Securities Purchase Agreement - InSight Health Services Corp. and The Carlyle Group
SECURITIES PURCHASE AGREEMENT
by and among
INSIGHT HEALTH SERVICES CORP.
and
CARLYLE PARTNERS II, L.P.,
CARLYLE PARTNERS III, L.P.,
CARLYLE INTERNATIONAL PARTNERS II, L.P.,
CARLYLE INTERNATIONAL PARTNERS III, L.P.,
C/S INTERNATIONAL PARTNERS,
STATE BOARD OF ADMINISTRATION OF FLORIDA,
CARLYLE INVESTMENT GROUP, L.P.,
CARLYLE-INSIGHT INTERNATIONAL PARTNERS, L.P., and
CARLYLE-INSIGHT PARTNERS, L.P.
OCTOBER 14, 1997
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.........................................................2
1.1 Defined Terms.........................................................2
ARTICLE II PURCHASE AND SALE OF SECURITIES...................................15
2.1 Purchase and Sale of Securities......................................15
2.2 Consideration for Securities.........................................15
ARTICLE III CLOSING..........................................................16
3.1 Closing..............................................................16
3.2 Deliveries by the Company at the Closing.............................16
3.3 Deliveries by the Purchaser at the Closing...........................16
3.4 Second Closing.......................................................16
3.5 Form of Documents and Instruments....................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................17
4.1 Organization of the Company..........................................17
4.2 Capitalization of the Company........................................17
4.3 Authorization of Issuance............................................19
4.4 Authorization........................................................20
4.5 Noncontravention.....................................................20
4.6 Consents.............................................................20
4.7 Subsidiaries.........................................................21
4.8 Employee Benefit Plans and Other Agreements..........................22
4.9 Governmental Filings.................................................25
4.10 Financial Statements and Reports....................................25
4.11 Absence of Undisclosed Liabilities: Guarantees......................26
4.12 Absence of Certain Changes..........................................26
4.13 Compliance With Laws................................................27
4.14 Litigation..........................................................28
4.15 True and Complete Disclosure........................................29
4.16 Taxes...............................................................29
4.17 Environmental Matters...............................................31
4.18 Insurance...........................................................32
4.19 Real Property and Leaseholds........................................32
4.20 Tangible Assets.....................................................33
4.21 Contracts and Commitments...........................................34
4.22 Books and Records...................................................34
4.23 Labor Matters.......................................................35
4.24 Payments............................................................35
4.25 Intellectual Property...............................................35
4.26 Securities Offerings................................................36
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4.27 No Other Agreements to Sell the Assets or the Company...............36
4.28 No Brokers..........................................................36
4.29 Accounts and Notes Receivable.......................................37
4.30 Indebtedness........................................................37
4.31 Transactions with Affiliates........................................37
4.32 No Research Grants..................................................37
4.33 Certain Regulatory Matters..........................................37
4.34 Certain Additional Regulatory Matters...............................38
4.35 Medicare/Medicaid Participation.....................................39
4.36 Compliance with Medicare/Medicaid and Insurance Programs............39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE PURCHASER....................40
5.1 Organization of the Purchaser........................................40
5.2 Authorization........................................................40
5.3 Noncontravention.....................................................41
5.4 Consents and Appeals.................................................41
5.5 Purchase for Investment..............................................41
5.6 No Brokers...........................................................42
5.7 No Agreements........................................................42
ARTICLE VI COVENANTS.........................................................42
6.1 Best Efforts.........................................................42
6.2 Restrictive Agreements Prohibited....................................43
6.3 Continuing Operations................................................43
6.4 Financial Statements and Information.................................43
6.5 Press Releases.......................................................45
6.6 Notification of Certain Matters......................................45
6.7 Liability Insurance..................................................45
6.8 Conversion Stock.....................................................46
6.9 Certain Regulatory Matters...........................................46
6.10 Employment Arrangements.............................................47
6.11 Transactions with Affiliates........................................47
6.12 Stockholder Approval of Certain Actions.............................48
6.13 Board of Directors..................................................51
6.14 Restrictions on Transfer of Capital Stock...........................53
6.15 Expiration of Certain Covenants.....................................56
ARTICLE VII CONDITIONS TO CLOSING............................................56
7.1 Conditions to Each Party's Obligations...............................56
7.2 Conditions to the Company's Obligations..............................57
7.3 Conditions to the Purchaser' Obligations.............................58
ARTICLE VIII INDEMNIFICATION.................................................59
8.1 Survival of Representations, Etc.....................................59
8.2 Indemnification by the Company.......................................60
8.3 Limitation on Indemnities............................................60
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8.4 Losses...............................................................60
8.5 Defense of Claims....................................................61
ARTICLE IX MISCELLANEOUS.....................................................62
9.1 Fees and Expenses....................................................62
9.2 Injunctive Relief....................................................62
9.3 Assignment...........................................................62
9.4 Notices..............................................................63
9.5 Choice of Law........................................................64
9.6 Entire Agreement.....................................................64
9.7 Counterparts.........................................................64
9.8 Invalidity...........................................................65
9.9 Headings; Language...................................................65
9.10 Limitation of Liability.............................................65
9.11 Amendments and Waivers..............................................65
EXHIBITS
EXHIBIT A: Form of Amended and Restated Bylaws
EXHIBIT B: Form of Registration Rights Agreement
EXHIBIT C: Form of Series B Certificate of Designation
EXHIBIT D: Form of Series C Certificate of Designation
EXHIBIT E: Form of Series D Certificate of Designation
EXHIBIT F: Form of Warrant Agreement
EXHIBIT G: Form of GE Warrant Agreement
EXHIBIT H: Form of Opinion of the Purchaser's Counsel
EXHIBIT I: Form of Opinion of the Company's Corporate Counsel
EXHIBIT J: Persons Whose Knowledge Is Attributed to the Company
EXHIBIT K: Center Operations
EXHIBIT L: Form of Supplemental Service Fee Termination Agreement
SCHEDULES
Schedule 4.1(b) Organization of the Company
Schedule 4.2 Capitalization of the Company
Schedule 4.6 Consents
Schedule 4.7 Subsidiaries
Schedule 4.8 Employee Benefit Plans and Other Agreements
Schedule 4.11 Absence of Undisclosed Liabilities: Guarantees
Schedule 4.12(x) Absence of Certain Changes
Schedule 4.13(a) Compliance With Laws
Schedule 4.14 Litigation
Schedule 4.16 Taxes
Schedule 4.17 Environmental Matters
Schedule 4.19 Real Property and Leaseholds
Schedule 4.20 Tangible Assets
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Schedule 4.21 Contracts and Commitments
Schedule 4.23 Labor Matters
Schedule 4.25 Intellectual Property
Schedule 4.26 Securities Offerings
Schedule 4.30 Indebtedness
Schedule 4.31 Transactions with Affiliates
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of
October 14, 1997, is by and among INSIGHT HEALTH SERVICES CORP., a Delaware
corporation (the "Company"), and CARLYLE PARTNERS II, L.P., a Delaware limited
partnership, CARLYLE PARTNERS III, L.P., a Delaware limited partnership, CARLYLE
INTERNATIONAL PARTNERS II, L.P., a Cayman Islands exempted limited partnership,
CARLYLE INTERNATIONAL PARTNERS III, L.P., a Cayman Islands exempted limited
partnership, C/S INTERNATIONAL PARTNERS, a Cayman Islands general partnership,
STATE BOARD OF ADMINISTRATION OF FLORIDA, a separate account maintained pursuant
to an Investment Management Agreement dated as of September 6, 1996 between the
State Board of Administration of Florida, Carlyle Investment Group, L.P. and
Carlyle Investment Management, L.L.C., CARLYLE INVESTMENT GROUP, L.P., a
Delaware limited partnership, CARLYLE-INSIGHT INTERNATIONAL PARTNERS, L.P., a
Cayman Islands exempted limited partnership, and CARLYLE-INSIGHT PARTNERS, L.P.,
a Delaware limited partnership (collectively, the "Purchaser").
RECITALS
WHEREAS, the Company desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Company, for the consideration set forth
in Section 2.2 hereof, (i) an aggregate of 25,000 shares (the "Preferred
Shares") of its newly issued Series B Preferred Stock, each share of which
Series B Preferred Stock shall be convertible (a) initially into one hundred
nineteen and four hundred three one-thousandths (119.403) shares of Common Stock
at an initial conversion price of $8.375 per share of such Common Stock (so that
all of the shares of Series B Preferred Stock purchased by the Purchaser shall
be convertible initially into an aggregate of 2,985,075 shares of such Common
Stock), having the rights, designations and preferences set forth in the Series
B Certificate of Designation or (b) after the Type B Trigger Date, into shares
of Series D Preferred Stock having the rights, designations and preferences set
forth in the Series D Certificate of Designation on the terms set forth in the
Series D Certificate of Designation and (ii) the Warrants; and
WHEREAS, contemporaneously with the Purchaser's acquisition of the
Securities, and as a condition to such acquisition, General Electric Company
shall (i) acquire warrants (the "GE Warrants") initially to purchase 250,000
shares of Common Stock at an initial exercise price of $10.00 per share and
(ii) terminate the Supplemental Service Fee described in the Proxy Statement in
exchange for 7,000 shares of newly issued Series C Preferred Stock, each share
of which Series C Preferred Stock shall be convertible (a) initially into one
hundred nineteen and four hundred three one-thousandths (119.403) shares of
Common Stock at an initial conversion price of $8.375 per share of Common Stock
(so that such shares of Series C Preferred Stock acquired in respect of such
termination would be initially convertible into an aggregate of 835,821 shares
of Common Stock, at an initial conversion price of $8.375 per share) or (b)
after the Type B Trigger Date, into shares of Series D Preferred Stock having
the rights, designations and
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preferences set forth in the Series D Certificate of Designation on the terms
set forth in the Series D Certificate of Designation; and
WHEREAS, contemporaneously with the Purchaser's acquisition of the
Securities, and as a condition to such acquisition, the Company shall execute
and deliver definitive documents with respect to the Credit Facility, and
funding shall occur upon filing by the lender under the Credit Facility of
appropriate UCC filings and certain other conditions set forth in the
documentation related to the Credit Facility, and upon such funding, certain of
the proceeds of the Credit Facility and the investment described herein shall be
used by the Company to repay (i) Seventy Million Seven Hundred One Thousand Six
Hundred Eleven Dollars and Seventy-Five Cents ($70,701,611.75) in principal,
interest and fees, plus additional accrued and unpaid interest associated
therewith at the rate of Nineteen Thousand, Two Hundred Ninety-Six Dollars
($19,296) per day for each day after October 14, 1997, of Indebtedness of the
Company and certain of its Affiliates to GE pursuant to the Master Debt
Restructuring Agreement, and (ii) certain other Indebtedness; and
WHEREAS, the parties contemplate that at the Second Closing, GE shall
convert all of its 2,501,760 shares of Series A Preferred Stock into 20,953
shares of newly issued Series C Preferred Stock.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 DEFINED TERMS.
As used herein, the terms below shall have the following meanings:
"AFFILIATE" of any specified Person means (a) any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person or (b) the beneficial owner of ten
percent (10%) or more of the voting securities of such Person). For purposes of
this definition, "control" (including, with correlative meanings, the terms:
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"AGREEMENT" means this Securities Purchase Agreement, together with
all Schedules and Exhibits referenced herein, as the same hereinafter may be
amended from time to time.
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"AMENDED BYLAWS" means the Amended and Restated Bylaws of the Company,
in the form attached hereto as Exhibit A.
"ANCILLARY AGREEMENTS" means the Warrant Agreement and the
Registration Rights Agreement, as each hereinafter may be amended from time to
time.
"APPLICABLE LAW" means any statute, law, rule or regulation or any
judgment, order, writ, injunction, decree or financial assessment (subject, in
the case of financial assessments, to the exhaustion of appeals) of any
Governmental Entity to which a specified Person or its properties or assets, or
its officers, directors, employees, consultants or agents (in their capacities
as such) is subject, including, without limitation, all such statutes, laws,
rules, regulations, judgments, orders, writs, injunctions, decrees and financial
assessments relating to, without limitation, energy regulation, public utility
regulation, securities regulation, consumer protection, equal opportunity,
health care industry regulation, public health and safety, motor vehicle safety
or standards, third party reimbursement (including Medicare and Medicaid),
environmental protection, fire, zoning, building and occupational safety and
health matters and laws respecting employment practices, employee documentation,
terms and conditions of employment and wages and hours.
"APPROVALS" has the meaning set forth in Section 4.13 of this
Agreement.
"BENEFIT ARRANGEMENT" means any employment, consulting, severance or
other similar contract, arrangement or policy and each plan, arrangement
(written or oral), program, agreement or commitment providing for insurance
coverage (including without limitation any self-insured arrangements), workers'
compensation, disability benefits, supplemental unemployment benefits, vacation
benefits, retirement benefits, life, health or accident benefits (including
without limitation any "voluntary employees' beneficiary association" as defined
in Section 501(c)(9) of the Code providing for the same or other benefits) or
for deferred compensation, profit-sharing bonuses, stock options, stock
appreciation rights, stock purchases or other forms of incentive compensation or
post-retirement insurance, compensation or benefits which (a) is not a Welfare
Plan, Pension Plan or Multiemployer Plan, (b) is entered into, maintained,
contributed to or required to be contributed to, as the case may be, by the
Company or an ERISA Affiliate or under which the Company or any ERISA Affiliate
may incur any liability, and (c) covers any present or former employees,
directors or consultants of the Company (with respect to their relationship with
such entities).
"BOARD OF DIRECTORS" means the board of directors of the Company as it
is constituted from time to time in accordance with the terms of this Agreement,
the Certificate of Incorporation and the Amended Bylaws.
"BYLAWS" means the Bylaws of the Company as in effect on the date
hereof.
"BUSINESS" means the provision of diagnostic services to the
healthcare industry.
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"CAPITAL BUDGET PLAN" means, for each Fiscal Year, the plan of the
Company for making Capital Expenditures for such Fiscal Year which has been
approved for such Fiscal Year by either the Executive Committee or a
Supermajority Vote of the Board of Directors.
"CAPITAL EXPENDITURES" means, for any period, expenditures made by the
Company or any of its Subsidiaries to acquire or construct fixed assets, plant
and Fixtures and Equipment (including additions, improvements, upgrades and
replacements, but excluding repairs) during such period calculated in accordance
with GAAP.
"CAPITAL LEASE OBLIGATION" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a lease that
would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership, partnership
interests (whether general or limited) and (iv) any other interest or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CARLYLE AFFILIATES" means the Purchaser, TC Group, L.L.C., and any
investor in any entity comprising the Purchaser or TC Group, L.L.C. on the date
hereof.
"CARLYLE TRANSACTION EXPENSES" means the reasonable fees and expenses
incurred by the Purchaser and any Carlyle Affiliate (including, but not limited
to, reasonable fees and expenses of legal counsel, accountants, consultants and
travel expenses in connection with the preparation of this Agreement and the
Purchaser's due diligence examination) relating to this Agreement and the
Transaction, which, together with the GE Transaction Expenses (as such term is
defined in the GE Purchase Agreement) shall be in an amount not to exceed
$500,000.
"CENTER OPERATIONS" means the operations of the Company and its
Subsidiaries at the locations identified in Exhibit K hereto.
"CERTIFICATE OF INCORPORATION" means the certificate of incorporation
(as defined in Section 104 of the Delaware General Corporation Law) of the
Company in effect on the date hereof, including, without limitation, the Series
B, the Series C and the Series D Certificates of Designation.
"CHAMPUS" has the meaning set forth in Section 4.34 of this Agreement.
"CHANGE OF CONTROL" shall be deemed to have occurred (i) at such time
as any person (as defined in Section 13(d)(3) of the Exchange Act but excluding
GE and the Purchaser, individually and collectively) at any time shall directly
or indirectly acquire more than 40% of the voting power of the Common Stock of
the Company, (ii) at such time as during any one (1) year period, individuals
who at the beginning of such period constitute the Company's Board of Directors
cease to constitute at least a majority of such Board of Directors (provided,
however, that a change in directors upon a Type B Event Date shall not be deemed
to cause a Change of
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Control pursuant to this clause (ii)), (iii) upon consummation of a merger or
consolidation of the Company into or with another Person in which the
stockholders of the Company immediately prior to the consummation of such
transaction shall own fifty percent (50%) or less of the voting securities of
the surviving corporation (or the parent corporation of the surviving
corporation where the surviving corporation is wholly-owned by the parent
corporation) immediately following the consummation of such transaction, or (iv)
the sale, transfer or lease of all or substantially all of the assets of the
Company, in any of cases (i), (ii), (iii) or (iv) in a single transaction or
series of related transactions; PROVIDED, that no Change of Control hereunder
with respect to the Company shall be deemed to occur solely by reason of (x) the
ownership by Carlyle or any Carlyle Affiliate thereof or GE or its Affiliates of
the Series C Preferred Stock or any Affiliate thereof of any Capital Stock of
the Company or (y) the conversion of shares of Series B Preferred Stock into
either Series D Preferred Stock (and any change in the Board of Directors
incident thereto) or Common Stock, or (z) the conversion of shares of Series D
Preferred Stock into Common Stock. .
"CLAIM" has the meaning set forth in Section 8.5 of this Agreement.
"CLAIM NOTICE" has the meaning set forth in Section 8.5 of this
Agreement.
"CLOSING" means the time at which this Agreement is executed and
delivered by the parties, the Purchaser purchases the Securities and GE
purchases the GE Warrants and exchanges the Supplemental Service Fee for Series
C Preferred Stock.
"CLOSING DATE" means the date on which the Closing occurs.
"CODE" means the Internal Revenue Code of 1986, as it may be amended
from time to time.
"COMMISSION" means the United States Securities and Exchange
Commission.
"COMMON EQUITY" means all shares now or hereafter authorized of any
class of common stock of the Company (including the Common Stock) and any other
stock of the Company, however designated, authorized after the date hereof,
which has the right (subject always to prior rights of any class or series of
preferred stock) to participate in any distribution of the assets or earnings of
the Company without limit as to per share amount, but shall not include the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock or the Series D Preferred Stock.
"COMMON STOCK" has the meaning set forth in Section 4.2(a) of this
Agreement.
"COMMON STOCK DIRECTOR" has the meaning set forth in the Certificate
of Incorporation.
"COMPANY" has the meaning set forth in the Preamble to this Agreement,
and, in addition, with respect to past events, means the Company and its
predecessors.
"CONVERSION DIRECTOR" has the meaning set forth in the Amended Bylaws.
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"CONVERSION PRICE" means $8.375 per share of Common Stock, subject to
adjustment as set forth in the Series B Certificate of Designation.
"CONVERTIBLE SECURITIES" shall mean any stock or securities directly
or indirectly convertible into or exchangeable for Common Equity, including,
without limitation, any exchangeable debt securities.
"CREDIT FACILITY" means the credit facility provided to the Company
pursuant to the terms of the Credit Agreement dated as of October 14, 1997 among
the Company, certain subsidiaries, as guarantors, certain financial institutions
party thereto and NationsBank, N.A., as Agent.
"CURRENT CUSTOMER" has the meaning set forth in Section 4.21 of this
Agreement.
"ELIGIBLE HOLDER" has the meaning set forth in Section 6.4 of this
Agreement.
"ELIGIBLE SECURITIES" means (i) the Series B Conversion Stock, the
Series C Conversion Stock and the Series D Conversion Stock, (ii) the Warrants
and (iii) any Common Stock of the Company issued or issuable in respect of the
Securities or other securities issued or issuable pursuant to the conversion of
the Securities upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event. Securities shall cease to constitute "Eligible
Securities" at such time that they are sold or transferred in a transaction
wherein the transferee does not acquire "restricted securities" within the
meaning of Rule 144 promulgated under the Securities Act.
"EMPLOYEE PLANS" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"EMPLOYMENT AGREEMENTS" has the meaning set forth in Section 4.8 of
this Agreement.
"ENCUMBRANCE" means any claim, lien, pledge, option, charge, easement,
security interest, right-of-way, encumbrance or other right of third parties,
and, with respect to any securities, any agreements, understandings or
restrictions affecting the voting rights or other incidents of record or
beneficial ownership pertaining to such securities.
"ENVIRONMENTAL CONDITION" means the Release or threatened Release of
any Hazardous Material (whether or not upon a Facility or any former facility or
other property and whether or not such Release constituted at the time thereof a
violation of any Environmental Law) as a result of which the Company has or
would reasonably be expected to become liable to any Person or by reason of
which any Facility, any former facility or any of the assets of the Company may
suffer or be subjected to any Encumbrances.
"ENVIRONMENTAL LAWS" means any and all foreign, federal, state, local
or municipal laws, rules, orders, regulations, statutes, ordinances, codes,
legally binding decrees or other requirements of any Governmental Entity
(including, without limitation, common law) regulating, relating to or imposing
liability or standards of conduct concerning protection of the environment
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or of human health relating to exposure of any kind of Hazardous Materials, as
have been, are now or may at any time hereafter be in effect.
"ENVIRONMENTAL PERMITS" means any and all permits, licenses,
registrations, notifications, exemptions and any other authorizations required
under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, a member of an "affiliated service group" with or otherwise
required to be aggregated with the Company, as set forth in Section 414(b), (c),
(m) or (o) of the Code.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FACILITY" or "FACILITIES" means one or more of the offices and
buildings and all other real property and related facilities which are owned,
leased or operated by the Company or any Subsidiary.
"FEDERAL HEALTH CARE PROGRAM" has the meaning set forth in Section
4.35 hereof.
"FINANCIAL STATEMENTS" has the meaning set forth in Section 4.10
hereof.
"FISCAL YEAR" means each year ending June 30, or any other fiscal year
as approved by the Board of Directors.
"FIXTURES AND EQUIPMENT" means all of the furniture, fixtures,
furnishings, machinery, equipment and other tangible assets owned by the Company
or any Subsidiary that are material to the conduct of their businesses as
currently conducted.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board, which are in effect as of the date of
this Agreement.
"GE" means General Electric Company, a New York corporation, and its
Affiliates.
"GE PURCHASE AGREEMENT" means that certain Securities Purchase
Agreement, of even date herewith, by and between the Company and GE in respect
of the Series C Preferred Stock and the GE Warrants.
"GE WARRANT AGREEMENT" means that certain Warrant Agreement by and
between the Company and GE substantially in the form attached hereto as Exhibit
G pursuant to which the Company shall issue the GE Warrants to GE.
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"GE WARRANTS" means the warrants to purchase Common Stock to be
acquired by GE at the Closing.
"GE WARRANT SHARES" means the Common Stock issuable to GE upon the
exercise of the GE Warrants.
"GOVERNMENTAL ENTITY" means any court or tribunal in any jurisdiction
(domestic or foreign) or any federal, state or local public, governmental or
regulatory body, agency, department, commission, board, bureau or other
authority or instrumentality (domestic or foreign).
"HAZARDOUS MATERIALS" means any hazardous substance, gasoline or
petroleum (including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, ureaformaldehyde insulation, asbestos or
asbestos-containing materials, pollutants, contaminants, radioactivity and any
other materials or substances of any kind, whether solid, liquid or gas, and
whether or not any such substance is defined as hazardous under any
Environmental Law, that is regulated pursuant to any Environmental Law or that
could give rise to liability under any Environmental Law.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"INDEBTEDNESS" means, as to any Person without duplication, (a) all
items which, in accordance with GAAP, would be included as a liability on the
balance sheet of such Person and its Subsidiaries (including any obligation of
such Person to the issuer of any letter of credit for reimbursement in respect
of any drafts drawn under such letter of credit), excluding (i) obligations in
respect of deferred taxes and deferred employee compensation and benefits, and
(ii) anything in the nature of Capital Stock, surplus capital and retained
earnings; (b) Capital Lease Obligations of such Person; and (c) all obligations
of other Persons that such Person has guaranteed, including, without limitation,
all obligations of such Person consisting of recourse liabilities with respect
to accounts receivable sold or otherwise disposed of by such Person, PROVIDED,
HOWEVER, that the term Indebtedness shall not include trade accounts payable
(other than for borrowed money) arising in, and accrued expenses incurred in,
the ordinary course of business of such Person, provided the same are not more
than sixty (60) days overdue or are being contested in good faith.
"INDEMNIFIED PARTY" has the meaning set forth in Section 8.2 of this
Agreement.
"INDEPENDENT" means any person who is not an officer or employee of
the Company or any Subsidiary or other Affiliate of the Company or otherwise
paid any compensation or remuneration by the Company or any Subsidiary or other
Affiliate of the Company other than director's fees.
"JOINT DIRECTOR" has the meaning set forth in Section 6.13 of this
Agreement.
"LIABILITY" or "LIABILITIES" means, with respect to any Person, any
liability or obligation of such Person of any kind, character or description,
whether known or unknown, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, secured or unsecured,
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joint or several, due or to become due, vested or unvested, executory,
determined, determinable or otherwise and whether or not the same is required to
be accrued on the financial statements of such Person.
"LIQUIDATING EVENT" means (i) the commencement by the Company of a
voluntary case under the bankruptcy laws of the United States, as now or
hereafter in effect, or, if an involuntary case against the Company has been
commenced, the decision by the Company not to timely controvert such petition
and seek its prompt dismissal; (ii) the commencement by the Company of any
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company or the
adoption of a plan of liquidation; (iii) if any proceeding set forth in the
preceding clause has been commenced against the Company, the decision by the
Company not to controvert such proceeding and seek its prompt dismissal; or
(iv) any Change of Control (A) pursuant to clauses (i) and (ii) of the
definition thereof if such Change of Control occurred in or as a result of a
transaction or series of related transactions approved by the Board of
Directors, or (B) pursuant to clauses (iii) or (iv) of the definition of Change
of Control; in any of cases (i) through (iv) above, in a single transaction or
series of related transactions.
"LOSSES" has the meaning set forth in Section 8.2 of this Agreement.
"MARKET PRICE" means as to any security the average of the closing
prices of any such security's sales on all domestic securities exchanges on
which such security may at the time be listed, or, if there have been no sales
on any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
security is not so listed, the average of the representative bid and asked
prices quoted in Nasdaq as of 4:00 P.M., New York time, on such day, or, if on
any day such security is not quoted in Nasdaq, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of twenty-one
(21) business days consisting of the day as of which "Market Price" is being
determined and the twenty (20) consecutive business days prior to such day;
provided that if such security is listed on any domestic securities exchange the
term "business days" as used in this sentence means business days on which such
exchange is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in Nasdaq or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined by the Company and approved by the Purchaser; provided that if such
parties are unable to reach agreement within a reasonable period of time, such
fair value shall be determined by an appraiser jointly selected by the Company
and the Purchaser. The determination of such appraiser shall be final and
binding on the Company and the Purchaser, and the fees and expenses of such
appraiser shall be paid by the Company.
"MASTER DEBT RESTRUCTURING AGREEMENT" means that certain Master Debt
Restructuring Agreement dated as of June 26, 1996 by and among GE, General
Electric Capital Corporation, the Company, American Health Services Corp. Maxum
Health Corp. and certain subsidiaries of Maxum Health Corp., as amended through
the date hereof.
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"MATERIAL ADVERSE EFFECT" with respect to any Person means a material
adverse effect on the results of operations, condition (financial or otherwise),
assets, liabilities (whether absolute, accrued, contingent or otherwise) or
business of such Person and its Subsidiaries (if any), taken as a whole.
"MATERIAL AGREEMENTS" has the meaning set forth in Section 4.21 of
this Agreement.
"MERGER AGREEMENT" means that certain Agreement and Plan of Merger
dated as of February 26, 1996 by and among the Company, American Health Services
Corp., AHSC Acquisition Corp., Maxum Health Corp. and MXHC Acquisition Corp.
"MOBILE OPERATIONS" means all operations of the Company and its
Subsidiaries other than Center Operations.
"MULTIEMPLOYER PLAN" means any "multiemployer plan," as defined in
Section 400l(a)(3) or 3(37) of ERISA, which (a) the Company or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or, after September 25, 1980, maintained, administered, contributed to or
was required to contribute to, or under which the Company or any ERISA Affiliate
may incur any liability and (b) covers any employee or former employee of the
Company or any ERISA Affiliate (with respect to their relationship with such
Persons).
"OPERATING LEASE" shall mean any lease with respect to which the
obligations of the lessee thereunder are, at the time any determination thereof
is to be made, not required to be capitalized on the lessee's balance sheet in
accordance with GAAP.
"OPTION" shall mean any rights or options to subscribe for or purchase
Common Equity or Convertible Securities.
"ORDINARY COURSE OF BUSINESS," for purposes of Section 6.12(s) of this
Agreement, means the ordinary course of business for a company engaged in the
business of providing diagnostic services to the health care industry; provided,
however, that all sales by the Company or any Subsidiary, as the case may be, of
inventory and sales of Fixtures and Equipment no longer used or useful in such
business shall be deemed to be in the Ordinary Course of Business.
"PARITY SECURITIES" has the meaning set forth in Section 2 of the
Series B Certificate of Designation.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) the Company or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, within the five (5) years prior to the Closing Date,
maintained, administered, contributed to or was required to contribute to, or
under which the Company or any ERISA Affiliate may incur any liability and
(b) covers any
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employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such Persons).
"PERMITS" means all licenses, permits, orders, consents, approvals,
registrations, authorizations, qualifications and filings required by any
federal, state, local or foreign law or regulation or governmental or regulatory
bodies and all industry or other non-governmental self-regulatory organizations.
"PERMITTED ENCUMBRANCES" means (a) any mechanic's or materialmen's
lien or similar Encumbrances with respect to amounts not yet due and payable or
which are being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established, (b) Encumbrances for Taxes not yet
due and payable or which are being contested in good faith by appropriate
proceedings, for which appropriate reserves have been established,
(c) easements, licenses, covenants, rights of way and similar Encumbrances
which, individually or in the aggregate, would not materially and adversely
affect the marketability or value of the property encumbered thereby or
materially interfere with the operations of the Business and (d) Encumbrances
arising under the Credit Facility.
"PERSON" means any individual, corporation, partnership, limited
partnership, limited liability partnership, joint venture, association, limited
liability company, joint-stock company, trust, unincorporated organization or
government or agency or political subdivision thereof (including any subdivision
or ongoing business of any such entity or substantially all of the assets of any
such entity, subdivision or business).
"PRE-CLOSING ENVIRONMENTAL CONDITIONS" means any Environmental
Condition occurring or in existence on or prior to the Closing Date.
"PREFERRED SHARES" has the meaning set forth in the Recitals to this
Agreement.
"PREFERRED STOCK DIRECTOR" has the meaning set forth in the Amended
Bylaws.
"PROCEEDING" means any action, suit, claim, litigation, legal or other
proceeding, whether civil, criminal, administrative, arbitrative or
investigative, any appeal in such an action, suit, claim, litigation, legal or
other proceeding, and any investigation that could reasonably be expected to
lead to such an action, suit, claim, litigation, legal or other proceeding, not
including an audit other than an audit by a Governmental Entity pursuant to any
Applicable Laws relating to health care, the health care industry and the
provision of health care services, third party reimbursement (including Medicare
and Medicaid), public health and safety or wrongful death and medical
malpractice, which shall be included in this definition of "Proceeding."
"PROPRIETARY RIGHTS" has the meaning set forth in Section 4.25 of this
Agreement.
"PROXY STATEMENT" means that certain Maxum Health Corp. and American
Health Services Corp. Joint Proxy Statement for Special Meeting of Stockholders
to be held June 25, 1996, dated May 9, 1996.
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"PURCHASER" has the meaning set forth in the Preamble to this
Agreement, and shall include the Purchaser's successors and permitted assigns.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement by and among the Company and the Purchaser substantially in the form
attached hereto as Exhibit B.
"REGULATION D" has the meaning set forth in Section 4.26 of this
Agreement.
"RELEASE" means and includes any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping or
disposing into the environment or the workplace of any Hazardous Materials, and
otherwise as defined in any Environmental Law.
"SEC FILINGS" has the meaning set forth in Section 4.9 of this
Agreement.
"SECOND CLOSING" means the time at which GE converts all of its Series
A Preferred Stock into Series C Preferred Stock.
"SECOND CLOSING DATE" means the business day after all waiting periods
with respect to GE's filing of a notification under the HSR Act with respect to
the transactions to occur at the Second Closing have expired or have been
terminated and neither the Federal Trade Commission nor the Department of
Justice shall have sent a letter giving notice of its intention to initiate
legal action to prevent such transactions or to seek further information.
"SECURITIES" means the Preferred Shares and the Warrants.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SENIOR MANAGEMENT" means such members of the senior management of the
Company as are proposed by the President of the Company and accepted by the
Series B Directors and the Series C Director, which acceptance shall not
unreasonably be withheld.
"SENIOR SECURITIES" has the meaning set forth in Section 2 of the
Series B Certificate of Designation.
"SERIES A PREFERRED STOCK" means the Convertible Preferred Stock,
Series A, par value $0.001 per share, of the Company, all of the outstanding
shares of which as of the date of this Agreement are held by GE.
"SERIES B CERTIFICATE OF DESIGNATION" means the Certificate of
Designation, Preferences and Rights of the Series B Preferred Stock, in the form
attached hereto as Exhibit C.
"SERIES B CONVERSION SHARES" means the shares of Common Stock
issuable, upon certain conditions, by the Company to the Purchaser in respect of
the Series B Preferred Stock.
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"SERIES B PREFERRED STOCK" means the Convertible Preferred Stock,
Series B, par value $0.001 per share, of the Company, with the rights,
preferences and privileges set forth in the Series B Certificate of Designation.
"SERIES C CERTIFICATE OF DESIGNATION" means the Certificate of
Designation, Preferences and Rights of the Series C Preferred Stock, in the form
attached hereto as Exhibit D.
"SERIES C CONVERSION SHARES" means the shares of Common Stock
issuable, upon certain conditions, by the Company to GE in respect of the Series
C Preferred Stock.
"SERIES C PREFERRED STOCK" means the Convertible Preferred Stock,
Series C, par value $0.001 per share, of the Company, with the rights,
preferences and privileges set forth in the Series C Certificate of Designation.
"SERIES D CERTIFICATE OF DESIGNATION" means the Certificate of
Designation, Preferences and Rights of the Series D Preferred Stock, in the form
attached hereto as Exhibit E.
"SERIES D CONVERSION SHARES" means the shares of Common Stock
issuable, upon certain conditions, by the Company to the Purchaser in respect of
the Series D Preferred Stock.
"SERIES D PREFERRED STOCK" means the Convertible Preferred Stock,
Series D, par value $0.001 per share, of the Company, with the rights,
preferences and privileges set forth in the Series D Certificate of Designation.
"SPECIAL CORPORATE EVENT" shall be deemed to have occurred (i) at
such time as any person (as defined in Section 13(d)(3) of the Exchange Act),
except the Purchaser, any Carlyle Affiliate, GE and/or any Affiliate of GE, at
any time shall directly or indirectly acquire more than twenty percent (20%) of
the voting power of the Common Stock of the Company, (ii) at such time as during
any one (1) year period, individuals who at the beginning of such period
constitute the Company's Board of Directors cease to constitute at least a
majority of such Board (provided, however, that a change in directors upon a
Type B Event Date shall not be deemed to cause a Special Corporate Event
pursuant to this clause (ii)), (iii) upon consummation of a merger or
consolidation of the Company into or with another Person in which the
stockholders of the Company immediately prior to the consummation of such
transaction shall own fifty percent (50%) or less of the voting securities of
the surviving corporation (or the parent corporation of the surviving
corporation where the surviving corporation is wholly-owned by the parent
corporation) immediately following the consummation of such transaction, or (iv)
the sale, transfer or lease of all or substantially all of the assets of the
Company, in any of cases (i), (ii), (iii) or (iv) in a single transaction or
series of related transactions.
"SSA" has the meaning set forth in Section 4.34 of this Agreement.
"STATE HEALTH CARE PROGRAM" has the meaning set forth in Section 4.35
of this Agreement.
"SUBSIDIARY" means (a) any corporation of which at least a majority in
interest of the outstanding voting stock (having by the terms thereof voting
power under ordinary
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circumstances to elect a majority of the directors of such corporation,
irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned or
controlled by the Company and/or by one or more Subsidiaries of the Company, or
(b) any corporate or non-corporate entity in which the Company and/or one or
more Subsidiaries of the Company, directly or indirectly, at the date of
determination thereof, has an ownership interest and one hundred percent (100%)
of the revenue of which is included in the consolidated financial reports of the
Company consistent with GAAP. With respect to past events, a reference to a
Subsidiary shall be a reference to such Subsidiary and its predecessors.
"SUPERMAJORITY VOTE" means the affirmative vote of six (6) directors
of the Company with respect to the matter subject to such vote.
"SUPERVOTING SECURITIES" means any class or series of the Company's
Capital Stock the holders of which have the right to cast more than one vote per
share and/or have the right to elect one or more members of the Board of
Directors, voting as a class or series.
"SUPPLEMENTAL SERVICE FEE" has the meaning set forth in the Recitals
hereof.
"SUPPLEMENTAL SERVICE FEE TERMINATION AGREEMENT" means the
Supplemental Service Fee Termination Agreement between the Company and the
Purchaser substantially in the form attached hereto as Exhibit L.
"TAX" or "TAXES" means any federal, state, local or foreign net or
gross income, gross receipts, license, payroll, employment, excise, severance,
stamp, occupation, premium, (including taxes under Section 59A of the Code),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated or other tax, governmental fee or like assessment or charge of any
kind whatsoever, including any interest, penalty or addition thereto, whether
disputed or not, imposed by any Governmental Entity or arising under any tax law
or agreement, including, without limitation, any joint venture or partnership
agreement.
"TAX RETURN" means any return, declaration, report, claim for refund
or information or return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendments thereof.
"THIRD PARTY NOTICE" has the meaning set forth in Section 8.5 of this
Agreement.
"TRANSACTION" means, taken together, the transactions contemplated
under this Agreement and the GE Purchase Agreement, including, without
limitation, the transactions that will occur at the Closing, the initial funding
of the Credit Facility and the Second Closing.
"TYPE B CONVERSION" has the meaning set forth in the Series B
Certificate of Designation and the Series C Certificate of Designation.
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"TYPE B EVENT DATE" has the meaning set forth in the Series B
Certificate of Designation and the Series C Certificate of Designation.
"TYPE B TRIGGER DATE" means the date one year after the initial
borrowing of funds under the Credit Facility.
"WARRANT AGREEMENT" means that certain Warrant Agreement by and
between the Company and the Purchaser substantially in the form attached hereto
as Exhibit F pursuant to which the Company shall issue the Warrants to the
Purchaser.
"WARRANT CERTIFICATES" means one or more warrant certificates
evidencing the Warrants, in the form attached as an exhibit to the Warrant
Agreement.
"WARRANTS" means 250,000 warrants, issued pursuant to the Warrant
Agreement, to purchase, initially, an equivalent number of shares of Common
Stock at an initial exercise price of $10.00 per share, expiring on the date
that is the fifth anniversary of the Closing Date.
"WARRANT SHARES" means the Common Stock issuable upon the exercise of
the Warrants.
"WELFARE PLAN" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, which (a) the Company or any ERISA Affiliate maintains,
administers, contributes to or is required to contribute to, or under which the
Company or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company or any ERISA Affiliate (with respect
to their relationship with such entities).
ARTICLE II
PURCHASE AND SALE OF SECURITIES
2.1 PURCHASE AND SALE OF SECURITIES.
Upon the terms and subject to the conditions contained herein, on the
Closing Date the Company shall sell to the Purchaser and the Purchaser shall
purchase from the Company all of the Securities.
2.2 CONSIDERATION FOR SECURITIES.
Upon the terms and subject to the conditions contained herein, as
consideration for the purchase of the Securities, on the Closing Date the
Purchaser shall pay to the Company an aggregate purchase price in the amount of
$25,000,000 minus the Carlyle Transaction Expenses and minus a private placement
fee of One Hundred Twenty Five Thousand Dollars ($125,000), payable by wire
transfer of immediately available funds to an account designated by the Company
at least 24 hours before the Closing.
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ARTICLE III
CLOSING
3.1 CLOSING.
The Closing shall be held at 10:00 a.m. Los Angeles time on the
Closing Date, at the offices of Gibson, Dunn & Crutcher LLP, 333 South Grand
Avenue, Los Angeles, CA 90071, unless the parties hereto otherwise agree.
3.2 DELIVERIES BY THE COMPANY AT THE CLOSING.
At the Closing, the Company shall issue and deliver to the Purchaser:
(a) Certificates evidencing the Preferred Shares in the names of the
Persons comprising the Purchaser (or their assignees), in the respective amounts
as set forth in a written notice provided to the Company by the Purchaser 24
hours in advance;
(b) The Warrant Certificates in the names of the Persons comprising
the Purchaser (or their assignees), in the respective amounts as set forth in a
written notice provided to the Company by the Purchaser;
(c) The Ancillary Agreements;
(d) The certificates, opinions of counsel and other documents
described in Article VII of this Agreement; and
(e) All such other documents and instruments as the Purchaser or its
counsel shall reasonably request to consummate the Closing.
3.3 DELIVERIES BY THE PURCHASER AT THE CLOSING.
At the Closing, the Purchaser shall deliver to the Company:
(a) Wire transfer of immediately available funds as provided in
Section 2.2;
(b) The Ancillary Agreements;
(c) The certificates, opinions of counsel and other documents
described in Article VII of this Agreement; and
(d) All such other documents and instruments as the Company or its
counsel shall reasonably request to consummate the Closing.
3.4 SECOND CLOSING.
The parties contemplate that the Second Closing shall occur on the
Second Closing Date. At the Second Closing, all of GE's shares of Series A
Preferred Stock shall be converted into Series C Preferred Stock.
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3.5 FORM OF DOCUMENTS AND INSTRUMENTS.
All of the documents and instruments delivered at the Second Closing
shall be in form and substance, and shall be executed and delivered in a manner,
reasonably satisfactory to the respective counsel of the Purchaser and the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Purchaser as follows:
4.1 ORGANIZATION OF THE COMPANY.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has all requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as presently being conducted and as proposed
to be conducted. No actions or Proceedings to dissolve the Company are pending
or, to the Knowledge of the Company, threatened. The copies of the Certificate
of Incorporation and Amended Bylaws heretofore delivered by the Company to TC
Group, L.L.C. are accurate and complete as of the date hereof. The Company is
duly qualified or licensed to do business as a foreign corporation and is in
good standing in each jurisdiction in which the property owned, leased or
operated by it or the conduct of its business requires such qualification or
licensing, except where the failure to do so taken in the aggregate would not
have a Material Adverse Effect on the Company. The Certificate of Incorporation
and the Amended Bylaws of the Company comply in all material respects with
Delaware law.
(b) Each Subsidiary is a corporation or other business entity duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has all requisite power and authority to own,
lease and operate its properties and assets and to carry on its business as
presently being conducted and as proposed to be conducted. Except as set forth
in Schedule 4.1(b), each Subsidiary is duly qualified or licensed to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the property owned, leased or operated by it or the conduct of its business
requires such qualification or licensing, except where the failure to do so
would not have a Material Adverse Effect on the Company. The terms and
provisions of the organizational documents of each Subsidiary comply in all
material respects with the laws of such Subsidiary's jurisdiction of
incorporation.
4.2 CAPITALIZATION OF THE COMPANY.
(a) The authorized Capital Stock of the Company consists of:
(i) Twenty-Five Million (25,000,000) shares of common stock, par value $0.001
per share (the "Common Stock"), Two Million Seven Hundred Fourteen Thousand
Seven Hundred Twenty Five (2,714,725) shares of which will be issued and
outstanding immediately after the Closing Date; (ii) Three Million Five Hundred
Thousand (3,500,000) shares of preferred stock, of which (A) Two Million Five
Hundred One Thousand Seven Hundred Sixty (2,501,760) shares of Series A
Preferred Stock are issued and outstanding as of the date hereof, all of which
shares are expected to be exchanged at
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the Second Closing for shares of Series C Preferred Stock so that no shares of
Series A Preferred Stock are expected to be outstanding immediately after the
Second Closing Date; (B) Twenty Five Thousand (25,000) shares of Series B
Preferred Stock which will be designated and authorized as of the Closing Date,
all of which will be issued and outstanding immediately after the Closing Date;
(C) Twenty Seven Thousand Nine Hundred Fifty Three (27,953) shares of Series C
Preferred Stock which will be designated and authorized as of the Closing Date,
Seven Thousand (7,000) shares of which will be issued and outstanding
immediately after the Closing Date and all of which are expected to be issued
and outstanding immediately after the Second Closing Date; and (D) Six Hundred
Thirty Two Thousand Two Hundred Sixty Six (632,266) shares of Series D Preferred
Stock which will be designated and authorized as of the Closing Date, no shares
of which will be issued and outstanding immediately after the Closing Date. All
outstanding shares of Capital Stock of the Company are fully paid,
non-assessable, free and clear of all Encumbrances and have been issued in
compliance with all state and federal securities laws. Except for the Series B
Preferred Stock, the Series C Preferred Stock and the Series D Preferred Stock,
none of such shares is subject to, nor has been issued in violation of, any
preemptive rights.
(b) The Company has not become subject to any commitment or
obligation, either absolute or conditional, matured or unmatured, vested or not
yet vested, to issue, deliver or sell, or cause to be issued, delivered or sold,
under offers, stock option agreements, stock bonus agreements, stock purchase
plans, incentive compensation plans, warrants, options, calls, conversion rights
or otherwise, any shares of the Capital Stock or other securities of the Company
including securities or obligations convertible into or exchangeable for any
shares of Capital Stock, other equity securities or ownership interests, upon
payment of any consideration or otherwise, except for (i) the commitments and
obligations of the Company pursuant to this Agreement, the Warrant Agreement,
the GE Purchase Agreement, the GE Warrant Agreement, the Series B Certificate of
Designation and the Series C Certificate of Designation; (ii) the issuance, sale
or grant of the options outstanding on the date hereof to Senior Management and
directors of the Company set forth on SCHEDULE 4.2 hereto; (iii) the warrants
outstanding on the date hereof set forth on SCHEDULE 4.2 hereto; (iv) as set
forth on SCHEDULE 4.2 hereto, the number of shares of Capital Stock (all of
which are included in the Two Million Seven Hundred Fourteen Thousand Seven
Hundred Twenty Five (2,714,725) outstanding shares of Common Stock stated in
Section 4.2(a)) as to which the Company would be required to issue new stock
certificates if all stock certificates were now surrendered that represented
shares of Capital Stock of American Health Services Corp. or Maxum Health Corp.
(constituent corporations in the mergers contemplated by the Merger Agreement)
that either were outstanding immediately prior to such mergers or that were
issuable pursuant to any commitment or obligation of either of such constituent
corporations, either absolute or conditional, matured or unmatured, vested or
not yet vested, to issue, deliver or sell, or cause to be issued, delivered or
sold, under offers, stock option agreements, stock bonus agreements, stock
purchase plans, incentive compensation plans, warrants, options, calls,
conversion rights or otherwise; and (v) as set forth on SCHEDULE 4.2, and to the
extent not otherwise described in clause (iv) of this Section 4.2, the number of
shares of Capital Stock of the Company that would be required to be issued if
the surviving corporations of such mergers were to give their written approval
(pursuant to Section 262(k) of the Delaware General Corporation Law), to holders
of shares of Capital Stock of such constituent corporations who exercised their
appraisal rights with respect to such shares, to withdraw such holders'
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demands for appraisal and accept such mergers. Except as provided in this
Agreement, the Company is not a party or subject to any agreement or
understanding and, to the Company's Knowledge, there is no agreement or
understanding between any Persons and/or entities, that affects or relates to
the voting or giving of written consents with respect to any of the Company's
voting securities.
(c) Upon issuance to the Purchaser of the Twenty-Five Thousand
(25,000) shares of Series B Preferred Stock to be issued hereunder, if the
Purchaser were to immediately convert such shares into Common Stock, such shares
of Common Stock would represent Twenty Eight and Four-Tenths Percent (28.4%) of
the Common Stock of the Company on a fully diluted basis. Such percentage shall
equal one hundred (100) times the following quotient. The numerator of such
quotient shall be the number of shares of Common Stock that the Purchaser would
be entitled to receive if the Purchaser were to convert into Common Stock,
immediately following the Closing and pursuant to the terms of the Series B
Certificate of Designation, all of the shares of Series B Preferred Stock the
Purchaser is to receive at the Closing pursuant to the terms of this Agreement.
The denominator of such quotient shall equal the sum of (1) such numerator, plus
(2) the number of shares of Common Stock that would need to be issued if all of
the shares of Series C Preferred Stock to be issued pursuant to the GE Purchase
Agreement (whether issuable at the Closing or at the Second Closing) were
converted into Common Stock, pursuant to the terms of the Series C Certificate
of Designation, plus (3) the number of shares of Common Stock that would need to
be issued if the all of the Warrants and GE Warrants were exercised in full,
plus (4) the maximum number of shares of Common Stock that would need to be
issued if all of the issuances of Capital Stock contemplated in clauses (ii),
(iii), (iv) and (v) of Section 4.2(b) were to occur immediately following the
Closing plus (5) all shares of Common Stock issued and outstanding on the
Closing Date. The calculation in the immediately preceding sentence shall be
made as if all issuances of Common Stock referred to in clauses (1), (2), (3),
(4) and (5) thereof were made immediately following the Closing, whether or not
the Company is or could be under any obligation to issue such shares of Common
Stock immediately following the Closing.
4.3 AUTHORIZATION OF ISSUANCE.
The rights, preferences, privileges and restrictions of the Series B
Preferred Stock are as stated in the Series B Certificate of Designation. The
rights, preferences, privileges and restrictions of the Series C Preferred Stock
are as stated in the Series C Certificate of Designation. The rights,
preferences, privileges and restrictions of the Series D Preferred Stock are as
stated in the Series D Certificate of Designation. Upon consummation of the
Transaction, the Securities acquired by the Purchaser from the Company will be
duly authorized and validly issued, fully paid and non-assessable and not
subject to any preemptive rights except as set forth in the Series B Certificate
of Designation, and the Purchaser will have good and marketable title to such
Securities, free and clear of any Encumbrances or preemptive rights. Upon
consummation of the Transaction, the Series B Conversion Shares and the Series
C Conversion Shares (and the Series D Conversion Shares, which will not be
issued to the extent that Series B Conversion Shares and Series C Conversion
Shares are issued) will be duly authorized and reserved for issuance and upon
conversion in accordance with the terms of the Series B Preferred Stock and the
Series C Preferred Stock (and the Series D Preferred Stock), respectively, will
be validly
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issued, fully paid and non-assessable and not subject to any preemptive rights
except as set forth in the Series B Certificate of Designation and the Series C
Certificate of Designation (and the Series D Certificate of Designation),
respectively, and the Purchaser will have good and marketable title to the
Series B Conversion Shares (and the Series D Conversion Shares), free and clear
of any Encumbrances or preemptive rights. Upon consummation of the Transaction,
the Warrant Shares and the GE Warrant Shares will be duly authorized and
reserved for issuance and, upon exercise of the Warrants or the GE Warrants, as
the case may be, and when issued and paid for in accordance with the terms of
the Warrants or the GE Warrants, as the case may be, will be validly issued,
fully paid and non-assessable and not subject to any preemptive rights, and the
Purchaser will have good and marketable title to the Warrant Shares, free and
clear of any Encumbrances or preemptive rights.
4.4 AUTHORIZATION.
The Company has full corporate power and authority to execute and
deliver this Agreement, the GE Purchase Agreement and the Ancillary Agreements
and to consummate the Transaction. The execution and delivery by the Company of
this Agreement, the GE Purchase Agreement and the Ancillary Agreements and the
consummation by it of the Transaction, have been duly authorized by all
necessary corporate action of the Company. This Agreement, the GE Purchase
Agreement and each Ancillary Agreement has been duly executed and delivered by
the Company and each constitutes a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that such enforceability may be limited by (i) applicable bankruptcy,
insolvency, reorganization, moratorium, and similar laws affecting creditors'
rights generally, and (ii) general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law). No
approval or consent of the Company's stockholders for this Agreement, the GE
Purchase Agreement, the Ancillary Agreements or the consummation of the
Transaction is required.
4.5 NONCONTRAVENTION.
The execution and delivery by the Company of this Agreement, the GE
Purchase Agreement and the Ancillary Agreements and the consummation by it of
the Transaction do not and will not (i) conflict with or result in a violation
of any provision of the Certificate of Incorporation or the Amended Bylaws, or
the charter, bylaws or other governing instruments of any Subsidiary,
(ii) materially conflict with or result in a material violation of any provision
of, constitute (with or without the giving of notice or the passage of time or
both) a material default under or give rise (with or without the giving of
notice or the passage of time or both) to any loss of material benefit or of any
right of termination, cancellation or acceleration under, any Material
Agreement, (iii) result in the creation or imposition of any material
Encumbrance upon the properties of the Company or any Subsidiary, or
(iv) violate in any material respect any Applicable Law binding upon the Company
or any Subsidiary.
4.6 CONSENTS.
No material consent, approval, order, authorization of or declaration,
filing or registration with any Governmental Entity is required to be obtained
or made by the Company or
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any Subsidiary in connection with the execution and delivery by the Company of
this Agreement, the GE Purchase Agreement and the Ancillary Agreements or the
consummation of the Transaction, other than (a) compliance with any applicable
requirements of the Securities Act; (b) compliance with any applicable
requirements of the Exchange Act; (c) compliance with any applicable state
securities laws and (d) compliance with applicable provisions of the HSR Act.
Except as set forth on SCHEDULE 4.6, no material consent or approval of any
Person is required to be obtained or made by the Company or any Subsidiary in
connection with the execution and delivery by the Company of this Agreement, the
GE Purchase Agreement and the Ancillary Agreements or the consummation of the
Transaction.
In addition, no consent, approval, order, authorization of or
declaration, filing or registration with any Governmental Entity is required to
be obtained or made by the Company or any Subsidiary that could affect the
validity of the issuance of the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock, the Warrants, the GE Warrants, the Warrant
Shares or the GE Warrant Shares, other than (a) compliance with any applicable
requirements of the Securities Act; (b) compliance with any applicable
requirements of the Exchange Act; and (c) compliance with any applicable state
securities laws; and (d) compliance with applicable provisions of the HSR Act.
Except as set forth on SCHEDULE 4.6, no consent or approval of any Person is
required to be obtained or made by the Company or any Subsidiary that could
affect the validity of the issuance of the Series B Preferred Stock, the Series
C Preferred Stock, the Series D Preferred Stock, the Warrants, the GE Warrants,
the Warrant Shares or the GE Warrant Shares.
4.7 SUBSIDIARIES.
(a) Except as otherwise set forth on SCHEDULE 4.7, the Company does
not own, directly or indirectly, more than five percent (5%) of the Capital
Stock or other securities of any Person or have any direct or indirect equity or
ownership interest of more than five percent (5%) in any other Person, other
than its Subsidiaries. SCHEDULE 4.7 lists each Subsidiary as of the date
hereof, its respective jurisdiction of incorporation and the jurisdictions in
which it is qualified to do business, the number of shares, partnership or other
equity interests and the percentage ownership interest held by the Company in
each such Subsidiary. Except as otherwise indicated on SCHEDULE 4.7, no actions
or other Proceedings to dissolve any Subsidiary are pending.
(b) Except as otherwise indicated on SCHEDULE 4.7, all the
outstanding Capital Stock or other equity interests of each Subsidiary is owned
directly or indirectly by the Company, free and clear of all Encumbrances and
restrictions on voting, sale or disposition. All outstanding shares of Capital
Stock of each Subsidiary have been validly issued and are fully paid and
non-assessable. No shares of Capital Stock or other equity interests of any
Subsidiary are subject to, nor have any been issued in violation of, preemptive
or similar rights.
(c) Except for shares of common stock owned by the Company or any
Subsidiary and as set forth on SCHEDULE 4.7, there are outstanding (i) no shares
of Capital Stock or other voting securities of any Subsidiary; (ii) no
securities of any Subsidiary convertible into or exchangeable for shares of
Capital Stock or other voting securities of any Subsidiary; (iii) no
subscriptions, options, warrants, calls, commitments, preemptive rights or other
rights of any kind
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to acquire Capital Stock or other voting securities from any Subsidiary, and no
obligation of any Subsidiary to issue or sell, any shares of Capital Stock or
other voting securities of any Subsidiary or any securities of any Subsidiary
convertible into or exchangeable for such Capital Stock or voting securities;
and (iv) no equity equivalents, interests in the ownership or earnings or other
similar rights of or with respect to any Subsidiary to repurchase, redeem or
otherwise acquire any shares of Capital Stock or any other securities of the
type described in clauses (i)-(iv) above. No Subsidiary holds shares of its
Capital Stock in its treasury.
4.8 EMPLOYEE BENEFIT PLANS AND OTHER AGREEMENTS.
(a) SCHEDULE 4.8 contains a complete list of Employee Plans. True
and complete copies of each of the following Employee Plan documents have been
delivered or made available by the Company to the Purchaser: (i) each Employee
Plan document (and, if applicable, related trust agreements and all annuity
contracts or other funding instruments) and all amendments thereto, all
reasonably available written descriptions thereof which have been distributed to
the Company's employees and those of its ERISA Affiliates during the last
thirty-six (36) months and a reasonably detailed description of any Employee
Plan which is not in writing,, (ii) the most recent determination or opinion
letter issued by the Internal Revenue Service with respect to each Pension Plan
and each Welfare Plan (other than a Multiemployer Plan), (iii) for the three (3)
most recent plan years, Annual Reports on Form 5500 Series required to be filed
with any governmental agency for each Pension Plan, (iv) a description setting
forth the amount of any liability of the Company as of the Closing Date for
payments more than thirty (30) calendar days past due with respect to each
Welfare Plan.
(b) EMPLOYEE PLANS.
(i) PENSION PLANS.
(A) No Pension Plan is or has been subject to Title IV
of ERISA or Section 412 of the Code.
(B) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument is qualified and
tax-exempt under the provisions of Code Sections 401(a) (or 403(a), as
appropriate) and 501(a) and has been so qualified during the period
from its adoption to date.
(C) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument presently complies and
has been maintained in compliance, in all material respects, with its
terms and, both as to form and in operation, with the requirements
prescribed by any and all Applicable Laws, including without
limitation ERISA and the Code.
(ii) MULTIEMPLOYER PLANS.
(A) Neither the Company nor any ERISA Affiliate has, at
any time within the last seventy-two (72) months, maintained,
contributed to or been obligated to maintain or contribute to, or
withdrawn from, a Multiemployer Plan.
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(iii) WELFARE PLANS.
(A) Each Welfare Plan presently complies and has been
maintained in compliance, in all material respects, with its terms
and, both as to form and operation, with the requirements prescribed
by any and all statutes, orders, rules and regulations which are
applicable to such Welfare Plan, including, without limitation, ERISA
and the Code.
(B) Except as disclosed on SCHEDULE 4.8, none of the
Company, any ERISA Affiliate or any Welfare Plan has any present or
future obligation to make any payment to, or with respect to any
present or former employee of the Company or any ERISA Affiliate
pursuant to, any retiree medical benefit plan or other retiree Welfare
Plan, and no condition exists which would prevent the Company from
amending or terminating any such benefit plan or Welfare Plan.
(C) Each Welfare Plan which is a "group health plan," as
defined in Section 607(1) of ERISA, has been operated in compliance
with provisions of Part 6 of Title I, Subtitle B of ERISA and 4980B of
the Code at all times. The Company is not obligated to provide health
care benefits of any kind to its retired or former employees or their
dependents pursuant to any agreement or understanding.
(iv) BENEFIT ARRANGEMENTS. Each Benefit Arrangement has been
maintained in compliance, in all material respects, with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Benefit Arrangement, including
without limitation, the Code, and with all plan documents. Except as set
forth in SCHEDULE 4.8 and except as provided by law, the employment of all
persons presently employed or retained by the Company is terminable at
will.
(v) UNRELATED BUSINESS TAXABLE INCOME. No Employee Plan (or
trust or other funding vehicle pursuant thereto) is subject to any Tax
under Section 511 of the Code.
(vi) DEDUCTIBILITY OF PAYMENTS. Except as disclosed in
SCHEDULE 4.8, there is no contract, agreement, plan or arrangement covering
any present or former employee, director or consultant of the Company or
any of its ERISA Affiliates (with respect to his or her relationship with
such entities) that, individually or collectively, provides for the payment
by the Company of any amount (i) that is not deductible under
Section 162(a)(l) or 404 of the Code or (ii) that is an "excess parachute
payment" pursuant to Section 280G of the Code.
(vii) FIDUCIARY DUTIES AND PROHIBITED TRANSACTIONS. Neither the
Company nor any plan fiduciary of any Welfare Plan or Pension Plan has
engaged in any transaction in violation of Sections 404 or 406 of ERISA or
any "prohibited transaction," as defined in Section 4975(c)(1) of the Code,
for which no exemption exists under Section
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408 of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise
violated the provisions of Part 4 of Title I, Subtitle B of ERISA. The
Company has not participated in a violation of Part 4 of Title I, Subtitle
B of ERISA by any plan fiduciary of any Welfare Plan or Pension Plan. The
Company has not been assessed any civil penalty under Section 502(1) of
ERISA.
(viii) VALIDITY AND ENFORCEABILITY. Each Welfare Plan related
trust agreement, annuity contract or other funding instrument is legally
valid, binding, enforceable against the Company and in full force and
effect, except as enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium, and similar laws
affecting creditors' rights generally, and (ii) general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ix) LITIGATION. There is no Proceeding relating to or
seeking benefits under any Employee Plan that is pending, or, to the
Knowledge of the Company, threatened against the Company, any ERISA
Affiliate or any Employee Plan other than routine claims for benefits.
(x) NO AMENDMENTS. Except as disclosed in Schedule 4.8,
neither the Company nor any ERISA Affiliate has any announced plan or
legally binding commitment to create any additional Employee Plans which
are intended to cover present or former employees, directors or consultants
of the Company or any of its ERISA Affiliates (with respect to their
relationship with such Persons) or to amend or modify any existing Employee
Plan. Each Employee Plan can be amended or terminated at any time without
approval from any Person, without advance notice and without any liability
other than for benefits accrued prior to such amendments or termination.
(xi) NO OTHER MATERIAL LIABILITY. To the Knowledge of the
Company, no event has occurred in connection with which the Company or any
ERISA Affiliate or any Employee Plan, directly or indirectly, could be
subject to any material liability (A) under any statute, regulation or
governmental order relating to any Employee Plan or (B) pursuant to any
obligation of the Company to indemnify any person against liability
incurred under any such statute, regulation or order as they relate to the
Employee Plans.
(xii) INSURANCE CONTRACTS. Neither the Company nor any
Employee Plan (other than a Multiemployer Plan) holds as an asset of any
Employee Plan any interest in any annuity contract, guaranteed investment
contract or any other investment or insurance contract issued by an
insurance company that is the subject of bankruptcy, conservatorship or
rehabilitation proceedings.
(xiii) NO ACCELERATION OR CREATION OF RIGHTS. Except as
disclosed on Schedule 4.8, neither the execution and delivery of this
Agreement by the Company nor the consummation of all or any portion of the
Transaction will result in the acceleration or creation of any rights of
any person to benefits under any Employee Plan (including, without
limitation, the acceleration of the vesting or exercisability of any stock
options,
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the acceleration of the vesting of any restricted stock, the acceleration
of the accrual or vesting of any benefits under any Pension Plan or the
acceleration or creation of any rights under any severance, parachute or
change in control agreement).
(c) There are no employment, consulting, change of control, severance
pay, continuation pay, termination pay, loans, guarantees or indemnification
agreements or other similar agreements of any nature whatsoever (collectively,
"Employment Agreements") between the Company, on the one hand, and any current
or former stockholder, officer, director, employee or Affiliate of the Company
or any consultant or agent of the Company, on the other hand, that, as a direct
result of the Transaction, (i) will require any payment by the Company or any
consent or waiver from any stockholder, officer, director, employee or Affiliate
of the Company or any consultant or agent of the Company, or (ii) will result in
any change in the nature of any rights of any stockholder, officer, director,
employee or Affiliate of the Company or any consultant or agent of the Company
under any such Employment Agreement or other similar agreement (including,
without limitation, any accelerated payments, deemed satisfaction of goals or
conditions, new or increased benefits or additional or accelerated vesting).
4.9 GOVERNMENTAL FILINGS.
(a) Since June 30, 1994, the Company and each of its Subsidiaries
have filed with the Commission all forms, reports, schedules, statements and
other documents required to be filed by them under the Securities Act, the
Exchange Act and all other federal securities laws and the rules and regulations
promulgated thereunder (the "SEC Filings"). Each SEC Filing was prepared in
accordance with, and at the time of filing complied in all material respects
with, the requirements of the Securities Act, the Exchange Act or other
applicable federal securities law and the rules and regulations promulgated
thereunder, as the case may be, except as the same was corrected or superseded
in an amendment to such SEC Filing filed with the Commission. None of the SEC
Filings, including, without limitation, any financial statements or schedules
included therein, at the time filed, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary in order to make the statements contained therein, in light
of the circumstances under which they were made, not misleading, except as the
same was corrected or superseded in a subsequent document duly filed with the
Commission. The Company has heretofore furnished or made available to the
Purchaser true, correct and complete copies of all SEC Filings since June 30,
1996.
(b) Since June 30, 1992, all material reports, documents and notices
required to be filed, maintained or furnished to any Governmental Entity (other
than the Commission) by the Company or any Subsidiary have been so filed,
maintained or furnished. All such reports, documents and notices were complete
and correct in all material respects on the date filed (or were corrected in or
superseded by a subsequent filing) such that no Liabilities exist with respect
to such filing.
4.10 FINANCIAL STATEMENTS AND REPORTS.
(a) The financial statements contained in the SEC Filings
(collectively, the "Financial Statements") have been prepared in accordance with
GAAP applied on a consistent
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basis throughout the periods indicated and with each other (except that the
Financial Statements may not contain all footnotes required by GAAP) and fairly
present the consolidated financial condition of the Company and the Subsidiaries
and the consolidated results of operations as of such dates and for such periods
indicated. Since April 30, 1997, there has not been any change to the financial
condition of the Company or any Subsidiary as set forth in the Financial
Statements that would have a Material Adverse Effect on the Company. Except as
reflected in the Financial Statements, neither the Company nor any Subsidiary is
a guarantor or indemnitor of any Indebtedness of any other Person. The Company
maintains a standard system of accounting established and administered in
accordance with GAAP. The general ledger, accounts receivable, accounts
payable, bank reconciliations and payroll records of the Company have been
maintained in all material respects in the ordinary course and contain a
materially correct and complete record of the matters typically contained in
records of such nature.
(b) The Company has not received any management letters or other
letters (other than audit letters included in the SEC Filings) from the
Company's independent auditing firm(s) relating to the results of operations,
financial statements or internal controls of the Company or any Subsidiary
insofar as the same may pertain to the business or assets of the Company and any
Subsidiary during any period from and after June 30, 1994.
4.11 ABSENCE OF UNDISCLOSED LIABILITIES: GUARANTEES.
(a) Except as set forth in the Financial Statements or as set forth
on SCHEDULE 4.11: (i) as of April 30, 1997, neither the Company nor any
Subsidiary had any Liabilities or obligations (whether accrued, absolute,
contingent, unliquidated or otherwise) which are reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company, and
(ii) since April 30, 1997, the Company and its Subsidiaries, taken as a whole,
have not incurred any such Liabilities or obligations that have had a Material
Adverse Effect on the Company.
(b) Except as set forth on SCHEDULE 4.11, neither the Company nor any
Subsidiary is a party to (i) any Material Agreement relating to the making of
any advance to, or investment in, any Person, or (ii) any Material Agreement
providing for a guarantee or other contingent liability with respect to any
Indebtedness or similar obligation of any Person.
4.12 ABSENCE OF CERTAIN CHANGES.
Since April 30, 1997, except as reflected in the Financial Statements
or the SEC Filings, neither the Company nor any Subsidiary has (i) declared or
paid any dividends, or authorized or made any distribution upon or with respect
to any class or series of its Capital Stock; (ii) made Capital Expenditures or
commitments therefor, other than such Capital Expenditures or commitments made
in the ordinary course consistent with past practice; (iii) made any loans or
advances to any Person exceeding $5,000 individually or $25,000 in the aggregate
(other than advances for business or travel expenses) or guaranteed the
obligations of any Person; (iv) sold, exchanged or otherwise disposed of any of
its assets or rights exceeding $5,000 individually or $25,000 in the aggregate,
other than the sale, exchange or other disposition of its equipment and services
in the ordinary course of business consistent with past practice;
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(v) incurred any material change in the assets, Liabilities, financial
condition, operating results or Business of the Company from that reflected in
the Financial Statements, except changes that have not, in the aggregate, had a
Material Adverse Effect on the Company; (vi) suffered any damage, destruction or
loss, whether or not covered by insurance, that had or would have a Material
Adverse Effect on the Company; (vii) waived a right or a debt owed to it
exceeding $1,000 individually or $5,000 in the aggregate, except in the ordinary
course of business consistent with past practice; (viii) satisfied or discharged
any Encumbrance or payment of any obligation, except in the ordinary course of
business consistent with past practice and that has not had and is not
reasonably expected to have a Material Adverse Effect on the Company;
(ix) agreed to or made any material change or amendment to any Material
Agreement, except in the ordinary course of business consistent with past
practice; (x) except as set forth in SCHEDULE 4.12 (X), made any material change
in any compensation arrangement or agreement with any employee that would
increase such employees' compensation by more than ten percent (10%);
(xi) permitted or allowed any of its assets to be subjected to any material
Encumbrance, other than Encumbrances on equipment in the ordinary course of
business consistent with past practice; (xii) written up the value of any
inventory, notes or accounts receivable or other assets in any material respect;
(xiii) licensed, sold, transferred, pledged, modified, disclosed, disposed of or
permitted to lapse any right to the use of any Proprietary Rights; (xiv) made
any change in any method of accounting or accounting practice or any change in
depreciation or amortization policies or rates previously adopted; (xv) paid,
lent or advanced any amount to, sold, transferred or leased any assets to or
entered into any material agreement or material arrangement with any of its
Subsidiaries or GE (except for the GE Purchase Agreement, the GE Registration
Rights Agreement, the GE Warrant Agreement and related documents) or entered
into any agreement or arrangement whatsoever with any of its Affiliates other
than its Subsidiaries and GE, except for directors' fees, travel expense
advances and employment compensation to officers; or (xvi) incurred or suffered
any other event or condition of any character that could reasonably be expected
to have a Material Adverse Effect on the Company.
4.13 COMPLIANCE WITH LAWS.
(a) The Company and its Subsidiaries are in compliance in all
material respects with all material Applicable Laws. Material Applicable Laws
includes, without limitation, all Applicable Laws relating to health care, the
health care industry and the provision of health care services, third party
reimbursement (including Medicare and Medicaid), public health and safety and
wrongful death and medical malpractice. Neither the Company nor any of its
Subsidiaries has received any notice of, nor does the Company or any of its
Subsidiaries have any Knowledge of, any violation (or of any investigation,
inspection, audit or other proceeding by any Governmental Entity involving
allegations of any violation) of any Applicable Law involving or related to the
Company or any of its Subsidiaries which has not been dismissed or otherwise
disposed of. Except as set forth in SCHEDULE 4.13(a), neither the Company nor
any of its Subsidiaries has received notice or otherwise has any Knowledge that
the Company or any Subsidiary is charged with, threatened with or under
investigation with respect to, any violation of any Applicable Law, or has any
Knowledge of any proposed change in any Applicable Law that would have a
Material Adverse Effect on the Transaction or the Company.
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(b) Each of the Company and its Subsidiaries has, and all
professional employees or agents of each of the Company and its Subsidiaries who
are performing health care or health care related functions on behalf of the
Company or any of its Subsidiaries or joint ventures have, all material
licenses, franchises, permits, accreditations, provider numbers, authorizations,
including certificates of need, consents or orders of, or filings with, or other
approvals from all Governmental Entities ("Approvals") necessary for the conduct
of, or relating to the operation of, the business of each of the Company and its
Subsidiaries and the occupancy and operation, for its present uses, of the real
and personal property which each of the Company and its Subsidiaries owns or
leases, and neither the Company nor any Subsidiary or the professional employees
or agents of either (acting in such capacities) is in violation of any such
Approval in any material respect or any terms or conditions thereof. All such
Approvals are in full force and effect, have been issued to and fully paid for
by the holder thereof and no notice or warning from any Governmental Entity with
respect to the suspension, revocation or termination of any Approval has been,
to the Knowledge of the Company, threatened by any Governmental Entity or issued
or given to the Company or any Subsidiary. No such Approvals will in any way be
affected by, terminate or lapse by reason of the consummation of all or any
portion of the Transaction. There are no physicians (other than radiologists
and radiation oncologists) owning Capital Stock in any Subsidiary, and no
physicians own stock in the Company, except for physician ownership of publicly
traded stock of the Company acquired on terms equally available to the public
through trading on the Nasdaq Stock Market, and no physician owns 5% or more of
the outstanding shares of any class of securities issued by the Company.
4.14 LITIGATION.
Except as set forth on SCHEDULE 4.14 hereto, there is no Proceeding
(by any Governmental Entity or otherwise) of which the Company has received
notice or of which the Company has Knowledge pending against or affecting the
Company, any Subsidiary or the assets, products or business of any of them or,
to the Knowledge of the Company, any basis therefor or threat thereof. Except
as set forth on SCHEDULE 4.14 hereto, neither the Company nor any Subsidiary is
a party or subject to the provisions of any order, writ, injunction, judgment or
decree of any court or other Governmental Entity. Except as set forth on
SCHEDULE 4.14 hereto, there is no Proceeding by the Company or any Subsidiary
currently pending or that the Company or any Subsidiary currently intends to
initiate. There are no Proceedings pending or, to the Knowledge of the Company,
threatened against the Company, any Subsidiary or any of their respective
businesses, assets or products that seek to enjoin, question the validity of or
rescind the Transaction, the GE Purchase Agreement, the Ancillary Agreements or
otherwise prevent the Company from complying with the terms and provisions of
this Agreement, the GE Purchase Agreement, the Ancillary Agreements or any of
such other agreements. Any and all Liabilities of the Company and its
Subsidiaries under such Proceedings that are probable and subject to reasonable
estimation within the meaning of GAAP are adequately covered (except for
standard deductible amounts) by the existing insurance maintained by the Company
or estimates in accordance with GAAP for the uninsured costs thereof are
reflected in the Financial Statements. No holder of shares of the Capital Stock
of either American Health Services Corp. or Maxum Health Corp. (constituent
corporations in the mergers contemplated by the Merger Agreement) that either
were outstanding immediately prior to such mergers made a demand for the
appraisal of his shares pursuant to Section 262 of the Delaware General
Corporation Law.
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4.15 TRUE AND COMPLETE DISCLOSURE.
Taken as a whole, this Agreement, the GE Purchase Agreement, the
Ancillary Agreements, the Exhibits, Schedules, statements and certifications
made or delivered in connection herewith or therewith, do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements herein or therein not misleading. All financial projections
reflected in the 1998 budget provided by the Company to the Purchaser were
prepared in good faith on the basis of assumptions believed to be reasonable at
the time such projections were prepared.
4.16 TAXES.
(a) All Company Tax Returns have been properly and timely filed and
all such Tax Returns are correct and complete in all material respects. Each
affiliated group with which any of the Company and its Subsidiaries files a
consolidated or combined Tax Return has filed all such Tax Returns that it was
required to file for each taxable period during which any of the Company and its
Subsidiaries was a member of the group. All such consolidated and combined Tax
Returns were correct and complete in all material respects.
(b) All material Taxes due and payable by the Company and/or its
Subsidiaries (whether or not shown on any Tax Return) have been timely paid in
full. All material Taxes owed by any affiliated group with which any of the
Company and its Subsidiaries files a consolidated or combined Tax Return
(whether or not shown on any Tax Return) have been paid for each taxable period
during which any of the Company and the Subsidiaries was a member of the group.
(c) There is no (nor is there any pending request for an) agreement,
waiver or consent providing for an extension of time with respect to the
assessment or collection of, or statute of limitations regarding, any Taxes or
the filing of any Tax Returns that is currently in effect and no power of
attorney granted by or with respect to the Company or any Subsidiary with
respect to any Tax matter is currently in force.
(d) To the Knowledge of the Company, there is no pending audit,
examination or investigation with respect to any Company Tax Returns, nor to the
Knowledge of the Company, is there pending any notice of the initiation thereof;
there is no Proceeding, claim, demand, deficiency or additional assessment
pending or threatened with respect to any Company Tax Returns.
(e) To the Knowledge of the Company and its Subsidiaries, the Company
and its Subsidiaries have withheld all Taxes required to have been withheld and
paid by them on their behalf in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other related or
unrelated third party, and such withheld Taxes have either been duly paid to the
proper Governmental Entity or set aside in accounts for such purpose.
(f) None of the Company and its Subsidiaries (i) has been a member of
any affiliated group filing a consolidated federal income Tax Return (other than
a group the common parent of which is the Company) or (ii) has any liability for
the Taxes of any Person (other than
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the Company and its Subsidiaries) under Treas. Reg. Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract or otherwise.
(g) The charges, accruals and reserves for Taxes (including deferred
Taxes) currently reflected on the Financial Statements in accordance with GAAP
are adequate to cover all unpaid Taxes accruing or payable by the Company and
its Subsidiaries in respect of taxable periods that end on or before the Closing
Date and for any taxable periods that begin before the Closing Date and end
thereafter to the extent such Taxes are attributable to the portion of such
period ending on the Closing Date.
(h) Neither the Company nor any Subsidiary has agreed, requested or
been requested to make, or is required to make, any adjustment to taxable income
for any taxable period after the Closing under Sections 481(a) or 263A of the
Code or any comparable provision of state or foreign tax laws by reasons of a
change in accounting method or otherwise.
(i) There are no Encumbrances (other than Permitted Encumbrances) on
any asset or property of the Company or any Subsidiary arising out of, connected
with or related to any Tax imposed on the Company, its Subsidiaries or any of
their businesses or properties.
(j) The Company is not a party to, is not bound by and has no
obligation (or potential obligation) under any Tax sharing or allocation
agreement.
(k) Neither the Company nor any Subsidiary is a party to any
agreement with an Affiliate relating to a foreign sales corporation (or "FSC")
within the meaning of Section 922 of the Code; or a domestic international sales
corporation (or "DISC") within the meaning of Section 992 of the Code.
(l) Other than the elections made in the Tax Returns provided to or
made available to the Purchaser, no agreement, consent or election for foreign,
federal, state or local tax purposes that would affect or be binding on the
Company or any Subsidiary after the Closing has been filed or entered into by
the Company or any Subsidiary. No consent has been filed with respect to the
Company or any Subsidiary under Section 341(f) of the Code.
(m) SCHEDULE 4.16 lists all federal, state, local and foreign Tax
Returns that have been audited, and indicates those Tax Returns that currently
are the subject of audit, other than (i) Tax Returns relating to closed years,
and (ii) Tax Returns that have been audited where such audit did not result in
any change in any tax due from the Company or any Subsidiary to any Governmental
Entity. Correct and complete copies of all federal Tax Returns, examination
reports and statements of deficiencies assessed against or agreed to by the
Company or any of its Subsidiaries since June 30, 1996 have been delivered or
made available to the Purchaser. Each of the Company and its Subsidiaries has
disclosed on its federal income Tax Returns all positions taken therein that
could reasonably be expected to give rise to a substantial understatement of
federal income Tax within the meaning of Section 6662 of the Code.
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4.17 ENVIRONMENTAL MATTERS.
(a) For purposes of this Section 4.17, the term "Company" shall
include (i) the Company, (ii) any Affiliates of the Company other than GE,
(iii) the Business, (iv) all partnerships, joint ventures and other entities or
organizations in which the Company or the Business was at any time or is a
partner, joint venturer, member or participant, and (v) all predecessor or
former corporations, partnerships, joint ventures, organizations, businesses or
other entities, whether in existence as of the date hereof or at any time prior
to the date hereof, the assets or obligations of which have been acquired or
assumed by the Company or the Business or to which the Company or the Business
has succeeded.
(b) The Company and its Subsidiaries: (i) are, and within the period
of all applicable statutes of limitation have been, in compliance in all
material respects with all applicable Environmental Laws PROVIDED, that the
representation and warranty contained in this clause (i) is limited to the
Knowledge of the Company to the extent (but only to the extent) that it directly
applies to real property that the Company has purchased or has leased from
another Person in a transaction other than the acquisition of such Person
(whether by merger or consolidation, stock purchase or exchange, acquisition of
all or substantially all of the assets of such Person or a similar fundamental
transaction); (ii) hold all Environmental Permits (each of which is in full
force and effect) required for any of their current or intended operations or
for any property owned, leased or otherwise operated by any of them; (iii) are,
and within the period of all applicable statutes of limitation have been, in
compliance with all of their Environmental Permits; and (iv) reasonably believe
that each of their Environmental Permits currently in effect will be renewed
effective prior to the expiration of such Environmental Permit.
(c) Except as set forth on SCHEDULE 4.17, the Company and its
Subsidiaries have not received any notice of alleged, actual or potential
responsibility for, or any inquiry or investigation regarding, any Environmental
Condition. The Company has not received any notice of any other claim, demand
or action by any individual or entity alleging any actual or threatened injury
or damage to any person, property, natural resource or the environment arising
from or relating to any Release or threatened Release of any Hazardous Materials
at, on, under, in, to or from any Facility or any former Facilities, or in
connection with any operations or activities of the Company or any of its
Subsidiaries.
(d) Except as disclosed in SCHEDULE 4.17 or with respect to such
matters as have been fully and finally resolved and as to which there are to the
Knowledge of the Company, no remaining obligations, neither the Company nor any
of its Subsidiaries has entered into or agreed to or is subject to any consent
decree, order or settlement or other agreement in any judicial, administrative,
arbitral or other similar forum relating to compliance with or Liability under
any Environmental Law.
(e) Except as disclosed in SCHEDULE 4.17, Hazardous Materials have
not been transported, disposed of, emitted, discharged or otherwise Released or
threatened to be Released to or at any real property presently or formerly owned
or leased by the Company or any of its Subsidiaries, which Hazardous Materials
are reasonably expected to (i) give rise to Liability of the Company or any
Subsidiary under any applicable Environmental Law, (ii) interfere with the
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Company's or any Subsidiary's continued operations or (iii) materially impair
the fair salable value of any real property owned or leased by the Company or
any Subsidiary.
(f) Except as disclosed in SCHEDULE 4.17, neither the Company nor any
of its Subsidiaries has assumed or retained, by contract or, to the Knowledge of
the Company, by operation of law in connection with the sale or transfer of any
assets or business, Liabilities arising from or associated with or otherwise in
connection with such assets or business of any kind, fixed or contingent, known
or not known, under any applicable Environmental Law. Neither the Company nor
any of its Subsidiaries, to the Knowledge of the Company, is required to make
any capital or other expenditures to comply with any Environmental Law nor to
the Knowledge of the Company is there any reasonable basis on which any
Governmental Entity could take any action that would require any such capital
expenditures.
(g) True, complete and correct copies of the written reports, and all
parts thereof, of all environmental audits or assessments which have been
conducted in respect of any Facility or any former Facility within the past five
(5) years, either by the Company or any attorney, environmental consultant or
engineer or other Person engaged by the Company or any of its Subsidiaries for
such purpose, have been delivered to the Purchaser and a list of all such
reports, audits and assessments and any other similar report, audit or
assessment of which the Company has Knowledge is included on SCHEDULE 4.17.
4.18 INSURANCE.
Each insurance policy held by or for the benefit of the Company or any
of its Subsidiaries is in full force and effect. Each of the Company and its
Subsidiaries carries, and will continue to carry, insurance with reputable
insurers (except as to self-insurance) with respect to such of their respective
properties and businesses, in such amounts and against such risks as is
customarily maintained by other entities of similar size engaged in similar
businesses (which may include self-insurance in amounts customarily maintained
by companies similarly situated or has been maintained in the past by the
Company and its Subsidiaries). None of such insurance was obtained through the
use of materially false or misleading information or the failure to provide the
insurer with all material information requested in order to evaluate the
liabilities and risks insured. Neither the Company nor any of its Subsidiaries
has received any notice of cancellation or non-renewal of any insurance policies
or binders.
4.19 REAL PROPERTY AND LEASEHOLDS.
(a) To the Knowledge of the Company, each lease agreement and
mortgage to which the Company or any Subsidiary is a party is in full force and
effect in accordance with its terms.
(b) With respect to each parcel of real property owned or leased by
the Company or any of its Subsidiaries:
(i) The Company or the relevant Subsidiary, as the case may
be, has good and valid title to and/or a valid and subsisting leasehold
interest in each item of real
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property and leasehold, as appropriate, free and clear of all mortgages,
liens, Encumbrances (except Permitted Encumbrances), leases, equities,
claims, charges, easements, rights-of-way, covenants, conditions and
restrictions, except for liens, if any, for property taxes not due;
(ii) No officer, director or employee of the Company, of any
Subsidiary or of any Affiliate of the Company, nor any Subsidiary or
Affiliate of the Company, owns directly or indirectly in whole or in
part, any of such real properties or leaseholds;
(iii) Neither the Company nor any Subsidiary is in default with
respect to any material term or condition of any such mortgage or lease,
nor has any event occurred which, through the passage of time or the
giving of notice or both, would constitute a default thereunder by the
Company or any Subsidiary or would cause the acceleration of any
obligation of the Company or any Subsidiary or the creation of a lien or
encumbrance upon any asset of the Company or any Subsidiary;
(iv) All of the buildings, fixtures and other improvements
described in SCHEDULE 4.19 are in reasonably good operating condition,
have been maintained in accordance with reasonable industry practices and
are adequate to conduct the business of the Company and its Subsidiaries,
as the case may be, as presently conducted; and
(v) Neither the Company nor any Subsidiary has received any
notice or otherwise has Knowledge that the Company or any such
Subsidiary, as the case may be, is in violation of any applicable
building code, zoning ordinance or other law or regulation.
4.20 TANGIBLE ASSETS.
(a) The Company and its Subsidiaries have good and valid title to or
valid and subsisting leasehold interests in all Fixtures and Equipment having
original cost or fair market value in excess of Five Thousand Dollars ($5,000),
including all such Fixtures and Equipment reflected in the Company's most recent
balance sheet included in the Financial Statements and all such Fixtures and
Equipment purchased or otherwise acquired by the Company or any Subsidiary since
the date of such Balance Sheet. Except as set forth on SCHEDULE 4.20, none of
such Fixtures and Equipment is subject to any Encumbrance except for Permitted
Encumbrances and Encumbrances which, individually or in the aggregate, are not
substantial in amount and do not materially detract from the value of the
property or assets of the Company and its Subsidiaries taken as a whole or
interfere with the present use of such property or assets (taken as a whole).
The Company and each Subsidiary has in all material respects performed all the
obligations required to be performed by it with respect to all such Fixtures and
Equipment leased by it through the date hereof, except where the failure to
perform would not have a Material Adverse Effect on the Company and its
Subsidiaries, taken as a whole. All such leases are valid, binding and
enforceable with respect to the Company and its Subsidiaries in accordance with
their terms and are in full force and effect. No default has occurred
thereunder on the part of the Company, any Subsidiary or, to the Knowledge of
the Company, any other party which default would be reasonably likely to have a
Material Adverse Effect on the Company.
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(b) The buildings and Fixtures and Equipment of the Company and its
Subsidiaries are in reasonably good operating condition and repair (except for
ordinary wear and tear), with no material defects, are sufficient for the
operation of the business of the Company and its Subsidiaries as presently
conducted and are in conformity, in all material respects, with all Applicable
Laws relating thereto currently in effect, except where the failure to conform
would not have a Material Adverse Effect on the Company.
4.21 CONTRACTS AND COMMITMENTS.
(a) SCHEDULE 4.21 contains a correct and complete list of all
agreements, contracts, Indebtedness, Liabilities and other obligations to which
the Company or any Subsidiary is a party or by which it is bound that are
material to the conduct and operations of its business and properties, which
provide for payments to or by the Company or any Subsidiary in excess of Five
Hundred Thousand Dollars ($500,000) annually, which obligate the Company or any
Subsidiary to share, license or develop any product or technology or which
involve transactions or proposed transactions between the Company and any
Subsidiary, on the one hand, and any officer, director or Affiliate or
Subsidiary, on the other hand (collectively, the "Material Agreements").
(b) The Company and its Subsidiaries have in all material respects
performed, and are now performing in all material respects, the obligations
under, and are not in default (or by the lapse of time and/or the giving of
notice or otherwise be in default) in respect of, any of the Material
Agreements. Each of the Material Agreements is in full force and effect and is
a valid and enforceable obligation against the Company or a Subsidiary, as
applicable, and, to the Company's Knowledge, the other party or parties thereto,
in accordance with its terms.
(c) "Current Customer" means any Person from whom the Company or any
Subsidiary has recognized revenue since June 1, 1997 or to whom the Company or
any Subsidiary has any obligation to complete work or honor any contractual
warranty or has any obligation or Liabilities. Since June 1, 1997, no Current
Customer with respect to a Center Operation has canceled or terminated any
Material Agreement or notified the Company or any Subsidiary in writing or
orally of its intent to cancel or terminate its contract, and no Current
Customer with respect to a Mobile Operation has canceled or terminated any
Material Agreement or notified the Company or any Subsidiary in writing or
orally of its intent to cancel or terminate its contract, except any such
cancellations, terminations or notifications from Current Customers with respect
to Mobile Operations that in the aggregate could not have a Material Adverse
Effect (taking into account revenue generated from replacement customers) on the
Company.
4.22 BOOKS AND RECORDS.
The Company has made and kept (and given the Purchaser access to)
books and records and accounts, which, in reasonable detail, accurately and
fairly reflect the activities of the Company and its Subsidiaries, taken as a
whole. The minute books of the Company and each such Subsidiary previously made
available to the Purchaser accurately and adequately reflect all action
previously taken by the stockholders, the Board of Directors and committees of
the Board of Directors and each of its Subsidiaries.
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4.23 LABOR MATTERS.
(a) Since June 30, 1992, neither the Company nor any Subsidiary has
or has ever had any employees represented by collective bargaining agreements.
The Company and its Subsidiaries are in compliance in all material respects with
all material Applicable Laws respecting employment practices, terms and
conditions of employment and wages and hours and are not engaged in any unfair
labor practice. There is no unfair labor practice charge or complaint against
the Company or any Subsidiary pending before the National Labor Relations Board
or any other governmental agency arising out of the activities of the Company or
any of its Subsidiaries of which the Company has received notice or of which the
Company has Knowledge, and the Company has no Knowledge of any facts or
information which would give rise thereto. There is no labor strike or labor
disturbance pending or, to the Knowledge of the Company, threatened against the
Company or any of its Subsidiaries. There is no grievance currently being
asserted and neither the Company nor any Subsidiary has experienced since
June 30, 1994 a work stoppage or other labor difficulty which grievance, work
stoppage or other labor difficulty is reasonably likely to have a Material
Adverse Effect on the Company. No collective bargaining representation petition
is pending or, to the Knowledge of the Company, threatened against the Company
or any Subsidiary.
(b) SCHEDULE 4.23 lists those employees of the Company that prior to
the Closing Date had written employment agreements with the Company in effect.
4.24 PAYMENTS.
Neither the Company nor any of its Subsidiaries has, directly or
indirectly, paid or delivered any fee, commission or other sum of money or item
of property, however characterized, to any finder, agent, government official or
other party, in the United States or any other country, which is in any manner
related to the business or operations of the Company or its Subsidiaries and
which the Company or any of its Subsidiaries knows or has reason to believe to
have been illegal under any federal, state or local laws of the United States
(including, without limitation the U.S. Foreign Corrupt Practices Act) or any
other country having jurisdiction. Neither the Company nor any of its
Subsidiaries has participated, directly or indirectly, in any boycotts or other
similar practices affecting any of its actual or potential customers
4.25 INTELLECTUAL PROPERTY.
(a) The Company and its Subsidiaries either own or have valid
licenses or other rights to use all patents, copyrights, trademarks, service
marks, software, databases, data and other technical information used in their
businesses as presently conducted ("Proprietary Rights"), subject to the
limitations contained in the agreements governing the use of the same. SCHEDULE
4.25 sets forth all such Proprietary Rights owned by, used by or licensed to the
Company or any Subsidiary. There are no limitations contained in such
agreements of the type described in the immediately preceding sentence which,
upon consummation of all or any portion of the Transaction, will materially
alter or materially impair any such rights, breach any such material agreement
with any third party vendor or require payments of additional sums thereunder.
The Company and its Subsidiaries are in compliance in all material respects with
such
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licenses and agreements. Except as set forth on SCHEDULE 4.25, there are no
pending or, to the Knowledge of the Company, threatened Proceedings challenging
or questioning the validity or effectiveness of any license or agreement
relating to such property or the right of the Company or any Subsidiary to use,
copy, modify or distribute the same.
(b) No person has a right, other than those set forth on SCHEDULE
4.25, to receive a royalty or similar payment in respect of any material
Proprietary Rights whether or not pursuant to any contractual arrangements
entered into by the Company or its Subsidiaries.
4.26 SECURITIES OFFERINGS.
(a) Except as set forth on SCHEDULE 4.26, since the consummation of
the merger pursuant to the Merger Agreement, the Company has not sold any
securities other than securities registered pursuant to the Securities Act.
(b) Neither the Company nor any affiliate (as defined in Rule 501(b)
of Regulation D under the Securities Act ("Regulation D")) of the Company has,
directly or through any agent (provided that no representation is made as to the
Purchaser or any person acting on their behalf), (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of any security (as
defined in the Securities Act) that is or will be integrated with the offering
and sale of the Securities in a manner that would require the registration of
the Securities under the Securities Act or (ii) engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with the offering of the Securities.
(c) Except as provided in Schedule 4.26(c), neither the Company nor
any Subsidiary is a party to any agreement or commitment that obligates the
Company to register under the Securities Act any of its presently outstanding
securities or any of its securities that hereafter may be issued, except as
contemplated hereby and by the Registration Rights Agreement.
4.27 NO OTHER AGREEMENTS TO SELL THE ASSETS OR THE COMPANY.
Except as contemplated by this Agreement, none of the Company or any
of its Subsidiaries have any legal obligation, absolute or contingent, to any
other person or firm to sell the Capital Stock, material assets or the business
of the Company or any Subsidiary or to effect any merger, consolidation,
liquidation, dissolution, recapitalization or other reorganization of the
Company or any Subsidiary or to enter into any agreement with respect thereto.
4.28 NO BROKERS.
Except for Shattuck Hammond Partners Inc., the aggregate fees of which
are Five Hundred Thousand Dollars ($500,000) in connection with the Transaction,
all of which shall be paid by the Company, neither the Company nor any
Subsidiary has employed, nor is any of them subject to the known claim of, any
broker, finder, consultant or other intermediary in connection with all or any
portion of the Transaction (or the negotiations looking toward the consummation
of all or any portion of the Transaction) who might be entitled to a fee or
commission from the
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Company in connection with all or any portion of the Transaction (or the
negotiations looking toward the consummation of all or any portion of the
Transaction).
4.29 ACCOUNTS AND NOTES RECEIVABLE.
None of the accounts, notes and other receivables owed to the Company
or any Subsidiary as of the date hereof is pledged to any third party. The
reserve for doubtful accounts shown on the Company's most recent balance sheet
included in the Financial Statements is in accordance with GAAP.
4.30 INDEBTEDNESS.
SCHEDULE 4.30 sets forth a true and complete list of all Indebtedness
of the Company or any Subsidiary for borrowed money as of September 30, 1997.
4.31 TRANSACTIONS WITH AFFILIATES.
Except as set forth in SCHEDULE 4.31 and for regular salary payments
and fringe benefits under an individual's compensation package with the Company
or any Subsidiary, none of the officers, employees, directors or other
Affiliates of the Company or any Subsidiary or members of their families is a
party to any agreement, understanding, Indebtedness or proposed transaction with
the Company or any Subsidiary or is directly interested in any Material
Agreement with the Company or any Subsidiary. Neither the Company nor any
Subsidiary has guaranteed or assumed any obligations of their respective
officers, directors, employees or other Affiliates or members of any of their
families. To the Company's Knowledge, none of such Persons has any direct or
indirect ownership interest in any Affiliate or Subsidiary, with any Person with
which the Company or any Subsidiary has a business relationship or with any
Person that competes with the Company or any Subsidiary, other than an interest
of less than five percent (5%) ownership in any publicly traded company that may
compete with the Company or any Subsidiary. For purposes of this Section 4.31,
the term "Affiliates" shall not include GE.
4.32 NO RESEARCH GRANTS
Neither the Company nor any of its Subsidiaries since inception has
provided any research, educational or study grants of any kind to any hospital,
physician or health care provider.
4.33 CERTAIN REGULATORY MATTERS.
Neither the Company nor any of its Subsidiaries since inception has
received notice that the Company or any Subsidiary has been, or to the Company's
Knowledge has been, the subject of any investigative proceeding before any
federal or state regulatory authority or the agent of any such authority,
including, without limitation, federal and state health authorities.
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4.34 CERTAIN ADDITIONAL REGULATORY MATTERS.
Neither the Company nor any Subsidiary, nor the officers, directors or
managing employees, as that term is defined in 42 C.F.R. Section
1001.1001(a)(1), nor to the Knowledge of the Company or any Subsidiary, the
other employees or agents, of any of the Company or any Subsidiary have engaged
in any activities which are prohibited under criminal law, or are cause for
civil penalties or mandatory or permissive exclusion from Medicare or Medicaid,
or any other State Health Care Program or Federal Health Care Program (as
defined in Section 4.35 below) under Sections 1320a-7, 1320a-7a, 1320a-7b or
1395nn of Title 42 of the United States Code, the federal Civilian Health and
Medical Plan of the Uniformed Services statute ("CHAMPUS"), or the regulations
promulgated pursuant to such statutes or regulations or related state or local
statutes or which are prohibited by any private accrediting organization from
which the Company or any of its Subsidiaries seeks accreditation or by generally
recognized professional standards of care or conduct, including, but not limited
to, the following activities:
(a) Knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(b) Knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining rights to
any benefit or payment;
(c) Presenting or causing to be presented a claim for reimbursement
under CHAMPUS, Medicare, Medicaid or any other State Health Care Program or
Federal Health Care Program that is (i) for an item or service that the Person
presenting or causing to be presented knows or should know was not provided as
claimed, or (ii) for an item or service that the Person presenting knows or
should know that the claim is false or fraudulent;
(d) Knowingly and willfully offering, paying, soliciting or receiving
any remuneration (including any kickback, bribe or rebate), directly or
indirectly, overtly or covertly, in cash or in kind (i) in return for referring,
or to induce the referral of, an individual to a Person for the furnishing or
arranging for the furnishing of any item or service for which payment may be
made in whole or in part by CHAMPUS, Medicare or Medicaid or any other State
Health Care Program or any Federal Health Care Program, or (ii) in return for,
or to induce the purchase, lease or order or the arranging for or recommending
of the purchase, lease or order of, any good, facility, service or item for
which payment may be made in whole or in party by CHAMPUS, Medicare or Medicaid
or any other State Health Care Program or any Federal Health Care Program; or
(e) Knowingly and willfully making or causing to be made or inducing
or seeking to induce the making of any false statement or representation (or
omitting to state a material fact required to be stated therein or necessary to
make the statements contained therein not misleading) or a material fact with
respect to (i) the conditions or operations of a facility in order that the
facility may qualify for CHAMPUS, Medicare, Medicaid or any other State Health
Care Program certification or any Federal Health Care Program certification, or
(ii) information required to be provided under Section 1124(A) of the Social
Security Act ("SSA") (42 U.S.C. Section 1320a-3).
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4.35 MEDICARE/MEDICAID PARTICIPATION.
Neither (a) the Company nor any other Person who after the Closing
will have a direct or indirect ownership interest of 5% or more (as those terms
are defined in 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any
Subsidiary, or who will have an ownership or control interest (as defined in SSA
Section 1124(a)(3) or any regulations promulgated thereunder) in the Company or
any Subsidiary, or who will be an officer, director or managing employee (as
defined in 42 C.F.R. Section 1001.1001(a)(1)) of the Company or any Subsidiary,
or, to the Knowledge of the Company and any Subsidiary, any other employee or
agent thereof, nor (b) any Person with any relationship with such entity
(including, without limitation, a parent company of or partner in a Subsidiary)
who after the Closing will have an indirect ownership interest of 5% or more (as
that term is defined in 42 C.F.R. Section 1001.1001(a)(2)) in the Company or any
Subsidiary: (i) has had a civil monetary penalty assessed against it under
Section 1128A of the SSA or any regulations promulgated thereunder; (ii) has
been excluded from participation under Medicare, Medicaid or a state health care
program as defined in SSA Section 1128(h) or any regulations promulgated
thereunder ("State Health Care Program") or a federal health care program as
defined in SSA Section 1128B(f) ("Federal Health Care Program"); or (iii) has
been convicted (as that term is defined in 42 C.F.R. Section 1001.2) of any of
the following categories of offenses as described in SSA Section 1128(a) and
(b)(1), (2), (3) or any regulations promulgated thereunder:
(A) Criminal offenses relating to the delivery of an
item or service under Medicare, Medicaid or any other State Health Care
Program or Federal Health Care Program;
(B) Criminal offenses under federal or state law
relating to patient neglect or abuse in connection with the delivery of a
health care item or service;
(C) Criminal offenses under federal or state law
relating to fraud, theft, embezzlement, breach of fiduciary
responsibility or other financial misconduct in connection with the
delivery of a health care item or service or with respect to any act or
omission in a program operated by or financed in whole or in part by any
federal, state or local governmental agency;
(D) Federal or state laws relating to the interference
with or obstruction of any investigation into any criminal offense
described in (A) through (C) above; or
(E) criminal offenses under federal or state law
relating to the unlawful manufacture, distribution, prescription or
dispensing of a controlled substance.
4.36 COMPLIANCE WITH MEDICARE/MEDICAID AND INSURANCE PROGRAMS
(a) The Company and its subsidiaries are eligible to receive payments
with respect to operations of their respective business under Title XVIII of the
SSA and under Title XIX of the SSA. The Company and its Subsidiaries have
timely filed (except where the failure to
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timely file would not reasonably be expected to have a Material Adverse Effect
on the Company) all claims and reports required to be filed with respect to the
operations of their respective businesses in connection with all state Medicaid
and federal Medicare programs, which claims and reports are complete and
correct. The failure to timely file a medical claim or report resulting only in
a late payment will not for these purposes be deemed adverse to the Company or
its Subsidiaries. There are no actions, appeals or investigations pending or,
to the best of the Company's and its Subsidiaries' Knowledge, threatened before
any entity, commission, board or agency, including an intermediary or carrier or
the administrator of the Health Care Financing Administration, with respect to
any Medicare or Medicaid claims or reports filed by the Company or its
Subsidiaries with respect to the operations of their respective businesses on or
before the date hereof or program compliance matters, which would reasonably be
expected to have a Material Adverse Effect on the Company.
(b) Other than regularly scheduled audits and reviews, no validation
review, peer review or program integrity review related to the operations of the
Company or its Subsidiaries' respective businesses has been conducted by any
entity, commission, board or agency in connection with the Medicare or Medicaid
program, and to the best of the Company's and its Subsidiaries' Knowledge, no
such reviews are scheduled, pending or threatened against or affecting such
businesses.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Each Person that is part of the Purchaser hereby represents and
warrants to the Company, with respect to itself only, as follows:
5.1 ORGANIZATION OF THE PURCHASER.
Such Person is duly formed and validly existing and in good standing
under the laws of its jurisdiction of formation and has full power and authority
to carry on its business as currently being conducted.
5.2 AUTHORIZATION.
Such Person has full power and authority to execute and deliver this
Agreement and the Ancillary Agreements and to consummate the Transaction. The
execution and delivery by such Person of this Agreement and the Ancillary
Agreements and the consummation by it of the Transaction have been duly
authorized by all necessary action of such Person. This Agreement and each
Ancillary Agreement has been duly executed and delivered by such Person and
constitutes a valid and legally binding obligation of such Person, enforceable
against such Person in accordance with its terms, except that such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights
generally and (ii) general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
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5.3 NONCONTRAVENTION.
The execution and delivery by such Person of this Agreement and the
Ancillary Agreements and the consummation by it of the Transaction do not and
will not (i) conflict with or result in a violation of any provision of the
operating agreement or any other governing agreement of such Person,
(ii) conflict with or result in a violation of any provision of, constitute
(with or without the giving of notice or the passage of time or both) a default
under or give rise (with or without the giving of notice or the passage of time
or both) to any right of termination, cancellation, or acceleration under any
bond, debenture, note, mortgage, indenture, lease, agreement or other instrument
or obligation to which such Person is a party or by which such Person or any of
its properties may be bound, (iii) result in the creation or imposition of any
Encumbrance upon the properties of such Person, or (iv) violate any Applicable
Law binding upon such Person, except, in the case of clauses (ii), (iii) and
(iv) above, for any such conflicts, violations, defaults, terminations,
cancellations, accelerations or Encumbrances which would not, individually or in
the aggregate, have a material adverse effect on the ability of such Person to
consummate the Transaction.
5.4 CONSENTS AND APPEALS.
No consent, approval, order or authorization of or declaration, filing
or registration with any Governmental Entity is required to be obtained or made
by such Person in connection with the execution and delivery by such Person of
this Agreement and the Ancillary Agreements or the consummation of the
Transaction other than (i) any filings required under Section 13 of the Exchange
Act and Rule 13d-1 under the Exchange Act (ii) compliance with applicable
provisions of the HSR Act, as amended and (iii) such consents, approvals, orders
or authorization which, if not made, would not, individually or in the
aggregate, have a material adverse effect on the ability of such Person to
consummate the Transaction.
5.5 PURCHASE FOR INVESTMENT.
(a) Such Person and the Carlyle Affiliates have been furnished with
all information that it has requested for the purpose of evaluating the proposed
acquisition of the Securities pursuant hereto, and such Person and the Carlyle
Affiliates have had an opportunity to ask questions of and receive answers from
the Company regarding the Company and its Business, assets, results of
operations, financial condition and prospects and the terms and conditions of
the issuance of the Securities.
(b) Such Person is acquiring the Securities solely by and for its own
account, for investment purposes only and not for the purpose of resale or
distribution. Neither such Person nor any Carlyle Affiliate has any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or
pledge to such Person or anyone else any Securities and such Person has no
present plans or intentions to enter into any such contract, undertaking or
arrangement.
(c) Such Person acknowledges and understands that (i) no registration
statement relating to the Securities, the Series B Conversion Shares or the
Warrant Shares has
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been or is to be filed with the Commission under the Securities Act or pursuant
to the securities laws of any state; (ii) the Securities, the Series B
Conversion Shares, the Series D Preferred Stock, the Series D Conversion Shares
and the Warrant Shares cannot be sold or transferred without compliance with the
registration provisions of the Securities Act or compliance with exemptions, if
any, available thereunder and without the delivery to the Company by reputable
counsel of such counsel's opinion, in form and substance reasonably satisfactory
to the Company, to the effect that such sale or transfer is exempt from such
registration provisions; (iii) the certificates representing the respective
Securities will include a legend thereon that refers to the foregoing; and
(iv) the Company has no obligation or intention to register the Securities, the
Series B Conversion Shares, the Series D Preferred Stock, the Series D
Conversion Shares or the Warrant Shares under any federal or state securities
act or law, except to the extent, in each case, that the terms of the
Registration Rights Agreement shall otherwise provide.
(d) Such Person and each Carlyle Affiliate (i) is an "accredited
investor" as defined in Rule 501 of Regulation D under the Securities Act;
(ii) has such knowledge and experience in financial and business matters in
general that it has the capacity to evaluate the merits and risks of an
investment in the Securities and to protect its own interest in connection with
an investment in the Securities; (iii) has such a financial condition that it
has no need for liquidity with respect to its investment in the Securities to
satisfy any existing or contemplated undertaking, obligation or Indebtedness;
and (iv) is able to bear the economic risk of its investment in the Securities
for an indefinite period of time.
5.6 NO BROKERS.
Such Person has not employed, and is not subject to the known claim
of, any broker, finder, consultant or other intermediary in connection with all
or any portion of the Transaction (or the negotiations looking toward the
consummation of all or any portion of the Transaction) who might be entitled to
a fee or commission in connection with all or any portion of the Transaction (or
the negotiations looking toward the consummation of all or any portion of the
Transaction).
5.7 NO AGREEMENTS.
Such Person has not entered into any agreement or arrangement with
respect to the disposition or voting of or exercise of any other rights with
respect to any Capital Stock of the Company with any Person who is not an
Affiliate of such Person (which shall in no event include GE).
ARTICLE VI
COVENANTS
6.1 BEST EFFORTS.
The Company shall comply with the GE Purchase Agreement and the Credit
Facility through and including the Second Closing.
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6.2 RESTRICTIVE AGREEMENTS PROHIBITED.
Through and including the Second Closing, the Company shall not become
a party to any agreement which by its terms violates the terms of the GE
Purchase Agreement, the terms of the Series B Preferred Stock as set forth in
the Series B Certificate of Designation, the terms of the Series C Preferred
Stock as set forth in the Series C Certificate of Designation, the terms of the
Series D Preferred Stock as set forth in the Series D Certificate of
Designation, or the terms of the GE Warrants. From and after the Second
Closing, the Company shall not become a party to any agreement which by its
terms violates the terms of the Series B Preferred Stock as set forth in the
Series B Certificate of Designation or the terms of the Series D Preferred Stock
as set forth in the Series D Certificate of Designation .
6.3 CONTINUING OPERATIONS.
From and after the Closing Date, the Company shall, and shall use its
best efforts to cause each Subsidiary to, use all commercially reasonable
efforts to operate its business in a prudent fashion and in such a fashion as is
not likely to result in a Material Adverse Effect on the Company; PROVIDED,
HOWEVER, that the Company shall not be liable to the Purchaser for violation of
this Section 6.3 in connection with any action or operation of the Company that
those members of the Board of Directors who were elected by the Purchaser (as
provided in Section 6.13 of this Agreement) voted to approve, adopt or ratify
(if such action or operation was voted upon by the Board of Directors), unless
the information provided to the Board of Directors in connection with its vote
upon such action or operation failed to contain all information that a
reasonable person would deem material in considering such action or operation.
6.4 FINANCIAL STATEMENTS AND INFORMATION.
(a) For so long as the Purchaser and any Carlyle Affiliates hold, in
the aggregate, 25% or more of the shares of Series B Preferred Stock issued to
the Purchaser at the Closing, the Company shall furnish to the Purchaser:
(i) MONTHLY REPORTS. Within thirty (30) days following the
end of each calendar month, a management report for the preceding
calendar month summarizing the Company's operating and financial
performance during such preceding calendar month and including, without
limitation, an unaudited income statement, an unaudited balance sheet and
an unaudited statement of cash flows for such preceding calendar month
and a narrative description of any event, condition or change in
condition that had, or is likely to have, a Material Adverse Effect on
the Company (but such reports need only be furnished if the Purchaser
(and any Carlyle Affiliate who is to receive such reports) shall have
executed and delivered to the Company an appropriate confidentiality
agreement reasonably satisfactory to the Company.
(ii) QUARTERLY FINANCIAL STATEMENTS. As soon as available and
in any event within sixty (60) days after the end of each of the first
three (3) fiscal quarterly periods of each Fiscal Year, the Company's
quarterly report on Form 10-Q as filed with the Commission.
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(iii) ANNUAL FINANCIAL STATEMENTS. As soon as available and in
any event within one hundred twenty (120) days after the end of each
Fiscal Year, the Company's Annual Report on Form 10-K and related Annual
Report to Shareholders as filed with the Commission.
(iv) SEC REPORTS; MAILINGS TO STOCKHOLDERS. Promptly after
sending or making available or filing of the same, copies of all
registration statements, proxy statements, financial statements and
reports on Forms 10-K, 10-Q and 8-K (or any comparable successor form),
if any, which the Company or any of its Subsidiaries shall file with the
Commission or any national securities exchange. In addition, (A) at the
same time that the Company makes a mailing to its stockholders generally
and (B) promptly after the Company issues a press release, the Company
shall provide a copy of the same to the Purchaser.
(v) NOTICE OF DEFAULT OR CLAIMED DEFAULT. Promptly upon (and
in any event within five (5) business days following) any officer of the
Company obtaining Knowledge (A) of any condition or event which
constitutes an event of default or default (including, without
limitation, by way of cross-default) under any Indebtedness having a
principal amount of at least $5 million, (B) that the holder of any
Indebtedness has given any written notice or taken any other action with
respect to a claimed condition or event which constitutes such an event
of default or default or (C) that any Person has given any written notice
to the Company or any of its Subsidiaries or taken any other action with
respect to a claimed default under an agreement (other than Indebtedness
included in clause (A) of this Section 6.4(a)(v)) or other obligation
having total consideration to the parties of at least $1 million, an
officer's certificate describing the same and the period of existence
thereof and what action the Company has taken, is taking and proposes to
take with respect thereto.
(vi) BANKRUPTCY. Promptly upon receiving notice of any
Person's seeking to obtain or threatening to seek to obtain a decree or
order for relief with respect to the Company or any of its Subsidiaries
in an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, a written notice thereof
specifying what action the Company or such Subsidiary is taking or
proposes to take with respect thereto.
(vii) ADDITIONAL INFORMATION. With reasonable promptness, such
other information, including financial statements and computations,
relating to the performance of the provisions of this Agreement or the
affairs of the Company or any of its Subsidiaries as the Purchaser may
from time to time reasonably request.
(b) The Company will furnish to the Purchaser, at the time it
furnishes each set of financial statements pursuant to Section 6.4(a)(ii) or
(iii) above, an officer's certificate to the effect that no event of default
under any Indebtedness has occurred and is continuing (or, if any such event of
default has occurred and is continuing, describing the same in reasonable
detail, the period of existence thereof and the action that the Company has
taken and proposes to take with respect thereto).
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(c) The Company will keep at its principal executive offices the
books, accounts and records of the Company and cause the same to be available
for inspection at said offices during normal business hours by the Purchaser or
by any prospective purchaser of any of the Securities from either the Purchaser
or any Carlyle Affiliate (other than such a purchaser proposing to purchase
pursuant to a valid registration statement or pursuant to Rule 144 promulgated
under the Securities Act). The Purchaser may, at its option and its own
expense, conduct internal audits of the books, records and accounts of the
Company. Audits may be on either a continuous or periodic basis or both and may
be conducted by employees of the Purchaser or by independent auditors or other
consultants retained by the Purchaser. The Company shall make available to the
Purchaser such information and financial statements in addition to the foregoing
as shall be required by the Purchaser in connection with the preparation of
registration statements, current and periodic reports, proxy statements, Tax
Returns and other documents required to be filed under Applicable Law and shall
cooperate in the preparation of any such documents.
6.5 PRESS RELEASES.
Except as may be required by Applicable Law or by the rules of any
national securities exchange, neither the Purchaser nor the Company shall issue
any press release with respect to this Agreement or the Transaction without the
prior consent of the other party hereto (which consent shall not be unreasonably
withheld under the circumstances). Any such press release required by
Applicable Law or by the rules of any national securities exchange shall only be
made after reasonable notice to the other party as to the form and content of
such press release.
6.6 NOTIFICATION OF CERTAIN MATTERS.
The Company shall give prompt notice to the Purchaser, and the
Purchaser shall give prompt notice to the Company, of (i) the occurrence or
failure to occur of any event which occurrence or failure causes any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from and including the date
hereof through the time at which such representation or warranty ceases to
survive pursuant to Section 8.1 hereof, and (ii) any material failure of the
Company or the Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder, and each party shall use all reasonable efforts to remedy such
failure. In addition, the Company shall give prompt notice to the Purchaser of
any developments that could reasonably be expected to have a Material Adverse
Effect on the Company.
6.7 LIABILITY INSURANCE.
For so long as the Purchaser and any Carlyle Affiliates hold, in the
aggregate, 25% or more of the shares of Series B Preferred Stock issued to the
Purchaser at Closing, the Company shall ensure that each person serving on the
Board of Directors on and after the Closing Date shall receive the same
liability insurance coverage as a member of the Board of Directors receives as
of the date hereof (including coverage for liabilities arising before the date
of taking office to the extent arising from such person's status as a
prospective member of the Board of
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Directors) and that such policies shall be in full force and effect in
accordance with their terms as of the Closing Date.
6.8 CONVERSION STOCK.
The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock and preferred stock, par value
$.001 per share, solely for the purpose of effecting the conversion of shares of
Series B Preferred Stock and Series C Preferred Stock and the issuance of Common
Stock in respect of the Warrants and the GE Warrants, the full number of whole
shares of Common Stock and Series D Preferred Stock then deliverable upon (a)
the conversion of all shares of Series B Preferred Stock and Series C Preferred
Stock then outstanding, (b) the issuance of Common Stock in respect of the
Warrants and the GE Warrants, and (c) if any Series D Preferred Stock is then
outstanding, the full number of whole shares of Common Stock then deliverable
upon the conversion of all shares of Series D Preferred Stock then outstanding.
The Company shall take at all times such corporate action as shall be necessary
in order that the Company may validly and legally issue fully paid and
non-assessable shares of Common Stock or Series D Preferred Stock (as the case
may be) upon the conversion of shares of Series B Preferred Stock, Series C
Preferred Stock, and Series D Preferred Stock and the exercise of the then
outstanding Warrants and GE Warrants. If at any time the number of authorized
but unissued shares of Common Stock or Series D Preferred Stock shall not be
sufficient to effect the conversion of all then outstanding shares of the Series
B Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock and
the exercise of all the then outstanding Warrants and GE Warrants, in addition
to such other remedies as shall be available to the holders of the Series B
Preferred Stock, Series C Preferred Stock, and Series D Preferred Stock, the
Company shall forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock or Series D
Preferred Stock to such numbers of shares as shall be sufficient for such
purpose, including but not limited to promtly calling and holding a meeting of
the Company's stockholders, at which the Company's stockholders shall vote on a
proposed amendment to the Certificate of Incorporation that would so increase
the number of authorized shares of Common Stock or preferred stock, par value
$.001 per share, as appropriate, a favorable vote for which amendment shall have
been recommended to the Company's stockholders by the Board of Directors,
pursuant to a duly and validly adopted resolution of the Board of Directors
setting forth the amendment proposed and declaring its advisability, all in
accordance with Section 242 of the Delaware General Corporation Law; and, in
case of an increase in the number of authorized shares of such preferred stock,
the Board of Directors shall promptly cause to become effective a certificate of
increase pursuant to Section 151 of the Delaware General Corporation Law.
6.9 CERTAIN REGULATORY MATTERS.
(a) The operations of the Company and its Subsidiaries will be
conducted in compliance with all material Applicable Laws (material Applicable
Laws includes, without limitation, all Applicable Laws relating to health care,
the health care industry and the provision of health care services, third party
reimbursement (including Medicare and Medicaid), public health and safety and
wrongful death and medical malpractice). In addition to, and without limiting
the generality of the foregoing, the Company shall adopt and implement a
compliance plan adequate
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to assure such compliance. The compliance plan shall include all material
elements of an effective program to prevent and detect violations of law as
defined in Commentary 3(k) to Section 8A1.2 of the Federal Sentencing
Guidelines.
(b) Without limiting the generality of the foregoing, the Company and
all Affiliates shall comply in all material respects with all lawful directives,
orders, instructions, bulletins and other announcements received from third
party payors and their agents (including, without limitation, Medicare carriers
and fiscal intermediaries) regarding participation in third party payment
programs, including, without limitation, preparation and submission of claims
for reimbursement. Nothing in this Section 6.9 shall be construed as or is
intended to create any third party beneficiaries.
6.10 EMPLOYMENT ARRANGEMENTS.
(a) The Company will keep in effect following the Closing the
employment agreements with the employees set forth in SCHEDULE 4.23, on the same
terms and conditions contained in such employment agreements prior to the
Closing Date; provided, however, that such employment agreements shall be
modified so that none of (i) the Transaction, (ii) any conversion of Series B
Preferred Stock or Series C Preferred Stock acquired hereunder or under the GE
Purchase Agreement into shares of Series D Preferred Stock or Common Stock ,
(iii) any conversion of shares of Series D Preferred Stock into Common Stock, or
(iv) any change in the membership, size or composition of the Board of Directors
incident to the transaction or such conversions, shall trigger or constitute a
change of control or otherwise give any party to such employment agreements any
right to receive any payment (or any acceleration thereof) or protections
whatsoever.
(b) Following the Closing, the Company and the Purchaser will review
the terms and conditions of the bonus plan currently in effect at the Company to
determine whether any changes should be made to such bonus plan.
6.11 TRANSACTIONS WITH AFFILIATES.
For so long as the Purchaser and any Carlyle Affiliates hold, in the
aggregate, 25% or more of the shares of Series B Preferred Stock issued to the
Purchaser at Closing, the Company covenants and agrees that it will not, and
will not permit any of its Subsidiaries to, directly or indirectly, engage in
any transaction with any Affiliate of the Company, including, without
limitation, the purchase, sale or exchange of assets or the rendering of any
service, except: (a) transactions with Affiliates of the Company that involve
consideration or payments in the aggregate of less than $5,000; (b) transactions
with Affiliates of the Company that are approved by the Board of Directors; and
(c) transactions with Affiliates of the Company in the ordinary course of
business and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms that are no less
favorable to the Company or such Subsidiary, as the case may be, than those
which might be obtained in an arm's-length transaction at the time from a Person
which is not such an Affiliate.
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6.12 STOCKHOLDER APPROVAL OF CERTAIN ACTIONS.
Without limitation of the rights, restrictions and protections
contained in the Series B Certificate of Designation or otherwise available to
holders of shares of the Series B Preferred Stock, for so long as at least
thirty-three percent (33%) of the number of shares of the Series B Preferred
Stock originally issued to the Purchaser is outstanding, the Company shall not
take, and shall cause its Subsidiaries not to take, any of the following actions
without the affirmative vote of holders of at least sixty-seven percent (67%) of
the shares of the Series B Preferred Stock then outstanding:
(a) Alter, change or amend (by merger or otherwise) any of the
rights, preferences and privileges of the Series B Preferred Stock, the Series C
Preferred Stock or any other class of Capital Stock or the terms or provisions
of any Option or Convertible Security;
(b) Effect or enter into any transaction or event that results or
could reasonably be expected to result, directly or indirectly, in a Special
Corporate Event with respect to the Company or any Subsidiary;
(c) The occurrence of any Liquidating Event with respect to the
Company or any Subsidiary;
(d) Amend, restate, alter, modify or repeal (by merger or otherwise)
the Certificate of Incorporation or the Amended Bylaws of the Company,
including, without limitation, amending, restating, modifying or repealing (by
merger or otherwise) any certificate of designation or preferences (as in effect
from time to time) relating to the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock or the Series D Preferred Stock,
including, without limitation, the filing by the Company of a certificate with
the Secretary of State of the State of Delaware, pursuant to Section 151(g) of
the Delaware General Corporation Law, setting forth a resolution or resolutions
adopted by the Board of Directors of the Company that none of the authorized
shares of Series D Preferred Stock are outstanding and that none will be issued
subject to the Series D Certificate of Designation, (provided however, that upon
any Type A Conversion pursuant to Section 5 of the Series B Certificate of
Designation, the Company shall immediately file a certificate with the Secretary
of State of the State of Delaware, pursuant to Section 151(g) of the Delaware
General Corporation Law, setting forth a resolution or resolutions adopted by
the Board of Directors of the Company that none of the authorized shares of
Series D Preferred Stock are outstanding and that none will be issued subject to
the Series D Certificate of Designation.)
(e) Change the number of directors of the Company to a number less
than eight (8) or more than nine (9) or the manner in which the directors are
selected, except as provided in the Certificate of Incorporation, Amended
Bylaws, Series B Certificate of Designation, Series C Certificate of Designation
and Series D Certificate of Designation;
(f) Incur any Indebtedness, in the aggregate with respect to the
Company and its Subsidiaries, in excess of $15 million in any Fiscal Year;
PROVIDED, HOWEVER, that this provision
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shall not apply to draw-downs under any credit facility as to which a credit
agreement had been executed and delivered on or prior to the date hereof;
(g) Become a party to Operating Leases during any Fiscal Year with
respect to which the present value of all payments due during the term of such
Operating Leases in the aggregate (determined using a discount rate of 10%)
exceed $15 million;
(h) Create, authorize or issue any shares of Series B Preferred Stock
or any class or series of Senior Securities, Parity Securities, Supervoting
Securities or shares of any such class or series;
(i) Reclassify any authorized stock of the Company into Series B
Preferred Stock or any class or series of Senior Securities, Parity Securities,
Supervoting Securities or shares of such class or series;
(j) Increase or decrease the authorized number of shares of Series B
Preferred Stock, Series D Preferred Stock or any class or series of Senior
Securities, Parity Securities, Supervoting Securities or shares of any such
class or series;
(k) Issue any equity security below either the then current Market
Price (without deduction for any underwriters' discount) or the then applicable
Conversion Price of the Series B Preferred Stock (as defined in the Series B
Certificate of Designation), other than for (i) management stock options
currently authorized and available for grant for not more than Three Hundred
Thousand (300,000) shares of Common Stock in the aggregate, in which Senior
Management of the Company shall not participate, (ii) management stock options
exercisable at not less than the then-applicable Conversion Price per share of
Common Stock issued after October 14, 1997, exercisable for not more than Five
Hundred Thousand (500,000) shares of Common Stock in the aggregate, in which
only Senior Management of the Company shall participate, and (iii) the Common
Stock underlying such management stock options and other stock options
outstanding as of October 14, 1997;
(l) Declare or pay any dividend or make any distribution (including,
without limitation, by way of redemption, purchase or other acquisition) with
respect to shares of Capital Stock or any securities convertible into or
exercisable, redeemable or exchangeable for any share of Capital Stock of the
Company or any Subsidiary (including, without limitation, any Option or
Convertible Security) directly or indirectly, whether in cash, obligations or
shares of the Company or other property;
(m) Acquire, in one or a series of related transactions, any equity
ownership interest or interests of any Person, where the aggregate consideration
payable in connection with such acquisition (including, without limitation, cash
consideration, the fair market value of any securities and the net present value
of any deferred consideration) is at least $15 million;
(n) Acquire, in one or a series of related transactions, any asset or
assets of any Person, where the aggregate consideration payable in connection
with such transaction (including, without limitation, cash consideration, the
fair market value of any securities and the net present
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value of any deferred consideration) is equal to or greater that $15 million;
PROVIDED, HOWEVER, that this provision shall not apply to Capital Expenditures
made by the Company in the Ordinary Course of Business;
(o) Merge or consolidate with any Person, or permit any other Person
to merge into it where: (i) the stockholders of the Company immediately prior
to the consummation of such merger or consolidation shall, immediately after the
consummation of such merger or consolidation, hold securities possessing more
than 50% of both the total voting power of and the beneficial ownership
interests in the surviving entity of such merger or consolidation and (ii) the
equity holders of such other Person immediately prior to the consummation of
such transaction shall receive (directly or indirectly) aggregate consideration
payable in connection with such transaction (including without limitation cash
consideration, the fair market value of any securities and the net present value
of any deferred consideration) equal to or greater than $15 million;
(p) Cause or permit any Subsidiary to merge or consolidate with any
other Person (other than the Company or a wholly-owned Subsidiary), or cause or
permit any other Person to merge into it, where: (i) the stockholders of such
Subsidiary immediately prior to the consummation of such merger or consolidation
shall, immediately after the consummation of such merger or consolidation, hold
securities possessing more than 50% of both the total voting power of and the
beneficial ownership interests in the surviving entity of such merger or
consolidation and (ii) the equity holders of the subject Person immediately
prior to the consummation of such transaction shall receive (directly or
indirectly) aggregate consideration payable in connection with such transaction
(including without limitation cash consideration, the fair market value of any
securities and the net present value of any deferred consideration) equal to or
greater than $15 million;
(q) Substantially and materially engage in, either through
acquisition or internal development, any business other than the Business;
(r) Make or permit any of its Subsidiaries to make Capital
Expenditures in any Fiscal Year in excess, in the aggregate, of two percent (2%)
above the approved Capital Budget Plan for such Fiscal Year unless such Capital
Expenditure is approved by the Executive Committee of the Board of Directors or
a Supermajority Vote of the Board of Directors;
(s) (i) sell, transfer, convey, lease or dispose of, outside the
Ordinary Course of Business, any assets or properties of the Company or any
Subsidiary, whether now or hereafter acquired, in any transaction or
transactions, if (X) the aggregate consideration payable in connection with any
single such transaction (including, without limitation, cash consideration, the
fair market value of any securities and the net present value of any deferred
consideration), is greater than $5 million or (Y) the aggregate consideration
payable in connection with all such transactions (including, without limitation,
cash consideration, the fair market value of any securities and the net present
value of any deferred consideration), consummated after the Initial Issue Date,
taken as a whole, is or would become as a result of such transaction greater
than $20 million; (ii) undergo or cause or permit any Subsidiary to undergo a
reorganization or recapitalization; (iii) merge or consolidate with any Person,
or permit any other Person to merge into it, where the stockholders of the
Company immediately prior to the consummation of such
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merger or consolidation shall, immediately after the consummation of such merger
or consolidation, hold securities possessing 50% or less of either the total
voting power of or the beneficial ownership interests in the surviving entity of
such merger or consolidation; (iv) cause or permit any Subsidiary to merge or
consolidate with any other Person (other than the Company or a wholly-owned
Subsidiary of the Company), or cause or permit any other Person to merge into
such Subsidiary, where the stockholders of such Subsidiary immediately prior to
the consummation of such merger or consolidation shall, immediately after the
consummation of such merger or consolidation, hold 50% or less of either the
total voting power of or the beneficial ownership interests in the surviving
entity of such merger or consolidation, if (X) the value of the assets of such
Subsidiary is greater than $5 million or (Y) the aggregate value of the assets
of all such Subsidiaries with respect to all such mergers or consolidations
consummated after the Initial Issue Date, taken as a whole, and including such
transaction, is greater than $20 million;
(t) Permit any Subsidiary to issue or sell any share of Capital
Stock, Option or Convertible Security; PROVIDED, HOWEVER, that the Company may
form a new Subsidiary not all of the equity securities of which need be owned
directly or indirectly by the Company (a "Partial Subsidiary"), but only if (i)
at the time of creation of such Partial Subsidiary, such Partial Subsidiary is
designated as such in a written notice to the Purchaser, and, (ii) cumulatively
through time no more than $5,000 of assets (in the aggregate ) are transferred
to such Partial Subsidiary by the Company or any other Subsidiary, and (iii) no
liabilities of such Partial Subsidiary are ever assumed or guaranteed by the
Company or any other Subsidiary;
(u) Amend, restate, alter, modify or repeal (by merger or otherwise)
or permit any Subsidiary to amend, restate, modify or repeal (by merger or
otherwise) the certificate of incorporation or bylaws of any Subsidiary in any
material respect; or
(v) Issue any shares of Series D Preferred Stock, otherwise than
pursuant to a Type B Conversion.
6.13 BOARD OF DIRECTORS.
(a) The Board of Directors at all times following the Closing and
before a Type B Event Date shall be comprised of between eight (8) and nine (9)
members with one vacancy until the ninth member, an Independent nominated by the
Purchaser and GE has been approved by the Board of Directors (the "Joint
Director") to fill such vacancy. After the occurrence of a Type B Event Date,
the Board of Directors shall be comprised of a number of members that is
consistent with the Series B Certificate of Designation, the Series C
Certificate of Designation, the Series D Certificate of Designation and the
Amended Bylaws. As long as the Purchaser and all Carlyle Affiliates own at
least fifty percent (50%) of the shares of Series B Preferred Stock originally
purchased by the Purchaser, the holders of the Series B Preferred Stock, by a
vote as provided in the Series B Certificate of Designation, shall have the
right to elect two (2) directors. As long as the Purchaser and all Carlyle
Affiliates own at least twenty-five percent (25%) but less than fifty percent
(50%) of the Series B Preferred Stock originally purchased by the Purchaser, the
holders of the Series B Preferred Stock, by a vote as provided in the Series B
Certificate of Designation, shall have the right to elect one (1) director.
Until the occurrence of a Type B Event Date, the holders of the Common Stock
shall have the right to elect
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between five (5) and six (6) directors (one (1) of whom shall be the Joint
Director) plus, if any of the percentage ownership conditions contained in the
two immediately preceding sentences fail to be satisfied otherwise than pursuant
to a Type B Conversion, such director or directors as would, absent such
failure, be elected by holders of the Series B Preferred Stock or the Series C
Preferred Stock, as appropriate.
(b) Immediately following the Closing, the Board of Directors shall
appoint, and shall thereafter until a Type B Event Date, unless approved by a
majority of the entire board of directors and a majority of the directors
elected by the holders of the Series B Preferred Stock and the Series C
Preferred Stock, maintain as provided in the Amended Bylaws the following
committees of the Board of Directors with the respective duties, membership and
voting requirements stated below, PROVIDED, that if the holders of the Series B
Preferred Stock shall, otherwise than as a result of the conversion of their
shares of Series B Preferred Stock in a Type B Conversion, cease to have the
right to nominate and elect any Preferred Stock Director at all, then such
holders shall no longer have the right to select any member of any of the
following committees and the member or members of such committees selected by
such holders shall automatically cease to be a member or members of such
committees:
(i) Compensation Committee, which shall consist of three (3)
directors, at least one (1) of whom shall be selected jointly by the
directors elected by the Series B Preferred Stock and the director
elected by the Series C Preferred Stock. An affirmative vote of at least
two (2) members of the Compensation Committee shall be required for
approval of matters considered by the Compensation Committee. The
Compensation Committee shall ensure that the representative on the
Compensation Committee selected by the directors elected by the Series B
Preferred Stock and the director elected by the Series C Preferred Stock
shall receive adequate notice of and an opportunity to participate in any
meetings of the Compensation Committee;
(ii) Audit Committee, which shall consist of three (3)
directors, including as many Independent directors as are available, not
to exceed three (3). An affirmative vote of at least two (2) members of
the Audit Committee shall be required for approval of matters considered
by the Audit Committee;
(iii) Executive Committee, which shall consist of four (4)
directors, one (1) of whom shall be selected by the directors elected by
the Series B Preferred Stock, one (1) of whom shall be selected by the
director elected by the Series C Preferred Stock and two (2) of whom
shall be selected by the Board of Directors. The members selected by the
directors elected by the Series B Preferred Stock and the director
elected by the Series C Preferred Stock may be removed only by the
director or directors, respectively, who selected such members. The
Executive Committee shall, in addition to the customary duties of an
executive committee, have the right to approve any financing activity,
including but not limited to the Capital Budget Plan. An affirmative
vote of at least three (3) members of the Executive Committee shall be
required for approval of any matters considered by the Executive
Committee. Each financing activity not approved by the Executive
Committee may be referred to the Board of Directors for approval, which
approval shall require a Supermajority Vote; and
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(iv) Acquisitions Committee, which shall consist of four (4)
directors, one (1) of whom shall be selected by the directors elected by
the Series B Preferred Stock, one (1) of whom shall be selected by the
director elected by the Series C Preferred Stock, and two (2) of whom
shall be selected by the Board of Directors. The Acquisitions Committee
shall have the right to approve any transaction of the types described in
Sections 6.12(m), (n), (o) and (p) with respect to which transaction the
aggregate consideration payable in connection with such transaction
(including, without limitation, cash consideration, the fair market value
of any securities and the net present value of any deferred
consideration) is less than $15 million. A unanimous vote of the
Acquisitions Committee shall be required for approval of any matters
considered by the Acquisitions Committee. Except as described in the
next sentence, each matter considered but not unanimously approved by the
Acquisitions Committee may be referred to the Board of Directors for
approval, which approval shall require a majority vote of the Board of
Directors. The unanimous approval of the Acquisitions Committee or the
unanimous approval of the Board of Directors shall be required before the
Company or any of its Subsidiaries engage in a transaction of the types
described in Sections 6.12(m), (n) (which, only for purposes of this
clause, shall also apply to Capital Expenditures made by the Company in
the ordinary course of business), (o) and (p), in which transaction: (A)
the aggregate consideration payable in connection with such transaction
(including, without limitation, cash consideration, the fair market value
of any securities and the net present value of any deferred
consideration) is less than $15 million; and (B) the Company is to issue
its common stock at an implicit or explicit price of less than $8.375 per
share. Such implicit price shall be determined in an appraisal approved
unanimously by the Acquisitions Committee or unanimously by the Board of
Directrs, such appraisal to be performed by an independent appraiser
selected unanimously by the Acquisitions Committee or unanimously by the
Board of Directors.
(c) Regular meetings of the Board of Directors of the Company shall
be held at least once a calendar quarter at the offices of the Company or at
such other times and places as may be fixed by the Board of Directors upon
notice to the members of the Board of Directors.
(d) After the Closing, the following matters, among others specified
in the Amended Bylaws, shall be deemed approved by the Board of Directors only
upon a Supermajority Vote in respect of any such matter:
(i) Approving the annual Capital Budget Plan; and
(ii) Approving the Company entering into any financing
activity not approved by the Executive Committee.
(e) Upon any Type A Conversion pursuant to Section 5 of the Series B
Certificate of Designation and Section 5 of the Series C Certificate of
Designation, of all of the outstanding shares of Series B Preferred Stock and
Series C Preferred Stock, the Company shall immediately file a certificate with
the Secretary of State of the State of Delaware, pursuant to Section 151(g) of
the Delaware General Corporation Law, setting forth a resolution or resolutions
adopted by the Board of Directors of the Company that none of the authorized
shares
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of Series D Preferred Stock are outstanding and that none will be issued subject
to the Series D Certificate of Designation.
6.14 RESTRICTIONS ON TRANSFER OF CAPITAL STOCK.
(a) The Purchaser shall not transfer, sell, assign, or pledge to any
Person other than a Carlyle Affiliate, or dispose of, any interest in any shares
of the Series B Preferred Stock without the prior approval of the Board of
Directors, in its sole discretion. The Purchaser shall not transfer, sell or
assign to a Carlyle Affiliate, any interest in any shares of the Series B
Preferred Stock if such Carlyle Affiliate is engaged in the Business.
(b) After the Closing Date and before the earlier to occur of April
14, 1999 and a Type B Event Date, the Purchaser shall not transfer, sell or
assign to any Person any of the Series D Preferred Stock, Series B Conversion
Shares or Series D Conversion Shares without the prior approval of an ordinary
majority of the Board of Directors in its sole discretion, other than in the
following circumstances:
(i) A transfer to a Carlyle Affiliate (provided that prior to
any such transfer such Carlyle Affiliate shall have delivered to the
Company its written agreement to be bound by the terms of this Section
6.14);
(ii) A transfer permitted under Rule 144 under the Securities
Act;
(iii) A transfer pursuant to a registered offering under
registration rights from the Company as provided in the Registration
Rights Agreement; or
(iv) A transfer pursuant to a transaction available to all
stockholders of the Company on the same terms as to the Purchaser, which
has been approved by a majority of the Board of Directors;
(c) If a Type B Event Date occurs prior to April 14, 1999, then from
the Type B Event Date until the second subsequent annual meeting of stockholders
of the Company after such Type B Event Date, (A) the Purchaser shall not make a
transfer of any of its Series D Preferred Stock, Series B Conversion Shares or
Series D Conversion Shares in a transaction available to all holders of Common
Stock on the same terms as to the Purchaser, unless such transaction has been
approved either by (I) the affirmative vote of not less than 80 percent of the
outstanding shares of the Company entitled to vote, or (II) at least two-thirds
(2/3) of the directors of the Company (which must include either (i) the Joint
Director if either (x) such Joint Director served in such position as of the
Type B Event Date, or (y) such Joint Director has been approved by a majority of
directors who were Common Stock Directors as of the Type B Event Date, or (ii)
at least one director who was a Common Stock Director prior to the Type B Event
Date, unless neither such Joint Director, nor any of such Common Stock Directors
continue to serve on the Board of Directors at such time) and (B) the Purchaser
shall not make a transfer of any of its Series D Preferred Stock, Series B
Conversion Shares or Series D Conversion Shares in a transaction other than one
available to all holders of Common Stock on the same terms as to the Purchaser,
unless such transaction has been approved either by (I) the affirmative vote of
not less
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than 80 percent of the outstanding shares of the Company entitled to vote, or
(II) at least 50 percent of the directors of the Company who are not the
Preferred Stock Directors or the Conversion Directors. If a Type B Event Date
occurs prior to October 14, 1999, then from the Type B Event Date until the
second subsequent annual meeting of stockholders of the Company after such Type
B Event Date, none of the following actions or transactions shall be effected by
the Company or approved by the Company as a stockholder of any subsidiary of the
Company, and neither the Purchaser nor any other holder of Series D Preferred
Stock (other than a holder pursuant to a transfer permitted in paragraphs
(b)(ii) or (b)(iii) of this Section 6.14) shall engage in, or be a party to, any
of the following actions or transactions involving the Company or any subsidiary
of the Company, if, as of the record date for the determination of the
stockholders entitled to vote thereon, or consent thereto, any other
corporation, person or entity referred to in clauses (i) through (iv) of this
sentence beneficially owns or controls, directly or indirectly, five percent
(5%) or more of the outstanding shares of the Company entitled to vote:
(i) any merger or consolidation of the Company or any of its
subsidiaries with or into such other corporation, person or entity; or
(ii) any sale, lease, exchange or other disposition of all or any
substantial part of the assets of the Company or any of its subsidiaries to, or
with, such other corporation, person or entity; or
(iii) the issuance or delivery of any voting securities of the
Company or any of its subsidiaries to such other corporation, person or entity
in exchange for cash, other assets or securities, or a combination thereof; or
(iv) any dissolution or liquidation of the Company;
PROVIDED, HOWEVER, that the prohibitions contained in this sentence shall not
apply with respect to any such action or transaction approved by (I) the
affirmative vote of not less than 80 percent of the outstanding shares of the
Company entitled to vote or (II) at least two-thirds (2/3) of the directors of
the Company (which must include either the Joint Director if either (x) such
Joint Director served in such position as of the Type B Event Date, or (y) such
Joint Director has been approved by a majority of directors who were Common
Stock Directors as of Type B Event Date, or at least one director who was a
Common Stock Director prior to the Type B Event Date, unless neither such Joint
Director, nor any of such Common Stock Directors continue to serve on the Board
of Directors at such time). For purposes of the immediately preceding sentence,
a Person shall be deemed to own or control directly or indirectly, any
outstanding shares of stock of the Company (A) which it has the right to acquire
pursuant to any agreement, or upon the exercise of, conversion rights, warrants,
options or otherwise or (B) which are beneficially owned, directly or indirectly
(including shares deemed owned through application of clause (A) above) by any
other corporation, person or other entity (x) with which it or its "affiliate"
or "associate," (as defined below) has any agreement, arrangement, or
understanding for the purpose of acquiring, holding, voting or disposing of
stock of the Company or (y) which is its "affiliate" or "associate" as those
terms are defined under the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
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No transfer of Series B Preferred Stock or Series B Conversion Shares may be
made by Purchaser or any Carlyle Affiliate (other than a transfer described in
paragraph (b)(ii) or (b)(iii) of this Section 6.14), unless prior thereto, the
transferee in such transfer shall have entered into an agreement in form and
substance reasonably satisfactory to the Company, agreeing to be bound by the
terms of this Section 6.14(c). Notwithstanding anything to the contrary
contained in this Section 6.14(c), the Purchaser shall not need any approval by
any directors, the Board of Directors or any stockholders under this Section
6.14 in order to transfer, sell or assign any of its Series B Conversion Shares
in the circumstances and the persons set forth in clauses (i), (ii) and (iii) of
Section 6.14(b).
(d) The Warrants and the Warrant Shares shall be transferable by
the Purchaser, subject to compliance with federal and state securities laws,
without the approval of the Board of Directors.
(e) Except in the case of a transfer pursuant to Rule 144
promulgated pursuant to the Securities Act, or any successor rule, prior to
consummating any private sale or transfer of Common Stock to any Person other
than a Carlyle Affiliate, the Purchaser shall provide to the Company the written
opinion of reputable legal counsel in form reasonably acceptable to the Company
that such sale or transfer is being made in compliance with applicable federal
securities laws.
6.15 EXPIRATION OF CERTAIN COVENANTS.
The covenants contained in Sections 6.3, 6.5 and 6.9 of this Agreement
shall expire if, at any date after the Closing Date, the Purchaser and the
Carlyle Affiliates hold, and, upon conversion into Common Stock of all of the
Series B Preferred Stock or Series D Preferred Stock held by the Purchaser and
the Carlyle Affiliates, would hold less than 5% of the issued and outstanding
Common Stock of the Company on a fully diluted basis; PROVIDED, HOWEVER, that to
the extent that such covenants relate to or arise out of any Applicable Laws
relating to health care, the health care industry and the provision of health
care services, third party reimbursement (including Medicare and Medicaid),
public health and safety and wrongful death and medical malpractice), such
covenants shall expire if, at any date after the Closing Date, the Purchaser and
the Carlyle Affiliates hold less than 5% of the Series B Preferred Stock
originally purchased by the Purchaser.
ARTICLE VII
CONDITIONS TO CLOSING
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligation of each party to consummate the Closing on
the Closing Date is subject to the satisfaction or waiver, on or prior to the
Closing Date, of the condition that there shall be no injunction or court order
restraining consummation of all or any portion of the Transaction, there shall
be no pending or threatened Proceeding by or before a court or governmental body
brought by or on behalf of any Person or Governmental Entity seeking to
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restrain or invalidate all or any portion of the Transaction and there shall not
have been adopted any law or regulation making all or any portion of the
Transaction illegal.
7.2 CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The obligation of the Company to consummate the Transaction on the
Closing Date is subject to the satisfaction or waiver, by the Company, on or
prior to the Closing Date of each of the following conditions:
(a) All representations and warranties of the Purchaser contained
in this Agreement shall be true and correct in all material respects at and as
of the Closing Date as if such representations and warranties were made at and
as of the Closing Date, and the Purchaser shall have performed in all material
respects all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date. There shall be delivered to the Company a
certificate (signed by an authorized person of the Purchaser) to the foregoing
effect.
(b) All consents, approvals, Permits and waivers from Governmental
Entities and other parties necessary to permit the Company and the Purchaser to
consummate the Transaction shall have been obtained.
(c) The Purchaser shall have delivered to the Company the opinions
of Gibson, Dunn & Crutcher, LLP, counsel to the Purchaser, in the form attached
hereto as Exhibit H.
(d) No order enjoining the sale of the Securities or the GE
Warrants or the proposed issuance of the Series C Preferred Stock, the Series B
Conversion Shares, the Series C Conversion Shares, the Series D Preferred Stock,
the Series D Conversion Shares, the Warrant Shares or the GE Warrant Shares
shall have been issued and no proceedings for such purpose shall be pending or
threatened by the Commission or any commissioner of corporations or similar
officer of any state having jurisdiction over the Transaction. At the time of
the Closing, the sale and issuance of the Securities, the GE Warrants, the
Series C Preferred Stock, the Series B Conversion Shares, the Series C
Conversion Shares, the Series D Preferred Stock, the Series D Conversion Shares,
the Warrant Shares and the GE Warrant Shares shall be legally permitted by all
laws and regulations to which the Company and the Purchaser are subject.
(e) The Supplemental Service Fee shall have been terminated by GE.
(f) The Purchaser shall have delivered to the Company, unless
waived in writing by the Company, such other documents relating to the
Transaction as the Company or the Company's counsel may reasonably request.
(g) The lender under the Credit Facility shall have executed and
delivered the Credit Facility and all related documents.
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7.3 CONDITIONS TO THE PURCHASER' OBLIGATIONS.
The obligation of the Purchaser to consummate the Closing on the
Closing Date is subject to the satisfaction or waiver on or prior to the Closing
Date of each of the following conditions:
(a) All representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects at and as of
the Closing Date as if such representations and warranties were made at and as
of the Closing Date, and the Company shall have performed in all material
respects all agreements and covenants required hereby to be performed by it
prior to or at the Closing Date. There shall be delivered to the Purchaser a
certificate (signed by the President and Chief Executive Officer and the
Secretary of the Company) to the foregoing effect.
(b) All consents, approvals, Permits and waivers from Governmental
Entities and other parties necessary to permit the Purchaser and the Company to
consummate the Closing shall have been obtained.
(c) The Company shall have delivered to the Purchaser the opinions
of McDermott, Will & Emery, special counsel for the Company, in the form
attached hereto as Exhibit I.
(d) Since the date of this Agreement, there shall not have been any
Material Adverse Effect on the Company.
(e) All actions shall have been taken by the Company and its Board
of Directors so that, immediately upon the Purchaser's purchase of the
Securities, the Board of Directors shall consist of eight (8) directors, two (2)
of whom were elected by the holders of Series B Preferred Stock pursuant to the
Series B Certificate of Designation and one (1) of whom was elected by the
holders of Series C Preferred Stock pursuant to the Series C Certificate of
Designation.
(f) The Amended Bylaws shall be in effect in the form set forth in
Exhibit A hereto.
(g) The Company shall have provided to the Purchaser a copy of the
insurance policies together with the riders and schedules thereto which evidence
compliance with the provisions set forth in Section 6.7.
(h) No order enjoining the sale of the Securities or the GE
Warrants or the proposed issuance of the Series C Preferred Stock, the Series B
Conversion Shares, the Series C Conversion Shares, the Series D Preferred Stock,
the Series D Conversion Shares, the Warrant Shares or the GE Warrant Shares
shall have been issued and no Proceedings for such purpose shall be pending or
threatened by the Commission or any commissioner of corporations or similar
officer of any state having jurisdiction over the Transaction. At the time of
the Closing, the sale and issuance of the Securities, the GE Warrants, the
Series C Preferred Stock, the Series B Conversion Shares, the Series C
Conversion Shares, the Series D Preferred Stock, the Series D
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Conversion Shares, the Warrant Shares and the GE Warrant Shares shall be legally
permitted by all laws and regulations to which the Company and the Purchaser are
subject.
(i) The Company shall have adopted and duly filed with the Secretary
of State of Delaware the Series B Certificate of Designation, the Series C
Certificate of Designation, and the Series D Certificate of Designation and each
such Certificate shall have become effective under Delaware law.
(j) The Company shall have delivered to the Purchaser, unless waived
in writing by the Purchaser:
(A) copies (certified by the Secretary of the Company) of
the resolutions duly adopted by the Board of Directors of the Company,
authorizing the execution, delivery and performance of this Agreement and
the other agreements contemplated hereby;
(B) a copy (certified by the Secretary of the State of
Delaware) of the certificate of incorporation as amended through the date
of the Closing and a copy (certified by the Secretary of the Company) of
the Company's Amended Bylaws as amended through the date of the Closing;
and
(C) such other documents relating to the Transaction as the
Purchaser or the Purchaser's counsel may reasonably request.
(k) The Company shall have (A) terminated the Supplemental Service
Fee described in the Proxy Statement and issued the Series C Preferred Stock in
respect thereto and (B) issued the GE Warrants.
(l) The Company and the lender under the Credit Agreement shall have
executed and delivered the Credit Facility and related documents.
ARTICLE VIII
INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS, ETC.
The representations and warranties of the parties hereto contained
herein shall survive the Closing for a period of sixty (60) days following
receipt by the Purchaser of the audited financial statements of the Company for
the Fiscal Year ended June 30, 1998, except as to (a) the representations and
warranties set forth in Sections 4.8, 4.9, 4.13 (to the extent related to any
Applicable Laws relating to health care, the health care industry and the
provision of health care services, third party reimbursement (including Medicare
and Medicaid), public health and safety and wrongful death and medical
malpractice), 4.16, 4.17, 4.32, 4.33, 4.34, 4.35 and 4.36 hereof, which shall
survive for the period of the statute of limitations applicable thereto; (b) any
matter as to which a Claim has been submitted in writing to the Company prior to
such date; and (c) any matter based on fraud by the Company in making any of the
representations and
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warranties contained in this Agreement. With respect to the matters set forth
in (b) and (c) above, the cause of action in favor of the Purchaser in respect
of such matters shall survive indefinitely.
8.2 INDEMNIFICATION BY THE COMPANY.
The Company agrees to indemnify and hold harmless the Purchaser, its
Subsidiaries, its Affiliates, the Carlyle Affiliates and the directors,
officers, employees, stockholders and partners of each of the Purchaser, its
Subsidiaries, its Affiliates and the Carlyle Affiliates (individually, an
"Indemnified Party" and collectively, the "Indemnified Parties"), from and
against any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, claims, costs and reasonable attorneys' fees, expenses and
disbursements of any kind ("Losses") which may be imposed upon or incurred by
the Purchaser in any manner relating to or arising out of any untrue
representation, breach of warranty or failure to perform any covenant or
agreement by the Company contained in this Agreement (including, without
limitation, the schedules and exhibits hereto), the Series B Certificate of
Designation, the Series D Certificate of Designation, the Ancillary Agreements
or in any certificate or document delivered pursuant hereto or thereto or
arising out of any Applicable Laws relating to health care, the health care
industry and the provision of health care services, third party reimbursement
(including Medicare and Medicaid), public health and safety and wrongful death
and medical malpractice or otherwise relating to or arising out of the
Transaction; PROVIDED, HOWEVER, that the Company shall provide no
indemnification with respect to Losses relating to or arising out of the
Transaction if such Losses were caused principally by the gross negligence or
willful misconduct of one or more Indemnified Parties.
8.3 LIMITATION ON INDEMNITIES.
No Claim may be made against the Company for indemnification pursuant
to Section 8.2 until the aggregate dollar amount of all Losses indemnifiable
pursuant to Section 8.2 exceeds $250,000 (in which event the Purchaser shall be
entitled to claim the whole amount of such Losses and not merely the excess).
In no event shall the aggregate amount paid by the Company pursuant to Section
8.2 exceed $25 million with respect to Claims arising out of or related to
matters other than breaches of the representations, warranties and covenants
contained in Sections 4.13 (to the extent related to Applicable Laws relating to
health care, the health care industry and the provision of health care services,
third party reimbursement (including Medicare and Medicaid), public health and
safety and wrongful death and medical malpractice), 4.32, 4.33, 4.34, 4.35, 4.36
and 6.9 (to the extent related to Applicable Laws relating to health care, the
health care industry and the provision of health care services, third party
reimbursement (including Medicare and Medicaid), public health and safety and
wrongful death and medical malpractice), as to which breaches of the
representations, warranties and covenants contained in such Sections, there
shall be no cap on the Company's indemnification obligations under Section 8.2.
8.4 LOSSES.
The term "Losses" as used in this Article VIII is not limited to
matters asserted by third parties but includes Losses incurred or sustained
by an Indemnified Party in the absence of third party claims. The difference
between (a) any insurance proceeds received by an Indemnified
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Party in respect of Losses and (b) the legal costs and expenses incurred by
such Indemnified Party, if any, in seeking the payment of such insurance
proceeds from the insurer or insurers who insured against such Loss, shall be
deducted from any Claim for indemnification made by such Indemnified Party
against the Company. Payments by an Indemnified Party of amounts for which
such Indemnified Party is indemnified hereunder shall not be a condition
precedent to recovery. If, after payment of any Claim by the Company to an
Indemnified Party, such Indemnified Party receives insurance proceeds on
account of the Loss indemnified by such payment by the Company, such
Indemnified Party shall pay to the Company the lesser of (a) the amount of
the payment on the Claim with respect to such Loss by the Company to the
Indemnified Party and (b) the amount of such insurance proceeds minus the
legal costs and expenses incurred by such Indemnified Party, if any, in
seeking the payment of such insurance proceeds from the insurer or insurers
who insured against such Loss.
8.5 DEFENSE OF CLAIMS.
If a claim for Losses (a "Claim") is to be made by an Indemnified
Party, such Indemnified Party shall give written notice (a "Claim Notice") to
the Company as soon as practicable after such Indemnified Party becomes aware of
any fact, condition or event which may give rise to Losses for which
indemnification may be sought under this Article VIII. If any lawsuit or
enforcement action is filed against any Indemnified Party hereunder, notice
thereof (a "Third Party Notice") shall be given to the Company as promptly as
practicable (and in any event within ten (10) calendar days after the service of
the citation or summons). The failure of any Indemnified Party to give timely
notice hereunder shall not affect rights to indemnification hereunder, except to
the extent that the Company demonstrates actual damage caused by such failure.
After receipt of a Third Party Notice, if the Company shall acknowledge in
writing to the Indemnified Party that the Company shall be obligated under the
terms of its indemnity hereunder in connection with such lawsuit or action, then
the Company shall be entitled, if it so elects, (a) to take control of the
defense and investigation of such lawsuit or action, (b) to employ and engage
attorneys of its own choice to handle and defend the same, at the Company's
cost, risk and expense unless the named parties to such action or proceeding
include both the Company and the Indemnified Party and the Indemnified Party has
been advised in writing by counsel that there may be one or more legal defenses
available to such Indemnified Party that are different from or additional to
those available to the Company, and (c) to compromise or settle such claim,
which compromise or settlement (i) shall be made and entered into only with the
advance written consent of the Indemnified Party (in its sole discretion) if
such compromise or settlement, in the reasonable judgment of the Indemnified
Party, would cause more than de minimis harm to such Indemnified Party's
business reputation, (ii) may be made and entered into in the sole discretion of
the Company if such compromise or settlement provides for the payment solely of
cash to the claimant in such lawsuit in full satisfaction of such claimant's
claim therein and includes a release of the Indemnified Party to the maximum
extent permitted by law (and would not otherwise, in the reasonable judgment of
such Indemnified Party, cause more than de minimis harm to such Indemnified
Party's business reputation) and (iii) otherwise shall be entered into only with
the advance written consent of the Indemnified Party (such consent not to be
unreasonably withheld). The Indemnified Party shall cooperate in all reasonable
respects with the Company and such attorneys in the investigation, trial
and defense of such lawsuit or action and any appeal arising therefrom; and the
Indemnified Party may, at its own cost, participate in the investigation, trial
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and defense of such lawsuit or action and any appeal arising therefrom and
appoint its own counsel therefor, at its own cost. The parties shall also
cooperate with each other in any notifications to insurers. If the Company
fails to assume the defense of such claim within fifteen (15) calendar days
after receipt of the Third Party Notice, the Indemnified Party against which
such claim has been asserted will (upon delivering notice to such effect to the
Company) have the right to undertake the defense, compromise or settlement of
such claim at the Company's cost and the Company shall have the right to
participate therein at its own cost; provided, however, that such claim shall
not be compromised or settled without the written consent of the Company, which
consent shall not be unreasonably withheld. In the event the Indemnified Party
assumes the defense of the claim, the Indemnified Party will keep the Company
reasonably informed of the progress of any such defense, compromise or
settlement. Notwithstanding the foregoing, the Company shall not be liable for
the reasonable fees and expenses of more than one firm of attorneys at any time
for any and all Indemnified Parties (which firm shall be designated in writing
by such Indemnified Party or Parties) in connection with any one such action or
proceeding or multiple actions or proceedings provided that they are held in the
same jurisdiction, arising out of the same general allegations or circumstances.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
The Company shall be responsible for the payment of all expenses
incurred by the Company in connection with the Transaction, regardless of
whether any portion of the Transaction closes, including, without limitation,
all fees and expenses of the Company's legal counsel and all third party
consultants engaged by the Company to assist in the Transaction.
9.2 INJUNCTIVE RELIEF.
The parties hereto acknowledge and agree that irreparable damage would
occur in the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Agreement and shall be
entitled to enforce specifically the provisions of this Agreement in any court
of the United States or any state thereof having jurisdiction, in addition to
any other remedy to which the parties may be entitled under this Agreement or at
law or in equity
9.3 ASSIGNMENT.
Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by the Company without the prior written consent of the
Purchaser, or by the Purchaser without the prior written consent of the Company,
except that the Purchaser may, without such consent, assign, in whole or in
part, the right to acquire the Securities hereunder to a Carlyle Affiliate.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, and
no other person shall have any right, benefit or obligation hereunder.
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9.4 NOTICES.
Unless otherwise provided herein, any notice, request, instruction or
other document to be given hereunder by any party to the other shall be in
writing and delivered by hand-delivery, registered first-class mail, return
receipt requested, facsimile or air courier guaranteeing overnight delivery, as
follows:
If to the Company: InSight Health Services Corp.
4400 MacArthur Boulevard, Suite 800
Newport Beach, CA 92660
Facsimile: 714.851.4488
Attn: Chief Financial Officer
With a copy to: McDermott, Will & Emery
2049 Century Park East - 34th Floor
Los Angeles, CA 90067
Facsimile: 310.277.4730
Attn: Mark J. Mihanovic, Esq.
and
Arent, Fox, Kintner, Plotkin & Kahn
1050 Connecticut Avenue, N.W., Suite 600
Washington, D.C. 20036
Facsimile: 202.857.6395
Attn: Gerald P. McCartin, Esq.
If to the Purchaser: c/o The Carlyle Group
1001 Pennsylvania Avenue, N W
Suite 2205
Washington, D.C. 20004
Facsimile: 202.347.9250
Attn: David W. Dupree
63
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With a copy to: Gibson, Dunn & Crutcher LLP
1050 Connecticut Avenue, N.W.
Washington, D.C. 20036
Facsimile: 202.467.0539
Attn: John F. Olson, Esq.
or to such other place and with such other copies as either party may designate
as to itself by written notice to the other. All such notices, requests,
instructions or other documents shall be deemed to have been duly given at the
time delivered by hand, if personally delivered, four (4) business days after
being deposited in the mail, postage prepaid, if mailed, when receipt is
acknowledged by addressee, if by facsimile, or on the next business day, if
timely delivered to an air courier guaranteeing overnight delivery.
9.5 CHOICE OF LAW; JURISDICTION; VENUE.
This Agreement shall be construed, interpreted and the rights of the
parties determined in accordance with the internal laws of the State of New
York, without regard to the conflict of law principles thereof; except with
respect to matters of law concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of this Agreement, and as to
those matters the law of the jurisdiction under which the respective entity
derives its powers shall govern. The parties irrevocably elect as the sole
judicial forum for the adjudication of any matters arising under or in
connection with this Agreement, the Ancillary Agreements and the transactions
contemplated hereby and thereby, and consent to the jurisdiction of, the courts
of the United States of America for the Southern District of New York and of the
State of New York in Manhattan in connection with the adjudication of any matter
arising under or in connection with this Agreement, the Ancillary Agreements and
the transactions contemplated hereby and thereby, and waive any and all
objections to such jurisdiction or venue that they may have.
9.6 ENTIRE AGREEMENT.
All Exhibits and Schedules attached to this Agreement by this
reference are incorporated herein as if fully set forth herein. This Agreement,
including all Exhibits and Schedules attached hereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, of the parties, including the written summary of
proposed terms between the Company and the Purchaser dated September 15, 1997.
Capitalized terms used in the Exhibits and Schedules but not defined therein
shall have the respective meanings ascribed to such terms in this Agreement.
Any item disclosed in one Schedule shall be deemed to have been disclosed in all
other Schedules.
9.7 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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9.8 INVALIDITY.
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein shall for any reason be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
9.9 HEADINGS; LANGUAGE.
The headings of the Articles and Sections herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement. In this Agreement, unless the
context otherwise requires, the masculine, feminine and neuter genders and the
singular and the plural include one another. Whenever used in this Agreement:
the term "Knowledge," with respect to any Person, means the actual knowledge of
such Person, after reasonable inquiry. For purposes hereof, a Person shall be
deemed to have actual knowledge of the contents of all books and records with
respect to which such Person has reasonable access. Without limiting the
generality of the foregoing, with respect to any Person that is a corporation,
partnership or other business entity, actual knowledge shall be deemed to
include the actual knowledge of all principal employees of any such Person
(which, for purposes of the Company, shall include without limitation those
Persons listed in Exhibit J) as well as the Chief Executive Officer, President,
Chief Financial Officer and all Vice Presidents in the case of corporate
Persons, and general partners in the case of general or limited partnerships, as
the case may be; "receipt by the Company or any Subsidiary of notice," and
similar phrases, means physical receipt at a location owned, leased or operated
by the Company or its Subsidiaries; "including" means including, without
limitation. All capitalized terms used but not defined in this Agreement have
the meaning given to such terms in the Certificate of Incorporation, or, if not
in the Certificate of Incorporation, in the Amended Bylaws.
9.10 LIMITATION OF LIABILITY.
In no event shall (a) any Carlyle Affiliate, (b) any member or
representative of the Purchaser or of any Carlyle Affiliate or (c) any direct or
indirect member, stockholder, officer, director, limited partner, employee or
any other such person of the Purchaser or any Carlyle Affiliate (other than a
general partner of the entities constituting the Purchaser), be personally
liable for any obligation of the Purchaser under this Agreement. In no event
shall any direct or indirect stockholder, officer, director, partner, employee
or salesperson of the Company or any Subsidiary or any other such Person be
personally liable for any obligation of the Company under this Agreement.
9.11 AMENDMENTS AND WAIVERS.
Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of the Purchaser, the Company and General Electric Company.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities
Purchase Agreement to be duly executed as of the day and year first above
written.
THE COMPANY:
INSIGHT HEALTH SERVICES CORP.,
a Delaware corporation
By
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
THE PURCHASER:
CARLYLE PARTNERS II, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
CARLYLE PARTNERS III, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
CARLYLE INTERNATIONAL PARTNERS II, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
<PAGE>
CARLYLE INTERNATIONAL PARTNERS III, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
C/S INTERNATIONAL PARTNERS,
a Cayman Islands general partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
STATE BOARD OF ADMINISTRATION OF
FLORIDA,
a separate account maintained pursuant to an
Investment Management Agreement dated as of
September 6, 1996 between the State Board of
Administration of Florida, Carlyle Investment
Group, L.P. and Carlyle Investment Management,
L.L.C.
By: Carlyle Investment Management, L.L.C.,
as Investment Manager
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
2
<PAGE>
CARLYLE INVESTMENT GROUP, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
CARLYLE-INSIGHT INTERNATIONAL
PARTNERS, L.P.,
a Cayman Islands exempted limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
CARLYLE-INSIGHT PARTNERS, L.P.,
a Delaware limited partnership
By: TC Group, L.L.C., as the General Partner
By:
--------------------------------
Name:
--------------------------------
Title: Managing Director
3
<PAGE>
INSIGHT HEALTH SERVICES CORP.
IRREVOCABLE PROXY
The undersigned agrees to, and hereby grants to Carlyle Partners II, L.P.,
a Delaware limited partnership, an irrevocable proxy pursuant to the provisions
of Section 212 of the Delaware General Corporation Law to vote, or to execute
and deliver written consents or otherwise act with respect to, all shares of
capital stock (the "Stock") of INSIGHT HEALTH SERVICES CORP. (the "Company") now
owned or hereafter acquired by the undersigned as fully, to the same extent and
with the same effect as the undersigned might or could do under any applicable
laws or regulations governing the rights and powers of shareholders of a
Delaware corporation in connection with the nomination of the Joint Director and
in connection with the matters identified in Sections 6.12(a) - 6.12(v),
inclusive, of a certain Securities Purchase Agreement, dated as of October 14,
1997 among the Company and certain purchasers, as provided in a certain Voting
Agreement, dated as of October 14, 1997, among the purchasers under such
Securities Purchase Agreement. The undersigned hereby affirms that this is
given as a condition of said voting agreement and as such is coupled with an
interest and is irrevocable. It is further understood by the undersigned that
this proxy may be exercised by Carlyle Partners II, L.P. for the period
beginning the date hereof and ending on the day immediately preceding the
Company's 2020 annual stockholders' meeting, unless sooner terminated in
accordance with provisions of said voting agreement.
THIS PROXY SHALL REMAIN IN FULL FORCE AND EFFECT AND BE ENFORCEABLE AGAINST
ANY DONEE, TRANSFEREE OR ASSIGNEE OF THE STOCK.
Date this 14th day of October, 1997.
CARLYLE PARTNERS III, L.P.
a Delaware limited partnership
By: TC Group, L.L.C., its General Partner
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------