EXHIBIT (c)(8)
Execution Copy
AGREEMENT AND PLAN OF MERGER
BETWEEN
NEWPORT INVESTMENT LLC,
AND
ALLIANCE IMAGING, INC.
DATED AS OF JULY 23, 1997
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER................................................. 2
1.1 The Merger............................................. 2
1.2 Consummation of the Merger............................. 2
1.3 Effects of the Merger.................................. 2
1.4 Certificate of Incorporation and Bylaws................ 2
1.5 Directors and Officers................................. 3
1.6 Company Actions........................................ 3
ARTICLE II EFFECTS OF THE MERGER..................................... 3
2.1 Stockholders' Meeting.................................. 3
2.2 Retained Share Elections............................... 4
2.3 Conversion of Shares................................... 5
2.4 Proration.............................................. 6
2.5 Conversion of Common Stock of Newco.................... 7
2.6 Exchange of Certificates............................... 7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.................................................. 9
3.1 Organization........................................... 9
3.2 Capitalization......................................... 10
3.3 Subsidiaries........................................... 11
3.4 Authority.............................................. 12
3.5 Consents and Approvals; No Violations.................. 12
i
3.6 SEC Documents; Financial Statements; Other
Financial Information.................................. 13
3.7 Information Supplied................................... 14
3.8 Absence of Certain Changes or Events................... 15
3.9 Litigation............................................. 15
3.10 Contracts.............................................. 16
3.11 Compliance with Laws................................... 16
3.12 Environmental Matters.................................. 17
3.13 Absence of Changes in Benefit Plans; Labor
Relations.............................................. 18
3.14 Employment Matters; Affiliate Transactions............. 19
3.15 ERISA Compliance....................................... 19
3.16 Taxes.................................................. 21
3.17 [Intentionally Omitted]................................ 22
3.18 Title to Properties; Condition of Assets............... 22
3.19 Intellectual Property.................................. 23
3.20 Non-Compete............................................ 23
3.21 Voting Requirements.................................... 24
3.22 State Takeover Statutes................................ 24
3.23 Brokers; Schedule of Fees and Expenses................. 24
3.24 Opinion of Financial Advisor........................... 24
3.25 Certain Additional Regulatory Matters.................. 25
3.26 Medicare/Medicaid Participation; Accreditation......... 26
3.27 Regulated Customers.................................... 27
ii
3.28 Insurance.............................................. 27
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF
INVESTOR AND NEWCO........................................... 27
4.1 Organization........................................... 27
4.2 Authority.............................................. 28
4.3 Consents and Approvals; No Violations.................. 28
4.4 Information Supplied................................... 29
4.5 Interim Operations of Newco............................ 29
4.6 Brokers................................................ 29
4.7 Financing.............................................. 29
ARTICLE V COVENANTS.................................................. 30
5.1 Conduct of Business.................................... 30
5.2 No Solicitation........................................ 32
5.3 Certain Tax Matters.................................... 34
5.4 Other Actions.......................................... 34
5.5 Advice of Changes; Filings............................. 34
5.6 Financial Information.................................. 35
5.7 Redemption of Preferred Stock and Senior Debt.......... 35
5.8 Refinancing of Outstanding Indebtedness................ 35
5.9 Matters Involving SMT ................................. 35
5.10 Insurance.............................................. 37
ARTICLE VI ADDITIONAL AGREEMENTS..................................... 37
6.1 Preparation of Proxy Statement/Prospectus.............. 37
iii
6.2 Access to Information; Confidentiality................. 38
6.3 Reasonable Efforts; Notification....................... 38
6.4 Stock Option Plans and Warrants........................ 40
6.5 Indemnification, Exculpation........................... 40
6.6 Registration Rights Agreement.......................... 41
6.7 [Intentionally Omitted]................................ 41
6.8 Directors.............................................. 41
6.9 Fees and Expenses...................................... 41
6.10 Public Announcements................................... 43
6.11 Stop Transfer.......................................... 44
ARTICLE VII CONDITIONS............................................... 44
7.1 Conditions to Each Party's Obligation to Effect
the Merger............................................. 44
7.2 Conditions to the Company's Obligation To Effect
the Merger............................................. 45
7.3 Conditions to Investor's and Newco's Obligations
to Effect the Merger................................... 45
ARTICLE VIII TERMINATION AND AMENDMENT............................... 47
8.1 Termination............................................ 47
8.2 Effect of Termination.................................. 49
8.3 [Intentionally Omitted]................................ 49
8.4 Extension; Waiver...................................... 49
8.5 Amendment.............................................. 49
ARTICLE IX MISCELLANEOUS............................................. 50
iv
9.1 Nonsurvival of Representations, Warranties and
Agreements............................................. 50
9.2 Notices................................................ 50
9.3 Interpretation......................................... 51
9.4 Entire Agreement; Third Party Beneficiaries............ 52
9.5 Governing Law.......................................... 52
9.6 Counterparts........................................... 52
9.7 Assignment............................................. 52
9.8 Enforcement............................................ 52
Signature Page................................................ 54
Exhibit and Schedule Index.................................... 55
Exhibits
Schedules
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of July 23,
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1997, between NEWPORT INVESTMENT LLC, a Delaware limited liability company
("Investor"), and ALLIANCE IMAGING, INC., a Delaware corporation (the
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"Company").
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WHEREAS, the Board of Directors of the Company has determined that it
is fair and in the best interests of its stockholders for a corporation to be
formed, and wholly-owned, by Investor, to merge with and into the Company (the
"Merger") pursuant to Section 251 of the Delaware General Corporation Law
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("DGCL") upon the terms and subject to the conditions set forth herein;
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WHEREAS, the Board of Directors of the Company has adopted resolutions
approving the Merger, this Agreement and the transactions to which the Company
is a party contemplated hereby, and has agreed, upon the terms and subject to
the conditions set forth herein, to recommend that the Company's stockholders
approve the Merger and this Agreement;
WHEREAS, the parties have agreed (subject to the terms and conditions
of this Agreement), as soon as practicable following the approval by the
stockholders of the Company, to effect the Merger, as more fully described
herein;
WHEREAS, it is intended that the Merger be treated as a
recapitalization of the Company for financial reporting purposes;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Investor to enter into this Agreement, Investor and certain
stockholders of the Company are entering into a Stockholder Agreement (the
"Stockholder Agreement") pursuant to which such stockholders have, among other
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things, granted to Investor an irrevocable proxy to vote their Shares (as
hereinafter defined) in favor of the Merger and all other actions necessary to
consummate the Merger, upon the terms and subject to the conditions set forth in
the Stockholder Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Investor to enter into this Agreement, the Company and certain
members of the Company's senior management are executing and delivering the
Employment Agreements, in substantially the form attached hereto as EXHIBIT A
(the "Employment Agreements") pursuant to which such persons have, among other
---------------------
things, agreed to certain confidentiality and non-solicitation covenants; and
WHEREAS Investor and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Investor and the Company hereby agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER.
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Prior to the Effective Time (as defined below), Investor shall form a
new corporation to be called Newport Acquisition Corp. ("Newco") in accordance
with the relevant provisions of the DGCL. Upon the terms and subject to the
conditions hereof, and in accordance with the relevant provisions of the DGCL,
Newco shall be merged with and into the Company as soon as practicable following
the satisfaction or waiver, if permissible, of the conditions set forth in
Article VII hereof. The Company shall be the surviving corporation in the
Merger (the "Surviving Corporation") and shall continue its existence under the
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laws of Delaware. The separate corporate existence of Newco shall cease.
1.2 CONSUMMATION OF THE MERGER.
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Subject to the provisions of this Agreement, the parties hereto shall
cause the Merger to be consummated by filing with the Secretary of State of the
State of Delaware a duly executed and verified certificate of merger, as
required by the DGCL, and shall take all such other and further actions as may
be required by law to make the Merger effective as promptly as practicable.
Prior to the filing referred to in this Section, a closing (the "Closing") will
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be held at the offices of X'Xxxxxxxx Graev & Karabell, LLP, 00 Xxxxxxxxxxx
Xxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx (or such other place as the parties may
agree) for the purpose of confirming all the foregoing. The time the Merger
becomes effective in accordance with applicable law is referred to as the
"Effective Time."
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1.3 EFFECTS OF THE MERGER.
---------------------
The Merger shall have the effects set forth in the applicable
provisions of the DGCL and set forth herein.
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS.
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(a) The Restated Certificate of Incorporation of the Company (the
"Certificate of Incorporation"), as in effect immediately prior to the Effective
----------------------------
Time, shall be the certificate of incorporation of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
(b) The by-laws of Newco (the "By-laws") as in effect immediately
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prior to the Effective Time shall be the by-laws of the Surviving Corporation,
until thereafter changed or amended as provided therein or by applicable law.
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1.5 DIRECTORS AND OFFICERS.
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The directors of Newco immediately prior to the Effective Time and the
officers of the Company immediately prior to the Effective Time shall be the
directors and officers, respectively, of the Surviving Corporation until their
respective successors are duly elected and qualified.
1.6 COMPANY ACTIONS.
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The Company hereby represents and warrants that (a) its Board of
Directors (at a meeting duly called and held), has (i) determined that the
Merger (upon the terms and subject to the conditions of this Agreement) is fair
to and in the best interests of the stockholders of the Company, (ii) resolved
to approve this Agreement, the Merger, the issuance of shares of common stock of
the Company, par value $0.01 per share (the "Shares") to the Investor as sole
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shareholder of Newco in connection with the Merger, and to recommend (subject to
Section 5.2 of this Agreement) approval of the Merger and this Agreement by the
stockholders of the Company, (iii) taken all necessary steps to render Section
203 of the DGCL inapplicable to the Merger and the transactions contemplated by
this Agreement, and (iv) resolved to elect not to be subject, to the extent
permitted by law, to any state takeover law other than Section 203 of the DGCL
that may purport to be applicable to the Merger, or the transactions
contemplated by this Agreement, and (b) Salomon Brothers Inc (the "Financial
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Advisor") has advised the Company's Board of Directors that, in its opinion, the
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consideration to be received and retained by the Company's stockholders in the
Merger is fair, from a financial point of view, to such stockholders.
ARTICLE II
EFFECTS OF THE MERGER
2.1 STOCKHOLDERS' MEETING.
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(a) Subject to Section 5.2 of this Agreement, the Company, acting
through its Board of Directors, shall, in accordance with applicable law, duly
call, give notice of, convene and hold a special meeting (the "Special Meeting")
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of its stockholders as soon as practicable for the purpose of obtaining the
approval of this Agreement, include in the registration statement on Form S-4
that includes a proxy statement relating to any required approval by or meeting
of the Company's stockholders with respect to this Agreement and the Merger (the
"Proxy Statement/Prospectus") for use in connection with the Special Meeting,
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the recommendation of the Company's Board of Directors that stockholders of the
Company vote in favor of the Merger and approve this Agreement. The Investor
and, subject to Section 5.2 of this Agreement, the Company agree to use
commercially reasonable efforts to cause
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the Special Meeting to occur as soon as possible under applicable law and the
Company's Bylaws after the Company has responded to all SEC comments with
respect to the preliminary Proxy Statement/Prospectus as provided in Section
6.1.
(b) Prior to the mailing of the Proxy Statement/Prospectus, Newco
shall appoint an independent bank or trust company to act as paying agent (the
"Paying Agent"), which Paying Agent shall be reasonably satisfactory to the
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Company, for the payment of the cash portion of the Merger Consideration.
2.2 RETAINED SHARE ELECTIONS.
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(a) Each person who is a record holder of Shares on or prior to 5:00
p.m., New York City time, on the date of the Special Meeting or the date of any
meeting of stockholders held pursuant to any adjournment of the Special Meeting
(the "Election Date") will be entitled, with respect to all or any portion of
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his or its Shares, to make an election to retain Shares as set forth in, and
subject to the provisions of this Section 2.2.
(b) The Company shall prepare and mail a form of election, which form
shall be subject to the approval of Investor (the "Election Form"), with the
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Proxy Statement/Prospectus to the record holders of Shares as of the record date
for the Special Meeting, which Election Form shall be used by each record holder
of Shares who wishes to elect to retain Shares in lieu of such Shares being
converted into the right to receive the Cash Merger Price (as defined below) for
each such Share. Notwithstanding anything to the contrary contained in this
Agreement, any such election shall be subject to proration as set forth below.
The Company will use commercially reasonable efforts to make the Election Form
and the Proxy Statement/Prospectus available to all persons who become holders
of Shares during the period between such record date and the Election Date. Any
such holder's election to retain Shares shall have been validly made only if the
Paying Agent shall have received at its designated office, on or prior to the
Election Date, an Election Form properly completed and signed in accordance with
such rules as the Paying Agent may establish pursuant to Section 2.2(e), and
accompanied by either (i) certificates for the Shares to which such Election
Form relates, duly endorsed in blank or otherwise in form acceptable for
transfer on the books of the Company or (ii) an appropriate guarantee of
delivery of such certificates as set forth in such Election Form from a firm
which is a member of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., or a commercial bank or trust
company having an office or correspondent in the United States (a "Notice of
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Guaranteed Delivery"). Notwithstanding anything to the contrary contained
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herein, any Election Form accompanied by a Notice of Guaranteed Delivery shall
be deemed not validly made if the certificate or certificates are in fact
delivered to the Paying Agent after three (3) Nasdaq Stock Market trading days
after the date of execution of such guarantee of delivery.
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(c) Any Election Form may be revoked by the stockholder submitting
such Election Form if a written notice of revocation is received by the Paying
Agent prior to 5:00 p.m., New York City time, on the Election Date. In
addition, all Election Forms shall be revoked automatically if this Agreement is
terminated pursuant to Section 8.1. If an Election Form is revoked, the
certificate or certificates (or guarantees of delivery, as appropriate) for the
Shares to which such Election Form relates shall be returned by the Paying Agent
to the stockholder submitting the same to the Paying Agent.
(d) For purposes of this Agreement, (i) "Elected Retained Share" shall
----------------------
mean a Share in respect of which an election to retain such Share is validly
made and not validly revoked prior to the Election Date and (ii) "Elected Cash
------------
Share" shall mean a Share in respect of which either an election to retain such
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Share is not validly made prior to the Election Date or an election to retain
such Share is validly revoked prior to the Election Date.
(e) The Paying Agent may, with the mutual agreement of the Investor
and the Company, make such rules as are consistent with this Section 2.2 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections.
(f) The Paying Agent shall determine (i) whether or not elections to
retain Shares have been validly made or validly revoked pursuant to this Section
2.2 and (ii) when elections and revocations have been received by it. If the
Paying Agent determines that any election to retain Shares was not validly made,
such Shares shall be converted in the Merger into the right to receive the Cash
Merger Price (as defined below). The Paying Agent shall also make all
computations as to the allocation and the proration contemplated by Section 2.4.
All determinations and calculations by the Paying Agent shall be conclusive and
binding on the holders of Shares.
2.3 CONVERSION OF SHARES.
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(a) All Shares held in the treasury of the Company (the "Excluded
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Shares") shall be canceled and shall cease to exist as of the Effective Time,
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without any consideration being payable therefore.
(b) Notwithstanding anything in this Agreement to the contrary, Shares
which would otherwise constitute Elected Cash Shares or Non-Elected Cash Shares
hereunder, which are issued and outstanding immediately prior to the Effective
Time and which are held by stockholders who did not vote in favor of the Merger
and who comply with all of the relevant provisions of Section 262 of the DGCL
(the "Dissenting Shares") shall not be converted into or be exchangeable for the
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right to receive the Cash Merger Price (as defined below), but instead shall be
converted into the right to receive payment from the Surviving Corporation with
respect to such Dissenting Shares in accordance with the DGCL, unless and until
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such holders shall have effectively withdrawn or lost their rights to appraisal
under the DGCL. If any such holder shall have effectively withdrawn or lost
such right, such holder's Shares shall be converted into the right to receive
the Cash Merger Price (as defined below). The Company shall give prompt notice
to the Investor of any demands received by the Company for appraisal of Shares,
and the Investor shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. The Company shall
not, except with the prior written consent of the Investor, make any payment
with respect to, or settle or offer to settle, any such demands.
(c) By virtue of the Merger, each Share issued and outstanding
immediately prior to the Effective Time, other than Excluded Shares and
Dissenting Shares, shall be retained or converted into the right to receive cash
as follows:
(i) Each Share that is an Elected Retained Share and each Share
that is a Non-Elected Retained Share (as defined in Section 2.4(c))
(in either case, a "Retained Share") shall be retained by the holder
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thereof following the Effective Time, shall remain outstanding and
shall represent one share of Common Stock, par value $.01 per share,
of the Surviving Corporation; and
(ii) Each Share that is an Elected Cash Share and each Share
that is a Non-Elected Cash Share (as defined in Section 2.4(b)) shall
be converted into the right to receive from the Surviving Corporation
$11.00 in cash (the "Cash Merger Price").
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2.4 PRORATION.
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(a) Notwithstanding anything in this Agreement to the contrary, the
aggregate number of Retained Shares (the "Actual Retained Share Number") shall
----------------------------
be equal to 727,273 Shares.
(b) If the aggregate number of Shares constituting Elected Retained
Shares (the "Elected Retained Share Number") exceeds the Actual Retained Share
-----------------------------
Number, then the number of Shares which shall be Retained Shares pursuant to
Section 2.3(c)(i) shall be reduced by such excess number of Shares (each such
Share included among such excess, a "Non-Elected Cash Share"). In such event,
----------------------
each holder of Elected Retained Shares shall be allocated Non-Elected Cash
Shares in lieu of Retained Shares such that (after giving effect to Section
2.6(e)) each such holder shall be deemed to hold Non-Elected Cash Shares in an
amount equal to (x) the total number of Elected Retained Shares held by such
holder less (y) the product of (A) a fraction, the numerator of which is the
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Actual Retained Share Number, and the denominator of which is the Elected
Retained Share Number, multiplied by (B) the total number of Elected Retained
Shares held by such holder.
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(c) If the Actual Retained Share Number is greater than the Elected
Retained Share Number, then the aggregate number of Shares which shall be
converted into the right to receive cash pursuant to Section 2.3(c)(ii) shall be
decreased by a number of Shares equal to the excess of the Actual Retained Share
Number over the Elected Retained Share Number (each Share included among such
excess, a "Non-Elected Retained Share"). In such event, each holder of Elected
--------------------------
Cash Shares (other than the Investor) shall be allocated a portion of the Non-
Elected Retained Shares in lieu of Elected Cash Shares (after giving effect to
Section 2.6(e)) equal to (i) the number of Elected Cash Shares held by such
holder, multiplied by (ii) a fraction, the numerator of which is the number of
Non-Elected Retained Shares and the denominator of which is the aggregate number
of Elected Cash Shares held by all holders (other than the Investor).
2.5 CONVERSION OF COMMON STOCK OF NEWCO.
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(a) The shares of common stock, par value $.01 per share ("Newco
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Share"), of Newco, issued and outstanding immediately prior to the Effective
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Time shall, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become at the Effective Time 3,363,636
shares of Common Stock of the Surviving Corporation.
(b) If the Investor shall purchase Shares prior to the Effective Time
pursuant to the Stockholder Agreement, a number of such Shares, to be determined
in Investor's discretion, may be contributed by the Investor to Newco
immediately prior to the Effective Time and shall be cancelled and shall cease
to exist as of the Effective Time without any consideration being payable
therefor. Any other Shares purchased by the Investor shall be retained by the
Investor and shall be entitled to receive the Cash Merger Price (but shall not
be treated as Retained Shares).
2.6 EXCHANGE OF CERTIFICATES.
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(a) As soon as reasonably practicable as of or after the Effective
Time of the Merger, Newco shall deposit with the Paying Agent, for the benefit
of the holders of Shares, for payment in accordance with this Article II, the
funds necessary to pay the Cash Merger Price for each Share.
(b) As soon as practicable after the Effective Time of the Merger,
each holder of an outstanding certificate or certificates which prior thereto
represented Shares, upon surrender to the Paying Agent of such certificate or
certificates and acceptance thereof by the Paying Agent, shall be entitled to a
certificate or certificates representing the number of full Retained Shares of
the Surviving Corporation, if any, to be retained by the holder thereof as
Retained Shares pursuant to this Agreement and the amount of cash, if any, into
which the number of Shares previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this Agreement.
The Paying
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Agent shall accept such certificates upon compliance with such reasonable terms
and conditions as the Paying Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. After the Effective Time
of the Merger, there shall be no further transfer on the records of the Company
or its transfer agent of certificates representing Shares which have been
converted, in whole or in part, pursuant to this Agreement, into the right to
receive cash, and if such certificates are presented to the Company for
transfer, they shall be canceled against delivery of such cash. If any
certificate for Retained Shares is to be issued in, or if cash is to be remitted
to, a name other than that in which the certificate for Shares surrendered for
exchange is registered, it shall be a condition of such exchange that the
certificate so surrendered shall be properly endorsed, with signature guaranteed
or otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Company or its transfer agent any transfer or other
taxes required by reason of the issuance of certificates for such Retained
Shares in a name other than that of the registered holder of the certificate
surrendered, or establish to the satisfaction of the Company or its transfer
agent that such tax has been paid or is not applicable. Until surrendered as
contemplated by this Section 2.6(b), each certificate for Shares shall be deemed
at any time after the Effective Time of the Merger to represent only the right
to receive upon such surrender the Cash Merger Price for each Share (other than
any Retained Share) and a new certificate for each Retained Share, as
contemplated by Section 2.1.
(c) No dividends or other distributions with respect to Retained
Shares with a record date after the Effective Time of the Merger shall be paid
to the holder of any certificate for Shares not surrendered with respect to the
Retained Shares represented thereby and no cash payment in lieu of fractional
Shares shall be paid to any such holder pursuant to Section 2.6(e) until the
surrender of such certificate in accordance with this Article II. Subject to
applicable law, following surrender of any such certificate, there shall be paid
to the holder of the certificate representing whole Retained Shares issued in
connection therewith, without interest (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional retained share to which such
holder is entitled pursuant to Section 2.6(e) and the proportionate amount of
dividends or other distributions with a record date after the Effective Time of
the Merger therefor paid with respect to such Retained Shares, and (ii) at the
appropriate payment date, the proportionate amount of dividends or other
distributions with a record date after the Effective Time of the Merger but
prior to such surrender and a payment date subsequent to such surrender payable
with respect to such whole Retained Shares.
(d) All cash paid upon the surrender for exchange of certificates
representing Shares in accordance with the terms of this Article II (including
any cash paid pursuant to Section 2.6(e)) shall be deemed to have been paid in
full satisfaction of all rights pertaining to the Shares exchanged for cash
theretofore represented by such certificates.
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(e) Notwithstanding any other provision of this Agreement, each holder
of Shares retained pursuant to the Merger who would otherwise have been entitled
to retain a fraction of a Retained Share (after taking into account all Shares
delivered by such holder) shall receive, in lieu thereof, a cash payment
(without interest) equal to such fraction multiplied by the Cash Merger Price.
(f) Any cash deposited with the Paying Agent pursuant to this Section
2.6 (the "Exchange Fund") which remains undistributed to the holders of the
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certificates representing Shares 180 days after the Effective Time of the Merger
shall be delivered to the Surviving Corporation at such time and any holders of
Shares prior to the Merger who have not theretofore complied with this Article
II shall thereafter look only to the Surviving Corporation and only as general
unsecured creditors thereof for payment of their claim for cash, if any.
(g) None of Newco or the Company or the Paying Agent shall be liable
to any person in respect of any cash from the Exchange Fund delivered to a
public office pursuant to any applicable abandoned property, escheat or similar
law. If any certificates representing Shares shall not have been surrendered
prior to one year after the Effective Time of the Merger (or immediately prior
to such earlier date on which any cash in respect of such certificate would
otherwise escheat to or become the property of any Governmental Entity (as
defined below)), any such cash in respect of such certificate shall, to the
extent permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person previously
entitled thereto.
(h) The Paying Agent shall invest any cash included in the Exchange
Fund, as directed by the Investor, on a daily basis. Any interest and other
income resulting from such investments shall be paid to the Company. To the
extent that there are losses with respect to such investments, or the Exchange
Fund diminishes for other reasons below the level required to make prompt
payments of the Cash Merger Price as contemplated hereby, Investor shall
promptly replace or restore the portion of the Exchange Fund lost through
investments or other events so as to ensure that the Exchange Fund is, at all
times, maintained at a level sufficient to make such payments.
(i) The Company shall pay all charges and expenses of the Paying
Agent.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Investor and, when formed in
accordance with the terms of this Agreement, Newco, as follows (all schedule
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references in this Article III are to the schedules to the Disclosure Statement
provided by the Company to Investor as of the date hereof):
3.1 ORGANIZATION.
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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 carry on its business as now being conducted.
The Company is duly qualified or licensed to do business and in good standing in
each jurisdiction in which the property owned, leased or operated by it or the
nature of the business conducted by it makes such qualification or licensing
necessary, except in such jurisdictions where the failure to be so duly
qualified or licensed and in good standing has not had a material adverse effect
(as defined in Section 9.3 of this Agreement) that has not been cured and
reasonably would not be expected to have a material adverse effect or prevent or
materially delay the consummation of the Merger. The Company has made available
to Investor or Newco or their respective counsel, representatives or advisors,
complete and correct copies of its Certificate of Incorporation and By-laws, as
amended to the date hereof.
3.2 CAPITALIZATION.
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The authorized capital stock of the Company consists of 50,000,000
Shares and 1,000,000 shares of preferred stock, par value $.01 per share
("Company Preferred Stock"), 4,000 of which are designated as Series C 5%
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Cumulative Convertible Redeemable Preferred Stock, par value $.01 per share (the
"Series C Shares"), 18,000 of which are designated as Series D 4% Cumulative
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Redeemable Convertible Preferred Stock, par value $.01 per share (the "Series D
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Shares") and 9,000 of which are designated as Series E 4% Cumulative Redeemable
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Convertible Preferred Stock, par value $.01 per share (the "Series E Shares"
---------------
and, collectively with the Series C Shares and the Series D Shares, the
"Convertible Preferred Shares"). At the close of business the business day
----------------------------
immediately preceding the date hereof (except, with respect to subclause (d)
below, at the close of business on July 22, 1997), (a) 10,943,138 Shares were
issued and outstanding, (b) no Shares were held by the Company in its treasury,
(c) 1,409,233 Shares were reserved for issuance upon exercise of outstanding
Company Stock Options (as defined in Section 6.4), (d) 79,676 Shares were
issuable upon the conversion of the outstanding Series C Shares, (e) 3,000,000
Shares were issuable upon the conversion of the outstanding Series D Shares, (f)
no Shares were issuable upon the conversion of the outstanding Series E Shares,
(g) 328,900 Shares were issuable upon the exercise of outstanding Warrants (as
defined in Section 6.4), (h) 3,876 Series C Shares were issued and outstanding,
(i) 18,000 Series D Shares were issued and outstanding and (j) no Series E
Shares were issued and outstanding and 9,000 Series E Shares were reserved for
issuance upon the conversion of the Company's Senior Notes (of which
$18,481,867.14 aggregate principal amount is currently outstanding). The Senior
Notes may be repaid at the option of the Company at any time or from time to
time and, to the extent convertible into Series E Shares, may not be converted
into Series
-10-
E Shares prior to January 1, 1998. Except as set forth above, and except for
shares issued since the close of business on the business day immediately
preceding the date hereof upon the exercise of any then outstanding Company
Stock Option or any then outstanding Warrant or upon the conversion of any then
outstanding Convertible Preferred Shares, since such date no shares of capital
stock or other voting securities of the Company were issued, reserved for
issuance, issuable or outstanding. All outstanding Shares are, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except for the amount of Senior Notes convertible into Series E Shares
(which Series E Shares are convertible into Shares), there are no bonds,
debentures, notes or other indebtedness of the Company having the right to vote
(or convertible into, or exchangeable for, securities having the right to vote)
on any matters on which stockholders of the Company may vote. Except as set
forth above, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which the
Company is a party or by which it is bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or other voting securities of the Company or obligating the
Company to issue, grant, extend or enter into any such security, option,
warrant, call, right, commitment, agreement, arrangement or undertaking. There
are no outstanding contractual obligations of the Company to repurchase, redeem
or otherwise acquire any shares of capital stock of the Company (other than as
set forth in Section 6.4).
3.3 SUBSIDIARIES.
------------
(a) The authorized capital stock of each of the subsidiaries (as
defined in Section 9.3 of this Agreement) of the Company (the "Subsidiaries";
------------
provided that Georgia Magnetic Imaging Center, L.P., a Georgia limited
partnership ("GMIC"), shall be deemed to be a Subsidiary only for purposes of
Sections 3.3, 3.5(a), 3.6(a), 3.6(d), 3.25, 3.26 and 6.9) is set forth on
Schedule 3.3. All of the outstanding shares of capital stock of Subsidiaries
------------
are owned of record and beneficially by the Company, free and clear of all
mortgages, liens, pledges, charges, encumbrances or other security interests
(collectively, "Liens").
-----
(b) Except as set forth on Schedule 3.3, since December 31, 1996, no
------------
shares of capital stock or other voting securities of any Subsidiary were
issued, reserved for issuance, issuable or outstanding. All outstanding shares
of capital stock of Subsidiaries are, duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights. There are no
bonds, debentures, notes or other indebtedness of any Subsidiary having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Subsidiaries may vote.
There are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which the Company or any
Subsidiary is a party or by which any of them is bound obligating the Company or
any Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of any
Subsidiary or obligating the Company or any Subsidiary to issue,
-11-
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are no outstanding
contractual obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any shares of capital stock of any Subsidiary. Except for
the Company's interest in the Subsidiaries, neither the Company nor any
Subsidiary owns directly or indirectly any interest or investment in the form of
debt or equity in, and neither the Company nor any Subsidiary is subject to any
obligation or requirement to provide for or to make any investment in, any
person (other than financially insignificant holdings of publicly reporting
companies held in order to obtain filings).
3.4 AUTHORITY.
---------
The Company has the requisite corporate power and authority to execute
and deliver this Agreement and to consummate the transactions contemplated
hereby (other than, with respect to the Merger and this Agreement, the approval
of the Merger and the approval and adoption of this Agreement by the holders of
a majority of the Shares outstanding as of the record date for the Special
Meeting (the "Company Stockholder Approval")). The execution, delivery and
----------------------------
performance of this Agreement and the consummation by the Company of the Merger
and of the other transactions to which the Company is a party contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (in each case, other than, with respect to the Merger and this
Agreement, the Company Stockholder Approval). This Agreement has been duly
executed and delivered by the Company and constitutes a valid and binding
obligation of the Company enforceable against the Company in accordance with its
terms.
3.5 CONSENTS AND APPROVALS; NO VIOLATIONS.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of, the Securities Act
of 1933 as amended (the "Securities Act") and the Exchange Act (including the
filing with the SEC of the Proxy Statement/Prospectus) and the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), neither the
-------
execution, delivery or performance of this Agreement by the Company nor the
consummation by the Company of the transactions contemplated hereby will (a)
conflict with or result in any breach of any provision of the Certificate of
Incorporation or By-laws or partnership agreement, as applicable, of the Company
or any of its Subsidiaries (or, in the case of GMIC, any agreement or contract
related to the Company's investment therein), (b) except as disclosed on
Schedule 3.5 require any filing with, notice to, or Permit (as defined in
------------
Section 3.11), authorization, consent or approval of, any Federal, state or
local government or any court, tribunal, administrative agency or commission or
other governmental or other
-12-
regulatory authority or agency, domestic, foreign or supranational (a
"Governmental Entity"), (c) result in the creation or imposition of any Liens
-------------------
upon the properties or assets of the Company or any Subsidiary, (d) except as
set forth on Schedule 3.5, result in a violation or breach of, require any
------------
notice to any party pursuant to, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation, acceleration or right of non-renewal or contractually
require any prepayment or offer to purchase any debt or give rise to the loss of
a material benefit) under, any of the terms, conditions or provisions of any
Commitment (as defined in Section 3.10) to which the Company or any of its
Subsidiaries is a party or by which the Company's or any of its Subsidiaries'
properties or assets may be bound, (e) violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets or (f) except as
disclosed on Schedule 3.5 result in the loss, forfeiture, revocation,
------------
termination or diminution of any Permit, except in the case of clauses (b), (c),
(d), (e) or (f) for failures to fulfill requirements, Liens, losses,
forfeitures, revocations, diminutions, violations, breaches or defaults that,
individually or in the aggregate, have not had a material adverse effect that
has not been cured and reasonably would not be expected to have a material
adverse effect or prevent or materially delay the consummation of the Merger.
3.6 SEC DOCUMENTS; FINANCIAL STATEMENTS; OTHER FINANCIAL INFORMATION.
----------------------------------------------------------------
(a) The Company has filed with the SEC all reports, forms, schedules
and statements and other documents required to be filed by it (the "SEC
---
Documents"). As of their respective filing dates, (i) the SEC Documents
---------
complied in all material respects with the requirements of the Securities Act,
or the Exchange Act, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such SEC Documents, and (ii) none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements included in the SEC Documents
complied, as of their respective filing dates as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles ("GAAP") (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto) and fairly present, in all material respects, the consolidated
financial position of the Company and its Subsidiaries as of the dates thereof
and the results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth on Schedule 3.6 and except for liabilities
------------
and obligations incurred in the ordinary course of business consistent with past
practice since the date of the most recent consolidated balance sheet included
in the SEC Documents filed and publicly available prior to the date hereof,
neither the Company nor any of its
-13-
Subsidiaries has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a balance
sheet or in the notes thereto. Management of the Company has no reason to
believe that with respect to its and its Subsidiaries' long-lived assets and
intangible assets which are subject to Financial Accounting Standards No. 121,
as of June 30, 1997, the undiscounted future cash flows related to such assets
did not exceed the carrying values thereof recorded as of such date, as required
by GAAP.
(b) Schedule 3.6(b) sets forth, as of the close of business on July 3,
---------------
1997, (A) the consolidated indebtedness owed by the Company and its Subsidiaries
to any third party (separately identifying the portion of such indebtedness
incurred in respect of (i) any Magnetic Resonance Imaging unit (each, an "MRI
---
Unit") owned, leased or on order by the Company or any Subsidiary, including,
----
mobile and fixed site MRI Units, (ii) any equipment owned, leased or on order by
the Company or any Subsidiary, which equipment is used to provide computed axial
tomography services and imaging systems (each a "CT Unit"), and (iii) the
-------
construction costs incurred in respect of any fixed site location), and (B) the
Company's aggregate consolidated cash and cash equivalents, in the case of
clauses (A) and (B), each calculated in accordance with GAAP, consistently
applied. The term "indebtedness" shall include indebtedness for borrowed money,
------------
reimbursement obligations with respect to letters of credit and similar
instruments, obligations incurred, issued or assumed as the deferred purchase
price of property or services (other than accounts payable incurred in the
ordinary course of business consistent with past practice), obligations of
others secured by (or, for which the holder of such indebtedness has an existing
right, contingent or otherwise, to be secured) any Lien on property or assets of
the Company or any Subsidiary, capital lease obligations, and obligations in
respect of guarantees of any of the foregoing or any "keep well" or other
agreement to maintain any financial statement condition of another person, in
each case, whether or not matured, liquidated, fixed, contingent, or disputed.
(c) Schedule 3.6(c) sets forth, (i) as of June 30, 1997, a fixed asset
---------------
schedule that includes a general description of each MRI Unit and CT unit
(including upgrades thereto) owned or subject to capital lease obligations by
the Company or any Subsidiary as of that date, and (ii) as of the date of this
Agreement, a list (the "Commitments List") of all outstanding commitments by the
Company or any Subsidiary to purchase an MRI Unit or CT Unit (including upgrades
thereto), indicating for each such commitment the purchase price as indicated on
the purchase order therefor placed with the manufacturer or other seller of such
unit.
(d) To the Company's knowledge, the financial statements of GMIC as of
December 31, 1996, and June 30, 1997, set forth on Schedule 3.6(d), were
---------------
prepared in accordance with GAAP, applied on a consistent basis during the
periods involved (except that the June 30, 1997 financial statements were
prepared on the income tax basis of accounting, which is a comprehensive basis
of accounting other than GAAP), and fairly present, in all material respects,
the financial position of GMIC as of the dates thereof and the results of its
operations and cash flows
-14-
(except the June 30, 1997 financial statements, which do not contain a statement
of cash flows) for the periods then ended (subject, in the case of unaudited
statements, to normal year end adjustments).
3.7 INFORMATION SUPPLIED.
--------------------
None of the information supplied or to be supplied by the Company
specifically for inclusion or incorporation by reference in any documents to be
filed by the Company with the SEC or any other Governmental Entity in connection
with the Merger and the other transactions contemplated hereby will, on the date
of its filing or, with respect to the Proxy Statement/Prospectus, as
supplemented if necessary, on the date it is sent or given to stockholders or at
the time of the Special Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading; provided that no representation or warranty is
--------
made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Investor or Newco specifically for
inclusion or incorporation by reference therein. The Proxy Statement/Prospectus
and any such other documents filed by the Company with the SEC or with any other
Governmental Entity will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder.
3.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
------------------------------------
Except as set forth on Schedule 3.8 hereto, since the date of the most
------------
recent audited financial statements included in the SEC Documents, the Company
and its Subsidiaries have conducted their respective businesses only in the
ordinary course consistent with prior practice, and there has not been (a) any
material adverse change, (b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or property) with respect
to any of the Company's capital stock, except for regular dividends on the
Series D Shares and Series C Shares in accordance with the terms thereof, (c)
any split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock, (d) (i) any
granting by the Company or any Subsidiary to any officer of the Company of any
increase in compensation, (ii) any granting by the Company or any Subsidiary to
any officer, employee, director or consultant of any increase in severance or
termination pay or (iii) any entry by the Company or any Subsidiary into any
written employment agreement, or any severance or termination agreement or
arrangement with any officer, employee, director or consultant, (e) any damage,
destruction or loss to property, whether or not covered by insurance, that,
individually or in the aggregate, has not been cured and would not be reasonably
expected to have, individually or in the aggregate, a material adverse effect,
(f) any change in accounting methods, principles or practices by the Company or
any Subsidiary, (g) any delivery of a notice of non-renewal or any other failure
to renew
-15-
contracts or agreements between the Company or any Subsidiary, on the one hand,
and hospitals, clinics, medical or healthcare providers, health maintenance
organizations or other customers or third party payors, on the other hand, which
are material, individually or in the aggregate, except that any such event shall
not be deemed material for this purpose to the extent that the Company has
obtained new or additional contracts as replacements thereof, or (h) any loss of
any employee who earned more than $100,000 in the most recent fiscal year (in
salary, bonus and other cash compensation).
3.9 LITIGATION.
----------
Except as disclosed on Schedule 3.9, there is no claim, suit, action,
------------
proceeding or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries and there
is no judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against the Company or any Subsidiary (other than such
rules or orders that are of general application to the Company's industry, none
of which has had or would likely have, a material adverse effect).
3.10 CONTRACTS.
---------
Except as set forth on Schedule 3.10, filed as exhibits to or
-------------
otherwise reflected in the report on Form 10-K filed with the SEC by the Company
related to the fiscal year ended December 31, 1996 and all SEC Documents filed
thereafter (collectively, the "Recent SEC Documents"), or delivered to or made
--------------------
available to Investor or Newco, or their respective counsel, representatives or
advisors, there are no (a) notes, bonds, mortgages, indentures, material leases,
or material Permits to which the Company is a party or which affects its assets,
or (b) other material contracts, agreements or other instruments or obligations
or any amendments, supplements or restatements of any of the foregoing ((a) and
(b), collectively, "Commitments") that (i) relate to real property, (ii) relate
-----------
to services provided by the Company to or at hospitals, clinics, medical or
healthcare providers or other customers or services paid for by health
maintenance organizations or other third party payors, (iii) relate to the
construction, reconstruction, maintenance, transportation or use of Magnetic
Resonance Imaging equipment, (iv) relate to any proposed Alternative Transaction
(as defined below) as to which discussions have not been terminated prior to the
date hereof, including all Commitments containing confidentiality, standstill,
non-solicitation or similar provisions, (v) relate to contracts for the
provision of services provided to the Company by physicians, physician groups or
other medical professionals or (vi) are otherwise material to the business,
financial condition or results of operations of the Company and its
Subsidiaries, taken as a whole. Neither the Company nor any Subsidiary is and,
to the knowledge of the Company, no other party is in violation of or in default
under (nor does there exist any condition affecting the Company, or to the
Company's knowledge, other parties to such Commitments which upon the passage of
time or the giving of notice or both would reasonably be expected to cause such
a violation of or default under)
-16-
any material Commitment to which it is a party or by which it or any of its
properties or assets is bound. Each Commitment constitutes a valid and binding
obligation of the Company and/or Subsidiary party thereto and, to the knowledge
of the Company, each other party thereto, enforceable against such other party
in accordance with its terms.
3.11 COMPLIANCE WITH LAWS.
--------------------
The Company and each Subsidiary is in compliance with all applicable
statutes, laws, codes, ordinances, regulations, rules, Permits, judgments,
decrees and orders of any Governmental Entity applicable to its assets,
properties, business or operations, except for such failures to be in compliance
as have not had a material adverse effect that has not been cured and would not
be reasonably expected to have, individually or in the aggregate, a material
adverse effect. The Company and each Subsidiary has in effect (and the Company
and/or each Subsidiary has timely made appropriate filings for issuance or
renewal thereof) all Federal, state, local and foreign governmental approvals,
authorizations, certificates, filings, franchises, licenses, notices, permits
and rights, including all certificates of need and authorizations under
Environmental Laws (as defined below) and exemptions from any of the foregoing
(collectively, "Permits") necessary for it to own, lease or operate its
-------
properties and assets and to carry on its business as now conducted, except for
the failure to have such Permits that, individually or in the aggregate, has not
had and would not reasonably be expected to have a material adverse effect.
Schedule 3.11 contains a list of all material Permits (including, without
-------------
limitation, all Certificates of Need), and copies thereof have been provided to
Investor or its counsel. No default under any Permit has occurred, except for
defaults under Permits that, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect. The Company has
received no notice of any pending investigation or review by any Governmental
Entity with respect to the Company or any Subsidiary. To the Company's
knowledge, no such investigation or review is threatened.
3.12 ENVIRONMENTAL MATTERS.
---------------------
Except as set forth in Schedule 3.12:
-------------
(a) the Company and each Subsidiary is, and has been, in compliance
with all applicable Environmental Laws (as defined below) except for any
noncompliance that, individually or in the aggregate, has not had a material
adverse effect that has not been cured and would not reasonably be expected to
have a material adverse effect. The term "Environmental Laws" means any
------------------
Federal, state, provincial, regional, municipal, local or foreign judgment,
order, decree, statute, law, ordinance, rule, regulation, code, permit, consent,
approval, license, writ, decree, directive, injunction or other enforceable
governmental requirement, including any registration requirement, relating to:
(A) Releases (as defined below) or threatened Releases of Hazardous Materials
(as defined below) into the
-17-
environment; (B) the generation, treatment, storage, disposal, use, handling,
manufacturing, transportation or shipment of Hazardous Materials; or (C)
otherwise relating to pollution or protection of health or safety or the
environment;
(b) there has been no Release or threatened Release of Hazardous
Materials, in, on, under or affecting any property now or previously owned,
leased, controlled or operated by the Company or any Subsidiary or, to the
knowledge of the Company, any adjacent site that has had or would reasonably be
expected to have a material adverse effect. The term "Release" has the meaning
-------
set forth in 42 U.S.C. (S) 9601(22). The term "Hazardous Materials" means any
-------------------
pollutant, contaminant, hazardous, radioactive or toxic substance, material,
constituent or waste, or any other waste, substance, chemical or material
regulated under any Environmental Law, including (1) petroleum, crude oil and
any fractions thereof, (2) natural gas, synthetic gas and any mixtures thereof,
(3) asbestos and/or asbestos-containing material, (4) radon and (5)
polychlorinated biphenyls ("PCBs"), or materials or fluids containing PCBs;
----
(c) there is no pending, or, to the knowledge of the Company,
threatened claim, action, demand, investigation or inquiry of or against the
Company by any Governmental Entity or other person relating to any actual or
potential violations of Environmental Law or any actual or potential obligation
to investigate or remediate a Release or threatened Release of any Hazardous
Materials;
(d) neither the Company nor any Subsidiary has assumed, whether by
contract or operation of law, any liabilities or obligations arising under
Environmental Laws in connection with properties or facilities previously owned,
leased or operated by the Company or any Subsidiary or in connection with any
divisions, subsidiaries, companies or other entities formerly owned by the
Company or any Subsidiary; and
(e) there are no underground or aboveground storage tanks,
incinerators or surface impoundments at, on or about, under or within any
property, owned, leased, controlled or operated by the Company or any
Subsidiary, and no such tanks, incinerators or impoundments have been removed
from any such property; and
(f) neither the Company nor any Subsidiary has used any waste disposal
site, or otherwise disposed of, transported, or arranged for the transportation
of, any Hazardous Materials to any place or location, except for any such use,
disposal, transportation or arrangement that has not had a material adverse
effect that has not been cured and reasonably would not be expected to have a
material adverse effect.
-18-
3.13 ABSENCE OF CHANGES IN BENEFIT PLANS; LABOR RELATIONS.
----------------------------------------------------
Except as disclosed on Schedule 3.13 or as expressly provided in this
-------------
Agreement, since the date of the most recent audited financial statements
included in the SEC Documents, there has not been any adoption or amendment in
any material respect by the Company or any Subsidiary of any collective
bargaining agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan or arrangement providing
benefits to any current or former employee, officer or director of the Company
or any Subsidiary (for the avoidance of doubt, regular salary and/or wage
increases and modifications to bonus, commission and other incentive
compensation arrangements in case with respect to non-officer employees of the
Company or any Subsidiary in the ordinary course of business and consistent with
past practice are excluded from the foregoing). Except as set forth in Schedule
--------
3.13 and except as provided in the Company's certificates and bylaws or as
----
expressly provided in this Agreement, there exist no employment, consulting,
severance, termination or indemnification agreements or arrangements between the
Company and any current or former employee, officer or director of the Company.
Schedule 3.13 contains a list of all amounts payable or that will or may become
-------------
payable to each director, officer or employee or former director, officer or
employee of the Company or any Subsidiary pursuant to any employment, change-in-
control, severance or termination agreement or arrangement, other than pursuant
to the Employment Agreements, as a result of the Merger. There are no
collective bargaining or other labor union agreements to which the Company or
any Subsidiary is a party or by which it is bound. To the knowledge of the
Company, since January 1, 1994, the Company has not encountered any labor union
organizing activity, or had any actual or threatened employee strikes, work
stoppages, slowdowns or lockouts.
3.14 EMPLOYMENT MATTERS; AFFILIATE TRANSACTIONS.
------------------------------------------
(a) Schedule 3.14(a) sets forth a list of all directors and officers
----------------
of the Company and each Subsidiary as of the date hereof and the aggregate
salary, bonus and other cash compensation paid and the number of Company Stock
Options and/or Warrants granted or issued to each such officer and director and
to each employee of the Company or any Subsidiary in the most recently completed
fiscal year and paid and granted or issued to each such person from the
beginning of the current fiscal year through June 30, 1997.
(b) Schedule 3.14(b) sets forth a list of all outstanding Company
----------------
Stock Options and Warrants as of the date hereof, showing for each such Company
Stock Option and Warrant: (i) the number of Shares issuable, (ii) the number of
vested Shares, (iii) the date of grant, (iv) the exercise price and (v) the
holder thereof.
-19-
(c) Schedule 3.14(c) or the Recent SEC Documents sets forth a
----------------
description of all transactions between the Company or its Subsidiaries, on the
one hand, and any of their respective Affiliates, directors, officers,
employees, or consultants, on the other hand, in each case consummated at any
time since January 1, 1996 (except for ordinary course commercial transactions
involving MRI Units, CT Units and related equipment, and the maintenance
thereof, with General Electric Company and its Affiliates (a "GE Transaction")).
Except as set forth on Schedule 3.14(c) or reflected in the Recent SEC
----------------
Documents, or pursuant to a GE Transaction, there are no agreements or
arrangements between the Company or its Subsidiaries, on the one hand, and any
of their respective Affiliates, directors, officers, employees or consultants,
on the other hand, with respect to any such transactions. No Affiliate,
director, officer, employee or consultant of the Company owns any interest in
any asset or property (real or personal, tangible or intangible), business or
contract used or intended for use or otherwise relating to the business
currently conducted or proposed to be conducted by the Company or any
Subsidiary, other than pursuant to a GE Transaction or reflected in the Recent
SEC Documents.
3.15 ERISA COMPLIANCE.
----------------
(a) Schedule 3.15(a) contains a list of all "employee pension benefit
----------------
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) (sometimes referred to herein as "Pension
----- -------
Plans"), "employee welfare benefit plans" (as defined in Section 3(1) of ERISA)
-----
and all other benefit plans maintained or contributed to by the Company or any
other person or entity that, together with the Company, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of
1986, as amended (the "Code") (the Company and each such other person or entity,
----
a "Commonly Controlled Entity"), for the benefit of any current or former
--------------------------
employees, officers or directors of the Company or dependents of any such person
(collectively, "Benefit Plans"). The Company has delivered or made available to
-------------
Investor or Newco, or their respective counsel, representatives or advisors,
true, complete and correct copies of (i) each Benefit Plan (or, in the case of
any unwritten Benefit Plans, descriptions thereof), (ii) the most recent annual
report on Form 5500 filed with the Internal Revenue Service with respect to each
Benefit Plan (if any such report was required), (iii) the most recent summary
plan description for each Benefit Plan for which such summary plan description
is required and (iv) each trust agreement and group annuity contract relating to
any Benefit Plan. None of the following have occurred which could have a
material adverse effect: (A) any failure to administer any Benefit Plan in all
material respects in accordance with its terms, (B) any failure by the Company
or any Subsidiary or any Benefit Plan to comply in all material respects, or any
failure of any Benefit Plan to be operated and administered in all material
respects, in accordance with the applicable provisions of ERISA and the Code,
(C) any "reportable event" or "prohibited transaction" (as such terms are
defined in ERISA and the Code), (D) any termination of any Benefit Plan which
results in a "reportable event," or (E) the consummation of the transactions
-20-
entered into pursuant to this Agreement if such transactions result in a
"reportable event."
(b) Except as disclosed in Schedule 3.15(b), all Pension Plans
----------------
intended to qualify under Section 401(a) of the Code have been the subject of
determination letters from the Internal Revenue Service to the effect that such
Pension Plans are qualified and exempt from Federal income taxes under Section
401(a) and 501(a), respectively, of the Code, and no such determination letter
has been revoked nor has any such Pension Plan been amended since the date of
its most recent determination letter or application therefor in any respect, and
no event has occurred that would adversely affect its qualification or
materially increase its costs in a manner which would constitute a material
adverse effect. There have been no material violations of ERISA or the Code
with respect to the filing of applicable documents, notices or reports
(including, without limitation, annual reports filed on IRS Form 5500) relating
to any Benefit Plan maintained by the Company or any Commonly Controlled Entity
with any Governmental Authority or the furnishing of such required documents to
the participants or beneficiaries of such Benefit Plans.
(c) Neither the Company nor any Commonly Controlled Entity has within
the five year period immediately preceding the date hereof maintained,
contributed to or been obligated to contribute to any Benefit Plan that is
subject to Title IV of ERISA or Section 412 of the Code. Neither the Company
nor any Commonly Controlled Entity is required to contribute to any
"multiemployer plan" (as defined in Section 4001(a) (3) of ERISA) or has
withdrawn from any multiemployer plan where such withdrawal has resulted or
would result in any "withdrawal liability" (within the meaning of Section 4201
of ERISA) that has not been fully paid.
(d) With respect to any Benefit Plan that is an employee welfare
benefit plan, except as disclosed in Schedule 3.15(d), (1) no such Benefit Plan
----------------
is funded through a "welfare benefits fund", as such term is defined in Section
419 (e) of the Code, (2) each such Benefit Plan that is a "group health plan",
as such term is defined in Section 5000 (b)(1) of the Code, complies
substantially with the applicable requirements of Section 4980B(f) of the Code
and (3) except as provided in writing in such plan, there are no understandings,
agreements or undertakings, written or oral, that would prevent any such plan
(including any such plan covering retirees or other former employees) from being
amended or terminated without material liability to the Company or any
Subsidiary on or at any time after the Effective Time. Except as set forth in
Schedule 3.15(d), no Benefit Plan that is a welfare benefit plan provides for
----------------
post-retirement medical or life insurance benefits coverage to any current or
former employee, officer, or director of the Company or any dependent of any
such individual except as may be required under Section 4980B of the Code.
-21-
(e) Except as set forth on Schedule 3.15(e) and except with respect to
----------------
the Company Stock Options, no employee or director of the Company will be
entitled to any additional compensation or benefits or any acceleration of the
time of payment or vesting of any compensation or benefits under any Benefit
Plan as a result of the transactions contemplated by this Agreement. It shall
be assumed for purposes of the preceding sentence that no payments will be
received by, or accelerated to, any such employee or director as a result of the
termination of such individual's employment/service relationship by the
Surviving Corporation after the Effective Time.
(f) All contributions due and payable on or before the Closing Date in
respect of any Benefit Plan have been made in full and proper form, or adequate
accruals have been provided for in the financial statements contained in the SEC
Documents, in accordance with GAAP, for all other contributions or amounts in
respect of the Benefit Plans for periods ending on the Closing Date, or, in the
case of any contributory Benefit Plan, amounts have been contributed to such
Benefit Plan within the time prescribed by the Code, ERISA, or any regulations
thereunder or interpretations thereof by the Internal Revenue Service or the
Department of Labor.
(g) As of the Closing Date, there are no actions, suits, disputes,
arbitrations or claims pending (other than routine claims for benefits) and the
Company has received no notice of any legal, administrative or other proceedings
or governmental investigations pending or, to the knowledge of the Company and
any Commonly Controlled Entity, threatened against any Benefit Plan or against
the assets of any Benefit Plan.
3.16 TAXES.
-----
(a) The Company has filed all tax returns and reports required to be
filed by it (which returns are true and complete in all material respects) and
has paid all taxes due and required to be paid by it. The most recent financial
statements contained in the SEC Documents reflect an adequate reserve for all
taxes payable by the Company or any Subsidiary for all taxable periods and
portions thereof through the date of such financial statements. No deficiencies
for any taxes have been proposed, asserted or assessed against the Company or
any Subsidiary that have not either been fully paid or specifically reserved
against in the financial statements included in the SEC Documents, and, except
as set forth on Schedule 3.16, no requests for waivers of the time to assess any
-------------
such taxes are pending. Except as disclosed in Schedule 3.16, none of the
-------------
income tax returns of the Company or any Subsidiary have been or is currently
being examined by the United States Internal Revenue Service or any other
Governmental Entity. Schedule 3.16 sets forth the periods during which the
-------------
Company's and its Subsidiaries' Consolidated Federal net operating loss
carryforwards (the "NOL Carryforwards") arose and the expiration dates of the
NOL Carryforwards, identifies which portions thereof are currently limited under
Section 382 of the Code or the "separate return limitation
-22-
year" ("SRLY") rules of the consolidated return regulations, and, in the case of
----
NOL Carryforwards currently limited under Section 382 of the Code, the relevant
Section 382 limitation (within the meaning of Section 382(b) (1) of the Code).
As used in this Agreement, "taxes" shall mean all Federal, state, local and
-----
foreign income, property, sales, payroll, employment, excise, withholding and
other taxes, tariffs or other governmental charges in the nature of a tax as
well as any interest, penalties and additions to tax.
(b) Except as set forth on Schedule 3.16, no amount that could be
-------------
received pursuant to the Benefit Plans or any executed and delivered agreements
between the Company or any Subsidiary and any officer, director or employee
thereof in effect as of the date hereof (whether in cash or property or the
vesting of property) as a result of any of the transactions contemplated by this
Agreement by any employee, officer or director of the Company or any Subsidiary
who is a "disqualified individual" (as such term is defined in proposed Treasury
Regulation Section 1.280G-1) under any employment, severance, change-in-control
or termination agreement, other compensation arrangement or Benefit Plan
currently in effect would either alone, or in combination with any other amounts
to be paid, be an "excess parachute payment" (as such term is defined in Section
280G(b) (1) of the Code). No officer, director or employee of the Company or
any Subsidiary is entitled to receive any additional payment from the Company,
any Subsidiary, the Surviving Corporation, or any other person referred to in
Q&A 10 under proposed Treasury Regulation Section 1.280G-1 (a "Parachute Gross-
---------------
Up Payment") in the event that the 20 per cent parachute excise tax of Section
----------
4999(a) of the Code is imposed on such person.
(c) All Company Stock Options granted under any Stock Option Plan
qualify, under Section 162(m)(4) of the Code, as an exception from "applicable
employee remuneration," and as such, no deduction of the Company or any
Subsidiary relating to the Company Stock Options, shall be disallowed by reason
of Section 162(m) of the Code.
3.17 [Intentionally Omitted]
3.18 TITLE TO PROPERTIES; CONDITION OF ASSETS.
----------------------------------------
(a) Except as set forth in Schedule 3.18, the Company and each
-------------
Subsidiary has good and marketable title to, or valid leasehold interests in,
all its material properties and assets except for such as are no longer used in
the conduct of its businesses or as have been disposed of in the ordinary course
of business. All such material assets and properties are free and clear of all
Liens other than those set forth in Schedule 3.18 and except for Liens that,
-------------
individually or in the aggregate, do not interfere with the ability of the
Company or any Subsidiary to conduct its business as currently conducted and do
not adversely affect the value of, or the ability to sell, in any material
respect, such assets and properties.
-23-
(b) The properties and assets of the Company and its Subsidiaries are
in reasonably good repair and operating condition, ordinary wear and tear
excepted and are sufficient for the conduct of the business of the Company and
Subsidiaries as presently conducted.
(c) Except as set forth in Schedule 3.18, the Company and each
-------------
Subsidiary has complied in all material respects with the terms of all material
leases to which it is a party or under which it is in occupancy, and all such
leases are in full force and effect. The Company enjoys peaceful and
undisturbed possession under all such material leases.
(d) Neither the Company nor any Subsidiary owns any real property.
3.19 INTELLECTUAL PROPERTY.
---------------------
The Company and each Subsidiary owns, or is validly licensed or
otherwise has the right to use, without any obligation to make any fixed or
contingent payments, including any royalty payments, as applicable, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service xxxx rights, copyrights and other proprietary
intellectual property rights and computer programs that are used in the conduct
of the business of the Company as now operated (collectively, "Intellectual
------------
Property Rights"). Schedule 3.19 sets forth a description of all patents,
--------------- -------------
trademarks and copyrights and applications therefor owned by or licensed to the
Company that are used in the conduct of the business of the Company as now
operated (excluding customary commercial software licenses). Except as set
forth in Schedule 3.19, no claims are pending or, to the knowledge of the
-------------
Company, threatened that the Company is, and to the knowledge of the Company,
neither the Company nor any Subsidiary is, infringing or otherwise adversely
affecting the rights of any person with regard to any Intellectual Property
Right. To the knowledge of the Company, except as set forth in Schedule 3.19,
-------------
no person is infringing the rights of the Company with respect to any
Intellectual Property Right. The Company has not licensed, or otherwise
granted, to any third party, any rights in or to any Intellectual Property
Rights.
3.20 NON-COMPETE.
-----------
Except for local vicinity covenants provided to certain healthcare
customers of the Company or a Subsidiary or as set forth in Schedule 3.20,
-------------
neither the Company nor any Subsidiary is subject to any agreement, covenant or
understanding that restricts the Company or any Subsidiary from entering or
conducting any line of business in any location at any time.
-24-
3.21 VOTING REQUIREMENTS.
-------------------
The affirmative vote of the holders of a majority of the outstanding
Shares is the only vote of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement and the Merger.
3.22 STATE TAKEOVER STATUTES.
-----------------------
The Board of Directors of the Company has approved the Merger and this
Agreement, and such approval is sufficient to render inapplicable to the Merger
and this Agreement, the provisions of Section 203 of the DGCL to the extent, if
any, such Section is applicable to the Merger, this Agreement and the
transactions contemplated by this Agreement and the Stockholder Agreement. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement or the transactions contemplated
by this Agreement.
3.23 BROKERS; SCHEDULE OF FEES AND EXPENSES.
--------------------------------------
No broker, investment banker, financial advisor, finder or other
person is entitled to any brokerage, investment banker's, financial advisor's,
finder's or other fee or commission for which Investor, Newco or any of their
respective Affiliates (other than, after the Merger, the Company) will be liable
in connection with the execution of this Agreement by the Company or the
performance by the Company or its Subsidiaries of the Company's obligations
hereunder. The fees and expenses incurred and to be incurred by or on behalf of
the Company and/or its Subsidiaries in connection with this Agreement and the
transactions contemplated by this Agreement, including the fees and expenses of
the Financial Advisor and the fees and expenses of the Company's legal counsel
(including any counsel retained by any independent committee of the Board of
Directors of the Company or any other counsel retained to represent the
interests of the Company or its directors or shareholders), shall not exceed, in
the aggregate, the applicable amount set forth in a disclosure letter delivered
to Investor on the date hereof (the "Disclosure Letter").
-----------------
3.24 OPINION OF FINANCIAL ADVISOR.
----------------------------
The Board of Directors of the Company has received the opinion of the
Financial Advisor, addressed to the Board, dated the date of this Agreement to
the effect that, as of such date and based upon and subject to the matters set
forth therein, the consideration to be received and retained by holders of
Shares pursuant to the Merger is fair from a financial point of view to such
holders, and a copy of such opinion, signed and addressed to the Company's
Board, has been delivered to Investor.
-25-
3.25 CERTAIN ADDITIONAL REGULATORY MATTERS.
-------------------------------------
Except where a matter has not had a material adverse effect that has
not been cured or where a material adverse effect would not reasonably be
expected to occur, none of (x) the Company, any Affiliate of the Company, or,
the officers, directors, or employees or agents of the Company or any Affiliate,
(y) to the Company's knowledge (for this purpose, without independent
investigation or inquiry), any of the Persons having a direct or indirect
ownership interest in the Company or any of its Subsidiaries within the meaning
of Section 1320a-7(b)(8) of Title 42 of the United States Code or (z) to the
Company's knowledge (for this purpose, without independent investigation or
inquiry), any 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 constitute violations of, or are cause for
imposition of civil penalties upon the Company or mandatory or permissive
exclusion of the Company 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 including 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 (as
defined below) or Federal Health Care Program (as defined below) 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;
-26-
(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 part 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) of a material fact with
respect to (i) the conditions or operations of a facility in order that the
facility may qualify for CHAMPUS, Medicare, Medicaid or any other State Health
Care Program certification or any Federal Health Care Program certification, or
(ii) information required to be provided under Section 1124(A) of the Social
Security Act ("SSA") (Section 1320a-3 of Title 42 of the United States Code).
---
3.26 MEDICARE/MEDICAID PARTICIPATION; ACCREDITATION.
----------------------------------------------
(a) Except where a matter has not had a material adverse effect that
has not been cured or where a material adverse effect would not reasonably be
expected to occur, neither the Company nor any existing officers or directors of
the Company who (based on advice by Investor to the Company) is expected to 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: (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:
(i) criminal offenses relating to the delivery of an item or service
under Medicare or any State Health Care Program or any Federal Health Care
Program;
(ii) criminal offenses under federal or state law relating to patient
neglect or abuse in connection with the delivery of a health care item or
-27-
service; 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;
(iii) federal or state laws relating to the interference with or
obstruction of any investigation into any criminal offense described above in
this clause (a); or
(iv) criminal offenses under federal or state law relating to the
unlawful manufacture, distribution, prescription or dispensing of a controlled
substance.
(b) The Company or a Subsidiary has a Medicare provider number, and a
participating provider agreement in force with a Medicare Part B carrier, in
each locale, as applicable, in which the Company or such Subsidiary bills
directly to Medicare for services furnished by the Company or such Subsidiary.
(c) The Company or a Subsidiary has a Medicaid number and a
participating provider agreement in each state, as applicable, in which the
Company or such Subsidiary bills directly to such states' Medicaid agency for
services provided by the Company or such Subsidiary.
(d) The Company or a Subsidiary intends to seek accreditation from a
private accrediting organization and has no reason to believe that such
accreditation will not be issued in the ordinary course.
3.27 REGULATED CUSTOMERS.
-------------------
To the Company's knowledge (for this purpose, without independent
investigation or inquiry) each party to each Commitment (other than the Company
and its Subsidiaries) and each other person to which the Company or any
Subsidiary provides services has all Permits necessary or advisable for the
conduct of its business and there are no adverse claims, suits, actions,
proceedings or investigations pending or threatened against such person, in each
case, relating to such Commitment or services.
3.28 INSURANCE.
---------
The Company has in full force and effect the insurance policies set
forth in Schedule 3.28 (the "Insurance Policies").
-------------
-28-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTOR AND NEWCO
Investor represents and warrants to the Company, with respect to
itself and Newco and, when formed in accordance with the terms hereof, Newco
represents and warrants to the Company, as follows:
4.1 ORGANIZATION.
------------
Investor is, and Newco, from and after formation in accordance with
Section 1.1 hereof (hereinafter, such formation shall be referred to as the
"Formation"), will be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization and has all requisite
power and authority to carry on its business as now being conducted. Investor
is and, from and after Formation, Newco will be, duly qualified or licensed to
do business and is in good standing in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such
qualifications or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed (individually or in the aggregate)
could not be reasonably expected to either prevent or materially delay the
consummation of the Merger or impair its ability to perform its obligations
hereunder. Investor has made, and from and after Formation, Newco will make
available to the Company complete and correct copies of their certificate of
formation, operating agreement, certificate of incorporation and by-laws, as
amended to the date hereof.
4.2 AUTHORITY.
---------
Investor has, and Newco, from and after Formation, will have the
requisite power and authority to execute and deliver this Agreement and the
Stockholder Agreement, and to consummate the transactions contemplated by this
Agreement and the Stockholder Agreement. The execution, delivery and
performance of this Agreement and the Stockholder Agreement, and the
consummation of the transactions contemplated by this Agreement and the
Stockholder Agreement, have been (or, will be, in case of Newco) duly authorized
by all necessary action on the part of Investor and Newco and no other
proceedings on the part of Investor and Newco are (or, will be, in the case of
Newco) necessary to authorize this Agreement or the Stockholder Agreement or to
consummate the transactions contemplated hereby or thereby. Each of this
Agreement and the Stockholder Agreement has been (or, will be, in the case of
Newco) duly executed and delivered by Investor and Newco and constitutes (or,
will constitute, in the case of Newco) a valid and binding obligation of
Investor and Newco enforceable against Investor and Newco in accordance with its
terms.
-29-
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
-------------------------------------
Except for filings, permits, authorizations, consents and approvals as
may be required under, and other applicable requirements of the Exchange Act,
the HSR Act, the DGCL and state takeover laws, neither the execution, delivery
or performance of this Agreement or the Stockholder Agreement by Investor and
Newco, nor the consummation by Investor and Newco of the transactions
contemplated hereby or thereby will (i) conflict with or result in any breach of
any provision of the respective certificate of incorporation or formation or by-
laws or operating agreement, or comparable documents of Investor and Newco, as
the case may be, (ii) require any filing with, notice to, or permit,
authorization, consent or approval of, any Governmental Entity (except where the
failure to obtain such permits, authorizations, consents or approvals or to make
such filings would not reasonably be expected to prevent or materially delay the
consummation of the Merger), (iii) result in a violation or breach of, require
any notice to any party pursuant to, or constitute (with or without due notice
or lapse of time or both) a default (or give rise to any right of termination,
amendment, cancellation or acceleration) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, lease, contract,
agreement or other instrument or obligation to which Investor or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Investor, any of its subsidiaries or
any of their properties or assets, except in the case of clauses (iii) and (iv)
for violations, breaches or defaults which could not, individually or in the
aggregate, be reasonably expected to either prevent or materially delay the
consummation of the Merger or impair its ability to perform its obligations
hereunder.
4.4 INFORMATION SUPPLIED.
--------------------
None of the written information supplied or to be supplied by Investor
or Newco specifically for inclusion or incorporation by reference in the Proxy
Statement/Prospectus, as supplemented if necessary, and any other documents to
be filed by the Company with the SEC or any Governmental Entity in connection
with the Merger and the other transactions contemplated hereby will, on the date
of its filing or, with respect to the Proxy Statement/Prospectus, as
supplemented if necessary, on the date it is sent or given to stockholders or at
the time of the Special Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading.
-30-
4.5 INTERIM OPERATIONS OF NEWCO.
---------------------------
Newco was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
4.6 BROKERS.
-------
No broker, investment banker, financial advisor, finder or other
person is entitled to any brokerage, investment banker's, financial advisor's,
finder's or other fee or commission for which the Company will be liable in
connection with the execution of this Agreement by Investor and Newco or the
performance by Investor and Newco of their obligations hereunder.
4.7 FINANCING.
---------
Investor has sufficient sources of liquid capital funds, and
concurrently with the Effective Time will fund, in cash, to the Company at least
(a) $37 million in equity capital and (b) $35 million in subordinated PIK notes
of the Company having substantially the terms and conditions reflected on
Schedule 4.7 attached hereto (the "Junior Notes"). Investor has delivered to
------------
the Company true and correct copies of signed letters received by Investor with
respect to the balance of the financing (the "Financing Letters") required for
-----------------
the consummation of the transactions contemplated hereby. A copy of each
Financing Letter is set forth in EXHIBIT B. Assuming satisfaction of all
applicable conditions set forth in the Financing Letters and full funding
thereunder, such financing, together with the equity capital in Newco and
proceeds from the issuance of the Junior Notes, will provide sufficient funds to
(i) pay the aggregate Cash Merger Price with respect to all outstanding Shares,
on a fully diluted basis, (ii) prepay, redeem, refinance or renegotiate the
Company's existing indebtedness, if required to consummate the Merger and the
other transactions contemplated hereby, and pay any and all fees, expenses,
costs and penalties in connection with any such prepayment, redemption,
refinancing or renegotiation and in connection with obtaining of the financing
contemplated by the Financing Letter, (iii) pay the fees and expenses of the
Financial Advisor and the Company's legal counsel (subject to Section 3.23
hereof), (iv) consummate all of the other transactions contemplated by this
Agreement, and (v) provide sufficient working capital needs of the Company
following the Merger (as determined by Investor).
-31-
ARTICLE V
COVENANTS
5.1 CONDUCT OF BUSINESS.
-------------------
From the date hereof to the Effective Time, except as set forth on
Schedule 5.1, the Company shall, and shall cause each Subsidiary to, carry on
------------
its business in the ordinary course consistent with past practice and use
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, licensees and others having
significant business dealings with it. Without limiting the generality of the
foregoing, from the date hereof to the Effective Time, the Company shall not and
shall cause each Subsidiary not to (except as expressly permitted by this
Agreement or with Investor's consent, which consent shall be deemed given after
Investor's receipt of the Company's written request for a waiver of a covenant
in this Section 5.1, which request has not been rejected in writing by Investor
within three days after Investor's signed receipt thereof by overnight courier
service):
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions in respect of, any of its capital stock other than regular
dividends on the Company's Series D Shares in accordance with the terms of such
securities, (ii) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for Shares of its capital stock, or (iii) purchase, redeem or
otherwise acquire any Shares or any capital stock of the Company or any
Subsidiary or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(b) issue, deliver, sell, pledge or otherwise encumber any shares of
its capital stock, any other voting securities or any securities convertible
into, or any rights, warrants or options to acquire, any such shares, voting
securities or convertible securities (other than the conversion of the Company's
Series D Shares and Series C Shares, in accordance with the terms of such
securities and the issuance of Shares upon the exercise of Company Stock Options
or Warrants outstanding on the date hereof in accordance with their present
terms);
(c) amend its Certificate of Incorporation or Bylaws or other
comparable charter or organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with,
or by purchasing a substantial portion of the assets or stock of, or by any
other manner, any business or any person, other than as set forth on Schedule
--------
5.1 or (ii) any assets except for the purchase of (x) equipment as identified on
---
the Commitments List or the schedule of anticipated commitments, as set forth on
-32-
Schedule 5.1 (the "Anticipated Commitments List") or (y) equipment or other
------------
assets in the ordinary course of business, provided that the amount thereof does
not exceed, individually or in the aggregate, $1,000,000, other than as set
forth on Schedule 5.1;
------------
(e) sell, lease, license, mortgage or otherwise encumber or subject to
any Lien or otherwise dispose of any of its properties or assets, except (i)
immaterial assets, (ii) in the ordinary course of business (including for trade-
ins) and (iii) where the amount of such sales does not exceed, individually or
in the aggregate, $1,000,000;
(f) except as identified on the Commitments List, the Anticipated
Commitments List or in the ordinary course of business consistent with past
practice, or as set forth in Schedule 5.1 (i) incur any indebtedness or
------------
guarantee any such indebtedness of another person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of the
Company or any Subsidiary, guarantee any debt securities of another person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing except for short-term borrowings
incurred in the ordinary course of business consistent with past practice, or
(ii) make any loans, advances (other than advances to Subsidiaries or among
Subsidiaries) or capital contributions to, or investments in, any other person;
(g) make or agree to make any capital expenditure or expenditures with
respect to property, plant or equipment which, individually, is in excess of
$50,000 or, in the aggregate, are in excess of $250,000, except as identified on
the Commitments List, the Anticipated Commitments List or otherwise in the
ordinary course of business consistent with past practice in order to satisfy
actual or expected contractual commitments to customers, or as set forth in
Schedule 5.1;
------------
(h) make any material tax election or settle or compromise any
material income tax liability;
(i) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in the most recent
consolidated financial statements (or the notes thereto) of the Company included
in the SEC Documents or incurred thereafter in the ordinary course of business
consistent with past practice, or waive any material benefits of, or agree to
modify in any material respect, any confidentiality, standstill, non-
solicitation or similar agreement to which the Company or any Subsidiary is a
party;
-33-
(j) modify, amend or terminate any Commitment to which the Company or
any Subsidiary is a party, or waive, release or assign any rights or claims,
other than in the ordinary course of business consistent with past practice;
(k) enter into any Commitment relating to the provision of services by
the Company or any Subsidiary, the maintenance of any MRI Unit or CT Unit or the
distribution, sale or marketing by third parties of the Company's or any
Subsidiary's services, including any Commitment with any hospital, clinic,
medical or healthcare provider, health maintenance organization or other
customer or third party payor, other than in the ordinary course of business
consistent with past practice;
(l) except as required to comply with applicable law or with
Investor's consent, (i) adopt, enter into, terminate or amend any Benefit Plan
or other arrangement for the benefit or welfare of any director, officer or
current or former employee, other than, in the case or non-officer employees, in
the ordinary course of business consistent with past practice (ii) increase in
any manner the compensation or fringe benefits of, or pay any bonus to, any
director or officer (other than as set forth on Schedule 5.1), (iii) pay any
------------
material benefit not provided for under any Benefit Plan, (iv) except as
permitted in clause (ii), grant any awards under any bonus, incentive,
performance or other compensation plan or arrangement or Benefit Plan (including
the grant of stock options, stock appreciation rights, stock based or stock
related awards, performance units or restricted stock, or the removal of
existing restrictions in any Benefit Plans or agreement or awards made
thereunder) or (v) take any action to fund or in any other way secure the
payment of compensation or benefits under any employee plan, agreement, contract
or arrangement or Benefit Plan; or
(m) authorize any of, or commit or agree to take any of, the foregoing
actions.
5.2 NO SOLICITATION.
---------------
(a) The Company shall, shall cause each Subsidiary to and shall direct
and use reasonable efforts to cause its and its Subsidiaries' officers,
directors, employees, representatives and agents to, immediately cease any
discussions or negotiations with any parties other than Investor and Newco that
may be ongoing with respect to an Alternative Transaction (as hereinafter
defined). The Company shall not, shall cause each Subsidiary not to and shall
not authorize and shall direct and use reasonable efforts to cause its and its
Subsidiaries' officers, directors, employees and any investment banker,
financial advisor, attorney, accountant or other representative retained by it
not to, directly or indirectly, (i) solicit, initiate or encourage (including by
way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal that may lead to an Alternative
Transaction or (ii) participate in any discussions or negotiations regarding any
proposed Alternative Transaction; provided, however, that if, during
-------- -------
-34-
the 45 days following the date of this Agreement, the Board of Directors of the
Company determines in good faith, after consultation with its financial
advisors, and following receipt of written advice from outside counsel, that
action is required by reason of the Board of Directors' fiduciary duties to the
Company's stockholders under applicable law, the Company may (subject to
compliance with Section 5.2(c)), during such 45 day period, in response to an
unsolicited Third Party Proposal (as defined herein), (A) furnish information
with respect to the Company to the person making such Third Party Proposal
pursuant to a confidentiality agreement that is at least as protective of the
Company's interests as is the Confidentiality Agreement (as defined in Section
6.2), (B) participate in negotiations regarding such Third Party Proposal, and
(C) take any position (and disclose such position to its stockholders) with
regard to such Third Party Proposal pursuant to Rules 14d-9 and 14e-2
promulgated under the Exchange Act; provided, however, that in the case of
-------- -------
clause (C), (x) the Company shall have provided Investor and Newco with as much
advance notice of its position and proposed disclosure as is practicable under
the circumstances, and (y) neither the Company nor its Board of Directors nor
any committee thereof shall, except as permitted by Section 5.2(b), withdraw or
modify its position with respect to the Merger or this Agreement or approve or
recommend such Third Party Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding
sentence by any director, officer or employee of the Company or any Subsidiary
or any investment banker, financial advisor, attorney, accountant or other
representative of the Company, acting on behalf of the Company, shall be deemed
to be a breach of this Section 5.2(a) by the Company. For purposes of this
Agreement, a "Third Party Proposal" means a bona fide proposal from a third
--------------------
party, which proposal did not result from a breach of this Section 5.2(a) by the
Company and which third party the Board of Directors of the Company determines
in good faith, taking into account all factors that the Board of Directors
reasonably deems relevant and upon the advice of the Company's financial
advisor, has the capacity and is reasonably likely to have the ability to
consummate a Superior Proposal (as defined in Section 8.1(g)). For purposes of
this Agreement, an "Alternative Transaction" means any direct or indirect
-----------------------
acquisition or purchase of assets of the Company or any Subsidiary outside the
ordinary course of business or any outstanding equity securities of the Company
or any Subsidiary, any tender offer or exchange offer that if consummated would
result in any person beneficially owning equity securities of the Company or any
merger, consolidation, business combination, sale of substantially all the
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Company or any Subsidiary, other than the transactions
contemplated by this Agreement and other than the acquisition of Shares pursuant
to the exercise of Company Stock Options or Warrants that are issued and
outstanding as of the date hereof or conversion of Series C Shares or Series D
Shares.
(b) Neither the Board of Directors of the Company nor any Committee
thereof shall (i) withdraw or modify, the approval or recommendation by such
Board of Directors or such committee of this Agreement or the Merger, (ii)
approve or recommend, any Alternative Transaction or (iii) cause the Company to
-35-
enter into any letter of intent, agreement in principle, acquisition agreement
or other agreement, including any exclusivity agreement (an "Acquisition
-----------
Agreement") with respect to an Alternative Transaction unless the Board of
---------
Directors of the Company shall have previously terminated this Agreement
pursuant to Section 8.1(g).
(c) In addition to the obligations of the Company set forth in
paragraphs (a) and (b) of this Section 5.2, the Company shall immediately advise
Investor orally and in writing of any request for information or of any proposal
or any inquiry regarding any Alternative Transaction, the material terms and
conditions of such request, proposal or inquiry and the identity of the person
making such request, proposal or inquiry. The Company will keep Investor fully
informed of the status and details (including amendments or proposed amendments)
of any such request, proposal or inquiry.
5.3 CERTAIN TAX MATTERS.
-------------------
From the date hereof until the Effective Time, (i) the Company and
each Subsidiary will file all tax returns and reports ("Post-Signing Returns")
--------------------
required to be filed; (ii) the Company and each Subsidiary will timely pay all
taxes shown as due and payable on the Company's Post-Signing Returns that are so
filed; (iii) the Company and each Subsidiary will make provision for all taxes
payable by the Company for which no Post-Signing Return is due prior to the
Effective Time; and (iv) the Company will promptly notify Investor of any
action, suit, proceeding, claim or audit pending against or with respect to the
Company and each Subsidiary in respect of any tax where there is a reasonable
possibility of a determination or decision which would reasonably be expected to
have a significant adverse effect on the Company's or any Subsidiary's tax
liabilities or tax attributes.
5.4 OTHER ACTIONS.
-------------
The Company shall not, and shall cause each Subsidiary not to, take or
omit to take any action, the taking or omission of which would reasonably be
expected to result in (a) any of the representations and warranties of the
Company set forth in this Agreement becoming untrue or inaccurate or (b) any of
the conditions set forth in Section 7.2 not being satisfied (subject to the
Company's right to take actions specifically permitted by Section 5.1, Section
5.2 or Section 8.1).
5.5 ADVICE OF CHANGES; FILINGS.
--------------------------
The Company shall confer with Investor on a regular and frequent basis
as reasonably requested by Investor, report on operational matters and promptly
advise Investor orally and, if requested by Investor, in writing, of any
material change with respect to the Company or any Subsidiary. The Company
shall promptly provide to Investor (or its counsel) copies of all filings made
by the Company or any Subsidiary with any Governmental Entity in connection with
this Agreement and the transactions contemplated hereby.
-36-
5.6 FINANCIAL INFORMATION.
---------------------
The Company shall furnish to Investor the following financial
information (all to be prepared in accordance with generally accepted accounting
principles consistently applied):
(a) as soon as available but in any event within 20 days of each
calendar month, the unaudited consolidated balance sheets and income statements
of the Company, showing its financial condition as of the close of such month
and the results of operations during such month and for the then elapsed portion
of the Company's fiscal year, in each case, setting forth the comparative
figures for the corresponding month in the prior fiscal year and the
corresponding elapsed portion of the prior fiscal year; and
(b) all documents filed with or submitted to the SEC by the Company
simultaneously with such filing or submission.
5.7 REDEMPTION OF PREFERRED STOCK AND SENIOR DEBT.
---------------------------------------------
The Company shall cause (a) all of its outstanding shares of Preferred
Stock (including the Series C Shares and the Series D Shares; provided that in
the case of the Series C Shares, Investor will give the Company at least 35 days
notice of the anticipated Election Date) to be redeemed or converted into Shares
on or prior to the Election Date in accordance with the terms set forth in the
applicable Certificates of Designation and (b) all of its outstanding Senior
Notes to be redeemed on or prior to the Election Date in accordance with their
terms.
5.8 REFINANCING OF OUTSTANDING INDEBTEDNESS.
---------------------------------------
The Company will use all commercially reasonable efforts to cause
satisfaction of the condition set forth in Section 7.3(h) of this Agreement, to
the extent requested by Investor.
5.9 MATTERS INVOLVING SMT
---------------------
(a) The Company (and where applicable, the Investor) covenants and
agrees that, prior to the Effective Time, it shall (i) cause the formation of a
new Delaware corporation, all of the capital stock of which shall be owned by
the Company ("SMT Acquisition") and (ii) if Three Rivers Acquisition Corp., a
---------------
Delaware corporation ("Three Rivers Acquisition"), becomes the owner of all of
------------------------
the shares of common stock, par value $.01, of SMT Health Services Inc., a
Delaware corporation ("SMT"), assuming the exercise of all options, warrants and
---
other rights to acquire shares of common stock, par value $.01, of SMT, the
Company shall (subject to the performance by the Investor of its covenants set
forth in Section 5.9(d)) cause SMT Acquisition to enter into an Agreement and
Plan of Merger (the "SMT/Alliance Merger Agreement") among Three Rivers Holding
-----------------------------
Corp. and the
-37-
Company pursuant to which, if Three Rivers Acquisition is merged (the "SMT/Three
Rivers Merger") with and into SMT on the terms and conditions set forth in the
Agreement and Plan of Merger dated as of June 24, 1997 (the "SMT/Three Rivers
----------------
Merger Agreement"), among SMT, Three Rivers Holding Corp., a Delaware
----------------
corporation ("Three Rivers Holding Corp.") and Three Rivers Acquisition, and the
--------------------------
other conditions set forth in Section 5.9(c) shall have been satisfied or waived
then, promptly after the Effective Time, (A) SMT Acquisition and Three Rivers
Holding Corp. shall be merged (the "SMT/Alliance Merger"), (B) each share of SMT
-------------------
Acquisition issued and outstanding as of the effective time of the SMT/Alliance
Merger will be converted into one fully paid and non-assessable share of common
stock, par value $.01, of Three Rivers Holding Corp., as the surviving
corporation, and (C) the shares of common stock, par value $.01, of Three Rivers
Holding Corp. outstanding immediately prior to the effective time of the
SMT/Alliance Merger would be converted into, in the aggregate, 3,181,818 fully
paid and non-assessable Shares of the Company as the Surviving Corporation of
the Merger.
(b) The Company further covenants and agrees that (i) if the
SMT/Alliance Merger Agreement is executed prior to the mailing of the Proxy
Statement/Prospectus, it shall, if requested by the Investor, submit the
SMT/Alliance Merger Agreement and the SMT/Alliance Merger to its shareholders
for the shareholders' approval at the Special Meeting and (ii) it will cause SMT
Acquisition to consummate the transactions contemplated by the SMT/Alliance
Merger Agreement, pursuant to the terms and subject to the conditions set forth
therein.
(c) Notwithstanding anything to the contrary contained herein, the
consummation of the transactions contemplated by the SMT/Alliance Merger
Agreement shall be subject to reasonable and customary terms and conditions,
including the satisfaction or waiver of the following conditions:
(i) the SMT/Three Rivers Merger shall have been consummated in
accordance with the terms and conditions of the SMT/Three Rivers
Merger Agreement;
(ii) the Merger shall have been consummated in accordance with
the terms of this Agreement;
(iii) the waiting period applicable to the consummation of the
SMT/Alliance Merger under the HSR Act, if applicable, shall have
expired or shall have been terminated; and
(iv) no statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced
by any court or Governmental Authority that prohibits or materially
restricts the consummation of the SMT/Alliance Merger or makes such
consummation illegal (each party agreeing to use commercially
reasonably efforts to have any such prohibition lifted).
-38-
(d) The Investor covenants and agrees that if Three Rivers Acquisition
becomes the owner of all of the shares of common stock, par value $.01, of SMT
(excluding any shares of such common stock and options and other rights to
acquire such common stock that may be issued to management of SMT in connection
with the transactions contemplated by the SMT/Three Rivers Merger Agreement),
assuming the exercise of all options, warrants and other rights to acquire
shares of common stock, par value $.01, of SMT, the Investor shall (x) (subject
to the performance by the Company of its covenants set forth in Section 5.9(a))
cause Three Rivers Holding Corp. to enter into the SMT/Alliance Merger Agreement
with SMT Acquisition and to consummate the transactions contemplated thereby;
and (y) concurrently with such consummation, cause the Company to redeem all
Junior Notes then outstanding for the unpaid principal amount thereof plus
accrued interest and otherwise in accordance with the terms thereof.
5.10 INSURANCE.
---------
The Company shall maintain the Insurance Policies in full force and
effect.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 PREPARATION OF PROXY STATEMENT/PROSPECTUS.
-----------------------------------------
The Company shall, as soon as practicable, prepare and file a
preliminary Proxy Statement/Prospectus with the SEC, reasonably satisfactory to
Investor, and will use its best efforts to respond to any comments of the SEC
and its staff and to cause the Proxy Statement/Prospectus to be declared
effective and mailed to the Company's stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the SEC or its
staff. The Company will notify Investor promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement/Prospectus or for additional
information and will supply Investor with copies of all correspondence between
the Company or any of its representatives, on the one hand, and the SEC or its
staff, on the other hand, with respect to the Proxy Statement/Prospectus or the
Merger. If at any time prior to the Stockholders Meeting there shall occur any
event that should be set forth in an amendment or supplement to the Proxy
Statement/Prospectus, the Company will promptly prepare and mail to its
stockholders such an amendment or supplement. The Company will not mail any
Proxy Statement/Prospectus, or any amendment or supplement thereto, to which
Investor reasonably objects, unless required by law, rule, regulation or the SEC
staff, in the opinion of outside counsel; provided, that
--------
-39-
Investor shall identify its objections and fully cooperate with the Company to
create a mutually satisfactory Proxy Statement/Prospectus. In connection with
such preliminary Proxy Statement/Prospectus, Proxy Statement/Prospectus and any
amendment or supplement thereto, Investor and, from and after formation, Newco
shall promptly provide all information reasonably requested by the Company.
6.2 ACCESS TO INFORMATION; CONFIDENTIALITY.
--------------------------------------
The Company and its Subsidiaries shall afford to Investor, and to
Investor's officers, employees, accountants, counsel, financial advisers and
other representatives, reasonable access during normal business hours from the
date hereof to the Effective Time to all their respective properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall furnish promptly to Investor (a) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of Federal or state securities laws and (b) all
other information concerning its business, properties and personnel as Investor
may reasonably request. Investor will hold, and will cause its officers,
employees, accountants, counsel, financial advisers and other representatives
and Affiliates to hold, any and all information received from the Company,
directly or indirectly, in confidence, according to the terms of the
confidentiality agreement dated as of April 25, 1997, between the Company and an
affiliate of Investor (the "Confidentiality Agreement").
-------------------------
6.3 REASONABLE EFFORTS; NOTIFICATION.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger, and the other transactions contemplated by this
Agreement, including (i) the obtaining of all necessary actions or nonactions,
waivers, consents and approvals from Governmental Entities and the making of all
necessary registrations and filings (including filings with Governmental
Entities, if any) and the taking of all reasonable steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the consummation of any of the transactions contemplated by this Agreement,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, (iv) the execution and
delivery of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement, (v)
reasonably cooperating with all potential sources of financing to Investor in
connection with the Merger, and the other
-40-
transactions contemplated by this Agreement, and the taking of all reasonable
steps as may be necessary or advisable to consummate one or more financing
transactions with such potential sources of financing, including participating
in "road shows" with respect to the issuance of securities in one or more
private placements or transactions registered under the Securities Act, (vi) if
necessary to obtain recapitalization accounting treatment of the Merger and the
transactions contemplated by this Agreement, taking reasonable actions to
restructure the Merger and the transactions contemplated by this Agreement and
(vii) with respect to any Shares that Investor has acquired by exercise of any
option pursuant to the Stockholder Agreement or otherwise, or which Investor has
the right to vote, including, without limitation, pursuant to a proxy granted
pursuant to the Stockholder Agreement or otherwise, Investor's voting or causing
the voting in favor of, or granting or causing the granting of consent or
approval with respect to, the Merger and the adoption by the Company of the
Merger Agreement and, if applicable,, the SMT/Alliance Merger Agreement and
SMT/Alliance Merger. In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (i) take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement, the Stockholder Agreement or any of
the other transactions contemplated by this Agreement or the Stockholder
Agreement and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Merger, this Agreement, the Stockholder
Agreement or any other transaction contemplated by this Agreement or the
Stockholder Agreement, take all action reasonably necessary to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement, the Stockholder Agreement and the other transactions
contemplated by this Agreement or the Stockholder Agreement. Nothing in this
Agreement shall be deemed to require Investor to dispose of or hold separate any
asset or collection of assets.
(b) The Company shall give prompt notice to Investor of, to the
knowledge of the Company (i) any representation or warranty made by it contained
in this Agreement becoming untrue or inaccurate or (ii) the failure by it or any
Subsidiary to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it or any Subsidiary under this Agreement;
provided, however, that no such notification shall affect the representations,
-------- -------
warranties, covenants or agreement of the parties or the conditions to the
obligations of the parties under this Agreement.
(c) Each of Investor and, from and after formation, Newco shall give
prompt notice to the Company of, to the knowledge of Investor or Newco (i) any
representation or warranty made by it contained in this Agreement becoming
untrue or inaccurate or (ii) the failure by it to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, or any adverse development with respect to the financing
contemplated by the
-41-
Financing Letters referred to in Section 4.7; provided, however, that no such
-------- -------
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
6.4 STOCK OPTION PLANS AND WARRANTS.
-------------------------------
(a) As soon as practicable following the date hereof but in no event
later than the Effective Time, the Company (or, if appropriate, the Board of
Directors of the Company or any committee administering the Stock Option Plans
(as defined below)) shall take action, including by adopting resolutions or
taking any other actions, so as to allow each outstanding option to purchase
Shares (a "Company Stock Option") heretofore granted under any stock option,
--------------------
stock appreciation rights or stock purchase plan, program or arrangement of the
Company (collectively, the "Stock Option Plans") and each outstanding warrant or
------------------
other right or option to purchase Shares (a "Warrant") in each case outstanding
-------
immediately prior to the date hereof, whether or not then exercisable, either
(i) shall be canceled at the Effective Time in exchange for an amount in cash,
payable at the time of such cancellation, equal to the product of (x) the number
of Shares subject to such Company Stock Option or Warrant immediately prior to
the Effective Time and (y) the excess of the Cash Merger Price over the per
Share exercise price of such Company Stock Option or Warrant (the "Net Amount")
----------
or (ii) shall be converted immediately prior to the Effective Time into the
right solely to receive the Net Amount; provided, that no such cash payment has
--------
been made. The Company shall not make, or agree to make, any payment of any
kind to any holder of a Company Stock Option or a Warrant (except for the
payment described above) without the consent of Investor (which consent will not
be unreasonably withheld).
(b) All Stock Option Plans shall be terminated as of the Effective
Time and the provisions in any other Benefit Plan providing for the issuance,
transfer or grant of any capital stock of the Company or any interest in respect
of any capital stock of the Company shall be terminated as of the Effective
Time. The Company shall ensure that following the Effective Time, no holder of
a Company Stock Option or Warrant or any participant in any Stock Option Plan
shall have any right thereunder to acquire any capital stock of the Company,
Investor or the Surviving Corporation, except as agreed to otherwise by the
Investor.
(c) The Surviving Corporation shall continue to be obligated to pay
the Net Amount to holders of any Company Stock Options or Warrants converted in
accordance with clause (y) of Section 6.4(a).
(d) The Company shall pay its portion and withhold and deposit the
proper amount of all Federal and state payroll and employment taxes required to
be paid and withheld from the Net Amount.
-42-
6.5 INDEMNIFICATION, EXCULPATION.
----------------------------
(a) All rights to indemnification and exculpation (including the
advancement of expenses) from liabilities for acts or omissions occurring at or
prior to the Effective Time (including with respect to the transactions
contemplated by this Agreement) existing as of the date hereof in favor of the
current or former directors, officers and employees of the Company, as provided
in the Company's or Subsidiary's Certificate of Incorporation and/or its By-laws
and/or any indemnification agreements and pursuant to applicable law shall be
assumed by the Surviving Corporation in the Merger, without further action, as
of the Effective Time and shall survive the Merger and shall continue in full
force and effect without amendment, modification or repeal in accordance with
their terms for a period of not less than 5 years after the Effective Time;
provided, however, that if any claims are asserted or made within such period,
-------- -------
all rights to indemnification (and to advancement of expenses) hereunder in
respect of any such claims shall continue, without diminution, until disposition
of any and all such claims.
(b) For a period of at least five years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect standard policies
of directors' and officers' liability insurance in an aggregate coverage amount
not less than the coverage amounts maintained by the Company as of the date
hereof and including coverage with respect to claims arising from facts or
events which occurred before the Effective Time to the extent available.
(c) The provisions of this Section 6.5 are intended to be for the
benefit of, and will be enforceable by, each indemnified party, his or her heirs
and his or her representatives.
6.6 REGISTRATION RIGHTS AGREEMENT.
------------------------------
Prior to the Effective Time, the Company shall execute and deliver to
Investor a registration rights agreement (the "Registration Rights Agreement")
-----------------------------
in a form mutually acceptable to Investor and the Company, such agreement to
provide Investor with three demand registration rights and unlimited piggyback
and S-3 registration rights for its Shares, all subject to customary terms and
provisions.
6.7 [INTENTIONALLY OMITTED].
6.8 DIRECTORS.
---------
At the Effective Time, Investor shall be entitled to designate such
number of directors (the "Investor Nominees") of the Surviving Corporation as
-----------------
will give Investor a majority of such directors. In connection with the
foregoing,
-43-
immediately following receipt of Shareholder Approval, the Company will obtain a
resignation from each director of the Company unless Investor requests
otherwise.
6.9 FEES AND EXPENSES.
-----------------
(a) Except as otherwise provided herein and as provided below in this
Section 6.9, all fees and expenses incurred in connection with the Merger, this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such fees or expenses, whether or not the Merger is
consummated.
(b) If this Agreement is terminated (i) pursuant to Section 8.1(g),
(ii) by Investor pursuant to Section 8.1(b) or 8.1(e) as a result of any willful
breach by the Company of any covenant or agreement made in this Agreement or
(iii) by Investor pursuant to Section 8.1(b) or 8.1(e) as a result of any
failure or failures to be true as of the date hereof of one or more of the
representations and warranties made by the Company in this Agreement, which
failures to be true are reasonably expected to have an aggregate negative impact
on the value of the Company and its Subsidiaries taken as a whole (a "Negative
Impact"), of $25 million or more, the Company shall pay to Investor within 90
days of such termination (except for any termination pursuant to Section 8.1(g),
in which case payment shall be made promptly upon such termination) $10,000,000
(or, in the case of clause (iii), $5,000,000) plus all Expenses (as defined
below).
(c) If this Agreement is terminated (i) by Investor pursuant to
Section 8.1(b) or 8.1(e) as a result of any breach by the Company, other than a
willful breach, of any covenant or agreement made in this Agreement, (ii) by
Investor pursuant to Section 8.1(b) or 8.1(e) as a result of any failure or
failures to be true as of the date hereof of one or more representations and
warranties made by the Company in this Agreement which failures to be true in
the aggregate have a Negative Impact of less than $25 million, (iii) by Investor
pursuant to Section 8.1(b) or 8.1(e) as a result of any failure or failures to
be true as of the time of such termination one or more representations and
warranties, which representations and warranties were true as of the date
hereof, (iv) by Investor pursuant to Section 8.1(b) as a result of a failure of
the condition set forth in Section 7.3(c) to be satisfied, or (v) pursuant to
Section 8.1(f), the Company shall promptly pay to Investor all Expenses, and,
if, within 180 days of such termination either an Alternative Transaction shall
be consummated or the Company shall enter into an Acquisition Agreement
providing for an Alternative Transaction (in either event, the "Tail Condition")
then the Company shall pay to Investor, upon the closing of such transaction, if
and whenever it occurs, $5,000,000.
(d) If this Agreement is terminated by Investor pursuant to 8.1(b) as
a result of a failure of the condition set forth in Section 7.1(a) to be
satisfied or pursuant to Section 8.1(d), the Company shall pay to Investor all
Expenses, and if the Tail Condition is subsequently satisfied, shall pay to
Investor
-44-
upon the closing of the relevant transaction, if and whenever it occurs,
$10,000,000 ; provided, however that no amounts whatsoever shall be payable to
Investor under this Section 6.9(d) if, at the Special Meeting or any
adjournments or postponements thereof, the Investor fails to vote or cause to be
voted, or fails to grant or to cause the granting of consent or approval with
respect to, any Shares owned by it or any Affiliate thereof or as to which it or
any Affiliate thereof has voting rights, in favor of the Merger and the adoption
by the Company of the Merger Agreement and, if applicable, the SMT/Alliance
Merger Agreement and SMT/Alliance Merger.
(e) If this Agreement is terminated (i) by Investor pursuant to
Section 8.1(b) in connection with the failure of any of the conditions set forth
in any of the following Sections: 7.1(b), 7.1(c), 7.1(d), 7.3(b), 7.3(d),
7.3(e), 7.3(f), 7.3(g), 7.3(h) or 7.3(i) and the Tail Condition is subsequently
satisfied or (ii) by Investor pursuant to Section 8.1(c) and the Tail Condition
is subsequently satisfied, the Company shall pay to Investor, upon the closing
of the relevant transaction, if and whenever it occurs, $5,000,000 plus
Expenses.
(f) The Company acknowledges that the agreements contained in this
Section 6.9 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Investor would not enter into
this Agreement. Accordingly, if the Company fails promptly to pay any amount
due pursuant to this Section 6.9, and, in order to obtain such payment, Investor
commences a suit which results in a judgment against the Company for the amounts
set forth in this Section 6.9, the Company shall pay to Investor all costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on such amounts (excluding Investor's costs and expenses)
at the prime rate of the Bankers Trust Company in effect on the date such
payment was required to be made. If such a suit results in a judgment against
Investor and/or Newco, Investor shall pay to the Company all costs and expenses
(including attorney's fees and expenses) in connection with such suit.
"Expenses" shall mean all reasonably documented out-of-pocket expenses incurred
---------
by Investor and Newco in connection with this Agreement (including the financing
contemplated hereby), the Stockholder Agreement and the transactions
contemplated hereby and thereby, including fees and expenses of its, and its
financing sources', printer, consultants, attorneys, accountants, and other
advisors; provided, however, that (i) such expenses shall not include any
advisory or similar fees paid to Investor or any Affiliate thereof or to any
investment banking firm or placement agent retained in connection with the
financing contemplated by this Agreement, and (ii) unless the Company has
previously agreed in writing to increase such amount, the aggregate amount of
such Expenses shall not exceed (i) $3,000,000 if such termination occurs prior
to September 1, 1997, or (ii) $5,000,000 if such termination occurs thereafter
(the parties further agreeing that such amounts shall be reduced, dollar for
dollar, to the extent that the Company funds the expenses (excluding for the
services of the Company's professionals) of filing or printing the Proxy
Statement/Prospectus or the solicitation of proxies with respect thereto).
-45-
(g) After the Effective Time, the Company will pay to an Affiliate of
Investor a fee of $2,500,000 in connection with arranging the transactions
contemplated hereby (including the financings thereof) and an annual management
fee of $500,000 and agree to continue to receive financial advisory services
from such Affiliate on an ongoing basis with compensation to be determined.
6.10 PUBLIC ANNOUNCEMENTS.
--------------------
Investor and, from and after formation, Newco, on the one hand, and
the Company, on the other hand, will consult with each other before issuing, and
provide each other the opportunity to review and comment upon, any press release
or other public statements with respect to the transactions contemplated by this
Agreement and shall not issue any such press release or make any such public
statement prior to such consultation, except as may be required by applicable
law, court process or by obligations pursuant to any listing agreement with any
national securities exchange or national securities quotation system. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in the form heretofore
agreed to by the parties.
6.11 STOP TRANSFER.
-------------
The Company shall not register the transfer of any certificate
representing any Subject Shares (as defined in the Stockholder Agreement),
unless such transfer is made to Investor or Newco or otherwise in compliance
with the Stockholder Agreement. The Company will inscribe upon any certificates
representing Subject Shares submitted by a Stockholder (as defined in the
Stockholder Agreement) for such purpose the following legend:
"THE SHARES OF [COMMON STOCK] [PREFERRED STOCK], $.01 PAR VALUE OF
ALLIANCE IMAGING, INC. REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A STOCKHOLDERS AGREEMENT DATED AS OF JULY 23, 1997, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED, EXCEPT IN ACCORDANCE THEREWITH. COPIES
OF SUCH AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES
OF ALLIANCE IMAGING, INC."
-46-
ARTICLE VII
CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
----------------------------------------------------------
The respective obligations of each party to effect the Merger are
subject to the satisfaction or waiver, where permissible, prior to the Effective
Time, of the following conditions:
(a) The Company Stockholder Approval shall have been obtained as
required by and in accordance with applicable law and the Certificate of
Incorporation.
(b) No statute, rule, regulation, executive order, decree or
injunction shall have been enacted, entered, promulgated or enforced by any
court or Governmental Entity that prohibits or restricts the consummation of the
Merger or makes such consummation illegal (each party agreeing to use
commercially reasonable efforts to have any such prohibition lifted).
(c) The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.
(d) The Registration Statement on Form S-4 (or an alternative form
prescribed by the SEC) shall have been declared effective and shall not be the
subject of any stop order, unless the parties shall have mutually determined
that registration under the Securities Act is not required with respect to the
Merger.
7.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO EFFECT THE MERGER.
-----------------------------------------------------------
The obligation of the Company to effect the Merger shall be subject to
the satisfaction or waiver, prior to the proposed Effective Time, of the
following conditions: All of the representations and warranties of Investor and
Newco set forth in this Agreement shall be true and correct in all material
respects as of the date hereof and (except for those that are expressly made
only as of another date) as of the Effective Time as though made on and as of
such time, and Investor and Newco shall have performed in all material respects
all covenants and agreements required to be performed by then under this
Agreement at or prior to the Effective Time.
7.3 CONDITIONS TO INVESTOR'S AND NEWCO'S OBLIGATIONS TO EFFECT THE MERGER.
----------------------------------------------------------------------
The obligations of Investor and Newco to effect the Merger shall be
subject to the satisfaction or waiver by Investor and Newco, prior to the
proposed Effective Time, of the following conditions:
-47-
(a) All of the representations and warranties of the Company set forth
in this Agreement, shall be true and correct in all material respects as of the
date hereof and (except for those that are expressly made only as of another
date) as of the Effective Time as though made on and as of such time, and the
Company shall have performed in all material respects all covenants and
agreements required to be performed by it under this Agreement at or prior to
the Effective Time.
(b) None of the following shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange or the NASDAQ, (ii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States or any
limitation by federal or state authorities on the extension of credit by lending
institutions, or a disruption of or material adverse change in either the
syndication market for credit facilities or the financial, banking or capital
markets, (iii) a commencement of a war or armed hostilities or other national
or international calamity directly or indirectly involving the United States or
(iv) in the case of any of the foregoing existing as of the date hereof, a
material acceleration or worsening thereof.
(c) There shall not have occurred any material adverse change.
(d) The conditions set forth in the Financing Letters shall have been
satisfied or waived and the funding referred to therein shall be available to
Investor and Newco on terms no less favorable to Investor and Newco than are set
forth in such Financing Letters, unless the failure of such conditions to be
satisfied or waived, or the non-availability of such funds is caused solely by
any actions or failures to act of Investor or Newco that constitute a breach of
any representation, warranty or covenant of either of them set forth in this
Agreement.
(e) All filings required to be made prior to the Effective Time with,
and all consents, approvals, authorizations and Permits required to be obtained
prior to the Effective Time from, any Governmental Entity in connection with the
consummation of the Merger, have been made and/or obtained, other than those the
failure of which to be made and/or obtained would not reasonably be expected to
have a material adverse effect or prevent or materially delay the consummation
of the Merger.
(f) All notices required to be given prior to the Effective Time with,
and all consents, approvals, authorizations, waivers and amendments required to
be obtained prior to the Effective Time from, any third party in connection with
the consummation of the Merger and the finances thereof, have been made and/or
obtained (or, if the notice, consent, approval, authorization, waiver or
amendment that is not so made and/or obtained is required pursuant to the terms
of any of the Company's indebtedness or obligations for money borrowed, the
Company repays such indebtedness or obligation on or prior to the Effective
Time), other than those the failure of which to be made and/or obtained would
not reasonably be expected to have a material adverse effect or prevent or
materially delay the consummation of
-48-
the Merger; provided that the Company shall have obtained the items set forth on
Schedule 7.3(f).
---------------
(g) Investor shall have received advice from Ernst & Young LLP that
the Merger will qualify for recapitalization accounting treatment in accordance
with GAAP consistently applied.
(h) The Company shall have taken appropriate steps to arrange for the
payment or prepayment of capital leases, promissory notes and other loan or
financing obligations (collectively, "Obligations"; provided, that such term
shall not include (i) obligations under operating leases classified as such in
accordance with GAAP or (ii) any obligations incurred from and after October 1,
1997) to which the Company or any Subsidiary is a party or by which the assets
or properties of the Company or any Subsidiary are bound (including those in
respect of MRI Units and CT Units), such that, immediately following the
Effective Time (and assuming the receipt of equity and debt financing by the
Company in connection with the Merger, as contemplated by this Agreement), the
Company will be able to pay (or prepay) the aggregate amount of all such
Obligations, including the amount of any prepayment penalties or similar
payments related thereto (but excluding from such aggregate amount (i) no more
than an aggregate principal amount of $10 million of Obligations that the
Company elects to leave outstanding (the "Carryover Obligations") and (ii)
---------------------
accrued interest on the Obligations being paid) for an amount not to exceed
$76,000,000 (assuming that all regular payments due on or before October 1, 1997
in respect of the Obligations have been paid); provided, further that (x) the
consummation of the Merger will neither give rise to a right of acceleration of,
nor constitute an event of default under the terms of, any Carryover
Obligations, except, in either case, as set forth on Schedule 7.3(h) and (y) the
---------------
Company will not incur additional indebtedness or financing obligations (again,
excluding operating leases) during the fourth quarter of 1997 in excess of an
aggregate principal or face amount thereof equal to $11 million.
(i) The holders of less than 10% of the outstanding Shares shall have
validly elected to demand the appraisal of their Shares pursuant to Section 262
of the DGCL.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 TERMINATION.
-----------
This Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the terms of this Agreement by the
stockholders of the Company as follows:
-49-
(a) By mutual written consent of Investor and the Company.
(b) By either Investor or the Company if the Effective Time shall not
have occurred on or before December 31, 1997 (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Effective Time to occur on or before
such date).
(c) By either Investor or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Merger and such order,
decree or ruling or other action shall have become final and nonappealable.
(d) By either Investor or the Company if the Company Stockholder
Approval is not obtained by reason of the failure to obtain the required vote
upon a vote held at a duly called meeting of stockholders or at any adjournment
thereof.
(e) By Investor, if (x) any of the representations and warranties of
the Company contained in this Agreement shall fail to be true and correct in any
material respect, in each case either as of when made or (except for
representations and warranties made only as of a specific date) have since
become, and at the time of termination remain, untrue in any material respect,
or (y) the Company shall have breached or failed to comply in any material
respect with any of its obligations under this Agreement (other than as a result
of a breach by the Investor or the Newco of any of their obligations under this
Agreement) and such breach of failure shall continue unremedied for ten (10)
days after the Company has received written notice from the Investor or the
Newco of the occurrence of such breach or failure; provided, however, that in
-----------------
remedying any such breach or failure the Company shall not have spent any money,
incurred any liabilities or undertaken any obligations that, individually or
together with the breach or failure so remedied, would itself constitute a
breach of or failure to perform any representation, warranty or covenant of this
Agreement.
(f) By Investor if there shall have occurred any material adverse
change.
(g) By either Investor or the Company if, prior to the Effective Time,
(i) the Board of Directors of the Company determines that a Third Party Proposal
for an Alternative Transaction constitutes a Superior Proposal (as defined
below), (ii) the Company promptly notifies Investor of its determination in
writing, which writing shall set forth the terms and conditions of the Third
Party Proposal and the identity of the person making the Third Party Proposal,
(iii) ten days have elapsed following receipt by Investor of such written
notice, (iv) during such ten day period the Company cooperates with Investor
with the intent of enabling, but not obligating, Investor and the Company to
agree to a modification of the terms and
-50-
conditions of this Agreement so that the transactions contemplated hereby may be
effected, and (v) at the end of such ten day period, the Board of Directors of
the Company continues to believe that such Third Party Proposal constitutes a
Superior Proposal and the Company pays to Investor the amount specified under
Section 6.9(b) pursuant to the terms thereof. For purposes of this Agreement, a
"Superior Proposal" means any Third Party Proposal to acquire, directly or
-----------------
indirectly at least 80% of the Shares or all or substantially all of the assets
of the Company; provided that (i) the Board of Directors of the Company
--------
determines in its good faith judgment (following consultation with and the
receipt of the advice of the Company's financial advisor) that such Third Party
Proposal is on terms that are more favorable to the Company's stockholders than
the Merger (taking into account all factors that the Board of Directors
reasonably deems relevant, including, in the judgment of the Board of Directors,
the amount and form of consideration to be received in respect of Shares, and
the timing of, and likelihood of closing such proposal and the relative value of
any non-cash consideration) and (ii) the Board of Directors of the Company
determines in its good faith judgment (following receipt of the written advice
of its outside counsel) that the failure to recommend or accept such Third Party
Proposal would violate the fiduciary duties of the Board of Directors of the
Company to stockholder under applicable law.
(h) by the Company if (i) any of the representations and warranties of
the Investor or the Newco contained in this Agreement shall fail to be true and
correct in any material respect, in each case either when made or (except for
representations and warranties made only as of a specific date) have since
become, and at the time of termination remain, untrue in any material respect,
or (ii) Investor or the Newco shall have breached or failed to comply in any
material respect with any of its obligations under this Agreement (other than as
a result of a breach by the Company of any of its obligations under this
Agreement) and such breach or failure shall continue unremedied for ten (10)
days after the Investor or the Newco has received written notice from the
Company of the occurrence of such breach or failure; provided, however, that in
-----------------
remedying any such breach or failure neither Investor nor Newco shall have spent
any money, incurred any liabilities or undertaken any obligations that,
individually or together with the breach or failure so remedied, would itself
constitute a breach of or failure to perform any representation, warranty or
covenant of this Agreement.
8.2 EFFECT OF TERMINATION.
---------------------
In the event of a termination of this Agreement by either the Company
or Investor as provided in Section 8.1, this Agreement shall forthwith become
void and there shall be no liability or obligation on the part of Investor,
Newco or the Company or their respective officers or directors, except with
respect to Section 4.6, the last sentence of Section 6.2, Section 6.9, Section
8.1, this Section 8.2 and Article IX; provided, however, that nothing herein
-------- -------
shall relieve any party for liability for any breach hereof.
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8.3 [INTENTIONALLY OMITTED]
8.4 EXTENSION; WAIVER.
-----------------
At any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto or (iii) subject to Section 8.3, waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in a written instrument signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of those rights.
8.5 AMENDMENT.
---------
To the extent permitted by applicable law, this Agreement may be
amended by action taken by or on behalf of the Boards of Directors of the
Company, Investor and Newco at any time before or after obtaining Company
Stockholder Approval. After obtaining Company Stockholder Approval, no
amendment shall be made which decreases the Merger Consideration or which
materially and adversely affects the rights of the Company's stockholders
hereunder without the approval of the stockholders of the Company. This
Agreement may not be amended except by an instrument in writing signed on behalf
of all of the parties.
ARTICLE IX
MISCELLANEOUS
9.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
---------------------------------------------------------
None of the representations, warranties or covenants (subject to the
succeeding sentence) in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time. This Section 9.1 shall not
limit any covenant or agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
-52-
9.2 NOTICES.
-------
All notices and other communications hereunder shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed),
sent by overnight courier (providing proof of delivery) or mailed by registered
or certified mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
if to Investor or Newco, to
Newport Investment LLC
c/o Apollo Management, L.P.
1301 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
and
if to the Company, to
Alliance Imaging, Inc.
0000 XxxxxxXxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Irell & Xxxxxxx LLP
000 Xxxxx Xxxx Xxxxxx
Xxxxx 0000
Attention: Xxxxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
-53-
9.3 INTERPRETATION.
--------------
When a reference is made in this Agreement to an Article or a Section,
such reference shall be to an Article or a Section of this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Unless the context otherwise
requires, words importing the singular shall include the plural, and vice versa.
Whenever the words "include", "includes" or "including" are used in this
------- -------- ---------
Agreement, they shall be deemed to be followed by the words "without
-------
limitation". The phrase "made available" in this Agreement shall mean that the
--------------
information referred to has been made available if requested by the party to
whom such information is to be made available. As used in this Agreement, the
term "subsidiary" of any person means another person, an amount of the voting
----------
securities, other voting ownership or voting partnership interests of which is
sufficient to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first person.
As used in this Agreement, "material adverse effect" means, when used in respect
-----------------------
of the Company, any effect or condition that, individually or in the aggregate
with any other effect or condition, is materially adverse to the assets,
properties, business, financial condition, results of operations or prospects of
the Company and its Subsidiaries, taken as a whole. As used in this Agreement,
"material adverse change" means, when used in respect of the Company, any change
-----------------------
or event that, individually or in the aggregate with any other change or event,
is materially adverse to the assets, properties, business, financial condition,
results of operations or prospects of the Company and its Subsidiaries, taken as
a whole. As used in this Agreement, except where expressly indicated otherwise,
the phrase "knowledge" with respect to the Company, means to the actual
---------
knowledge of the Company, its Subsidiaries, and each of their respective
directors and officers, after due inquiry (i.e., the amount of inquiry that
----
would be undertaken by a reasonably prudent business person given like facts and
circumstances). As used in this Agreement, the term "person" shall be
interpreted broadly and shall include any person, individual, corporation,
limited partnership, limited liability company, trust, association or other
entity or business organization of any kind or division thereof.
9.4 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES.
-------------------------------------------
This Agreement (a) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) except as provided in Section
6.5 is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
-54-
9.5 GOVERNING LAW.
-------------
This Agreement shall be governed and construed in accordance with the
laws of the State of Delaware.
9.6 COUNTERPARTS.
------------
This Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement and shall become effective
when two or more counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
9.7 ASSIGNMENT.
----------
Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the other parties,
which consent will not be unreasonably withheld. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
9.8 ENFORCEMENT.
-----------
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of
Delaware or in a Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In addition, each of the
parties hereto (i) consents to submit such party to the personal jurisdiction of
any Federal court located in the State of Delaware or any Delaware state court
in the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or any of the transactions contemplated hereby in any court other
than a Federal court sitting in the state of Delaware or a Delaware state court
and (iv) waives any right to trial by jury with respect to any claim or
proceeding related to or arising out of this Agreement or any of the
transactions contemplated hereby.
[Remainder of this page intentionally left blank]
-55-
IN WITNESS WHEREOF, Investor and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
NEWPORT INVESTMENT LLC, a
Delaware limited liability company
By: /s/ XXXXXXX XXXXX
---------------------------
Name: Xxxxxxx Xxxxx
Title: President
ALLIANCE IMAGING, INC., a
Delaware corporation
By: /s/ XXXXXXX X. XXXXXX
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: CEO
-56-
EXHIBITS
Exhibit A: Form of Employment Agreements: Xxxxxx and Xxxx
Exhibit B: Financing Letters
SCHEDULES
Company Disclosure Statement: Schedules to the following sections of the
Agreement (names of Schedules are for descriptive purposes only):
3.3 Subsidiaries
3.5 Consents and Approvals
3.6(b) Indebtedness
3.6(c) Fixed Assets; Commitments List
3.6(d) GMIC financial statements
3.8 Absence of Certain Changes
3.9 Litigation
3.10 Contracts
3.11 Permits
3.12 Environmental
3.13 Absence of Changes in Benefits Plans
3.14(a) Salary and Options
3.14(b) Outstanding options and warrants
3.14(c) Affiliate transactions
3.15(a) ERISA plans
3.15(b) 401(a) plans
3.15(d) Welfare Benefits/Group health
3.15(e) Benefits in connection with Merger
3.16 Taxes
3.18 Liens on Assets
3.19 Intellectual Property
3.20 Non-competes
3.23 Disclosure of Fees/Expenses letter
3.28 Insurance
5.1 Covenants/Anticipated Commitments List
Schedule 4.7: Terms of Junior Notes
Schedule 7.3(f): Required Consents
Schedule 7.3(h): Certain Debt
-00-
XXXXXXXXXX XXXXXXXXX
DATED JULY 23, 1997
Reference is made to the Agreement and Plan of Merger, dated as of
July 23, 1997, between Newport Investment LLC, a Delaware limited liability
company and Alliance Imaging, Inc., a Delaware corporation (the "Agreement").
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Capitalized terms used in the schedules attached hereto and not otherwise
defined shall have the respective meanings ascribed to such terms in the
Agreement. The inclusion of any matter on any schedule attached hereto shall
not be deemed an admission by the Company as to the materiality of such matter
nor be deemed to expand the scope of materiality for purpose of any of the
schedules attached hereto or the Agreement.
A-1
