Annual Report — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K Form 10-K for American Shared Hospital Services 72 319K
2: EX-2.1 Securities Purchase Agreement 73 250K
3: EX-10.13B Amendment to Gk Financing, LLC Operating Agreement 2 10K
4: EX-10.16 Amendment #3 to Loan and Security Agreement 2± 14K
5: EX-10.17 Amendment #4 to Loan and Security Agreement 2± 13K
6: EX-10.18 Amendment #5 to Loan and Security Agreement 2± 13K
7: EX-21 Subsidiaries of American Shared Hospital Services 1 7K
8: EX-23.1 Consent of Independent Auditors 1 9K
9: EX-27 Financial Data Schedule - Year Ended 12/31/97 1 8K
10: EX-27.A Restated Financial Data Schedule - Year 12/31/95 1 8K
11: EX-27.B Restated Financial Data Schedule - Quarter 3/31/96 1 8K
12: EX-27.C Restated Financial Data Schedule - Quarter 6/30/96 1 9K
13: EX-27.D Restated Financial Data Schedule - Quarter 9/30/96 1 8K
14: EX-27.E Restated Financial Data Schedule - Year 12/31/96 1 8K
15: EX-27.F Restated Financial Data Schedule - Quarter 3/31/97 1 8K
16: EX-27.G Restated Financial Data Schedule - Quarter 6/30/97 1 8K
17: EX-27.H Restated Financial Data Schedule - Quarter 9/30/97 1 8K
EX-2.1 — Securities Purchase Agreement
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Exhibit 2.1
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
ALLIANCE IMAGING, INC.
EMBARCADERO HOLDING CORP. I,
EMBARCADERO HOLDING CORP. II,
AMERICAN SHARED HOSPITAL SERVICES,
AND
MMRI, INC.
DATED AS OF MARCH 12, 1998
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SECURITIES PURCHASE AGREEMENT dated
as of March 12, 1998, by and among ALLIANCE
IMAGING, INC., a Delaware corporation
("Alliance"), EMBARCADERO HOLDING CORP. I, a
Delaware corporation ("Purchaser A"),
EMBARCADERO HOLDING CORP. II, a Delaware
corporation ("Purchaser B" and, together
with Purchaser A, the "Purchasers"),
AMERICAN SHARED HOSPITAL SERVICES, a
California corporation ("Parent") and MMRI,
INC., a California corporation ("M Sub").
WHEREAS, each Entity is engaged in the business of providing
mobile, shared diagnostic imaging services to hospitals, medical centers and
medical offices (including magnetic resonance imaging ("MRI") services,
computed axial tomography scanning ("CT") services, ultrasound services,
nuclear medicine services and related services) (collectively, the "Business");
WHEREAS, the Parent owns all of the issued and outstanding
shares of common stock, par value $1.00, of CT Sub (the "CT Shares") and the
Parent Partnership Interests;
WHEREAS, M Sub owns the M Sub Partnership Interests;
WHEREAS, the Sellers desire to sell to Alliance, and Alliance
desires to purchase from the Sellers, all of the Shares, on the terms and
subject to the conditions contained in this Agreement; and
WHEREAS, Alliance has designated the Purchasers, each of which
is a wholly-owned Subsidiary of Alliance, to acquire the Shares for and on
behalf of Alliance.
NOW, THEREFORE, in consideration of the premises and the
mutual representations hereinafter set forth, the parties hereto hereby agree
as follows (certain capitalized terms used herein are defined on Annex I
hereto):
ARTICLE I
PURCHASE AND SALE
1.1 TRANSFER OF SHARES.
(a) On the terms and subject to the conditions of this
Agreement, at the Closing (after the transactions referenced in Section 1.2
have been consummated), (i) the
Parent shall sell, transfer, convey and assign to Purchaser A, and Purchaser A
shall purchase and acquire from the Parent, all of the Shares (other than the M
Sub Partnership Interests), free and clear of all Encumbrances and (ii) M Sub
shall sell, transfer, convey and assign to Purchaser B and Purchaser B shall
purchase and acquire from M Sub, the M Sub Partnership Interests, free and clear
of all Encumbrances. It is agreed by the parties, that Purchaser A and Purchaser
B have been designated by, and hereto shall purchase the Shares for and on
behalf of Alliance.
(b) The Sellers shall, at any time after the Closing, upon the
request of the Purchasers, take, execute, acknowledge and deliver, and cause to
be taken, executed, acknowledged and delivered, all such further acts, deeds,
assignments, transfers, conveyances, powers of attorney or assurances as may be
required to transfer, convey, grant and confirm to and vest in the Purchasers,
good and marketable title to all of the Shares, free and clear of all
Encumbrances.
1.2 TRANSFERS OF ASSETS AND LIABILITIES.
(a) Prior to the Closing Date, the Parent and M Sub shall
effectively sell, transfer, convey and assign (the "Asset Contribution") to the
Partnership, (i) all of the Parent's and M Sub's right, title and interest in,
to and under the assets, properties, interests in properties and rights of the
Parent or M Sub, as the case may be, of every kind, nature and description,
whether real, personal or mixed, movable or immovable, tangible or intangible,
used in or held for use in the Business, wherever located and listed on
Schedule 1.2(a) hereof (the "Purchased Parent Assets") and (ii) all of the
Liabilities (other than any Excluded Liabilities) related to the Purchased
Parent Assets, on terms and conditions satisfactory to the Purchasers
including, without limitation, pursuant to such deeds, bills of sale,
endorsements, assignments and other good and sufficient instruments of sale,
transfer, conveyance and assignment (collectively, the "Conveyance
Instruments") as are necessary to sell, transfer, convey and assign to the
Partnership the Purchased Parent Assets and such Liabilities.
(b) Prior to the Closing Date, (i) the Parent shall cause each
of the Entities to effectively sell, transfer, convey and assign (the "Asset
Disposition") to the Parent all of such Entities' right, title and interest in,
to and under the assets, properties, interests in properties and rights listed
on Schedule 1.2(b) hereof (the "Excluded Assets") and (ii) the Parent shall
assume from each of the Entities all of the Excluded Liabilities which are
Liabilities of each Entity, on terms and conditions satisfactory to the
Purchasers including, without limitation, pursuant to Conveyance Instruments as
are necessary to sell, transfer, convey and assign to the Parent the Excluded
Assets and the Excluded Liabilities.
(c) Anything contained in this Agreement to the contrary
notwithstanding, (i) neither the Purchasers nor Alliance are assuming any
Liabilities (fixed or contingent, known or unknown, matured or unmatured) of
the Sellers or the Entities whether or not relating to the Business which are
specified on Schedule 1.2(c) (the "Excluded Liabilities") all of which Excluded
Liabilities shall at and after the Closing become the exclusive
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responsibility of the Parent and (ii) on the Closing Date, the Sellers or any of
their Subsidiaries (other than the Entities and GK Finance) shall retain (x) not
less than $600,000 aggregate amount of Liabilities in respect of accounts
payable (y) not less than $175,000 aggregate amount of Liabilities in respect of
accrued expenses (other than Liabilities in respect of accrued expenses
referenced in Section 1.2(c)(z)) and (z) all of the Liabilities in respect of
accrued expenses for "accrued payroll" and "accrued payroll taxes and benefits"
outstanding as of the Closing Date.
1.3 PAYMENT OF THE PURCHASE PRICE.
The aggregate purchase price (the "Purchase Price") to be paid by
Alliance to the Sellers for the Shares and the covenants set forth in Section
6.10 of this Agreement shall be a cash amount equal to $13,552,000. At the
Closing and subject to the terms and conditions of this Agreement and the
Related Documents, Alliance shall cause the Purchasers to make payment of the
Purchase Price (minus $75,000 of the Purchase Price which was previously paid
to the Parent) to the Sellers by wire transfer of immediately available funds
to the accounts previously designated in writing to the Purchasers by the
Parent.
1.4 ALLOCATION OF PURCHASE PRICE.
The parties hereto agree that the Purchase Price, subject to any
indemnification payments made hereunder, shall be allocated to the CT Shares
and to the Partnership Interests by the Purchasers on a basis reasonably
satisfactory to the Sellers.
ARTICLE II
THE CLOSING
Unless this Agreement shall have terminated pursuant to its
terms, the closing (the "Closing") of the transactions contemplated by this
Agreement and the Related Documents shall take place at the offices of
O'Sullivan Graev & Karabell, LLP, 30 Rockefeller Plaza, New York, New York
10112, at 10:00 a.m. (New York time) on a date that shall be mutually agreeable
to the parties hereto (the "Closing Date"), provided, however, that the parties
shall use commercially reasonable efforts to consummate the Closing, in
accordance with Section 6.3 hereof, as soon as practicable following the date
of the Parent Stockholder Approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Sellers jointly and severally represent and warrant to the
Purchasers and Alliance as of the date hereof, and as of the Closing Date as
follows:
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3.1 TITLE TO THE SHARES.
Each of the Sellers is the lawful record and beneficial owner of the
Shares purported to be owned by it and has good and marketable title to such
Shares, free and clear of any Encumbrances whatsoever and with no restriction
on the voting rights and other incidents of record and beneficial ownership
pertaining thereto (except restrictions imposed by federal and state securities
laws). No Entity is the subject of any bankruptcy, reorganization or similar
proceeding.
3.2 ORGANIZATION, POWER, AUTHORITY AND GOOD STANDING.
(a) CT Sub is a corporation. The Partnership is a general partnership.
The Parent was incorporated on October 31, 1983 in the State of California. CT
Sub was incorporated on May 1, 1984 in the State of Delaware. M Sub was
incorporated on October 8, 1987 in the State of California. The Partnership was
formed on March 7, 1985 in the State of California.
(b) Each Seller and each Entity is duly organized and validly existing
and in good standing under the laws of its jurisdiction of organization and has
all requisite power and authority (corporate and otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted.
(c) Each Seller and each Entity is duly qualified and in good standing
to transact business as a foreign Person in those jurisdictions set forth
opposite its name on Schedule 3.2(c), which constitute all the jurisdictions in
which the character of the property owned, leased or operated by such Person or
the nature of the business or activities conducted by such Person makes such
qualification necessary other than those jurisdictions in which the failure to
be so qualified and in good standing could not reasonably be expected to have a
Material Adverse Effect.
(d) The Purchasers have been furnished with true, correct and complete
copies of the Organizational Documents of each Entity and each Seller, in each
case as amended and in effect on the date hereof.
(e) No Entity or Seller has (i) during the five year period prior to the
date hereof, engaged in any business other than the Business or as otherwise set
forth opposite its name on Schedule 3.2(e)(i) and (ii) within the last five
years, used any trade names or assumed names other than the trade names or
assumed names set forth opposite its name on Schedule 3.2(e)(ii).
(f) Each Seller has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. Except for the Parent
Stockholder Approval, each Seller's execution and delivery of this Agreement and
each Related Document to which it is or will be a party, and the performance by
each Seller of its obligations hereunder and
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thereunder have been duly and validly authorized by all requisite corporate
action on the part of such Seller, and this Agreement and each Related Document
to which either Seller is or will be a party has been, or upon the execution
thereof will be, duly and validly executed and delivered by such Seller,
respectively, and constitutes, or upon its execution and delivery will
constitute, a valid and binding obligation of such Seller, respectively,
enforceable against such Seller, respectively, in accordance with its terms
except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law). Except as set forth on
Schedule 3.2(f), none of the execution and delivery by each Seller of this
Agreement and each Related Document, the performance by either Seller of its
obligations under this Agreement and each Related Document to which it is or
will be a party, or the consummation of the transactions contemplated hereby or
thereby, does or will (a) result in the creation of an Encumbrance upon any
Entities' assets or properties, (b) conflict with, or result in any violation or
breach of, any of the terms, conditions or provisions of, or constitute (with
due notice or lapse of time, or both) a default or give rise to any right of
contingent payment, termination, cancellation, acceleration or non-renewal,
under, any provision of any Organizational Document of any such Person or any
Contract to which any such Person is a party or by which any of its assets or
properties is or may be bound which, in the case of such Contracts, could
reasonably be expected to have a Material Adverse Effect or prevent the
consummation of the transactions contemplated hereby or under the Related
Documents and other than with respect to the foregoing for which consents have
been obtained, or (c) violate any Law applicable to any Entity or Seller, which
conflict or violation could prevent the consummation of the transactions
contemplated by this Agreement or any of the Related Documents to which any such
Person is or will be a party.
(g) Except as contemplated by this Agreement or as set forth on Schedule
3.2(g), no consent, approval, Permit, Order, notification or authorization of,
or any exemption from or registration, declaration or filing with, any
Governmental Entity or any Person is required in connection with the execution,
delivery and performance by any Seller of this Agreement or any Related Document
to which any Seller is or will be a party or the consummation by any Seller of
the transactions contemplated hereby or thereby, except for those consents,
approvals, Permits, Orders, notifications, authorizations, exemptions,
registrations, declarations or filings the failure to obtain could not
reasonably be expected to have a Material Adverse Effect or prevent the
consummation of the transactions contemplated hereunder or under the Related
Documents or for those consents, approvals, Permits, Orders, notifications,
authorizations, exemptions, registrations, declarations and filings which have
been obtained.
3.3 CAPITALIZATION.
(a) The authorized capital stock of CT Sub consists of 1,000 duly
authorized shares of common stock, par value $1.00 per share, of which 1,000
shares are duly and validly issued and outstanding, fully paid and
nonassessable, with no personal
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Liability attached to the ownership thereof and all of which are held of record
and beneficially by the Parent.
(b) The Partnership Interests of the Partnership are owned beneficially
and of record in the amounts and by the Persons set forth in Schedule 3.3(b).
(c) There are no securities outstanding which are convertible into,
exchangeable for, or carrying the right to acquire, Equity Interests of any
Entity, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
any Entity to issue, sell, register, purchase or redeem any of its Equity
Interests or any ownership interest or rights therein. There are no voting
trusts or other similar agreements to which any Entity is bound with respect to
the voting of the any Entity's Equity Interests. There are no stock appreciation
rights, phantom stock rights or similar rights or arrangements outstanding with
respect to any Entity.
(d) Except as set forth on Schedule 3.3(d), there are no Contracts,
commitments, arrangements, understandings or restrictions to which any Seller or
any of its Subsidiaries is bound relating in any way to any Equity Interest of
any Entity, including any rights of first refusal and any rights of first offer.
(e) All Shares issued by each Entity have been issued in transactions
exempt from registration under the Securities Act and the rules and regulations
promulgated thereunder and all applicable state securities or "blue sky" laws,
and no Entity has violated the Securities Act or any applicable state securities
or "blue sky" laws which may give rise to rights of rescission, cancellation or
damages in connection with the issuance of any such securities.
3.4 SUBSIDIARIES; INVESTMENTS.
No Entity owns or holds, directly or indirectly, any Equity Interest
in any Person.
3.5 FINANCIAL INFORMATION.
(a) The Parent has filed with the SEC all reports, forms, schedules and
statements and other documents required to be filed by it (the "SEC Documents").
As of their respective filing dates, (i) the SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and (ii) none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements included in the SEC Documents complied, as
of their respective filing dates, as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP (except, in
the case of unaudited
6
statements, as permitted by Form 10-Q of the SEC and as otherwise noted therein)
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present, in all material respects,
the consolidated financial position of the Parent and its Subsidiaries as of the
dates thereof and the results of operations and cash flows for the periods then
ended (subject, in the case of unaudited statements, to normal year-end audit
adjustments). Except as set forth on Schedule 3.5(a) and except for Liabilities
incurred in the ordinary course of business consistent with past practices since
the date of the most recent consolidated balance sheet included in the SEC
Documents filed and publicly available prior to the date hereof, neither the
Parent nor any of its Subsidiaries has any Liabilities of any nature (whether
accrued, absolute, contingent or otherwise) required by GAAP to be set forth on
a balance sheet or in the notes thereto.
(b) Schedule 3.5(b) contains true, correct and complete copies of the
unaudited balance sheets of each of the Entities as of December 31, 1997 (the
"Latest Balance Sheet"; and such date being the "Latest Balance Sheet Date"),
and the unaudited statements of operations, shareholders' equity and cash flows
for the twelve month period then ended, adjusted to give effect to the
consummation of the transactions contemplated by Section 1.2 hereof as if such
transactions were consummated at January 1, 1997 prepared in accordance with
GAAP (the "Entities' Financial Statements").
(c) Neither of the Sellers has any knowledge of any fact, event or
circumstance that would reasonably cause it to believe that the Entities'
Financial Statements do not fairly present, in all material respects, the
financial position of the Persons referenced therein as of the dates indicated
and the results of operations and cash flows of such Persons for the periods
indicated.
(d) Schedule 3.5(d) sets forth as of January 31, 1998, the Funded
Indebtedness owed by the Parent and each Entity to any third party (separately
identifying the portion of such Funded Indebtedness incurred in respect of each
mobile and each fixed magnetic resonance imaging unit (each, an "MRI Unit"),
each mobile and each fixed computed axial tomography unit (each, a "CT Unit"),
each single photon emission computed tomography unit (each a "SPECT UNIT"), each
ultrasound machine (each, an "Ultrasound Machine"), each respiratory system
(each a "Respiratory System"), and each cardiac catherization lab (each a "Cath
Lab" and together with the MRI Units, CT Units, SPECT Units, Ultrasound
Machines, Respiratory Systems, and Cath Labs, the "Units") owned, leased or on
order by any Entity and the Parent, if any). As of the date hereof, the sum of
the aggregate commitments of the lenders under the DVI Revolving Credit
Agreement is $5,500,000 and as of the close of business on March 10, 1998, the
aggregate principal amount of loans and obligations outstanding thereunder is
$5,222,484.75.
(e) Schedule 3.5(e) sets forth as of (other than in the case of clause
(iv) below) the date which is 10 Business Days prior to the date hereof, (i) the
specifications of each Unit owned, leased, used or on order by any Entity or the
Parent, (ii) the name of the applicable Entity or the Parent, whether such Unit
is owned, leased, used or on order and,
7
in the case of Units used but not owned or leased by any such Person, the name
of the owner or the lessee thereof, (iii) the date that such Person purchased,
commenced leasing or using or, in the case of Units on order, has committed to
purchase or lease, such Unit, (iv) the net book value per Unit as of December
31, 1997 or, in the case of Units on order, the price to be paid to the
manufacturer thereof or that any such Person or any source of financing has
committed to pay to the manufacturer thereof (specifying, if applicable, the
price applicable to the Unit and the price applicable to the coach or van used
or to be used to transport such Unit) and (v) a summary of whether Tax payments
in respect of the lease payments for each Unit are paid at the inception of the
relevant lease or as part of the monthly lease payment.
(f) Schedule 3.5(f) sets forth (i) thedate and cost of each upgrade
completed in the one year period prior to the date hereof to each Unit owned,
leased or used by each Entity or the Parent and (ii) all amounts in excess of an
aggregate of $25,000 that each Entity or the Parent has committed to pay in
respect of any pending upgrade.
(g) Schedule 3.5(g) sets forth a true and correct Schedule of all of the
accounts payable of the Entities (including payee, amount due and due date) as
of the close of business on January 31, 1998.
(h) Schedule 3.5(h) sets forth a true and correct Schedule of (i) all
principal payments or prepayments made by the Parent and each Entity for the
year ended on the Latest Balance Sheet Date and for the one month period ending
January 31, 1998, (ii) the interest expense incurred by the Parent and each
Entity in respect of Funded Indebtedness for the year ended on the Latest
Balance Sheet Date and for the one month period ending January 31, 1998, (iii)
the revenues, cash operating expenses, and EBITDA generated per Unit for the
Parent and each Entity for the year ended on the Latest Balance Sheet Date and
for the one month period ending January 31, 1998 and (iv) the capital
expenditures made by the Parent and each Entity for the year ended on the Latest
Balance Sheet Date, and for the one month period ending January 31, 1998, in
each case, setting forth such information separately for each such Person.
3.6 INFORMATION SUPPLIED.
None of the information supplied or to be supplied by the Parent
specifically for inclusion or incorporation by reference in any documents to be
filed by the Parent with the SEC or any other Governmental Entity in connection
with the Parent Stockholder Vote and the other transactions contemplated hereby
and under the Related Documents will, on the date of its filing, or, with
respect to the Proxy Statement, as supplemented if necessary, on the date it is
sent or given to stockholders or at the time of the Parent Stockholder Vote,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading; provided, that no representation or warranty is made by the Sellers
with respect to statements made or incorporated by reference therein based on
information supplied by the Purchasers
8
specifically for inclusion or incorporation by reference therein. The Proxy
Statement and any such other documents filed by the Parent with the SEC or with
any other Governmental Entity will comply as to form in all material respects
with the requirements of the Exchange Act and the rules and regulations
thereunder.
3.7 ABSENCE OF CHANGES.
Since the Latest Balance Sheet Date and on or prior to the date
hereof, except as set forth on Schedule 3.7, the Parent (with respect to the
Business) and each Entity have been operated in the ordinary course, consistent
with past practice, and there has not been:
(a) any change or event that, individually or in the aggregate with any
other change or event, has had or can reasonably be expected to have a material
adverse effect on the assets, properties, business, financial condition, results
of operations or prospects of the Business (a "Material Adverse Effect");
(b) any general uniform increase in the salaries or wages of employees
of the Parent or any Entity, or any increase in salaries or wages payable to any
officer, director or employee of any such Person whose total salary, wages,
bonus and commissions for 1997 exceeded $75,000;
(c) any change in the tax or other accounting methods or practices
followed by the Parent or any Entity, any change in depreciation or amortization
policies or rates previously adopted or any write-up of inventory or other
assets;
(d) any delivery of a notice of non-renewal or any failure to renew any
Contract by any hospitals, clinics, medical or healthcare providers, health
maintenance organizations or other customers or third party payors, which are
material, individually or in the aggregate, except that any such event shall not
be deemed material for this purpose to the extent that new or additional
Contracts as replacements thereof have been obtained;
(e) any loss of any employee of the Parent or any Entity who earned,
during 1997, more than $125,000 (in salary, bonus and other cash compensation);
(f) any sale, lease, license or other disposition of any assets with a
book value in excess of $50,000 in the aggregate;
(g) any issuance, sale or transfer of any Equity Interests of any Entity
or issuance or sale of any securities convertible into, exercisable or
exchangeable for or options or warrants to purchase or rights to subscribe for,
any such Equity Interests;
(h) any new Contract (except for any Contract related to any Employee
Benefit Plan of the Parent for which neither Entity has assumed or has any
Liability that is not disclosed hereunder) entered into with aggregate payments
which could exceed $50,000, any incurrence of Funded Indebtedness or operating
leases (other than Funded Indebtedness or operating leases outstanding on the
date hereof and disclosed on any
9
Schedule hereunder) or any amendment, waiver or modification with respect to the
terms of any Funded Indebtedness or operating leases (including, without
limitation, any increase in the commitments to extend credit thereunder);
(i) a change in any accounting principles or policies;
(j) any material Tax election made or compromise of any material Tax
Liability;
(k) any payments made by the Parent or any Entity to or for the benefit
of GK Finance (other than payments made on behalf of GK Finance and reimbursed
by GK Finance on a basis consistent with past practices and in the ordinary
course of business);
(l) any amendment to any Organizational Document or Contracts;
(m) any creation or incurrence (whether or not voluntary) of any
Encumbrance other than Permitted Encumbrances and Encumbrances which exist on
the date hereof and which have been disclosed on the Schedules to this
Agreement;
(n) any payments made or deferred in respect of accounts payable or any
expenses in a manner which is not consistent with past practices or is not in
the ordinary course of business; or
(o) any agreement, whether in writing or otherwise, to take any of the
actions specified in the foregoing clauses in this Section 3.7.
3.8 TAX MATTERS; CERTAIN DEFINITIONS.
(a) Except as set forth on Schedule 3.8(a), each Entity, each Seller and
every other corporation (a "Consolidated Affiliate") that is or has been
included (or should have been included) in the filing of a consolidated or
combined Tax Return that included any Entity or Seller, (but with respect to a
Consolidated Affiliate, only for the years that such Consolidated Affiliate was
(or should have been included) in such Tax Return (the "Years Included")),
(i) has timely paid or caused to be paid all Taxes required to
be paid by it through the date hereof and as of the Closing Date
(including any Taxes shown due on any Tax Return filed by such Entity or
Seller);
(ii) has filed or caused to be filed in a timely and proper
manner (within any applicable extension periods) all Tax Returns
required to be filed by it with the appropriate Governmental Entities in
all jurisdictions in which such Tax Returns are required to be filed;
and
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(iii) (iii) has not requested or caused to be requested any
extension of time within which to file any Tax Return, which Tax Return
has not since been filed.
(b) The Sellers have previously delivered true, correct and complete
copies of all Tax Returns filed by or on behalf of the Sellers and each Entity
for each of the Tax years of each such Person for which the applicable statutes
of limitation have not, as of the Closing Date, expired. All such Tax Returns
are true, complete and correct.
(c) Except as set forth in Schedule 3.8(c):
(i) no Entity, Seller or Consolidated Affiliate, for the Years
Included, has been notified by the Internal Revenue Service or any other
taxing authority that any issues have been raised, which issues are
currently pending, by the Internal Revenue Service or any other taxing
authority in connection with any Tax Return of any such Person, there
are no pending Tax audits and no waivers of statutes of limitation have
been given or requested with respect to any such Person which waivers
are currently in effect;
(ii) full and adequate provision has been made (A) on the Latest
Balance Sheet, and the books and records of each Entity and the Sellers
for all Tax Liabilities of such Person for all periods ending on or
prior to the Latest Balance Sheet Date, and (B) on the books and records
of each such Person for all Tax Liabilities of each such Person for all
periods beginning after the Latest Balance Sheet Date;
(iii) no Entity, Seller or Consolidated Affiliate has or shall
incur any Tax Liability from and after the Latest Balance Sheet Date
through the Closing Date other than Taxes attributable to the
transactions described herein or attributable to transactions or other
activities conducted in the ordinary course of business and consistent
with previous years and past practices;
(iv) no Entity or the Sellers is or has (A) made an election to
be treated as a "consenting corporation" under Section 341(f) of the
Code or (B) been a "personal holding company" within the meaning of
Section 542 of the Code;
(v) each Entity, Seller and Consolidated Affiliate, for the
Years Included, has complied in all respects with all applicable Laws
relating to the collection or withholding of Taxes (such as sales Taxes
or withholding of Taxes from the wages of employees);
(vi) CT Sub is, as of the Closing Date will be, and has been
from October 15, 1987 and through the Closing, a member of the
affiliated group, as defined in Section 1504 of the Code, that included
the Parent (the "Consolidated Group"). CT Sub has been included in all
consolidated Tax Returns filed by the
11
Consolidated Group for all periods during which CT Sub has been a member
of the Consolidated Group including the taxable year of the Consolidated
Group that includes the Closing Date;
(vii) no Entity or the Sellers has incurred any Liability to
make or possibly make any payments either alone or in conjunction with
any other payments, including payments that are made in connection with
transactions contemplated hereunder or under the Related Documents, that
would constitute a "parachute payment" within the meaning of, Section
280G of the Code (or any corresponding provision of state, local or
foreign income Tax Law);
(viii) no Entity has agreed with the Internal Revenue Service to
change its method of accounting and the Internal Revenue Service has not
proposed that any Entity change its method of accounting for any Tax
period;
(ix) no written claim has ever been made by any taxing authority
in a jurisdiction in which any Entity, Seller or Consolidated Affiliate
(for the Years Included) does not file Tax Returns that such Person is
or may be subject to taxation by that jurisdiction; and
(x) no Entity or the Sellers is a foreign Person within the
meaning of Treas. Reg. Section 1.1445-2(b), and the Purchasers have been
furnished with a true and accurate certificate of each such Person so
stating which complies in all respects with Treas. Reg. Section
1.1445-2(b)(1).
(d) Schedule 3.8(d) sets forth a list of all of the states and
localities with respect to which each Entity and the Sellers is required to file
or be included in a consolidated or combined filing of any corporate, income or
franchise tax returns during the three taxable years ended December 31, 1996.
(e) The Partnership, since its date of organization and for all years
and periods thereafter up to the Closing, has been validly classified as a
partnership for Federal, state and local income tax purposes and subject to the
provisions of Subchapter K of the Code, the Partnership will have a valid
Section 754 election in effect as of the Closing Date.
(f) M Sub has not engaged in any sales, transfers or dispositions of
tangible personal property (other than the sale of the M Sub Partnership
Interests to be sold on the Closing Date) during the twelve month period ending
on the Closing Date.
3.9 TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED MATTERS.
(a) Each Entity has (or will have after the consummation of the Asset
Contribution) good and marketable title to all of the assets, properties and
interests in properties, real, personal or mixed, reflected on its Latest
Balance Sheet or acquired after such Latest Balance Sheet Date (except accounts
receivable paid in full subsequent to the
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Latest Balance Sheet Date), free and clear of all Encumbrances, of any kind or
character, except for those Encumbrances set forth on Schedule 3.9 and Permitted
Encumbrances. The properties and assets necessary or required to conduct the
Business are in reasonably good repair and operating condition, ordinary wear
and tear excepted and are sufficient for the conduct of the Business as
presently conducted. After the consummation of the transactions contemplated by
Section 1.2 hereof, the Parent and M Sub shall own no assets whatsoever related
to the Business (other than the Excluded Assets) and the Partnership shall
acquire good and marketable title to all of the Purchased Parent Assets. As of
the Closing Date, each of the transactions contemplated by Section 1.2 hereof
shall have been consummated in accordance with their respective terms. Each of
Schedule 1.2(a), Schedule 1.2(b) and Schedule 1.2(c) accurately reflects the
aggregate balances of each of the assets and liabilities set forth therein, in
each case as of the date hereof.
(b) Except as set forth in Schedule 3.9, the Parent and each Entity has
complied in all material respects with the terms of all material leases to which
it is a party or under which it is in occupancy relating to the Business, and
all such leases are in full force and effect. The Parent and each Entity enjoy
peaceful and undisturbed possession under all such material leases.
3.10 REAL PROPERTY-OWNED OR LEASED.
No Entity owns any real property. Schedule 3.10(a) contains a list
and brief description of all of the real property leased by each Entity
pursuant to one or more leases (the "Leased Property"), and sets forth the
names of the lessor and the lessee and the basic terms thereof. The Leased
Property constitutes all real property used or occupied by the Entities in
connection with the Business.
3.11 INTELLECTUAL PROPERTY.
(a) Except in each case as set forth on Schedule 3.11(a):
(i) each Entity owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of,
all Intellectual Property Rights necessary or required for the conduct
of the Business (collectively, the "Owned Requisite Rights"), other than
those Intellectual Property Rights for which any Entity has a valid
license, all of which are listed on Schedule 3.11(a) (collectively, the
"Licensed Requisite Rights"; and together with the Owned Requisite
Rights, the "Requisite Rights"), and such rights to use, sell, license,
dispose of and bring actions are exclusive with respect to the Owned
Requisite Rights;
(ii) each Entity has taken reasonable and practicable steps
designed to safeguard and maintain (i) the secrecy and confidentiality
of Confidential or Proprietary Information and (ii) the proprietary
rights of each Entity in all of its Requisite Rights;
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(iii) no Entity has interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property Rights of any Person or committed any acts of unfair
competition, and no Entity has received from any Person in the past five
years any notice, charge, complaint, claim or assertion thereof, and no
such claim is impliedly threatened; and
(iv) no Entity has sent to any Person in the past five years, or
otherwise communicated to any Person, any notice, charge, complaint,
claim or other assertion of any present, impending or threatened
infringement by or misappropriation of, or other conflict with, any
Intellectual Property Rights of any Entity by such other Person or any
acts of unfair competition by such other Person, nor to the Best
Knowledge of the Sellers, is any such infringement, misappropriation,
conflict or act of unfair competition occurring or threatened.
(b) Schedule 3.11(b) contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to any
Laws by each Entity to perfect or protect its interest in its Intellectual
Property Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks and service mark
applications, copyrights and copyright applications.
3.12 AGREEMENTS, NO DEFAULTS, ETC.
(a) Except for Contracts relating to any Employee Benefit Plan listed on
Schedule 3.17(a), Schedule 3.12 contains a true and complete list and brief
description of all Contracts, to which each Entity is a party and (x) which were
entered into or made outside the ordinary course of business, or (y) which were
entered into or made in the ordinary course of business and are described in any
of clauses (i) through (xiv) of this Section 3.12(a). Except as set forth on
Schedule 3.12, no Entity is a party to any of the following: (i)
distributorship, dealer, sales, advertising, agency, manufacturer's
representative or other Contract relating to the payment of a commission; (ii)
Contract for the employment of any officer, employee or consultant or any other
type of Contract or understanding with any officer, employee or consultant,
including any agreement or understanding relating to severance payments, but
excluding Contracts, agreements or understandings relating to any Employee
Benefit Plan listed on Schedule 3.17(a); (iii) indenture, mortgage, promissory
note, loan agreement, security agreement, pledge agreement, conditional sale,
guarantee or other Contract for the borrowing of money, for a line of credit or
for a Capital Lease; (iv) Contract for charitable contributions; (v) Contract
for capital expenditures in excess of $25,000 individually or $100,000 in the
aggregate; (vi) Contract or arrangement for the sale of any assets, properties
or rights other than the sale of services or products in the ordinary course of
business; (vii) lease or other agreement pursuant to which it is a lessee of or
holds or operates any machinery, equipment (including Units), motor vehicles,
office furniture, fixtures, products, merchandise or other personal property
owned by any other Person, with annual lease payments in excess of $20,000
individually or $50,000 in the aggregate; (viii) Contract with respect to the
lending or investing of funds, other than with respect to any Employee
14
Benefit Plan listed on Schedule 3.17(a); (ix) Contract with respect to any form
of intangible property, including any Intellectual Property Rights; (x) Contract
which restricts any Entity from engaging in any aspect of the Business or any
other business anywhere in the world; (xi) Contract or group of related
Contracts with the same Person (excluding purchase orders entered into in the
ordinary course of business which are to be completed within three months of
entering into such purchase orders) for the purchase or sale of products or
services under which the undelivered balance thereof (including the aggregate
undelivered balance under any such Contracts between the same Person and such
Entity) has a selling price or outstanding balance in excess of $10,000; (xii)
agreement for the acquisition or disposition of a Person or a division of a
Person for which either of the Entities shall have continuing Liabilities after
the Closing Date; (xiii) Contract to provide MRI, CT, ultrasound or nuclear
medicine services to a hospital, clinic or provider; and (xiv) other Contract
material to the Business, including all franchise agreements and license
agreements and all financing agreements related thereto, other than with respect
to any Employee Benefit Plan listed on Schedule 3.17(a). With respect to the
Contracts specified in Section 3.12(a)(vii), Schedule 3.12 sets forth with
respect to each such Contract, as of the date hereof, the aggregate annual
rental payments (including interest factor) and the purchase price payable to
terminate such Contract and acquire the underlying asset. With respect to the
Contracts specified in Section 3.12(a)(xiii), Schedule 3.12 sets forth the fees,
as of the date hereof, for each scan, study or other service performed
thereunder.
(b) All items listed on Schedule 3.12 are in full force and effect,
constitute legal, valid and binding obligations of the respective parties
thereto, and are enforceable in accordance with their respective terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in equity or at law). Except as set forth on Schedule 3.12, there
exists no default, or any event which upon the giving of notice or the passage
of time, or both, would give rise to a claim of a default in the performance by
any Entity or to the Best Knowledge of the Sellers, any other party to any of
the foregoing of their respective obligations thereunder. The Purchasers have
been furnished with true, complete and correct copies of all items listed on
Schedule 3.12.
3.13 LITIGATION, ETC.
(a) Except as disclosed on Schedule 3.13(a), there are no (i)
Proceedings pending or, to the Best Knowledge of the Sellers, threatened against
any Entity, whether at law or in equity, whether civil or criminal in nature or
whether before or by any Governmental Entity or arbitrator, or (ii) Orders of
any Governmental Entity or arbitrator with respect to, involving or against any
Entity. The Sellers have delivered to the Purchasers, or made available to the
Purchasers, all material documents and correspondence relating to such matters
referred to on Schedule 3.13(a).
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(b) Schedule 3.13(b) lists each matter described in Section 3.13(a) that
was in existence within the last 3 years that resulted in any criminal sanctions
or payments in excess of $50,000 by any Entity (whether as a result of a
judgment, civil fine, settlement or otherwise).
3.14 COMPLIANCE WITH LAWS.
Each Entity (a) has complied in all respects with, and is in
compliance in all respects with, all Laws, Orders and Permits applicable to it
and the Business, the noncompliance with which could reasonably be expected to
have a Material Adverse Effect and (b) has all material Permits used or
necessary in the conduct of the Business. All of such Permits are listed on
Schedule 3.14, are in full force and effect, no violations with respect to any
thereof have occurred or are or have been recorded, no Proceeding is pending
or, to the Best Knowledge of the Sellers, threatened to revoke or limit any
thereof except, in each case, such of the foregoing as could not reasonably be
expected to have a Material Adverse Effect. No investigation or review by any
Governmental Entity with respect to any Entity is pending or, to the Best
Knowledge of the Sellers, threatened, nor has any Governmental Entity notified
any Entity or any Seller of its intention to conduct the same.
3.15 INSURANCE.
(a) Schedule 3.15(a) contains a true and complete list of all policies
of liability, theft, fidelity, fire, product liability, workmen's compensation
and other forms of insurance held by each Entity and/or by any Seller for the
benefit of any Entity (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims thereunder) other than policies
relating to any Employee Benefit Plan.
(b) Except as set forth on Schedule 3.15(b), with respect to each policy
of insurance listed on Schedule 3.15(a): (i) all premiums with respect thereto
are currently paid and are not subject to adjustment, and no Person is in
default in any respect with respect to its obligations under such policy, and
(ii) no Entity has received any notice that such policy has been or shall be
canceled or terminated or will not be renewed on substantially the same terms as
are now in effect or the premium on such policy shall be materially increased on
the renewal thereof.
3.16 LABOR RELATIONS: EMPLOYEES.
(a) Schedule 3.16(a) sets forth a list of all directors, officers and
employees of each Entity and employees of the Parent (solely with respect to the
Business) as of the date hereof whose aggregate compensation exceeded $75,000 in
1997, together with their respective titles, their rate of annual salary,
bonuses and commissions for 1997 and the respective dates on which they
commenced employment. To the extent any such employee is on a leave of absence
as of the date hereof, Schedule 3.16(a) indicates the nature of such leave of
absence and such employee's anticipated date of return to active employment.
Except as set forth on Schedule 3.16(a), no former employee whose
16
aggregate compensation exceeded $75,000 in 1997 has left the service of any
Entity or the Parent within the last 6 months. The schedule of employees of the
Parent and the Entities previously provided to the Purchasers by the Parent
(which sets forth the Person (as among the Parent and the Entities) which
employs each such employee) was true and correct as of the date provided and
none of such employees who are currently employees of Parent or the Entities has
become employed by any other Person (as among Parent and the Entities) since
such date.
(b) As of the date hereof, except as set forth on Schedule 3.16(b): (i)
there is no labor strike or work stoppage actually pending against any Entity or
the Parent; (ii) no Entity or the Parent is a party to or bound by any
collective bargaining agreement or union contract; (iii) no such agreement is
currently being negotiated by any Entity or the Parent and (iv) no Entity or the
Parent has received a request for recognition from any labor organization or any
notice that a petition for election with respect to such Person has been filed
with the National Labor Relations Board.
3.17 ERISA COMPLIANCE.
(a) Schedule 3.17(a) contains a true, complete and correct list of all
existing Employee Benefit Plans (collectively, the "Employee Plans") (i) that
cover any employees, contract employees or former employees of any Entity or any
spouses, family members or beneficiaries thereof (A) that are maintained,
sponsored or contributed to by any Entity or (B) with respect to which any
Entity is obligated to contribute or has any Liability, or (ii) with respect to
which any Entity has any Liability on account of the maintenance or sponsorship
thereof or contribution thereto by any present or former ERISA Affiliate of any
Entity.
(b) Administration and Compliance. Except as set forth on Schedule
3.17(b), with respect to each Employee Plan:
(i) such Employee Plan has been established, maintained,
operated and administered in all material respects in accordance with
its terms and in compliance in all material respects with ERISA, the
Code, and other applicable Laws (including with respect to reporting and
disclosure);
(ii) all amounts withheld pursuant to such Employee Plan from
employees have, where applicable, been timely deposited into the
appropriate trust or account;
(iii) no Entity or any ERISA Affiliate of either Entity has
breached the fiduciary rules of ERISA or engaged in a prohibited
transaction that could subject either Entity to any Tax or penalty
imposed under Section 4975 of the Code or Section 502(i), (j) or (l) of
ERISA in excess of $50,000;
17
(iv) as of the date hereof, no Proceedings (other than routine
claims for benefits or administrative appeals with respect thereto) are
pending against such Employee Plan;
(v) such Employee Plan, if intended to be "qualified", within
the meaning of Section 401(a) of the Code, has been determined by the
Internal Revenue Service to be so qualified to the extent addressed in
the most recent favorable determination letter, and nothing has occurred
that has or could reasonably be expected to adversely affect such
qualification;
(vi) except as may be required under Laws of general
application, such Employee Plan does not obligate any Entity to provide
any employee or former employee, or their spouses, family members or
beneficiaries, any post-employment or post-retirement health or life
insurance, accident or other "welfare-type" benefits;
(vii) if such Employee Plan is a "group health plan" within the
meaning of Section 5000 of the Code, such Employee Plan has been
maintained in compliance with Section 4980B of the Code and Title I,
Subtitle B, Part 6 of ERISA so that no Tax imposed under Section 4980B
of the Code has been or is expected to be incurred by either Entity in
excess of $50,000;
(viii) all reporting and disclosure obligations imposed under
ERISA and the Code have been satisfied in all material respects and no
IRS Form 5500 has been filed late (after consideration of any applicable
extension) for any of the three most recently ended plan years; and
(ix) without limiting Section 3.8(c), no benefit payable or
which becomes payable by any Entity pursuant to such Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise Tax under Section 4999 of the Code or which will not be
deductible by reason of Section 280G of the Code.
(c) Since 1988, no Entity and no ERISA Affiliate of any Entity is or has
ever maintained or been obligated to contribute to a "multiemployer plan" as
defined in Section 3(37) of ERISA, a "multiple employer plan," as defined in
Section 413 of the Code, or a "defined benefit pension plan," as defined in
Section 3(35) of ERISA;
(d) With respect to each Employee Plan, as of the date hereof, the
Purchasers have been provided with true and complete copies, to the extent
applicable, of each plan and trust document governing the terms of such Employee
Plan, the two most recent annual reports (Form 5500 and attachments) and
financial statements prepared therefor, the most recent favorable determination
letter issued to Parent or either Entity (and pending requests therefor), and
each of the foregoing documents accurately reflects the terms of such Employee
Plan in effect at the time such document was prepared
18
(including, without limitation, any agreement or provision which would limit the
ability of any Entity to make any prospective amendments or terminate such
Employee Plan).
3.18 CERTAIN ADDITIONAL REGULATORY MATTERS.
(a) None of the Sellers, the Entities or any officer, director or
managing employee of the Sellers or the Entities (within the meaning of 42
U.S.C. (Section 1320a-5(b)) have engaged in any activities which constitute
violations of, or are cause for imposition of civil penalties upon any Entity or
mandatory or permissive exclusion of any Entity from Medicare or Medicaid, under
(S) 1320a-7, 1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States
Code, the federal Civilian Health and Medical Plan of the Uniformed Services
statute ("CHAMPUS"), or the regulations promulgated pursuant to such statutes or
regulations or related state or local statutes or which constitute violations of
or deficiencies under the standards of any private accrediting organization from
which any Entity is accredited or seeks accreditation, including the following
activities:
(i) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for
any benefit or payment;
(ii) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in
determining rights to any benefit or payment;
(iii) knowingly and willfully presenting or causing to be
presented a claim for reimbursement under CHAMPUS, Medicare, Medicaid or
any other State Health Care Program or Federal Health Care Program that
is (i) for an item or service that the Person presenting or causing to
be presented knows or should know was not provided as claimed, or (ii)
for an item or service where the Person presenting knows or should know
that the claim is false or fraudulent;
(iv) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (i) in
return for referring, or to induce the referral of, an individual to a
Person for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part by CHAMPUS,
Medicare or Medicaid, or any other State Health Care Program or any
Federal Health Care Program, or (iii) in return for, or to induce, the
purchase, lease, or order, or the arranging for or recommending of the
purchase, lease, or order, of any good, facility, service, or item for
which payment may be made in whole or in part by CHAMPUS, Medicare or
Medicaid or any other State Health Care Program or any Federal Health
Care Program; or
(v) knowingly and willfully making or causing to be made or
inducing or seeking to induce the making of any false statement or
representation (or omitting to state a material fact required to be
stated therein or necessary to
19
make the statements contained therein not misleading) of a material fact
with respect to (i) the conditions or operations of a facility in order
that the facility may qualify for CHAMPUS, Medicare, Medicaid or any
other State Health Care Program certification or any Federal Health Care
Program certification, or (ii) information required to be provided under
(S) 1124(A) of the Social Security Act ("SSA") (42 U.S.C. (S) 1320a-3).
(b) Each Entity has a Medicare provider number, and a participating
provider agreement in force with a Medicare Part B carrier, in each locale, as
applicable, in which such Entity bills directly to Medicare for services
furnished by such Entity.
(c) Each Entity has a Medicaid number and a participating provider
agreement in each state, as applicable, in which such Entity bills directly to
such states' Medicaid agency for services provided by such Entity.
3.19 MEDICARE/MEDICAID PARTICIPATION.
None of the Sellers, the Entities, or any officer, director, or
managing employee (as defined in SSA (S) 1126(b) or any regulations promulgated
thereunder) of the Sellers or the Entities: (1) has had a civil monetary
penalty assessed against him, her or it under (S) 1128A of the SSA or any
regulations promulgated thereunder; (2) has been excluded from participation
under the Medicare program or a state health care program as defined in SSA (S)
1128(h) or any regulations promulgated thereunder ("State Health Care Program")
or a federal health care program as defined in SSA (S) 1128B(f) ("Federal
Health Care Program"); or (3) has been convicted (as that term is defined in 42
C.F.R. (S) 1001.2) of any of the following categories of offenses as described
in SSA (S) 1128(a) and (b)(1), (2), (3) or any regulations promulgated
thereunder:
(i) criminal offenses relating to the delivery of an item or
service under Medicare or any State Health Care Program or any Federal
Health Care Program;
(ii) criminal offenses under federal or state law relating to
patient neglect or abuse in connection with the delivery of a health
care item or service;
(iii) criminal offenses under federal or state law relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct in connection with the delivery of a health care
item or service or with respect to any act or omission in a program
operated by or financed in whole or in part by any federal, state or
local governmental agency;
(iv) federal or state laws relating to the interference with or
obstruction of any investigation into any criminal offense; or
20
(v) criminal offenses under federal or state law relating to the
unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
3.20 ENVIRONMENTAL MATTERS.
(a) Except as set forth on Schedule 3.20(a), each Entity is in material
compliance with all applicable Environmental, Health and Safety Laws. Each
Entity has all of the Permits, licenses, authorizations, registrations and
approvals from Governmental Entities necessary to operate the Business, and all
such Permits, licenses, authorizations, registrations and approvals are valid
and in effect
(b) Except as set forth on Schedule 3.20(b), there are no pending or, to
the knowledge of the Sellers, threatened claims by any Governmental Entity
concerning or alleging a violation of any Environmental Health and Safety Law by
any Entity, nor are any pending or, to the knowledge of the Sellers, threatened
claims under any Environmental Health and Safety Laws concerning any property or
facility previously owned, leased or operated by any Seller or Entity or
predecessor of any Seller or Entity.
(c) Except as set forth on Schedule 3.20(c), no Entity presently is the
subject of any ongoing administrative or judicial proceeding or investigation
brought by any Governmental Entity under any Environmental, Health or Safety Law
including, without limitation, any voluntary clean-up program or any Proceeding
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA," also known as "Superfund") or any state counterparts to CERCLA, nor
is any Entity obligated to remediate, monitor, investigate, conduct corrective
action or report on environmental, health and safety matters concerning the
Business pursuant to any order, agreement, decree or mediation or arbitration
proceeding.
(d) Except as set forth on Schedule 3.20(d), in the five years preceding
the date hereof, no Entity has received any written notice, report or other
written information (i) regarding any actual or alleged violation of any
Environmental, Health and Safety Laws, or (ii) that any Entity is potentially
responsible under any Environmental, Health and Safety Laws for response costs,
corrective action or natural resource damages, as those terms are defined under
any Environmental, Health and Safety Laws.
(e) Except as set forth on Schedule 3.20(e), Sellers are not aware of
impending changes in Environmental Health or Safety Laws which could reasonably
be expected to materialize before the one year anniversary of the Closing Date
and which could result in a Material Adverse Effect.
(f) Sellers have provided to the Purchasers copies of, or access for
purposes of review to, all documents, reports, studies or other non-legally
privileged information concerning environmental, heath or safety matters
relating to the Business which are in the possession of Sellers. The information
prepared or originated by the Sellers or the Entities and provided to the
Purchasers is true and correct.
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3.21 BROKERS.
No Seller or Entity has employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any Purchaser or Alliance
may have Liability after the Closing.
3.22 RELATED TRANSACTIONS.
Except as set forth on Schedule 3.22 or on Schedules 3.17 (a) or (b)
and except for compensation to bona-fide employees of any Entity for services
rendered in the ordinary course of business, no Affiliate of any Entity or any
"associate" (as defined in the rules promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) thereof, is now (i) party to any
transaction or Contract with any Entity providing for the furnishing of
services by, or rental of real or personal property from, or otherwise
requiring payments to, any such Affiliate or associate, or (ii) the direct or
indirect owner of a controlling interest in any Person which is a present or
potential competitor, supplier or customer of any Entity (other than
nonaffiliated holdings in publicly held companies). Except as set forth on
Schedule 3.22, no Entity is a guarantor or otherwise liable for any actual or
potential Liability of its Affiliates and their associates (other than with
respect to any Entity, the other Entity). Except as set forth on Schedule
3.22, no Entity owns or pays for any social club memberships, whether or not
for the benefit of any Entity and/or its executives.
3.23 BANK ACCOUNTS; POWERS OF ATTORNEY.
Schedule 3.23 sets forth a true and complete list of (i) all bank
accounts and safe deposit boxes of each Seller and Entity and all Persons who
are signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from any Seller or Entity and a summary
of the terms thereof.
3.24 VOTING.
The affirmative vote of a majority of the outstanding shares (the
"Parent Stockholder Approval") of the Parent's common stock, par value $0.01
per share (the "Parent Common Stock") is the only vote of the holders of any
class or series of the Parent's capital stock which is necessary to approve
this Agreement and the transactions contemplated hereby.
3.25 OPINION OF FINANCIAL ADVISOR.
The Board of Directors of the Parent has received the oral opinion of
Paine Webber Incorporated to the effect that, as of the date hereof, the
consideration to be received in respect of Shares pursuant to this Agreement is
fair from a financial point of view to the Parent.
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3.26 PHYSICIAN RELATIONSHIPS.
(a) Except as set forth in Schedule 3.26 the Entities do not have any
"financial relationship" with any "referring physician" or an immediate family
member of such physician, within those terms' meanings under 42 U.S.C. Section
1395nn.
(b) To the Best Knowledge of each of the Sellers, no "referring
physician" (within the meaning of 42 U.S.C. Section 1395nn) owns any securities
of the Sellers.
3.27 OTHER HOSPITAL RELATIONSHIPS.
Except as set forth in Schedule 3.27 other than with respect to
reading radiologists, the Entities do not have any lease or other arrangement
with any hospital or other entity whereby the Entities pay the hospital or
other entity rent or any other fee the amount of which is dependent in whole or
in part on the gross or net revenues, net income, or cash flow of any segment
of the business of the Entities.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants, severally as to
itself, as of the date hereof and as of the Closing Date as follows:
4.1 ORGANIZATION; CORPORATE AUTHORITY.
Such Purchaser is a corporation duly organized, validly existing and
in good standing under the Laws of the jurisdiction of its incorporation and
has all requisite power and authority (corporate or otherwise) to own, lease
and operate its assets and properties and to carry on its business as presently
conducted and as presently proposed to be conducted. Such Purchaser is duly
qualified and in good standing to transact business as a foreign Person in
those jurisdictions set forth on Schedule 4.1, which, as of the date hereof,
constitute all the jurisdictions in which the character of the property owned,
leased or operated by such Purchaser or the nature of the business or
activities conducted by such Purchaser makes such qualification necessary.
4.2 CORPORATE ACTION; AUTHORITY; NO CONFLICT.
Such Purchaser has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by such Purchaser of this Agreement and each Related Document to
which it is or will be a party, and performance of its obligations hereunder
and thereunder have been duly and validly authorized by all necessary corporate
action on the part of such Purchaser. This Agreement and each Related Document
to which it is or will be a party has been or upon
23
the execution thereof will be, duly and validly executed and delivered by such
Purchaser, and constitutes, or upon its execution and delivery will constitute,
a valid and binding obligation of such Purchaser, enforceable against it in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law). Neither such
Purchaser's execution and delivery of, and/or performance of its obligations
under, this Agreement and each Related Document to which it is or will be a
party, nor the consummation of the transactions contemplated hereby and thereby
shall (i) conflict with or result in any violation or breach of, any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time, or both) a default under, or give rise to any right of termination,
cancellation or acceleration or result in the creation of any Encumbrance upon
any of the assets or properties of such Purchaser under provision of such
Purchaser's Organizational Documents or any Contract to which such Purchaser is
a party (other than security documents relating to financing arrangements
existing for the benefit of the Purchasers' Affiliates) or by which it or any of
its assets or properties is or may be bound which, in the case of such
Contracts, would reasonably be expected to have a material adverse effect on any
Purchaser or prevent the consummation of the transactions contemplated hereby or
under the Related Documents and other than with respect to the foregoing for
which consents have been obtained or (ii) violate, or result in the creation of
an Encumbrance upon any of such Purchaser's assets as a result of, any Law's
applicable to such Purchaser or any of its properties or assets, in each case,
which would prohibit the such Purchaser from consummating the transactions
contemplated hereby.
4.3 BROKERS.
Such Purchaser has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any Seller may have any
Liability after the Closing.
4.4 CONSENTS.
Except as contemplated by this Agreement or as set forth on Schedule
4.4, and the Related Documents, no consent, approval, Order or authorization
of, or registration, declaration or filing with or notification to, any
Governmental Entity or any third party is required in connection with the
execution, delivery and performance by such Purchaser of this Agreement or the
Related Documents to which such Purchaser is or will be a party or the
consummation of the transactions contemplated hereby or thereby except for
those consents, approvals, Orders, authorizations, registrations, declarations,
filings or notifications the failure to obtain could not reasonably be expected
to have a material adverse effect on such Purchaser or except for those
consents, approvals, Orders, authorizations, registrations, declarations or
filings which have been obtained.
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4.5 INVESTMENT REPRESENTATIONS.
Each of the Purchasers are acquiring the Shares to be purchased by it,
for its own account, for investment and not with a view to the distribution
thereof in violation of the Securities Act.
4.6 INFORMATION SUPPLIED.
None of the written information supplied or to be supplied by any
Purchaser specifically for inclusion or incorporation by reference in the Proxy
Statement, as supplemented if necessary, and any other documents to be filed by
the Parent with the SEC or any Governmental Entity in connection with the
transactions contemplated hereby will, on the date of its filing or, with
respect to the Proxy Statement, as supplemented if necessary, on the date it is
sent or given to stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
Alliance represents and warrants, as to itself, as of the date
hereof and as of the Closing Date as follows:
5.1 ORGANIZATION; CORPORATE AUTHORITY.
Alliance is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted and as presently proposed to be conducted.
5.2 CORPORATE ACTION; AUTHORITY; NO CONFLICT.
Alliance has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by Alliance of this Agreement and each Related Document to which it
is or will be a party, and performance of its obligations hereunder and
thereunder have been duly and validly authorized by all necessary corporate
action on the part of Alliance. This Agreement and each Related Document to
which Alliance is or will be a party has been or upon the execution thereof
will be, duly and validly executed and delivered by it, and constitutes, or
upon its execution and delivery will constitute, a valid and binding obligation
of it, enforceable against it in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar
25
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law). Neither
Alliance's execution and delivery of, and/or performance of its obligations
under, this Agreement and each Related Document to which it is or will be a
party, nor the consummation of the transactions contemplated hereby and thereby
shall (i) conflict with or result in any violation or breach of, any of the
terms, conditions or provisions of, or constitute (with due notice or lapse of
time, or both) a default under, or give rise to any right of termination,
cancellation or acceleration or result in the creation of any Encumbrance upon
any of the assets or properties of Alliance under provision of its
Organizational Documents or any Contract to which it is a party or by which it
or any of its assets or properties is or may be bound which, in the case of such
Contracts, would reasonably be expected to have a material adverse effect on it
or prevent the consummation of the transactions contemplated hereby or under the
Related Documents and other than with respect to the foregoing for which
consents have been obtained or (ii) violate, or result in the creation of an
Encumbrance upon any of its assets as a result of, any Law's applicable to it or
any of its properties or assets, in each case, which would prohibit it from
consummating the transactions contemplated hereby.
5.3 DESIGNATION OF PURCHASERS.
Alliance has duly designated the Purchasers to acquire the
Shares hereunder, and will cause the Purchasers to perform each and every
obligation undertaken by them herein.
ARTICLE VI
COVENANTS AND AGREEMENTS
6.1 ACCESS TO RECORDS AND PROPERTIES OF THE ENTITIES.
From and after the date hereof until the Closing, the Sellers shall,
and shall cause each Entity to afford, (i) to the Purchasers, their respective
lenders and Affiliates and each of their respective authorized representatives,
including accountants, consultants and attorneys, free and full access at all
reasonable times to the assets, business, facilities, properties, books,
records (including tax returns filed and in preparation), customers,
consultants, and employees of or relating to each Entity and the Parent in
order that the Purchasers have full opportunity to make such investigation as
they shall reasonably desire to make of the affairs of each Entity and the
Parent and in order that the Purchasers may integrate the Business into the
business currently being conducted by the Purchasers' Affiliates, and (ii) to
the respective independent certified public accountants of the Purchasers, free
and full access at all reasonable times to the records of the independent
certified public accountants of each Entity and the Parent. The Sellers shall
cause their employees to actively cooperate and assist Purchasers and such
other Persons in effecting such integration. From and after the date hereof
until the Closing, (i) the Sellers shall provide to the Purchasers promptly but
in any event no later than the 25th day after the
26
last day of each calendar month, a copy of the consolidated and consolidating
balance sheets, statements of operations, shareholders equity and cash flows of
the Parent and its Subsidiaries for each such calendar month, together with a
copy of the Parent's "white book" and "blue book" (and any supporting
information with respect thereto), and (ii) such other information regarding the
Parent and its Subsidiaries as may be reasonably requested by the Purchasers.
The investigation contemplated by this Section 6.1 shall not affect or otherwise
diminish or obviate in any respect any of the representations and warranties or
the indemnification obligations contained in this Agreement.
6.2 CONDUCT PENDING CLOSING.
From and after the date hereof until the earlier of the Closing or the
termination of this Agreement pursuant to Article IX, each of the Sellers
shall, and shall cause each Entity to (unless otherwise consented to in writing
by the Purchasers):
(a) not sell, lease, license or otherwise dispose of any assets with a
book value in excess of $50,000 in the aggregate;
(b) not issue, sell or in any way transfer any Equity Interests of the
Entities or issue or sell any securities convertible into, exercisable or
exchangeable for or options or warrants to purchase or rights to subscribe for,
any such Equity Interests;
(c) not change the number of authorized shares of the Equity Interests
of the Entities or reclassify, combine, split, subdivide or redeem or otherwise
repurchase any of such Equity Interests, or issue, deliver, pledge or encumber
any additional Equity Interests of the Entities or other securities equivalent
to, or exchangeable for, Equity Interests of the Entities or enter into any
Contract to do any of the foregoing;
(d) not incur or issue any securities evidencing any Funded Indebtedness
or enter into any operating leases (other than Funded Indebtedness of a Seller
for which no Entity (or its assets) is liable or obligated (whether
contractually, by applicable Law, as a guarantor or through the incurrence or
grant of any Encumbrances), Funded Indebtedness related to money advanced from
Sellers or GK Finance to an Entity on a basis consistent with past practice and
in the ordinary course of business, provided that the amounts so advanced are
repaid prior to the Closing Date, Funded Indebtedness or operating leases
outstanding on the date hereof and disclosed on any Schedules hereunder), or
amend, modify or agree to a waiver of the terms of any Funded Indebtedness or
operating leases (including, without limitation increasing any commitments to
extend credit thereunder);
(e) not enter into any Contract with aggregate payments which could
exceed $50,000 (except for any Contract related to any Employee Benefit Plan of
the Parent or any Subsidiary other than the Entities, and for which Contract
neither Entity assumes or has any Liability not disclosed hereunder) or any
Contract in respect of the rental of any Unit;
27
(f) not enter into any employment agreement, or in any manner change the
Person (as among the Parent and the Entities) which is the employer of the
employees of the Parent and the Entities from the Person disclosed on the
schedule referenced in the last sentence of Section 3.16(a) as such employee's
employer, or terminate the employment of any employees in a manner which is
inconsistent with past practices or policies, or except as required by
applicable Law, effect any increase in the rate or terms of compensation payable
or to become payable to officers or employees of any Entity or the Parent
(solely as relating to the Business) other than increases in compensation under
Employee Benefit Plans which are available to all employees generally;
(g) not create or suffer to exist any Encumbrance on any of its assets
or properties other than Permitted Encumbrances, Encumbrances on Equity
Interests or assets of GK Finance or any assets of Subsidiaries of the Parent
other than the Entities, and Encumbrances which exist on the date hereof and
which have been disclosed on the Schedules to this Agreement;
(h) not change its tax or accounting principles, policies or practices,
change any depreciation or amortization policies or rates previously adopted or
write-up inventory or any other assets;
(i) not make any material Tax election or compromise any material Tax
Liability;
(j) not make any payments to or for the benefit of GK Finance (other
than payments made on behalf of GK Finance and reimbursed by GK Finance on a
basis consistent with past practices and in the ordinary course of business);
(k) not amend any of its Organizational Documents or any Contracts
(other than Contracts related to any Employee Plan);
(l) not enter into any transaction other than in the ordinary course of
business, or any transaction which is not at arms-length with unaffiliated
third Persons;
(m) not take or omit to take any action which would result in the
representations and warranties contained in this Agreement and the Related
Documents being untrue on the Closing Date, other than such action as shall have
been previously agreed to in writing by the parties hereto;
(n) not make any material change in the manner in which such Person
extends discounts or credits to customers or any material change in the manner
or terms by which such Person collects its accounts receivable or otherwise
deals with customers;
(o) not agree or otherwise commit to take any of the actions set forth
above;
28
(p) promptly provide the Purchasers with at least five Business Days
notice of (i) the terms and conditions with respect to renewals of any existing
Contracts to be renewed by the Entities, (ii) any intention to not renew any
existing Contracts and (iii) the actual nonrenewal of any existing Contract;
(q) conduct its business substantially as presently conducted and only
in the ordinary course consistent with past practice;
(r) use commercially reasonable efforts to (i) maintain its business,
assets, relations with present employees, customers, suppliers, partners,
licensees and operations as an ongoing business and preserve its goodwill, in
accordance with past custom and practice and (ii) to satisfy each of the closing
conditions to be satisfied by it set forth in Article VII hereof; and
(s) pay and continue to defer all accounts payable and all expenses in a
manner which is consistent with past practices and in the ordinary course of
business.
6.3 EFFORTS TO CONSUMMATE.
Subject to the terms and conditions of this Agreement, each party
shall use commercially reasonable efforts to take or cause to be taken all
actions and do or cause to be done all things required under all applicable
Laws, in order to consummate the transactions contemplated hereby.
6.4 NO SOLICITATION.
(a) The Parent shall, shall cause M Sub and each Entity to and shall
direct and cause its and each such Person's officers, directors, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties (other than the Purchasers and Alliance) that may be ongoing
with respect to an Alternative Transaction. The Parent shall not, shall cause M
Sub and each Entity not to and shall not authorize or permit any of its or any
such Person's officers, directors or employees or any investment banker,
financial advisor, attorney, accountant or other representative representing any
such Person to, directly or indirectly, (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action to
facilitate, any inquiries or the making of any proposal that may lead to an
Alternative Transaction or (ii) participate in any discussions or negotiations
regarding any proposed Alternative Transaction; provided, however, that if, at
any time prior to the Closing Date, the Board of Directors of the Parent
determines in good faith, based on written advice from outside counsel, that
action is required by reason of such Board of Directors' fiduciary duties to the
Parent's stockholders under applicable law, the Parent may (subject to
compliance with Section 6.4(c)), in response to an unsolicited Third Party
Proposal, (A) furnish information with respect to the Parent and the Entities to
the Person making such Third Party Proposal pursuant to a confidentiality
agreement that is at least as protective of the Parent's and its Subsidiaries'
interests as is the Confidentiality Agreement and (B) participate in
negotiations regarding such a Third Party Proposal. Without limiting the
29
foregoing, it is understood that any violation of the restrictions set forth in
the preceding sentence by any director, officer or employee of the Parent, M Sub
or any Entity or any investment banker, financial advisor, attorney, accountant
or other representative acting on behalf of any such Person shall be deemed to
be a breach of this Section 6.4(a).
(b) Neither the Board of Directors of the Parent nor any committee
thereof shall (i) withdraw or modify the approval or recommendation by such
Board of Directors or such committee of this Agreement, the Related Documents or
any of the transactions contemplated hereby or thereby, (ii) approve or
recommend any Alternative Transaction or (iii) cause or permit the Parent, M Sub
or any Entity to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement (an "Acquisition Agreement") with
respect to an Alternative Transaction unless the Board of Directors of the
Parent shall have previously terminated this Agreement pursuant to Section
9.1(f).
(c) In addition to the obligations of the Parent set forth in paragraphs
(a) and (b) of this Section 6.4, the Parent shall immediately advise the
Purchasers orally and in writing of any request for information or of any
proposal or any inquiry regarding any Alternative Transaction, the material
terms and conditions of such request, proposal or inquiry and the identity of
the Person making such request, proposal or inquiry. The Parent will keep the
Purchasers fully informed of the status and details (including amendments or
proposed amendments) of any such request, proposal or inquiry.
(d) Nothing contained in this Section 6.4 shall prohibit the Parent from
at any time taking and disclosing to its stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Parent's stockholders, in each case with respect to any Third
Party Proposal, if the Parent shall have provided the Purchasers with as much
advance notice of its position and proposed disclosure as is possible under the
circumstances; provided, however, that neither the Parent nor its Board of
Directors nor any Committee thereof shall, except as permitted by Section
6.4(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to this Agreement, the Related Documents or any of the transactions
contemplated hereby or thereby or approve or recommend, or propose to approve or
recommend, an Alternative Transaction.
6.5 CONFIDENTIALITY.
The Sellers and the Purchasers agree that, through and including the
Closing Date, they shall comply with that certain letter agreement relating to
matters of confidentiality dated as of July 24, 1997 (as amended, modified or
supplemented, the "Confidentiality Agreement").
6.6 NOTICE OF PROSPECTIVE BREACH.
Each party shall immediately notify the other parties in writing upon
the occurrence, or failure to occur, of any event, which occurrence or failure
to occur would be reasonably likely to cause any representation or warranty of
such party that is contained
30
in this Agreement or any Related Document to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Closing.
6.7 PUBLIC ANNOUNCEMENTS.
Each party agrees that, except (i) as otherwise required by Law or
Order and (ii) for disclosure to its respective directors, officers, employees,
financial advisors, potential financing sources, legal counsel, independent
certified public accountants or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential relationship, it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement or any Related Document to which it is a party or the
transactions contemplated hereby or thereby, without consulting in advance with
the other parties hereto.
6.8 COOPERATION REGARDING TAX FILINGS; SECTION 338(h)(10).
(a) After the Closing, the Purchasers and the Sellers shall act in good
faith and cooperate with one another for the purpose of filing all Tax Returns
and reports required to be filed by any of them. Parent shall join Purchaser A
in a timely election pursuant to Section 338(h)(10) of the Code (and under any
comparable provision of any state or local law) with respect to the CT Shares
(the "338(h)(10) Election"). The parties hereto recognize that the 338(h)(10)
Election will result in the purchase of the CT Shares hereunder being treated as
a sale of assets by CT Sub for Federal income Tax purposes and for applicable
state and local tax purposes and that any Tax Liability arising with respect to
the 338(h)(10) Election (other than a Liability for Transfer Taxes described in
Section 10.14) shall be deemed a Covered Tax. None of the parties hereto shall
make any Tax Return or other filing that is inconsistent with the foregoing.
(b) The Purchasers shall be responsible for the preparation and filing
of all 338(h)(10) Election forms and the Sellers shall execute and deliver to
Purchasers such documents as are reasonably requested to properly complete such
forms at least twenty (20) days prior to the date such 338(h)(10) Election is
required to be filed. The Sellers agree that the Purchasers shall be entitled to
determine the allocation of the Modified Aggregate Deemed Sales Price (as
defined in the treasury regulations promulgated under Section 338 of the Code)
among the assets of CT Sub in their sole discretion, and in accordance with
Section 338 of the Code and the regulations thereunder (including the allocation
of any adjustment to the Modified Aggregate Deemed Sales Price by reason of any
purchase price adjustment or indemnification payment under this Agreement), and
shall notify the Sellers of such determination as soon as possible after making
such determination. The Purchasers and the Sellers agree to act in accordance
with any such allocation in all relevant Tax Returns and filings.
(c) Parent shall cause to be prepared and cause to be timely filed all
consolidated, combined or unitary federal, state, local or foreign Tax Returns
required to be filed with respect to Parent for all taxable periods ending
before or including the Closing Date and shall include CT Sub in all such
returns in which it is eligible to be
31
included. The Purchasers agree to cooperate with Parent and its Affiliates in
the preparation of the portions of such Tax Returns pertaining to CT Sub. The
Parent shall permit the Purchasers to review and comment on the portion of all
Tax Returns prepared by Parent pursuant to this Section 6.8(c) pertaining to CT
Sub, or the Partnership prior to the filing of such Tax Returns. Parent shall
cause to be timely paid all Taxes to which such Tax Returns relate for all
periods covered by such Tax Returns.
(d) The extent to which Taxes of CT Sub and the Partnership for a
taxable period that includes but does not end on the Closing Date are treated as
Taxes for the period ending on or prior to the Closing Date shall be determined
for all purposes, including for purposes of calculating Covered Taxes, as
follows: (i) Taxes measured in whole or in part by net or gross income and Taxes
relating to specific transactions shall be apportioned on the basis of a closing
of the books of the Entity liable for such Tax at the close of business on the
Closing Date; provided, however, that all transactions not in the ordinary
course of business and not contemplated in this Agreement that occur on the
Closing Date after Purchaser A's purchase of the CT Shares shall be reported on
Purchaser A's federal income tax return to the extent permitted by Treas. Reg.
Section 1502-76(b((1)(3); and (ii) all other Taxes shall be prorated according
to the ratio of the number of days in such taxable period prior to and including
the Closing Date to the number of days in such taxable period.
(e) The Sellers shall cause to be prepared all required federal, state,
local and foreign Tax Returns of CT Sub and the Partnership for any period which
ends on or before the Closing Date, for which Tax Returns have not been filed as
of the Closing Date (other than Tax Returns to be filed by Parent pursuant to
Section 6.8(c)). The Purchasers shall cause to be prepared and cause to be
timely filed all required federal, state, local and foreign Tax Returns of CT
Sub and the Partnership (other than Tax Returns to be filed by Parent pursuant
to Section 6.8(c)) for taxable periods beginning before and ending after the
Closing Date. The Sellers and Purchasers agree to cooperate with each other in
the preparation of such Tax Returns. The Purchasers shall permit Sellers to
review and comment on all Tax Returns prepared by the Purchasers pursuant to
this Section 6.8(e) and such Tax Returns shall be subject to the prior approval
of the Sellers which approval shall not be unreasonably withheld. The Sellers
shall permit the Purchasers to review and comment on all Tax Returns prepared by
the Sellers pursuant to this Section 6.8(e). Prior to the date such Tax Returns
are due, the Parent will provide the Purchasers with amounts equal to the
Covered Taxes, as shown on the Tax Returns to be filed under this Section
6.8(e), after taking into account any Tax or estimated Tax paid with respect to
such Covered Taxes prior to the Closing Date. Promptly after receipt by the
Purchasers of the amounts in respect of the Covered Taxes from the Parent, the
Purchasers will cause the applicable Tax Returns prepared by the Seller to be
filed.
(f) Parent shall be entitled to any refund of Taxes paid by or with
respect to CT Sub that is attributable to taxable periods ending on or prior to
the Closing Date, and the Purchasers shall cause CT Sub to pay over to Parent
any such refunds (net of any Tax Liability attributable thereto and any expenses
incurred in the collection of such refund)
32
within fifteen (15) days after receipt thereof. If the amount of such refund
that is paid over by Parent is subsequently reduced by a Governmental Entity,
Parent shall pay to Purchasers an amount necessary to reflect such adjustment.
(g) The Parent shall not file any claim for a refund or credit, or an
amended return claiming a refund or credit, after the Closing Date, for any Tax
paid by CT Sub without the prior written consent of the Purchasers, which
consent shall not be unreasonably withheld.
(h) Each of the Purchasers and the Sellers shall promptly notify the
other party upon receipt of a notice of any pending or threatened Tax audit or
assessment (a "Tax Claim") that may affect the Tax Liabilities of CT Sub, or the
Partnership and for which any Seller would be liable under this Agreement;
provided, however, that no delay on the part of either party in so notifying the
other party shall relieve the other party from any liability or obligation
hereunder (unless, and then solely to the extent) that the other party is
materially and irrevocably prejudiced by such delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Tax
Claim.
(i) If the Sellers shall acknowledge in a writing delivered to the
Purchasers that such Tax Claim is properly subject to their indemnification
obligations hereunder and the Sellers shall have the financial resources to meet
such indemnification obligations, then subject to the further provisions of this
Section 6.8(i), the Sellers shall have the right to assume the defense of such
Tax Claim at their own expense and by their own counsel and other advisers,
which counsel and other advisors shall be reasonably satisfactory to the
Purchasers; provided, however, that the Sellers shall not have the right to
assume the defense of any Tax Claim, notwithstanding the giving of such written
acknowledgment, if the Sellers shall not have assumed the defense of such Tax
Claim in a timely fashion. Notwithstanding anything to the contrary contained
herein, if a Tax Claim involves, or could have a material effect on any material
matter beyond the scope of the indemnification obligations of the Sellers, the
Sellers and Purchasers shall jointly assume the defense of such Tax Claim at
their own expense. If the Sellers exercise their right to assume the defense of
a Tax Claim pursuant to and in accordance with this Section 6.8(i), (i) the
Purchasers shall be entitled to participate in such defense with their own
counsel and other advisors at their own expense, (ii) the Purchasers will
reasonably cooperate with the Sellers and their counsel and advisors in the
defense of such Tax Claim, and (iii) the Sellers shall not make any settlement
of such Tax Claim without the written consent of the Purchasers, which consent
shall not be unreasonably withheld, provided that consent may be withheld if any
Losses to be incurred by the Purchasers pursuant to such settlement are not
indemnified pursuant to the indemnification provisions set forth in Article VIII
hereunder.
(j) If the Sellers shall assume the defense of a Tax Claim pursuant to
and in accordance with Section 6.8(i), the Sellers shall not be responsible for
any legal or other defense costs subsequently incurred by the Purchasers in
connection with the defense thereof. If the Sellers do not exercise their right
to assume the defense of a Tax Claim or
33
are otherwise restricted from doing so pursuant to Section 6.8(i), the Sellers
shall nevertheless be entitled to participate in such defense with their own
counsel and other advisors at their own expense. If the defense of a Tax Claim
is retained by the Purchasers, the Purchasers shall not be entitled to settle
such Tax Claim without the prior written consent of the Sellers, which consent
shall not be unreasonably withheld.
(k) After the Closing Date, the Sellers and the Purchasers shall make
available to the other, as reasonably requested, all information, records or
documents relating to Tax Liabilities or potential Tax Liabilities of CT Sub or
the Partnership for all periods ending on or prior to the Closing Date, and
shall preserve all such information, records and documents until the expiration
of any applicable statute of limitations or extensions thereof.
(l) All Tax Returns which are required to be prepared by Sellers
pursuant to Sections 6.8(c) and (e) shall be prepared and filed in a manner
consistent with past practice and applicable Law and, on such Tax Returns, no
position shall be taken, elections made or method adopted that is inconsistent
with positions taken, elections made or methods used in preparing and filing
similar Tax Returns in prior periods.
6.9 EXCHANGE PROCEEDS.
If, between the date hereof and the Closing, any Entity or any Seller
receives any proceeds in consideration for the exchange of any of its assets
(solely, in the case of the Parent as it relates to the Purchased Parent
Assets), whether from the sale of any such assets, from insurance proceeds
payable on account of any loss or casualty to such assets, any proceeds from
the taking of such assets pursuant to the power of eminent domain, or any other
proceeds from whatever source relating to the disposition of such assets (the
"Exchange Proceeds"), the Sellers shall immediately notify the Purchasers of
the receipt of such Exchange Proceeds and shall consult with the Purchasers
with respect to the application of any such Exchange Proceeds. The Sellers
shall ensure that any Exchange Proceeds received by any Entity shall either be
used to purchase replacement assets or shall be retained by the applicable
Entity.
6.10 NON-COMPETE; NON-SOLICITATION.
(a) During the Non-Compete Period, the Parent shall not, and cause its
Affiliates not to, directly or indirectly, own, manage, control, participate in,
consult with, render services for, or in any manner engage in or represent any
business within any Restricted Territory that is competitive with the Business
or any product or services of the Business as such Business is conducted or
proposed to be conducted from and after the Closing Date; provided, however,
that nothing herein shall be deemed to prevent the Parent or any of its
Affiliates from engaging in any activities presently conducted or proposed to be
conducted by GK Finance or from providing any imaging modality as part of its
"Operating Room of the Twenty First Century" business.
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(b) During the Non-Compete Period, none of the Parent nor any Affiliate
shall directly or indirectly through another Person (i) induce or attempt to
induce any employee of any Purchaser or any Affiliate of such Purchaser to leave
the employ of such Purchaser or such Affiliate or in any way interfere with the
relationship between such Purchaser or any such Affiliate, on the one hand, and
any employee thereof, on the other hand, or (ii) induce or attempt to induce any
customer, supplier, licensee or other business relation of any Purchaser or any
Affiliate of such Purchaser to cease doing business with such Person or in any
way interfere with the relationship between any such customer, supplier,
licensee or business relation, on the one hand, and such Person, on the other
hand.
(c) If, at the time of enforcement of this Section 6.10, a court holds
that the restrictions stated herein are unreasonable under the circumstances
then existing, the parties agree that the maximum period, scope or geographical
area reasonable under such circumstances shall be substituted for the stated
period, scope or area. The parties hereto acknowledge that money damages would
be an inadequate remedy for any breach of this Section 6.10. Therefore, in the
event of a breach or threatened breach of this Section 6.10, the Purchasers or
their successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce, or
prevent any violations of, the provisions of this Section 6.10.
6.11 CERTAIN TAX MATTERS.
From the date hereof until the Closing Date, (i) the Parent shall and
shall cause each Entity to file all tax returns and reports ("Post-Signing
Returns") required to be filed in a manner consistent with past practices; (ii)
the Parent shall and shall cause each Entity to timely pay all Taxes shown as
due and payable on the Post-Signing Returns; (iii) the Parent shall and shall
cause each Entity to make provision for all Taxes payable for which no
Post-Signing Return is due prior to the Closing Date; (iv) the Parent shall
allow the Purchasers an opportunity to review and comment on any Post-Signing
Return prior to the due date of such Post-Signing Return; and (v) the Parent
will promptly notify the Purchasers of any action, suit, proceeding, claim or
audit pending against or with respect to the Parent or any Entity in respect of
any Tax where there is a possibility of a determination or decision which could
have an adverse effect on the Parent's or any Entity's Tax Liabilities or Tax
attributes.
6.12 ADVICE OF CHANGES; FILINGS.
The Parent shall confer with the Purchasers on a regular and frequent
basis as reasonably requested by the Purchasers, report on operational matters
and promptly advise the Purchasers orally and, if requested by the Purchasers,
in writing of any change with respect to the Parent or any Entity. The Parent
shall promptly provide to the Purchasers (or their counsel) copies of all
filings made by the Parent or any Entity with any
35
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
(a) The Parent will, as soon as practicable following the date hereof,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Stockholders Meeting") for the purpose of obtaining the approval of this
Agreement, the Related Documents, and the transactions contemplated hereby and
thereby. The Parent will, through its Board of Directors, recommend to its
stockholders that the Parent Stockholder Approval be given.
(b) The Parent will, as soon as practicable following the date hereof,
prepare and file a preliminary proxy or information statement (as amended,
modified or supplemented, the "Proxy Statement") with the SEC and will use its
best efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to its stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the SEC staff. The
Proxy Statement shall contain the written opinion of Paine Webber Incorporated,
opining as to the matters set forth in Section 3.25. The Parent will afford the
Purchasers opportunity to review and comment upon any description of the
Purchasers or their Affiliates, this Agreement, the Related Documents or the
transactions contemplated hereby and thereby set forth in the Proxy Statement
(including all drafts or amendments thereto). Each Purchaser shall provide the
Parent with all necessary information reasonably requested with respect to
itself and Alliance solely for inclusion by the Parent in the Proxy Statement.
The Parent will notify the Purchasers promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply the Purchasers with copies of all correspondence between the
Parent or any of its representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Proxy Statement. If at any time prior to
the Stockholders Meeting there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Parent will promptly
prepare and mail to its stockholders such an amendment or supplement.
6.13 MAINTENANCE OF CASH AND CASH EQUIVALENTS.
During the period commencing on the Closing Date and ending on April
15, 1999, the Parent shall at all times hold cash or Cash Equivalents of not
less than $1,000,000 in the aggregate in an investment account at a financial
institution reasonably satisfactory to the Purchasers which shall not be
subject to any Encumbrance other than Permitted Encumbrances. During such
period, the Parent shall provide copies of all notices or reports delivered to
it in respect of such account to the Purchasers within 5 Business Days of the
receipt thereof.
6.14 FURTHER ASSURANCES.
The Sellers shall and shall cause the Entities to take such further
actions or execute such further documents or instruments as shall be reasonably
requested by the Purchasers
36
to further implement the transactions contemplated by Section 1.2 including,
without limitation, discharging or disposing of any Excluded Liability which may
be a Liability of any Entity on terms reasonably satisfactory to the Purchasers.
6.15 AUDITED FINANCIAL STATEMENTS.
The Parent shall, and shall cause each of its Subsidiaries to, provide
the Purchasers and their advisors with such information (including, without
limitation, consolidating balance sheets and statements of operations as at
December 31, 1997 and for the fiscal year then ended; such consolidating
financial statements to incorporate the Entities in such form as presented in
Schedule 3.5(b) as well as individual columns for each of GK Finance, Parent
and each other Subsidiary of the Parent, in each case, as adjusted to give
effect to the transactions contemplated by Section 1.2 hereof), and access to
its books and records (including, without limitation, access to its management
employees), to permit them or their advisors to prepare audited balance sheets
of the Entities as of December 31, 1997, and related audited statements of
operations, shareholders' equity and cash flows for the period then ended, in
each case in accordance with GAAP and adjusted to give effect to the
consummation of the transactions contemplated by Section 1.2 as if such
transactions were consummated at January 1, 1997.
6.16 DVI FUNDED INDEBTEDNESS.
At the request of the Purchasers, on the Closing Date, the Parent
shall and shall cause its Subsidiaries to repay all Funded Indebtedness held by
DVI Financial Services, Inc. and DVI Business Credit Receivables Corp. ("DVI")
under agreements relating to Funded Indebtedness provided by DVI to the Parent
and its Subsidiaries upon payment by the Purchasers in full of all amounts due
on the Closing Date to DVI in respect of principal, accrued interest thereon
and prepayment premiums not to exceed $75,000 in the aggregate. On the Closing
Date, Parent shall deliver all instruments and documents reasonably requested
by the Purchasers to evidence the repayment in full of such Funded Indebtedness
including reasonably satisfactory pay-off letters, releases of Encumbrances,
releases of pledges of Equity Interests and UCC-3 financing statements.
6.17 TRANSFER OF PARENT PARTNERSHIP INTERESTS.
Upon the request of the Purchasers, the Parent shall, on or
immediately prior to the Closing Date, assign the Parent Partnership Interests
to a newly organized wholly-owned corporate Subsidiary (which shall conduct no
business whatsoever) and shall cause such Subsidiary to assign the Parent
Partnership Interests to Purchaser A in accordance with Section 1.1 hereof.
6.18 CERTAIN EMPLOYEE MATTERS.
(a) On the Closing Date, the Purchasers shall or shall cause
the Entities or an Affiliate of the Purchasers, to continue the employment of
or offer employment, as applicable, to the employees of the Entities and Parent
to be identified by the Purchasers
37
prior to the Closing Date in accordance with the terms of a letter, dated of
even date herewith, delivered by Purchaser A to the Parent (any such employees
who so continue or accept such offer of employment being referred to herein as
the "Hired Employees"). Such employment shall be in a substantially similar
position as such Hired Employee held while employed by the applicable Entity or
Parent prior to the Closing, and the Purchasers shall have no Liability or
obligation to any other employees of the Parent or any of its Subsidiaries
(other than the Entities as set forth herein). Prior to the Closing, Parent and
the Entities shall take such actions and, after the Closing Date, Parent and the
Purchasers shall take, and the Purchasers shall cause the Entities to take, such
actions as are necessary so that each Hired Employee shall cease to be entitled
to participate in or accrue benefits under any of Parent's Employee Benefit
Plans, programs, policies and arrangements except to the extent required by
applicable Law. The Purchasers shall, or shall cause the Entities or an
Affiliate of the Purchasers, to take such actions as may be necessary such that,
subject to the provisions of this Section 6.18, on and after the Closing Date,
each Hired Employee shall be eligible to participate in, and be subject to the
provisions of, the Employee Benefit Plans (including a 401(k) plan and a
flexible benefits plan), programs, personnel policies and guidelines sponsored
or maintained by Alliance, and applicable for employees of Alliance or its
Affiliates in a similar position, subject to the satisfaction of all the
eligibility criteria for participation thereunder (except as otherwise provided
in this Section 6.18).
(b) With respect to the Alliance Employee Benefit Plans, programs,
personnel policies and guidelines, Alliance shall grant all Hired Employees from
and after the Closing Date credit for all service with the Entities and Parent
prior to the Closing Date for all purposes. Alliance shall take such actions as
are necessary to provide that on the Closing Date all Hired Employees and their
spouses and dependents shall be immediately covered by the group health plan
maintained by Alliance which shall (i) provide immediate coverage as of the
Closing Date without any waiting period, (ii) waive any pre-existing condition
exclusions or limitations, and (iii) provide that any amounts paid by Hired
Employees through the Closing Date for medical expenses that are treated as
deductible, co-insurance and out-of-pocket payments under the Parent's health
plan shall reduce the amount of any deductible, co-insurance or out-of-pocket
payments required to be paid for a similar period under the Alliance health
plan; provided, however, that the Sellers shall provide Alliance with a list of
all current and former employees participating in the Parent's health plan along
with a listing of each employee's deductible and co-insurance payments through
the Closing Date.
(c) Effective as of the Closing, the Purchasers shall assume the
Parent's or Entities' obligations with respect to accrued sick pay, personal
holidays and vacation pay for Hired Employees, provided that the vacation pay
costs as of the Latest Balance Sheet Date have been accrued and reflected on the
Latest Balance Sheet.
(d) Parent shall take such actions as are necessary to provide that the
Hired Employees are fully vested in their benefits under the Retirement Plan for
Employees of Parent and CT Sub (the "ASHS 401(k) Plan"). Parent shall also take
such actions as are
38
necessary to provide that the Hired Employees will be eligible to receive
distributions from the ASHS 401(k) Plan that will be eligible for rollover to
the Alliance "401(k)" plan. The Purchasers shall take such action as is
necessary after the Closing Date to provide that the Alliance "401(k)" plan will
allow rollovers of distributions from the ASHS 401(k) Plan.
(e) After the Closing Date, the Purchasers and the Sellers agree to take
such actions as are necessary to provide for the transfer of the account
balances of the flexible spending accounts of each Hired Employee from Parent's
"Section 125" plan to the Alliance "Section 125" plan and the Purchasers shall
provide for the reimbursement from the Alliance "Section 125" plan of medical
and childcare expenses incurred by Hired Employees during 1998.
(f) After the Closing Date, the Purchasers shall be responsible for
providing health care continuation coverage pursuant to the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), to
the extent required by COBRA, for all former employees of the Entities and/or
their "qualified beneficiaries" (as such term is defined in Part 6 of Title I of
ERISA) who were receiving health care continuation coverage under COBRA prior to
the Closing Date or who are or become eligible to receive such coverage on or
after the Closing Date. As of the date hereof, there were 2 former employees of
the Entities and/or their "qualified beneficiaries" who were receiving health
care continuation coverage under COBRA and 8 former employees who experienced a
"qualifying event" under COBRA.
ARTICLE VII
CLOSING CONDITIONS
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each party to consummate the
transactions contemplated hereby is subject to the satisfaction prior to the
Closing Date of the following conditions unless waived (to the extent such
conditions can be waived) by the Parent (on behalf of the Sellers) or the
Purchasers and Alliance, as applicable:
(a) Approvals. The authorizations, consents, Orders or approvals of, or
declarations or filings with, or expiration of waiting periods of any
Governmental Entity required to consummate the transactions contemplated hereby
shall have been obtained or made.
(b) Stockholder Approval. The Parent Stockholder Approval shall have
been obtained.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
39
(d) Actions and Statutes. No Proceeding shall have been taken or
threatened, and no Law or Order shall have been enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement or the
Related Documents by any Governmental Entity that could (i) make the
consummation of the transactions contemplated hereby or thereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby or thereby or (ii) render any party unable to consummate the
transactions contemplated hereby or thereby.
7.2 CONDITIONS TO OBLIGATIONS OF THE PURCHASERS AND ALLIANCE.
The obligations of the Purchasers and Alliance under this Agreement
are subject to the satisfaction of the following conditions unless waived (to
the extent such conditions can be waived) by the Purchasers and Alliance:
(a) Accuracy of Representations and Warranties. All representations and
warranties made by the Sellers in this Agreement and the Related Documents shall
be true and correct, individually or in the aggregate, in all material respects
(except for such representations and warranties which are qualified by their
terms by a reference to materiality, or "Material Adverse Effect" which
representations and warranties as so qualified shall be true and correct,
individually or in the aggregate, in all respects) as of the date hereof and as
of the Closing Date (unless such representations and warranties relate to a
specific date other than the Closing Date, in which case such representations
and warranties shall be true and correct, individually or in the aggregate, in
all material respects, or in all respects, as the case may be, on such date)
with the same effect as if such representations and warranties had been made at
and as of the Closing Date (including, after giving effect to the transactions
contemplated by Section 1.2).
(b) Performance of Obligations of the Sellers. The Sellers shall have
performed in all material respects all obligations, agreements and covenants
required to be performed by them under this Agreement and the Related Documents
prior to or as of the Closing Date.
(c) Certificates. At the Closing, in consideration of the delivery of
the Purchase Price pursuant to Section 1.3 hereof, (a) the Parent shall deliver
or cause to be delivered to Purchaser A, the certificates representing the
Shares (other than the M Sub Partnership Interests) and the Parent shall deliver
or cause to be delivered to Purchaser B, a certificate representing the M Sub
Partnership Interests, in each case, duly endorsed in blank for transfer or
accompanied by stock and partnership transfer powers duly executed in blank,
sufficient in form and substance to convey to each Purchaser good and marketable
title to all of the Shares purchased by such Purchaser, free and clear of all
Encumbrances.
(d) Consents and Approvals. The Purchasers shall have received duly
executed copies of all consents and approvals required for or in connection with
the execution and delivery by the Sellers of this Agreement and each of the
Related
40
Documents to which any of them may be parties (including, without limitation,
the assumption of any Funded Indebtedness and any consents or approvals
necessary to be obtained in connection with the transactions contemplated by
Section 10.4(b)), the consummation of the transactions contemplated hereby and
thereby, and the continued conduct of the Business as previously conducted
(including, without limitation, the transfer of any necessary regulatory Permits
currently in the name of the Parent or any Subsidiary other than the Entities),
in form and substance reasonably satisfactory to the Purchasers and their
counsel. The Sellers shall obtain all Permits required to conduct the Business
which have not been obtained on or prior to the date hereof in the name of the
Entities. The Parent shall cause each of the Encumbrances designated to be
terminated on or prior to the Closing Date on Schedule 3.9 to be so terminated
on or prior to the Closing Date (unless such Encumbrances cease to be effective
under applicable Law).
(e) Asset Contribution and Asset Disposition. The Asset Contribution,
Asset Disposition and the other transactions contemplated by Section 1.2 shall
each be consummated in accordance with Section 1.2 hereof.
(f) Absence of Material Adverse Effect. Since the Latest Balance Sheet
Date, there shall have been no change in respect of the Business that has had or
is reasonably likely to have a Material Adverse Effect.
(g) Related Documents. Each of the agreements attached hereto as Exhibit
A-1 and Exhibit A-2, respectively (each as amended, modified or supplemented, a
"Related Document" or a "Stockholder Agreement") shall have been executed and
delivered by the parties thereto and the transactions contemplated thereby to be
completed at or prior to the Closing substantially consummated or effected, as
the case may be, in accordance with the terms thereof.
(h) Partnership Agreement Amendment. The Partnership Agreement shall be
amended and restated in its entirety by the Sellers on such terms and conditions
as shall be satisfactory to the Sellers and the Purchasers.
(i) Sellers' Certificates. Each of the following certificates shall have
been executed and delivered, as the case may be, by the Person who or which is
the subject thereof:
(i) a certificate of the Sellers, dated as of the Closing Date,
certifying, in each case, (i) that true and complete copies of the
Organizational Documents of each Entity and the Sellers as in effect on
the Closing Date are attached thereto, (ii) as to the incumbency and
genuineness of the signatures of each officer of such Seller executing
this Agreement and the Related Documents, (iii) the genuineness of the
resolutions (attached thereto) of the board of directors of the Sellers
authorizing the execution, delivery and performance of this Agreement
and the Related Documents to which the Sellers are a party and the
consummation of the transactions contemplated hereby and thereby and
(iv) the genuineness of the resolutions (attached thereto) of the
management committee or
41
similar governing body of each Entity authorizing such Entity to consent
to the transactions contemplated by this Agreement;
(ii) certificates of the secretaries of state of the states (or
other applicable office) in which each Seller and each Entity is
organized and qualified to do business, dated as of a date not more than
five days prior to the Closing Date, certifying as to the good standing
and non-delinquent tax status of such Seller and Entity;
(iii) a certificate signed by the principal executive officer of
each Seller, dated as of the Closing Date, and certifying as to (A) the
accuracy of the representations and warranties of the Sellers contained
herein, as contemplated by Section 7.2(a) hereof, and (B) the
performance of the obligations, covenants and agreements of the Sellers
contained herein, as contemplated in Section 7.2(b) hereof; and
(iv) a certificate of the Sellers dated as of the Closing Date,
certifying that no Entity is a foreign person within the meaning of
Section 1445 of the Code.
(j) Resignation of Officers and Directors. The Purchasers shall have
received letters from all of the officers and directors of the Entities,
resigning their respective positions as officers and directors of such Entities,
respectively, immediately upon the Closing.
(k) Officer's Certificate. The Purchasers shall have received a
certificate of a duly authorized officer of the Parent certifying as to the
matters set forth in Section 7.2(e).
7.3 CONDITIONS TO OBLIGATIONS OF THE SELLERS.
The obligations of the Sellers under this Agreement are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Sellers:
(a) Accuracy of Representations and Warranties. All representations and
warranties made by Alliance and the Purchasers in this Agreement and the Related
Documents shall be true and correct, individually or in the aggregate, in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, or "Material Adverse
Effect" which representations and warranties as so qualified shall be true and
correct, individually or in the aggregate, in all respects) as of the date
hereof and at and as of the Closing Date (unless such representations and
warranties relate to a specific date other than the Closing Date, in which case,
such representations and warranties shall be true and correct, individually or
in the aggregate, in all material respects, or in all respects, as the case may
be, on such date)
42
with the same effect as if such representations and warranties had been made at
and as of the Closing Date.
(b) Performance of Obligations of the Purchasers and Alliance. Alliance
and the Purchasers shall have performed in all material respects all
obligations, agreements and covenants required to be performed by them under
this Agreement and the Related Documents prior to or as of the Closing Date.
(c) Certificates. Each of the following certificates shall have been
executed and delivered, as the case may be, by the Person who or which is the
subject thereof:
(i) a certificate of the secretary of Alliance and each
Purchaser, dated as of the Closing Date, certifying, in each case, (i)
that true and complete copies of its Organizational Documents as in
effect on the Closing Date are attached thereto, (ii) as to the
incumbency and genuineness of the signatures of each officer of Alliance
and such Purchaser executing this Agreement and the Related Documents,
and (iii) the genuineness of the resolutions (attached thereto) of the
board of directors of Alliance and such Purchaser (or committee thereof)
authorizing the execution, delivery and performance of this Agreement
and the Related Documents to which Alliance or such Purchaser is a party
and the consummation of the transactions contemplated hereby and
thereby;
(ii) (xlii) certificates of the secretaries of state of the
states in which Alliance and each of the Purchasers is organized, dated
a date not more than five days prior to the Closing Date as of the
Closing Date, certifying as to the good standing and non-delinquent tax
status of Alliance and the Purchasers; and
(iii) (xliii) a certificate signed by a principal executive
officer of Alliance and each Purchaser, dated as of the Closing Date,
and certifying as to (A) the accuracy of the representations and
warranties of Alliance and such Purchaser contained herein, as
contemplated by Section 7.3(a) hereof and (B) the performance of the
obligations, agreements and covenants of Alliance and such Purchaser
contained herein, as contemplated in Section 7.3(b) hereof.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION GENERALLY; ETC.
(a) Subject to the further terms of this Article VIII, the Sellers
agree, jointly and severally, to indemnify the Purchaser Indemnified Persons
for, and hold them harmless from and against, any and all Purchaser Losses
arising from or in connection with any of the following:
43
(i) the untruth, inaccuracy or breach of any representation or
warranty (without regard to whether such representation or warranty is
qualified by reference to materiality or "Material Adverse Effect") of
the Sellers contained herein, in any Related Document, or in any
certificate delivered by any Seller relating thereto delivered in
connection herewith (or any facts or circumstances constituting any such
untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of the Sellers
contained in this Agreement or in any Related Document;
(iii) any Liability of any Entity in any manner related to a
claim asserted under the Agreement for Purchase and Sale of Assets,
dated as of December 30, 1994 among Vencor, Inc., CT Sub and Parent;
(iv) for any Liability with respect to Covered Taxes and for 50%
of any Liability with respect to all transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees ("Transfer Taxes")
with respect to the transactions contemplated by Section 1.2; and
(v) any Liability of any Entity for Taxes attributable to the
inclusion of an adjustment in taxable income of an Entity under Section
481 of the Code for any Tax period beginning on or after the Closing
Date as a result of a required or optional change in method of
accounting with respect to a Tax period ending on or prior to the
Closing Date.
(b) Subject to the further terms of this Article VIII, each of Alliance
and the Purchasers agree jointly and severally to indemnify the Seller
Indemnified Persons for, and hold them harmless from and against, any and all
Seller Losses arising from or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty (without regard to whether such representation or warranty is
qualified by reference to materiality or "Material Adverse Effect") of
Alliance or such Purchaser contained herein, any Related Document, or
any certificate delivered by Alliance or such Purchaser in connection
herewith at or before the Closing (or any facts or circumstances
constituting any such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of Alliance or
either Purchaser contained in this Agreement or in any Related Document;
(iii) any failure to comply after the Closing Date with the
Worker Adjustment and Retraining Act of 1988, as amended, or any similar
state law arising out of, or relating to, any actions taken by Alliance
or the Purchasers with respect to Hired Employees after the Closing
Date; and
44
(iv) any Liability for Transfer Taxes to be borne by
Purchasers or Alliance pursuant to Section 10.14.
(c) Notwithstanding the foregoing the Purchasers shall not be entitled
to indemnification hereunder for any Losses arising as a result of the untruth
or inaccuracy of any representation or warranty to the extent that a Liability
arising as a result of such untruth or inaccuracy is reflected as a Liability in
the financial statements delivered on the date hereof pursuant to Section 3.5
hereof.
(d) Absent fraud, the rights of the parties for indemnification relating
to this Agreement and the transactions contemplated hereby and under the Related
Documents shall be strictly limited to those contained in this Article VIII, and
such indemnification rights shall be the exclusive remedies of the parties
subsequent to the Closing Date with respect to any matter relating to this
Agreement or arising in connection herewith.
8.2 ASSERTION OF CLAIMS.
No claim shall be brought for a breach of a representation or warranty
under Section 8.1 hereof unless the Indemnified Persons, or any of them, at any
time prior to the applicable Survival Date, give the Indemnifying Persons (a)
written notice of the existence of any such claim, specifying the nature and
basis of such claim and the amount thereof, to the extent known or (b) written
notice pursuant to Section 8.3 of any Third Party Claim, the existence of which
might give rise to such a claim. Upon the giving of such written notice as
aforesaid, the Indemnified Persons, or any of them, shall have the right to
commence legal proceedings prior to or subsequent to the Survival Date for the
enforcement of their rights under Section 8.1.
8.3 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS.
The obligations and liabilities of an Indemnifying Person with respect
to Losses resulting from the assertion of claim or Liability by third parties
other than in respect of Tax Claims (each, a "Third Party Claim") shall be
subject to the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to the
Indemnifying Persons of any Third Party Claim which might give rise to any Loss
by the Indemnified Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent known; provided, however, that no
delay on the part of the Indemnified Persons in notifying any Indemnifying
Persons shall relieve the Indemnifying Persons from any liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Person thereby
is materially and irrevocably prejudiced by the delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including any summons, complaint or other pleading which may have
been served, any written demand or any other document or instrument.
45
(b) If the Indemnifying Persons shall acknowledge in a writing delivered
to the Indemnified Persons that such Third Party Claim is properly subject to
their indemnification obligations hereunder, then the Indemnifying Persons shall
have the right to assume the defense of any Third Party Claim at their own
expense and by their own counsel, which counsel shall be reasonably satisfactory
to the Indemnified Persons; provided, however, that the Indemnifying Persons
shall not have the right to assume the defense of any Third Party Claim,
notwithstanding the giving of such written acknowledgment, if (i) the
Indemnified Persons shall have been advised by counsel that there are one or
more legal or equitable defenses available to them which are different from or
in addition to those available to the Indemnifying Persons, and, in the opinion
of the Indemnified Persons, counsel for the Indemnifying Persons could not
adequately represent the interests of the Indemnified Persons because such
interests could be in conflict with those of the Indemnifying Persons, or (ii)
the Indemnifying Persons shall not have assumed the defense of the Third Party
Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a Third
Party Claim (under circumstances in which the proviso to the first sentence of
Section 8.3(b) is not applicable), the Indemnifying Persons shall not be
responsible for any legal or other defense costs subsequently incurred by the
Indemnified Persons in connection with the defense thereof. If the Indemnifying
Persons do not exercise their right to assume the defense of a Third Party Claim
by giving the written acknowledgment referred to in Section 8.3(b), or are
otherwise restricted from so assuming by the proviso to the first sentence of
Section 8.3(b), the Indemnifying Persons shall nevertheless be entitled to
participate in such defense with their own counsel and at their own expense. If
the defense of a Third Party Claim is assumed by the Indemnified Persons, the
Indemnified Persons shall not be entitled to settle such Third Party Claim
without the prior written consent of the Indemnifying Persons, which shall not
be unreasonably withheld.
(d) If the Indemnifying Persons exercise their right to assume the
defense of a Third Party Claim, (i) the Indemnified Persons shall be entitled to
participate in such defense with their own counsel at their own expense and (ii)
the Indemnifying Persons shall not make any settlement of any claims without the
written consent of the Indemnified Persons, which shall not be unreasonably
withheld.
8.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
(a) Subject to the further provisions of this Section 8.4, the
representations and warranties contained in this Agreement, the Related
Documents, or in any certificate or other writing delivered in connection with
this Agreement shall survive the Closing Date until April 15, 1999; provided,
however, that (i) the representations and warranties contained in Sections 3.1,
3.2, 3.3, 3.4, 3.21, 4.1, 4.2, 4.3, 4.4, 5.1, 5.2 and 5.3 (other than the
covenant set forth therein which shall survive in accordance with the second
sentence of this Section 8.4(a)) of this Agreement shall survive indefinitely
and (ii) the representations and warranties contained in Sections 3.8 and 3.20
of this Agreement shall survive the Closing Date until the expiration of any
applicable statue of limitations (those
46
representations and warranties referenced in the foregoing clauses (i) and (ii),
being the "Excluded Representations and Warranties") for Third Party Claims
applicable to the matters covered thereby. The covenants and other agreements of
the parties contained in this Agreement and the Related Documents (including the
indemnity provided for in Section 8.1(a)(iii) of this Agreement) shall survive
the Closing Date until they are otherwise terminated by their terms. The
obligations of the Sellers under Section 8.1(a)(iv) and (a)(v) shall survive the
Closing Date until the expiration of any applicable statute of limitations with
respect to the matters set forth therein. The obligations of Alliance and the
Purchasers under Section 8.1(b)(iv) shall survive the Closing Date until the
expiration of any applicable statute of limitations with respect to the matters
set forth therein.
(b) For convenience of reference, the date upon which any representation
or warranty contained herein shall terminate, if any, is referred to herein as
the "Survival Date".
8.5 LIMITATIONS ON INDEMNIFICATION.
(a) Indemnity Baskets for the Sellers. The Purchaser Indemnified Persons
shall not have the right to be indemnified for breaches of representations and
warranties pursuant to Section 8.1(a)(i) unless and until the Purchaser
Indemnified Persons shall have incurred on a cumulative basis aggregate Losses
(without giving effect, in determining whether and to what extent
representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect") in
an amount of $500,000, in which event the right to be indemnified shall apply in
respect of all Losses; provided, however, that in no event shall the limitations
set forth in this Section 8.5(a) apply with respect to the Excluded
Representations and Warranties.
(b) Indemnity Limitations for the Sellers. The sum of all Losses
(without giving effect, in determining whether and to what extent
representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect")
pursuant to which indemnification is payable by the Sellers pursuant to Section
8.1(a)(i) shall not exceed $2,000,000; provided, however, that in no event shall
the limitations set forth in this Section 8.5(b) apply with respect to the
Excluded Representations and Warranties.
8.6 LIMITATIONS ON INDEMNIFICATION.
(a) Indemnity Baskets for the Purchasers and Alliance. The Seller
Indemnified Persons shall not have the right to be indemnified for breaches of
representations and warranties pursuant to Section 8.1(b)(i) unless and until
the Seller Indemnified Persons shall have incurred on a cumulative basis
aggregate Losses (without giving effect, in determining whether and to what
extent representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect") in
an amount of $500,000, in which event the right to be indemnified shall apply in
respect of all Losses; provided, however, that in no event shall
47
the limitations set forth in this Section 8.6(a) apply with respect to the
Excluded Representations and Warranties.
(b) Indemnity Limitations for the Purchasers and Alliance. The sum of
all Losses (without giving effect, in determining whether and to what extent
representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect")
pursuant to which indemnification is payable by the Purchasers and Alliance
pursuant to Section 8.1(b)(i) shall not exceed $2,000,000; provided, however,
that in no event shall the limitations set forth in this Section 8.6(b) apply
with respect to the Excluded Representations and Warranties.
8.7 ALLOCATION OF INDEMNIFICATION PAYMENTS.
The parties hereto agree that any indemnification payment shall be
treated as an adjustment to the Purchase Price.
ARTICLE IX
TERMINATION; EFFECT OF TERMINATION
9.1 TERMINATION.
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual written consent of the parties hereto; or
(b) the Purchasers or Alliance, if there has been a breach by any Seller
of any of the representations or warranties in this Agreement or in any Related
Document, individually or in the aggregate, in any material respect (except for
representations and warranties which are qualified by their terms by a reference
to materiality or "Material Adverse Effect" in which case, such representations
or warranties as so qualified shall have been breached in any respect),
covenant, obligation or agreement set forth in this Agreement or in any Related
Document and such breach shall not have been cured within 10 Business Days after
notice thereof is given by any Purchaser or Alliance (except that no cure period
shall be provided for a breach which by its nature cannot be cured); or
(c) the Sellers, if there has been a breach by Alliance or any Purchaser
of any of the representations or warranties in this Agreement or in any Related
Document, individually or in the aggregate, in any material respect (except for
representations and warranties which are qualified by their terms by a reference
to materiality or "Material Adverse Effect" in which case, such representations
or warranties as so qualified shall have been breached in any respect),
covenant, obligation or agreement set forth in this Agreement or in any Related
Document and such breach shall not have been cured within 10 Business Days after
notice thereof is given by any Seller (except that no cure period shall be
provided for a breach which by its nature cannot be cured); or
48
(d) either the Purchasers, Alliance or the Sellers, if the Closing shall
not have been consummated by September 15, 1998; or
(e) either the Purchasers, Alliance or the Sellers, if any permanent
injunction or Order of a Governmental Entity preventing the Closing shall have
become final and nonappealable;
(f) By either Parent or the Purchasers if, prior to the Closing Date,
(i) the Board of Directors of the Parent determines that a Third Party Proposal
for an Alternative Transaction constitutes a Superior Proposal, (ii) the Parent
promptly notifies the Purchasers of its determination in writing, which writing
shall set forth the terms and conditions of the Third Party Proposal and the
identity of the Person making the Third Party Proposal, (iii) ten days have
elapsed following receipt by the Purchasers of such written notice, (iv) during
such ten day period the Parent cooperates with the Purchasers with the intent of
enabling, but not obligating, the Purchasers to agree to a modification of the
terms and conditions of this Agreement so that the transactions contemplated
hereby may be effected, and (v) at the end of such ten day period, the Board of
Directors of the Parent continues to believe that such Third Party Proposal
constitutes a Superior Proposal and the Parent pays to the Purchasers the
amounts specified under Section 10.5(b) pursuant to the terms thereof. For
purposes of this Agreement, a "Superior Proposal" means any Third Party Proposal
to effect an Alternative Transaction; provided that (i) the Board of Directors
of the Parent determines in its good faith judgment (following the consultation
with, and the receipt of the advice of, the Parent's financial advisor) that
such Third Party Proposal is on terms that are more favorable to the Parent's
stockholders than the transactions contemplated by this Agreement (taking into
account all relevant factors, including the amount and form of consideration to
be received, the relative value of any non-cash consideration, and the timing
and certainty of closing) and (ii) the Board of Directors of the Parent
determines in its good faith judgment (based on the written advice of outside
counsel) that the failure to recommend or accept such Third Party Proposal would
violate the fiduciary duties of the Board of Directors of the Parent under
applicable Law;
provided, however, in each case, that none of the Sellers, Alliance nor the
Purchasers shall be entitled to terminate this Agreement if such party's breach
of this Agreement has prevented the satisfaction of a condition. Any
termination pursuant to this Section 9.1 shall be effected by written notice
from the party or parties so terminating to the other parties hereto, which
notice shall specify the Section of this Agreement pursuant to which this
Agreement is being terminated.
9.2 EFFECT OF TERMINATION.
In the event of the termination of this Agreement as provided in
Section 9.1, this Agreement shall be of no further force or effect, except for
Section 6.7, Section 10.5 and this Section 9.2, each of which shall survive the
termination of this Agreement; provided, however, that the Liability of any
party for any intentional, willful or knowing breach by
49
such party of the representations, warranties, covenants, obligations or
agreements of such party set forth in this Agreement occurring prior to the
termination of this Agreement shall survive the termination of this Agreement
and, in addition, in the event of any action for breach of contract in the event
of a termination of this Agreement, the prevailing party shall be reimbursed by
the other party to the action for reasonable attorneys' fees and expenses
relating to such action.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 AMENDMENT.
This Agreement shall not be altered or otherwise amended except
pursuant to an instrument in writing signed by the parties hereto. No waiver
by any party of any default, misrepresentation, or breach of representation or
warranty or covenant hereunder, whether intentional or not, shall be deemed to
extend to any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights arising by
virtue of any prior or subsequent such occurrence.
10.2 ENTIRE AGREEMENT.
This Agreement and the other agreements and documents referenced
herein (including, but not limited to, the schedules and the exhibits (in their
executed form) attached hereto) and any other document or agreement
contemporaneously entered into with this Agreement (including the Related
Documents) contain all of the agreements among the parties hereto with respect
to the transactions contemplated hereby and supersede all prior agreements or
understandings among the parties with respect thereto (including, but not
limited to, the letter agreement dated September 15, 1997 (as amended to the
date hereof) between the Parent and Apollo Management, L.P.
10.3 SEVERABILITY.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent permissible under the Law and
public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, in the event that any provision of this Agreement would be held in
any jurisdiction to be invalid, prohibited or unenforceable for any reason,
such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
Notwithstanding the foregoing, if such provision could be more narrowly drawn
so as not to be invalid, prohibited or unenforceable in such jurisdiction, it
shall, as to such jurisdiction, be so narrowly drawn, without invalidating the
remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction.
50
10.4 BENEFITS OF AGREEMENT.
All the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns. Except as expressly provided herein, this Agreement shall
not confer any rights or remedies upon any Person other than the foregoing;
provided, however, that anything contained herein to the contrary
notwithstanding, the Purchasers may (a) collaterally assign this Agreement and
the Related Documents, without the prior consent of any other party, to a
financial or lending institutions providing financing to such Persons or their
Affiliates, (b) assign the rights to acquire any and all assets (including
interests under leases, Permits and Contracts with third parties) related to
certain MRI Units to be designated by the Purchasers to the Sellers to any
Affiliate of the Purchasers, pursuant to Conveyance Instruments reasonably
satisfactory to the Purchasers on the Closing Date and (c) assign this
Agreement to any wholly-owned Subsidiary of Alliance.
10.5 FEES AND EXPENSES
(a) Except as otherwise provided herein and as provided below in this
Section 10.5, all fees and expenses incurred in connection with this Agreement,
the Related Documents and the transactions contemplated hereby and thereby shall
be paid by the party incurring such fees or expenses, whether or not such
transactions are consummated; provided, however, that the Purchasers shall pay
the reasonable fees and expenses of Ernst & Young, LLP in connection with the
preparation of the financial statements referenced in Section 3.5(b) and Section
6.15.
(b) If this Agreement is terminated pursuant to Section 9.1(f), the
Sellers shall pay to the Purchasers promptly upon such termination $1,350,000
plus all Expenses.
(c) If this Agreement is terminated by any Purchaser or Alliance
pursuant to Section 9.1(d) as a result of a failure to be satisfied of the
condition precedent set forth in Section 7.1(b), and, if, within 180 days of
such termination either an Alternative Transaction shall be consummated or any
Seller or Entity shall enter into an Acquisition Agreement providing for an
Alternative Transaction, then the Sellers shall pay the Purchasers, upon the
closing of such transaction, if and whenever it occurs, $1,350,000 plus all
Expenses. No amounts whatsoever shall be payable to the Purchasers under this
Section 10.5(c) if, at the Stockholders Meeting or any adjournments or
postponements thereof, the Purchasers or their Affiliates fail to vote or cause
to be voted, or fail to grant or cause the granting of consent or approval with
respect to, any shares of Parent Common Stock owned by them or as to which they
have voting rights, in favor of this Agreement and the transactions contemplated
hereby.
(d) The Sellers acknowledge that the agreements contained in this
Section 10.5 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the Purchasers and Alliance would
not enter into this Agreement. Accordingly, if the Sellers fail promptly to pay
any amount due pursuant to this Section 10.5, and, in order to obtain such
payment, the Purchasers or Alliance
51
commence a suit which results in a judgment against the Sellers for the amounts
set forth in this Section 10.5, the Sellers shall pay the Purchasers and
Alliance all costs and expenses (including attorney's fees and expenses) in
connection with such suit, together with interest on such amounts (excluding the
Purchaser's and Alliance's costs and expenses) at the prime rate of the Bankers
Trust Company in effect on the date such payment was required to be made. If
such a suit results in a judgment against the Purchasers or Alliance, the
Purchasers and Alliance shall pay to the Sellers all costs and expenses
(including attorney's fees and expenses) in connection with such suit.
"Expenses" shall mean all reasonably documented out-of-pocket expenses incurred
by the Purchasers and Alliance in connection with this Agreement, the Related
Documents and the transactions contemplated hereby and thereby, including fees
and expenses of its consultants, attorneys, accountants, and other advisors;
provided, however, that unless the Parent has previously agreed in writing to
increase such amount, the aggregate amount of such Expenses reimbursable under
this Section 10.5 shall not exceed $350,000.
10.6 HEADINGS.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
10.7 NOTICES.
All notices or other communications pursuant to this Agreement shall
be in writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by nationally-recognized, overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to
the parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to any Seller, to:
American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, California 94111
Attention: Ernest A. Bates, M.D.
Telephone No.: (415) 788-5300
Facsimile No.: (415) 788-5660
52
with a copy to:
Sidley & Austin
875 Third Avenue
14th Floor
New York, New York 10022
Attention: Daniel Kelly
Telephone No.: (212) 906-2000
Facsimile No.: (212) 906-2021
(b) if to the Purchasers or Alliance, to:
Alliance Imaging, Inc.
1065 PacifiCenter Drive
Suite 200
Anaheim, California 92806
Attention: Richard N. Zehner
Telephone No.: (714) 688-7100
Facsimile No.: (714) 688-3388
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone No.: (212) 408-2400
Facsimile No.: (212) 408-2420.
All such notices and other communications shall be deemed to
have been given and received (i) in the case of personal delivery, on the date
of such delivery, (ii) in the case of delivery by telecopier, on the date of
such delivery, (iii) in the case of delivery by nationally-recognized,
overnight courier, on the Business Day following dispatch, and (iv) in the case
of mailing, on the third Business Day following such mailing.
10.8 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
10.9 GOVERNING LAW.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW OR CONFLICTING
53
PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK, OR ANY OTHER JURISDICTION)
THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK
TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL LAW OF THE STATE OF
NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF THIS AGREEMENT,
EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF LAW ANALYSIS, THE
SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY APPLY. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY RELATED DOCUMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY AND ASSETS, GENERALLY AND UNCONDITIONALLY THE
JURISDICTION OF THE AFORESAID COURTS.
10.10 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Annexes, Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
10.11 INTERPRETATION; CONSTRUCTION.
The term "Agreement" means this agreement together with all schedules,
annexes and exhibits hereto, as the same may from time to time be amended,
modified, supplemented or restated in accordance with the terms hereof. Unless
the context otherwise requires, words importing the singular shall include the
plural, and vice versa. In this Agreement, the term "Best Knowledge" of any
Person means (i) the actual knowledge of such Person and (ii) that knowledge
which should have been acquired by such Person after making such due inquiry
and exercising such due diligence as a prudent businessperson would have made
or exercised in the management of his or her business affairs, including due
inquiry of those officers, directors, employees and professional advisers
(including attorneys, accountants and consultants) of the Person who could
reasonably be expected to have actual knowledge of the matters in question.
When used in the case of the Sellers, the term "Best Knowledge" shall include
the Best Knowledge of each Seller and each Entity. The use in this Agreement
of the term "including" means "including, without limitation." The words
"herein", "hereof", "hereunder", "hereby", "hereto", "hereinafter", and other
words of similar import refer to this Agreement as a whole, including the
schedules, annexes and exhibits, as the same may from time to time be amended,
modified, supplemented or restated, and not to any particular article, section,
subsection, paragraph, subparagraph or clause contained in this Agreement. All
references to articles, sections, subsections, clauses, paragraphs, schedules
and exhibits mean such provisions of this Agreement and the schedules and
exhibits attached to this Agreement, except where otherwise stated. The title
of and the article, section and paragraph headings in this Agreement are for
convenience of reference only and shall not govern or
54
affect the interpretation of any of the terms or provisions of this Agreement.
The use herein of the masculine, feminine or neuter forms shall also denote the
other forms, as in each case the context may require. Where specific language is
used to clarify by example a general statement contained herein, such specific
language shall not be deemed to modify, limit or restrict in any manner the
construction of the general statement to which it relates. The language used in
this Agreement has been chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
Accounting terms used but not otherwise defined herein shall have the meanings
given to them under GAAP. Unless expressly provided otherwise, the measure of a
period of one month or year for purposes of this Agreement shall be that date of
the following month or year corresponding to the starting date, provided that if
no corresponding date exists, the measure shall be that date of the following
month or year corresponding to the next day following the starting date. For
example, one month following February 18 is March 18, and one month following
March 31 is May 1.
10.12 REMEDIES.
The parties shall each have and retain all rights and remedies
existing in their favor under this Agreement, the Related Documents, at law or
equity, including rights to bring actions for specific performance and
injunctive and other equitable relief (including, without limitation, the
remedy of rescission) to enforce or prevent a breach or any violation of this
Agreement or the Related Documents. All such rights and remedies shall, to the
extent permitted by applicable Law, be cumulative.
10.13 APPOINTMENT OF REPRESENTATIVE.
M Sub hereby irrevocably appoints the Parent to be its
attorney-in-fact and representative for the purpose of administering this
Agreement on behalf M Sub. The Purchasers shall be entitled to deal
exclusively with the Parent, as the representative of M Sub. Purchaser B
hereby irrevocably appoints Purchaser A to be its attorney-in-fact and
representative for the purpose of administering this Agreement on behalf of
Purchaser B. The Sellers shall be entitled to deal exclusively with Purchaser
A as the representative of Purchaser B.
10.14 SALE AND TRANSFER TAXES.
All Transfer Taxes incurred in connection with the consummation of the
transactions contemplated herein (other than the Transfer Taxes referenced in
Section 8.1(a)(iv) to be borne by the Sellers) shall be paid 100% by Alliance
and the Purchasers.
10.15 WAIVER OF JURY TRIAL.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENT.
55
* * *
56
IN WITNESS WHEREOF, the parties hereto have executed this
Securities Purchase Agreement as of the date first written above.
ALLIANCE IMAGING, INC.
By: /s/ Richard N. Zehner
----------------------------------
Name: Richard N. Zehner
Title: CEO
EMBARCADERO HOLDING CORP. I
By: /s/ Josh Harris
----------------------------------
Name: Josh Harris
Title: Vice President
EMBARCADERO HOLDING CORP. II
By: /s/ Josh Harris
----------------------------------
Name: Josh Harris
Title: Vice President
AMERICAN SHARED HOSPITAL
SERVICES
By: /s/ Ernest A. Bates
----------------------------------
Name: Ernest A. Bates, M.D.
Title: Chairman and CEO
57
MMRI, INC.
By: /s/ Ernest A. Bates
----------------------------------
Name: Ernest A. Bates, M.D.
Title: Chairman and President
58
ANNEX I
DEFINITIONS
"Acquisition Agreement" has the meaning ascribed thereto in
Section 6.4.
"Affiliate" means, with respect to any Person, (i) a director,
officer or greater than 10% shareholder of such Person, (ii) a spouse, parent,
sibling or descendant of such Person (or spouse, parent, sibling or descendant
of any director or executive officer of such Person), or (iii) any other Person
that, directly or indirectly through one or more intermediaries, Controls, or
is Controlled by, or is under common Control with, such Person.
"Alliance" has the meaning ascribed thereto in the preamble.
"Alternative Transaction" means any (i) acquisition or
purchase of any material portion of the Business or any material assets of
either Entity outside the ordinary course of business, (ii) acquisition or
purchase of any Equity Securities of any Entity, any tender offer or exchange
offer that if consummated would result in any Person beneficially owning more
than 50% of any class of Equity Securities of the Parent or any Equity
Securities of either Entity or (iii) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving any Entity, other than the transactions contemplated to be effected
with the Purchasers by this Agreement.
"ASHS 401(k) Plan" has the meaning ascribed thereto in Section
6.18.
"Asset Contribution" has the meaning ascribed thereto in
Section 1.2.
"Asset Disposition" has the meaning ascribed thereto in
Section 1.2.
"Business" has the meaning ascribed thereto in the first
WHEREAS clause.
"Business Day" means any day that is not a Saturday, Sunday or
a day on which banking institutions in New York, New York are not required to
be open.
"Capital Lease" means any obligation to pay rent or other
amounts under any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which obligations are
required to be classified and accounted for as capital leases on a balance
sheet of such Person as of such date computed in accordance with GAAP.
"Cash Equivalents" means any of the following: (a) securities
issued, or that are directly and fully guaranteed or insured, by the United
States Government or any agency or instrumentality thereof having maturities of
not more than 12 months from the date of acquisition, (b) time deposits and
certificates of deposit having maturities of not more than 12 months from the
date of acquisition of any domestic commercial bank having capital and surplus
in excess of $500,000,000, (c) repurchase agreements with a
term of not more than seven days for underlying securities of the types
described in clauses (a) and (b) above entered into with any bank meeting the
qualifications specified in clause (b) above or with securities dealers of
recognized national standing, and (d) commercial paper rated (as of the date of
acquisition thereof) at least A-1 or the equivalent thereof by Moody's Investors
Service, Inc. and at least P-1 or the equivalent thereof by Standard & Poor's
Corporation and maturing within six months after the date of its acquisition.
"Cath Lab" has the meaning ascribed thereto in Section 3.5.
"CERCLA" has the meaning ascribed thereto in Section 3.20.
"CHAMPUS" has the meaning ascribed thereto in Section 3.18.
"Closing" has the meaning ascribed thereto in Article II.
"Closing Date" has the meaning ascribed thereto in Article II.
"COBRA" has the meaning ascribed thereto in Section 6.18.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential or Proprietary Information" means all
information disclosed (i) by or on behalf of any Entity or any Seller to the
Purchasers, Alliance or to employees, consultants or others in a confidential
relationship with any of them, or (ii) by or on behalf of the Purchasers or
Alliance to any Seller or any Entity, or to employees, consultants or others in
a confidential relationship with any of them, in each case other than such
information which (A) becomes generally available to the public (other than as
a result of a breach of this Agreement), (B) was known to the party to whom
such information was disclosed prior to its disclosure to such party, (C) is
hereafter available to the party to whom such information was disclosed on a
non-confidential basis from a source (other than the party disclosing or on
whose behalf such information was disclosed) which was, to the knowledge of the
receiving party, entitled to disclose the same or (D) is compelled by Law or
Order to be disclosed by the party to whom such information was disclosed.
"Confidentiality Agreement" has the meaning ascribed thereto
in Section 6.5.
"Consolidated Affiliate" has the meaning ascribed thereto in
Section 3.8.
"Consolidated Group" has the meaning ascribed thereto in
Section 3.8.
"Contract" means any agreement, contract, or license (i) for
purposes of Section 3.7(l) and Section 6.2(k), relating to payments by any
Person of a dollar amount in excess of $25,000 and (ii) for purposes of all
other Sections of this Agreement, relating to payments by any Person of a
dollar amount in excess of $10,000.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of
securities, by contract or otherwise.
"Conveyance Instruments" has the meaning ascribed thereto in
Section 1.2.
"Covered Taxes" means, all Taxes of CT Sub and/or the
Partnership with respect to periods ending on or prior to the Closing Date
other than those Taxes that are to be paid by Purchasers and Alliance pursuant
to Section 10.14.
"CT Shares" has the meaning ascribed thereto in the second
WHEREAS clause.
"CT Sub" means CuraCare, Inc., a Delaware corporation.
"CT Unit" has the meaning ascribed thereto in Section 3.5.
"DVI" has the meaning ascribed thereto in Section 6.16.
"DVI Revolving Credit Agreement" means the Loan and Security
Agreement dated as of January 31, 1996 among MRI Sub and CT Sub, as borrowers,
the Parent and Ernest A. Bates, M.D., as guarantors, and DVI, as lender, as
amended by Amendment No. 1 dated March 26, 1996, as amended by Amendment No. 2
dated January 31, 1997, as amended by Amendment No. 3 dated April 30, 1997, as
amended by Amendment No. 4 dated as of July 31, 1997 and as amended by
Amendment No. 5 dated as of December 1, 1997.
"EBITDA" means, for any period with respect to any Unit, net
income (or net loss) from operations plus, to the extent deducted in
calculating such net income (or net loss), the sum of (a) interest expense, (b)
income tax expense, (c) depreciation expense and (d) amortization expense, in
each case determined and as properly allocated to such Unit in accordance with
GAAP.
"Employee Benefit Plan" means (i) any qualified or
non-qualified "employee pension benefit plan," as defined in Section 3(2) of
ERISA, including any "multiemployer plan," as defined in Section 3(37) of ERISA,
or "multiple employer plan," as defined in Section 413 of the Code, (ii) any
"employee welfare benefit plan," as defined in Section 3(1) of ERISA, or (iii)
any severance, employment, incentive, bonus, profit-sharing, stock option, stock
purchase or other pension, welfare or fringe plan, program or arrangement,
whether or not subject to ERISA and whether or not funded.
"Employee Plans" has the meaning ascribed thereto in Section
3.17.
"Encumbrances" shall mean any security interest, mortgage,
lien, pledge or charge or any option or right of first refusal.
"Entities" means CT Sub and the Partnership.
"Entities' Financial Statements" has the meaning ascribed
thereto in Section 3.5.
"Environmental, Health and Safety Laws" means all Laws,
Permits, Orders and Contracts and all common Law relating to or addressing
pollution or protection of the environment, public health and safety, or
employee health and safety, including, but not limited to, all those relating
to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise or radiation.
"Equity Interests" means (i) with respect to a corporation,
any and all shares, interests, participation or other equivalents (however
designated) of corporate stock, including all common stock and preferred stock,
or warrants, options or other rights to acquire any of the foregoing and (ii)
with respect to a partnership, limited liability company or similar Person, any
and all units, interests, rights to purchase, warrants, options or other
equivalents of, or other ownership interests in, any such Person.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means, with respect to any Person, any other
Person that is a member of a "controlled group of corporations" with, or is
under "common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Section 414(b), 414(c), 414(m) or 414(o)
of the Code.
"Exchange Act" has the meaning ascribed thereto in Section
3.22.
"Exchange Proceeds" has the meaning ascribed thereto in
Section 6.9.
"Excluded Assets" has the meaning ascribed thereto in Section
1.2.
"Excluded Liabilities" has the meaning ascribed thereto in
Section 1.2.
"Excluded Representations and Warranties" has the meaning
ascribed thereto in Section 6.4.
"Expenses" has the meaning ascribed thereto in Section 10.5.
"Federal Health Care Program" has the meaning ascribed thereto
in Section 3.19.
"Funded Indebtedness" means, without duplication, with respect
to any Person the aggregate amount (including the current portions thereof) of
all (i) indebtedness for money borrowed from others and purchase money
indebtedness (other
than accounts payable in the ordinary course) of such Person; (ii) indebtedness
of the type described in clause (i) above guaranteed, directly or indirectly, in
any manner by such Person, through an agreement, contingent or otherwise, to
supply funds to, or in any other manner invest in, the relevant debtor, or to
purchase indebtedness, or to purchase and pay for property if not delivered or
pay for services if not performed, primarily for the purpose of enabling such
debtor to make payment of the indebtedness or to assure the owners of the
indebtedness against loss (any such arrangement being hereinafter referred to as
a "Guaranty"), but excluding endorsements of checks and other instruments in the
ordinary course; (iii) indebtedness of the type described in clause (i) above
secured by any Encumbrances upon property owned by such Person, even though such
Person has not in any manner become liable for the payment of such indebtedness;
(iv) interest expense accrued but unpaid, and all prepayment premiums, on or
relating to any of such indebtedness; (v) obligations in respect of leases which
would be required to be capitalized under GAAP; and (vi) obligations under
operating leases for Units.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"GK Finance" means GK Financing, LLC, a California limited
liability company.
"Governmental Entity" means any federal, state, local or
foreign government and any court, tribunal, administrative agency, commission
or other governmental or regulatory authority or agency, domestic, foreign or
supranational.
"Guaranty" has the meaning ascribed thereto in the definition
of Funded Indebtedness.
"Hired Employees" has the meaning ascribed thereto in Section
6.18.
"Indemnified Persons" means and includes the Seller
Indemnified Persons and/or the Purchaser Indemnified Persons, as the case may
be.
"Indemnifying Persons" means and includes the Seller
Indemnifying Persons and/or the Purchaser Indemnifying Persons, as the case may
be.
"Intellectual Property Rights" means all intellectual property
rights, including, without limitation, patents, patent applications,
trademarks, trademark applications, tradenames, servicemarks, servicemark
applications, trade dress, logos and designs and the goodwill connected with
the foregoing, copyrights and copyright applications, know-how, trade secrets,
proprietary processes and formulae, confidential information, franchises,
licenses, inventions, instructions, marketing materials and all documentation
and media constituting, describing or relating to the foregoing, including,
without limitation, manuals, memoranda and records.
"Latest Balance Sheet" has the meaning ascribed thereto in
Section 3.5.
"Latest Balance Sheet Date" has the meaning ascribed thereto
in Section 3.5.
"Law" means any applicable foreign, federal, state or local
law, statute, treaty, rule, directive, regulation, ordinance and similar
provision having the force or effect of law or an Order of any Governmental
Entity (including all Environmental, Health and Safety Laws).
"Leased Property" has the meaning ascribed thereto in Section
3.10.
"Liability" means any liability whether fixed or unfixed or
liquidated or unliquidated.
"Licensed Requisite Rights" has the meaning ascribed thereto
in Section 3.11.
"Losses" means any and all losses, claims, damages,
Liabilities, expenses (including reasonable attorneys' and accountants' and
other professionals' fees), assessments and Taxes, (including interest or
penalties thereon) that are the subject of indemnification under Article VIII,
in each case, (i) net of any cash insurance benefits actually received and (ii)
net of any Tax benefits realized in respect of the Losses for which the
indemnification payments are being made. For purposes of this definition, Tax
benefits realized shall mean the sum of all reductions in federal, state, local
and foreign Taxes (including estimated Taxes) payable by the Indemnified Person
solely as a result of the Losses for which the indemnification payments are
being made. All calculations shall be made using reasonable assumptions agreed
upon by the Purchasers, Alliance and the Sellers including the timing of the
utilization of any such Tax benefits, and any such Tax benefits shall be assumed
to be utilized in a given Tax year only after all other Tax benefits available
in such year have first been taken into account. If a Tax benefit that has been
taken into account for purposes of calculating Losses hereunder is wholly or
partially disallowed by a taxing authority, the Indemnifying Person shall pay
the Indemnified Person the amount that would have been paid originally with
respect to such Losses had such disallowed Tax benefit not been taken into
account.
"M Sub" has the meaning ascribed thereto in the preamble.
"M Sub Partnership Interests" means the 50% general
partnership interests in the Partnership held or owned by M Sub.
"Material Adverse Effect" has the meaning ascribed thereto in
Section 3.7.
"MRI Unit" has the meaning ascribed thereto in Section 3.5.
"Non-Compete Period" means the period ending on the fifth
anniversary of the Closing Date.
"Orders" means judgments, writs, decrees, compliance
agreements, injunctions or judicial or administrative orders and determinations
of any Governmental Entity or arbitrator.
"Organizational Documents" means (i) any certificate or
articles filed with any state which filing forms a Person and (ii) all
agreements, documents or instruments governing the internal affairs of a
Person, including such Person's by-laws, codes of regulations, partnership
agreements, limited liability company agreements, joint venture agreements and
operating agreements.
"Owned Requisite Rights" has the meaning ascribed thereto in
Section 3.11.
"Parent" has the meaning ascribed thereto in the preamble.
"Parent Common Stock" has the meaning ascribed thereto in
Section 3.24.
"Parent Partnership Interests" means the 50% general
partnership interest in the Partnership held or owned by the Parent.
"Parent Stockholder Approval" has the meaning ascribed thereto
in Section 3.24.
"Partnership" means American Shared-CuraCare, a California
general partnership.
"Partnership Agreement" means the Joint Venture Agreement,
between M Sub and the Parent, dated March 7, 1985, as modified by the
Modification to Joint Venture Agreement dated April 5, 1985, the Modification
to Joint Venture Agreement dated May 20, 1985, the First Supplement to the
Joint Venture Agreement dated as of October 14, 1987, the Second Supplement to
the Joint Venture Agreement dated as of May 15, 1995, and as further amended,
modified or supplemented from time to time including, without limitation, as
amended and restated pursuant to Section 7.2 hereunder.
"Partnership Interests" means the M Sub Partnership Interests
and the Parent Partnership Interests.
"Permits" means all permits, certificates of need, licenses,
authorizations, registrations, franchises, approvals, certificates, variances
and similar rights obtained, or required to be obtained, from Governmental
Entities.
"Permitted Encumbrances" means with respect to any Person, (i)
Encumbrances for Taxes not yet due and payable or being contested in good faith
by appropriate proceedings and for which there are adequate reserves on the
books and records of such Person, (ii) workers or unemployment compensation
liens arising in the ordinary course of business, (iii) statutory lessor liens
arising under leases, and (iv)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Person" shall be construed broadly and shall include an
individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a Governmental Entity (or any department, agency or political
subdivision thereof).
"Post Signing Returns" has the meaning ascribed thereto in
Section 6.11.
"Proceedings" means any action, suit, investigation or
proceedings before any Governmental Entity or arbitrator other than the review
by Internal Revenue Service of an application for a favorable determination
letter regarding any Employee Plan.
"Proxy Statement" has the meaning ascribed thereto in Section
6.12.
"Purchase Price" has the meaning ascribed thereto in Section
1.3.
"Purchased Parent Assets" has the meaning ascribed thereto in
Section 1.2.
"Purchaser A" has the meaning ascribed thereto in the
preamble.
"Purchaser B" has the meaning ascribed thereto in the
preamble.
"Purchaser Indemnified Persons" means and includes the
Purchasers, their Affiliates (including, without limitation, Alliance), their
successors and assigns, and the respective officers, directors, employees and
agents of each of the foregoing.
"Purchaser Indemnifying Persons" means Alliance and each
Purchaser (jointly and severally) and their successors and assigns.
"Purchaser Losses" means any and all Losses sustained,
suffered or incurred by any Purchaser Indemnified Person arising from or in
connection with any such matter which is the subject of indemnification under
Article VIII.
"Purchasers" has the meaning ascribed thereto in the preamble.
"Related Documents" has the meaning ascribed thereto in Section
7.2
"Requisite Rights" has the meaning ascribed thereto in Section
3.11.
"Respiratory System" has the meaning ascribed thereto in
Section 3.5.
"Restricted Territory" means any portion of the United States
in which the Business has operated during the three years preceding the Closing
Date.
"SEC" means the United States Securities and Exchange
Commission and any successor agency.
"SEC Documents" has the meaning ascribed thereto in Section
3.5.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Indemnified Persons" means and includes the Sellers
and their respective successors and assigns.
"Seller Indemnifying Persons" means and includes the Sellers
(jointly and severally) and their respective successors and assigns.
"Seller Losses" shall mean any and all Losses sustained,
suffered or incurred by any Seller Indemnified Person arising from or in
connection with any matter which is the subject of indemnification under
Article VIII.
"Sellers" means the Parent and M Sub.
"Shares" means the CT Shares and the Partnership Interests.
"SPECT UNIT" has the meaning ascribed thereto in Section 3.5.
"SSA" has the meaning ascribed thereto in Section 3.18.
"State Health Care Program" has the meaning ascribed thereto
in Section 3.19.
"Stockholders Agreement" has the meaning ascribed thereto in
Section 7.2.
"Stockholders Meeting" has the meaning ascribed thereto in
Section 6.12.
"Subsidiary" means any Person with respect to which a
specified Person (or a Subsidiary thereof) has the power to vote or direct the
voting of sufficient securities to elect a majority of the directors or other
governing body.
"Superfund" has the meaning ascribed thereto in Section 3.20.
"Superior Proposal" has the meaning ascribed thereto in
Section 9.1.
"Survival Date" has the meaning ascribed thereto in Section
8.4.
"Tax Claim" has the meaning ascribed thereto in Section 6.8.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Taxes" means, with respect to any Person, (i) all income
taxes (including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use,
ad valorem, transfer, franchise, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property or windfall profits
taxes, alternative or add-on minimum taxes, customs duties and other taxes,
fees, assessments or charges of any kind whatsoever, together with all interest
and penalties, additions to tax and other additional amounts imposed by any
taxing authority (domestic or foreign) on such Person (if any) and (ii) any
liability for the payment of any amount of the type described in clause (i)
above as a result of (A) being a "transferee" (within the meaning of Section
6901 of the Code or any other applicable Law) of another Person, (B) being a
member of an affiliated, combined or consolidated group or (C) a contractual
arrangement or otherwise.
"Third Party Claim" has the meaning ascribed thereto in
Section 8.3.
"Third Party Proposal" means a bona fide proposal from a third
party, which proposal did not result from a breach of Section 6.4(a) and which
third party the Board of Directors of the Parent determines in good faith has
the capacity and is reasonably likely to consummate a Superior Proposal.
"338(h)(10) Election" has the meaning ascribed thereto in
Section 6.8.
"Transfer Taxes" has the meaning ascribed thereto in Section
8.1.
"Ultrasound Machine" has the meaning ascribed thereto in
Section 3.5.
"Units" has the meaning ascribed thereto in Section 3.5.
"Years Included" has the meaning ascribed thereto in Section
3.8.
ADDENDUM
The following is a list of and description of the contents of Schedules to the
foregoing Securities Purchase Agreement that have been omitted from such
Agreement as filed with the Annual Report on Form 10-K; such Schedules will be
provided to the Commission upon request:
[Download Table]
Schedule Number Title and Description
--------------- ---------------------
1.2(a) Purchased Parent Assets: assets used in the business current
held by the Parent and that are to be assigned or transfered to
the Entities prior to the Closing.
1.2(b) Excluded Assets: assets held by either of the Entities that are
to be assigned or transfered by the Entities to the Parent
prior to the Closing.
1.2(c) Excluded Liabilities: liabilities of the Entities that are not
being assumed by the Purchasers and that must be assumed by the
Parent prior to the Closing.
3.2(c) Jurisdictions of Sellers and Entities: list of each state
(other than the state of incorporation) in which the Sellers
and Entities are qualified to do business and are in good
standing.
3.2(e)(i) Businesses: Description of businesses engaged in during the
last five years by the Sellers and the Entities.
3.2(e)(ii) Trade Names and Assumed Names: trade and assumed names used by
the Sellers and the Entities.
3.2(f) Authority: listing of agreements or documents that would be in
default as a result of the agreement, absent waiver or consent.
3.2(g) Consents: Consents of third parties that must be obtained for
the transactions contemplated by the Agreement.
3.3(b) Partnership Interests: Listing of percentage of interests in
the Partnership owned by each Seller.
3.3(d) Contracts re Equity Interests: Listing of any outstanding
agreements related to equity interests in the Entities.
[Download Table]
3.5(a) Parent and Subsidiary Liabilities Incurred Since September 30,
1997: Description of Liabilities incurred by Parent and its
Subsidiaries since September 30, 1997.
3.5(b) Pro Forma Financial Statements: Financial Statements of the
Entities pro forma for the transactions provided for in Section
1.2 of the Agreement.
3.5(d) Funded Indebtedness: Funded Indebtedness outstanding at January
31, 1998.
3.5(e) Specifications of Units: Information related to each Unit used
in the Business, including specifications, net book value, date
acquired.
3.5(f) Upgrades and Commitments for Upgrades of Units: Description of
upgrades completed within the last year and upgrades that have
been committed to be completed.
3.5(g) Accounts Payable: Accounts payable outstanding at January 31,
1998.
3.5(h) Principal Payments or Prepayments: Listing of principal and
interest payments made and capital expenditures during the year
ended December 31, 1997 and one month ended January 31, 1998;
revenues and EBITDA for each Unit for the year ended December
31, 1997 and the one month ended January 31, 1998.
3.7 Changes in Operations: Description of changes in operations of
the business since December 31, 1997.
3.8(a) Tax Returns: Description of any tax returns that have not been
filed on a timely basis.
3.8(c) Audits: Description of any outstanding audits related to taxes.
3.8(d) States Where Filed Income Tax Returns: Listing of states in
which income tax returns were required to be filed in each of
the three years ended December 31, 1997.
3.9 Compliance with Leases; Encumbrances on Property: Schedule
showing any existing defaults or items that, with passage of
time or giving of notice, would constitute a default under
leases and a listing of liens (UCC financing statements) on
record against the Sellers and the Entities.
3.10(a) Leased Real Property: Listing of all real property leased by
the Sellers and Entities and a description of the basic terms
of the leases.
- 2 -
[Download Table]
3.11(a) Owned or Leased Intellectual Property: Listing of intellectual
property owned or leased by the Sellers and Entities.
3.11(b) Applications re Intellectual Property: Listing of applications
to register trade marks or service marks that are pending.
3.12 Contracts: Listing of Contracts related to the Business.
3.12 Defaults: Defaults under Contracts existing at the signing date
or items that, with the passage of time or giving of notice
could constitute default.
3.13(a) Pending and Threatened Civil and Criminal Proceedings: Listing
and description of pending and threatened civil and criminal
litigation, investigations, administrative proceedings and
similar matters.
3.13(b) Concluded Material Proceedings: Description of concluded
matters in which the Entities paid more than $50,000 in
settlement or damages during the last three years.
3.14 Permits: Listing of permits issued to Sellers or the Entities
used in the Business.
3.15(a) Insurance: Listing of insurance policies maintained by the
Sellers or the Entities in connection with the Business and a
summary of pending claims.
3.15(b) Premiums: Listing of any premiums for insurance policies that
have not been paid or are subject to adjustment or
retrospective premium.
3.16(a) Officers, Directors and Employees Earning Greater than $75,000
per year: Listing of officers and directors of the Entitites
and employees who earned more than $75,000 during 1997.
3.16(b) Labor Matters: Listing of any pending labor matters.
3.17(a) Employee Benefit Plans: Listing of employee benefit plans
maintained by the Sellers or the Entities.
3.17(b) Administration of Employee Benefit Plans: Listing of any
pending proceedings or violations in the administration of the
employee benefit plans.
3.20(a) Environmental Matters: Listing of any matters in which the
Entitites are not in compliance with environmental laws.
- 3 -
[Download Table]
3.20(b) Environmental Claims: Listing of any pending or threatened
claims by governmental entities concerning a violation of an
environmental law.
3.20(c) Administrative Proceedings re Environmental: Listing of any
pending administrative or judicial proceeding or investigation
regarding remediation under environmental, health or safety
laws.
3.20(d) Notices of Violations of Environmental: Listing of notices or
violations or requirements to remediate or take corrective
action related to environmental, health and safety laws during
the last five years by the Entities.
3.20(e) Changes in Environmental Laws: Listing of changes in
environmental laws of which the Sellers have knowledge.
3.22 Related Transactions: Summary of transactions with affiliates.
3.23 Bank Accounts and Powers of Attorney: Listing of bank accounts
maintained by the Sellers or the Entities and powers of
attorney granted by Entities or Sellers.
3.26 Physician Relationships: Description of any "financial
relationships" of the Entities with "referring physicians"
under 42 U.S.C. Section 1395nn..
3.27 Hospital Relationships: Description of any relationships of the
Entities with hospitals in connection with rental payments
based on fees or revenues of any segment of the business of the
Entities.
4.1 Organization of Purchasers: Jurisdictions in which Purchasers
are qualified to do business as a foreign person.
4.4 Consents: Listing of consents that must be obtained or actions
that must be taken by Purchasers to avoid conflicts with
agreements or documents to which it is a party or subject.
- 4 -
Dates Referenced Herein and Documents Incorporated by Reference
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