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STOCK PURCHASE AGREEMENT
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TABLE OF CONTENTS
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1. DEFINITIONS. 1
2. PURCHASE AND SALE OF SERIES D PREFERRED STOCK. 13
2.1 AUTHORIZATION 13
2.2 SALE AND ISSUANCE OF CERTAIN SHARES OF SERIES D PREFERRED STOCK 13
3. CLOSING; DELIVERIES; FORM OF CONSIDERATION. 14
3.1 THE CLOSING 14
3.2 DELIVERIES 14
3.3 FORM OF CONSIDERATION 14
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY 14
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION 14
4.2 CAPITALIZATION. 15
4.3 SUBSIDIARIES 16
4.4 AUTHORIZATION. 17
4.5 GOVERNMENTAL AND OTHER CONSENTS; NO VIOLATION 17
4.6 LITIGATION 18
4.7 FINANCIAL STATEMENTS AND REPORTS. 18
4.8 PROPRIETARY INFORMATION 19
4.9 REGISTRATION RIGHTS 19
4.10 CONTRACTS. 19
4.11 ABSENCE OF CHANGES 20
4.12 INTELLECTUAL PROPERTY 21
4.13 COMPLIANCE WITH OTHER INSTRUMENTS 21
4.14 COMPLIANCE WITH LAW; APPROVALS 22
4.15 TITLE TO ASSETS 23
4.16 PLANT, PROPERTY, AND EQUIPMENT 23
4.17 ACCOUNTS AND NOTES RECEIVABLE 23
4.18 INDEBTEDNESS 24
4.19 REAL PROPERTY. 24
4.20 EMPLOYEE PLANS AND ARRANGEMENTS. 25
4.21 EMPLOYEES. 27
4.22 INSURANCE 27
4.23 ENVIRONMENTAL COMPLIANCE. 28
4.24 NO UNDISCLOSED LIABILITIES 28
4.25 TAXES. 29
4.26 NO RESEARCH GRANTS 30
4.27 CERTAIN REGULATORY MATTERS 31
4.28 TRANSACTIONS WITH AFFILIATES 31
4.29 REPORTS; SEC DOCUMENTS 31
4.30 DISCLOSURE 31
4.31 BROKERS 31
4.32 CERTAIN ADDITIONAL REGULATORY MATTERS 32
4.33 MEDICARE/MEDICAID PARTICIPATION 33
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR 34
5.1 ACCREDITED INVESTOR 34
5.2 INVESTMENT INTENT 34
5.3 CERTAIN SECURITIES LAW ISSUES 34
5.4 AUTHORIZATION 34
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5.5 BROKERS 34
6. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING 34
6.1 REPRESENTATIONS AND WARRANTIES 35
6.2 PERFORMANCE 35
6.3 NO INJUNCTION 35
6.4 QUALIFICATIONS; LEGAL INVESTMENT 35
6.5 COMPLETION OF REVIEW OF THE COMPANY 35
6.6 CERTIFICATES OF DESIGNATION 35
6.7 CLOSING DOCUMENTS 36
6.9 OPINIONS OF COMPANY COUNSEL 36
6.10 MATERIAL ADVERSE CHANGES 36
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING 36
7.1 REPRESENTATIONS AND WARRANTIES 36
7.2 PERFORMANCE 37
7.3 NO INJUNCTION 37
7.4 QUALIFICATIONS; LEGAL INVESTMENT 37
8. COVENANTS. 37
8.1 BEST EFFORTS 37
8.2 CONVERSION STOCK 37
8.3 RESTRICTIVE AGREEMENTS PROHIBITED 38
8.4 COMPLIANCE WITH ELEVENTH AMENDMENT AND RESTATED NOTE 38
8.5 CERTAIN REGULATORY MATTERS 38
8.6 FINANCIAL STATEMENTS AND INFORMATION 39
8.7 MERGER 40
8.8 LIMITATIONS ON LIENS 42
8.9 INDEBTEDNESS 44
8.10 INVESTMENTS 45
8.11 CAPITAL EXPENDITURES 45
8.12 TRANSACTIONS WITH AFFILIATES 46
8.13 LIMITATION ON DISPOSITION OF ASSETS 46
8.14 LIMITATION RELATING TO SUBSIDIARIES 47
8.15 LIMITATIONS ON LEASES 47
8.16 BOARD OBSERVATION RIGHTS 48
8.17 NO DEFAULTS UNDER FUNDED DEBT DOCUMENTS 48
8.18 NO CHANGE IN BUSINESS 49
9. INDEMNIFICATION 49
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 49
9.2 INDEMNIFICATION. 49
9.3 CLAIMS FOR INDEMNIFICATION 50
9.4 DEFENSE BY THE COMPANY 50
9.5 MATERIALITY 51
10. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
COMPLIANCE WITH SECURITIES ACT; REGISTRATION RIGHTS. 51
10.1 RESTRICTIONS ON TRANSFERABILITY 51
10.2 RESTRICTIVE LEGEND 51
10.3 REQUESTED REGISTRATION. 51
10.4 COMPANY REGISTRATION. 52
10.5 REGISTRATION ON FORM S-3 53
10.6 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS 54
10.7 EXPENSES OF REGISTRATION 54
10.8 SECURITIES INDEMNIFICATION 54
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10.9 TRANSFER OF REGISTRATION RIGHTS 55
11. MISCELLANEOUS. 55
11.1 EXPENSES 55
11.2 PUBLICITY 55
11.3 SUCCESSORS AND ASSIGNS 55
11.4 GOVERNING LAW 55
11.5 COUNTERPARTS 56
11.6 TITLES AND SUBTITLES 56
11.7 NOTICES 56
11.8 AMENDMENTS AND WAIVERS 56
11.9 SEVERABILITY 56
11.10 ENTIRE AGREEMENT 56
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SCHEDULES AND EXHIBITS
EXHIBITS
Exhibit A Eleventh Amendment to Note Purchase Agreement
Exhibit B Form of Restated Note
Exhibit C Series D Certificate of Designation
Exhibit D Series E Certificate of Designation
Exhibit E Form of Opinion of Corporate Counsel to Company
Exhibit F-1 Form of Opinion of Regulatory Counsel to Company
Exhibit F-2 Form of Opinion of Regulatory Counsel to Company
SCHEDULES
Schedule 4 Company Disclosure Schedule
Schedule 4.1 Certificate and Bylaws; Jurisdictions
Schedule 4.3 Subsidiaries
Schedule 4.7(b) Accountant Letters
Schedule 4.10(b) Material Contracts
Schedule 4.14(e) Approvals
Schedule 4.18 Indebtedness
Schedule 4.19(b) Lease Agreements
Schedule 4.20(b) Employee Benefit Plans
Schedule 4.23(a) Environmental Permits
Schedule 4.25 Tax Returns
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
25th day of March, 1997, by and among Alliance Imaging, Inc., a Delaware
corporation (the "Company") and General Electric Company, a New York
Corporation acting through GE Medical Systems (the "Investor"). Certain of
the capitalized terms used in the Agreement are defined in Section 1 hereof.
R E C I T A L S
WHEREAS, the Investor desires to purchase certain securities of the
Company on the terms and conditions set forth herein;
WHEREAS, the Company desires to sell to the Investor such
securities on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals, the
terms and provisions set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
1. DEFINITIONS.
The following terms have the following meanings when used in this
Agreement, unless the context expressly or by necessary implication otherwise
requires:
"Affiliate" shall mean, with respect to any Person, any other
Person which directly or indirectly controls or is controlled by or is under
common control with such Person, and, with respect to the Company only,
includes any other Person with whom the Company has any joint venture,
partnership, or other shared investment interest. As used in this
definition, "control" (including its correlative meanings, "controlled by"
and "under common control with") shall mean possession, directly or
indirectly, of power to (i) direct or cause the direction of management or
policies of such Person (whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise) or (ii)
vote 10% or more of the securities having ordinary voting power for the
election of directors of such Person.
"Aggregate Purchase Price" is defined in Section 2.2.
"Agreement" is defined in the preamble hereto.
"Applicable Law" means, with respect to any Person, any federal,
state or local statute, law, ordinance, rule, administrative interpretation,
regulation, order, writ, injunction, directive, judgment, decree or other
requirement of any Governmental Authority (including any Environmental Law)
applicable to such Person or any of its Affiliates or Plan Affiliates or any
of their respective properties, assets, officers, directors, employees,
consultants or agents.
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"Approvals" is defined in Section 4.14(d).
"Average Market Price" of a share of Common Stock at any date shall
mean the average of the daily closing prices per share of Common Stock for
twenty-five (25) consecutive trading days ending on the trading day
immediately preceding such date (as adjusted for any stock dividend, split,
combination or reclassification that took effect during such 25 day period).
The closing price for each trading day shall mean the closing sales price on
such trading day of a share of Common Stock on the principal national
securities exchange or automated quotation system on which the shares of
Common Stock are listed or admitted to trading.
"Benefit Arrangement" means any material benefit arrangement that
is not an Employee Benefit Plan, including (i) each employment, consulting or
change of control agreement, (ii) each arrangement providing for fringe
benefits, insurance coverage or workers' compensation benefits, (iii) each
bonus, incentive, or performance pay or deferred bonus, incentive, or
performance pay arrangement, (iv) each arrangement providing any termination
allowance, severance or similar benefits, (v) each equity compensation plan,
(vi) each deferred compensation plan and (vii) each compensation policy and
practice maintained by the Company covering the employees, former employees,
officers, former officers, directors and former directors of the Company, and
the beneficiaries of any of them.
"Benefit Plan" means an Employee Benefit Plan or Benefit
Arrangement.
"Board of Directors" shall mean, as to any corporation. the Board
of Directors of such corporation or a committee of such corporation having
authority to exercise, when the Board of Directors is not in session, the
powers of the Board of Directors (subject to any designated limitations) in
the management of the business and affairs of such corporation.
"Bridge Loan Agreement" means the Bridge Loan Agreement between the
Company and the Investor dated as of December 31, 1996.
"Business Day" means each day other than a Saturday, Sunday or
other day on which commercial banks in San Francisco, California are
authorized or required by law to close. Unless specifically referenced in
this Agreement as a Business Day, all references to "days" shall be to
calendar days.
"Capital Expenditure Adjustment Amount" shall mean, for any Capital
Expenditure Period corresponding to a capital raising transaction described
in clause (i) following, the positive amount, if any, of (i) net cash
proceeds from issuances of Common Stock or other securities convertible into
Common Stock or other non-redeemable equity securities of the Company MINUS
(ii) cash expended during such Capital Expenditure Period by the Company or
its Majority-Owned Subsidiaries in connection with business acquisitions
(including without limitation acquisitions of substantially all of the assets
of a Person permitted under this Agreement); PROVIDED, HOWEVER, that any cash
expenditures constituting Capital Expenditures for such Capital
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Expenditure Period that are already included in the calculation of the total
amount of Capital Expenditures for such Capital Expenditure Period for
purposes of determining compliance with Section 8.11 hereof (without
considering the Capital Expenditure Adjustment Amount) shall only be included
once in such total amount, regardless of whether such Capital Expenditures
arise in connection with a business acquisition. If the Company could
properly include a Capital Expenditure within the general limitation under
Section 8.11 hereof and/or under an available Capital Expenditure Adjustment
Amount, the Company shall be entitled in its discretion to select the
allocation of such Capital Expenditure. To the extent that amounts expended
are included under clause (ii) of the foregoing definition, such amounts
shall be deducted from the amount described in clause (i) on a chronological
basis (i.e., the first such amount deducted will be the first of such amounts
expended, and so on).
"Capital Expenditure Period" means, with respect to each capital
raising transaction described in clause (i) of the definition of Capital
Expenditure Adjustment Amount, the two-year period beginning with the date
that net proceeds with respect to such transaction are received by the
Company.
"Capital Expenditures" shall mean, for any period, expenditures
made by the Company or any of its Majority-Owned Subsidiaries to acquire or
construct fixed assets, plant and equipment (including additions,
improvements, upgrades and replacements, but excluding repairs) during such
period calculated in accordance with GAAP.
"Capital Lease" shall mean any lease by a Person of any property
(whether real, personal or mixed) which, in conformity with GAAP (including
Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board), is accounted for as a capital lease on the
balance sheet of such Person.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a Capital Lease
and, for purposes of this Agreement, the amount of such obligations shall be
the capitalized amount thereof, determined in accordance with GAAP (including
Statement of Financial Accounting Standards No. 13 of the Financial
Accounting Standards Board).
"Capital Stock" of any Person shall mean the beneficial ownership
interests in said Person, including, without limitation, the capital stock of
any Person that is a corporation and the partnership interests (general and
limited) in any Person that is a partnership.
"Certificate of Incorporation" means the Restated Certificate of
Incorporation of the Company, including all amendments thereto, as in effect
on the date hereof.
"CHAMPUS" is defined in Section 4.32.
"Charter Documents" has the meaning set forth in Section 4.13.
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"Closing" has the meaning set forth in Section 3.1
"Closing Date" has the meaning set forth in Section 3.1.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of
Title I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral Agent" shall mean First Security Bank of Utah, N.A., as
collateral agent under the Note Purchase Agreement, or any successor thereto,
with respect to the Company's Senior Secured Notes.
"Collateral Pool" shall mean the Eligible First Lien Equipment, the
Eligible Second Lien Equipment and the Cash Equivalent Collateral (all as
defined in the Note Purchase Agreement) pledged to the Collateral Agent, on
behalf of the holders of the Senior Secured Notes, pursuant to the Note
Purchase Agreement and the Security Documents (as defined in the Note
Purchase Agreement), and such additions thereto and substitutions therefor as
may be permitted or required pursuant to the Note Purchase Agreement.
"Common Stock" is defined in Section 4.2(a).
"Company Disclosure Schedule" has the meaning set forth in Article
4.
"Consolidated Rental Obligations" shall mean, with reference to any
period, the aggregate amount of all minimum or guaranteed net rentals for
which the Company and its Majority-Owned Subsidiaries are directly or
indirectly liable (as lessee or as guarantor or other surety) under all
leases in effect at any time during such period, including all amounts for
which any Person was so liable during such period accrued prior to the date
such Person became a Majority-Owned Subsidiary or was merged into or
consolidated with the Company or a Majority-Owned Subsidiary.
"Contract" means all contracts and agreements, contract rights,
executory commitments, license agreements, purchase and sales orders, written
or oral, relating to the operation of the business of the Company or any
Majority-Owned Subsidiary.
"Contractual Obligation" means, as applied to any Person, any
provision of any agreement or other instrument to which that Person is a
party or by which it or any of the properties owned or leased by it is bound
or otherwise subject.
"Conversion Stock" means the shares of Common Stock issuable upon
conversion of the shares of Series D Preferred Stock.
"Current Liabilities" shall mean, at any date, the liabilities of
the Company and its Majority-Owned Subsidiaries (including tax and other
proper accruals) that would
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be classified as current liabilities in accordance with GAAP consistent with
those applied in the preparation of the financial statements referred to in
Section 4.7 hereof, but excluding the current portion of Funded Debt.
"Debt For Money Borrowed" shall mean, as to any Person, all
Indebtedness excluding Indebtedness referred to in clause (b) under the
definition of the term "Indebtedness."
"Default" has the meaning given in the Note Purchase Agreement.
"Eleventh Amendment" means the Eleventh Amendment to Note Purchase
Agreement dated as of the date hereof between the Company and the Investor,
in substantially the form attached as EXHIBIT A hereto.
"Eligible Holder" is defined in Section 8.6.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, that is sponsored or contributed to by the Company
or any ERISA Affiliate covering employees or former employees of the Company,
or with respect to which the Company or any ERISA Affiliate is a party or is
otherwise bound.
"Employee Pension Benefit Plan" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is regulated under Title IV
of ERISA or is subject to the funding requirements of Part III of Title I of
ERISA or Section 412 of the Code, other than a Multiemployer Plan.
"Employment Agreements" is defined in Section 4.20(a).
"Environmental Law" means all laws, ordinances and regulations
regulating or otherwise concerning the environment or relating to Hazardous
Materials, including, without limitation, the Clean Air Act, as amended, 42
U.S.C. Section 7401 ET SEQ.; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. Section 1251 ET SEQ.; the Resource Conservation and
Recovery Act of 1976, as amended, 42 U.S.C. Section 6901 ET SEQ.; the
Comprehensive Environment Response, Compensation and Liability Act of 1980,
as amended (including the Superfund Amendments and Reauthorization Act of
1986, "CERCLA"), 42 U.S.C. Section 9601 ET SEQ.; the Toxic Substances Control
Act, as amended, 15 U.S.C. Section 2601 ET SEQ.; the Occupational Safety and
Health Act, as amended, 29 U.S.C. Section 651, the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 ET SEQ.; the
Mine Safety and Health Act of 1977, as amended, 30 U.S.C. Section 801 ET
SEQ.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f ET
SEQ.; and all comparable state and local laws, orders and regulations of
applicable jurisdictions.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" of the Company means any other Person that,
together with the Company as of the relevant measuring date under ERISA, was
or is required to
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be treated as a single employer under Section 414 of the Code.
"Event of Default" has the meaning given in the Note Purchase
Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time.
"Federal Health Care Program" is defined in Section 4.33.
"Financial Statements" is defined in Section 4.7.
"Fiscal Quarter" shall mean the quarters ending on the last days of
March, June, September and December each year, or such other fiscal quarters
as the Board of Directors of the Company may adopt in connection with a
change in the Company's fiscal year.
"Fiscal Year" shall mean the fiscal year of the Company, which
shall be the twelve (12) month period ending on December 31 in each year or
such other period as the Board of Directors of the Company may adopt.
"Funded Debt" shall mean as applied to any Person, all Indebtedness
of such Person, in a principal amount of at least $1,000,000 in each
instance, which by its terms or by the terms of any instrument or agreement
relating thereto matures, or which is otherwise payable or unpaid, more than
one year from, or is directly or indirectly renewable or extendible at the
option of the debtor to a date more than one year (including an option of the
debtor under a revolving credit or similar agreement obligating the lender or
lenders to extend credit over a period of more than one year) from the date
of the creation thereof; PROVIDED that "Funded Debt" shall include, as at any
date of determination, any portion of such Funded Debt outstanding on such
date which matures on demand or within one year from such date (whether by
sinking fund, other required prepayment or final payment at maturity) and
which is not directly or indirectly renewable, extendible or refundable, at
the option of the debtor to a date more than one year from such date;
PROVIDED, FURTHER, that "Funded Debt" shall include the Company's Senior
Notes due 2003 issued pursuant to that certain Note Purchase Agreement dated
as of April 14, 1989, as amended to and including the Closing Date; and
PROVIDED, FURTHER, that except with respect to Indebtedness pursuant to that
certain Note Purchase Agreement dated as of April 14, 1989, as amended to and
including the Closing Date, "Funded Debt" shall not include (i) Indebtedness
secured by equipment, trailers or modular buildings used in the business of
the Company or (ii) Indebtedness convertible into equity securities of the
Company on commercially reasonable terms.
"Funded Debt Default" means any date 30 days after the Company
shall have Knowledge that it is in default with respect to any Funded Debt,
unless during such 30 day period either (i) such default shall have been
waived by the lender with respect to such Funded Debt or (ii) the agreement
or agreements governing such Funded Debt shall have been amended to eliminate
such default, in either of cases (i) or (ii) without
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any economic consideration (other than such consideration required by the
terms of the documentation with respect to such Funded Debt as in effect
prior to any amendment of such documentation described in clause (ii) above)
provided to the lender with respect to such Funded Debt by the Company.
"GAAP" is defined in Section 4.7.
"Governmental Authority" means any federal, territorial, state or
local governmental authority, quasi-governmental authority, instrumentality,
court, government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any
political or other subdivision, department or branch of any of the foregoing,
in all such cases whether domestic or foreign.
"Group Health Plan" means any group health plan, as defined in
Section 5000(b)(1) of the Code.
"Guaranty" is defined in Section 8.9(b).
"Hazardous Materials" means oil, flammable explosives, asbestos,
urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic
or contaminated substances or similar materials, including, without
limitation, any substances which are "hazardous substances," "hazardous
wastes," "hazardous materials" or "toxic substances" under any Environmental
Laws.
"Indebtedness" shall mean, 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 Majority-Owned
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 obligations in respect of deferred taxes and
deferred employee compensation and benefits, and anything in the nature of
capital stock, surplus capital and retained earnings; (b) the amount
available for drawing under all letters of credit issued for the account of
such Person; (c) obligations (whether or not such Person has assumed or
become liable for the payment of such obligation) secured by Liens; (d)
Capital Lease Obligations of such Person; and (e) all guarantees of 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 45 days overdue or are being contested in
good faith.
"Intellectual Property Right" means all of the Company's or any
Majority-Owned Subsidiary's rights, title and interest in and to all: (a)
United States and foreign patents and patent applications; (b) copyrights in
computer programs and other works of authorship; (c) trade secrets and
proprietary or confidential business and technical information; (d)
proprietary "know-how," whether or not protectable by patent, copyright or
trade secret right; and (e) United States and foreign trademarks, service
marks, trade names and associated goodwill, and registrations or applications
for registration of an such marks or names.
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"Interest Rate Protection Agreement" shall mean an interest rate
swap, cap or collar agreement or similar arrangement between any Person and a
financial institution providing for the transfer or mitigation of interest
risks either generally or under specific contingencies.
"Internal Rate of Return" means, as of the final date of any Fiscal
Quarter after December 31, 1999, the annual internal rate of return deemed
realized by the holders of the Series D Preferred Stock, computed in
accordance with customary financial practices (compounded annually):
(a) assuming:
(i) a deemed initial investment per share of Series D
Preferred Stock as of the Closing Date equal to the Conversion Price (as
defined and computed in accordance with the Series D Certificate of
Designation) as of the date of determination;
(ii) a deemed value for each share of Series D Preferred Stock
as of any date after December 31, 1999 of an amount equal to the then Average
Market Price of a share of Common Stock; and
(b) taking into account all Regular Dividends (as defined in the
Series D Certificate of Designation) actually received with respect to each
such share through and including the date of determination.
"Investments" when used with reference to any investment of the
Company or any of its Majority-Owned Subsidiaries shall mean any investment
so classified under GAAP, and, whether or not so classified, includes,
without duplication, (a) any direct or indirect Loan or advance made by it to
any other Person, (b) any direct or indirect guarantee of the obligations of
any other Person, (c) any capital contribution to any other Person, and (d)
any ownership or similar interest in any other Person; and the amount of any
Investment shall be the original principal or capital amount thereof (PLUS
any subsequent principal or capital amount), including amounts written off in
respect of such principal or capital amounts, MINUS all returns of principal
or capital thereof (whether in cash or other assets, including assets
transferred by virtue of any merger, consolidation or liquidation).
"IRR Trigger Date" shall mean the first day of the first Fiscal
Quarter after the date, if any, after December 31, 1999 on which the Internal
Rate of Return shall exceed 25% per annum; provided, that no IRR Trigger Date
shall occur unless at such time the shares of Common Stock are listed or
trading on a national securities exchange or automated quotation system.
"Knowledge" or "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
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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 Xxxxxxx X. Xxxxxx,
Xxxxxxx X. Xxxx, Xxxxxxxx X. Xxxxx, Xxx X. Xxxxxxx, Xxxxx X. Xxxxxxx, Xxxx X.
Xxxxxxx, Ph.D., Xxxxxx X. Xxxx, and Xxxxxxx X. Xxxxxxx) 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.
"Lease Agreements" is defined in Section 4.19(b).
"Leased Real Property" means all real property leased, occupied,
operated or controlled by the Company or any Majority-Owned Subsidiary or
otherwise related to or used in the business of the Company or any
Majority-Owned Subsidiary.
"Liability" means, with respect to any Person, any liability or
obligation of such Person of any kind, character or description, whether
known or unknown, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, secured or unsecured, joint or several, due or to become due,
vested or unvested, executory, determined, determinable or otherwise and
whether or not the same is required to be accrued on the financial statements
of such Person.
"Lien" means any lien, mortgage, pledge, security interest, charge,
or encumbrance of any kind (including any conditional sale or other title
retention agreement or any lease in the nature thereof) and any agreement to
give or refrain from giving any lien, mortgage, pledge, security interest,
charge, or other encumbrance of any kind. For purposes of this Agreement,
the Company or any of its Subsidiaries shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means the Senior Loan.
"Loan Documents" means, collectively, the Bridge Loan Agreement and
the Senior Note, as amended, supplemented, replaced or modified.
"Long-Term Lease" shall mean any lease which is not a Capital Lease
of any property (whether real, personal or mixed) other than any such lease
having a term (including all renewal terms, whether or not exercised) of less
than 12 months from the date of inception of such lease.
"Material Adverse Effect" means, with respect to any Person or
designated group of Persons, a change in, or effect on, or group of such
changes in or effects on, the operations, financial condition or results of
operations, prospects, assets or Liabilities of the Person or group of
Persons, as the case may be, taken as a whole, that results in a material
adverse effect on, or a material adverse change in, the operations, financial
condition, results of operations, prospects, assets or Liabilities of the
Person or group of Persons, as the case may be, taken as a whole, excluding
adverse changes in the general economy.
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"Majority-Owned Subsidiary" means any Subsidiary of which at least
a majority of the outstanding shares, partnership interests or other equity
interests therein is at the time directly or indirectly owned or controlled
by the Company or any other Subsidiary which is a consolidated subsidiary of
the Company under GAAP, or one or more of the Majority-Owned Subsidiaries or
by the Company and one or more of the Majority-Owned Subsidiaries.
"Material Contracts" is defined in Section 4.10(b).
"Multiemployer Plan" means any multiemployer plan as defined in
either Section 3(37) or 4001(a)(3) of ERISA.
"Multiple Employer Plan" means any Employee Benefit Plan sponsored
by more than one employer, within the meaning of Sections 4063 of 4064 of
ERISA or Code Section 413(c).
"Net Worth" shall mean, as at any date of determination thereof,
the sum of the following for any Person and its consolidated subsidiaries
determined (without duplication) in accordance with GAAP: (a) the amount of
capital stock, plus (b) the amount of surplus and retained earnings (or, in
the case of a surplus or retained earnings deficit, minus the amount of such
deficit).
"Note Purchase Agreement" is defined in Section 8.4.
"Permitted Encumbrances" means: (i) Liens for taxes, assessments or
charges for claims that are not yet due and payable or being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves or other appropriate provisions are being maintained in accordance
with GAAP; (ii) statutory Liens of carriers, warehousemen, mechanics,
materialmen, bankers and other Liens imposed by law and created in the
ordinary course of business for amounts that are not material, and that are
not yet due and payable or that are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP; (iii)
Liens incurred and deposits made in the ordinary course of business to secure
the performance (including by way of surety bonds or appeal bonds) of
tenders, bids, leases, contracts, statutory obligations or similar
obligations or arising as a result of progress payments under contracts, in
each case in the ordinary course of business and not relating to the
repayment of debt; (iv) easements, rights-of-way, covenants, consents,
reservations, encroachments, variations and other restrictions, charges,
encumbrances; (v) building restrictions, zoning laws and other statutes,
laws, rules, regulations, ordinances and restrictions; (vi) leases or
subleases approved by, or deemed approved by Investor; (vii) any attachment
or judgment Lien, not otherwise constituting a Default under the Note
Purchase Agreement, in existence less than thirty (30) days after the entry
thereof or with respect to which (A) execution has been stayed, (B) payment
is covered in full by insurance to which Investor has been made the loss
payable party, or (C) Company is in good faith prosecuting an appeal or other
appropriate proceedings for review and has set aside on its books and granted
to
Page 16
Investor a priority perfected security interest in such reserves as may be
required by GAAP with respect to such judgment or award; (viii) Liens with
respect to purchase money security interests (including refinancings thereof)
granted in the ordinary course of the Company's business, consistent with
past practice; and (ix) rights of Persons under leases of equipment to such
Person in the ordinary course of business.
"Person" or "person," means any natural person, firm, corporation,
partnership, limited liability company, association, trust, Governmental
Authority or other entity.
"Plan Affiliate" means, with respect to any Person, any employee
benefit plan or arrangement sponsored by, maintained by or contributed to by
such Person, and with respect to any employee benefit plan or arrangement,
any Person sponsoring, maintaining or contributing to such plan or
arrangement.
"Preferred Stock" means, collectively, the Series D Preferred Stock
and the Series E Preferred Stock.
"Proceeding" means any action, suit, hearing, arbitration, audit,
investigation or similar proceeding.
"Prohibited Transaction" means a transaction that is prohibited
under Section 4975 of the Code or Section 406 of ERISA and not exempt under
Section 4975 of the Code or Section 408 of ERISA.
"Purchased Stock" has the meaning set forth in Section 2.2.
"Registrable Securities" means (i) the Conversion Stock and the
Series E Conversion Stock; and (ii) 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 "Registrable 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. Securities shall cease to constitute
"Registrable 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.
"Refinancing Agreements" means the Assignment and Amended &
Restated Standstill Agreement between the Company, on the one hand, and The
Northwestern Mutual Life Insurance Company, The Travelers Insurance Company,
The Travelers Indemnity Company, The Travelers Life and Annuity Company, The
Lincoln National Life Insurance Company and Bedrock Asset Trust I, on the
other hand, dated as of December 31, 1996.
"Restated Note" shall mean the 7.50% Restated Convertible Senior
Note Due 2003, payable to Investor by the Company, in the form attached
hereto as EXHIBIT
Page 17
B.
"SEC" is defined in Section 4.29.
"SEC Documents" is defined in Section 4.29.
"Secured Obligations" shall mean, as at any date of determination,
the aggregate principal amount of the term loans and the revolving credit
loans outstanding under the Working Capital Facility.
"Securities" shall mean, collectively, the Series D Preferred
Stock, the Conversion Stock, the Series E Preferred Stock, and the Series E
Conversion Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time.
"Senior Note" means the note evidencing the Senior Loan.
"Senior Note Accrued Interest" is defined in Section 3.3.
"Senior Loan" means the loan extended to the Company by the
Investor in its capacity as lender under the Bridge Loan Agreement.
"Senior Secured Notes" is defined in Section 8.6(d).
"Series C Preferred Stock" is defined in Section 4.2.
"Series D Certificate of Designation" shall mean the Amended
Certificate of Designation, Preferences and Rights of Series D 4% Cumulative
Redeemable Convertible Preferred Stock in the form set forth as EXHIBIT C
hereto.
"Series D Preferred Stock" shall mean the Series D 4% Cumulative
Redeemable Convertible Preferred Stock, with the rights, preferences and
privileges set forth in the Series D Certificate of Designation.
"Series E Certificate of Designation" shall mean the Amended
Certificate of Designation, Preferences and Rights of Series E 4% Cumulative
Redeemable Convertible Preferred Stock in the form set forth as EXHIBIT D
hereto.
"Series E Conversion Stock" means the shares of Common Stock
issuable, upon certain conditions, by the Company to the Investor in respect
of the Series E Preferred Stock.
"Series E Preferred Stock" shall mean the Series E 4% Cumulative
Redeemable Convertible Preferred Stock, with the rights, preferences and
privileges set forth in the Series E Certificate of Designation.
"Seventh Amendment Effective Date" shall mean December 31, 1994.
Page 18
"State Health Care Program" is defined in Section 4.33.
"Subordinated Debentures" means the Company's 7.50% Senior
Subordinated Debentures due 2005.
"Subsidiary" is defined in Section 4.3.
"Subsidiary Total Debt" shall mean the aggregate amount of
Indebtedness, without duplication, of the Majority-Owned Subsidiaries of the
Company excluding Indebtedness with respect to each guaranty of the Senior
Secured Notes.
"Voting Stock" shall mean, with respect to any corporation, any
shares of Capital Stock of such Corporation having general voting power under
ordinary circumstances to vote for members of the Board of Directors of such
corporation (irrespective of whether at the time stock of any other class or
classes shall have or might have voting power by reason of the happening of
any contingency).
"Tax" or "Taxes" means any tax or other similar Liability imposed
or collected by any Governmental Authority, including all federal, state,
county, local and foreign income, profits, franchise, gross receipts,
payroll, sales, employment, use, occupation, property, excise, value added,
withholding and other taxes, duties or assessments (including the recapture
of any tax items such as investment tax credits), together with any related
interest, penalties and additions and shall include any transferee or
secondary Liability for a Tax and any Liability arising as a result of being
(or ceasing to be) a member of any affiliated, consolidated, combined, or
unitary group or being included (or required to be included) in any Tax
Return relating thereto.
"Tax Agreement" means any sharing, allocation, indemnity or other
agreement or arrangement (written or unwritten) relating to Taxes (other than
this Agreement).
"Tax Return" means any return, report, information return or other
documents (including any related or supporting schedules, statements or
information) filed or required to be filed with any Tax authority or
Governmental Authority in connection with the determination, assessment or
collection of any Taxes of any Person or the administration of any laws,
regulations or administrative requirements relating to any Taxes.
"Working Capital Facility" shall have the meaning specified in
Section 9.06 of the Note Purchase Agreement.
2. PURCHASE AND SALE OF SERIES D PREFERRED STOCK.
2.1 AUTHORIZATION. The Company has authorized the sale and
issuance of up to Eighteen Thousand (18,000) shares of its Series D Preferred
Stock, having the rights, privileges, preferences and restrictions as stated
in the Series D Certificate of Designation set forth as EXHIBIT C to this
Agreement.
Page 19
2.2 SALE AND ISSUANCE OF CERTAIN SHARES OF SERIES D PREFERRED
STOCK. Subject to the terms and conditions set forth in this Agreement, the
Investor shall purchase at the Closing (as defined below), and the Company
shall sell and issue to the Investor at the Closing, Eighteen Thousand
(18,000) shares of Series D Preferred Stock (the "Purchased Stock") for a
purchase price of One Thousand Dollars ($1,000.00) per share, or an aggregate
purchase price of Eighteen Million Dollars ($18,000,000) (the "Aggregate
Purchase Price.")
3. CLOSING; DELIVERIES; FORM OF CONSIDERATION.
3.1 THE CLOSING. Subject to the satisfaction or waiver of
the conditions set forth in this Agreement, the closing (the "Closing") of
the purchase and sale of the Series D Preferred Stock shall take place at the
offices of Xxxxxx, Xxxx & Xxxxxxxx LLP, 000 Xxxxx Xxxxx Xxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000 on a date to which the Company and the Investor may agree
(the "Closing Date").
3.2 DELIVERIES. At the Closing, the Company shall deliver to
the Investor certificates representing the numbers of shares of Purchased
Stock under this Agreement in exchange for delivery to the Company from the
Investor of the consideration specified in Section 2.2 of this Agreement.
3.3 FORM OF CONSIDERATION. The Company hereby acknowledges
and agrees that there is outstanding pursuant to the Senior Note a principal
balance of $18,000,000, plus accrued interest as provided for in the Bridge
Loan Agreement and Senior Note (such accrued interest, the "Senior Note
Accrued Interest"), with such principal balance and Senior Note Accrued
Interest as of the date hereof due and owing to the Investor from the
Company. The Investor shall deliver the Aggregate Purchase Price hereunder
in the form of an exchange of the principal balance due under the Senior Note
for the Purchased Shares. At the Closing, the Company shall pay to the
Investor all Senior Note Accrued Interest in cash.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set
forth on the Company Disclosure Schedule attached hereto as Schedule 4 (the
"Company Disclosure Schedule"), the Company represents and warrants to the
Investor as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION.
(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 and operate its properties
and assets and to carry on its business as now conducted and as proposed to
be conducted. The Company is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure to so qualify, either
alone or together with all other such failures, would have a Material Adverse
Effect on the Company. Schedule 4.1 includes true and complete copies of the
Company's Certificate of Incorporation and Bylaws
Page 20
currently in effect and a list of all states or other jurisdictions in which
the Company is qualified to do business. All of the terms and provisions of
the Certificate of Incorporation and Bylaws are legal, valid and enforceable.
(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 and operate its properties and assets and to carry on its
business as now conducted and as proposed to be conducted. Each Subsidiary
is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure to so qualify, either along or together
with all other such failures, would have a Material Adverse Effect on such
Subsidiary. Schedule 4.1 contains a list of all states or other
jurisdictions in which each Subsidiary is qualified to do business. All of
the terms and provisions of the organizational documents of each Subsidiary
are legal, valid and enforceable.
4.2 CAPITALIZATION.
(a) The authorized capital of the Company consists of:
(i) Twenty-Five Million (25,000,000) shares of common stock ("Common Stock"),
10,927,471 shares of which will be issued and outstanding immediately after
the Closing Date; (ii) One Million (1,000,000) shares of Preferred Stock, of
which (A) Four Thousand (4,000) shares of Series C Convertible Preferred
Stock ("Series C Preferred Stock") are designated and authorized as of the
Closing Date, 3,876 shares of which will be issued and outstanding
immediately after the Closing Date; (B) Eighteen Thousand (18,000) shares of
Series D Preferred Stock are designated and authorized as of the Closing
Date, all of which will be issued and outstanding immediately after the
Closing Date; and (C) Nine Thousand (9,000) shares of Series E Preferred
Stock are designated and authorized as of the Closing Date, none of which
will be issued and outstanding immediately after the Closing Date. The
outstanding shares of Common Stock and Series C Preferred Stock are fully
paid, non-assessable, free and clear of all encumbrances and have been issued
in compliance with all state and federal securities laws. None of such shares
is subject to any preemptive rights.
(b) The rights, preferences, privileges and restrictions
of the Series D Preferred Stock are as stated in the Series D Certificate of
Designation. The rights, preferences, privileges and restrictions of the
Series E Preferred Stock are as stated in the Series E Certificate of
Designation. The shares of Purchased Stock and all other Securities will be
issued in compliance with applicable state and federal securities laws. The
shares of Purchased Stock and all other Securities have been duly authorized.
The shares of Purchased Stock will be validly issued and delivered, fully
paid and non-assessable, and free from restrictions on transfer except as set
forth in this Agreement and pursuant to applicable securities laws as of the
Closing Date. All of the Securities (other than the Purchased Stock), when
and if issued in accordance with this Agreement, the Restated Note, the Note
Purchase Agreement, the Series D Certificate of Designation, and the Series E
Certificate of Designation, as the case may be, will be validly issued and
delivered, fully paid and non-assessable, and free from restrictions on
transfer except as set forth in this Agreement, the Restated Note, the
Page 21
Note Purchase Agreement, the Series D Certificate of Designation, or the
Series E Certificate of Designation, as the case may be, and pursuant to
applicable securities laws.
(c) Except for (i) the Conversion Stock relating to the
Series D Preferred Stock, (ii) the issuance of Series E Preferred Stock and
the issuance of Series E Conversion Stock, (iii) the issuance, sale or grant
of rights to purchase (including options and warrants) aggregating up to
990,983 shares of Common Stock to key employees and directors of the Company
outstanding on the date hereof, (iv) warrants relating to an aggregate of
328,900 shares of Common Stock outstanding on the date hereof and (v) for
77,520 shares of Common Stock currently issuable upon conversion of the
Company's outstanding Series C Preferred Stock, the Company has not become
subject to, any commitment or obligation, either absolute or conditional, 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
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.
4.3 SUBSIDIARIES.
(a) SCHEDULE 4.3 sets forth a correct and complete list of:
(i) the name, number of shares, partnership interests or other equity
interests held, and percentage ownership by the Company in each corporation,
partnership, joint venture or other entity in which the Company has, directly
or indirectly, any equity interest in the capital stock thereof, any
partnership interest, or any other equity interest therein (individually a
"Subsidiary" and collectively "Subsidiaries".) Except as specifically set
forth in SCHEDULE 4.3, the Company owns of record and beneficially all of the
outstanding capital stock of each of the Subsidiaries free and clear of all
Liens. Each of the Subsidiaries is duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation, is
entitled to own, lease or operate the properties and assets it now owns,
leases or operates, and is qualified to do business, is in good standing and
has all required and appropriate licenses in each jurisdiction in which its
failure to obtain or maintain such qualification, good standing or licensing,
or group of the foregoing, would have a Material Adverse Effect on such
Subsidiary. The shares of capital stock of each Subsidiary shown in SCHEDULE
4.3 to be issued and outstanding have been validly authorized and issued and
are validly outstanding, fully paid and non-assessable. No Subsidiary holds
shares of its capital stock in its treasury, and there are not outstanding
(i) any options, warrants or other rights with respect to the capital stock
of any of the Subsidiaries, (ii) any securities convertible into or
exchangeable for shares of such stock or (iii) any other commitments of any
kind for the issuance of additional shares of capital stock or options,
warrants or other securities of
Page 22
any of them. The Company has provided or made available to the Investor
copies of the certificates of incorporation, articles of incorporation,
partnership agreements, limited liability company operating agreements, joint
venture agreements, or other governing documents with respect to each
Subsidiary.
(b) The Company's wholly-owned Subsidiary, EPIC/Alliance of
Texas, Inc., a Texas corporation, has purchased all partnership units
previously owned by any other Person in EPIC/Alliance of North Texas, Ltd., a
Texas limited partnership, and is currently the sole owner of all units of
such partnership. EPIC/Alliance of North Texas, Ltd., has been terminated by
operation of law in accordance with Texas law. Neither the Company nor any
Subsidiary is a party to any partnership or joint venture other than the
Georgia Magnetic Imaging Center Limited Partnership.
4.4 AUTHORIZATION.
(a) The Company has all corporate and other requisite
authority to execute, deliver and carry out and perform its obligations under
the terms of this Agreement and the other agreements referred to herein, and
all of the transactions contemplated hereunder and thereunder, including the
sale and issuance of the Securities. The execution and delivery of this
Agreement and the other agreements referred to herein, and the consummation
of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary action on the part of the Company and, except as
set forth herein, no other approval is required for the performance by the
Company of its obligations hereunder, or thereunder. This Agreement and the
other agreements referred to herein have been, and at Closing will be, duly
executed and delivered by the Company.
(b) This Agreement and the other agreements referred to
herein, when executed and delivered by the Company, will constitute valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
the rights and remedies of creditors, and general principles of equity
regardless of whether applied in a proceeding in equity or at law.
(c) The Board of Directors of the Company, at a meeting
duly called and held or by a unanimous written consent, has in light of and
subject to the terms and conditions set forth herein, (i) determined that
this Agreement, the other agreements referred to herein, and the transactions
contemplated hereby and thereby, taken together, are in the best interest of
the Company and its shareholders and (ii) approved this Agreement, the other
agreements referred to herein, and the transactions contemplated hereby and
thereby. All required notices to, and approvals and consents of, the
Company's shareholders for this Agreement and the other agreements referred
to herein, and the consummation of the transactions contemplated hereby and
thereby, have been validly given and obtained.
4.5 GOVERNMENTAL AND OTHER CONSENTS; NO VIOLATION. No consent,
Page 23
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any Governmental Authority or any
other Person is required on the part of the Company in connection with the
Company's valid execution, delivery or performance of this Agreement or the
other agreements referred to herein or the offer, sale or issuance of the
Securities, except as may be required under applicable state "blue sky" laws.
The execution, delivery and performance by the Company of this Agreement,
the issuance of the Purchased Stock and the other Securities, and the
consummation of the other transactions contemplated hereby, do not and will
not (a) violate any provision of the Company's Certificate of Incorporation
or Bylaws as currently in effect, (b) conflict with, result in a breach of,
or constitute (or, with the giving of notice or lapse of time or both, would
constitute) a default under, or, except for consents that have been obtained
and are in full force and effect, require the approval or consent of any
Person pursuant to, any Contractual Obligation of the Company, or (c) result
in the creation or imposition of any Lien upon any asset of the Company.
4.6 LITIGATION. There is no action, suit, claim,
arbitration, litigation, legal, administrative or other proceeding, or
investigation (by any Governmental Authority or otherwise) 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, other than disputes and claims arising in the ordinary course of the
Company's business that could not in the aggregate have a Material Adverse
Effect on the Company and its Subsidiaries. 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 Authority.
There is no action, suit, claim, arbitration, litigation, legal,
administrative or other proceeding, or investigation by the Company or any
Subsidiary currently pending or that the Company or any Subsidiary currently
intends to initiate. There are no judicial or administrative actions,
proceedings or investigations pending or, to the Company's Knowledge,
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 transactions contemplated by this Agreement or any of the
other agreements referred to herein or otherwise prevent the Company from
complying with the terms and provisions of this Agreement or any of such
other agreements.
4.7 FINANCIAL STATEMENTS AND REPORTS.
(a) The financial statements contained in the SEC
Reports (collectively, the "Financial Statements") have been prepared in
accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods indicated and with each other
(except that the Financial Statements may not contain all footnotes required
by GAAP) and fairly present the consolidated financial condition of the
Company and the Subsidiaries and the consolidated results of operations as of
such dates and for such periods indicated. Since September 30, 1996, there
has not been any material adverse change to the financial condition of the
Company or any Subsidiary as set forth in the Financial Statements. There
are no Liabilities required by GAAP to be disclosed in the Financial
Statements that are not disclosed in the Financial Statements. Except as
reflected in
Page 24
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 Company's accounting policies relating to revenue
recognition, reserves, capitalization expense, depreciation and amortization
are administered in accordance with GAAP. The general ledger, accounts
receivable, accounts payable, bank reconciliations and payroll records of the
Company have been maintained in the ordinary course and contain a correct and
complete record of the matters typically contained in records of such nature.
(b) SCHEDULE 4.7(b) lists all management letters and all
other letters (other than audit letters included in the SEC Documents)
delivered to the Company by 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 January 1, 1994.
(c) Since January 1, 1994, there has been no material
disagreement (within the meaning of Item 304(a)(1)(iv) of Regulation S-K
under the Securities Act of 1933, as amended (the "Securities Act")) between
the Company and its independent auditing firm(s) concerning any aspect of the
manner in which the Company has reported upon the financial condition and
results of operations of the business or assets of the Company since such
date, that has not been resolved to the satisfaction of the relevant
independent auditing firm.
4.8 PROPRIETARY INFORMATION. To the Company's Knowledge
(which for purposes hereof shall not include the knowledge of the applicable
officer, director or employee), none of the officers, directors or employees
of the Company or any of its Subsidiaries is in violation of any agreement
regarding proprietary information and inventions. To the Company's Knowledge
(which for purposes hereof shall not include the knowledge of the applicable
officer or employee), none of the officers or employees of the Company or any
of its Subsidiaries is in violation of any prior employment contract or
proprietary information agreement with any Person.
4.9 REGISTRATION RIGHTS. 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 may hereafter be issued, except as
contemplated hereby.
4.10 CONTRACTS.
(a) "Current Customer" means any Person from whom the
Company or any Subsidiary has recognized revenue since January 1, 1995
through the date hereof 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 January 1, 1996 no Current Customers of the
business have canceled or terminated their Contracts, or notified the Company
or any Subsidiary in writing or, to
Page 25
the Knowledge of the Company or any Subsidiary, orally, of their specific
intent to cancel or terminate their contract, except any such cancellations,
terminations or notifications that in the aggregate could not have a Material
Adverse Effect (taking into account revenue generated from replacement
customers) on the Company and its Subsidiaries.
(b) SCHEDULE 4.10(b) 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 $500,000 annually or $2,000,000 in the aggregate, 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 the officers, directors,
Affiliates or any Affiliate of the Company or any Subsidiary, on the other
hand (collectively, the "MATERIAL CONTRACTS"), excluding any such Material
Contracts that are contracts with Current Customers.
(c) The Company and the Subsidiaries have in all
material respects performed, and are now performing in all material respects,
the obligations under, and are not in default (or to the Company's Knowledge,
would by the lapse of time and/or the giving of notice or otherwise be in
default) in respect of, any of the Material Contracts. To the Company's
Knowledge, each of the Material Contracts is in full force and effect and is
a valid and enforceable obligation against the Company or a Subsidiary, as
applicable, and the other party thereto, in accordance with its terms.
4.11 ABSENCE OF CHANGES. Since January 1, 1996, except as
reflected in the Financial Statements or the SEC Documents, 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) incurred any indebtedness for money
borrowed other than in the ordinary course or any other Liabilities other
than in the ordinary course; (iii) made any loans or advances to any Person
(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, other than the sale, exchange or other disposition
of its equipment and services in the ordinary course of business consistent
with past practice; (v) incurred any change in the assets, Liabilities,
financial condition, operating results, prospects or business of the Company
from that reflected in the Financial Statements, except changes in the
ordinary course of business consistent with past practice that have not been,
in the aggregate, materially adverse; (vi) suffered any damage, destruction
or loss, whether or not covered by insurance, materially and adversely
affecting the assets, properties, financial condition, operating results,
prospects or business of the Company (as such business is presently conducted
and as it is proposed to be conducted); (vii) waived a valuable right or a
debt owed to it, except in the ordinary course of business consistent with
past practice; (viii) satisfied or discharged any Lien, claim or encumbrance
or payment of any obligation, except in the ordinary course of business
consistent with past practice and that is not material to the assets,
properties, financial
Page 26
condition, operating results, prospects or business of the Company or any
Subsidiary (as such business is presently conducted and as it is proposed to
be conducted); (ix) agreed to or made any material change or amendment to any
Material Contract, except in the ordinary course of business consistent with
past practice; (x) made any material change in any compensation arrangement
or agreement with any employee; (xi) permitted or allowed any of its assets
to be subjected to any material Lien, other than Liens 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;
(xiii) licensed, sold transferred, pledged, modified, disclosed, disposed of
or permitted to lapse any right to the use of any Intellectual Property
Right; (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, or sold,
transferred or leased any assets to, or entered into any agreement or
arrangement with, any of its Affiliates, except for directors' fees, and
employment compensation to officers; (xvi) made capital expenditures or
commitments therefor, other than such capital expenditures or commitments
made in the ordinary course consistent with past practice and not exceeding,
in the aggregate, Thirty Million Dollars ($30,000,000) for the period from
September 30, 1996 through the Closing Date; and (xvii) to the Company's
Knowledge, incurred or suffered any other event or condition of any character
that could reasonably be expected to result in a Material Adverse Effect to
the Company or any Subsidiary.
4.12 INTELLECTUAL PROPERTY. The Company and each of the
Subsidiaries owns or possesses adequate rights to use all material patents,
patent applications, trademarks, service marks, trade names, trademark
registrations, service xxxx registrations, copyrights, technology, software,
trade secrets, know-how and licenses necessary for the conduct of their
respective businesses and have no reason to believe that the conduct of their
respective businesses will conflict with, and have not received any notice of
any claim of conflict with, any such rights of others.
4.13 COMPLIANCE WITH OTHER INSTRUMENTS. Neither the Company
nor any Subsidiary is in violation or default of any provisions of its
Charter or Bylaws (the "CHARTER DOCUMENTS"), or of any provision of
Applicable Law. Neither the Company nor any Subsidiary is in violation or
default of any instrument, judgment, order, writ, decree or oral or written
contract or other agreement to which it is a party or by which it is bound,
except with respect to any such defaults which could not have a Material
Adverse Effect on the Company or the relevant Subsidiary, as the case may be.
The execution, delivery and performance of this Agreement and the other
agreements referred to in this Agreement, and the consummation of the
transactions contemplated hereby and thereby, will not result in any such
violation or be in conflict with any provision of the Charter Documents or
Applicable Law, or any instrument, judgment, order, writ, decree, contract or
other agreement, and will not be an event that results in the creation of any
Lien upon any assets of the Company or any Subsidiary or constitute a default
under or give rise to any right of termination, cancellation or acceleration
of, or to a loss of any benefit to which the Company or any Subsidiary is
entitled, under any contract or any license, franchise, permit or similar
authorization relating to the Company or any Subsidiary or by which its
business or assets may be
Page 27
bound.
4.14 COMPLIANCE WITH LAW; APPROVALS.
(a) The operations of the Company and its Affiliates
have been and will continue to be conducted in accordance with all Applicable
Laws, including, without limitation, all such laws, regulations, orders and
requirements promulgated by any Governmental Authority or relating to
consumer protection, equal opportunity, health care industry regulation,
third party reimbursement (including Medicare and Medicaid), environmental
protection, fire, zoning and building and occupational safety matters, except
for violations that individually or in the aggregate would not and, insofar
as may reasonably be foreseen, in the future will not, have a Material
Adverse Effect on the Company or any Subsidiary.
(b) Neither the Company nor any Affiliate has received
notice of any violation (or of any investigation, inspection, audit, or other
proceeding by any Governmental Authority involving allegations of any
violation ) of any Applicable Law, or is in material default with respect to
any Applicable Law, and to the best Knowledge of the Company and all
Affiliates, no investigation, inspection, audit, or other proceeding by any
Governmental Authority involving allegations of violation of any Applicable
Law is threatened or contemplated.
(c) Neither the Company nor any Affiliate has any
Knowledge of any proposed change in any Applicable Law that would materially
adversely affect the transactions contemplated by this Agreement or all or
any material part of the assets or business of the Company or any Affiliate.
(d) Each of the Company and its Affiliates has, and all
professional employees or agents of each of the Company and its Affiliates
have, all licenses, franchises, permits, authorizations, including
certificates of need, or approvals from all Governmental Authorities
("Approvals") required for the conduct of the business of each of the Company
and its Affiliates and the occupancy and operation, for its present uses, of
the real and personal property which each of the Company and its Affiliates
owns or leases, except where the failure to have such Approvals would not,
individually or in the aggregate, have a Material Adverse Effect on any of
the Company or any Affiliate, and neither the Company nor any Affiliate or
the professional employees or agents of either is in violation of any such
Approval or any terms or conditions thereof, except for such violations as
would not, individually or in the aggregate, have a Material Adverse Effect
on any of the Company or any Affiliate. Each of the Company and its
Affiliates has all Approvals required for the conduct of the business of each
of the Company and its Affiliates and the occupancy and operation, for its
present uses, of the real and personal property which each of the Company and
its Affiliates owns or leases, and neither the Company nor any Affiliate is
in violation of any such Approval or the terms or conditions thereof.
(e) SCHEDULE 4.14(e) sets forth a true and complete list
of all Approvals issued or granted to each of the Company and any Affiliate
(excluding any
Page 28
licenses granted to any natural person); such list contains a summary
description of each such item and, where applicable, specifies the date
issued, granted or applied for, the expiration date and the current status
thereof.
(f) All such Approvals are in full force and effect,
have been issued to and fully paid for by the holder thereof and, to the
Knowledge of each of the Company and its Affiliates, no suspension or
cancellation thereof has been threatened.
(g) No such Approvals will in any way be affected by, or
terminate or lapse by reason of, the transactions contemplated by this
Agreement.
4.15 TITLE TO ASSETS. The Company and the Subsidiaries have
good and valid title to or a valid leasehold interest in all of the material
tangible assets owned or leased by them, or otherwise used in or pertaining
to the business of the Company and the Subsidiaries as presently conducted,
including all material tangible assets reflected in the Company's most recent
balance sheet included in the Financial Statements and all material tangible
assets purchased or otherwise acquired by the Company or any Subsidiary since
the date of such balance sheet (except for properties and assets sold since
such date in the ordinary course consistent with past practice). None of
such material tangible assets is subject to any material Lien except for
Permitted Encumbrances.
4.16 PLANT, PROPERTY, AND EQUIPMENT. To the Company's
Knowledge, the Leased Real Property, and other plant, property, equipment,
leasehold improvements and other material tangible assets of the business,
conform in all material respects with Applicable Law; are structurally sound
with no material defects; are in good operating condition and repair
(ordinary wear and tear excepted); and are adequate in all material respects
for the purposes for which they are being used.
4.17 ACCOUNTS AND NOTES RECEIVABLE. Except to the extent of
applicable reserves for doubtful accounts and contract reserves shown on the
Company's most recent balance sheet included in the Financial Statements, all
of the accounts, notes and other receivables owed to the Company or any
Subsidiary as of the date hereof or thereafter acquired or arising prior to
the Closing Date, constitute, and as of the Closing Date will constitute,
valid and enforceable claims (subject, as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting creditors' rights, and, with respect to the remedy of specific
performance, equitable doctrines applicable thereto) arising from bona fide
transactions on the part of the Company and the Subsidiaries and, to the
Company's Knowledge, bona fide transactions for parties other than the
Company and the Subsidiary in the ordinary course, and there are no claims,
refusals to pay or other rights of set-off against any thereof (other than
ordinary course disputes that could not in the aggregate have a Material
Adverse Effect on the Company and its Subsidiaries, taken as a whole). None
of such accounts 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.
Page 29
4.18 INDEBTEDNESS. SCHEDULE 4.18 sets forth a true and
complete list of all indebtedness of the Company or any Subsidiary for
borrowed money as of March 1, 1997.
4.19 REAL PROPERTY.
(a) NO OWNED REAL PROPERTY. Neither the Company nor any
Subsidiary has or has ever had any fee or other direct or indirect ownership
interest in any real property.
(b) LEASED REAL PROPERTY AGREEMENTS. SCHEDULE 4.19(B)
sets forth a true and complete list of all Leased Real Property and a list of
all of the agreements (as amended) to which the Company or any Subsidiary is
a party relating thereto (the "Lease Agreements"). To the Company's
Knowledge, all the Lease Agreements are in full force and effect and are
valid and enforceable against the other parties thereto in accordance with
their terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
creditors' rights, and, with respect to the remedy of specific performance,
equitable doctrines applicable thereto). Neither the Company nor any
Subsidiary is in default under any of the Lease Agreements. To the Company's
Knowledge, no other Person party to the Lease Agreements is in default under
any of the Lease Agreements. There are no other agreements that concern any
right, title or interest in or to the Leased Real Property or grant to a
third party the right to occupy the premises used in the business, other than
Permitted Encumbrances. The Closing will not affect the rights to the
continued use and possession of the Leased Real Property on the terms and
conditions specified in the Lease Agreements for the purposes for which such
property is now used in the business.
(c) LEASES OF REAL PROPERTY TO OTHERS. To the Company's
Knowledge, no Leased Real Property is subject to any lease or other right of
use of possession by any Person other than the Company or a Subsidiary.
(d) LEGAL PROCEEDINGS AFFECTING PROPERTY. To the
Company's Knowledge, there is not: (i) any planned public improvement that
will result in any charge being levied or assessed against any Leased Real
Property or that would create any encumbrance upon such property, (ii) any
condemnation proceeding with respect to any Leased Real Property, (iii) any
proposal by a tax authority to change materially the assessed value or
assessment rates of any Leased Real Property, or (iv) any other claim, suit,
proceeding, order or demand of any Governmental Authority or any Persons that
could have a material adverse impact on the value, right to develop, use or
condition of any Leased Real Property.
(e) DISPUTES. There is no currently pending material
claim, dispute or controversy with respect to any of the Lease Agreements.
To the Company's Knowledge, no Person has raised any material claim, dispute
or controversy with respect to any of the Lease Agreements since January 1,
1995.
Page 30
4.20 EMPLOYEE PLANS AND ARRANGEMENTS.
(a) 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 shareholder, 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 transactions
contemplated by this Agreement, (i) will require any payment by the Company
or any consent or waiver from any shareholder, 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 shareholder,
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).
(b) SCHEDULE 4.20(B) sets forth all Employee Benefit
Plans and Benefit Arrangements of the Company and each Subsidiary that are
currently in effect.
(c) Neither the Company nor any of its ERISA Affiliates
sponsors or has sponsored, maintained, contributed to, or incurred an
obligation to contribute to, any Employee Pension Benefit Plan (whether or
not terminated).
(d) Neither the Company nor any of its ERISA Affiliates
sponsors or has sponsored, maintained, contributed to, or incurred an
obligation to contribute to any Multiemployer Plan or Multiple Employer Plan
(whether or not terminated).
(e) No agreement, commitment or obligation exists to
increase benefits under any Benefit Plan or to adopt any new Benefit Plan.
Further, no individual will accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Benefit Plan, including
the right to receive any parachute payment, as defined in Section 280G of the
Code, or become entitled to severance, termination allowance or similar
payments as a result of the transactions contemplated by this Agreement, and
the Company is not a party to any agreement or arrangement that could result
in the payment of any such benefits or payments.
(f) No Employee Benefit Plan has participated in,
engaged in or been a party to any Prohibited Transaction, and neither the
Company nor any of its ERISA Affiliates has had asserted against it any claim
for any excise tax or penalty imposed under ERISA or the Code with respect to
any Employee Benefit Plan nor, to the knowledge of the Company, is there a
basis for any such claim. No officer, director or employee of the Company or
any ERISA Affiliate has committed a material breach of any responsibility or
obligation imposed upon fiduciaries by Title I of ERISA
Page 31
with respect to any Employee Benefit Plan, with respect to which breach the
Company is or could be directly or indirectly liable.
(g) Other than routine uncontested claims for benefits,
there is no claim pending involving any Benefit Plan by any Person against
such plan or the Company or any ERISA Affiliate, nor, to the knowledge of the
Company, is any such claim threatened. There is no pending or to the
knowledge of the Company, threatened, Proceeding involving any Employee
Benefit Plan before the Internal Revenue Service, the United States
Department of Labor or any other Governmental Authority.
(h) There is no material violation of any reporting or
disclosure requirement imposed by ERISA or the Code with respect to any
Employee Benefit Plan.
(i) Each Benefit Plan has been maintained in all
material respects, by its terms and in operation, in accordance with both its
plan documents and with ERISA, the Code and all other Applicable Laws. The
Company and its ERISA Affiliates have made full and timely payment of all
amounts required to be contributed under the terms of each Benefit Plan and
Applicable Law or required to be paid as expenses or benefits under such
Benefit Plan, and has made adequate provision for reserves to satisfy
contributions and payments not yet made because they are not yet due under
the terms of the Benefit Plan or Applicable Law. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code is and has
always been so qualified, and either has received a favorable determination
letter with respect to such qualified status from the IRS or has filed a
request for such a determination letter with the IRS within the remedial
amendment period such that such determination of qualified status will apply
from and after the effective date of any such Employee Benefit Plan.
(j) With respect to any Group Health Plans maintained by
the Company or its ERISA Affiliates, whether or not for the benefit of the
Company's employees, the Company and its ERISA Affiliates have complied in
all material respects with the provisions of COBRA. 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.
(k) Except pursuant to the provisions of COBRA, neither
the Company nor any ERISA Affiliate maintains any Employee Benefit Plan that
provides benefits described in Section 3(1) of ERISA to any former employees
or retirees, or the beneficiaries of any of them, of the Company or its ERISA
Affiliates.
(l) The Company has made available to the Investor a
copy of (i) the three (3) most recently filed Federal Form 5500 series and
accountant's opinion, if applicable, for each Employee Benefit Plan other
than Multiemployer Plans. All information provided by the Company, as
applicable, to any individual in connection with the preparation of any such
opinion or report was true, correct and complete in all
Page 32
respects.
(m) Each Benefit 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 amendment or
termination.
(n) In connection with any Employee Pension Benefit
Plan currently maintained by the Company or any ERISA Affiliate, (i) there have
been no accumulated funding deficiencies (within the meaning of Code Section
412), whether or not waived, (ii) there have been no reportable events
(within the meaning of ERISA Section 4043(b)), and (iii) no circumstances
exist that would warrant a termination of any such plan by the Pension
Benefit Guaranty Corporation pursuant to ERISA Section 4042. No Employee
Pension Benefit Plan has been terminated within the last five years in other
than a standard termination under Section 4041(b) of ERISA and all
liabilities under such plans have been adequately and properly discharged.
4.21 EMPLOYEES.
(a) Neither the Company nor any Subsidiary has or
has ever had any employees represented by collective bargaining agents.
(b) The Company and each Subsidiary has complied in
all material respects with all Applicable Laws respecting employment and
employment practices, terms and conditions of employment, and wages and
hours. Neither the Company nor any Subsidiary has or could reasonably be
expected to have any material Liability to any former employee or individual
who provided services to the Company in a capacity other than as an employee
in circumstances where such Liability arises or would arise under the express
terms of a Benefit Plan. No charges of employment or labor law violations
exist or, to the Company's Knowledge, are threatened, before any Governmental
Authority concerning any current, prospective or former employees or
independent contractors of the Company or any Subsidiary, and no valid basis
exists for any such charge.
(c) There is no strike, labor dispute, work
slowdown or work stoppage actually pending or, to the Knowledge of the
Company, threatened, against the Company or any of its Subsidiaries or, to
the Knowledge of the Company, any of its key subcontractors or suppliers. No
collective bargaining representation petition is pending or, to the Knowledge
of the Company, threatened against the Company or any Subsidiary.
4.22 INSURANCE. Each of the Company and each Subsidiary
has in full force and effect and will maintain (i) insurance on its assets
and activities of a type customarily insured, covering property damage and
loss of income by fire or other casualty, in amounts customary for companies
similarly situated as the Company or the Subsidiary, as the case may be, and
(ii) insurance protection against all Liabilities, claims and risks against
which, and in such amounts as, are customary for companies similarly situated
as the Company to insure.
Page 33
4.23 ENVIRONMENTAL COMPLIANCE.
(a) The Company and each Subsidiary has obtained
all approvals, authorizations, certificates, consents, licenses, orders and
permits or other similar authorizations of any Governmental Authority, or
from any other Person, that are required under any Environmental Law and
relate to its business, its assets or its products. SCHEDULE 4.23(A) sets
forth (i) all permits, licenses and other authorizations issued under any
Environmental Law to the Company or any Subsidiary relating to its business,
its assets or its products and (ii) a description and good faith estimate by
the Company of the costs of all capital expenditures that may be necessary to
maintain or continue to be qualified for each such permit, license or other
authorization.
(b) The Company and each Subsidiary is in
compliance in all material respects with all terms and conditions of all
approvals, authorizations, certificates, consents, licenses, orders and
permits or other similar authorizations of any Governmental Authority (and
all other Persons) required under all Environmental Laws and used in its
business or that relate to its assets, and is also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, requirements, schedules and timetables required or imposed under
all Environmental Laws.
(c) There is no pending or, to the Company's
Knowledge, threatened, proceeding, citation or notice of violation under any
Environmental Law relating to the Company or any Subsidiary, or any of the
equipment, business or assets of the Company or any Subsidiary.
(d) There are no past or present events,
conditions, circumstances, activities, practices, incidents, actions,
omissions or plans that may interfere with or prevent continued compliance by
the Company or any Subsidiary with any Environmental Law, or that may give
rise to any Liability, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, study or investigation (1) under any
Environmental Law, (2) based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or
the emission, discharge, release or threatened release of any Hazardous
Material, or (3) resulting from exposure to workplace hazards.
(e) Neither the Company nor any Subsidiary is
required to make any capital or other expenditures to comply with any
Environmental Law nor is there any reasonable basis on which any Governmental
Authority could take any action that would require any such capital
expenditures.
4.24 NO UNDISCLOSED LIABILITIES. There are no
Liabilities of the Company or any Subsidiary required to be reflected on a
balance sheet prepared in accordance with GAAP except: (a) Liabilities
accrued or reserved on the Financial Statements; and (b) Liabilities incurred
in the ordinary course of business since the most recent Financial Statement
that are not individually or in the aggregate material to the
Page 34
Company or any Subsidiary.
4.25 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 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 income 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) There is no pending audit, examination or
investigation with respect to any Company Tax Returns, nor is there pending
any notice of the initiation thereof; there is no action, suit, proceeding
(administrative or court), claim, demand, deficiency or additional assessment
pending or, to the Knowledge of Company, threatened with respect to any
Company Tax Returns.
(e) 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 third party, and such withheld
Taxes have either been duly paid to the proper Governmental Authority or set
aside in accounts for such purpose.
(f) None of the Company and its Subsidiaries (A)
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) and (B) has any liability for the Taxes of any Person as defined in
Section 7701(a)(1) of the Code (other than the Company and its Subsidiaries)
under Treas. Reg. Section 1.1502-6 (or any similar provision of state, local,
or foreign tax), 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
Page 35
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 (determined under the
closing of the books method of allocation).
(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
Section 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 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) All Tax years (or periods) with respect to the
Federal income Tax Liabilities of the Company, and its assets or operations
are closed.
(m) Other than the elections made in the Tax
Returns provided to or made available to the Investor, 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.
(n) SCHEDULE 4.25 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 material change in any tax due from Company
or any Subsidiary to any Governmental Authority. 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 January 1, 1995 have been delivered or made available to
Investor.
4.26 NO RESEARCH GRANTS. Neither the Company nor any of
its Subsidiaries since inception has provided any research, educational or
study grants or other financial support of any kind to any hospital,
physician, or health care provider.
Page 36
4.27 CERTAIN REGULATORY MATTERS. Neither the Company nor
any of its Subsidiaries since inception has received notice that the Company
or any Subsidiary has been, or to the Company's knowledge has been, the
subject of any investigative proceeding before any federal or state
regulatory authority or the agent of any such authority, including without
limitation federal and state health authorities.
4.28 TRANSACTIONS WITH AFFILIATES. Except 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 agreements, understandings, indebtedness or
proposed transactions with the Company or any Subsidiary or is directly
interested in any Contract 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 firm or entity with which
the Company or any Subsidiary is affiliated or with which the Company or any
Subsidiary has a business relationship, or any entity that competes with the
Company or any Subsidiary, other than publicly traded companies that may
compete with the Company or any Subsidiary.
4.29 REPORTS; SEC DOCUMENTS. All material reports,
documents and notices required to be filed, maintained or furnished with or
to any Governmental Authority 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 the original filing, maintenance or furnishing
thereof). The Company has heretofore furnished to or made available to the
Investor complete copies of all registration statements, reports and proxy
statements, including amendments thereto, filed with the Securities and
Exchange Commission (the "SEC") since January 1, 1995 and prior to the date
of this Agreement (collectively, the "SEC Documents"). None of the SEC
Documents contains any untrue statement of a material fact or omits to state
a material fact necessary to make the statements contained therein not
misleading.
4.30 DISCLOSURE. Neither this Agreement nor the other
agreements referred to in this Agreement nor any other statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which
they are made, not misleading.
4.31 BROKERS. Neither the Company nor any Subsidiary has
dealt with, or incurred liability for a fee to, any finder, broker,
investment banker or financial advisor in connection with any of the
transactions contemplated by this Agreement or the negotiations looking
toward the consummation of such transactions.
Page 37
4.32 CERTAIN ADDITIONAL REGULATORY MATTERS. Neither the
Company nor any Affiliate, nor the officers, directors, employees or agents
of any of the Company or any Affiliate, and none of the Persons who provide
professional services under agreements with any of the Company or any
Affiliate as agents of such entities have engaged in any activities which are
prohibited, or are cause for civil penalties or mandatory or permissive
exclusion from Medicare or Medicaid, 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
Affiliates 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 and 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 (iii) in return for, or to induce, the purchase,
lease, or order, or the arranging for or recommending of the purchase, lease,
or order, of any good, facility, service, or item for which payment may be
made in whole or in 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,
Page 38
Medicare, Medicaid or any other State Health Care Program certification or
any Federal Health Care Program certification, or (ii) information required
to be provided under Section 1124(A) of the Social Security Act ("SSA") (42
U.S.C. Section 1320a-3).
4.33 MEDICARE/MEDICAID PARTICIPATION. Neither the
Company nor any other Person who after the Closing will have a direct or
indirect ownership interest (as those terms are defined in 42 C.F.R. Section
1001.1001(a)(2)) in the Company or any Affiliate of 5% or more (other than
Investor), 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 Affiliate (other than Investor), or who will be an officer,
director, agent (as defined in 42 C.F.R. Section 1001.1001(a)(2)), or
managing employee (as defined in SSA Section 1126(b) or any regulations
promulgated thereunder) of the Company or any Affiliate and (ii) to the best
Knowledge of the Company and any Affiliate, no Person or entity with any
relationship with such entity (including without limitation a parent company
or shareholder of, or partner in an Affiliate) who after the Closing will
have an indirect ownership interest (as that term is defined in 42 C.F.R.
Section 1001.1001(a)(2)) in the Company or any Affiliate of 5% or more (other
than Investor): (1) has had a civil monetary penalty assessed against it
under Section 1128A of the SSA or any regulations promulgated thereunder; (2)
has been excluded from participation under the Medicare program or a state
health care program as defined in SSA 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 (3) 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 or any State Health Care Program or any
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.
Page 39
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. The
Investor represents and warrants to the Company as follows:
5.1 ACCREDITED INVESTOR. The Investor is an "accredited
investor" as defined by the SEC's Rule 501 under the Securities Act.
5.2 INVESTMENT INTENT. The Investor is acquiring the
Purchased Stock , and will acquire the other Securities, as applicable, for
its own account or one of its affiliates, and not with a present view to, or
for sale in connection with any, distribution thereof, provided that the
disposition of the Investor's property shall at all times be and remain
within its control.
5.3 CERTAIN SECURITIES LAW ISSUES. The Investor
understands that the shares of Purchased Stock and the other Securities are
or will be "restricted securities" under the federal securities laws inasmuch
as they are being acquired from the Company in a transaction not involving a
public offering and that under such laws and applicable regulations such
securities may be resold without registration under the Securities Act only
in certain limited circumstances.
5.4 AUTHORIZATION. All corporate action on the part of
the Investor necessary for the authorization, execution, delivery and
performance by the Investor of this Agreement and the other agreements
referred to in this Agreement, the purchase of the shares of Purchased Stock,
and the performance of all of the Investor's obligations hereunder and
thereunder have been taken or will be taken prior to the Closing. This
Agreement, when executed and delivered by the Investor, will constitute a
valid and binding obligation of the Investor, enforceable against the
Investor in accordance with its terms, subject to bankruptcy, insolvency,
reorganization, moratorium and other laws of general application affecting
the rights and remedies of creditors, and general principles of equity
regardless of whether applied in a proceeding in equity or at law. This
Agreement and the other agreements referred to herein have been, and at
Closing will be, duly executed and delivered by the Investor.
5.5 BROKERS. The Investor has not dealt with, or
incurred Liability for a fee to, any finder, broker, investment banker or
financial advisor in connection with any of the transactions contemplated by
this Agreement or the negotiations looking toward the consummation of such
transactions.
6. CONDITIONS TO INVESTOR'S OBLIGATIONS AT CLOSING. The
obligations of the Investor to purchase and pay for the shares of Purchased
Stock and the other obligations of the Investor under this Agreement are
subject to the fulfillment at or prior to the Closing of the following
conditions, any of which may be waived in writing in whole or in part by the
Investor:
6.1 REPRESENTATIONS AND WARRANTIES. On the date of the
Closing, the representations and warranties of the Company contained in
Section 4 shall be true and correct in all respects with the same force and
effect as though such
Page 40
representations and warranties had been made at and as of the time of
Closing, except to the extent that any changes therein are specifically
contemplated by this Agreement.
6.2 PERFORMANCE. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it at or
prior to the Closing.
6.3 NO INJUNCTION. There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits consummation of the transactions contemplated
hereby.
6.4 QUALIFICATIONS; LEGAL INVESTMENT. All
authorizations, approvals, or permits, if any, of any Governmental Authority
or any other Person that are required in connection with the lawful sale and
issuance of the shares of the Purchased Stock and the consummation of the
transactions contemplated by this Agreement shall have been duly obtained and
shall be effective on and as of the Closing. No stop order or other order
enjoining the sale of the shares of the Purchased Stock or the proposed
issuance of the Conversion Stock relating thereto shall have been issued and
no proceedings for such purpose shall be pending or, to the knowledge of the
Company and the Investor, threatened by the SEC, the California Commissioner
of Corporations or any commissioner of corporations or similar officer of any
state having jurisdiction over this transaction. At the time of the Closing,
the sale and issuance of the shares of Purchased Stock and the Conversion
Stock relating thereto shall be legally permitted by all laws and regulations
to which the Company and the Investor are subject.
6.5 COMPLETION OF REVIEW OF THE COMPANY. The Investor
shall have completed and been satisfied in its sole discretion with its
review of the business, operations, properties, assets, liabilities,
prospects and condition, financial and otherwise, of the Company and the
Subsidiaries.
6.6 CERTIFICATES OF DESIGNATION. The Company shall have
adopted and duly filed with the Secretary of State of Delaware the Series D
Certificate of Designation in the form set forth in EXHIBIT C to this
Agreement. The Company shall adopt and duly file with the Secretary of State
of Delaware the Series E Certificate of Designation in the form set forth in
EXHIBIT D to this Agreement.
6.7 CLOSING DOCUMENTS. The Company shall have delivered
to the Investor, unless waived in writing by the Investor:
(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
Page 41
Closing and a copy (certified by the Secretary of the Company) of the
Company's Bylaws as amended through the date of the Closing; and
(c) an executed copy of the Restated Note;
(d) an executed copy of the Eleventh Amendment;
(e) such other documents relating to the
transactions contemplated by this Agreement as the Investor or the Investor's
counsel may reasonably request.
6.9 OPINIONS OF COMPANY CORPORATE AND REGULATORY
COUNSEL. The Investor shall have received the opinion of Irell & Xxxxxxx
LLP, corporate counsel to the Company, in the form set forth as EXHIBIT E
hereto. The Investor shall have received the opinions of Xxxx, Xxxxx Xxxx &
XxXxxx and Xxxxxxxx, Xxxxxx & Xxxxxxxx, regulatory counsel to the Company, in
the forms set forth respectively as EXHIBIT F-1 and EXHIBIT F-2 hereto.
6.10 MATERIAL ADVERSE CHANGES. Since the date of the
Bridge Loan Agreement, there shall not have been any material adverse change
in the Company or any Subsidiary, and no event (including a breach of any
agreement to which the Company or any Subsidiary is a party) shall have
occurred, that may, in the sole judgment of the Investor, result in such a
material adverse change.
7. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The
obligations of the Company under this Agreement are subject to the
fulfillment at or prior to the Closing of the following conditions, any of
which may be waived in writing in whole or in part by the Company:
7.1 REPRESENTATIONS AND WARRANTIES. On the date of the
Closing, the representations and warranties of the Investor contained in
Section 5 shall be true and correct in all respects with the same force and
effect as though such representations and warranties had been made at and as
of the time of Closing, except to the extent that any changes therein are
specifically contemplated by this Agreement.
7.2 PERFORMANCE. The Investor shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by such Investor
on or before the Closing, including payment to the Company of the Purchase
Price set forth in Section 2.2(a) of this Agreement.
7.3 NO INJUNCTION. There shall not be in effect any
order, decree or injunction of a court or agency of competent jurisdiction
which enjoins or prohibits consummation of the transactions contemplated
hereby.
7.4 QUALIFICATIONS; LEGAL INVESTMENT. All
authorizations, approvals, or permits, if any, of any Governmental Authority
that are required in connection with the lawful sale and issuance of the
shares of Purchased Stock and
Page 42
consummation of the transactions contemplated by this Agreement and the other
agreements referred to herein shall have been duly obtained and shall be
effective on and as of the Closing. No stop order or other order enjoining
the sale of the shares of Purchased Stock or the proposed issuance of the
Conversion Stock relating thereto shall have been issued and no proceedings
for such purpose shall be pending or, to the knowledge of the Company or the
Investor, threatened by the SEC, the California Commissioner of Corporations
or any commissioner of corporations or similar officer of any state having
jurisdiction over this transaction. At the time of the Closing, the sale and
issuance of the shares of the Purchased Stock and the Conversion Stock
relating thereto shall be legally permitted by all laws and regulations to
which the Company and the Investor are subject.
8. COVENANTS.
8.1 BEST EFFORTS. Subject to the terms and conditions
herein rpovided, the parties agree to use their best commercially reasonable
efforts to cause all actions, and to do, or cause to be done, all things
necessary, proper or advisable under Applicable Law to consummate and make
effective the transactions contemplated by this Agreement.
8.2 CONVERSION STOCK. The Company shall at all times keep
available out of its authorized but unissued shares of Common Stock, for the
purpose of effecting the conversion of the shares of Series D Preferred Stock
and the shares of Series E Preferred Stock, such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of the
shares of Series D Preferred Stock and Series E Preferred Stock from time to
time outstanding. If at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of the then
outstanding shares of Series D Preferred Stock and Series E Preferred Stock, the
Company shall forthwith take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
8.3 RESTRICTIVE AGREEMENTS PROHIBITED. The Company
shall not become a party to any agreement which by its terms violates the
terms of this Agreement, the Restated Note, the Note Purchase Agreement (as
defined below), the terms of the Series D Preferred Stock as set forth in the
Series D Certificate of Designation, or the terms of the Series E Preferred
Stock as set forth in the Series E Certificate of Designation.
8.4 COMPLIANCE WITH ELEVENTH AMENDMENT AND RESTATED
NOTE. The Company will comply in all respects with the terms of the Note
Purchase Agreement dated as of April 14, 1989, as amended to the date hereof
(including without limitation as amended by the Eleventh Amendment) (the
"Note Purchase Agreement") and the Restated Note. Without limiting the
foregoing, upon a request by Investor to convert all or a portion of the
principal amount of indebtedness owing to the Investor under the Restated
Note to Series E Preferred Stock (under the terms and conditions set forth in
the Eleventh Amendment, the Restated Note, and the Series E Certificate of
Page 43
Designation), the Company promptly will issue the applicable amount of such
Series E Preferred Stock to the Investor.
8.5 CERTAIN REGULATORY MATTERS.
(a) The operations of the Company and its
Affiliates will be conducted in accordance with all Applicable Laws,
including, without limitation, all such laws, regulations, orders and
requirements promulgated by any Governmental Authority or relating to
consumer protection, equal opportunity, health care industry regulation,
third party reimbursement (including Medicare and Medicaid), environmental
protection, fire, zoning and building and occupational safety matters, except
for violations that individually or in the aggregate would not and, insofar
as may reasonably be foreseen, in the future will not, have a Material
Adverse Effect on the Company or any Subsidiary.
(b) Without limiting the generality of the
foregoing, the operations of the Company and its Affiliates will be conducted
in accordance with all laws, regulations, orders and requirements relating to
health care industry regulation and third party reimbursement (including
Medicare and Medicaid).
(c) Without limiting the generality of the
foregoing, the Company and all Affiliates shall comply in all material
respects with all 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, and including without
limitation preparation and submission of claims for reimbursement. Nothing
in this Section 8.5 shall be construed as or is intended to create any third
party beneficiaries.
(d) The Company shall provide written notice to the
Investor within ten (10) Business Days after acquiring any partnership
interest, limited liability company interest, or other equity interest in any
Subsidiary not listed on Schedule 4.3 hereto. Such notice shall contain a
description of the Subsidiary and the equity interest acquired by the Company
in such Subsidiary. Nothing in this Section 8.5(d) shall be construed to
derogate from any other obligations of the Company set forth in this
Agreement, including without limitation the restrictions on Investments set
forth in Section 8.10 hereof.
8.6 FINANCIAL STATEMENTS AND INFORMATION. The Company
will furnish to the Investor and to any of its Affiliates, so long as the
Investor or such Affiliates shall hold any Securities, and to each other
institutional holder of any Securities so long as such Securities remain
Registrable Securities (such a holder in any such case being hereinafter
called an "Eligible Holder"):
(a) Quarterly Financial Statements. As soon as
available and in any event within 45 days after the end of each of the first
three fiscal quarterly periods of each Fiscal Year of the Company, the
Company's quarterly report on Form 10-Q as filed with the Securities and
Exchange Commission.
Page 44
(b) Annual Financial Statements. As soon as
available and in any event within 120 days after the end of each Fiscal Year
of the Company, the Company's Annual Report on Form 10-K and related Annual
Report to Shareholders as filed with the Securities and Exchange Commission.
(c) SEC Reports; Mailings to Shareholders. 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 Securities and
Exchange Commission or any national securities exchange. In addition, (i) at
the same time that the Company makes a mailing to its shareholders generally
and (ii) promptly after the Company issues a press release, the Company shall
provide a copy of the same to each Eligible Holder.
(d) Notice of Default or Claimed Default. Promptly
upon (and in any event within five (5) Business Days of) any officer of the
Company obtaining knowledge of any condition or event which constitutes an
Event of Default or Default under the Company's Senior Notes due 2003 (the
"Senior Secured Notes"), or that the holder of any such Senior Secured Note
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 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 or event or condition of the type referred to in Section 12.01(e) of
the Note Purchase Agreement, an officers' 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.
(e) Merger. At least five (5) Business Days prior
to any merger or consolidation by the Company or any Subsidiary, notice of
such merger or consolidation, together with an officers' certificate to the
effect that such merger or consolidation will be done in compliance with the
provisions of Section 8.7 hereof.
(f) 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.
(g) 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 Investor or
any such Eligible Holder may from time to time reasonably request.
The Company will furnish to each Eligible Holder, at
the time it furnishes each set of financial statements pursuant to paragraph
(a) or (b) above, an
Page 45
officers' certificate to the effect that no Event of Default under the Note
Purchase Agreement 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 describing the action that the
Company has taken and proposes to take with respect thereto).
The Company will keep at its principal executive
office a true copy of this Agreement (as at the time in effect), and cause
the same to be available for inspection at said office during normal business
hours by the Investor, any Eligible Holder, or any prospective purchaser of
any of the Securities.
8.7 MERGER. The Company covenants and agrees that so
long as, and at any time that, (i) any shares of Preferred Stock are held by
the Investor or any Eligible Holder, and (ii) the IRR Trigger Date has not
occurred, the Company:
(a) will not consolidate with or merge into any
Person, or permit any other Person to merge into it, or sell, lease, transfer
or otherwise dispose of all or substantially all of its assets, unless, in
any such case, the following conditions shall be fulfilled:
(i) such successor Person (if not the Company) or the Person
purchasing or otherwise acquiring all or substantially all of
such assets shall be a corporation incorporated within the United
States of America;
(ii) the obligations of the Company under this Agreement shall be
expressly assumed by such successor corporation (if not the
Company) or the Person purchasing or otherwise acquiring all or
substantially all of such assets;
(iii) immediately after giving effect to such consolidation
or merger or sale or other disposition of assets (and the
assumption provided for in clause (ii) above), no Default or
Event of Default shall have occurred and be continuing with
respect to any Funded Debt;
(iv) immediately after giving effect to such consolidation or
merger or sale or other disposition of assets, such successor
corporation (whether or not the Company) or the Person purchasing
or otherwise acquiring all or substantially all of such assets
could incur additional Indebtedness in compliance with
Section 8.9 hereof; and
(v) the Net Worth of the surviving entity of such consolidation
or merger, or other successor to the Company pursuant hereto, or
the Person purchasing or otherwise acquiring all or substantially
all of such assets on a pro forma basis after giving effect to
such transaction is not less than the Net Worth of the Company
Page 46
immediately preceding the transaction.
(b) will not permit any Majority-Owned Subsidiary
to consolidate with or merge into any other Person (other than the Company),
or permit any other Person to merge into a Majority-Owned Subsidiary, unless
the following conditions shall be fulfilled:
(i) prior to and immediately after giving effect to such
consolidation or merger, no Default or Event of Default shall
have occurred and be continuing under the Note Purchase
Agreement;
(ii) immediately after giving effect to such consolidation
or merger, the surviving entity of such consolidation or merger
could incur additional funded Indebtedness in compliance with
Section 8.9 hereof;
(iii) if the surviving corporation is a Majority-Owned
Subsidiary, the Net Worth of the surviving entity of such
consolidation or merger, on a pro forma basis after giving effect
to such transaction, is not less than the Net Worth of the
Majority-Owned Subsidiary immediately preceding the transaction;
and
(iv) either the surviving entity is a Majority-Owned Subsidiary,
or, if the surviving entity is not a Majority-Owned Subsidiary,
such merger shall be treated as a sale of stock of such
Majority-Owned Subsidiary and each and every condition required to be
satisfied in connection with a sale by the Company of the capital
stock of a Majority-Owned Subsidiary as an entirety set out in
Section 8.13 hereof shall be satisfied.
8.8. LIMITATIONS ON LIENS. The Company covenants and
agrees that so long as, and at any time that, (i) any shares of Preferred
Stock are held by the Investor or any Eligible Holder, and (ii) the IRR
Trigger Date has not occurred, the Company will not, and will not permit any
Majority-Owned Subsidiary to, cause, or incur or suffer to be incurred, any
Lien on its or their property or assets (including any document or instrument
in respect of goods or accounts receivable) of the Company or any
Majority-Owned Subsidiary, whether now owned or held or hereafter acquired,
or any income or profits therefrom, except:
(a) Permitted Encumbrances;
(b) any Lien existing on property of a Person
immediately prior to its being consolidated with or merged into the Company
or a Majority-Owned Subsidiary or its becoming a Majority-Owned Subsidiary,
or any Lien existing on any property acquired by the Company or any
Subsidiary at the time such property is so acquired (whether or not the
Indebtedness secured thereby shall have been assumed) , PROVIDED, that (x) no
such Lien shall have been created or assumed in contemplation of such
consolidation or merger or such Person's becoming a Majority-Owned Subsidiary
Page 47
or such acquisition of property, and (y) each such Lien shall at all times be
confined solely to the item or items of property so acquired, and any
property that is an improvement thereto or an upgrade thereof or acquired for
specific use in connection therewith;
(c) Liens on accounts receivable of the Company and
any Majority-Owned Subsidiary and related leases or use contracts with
customers and proceeds of the foregoing required to be incurred in order to
secure Indebtedness permitted to be incurred under Section 8.9(a) hereof;
(d) Liens in favor of the Collateral Agent on any
assets in the Collateral Pool, and such substitutions therefor or
replacements thereof as contemplated in the Note Purchase Agreement;
(e) Subject to the limitations set forth in Section
8.9(d) hereof, any Lien created to secure any Indebtedness incurred or
assumed to pay all or any part of the purchase price of property acquired by
the Company or a Majority-Owned Subsidiary after December 31, 1994 (or
created to secure Indebtedness incurred to finance equipment pursuant to
Section 8.9(d) hereof); PROVIDED, that (i) any such Lien shall be confined
solely to the item or items of property so acquired or currently owned (the
"Financed Equipment") and any property that is an improvement to or upgrade
of or acquired for specific use in connection with such Financed Equipment;
PROVIDED, HOWEVER, that in the case of an MRI Unit or a CT Unit
(collectively, "Units") currently owned by the Company or a Majority-Owned
Subsidiary that is, at the time of acquisition of a newly-acquired Unit,
subject to a Lien in favor of the same secured party financing the purchase
price of the newly-acquired Unit, such Lien securing the Indebtedness
relating to the newly acquired Unit may extend to the currently-owned Unit
and such Lien securing the Indebtedness relating to the currently-owned Unit
may extend to the newly-acquired Unit; PROVIDED, FURTHER, that
notwithstanding the immediately preceding proviso no Lien under this Section
8.8(e) shall extend to any Unit as to which the purchase price is paid in
full and there is outstanding no Indebtedness incurred to finance such
purchase price, it being understood that the cross-collateralization
permitted by the immediately preceding proviso shall immediately cease and
terminate as to any Unit upon payment of the purchase price (or related
purchase money Indebtedness) of such Unit; and (ii) in the case of
newly-acquired Financed Equipment, any such Lien shall be created within six
(6) months after the acquisition thereof;
(f) Liens on property or assets of any
Majority-Owned Subsidiary to secure Debt For Money Borrowed of a
Majority-Owned Subsidiary to the Company or to another Majority-Owned
Subsidiary in existence on the Seventh Amendment Effective Date;
(g) Liens securing Indebtedness of the Company and
its Majority-Owned Subsidiaries existing on the Seventh Amendment Effective
Date;
(h) Additional Liens on property of the Company or any
Page 48
Majority-Owned Subsidiary to secure Indebtedness permitted by Section 8.9(f)
hereof;
(i) Subject to the limitations set forth in Section
8.9(d) hereof, any Lien created to secure any Indebtedness incurred or
assumed after the Seventh Amendment Effective Date to pay all or any part of
the purchase price of an improvement to or upgrade of a Unit owned by the
Company or a Majority-Owned Subsidiary, PROVIDED that (i) any such Lien shall
be confined solely to the improved or upgraded Unit subject to such Lien;
PROVIDED, HOWEVER, that in the case of a Unit owned by the Company or a
Majority-Owned Subsidiary that is, at the time of acquisition of an
improvement or upgrade to a Unit, already subject to a Lien in favor of the
same secured party financing the purchase price of such improvement or
upgrade, such Lien securing the Indebtedness relating to the newly-improved
or upgraded Unit may extend to the Unit already owned and such Lien securing
the Indebtedness relating to the Unit already owned may extend to the
newly-improved Unit; PROVIDED, FURTHER, that notwithstanding the immediately
preceding proviso no such Lien shall extend to any Unit as to which (A) the
purchase price thereof (and of any improvement thereto or upgrade thereof) is
paid in full and (B) there is outstanding no Indebtedness incurred to finance
such purchase price, it being understood that the cross-collateralization
permitted by the immediately preceding proviso shall immediately cease and
terminate upon payment of the purchase price (or related purchase money
Indebtedness) of each Unit and any improvement to or upgrade thereof, and
(ii) any such Lien shall be created within six months after the completion or
installation of such improvement or upgrade;
(j) Any Lien created to secure Indebtedness incurred
to finance equipment pursuant to the terms of Section 8.9(d) hereof; and
(k) Any extension, renewal or replacement (or
successive extensions, renewals or replacements), in whole or in part, of (a)
through (j) above, so long as the outstanding principal amount of the
Indebtedness secured by such Lien at the time of such extension, renewal or
replacement is not increased, nor the periodic debt service payment
(principal and interest) payable with respect thereto increased, and the
renewed or extended-Lien does not cover any property which is not covered by
the existing Lien renewed or extended thereby.
8.9. INDEBTEDNESS. The Company covenants and agrees that
so long as, and at any time that, (i) any shares of Preferred Stock are held
by the Investor or any Eligible Holder, and (ii) the IRR Trigger Date has not
occurred, the Company will not create, incur or assume or permit to exist,
and will not permit any Majority-Owned Subsidiary to create, incur or assume
or permit to exist or remain liable with respect to Indebtedness, other than
the following:
(a) The Company may become and remain liable with
respect to Indebtedness for working capital purposes under the Working
Capital Facility as provided for in Section 9.06 of the Note Purchase
Agreement or any renewal, extension or replacement thereof, provided that the
indebtedness thereunder does not at any time exceed 75% of the net accounts
receivable of the Company (determined in accordance with GAAP) and the terms
and conditions thereof are not, in the aggregate,
Page 49
materially more burdensome than under the preexisting Working Capital
Facility and reflect current market conditions;
(b) The Company may become and remain liable with
respect to Indebtedness evidenced by the Senior Secured Notes; and any
Majority-Owned Subsidiary may become and remain liable with respect to
Indebtedness evidenced by a guaranty thereof (each, a "Guaranty");
(c) The Company or any Majority-Owned Subsidiary,
as appropriate, may remain liable with respect to any Indebtedness in
existence on the Seventh Amendment Effective Date;
(d) Subject to the limitations on incurrence of
Capital Expenditures set forth in Section 8.11 hereof, the Company or any
Majority-Owned Subsidiary may become and remain liable with respect to
Indebtedness incurred to acquire equipment (including CT Scanners and MRI
Units and related additions, parts and improvements);
(e) Any Majority-Owned Subsidiary may become and
remain liable with respect for Debt for Money Borrowed of such Majority-Owned
Subsidiary owing to the Company or to a Majority-Owned Subsidiary consisting
of (i) Indebtedness arising out of an Investment by the Company or such
Majority-Owned Subsidiary as permitted by Section 8.10(a) through (c) or (ii)
intercompany operating advances incurred in the ordinary course of business;
(f) In addition to (a) through (e) above, the
Company or any Majority-Owned Subsidiary may incur and remain liable with
respect to other Indebtedness not to exceed an aggregate amount of $5,000,000
at any time outstanding; and
(g) Indebtedness which is a renewal, extension or
replacement of existing Indebtedness permitted under this Section 8.9;
provided that the principal amount of the Indebtedness is less than or equal
to the principal amount outstanding immediately prior to such renewal,
extension or replacement and that the periodic debt payment with respect
thereto is less than or equal to the periodic debt payment currently payable
with respect to such Indebtedness.
8.10 INVESTMENTS. The Company covenants and agrees that
so long as, and at any time that, (i) any shares of Preferred Stock are held
by the Investor or any Eligible Holder, and (ii) the IRR Trigger Date has not
occurred, the Company will not, and will not permit any of its Majority-Owned
Subsidiaries to, make any Investments other than the following: (a) capital
contributions and funded loans to any Majority-Owned Subsidiary, and any
partnership or other joint venture (including a corporate joint venture);
PROVIDED that the aggregate outstanding amount of all Investments made
pursuant to this clause (a) does not exceed $5,000,000 at any time; (b) loans
and advances to employees in the ordinary course of business for a proper
corporate purpose not to exceed $250,000 in the aggregate at any time
outstanding
Page 50
(excluding notes received from option holders in payment of the exercise
price of stock options issued pursuant to a stock option plan of the Company
approved by the Company's Board of Directors); (c) Investments with respect
to hedging the Company's exposure to foreign currency fluctuations to the
extent that the Company has sales denominated in such foreign currency; (d)
Investments in Interest Rate Protection Agreements; (e) short-term operating
advances described in Section 8.9(f)(ii), to the extent such advances
constitute Investments; and (f) Investments where the consideration paid by
the Company consists of equity securities of the Company, to the extent that
consideration was or is paid in that form. For purposes of computing the
amount subject to the $5,000,000 limitation in clause (a) above, (I) there
shall be excluded Investments where the consideration paid by the Company
consists of equity securities of the Company, to the extent that
consideration was or is paid in that form, and (II) there shall be included
Investments made only from and after the Effective Date of the Tenth Amendment
to the Note Purchase Agreement, and not Investments made prior thereto.
8.11 CAPITAL EXPENDITURES. The Company covenants and
agrees that so long as, and at any time that, (i) any shares of Preferred
Stock are held by the Investor or any Eligible Holder, and (ii) the IRR
Trigger Date has not occurred, the Company will not, and will not permit any
of its Majority-Owned Subsidiaries to, make Capital Expenditures, unless,
after including such Capital Expenditures in the aggregate amount of Capital
Expenditures incurred by the Company and its Majority-Owned Subsidiaries
during the current Fiscal Year, the aggregate Capital Expenditures for such
Fiscal Year do not exceed an amount equal to $30,000,000 plus the Capital
Expenditure Adjustment Amount; PROVIDED, HOWEVER, that the Company or any of
its Majority-Owned Subsidiaries may dispose of equipment and within 180 days
purchase replacement equipment with only the net incremental amount being
deemed to be a Capital Expenditure; PROVIDED, FURTHER, that to the extent the
Company receives credit against the purchase price of newly-acquired
equipment as a result of a trade-in of currently-owned equipment, the amount
of such credit shall not be included in determining the amount of Capital
Expenditures permitted to be incurred hereunder; and PROVIDED, FURTHER, that
if the amount of permitted Capital Expenditures for any Fiscal Year is not
fully utilized, then the unutilized portion (up to 50% of the permitted
amount for such Fiscal Year) may be carried forward and made in the following
Fiscal Year, in addition to the amount otherwise permitted for such following
Fiscal Year.
For purposes of this Section 8.11 the incurrence of
a Capital Expenditure shall be deemed to have occurred when the Company (or
any of its Majority-Owned Subsidiaries) enters into a binding commitment to
purchase the applicable equipment as evidenced by a written agreement or
accepted purchase order between the Company and the manufacturer or seller of
such equipment.
8.12 TRANSACTIONS WITH AFFILIATES. The Company covenants
and agrees that so long as, and at any time that, any shares of Preferred
Stock are held by the Investor or any Eligible Holder, the Company will not,
and will not permit any of its Majority-Owned Subsidiaries to, directly or
indirectly, engage in any transaction with any Affiliate of the Company,
including, without limitation, the purchase, sale or exchange of
Page 51
assets or the rendering of any service, except in the ordinary course of
business and pursuant to the reasonable requirements of the Company's or such
Majority-Owned Subsidiary's business and upon fair and reasonable terms that
are no less favorable to the company or such Majority-Owned Subsidiary, as
the case may be, than those which might be obtained in an arm's-length
transaction at the time from Persons which are not such an Affiliate.
8.13 LIMITATION ON DISPOSITION OF ASSETS. The Company
covenants and agrees that so long as, and at any time that, (i) any shares of
Preferred Stock are held by the Investor or any Eligible Holder, and (ii) the
IRR Trigger Date has not occurred, other than as permitted and subject to the
limitations set forth in Section 8.7 through 8.10 hereof, the Company will
not, and will not permit any of its Majority-Owned Subsidiaries to, directly
or indirectly, sell, lease, transfer or otherwise dispose of (other than in
the ordinary course of business) any of its properties unless (i) after
giving effect to any such sale, lease, transfer or other disposition by the
Company or any Majority-Owned Subsidiary, the aggregate net book value of the
properties involved in such dispositions during any Fiscal Year of the
Company does not exceed $2,000,000 and in the aggregate at any time after the
Effective Date of the Tenth Amendment does not exceed $4,000,000 and (ii)
prior to and after giving effect to any such sale, lease, transfer or other
disposition by the Company or any Majority-Owned Subsidiary, no Default or
Event of Default has occurred or is continuing; PROVIDED that the foregoing
restrictions do not apply to a transfer of properties by a Majority-Owned
Subsidiary to the Company.
Notwithstanding the foregoing, the Company or a Majority-Owned
Subsidiary may make any such disposition and the properties involved in any
such disposition shall be excluded from the foregoing computation set forth
in (i) above if within one hundred eighty (180) days after such disposition
the Company or a Majority-Owned Subsidiary reinvests the proceeds in assets
substantially similar to those which are disposed of, or applies the net
proceeds (after deducting direct costs and expenses incurred as a result of
such disposition and discharging any underlying debt which is secured by such
property) to the prepayment or redemption of the Secured Obligations or the
Senior Secured Notes or other Indebtedness of the Company, or retains the
proceeds in cash or cash-equivalent investments; PROVIDED, FURTHER, that the
aggregate net book value of properties disposed of under this Section 8.13
the net proceeds of which are so applied shall not exceed the greater of
$10,000,000 or fifteen percent (15%) of the net book value of the then
existing MRI Units.
8.14 LIMITATION RELATING TO SUBSIDIARIES. The Company
covenants and agrees that so long as, and at any time that, any shares of
Preferred Stock are held by the Investor or any Eligible Holder, the Company
will not and will not permit any Majority-Owned Subsidiary to:
(a) transfer any stock of any Majority-Owned
Subsidiary, or permit any Majority-Owned Subsidiary to issue or transfer its
stock or transfer the stock of any other Subsidiary, if as a result thereof,
the Company would own, directly or
Page 52
indirectly, less than 95% of the Capital Stock or Voting Stock of any
Majority-Owned Subsidiary, provided that no transfer of any such stock shall
be permitted unless such transfer is made for fair value, as determined in
good faith by the Board of Directors of the Company; or
(b) permit any Majority-Owned Subsidiary to enter
into an agreement restricting it from paying dividends to the Company.
Notwithstanding the provisions of clause (a) above, all of the
shares of Capital Stock of all classes of any Majority-Owned Subsidiary owned
by the Company and/or its Majority-Owned Subsidiaries may be sold for fair
market value as an entirety if the following conditions are met:
(i) the Majority-Owned Subsidiary whose stock is so sold
does not own any shares of capital stock of any other
Majority-Owned Subsidiary not being simultaneously sold;
(ii) after giving effect to the sale, any Indebtedness of
the Company or any remaining Majority-Owned Subsidiary owing to
the Majority-Owned Subsidiary whose stock is so sold could then
be incurred by the Company or such remaining Majority-Owned
Subsidiary, as the case may be, under the terms and conditions of
this Agreement;
(iii) such sale would be permissible under Section 8.13
hereunder; and
(iv) prior to and immediately after giving effect to such
sale, no Default or Event of Default shall have occurred and be
continuing under this Agreement or the Senior Secured Notes.
8.15.LIMITATIONS ON LEASES. Except as set forth in the
next sentence, the Company covenants and agrees that so long as, and at any
time that, (i) any shares of Preferred Stock are held by the Investor or any
Eligible Holder and (ii) the IRR Trigger Date has not occurred, the Company
will not, and will not permit any Majority-Owned Subsidiary to, enter into
any Long-Term Lease, unless, after including in Consolidated Rental
Obligations the amount of all minimum or guaranteed net rentals the Company
or such Majority-Owned Subsidiary is directly or indirectly liable for (as
lessee or as a guarantor or other surety) under such Long-Term Lease which
will accrue during the 12-month period following the date upon which the
Company or its Subsidiary enters into such Long-Term Lease, the Consolidated
Rental Obligations for such 12-month period will not exceed the applicable
amount set forth below based upon the Fiscal Year in which such Long-Term
Lease is proposed to be entered into:
1996 $2,700,000
1997 $2,500,000
1998 $2,200,000
1999 $1,750,000
Page 53
2000 $1,500,000
Notwithstanding the foregoing, there shall be
excluded from the calculation of Consolidated Rental Obligations pursuant to
the preceding sentence any and all variable lease payments (i.e., payments
made pursuant to a Long-Term Lease or otherwise that are based solely upon
usage or other operating criteria rather than being fixed in amount and as to
which there are no minimum and no guaranteed periodic payment obligations).
Notwithstanding the foregoing, for the purposes of this Section 8.15, there
shall be excluded from the coverage of "Long-Term Leases" and "Consolidated
Rental Obligations" any lease or other contract or commitment, and payments
required thereunder, with respect to MRI, CT or other medical equipment and
related trailers or buildings and related improvements.
8.16.BOARD OBSERVATION RIGHTS. The Company covenants
and agrees that so long as, and at any time that, any shares of Preferred
Stock are held by the Investor, the Investor shall be entitled to appoint one
observer (who may be, but shall not be required to be, an employee of
Investor) to attend each meeting of the Board of Directors of the Company,
and shall be entitled to a copy of all written materials (including Board
meeting agendas and background materials) distributed to each member of the
Board of Directors of the Company as and when so distributed, subject in each
case to reasonable safeguards with respect to (i) the protection of the
Company's highly confidential information (such safeguards to be deemed
satisfied by the execution of a confidentiality agreement in form and
substance reasonably satisfactory to the parties) and (ii) conflict of
interest situations with respect to the business of the Medical Systems
Division of the Investor.
0.00.XX FUNDED DEBT DEFAULTS. The Company shall not
commit or suffer to exist any Funded Debt Default; provided, however, that
the Company shall not be deemed to have breached this covenant with respect
to any particular Funded Debt Default if the Investor shall have exercised
its right under the Series D Certificate of Designation or the Series E
Certificate of Designation to decline to accept (or shall have been deemed to
have declined to accept) the Special Dividend Event Repurchase Offer (as
defined in the Series D Certificate of Designation or the Series E
Certificate of Designation, as the case may be) related to such Funded Debt
Default.
0.00.XX CHANGE IN BUSINESS. The Company shall not
substantially and materially engage in any business other than the business
of providing diagnostic and therapeutic medical equipment and related
services to the healthcare industry.
9. INDEMNIFICATION
9.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. The warranties, representations and covenants of the Company
contained in or made pursuant to this Agreement shall forever survive the
execution and delivery of this Agreement and the Closing and shall in no way
be affected by any investigation of the subject matter thereof made by or on
behalf of the Investor or the Company; provided, however, that the warranties
and representations contained in Sections 4.8, 4.9, 4.10,
Page 54
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, 4.18, 4.19, 4.20, 4.21 and 4.22 shall
survive for a period of two (2) years after the Closing Date. As of the
Closing Date, upon consummation of the transactions contemplated by this
Agreement, the representations, warranties and covenants contained in the
Bridge Loan Agreement shall be deemed to be superseded by the provisions of
this Agreement and shall be of no further force and effect.
9.2 INDEMNIFICATION.
(a) The Company shall indemnify and hold harmless
the Investor and its Affiliates, partners, directors, officers, employees,
agents and attorneys, in respect of any losses, expenses or Liabilities
(including any legal and other out-of-pocket expenses for investigating,
settling or defending any actions or threatened actions) (collectively,
"Damages") incurred, directly or indirectly, by any of the foregoing in
connection with any misrepresentation, breach or alleged breach of any
representation, warranty, covenant or agreement made by the Company in this
Agreement, the other agreements referred to in this Agreement (except the
Bridge Loan Agreement), or in any certificate, instrument, schedule or
document given by the Company to the Investor in connection herewith or
therewith.
(b) Whenever a representation or warranty contained
herein is qualified as to materiality, the Company shall have the burden to
prove by a preponderance of the evidence that the effect of any occurrence,
event, condition or other factor that makes any representation or warranty
untrue is not material or was not expected to be material at the time the
representation or warranty is made.
(c) No Person shall be entitled to indemnification
pursuant to this Section 9 for any Damages incurred unless the aggregate
amount for which indemnification is sought is in excess of $50,000, based on
all Damages from the first dollar and without regard to any materiality
qualifier (the "Threshold"), whether represented by one or more claims. If
the amount of claims for Damages exceeds the Threshold, then the Person
entitled to indemnification pursuant to this Section 9 shall be entitled to
indemnification for all Damages, including without limitation the first
$50,000 of such Damages incurred.
9.3 CLAIMS FOR INDEMNIFICATION. Whenever any claim
shall arise for indemnification, the indemnified party shall notify the
Company of the claim in writing and, when known, the facts constituting the
basis for such claim and the amount or an estimate of the amount of the
Liability arising from such claim. The indemnified party shall not settle or
compromise any claim by a third party that is entitled to indemnification
hereunder without the prior written consent of the Company unless (i) suit
shall have been instituted against the indemnified party and (ii) the Company
shall not have taken control of such suit within fifteen (15) Business Days
after notification thereof as provided in Section 9.4.
9.4 DEFENSE BY THE COMPANY. In connection with any
claim giving rise to indemnity hereunder resulting from or arising out of any
claim or legal
Page 55
proceeding by a Person other than the Investor, the Company or their
respective Affiliates, partners, directors, officers, employees, agents or
attorneys, the Company at its sole cost and expense, may, upon written notice
to the Investor, assume the defense of any such claim or legal proceeding
without prejudice to the right of the Company thereafter to contest its
obligation to indemnify such Person in respect of the claims asserted
therein. If the Company assumes the defense of any such claim or legal
proceeding, the Company shall select counsel to conduct the defense of such
claims or legal proceedings at its sole cost and expense and shall take all
steps necessary in the defense or settlement thereof. The Company shall not
consent to a settlement of, or the entry of any judgment arising from, any
such claims or legal proceeding, without the prior written consent of the
indemnified party, unless the Company admits in writing its Liability to hold
the indemnified party harmless from and against any loss, damages, expenses
and Liabilities arising out of such settlement and concurrently with such
settlement the Company pays into court the full amount of all losses,
damages, expenses and Liabilities to be paid by the Company in connection
with such settlement. The indemnified party shall be entitled to participate
in (but not control) the defense of any such action, with its own counsel and
at its own expense. If the Company does not assume the defense of any such
claim or litigation resulting therefrom in accordance with the terms hereof,
the indemnified party may defend against such claim or litigation in such
manner as it may deem appropriate, including settling such claim or
litigation, after giving notice of the same to the Company, on such terms as
the indemnified party may deem appropriate. The Company shall be entitled to
participate in the defense of any action by the indemnified party, which
participation shall be limited to contributing information to the defense and
being advised of its status. In any action by the indemnified party seeking
indemnification from the Company in accordance with the provisions of this
paragraph, the Company shall not be entitled to question the manner in which
the indemnified party defended such claim or litigation or the amount of or
nature of any such settlement, except to the extent that the indemnified
party has breached the provisions of this Section 9.
9.5 MATERIALITY. The parties agree that for all
purposes of this Agreement, unless specifically stated to the contrary, the
dollar amounts set forth in various provisions hereof, other than the
purchase price hereunder shall not affect or determine the meaning of the
term "material" or have any bearing thereon.
10. RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE
WITH SECURITIES ACT; REGISTRATION RIGHTS.
10.1 RESTRICTIONS ON TRANSFERABILITY. The Securities
shall not be sold, assigned, transferred or pledged except upon satisfaction
of the conditions specified in this Section 10, which conditions are intended
to ensure compliance with the provisions of the Securities Act. The Investor
will cause any proposed purchaser, assignee, transferee, or pledgee of the
shares of Securities to agree to take and hold such securities subject to the
provisions and conditions of this Section 10.
10.2 RESTRICTIVE LEGEND. Each certificate representing
the Registrable Securities, shall be stamped or otherwise imprinted with a
legend in the
Page 56
following form (in addition to any legend required under applicable state
securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT
OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED. COPIES OF THE AGREEMENT COVERING THE
PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL
EXECUTIVE OFFICES OF THE CORPORATION.
10.3 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Company
shall receive from the Investor a written request that the Company effect a
registration under the Securities Act with respect to not less than 3,000,000
shares of Registrable Securities, the Company will, as soon as practicable,
use its best efforts to effect such registration (including, without
limitation, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such Registrable Securities
as are specified in such request; PROVIDED, HOWEVER, that the Company shall
not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 10.3 in any particular
jurisdiction in which the Company would be required to execute a general
consent to service of process or become subject to taxation in effecting such
registration, qualification or compliance unless the Company is already subject
to service or taxation in such jurisdiction. The Company shall be obligated
to effect only three such registrations pursuant to this Section 10.3.
(b) UNDERWRITING. In the event that a registration
pursuant to this Section 10.3 is for a registered public offering involving
an underwriting, the Investor shall so advise the Company as a part of its
request made pursuant to Section 10.3(a). In such event, the right of the
Investor to registration pursuant to this Section 10.3 shall be conditioned
upon the Investor's participation in the underwriting arrangements required
by this Section 10.3(b), and the inclusion of the Investor's Registrable
Securities in the underwriting to the extent requested shall be limited as
provided herein. The Company and the Investor shall enter into an
underwriting agreement in customary form with managing underwriter(s)
selected for such underwriting by the Investor, but subject to the Company's
reasonable approval. Notwithstanding any other provision of this Section
10.3, if the managing underwriter(s) advise(s) the Company in writing that
marketing factors require a limitation of the
Page 57
number of shares to be underwritten, then the Company shall so advise the
Investor and the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be so limited. If the
Investor disapproves of the terms of the underwriting, the Investor may elect
to withdraw therefrom by written notice to the Company.
(c) DEFERRAL BY COMPANY. Notwithstanding the
foregoing, the Company shall not be obligated to effect a registration
pursuant to this Section 10.3 if the Company shall furnish to the Investor a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company it would be seriously
detrimental to the Company and its shareholders for the Company to comply
with such request, and it is therefore essential to defer the filing of the
registration statement relating thereto. Any such deferral shall be for a
period of not more than 90 days after receipt of the Investor's request for
registration pursuant to Section 10.3(a); PROVIDED, HOWEVER, that the Company
may not exercise this deferral right more than once in any 12-month period;
PROVIDED, FURTHER, that any requested registration deferred by the Company
pursuant to the provisions of this Section 10.3(c) shall thereafter not be
deemed to be a requested registration for purposes of the limitation to three
requested registrations pursuant to Section 10.3(a), until such deferral
expires and the Company effects the related registration.
10.4 COMPANY REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from
time to time the Company shall determine to register any of its securities,
whether or not for its own account, the Company will promptly give to the
Investor written notice thereof, and include in such registration (and any
related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a
written request or requests, made within 20 days after receipt of such
written notice from the Company, by the Investor.
(b) UNDERWRITING. If the registration of which the
Company gives notice under this Section 10.4 is for a registered public
offering involving an underwriting, the Company shall so advise the Investor
as a part of the written notice given pursuant to Section 10.4(a). In such
event the right of the Investor to registration pursuant to this Section 10.4
shall be conditioned upon the Investor's participation in such underwriting
and the inclusion of the Investor's Registrable Securities in the
underwriting to the extent provided herein. The Investor and the Company
shall enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 10.4, if the managing
underwriter determines that marketing factors require a limitation of the
number of shares to be underwritten, the managing underwriter may limit the
Registrable Securities to be included in such registration, and the Company
shall include in such registration: (i) first, 100% of the securities the
Company proposes to sell for its own account, and (ii) second, such number of
Registrable Securities which the Investor has requested to be included in
such registration and such number of securities which other holders have
requested to be included in such registration which,
Page 58
in the opinion of such managing underwriter, can be sold without having an
adverse effect on the marketing of the securities referred to above, such
number of Registrable Securities and securities of other holders described in
this clause (ii) to be included on a pro rata basis among the Investor and
all other holders. To facilitate the allocation of shares in accordance with
the above provisions, the Company may round the number of shares allocated to
the Investor or other holders to the nearest 100 shares. If the Investor
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter.
(c) RIGHT TO TERMINATE REGISTRATION. The Company
shall have the right to terminate or withdraw any registration initiated by
it under this Section 10.4 prior to the effectiveness of such registration
whether or not the Investor has elected to include securities in such
registration.
10.5 REGISTRATION ON FORM S-3. If the Investor requests
that the Company file a registration statement on Form S-3 (or any successor
form to Form S-3) for a non-underwritten public offering of the Registrable
Securities, the reasonably anticipated aggregate price to the public of
which, net of discounts and commissions, would exceed $12,000,000 and the
Company is then entitled to use Form S-3 under applicable SEC rules to
register the Registrable Securities for such an offering, the Company shall
use its best efforts to cause such Registrable Securities to be registered
for the offering on such form and to cause such Registrable Securities to be
qualified in such jurisdictions as the Investor may reasonably request;
provided, however, that the Company shall not be required to effect more than
one registration pursuant to this Section 10.5 in any twelve (12) month
period or in excess of three (3) registrations under this Section 10.5;
PROVIDED, HOWEVER, that the Company shall not be obligated to take any action
to effect any such registration, qualification or compliance pursuant to this
Section 10.5 in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process or become subject
to taxation in effecting such registration, qualification or compliance
unless the Company is already subject to service or taxation in such
jurisdiction. The substantive provisions of Section 10.3(b) shall be
applicable to each registration initiated under this Section 10.5.
10.6 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From
and after the Closing Date, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless (i) such new
registration rights are on a pari passu basis with those rights of the
Investor hereunder, or (ii) such new registration rights are subordinate to
the registration rights granted to the Investor hereunder.
10.7 EXPENSES OF REGISTRATION. All expenses (other than
underwriting discounts and commissions relating to Registrable Securities and
fees and disbursements of counsel for the Investor), including without
limitation all registration, filing, and qualification fees, printing and
accounting fees and legal fees and expenses of counsel to the Company
incurred in connection with any registration pursuant to Section 10.3, 10.4
or 10.5 shall be borne by the Company.
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10.8 SECURITIES INDEMNIFICATION. The Company will
indemnify the Investor, each of its officers, directors and partners, and
each Person controlling such Investor within the meaning of Section 15 of the
Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 10, and each
underwriter, if any, and each Person who controls any underwriter within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Company of the Securities Act or any
rule or regulation promulgated under the Securities Act applicable to the
Company in connection with any such registration, qualification or
compliance, and the Company will reimburse the Investor, each of its officers
and directors, and each Person controlling the Investor, each such
underwriter and each Person who controls any such underwriter, for any legal
and any other expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that the Company will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission or alleged untrue statement or
omission, made in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by the Investor,
controlling Person or underwriter and stated to be specifically for use
therein. The procedures governing the securities indemnification obligations
of the Company under this Section 10.8 shall be as set forth in Section 9.
The indemnification obligations of the Company under this Section 10.8 shall
be in addition to the indemnification obligations of the Company under
Section 9.
10.9 TRANSFER OF REGISTRATION RIGHTS. The rights to
cause the Company to register securities granted to Investor under Sections
10.3, 10.4, and 10.5 may be assigned to a transferee or assignee reasonably
acceptable to the Company in connection with any transfer or assignment of
Registrable Securities by the Investor provided that such transfer may
otherwise be effected in accordance with applicable securities laws.
11. MISCELLANEOUS.
11.1 EXPENSES. At Closing, the Company shall promptly pay
the Investor all of the Investor's reasonable out-of-pocket expenses incurred in
connection with this transaction, including legal fees and expenses, accounting
fees and expenses and due diligence expenses, provided that the Company's
maximum responsibility therefor shall be Ninety Thousand Dollars ($90,000).
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11.2 PUBLICITY. Neither the Company nor the Investor
shall release any information to any third party with respect to the terms of
this Agreement or the transactions contemplated hereby without the prior
written consent of the other party, other than as may be required by
applicable law or court order. The parties shall mutually agree upon a joint
initial announcement of the execution of this Agreement and the related
transactions. Each party agrees to consult the other party as to the form
and content of all subsequent public announcements relating to this Agreement
or the transactions contemplated hereby.
11.3 SUCCESSORS AND ASSIGNS. Except as otherwise
expressly provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of the Securities). The
Securities shall be freely transferable without the consent of the Company,
subject to applicable law. Nothing in this Agreement, express or implied, is
intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
Liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
11.4 GOVERNING LAW. This Agreement shall be governed by
and construed under the laws of the State of New York as applied to agreements
among New York residents entered into and to be performed entirely within
New York.
11.5 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.
11.6 TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered
in construing or interpreting this Agreement.
11.7 NOTICES. All notices, demands, or other
communications under this Agreement shall be in writing and shall be
delivered via confirmed facsimile, overnight courier, by hand delivery or by
certified mail, return receipt requested, to the appropriate party at the
address set forth on the signature page of this Agreement (subject to change
from time to time by written notice to all other parties to this Agreement).
All communications shall be deemed served upon delivery of, or if mailed,
upon the first to occur of receipt or the expiration of three (3) days after
the deposit in the United States Postal Service mail, postage prepaid and
addressed to the address of Company or the Investor at the address specified
or, if transmitted via facsimile, upon electronic confirmation of receipt;
PROVIDED, HOWEVER, that non-receipt of any communication as the result of any
change of address or facsimile number of which the sending party was not
notified or as the result of a refusal to accept delivery shall be deemed
receipt of such communication.
11.8 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
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prospectively), only with the written consent of the Company and the
Investor.
11.9 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
or provisions shall be excluded from this Agreement and the balance of the
Agreement shall be interpreted as if such provision or provisions were so
excluded and shall be enforceable in accordance with its terms.
11.10 ENTIRE AGREEMENT. This Agreement, the
Schedules and Exhibits hereto, the other agreements referred to herein and
the other documents required to be delivered pursuant hereto constitute the
entire understanding and agreement between the parties with regard to the
specific subject matter hereof, and no party shall be liable or bound by any
representation, warranty, covenant or
Page 62
agreement except as specifically set forth herein or therein. Any by this
previous agreement (whether written, oral or implied) among the parties
relative to the specific subject matter hereof is superseded Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Agreement as of the date first above written.
THE COMPANY:
ALLIANCE IMAGING, INC.,
a Delaware corporation
By: ___________________________
Address: 0000 Xxxxx Xxxxxx Xxxxxx,
Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
THE INVESTOR:
GENERAL ELECTRIC COMPANY, a New York
corporation acting through GE Medical Systems
By: ______________________________
Address: GE Medical Systems
00000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
