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Exhibit 10.76
NEXTHEALTH, INC.
17,109 SHARES OF SERIES A PREFERRED STOCK
28,956 SHARES OF SERIES B PREFERRED STOCK
WARRANT TO PURCHASE 500,000 SHARES OF COMMON STOCK
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
NOVEMBER 14, 1996
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TABLE OF CONTENTS
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SECTION 1. TERMS OF PURCHASE.............................................................................. 1
1.1 Sale of Preferred Stock and Warrant............................................................ 1
1.2 Purchase Price................................................................................. 1
1.3 Closing........................................................................................ 1
1.4 Reserved Shares................................................................................ 2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION.............................................. 2
2.1 Corporate Status............................................................................... 2
2.2 Corporate Power and Authority.................................................................. 2
2.3 Capitalization................................................................................. 2
2.4 Title to Properties............................................................................ 3
2.5 Effect of Transactions......................................................................... 3
2.6 Litigation..................................................................................... 3
2.7 Offerees....................................................................................... 3
2.8 Subsidiaries................................................................................... 3
2.9 Employees...................................................................................... 4
2.10 Contracts...................................................................................... 4
2.11 Permits, Licenses, Technology, Trademarks, Patents and Other Rights............................ 4
2.12 Absence of Certain Changes..................................................................... 4
2.13 Tax Returns and Payments....................................................................... 5
2.14 Publicly Filed Documents and Financial Statements.............................................. 5
2.15 Use of Proceeds................................................................................ 6
2.16 No Brokers..................................................................................... 6
2.17 Material Misstatements or Omissions............................................................ 6
SECTION 3. CONDITIONS OF PURCHASE......................................................................... 6
3.1 Certificate of Corporation..................................................................... 6
3.2 Authorization.................................................................................. 6
3.3 Credit Agreement............................................................................... 7
3.4 Collateral Documents........................................................................... 7
3.5 Registration and Pre-Emptive Rights Agreement.................................................. 7
3.6 Irrevocable Proxy.............................................................................. 7
3.7 Opinion of Counsel............................................................................. 7
3.8 Compliance..................................................................................... 7
3.9 Tender of Aggregate Purchase Price............................................................. 7
3.10 Representations and Warranties................................................................. 7
3.11 Credit Agreement............................................................................... 7
3.12 Amendment of Earlier Warrant................................................................... 7
3.13 Registration and Pre-Emptive Rights Agreement.................................................. 8
SECTION 4. COVENANTS OF THE CORPORATION................................................................... 8
4.1 Financial Statements........................................................................... 8
4.2 Budget and Operating Forecast.................................................................. 8
4.3 Stockholder Approval........................................................................... 9
4.4 Payment of Taxes, Compliance with Laws, Etc.................................................... 9
4.5 Adverse Changes................................................................................ 9
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4.6 Insurance...................................................................................... 9
4.7 Maintenance of Properties...................................................................... 9
4.8 Affiliated Transactions........................................................................ 9
4.9 Management and Compensation.................................................................... 10
4.10 Inspection..................................................................................... 10
4.11 Board of Directors............................................................................. 10
4.12 Distributions or Redemption of Capital Stock................................................... 10
4.13 Maintenance of Corporate Existence, Etc........................................................ 10
SECTION 5. REPRESENTATIONS AND COVENANTS OF PURCHASER..................................................... 11
SECTION 6. GENERAL........................................................................................ 12
6.1 Indemnification................................................................................ 12
6.2 Amendments, Waivers and Consents............................................................... 12
6.3 Survival of Representations, Warranties and Covenants; Assignability
of Rights...................................................................................... 12
6.4 Section Headings............................................................................... 13
6.5 Counterparts................................................................................... 13
6.6 Notices and Demands............................................................................ 13
6.7 Waiver of Jury Trial........................................................................... 14
6.8 Specific Performance........................................................................... 14
6.9 Severability................................................................................... 15
6.10 Expenses....................................................................................... 15
6.11 Governing Law. ............................................................................... 15
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AGREEMENT dated as of November 14, 1996 by and between
NextHealth, Inc., a Delaware corporation (the "Corporation"), and AP NH LLC, a
Delaware limited liability company (the "Purchaser").
WHEREAS, the Corporation desires to sell, and the Purchaser
desires to purchase, at the Closing (as defined below), subject to the terms and
conditions set forth herein, (i) 17,109 shares of the Corporation's Series A
Preferred Stock (as defined below), (ii) 28,956 shares of the Corporation's
Series B Preferred Stock (as defined below) and (iii) a warrant to purchase up
to 500,000 shares of the Corporation's Common Stock (as defined below); and
WHEREAS, the Corporation has authorized and reserved for
issuance and sale (i) 17,109 shares of Series A Preferred Stock, (ii) 28,956
shares of Series B Preferred Stock and (iii) a warrant to purchase up to 500,000
shares of Common Stock;
NOW, THEREFORE, in consideration of the mutual promises set
forth herein, the Corporation agrees with the Purchasers as follows:
SECTION 1. TERMS OF PURCHASE
1 SALE OF PREFERRED STOCK AND WARRANT. Subject to the terms
and conditions set forth herein, at the Closing the Corporation shall issue and
sell to the Purchaser, and the Purchaser shall purchase from the Corporation,
for the consideration specified in Section 1.2 (i) 17,109 shares of the
Corporation's authorized but unissued Convertible Preferred Stock, Series A, par
value $0.01 per share (the "Series A Preferred Stock"), (ii) 28,956 shares of
the Corporation's authorized but unissued Cumulative Preferred Stock, Series B,
par value $0.01 per share (the "Series B Preferred Stock" and together with the
Series A Preferred Stock, the "Preferred Stock"), and (iii) a warrant (the
"Warrant") representing the right to purchase up to 500,000 shares of the
Corporation's common stock, par value $0.01 per share (the "Common Stock"). The
Preferred Stock shall have the terms and preferences set forth in Exhibit A
hereto, and the Warrant shall be subject to the terms and conditions set forth
in the Warrant Certificate evidencing the Warrant, which Certificate shall be in
the form of Exhibit B hereto.
2 PURCHASE PRICE. The aggregate purchase price for (i) the
Series A Preferred Stock shall be $1,578,476.34 (or $92.26 per share), (ii) the
Series B Preferred Stock shall be $2,671,480.56 (or $92.26 per share and (iii)
the Warrant shall be $43.10.
3 CLOSING. The closing (the "Closing") of the sale and
purchase of the Preferred Stock and the Warrant shall take place at 10:00 a.m.
New York time on November 14, 1996 at the offices of Battle Xxxxxx LLP, located
at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other time, date or
place as shall be mutually agreed upon by the Corporation and the Purchaser. The
date on which the Closing occurs shall be referred to herein as the "Closing
Date". At the Closing, the Corporation will deliver to the Purchaser
certificates representing the number of shares of Series A Preferred Stock and
Series B Preferred Stock, as the case may be, and the Warrant to be purchased by
the Purchaser against payment of the purchase price therefor. Payment of the
purchase price for the shares of Preferred Stock and the Warrant shall be by
wire transfer or by certified or bank cashier's check.
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4 RESERVED SHARES. The Corporation will authorize and reserve,
and covenants to continue to reserve, for issuance a sufficient number of shares
of Common Stock to satisfy the (x) rights of conversion of the holders of the
Preferred Stock and (y) right to exercise the Warrant.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
In order to induce the Purchaser to enter into this Agreement,
the Corporation represents and warrants to the Purchaser as follows:
1 CORPORATE STATUS. The Corporation (i) is a duly organized
and validly existing corporation in good standing under the laws of the State of
Delaware, (ii) has the corporate power and authority to own its property and
assets and to transact the business in which it is presently engaged and (iii)
is duly qualified and authorized to do business and is in good standing in all
jurisdictions where it is required to be so qualified and where the failure to
be so qualified could have a material adverse effect on the business,
properties, liabilities, operations or condition (financial or otherwise) of the
Corporation.
2 CORPORATE POWER AND AUTHORITY. The Corporation has the
corporate power and authority to execute, deliver and carry out the terms and
provisions of this Agreement and has taken all necessary corporate action to
authorize the execution, delivery and performance of this Agreement. The
Corporation has duly executed and delivered this Agreement and this Agreement
constitutes the legal, valid and binding obligation of the Corporation
enforceable in accordance with its terms, except to the extent that the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws generally affecting creditors' rights
and by equitable principles (regardless of whether enforcement is sought in
equity or at law).
3 CAPITALIZATION. As of the Closing Date and after taking into
account the transactions contemplated by this Agreement, the Corporation's total
authorized capital shares will consist of (i) 4,000,000 shares of Preferred
Stock, comprised of (x) 46,065 shares of Series A Preferred Stock, of which
17,109 shares of Series A Preferred Stock shall be issued and outstanding as of
the Closing Date, (y) 28,956 shares of Series B Preferred Stock, all of which
will be issued and outstanding as of the Closing Date, and (z) 3,924,979 of
authorized but undesignated preferred stock, none of which will be issued and
outstanding as of the Closing Date, (ii) 16,000,000 shares of Common Stock, of
which 8,554,938 shares of Common Stock will be issued and outstanding and
5,106,500 shares of Common Stock will be reserved for issuance upon (x) the
conversion of all of the authorized shares of Series A Preferred Stock and (y)
the exercise of the Warrant. As of the Closing Date and after giving effect to
the transactions contemplated by this Agreement, all of the issued and
outstanding shares of capital stock of the Corporation (including the shares of
Preferred Stock being issued under this Agreement) shall be duly and validly
authorized and issued and are fully paid and non-assessable. The relative
rights, preferences, restrictions and other provisions relating to the Preferred
Stock are as set forth in Exhibit A. Except as provided for in this Agreement or
disclosed in the Company Publicly Filed Documents or in Schedule 2.3 to this
Agreement: (a) there are no outstanding warrants, options or other rights to
purchase or acquire any shares of the Corporation's capital stock, nor any
outstanding securities convertible into such shares or outstanding warrants,
options or other rights to acquire any such convertible securities; (b) there
are no preemptive rights with respect to the issuance or sale of the
Corporation's capital stock; and (c) as of the Closing Date there will be no
restrictions on the transfer of the Corporation's capital stock other than those
arising from federal and state securities laws.
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4 TITLE TO PROPERTIES. The Corporation has good and marketable
title to its assets used in conducting its business, free and clear of all
liens, restrictions or encumbrances after application of the proceeds of the
financing contemplated hereby and under the Credit Agreement.
5 EFFECT OF TRANSACTIONS. Except as set forth in Schedule 2.5
to this Agreement, the execution, delivery and performance by the Corporation of
this Agreement and the agreements and transactions contemplated hereby will not
conflict with or result in any default under any material contract, obligation
or commitment of the Corporation, or any charter provision, by-law or corporate
restriction of the Corporation, or the creation of any lien, charge, restriction
or encumbrance of any nature upon any of the properties or assets of the
Corporation, except pursuant to this Agreement and the Collateral Documents (as
defined in the Credit Agreement referred to below). Except as set forth in
Schedule 2.5 to this Agreement, the Corporation's execution and delivery of this
Agreement and its performance of the transactions contemplated hereby will not
violate any material instrument, agreement, judgment, decree, order, statute,
rule or regulation of any federal, state or local government or agency
applicable to the Corporation.
6 LITIGATION. There is no litigation or governmental
proceeding or investigation pending or, to the best knowledge of the
Corporation, threatened against the Corporation affecting any of its properties
or assets, or which has a reasonable possibility of calling into question the
validity, or materially hindering the enforceability or performance, of this
Agreement, or any action taken or to be taken pursuant hereto; nor, to the best
knowledge of the Corporation, has there occurred any event or does there exist
any condition on the basis of which any litigation, proceeding or investigation
might properly be instituted with any substantial chance of a recovery which
could be materially adverse to the Corporation.
7 OFFEREES. Neither the Corporation nor any other party
authorized to act on behalf of the Corporation has in the past or will hereafter
sell, offer for sale or solicit offers to buy any securities of the Corporation
so as to bring the offer, issuance or sale of the Preferred Stock, as
contemplated by this Agreement, within the provisions of Section 5 of the
Securities Act of 1933, as amended (the "Securities Act"), unless such offer,
issuance or sale was or shall be within the exemptions of Section 4 thereof.
8 SUBSIDIARIES. Except as set forth in Schedule 2.8, the
Corporation has no subsidiaries and does not own of record or beneficially any
capital stock or equity interest or investment in any corporation, association,
partnership, joint venture or business entity.
9 EMPLOYEES. To the best of the Corporation's knowledge and
belief after due inquiry, no employee of the Corporation is, or is now expected
to be, in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any other contract or agreement or any
restrictive covenant or any other common law obligation to a former employer
relating to the right of any such employee to be employed by the Corporation
because of the nature of the business conducted or to be conducted by the
Corporation or to the use of trade secrets or proprietary information of others,
and to the best of the Corporation's knowledge and belief, the employment of the
Corporation's employees does not subject the Corporation or the Purchaser to any
liability. There is neither pending nor, to the Corporation's knowledge and
belief, threatened any actions, suits, proceedings or claims, or to its
knowledge any basis therefor or threat thereof with respect to any contract,
agreement, covenant or obligation referred to in the preceding sentence. All
employment, non- disclosure, confidentiality or non-competition agreements with
any
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employees of the Corporation or its subsidiaries and any collective bargaining
agreement covering any Corporation or subsidiary employees are set forth on
schedule 2.9.
10 CONTRACTS. Except as set forth in Schedule 2.10 or as an
exhibit to the Company Filed Documents, the Corporation does not have any
currently existing contract, obligation, agreement, plan, arrangement,
commitment or the like (written or oral) which is material to the Corporation
and its business. The Corporation has complied in all material respects with the
provisions of all said contracts, obligations, agreements, plans, arrangements
and commitments and is not in default thereunder.
11 PERMITS, LICENSES, TECHNOLOGY, TRADEMARKS, PATENTS AND
OTHER RIGHTS. The Corporation has all franchises, permits, licenses and other
similar authority necessary for the conduct of its business as now being
conducted by it and as planned to be conducted, the lack of which could
materially and adversely affect the prospects, operations or condition,
financial or otherwise, of the Corporation, and it is not in default in any
material respect under any of such franchises, permits, licenses or other
similar authority. The Corporation possesses all technology, technology rights,
patents, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, trade secrets, proprietary rights and processes known by the
Corporation to be necessary to conduct its business as now being conducted and
as planned to be conducted, without, to the knowledge of the Corporation after
due inquiry, conflict with or infringement upon any valid rights of others and
the lack of which could materially and adversely affect the operations or
condition, financial or otherwise, of the Corporation, and has not received any
notice of infringement upon or conflict with the asserted rights of others.
12 ABSENCE OF CERTAIN CHANGES. Since September 30, 1996,
except to the extent described in Schedule 2.12 or as described in or
contemplated by the Company Publicly Filed Documents or the Financial
Statements, there has not been any event or condition of any character which has
adversely affected the Corporation's business or prospects, including but not
limited to:
(a) Any material adverse change in the condition, assets,
liabilities or business of the Corporation from that shown on the Corporation's
balance sheet dated September 30, 1996;
(b) Any damage, destruction or loss of any of the properties
or assets of the Corporation (whether or not covered by insurance) materially
adversely affecting the business or plans of the Corporation;
(c) Any declaration, setting aside or payment or other
distribution in respect of any of the Corporation's capital stock, or any direct
or indirect redemption, purchase or other acquisition of any of such shares by
the Corporation; or
(d) Any labor trouble, or any event or condition of any
character, materially adversely affecting the business or plans of the
Corporation.
13 TAX RETURNS AND PAYMENTS. Each of the Corporation and its
subsidiaries has filed all Federal income tax returns, domestic and foreign,
required to be filed by it and has paid all Federal taxes and assessments shown
to be due on such returns and all other material taxes and assessments, domestic
and foreign, in each case payable by it which have become due, other than those
not yet delinquent and except those contested in good faith and for which
adequate
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reserves have been provided in accordance with generally accepted accounting
principles ("GAAP").
14 PUBLICLY FILED DOCUMENTS AND FINANCIAL STATEMENTS.
(a) The Corporation has previously furnished or made available
to the Purchaser true and complete copies of (i) its Annual Reports on Form 10-K
for each of the three fiscal years ended December 31, 1995, 1994 and 1993, as
each such Annual Report has been amended through the date hereof, and as each
was filed with the United States Securities and Exchange Commission (the "SEC");
(ii) its Quarterly Reports on Form 10-Q for each of the quarterly periods ended
June 30, 1996, and March 31, 1996, as each such quarterly report has been
amended through the date hereof, and as each was filed with the SEC; (iii) its
proxy statements relating to all meetings of its stockholders (whether annual or
special) since January 1, 1995; and (iv) all other reports or registration
statements filed by the Corporation with the SEC since January 1, 1996, as each
has been amended through the date hereof (collectively, the "Company Publicly
Filed Documents"). None of the Company Publicly Filed Documents, and including,
without limitation, any financial statements or schedules included in any
Company Publicly Filed Documents, at the time filed contained any untrue
statement of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of any
circumstances under which they were made, not misleading, which untrue
statements or omissions have not been corrected or updated in a document
subsequently filed with the SEC. The financial statements contained in the
Company Publicly Filed Documents (the "Financial Statements") comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applicable to year-end financial statements
(except, in the case of unaudited interim financial statements, for the absence
of footnotes and normal year-end adjustments) consistently applied during the
periods involved, and present fairly the consolidated financial condition and
results of operations and cash flow of the Corporation and its subsidiaries as
of such dates and for such periods. There is no material liability or obligation
of any kind, whether accrued, absolute, fixed or contingent, of the Corporation
or any subsidiary of the Corporation that is required to be disclosed under GAAP
and that is not reflected or reserved against in the unaudited consolidated
balance sheet of the Corporation as of June 30, 1996 contained in the
Corporation's quarterly report on Form 10-Q for the quarterly period ended June
30, 1996 or reflected in the notes thereto, other than liabilities incurred in
the ordinary course of business, consistent with past practice, since June 30,
1996, none of which has had or could reasonably be expected to have a material
adverse effect on the financial condition or results of operations of the
Corporation.
15 USE OF PROCEEDS. The Corporation shall use the proceeds of
the sale of the Preferred Stock and Warrant as set forth in Schedule 2.13.
16 NO BROKERS. The Corporation does not have nor will have any
obligation to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby which has not been
satisfied in full and disclosed to the Purchaser.
17 MATERIAL MISSTATEMENTS OR OMISSIONS. No representations or
warranties by the Corporation in this Agreement, nor any document, exhibit,
statement, certificate or schedule furnished or to be furnished to Purchaser
pursuant hereto (including, without limitation, the Schedules hereto), or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state any
material fact
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necessary to make the statements or facts contained therein not misleading. The
Corporation has disclosed all events, conditions and facts materially affecting
(i) the business or the condition (financial or otherwise), properties,
liabilities, reserves, working capital, earnings, prospects or relations with
customers, suppliers, distributors or employees of the Corporation and (ii) the
right or ability of the Corporation to consummate the transactions contemplated
hereby.
SECTION 3. CONDITIONS OF PURCHASE
The Purchaser's obligation to purchase and pay for the
Preferred Stock and the Warrant and to take the other actions required to be
taken by the Purchaser at the Closing shall be subject to compliance by the
Corporation with its agreements herein contained and to the fulfillment to the
Purchaser's satisfaction on or before the Closing Date of the following
conditions:
1 CERTIFICATE OF CORPORATION. The representations and
warranties of the Corporation contained in this Agreement, including but not
limited to the representations and warranties made in Section 2, shall be true
and correct in all material respects; each of the conditions hereafter specified
in this Section 3 shall have been satisfied in all material respects; and on the
Closing Date a certificate to such effect executed by the President or a Vice
President of the Corporation shall be delivered to the Purchaser.
2 AUTHORIZATION. The Board of Directors of the Corporation
shall have duly adopted resolutions in form and substance reasonably
satisfactory to the Purchaser authorizing the Corporation to consummate the
transactions contemplated hereby in accordance with the terms hereof, and the
Purchaser shall have received a duly executed certificate of the Secretary or an
Assistant Secretary of the Corporation setting forth such resolutions and such
other matters as may be requested by the Purchaser.
3 CREDIT AGREEMENT. On or prior to the Closing Date, the
Corporation shall have executed and delivered to the Purchaser a counterpart to
the Credit Agreement, dated as of the date hereof (the "Credit Agreement"),
between the Corporation and the Purchaser.
4 COLLATERAL DOCUMENTS. On or prior to the Closing Date, the
Corporation and its subsidiaries shall have executed and delivered to the
Purchaser each of the Collateral Documents (as defined in the Credit Agreement)
as required by the Credit Agreement.
5 REGISTRATION AND PRE-EMPTIVE RIGHTS AGREEMENT. The
Corporation shall have executed and delivered to the Purchaser a counterpart to
the Registration and PreEmptive Rights Agreement, dated as of the date hereof
(the "Registration Rights Agreement") between the Purchaser and the Corporation.
6 IRREVOCABLE PROXY. The Purchaser shall have received the
executed irrevocable proxy of Messers. X'Xxxxxxx and Schnitz in the form
attached hereto as Exhibit C.
7 OPINION OF COUNSEL. The Purchaser shall have received the
opinion of Xxxx, Gerber & Xxxxxxxxx, counsel to the Corporation, dated the
Closing Date, which opinion shall be in form and substance satisfactory to the
Purchaser.
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8 COMPLIANCE. The issuance and sale of the Preferred Stock and
the Warrant to the Purchaser shall be made in conformity with all applicable
state and federal securities laws.
The Corporation's obligation to sell the Preferred Stock and
the Warrant to the Purchaser shall be subject to the fulfillment on or before
the Closing Date of the following conditions:
9 TENDER OF AGGREGATE PURCHASE PRICE. The Purchaser shall have
tendered to the Corporation at Closing the aggregate consideration set forth in
Section 1.2
10 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Purchaser contained in Section 5 hereof shall be true and
correct in all material respects as of the Closing Date.
11 CREDIT AGREEMENT. On the Closing Date, the Purchaser shall
have executed and delivered to the Corporation a counterpart to the Credit
Agreement and advanced all amounts so required thereunder.
12 AMENDMENT OF EARLIER WARRANT. On or prior to the Closing
Date, Purchaser shall have obtained the agreement of the holder of Warrant No.
W-1 for 100,000 shares of Common Stock to the amendment of such warrant to defer
exercisability thereof until March 15, 1997.
13 REGISTRATION AND PRE-EMPTIVE RIGHTS AGREEMENT. On or prior
to the Closing Date, the Purchaser shall have executed and delivered to the
Corporation a counterpart to the Registration Rights Agreement.
SECTION 4. COVENANTS OF THE CORPORATION
The Corporation shall comply, and the Corporation shall cause
any direct or indirect subsidiaries of the Corporation to comply, with the
following covenants until the first to occur of (i) January 1, 2001, or (ii) the
Purchaser, its transferees and assigns shall cease to hold shares of capital
stock or securities convertible into or exercisable for shares of capital stock
of the Corporation representing 5% or more of all outstanding shares of capital
stock of the Corporation (all references to "the Corporation" in this Section 4
shall be deemed to refer to the Corporation and its direct and indirect
subsidiaries, if applicable, on a consolidated basis):
1 FINANCIAL STATEMENTS. The Corporation will maintain a system
of accounts in accordance with GAAP, keep full and complete financial records
and furnish to the Purchaser the following reports: (i) as soon as practicable
and, in any event, within 30 calendar days after the close of each calendar
month, consolidated and consolidating (x) statements of income and of cash flows
of the Corporation and its subsidiaries for such monthly period and (y) balance
sheets of the Corporation and its subsidiaries as of the end of such monthly
period, all in reasonable detail and including year to date information, and
certified by the chief financial officer of the Corporation to have been
prepared in accordance with GAAP (other than any requirement for footnote
disclosure and the recording of non-cash items), subject to year-end audit
adjustments; (ii) as soon as practicable and, in any event, within 90 calendar
days after the close of each fiscal year of the Corporation, a copy of the
annual audited report for such year for the Corporation, including consolidated
(x) statements of income and of cash flows of the Corporation and its
subsidiaries for such fiscal year, and (y) balance sheets of the Corporation and
its subsidiaries as of the end of such
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fiscal year, each setting forth in comparative form, if applicable, the
corresponding figures for the previous year, all in reasonable detail; the
statements of income and of cash flows and balance sheet to be audited by
independent, nationally recognized, certified public accountants, and certified
(without a "going concern" qualification or other qualification or exception of
similar gravity or any qualification arising out of the scope of the audit (but
not arising out of changes in financial accounting standards)) by such
accountants to have been prepared in accordance with GAAP, consistently applied
(except to the extent any inconsistency is disclosed in the notes to such
financial statements and approved by such accountants); and (iii) promptly, and
in any event within one calendar day after the filing thereof, a copy of any
annual, quarterly or interim report, proxy statement, information statement,
Schedule 13D or 13G or any other filing made by or with respect to the
Corporation with the SEC or Nasdaq.
2 BUDGET AND OPERATING FORECAST. The Corporation will prepare
and submit to the Board of Directors of the Corporation and the Purchaser a
budget for each fiscal year of the Corporation at least 30 days prior to the
beginning of such fiscal year, together with management's written discussion and
analysis of such budget. The budget shall be accepted as the budget for such
fiscal year when it has been approved by a majority of the entire Board
of Directors of the Corporation (including a majority of Preferred Directors (as
defined in Exhibit A hereto)). The Corporation shall review the budget
periodically and shall advise the Board of Directors and the Purchaser of all
material changes therein and all material deviations therefrom.
3 STOCKHOLDER APPROVAL. The Corporation will take all steps
necessary in accordance with applicable law and its Certificate of Incorporation
and By-Laws duly to call, give notice of, convene and hold (a) a special meeting
of stockholders as soon as practicable after the date hereof for the purpose of
approving the issuance to the Purchaser of common stock upon conversion of the
Series B Preferred Stock, and (b) a regular meeting of stockholders no later
than June 15, 1997 for the purpose of approving the elimination of Article 9 of
the Corporation's Certificate of Incorporation. The Board of Directors of the
Corporation will (i) recommend to the stockholders of the Company the approval
and adoption of the two foregoing proposals, and (ii) use all reasonable efforts
to obtain the approval by the stockholders of the Company of the two foregoing
proposals.
4 PAYMENT OF TAXES, COMPLIANCE WITH LAWS, ETC. The Corporation
will pay and discharge all lawful taxes, assessments and governmental charges or
levies imposed upon it or upon its income or property before the same shall
become in default, as well as all lawful claims for labor, materials and
supplies which, if not paid when due, might become a lien or charge upon its
property or any part thereof; provided, however, that the Corporation shall not
be required to pay and discharge any such tax, assessment, charge, levy, or
claim so long as the validity thereof is being contested by the Corporation in
good faith by appropriate proceedings and an adequate reserve therefor has been
established on its books. The Corporation will comply in all material respects
with all applicable laws and regulations in the conduct of its business.
5 ADVERSE CHANGES. The Corporation will promptly advise the
Purchaser of any event which represents a material adverse change in the
business, properties, liabilities, operations or condition (financial or
otherwise) of the Corporation. The Corporation will also promptly notify the
Purchaser of any facts which, if such facts had existed at the Closing, would
have constituted a material breach of the representations and warranties
contained herein.
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6 INSURANCE. The Corporation will keep its insurable
properties insured by financially sound and reputable insurers against the
perils of liability, casualty, fire and extended coverage in amounts of coverage
not less than those currently maintained by the Corporation. The Corporation
will also maintain with such insurers insurance against other hazards and risks
and liability to persons and property to the extent and in the manner currently
maintained.
7 MAINTENANCE OF PROPERTIES. The Corporation will maintain all
properties used or useful in the conduct of its business in good repair, working
order and condition as necessary to permit such business to be properly and
advantageously conducted.
8 AFFILIATED TRANSACTIONS. All transactions by and between the
Corporation and any officer, key employee or shareholder of the Corporation, or
persons controlled by or affiliated with such officer, key employee or
shareholder, shall be conducted on an arm's- length basis, shall be on terms and
conditions no less favorable to the Corporation than could be obtained from
non-related persons and shall be approved in advance by the Board of Directors,
including approval by a majority of the Preferred Directors, after full
disclosure of the terms thereof; provided, however, that the foregoing shall not
apply to any transaction or series of transactions involving in the aggregate an
expenditure or transfer of not more than $5,000 in money or money's worth.
9 MANAGEMENT AND COMPENSATION.
(a) The Corporation will not employ any person in any position
deemed to be suitable only for "key management personnel" unless approved by a
majority of the Board of Directors.
(b) Compensation paid by the Corporation to its management
will be reasonably comparable to compensation paid to management in companies in
similar industries of similar size and of similar maturity.
10 INSPECTION. The Corporation will permit the Purchaser and
its authorized representatives to visit and inspect any of the properties of the
Corporation, including its books of account (and to make copies thereof and take
extracts therefrom), and to discuss its affairs, finances and accounts with its
officers, administrative employees and independent accountants, all at such
reasonable times and as often as may be reasonably requested.
11 BOARD OF DIRECTORS. The Purchaser will have the right to
approve all future nominations to the Board of Directors othe than those
individuals serving as directors immediately prior to the Closing. The
Corporation shall ensure that meetings of its Board of Directors are held at
least four (4) times each year and at intervals of not more than four (4) months
and will reimburse Directors for their reasonable travel expenses, including the
cost of airfare and any necessary meals and lodging, incurred in connection with
attending meetings of the Board of Directors. Officers of the Corporation who
also serve as directors of the Corporation shall not be paid any fee for such
service (other than reimbursements for expenses).
12 DISTRIBUTIONS OR REDEMPTION OF CAPITAL STOCK. Except as
otherwise provided in this Agreement or Exhibit A hereto, the Corporation will
not declare or pay any dividends (other than a dividend payable in shares of its
Common Stock) or make any distributions of cash, property or securities of the
Corporation with respect to any shares of its Common Stock or Preferred Stock or
any other class of its capital stock, or directly or indirectly redeem,
purchase, or
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otherwise acquire for consideration any shares of its Common Stock or Preferred
Stock or any other class of its capital stock (other than repurchases of shares
from its employees, directors and consultants, at the same price as paid by such
employees, or any other price with the approval of the Board of Directors, under
stock restriction agreements).
13 MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Corporation
shall maintain in full force and effect its corporate existence, rights and
franchises and all licenses and other rights in or to use patents, processes,
licenses, trademarks, trade names or copyrights owned or possessed by it or any
subsidiary and deemed by the Corporation to be necessary to the conduct of its
or such subsidiary's business without, to the Corporation's best knowledge, any
conflict with any rights of others to use such patents, processes, licenses,
trademarks, trade names or copyrights.
SECTION 5. REPRESENTATIONS AND COVENANTS OF PURCHASER
The Purchaser hereby represents and warrants to the
Corporation as follows:
(a) The execution of this Agreement has been duly authorized
by all necessary action on the part of the Purchaser; this Agreement has been
duly executed and delivered by the Purchaser; and this Agreement constitutes a
valid, binding and enforceable agreement of the Purchaser.
(b) Purchaser is acquiring the Preferred Stock (and the shares
of Common Stock issuable upon conversion of shares of Series A Preferred Stock)
and the Warrant (and the shares of Common Stock issuable upon the exercise of
the Warrant (the "Warrant Stock")) for its own account, for investment, and not
with a view to any "distribution" thereof within the meaning of the Securities
Act.
(c) Purchaser understands that because the Preferred Stock,
the Warrant and the Warrant Stock have not been registered under the Securities
Act, it cannot dispose of any or all of the Preferred Stock or the Common Stock
issuable upon conversion of shares of Series A Preferred Stock or the Warrant or
the Warrant Stock unless such securities are subsequently registered under the
Securities Act or exemptions from such registration are available. The Purchaser
acknowledges and understands that, except as provided in the Registration Rights
and Pre-emptive Rights Agreement, dated as of the date hereof, between Purchaser
and the Corporation, it has no independent right to require the Corporation to
register the Preferred Stock, the Common Stock issuable upon conversion of
shares of Series A Preferred Stock, the Warrant or the Warrant Stock. The
Purchaser further understands that the Corporation may, as a condition to the
transfer of any of the Preferred Stock, the Common Stock issuable upon
conversion of shares of Series A Preferred Stock, the Warrant or the Warrant
Stock, require that a written request for transfer be delivered to the
Corporation accompanied by an opinion of counsel, in form and substance
satisfactory to the Corporation, to the effect that the proposed transfer does
not result in a violation of the Securities Act or that such transfer is covered
by an effective registration statement under the Securities Act. The Purchaser
understands that each certificate representing the Preferred Stock and the
Warrant will bear the following legend or one substantially similar thereto:
"THIS SECURITY AND SHARES ISSUABLE ON CONVERSION OR EXERCISE OF THIS
SECURITY MAY NOT HAVE BEEN REGISTERED UNDER THE
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SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY APPLICABLE STATE
SECURITIES LAWS BY REASON OF EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH STATE SECURITIES LAWS AND MAY NOT BE
SOLD, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE
SECURITIES LAWS OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR LAWS."
(d) The Purchaser is knowledgeable and experienced in the
making of equity investments, and is able to bear the economic risk of loss of
its investment in the Corporation.
(e) The Purchaser has been advised that the shares of
Preferred Stock and the Warrant issued hereunder have not been and are not being
registered under the Securities Act or under the "blue sky" laws of any
jurisdiction (except in the case of certain state filings) and that the
Corporation in issuing the Preferred Stock and the Warrant is relying upon,
among other things, the representations and warranties of Purchaser contained in
this Section 5 in concluding that each such issuance is a "private offering" and
does not require compliance with the registration provisions of the Securities
Act.
(f) The Purchaser has adequate means of providing for its
current needs and possible contingencies, has no need for liquidity of its
investment in the Preferred Stock or the Warrant and can bear the economic risk
of losing its entire investment therein.
(g) The Purchaser is controlled by or under common control
with Apollo Real Estate Advisors II, L.P.
The Purchaser covenants and agrees to vote the Series A Preferred Stock
in favor of the stockholder proposals referred to in Section 4.3.
SECTION 6. GENERAL
1 INDEMNIFICATION. The Corporation hereby agrees to indemnify
and hold harmless the Purchaser and its affiliates and their respective
officers, directors, employees and agents from and against any and all losses,
liabilities, claims, damages, costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by any of them in excess
of an aggregate of $100,000 and up to a maximum of $10 million in the aggregate
in connection with (i) any breach of any representation or warranty made by the
Corporation in this Agreement, (ii) any breach of any covenant, agreement or
obligation of the Corporation in this Agreement and (iii) any investigation,
litigation or other proceeding related to the entering into and/or performance
of this Agreement or the consummation of the transactions contemplated hereby.
2 AMENDMENTS, WAIVERS AND CONSENTS. For the purposes of this
Agreement and all agreements, documents and instruments executed pursuant
hereto, except as otherwise specifically set forth herein or therein, no course
of dealing between the Corporation and the Purchaser and no delay on the part of
any party hereto in exercising any rights hereunder or thereunder shall operate
as a waiver of the rights hereof and thereof. No covenant or other provision
hereof or thereof may be waived otherwise than by a written instrument signed by
the party so waiving such covenant or other provision. Any amendment or waiver
effected in accordance with this Section 6.2 shall be binding upon each holder
of Preferred Stock purchased under this
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Agreement at the time outstanding, each future holder of all such Preferred
Stock and the Corporation.
3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS;
ASSIGNABILITY OF RIGHTS.
(a) All representations and warranties of the Corporation made
herein and in the certificates, lists, exhibits, schedules or other written
information delivered or furnished to Purchaser in connection herewith shall be
deemed material and to have been relied upon by Purchaser, shall survive the
delivery of the Preferred Stock and the Warrant until December 31, 1998 (except
for Section 2.2, which shall survive indefinitely, and Section 2.13, which shall
survive until termination of any applicable statute of limitations), and shall
bind the Corporation's successors and assigns, whether so expressed or not, and,
except as provided otherwise in this Agreement, all such representations and
warranties shall inure to the benefit of the Purchaser, its successors and
assigns and to transferees of the Preferred Stock and the Warrant, whether so
expressed or not.
(b) All covenants of the Corporation made herein shall survive
the delivery of the Preferred Stock and the Warrant until the later of (i)
December 31, 2000 or (ii) the term specified herein for such covenant, and shall
bind the Corporation's successors and assigns, whether so expressed or not, and,
except as provided otherwise in this Agreement, all such covenants shall inure
to the benefit of the Purchaser, its successors and assigns and to transferees
of the Preferred Stock and the Warrant, whether so expressed or not.
4 SECTION HEADINGS. Article and Section headings used in this
Agreement are for convenience of reference only and shall not constitute a part
of this Agreement for any purpose or affect the construction of this Agreement
5 COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to be an original
and all of which counterparts, taken together, shall constitute one and the same
Agreement. This Agreement shall become effective upon the execution of a
counterpart hereof by each of the parties hereto.
6 NOTICES AND DEMANDS. All notices, demands, instructions and
other communications required or permitted to be given to or made upon any party
hereto shall be in writing delivered to the parties at the addresses set forth
below (or such other address as may be provided by one party in a notice to the
other):
If to Apollo:
c/o Apollo Real Estate Advisors, L.P.
1301 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxxxxxxx
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with a copy to:
Apollo Real Estate Advisors, L.P.
1999 Avenue of the Stars
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
and a copy to:
Battle Xxxxxx LLP
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxx Xxxxxxx, Esq.
If to the Corporation:
NextHealth, Inc.
00000 X. Xxxx Xxx Xxx Xxxxxxx
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
with a copy to:
Xxxx, Xxxxxx & Xxxxxxxxx
0 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxxx, Esq.
Notice delivered in accordance with the foregoing shall be effective (i) when
delivered, if delivered personally or by facsimile transmission, (ii) two days
after being delivered in the United States (properly addressed and all fees
paid) for overnight delivery service to a courier (such as Federal Express)
which regularly provides such service and regularly obtains executed receipts
evidencing delivery or (iii) five days after being deposited (properly addressed
and stamped for first-class delivery) in a daily serviced United States mail
box.
7 WAIVER OF JURY TRIAL. The Corporation hereby waives all
right to trial by jury in any action, proceeding or counterclaim arising out of
or relating to this Agreement, or any other agreement or instrument contemplated
hereby.
8 SPECIFIC PERFORMANCE. The Purchaser and each transferee or
assignee of the Purchaser shall have the right to specific performance by the
Corporation of Sections 1, 4.2, 4.3, 4.8, 4.9, 4.10 and 4.11 of this Agreement.
The Corporation hereby irrevocably waives, to the extent that it may do so under
applicable law, any defense based on the adequacy of a remedy at law which may
be asserted as a bar to the remedy of specific performance in any action brought
against the Corporation for specific performance of this Agreement by Purchaser
or its transferees and assignees.
9 SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such a manner as to be effective and valid
under applicable law, but if any provision of this Agreement shall be deemed
prohibited or invalid under such applicable law, such provision
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shall be ineffective to the extent of such prohibition or invalidity, and such
prohibition or invalidity shall not invalidate the remainder of such provision
or the other provisions or this Agreement.
10 EXPENSES. The Corporation shall pay all costs and expenses
incurred by it or the Purchaser with respect to the negotiation, execution,
delivery and performance of this Agreement and any modifications hereof.
11 GOVERNING LAW. This Agreement shall be deemed to have been
made in the State of Delaware and the validity of this Agreement, the
construction, interpretation, and enforcement thereof, and the rights of the
parties thereto shall be determined under, governed by, and construed in
accordance with the internal laws of the State of Delaware, without regard to
principles of conflicts of law.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first above written.
NEXTHEALTH, INC.
BY /s/ XXXXXXX X. X'XXXXXXX, XX.
_________________________________
NAME: XXXXXXX X. X'XXXXXXX, XX.
TITLE: PRESIDENT AND CEO
AP NH LLC
BY AP GP NH LLC, ITS MANAGING MEMBER
BY KRONUS PROPERTY, INC.,
ITS MANAGING MEMBER
BY: /s/ XXXXXX XXXXXXXXX
__________________________
NAME: XXXXXX XXXXXXXXX
TITLE: VICE PRESIDENT
