SECURITIES PURCHASE AGREEMENT
BY AND AMONG
ALLIANCE IMAGING, INC.
EMBARCADERO HOLDING CORP. I,
EMBARCADERO HOLDING CORP. II,
AMERICAN SHARED HOSPITAL SERVICES,
AND
MMRI, INC.
DATED AS OF MARCH 12, 1998
SECURITIES PURCHASE AGREEMENT dated as of
March 12, 1998, by and among ALLIANCE IMAGING,
INC., a Delaware corporation ("ALLIANCE"),
EMBARCADERO HOLDING CORP. I, a Delaware
corporation ("PURCHASER A"), EMBARCADERO HOLDING
CORP. II, a Delaware corporation ("PURCHASER B"
AND, TOGETHER WITH PURCHASER A, THE "PURCHASERS"),
AMERICAN SHARED HOSPITAL SERVICES, a California
corporation ("PARENT") and MMRI, INC., a
California corporation ("M SUB").
WHEREAS, each Entity is engaged in the business of providing mobile,
shared diagnostic imaging services to hospitals, medical centers and medical
offices (including magnetic resonance imaging ("MRI") services, computed axial
tomography scanning ("CT") services, ultrasound services, nuclear medicine
services and related services) (collectively, the "BUSINESS");
WHEREAS, the Parent owns all of the issued and outstanding shares of
common stock, par value $1.00, of CT Sub (the "CT SHARES") and the Parent
Partnership Interests;
WHEREAS, M Sub owns the M Sub Partnership Interests;
WHEREAS, the Sellers desire to sell to Alliance, and Alliance desires
to purchase from the Sellers, all of the Shares, on the terms and subject to the
conditions contained in this Agreement; and
WHEREAS, Alliance has designated the Purchasers, each of which is a
wholly-owned Subsidiary of Alliance, to acquire the Shares for and on behalf of
Alliance.
NOW, THEREFORE, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as
follows (certain capitalized terms used herein are defined on ANNEX I hereto):
ARTICLE I
PURCHASE AND SALE
1.1 TRANSFER OF SHARES.
(a) On the terms and subject to the conditions of this Agreement, at
the Closing (after the transactions referenced in SECTION 1.2 have been
consummated), (i) the Parent shall sell, transfer, convey and assign to
Purchaser A, and Purchaser A shall purchase and acquire from the Parent, all of
the Shares (other than the M Sub Partnership Interests), free and clear of all
Encumbrances and (ii) M Sub shall sell, transfer, convey
and assign to Purchaser B and Purchaser B shall purchase and acquire from M
Sub, the M Sub Partnership Interests, free and clear of all Encumbrances. It
is agreed by the parties, that Purchaser A and Purchaser B have been
designated by, and hereto shall purchase the Shares for and on behalf of
Alliance.
(b) The Sellers shall, at any time after the Closing, upon the
request of the Purchasers, take, execute, acknowledge and deliver, and cause to
be taken, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney or assurances as may be
required to transfer, convey, grant and confirm to and vest in the Purchasers,
good and marketable title to all of the Shares, free and clear of all
Encumbrances.
1.2 TRANSFERS OF ASSETS AND LIABILITIES.
(a) Prior to the Closing Date, the Parent and M Sub shall effectively
sell, transfer, convey and assign (the "ASSET CONTRIBUTION") to the Partnership,
(i) all of the Parent's and M Sub's right, title and interest in, to and under
the assets, properties, interests in properties and rights of the Parent or M
Sub, as the case may be, of every kind, nature and description, whether real,
personal or mixed, movable or immovable, tangible or intangible, used in or held
for use in the Business, wherever located and listed on SCHEDULE 1.2(a) hereof
(the "PURCHASED PARENT ASSETS") and (ii) all of the Liabilities (other than any
Excluded Liabilities) related to the Purchased Parent Assets, on terms and
conditions satisfactory to the Purchasers including, without limitation,
pursuant to such deeds, bills of sale, endorsements, assignments and other good
and sufficient instruments of sale, transfer, conveyance and assignment
(collectively, the "CONVEYANCE INSTRUMENTS") as are necessary to sell, transfer,
convey and assign to the Partnership the Purchased Parent Assets and such
Liabilities.
(b) Prior to the Closing Date, (i) the Parent shall cause each of the
Entities to effectively sell, transfer, convey and assign (the "ASSET
DISPOSITION") to the Parent all of such Entities' right, title and interest in,
to and under the assets, properties, interests in properties and rights listed
on SCHEDULE 1.2(b) hereof (the "EXCLUDED ASSETS") and (ii) the Parent shall
assume from each of the Entities all of the Excluded Liabilities which are
Liabilities of each Entity, on terms and conditions satisfactory to the
Purchasers including, without limitation, pursuant to Conveyance Instruments as
are necessary to sell, transfer, convey and assign to the Parent the Excluded
Assets and the Excluded Liabilities.
(c) Anything contained in this Agreement to the contrary
notwithstanding, (i) neither the Purchasers nor Alliance are assuming any
Liabilities (fixed or contingent, known or unknown, matured or unmatured) of the
Sellers or the Entities whether or not relating to the Business which are
specified on SCHEDULE 1.2(c) (the "EXCLUDED LIABILITIES") all of which Excluded
Liabilities shall at and after the Closing become the exclusive responsibility
of the Parent and (ii) on the Closing Date, the Sellers or any of their
Subsidiaries (other than the Entities and GK Finance) shall retain (x) not less
than $600,000 aggregate amount of Liabilities in respect of accounts payable (y)
not less than $175,000 aggregate amount of Liabilities in respect of accrued
expenses (other than
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Liabilities in respect of accrued expenses referenced in SECTION 1.2(c)(z))
and (z) all of the Liabilities in respect of accrued expenses for "accrued
payroll" and "accrued payroll taxes and benefits" outstanding as of the
Closing Date.
1.3 PAYMENT OF THE PURCHASE PRICE.
The aggregate purchase price (the "PURCHASE PRICE") to be paid by
Alliance to the Sellers for the Shares and the covenants set forth in SECTION
5.10 of this Agreement shall be a cash amount equal to $13,552,000. At the
Closing and subject to the terms and conditions of this Agreement and the
Related Documents, Alliance shall cause the Purchasers to make payment of the
Purchase Price (minus $75,000 of the Purchase Price which was previously paid to
the Parent) to the Sellers by wire transfer of immediately available funds to
the accounts previously designated in writing to the Purchasers by the Parent.
1.4 ALLOCATION OF PURCHASE PRICE.
The parties hereto agree that the Purchase Price, subject to any
indemnification payments made hereunder, shall be allocated to the CT Shares and
to the Partnership Interests by the Purchasers on a basis reasonably
satisfactory to the Sellers.
ARTICLE II
THE CLOSING
Unless this Agreement shall have terminated pursuant to its terms, the
closing (the "CLOSING") of the transactions contemplated by this Agreement and
the Related Documents shall take place at the offices of O'Sullivan Graev &
Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112, at 10:00 a.m.
(New York time) on a date that shall be mutually agreeable to the parties hereto
(the "CLOSING DATE"), PROVIDED, HOWEVER, that the parties shall use commercially
reasonable efforts to consummate the Closing, in accordance with SECTION 5.3
hereof, as soon as practicable following the date of the Parent Stockholder
Approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Sellers jointly and severally represent and warrant to the Purchasers
and Alliance as of the date hereof, and as of the Closing Date as follows:
3.1 TITLE TO THE SHARES.
Each of the Sellers is the lawful record and beneficial owner of the Shares
purported to be owned by it and has good and marketable title to such Shares,
free and clear of any Encumbrances whatsoever and with no restriction on the
voting rights and other incidents of record and beneficial ownership pertaining
thereto (except restrictions
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imposed by federal and state securities laws). No Entity is the subject of
any bankruptcy, reorganization or similar proceeding.
3.2 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
(a) CT Sub is a corporation. The Partnership is a general
partnership. The Parent was incorporated on October 31, 1983 in the State of
California. CT Sub was incorporated on May 1, 1984 in the State of Delaware. M
Sub was incorporated on October 8, 1987 in the State of California. The
Partnership was formed on March 7, 1985 in the State of California.
(b) Each Seller and each Entity is duly organized and validly
existing and in good standing under the laws of its jurisdiction of organization
and has all requisite power and authority (corporate and otherwise) to own,
lease and operate its assets and properties and to carry on its business as
presently conducted.
(c) Each Seller and each Entity is duly qualified and in good
standing to transact business as a foreign Person in those jurisdictions set
forth opposite its name on SCHEDULE 3.2(c), which constitute all the
jurisdictions in which the character of the property owned, leased or operated
by such Person or the nature of the business or activities conducted by such
Person makes such qualification necessary other than those jurisdictions in
which the failure to be so qualified and in good standing could not reasonably
be expected to have a Material Adverse Effect.
(d) The Purchasers have been furnished with true, correct and
complete copies of the Organizational Documents of each Entity and each Seller,
in each case as amended and in effect on the date hereof.
(e) No Entity or Seller has (i) during the five year period prior to
the date hereof, engaged in any business other than the Business or as otherwise
set forth opposite its name on SCHEDULE 3.2(e)(i) and (ii) within the last five
years, used any trade names or assumed names other than the trade names or
assumed names set forth opposite its name on SCHEDULE 3.2(e)(ii).
(f) Each Seller has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. Except for the Parent
Stockholder Approval, each Seller's execution and delivery of this Agreement and
each Related Document to which it is or will be a party, and the performance by
each Seller of its obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of such Seller,
and this Agreement and each Related Document to which either Seller is or will
be a party has been, or upon the execution thereof will be, duly and validly
executed and delivered by such Seller, respectively, and constitutes, or upon
its execution and delivery will constitute, a valid and binding obligation of
such Seller, respectively, enforceable against such Seller, respectively, in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
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moratorium or other similar laws affecting creditors' rights generally and by
general principles of equity (regardless of whether enforcement is sought in
equity or at law). Except as set forth on SCHEDULE 3.2(f), none of the
execution and delivery by each Seller of this Agreement and each Related
Document, the performance by either Seller of its obligations under this
Agreement and each Related Document to which it is or will be a party, or the
consummation of the transactions contemplated hereby or thereby, does or will
(a) result in the creation of an Encumbrance upon any Entities' assets or
properties, (b) conflict with, or result in any violation or breach of, any
of the terms, conditions or provisions of, or constitute (with due notice or
lapse of time, or both) a default or give rise to any right of contingent
payment, termination, cancellation, acceleration or non-renewal, under, any
provision of any Organizational Document of any such Person or any Contract
to which any such Person is a party or by which any of its assets or
properties is or may be bound which, in the case of such Contracts, could
reasonably be expected to have a Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby or under the Related
Documents and other than with respect to the foregoing for which consents
have been obtained, or (c) violate any Law applicable to any Entity or
Seller, which conflict or violation could prevent the consummation of the
transactions contemplated by this Agreement or any of the Related Documents
to which any such Person is or will be a party.
(g) Except as contemplated by this Agreement or as set forth on
SCHEDULE 3.2(g), no consent, approval, Permit, Order, notification or
authorization of, or any exemption from or registration, declaration or filing
with, any Governmental Entity or any Person is required in connection with the
execution, delivery and performance by any Seller of this Agreement or any
Related Document to which any Seller is or will be a party or the consummation
by any Seller of the transactions contemplated hereby or thereby, except for
those consents, approvals, Permits, Orders, notifications, authorizations,
exemptions, registrations, declarations or filings the failure to obtain could
not reasonably be expected to have a Material Adverse Effect or prevent the
consummation of the transactions contemplated hereunder or under the Related
Documents or for those consents, approvals, Permits, Orders, notifications,
authorizations, exemptions, registrations, declarations and filings which have
been obtained.
3.3 CAPITALIZATION.
(a) The authorized capital stock of CT Sub consists of 1,000 duly
authorized shares of common stock, par value $1.00 per share, of which 1,000
shares are duly and validly issued and outstanding, fully paid and
nonassessable, with no personal Liability attached to the ownership thereof and
all of which are held of record and beneficially by the Parent.
(b) The Partnership Interests of the Partnership are owned
beneficially and of record in the amounts and by the Persons set forth in
SCHEDULE 3.3(b).
(c) There are no securities outstanding which are convertible into,
exchangeable for, or carrying the right to acquire, Equity Interests of any
Entity, or
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subscriptions, warrants, options, calls, puts, convertible securities,
registration or other rights, arrangements or commitments obligating any
Entity to issue, sell, register, purchase or redeem any of its Equity
Interests or any ownership interest or rights therein. There are no voting
trusts or other similar agreements to which any Entity is bound with respect
to the voting of the any Entity's Equity Interests. There are no stock
appreciation rights, phantom stock rights or similar rights or arrangements
outstanding with respect to any Entity.
(d) Except as set forth on SCHEDULE 3.3(d), there are no Contracts,
commitments, arrangements, understandings or restrictions to which any Seller or
any of its Subsidiaries is bound relating in any way to any Equity Interest of
any Entity, including any rights of first refusal and any rights of first offer.
(e) All Shares issued by each Entity have been issued in transactions
exempt from registration under the Securities Act and the rules and regulations
promulgated thereunder and all applicable state securities or "blue sky" laws,
and no Entity has violated the Securities Act or any applicable state securities
or "blue sky" laws which may give rise to rights of rescission, cancellation or
damages in connection with the issuance of any such securities.
3.4 SUBSIDIARIES; INVESTMENTS.
No Entity owns or holds, directly or indirectly, any Equity Interest in any
Person.
3.5 FINANCIAL INFORMATION.
(a) The Parent has filed with the SEC all reports, forms, schedules
and statements and other documents required to be filed by it (the "SEC
DOCUMENTS"). As of their respective filing dates, (i) the SEC Documents
complied in all material respects with the requirements of the Securities Act,
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and (ii) none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements included in the SEC Documents
complied, as of their respective filing dates, as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of
the SEC and as otherwise noted therein) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present, in all material respects, the consolidated financial position of the
Parent and its Subsidiaries as of the dates thereof and the results of
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). Except as set
forth on SCHEDULE 3.5(a) and except for Liabilities incurred in the ordinary
course of business consistent with past practices since the date of the most
recent consolidated balance sheet included in the SEC Documents filed and
publicly available prior to the date hereof, neither the Parent nor any
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of its Subsidiaries has any Liabilities of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
balance sheet or in the notes thereto.
(b) SCHEDULE 3.5(b) contains true, correct and complete copies of the
unaudited balance sheets of each of the Entities as of December 31, 1997 (the
"LATEST BALANCE SHEET"; and such date being the "LATEST BALANCE SHEET DATE"),
and the unaudited statements of operations, shareholders' equity and cash flows
for the twelve month period then ended, adjusted to give effect to the
consummation of the transactions contemplated by SECTION 1.2 hereof as if such
transactions were consummated at January 1, 1997 prepared in accordance with
GAAP (the "ENTITIES' FINANCIAL STATEMENTS").
(c) Neither of the Sellers has any knowledge of any fact, event or
circumstance that would reasonably cause it to believe that the Entities'
Financial Statements do not fairly present, in all material respects, the
financial position of the Persons referenced therein as of the dates indicated
and the results of operations and cash flows of such Persons for the periods
indicated.
(d) SCHEDULE 3.5(d) sets forth as of January 31, 1998, the Funded
Indebtedness owed by the Parent and each Entity to any third party (separately
identifying the portion of such Funded Indebtedness incurred in respect of each
mobile and each fixed magnetic resonance imaging unit (each, an "MRI UNIT"),
each mobile and each fixed computed axial tomography unit (each, a "CT UNIT"),
each single photon emission computed tomography unit (each a "SPECT UNIT"), each
ultrasound machine (each, an "ULTRASOUND MACHINE"), each respiratory system
(each a "RESPIRATORY SYSTEM"), and each cardiac catherization lab (each a "CATH
LAB" and together with the MRI Units, CT Units, SPECT Units, Ultrasound
Machines, Respiratory Systems, and Cath Labs, the "UNITS") owned, leased or on
order by any Entity and the Parent, if any). As of the date hereof, the sum of
the aggregate commitments of the lenders under the DVI Revolving Credit
Agreement is $5,500,000 and as of the close of business on March 10, 1998,
the aggregate principal amount of loans and obligations outstanding thereunder
is $5,222,484.75.
(e) SCHEDULE 3.5(e) sets forth as of (other than in the case of
clause (iv) below) the date which is 10 Business Days prior to the date hereof,
(i) the specifications of each Unit owned, leased, used or on order by any
Entity or the Parent, (ii) the name of the applicable Entity or the Parent,
whether such Unit is owned, leased, used or on order and, in the case of Units
used but not owned or leased by any such Person, the name of the owner or the
lessee thereof, (iii) the date that such Person purchased, commenced leasing or
using or, in the case of Units on order, has committed to purchase or lease,
such Unit, (iv) the net book value per Unit as of December 31, 1997 or, in the
case of Units on order, the price to be paid to the manufacturer thereof or that
any such Person or any source of financing has committed to pay to the
manufacturer thereof (specifying, if applicable, the price applicable to the
Unit and the price applicable to the coach or van used or to be used to
transport such Unit) and (v) a summary of whether Tax payments in respect of the
lease payments for each Unit are paid at the inception of the relevant lease or
as part of the monthly lease payment.
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(f) SCHEDULE 3.5(f) sets forth (i) the date and cost of each upgrade
completed in the one year period prior to the date hereof to each Unit owned,
leased or used by each Entity or the Parent and (ii) all amounts in excess of an
aggregate of $25,000 that each Entity or the Parent has committed to pay in
respect of any pending upgrade.
(g) SCHEDULE 3.5(g) sets forth a true and correct Schedule of all of
the accounts payable of the Entities (including payee, amount due and due date)
as of the close of business on January 31, 1998.
(h) SCHEDULE 3.5(h) sets forth a true and correct Schedule of (i) all
principal payments or prepayments made by the Parent and each Entity for the
year ended on the Latest Balance Sheet Date and for the one month period ending
January 31, 1998, (ii) the interest expense incurred by the Parent and each
Entity in respect of Funded Indebtedness for the year ended on the Latest
Balance Sheet Date and for the one month period ending January 31, 1998, (iii)
the revenues, cash operating expenses, and EBITDA generated per Unit for the
Parent and each Entity for the year ended on the Latest Balance Sheet Date and
for the one month period ending January 31, 1998 and (iv) the capital
expenditures made by the Parent and each Entity for the year ended on the Latest
Balance Sheet Date, and for the one month period ending January 31, 1998, in
each case, setting forth such information separately for each such Person.
3.6 INFORMATION SUPPLIED
None of the information supplied or to be supplied by the Parent
specifically for inclusion or incorporation by reference in any documents to be
filed by the Parent with the SEC or any other Governmental Entity in connection
with the Parent Stockholder Vote and the other transactions contemplated hereby
and under the Related Documents will, on the date of its filing, or, with
respect to the Proxy Statement, as supplemented if necessary, on the date it is
sent or given to stockholders or at the time of the Parent Stockholder Vote,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; PROVIDED, that no representation or warranty is made by the Sellers
with respect to statements made or incorporated by reference therein based on
information supplied by the Purchasers specifically for inclusion or
incorporation by reference therein. The Proxy Statement and any such other
documents filed by the Parent with the SEC or with any other Governmental Entity
will comply as to form in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
3.7 ABSENCE OF CHANGES.
Since the Latest Balance Sheet Date and on or prior to the date hereof,
except as set forth on SCHEDULE 3.7, the Parent (with respect to the Business)
and each Entity have been operated in the ordinary course, consistent with past
practice, and there has not been:
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(a) any change or event that, individually or in the aggregate with
any other change or event, has had or can reasonably be expected to have a
material adverse effect on the assets, properties, business, financial
condition, results of operations or prospects of the Business (a "Material
Adverse Effect");
(b) any general uniform increase in the salaries or wages of
employees of the Parent or any Entity, or any increase in salaries or wages
payable to any officer, director or employee of any such Person whose total
salary, wages, bonus and commissions for 1997 exceeded $75,000;
(c) any change in the tax or other accounting methods or practices
followed by the Parent or any Entity, any change in depreciation or amortization
policies or rates previously adopted or any write-up of inventory or other
assets;
(d) any delivery of a notice of non-renewal or any failure to renew
any Contract by any hospitals, clinics, medical or healthcare providers, health
maintenance organizations or other customers or third party payors, which are
material, individually or in the aggregate, except that any such event shall not
be deemed material for this purpose to the extent that new or additional
Contracts as replacements thereof have been obtained;
(e) any loss of any employee of the Parent or any Entity who earned,
during 1997, more than $125,000 (in salary, bonus and other cash compensation);
(f) any sale, lease, license or other disposition of any assets with
a book value in excess of $50,000 in the aggregate;
(g) any issuance, sale or transfer of any Equity Interests of any
Entity or issuance or sale of any securities convertible into, exercisable or
exchangeable for or options or warrants to purchase or rights to subscribe for,
any such Equity Interests;
(h) any new Contract (except for any Contract related to any Employee
Benefit Plan of the Parent for which neither Entity has assumed or has any
Liability that is not disclosed hereunder) entered into with aggregate payments
which could exceed $50,000, any incurrence of Funded Indebtedness or operating
leases (other than Funded Indebtedness or operating leases outstanding on the
date hereof and disclosed on any Schedule hereunder) or any amendment, waiver or
modification with respect to the terms of any Funded Indebtedness or operating
leases (including, without limitation, any increase in the commitments to extend
credit thereunder);
(i) a change in any accounting principles or policies;
(j) any material Tax election made or compromise of any material Tax
Liability;
(k) any payments made by the Parent or any Entity to or for the
benefit of GK Finance (other than payments made on behalf of GK Finance and
reimbursed by GK Finance on a basis consistent with past practices and in the
ordinary course of business);
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(l) any amendment to any Organizational Document or Contracts;
(m) any creation or incurrence (whether or not voluntary) of any
Encumbrance other than Permitted Encumbrances and Encumbrances which exist on
the date hereof and which have been disclosed on the Schedules to this
Agreement;
(n) any payments made or deferred in respect of accounts payable or
any expenses in a manner which is not consistent with past practices or is not
in the ordinary course of business; or
(o) any agreement, whether in writing or otherwise, to take any of
the actions specified in the foregoing clauses in this SECTION 3.7.
3.8 TAX MATTERS; CERTAIN DEFINITIONS.
(a) Except as set forth on SCHEDULE 3.8(a), each Entity, each Seller
and every other corporation (a "CONSOLIDATED AFFILIATE") that is or has been
included (or should have been included) in the filing of a consolidated or
combined Tax Return that included any Entity or Seller, (but with respect to a
Consolidated Affiliate, only for the years that such Consolidated Affiliate was
(or should have been included) in such Tax Return (the "YEARS INCLUDED")),
(i) has timely paid or caused to be paid all Taxes required to
be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return filed by such Entity
or Seller);
(ii) has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns required
to be filed by it with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; and
(iii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return
has not since been filed.
(b) The Sellers have previously delivered true, correct and
complete copies of all Tax Returns filed by or on behalf of the Sellers and
each Entity for each of the Tax years of each such Person for which the
applicable statutes of limitation have not, as of the Closing Date, expired.
All such Tax Returns are true, complete and correct.
(c) Except as set forth in SCHEDULE 3.8(c):
(i) no Entity, Seller or Consolidated Affiliate, for the Years
Included, has been notified by the Internal Revenue Service or any other
taxing authority that any issues have been raised, which issues are
currently pending, by the Internal Revenue Service or any other taxing
authority in connection with any Tax Return of any such Person, there are
no pending Tax audits and no waivers of
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statutes of limitation have been given or requested with
respect to any such Person which waivers are currently in effect;
(ii) full and adequate provision has been made (A) on the
Latest Balance Sheet, and the books and records of each Entity and the
Sellers for all Tax Liabilities of such Person for all periods ending on
or prior to the Latest Balance Sheet Date, and (B) on the books and
records of each such Person for all Tax Liabilities of each such Person
for all periods beginning after the Latest Balance Sheet Date;
(iii) no Entity, Seller or Consolidated Affiliate has or
shall incur any Tax Liability from and after the Latest Balance Sheet
Date through the Closing Date other than Taxes attributable to the
transactions described herein or attributable to transactions or other
activities conducted in the ordinary course of business and consistent
with previous years and past practices;
(iv) no Entity or the Sellers is or has (A) made an
election to be treated as a "CONSENTING CORPORATION" under Section
341(f) of the Code or (B) been a "PERSONAL HOLDING COMPANY" within the
meaning of Section 542 of the Code;
(v) each Entity, Seller and Consolidated Affiliate, for the
Years Included, has complied in all respects with all applicable Laws
relating to the collection or withholding of Taxes (such as sales Taxes
or withholding of Taxes from the wages of employees);
(vi) CT Sub is, as of the Closing Date will be, and has been
from October 15, 1987 and through the Closing, a member of the affiliated
group, as defined in Section 1504 of the Code, that included the Parent
(the "CONSOLIDATED GROUP"). CT Sub has been included in all consolidated
Tax Returns filed by the Consolidated Group for all periods during which
CT Sub has been a member of the Consolidated Group including the taxable
year of the Consolidated Group that includes the Closing Date;
(vii) no Entity or the Sellers has incurred any
Liability to make or possibly make any payments either alone or in
conjunction with any other payments, including payments that are made in
connection with transactions contemplated hereunder or under the Related
Documents, that would constitute a "PARACHUTE PAYMENT" within the
meaning of, Section 280G of the Code (or any corresponding provision of
state, local or foreign income Tax Law);
(viii) no Entity has agreed with the Internal Revenue Service
to change its method of accounting and the Internal Revenue Service has
not proposed that any Entity change its method of accounting for any Tax
period;
(ix) no written claim has ever been made by any taxing
authority in a jurisdiction in which any Entity, Seller or Consolidated
Affiliate (for the Years Included) does not file Tax Returns that such
Person is or may be subject to taxation by that jurisdiction; and
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(x) no Entity or the Sellers is a foreign Person
within the meaning of Treas. Reg. Section 1.1445-2(b), and the
Purchasers have been furnished with a true and accurate certificate of
each such Person so stating which complies in all respects with Treas.
Reg. Section 1.1445-2(b)(1).
(d) SCHEDULE 3.8(d) sets forth a list of all of the states and
localities with respect to which each Entity and the Sellers is required
to file or be included in a consolidated or combined filing of any
corporate, income or franchise tax returns during the three taxable
years ended December 31, 1996.
(e) The Partnership, since its date of organization and for
all years and periods thereafter up to the Closing, has been validly
classified as a partnership for Federal, state and local income tax
purposes and subject to the provisions of Subchapter K of the Code, the
Partnership will have a valid Section 754 election in effect as of the
Closing Date.
(f) M Sub has not engaged in any sales, transfers or
dispositions of tangible personal property (other than the sale of the M
Sub Partnership Interests to be sold on the Closing Date) during the
twelve month period ending on the Closing Date.
3.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
(a) Each Entity has (or will have after the consummation of
the Asset Contribution) good and marketable title to all of the assets,
properties and interests in properties, real, personal or mixed,
reflected on its Latest Balance Sheet or acquired after such Latest
Balance Sheet Date (except accounts receivable paid in full subsequent
to the Latest Balance Sheet Date), free and clear of all Encumbrances,
of any kind or character, except for those Encumbrances set forth on
SCHEDULE 3.9 and Permitted Encumbrances. The properties and assets
necessary or required to conduct the Business are in reasonably good
repair and operating condition, ordinary wear and tear excepted and are
sufficient for the conduct of the Business as presently conducted. After
the consummation of the transactions contemplated by SECTION 1.2 hereof,
the Parent and M Sub shall own no assets whatsoever related to the
Business (other than the Excluded Assets) and the Partnership shall
acquire good and marketable title to all of the Purchased Parent Assets.
As of the Closing Date, each of the transactions contemplated by
SECTION 1.2 hereof shall have been consummated in accordance with their
respective terms. Each of SCHEDULE 1.2(a), SCHEDULE 1.2(b) and SCHEDULE
1.2(c) accurately reflects the aggregate balances of each of the assets
and liabilities set forth therein, in each case as of the date hereof.
(b) Except as set forth in SCHEDULE 3.9, the Parent and each
Entity has complied in all material respects with the terms of all
material leases to which it is a party or under which it is in occupancy
relating to the Business, and all such leases are in full force and
effect. The Parent and each Entity enjoy peaceful and undisturbed
possession under all such material leases.
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3.10 REAL PROPERTY-OWNED OR LEASED.
No Entity owns any real property. SCHEDULE 3.10(a) contains a list
and brief description of all of the real property leased by each Entity
pursuant to one or more leases (the "LEASED PROPERTY"), and sets forth
the names of the lessor and the lessee and the basic terms thereof. The
Leased Property constitutes all real property used or occupied by the
Entities in connection with the Business.
3.11 INTELLECTUAL PROPERTY.
(a) Except in each case as set forth on SCHEDULE 3.11(a):
(i) each Entity owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of,
all Intellectual Property Rights necessary or required for the conduct
of the Business (collectively, the "OWNED REQUISITE RIGHTS"), other than
those Intellectual Property Rights for which any Entity has a valid
license, all of which are listed on SCHEDULE 3.11(a) (collectively, the
"LICENSED REQUISITE RIGHTS"; and together with the Owned Requisite
Rights, the "REQUISITE RIGHTS"), and such rights to use, sell, license,
dispose of and bring actions are exclusive with respect to the Owned
Requisite Rights;
(ii) each Entity has taken reasonable and practicable steps
designed to safeguard and maintain (i) the secrecy and confidentiality of
Confidential or Proprietary Information and (ii) the proprietary rights
of each Entity in all of its Requisite Rights;
(iii) no Entity has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property Rights of any Person or committed any acts of unfair
competition, and no Entity has received from any Person in the past five
years any notice, charge, complaint, claim or assertion thereof, and no
such claim is impliedly threatened; and
(iv) no Entity has sent to any Person in the past five
years, or otherwise communicated to any Person, any notice, charge,
complaint, claim or other assertion of any present, impending or
threatened infringement by or misappropriation of, or other conflict
with, any Intellectual Property Rights of any Entity by such other
Person or any acts of unfair competition by such other Person, nor to
the Best Knowledge of the Sellers, is any such infringement,
misappropriation, conflict or act of unfair competition occurring or
threatened.
(b) SCHEDULE 3.11(b) contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to
any Laws by each Entity to perfect or protect its interest in its
Intellectual Property Rights, including, without limitation, all
patents, patent applications, trademarks, trademark applications,
service marks and service mark applications, copyrights and copyright
applications.
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3.12 AGREEMENTS, NO DEFAULTS, ETC.
(a) Except for Contracts relating to any Employee Benefit Plan
listed on SCHEDULE 3.17(a), SCHEDULE 3.12 contains a true and complete
list and brief description of all Contracts, to which each Entity is a
party and (x) which were entered into or made outside the ordinary
course of business, or (y) which were entered into or made in the
ordinary course of business and are described in any of CLAUSES (i)
through (xiv) of this SECTION 3.12(a). Except as set forth on SCHEDULE
3.12, no Entity is a party to any of the following: (i)
distributorship, dealer, sales, advertising, agency, manufacturer's
representative or other Contract relating to the payment of a
commission; (ii) Contract for the employment of any officer, employee or
consultant or any other type of Contract or understanding with any
officer, employee or consultant, including any agreement or
understanding relating to severance payments, but excluding Contracts,
agreements or understandings relating to any Employee Benefit Plan
listed on SCHEDULE 3.17(a); (iii) indenture, mortgage, promissory note,
loan agreement, security agreement, pledge agreement, conditional sale,
guarantee or other Contract for the borrowing of money, for a line of
credit or for a Capital Lease; (iv) Contract for charitable
contributions; (v) Contract for capital expenditures in excess of
$25,000 individually or $100,000 in the aggregate; (vi) Contract or
arrangement for the sale of any assets, properties or rights other than
the sale of services or products in the ordinary course of business;
(vii) lease or other agreement pursuant to which it is a lessee of or
holds or operates any machinery, equipment (including Units), motor
vehicles, office furniture, fixtures, products, merchandise or other
personal property owned by any other Person, with annual lease payments
in excess of $20,000 individually or $50,000 in the aggregate; (viii)
Contract with respect to the lending or investing of funds, other than
with respect to any Employee Benefit Plan listed on SCHEDULE 3.17(a);
(ix) Contract with respect to any form of intangible property, including
any Intellectual Property Rights; (x) Contract which restricts any
Entity from engaging in any aspect of the Business or any other business
anywhere in the world; (xi) Contract or group of related Contracts with
the same Person (excluding purchase orders entered into in the ordinary
course of business which are to be completed within three months of
entering into such purchase orders) for the purchase or sale of products
or services under which the undelivered balance thereof (including the
aggregate undelivered balance under any such Contracts between the same
Person and such Entity) has a selling price or outstanding balance in
excess of $10,000; (xii) agreement for the acquisition or disposition of
a Person or a division of a Person for which either of the Entities
shall have continuing Liabilities after the Closing Date; (xiii)
Contract to provide MRI, CT, ultrasound or nuclear medicine services to
a hospital, clinic or provider; and (xiv) other Contract material to the
Business, including all franchise agreements and license agreements and
all financing agreements related thereto, other than with respect to any
Employee Benefit Plan listed on SCHEDULE 3.17(a). With respect to the
Contracts specified in SECTION 3.12(a)(vii), SCHEDULE 3.12 sets forth
with respect to each such Contract, as of the date hereof, the aggregate
annual rental payments (including interest factor) and the purchase
price payable to terminate such Contract and acquire the underlying
asset. With respect to the Contracts specified in SECTION
3.12(a)(xiii), SCHEDULE 3.12 sets forth the fees, as of the date hereof,
for each scan, study or other service performed thereunder.
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(b) All items listed on SCHEDULE 3.12 are in full force and effect,
constitute legal, valid and binding obligations of the respective parties
thereto, and are enforceable in accordance with their respective terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in equity or at law). Except as set forth on SCHEDULE 3.12, there
exists no default, or any event which upon the giving of notice or the passage
of time, or both, would give rise to a claim of a default in the performance by
any Entity or to the Best Knowledge of the Sellers, any other party to any of
the foregoing of their respective obligations thereunder. The Purchasers have
been furnished with true, complete and correct copies of all items listed on
SCHEDULE 3.12.
3.13 LITIGATION, ETC.
(a) Except as disclosed on SCHEDULE 3.13(a), there are no (i)
Proceedings pending or, to the Best Knowledge of the Sellers, threatened against
any Entity, whether at law or in equity, whether civil or criminal in nature or
whether before or by any Governmental Entity or arbitrator, or (ii) Orders of
any Governmental Entity or arbitrator with respect to, involving or against any
Entity. The Sellers have delivered to the Purchasers, or made available to the
Purchasers, all material documents and correspondence relating to such matters
referred to on SCHEDULE 3.13(a).
(b) SCHEDULE 3.13(b) lists each matter described in SECTION 3.13(a)
that was in existence within the last 3 years that resulted in any criminal
sanctions or payments in excess of $50,000 by any Entity (whether as a result of
a judgment, civil fine, settlement or otherwise).
3.14 COMPLIANCE WITH LAWS.
Each Entity (a) has complied in all respects with, and is in compliance in
all respects with, all Laws, Orders and Permits applicable to it and the
Business, the noncompliance with which could reasonably be expected to have a
Material Adverse Effect and (b) has all material Permits used or necessary in
the conduct of the Business. All of such Permits are listed on SCHEDULE 3.14,
are in full force and effect, no violations with respect to any thereof have
occurred or are or have been recorded, no Proceeding is pending or, to the Best
Knowledge of the Sellers, threatened to revoke or limit any thereof except, in
each case, such of the foregoing as could not reasonably be expected to have a
Material Adverse Effect. No investigation or review by any Governmental Entity
with respect to any Entity is pending or, to the Best Knowledge of the Sellers,
threatened, nor has any Governmental Entity notified any Entity or any Seller of
its intention to conduct the same.
3.15 INSURANCE.
(a) SCHEDULE 3.15(a) contains a true and complete list of all
policies of liability, theft, fidelity, fire, product liability, workmen's
compensation and other forms of insurance held by each Entity and/or by any
Seller for the benefit of any Entity
15
(specifying the insurer, amount of coverage, type of insurance, policy number
and any pending claims thereunder) other than policies relating to any
Employee Benefit Plan.
(b) Except as set forth on SCHEDULE 3.15(b), with respect to each
policy of insurance listed on SCHEDULE 3.15(a): (i) all premiums with respect
thereto are currently paid and are not subject to adjustment, and no Person is
in default in any respect with respect to its obligations under such policy, and
(ii) no Entity has received any notice that such policy has been or shall be
canceled or terminated or will not be renewed on substantially the same terms as
are now in effect or the premium on such policy shall be materially increased on
the renewal thereof.
3.16 LABOR RELATIONS: EMPLOYEES.
(a) SCHEDULE 3.16(a) sets forth a list of all directors, officers and
employees of each Entity and employees of the Parent (solely with respect to the
Business) as of the date hereof whose aggregate compensation exceeded $75,000 in
1997, together with their respective titles, their rate of annual salary,
bonuses and commissions for 1997 and the respective dates on which they
commenced employment. To the extent any such employee is on a leave of absence
as of the date hereof, SCHEDULE 3.16(a) indicates the nature of such leave of
absence and such employee's anticipated date of return to active employment.
Except as set forth on SCHEDULE 3.16(a), no former employee whose aggregate
compensation exceeded $75,000 in 1997 has left the service of any Entity or the
Parent within the last 6 months. The schedule of employees of the Parent and
the Entities previously provided to the Purchasers by the Parent (which sets
forth the Person (as among the Parent and the Entities) which employs each such
employee) was true and correct as of the date provided and none of such
employees who are currently employees of Parent or the Entities has become
employed by any other Person (as among Parent and the Entities) since such date.
(b) As of the date hereof, except as set forth on SCHEDULE 3.16(b):
(i) there is no labor strike or work stoppage actually pending against any
Entity or the Parent; (ii) no Entity or the Parent is a party to or bound by any
collective bargaining agreement or union contract; (iii) no such agreement is
currently being negotiated by any Entity or the Parent and (iv) no Entity or the
Parent has received a request for recognition from any labor organization or any
notice that a petition for election with respect to such Person has been filed
with the National Labor Relations Board.
3.17 ERISA COMPLIANCE.
(A) SCHEDULE 3.17(a) contains a true, complete and correct list of
all existing Employee Benefit Plans (collectively, the "EMPLOYEE PLANS") (i)
that cover any employees, contract employees or former employees of any Entity
or any spouses, family members or beneficiaries thereof (A) that are maintained,
sponsored or contributed to by any Entity or (B) with respect to which any
Entity is obligated to contribute or has any Liability, or (ii) with respect to
which any Entity has any Liability on account of the maintenance or sponsorship
thereof or contribution thereto by any present or former ERISA Affiliate of any
Entity.
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(b) ADMINISTRATION AND COMPLIANCE. Except as set forth on SCHEDULE
3.17(b), with respect to each Employee Plan:
(i) such Employee Plan has been established, maintained,
operated and administered in all material respects in accordance with
its terms and in compliance in all material respects with ERISA, the
Code, and other applicable Laws (including with respect to reporting and
disclosure);
(ii) all amounts withheld pursuant to such Employee
Plan from employees have, where applicable, been timely deposited into
the appropriate trust or account;
(iii) no Entity or any ERISA Affiliate of either
Entity has breached the fiduciary rules of ERISA or engaged in a
prohibited transaction that could subject either Entity to any Tax or
penalty imposed under Section 4975 of the Code or Section 502(i), (j) or
(l) of ERISA in excess of $50,000;
(iv) as of the date hereof, no Proceedings (other than
routine claims for benefits or administrative appeals with respect
thereto) are pending against such Employee Plan;
(v) such Employee Plan, if intended to be "QUALIFIED",
within the meaning of Section 401(a) of the Code, has been determined by
the Internal Revenue Service to be so qualified to the extent addressed
in the most recent favorable determination letter, and nothing has
occurred that has or could reasonably be expected to adversely affect
such qualification;
(vi) except as may be required under Laws of general
application, such Employee Plan does not obligate any Entity to provide
any employee or former employee, or their spouses, family members or
beneficiaries, any post-employment or post-retirement health or life
insurance, accident or other "WELFARE-TYPE" benefits;
(vii) if such Employee Plan is a "GROUP HEALTH PLAN"
within the meaning of Section 5000 of the Code, such Employee Plan has
been maintained in compliance with Section 4980B of the Code and Title
I, Subtitle B, Part 6 of ERISA so that no Tax imposed under Section
4980B of the Code has been or is expected to be incurred by either
Entity in excess of $50,000;
(viii) all reporting and disclosure obligations imposed
under ERISA and the Code have been satisfied in all material respects
and no IRS Form 5500 has been filed late (after consideration of any
applicable extension) for any of the three most recently ended plan
years; and
(ix) without limiting SECTION 3.8(c), no benefit
payable or which becomes payable by any Entity pursuant to such Employee
Plan shall constitute an "excess parachute payment," within the meaning
of Section 280G of the Code, which is or may be subject to the
imposition of an excise Tax under Section 4999
17
of the Code or which will not be deductible by reason of Section 280G of
the Code.
(c) Since 1988, no Entity and no ERISA Affiliate of any Entity
is or has ever maintained or been obligated to contribute to a
"multiemployer plan" as defined in Section 3(37) of ERISA, a "multiple
employer plan," as defined in Section 413 of the Code, or a "defined
benefit pension plan," as defined in Section 3(35) of ERISA;
(d) With respect to each Employee Plan, as of the date hereof,
the Purchasers have been provided with true and complete copies, to the
extent applicable, of each plan and trust document governing the terms
of such Employee Plan, the two most recent annual reports (Form 5500 and
attachments) and financial statements prepared therefor, the most recent
favorable determination letter issued to Parent or either Entity (and
pending requests therefor), and each of the foregoing documents
accurately reflects the terms of such Employee Plan in effect at the
time such document was prepared (including, without limitation, any
agreement or provision which would limit the ability of any Entity to
make any prospective amendments or terminate such Employee Plan).
3.18 CERTAIN ADDITIONAL REGULATORY MATTERS.
(a) None of the Sellers, the Entities or any officer, director
or managing employee of the Sellers or the Entities (within the meaning
of 42 U.S.C. (Section 1320a-5(b)) have engaged in any activities which
constitute violations of, or are cause for imposition of civil penalties
upon any Entity or mandatory or permissive exclusion of any Entity from
Medicare or Medicaid, under (S) 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 constitute violations of or
deficiencies under the standards of any private accrediting organization
from which any Entity is accredited or seeks accreditation, including
the following activities:
(i) 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;
(ii) 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;
(iii) knowingly and willfully 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 where the Person presenting knows or should
know that the claim is false or fraudulent;
(iv) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly,
18
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
(iii) 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 part by CHAMPUS, Medicare or Medicaid or any other State Health
Care Program or any Federal Health Care Program; or
(v) 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) of 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 (S) 1124(A) of the Social
Security Act ("SSA") (42 U.S.C. (S) 1320a-3).
(b) Each Entity has a Medicare provider number, and a
participating provider agreement in force with a Medicare Part B
carrier, in each locale, as applicable, in which such Entity bills
directly to Medicare for services furnished by such Entity.
(c) Each Entity has a Medicaid number and a participating
provider agreement in each state, as applicable, in which such Entity
bills directly to such states' Medicaid agency for services provided by
such Entity.
3.19 MEDICARE/MEDICAID PARTICIPATION.
None of the Sellers, the Entities, or any officer, director, or
managing employee (as defined in SSA (S) 1126(b) or any regulations
promulgated thereunder) of the Sellers or the Entities: (1) has had a
civil monetary penalty assessed against him, her or it under (S) 1128A
of the SSA or any regulations promulgated thereunder; (2) has been
excluded from participation under the Medicare program or a state health
care program as defined in SSA (S) 1128(h) or any regulations
promulgated thereunder ("STATE HEALTH CARE PROGRAM") or a federal health
care program as defined in SSA (S) 1128B(f) ("FEDERAL HEALTH CARE
PROGRAM"); or (3) has been convicted (as that term is defined in 42
C.F.R. (S) 1001.2) of any of the following categories of offenses as
described in SSA (S) 1128(a) and (b)(1), (2), (3) or any regulations
promulgated thereunder:
(i) criminal offenses relating to the delivery of an item or
service under Medicare or any State Health Care Program or any Federal
Health Care Program;
(ii) 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;
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(iii) 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;
(iv) federal or state laws relating to the interference with or
obstruction of any investigation into any criminal offense; or
(v) criminal offenses under federal or state law relating to the
unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
3.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth on SCHEDULE 3.20(a), each Entity is in
material compliance with all applicable Environmental, Health and Safety
Laws. Each Entity has all of the Permits, licenses, authorizations,
registrations and approvals from Governmental Entities necessary to
operate the Business, and all such Permits, licenses, authorizations,
registrations and approvals are valid and in effect
(b) Except as set forth on SCHEDULE 3.20(b), there are no
pending or, to the knowledge of the Sellers, threatened claims by any
Governmental Entity concerning or alleging a violation of any
Environmental Health and Safety Law by any Entity, nor are any pending
or, to the knowledge of the Sellers, threatened claims under any
Environmental Health and Safety Laws concerning any property or facility
previously owned, leased or operated by any Seller or Entity or
predecessor of any Seller or Entity.
(c) Except as set forth on SCHEDULE 3.20(c), no Entity
presently is the subject of any ongoing administrative or judicial
proceeding or investigation brought by any Governmental Entity under any
Environmental, Health or Safety Law including, without limitation, any
voluntary clean-up program or any Proceeding under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA," also
known as "SUPERFUND") or any state counterparts to CERCLA, nor is any
Entity obligated to remediate, monitor, investigate, conduct corrective
action or report on environmental, health and safety matters concerning
the Business pursuant to any order, agreement, decree or mediation or
arbitration proceeding.
(d) Except as set forth on SCHEDULE 3.20(d), in the five years
preceding the date hereof, no Entity has received any written notice,
report or other written information (i) regarding any actual or alleged
violation of any Environmental, Health and Safety Laws, or (ii) that any
Entity is potentially responsible under any Environmental, Health and
Safety Laws for response costs, corrective action or natural resource
damages, as those terms are defined under any Environmental, Health and
Safety Laws.
(e) Except as set forth on SCHEDULE 3.20(e), Sellers are not aware of
impending changes in Environmental Health or Safety Laws which could reasonably
be
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expected to materialize before the one year anniversary of the
Closing Date and which could result in a Material Adverse Effect.
(f) Sellers have provided to the Purchasers copies of, or
access for purposes of review to, all documents, reports, studies or
other non-legally privileged information concerning environmental, heath
or safety matters relating to the Business which are in the possession
of Sellers. The information prepared or originated by the Sellers or
the Entities and provided to the Purchasers is true and correct.
3.21 BROKERS.
No Seller or Entity has employed any broker or finder or incurred
any Liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated hereby for which any
Purchaser or Alliance may have Liability after the Closing.
3.22 RELATED TRANSACTIONS.
Except as set forth on SCHEDULE 3.22 or on SCHEDULES 3.17 (a) OR
(b) and except for compensation to bona-fide employees of any Entity for
services rendered in the ordinary course of business, no Affiliate of
any Entity or any "associate" (as defined in the rules promulgated under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"))
thereof, is now (i) party to any transaction or Contract with any Entity
providing for the furnishing of services by, or rental of real or
personal property from, or otherwise requiring payments to, any such
Affiliate or associate, or (ii) the direct or indirect owner of a
controlling interest in any Person which is a present or potential
competitor, supplier or customer of any Entity (other than nonaffiliated
holdings in publicly held companies). Except as set forth on SCHEDULE
3.22, no Entity is a guarantor or otherwise liable for any actual or
potential Liability of its Affiliates and their associates (other than
with respect to any Entity, the other Entity). Except as set forth on
SCHEDULE 3.22, no Entity owns or pays for any social club memberships,
whether or not for the benefit of any Entity and/or its executives.
3.23 BANK ACCOUNTS; POWERS OF ATTORNEY.
SCHEDULE 3.23 sets forth a true and complete list of (i) all bank
accounts and safe deposit boxes of each Seller and Entity and all
Persons who are signatories thereunder or who have access thereto and
(ii) the names of all persons, firms, associations, corporations or
business organizations holding general or special powers of attorney
from any Seller or Entity and a summary of the terms thereof.
3.24 VOTING.
The affirmative vote of a majority of the outstanding shares (the
"PARENT STOCKHOLDER APPROVAL") of the Parent's common stock, par value
$0.01 per share (the "PARENT COMMON STOCK") is the only vote of the
holders of any class or series of the Parent's capital stock which is
necessary to approve this Agreement and the transactions contemplated
hereby.
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3.25 OPINION OF FINANCIAL ADVISOR.
The Board of Directors of the Parent has received the oral opinion
of Paine Webber Incorporated to the effect that, as of the date hereof,
the consideration to be received in respect of Shares pursuant to this
Agreement is fair from a financial point of view to the Parent.
3.26 PHYSICIAN RELATIONSHIPS.
(a) Except as set forth in SCHEDULE 3.26 the Entities do not
have any "financial relationship" with any "referring physician" or an
immediate family member of such physician, within those terms' meanings
under 42 U.S.C. Section 1395nn.
(b) To the Best Knowledge of each of the Sellers, no
"referring physician" (within the meaning of 42 U.S.C. Section 1395nn)
owns any securities of the Sellers.
3.27 OTHER HOSPITAL RELATIONSHIPS.
Except as set forth in SCHEDULE 3.27 other than with respect to reading
radiologists, the Entities do not have any lease or other arrangement with any
hospital or other entity whereby the Entities pay the hospital or other entity
rent or any other fee the amount of which is dependent in whole or in part on
the gross or net revenues, net income, or cash flow of any segment of the
business of the Entities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants, severally as to itself, as of the
date hereof and as of the Closing Date as follows:
4.1 ORGANIZATION; CORPORATE AUTHORITY.
Such Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation and has
all requisite power and authority (corporate or otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted and as presently proposed to be conducted. Such Purchaser is duly
qualified and in good standing to transact business as a foreign Person in those
jurisdictions set forth on SCHEDULE 4.1, which, as of the date hereof,
constitute all the jurisdictions in which the character of the property owned,
leased or operated by such Purchaser or the nature of the business or activities
conducted by such Purchaser makes such qualification necessary.
4.2 CORPORATE ACTION; AUTHORITY; NO CONFLICT.
Such Purchaser has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions
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contemplated hereby and thereby. The execution, delivery and
performance by such Purchaser of this Agreement and each Related
Document to which it is or will be a party, and performance of its
obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action on the part of such
Purchaser. This Agreement and each Related Document to which it is or
will be a party has been or upon the execution thereof will be, duly and
validly executed and delivered by such Purchaser, and constitutes, or
upon its execution and delivery will constitute, a valid and binding
obligation of such Purchaser, enforceable against it in accordance with
its terms except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting creditors' rights generally and by general principles of
equity (regardless of whether enforcement is sought in equity or at
law). Neither such Purchaser's execution and delivery of, and/or
performance of its obligations under, this Agreement and each Related
Document to which it is or will be a party, nor the consummation of the
transactions contemplated hereby and thereby shall (i) conflict with or
result in any violation or breach of, any of the terms, conditions or
provisions of, or constitute (with due notice or lapse of time, or both)
a default under, or give rise to any right of termination, cancellation
or acceleration or result in the creation of any Encumbrance upon any of
the assets or properties of such Purchaser under provision of such
Purchaser's Organizational Documents or any Contract to which such
Purchaser is a party (other than security documents relating to
financing arrangements existing for the benefit of the Purchasers'
Affiliates) or bywhich it or any of its assets or properties is or may
be bound which, in the case of such Contracts, would reasonably be
expected to have a material adverse effect on any Purchaser or prevent
the consummation of the transactions contemplated hereby or under the
Related Documents and other than with respect to the foregoing for which
consents have been obtained or (ii) violate, or result in the creation
of an Encumbrance upon any of such Purchaser's assets as a result of,
any Law's applicable to such Purchaser or any of its properties or
assets, in each case, which would prohibit the such Purchaser from
consummating the transactions contemplated hereby.
4.3 BROKERS.
Such Purchaser has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any Seller may have any
Liability after the Closing.
4.4 CONSENTS.
Except as contemplated by this Agreement or as set forth on SCHEDULE 4.4,
and the Related Documents, no consent, approval, Order or authorization of, or
registration, declaration or filing with or notification to, any Governmental
Entity or any third party is required in connection with the execution, delivery
and performance by such Purchaser of this Agreement or the Related Documents to
which such Purchaser is or will be a party or the consummation of the
transactions contemplated hereby or thereby except for those consents,
approvals, Orders, authorizations, registrations, declarations, filings or
notifications the failure to obtain could not reasonably be expected to have a
material
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adverse effect on such Purchaser or except for those consents,
approvals, Orders, authorizations, registrations, declarations or
filings which have been obtained.
4.5 INVESTMENT REPRESENTATIONS.
Each of the Purchasers are acquiring the Shares to be purchased by
it, for its own account, for investment and not with a view to the
distribution thereof in violation of the Securities Act.
4.6 INFORMATION SUPPLIED.
None of the written information supplied or to be supplied by any
Purchaser specifically for inclusion or incorporation by reference in
the Proxy Statement, as supplemented if necessary, and any other
documents to be filed by the Parent with the SEC or any Governmental
Entity in connection with the transactions contemplated hereby will, on
the date of its filing or, with respect to the Proxy Statement, as
supplemented if necessary, on the date it is sent or given to
stockholders or at the time of the Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
Alliance represents and warrants, as to itself, as of the date hereof
and as of the Closing Date as follows:
5.1 ORGANIZATION; CORPORATE AUTHORITY.
Alliance is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its assets and properties and to carry on its business as presently conducted
and as presently proposed to be conducted.
5.2 CORPORATE ACTION; AUTHORITY; NO CONFLICT.
Alliance has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this
Agreement and each Related Document to which it is or will be a party
and to consummate the transactions contemplated hereby and thereby. The
execution, delivery and performance by Alliance of this Agreement and
each Related Document to which it is or will be a party, and performance
of its obligations hereunder and thereunder have been duly and validly
authorized by all necessary corporate action on the part of Alliance.
This Agreement and each Related Document to which Alliance is or will be
a party has been or upon the execution thereof will be, duly and validly
executed and delivered by it, and constitutes, or upon its execution and
delivery will constitute, a valid and binding obligation of it,
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enforceable against it in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law). Neither Alliance's
execution and delivery of, and/or performance of its obligations under,
this Agreement and each Related Document to which it is or will be a
party, nor the consummation of the transactions contemplated hereby and
thereby shall (i) conflict with or result in any violation or breach of,
any of the terms, conditions or provisions of, or constitute (with due
notice or lapse of time, or both) a default under, or give rise to any
right of termination, cancellation or acceleration or result in the
creation of any Encumbrance upon any of the assets or properties of
Alliance under provision of its Organizational Documents or any Contract
to which it is a party or by which it or any of its assets or properties
is or may be bound which, in the case of such Contracts, would
reasonably be expected to have a material adverse effect on it or
prevent the consummaton of the transactions contemplated hereby or under
the Related Documents and other than with respect to the foregoing for
which consents have been obtained or (ii) violate, or result in the
creation of an Encumbrance upon any of its assets as a result of, any
Law's applicable to it or any of its properties or assets, in each case,
which would prohibit it from consummating the transactions contemplated
hereby.
5.3 DESIGNATION OF PURCHASERS.
Alliance has duly designated the Purchasers to acquire the Shares
hereunder, and will cause the Purchasers to perform each and every obligation
undertaken by them herein.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 ACCESS TO RECORDS AND PROPERTIES OF THE ENTITIES.
From and after the date hereof until the Closing, the Sellers shall, and
shall cause each Entity to afford, (i) to the Purchasers, their respective
lenders and Affiliates and each of their respective authorized representatives,
including accountants, consultants and attorneys, free and full access at all
reasonable times to the assets, business, facilities, properties, books, records
(including tax returns filed and in preparation), customers, consultants, and
employees of or relating to each Entity and the Parent in order that the
Purchasers have full opportunity to make such investigation as they shall
reasonably desire to make of the affairs of each Entity and the Parent and in
order that the Purchasers may integrate the Business into the business currently
being conducted by the Purchasers' Affiliates, and (ii) to the respective
independent certified public accountants of the Purchasers, free and full access
at all reasonable times to the records of the independent certified public
accountants of each Entity and the Parent. The Sellers shall cause their
employees to actively cooperate and assist Purchasers and such other Persons in
effecting such integration. From and after the date hereof until the Closing,
(i) the Sellers shall provide to the Purchasers promptly but in any event no
later than the 25th day after the
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last day of each calendar month, a copy of the consolidated and
consolidating balance sheets, statements of operations, shareholders
equity and cash flows of the Parent and its Subsidiaries for each such
calendar month, together with a copy of the Parent's "white book" and
"blue book" (and any supporting information with respect thereto), and
(ii) such other information regarding the Parent and its Subsidiaries as
may be reasonably requested by the Purchasers. The investigation
contemplated by this SECTION 5.1 shall not affect or otherwise diminish
or obviate in any respect any of the representations and warranties or
the indemnification obligations contained in this Agreement.
6.2 CONDUCT PENDING CLOSING.
From and after the date hereof until the earlier of the Closing or
the termination of this Agreement pursuant to ARTICLE 8, each of the
Sellers shall, and shall cause each Entity to (unless otherwise
consented to in writing by the Purchasers):
(a) not sell, lease, license or otherwise dispose of any
assets with a book value in excess of $50,000 in the aggregate;
(b) not issue, sell or in any way transfer any Equity
Interests of the Entities or issue or sell any securities convertible
into, exercisable or exchangeable for or options or warrants to purchase
or rights to subscribe for, any such Equity Interests;
(c) not change the number of authorized shares of the Equity
Interests of the Entities or reclassify, combine, split, subdivide or
redeem or otherwise repurchase any of such Equity Interests, or issue,
deliver, pledge or encumber any additional Equity Interests of the
Entities or other securities equivalent to, or exchangeable for, Equity
Interests of the Entities or enter into any Contract to do any of the
foregoing;
(d) not incur or issue any securities evidencing any Funded
Indebtedness or enter into any operating leases (other than Funded
Indebtedness of a Seller for which no Entity (or its assets) is liable
or obligated (whether contractually, by applicable Law, as a guarantor
or through the incurrence or grant of any Encumbrances), Funded
Indebtedness related to money advanced from Sellers or GK Finance to an
Entity on a basis consistent with past practice and in the ordinary
course of business, provided that the amounts so advanced are repaid
prior to the Closing Date, Funded Indebtedness or operating leases
outstanding on the date hereof and disclosed on any Schedules
hereunder), or amend, modify or agree to a waiver of the terms of any
Funded Indebtedness or operating leases (including, without limitation
increasing any commitments to extend credit thereunder);
(e) not enter into any Contract with aggregate payments which
could exceed $50,000 (except for any Contract related to any Employee
Benefit Plan of the Parent or any Subsidiary other than the Entities,
and for which Contract neither Entity assumes or has any Liability not
disclosed hereunder) or any Contract in respect of the rental of any
Unit;
(f) not enter into any employment agreement, or in any manner
change the Person (as among the Parent and the Entities) which is the
employer of the employees of the Parent and the Entities from the Person
disclosed on the schedule referenced in the
26
last sentence of SECTION 3.16(a) as such employee's employer, or
terminate the employment of any employees in a manner which is
inconsistent with past practices or policies, or except as required by
applicable Law, effect any increase in the rate or terms of compensation
payable or to become payable to officers or employees of any Entity or
the Parent (solely as relating to the Business) other than increases in
compensation under Employee Benefit Plans which are available to all
employees generally;
(g) not create or suffer to exist any Encumbrance on any of its
assets or properties other than Permitted Encumbrances, Encumbrances on Equity
Interests or assets of GK Finance or any assets of Subsidiaries of the Parent
other than the Entities, and Encumbrances which exist on the date hereof and
which have been disclosed on the Schedules to this Agreement;
(h) not change its tax or accounting principles, policies or
practices, change any depreciation or amortization policies or rates previously
adopted or write-up inventory or any other assets;
(i) not make any material Tax election or compromise any material Tax
Liability;
(j) not make any payments to or for the benefit of GK Finance (other
than payments made on behalf of GK Finance and reimbursed by GK Finance on a
basis consistent with past practices and in the ordinary course of business);
(k) not amend any of its Organizational Documents or any Contracts
(other than Contracts related to any Employee Plan);
(l) not enter into any transaction other than in the ordinary course
of business, or any transaction which is not at arms-length with unaffiliated
third Persons;
(m) not take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the Related
Documents being untrue on the Closing Date, other than such action as shall have
been previously agreed to in writing by the parties hereto;
(n) not make any material change in the manner in which such Person
extends discounts or credits to customers or any material change in the manner
or terms by which such Person collects its accounts receivable or otherwise
deals with customers;
(o) not agree or otherwise commit to take any of the actions set
forth above;
(p) promptly provide the Purchasers with at least five Business Days
notice of (i) the terms and conditions with respect to renewals of any existing
Contracts to be renewed by the Entities, (ii) any intention to not renew any
existing Contracts and (iii) the actual nonrenewal of any existing Contract;
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(q) conduct its business substantially as presently conducted and
only in the ordinary course consistent with past practice;
(r) use commercially reasonable efforts to (i) maintain its business,
assets, relations with present employees, customers, suppliers, partners,
licensees and operations as an ongoing business and preserve its goodwill, in
accordance with past custom and practice and (ii) to satisfy each of the closing
conditions to be satisfied by it set forth in ARTICLE 6 hereof; and
(s) pay and continue to defer all accounts payable and all expenses
in a manner which is consistent with past practices and in the ordinary course
of business.
6.3 EFFORTS TO CONSUMMATE.
Subject to the terms and conditions of this Agreement, each party shall use
commercially reasonable efforts to take or cause to be taken all actions and do
or cause to be done all things required under all applicable Laws, in order to
consummate the transactions contemplated hereby.
6.4 NO SOLICITATION.
(a) The Parent shall, shall cause M Sub and each Entity to and shall
direct and cause its and each such Person's officers, directors, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties (other than the Purchasers and Alliance) that may be ongoing
with respect to an Alternative Transaction. The Parent shall not, shall cause M
Sub and each Entity not to and shall not authorize or permit any of its or any
such Person's officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative representing any
such Person to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal that may lead to an
Alternative Transaction or (ii) participate in any discussions or negotiations
regarding any proposed Alternative Transaction; PROVIDED, HOWEVER, that if, at
any time prior to the Closing Date, the Board of Directors of the Parent
determines in good faith, based on written advice from outside counsel, that
action is required by reason of such Board of Directors' fiduciary duties to the
Parent's stockholders under applicable law, the Parent may (subject to
compliance with SECTION 5.4(c)), in response to an unsolicited Third Party
Proposal, (A) furnish information with respect to the Parent and the Entities to
the Person making such Third Party Proposal pursuant to a confidentiality
agreement that is at least as protective of the Parent's and its Subsidiaries'
interests as is the Confidentiality Agreement and (B) participate in
negotiations regarding such a Third Party Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any director, officer or employee of the Parent, M Sub
or any Entity or any investment banker, financial advisor, attorney, accountant
or other representative acting on behalf of any such Person shall be deemed to
be a breach of this SECTION 5.4(a).
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(b) Neither the Board of Directors of the Parent nor any committee
thereof shall (i) withdraw or modify the approval or recommendation by such
Board of Directors or such committee of this Agreement, the Related Documents or
any of the transactions contemplated hereby or thereby, (ii) approve or
recommend any Alternative Transaction or (iii) cause or permit the Parent, M Sub
or any Entity to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement (an "ACQUISITION AGREEMENT") with
respect to an Alternative Transaction unless the Board of Directors of the
Parent shall have previously terminated this Agreement pursuant to SECTION
8.1(f).
(c) In addition to the obligations of the Parent set forth in
paragraphs (a) and (b) of this SECTION 5.4, the Parent shall immediately advise
the Purchasers orally and in writing of any request for information or of any
proposal or any inquiry regarding any Alternative Transaction, the material
terms and conditions of such request, proposal or inquiry and the identity of
the Person making such request, proposal or inquiry. The Parent will keep the
Purchasers fully informed of the status and details (including amendments or
proposed amendments) of any such request, proposal or inquiry.
(d) Nothing contained in this SECTION 5.4 shall prohibit the Parent
from at any time taking and disclosing to its stockholders a position
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
from making any disclosure to the Parent's stockholders, in each case with
respect to any Third Party Proposal, if the Parent shall have provided the
Purchasers with as much advance notice of its position and proposed disclosure
as is possible under the circumstances; PROVIDED, HOWEVER, that neither the
Parent nor its Board of Directors nor any Committee thereof shall, except as
permitted by SECTION 5.4(b), withdraw or modify, or propose to withdraw or
modify, its position with respect to this Agreement, the Related Documents or
any of the transactions contemplated hereby or thereby or approve or recommend,
or propose to approve or recommend, an Alternative Transaction.
6.5 CONFIDENTIALITY.
The Sellers and the Purchasers agree that, through and including the
Closing Date, they shall comply with that certain letter agreement relating to
matters of confidentiality dated as of July 24, 1997 (as amended, modified or
supplemented, the "CONFIDENTIALITY AGREEMENT").
6.6 NOTICE OF PROSPECTIVE BREACH.
Each party shall immediately notify the other parties in writing upon the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause any representation or warranty of such
party that is contained in this Agreement or any Related Document to be untrue
or inaccurate in any material respect at any time from the date of this
Agreement to the Closing.
6.7 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (i) as otherwise required by Law or Order
and (ii) for disclosure to its respective directors, officers, employees,
financial advisors, potential
29
financing sources, legal counsel, independent certified public
accountants or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential
relationship, it will not issue any reports, statements or releases, in
each case pertaining to this Agreement or any Related Document to which
it is a party or the transactions contemplated hereby or thereby,
without consulting in advance with the other parties hereto.
6.8 COOPERATION REGARDING TAX FILINGS; SECTION 338(h)(10).
(a) After the Closing, the Purchasers and the Sellers shall
act in good faith and cooperate with one another for the purpose of
filing all Tax Returns and reports required to be filed by any of them.
Parent shall join Purchaser A in a timely election pursuant to Section
338(h)(10) of the Code (and under any comparable provision of any state
or local law) with respect to the CT Shares (the "338(h)(10) ELECTION").
The parties hereto recognize that the 338(h)(10) Election will result
in the purchase of the CT Shares hereunder being treated as a sale of
assets by CT Sub for Federal income Tax purposes and for applicable
state and local tax purposes and that any Tax Liability arising with
respect to the 338(h)(10) Election (other than a Liability for Transfer
Taxes described in SECTION 9.14) shall be deemed a Covered Tax. None of
the parties hereto shall make any Tax Return or other filing that is
inconsistent with the foregoing.
(b) The Purchasers shall be responsible for the preparation
and filing of all 338(h)(10) Election forms and the Sellers shall
execute and deliver to Purchasers such documents as are reasonably
requested to properly complete such forms at least twenty (20) days
prior to the date such 338(h)(10) Election is required to be filed. The
Sellers agree that the Purchasers shall be entitled to determine the
allocation of the Modified Aggregate Deemed Sales Price (as defined in
the treasury regulations promulgated under Section 338 of the Code)
among the assets of CT Sub in their sole discretion, and in accordance
with Section 338 of the Code and the regulations thereunder (including
the allocation of any adjustment to the Modified Aggregate Deemed Sales
Price by reason of any purchase price adjustment or indemnification
payment under this Agreement), and shall notify the Sellers of such
determination as soon as possible after making such determination. The
Purchasers and the Sellers agree to act in accordance with any such
allocation in all relevant Tax Returns and filings.
(c) Parent shall cause to be prepared and cause to be timely
filed all consolidated, combined or unitary federal, state, local or
foreign Tax Returns required to be filed with respect to Parent for all
taxable periods ending before or including the Closing Date and shall
include CT Sub in all such returns in which it is eligible to be
included. The Purchasers agree to cooperate with Parent and its
Affiliates in the preparation of the portions of such Tax Returns
pertaining to CT Sub. The Parent shall permit the Purchasers to review
and comment on the portion of all Tax Returns prepared by Parent
pursuant to this SECTION 5.8(c) pertaining to CT Sub, or the Partnership
prior to the filing of such Tax Returns. Parent shall cause to be
timely paid all Taxes to which such Tax Returns relate for all periods
covered by such Tax Returns.
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(d) The extent to which Taxes of CT Sub and the Partnership for a
taxable period that includes but does not end on the Closing Date are treated as
Taxes for the period ending on or prior to the Closing Date shall be determined
for all purposes, including for purposes of calculating Covered Taxes, as
follows: (i) Taxes measured in whole or in part by net or gross income and Taxes
relating to specific transactions shall be apportioned on the basis of a closing
of the books of the Entity liable for such Tax at the close of business on the
Closing Date; provided, however, that all transactions not in the ordinary
course of business and not contemplated in this Agreement that occur on the
Closing Date after Purchaser A's purchase of the CT Shares shall be reported on
Purchaser A's federal income tax return to the extent permitted by Treas. Reg.
Section 1502-76(b((1)(3); and (ii) all other Taxes shall be prorated according
to the ratio of the number of days in such taxable period prior to and including
the Closing Date to the number of days in such taxable period.
(e) The Sellers shall cause to be prepared all required federal,
state, local and foreign Tax Returns of CT Sub and the Partnership for any
period which ends on or before the Closing Date, for which Tax Returns have not
been filed as of the Closing Date (other than Tax Returns to be filed by Parent
pursuant to SECTION 5.8(c)). The Purchasers shall cause to be prepared and
cause to be timely filed all required federal, state, local and foreign Tax
Returns of CT Sub and the Partnership (other than Tax Returns to be filed by
Parent pursuant to SECTION 5.8(c)) for taxable periods beginning before and
ending after the Closing Date. The Sellers and Purchasers agree to cooperate
with each other in the preparation of such Tax Returns. The Purchasers shall
permit Sellers to review and comment on all Tax Returns prepared by the
Purchasers pursuant to this SECTION 5.8(e) and such Tax Returns shall be subject
to the prior approval of the Sellers which approval shall not be unreasonably
withheld. The Sellers shall permit the Purchasers to review and comment on all
Tax Returns prepared by the Sellers pursuant to this SECTION 5.8(e). Prior to
the date such Tax Returns are due, the Parent will provide the Purchasers with
amounts equal to the Covered Taxes, as shown on the Tax Returns to be filed
under this SECTION 5.8(e), after taking into account any Tax or estimated Tax
paid with respect to such Covered Taxes prior to the Closing Date. Promptly
after receipt by the Purchasers of the amounts in respect of the Covered Taxes
from the Parent, the Purchasers will cause the applicable Tax Returns prepared
by the Seller to be filed.
(f) Parent shall be entitled to any refund of Taxes paid by or with
respect to CT Sub that is attributable to taxable periods ending on or prior to
the Closing Date, and the Purchasers shall cause CT Sub to pay over to Parent
any such refunds (net of any Tax Liability attributable thereto and any expenses
incurred in the collection of such refund) within fifteen (15) days after
receipt thereof. If the amount of such refund that is paid over by Parent is
subsequently reduced by a Governmental Entity, Parent shall pay to Purchasers an
amount necessary to reflect such adjustment.
(g) The Parent shall not file any claim for a refund or credit, or an
amended return claiming a refund or credit, after the Closing Date, for any Tax
paid by CT Sub without the prior written consent of the Purchasers, which
consent shall not be unreasonably withheld.
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(h) Each of the Purchasers and the Sellers shall promptly notify the
other party upon receipt of a notice of any pending or threatened Tax audit or
assessment (a "TAX CLAIM") that may affect the Tax Liabilities of CT Sub, or the
Partnership and for which any Seller would be liable under this Agreement;
PROVIDED, HOWEVER, that no delay on the part of either party in so notifying the
other party shall relieve the other party from any liability or obligation
hereunder (unless, and then solely to the extent) that the other party is
materially and irrevocably prejudiced by such delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Tax
Claim.
(i) If the Sellers shall acknowledge in a writing delivered to the
Purchasers that such Tax Claim is properly subject to their indemnification
obligations hereunder and the Sellers shall have the financial resources to meet
such indemnification obligations, then subject to the further provisions of this
SECTION 5.8(i), the Sellers shall have the right to assume the defense of such
Tax Claim at their own expense and by their own counsel and other advisers,
which counsel and other advisors shall be reasonably satisfactory to the
Purchasers; provided, however, that the Sellers shall not have the right to
assume the defense of any Tax Claim, notwithstanding the giving of such written
acknowledgment, if the Sellers shall not have assumed the defense of such Tax
Claim in a timely fashion. Notwithstanding anything to the contrary contained
herein, if a Tax Claim involves, or could have a material effect on any material
matter beyond the scope of the indemnification obligations of the Sellers, the
Sellers and Purchasers shall jointly assume the defense of such Tax Claim at
their own expense. If the Sellers exercise their right to assume the defense of
a Tax Claim pursuant to and in accordance with this SECTION 5.8(i), (i) the
Purchasers shall be entitled to participate in such defense with their own
counsel and other advisors at their own expense, (ii) the Purchasers will
reasonably cooperate with the Sellers and their counsel and advisors in the
defense of such Tax Claim, and (iii) the Sellers shall not make any settlement
of such Tax Claim without the written consent of the Purchasers, which consent
shall not be unreasonably withheld, provided that consent may be withheld if any
Losses to be incurred by the Purchasers pursuant to such settlement are not
indemnified pursuant to the indemnification provisions set forth in ARTICLE VII
hereunder.
(j) If the Sellers shall assume the defense of a Tax Claim pursuant
to and in accordance with SECTION 5.8(i), the Sellers shall not be responsible
for any legal or other defense costs subsequently incurred by the Purchasers in
connection with the defense thereof. If the Sellers do not exercise their right
to assume the defense of a Tax Claim or are otherwise restricted from doing so
pursuant to SECTION 5.8(i), the Sellers shall nevertheless be entitled to
participate in such defense with their own counsel and other advisors at their
own expense. If the defense of a Tax Claim is retained by the Purchasers, the
Purchasers shall not be entitled to settle such Tax Claim without the prior
written consent of the Sellers, which consent shall not be unreasonably
withheld.
(k) After the Closing Date, the Sellers and the Purchasers shall make
available to the other, as reasonably requested, all information, records or
documents relating to Tax Liabilities or potential Tax Liabilities of CT Sub or
the Partnership for all periods ending on or prior to the Closing Date, and
shall preserve all such information,
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records and documents until the expiration of any applicable statute of
limitations or extensions thereof.
(l) All Tax Returns which are required to be prepared by Sellers
pursuant to SECTIONS 5.8(c) AND (e) shall be prepared and filed in a manner
consistent with past practice and applicable Law and, on such Tax Returns, no
position shall be taken, elections made or method adopted that is inconsistent
with positions taken, elections made or methods used in preparing and filing
similar Tax Returns in prior periods.
6.9 EXCHANGE PROCEEDS.
If, between the date hereof and the Closing, any Entity or any Seller
receives any proceeds in consideration for the exchange of any of its assets
(solely, in the case of the Parent as it relates to the Purchased Parent
Assets), whether from the sale of any such assets, from insurance proceeds
payable on account of any loss or casualty to such assets, any proceeds from the
taking of such assets pursuant to the power of eminent domain, or any other
proceeds from whatever source relating to the disposition of such assets (the
"EXCHANGE PROCEEDS"), the Sellers shall immediately notify the Purchasers of the
receipt of such Exchange Proceeds and shall consult with the Purchasers with
respect to the application of any such Exchange Proceeds. The Sellers shall
ensure that any Exchange Proceeds received by any Entity shall either be used to
purchase replacement assets or shall be retained by the applicable Entity.
6.10 NON-COMPETE; NON-SOLICITATION.
(a) During the Non-Compete Period, the Parent shall not, and cause
its Affiliates not to, directly or indirectly, own, manage, control, participate
in, consult with, render services for, or in any manner engage in or represent
any business within any Restricted Territory that is competitive with the
Business or any product or services of the Business as such Business is
conducted or proposed to be conducted from and after the Closing Date; PROVIDED,
HOWEVER, that nothing herein shall be deemed to prevent the Parent or any of its
Affiliates from engaging in any activities presently conducted or proposed to be
conducted by GK Finance or from providing any imaging modality as part of its
"Operating Room of the Twenty First Century" business.
(b) During the Non-Compete Period, none of the Parent nor any
Affiliate shall directly or indirectly through another Person (i) induce or
attempt to induce any employee of any Purchaser or any Affiliate of such
Purchaser to leave the employ of such Purchaser or such Affiliate or in any way
interfere with the relationship between such Purchaser or any such Affiliate, on
the one hand, and any employee thereof, on the other hand, or (ii) induce or
attempt to induce any customer, supplier, licensee or other business relation of
any Purchaser or any Affiliate of such Purchaser to cease doing business with
such Person or in any way interfere with the relationship between any such
customer, supplier, licensee or business relation, on the one hand, and such
Person, on the other hand.
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(c) If, at the time of enforcement of this SECTION 5.10, a
court holds that the restrictions stated herein are unreasonable under
the circumstances then existing, the parties agree that the maximum
period, scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area. The parties
hereto acknowledge that money damages would be an inadequate remedy for
any breach of this SECTION 5.10. Therefore, in the event of a breach or
threatened breach of this SECTION 5.10, the Purchasers or their
successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction
for specific performance and/or injunctive or other relief in order to
enforce, or prevent any violations of, the provisions of this SECTION
5.10.
6.11 CERTAIN TAX MATTERS.
From the date hereof until the Closing Date, (i) the Parent shall
and shall cause each Entity to file all tax returns and reports
("POST-SIGNING RETURNS") required to be filed in a manner consistent
with past practices; (ii) the Parent shall and shall cause each Entity
to timely pay all Taxes shown as due and payable on the Post-Signing
Returns; (iii) the Parent shall and shall cause each Entity to make
provision for all Taxes payable for which no Post-Signing Return is due
prior to the Closing Date; (iv) the Parent shall allow the Purchasers an
opportunity to review and comment on any Post-Signing Return prior to
the due date of such Post-Signing Return; and (v) the Parent will
promptly notify the Purchasers of any action, suit, proceeding, claim or
audit pending against or with respect to the Parent or any Entity in
respect of any Tax where there is a possibility of a determination or
decision which could have an adverse effect on the Parent's or any
Entity's Tax Liabilities or Tax attributes.
6.12 ADVICE OF CHANGES; FILINGS.
The Parent shall confer with the Purchasers on a regular and
frequent basis as reasonably requested by the Purchasers, report on
operational matters and promptly advise the Purchasers orally and, if
requested by the Purchasers, in writing of any change with respect to
the Parent or any Entity. The Parent shall promptly provide to the
Purchasers (or their counsel) copies of all filings made by the Parent
or any Entity with any Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(a) The Parent will, as soon as practicable following the date
hereof, duly call, give notice of, convene and hold a meeting of its
stockholders (the "STOCKHOLDERS MEETING") for the purpose of obtaining
the approval of this Agreement, the Related Documents, and the
transactions contemplated hereby and thereby. The Parent will, through
its Board of Directors, recommend to its stockholders that the Parent
Stockholder Approval be given.
(b) The Parent will, as soon as practicable following the date
hereof, prepare and file a preliminary proxy or information statement
(as amended, modified or supplemented, the "PROXY STATEMENT") with the
SEC and will use its best efforts to respond to any comments of the SEC
or its staff and to cause the Proxy Statement to be
34
mailed to its stockholders as promptly as practicable after responding
to all such comments to the satisfaction of the SEC staff. The Proxy
Statement shall contain the written opinion of Paine Webber
Incorporated, opining as to the matters set forth in SECTION 3.25. The
Parent will afford the Purchasers opportunity to review and comment upon
any description of the Purchasers or their Affiliates, this Agreement,
the Related Documents or the transactions contemplated hereby and
thereby set forth in the Proxy Statement (including all drafts or
amendments thereto). Each Purchaser shall provide the Parent with all
necessary information reasonably requested with respect to itself and
Alliance solely for inclusion by the Parent in the Proxy Statement. The
Parent will notify the Purchasers promptly of the receipt of any
comments from the SEC or its staff and of any request by the SEC or its
staff for amendments or supplements to the Proxy Statement or for
additional information and will supply the Purchasers with copies of all
correspondence between the Parent or any of its representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to
the Proxy Statement. If at any time prior to the Stockholders Meeting
there shall occur any event that should be set forth in an amendment or
supplement to the Proxy Statement, the Parent will promptly prepare and
mail to its stockholders such an amendment or supplement.
6.13 MAINTENANCE OF CASH AND CASH EQUIVALENTS.
During the period commencing on the Closing Date and ending on April 15,
1999, the Parent shall at all times hold cash or Cash Equivalents of not less
than $1,000,000 in the aggregate in an investment account at a financial
institution reasonably satisfactory to the Purchasers which shall not be subject
to any Encumbrance other than Permitted Encumbrances. During such period, the
Parent shall provide copies of all notices or reports delivered to it in respect
of such account to the Purchasers within 5 Business Days of the receipt thereof.
6.14 FURTHER ASSURANCES.
The Sellers shall and shall cause the Entities to take such further actions
or execute such further documents or instruments as shall be reasonably
requested by the Purchasers to further implement the transactions contemplated
by SECTION 1.2 including, without limitation, discharging or disposing of any
Excluded Liability which may be a Liability of any Entity on terms reasonably
satisfactory to the Purchasers.
6.15 AUDITED FINANCIAL STATEMENTS.
The Parent shall, and shall cause each of its Subsidiaries to, provide
the Purchasers and their advisors with such information (including, without
limitation, consolidating balance sheets and statements of operations as at
December 31, 1997 and for the fiscal year then ended; such consolidating
financial statements to incorporate the Entities in such form as presented in
SCHEDULE 3.5(b) as well as individual columns for each of GK Finance, Parent and
each other Subsidiary of the Parent, in each case, as adjusted to give effect to
the transactions contemplated by SECTION 1.2 hereof), and access to its books
and records (including, without limitation, access to its management employees),
to permit them or their advisors to prepare audited balance sheets of the
35
Entities as of December 31, 1997, and related audited statements of
operations, shareholders' equity and cash flows for the period then
ended, in each case in accordance with GAAP and adjusted to give effect
to the consummation of the transactions contemplated by SECTION 1.2 as
if such transactions were consummated at January 1, 1997.
6.16 DVI FUNDED INDEBTEDNESS.
At the request of the Purchasers, on the Closing Date, the Parent
shall and shall cause its Subsidiaries to repay all Funded Indebtedness
held by DVI Financial Services, Inc. and DVI Business Credit Receivables
Corp. ("DVI") under agreements relating to Funded Indebtedness provided
by DVI to the Parent and its Subsidiaries upon payment by the Purchasers
in full of all amounts due on the Closing Date to DVI in respect of
principal, accrued interest thereon and prepayment premiums not to
exceed $75,000 in the aggregate. On the Closing Date, Parent shall
deliver all instruments and documents reasonably requested by the
Purchasers to evidence the repayment in full of such Funded Indebtedness
including reasonably satisfactory pay-off letters, releases of
Encumbrances, releases of pledges of Equity Interests and UCC-3
financing statements.
6.17 TRANSFER OF PARENT PARTNERSHIP INTERESTS.
Upon the request of the Purchasers, the Parent shall, on or
immediately prior to the Closing Date, assign the Parent Partnership
Interests to a newly organized wholly-owned corporate Subsidiary (which
shall conduct no business whatsoever) and shall cause such Subsidiary to
assign the Parent Partnership Interests to Purchaser A in accordance
with SECTION 1.1 hereof.
6.18 CERTAIN EMPLOYEE MATTERS.
(a) On the Closing Date, the Purchasers shall or shall cause
the Entities or an Affiliate of the Purchasers, to continue the
employment of or offer employment, as applicable, to the employees of
the Entities and Parent to be identified by the Purchasers prior to the
Closing Date in accordance with the terms of a letter, dated of even
date herewith, delivered by Purchaser A to the Parent (any such
employees who so continue or accept such offer of employment being
referred to herein as the "HIRED EMPLOYEES"). Such employment shall be
in a substantially similar position as such Hired Employee held while
employed by the applicable Entity or Parent prior to the Closing, and
the Purchasers shall have no Liability or obligation to any other
employees of the Parent or any of its Subsidiaries (other than the
Entities as set forth herein). Prior to the Closing, Parent and the
Entities shall take such actions and, after the Closing Date, Parent and
the Purchasers shall take, and the Purchasers shall cause the Entities
to take, such actions as are necessary so that each Hired Employee shall
cease to be entitled to participate in or accrue benefits under any of
Parent's Employee Benefit Plans, programs, policies and arrangements
except to the extent required by applicable Law. The Purchasers shall,
or shall cause the Entities or an Affiliate of the Purchasers, to take
such actions as may be necessary such that, subject to the provisions of
this SECTION 5.18, on and after the Closing Date, each Hired Employee
shall be eligible to participate in, and be subject to
36
the provisions of, the Employee Benefit Plans (including a 401(k) plan
and a flexible benefits plan), programs, personnel policies and
guidelines sponsored or maintained by Alliance, and applicable for
employees of Alliance or its Affiliates in a similar position, subject
to the satisfaction of all the eligibility criteria for participation
thereunder (except as otherwise provided in this SECTION 5.18).
(b) With respect to the Alliance Employee Benefit Plans,
programs, personnel policies and guidelines, Alliance shall grant all
Hired Employees from and after the Closing Date credit for all service
with the Entities and Parent prior to the Closing Date for all purposes.
Alliance shall take such actions as are necessary to provide that on
the Closing Date all Hired Employees and their spouses and dependents
shall be immediately covered by the group health plan maintained by
Alliance which shall (i) provide immediate coverage as of the Closing
Date without any waiting period, (ii) waive any pre-existing condition
exclusions or limitations, and (iii) provide that any amounts paid by
Hired Employees through the Closing Date for medical expenses that are
treated as deductible, co-insurance and out-of-pocket payments under the
Parent's health plan shall reduce the amount of any deductible,
co-insurance or out-of-pocket payments required to be paid for a similar
period under the Alliance health plan; provided, however, that the
Sellers shall provide Alliance with a list of all current and former
employees participating in the Parent's health plan along with a listing
of each employee's deductible and co-insurance payments through the
Closing Date.
(c) Effective as of the Closing, the Purchasers shall assume
the Parent's or Entities' obligations with respect to accrued sick pay,
personal holidays and vacation pay for Hired Employees, provided that
the vacation pay costs as of the Latest Balance Sheet Date have been
accrued and reflected on the Latest Balance Sheet.
(d) (dm) Parent shall take such actions as are necessary to
provide that the Hired Employees are fully vested in their benefits
under the Retirement Plan for Employees of Parent and CT Sub (the "ASHS
401(k) PLAN"). Parent shall also take such actions as are necessary to
provide that the Hired Employees will be eligible to receive
distributions from the ASHS 401(k) Plan that will be eligible for
rollover to the Alliance "401(k)" plan. The Purchasers shall take such
action as is necessary after the Closing Date to provide that the
Alliance "401(k)" plan will allow rollovers of distributions from the
ASHS 401(k) Plan.
(e) After the Closing Date, the Purchasers and the Sellers
agree to take such actions as are necessary to provide for the transfer
of the account balances of the flexible spending accounts of each Hired
Employee from Parent's "Section 125" plan to the Alliance "Section 125"
plan and the Purchasers shall provide for the reimbursement from the
Alliance "Section 125" plan of medical and childcare expenses incurred
by Hired Employees during 1998.
(f) After the Closing Date, the Purchasers shall be
responsible for providing health care continuation coverage pursuant to
the requirements of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), to the extent required by COBRA, for all
former employees of the Entities and/or their
37
"qualified beneficiaries" (as such term is defined in Part 6 of Title I
of ERISA) who were receiving health care continuation coverage under
COBRA prior to the Closing Date or who are or become eligible to receive
such coverage on or after the Closing Date. As of the date hereof,
there were 2 former employees of the Entities and/or their "qualified
beneficiaries" who were receiving health care continuation coverage
under COBRA and 8 former employees who experienced a "qualifying event"
under COBRA.
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each party to consummate the transactions
contemplated hereby is subject to the satisfaction prior to the Closing Date of
the following conditions unless waived (to the extent such conditions can be
waived) by the Parent (on behalf of the Sellers) or the Purchasers and Alliance,
as applicable:
(a) APPROVALS. The authorizations, consents, Orders or approvals of,
or declarations or filings with, or expiration of waiting periods of any
Governmental Entity required to consummate the transactions contemplated hereby
shall have been obtained or made.
(b) STOCKHOLDER APPROVAL. The Parent Stockholder Approval shall have
been obtained.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(d) ACTIONS AND STATUTES. No Proceeding shall have been taken or
threatened, and no Law or Order shall have been enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement or the
Related Documents by any Governmental Entity that could (i) make the
consummation of the transactions contemplated hereby or thereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby or thereby or (ii) render any party unable to consummate the
transactions contemplated hereby or thereby.
7.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS AND ALLIANCE.
The obligations of the Purchasers and Alliance under this Agreement are
subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Purchasers and Alliance:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties made by the Sellers in this Agreement and the Related Documents
shall be
38
true and correct, individually or in the aggregate, in all material
respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, or "Material
Adverse Effect" which representations and warranties as so qualified
shall be true and correct, individually or in the aggregate, in all
respects) as of the date hereof and as of the Closing Date (unless such
representations and warranties relate to a specific date other than the
Closing Date, in which case such representations and warranties shall be
true and correct, individually or in the aggregate, in all material
respects, or in all respects, as the case may be, on such date) with the
same effect as if such representations and warranties had been made at
and as of the Closing Date (including, after giving effect to the
transactions contemplated by SECTION 1.2).
(b) PERFORMANCE OF OBLIGATIONS OF THE SELLERS. The Sellers
shall have performed in all material respects all obligations,
agreements and covenants required to be performed by them under this
Agreement and the Related Documents prior to or as of the Closing Date.
(c) CERTIFICATES. At the Closing, in consideration of the
delivery of the Purchase Price pursuant to SECTION 1.3 hereof, (a) the
Parent shall deliver or cause to be delivered to Purchaser A, the
certificates representing the Shares (other than the M Sub Partnership
Interests) and the Parent shall deliver or cause to be delivered to
Purchaser B, a certificate representing the M Sub Partnership Interests,
in each case, duly endorsed in blank for transfer or accompanied by
stock and partnership transfer powers duly executed in blank, sufficient
in form and substance to convey to each Purchaser good and marketable
title to all of the Shares purchased by such Purchaser, free and clear
of all Encumbrances.
(d) CONSENTS AND APPROVALS. The Purchasers shall have
received duly executed copies of all consents and approvals required for
or in connection with the execution and delivery by the Sellers of this
Agreement and each of the Related Documents to which any of them may be
parties (including, without limitation, the assumption of any Funded
Indebtedness and any consents or approvals necessary to be obtained in
connection with the transactions contemplated by SECTION 9.4(b)), the
consummation of the transactions contemplated hereby and thereby, and
the continued conduct of the Business as previously conducted
(including, without limitation, the transfer of any necessary regulatory
Permits currently in the name of the Parent or any Subsidiary other than
the Entities), in form and substance reasonably satisfactory to the
Purchasers and their counsel. The Sellers shall obtain all Permits
required to conduct the Business which have not been obtained on or
prior to the date hereof in the name of the Entities. The Parent shall
cause each of the Encumbrances designated to be terminated on or prior
to the Closing Date on SCHEDULE 3.9 to be so terminated on or prior to
the Closing Date (unless such Encumbrances cease to be effective under
applicable Law).
(e) ASSET CONTRIBUTION AND ASSET DISPOSITION. The Asset
Contribution, Asset Disposition and the other transactions contemplated
by SECTION 1.2 shall each be consummated in accordance with SECTION 1.2
hereof.
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(f) ABSENCE OF MATERIAL ADVERSE EFFECT. Since the Latest
Balance Sheet Date, there shall have been no change in respect of the
Business that has had or is reasonably likely to have a Material Adverse
Effect.
(g) RELATED DOCUMENTS. Each of the agreements attached hereto
as EXHIBIT A-1 and EXHIBIT A-2, respectively (each as amended, modified
or supplemented, a "RELATED DOCUMENT" or a "STOCKHOLDER AGREEMENT")
shall have been executed and delivered by the parties thereto and the
transactions contemplated thereby to be completed at or prior to the
Closing substantially consummated or effected, as the case may be, in
accordance with the terms thereof.
(h) PARTNERSHIP AGREEMENT AMENDMENT. The Partnership
Agreement shall be amended and restated in its entirety by the Sellers
on such terms and conditions as shall be satisfactory to the Sellers and
the Purchasers.
(i) SELLERS' CERTIFICATES. Each of the following certificates
shall have been executed and delivered, as the case may be, by the
Person who or which is the subject thereof:
(i) a certificate of the Sellers, dated as of the
Closing Date, certifying, in each case, (i) that true and complete
copies of the Organizational Documents of each Entity and the Sellers as
in effect on the Closing Date are attached thereto, (ii) as to the
incumbency and genuineness of the signatures of each officer of such
Seller executing this Agreement and the Related Documents, (iii) the
genuineness of the resolutions (attached thereto) of the board of
directors of the Sellers authorizing the execution, delivery and
performance of this Agreement and the Related Documents to which the
Sellers are a party and the consummation of the transactions
contemplated hereby and thereby and (iv) the genuineness of the
resolutions (attached thereto) of the management committee or similar
governing body of each Entity authorizing such Entity to consent to the
transactions contemplated by this Agreement;
(ii) certificates of the secretaries of state of the
states (or other applicable office) in which each Seller and each Entity
is organized and qualified to do business, dated as of a date not more
than five days prior to the Closing Date, certifying as to the good
standing and non-delinquent tax status of such Seller and Entity;
(iii) a certificate signed by the principal executive
officer of each Seller, dated as of the Closing Date, and certifying as
to (A) the accuracy of the representations and warranties of the Sellers
contained herein, as contemplated by SECTION 6.2(a) hereof, and (B) the
performance of the obligations, covenants and agreements of the Sellers
contained herein, as contemplated in SECTION 6.2(b) hereof; and
40
(iv) a certificate of the Sellers dated as of the
Closing Date, certifying that no Entity is a foreign person within the
meaning of Section 1445 of the Code.
(j) RESIGNATION OF OFFICERS AND DIRECTORS. The Purchasers
shall have received letters from all of the officers and directors of
the Entities, resigning their respective positions as officers and
directors of such Entities, respectively, immediately upon the Closing.
(k) OFFICER'S CERTIFICATE. The Purchasers shall have received
a certificate of a duly authorized officer of the Parent certifying as
to the matters set forth in SECTION 6.2(e).
7.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers under this Agreement are subject to
the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Sellers:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made by Alliance and the Purchasers in
this Agreement and the Related Documents shall be true and correct,
individually or in the aggregate, in all material respects (except for
such representations and warranties which are qualified by their terms
by a reference to materiality, or "Material Adverse Effect" which
representations and warranties as so qualified shall be true and
correct, individually or in the aggregate, in all respects) as of the
date hereof and at and as of the Closing Date (unless such
representations and warranties relate to a specific date other than the
Closing Date, in which case, such representations and warranties shall
be true and correct, individually or in the aggregate, in all material
respects, or in all respects, as the case may be, on such date) with
the same effect as if such representations and warranties had been made
at and as of the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF THE PURCHASERS AND ALLIANCE.
Alliance and the Purchasers shall have performed in all material
respects all obligations, agreements and covenants required to be
performed by them under this Agreement and the Related Documents prior
to or as of the Closing Date.
(c) CERTIFICATES. Each of the following certificates shall
have been executed and delivered, as the case may be, by the Person who
or which is the subject thereof:
(i) a certificate of the secretary of Alliance and
each Purchaser, dated as of the Closing Date, certifying, in each case,
(i) that true and complete copies of its Organizational Documents as in
effect on the Closing Date are attached thereto, (ii) as to the
incumbency and genuineness of the signatures of each officer of Alliance
and such Purchaser executing this Agreement and the Related Documents,
and (iii) the genuineness of the resolutions (attached thereto) of the
board of directors of Alliance and such Purchaser (or committee thereof)
41
authorizing the execution, delivery and performance of this Agreement
and the Related Documents to which Alliance or such Purchaser is a party
and the consummation of the transactions contemplated hereby and thereby;
(ii) certificates of the secretaries of state of the
states in which Alliance and each of the Purchasers is organized, dated
a date not more than five days prior to the Closing Date as of the
Closing Date, certifying as to the good standing and non-delinquent tax
status of Alliance and the Purchasers; and
(iii) a certificate signed by a principal executive
officer of Alliance and each Purchaser, dated as of the Closing Date,
and certifying as to (A) the accuracy of the representations and
warranties of Alliance and such Purchaser contained herein, as
contemplated by SECTION 6.3(a) hereof and (B) the performance of the
obligations, agreements and covenants of Alliance and such Purchaser
contained herein, as contemplated in SECTION 6.3(b) hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION GENERALLY; ETC.
(a) Subject to the further terms of this ARTICLE 7, the
Sellers agree, jointly and severally, to indemnify the Purchaser
Indemnified Persons for, and hold them harmless from and against, any
and all Purchaser Losses arising from or in connection with any of the
following:
(i) the untruth, inaccuracy or breach of any
representation or warranty (without regard to whether such
representation or warranty is qualified by reference to materiality or
"Material Adverse Effect") of the Sellers contained herein, in any
Related Document, or in any certificate delivered by any Seller relating
thereto delivered in connection herewith (or any facts or circumstances
constituting any such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of the Sellers
contained in this Agreement or in any Related Document;
(iii) any Liability of any Entity in any manner related to a
claim asserted under the Agreement for Purchase and Sale of Assets, dated
as of December 30, 1994 among Vencor, Inc., CT Sub and Parent;
(iv) for any Liability with respect to Covered Taxes
and for 50% of any Liability with respect to all transfer, documentary,
sales, use, stamp, registration and other such Taxes and fees ("TRANSFER
TAXES") with respect to the transactions contemplated by SECTION 1.2; and
(v) any Liability of any Entity for Taxes attributable to
the inclusion of an adjustment in taxable income of an Entity under
Section 481 of the
42
Code for any Tax period beginning on or after the Closing Date as a
result of a required or optional change in method of accounting with
respect to a Tax period ending on or prior to the Closing Date.
(b) Subject to the further terms of this ARTICLE 7, each of
Alliance and the Purchasers agree jointly and severally to indemnify the
Seller Indemnified Persons for, and hold them harmless from and against,
any and all Seller Losses arising from or in connection with any of the
following:
(i) the untruth, inaccuracy or breach of any representation
or warranty (without regard to whether such representation or warranty
is qualified by reference to materiality or "Material Adverse Effect")
of Alliance or such Purchaser contained herein, any Related Document, or
any certificate delivered by Alliance or such Purchaser in connection
herewith at or before the Closing (or any facts or circumstances
constituting any such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of Alliance or
either Purchaser contained in this Agreement or in any Related Document;
(iii) any failure to comply after the Closing Date
with the Worker Adjustment and Retraining Act of 1988, as amended, or
any similar state law arising out of, or relating to, any actions taken
by Alliance or the Purchasers with respect to Hired Employees after the
Closing Date; and
(iv) any Liability for Transfer Taxes to be borne by
Purchasers or Alliance pursuant to SECTION 9.14.
(c) Notwithstanding the foregoing the Purchasers shall not be
entitled to indemnification hereunder for any Losses arising as a result
of the untruth or inaccuracy of any representation or warranty to the
extent that a Liability arising as a result of such untruth or
inaccuracy is reflected as a Liability in the financial statements
delivered on the date hereof pursuant to SECTION 3.5 hereof.
(d) Absent fraud, the rights of the parties for
indemnification relating to this Agreement and the transactions
contemplated hereby and under the Related Documents shall be strictly
limited to those contained in this ARTICLE VII, and such indemnification
rights shall be the exclusive remedies of the parties subsequent to the
Closing Date with respect to any matter relating to this Agreement or
arising in connection herewith.
8.2 ASSERTION OF CLAIMS.
No claim shall be brought for a breach of a representation or warranty
under SECTION 7.1 hereof unless the Indemnified Persons, or any of them, at any
time prior to the applicable Survival Date, give the Indemnifying Persons (a)
written notice of the existence of any such claim, specifying the nature and
basis of such claim and the amount thereof, to the extent known or (b) written
notice pursuant to SECTION 7.3 of any Third Party Claim, the existence of which
might give rise to such a claim. Upon the giving of
43
such written notice as aforesaid, the Indemnified Persons, or any of
them, shall have the right to commence legal proceedings prior to or
subsequent to the Survival Date for the enforcement of their rights
under SECTION 7.1.
8.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and liabilities of an Indemnifying Person with
respect to Losses resulting from the assertion of claim or Liability by
third parties other than in respect of Tax Claims (each, a "THIRD PARTY
CLAIM") shall be subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice
to the Indemnifying Persons of any Third Party Claim which might give
rise to any Loss by the Indemnified Persons, stating the nature and
basis of such Third Party Claim, and the amount thereof to the extent
known; PROVIDED, HOWEVER, that no delay on the part of the Indemnified
Persons in notifying any Indemnifying Persons shall relieve the
Indemnifying Persons from any liability or obligation hereunder unless
(and then solely to the extent) the Indemnifying Person thereby is
materially and irrevocably prejudiced by the delay. Such notice shall
be accompanied by copies of all relevant documentation with respect to
such Third Party Claim, including any summons, complaint or other
pleading which may have been served, any written demand or any other
document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing
delivered to the Indemnified Persons that such Third Party Claim is
properly subject to their indemnification obligations hereunder, then
the Indemnifying Persons shall have the right to assume the defense of
any Third Party Claim at their own expense and by their own counsel,
which counsel shall be reasonably satisfactory to the Indemnified
Persons; PROVIDED, HOWEVER, that the Indemnifying Persons shall not have
the right to assume the defense of any Third Party Claim,
notwithstanding the giving of such written acknowledgment, if (i) the
Indemnified Persons shall have been advised by counsel that there are
one or more legal or equitable defenses available to them which are
different from or in addition to those available to the Indemnifying
Persons, and, in the opinion of the Indemnified Persons, counsel for the
Indemnifying Persons could not adequately represent the interests of the
Indemnified Persons because such interests could be in conflict with
those of the Indemnifying Persons, or (ii) the Indemnifying Persons
shall not have assumed the defense of the Third Party Claim in a timely
fashion.
(c) If the Indemnifying Persons shall assume the defense of a
Third Party Claim (under circumstances in which the proviso to the first
sentence of SECTION 7.3(b) is not applicable), the Indemnifying Persons
shall not be responsible for any legal or other defense costs
subsequently incurred by the Indemnified Persons in connection with the
defense thereof. If the Indemnifying Persons do not exercise their
right to assume the defense of a Third Party Claim by giving the written
acknowledgment referred to in SECTION 7.3(b), or are otherwise
restricted from so assuming by the proviso to the first sentence of
SECTION 7.3(b), the Indemnifying Persons shall nevertheless be entitled
to participate in such defense with their own counsel and at their own
expense. If the
44
defense of a Third Party Claim is assumed by the Indemnified Persons,
the Indemnified Persons shall not be entitled to settle such Third Party
Claim without the prior written consent of the Indemnifying Persons,
which shall not be unreasonably withheld.
(d) If the Indemnifying Persons exercise their right to assume
the defense of a Third Party Claim, (i) the Indemnified Persons shall be
entitled to participate in such defense with their own counsel at their
own expense and (ii) the Indemnifying Persons shall not make any
settlement of any claims without the written consent of the Indemnified
Persons, which shall not be unreasonably withheld.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Subject to the further provisions of this SECTION 7.4, the
representations and warranties contained in this Agreement, the Related
Documents, or in any certificate or other writing delivered in
connection with this Agreement shall survive the Closing Date until
April 15, 1999; PROVIDED, HOWEVER, that (i) the representations and
warranties contained in SECTIONS 3.1, 3.2, 3.3, 3.4, 3.21, 4.1, 4.2,
4.3, 4.4, 4A.1, 4A.2 AND 4A.3 (other than the covenant set forth therein
which shall survive in accordance with the second sentence of this
SECTION 7.4(a)) of this Agreement shall survive indefinitely and (ii)
the representations and warranties contained in SECTIONS 3.8 AND 3.20 of
this Agreement shall survive the Closing Date until the expiration of
any applicable statue of limitations (those representations and
warranties referenced in the foregoing clauses (i) and (ii), being the
"Excluded Representations and Warranties") for Third Party Claims
applicable to the matters covered thereby. The covenants and other
agreements of the parties contained in this Agreement and the Related
Documents (including the indemnity provided for in SECTION 7.1(a)(iii)
of this Agreement) shall survive the Closing Date until they are
otherwise terminated by their terms. The obligations of the Sellers
under SECTION 7.1(a)(iv) AND (a)(v) shall survive the Closing Date until
the expiration of any applicable statute of limitations with respect to
the matters set forth therein. The obligations of Alliance and the
Purchasers under SECTION 7.1(b)(iv) shall survive the Closing Date until
the expiration of any applicable statute of limitations with respect to
the matters set forth therein.
(b) For convenience of reference, the date upon which any
representation or warranty contained herein shall terminate, if any, is
referred to herein as the "SURVIVAL DATE".
8.5 LIMITATIONS ON INDEMNIFICATION.
(a) INDEMNITY BASKETS FOR THE SELLERS. The Purchaser
Indemnified Persons shall not have the right to be indemnified for
breaches of representations and warranties pursuant to SECTION 7.1(a)(i)
unless and until the Purchaser Indemnified Persons shall have incurred
on a cumulative basis aggregate Losses (without giving effect, in
determining whether and to what extent representations and warranties
were breached or Losses were incurred, to qualifications therein
relating to materiality or "Material Adverse Effect") in an amount of
$500,000, in which event the right to be indemnified shall apply in
respect of all Losses; PROVIDED, HOWEVER, that in no event shall
45
the limitations set forth in this SECTION 7.5(a) apply with respect to
the Excluded Representations and Warranties.
(b) INDEMNITY LIMITATIONS FOR THE SELLERS. The sum of all Losses
(without giving effect, in determining whether and to what extent
representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect")
pursuant to which indemnification is payable by the Sellers pursuant to SECTION
7.1(a)(i) shall not exceed $2,000,000; PROVIDED, HOWEVER, that in no event shall
the limitations set forth in this SECTION 7.5(b) apply with respect to the
Excluded Representations and Warranties.
8.6 LIMITATIONS ON INDEMNIFICATION.
(a) INDEMNITY BASKETS FOR THE PURCHASERS AND ALLIANCE. The Seller
Indemnified Persons shall not have the right to be indemnified for breaches of
representations and warranties pursuant to SECTION 7.1(b)(i) unless and until
the Seller Indemnified Persons shall have incurred on a cumulative basis
aggregate Losses (without giving effect, in determining whether and to what
extent representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect") in
an amount of $500,000, in which event the right to be indemnified shall apply in
respect of all Losses; PROVIDED, HOWEVER, that in no event shall the limitations
set forth in this SECTION 7.6(a) apply with respect to the Excluded
Representations and Warranties.
(b) INDEMNITY LIMITATIONS FOR THE PURCHASERS AND ALLIANCE.
The sum of all Losses (without giving effect, in determining whether and
to what extent representations and warranties were breached or Losses
were incurred, to qualifications therein relating to materiality or
"Material Adverse Effect") pursuant to which indemnification is payable
by the Purchasers and Alliance pursuant to SECTION 7.1(b)(i) shall not
exceed $2,000,000; PROVIDED, HOWEVER, that in no event shall the
limitations set forth in this SECTION 7.6(b) apply with respect to the
Excluded Representations and Warranties.
8.7 ALLOCATION OF INDEMNIFICATION PAYMENTS.
The parties hereto agree that any indemnification payment shall be
treated as an adjustment to the Purchase Price.
ARTICLE IX
TERMINATION; EFFECT OF TERMINATION
9.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual written consent of the parties hereto; or
46
(b) the Purchasers or Alliance, if there has been a breach by
any Seller of any of the representations or warranties in this Agreement
or in any Related Document, individually or in the aggregate, in any
material respect (except for representations and warranties which are
qualified by their terms by a reference to materiality or "Material
Adverse Effect" in which case, such representations or warranties as so
qualified shall have been breached in any respect), covenant, obligation
or agreement set forth in this Agreement or in any Related Document and
such breach shall not have been cured within 10 Business Days after
notice thereof is given by any Purchaser or Alliance (except that no
cure period shall be provided for a breach which by its nature cannot be
cured); or
(c) the Sellers, if there has been a breach by Alliance or any
Purchaser of any of the representations or warranties in this Agreement
or in any Related Document, individually or in the aggregate, in any
material respect (except for representations and warranties which are
qualified by their terms by a reference to materiality or "Material
Adverse Effect" in which case, such representations or warranties as so
qualified shall have been breached in any respect), covenant, obligation
or agreement set forth in this Agreement or in any Related Document and
such breach shall not have been cured within 10 Business Days after
notice thereof is given by any Seller (except that no cure period shall
be provided for a breach which by its nature cannot be cured); or
(d) either the Purchasers, Alliance or the Sellers, if the
Closing shall not have been consummated by September 15, 1998; or
(e) either the Purchasers, Alliance or the Sellers, if any
permanent injunction or Order of a Governmental Entity preventing the
Closing shall have become final and nonappealable;
(f) By either Parent or the Purchasers if, prior to the
Closing Date, (i) the Board of Directors of the Parent determines that a
Third Party Proposal for an Alternative Transaction constitutes a
Superior Proposal, (ii) the Parent promptly notifies the Purchasers of
its determination in writing, which writing shall set forth the terms
and conditions of the Third Party Proposal and the identity of the
Person making the Third Party Proposal, (iii) ten days have elapsed
following receipt by the Purchasers of such written notice, (iv) during
such ten day period the Parent cooperates with the Purchasers with the
intent of enabling, but not obligating, the Purchasers to agree to a
modification of the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected, and (v) at the end of
such ten day period, the Board of Directors of the Parent continues to
believe that such Third Party Proposal constitutes a Superior Proposal
and the Parent pays to the Purchasers the amounts specified under
SECTION 9.5(b) pursuant to the terms thereof. For purposes of this
Agreement, a "SUPERIOR PROPOSAL" means any Third Party Proposal to
effect an Alternative Transaction; PROVIDED that (i) the Board of
Directors of the Parent determines in its good faith judgment (following
the consultation with, and the receipt of the advice of, the Parent's
financial advisor) that such Third Party Proposal is on terms that are
more favorable to the Parent's stockholders than the transactions
contemplated by this Agreement (taking into account all relevant
factors, including the amount and form of consideration to be received,
the relative value of any non-cash consideration, and the timing and
certainty of closing) and
47
(ii) the Board of Directors of the Parent determines in its good faith
judgment (based on the written advice of outside counsel) that the
failure to recommend or accept such Third Party Proposal would violate
the fiduciary duties of the Board of Directors of the Parent under
applicable Law;
PROVIDED, HOWEVER, in each case, that none of the Sellers, Alliance
nor the Purchasers shall be entitled to terminate this Agreement if such
party's breach of this Agreement has prevented the satisfaction of a
condition. Any termination pursuant to this SECTION 8.1 shall be
effected by written notice from the party or parties so terminating to
the other parties hereto, which notice shall specify the Section of this
Agreement pursuant to which this Agreement is being terminated.
9.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in
SECTION 8.1, this Agreement shall be of no further force or effect,
except for SECTION 5.7, SECTION 9.5 and this SECTION 8.2, each of which
shall survive the termination of this Agreement; PROVIDED, HOWEVER, that
the Liability of any party for any intentional, willful or knowing
breach by such party of the representations, warranties, covenants,
obligations or agreements of such party set forth in this Agreement
occurring prior to the termination of this Agreement shall survive the
termination of this Agreement and, in addition, in the event of any
action for breach of contract in the event of a termination of this
Agreement, the prevailing party shall be reimbursed by the other party
to the action for reasonable attorneys' fees and expenses relating to
such action.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 AMENDMENT.
This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by the parties hereto. No
waiver by any party of any default, misrepresentation, or breach of
representation or warranty or covenant hereunder, whether intentional or
not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.2 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced
herein (including, but not limited to, the schedules and the exhibits
(in their executed form) attached hereto) and any other document or
agreement contemporaneously entered into with this Agreement (including
the Related Documents) contain all of the agreements among the parties
hereto with respect to the transactions contemplated hereby and
supersede all prior agreements or understandings among the parties with
respect thereto (including, but not limited to, the letter agreement
dated September 15, 1997 (as amended to the date hereof) between the
Parent and Apollo Management, L.P.
48
10.3 SEVERABILITY.
It is the desire and intent of the parties that the provisions of
this Agreement be enforced to the fullest extent permissible under the
Law and public policies applied in each jurisdiction in which
enforcement is sought. Accordingly, in the event that any provision of
this Agreement would be held in any jurisdiction to be invalid,
prohibited or unenforceable for any reason, such provision, as to such
jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability
of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to
be invalid, prohibited or unenforceable in such jurisdiction, it shall,
as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
10.4 BENEFITS OF AGREEMENT.
All the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Except as expressly provided herein,
this Agreement shall not confer any rights or remedies upon any Person
other than the foregoing; PROVIDED, HOWEVER, that anything contained
herein to the contrary notwithstanding, the Purchasers may (a)
collaterally assign this Agreement and the Related Documents, without
the prior consent of any other party, to a financial or lending
institutions providing financing to such Persons or their Affiliates,
(b) assign the rights to acquire any and all assets (including interests
under leases, Permits and Contracts with third parties) related to
certain MRI Units to be designated by the Purchasers to the Sellers to
any Affiliate of the Purchasers, pursuant to Conveyance Instruments
reasonably satisfactory to the Purchasers on the Closing Date and (c)
assign this Agreement to any wholly-owned Subsidiary of Alliance.
10.5 FEES AND EXPENSES
(a) Except as otherwise provided herein and as provided below
in this SECTION 9.5, all fees and expenses incurred in connection with
this Agreement, the Related Documents and the transactions contemplated
hereby and thereby shall be paid by the party incurring such fees or
expenses, whether or not such transactions are consummated; PROVIDED,
HOWEVER, that the Purchasers shall pay the reasonable fees and expenses
of Ernst & Young, LLP in connection with the preparation of the
financial statements referenced in SECTION 3.5(b) and SECTION 5.15.
(b) If this Agreement is terminated pursuant to SECTION
8.1(f), the Sellers shall pay to the Purchasers promptly upon such
termination $1,350,000 plus all Expenses.
(c) If this Agreement is terminated by any Purchaser or
Alliance pursuant to SECTION 8.1(d) as a result of a failure to be
satisfied of the condition precedent set forth in SECTION 6.1(b), and,
if, within 180 days of such termination either an Alternative
Transaction shall be consummated or any Seller or Entity shall enter
into an Acquisition Agreement providing for an Alternative Transaction,
then the Sellers shall pay the
49
Purchasers, upon the closing of such transaction, if and whenever it
occurs, $1,350,000 plus all Expenses. No amounts whatsoever shall be
payable to the Purchasers under this SECTION 9.5(c) if, at the
Stockholders Meeting or any adjournments or postponements thereof, the
Purchasers or their Affiliates fail to vote or cause to be voted, or
fail to grant or cause the granting of consent or approval with respect
to, any shares of Parent Common Stock owned by them or as to which they
have voting rights, in favor of this Agreement and the transactions
contemplated hereby.
(d) The Sellers acknowledge that the agreements contained
in this SECTION 9.5 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, the
Purchasers and Alliance would not enter into this Agreement.
Accordingly, if the Sellers fail promptly to pay any amount due pursuant
to this SECTION 9.5, and, in order to obtain such payment, the
Purchasers or Alliance commence a suit which results in a judgment
against the Sellers for the amounts set forth in this SECTION 9.5, the
Sellers shall pay the Purchasers and Alliance all costs and expenses
(including attorney's fees and expenses) in connection with such suit,
together with interest on such amounts (excluding the Purchaser's and
Alliance's costs and expenses) at the prime rate of the Bankers Trust
Company in effect on the date such payment was required to be made. If
such a suit results in a judgment against the Purchasers or Alliance,
the Purchasers and Alliance shall pay to the Sellers all costs and
expenses (including attorney's fees and expenses) in connection with
such suit. "EXPENSES" shall mean all reasonably documented
out-of-pocket expenses incurred by the Purchasers and Alliance in
connection with this Agreement, the Related Documents and the
transactions contemplated hereby and thereby, including fees and
expenses of its consultants, attorneys, accountants, and other advisors;
PROVIDED, HOWEVER, that unless the Parent has previously agreed in
writing to increase such amount, the aggregate amount of such Expenses
reimbursable under this SECTION 9.5 shall not exceed $350,000.
10.6 HEADINGS.
Descriptive headings are for convenience only and shall not control
or affect in any way the meaning or construction of any provision of
this Agreement.
10.7 NOTICES.
All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed to be sufficient if delivered
personally, telecopied, sent by nationally-recognized, overnight courier
or mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
50
(a) if to any Seller, to:
American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, California 94111
Attention: Ernest A. Bates, M.D.
Telephone No.: (415) 788-5300
Facsimile No.: (415) 788-5660
with a copy to:
Sidley & Austin
875 Third Avenue
14th Floor
New York, New York 10022
Attention: Daniel Kelly
Telephone No.: (212) 906-2000
Facsimile No.: (212) 906-2021
(b) if to the Purchasers or Alliance, to:
Alliance Imaging, Inc.
1065 PacifiCenter Drive
Suite 200
Anaheim, California 92806
Attention: Richard N. Zehner
Telephone No.: (714) 688-7100
Facsimile No.: (714) 688-3388
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone No.: (212) 408-2400
Facsimile No.: (212) 408-2420.
All such notices and other communications shall be deemed to have been
given and received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of delivery by telecopier, on the date of such
delivery, (iii) in the case of delivery by nationally-recognized, overnight
courier, on the Business Day following dispatch, and (iv) in the case of
mailing, on the third Business Day following such mailing.
51
10.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and
each such counterpart shall be deemed to be an original instrument, but
all such counterparts together shall constitute one agreement.
10.9 GOVERNING LAW.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY
CHOICE OF LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF
NEW YORK, OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY
JURISDICTION OTHER THAN THE STATE OF NEW YORK TO BE APPLIED. IN
FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF NEW YORK
WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT, EVEN
IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS,
THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY.
ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
RELATED DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY AND
ASSETS, GENERALLY AND UNCONDITIONALLY THE JURISDICTION OF THE AFORESAID
COURTS.
10.10 INCORPORATION OF EXHIBITS AND SCHEDULES.
The ANNEXES, EXHIBITS and SCHEDULES identified in this Agreement
are incorporated herein by reference and made a part hereof.
10.11 INTERPRETATION; CONSTRUCTION.
The term "AGREEMENT" means this agreement together with all
schedules, annexes and exhibits hereto, as the same may from time to
time be amended, modified, supplemented or restated in accordance with
the terms hereof. Unless the context otherwise requires, words
importing the singular shall include the plural, and vice versa. In
this Agreement, the term "BEST KNOWLEDGE" of any Person means (i) the
actual knowledge of such Person and (ii) that knowledge which should
have been acquired by such Person after making such due inquiry and
exercising such due diligence as a prudent businessperson would have
made or exercised in the management of his or her business affairs,
including due inquiry of those officers, directors, employees and
professional advisers (including attorneys, accountants and consultants)
of the Person who could reasonably be expected to have actual knowledge
of the matters in question. When used in the case of the Sellers, the
term "BEST KNOWLEDGE" shall include the Best Knowledge of each Seller
and each Entity. The use in this Agreement of the term "INCLUDING"
means
52
"INCLUDING, WITHOUT LIMITATION." The words "HEREIN", "HEREOF",
"HEREUNDER", "HEREBY", "HERETO", "HEREINAFTER", and other words of
similar import refer to this Agreement as a whole, including the
schedules, annexes and exhibits, as the same may from time to time be
amended, modified, supplemented or restated, and not to any particular
article, section, subsection, paragraph, subparagraph or clause
contained in this Agreement. All references to articles, sections,
subsections, clauses, paragraphs, schedules and exhibits mean such
provisions of this Agreement and the schedules and exhibits attached to
this Agreement, except where otherwise stated. The title of and the
article, section and paragraph headings in this Agreement are for
convenience of reference only and shall not govern or affect the
interpretation of any of the terms or provisions of this Agreement. The
use herein of the masculine, feminine or neuter forms shall also denote
the other forms, as in each case the context may require. Where
specific language is used to clarify by example a general statement
contained herein, such specific language shall not be deemed to modify,
limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement has
been chosen by the parties to express their mutual intent, and no rule
of strict construction shall be applied against any party. Accounting
terms used but not otherwise defined herein shall have the meanings
given to them under GAAP. Unless expressly provided otherwise, the
measure of a period of one month or year for purposes of this Agreement
shall be that date of the following month or year corresponding to the
starting date, provided that if no corresponding date exists, the
measure shall be that date of the following month or year corresponding
to the next day following the starting date. For example, one month
following February 18 is March 18, and one month following March 31 is
May 1.
10.12 REMEDIES.
The parties shall each have and retain all rights and remedies
existing in their favor under this Agreement, the Related Documents, at
law or equity, including rights to bring actions for specific
performance and injunctive and other equitable relief (including,
without limitation, the remedy of rescission) to enforce or prevent a
breach or any violation of this Agreement or the Related Documents. All
such rights and remedies shall, to the extent permitted by applicable
Law, be cumulative.
10.13 APPOINTMENT OF REPRESENTATIVE.
M Sub hereby irrevocably appoints the Parent to be its
attorney-in-fact and representative for the purpose of administering
this Agreement on behalf M Sub. The Purchasers shall be entitled to deal
exclusively with the Parent, as the representative of M Sub. Purchaser
B hereby irrevocably appoints Purchaser A to be its attorney-in-fact and
representative for the purpose of administering this Agreement on behalf
of Purchaser B. The Sellers shall be entitled to deal exclusively with
Purchaser A as the representative of Purchaser B.
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10.14 SALE AND TRANSFER TAXES.
All Transfer Taxes incurred in connection with the consummation of the
transactions contemplated herein (other than the Transfer Taxes referenced in
SECTION 7.1(a)(iv) to be borne by the Sellers) shall be paid 100% by Alliance
and the Purchasers.
10.15 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED DOCUMENT.
* * *
54
IN WITNESS WHEREOF, the parties hereto have executed this
Securities Purchase Agreement as of the date first written above.
ALLIANCE IMAGING, INC.
By: /s/ Richard N. Zehner
--------------------------
Name: Richard N. Zehner
Title: Chief Executive Officer
EMBARCADERO HOLDING CORP. I
By: /s/ Joshua J. Harris
--------------------------
Name: Joshua J. Harris
Title: Vice President
EMBARCADERO HOLDING CORP. II
By: /s/ Joshua J. Harris
--------------------------
Name: Joshua J. Harris
Title: Vice President
AMERICAN SHARED HOSPITAL SERVICES
By: /s/ Earnest A. Bates, MD
--------------------------
Name: Earnest A. Bates, MD
Title: Chairman and President
MMRI, INC.
By: /s/ Earnest A. Bates, MD
--------------------------
Name: Earnest A. Bates, MD
Title: Chairman and President
55
ANNEX I
DEFINITIONS
"ACQUISITION AGREEMENT" has the meaning ascribed thereto in SECTION
5.4.
"AFFILIATE" means, with respect to any Person, (i) a director,
officer or greater than 10% shareholder of such Person, (ii) a spouse,
parent, sibling or descendant of such Person (or spouse, parent, sibling
or descendant of any director or executive officer of such Person), or
(iii) any other Person that, directly or indirectly through one or more
intermediaries, Controls, or is Controlled by, or is under common
Control with, such Person.
"ALLIANCE" has the meaning ascribed thereto in the preamble.
"ALTERNATIVE TRANSACTION" means any (i) acquisition or purchase of
any material portion of the Business or any material assets of either
Entity outside the ordinary course of business, (ii) acquisition or
purchase of any Equity Securities of any Entity, any tender offer or
exchange offer that if consummated would result in any Person
beneficially owning more than 50% of any class of Equity Securities of
the Parent or any Equity Securities of either Entity or (iii) any
merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving any Entity,
other than the transactions contemplated to be effected with the
Purchasers by this Agreement.
"ASHS 401(k) PLAN" has the meaning ascribed thereto in SECTION 5.18.
"ASSET CONTRIBUTION" has the meaning ascribed thereto in SECTION
1.2.
"ASSET DISPOSITION" has the meaning ascribed thereto in SECTION 1.2.
"BUSINESS" has the meaning ascribed thereto in the first WHEREAS
clause.
"BUSINESS DAY" means any day that is not a Saturday, Sunday or a
day on which banking institutions in New York, New York are not required
to be open.
"CAPITAL LEASE" means any obligation to pay rent or other amounts
under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations
are required to be classified and accounted for as capital leases on a
balance sheet of such Person as of such date computed in accordance with
GAAP.
"CASH EQUIVALENTS" means any of the following: (a) securities
issued, or that are directly and fully guaranteed or insured, by the
United States Government or any agency or instrumentality thereof having
maturities of not more
56
than 12 months from the date of acquisition, (b) time deposits and
certificates of deposit having maturities of not more than 12 months
from the date of acquisition of any domestic commercial bank having
capital and surplus in excess of $500,000,000, (c) repurchase agreements
with a term of not more than seven days for underlying securities of the
types described in clauses (a) and (b) above entered into with any bank
meeting the qualifications specified in clause (b) above or with
securities dealers of recognized national standing, and (d) commercial
paper rated (as of the date of acquisition thereof) at least A-1 or the
equivalent thereof by Moody's Investors Service, Inc. and at least P-1
or the equivalent thereof by Standard & Poor's Corporation and maturing
within six months after the date of its acquisition.
"CATH LAB" has the meaning ascribed thereto in SECTION 3.5.
"CERCLA" has the meaning ascribed thereto in SECTION 3.20.
"CHAMPUS" has the meaning ascribed thereto in SECTION 3.18.
"CLOSING" has the meaning ascribed thereto in ARTICLE II.
"CLOSING DATE" has the meaning ascribed thereto in ARTICLE II.
"COBRA" has the meaning ascribed thereto in SECTION 5.18.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL OR PROPRIETARY INFORMATION" means all information
disclosed (i) by or on behalf of any Entity or any Seller to the
Purchasers, Alliance or to employees, consultants or others in a
confidential relationship with any of them, or (ii) by or on behalf of
the Purchasers or Alliance to any Seller or any Entity, or to employees,
consultants or others in a confidential relationship with any of them,
in each case other than such information which (A) becomes generally
available to the public (other than as a result of a breach of this
Agreement), (B) was known to the party to whom such information was
disclosed prior to its disclosure to such party, (C) is hereafter
available to the party to whom such information was disclosed on a
non-confidential basis from a source (other than the party disclosing or
on whose behalf such information was disclosed) which was, to the
knowledge of the receiving party, entitled to disclose the same or (D)
is compelled by Law or Order to be disclosed by the party to whom such
information was disclosed.
"CONFIDENTIALITY AGREEMENT" has the meaning ascribed thereto in
SECTION 5.5.
"CONSOLIDATED AFFILIATE" has the meaning ascribed thereto in
SECTION 3.8.
"CONSOLIDATED GROUP" has the meaning ascribed thereto in SECTION
3.8.
"CONTRACT" means any agreement, contract, or license (i) for
purposes of SECTION 3.7(l) and SECTION 5.2(k), relating to payments by
any Person of a dollar amount
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in excess of $25,000 and (ii) for purposes of all other Sections of this
Agreement, relating to payments by any Person of a dollar amount in
excess of $10,000.
"CONTROL" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the ownership of
securities, by contract or otherwise.
"CONVEYANCE INSTRUMENTS" has the meaning ascribed thereto in
SECTION 1.2.
"COVERED TAXES" means, all Taxes of CT Sub and/or the Partnership
with respect to periods ending on or prior to the Closing Date other
than those Taxes that are to be paid by Purchasers and Alliance pursuant
to SECTION 9.14.
"CT SHARES" has the meaning ascribed thereto in the second WHEREAS
clause.
"CT SUB" means CuraCare, Inc., a Delaware corporation.
"CT UNIT" has the meaning ascribed thereto in SECTION 3.5.
"DVI" has the meaning ascribed thereto in SECTION 5.16.
"DVI REVOLVING CREDIT AGREEMENT" means the Loan and Security
Agreement dated as of January 31, 1996 among MRI Sub and CT Sub, as
borrowers, the Parent and Ernest A. Bates, M.D., as guarantors, and DVI,
as lender, as amended by Amendment No. 1 dated March 26, 1996, as
amended by Amendment No. 2 dated January 31, 1997, as amended by
Amendment No. 3 dated April 30, 1997, as amended by Amendment No. 4
dated as of July 31, 1997 and as amended by Amendment No. 5 dated as of
December 1, 1997.
"EBITDA" means, for any period with respect to any Unit, net income
(or net loss) from operations PLUS, to the extent deducted in
calculating such net income (or net loss), the sum of (a) interest
expense, (b) income tax expense, (c) depreciation expense and (d)
amortization expense, in each case determined and as properly allocated
to such Unit in accordance with GAAP.
"EMPLOYEE BENEFIT PLAN" means (i) any qualified or non-qualified
"employee pension benefit plan," as defined in Section 3(2) of ERISA,
including any "multiemployer plan," as defined in Section 3(37) of
ERISA, or "multiple employer plan," as defined in Section 413 of the
Code, (ii) any "employee welfare benefit plan," as defined in Section
3(1) of ERISA, or (iii) any severance, employment, incentive, bonus,
profit-sharing, stock option, stock purchase or other pension, welfare
or fringe plan, program or arrangement, whether or not subject to ERISA
and whether or not funded.
"EMPLOYEE PLANS" has the meaning ascribed thereto in SECTION 3.17.
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"ENCUMBRANCES" shall mean any security interest, mortgage, lien,
pledge or charge or any option or right of first refusal.
"ENTITIES" means CT Sub and the Partnership.
"ENTITIES' FINANCIAL STATEMENTS" has the meaning ascribed thereto in
SECTION 3.5.
"ENVIRONMENTAL, HEALTH AND SAFETY LAWS" means all Laws, Permits,
Orders and Contracts and all common Law relating to or addressing
pollution or protection of the environment, public health and safety, or
employee health and safety, including, but not limited to, all those
relating to the presence, use, production, generation, handling,
transportation, treatment, storage, disposal, distribution, labeling,
testing, processing, discharge, release, threatened release, control or
cleanup of any hazardous materials, substances or wastes, chemical
substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"EQUITY INTERESTS" means (i) with respect to a corporation, any and
all shares, interests, participation or other equivalents (however
designated) of corporate stock, including all common stock and preferred
stock, or warrants, options or other rights to acquire any of the
foregoing and (ii) with respect to a partnership, limited liability
company or similar Person, any and all units, interests, rights to
purchase, warrants, options or other equivalents of, or other ownership
interests in, any such Person.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" means, with respect to any Person, any other
Person that is a member of a "CONTROLLED GROUP OF CORPORATIONS" with, or
is under "COMMON CONTROL" with, or is a member of the same "AFFILIATED
SERVICE GROUP" with such Person as defined in Section 414(b), 414(c),
414(m) or 414(o) of the Code.
"EXCHANGE ACT" has the meaning ascribed thereto in SECTION 3.22.
"EXCHANGE PROCEEDS" has the meaning ascribed thereto in SECTION 5.9.
"EXCLUDED ASSETS" has the meaning ascribed thereto in SECTION 1.2.
"EXCLUDED LIABILITIES" has the meaning ascribed thereto in SECTION
1.2.
"EXCLUDED REPRESENTATIONS AND WARRANTIES" has the meaning ascribed
thereto in SECTION 7.4.
"EXPENSES" has the meaning ascribed thereto in SECTION 9.5.
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"FEDERAL HEALTH CARE PROGRAM" has the meaning ascribed thereto in
SECTION 3.19.
"FUNDED INDEBTEDNESS" means, without duplication, with respect to any
Person the aggregate amount (including the current portions thereof) of all (i)
indebtedness for money borrowed from others and purchase money indebtedness
(other than accounts payable in the ordinary course) of such Person; (ii)
indebtedness of the type described in clause (i) above guaranteed, directly or
indirectly, in any manner by such Person, through an agreement, contingent or
otherwise, to supply funds to, or in any other manner invest in, the relevant
debtor, or to purchase indebtedness, or to purchase and pay for property if not
delivered or pay for services if not performed, primarily for the purpose of
enabling such debtor to make payment of the indebtedness or to assure the owners
of the indebtedness against loss (any such arrangement being hereinafter
referred to as a "GUARANTY"), but excluding endorsements of checks and other
instruments in the ordinary course; (iii) indebtedness of the type described in
clause (i) above secured by any Encumbrances upon property owned by such Person,
even though such Person has not in any manner become liable for the payment of
such indebtedness; (iv) interest expense accrued but unpaid, and all prepayment
premiums, on or relating to any of such indebtedness; (v) obligations in respect
of leases which would be required to be capitalized under GAAP; and (vi)
obligations under operating leases for Units.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"GK FINANCE" means GK Financing, LLC, a California limited liability
company.
"GOVERNMENTAL ENTITY" means any federal, state, local or foreign
government and any court, tribunal, administrative agency, commission or other
governmental or regulatory authority or agency, domestic, foreign or
supranational.
"GUARANTY" has the meaning ascribed thereto in the definition of
Funded Indebtedness.
"HIRED EMPLOYEES" has the meaning ascribed thereto in SECTION 5.18.
"INDEMNIFIED PERSONS" means and includes the Seller Indemnified
Persons and/or the Purchaser Indemnified Persons, as the case may be.
"INDEMNIFYING PERSONS" means and includes the Seller Indemnifying
Persons and/or the Purchaser Indemnifying Persons, as the case may be.
"INTELLECTUAL PROPERTY RIGHTS" means all intellectual property rights,
including, without limitation, patents, patent applications, trademarks,
trademark applications, tradenames, servicemarks, servicemark applications,
trade dress, logos and designs and the goodwill connected with the foregoing,
copyrights and copyright applications, know-how, trade secrets, proprietary
processes and formulae, confidential information, franchises, licenses,
inventions, instructions, marketing materials and all
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documentation and media constituting, describing or relating to the
foregoing, including, without limitation, manuals, memoranda and records.
"LATEST BALANCE SHEET" has the meaning ascribed thereto in SECTION
3.5.
"LATEST BALANCE SHEET DATE" has the meaning ascribed thereto in
SECTION 3.5.
"LAW" means any applicable foreign, federal, state or local law,
statute, treaty, rule, directive, regulation, ordinance and similar provision
having the force or effect of law or an Order of any Governmental Entity
(including all Environmental, Health and Safety Laws).
"LEASED PROPERTY" has the meaning ascribed thereto in SECTION 3.10.
"LIABILITY" means any liability whether fixed or unfixed or liquidated
or unliquidated.
"LICENSED REQUISITE RIGHTS" has the meaning ascribed thereto in
SECTION 3.11.
"LOSSES" means any and all losses, claims, damages, Liabilities,
expenses (including reasonable attorneys' and accountants' and other
professionals' fees), assessments and Taxes, (including interest or penalties
thereon) that are the subject of indemnification under ARTICLE 7, in each case,
(i) net of any cash insurance benefits actually received and (ii) net of any Tax
benefits realized in respect of the Losses for which the indemnification
payments are being made. For purposes of this definition, Tax benefits realized
shall mean the sum of all reductions in federal, state, local and foreign Taxes
(including estimated Taxes) payable by the Indemnified Person solely as a result
of the Losses for which the indemnification payments are being made. All
calculations shall be made using reasonable assumptions agreed upon by the
Purchasers, Alliance and the Sellers including the timing of the utilization of
any such Tax benefits, and any such Tax benefits shall be assumed to be utilized
in a given Tax year only after all other Tax benefits available in such year
have first been taken into account. If a Tax benefit that has been taken into
account for purposes of calculating Losses hereunder is wholly or partially
disallowed by a taxing authority, the Indemnifying Person shall pay the
Indemnified Person the amount that would have been paid originally with respect
to such Losses had such disallowed Tax benefit not been taken into account.
"M SUB" has the meaning ascribed thereto in the preamble.
"M SUB PARTNERSHIP INTERESTS" means the 50% general partnership
interests in the Partnership held or owned by M Sub.
"MATERIAL ADVERSE EFFECT" has the meaning ascribed thereto in SECTION
3.7.
"MRI UNIT" has the meaning ascribed thereto in SECTION 3.5.
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"NON-COMPETE PERIOD" means the period ending on the fifth anniversary
of the Closing Date.
"ORDERS" means judgments, writs, decrees, compliance agreements,
injunctions or judicial or administrative orders and determinations of any
Governmental Entity or arbitrator.
"ORGANIZATIONAL DOCUMENTS" means (i) any certificate or articles filed
with any state which filing forms a Person and (ii) all agreements, documents or
instruments governing the internal affairs of a Person, including such Person's
by-laws, codes of regulations, partnership agreements, limited liability company
agreements, joint venture agreements and operating agreements.
"OWNED REQUISITE RIGHTS" has the meaning ascribed thereto in SECTION
3.11.
"PARENT" has the meaning ascribed thereto in the preamble.
"PARENT COMMON STOCK" has the meaning ascribed thereto in SECTION
3.24.
"PARENT PARTNERSHIP INTERESTS" means the 50% general partnership
interest in the Partnership held or owned by the Parent.
"PARENT STOCKHOLDER APPROVAL" has the meaning ascribed thereto in
SECTION 3.24.
"PARTNERSHIP" means American Shared-CuraCare, a California general
partnership.
"PARTNERSHIP AGREEMENT" means the Joint Venture Agreement, between M
Sub and the Parent, dated March 7, 1985, as modified by the Modification to
Joint Venture Agreement dated April 5, 1985, the Modification to Joint Venture
Agreement dated May 20, 1985, the First Supplement to the Joint Venture
Agreement dated as of October 14, 1987, the Second Supplement to the Joint
Venture Agreement dated as of May 15, 1995, and as further amended, modified or
supplemented from time to time including, without limitation, as amended and
restated pursuant to SECTION 6.2 hereunder.
"PARTNERSHIP INTERESTS" means the M Sub Partnership Interests and the
Parent Partnership Interests.
"PERMITS" means all permits, certificates of need, licenses,
authorizations, registrations, franchises, approvals, certificates, variances
and similar rights obtained, or required to be obtained, from Governmental
Entities.
"PERMITTED ENCUMBRANCES" means with respect to any Person, (i)
Encumbrances for Taxes not yet due and payable or being contested in good faith
by appropriate proceedings and for which there are adequate reserves on the
books and records of such Person, (ii) workers or unemployment compensation
liens arising in the
62
ordinary course of business, (iii) statutory lessor liens arising under
leases, and (iv) mechanic's, materialman's, supplier's, vendor's or
similar liens arising in the ordinary course of business securing
amounts that are not delinquent.
"PERSON" shall be construed broadly and shall include an individual,
a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a Governmental Entity (or any department, agency or political subdivision
thereof).
"POST SIGNING RETURNS" has the meaning ascribed thereto in SECTION
5.11.
"PROCEEDINGS" means any action, suit, investigation or proceedings
before any Governmental Entity or arbitrator other than the review by Internal
Revenue Service of an application for a favorable determination letter regarding
any Employee Plan.
"PROXY STATEMENT" has the meaning ascribed thereto in SECTION 5.12.
"PURCHASE PRICE" has the meaning ascribed thereto in SECTION 1.3.
"PURCHASED PARENT ASSETS" has the meaning ascribed thereto in SECTION
1.2.
"PURCHASER A" has the meaning ascribed thereto in the preamble.
"PURCHASER B" has the meaning ascribed thereto in the preamble.
"PURCHASER INDEMNIFIED PERSONS" means and includes the Purchasers,
their Affiliates (including, without limitation, Alliance), their successors and
assigns, and the respective officers, directors, employees and agents of each of
the foregoing.
"PURCHASER INDEMNIFYING PERSONS" means Alliance and each Purchaser
(jointly and severally) and their successors and assigns.
"PURCHASER LOSSES" means any and all Losses sustained, suffered or
incurred by any Purchaser Indemnified Person arising from or in connection with
any such matter which is the subject of indemnification under ARTICLE 7.
"PURCHASERS" has the meaning ascribed thereto in the preamble.
"RELATED DOCUMENTS" has the meaning ascribed thereto in SECTION 6.2
"REQUISITE RIGHTS" has the meaning ascribed thereto in SECTION 3.11.
"RESPIRATORY SYSTEM" has the meaning ascribed thereto in SECTION 3.5.
"RESTRICTED TERRITORY" means any portion of the United States in which
the Business has operated during the three years preceding the Closing Date.
"SEC" means the United States Securities and Exchange Commission and
any successor agency.
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"SEC DOCUMENTS" has the meaning ascribed thereto in SECTION 3.5.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER INDEMNIFIED PERSONS" means and includes the Sellers and their
respective successors and assigns.
"SELLER INDEMNIFYING PERSONS" means and includes the Sellers (jointly
and severally) and their respective successors and assigns.
"SELLER LOSSES" shall mean any and all Losses sustained, suffered or
incurred by any Seller Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under ARTICLE 7.
"SELLERS" means the Parent and M Sub.
"SHARES" means the CT Shares and the Partnership Interests.
"SPECT UNIT" has the meaning ascribed thereto in SECTION 3.5.
"SSA" has the meaning ascribed thereto in SECTION 3.18.
"STATE HEALTH CARE PROGRAM" has the meaning ascribed thereto in
SECTION 3.19.
"STOCKHOLDERS AGREEMENT" has the meaning ascribed thereto in SECTION
6.2.
"STOCKHOLDERS MEETING" has the meaning ascribed thereto in SECTION
5.12.
"SUBSIDIARY" means any Person with respect to which a specified Person
(or a Subsidiary thereof) has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or other governing
body.
"SUPERFUND" has the meaning ascribed thereto in SECTION 3.20.
"SUPERIOR PROPOSAL" has the meaning ascribed thereto in SECTION 8.1.
"SURVIVAL DATE" has the meaning ascribed thereto in SECTION 7.4.
"TAX CLAIM" has the meaning ascribed thereto in SECTION 5.8.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"TAXES" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts,
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sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property or windfall profits taxes, alternative or add-on minimum taxes,
customs duties and other taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to tax
and other additional amounts imposed by any taxing authority (domestic
or foreign) on such Person (if any) and (ii) any liability for the
payment of any amount of the type described in CLAUSE (i) above as a
result of (A) being a "TRANSFEREE" (within the meaning of Section 6901
of the Code or any other applicable Law) of another Person, (B) being a
member of an affiliated, combined or consolidated group or (C) a
contractual arrangement or otherwise.
"THIRD PARTY CLAIM" has the meaning ascribed thereto in SECTION 7.3.
"THIRD PARTY PROPOSAL" means a bona fide proposal from a third party,
which proposal did not result from a breach of SECTION 5.4(a) and which third
party the Board of Directors of the Parent determines in good faith has the
capacity and is reasonably likely to consummate a Superior Proposal.
"338(h)(10) ELECTION" has the meaning ascribed thereto in SECTION 5.8.
"TRANSFER TAXES" has the meaning ascribed thereto in SECTION 7.1.
"ULTRASOUND MACHINE" has the meaning ascribed thereto in SECTION 3.5.
"UNITS" has the meaning ascribed thereto in SECTION 3.5.
"YEARS INCLUDED" has the meaning ascribed thereto in SECTION 3.8.
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