferred Stock
are outstanding and that none will be issued subject to the Series D
Certificate of Designation, (provided however, that upon any Type A
Conversion pursuant to Section 5 of the Series B Certificate of Designation,
the Company shall immediately file a certificate with the Secretary of State
of the State of Delaware, pursuant to Section 151(g) of the Delaware General
Corporation Law, setting forth a resolution or resolutions adopted by the
Board of Directors of the Company that none of the authorized shares of
Series D Preferred Stock are outstanding and that none will be issued subject
to the Series D Certificate of Designation.)
(e) Change the number of directors of the Company to a number
less than eight (8) or more than nine (9) or the manner in which the
directors are selected, except as provided in the Certificate of
Incorporation, Amended Bylaws, Series B Certificate of Designation, Series C
Certificate of Designation and Series D Certificate of Designation;
(f) Incur any Indebtedness, in the aggregate with respect to
the Company and its Subsidiaries, in excess of $15 million in any Fiscal
Year; PROVIDED, HOWEVER, that this provision shall not apply to draw-downs
under any credit facility as to which a credit agreement had been executed
and delivered on or prior to the date hereof;
(g) Become a party to Operating Leases during any Fiscal Year
with respect to which the present value of all payments due during the term
of such Operating Leases in the aggregate (determined using a discount rate
of 10%) exceed $15 million;
(h) Create, authorize or issue any shares of Series B
Preferred Stock or any class or series of Senior Securities, Parity
Securities, Supervoting Securities or shares of any such class or series;
(i) Reclassify any authorized stock of the Company into Series
B Preferred Stock or any class or series of Senior Securities, Parity
Securities, Supervoting Securities or shares of such class or series;
49
(j) Increase or decrease the authorized number of shares of
Series B Preferred Stock, Series D Preferred Stock or any class or series of
Senior Securities, Parity Securities, Supervoting Securities or shares of any
such class or series;
(k) Issue any equity security below either the then current
Market Price (without deduction for any underwriters' discount) or the then
applicable Conversion Price of the Series B Preferred Stock (as defined in
the Series B Certificate of Designation), other than for (i) management stock
options currently authorized and available for grant for not more than Three
Hundred Thousand (300,000) shares of Common Stock in the aggregate, in which
Senior Management of the Company shall not participate, (ii) management stock
options exercisable at not less than the then-applicable Conversion Price per
share of Common Stock issued after October 14, 1997, exercisable for not more
than Five Hundred Thousand (500,000) shares of Common Stock in the aggregate,
in which only Senior Management of the Company shall participate, and (iii)
the Common Stock underlying such management stock options and other stock
options outstanding as of October 14, 1997;
(l) Declare or pay any dividend or make any distribution
(including, without limitation, by way of redemption, purchase or other
acquisition) with respect to shares of Capital Stock or any securities
convertible into or exercisable, redeemable or exchangeable for any share of
Capital Stock of the Company or any Subsidiary (including, without
limitation, any Option or Convertible Security) directly or indirectly,
whether in cash, obligations or shares of the Company or other property;
(m) Acquire, in one or a series of related transactions, any
equity ownership interest or interests of any Person, where the aggregate
consideration payable in connection with such acquisition (including, without
limitation, cash consideration, the fair market value of any securities and
the net present value of any deferred consideration) is at least $15 million;
(n) Acquire, in one or a series of related transactions, any
asset or assets of any Person, where the aggregate consideration payable in
connection with such transaction (including, without limitation, cash
consideration, the fair market value of any securities and the net present
value of any deferred consideration) is equal to or greater that $15 million;
PROVIDED, HOWEVER, that this provision shall not apply to Capital
Expenditures made by the Company in the Ordinary Course of Business;
(o) Merge or consolidate with any Person, or permit any other
Person to merge into it where: (i) the stockholders of the Company
immediately prior to the consummation of such merger or consolidation shall,
immediately after the consummation of such merger or consolidation, hold
securities possessing more than 50% of both the total voting power of and the
beneficial ownership interests in the surviving entity of such merger or
consolidation and (ii) the equity holders of such other Person immediately
prior to the consummation of such transaction shall receive (directly or
indirectly) aggregate consideration payable in connection with such
transaction (including without limitation cash consideration, the fair market
value of any securities and the net present value of any deferred
consideration) equal to or greater than $15 million;
50
(p) Cause or permit any Subsidiary to merge or consolidate
with any other Person (other than the Company or a wholly-owned Subsidiary),
or cause or permit any other Person to merge into it, where: (i) the
stockholders of such Subsidiary immediately prior to the consummation of such
merger or consolidation shall, immediately after the consummation of such
merger or consolidation, hold securities possessing more than 50% of both the
total voting power of and the beneficial ownership interests in the surviving
entity of such merger or consolidation and (ii) the equity holders of the
subject Person immediately prior to the consummation of such transaction
shall receive (directly or indirectly) aggregate consideration payable in
connection with such transaction (including without limitation cash
consideration, the fair market value of any securities and the net present
value of any deferred consideration) equal to or greater than $15 million;
(q) Substantially and materially engage in, either through
acquisition or internal development, any business other than the Business;
(r) Make or permit any of its Subsidiaries to make Capital
Expenditures in any Fiscal Year in excess, in the aggregate, of two percent
(2%) above the approved Capital Budget Plan for such Fiscal Year unless such
Capital Expenditure is approved by the Executive Committee of the Board of
Directors or a Supermajority Vote of the Board of Directors;
(s) (i) sell, transfer, convey, lease or dispose of, outside
the Ordinary Course of Business, any assets or properties of the Company or
any Subsidiary, whether now or hereafter acquired, in any transaction or
transactions, if (X) the aggregate consideration payable in connection with
any single such transaction (including, without limitation, cash
consideration, the fair market value of any securities and the net present
value of any deferred consideration), is greater than $5 million or (Y) the
aggregate consideration payable in connection with all such transactions
(including, without limitation, cash consideration, the fair market value of
any securities and the net present value of any deferred consideration),
consummated after the Initial Issue Date, taken as a whole, is or would
become as a result of such transaction greater than $20 million; (ii) undergo
or cause or permit any Subsidiary to undergo a reorganization or
recapitalization; (iii) merge or consolidate with any Person, or permit any
other Person to merge into it, where the stockholders of the Company
immediately prior to the consummation of such merger or consolidation shall,
immediately after the consummation of such merger or consolidation, hold
securities possessing 50% or less of either the total voting power of or the
beneficial ownership interests in the surviving entity of such merger or
consolidation; (iv) cause or permit any Subsidiary to merge or consolidate
with any other Person (other than the Company or a wholly-owned Subsidiary of
the Company), or cause or permit any other Person to merge into such
Subsidiary, where the stockholders of such Subsidiary immediately prior to
the consummation of such merger or consolidation shall, immediately after the
consummation of such merger or consolidation, hold 50% or less of either the
total voting power of or the beneficial ownership interests in the surviving
entity of such merger or consolidation, if (X) the value of the assets of
such Subsidiary is greater than $5 million or (Y) the aggregate value of the
assets of all such Subsidiaries with respect to all such mergers or
consolidations consummated after the Initial Issue Date, taken as a whole,
and including such transaction, is greater than $20 million;
51
(t) Permit any Subsidiary to issue or sell any share of
Capital Stock, Option or Convertible Security; PROVIDED, HOWEVER, that the
Company may form a new Subsidiary not all of the equity securities of which
need be owned directly or indirectly by the Company (a "Partial Subsidiary"),
but only if (i) at the time of creation of such Partial Subsidiary, such
Partial Subsidiary is designated as such in a written notice to the
Purchaser, and, (ii) cumulatively through time no more than $5,000 of assets
(in the aggregate ) are transferred to such Partial Subsidiary by the Company
or any other Subsidiary, and (iii) no liabilities of such Partial Subsidiary
are ever assumed or guaranteed by the Company or any other Subsidiary;
(u) Amend, restate, alter, modify or repeal (by merger or
otherwise) or permit any Subsidiary to amend, restate, modify or repeal (by
merger or otherwise) the certificate of incorporation or bylaws of any
Subsidiary in any material respect; or
(v) Issue any shares of Series D Preferred Stock, otherwise
than pursuant to a Type B Conversion.
6.13 BOARD OF DIRECTORS.
(a) The Board of Directors at all times following the Closing
and before a Type B Event Date shall be comprised of between eight (8) and
nine (9) members with one vacancy until the ninth member, an Independent
nominated by the Purchaser and GE has been approved by the Board of Directors
(the "Joint Director") to fill such vacancy. After the occurrence of a Type
B Event Date, the Board of Directors shall be comprised of a number of
members that is consistent with the Series B Certificate of Designation, the
Series C Certificate of Designation, the Series D Certificate of Designation
and the Amended Bylaws. As long as the Purchaser and all Carlyle Affiliates
own at least fifty percent (50%) of the shares of Series B Preferred Stock
originally purchased by the Purchaser, the holders of the Series B Preferred
Stock, by a vote as provided in the Series B Certificate of Designation,
shall have the right to elect two (2) directors. As long as the Purchaser
and all Carlyle Affiliates own at least twenty-five percent (25%) but less
than fifty percent (50%) of the Series B Preferred Stock originally purchased
by the Purchaser, the holders of the Series B Preferred Stock, by a vote as
provided in the Series B Certificate of Designation, shall have the right to
elect one (1) director. Until the occurrence of a Type B Event Date, the
holders of the Common Stock shall have the right to elect between five (5)
and six (6) directors (one (1) of whom shall be the Joint Director) plus, if
any of the percentage ownership conditions contained in the two immediately
preceding sentences fail to be satisfied otherwise than pursuant to a Type B
Conversion, such director or directors as would, absent such failure, be
elected by holders of the Series B Preferred Stock or the Series C Preferred
Stock, as appropriate.
(b) Immediately following the Closing, the Board of Directors
shall appoint, and shall thereafter until a Type B Event Date, unless
approved by a majority of the entire board of directors and a majority of the
directors elected by the holders of the Series B Preferred Stock and the
Series C Preferred Stock, maintain as provided in the Amended Bylaws the
following committees of the Board of Directors with the respective duties,
membership and voting requirements stated below, PROVIDED, that if the
holders of the Series B Preferred Stock shall,
52
otherwise than as a result of the conversion of their shares of Series B
Preferred Stock in a Type B Conversion, cease to have the right to nominate
and elect any Preferred Stock Director at all, then such holders shall no
longer have the right to select any member of any of the following committees
and the member or members of such committees selected by such holders shall
automatically cease to be a member or members of such committees:
(i) Compensation Committee, which shall consist of three
(3) directors, at least one (1) of whom shall be selected jointly by the
directors elected by the Series B Preferred Stock and the director elected
by the Series C Preferred Stock. An affirmative vote of at least two (2)
members of the Compensation Committee shall be required for approval of
matters considered by the Compensation Committee. The Compensation
Committee shall ensure that the representative on the Compensation
Committee selected by the directors elected by the Series B Preferred Stock
and the director elected by the Series C Preferred Stock shall receive
adequate notice of and an opportunity to participate in any meetings of the
Compensation Committee;
(ii) Audit Committee, which shall consist of three (3)
directors, including as many Independent directors as are available, not to
exceed three (3). An affirmative vote of at least two (2) members of the
Audit Committee shall be required for approval of matters considered by the
Audit Committee;
(iii) Executive Committee, which shall consist of four
(4) directors, one (1) of whom shall be selected by the directors elected
by the Series B Preferred Stock, one (1) of whom shall be selected by the
director elected by the Series C Preferred Stock and two (2) of whom shall
be selected by the Board of Directors. The members selected by the
directors elected by the Series B Preferred Stock and the director elected
by the Series C Preferred Stock may be removed only by the director or
directors, respectively, who selected such members. The Executive
Committee shall, in addition to the customary duties of an executive
committee, have the right to approve any financing activity, including but
not limited to the Capital Budget Plan. An affirmative vote of at least
three (3) members of the Executive Committee shall be required for approval
of any matters considered by the Executive Committee. Each financing
activity not approved by the Executive Committee may be referred to the
Board of Directors for approval, which approval shall require a
Supermajority Vote; and
(iv) Acquisitions Committee, which shall consist of four (4)
directors, one (1) of whom shall be selected by the directors elected by
the Series B Preferred Stock, one (1) of whom shall be selected by the
director elected by the Series C Preferred Stock, and two (2) of whom shall
be selected by the Board of Directors. The Acquisitions Committee shall
have the right to approve any transaction of the types described in
Sections 6.12(m), (n), (o) and (p) with respect to which transaction the
aggregate consideration payable in connection with such transaction
(including, without limitation, cash consideration, the fair market value
of any securities and the net present value of any deferred consideration)
is less than $15 million. A unanimous vote of the Acquisitions Committee
shall be required for approval of any matters considered by the
53
Acquisitions Committee. Except as described in the next sentence, each
matter considered but not unanimously approved by the Acquisitions
Committee may be referred to the Board of Directors for approval, which
approval shall require a majority vote of the Board of Directors. The
unanimous approval of the Acquisitions Committee or the unanimous approval
of the Board of Directors shall be required before the Company or any of
its Subsidiaries engage in a transaction of the types described in Sections
6.12(m), (n) (which, only for purposes of this clause, shall also apply to
Capital Expenditures made by the Company in the ordinary course of
business), (o) and (p), in which transaction: (A) the aggregate
consideration payable in connection with such transaction (including,
without limitation, cash consideration, the fair market value of any
securities and the net present value of any deferred consideration) is less
than $15 million; and (B) the Company is to issue its common stock at an
implicit or explicit price of less than $8.375 per share. Such implicit
price shall be determined in an appraisal approved unanimously by the
Acquisitions Committee or unanimously by the Board of Directors, such
appraisal to be performed by an independent appraiser selected unanimously
by the Acquisitions Committee or unanimously by the Board of Directors.
(c) Regular meetings of the Board of Directors of the Company
shall be held at least once a calendar quarter at the offices of the Company or
at such other times and places as may be fixed by the Board of Directors upon
notice to the members of the Board of Directors.
(d) After the Closing, the following matters, among others
specified in the Amended Bylaws, shall be deemed approved by the Board of
Directors only upon a Supermajority Vote in respect of any such matter:
(i) Approving the annual Capital Budget Plan; and
(ii) Approving the Company entering into any financing
activity not approved by the Executive Committee.
(e) Upon any Type A Conversion pursuant to Section 5 of the
Series B Certificate of Designation and Section 5 of the Series C Certificate of
Designation, of all of the outstanding shares of Series B Preferred Stock and
Series C Preferred Stock, the Company shall immediately file a certificate with
the Secretary of State of the State of Delaware, pursuant to Section 151(g) of
the Delaware General Corporation Law, setting forth a resolution or resolutions
adopted by the Board of Directors of the Company that none of the authorized
shares of Series D Preferred Stock are outstanding and that none will be issued
subject to the Series D Certificate of Designation.
6.14 RESTRICTIONS ON TRANSFER OF CAPITAL STOCK.
(a) The Purchaser shall not transfer, sell, assign, or pledge to
any Person other than a Carlyle Affiliate, or dispose of, any interest in any
shares of the Series B Preferred Stock without the prior approval of the Board
of Directors, in its sole discretion. The Purchaser shall not transfer, sell or
assign to a Carlyle Affiliate, any interest in any shares of the Series B
Preferred Stock if such Carlyle Affiliate is engaged in the Business.
54
(b) After the Closing Date and before the earlier to occur of
April 14, 1999 and a Type B Event Date, the Purchaser shall not transfer, sell
or assign to any Person any of the Series D Preferred Stock, Series B Conversion
Shares or Series D Conversion Shares without the prior approval of an ordinary
majority of the Board of Directors in its sole discretion, other than in the
following circumstances:
(i) A transfer to a Carlyle Affiliate (provided that
prior to any such transfer such Carlyle Affiliate shall have delivered to
the Company its written agreement to be bound by the terms of this
Section 6.14);
(ii) A transfer permitted under Rule 144 under the
Securities Act;
(iii) A transfer pursuant to a registered offering under
registration rights from the Company as provided in the Registration
Rights Agreement; or
(iv) A transfer pursuant to a transaction available to
all stockholders of the Company on the same terms as to the Purchaser,
which has been approved by a majority of the Board of Directors;
(c) If a Type B Event Date occurs prior to April 14, 1999,
then from the Type B Event Date until the second subsequent annual meeting of
stockholders of the Company after such Type B Event Date, (A) the Purchaser
shall not make a transfer of any of its Series D Preferred Stock, Series B
Conversion Shares or Series D Conversion Shares in a transaction available to
all holders of Common Stock on the same terms as to the Purchaser, unless
such transaction has been approved either by (I) the affirmative vote of not
less than 80 percent of the outstanding shares of the Company entitled to
vote, or (II) at least two-thirds (2/3) of the directors of the Company
(which must include either (i) the Joint Director if either (x) such Joint
Director served in such position as of the Type B Event Date, or (y) such
Joint Director has been approved by a majority of directors who were Common
Stock Directors as of the Type B Event Date, or (ii) at least one director
who was a Common Stock Director prior to the Type B Event Date, unless
neither such Joint Director, nor any of such Common Stock Directors continue
to serve on the Board of Directors at such time) and (B) the Purchaser shall
not make a transfer of any of its Series D Preferred Stock, Series B
Conversion Shares or Series D Conversion Shares in a transaction other than
one available to all holders of Common Stock on the same terms as to the
Purchaser, unless such transaction has been approved either by (I) the
affirmative vote of not less than 80 percent of the outstanding shares of the
Company entitled to vote, or (II) at least 50 percent of the directors of the
Company who are not the Preferred Stock Directors or the Conversion
Directors. If a Type B Event Date occurs prior to October 14, 1999, then
from the Type B Event Date until the second subsequent annual meeting of
stockholders of the Company after such Type B Event Date, none of the
following actions or transactions shall be effected by the Company or
approved by the Company as a stockholder of any subsidiary of the Company,
and neither the Purchaser nor any other holder of Series D Preferred Stock
(other than a holder pursuant to a transfer permitted in paragraphs (b)(ii)
or (b)(iii) of this Section 6.14) shall engage in, or be a party to, any of
the following actions or transactions involving the Company or any subsidiary
of the Company, if, as of the record date for the determination of the
stockholders
55
entitled to vote thereon, or consent thereto, any other corporation, person or
entity referred to in clauses (i) through (iv) of this sentence beneficially
owns or controls, directly or indirectly, five percent (5%) or more of the
outstanding shares of the Company entitled to vote:
(i) any merger or consolidation of the Company or any of its
subsidiaries with or into such other corporation, person or entity; or
(ii) any sale, lease, exchange or other disposition of all or
any substantial part of the assets of the Company or any of its subsidiaries to,
or with, such other corporation, person or entity; or
(iii) the issuance or delivery of any voting securities of the
Company or any of its subsidiaries to such other corporation, person or entity
in exchange for cash, other assets or securities, or a combination thereof; or
(iv) any dissolution or liquidation of the Company;
PROVIDED, HOWEVER, that the prohibitions contained in this sentence shall not
apply with respect to any such action or transaction approved by (I) the
affirmative vote of not less than 80 percent of the outstanding shares of the
Company entitled to vote or (II) at least two-thirds (2/3) of the directors of
the Company (which must include either the Joint Director if either (x) such
Joint Director served in such position as of the Type B Event Date, or (y) such
Joint Director has been approved by a majority of directors who were Common
Stock Directors as of Type B Event Date, or at least one director who was a
Common Stock Director prior to the Type B Event Date, unless neither such Joint
Director, nor any of such Common Stock Directors continue to serve on the Board
of Directors at such time). For purposes of the immediately preceding sentence,
a Person shall be deemed to own or control directly or indirectly, any
outstanding shares of stock of the Company (A) which it has the right to acquire
pursuant to any agreement, or upon the exercise of, conversion rights, warrants,
options or otherwise or (B) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (A) above) by any
other corporation, person or other entity (x) with which it or its "affiliate"
or "associate," (as defined below) has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting or disposing of
stock of the Company or (y) which is its "affiliate" or "associate" as those
terms are defined under the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
No transfer of Series B Preferred Stock or Series B Conversion Shares may be
made by Purchaser or any Carlyle Affiliate (other than a transfer described in
paragraph (b)(ii) or (b)(iii) of this Section 6.14), unless prior thereto, the
transferee in such transfer shall have entered into an agreement in form and
substance reasonably satisfactory to the Company, agreeing to be bound by the
terms of this Section 6.14(c). Notwithstanding anything to the contrary
contained in this Section 6.14(c), the Purchaser shall not need any approval by
any directors, the Board of Directors or any stockholders under this Section
6.14 in order to transfer, sell or assign any of its Series B Conversion Shares
in the circumstances and the persons set forth in clauses (i), (ii) and (iii) of
Section 6.14(b).
56
(d) The Warrants and the Warrant Shares shall be transferable
by the Purchaser, subject to compliance with federal and state securities laws,
without the approval of the Board of Directors.
(e) Except in the case of a transfer pursuant to Rule 144
promulgated pursuant to the Securities Act, or any successor rule, prior to
consummating any private sale or transfer of Common Stock to any Person other
than a Carlyle Affiliate, the Purchaser shall provide to the Company the written
opinion of reputable legal counsel in form reasonably acceptable to the Company
that such sale or transfer is being made in compliance with applicable federal
securities laws.
6.15 EXPIRATION OF CERTAIN COVENANTS.
The covenants contained in Sections 6.3, 6.5 and 6.9 of this
Agreement shall expire if, at any date after the Closing Date, the Purchaser and
the Carlyle Affiliates hold, and, upon conversion into Common Stock of all of
the Series B Preferred Stock or Series D Preferred Stock held by the Purchaser
and the Carlyle Affiliates, would hold less than 5% of the issued and
outstanding Common Stock of the Company on a fully diluted basis; PROVIDED,
HOWEVER, that to the extent that such covenants relate to or arise out of any
Applicable Laws relating to health care, the health care industry and the
provision of health care services, third party reimbursement (including Medicare
and Medicaid), public health and safety and wrongful death and medical
malpractice), such covenants shall expire if, at any date after the Closing
Date, the Purchaser and the Carlyle Affiliates hold less than 5% of the Series B
Preferred Stock originally purchased by the Purchaser.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligation of each party to consummate the Closing
on the Closing Date is subject to the satisfaction or waiver, on or prior to the
Closing Date, of the condition that there shall be no injunction or court order
restraining consummation of all or any portion of the Transaction, there shall
be no pending or threatened Proceeding by or before a court or governmental body
brought by or on behalf of any Person or Governmental Entity seeking to restrain
or invalidate all or any portion of the Transaction and there shall not have
been adopted any law or regulation making all or any portion of the Transaction
illegal.
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligation of the Company to consummate the Transaction on
the Closing Date is subject to the satisfaction or waiver, by the Company, on or
prior to the Closing Date of each of the following conditions:
(a) All representations and warranties of the Purchaser
contained in this Agreement shall be true and correct in all material respects
at and as of the Closing Date as if
57
such representations and warranties were made at and as of the Closing Date,
and the Purchaser shall have performed in all material respects all
agreements and covenants required hereby to be performed by it prior to or at
the Closing Date. There shall be delivered to the Company a certificate
(signed by an authorized person of the Purchaser) to the foregoing effect.
(b) All consents, approvals, Permits and waivers from
Governmental Entities and other parties necessary to permit the Company and
the Purchaser to consummate the Transaction shall have been obtained.
(c) The Purchaser shall have delivered to the Company the
opinions of Gibson, Dunn & Crutcher, LLP, counsel to the Purchaser, in the
form attached hereto as Exhibit H.
(d) No order enjoining the sale of the Securities or the GE
Warrants or the proposed issuance of the Series C Preferred Stock, the Series
B Conversion Shares, the Series C Conversion Shares, the Series D Preferred
Stock, the Series D Conversion Shares, the Warrant Shares or the GE Warrant
Shares shall have been issued and no proceedings for such purpose shall be
pending or threatened by the Commission or any commissioner of corporations
or similar officer of any state having jurisdiction over the Transaction. At
the time of the Closing, the sale and issuance of the Securities, the GE
Warrants, the Series C Preferred Stock, the Series B Conversion Shares, the
Series C Conversion Shares, the Series D Preferred Stock, the Series D
Conversion Shares, the Warrant Shares and the GE Warrant Shares shall be
legally permitted by all laws and regulations to which the Company and the
Purchaser are subject.
(e) The Supplemental Service Fee shall have been terminated
by GE.
(f) The Purchaser shall have delivered to the Company,
unless waived in writing by the Company, such other documents relating to the
Transaction as the Company or the Company's counsel may reasonably request.
(g) The lender under the Credit Facility shall have
executed and delivered the Credit Facility and all related documents.
7.3 CONDITIONS TO THE PURCHASER' OBLIGATIONS.
The obligation of the Purchaser to consummate the Closing on
the Closing Date is subject to the satisfaction or waiver on or prior to the
Closing Date of each of the following conditions:
(a) All representations and warranties of the Company
contained in this Agreement shall be true and correct in all material
respects at and as of the Closing Date as if such representations and
warranties were made at and as of the Closing Date, and the Company shall
have performed in all material respects all agreements and covenants required
hereby to be performed by it prior to or at the Closing Date. There shall be
delivered to the Purchaser a certificate (signed by the President and Chief
Executive Officer and the Secretary of the Company) to the foregoing effect.
58
(b) All consents, approvals, Permits and waivers from
Governmental Entities and other parties necessary to permit the Purchaser and
the Company to consummate the Closing shall have been obtained.
(c) The Company shall have delivered to the Purchaser the
opinions of McDermott, Will & Emery, special counsel for the Company, in the
form attached hereto as Exhibit I.
(d) Since the date of this Agreement, there shall not have
been any Material Adverse Effect on the Company.
(e) All actions shall have been taken by the Company and its
Board of Directors so that, immediately upon the Purchaser's purchase of the
Securities, the Board of Directors shall consist of eight (8) directors, two (2)
of whom were elected by the holders of Series B Preferred Stock pursuant to the
Series B Certificate of Designation and one (1) of whom was elected by the
holders of Series C Preferred Stock pursuant to the Series C Certificate of
Designation.
(f) The Amended Bylaws shall be in effect in the form set
forth in Exhibit A hereto.
(g) The Company shall have provided to the Purchaser a copy
of the insurance policies together with the riders and schedules thereto which
evidence compliance with the provisions set forth in Section 6.7.
(h) No order enjoining the sale of the Securities or the GE
Warrants or the proposed issuance of the Series C Preferred Stock, the Series B
Conversion Shares, the Series C Conversion Shares, the Series D Preferred Stock,
the Series D Conversion Shares, the Warrant Shares or the GE Warrant Shares
shall have been issued and no Proceedings for such purpose shall be pending or
threatened by the Commission or any commissioner of corporations or similar
officer of any state having jurisdiction over the Transaction. At the time of
the Closing, the sale and issuance of the Securities, the GE Warrants, the
Series C Preferred Stock, the Series B Conversion Shares, the Series C
Conversion Shares, the Series D Preferred Stock, the Series D Conversion Shares,
the Warrant Shares and the GE Warrant Shares shall be legally permitted by all
laws and regulations to which the Company and the Purchaser are subject.
(i) The Company shall have adopted and duly filed with the
Secretary of State of Delaware the Series B Certificate of Designation, the
Series C Certificate of Designation, and the Series D Certificate of Designation
and each such Certificate shall have become effective under Delaware law.
(j) The Company shall have delivered to the Purchaser, unless
waived in writing by the Purchaser:
(A) copies (certified by the Secretary of the Company)
of the resolutions duly adopted by the Board of Directors of the Company,
authorizing the
59
execution, delivery and performance of this Agreement and the other
agreements contemplated hereby;
(B) a copy (certified by the Secretary of the State of
Delaware) of the certificate of incorporation as amended through the date
of the Closing and a copy (certified by the Secretary of the Company) of
the Company's Amended Bylaws as amended through the date of the Closing;
and
(C) such other documents relating to the Transaction
as the Purchaser or the Purchaser's counsel may reasonably request.
(k) The Company shall have (A) terminated the Supplemental
Service Fee described in the Proxy Statement and issued the Series C Preferred
Stock in respect thereto and (B) issued the GE Warrants.
(l) The Company and the lender under the Credit Agreement
shall have executed and delivered the Credit Facility and related documents.
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, ETC.
The representations and warranties of the parties hereto
contained herein shall survive the Closing for a period of sixty (60) days
following receipt by the Purchaser of the audited financial statements of the
Company for the Fiscal Year ended June 30, 1998, except as to (a) the
representations and warranties set forth in Sections 4.8, 4.9, 4.13 (to the
extent related to any Applicable Laws relating to health care, the health
care industry and the provision of health care services, third party
reimbursement (including Medicare and Medicaid), public health and safety and
wrongful death and medical malpractice), 4.16, 4.17, 4.32, 4.33, 4.34, 4.35
and 4.36 hereof, which shall survive for the period of the statute of
limitations applicable thereto; (b) any matter as to which a Claim has been
submitted in writing to the Company prior to such date; and (c) any matter
based on fraud by the Company in making any of the representations and
warranties contained in this Agreement. With respect to the matters set forth
in (b) and (c) above, the cause of action in favor of the Purchaser in
respect of such matters shall survive indefinitely.
8.2 INDEMNIFICATION BY THE COMPANY.
The Company agrees to indemnify and hold harmless the Purchaser,
its Subsidiaries, its Affiliates, the Carlyle Affiliates and the directors,
officers, employees, stockholders and partners of each of the Purchaser, its
Subsidiaries, its Affiliates and the Carlyle Affiliates (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties"), from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs and reasonable attorneys' fees, expenses and
disbursements of any kind ("Losses") which may be imposed upon or incurred by
the Purchaser in any manner relating to or arising out
60
of any untrue representation, breach of warranty or failure to perform any
covenant or agreement by the Company contained in this Agreement (including,
without limitation, the schedules and exhibits hereto), the Series B
Certificate of Designation, the Series D Certificate of Designation, the
Ancillary Agreements or in any certificate or document delivered pursuant
hereto or thereto or arising out of any Applicable Laws relating to health
care, the health care industry and the provision of health care services,
third party reimbursement (including Medicare and Medicaid), public health
and safety and wrongful death and medical malpractice or otherwise relating
to or arising out of the Transaction; PROVIDED, HOWEVER, that the Company
shall provide no indemnification with respect to Losses relating to or
arising out of the Transaction if such Losses were caused principally by the
gross negligence or willful misconduct of one or more Indemnified Parties.
8.3 LIMITATION ON INDEMNITIES.
No Claim may be made against the Company for indemnification
pursuant to Section 8.2 until the aggregate dollar amount of all Losses
indemnifiable pursuant to Section 8.2 exceeds $250,000 (in which event the
Purchaser shall be entitled to claim the whole amount of such Losses and not
merely the excess). In no event shall the aggregate amount paid by the
Company pursuant to Section 8.2 exceed $25 million with respect to Claims
arising out of or related to matters other than breaches of the
representations, warranties and covenants contained in Sections 4.13 (to the
extent related to Applicable Laws relating to health care, the health care
industry and the provision of health care services, third party reimbursement
(including Medicare and Medicaid), public health and safety and wrongful
death and medical malpractice), 4.32, 4.33, 4.34, 4.35, 4.36 and 6.9 (to the
extent related to Applicable Laws relating to health care, the health care
industry and the provision of health care services, third party reimbursement
(including Medicare and Medicaid), public health and safety and wrongful
death and medical malpractice), as to which breaches of the representations,
warranties and covenants contained in such Sections, there shall be no cap on
the Company's indemnification obligations under Section 8.2.
8.4 LOSSES.
The term "Losses" as used in this Article VIII is not limited
to matters asserted by third parties but includes Losses incurred or
sustained by an Indemnified Party in the absence of third party claims. The
difference between (a) any insurance proceeds received by an Indemnified
Party in respect of Losses and (b) the legal costs and expenses incurred by
such Indemnified Party, if any, in seeking the payment of such insurance
proceeds from the insurer or insurers who insured against such Loss, shall be
deducted from any Claim for indemnification made by such Indemnified Party
against the Company. Payments by an Indemnified Party of amounts for which
such Indemnified Party is indemnified hereunder shall not be a condition
precedent to recovery. If, after payment of any Claim by the Company to an
Indemnified Party, such Indemnified Party receives insurance proceeds on
account of the Loss indemnified by such payment by the Company, such
Indemnified Party shall pay to the Company the lesser of (a) the amount of
the payment on the Claim with respect to such Loss by the Company to the
Indemnified Party and (b) the amount of such insurance proceeds minus the
legal costs and
61
expenses incurred by such Indemnified Party, if any, in seeking the payment
of such insurance proceeds from the insurer or insurers who insured against
such Loss.
8.5 DEFENSE OF CLAIMS.
If a claim for Losses (a "Claim") is to be made by an
Indemnified Party, such Indemnified Party shall give written notice (a "Claim
Notice") to the Company as soon as practicable after such Indemnified Party
becomes aware of any fact, condition or event which may give rise to Losses
for which indemnification may be sought under this Article VIII. If any
lawsuit or enforcement action is filed against any Indemnified Party
hereunder, notice thereof (a "Third Party Notice") shall be given to the
Company as promptly as practicable (and in any event within ten (10) calendar
days after the service of the citation or summons). The failure of any
Indemnified Party to give timely notice hereunder shall not affect rights to
indemnification hereunder, except to the extent that the Company demonstrates
actual damage caused by such failure. After receipt of a Third Party Notice,
if the Company shall acknowledge in writing to the Indemnified Party that the
Company shall be obligated under the terms of its indemnity hereunder in
connection with such lawsuit or action, then the Company shall be entitled,
if it so elects, (a) to take control of the defense and investigation of such
lawsuit or action, (b) to employ and engage attorneys of its own choice to
handle and defend the same, at the Company's cost, risk and expense unless
the named parties to such action or proceeding include both the Company and
the Indemnified Party and the Indemnified Party has been advised in writing
by counsel that there may be one or more legal defenses available to such
Indemnified Party that are different from or additional to those available to
the Company, and (c) to compromise or settle such claim, which compromise or
settlement (i) shall be made and entered into only with the advance written
consent of the Indemnified Party (in its sole discretion) if such compromise
or settlement, in the reasonable judgment of the Indemnified Party, would
cause more than de minimis harm to such Indemnified Party's business
reputation, (ii) may be made and entered into in the sole discretion of the
Company if such compromise or settlement provides for the payment solely of
cash to the claimant in such lawsuit in full satisfaction of such claimant's
claim therein and includes a release of the Indemnified Party to the maximum
extent permitted by law (and would not otherwise, in the reasonable judgment
of such Indemnified Party, cause more than de minimis harm to such
Indemnified Party's business reputation) and (iii) otherwise shall be entered
into only with the advance written consent of the Indemnified Party (such
consent not to be unreasonably withheld). The Indemnified Party shall
cooperate in all reasonable respects with the Company and such attorneys in
the investigation, trial and defense of such lawsuit or action and any appeal
arising therefrom; and the Indemnified Party may, at its own cost,
participate in the investigation, trial and defense of such lawsuit or action
and any appeal arising therefrom and appoint its own counsel therefor, at its
own cost. The parties shall also cooperate with each other in any
notifications to insurers. If the Company fails to assume the defense of
such claim within fifteen (15) calendar days after receipt of the Third Party
Notice, the Indemnified Party against which such claim has been asserted will
(upon delivering notice to such effect to the Company) have the right to
undertake the defense, compromise or settlement of such claim at the
Company's cost and the Company shall have the right to participate therein at
its own cost; provided, however, that such claim shall not be compromised or
settled without the written consent of the Company, which consent shall not
be unreasonably withheld. In the event the
62
Indemnified Party assumes the defense of the claim, the Indemnified Party
will keep the Company reasonably informed of the progress of any such
defense, compromise or settlement. Notwithstanding the foregoing, the
Company shall not be liable for the reasonable fees and expenses of more than
one firm of attorneys at any time for any and all Indemnified Parties (which
firm shall be designated in writing by such Indemnified Party or Parties) in
connection with any one such action or proceeding or multiple actions or
proceedings provided that they are held in the same jurisdiction, arising out
of the same general allegations or circumstances.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
The Company shall be responsible for the payment of all
expenses incurred by the Company in connection with the Transaction,
regardless of whether any portion of the Transaction closes, including,
without limitation, all fees and expenses of the Company's legal counsel and
all third party consultants engaged by the Company to assist in the
Transaction.
9.2 INJUNCTIVE RELIEF.
The parties hereto acknowledge and agree that irreparable damage
would occur in the event any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and shall be
entitled to enforce specifically the provisions of this Agreement in any court
of the United States or any state thereof having jurisdiction, in addition to
any other remedy to which the parties may be entitled under this Agreement or at
law or in equity
9.3 ASSIGNMENT.
Neither this Agreement nor any of the rights or obligations
hereunder may be assigned by the Company without the prior written consent of
the Purchaser, or by the Purchaser without the prior written consent of the
Company, except that the Purchaser may, without such consent, assign, in whole
or in part, the right to acquire the Securities hereunder to a Carlyle
Affiliate. Subject to the foregoing, this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns, and no other person shall have any right, benefit or obligation
hereunder.
9.4 NOTICES.
Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by any party to the other
shall be in writing and delivered by hand-delivery, registered first-class mail,
return receipt requested, facsimile or air courier guaranteeing overnight
delivery, as follows:
If to the Company: InSight Health Services Corp.
63
4400 MacArthur Boulevard, Suite 800
Newport Beach, CA 92660
Facsimile: 714.851.4488
Attn: Chief Financial Officer
With a copy to: McDermott, Will & Emery
2049 Century Park East - 34th Floor
Los Angeles, CA 90067
Facsimile: 310.277.4730
Attn: Mark J. Mihanovic, Esq.
and
Arent, Fox, Kintner, Plotkin & Kahn
1050 Connecticut Avenue, N.W., Suite 600
Washington, D.C. 20036
Facsimile: 202.857.6395
Attn: Gerald P. McCartin, Esq.
If to the Purchaser: c/o The Carlyle Group
1001 Pennsylvania Avenue, N W
Suite 2205
Washington, D.C. 20004
Facsimile: 202.347.9250
Attn: David W. Dupree
64
With a copy to: Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Facsimile: 202.467.0539
Attn: John F. Olson, Esq.
or to such other place and with such other copies as either party may
designate as to itself by written notice to the other. All such notices,
requests, instructions or other documents shall be deemed to have been duly
given at the time delivered by hand, if personally delivered, four (4)
business days after being deposited in the mail, postage prepaid, if mailed,
when receipt is acknowledged by addressee, if by facsimile, or on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
9.5 CHOICE OF LAW; JURISDICTION; VENUE.
This Agreement shall be construed, interpreted and the rights
of the parties determined in accordance with the internal laws of the State
of New York, without regard to the conflict of law principles thereof; except
with respect to matters of law concerning the internal corporate affairs of
any corporate entity which is a party to or the subject of this Agreement,
and as to those matters the law of the jurisdiction under which the
respective entity derives its powers shall govern. The parties irrevocably
elect as the sole judicial forum for the adjudication of any matters arising
under or in connection with this Agreement, the Ancillary Agreements and the
transactions contemplated hereby and thereby, and consent to the jurisdiction
of, the courts of the United States of America for the Southern District of
New York and of the State of New York in Manhattan in connection with the
adjudication of any matter arising under or in connection with this
Agreement, the Ancillary Agreements and the transactions contemplated hereby
and thereby, and waive any and all objections to such jurisdiction or venue
that they may have.
9.6 ENTIRE AGREEMENT.
All Exhibits and Schedules attached to this Agreement by this
reference are incorporated herein as if fully set forth herein. This
Agreement, including all Exhibits and Schedules attached hereto, constitutes
the entire agreement among the parties pertaining to the subject matter
hereof and supersedes all prior agreements, understandings, negotiations and
discussions, whether oral or written, of the parties, including the written
summary of proposed terms between the Company and the Purchaser dated
September 15, 1997. Capitalized terms used in the Exhibits and Schedules but
not defined therein shall have the respective meanings ascribed to such terms
in this Agreement. Any item disclosed in one Schedule shall be deemed to have
been disclosed in all other Schedules.
9.7 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
65
9.8 INVALIDITY.
In the event that any one or more of the provisions contained
in this Agreement or in any other instrument referred to herein shall for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement or any other such instrument.
9.9 HEADINGS; LANGUAGE.
The headings of the Articles and Sections herein are inserted
for convenience of reference only and are not intended to be a part of or to
affect the meaning or interpretation of this Agreement. In this Agreement,
unless the context otherwise requires, the masculine, feminine and neuter
genders and the singular and the plural include one another. Whenever used
in this Agreement: the term "Knowledge," with respect to any Person, means
the actual knowledge of such Person, after reasonable inquiry. For purposes
hereof, a Person shall be deemed to have actual knowledge of the contents of
all books and records with respect to which such Person has reasonable
access. Without limiting the generality of the foregoing, with respect to
any Person that is a corporation, partnership or other business entity,
actual knowledge shall be deemed to include the actual knowledge of all
principal employees of any such Person (which, for purposes of the Company,
shall include without limitation those Persons listed in Exhibit J) as well
as the Chief Executive Officer, President, Chief Financial Officer and all
Vice Presidents in the case of corporate Persons, and general partners in the
case of general or limited partnerships, as the case may be; "receipt by the
Company or any Subsidiary of notice," and similar phrases, means physical
receipt at a location owned, leased or operated by the Company or its
Subsidiaries; "including" means including, without limitation. All
capitalized terms used but not defined in this Agreement have the meaning
given to such terms in the Certificate of Incorporation, or, if not in the
Certificate of Incorporation, in the Amended Bylaws.
9.10 LIMITATION OF LIABILITY.
In no event shall (a) any Carlyle Affiliate, (b) any member or
representative of the Purchaser or of any Carlyle Affiliate or (c) any
direct or indirect member, stockholder, officer, director, limited partner,
employee or any other such person of the Purchaser or any Carlyle Affiliate
(other than a general partner of the entities constituting the Purchaser), be
personally liable for any obligation of the Purchaser under this Agreement.
In no event shall any direct or indirect stockholder, officer, director,
partner, employee or salesperson of the Company or any Subsidiary or any
other such Person be personally liable for any obligation of the Company
under this Agreement.
9.11 AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance of
any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Purchaser, the Company and General Electric Company.
66
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed as of the day and year first
above written.
THE COMPANY:
------------
INSIGHT HEALTH SERVICES CORP.,
a Delaware corporation
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
THE PURCHASER:
--------------
CARLYLE PARTNERS II, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
CARLYLE PARTNERS III, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
CARLYLE INTERNATIONAL PARTNERS II, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
CARLYLE INTERNATIONAL PARTNERS III, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
C/S INTERNATIONAL PARTNERS,
a Cayman Islands general partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
STATE BOARD OF ADMINISTRATION OF FLORIDA,
a separate account maintained pursuant to an
Investment Management Agreement dated as of
September 6, 1996 between the State Board of
Administration of Florida, Carlyle Investment
Group, L.P. and Carlyle Investment Management,
L.L.C.
By: Carlyle Investment Management, L.L.C.,
as Investment Manager
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
2
CARLYLE INVESTMENT GROUP, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
CARLYLE-INSIGHT INTERNATIONAL PARTNERS, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
CARLYLE-INSIGHT PARTNERS, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By
-------------------------------------
Name:
----------------------------------
Title: Managing Director
3