<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 3, 1999
AMERICAN PHYSICIAN PARTNERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 000-23311 75-2648089
(STATE OF INCORPORATION) (COMMISSION FILE NUMBER) (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>
3600 CHASE TOWER, 2200 ROSS AVENUE DALLAS, TEXAS 75201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 303-2776
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 3, 1999, American Physician Partners, Inc. ("APPM") acquired
privately held Questar Imaging, Inc. of Tampa, Florida ("Questar") under a stock
purchase agreement (the "Stock Purchase Agreement"). Questar currently offers
magnetic resonance imaging (MRI) and other diagnostic imaging services at 27
centers in 14 states, and is in the process of developing 17 additional centers.
Upon completion of the centers under development, the transaction will add 44
centers to APPM's existing 90 locations. Questar's operating team will continue
with APPM, and Paul Stanley, Questar's President and Chief Executive Officer,
has been retained by APPM as a consultant.
APPM intends to continue to use Questar's plant, equipment and physical
property in substantially the same manner as they were used by Questar. APPM
paid Questar's shareholders approximately $15.7 million in cash at the closing.
The Stock Purchase Agreement requires APPM pay up to an additional $7.5 million,
subject to adjustment, for diagnostic imaging centers that are under
development; payment is due once those centers become operational. APPM may pay
additional consideration to the former Questar shareholders if APPM elects to
make an election under Section 338(h)(10) of the Internal Revenue Code to treat
the stock purchase as a deemed asset purchase.
The amount of consideration paid and other terms of the Stock Purchase
Agreement were the result of arms'-length negotiation among the officers of APPM
and Paul M. Stanley, Thomas R. Newkirk and Joseph J. Clauer, who are the former
shareholders of Questar. Before the transaction, none of Questar's shareholders
were affiliated with, or had any material relationship with, APPM or any of its
affiliates, any director or officer of APPM or any associate of any such
director or officer.
The purchase price was financed through the issuance of $20 million in
principal amount of junior convertible subordinated notes that initially bear
interest at a rate of 8 percent, which may be adjusted in certain circumstances,
to BT Capital Partners SBIC, L.P., a private equity arm and affiliate of
Deutsche Bank, in a private transaction. The notes are convertible into APPM
common stock at an initial conversion price of $8.625, which may be adjusted in
certain circumstances.
This report may contain forward-looking statements that relate to
future financial results or business expectations and that are subject to risks
and uncertainties that exist in APPM's operations and business environment.
Business plans may change as circumstances warrant and actual results may differ
materially from any forward-looking statements, which reflect the management's
opinion only as of the date hereof. Such risks and uncertainties include, but
are not limited to, those associated with APPM's acquisition and expansion
strategy; integration of APPM's affiliated physician practices; APPM's ability
to achieve operating efficiencies and engage in successful new practice
development efforts; regulatory changes; reimbursement trends; and general
economic and business conditions. Such risks and uncertainties, as well as
additional risk factors, are included in APPM's filings with the Securities and
Exchange Commission, including its Form 10-K/A dated May 12, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Not applicable.
(b) PRO FORMA FINANCIAL INFORMATION.
Not applicable.
(c) EXHIBITS
2.1 Stock Purchase Agreement effective as of August 1, 1999 by and among
APPM, Questar and the shareholders of Questar.
4.1 Securities Purchase Agreement dated as of August 3, 1999 among APPM and
BT Capital Partners SBIC, L.P.
1
<PAGE> 3
4.2 Convertible Junior Subordinated Promissory Note due August 3, 1999
issued to BT Capital Partners SBIC, L.P.
* * * * *
2
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICAN PHYSICIAN PARTNERS, INC.
August 17, 1999 By: /s/ Mark L. Wagar
-------------------------------------------------
Name: Mark L. Wagar
-------------------------------------------
Title: Chairman of the Board, President and
-----------------------------------------
Chief Executive Officer
------------------------------------------
3
<PAGE> 5
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
2.1 Stock Purchase Agreement effective as of August 1, 1999 by and among
APPM, Questar and the shareholders of Questar.
4.1 Securities Purchase Agreement dated as of August 3, 1999 among APPM
and BT Capital Partners SBIC, L.P.
4.2 Convertible Junior Subordinated Promissory Note due August 3, 1999
issued to BT Capital Partners SBIC, L.P.
</TABLE>
4
<PAGE> 1
EXHIBIT 2.1
===============================================================================
STOCK PURCHASE AGREEMENT
by and among
American Physician Partners, Inc.
(a Delaware corporation),
Questar Imaging, Inc.
(a Florida corporation),
and
Paul M. Stanley
Thomas R. Newkirk
Joseph J. Clauer
August 1, 1999
===============================================================================
<PAGE> 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is entered into as of
the 30th day of July, 1999, and effective as of August 1, 1999, by and among
American Physician Partners, Inc., a Delaware corporation ("APPM"), Questar
Imaging, Inc., a Florida corporation ("Company") and Paul M. Stanley
("Stanley"), Thomas R. Newkirk ("Newkirk"), and Joseph J. Clauer ("Clauer"), all
individuals residing in Hillsborough county, Florida (each individually a
"Shareholder" and collectively "Shareholders"). Capitalized terms not otherwise
defined when first used herein shall have the meanings ascribed to them in
Article XIII of this Agreement.
RECITALS
A. Shareholders collectively own 3,000 shares of common stock, $1.00
par value per share (the "Company Common Stock"), of Company, which shares
constitute all of the issued and outstanding capital stock of Company (the
"Shares").
B. Shareholders desire to sell to APPM and APPM desires to purchase
from Shareholders the Shares.
AGREEMENT
NOW, THEREFORE, in consideration of the preceding recitals and the
mutual representations, warranties, covenants and agreements set forth herein,
and other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
SALE AND PURCHASE OF SHARES
Section 1.1 Agreement to Sell and Purchase Shares. For the
consideration hereinafter provided and subject to the terms and conditions of
this Agreement, at the Closing (as defined in Section 1.4 hereof) Shareholders
shall sell, assign, transfer, convey and deliver to APPM, free and clear of all
Encumbrances, and APPM shall purchase and acquire from Shareholders, the Shares.
At the Closing, Shareholders shall cause to be delivered to APPM certificates
representing the Shares, together with accompanying signed stock powers or
instruments of assignment, duly endorsed in blank by Shareholders, for the
transfer of the Shares to APPM with all necessary transfer taxes paid or other
revenue stamps affixed thereto.
Section 1.2 Purchase Price. At the Closing, subject to the terms and
conditions of this Agreement, APPM agrees to pay to Shareholders, as the
purchase price (the "Purchase Price") for the Shares, the consideration set
forth in Exhibit A, plus the additional consideration set forth on Exhibit B
shall be paid to Shareholders at the time and subject to the conditions as are
set forth on such exhibit.
Section 1.3 Certain Prorations. APPM and Shareholders shall prorate
certain expenses set forth on Schedule 1.3 attached hereto of Company and
Subsidiaries through the Effective Date (as defined in Section 1.4 hereof).
Shareholders shall be jointly and severally responsible for paying the portion
of the prorated expenses that accrued prior to the Effective Date and APPM shall
be responsible for paying the portions of the prorated expenses on and
subsequent to the Effective Date. Notwithstanding anything to the contrary in
this Agreement, Shareholders or their respective assigns, and not APPM, shall be
responsible for all costs associated with the development of the Development
Centers from the Effective Date through the
<PAGE> 3
date that each such Development Center becomes operational and the Development
Center Assets of such Development Center are transferred and assigned to a
Subsidiary designated by Company as set forth in Section 4.3.
Section 1.4 Closing. The closing of the sale and purchase of the Shares
under and in accordance with this Agreement (the "Closing") shall take place at
the offices of Haynes and Boone, L.L.P., 901 Main Street, Suite 3100, Dallas,
Texas 75202, at 10:00 a.m., on July 30, 1999 (the "Closing Date"), or such later
date as may be mutually agreed to in writing by the parties hereto, and shall be
effective for all purposes as of August 1, 1999 at 12:01 a.m. (the "Effective
Date").
Section 1.5 Deemed Distribution of Company Cash Prior to Effective
Date. Prior to the Effective Date, Company shall determine and shall be deemed
to distribute to Shareholders an amount in cash equal to the amount of cash that
Company has in its bank accounts (including all accounts receivable collected by
Company and its Subsidiaries (or their respective billing agents) through the
day preceding the Effective Date) as of the close of business on the day
immediately preceding the Effective Date ("Available Cash"). Such deemed
distribution of Available Cash shall be paid on the Closing Date.
Section 1.6 Closing Costs. Each party shall pay for its own attorneys',
accountants' and other advisory fees associated with the Closing, including
those fees and costs incurred on or after the Effective Date, except that with
respect to any fees or costs that are not paid by Company from Available Cash,
then Shareholders shall be individually responsible for all attorneys',
accountants' and other advisory fees incurred by Company and Subsidiaries
associated with the transaction giving rise to this Agreement and the Closing.
Shareholders also shall be jointly and severally responsible for paying all
costs incurred by Company and Subsidiaries (that are not paid by Company from
Available Cash) for litigation, UCC, tax lien and judgment searches performed in
connection with this transaction. Shareholders shall not be required to
reimburse Company for fees or costs paid by Company with Available Cash.
Section 1.7 Certain Company Furniture, Fixtures and Equipment. All
Company furniture, fixtures and equipment that are located and utilized in
Company's principal business office at 15438 North Florida, Suite 200, Tampa,
Florida, will be deemed transferred to Shareholders, subject to liabilities
relating to such assets (e.g., operating leases, capital leases, etc.)
immediately preceding the Effective Date.
Section 1.8 Parties' Intention Regarding Pre-Effective Date
Liabilities. The parties intend that all costs and expenses, except Trade
Payables incurred in the ordinary course of business within one payment cycle
(not to exceed thirty (30) days) of the Effective Date, of Company and
Subsidiaries incurred or accrued prior to August 1, 1999, shall be paid by
Company or Subsidiaries prior to the Effective Date or shall be paid by Company
from Available Cash. If Company pays any such costs or expenses other than as
set forth above, then Shareholders shall immediately reimburse Company for all
such payments and APPM may offset any payments due by it to Shareholders for all
such payments.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY AND SHAREHOLDERS
As an inducement to APPM to enter into this Agreement and to purchase
the Shares and except as set forth and referenced in the Schedules, each
Shareholder, jointly and severally, represents and warrants to APPM, as of the
Effective Date and the Closing Date, as follows:
2
<PAGE> 4
Section 2.1 Capitalization; Ownership.
(a) Company. The authorized capital stock of Company consists
solely of 7,000 shares of Company Common Stock of which 3,000 shares
are issued and outstanding. Shareholders are the owners of all right,
title and interest (legal, record and beneficial) in and to the Shares
described in Schedule 2.1(a) hereto, free and clear of any and all
Encumbrances or restrictions of any nature whatsoever (except for any
restrictions on transfer imposed by any federal securities laws or
state blue sky laws) and the Shares described in Schedule 2.1(a)
constitute all of the issued and outstanding Company Common Stock. The
delivery to APPM of the Shares pursuant to and in accordance with the
provisions of this Agreement will transfer to APPM good and marketable
title in and to all such Shares free and clear of any and all
Encumbrances or restrictions of any kind or nature whatsoever (except
for any restrictions on transfer imposed by any federal securities laws
or state blue sky laws). Except as specifically set forth in this
Agreement, no Person has any interest, agreement, option, right,
participation, or privilege (whether preemptive or contractual) capable
of becoming an agreement or option, for the purchase of any of the
Shares, or any interest therein, from any Shareholder or Shareholders.
Each of the Shares has been legally and validly issued and is fully
paid and nonassessable, and was issued pursuant to a valid exemption
from registration under (i) the Securities Act and (ii) all applicable
state securities laws. No Shares have been issued or disposed of in
violation of any preemptive rights, rights of first refusal, or similar
rights of Shareholders or any interest holder of Company. Other than
Company Common Stock, Company has no securities, bonds, debentures,
notes or other obligations the holders of which have the right to vote
(or are convertible into or exercisable for securities having the right
to vote) with Shareholders on any matter.
(b) Subsidiaries. Schedule 2.1(b) lists (i) the name and state
of incorporation, organization or formation of each Subsidiary; (ii)
the number of shares of authorized capital stock or other ownership
interest of each Subsidiary (singularly, "Subsidiary's Capital Stock"
and collectively, "Subsidiaries' Capital Stock"); (iii) the owner of
all right, title and interest (legal, record and beneficial) in and to
the issued and outstanding shares or other ownership interest of each
Subsidiaries' Capital Stock; (iv) the number of shares or other
ownership interest of each Subsidiaries' Capital Stock owned by each
owner; (v) the states in which each Subsidiary is duly qualified to
conduct and/or conducts its business; and (vi) any assumed names used
by each Subsidiary in its business. Except as set forth on Schedule
2.1(b), the Subsidiaries' Capital Stock is wholly owned by Company,
free and clear of any and all Encumbrances or restrictions of any
nature whatsoever (except for any restrictions on transfer imposed by
any federal securities laws or state blue sky laws) and the shares
described in Schedule 2.1(b) are all of the issued and outstanding
shares or other ownership interest of Subsidiaries' Capital Stock.
Except as specifically set forth in this Agreement, no Person has any
interest, agreement, option, right, participation, or privilege
(whether preemptive or contractual) capable of becoming an agreement or
option, for the purchase of any Subsidiary's Capital Stock, or any
interest therein. All shares or other ownership interest of each
Subsidiary's Capital Stock have been legally and validly issued, are
fully paid and nonassessable, and were issued pursuant to a valid
exemption from registration under (i) the Securities Act and (ii) all
applicable state securities laws. No shares or other ownership interest
of any Subsidiary's Capital Stock has been issued or disposed of in
violation of any preemptive rights, rights of first refusal, or similar
rights of any Person. No Subsidiary has any securities, bonds,
debentures, notes or other obligations the holders of which have the
right to vote (or are convertible into or exercisable for securities
having the right to vote) on any matter.
Except as disclosed in Schedule 2.1(b) hereto, prior to the Closing,
Stanley Medical, Inc. has been liquidated and dissolved and all of its assets
and liabilities were transferred to and are now owned by Questar
3
<PAGE> 5
PVH, Inc. In addition, no entity owned by Company or Shareholders exists under
the laws of any jurisdiction named Questar Santa Barbara, Inc., Questar Novato,
Inc. or any substantially similar names.
Except as disclosed in Schedule 2.1(b) hereto, neither Company nor the
Subsidiaries owns, directly or indirectly, any capital stock or other equity,
ownership or proprietary interest in any corporation, partnership, limited
liability company, association, trust, joint venture or other entity, other than
marketable securities.
Section 2.2 Transactions in Capital Stock. There exist no Company
Rights or Subsidiaries Rights. Neither Company nor any Subsidiary has any
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any of their respective equity securities or any interests therein or to pay any
dividend or make any distribution in respect thereof.
Section 2.3 Organization and Good Standing; Qualification. Each of
Company and Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its state of incorporation or formation, with
all requisite corporate or other power and authority to own, operate and lease
its assets and properties and to carry on its business as currently conducted.
Company and each Subsidiary is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary. Copies of the Articles of Incorporation of
Company and each Subsidiary, as amended or restated, and the Bylaws of Company
and each Subsidiary, as amended or restated, and copies of the corporate minutes
of Company and each Subsidiary for the 36 months immediately preceding the date
of this Agreement, all of which have been or will be made available to APPM for
review prior to Closing, are true and complete and in effect on the date of this
Agreement, and in the case of the corporate minutes, accurately reflect all
material proceedings of Shareholders and the directors of Company and the
shareholders and directors of each Subsidiary (and all committees thereof) for
the subject time period. The stock record books of Company and each Subsidiary,
which have been or will be made available to APPM for review prior to Closing,
contain true, complete and accurate records of the stock ownership of record of
Company and Subsidiaries and the transfer record of the shares of its capital
stock. Company has provided to APPM a copy of all partnership, joint venture,
operating and similar agreements, including all amendments thereto as listed on
Schedule 2.1(b) hereto, and all such agreements are true and complete and in
effect on the date of this Agreement. The books and records of all partnerships,
joint ventures, operating and similar agreements that are under the control of
Company or any Subsidiary have been or will be made available to APPM for
review, contains true, complete and accurate records of the ownership of record
of the partnership, joint venture, limited liability company and similar
interests and the transfer record of the ownership of its partnership, joint
venture, limited liability company or similar interests.
Section 2.4 Authorization and Validity. Company and Shareholders have
all requisite corporate and individual power and capacity to enter into this
Agreement and all other agreements entered into in connection with the
transactions contemplated hereby, and to consummate the transactions
contemplated hereby and thereby. The execution, delivery, and performance by
Company of this Agreement and the agreements contemplated herein, and the
consummation by Company of the transactions contemplated hereby and thereby, are
within Company's corporate powers and have been duly authorized by all necessary
action on the part of Company's Board of Directors and Shareholders. This
Agreement has been duly executed by Company and Shareholders, and this
Agreement, and all other agreements and obligations entered into and undertaken
in connection with the transactions contemplated hereby to which Company and
Shareholders are a party, constitute, or upon execution will constitute, valid
and binding agreements of Company and Shareholders, enforceable against them in
accordance with their respective terms, except as enforceability may be limited
by bankruptcy or other laws affecting the enforcement of creditors' rights
generally, or by general equity principles, or by public policy.
4
<PAGE> 6
Section 2.5 Governmental Authorization. Other than consents, filings or
notifications required to be made or obtained by APPM and except as disclosed on
Schedule 2.5 hereto, the execution, delivery and performance by Company and
Shareholders of this Agreement and the agreements provided for herein, and the
consummation of the transactions contemplated hereby and thereby by Company and
Shareholders, require no action by or in respect of, or filing with, any
governmental body, agency, official or authority.
Section 2.6 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance by Company, Subsidiaries and each
Shareholder of this Agreement and any other agreements contemplated hereby (with
or without the giving of notice, the lapse of time, or both): (i) other than
consents, filings or notifications required to be made or obtained by APPM and
except as may be disclosed on Schedule 2.5 hereto do not require the consent of
any governmental or regulatory body or authority or any other third party; (ii)
will not conflict with any provision of Company's or Subsidiaries' respective
Articles of Incorporation or Articles of Organization, as amended or restated,
bylaws or operating agreement, as amended or restated, or partnership agreement,
as amended and restated; (iii) will not conflict with, result in a violation of,
or constitute a default under any law, ordinance, regulation, ruling, judgment,
order or injunction of any court or governmental instrumentality to which
Company, any Subsidiary or any Shareholder is a party or by which Company, any
Subsidiary or any Shareholder or any of their properties are subject or bound;
(iv) will not conflict with, constitute grounds for termination of, result in a
breach of, constitute a default under, require any notice under, or accelerate
or permit the acceleration of, any performance required by the terms of any
agreement, instrument, license or permit, material to this transaction, to which
Company, any Subsidiary or any Shareholder is a party or by which Company, any
Subsidiary or any Shareholder or any of their properties are bound; (v) will not
create any Encumbrance or restriction upon any of the assets or properties of
Company, Subsidiaries or Shareholders; (vi) will not cause, upon the transfer to
APPM of the Shares, any rights of first refusal, restrictions on transfer or any
similar rights or any change of control provision, contained in any agreement or
instrument, to become effective; and (vii) do not require the consent, approval
or authorization of, notice to, or declaration, filing or registration with, any
non-governmental Person.
Section 2.7 Y2K Representation. To Company's and Shareholders' best
knowledge, all areas of Company's and Subsidiaries' businesses and systems
(including, but not limited to, their software, hardware, firmware and products)
are Year 2000 Compliant. For purposes of this Section 2.7, Year 2000 Compliant
means that Company's and Subsidiaries' businesses and systems will correctly
recognize and perform properly date-sensitive functions involving dates prior to
and any date after December 31, 1999. To Company's and Shareholders' best
knowledge, each of Company's and Subsidiaries' suppliers, vendors and customers
will, on a timely basis, be Year 2000 Compliant.
Section 2.8 Absence of Changes. Except as disclosed in Schedule 2.8 or
as permitted or contemplated by this Agreement, since May 1, 1999, Company and
Subsidiaries have conducted their businesses only in the ordinary and usual
course, consistent with past practices, and have not:
(a) suffered any adverse change (whether or not covered by
insurance) to the businesses, properties, operations or prospects of
any of Company or Subsidiaries;
(b) paid, discharged or satisfied any material liability,
other than the payment, discharge or satisfaction of liabilities in the
ordinary course of business;
(c) written off as uncollectible any accounts receivable;
5
<PAGE> 7
(d) canceled or compromised any debts, or waived or permitted
to lapse any claims or rights, or sold, transferred or otherwise
disposed of any of their respective properties or assets;
(e) entered into any commitment or transaction not in the
ordinary course of business that is material to Company or any
Subsidiary, or made any capital expenditure or commitment in excess of
$5,000 individually or $10,000 in the aggregate;
(f) made any material change in any method of accounting or
accounting practice, credit practices, collection policies, or payment
policies;
(g) incurred any liabilities or obligations (absolute, accrued
or contingent) or additional borrowing or extensions of credit in
excess of $5,000 individually or $10,000 in the aggregate (but
specifically excluding any such liabilities, obligations, etc., with
respect to Development Center equipment leases);
(h) mortgaged, pledged, subjected, or agreed to subject, any
of their respective assets, tangible or intangible, to any claim or
Encumbrance, except for liens for current personal property taxes not
yet due and payable or for mechanics, landlords, materialmen, and other
statutory liens, purchase money security interests, sale-leaseback
interests granted, and all other Encumbrances granted in similar
transactions;
(i) sold, redeemed, acquired or otherwise transferred any
equity or other interest in Company or any Subsidiary;
(j) increased any salaries, wages or any employee benefits for
any employee of Company or any Subsidiary, or paid any bonus, except in
the ordinary course of business and consistent with past practice and
disclosed to APPM;
(k) hired, committed to hire, or terminated any employee
except in the ordinary course of business and as disclosed to APPM;
(l) declared, set aside, or made any payments, dividends or
other distributions to Shareholders in their capacities as
Shareholders, or any other holder of Company or any Subsidiary's
Capital Stock (except as expressly contemplated herein);
(m) entered into any agreement(s) (including, but not limited
to, equipment or tenant improvement leases, management agreements,
radiology services agreements, office leases, etc.) that are not
substantially similar to the agreements most recently used by Company
and Subsidiaries and consistent with the Expression of Interest Letter
among APPM, Company and Shareholders, dated May 27, 1999;
(n) since May 1, 1999, disposed of any assets owned by Company
or Subsidiaries, including, but not limited to, office furniture and
equipment, office supplies, computer hardware and software, trademarks,
trade-names, advertising and promotional literature, goodwill, website,
etc.;
(o) redeemed, or received or requested any refund of, any
prepaid expenses, deposits or similar items; or
(p) agreed, whether in writing or otherwise, to take any
action described in this Section 2.8.
6
<PAGE> 8
Section 2.9 Litigation and Claims. Except as disclosed in Schedule 2.9
hereto, there are no claims, lawsuits, actions, arbitrations, administrative or
other proceedings, governmental investigations or inquiries pending or
threatened against Company, Subsidiaries, Shareholders or any licensed
professional or other individual affiliated with Company or Subsidiaries, and
there is no basis for any such action or any set of facts or occurrence of any
event which might give rise to the foregoing. There are no unsatisfied judgments
against Company, Subsidiaries or Shareholders, or any consent decrees to which
any of the foregoing is subject, relating to services provided on behalf of
Company or Subsidiaries. Each of the matters, if any, disclosed in Schedule 2.9
(collectively, the "Litigation") is within the coverage provisions of insurance
of Company, Subsidiaries or Shareholders as in effect on the date hereof.
Section 2.10 No Violation of Law. Neither Company, Subsidiaries nor any
Shareholder has been, nor shall be as of the Closing Date and the Effective Date
(by virtue of any action, omission to act, contract to which it is a party, or
any occurrence or state of facts whatsoever), in violation of any applicable
local, state or federal law, ordinance, regulation, order, injunction or decree,
or any other requirement of any governmental body, agency, authority or court
binding on it, or relating to its properties, assets or business or its
advertising, sales or pricing practices.
Section 2.11 Employee Matters. Except as listed in Schedule 2.11 hereto
and in Schedule 2.13 hereto, neither Company nor any Subsidiary is currently,
whether directly or indirectly, a party to any employment contract (except for
oral employment agreements which are terminable at will), consulting or
collective bargaining contracts, deferred compensation, profit sharing, bonus,
stock option, stock purchase or other nonqualified benefit or compensation
commitments, benefit plans, arrangements or plans (whether written or oral), of
or pertaining to Company, Subsidiaries and Staffing Concepts, Inc. (all
references in this Agreement to Staffing Concepts, Inc. are limited to the
extent that Staffing Concepts, Inc. provides employees to Company and
Subsidiaries), or any of their respective present or former employees or any
predecessors in interest. Schedule 2.11 lists each employee (including employees
provided in connection with the agreement with Staffing Concepts, Inc.) or
contractor of, or consultant to, Company and/or Subsidiaries who received any
salary, benefit or bonus for 1998 in excess of $50,000, or who is expected to
receive any salary, benefit or bonus in 1999 in excess of $50,000. Neither
Company, any Subsidiary, nor Staffing Concepts, Inc. is delinquent in payment to
any of their respective employees for wages, salaries, bonuses or other direct
compensation for any services performed for them through the date hereof or
amounts required to be reimbursed to such employees. Upon termination of
employment of any employee employed by the Company, Subsidiaries and/or employed
through Staffing Concepts, Inc., no severance or other payments will be or
become due, and Company, Subsidiaries and Staffing Concepts, Inc. have no
policy, past practice or plan of paying severance on termination of employment.
Section 2.12 Labor Relations.
(a) Company, Subsidiaries and Staffing Concepts, Inc. are in
compliance with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages and
hours and occupational safety and health, and are not engaged in any
unfair labor practice within the meaning of Section 8 of the National
Labor Relations Act;
(b) There is no unfair labor practice, charge or complaint or
any other employment-related matter against or involving Company, any
Subsidiary or Staffing Concepts, Inc. pending or threatened before the
National Labor Relations Board or any other federal, state or local
agency, authority or court and no basis for any such charge or
complaint exists;
7
<PAGE> 9
(c) There are no charges, investigations, administrative
proceedings or formal complaints of discrimination (including
discrimination based upon sex, age, marital status, race, national
origin, the making of workers' compensation claims, sexual preference,
handicap or veteran status) pending or threatened before the Equal
Employment Opportunity Commission or any other federal, state or local
agency or court against Company, any Subsidiary or Staffing Concepts,
Inc. and no basis for any such charge or complaint exists. There have
been no governmental audits of the equal employment opportunity
practices of Company, any Subsidiary or Staffing Concepts, Inc., and no
basis for any such audit exists;
(d) Company, Subsidiaries and Staffing Concepts, Inc. are in
compliance with the Immigration Reform and Control Act of 1986, as
amended, and all applicable regulations promulgated thereunder;
(e) There are no inquiries, investigations or monitoring
activities of any licensed, registered, or certified professional
personnel employed or retained by Company, any Subsidiary or Staffing
Concepts, Inc. pending or threatened by any state professional board or
agency charged with regulating the professional activities of radiology
care practitioners and no basis for any such inquiry or investigation
exists; and
(f) Neither Company nor Subsidiaries are parties to any
agreement or contract with any labor union.
Section 2.13 Employee Benefit Plans.
(a) Identification. Schedule 2.13 hereto contains a complete
and accurate list of all employee benefit plans (within the meaning of
Section 3(3) of ERISA) sponsored by Company, Subsidiaries and Staffing
Concepts, Inc. (to the extent that Staffing Concepts, Inc. provides
employees to Company and Subsidiaries), or to which Company,
Subsidiaries or Staffing Concepts, Inc. contribute on behalf of their
respective employees and all employee benefit plans previously
sponsored or contributed to on behalf of their respective employees
within the three years preceding the date hereof (the "Employee Benefit
Plans"). "Employee Benefit Plans" includes a Code Section 401(k) plan
(the "401(k) Plan") sponsored by Staffing Concepts, Inc. The 401(k)
Plan accepts only elective deferral contributions from employees, and
the Company and Subsidiaries have no funding liability for the 401(k)
Plan. Company and Subsidiaries represent that Staffing Concepts, Inc.
has timely contributed all elective deferral contributions to the
401(k) Plan, including elective deferral contributions made up to and
including the Effective Date.
Company and Subsidiaries have provided to APPM copies of all
current plan documents (as they may have been amended to the date
hereof), determination letters, pending determination letter
applications, trust instruments, insurance contracts or policies
related to an Employee Benefit Plan, administrative services contracts,
annual reports for immediately preceding three (3) years, actuarial
valuations, summary plan descriptions, summaries of material
modifications, administrative forms and other documents that constitute
a part of, or are incident to the administration of, the Employee
Benefit Plans. Subject to the requirements of ERISA, each of the
Employee Benefit Plans can be terminated or amended at will by Company
or Subsidiaries without any further liability or obligation on the part
of Company or Subsidiaries to make further contributions or payments in
connection therewith following such termination, except to the extent
of any benefits accrued through the date of termination which accrued
benefits shall be paid by Company or Subsidiaries. No unwritten
amendment exists with respect to any Employee Benefit Plan.
8
<PAGE> 10
(b) Administration. Each Employee Benefit Plan has been
administered and maintained in compliance with all applicable laws,
rules and regulations.
(c) Examinations. Neither Company nor any Subsidiary has
received any written notice that any Employee Benefit Plan is currently
the subject of an audit, investigation, enforcement action or other
similar proceeding conducted by any state or federal agency or
authority and no basis for any such audit, investigation or enforcement
action exists.
(d) Prohibited Transactions. No prohibited transactions
(within the meaning of Section 4975 of the Code or Section 406 of
ERISA) have occurred with respect to any Employee Benefit Plan. There
has been no breach of any duty under ERISA or applicable law
(including, without limitation, any health care contractor requirements
or any other tax law requirements, or conditions to favorable tax
treatment, applicable to such plan), which would be reasonably likely
to result, directly or indirectly (including through any obligation of
indemnification or contribution), in any taxes, penalties or other
liability to Company, APPM or any of its Affiliates.
(e) Claims and Litigation. No pending or threatened claims,
suits or other proceedings exist with respect to any Employee Benefit
Plan other than normal benefit claims filed by participants or
beneficiaries and no basis for any such claim, suit or other proceeding
exists.
(f) Qualification. Except as noted on Schedule 2.13, Company
and Subsidiaries, as applicable, have received a favorable
determination letter or ruling from the IRS for each of the Employee
Benefit Plans intended to be qualified within the meaning of Section
401(a) or 501(c)(9) of the Code and/or tax-exempt within the meaning of
Section 501(a) of the Code, and each such Employee Benefit Plan has
been continually qualified under the applicable Section of the Code
since the effective date of such Employee Benefit Plan. No proceedings
are pending or have been threatened that could result in the revocation
of any such favorable determination letter or ruling and no basis for
any such revocation proceeding exists.
(g) Funding Status. No accumulated funding deficiency (within
the meaning of Section 412 of the Code), whether waived or unwaived,
exists with respect to any Employee Benefit Plan or any plan sponsored
by any member of a controlled group (within the meaning of Section
412(n)(6)(B) of the Code) in which Company or any Subsidiary is a
member (a "Controlled Group"). Neither Company, Subsidiaries nor any
member of a Controlled Group, including Staffing Concepts, Inc.,
maintains or has ever maintained an Employee Benefit Plan subject to
Title IV of ERISA or an Employee Benefit Plan described in Section
501(c)(9) of the Code. With respect to each Employee Benefit Plan
described in Section 501(c)(9) of the Code, the assets of each such
plan are at least equal in value to the present value of accrued
benefits, based upon the most recent actuarial valuation as of a date
no more than ninety (90) days prior to the date hereof. Schedule 2.13
contains a complete and accurate statement of all actuarial assumptions
applied to determine the present value of accrued benefits under all
Employee Benefit Plans subject to actuarial assumptions.
(h) Excise Taxes. Neither Company, Subsidiaries nor any member
of a Controlled Group, including Staffing Concepts, Inc., has any
liability to pay excise taxes with respect to any Employee Benefit Plan
under applicable provisions of the Code or ERISA.
(i) Multi-employer Plans. Neither Company, Subsidiaries nor
any member of a Controlled Group, including Staffing Concepts, Inc., is
or ever has been obligated to contribute to a multi-employer plan
within the meaning of Section 3(37) of ERISA or any other Employee
Benefit Plan which has been subject to Title IV of ERISA or Section 412
of the Code.
9
<PAGE> 11
(j) PBGC. No facts or circumstances exists that would be
reasonably likely to result in the imposition of liability against
Company, APPM or any of its Affiliates by the Pension Benefit Guaranty
Corporation ("PBGC") as a result of any act or omission by Company,
Subsidiaries or any member of a Controlled Group, including Staffing
Concepts, Inc. No reportable event (within the meaning of Section 4043
of ERISA), for which the notice requirement has not been waived, has
occurred with respect to any Employee Benefit Plan subject to the
requirements of Title IV of ERISA.
(k) Retirees. Except as noted on Schedule 2.13, neither
Company, any Subsidiary nor Staffing Concepts, Inc. has any obligation
or commitment to provide medical, dental or life insurance benefits to
or on behalf of any of its employees who may retire or any of its
former employees who have retired except as may be required pursuant to
the continuation of coverage provisions of Section 4980B of the Code
and the applicable provisions of ERISA.
(l) Other Compensation Arrangements. Neither Company,
Subsidiaries, Shareholders or Staffing Concepts, Inc. are a party to
any compensation or debt arrangement with any Person relating to the
provision of health care related services other than arrangements with
Company and/or Subsidiaries or to which Company and/or Subsidiaries are
a party.
Section 2.14 Environmental Matters.
(a) Neither Company, any Subsidiary nor any of their
respective predecessors has, within the five (5) years preceding the
date hereof, through the Closing Date and Effective Date, received from
any federal, state or local governmental body, agency, authority or
entity, or any other Person, any written notice, demand, citation,
summons, complaint or order, or any written notice of any penalty, lien
or assessment, and no investigation or review is pending by any
governmental entity, with respect to any (i) alleged violation by
Company, any Subsidiary or any of their respective predecessors of any
Environmental Law (as defined in subsection (e) below); (ii) alleged
failure by Company, any Subsidiary or any of their respective
predecessors to have any environmental permit, certificate, license,
approval, registration or authorization required pursuant to any
Environmental Law in connection with the conduct of its business; or
(iii) alleged illegal Regulated Activity (as defined in subsection (e)
below) by Company or any Subsidiary; and there is no basis for any such
notice, demand, citation, summons, complaint, order, investigation or
review with respect to (i)-(iii) hereof.
(b) Neither Company, any Subsidiary nor any of their
respective predecessors has used, transported, disposed of, or arranged
for the disposal of (as those terms are defined in and construed under
the Comprehensive Environmental Response, Compensation and Liability
Act) any Hazardous Substance (as defined in subsection (e) below) in a
manner that would be reasonably likely to give rise to any
Environmental Liabilities (as defined in subsection (e) below) for
Company or Subsidiaries under any applicable Environmental Law. Neither
Company, any Subsidiary nor any of their respective predecessors has
engaged in any activity, or failed to undertake any activity, which
action or failure to act has given, or would reasonably be likely to
give, rise to any Environmental Liabilities or enforcement action by
any federal, state or local regulatory agency or authority, or has
resulted, or would reasonably be likely to result, in any fine or
penalty imposed pursuant to any Environmental Law, and there is no
basis for any such Environmental Liability or enforcement action. There
is no known presence of asbestos in or on Company's or Subsidiaries'
owned or leased premises. There is no friable asbestos in or on
Company's or Subsidiaries' owned or leased premises.
10
<PAGE> 12
(c) No soil or water in or under any assets currently or
formerly held for use or sale by Company or Subsidiaries is or has been
contaminated by any Hazardous Substance while such assets or premises
were owned, leased, operated or managed, directly or indirectly, by
Company, any Subsidiary or any of their respective predecessors.
(d) There have been no environmental audits or other similar
reports which have been prepared by, for or concerning Company, any
Subsidiary or any of their respective predecessors within the five (5)
years preceding the date hereof through the Effective Date with respect
to any real property now or previously owned or leased by Company or
any Subsidiary or any of their respective predecessors.
(e) For the purposes of this Section 2.14, the following terms
have the following meanings:
"Environmental Laws" shall mean any domestic, federal, state
or local laws, ordinances, codes, regulations, rules, policies and
orders (including without limitation, Medical Waste Laws) that are
intended to assure the protection of the environment, or that classify,
regulate, call for the remediation of, require reporting with respect
to, or list or define air, water, groundwater, solid waste, hazardous,
toxic, or radioactive substances, materials, wastes, pollutants or
contaminants, or which are intended to assure the safety of employees,
workers or other persons, including the public in each case as in
effect on the date hereof.
"Environmental Liabilities" shall mean all liabilities of
Company and Subsidiaries, whether contingent or fixed, which (i) have
arisen, or would reasonably be likely to arise, under Environmental
Laws and (ii) relate to actions occurring or conditions existing on or
prior to the date hereof or the Closing Date.
"Hazardous Substances" shall mean any toxic or hazardous
substances, material or waste, including Medical Waste, or any
pollutant or contaminant, or infectious or radioactive substance or
material, including without limitation those substances, materials and
wastes defined in or regulated under any Environmental Laws.
"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal or release of any
Hazardous Substances.
Section 2.15 Filing Reports. All returns, reports, plans and filings of
any kind or nature necessary to be filed by Company and Subsidiaries with any
governmental agency or authority have been properly completed and timely filed
in compliance with all applicable requirements and all payments required in
connection therewith have been properly and timely made, including, without
limitation, any filings and payments required in connection with Florida's
Public Medical Assistance Trust Fund.
Section 2.16 Lease Agreements. Schedule 2.16 hereto contains a true,
accurate and complete list of all the lease agreements and license agreements to
which Company or any Subsidiary is a party and pursuant to which Company or any
Subsidiary leases (whether as lessor or lessee) or licenses (whether as licensor
or licensee) any real or personal property related to the operation of its
business and which requires payments in excess of $5,000 per year (the "Lease
Agreements"). Company has delivered to APPM true and complete copies of all of
the Lease Agreements. There is not under any Lease Agreement (i) any existing or
claimed default by Company or any Subsidiary or event which, with notice or
lapse of time, or both, would
11
<PAGE> 13
constitute a default by Company or any Subsidiary, or (ii) any existing default
by any other party under any of the Lease Agreements or any event which, with
notice or lapse of time, or both, would constitute a default by any such party.
There is no pending or threatened reassessment of any property covered by the
Lease Agreements. Company and Subsidiaries have a good, clear, valid and
enforceable, (except as enforceability may be limited by bankruptcy or other
laws affecting the enforcement of creditors' rights generally, by general equity
principles or by public policy) leasehold interest under each of the Lease
Agreements. The Lease Agreements are in compliance with all applicable safe
harbor provisions promulgated by the Department of Health and Human Services in
connection with the enforcement of the federal Fraud and Abuse Statute, 42 CFR
Part 1001, and any similar applicable state safe harbor or other exemption
provisions. Neither Company, Subsidiaries nor any other party thereto has
challenged the validity or effectiveness of any Lease Agreement.
Section 2.17 Insurance Policies. Schedule 2.17 hereto lists and briefly
describes Company's and Subsidiaries' policies of insurance to which Company or
any Subsidiary is a party or under which Company, any Subsidiary, or any officer
or director thereof is or has been covered at any time during the last five (5)
years preceding the date of this Agreement relating to the businesses of Company
and Subsidiaries (the "Insurance Policies"). All premiums with respect to the
Insurance Policies are currently paid. All Insurance Policies currently
maintained by Company and/or Subsidiaries ("Current Policies"), taken together,
(i) are sufficient for compliance with legal and contractual requirements to
which Company or Subsidiaries are a party or by which Company and/or
Subsidiaries may be bound and (ii) shall be maintained in force (including the
payment of all premiums and compliance with their terms) without interruption up
to and including the Effective Date. True, complete and correct copies of all
Current Policies have been provided to APPM. Neither Company, Subsidiaries nor
any officer or director thereof has received any notice or other written
communication from any issuer of any Current Policy canceling such policy,
increasing any deductibles or retained amounts thereunder, or increasing the
annual or other premiums payable thereunder, no such cancellation or increase of
deductibles, retainers or premiums is threatened, and no basis for any such
cancellation or increase exists. There are no outstanding claims, settlements or
premiums owed against any Insurance Policy, and all required notices have been
given and all known potential or actual claims under any Insurance Policy have
been presented in due and timely fashion. Within the five (5) years preceding
the Agreement, neither Company, Subsidiaries, nor Shareholders have filed a
written application for any professional liability insurance coverage which has
been denied by an insurance agency or carrier. Schedule 2.17 also sets forth a
list of all claims under any Insurance Policy in excess of $2,500 per occurrence
filed by Company, Subsidiaries, or Shareholders during the immediately preceding
three-year period. Each physician contractor has, at all times while a physician
contractor, maintained or been covered by professional malpractice insurance in
such types and amounts as are customary for a physician practicing the same type
of radiology in the same geographic area.
Section 2.18 Contracts and Commitments. Schedule 2.18 hereto contains a
true, accurate and complete list, and Company and Subsidiaries have delivered to
APPM prior to the Closing Date, true and complete copies, of each contract,
agreement, relationship or commitment, oral or written, which relates, directly
or indirectly, to the operation of the businesses of Company and Subsidiaries
(each a "Material Agreement") (other than Insurance Policies identified in
Schedule 2.17, Lease Agreements identified in Schedule 2.16, Employment
Contracts identified in Schedule 2.11 and Employee Benefit Plans identified in
Schedule 2.13 (the "Other Contracts")) to which Company or any Subsidiary is a
party or by which Company, any Subsidiary or any of their respective properties
or assets are bound including, without limitation, (i) all agreements between
Company or any Subsidiary, on the one hand, and any Payor, government entity,
provider, hospital, health maintenance organization, other managed care
organization or other third-party provider, on the other hand, then in effect
relating to the provision of medical, diagnostic imaging or consulting services,
treatments, patient referrals or other similar activities, (ii) all indentures,
mortgages, notes, loan or credit agreements, and other agreements and
obligations relating to the borrowing
12
<PAGE> 14
of money, or to the direct or indirect guarantee or assumption of obligations of
third parties requiring Company or any Subsidiary to make, or setting forth
conditions under which Company or any Subsidiary would be required to make,
aggregate future payments in excess of $10,000 in any fiscal year or $25,000 in
the aggregate, (iii) all agreements for capital improvements or acquisitions
involving an amount of $25,000 in any fiscal year or $25,000 in the aggregate,
(iv) all agreements containing a covenant limiting the freedom of Company or any
Subsidiary (or any provider employee of Company or Subsidiaries) to compete in
any line of business with any person or entity or in any geographic area, and
(v) all written contracts and commitments providing for future payments by
Company or any Subsidiary in excess of $10,000 in any fiscal year or $25,000 in
the aggregate and that are not cancelable by providing notice of sixty (60) days
or less. Neither Company nor any Subsidiary has challenged the validity or
effectiveness of any such Material Agreement, nor received written notification
from any other party thereto challenging its validity or effectiveness or
indicating any plan or intention of any other party to exercise any right to
cancel or terminate any Material Agreement required to be disclosed pursuant to
Section 2.18, and there are no fact(s) that would justify the exercise of such a
right (other than any discretionary right). None of the parties to any such
Material Agreement contemplates any amendment or change thereto; there has been
no threatened cancellation thereof; there are no outstanding disputes
thereunder; each such Material Agreement is with unrelated third parties and was
entered into on an arms'-length basis; and, subject to the provisions and
qualifications of Schedule 2.18, and assuming the receipt of the appropriate
consents, all will continue to be binding in accordance with their terms after
consummation of the transaction contemplated herein except as enforceability may
be limited by bankruptcy or other laws affecting the enforcement of creditor's
rights generally, or by general equity principles, or by public policy; there is
no Material Agreement to which Company or any Subsidiary is a party or is bound
which would reasonably be expected to have an adverse effect on the value of the
assets and properties of Company or any Subsidiary, assuming Company's and
Subsidiaries' full performance thereof and compliance therewith following the
Effective Date.
Section 2.19 Licenses, Authorization and Provider Programs.
(a) Company, each Subsidiary, each licensed independent
contractor of Company or any Subsidiary and each employee (either
employed directly by the Company or a Subsidiary or retained through
Staffing Concepts, Inc.) (i) is the holder of all valid licenses,
approvals, orders, consents, permits, registrations, qualifications,
and other rights and authorizations required by law, ordinance,
regulation or ruling of any governmental regulatory authority necessary
to operate its/his/her business, and (ii) is eligible to participate in
and to receive reimbursement under programs funded in whole or in part
by federal, state or local entities for which Company or any Subsidiary
is eligible and which are listed on Schedule 2.19(a) ("Governmental
Programs"). Each of Company and Subsidiaries, as applicable, has a
current provider number for such Governmental Programs and with such
private non-governmental programs (including without limitation any
private insurance program) under which Company and/or Subsidiaries are
presently receiving payments directly or indirectly from any Payor for
patient care provided by a licensed independent contractor (such
non-governmental programs herein referred to as "Private Programs"). A
true, correct and complete list of such licenses, permits, provider
numbers and other authorizations required for Company and each
Subsidiary to operate the business of Company or such Subsidiary, as
applicable (including, but not limited to, verification of Medicare and
Medicaid provider numbers (if any)), and provider agreements, is set
forth in Schedule 2.19 hereto. No violation, default, order or
deficiency exists with respect to any of the items listed in Schedule
2.19 hereto, and, except as disclosed in Schedule 2.19 hereof, there is
no action pending or threatened by any state or federal agencies having
jurisdiction over the items listed in Schedule 2.19, either to revoke,
withdraw or suspend any license or permit or to terminate the
participation of Company or any Subsidiary in any Governmental Program
or Private Program, and no event has occurred which, with or without
notice or lapse of time, or both, would constitute grounds for a
violation, order or deficiency with respect
13
<PAGE> 15
to any of the items listed in Schedule 2.19 or to revoke, withdraw or
suspend any license of Company or any Subsidiary to operate its
business as it is presently being conducted. No material contract with
a health care provider or Payor has been amended or terminated within
the last twelve (12) months. There has been no decision by either party
not to renew any existing agreement with any provider or Payor relating
to Company's or any Subsidiary's business as it is presently being
conducted. Neither Company, any licensed independent contractor of
Company, any Subsidiary, nor any employee (either employed directly by
Company or a Subsidiary or retained through Staffing Concepts, Inc.)
(i) has had his/her/its professional license, Drug Enforcement Agency
number, Medicare/Medicaid provider status or staff privileges at any
hospital or diagnostic imaging center suspended, relinquished,
terminated or revoked, (ii) has been reprimanded, sentenced, or
disciplined by any licensing board, state agency, regulatory body or
authority, hospital, Payor or specialty board, or (iii) during the last
five (5) years has had a final judgment or settlement entered against
him/her/its in connection with a malpractice or similar action.
Sandra L. Blake, Cynthia Foster and Barbara Baker, each an
employee of Company or a Subsidiary, each are properly certified and
licensed by the appropriate federal and state authorities to work in
the position that each such person holds with the Company or
Subsidiaries as of the Effective Date.
(b) Except as set forth in Schedule 2.19, Company and
Subsidiaries are not required, and for the 72-month period prior to the
Effective Date were not required, to file any cost reports or other
reports with any Governmental Program or Private Program.
Section 2.20 Inspections and Investigations. Neither the right of
Company, nor any Subsidiary, nor any licensed professional or other individual
affiliated with Company or any Subsidiary, to receive reimbursements pursuant to
any Governmental Program or Private Program has been terminated or otherwise
adversely affected as a result of any investigation or action whether by any
federal or state governmental regulatory authority or other third party. No
licensed professional or other individual affiliated with the business
(including those individuals provided to Company or any Subsidiary by Staffing
Concepts, Inc.) has, during the past three (3) years prior to the Effective
Date, had his or her professional license or privileges limited, suspended or
revoked by any governmental regulatory authority or agency, trade association,
professional review organization, accrediting organization or certifying agency
(including orders that have been entered by any such entities but stayed). True,
correct and complete copies of all reports, correspondence, notices and other
documents relating to any matter described or referenced in this Section 2.20
have been provided to APPM.
Section 2.21 Proprietary Rights and Information.
(a) Set forth in Schedule 2.21 hereto is a complete and
accurate list and summary description of the following: (i) all
trademarks (registered and unregistered), trade-names, service marks
and other trade designations, including common law rights,
registrations and applications therefor, currently owned in whole or
part, or used by Company or any Subsidiary, (ii) all patents and
applications therefor, and inventions and discoveries that may be
patentable, currently owned, in whole or in part, or used by Company or
any Subsidiary, (iii) all licenses, royalties, and assignments thereof
to which Company or any Subsidiary is a party, (iv) all copyrights (for
published and unpublished works) currently owned, in whole or part, or
used by Company or any Subsidiary, and (v) other similar agreements
relating to the foregoing to which Company or any Subsidiary is a party
(including expiration date if applicable) (collectively, the
"Proprietary Rights").
14
<PAGE> 16
(b) Schedule 2.21 hereto contains a complete and accurate list
and summary description of all agreements relating to technology, trade
secrets, know-how or processes that Company and Subsidiaries are
licensed or authorized to use by others (other than technology,
know-how or processes generally available to other health care
providers) or which Company or any Subsidiary licenses or authorizes
others to use, and true, correct and complete copies of which have been
provided to APPM. There are no outstanding or threatened disputes or
disagreements with respect to any such agreement and there exists no
basis in fact for any such dispute or disagreement.
(c) Company and Subsidiaries, as applicable, own or have the
legal right to use the Proprietary Rights in the geographic region in
which they are presently using them, and in association with the
services they are presently providing under them, without conflicting
with, infringing or violating the rights of any other Person. No
consent of any Person will be required for the continued similar use
thereof by Company and Subsidiaries upon consummation of the
transactions contemplated hereby, and the Proprietary Rights are freely
transferable. No claim has been asserted by any Person to the ownership
of, or for infringement by Company and Subsidiaries of, any Proprietary
Right of any other Person, and there exists no basis for any such
claim. No proceedings have been threatened which challenge the
Proprietary Rights of Company and Subsidiaries. Company and
Subsidiaries have the right to use, free and clear of any adverse
claims or rights of others, all trade secrets, customer lists and
proprietary information required for the performance and marketing of
all medical services.
Section 2.22 Accounts Receivable; Payors.
(a) Schedule 2.22 hereto sets forth a list and aging of all
accounts receivable of Company and each Subsidiary as of June 30, 1999,
which list is complete, true and accurate in all respects. All such
accounts receivable arose in the ordinary course of business, have not
been previously written off as bad debts, and are, to the extent still
uncollected, subject to exceptions set forth in Schedule 2.22,
collectible in the ordinary course of business, net of reserves for
doubtful and uncollectible accounts shown in Company Financial
Statements or on the accounting records of Company and Subsidiaries
(which reserves are calculated consistent with past practice). Nothing
contained herein shall be deemed a guarantee of collection with respect
to the accounts receivable. Company and Subsidiaries each have
collected their respective accounts receivable in the ordinary course
of business, consistent with past practices and have not pursued any
unusual or extraordinary means (i.e., factoring or negotiating
reductions with Payors in exchange for accelerated payments) in
collecting their respective outstanding accounts receivable prior to
the Effective Date.
(b) Schedule 2.22 hereto sets forth (i) a true, correct and
complete list of the names and addresses of each Payor of Company and
each Subsidiary as of such date, which accounted for more than 5% of
the revenues of Company and Subsidiary in the fiscal year ended
December 31, 1998, or which is reasonably expected to account for more
than 5% of the revenues of Company or any Subsidiary for the fiscal
year to end December 31, 1999, and (ii) a single line item listing for
all private-pay patients in the aggregate of Company and each
Subsidiary. Company and Subsidiaries have satisfactory relations with
such Payors set forth in (i) above, and none of such Payors has
notified Company or any Subsidiary in writing that it intends to
discontinue its relationship with Company or any Subsidiary.
Section 2.23 Accounts Payable; Suppliers.
(a) Schedule 2.23 hereto sets forth a true and complete (i)
list of the accounts payable of Company and each Subsidiary as of June
30, 1999, and (ii) list of each individual indebtedness
15
<PAGE> 17
owed by Company and each Subsidiary of $5,000 or more, setting forth
the payee and the amount of indebtedness. At the Closing, Company and
Subsidiaries each have outstanding Trade Payables arising in the normal
course of business; however, since May 1, 1999, Company and
Subsidiaries have maintained reasonable and timely payments of all of
their respective Trade Payables, consistent with past practices (but in
no event longer than the current payment cycle). In addition, Company
and Subsidiaries each have timely made all required payments associated
with their respective capital lease and operating lease obligations and
any other indebtedness through the Effective Date.
(b) Schedule 2.23 sets forth a true, correct and complete list
of the names and addresses of each of the providers/suppliers of
products or services to Company or any Subsidiary (including without
limitation all providers of care to patients) which accounted for a
dollar volume of purchases paid for by Company or any Subsidiary in
excess of $10,000 for the fiscal year ended December 31, 1998, or which
is reasonably expected to account for a dollar volume of purchases paid
for by Company or any Subsidiary in excess of $10,000 for the fiscal
year to end December 31, 1999.
Section 2.24 Taxes.
(a) Filing of Tax Returns. Except as set forth on Schedule
2.24(a) hereto, Company and each Subsidiary have duly and timely filed
(in accordance with any extensions duly granted by the appropriate
governmental agency, if applicable) with the appropriate governmental
agencies all Tax Returns required to be filed with the United States or
any state or any political subdivision thereof or any foreign
jurisdiction. All such Tax Returns are complete and accurate in all
respects and properly reflect the taxes of Company and each Subsidiary
for the periods covered thereby.
Company has obtained an extension of time until September 15,
1999, for filing its 1998 U.S. federal income Tax Return. Such Tax
Return shall be complete and accurate in all respects and properly
reflect the taxes of Company and each Subsidiary for the period covered
thereby.
(b) Payment of Taxes. Except for such items as Company and
Subsidiaries, as applicable, may be disputing in good faith by
proceedings in compliance with applicable law, which are described in
Schedule 2.24, (i) Company and each Subsidiary have paid all taxes,
penalties, assessments and interest that are due with respect to any
Tax Returns that it or they have filed and have set forth in the
Company Current Financial Statements all taxes, penalties, assessment
and interest that have not yet become due and payable or that may, in
the future, be due with respect to the Tax Returns (collectively
"Taxes"), and (ii) neither Company nor any Subsidiary is delinquent in
the payment of any Taxes, assessments or governmental charges.
(c) No Pending Deficiencies, Delinquencies, Assessments or
Audits. Neither Company nor any Subsidiary has received any notice that
any tax deficiency or delinquency has been asserted against Company or
any Subsidiary, there is no threat of such assertion and there exists
no basis for any such assertion. There is no unpaid assessment,
proposal for additional taxes, deficiency or delinquency in the payment
of any of the Taxes of Company and each Subsidiary that could be
asserted by any taxing authority. There is no taxing authority audit of
Company or any Subsidiary pending or threatened, and the results of any
completed audits are properly reflected in Company Financial
Statements. Neither Company nor any Subsidiary has violated any
applicable federal, state, local or foreign tax law. There are no
security interests or liens on any assets of Company or any Subsidiary
which have resulted from any failure to pay (or alleged failure to pay)
taxes.
16
<PAGE> 18
(d) No Extension of Limitation Period. Neither Company nor any
Subsidiary has granted an extension to any taxing authority of the
statute of limitation period during which any Tax may be assessed or
collected.
(e) All Withholding Requirements Satisfied. All monies
required to be withheld by Company and each Subsidiary and paid to
governmental agencies for all income, social security, unemployment
insurance, sales, excise, use, and other taxes have been collected or
withheld and paid to the respective governmental agencies.
(f) Foreign Person. Neither Company, any Subsidiary nor any
Shareholder is a foreign person, as such term is referred to in
Section 1445(f)(3) of the Code and Treasury Regulations
Section 1.1445-2.
(g) Safe Harbor Lease. None of the properties or assets of
Company or Subsidiaries constitutes property that Company,
Subsidiaries, APPM, or any Affiliate of APPM will be required to treat
as being owned by another person pursuant to the "Safe Harbor Lease"
provisions of Section 168(f)(8) of the Code prior to repeal by the Tax
Equity and Fiscal Responsibility Act of 1982.
(h) Tax Exempt Entity. None of the assets or properties of
Company or Subsidiaries is subject to a lease to a "tax exempt entity"
as such term is defined in Section 168(h)(2) of the Code.
(i) Collapsible Corporation. Neither Company nor any
Subsidiary has at any time consented to have the provisions of
Section 341(f)(2) of the Code apply to Company or any Subsidiary.
(j) Boycotts. Neither Company nor any Subsidiary has at any
time participated in or cooperated with any international boycott as
defined in Section 999 of the Code.
(k) Parachute Payments. No payment required or contemplated to
be made by Company or any Subsidiary will be characterized as an
"excess parachute payment" within the meaning of Section 280G(b)(1) of
the Code.
(l) Personal Holding Companies. Neither Company nor any
Subsidiary is or has been a personal holding company within the meaning
of Section 542 of the Code.
(m) S Corporation. Company has made an election to be taxed as
an "S" corporation under Section 1362(a) of the Code which election is
valid and in effect through the Effective Date.
(n) Qualified S Corporation Subsidiary. Company has elected
for each corporate Subsidiary to be treated as a qualified Subchapter S
corporation subsidiary under Section 1361(b) of the Code which election
is valid and in effect through the Effective Date.
Section 2.25 Fraud and Abuse and Self Referral. Neither Company, any
Subsidiary, any Shareholder nor Person providing professional services for or on
behalf of Company or any Subsidiary has engaged in any activities (i) which are
prohibited under 42 U.S.C. Section 1320a 7, 7a or 7b, or 42 U.S.C. Section
1395nn, or (subject to the exceptions or safe harbor provisions set forth in
such legislation) the regulations promulgated thereunder or pursuant to any
similar state or local statutes or regulations, (ii) which violate any state or
federal law governing health care fraud and abuse or prohibition on referral of
patients to any Person in which a licensed professional has a financial or other
form of interest occurring on before the Closing Date or any overpayment or
obligation (or alleged overpayment or obligation) arising out of or resulting
from
17
<PAGE> 19
claims submitted to any Payor on or before the Closing Date in violation of
applicable law and for which Company or any Subsidiary received payment on or
before the Closing Date (individually or collectively, "Healthcare Fraud"), or
(iii) which are prohibited by applicable rules of professional conduct.
Section 2.26 Continuity of Business Enterprise. Except as disclosed in
Schedule 2.26, there has not been any sale, distribution or spin-off of
significant assets of Company or any Subsidiary other than in the ordinary
course of business within the two (2) years preceding the date of this
Agreement.
Section 2.27 Company Financial Statements. Attached hereto as Schedule
2.27 are (i) the unaudited statements of assets, liabilities, and Shareholders'
equity-income tax basis of Company and Subsidiaries as of December 31, 1998, and
the accompanying supplementary information income tax basis (collectively, the
"Company Annual Financial Statements") and (ii) the unaudited statement of
assets, liabilities, and Shareholders' equity of Company and Subsidiaries as of
May 31, 1999, and the related statements of income of Company and Subsidiaries
for the five (5) month period then ended (collectively, the "Company Current
Financial Statements"). Company Annual Financial Statements and Company Current
Financial Statements are sometimes collectively referred to herein as the
"Company Financial Statements." Company Annual Financial Statements (a) have
been prepared in all respects in accordance with Company's and Subsidiaries'
regular cash receipts and disbursements accounting method consistently applied
(except as may be indicated therein or in the notes thereto), (b) present fairly
the financial position of Company and each Subsidiary as of the dates indicated
and present fairly the results of Company's and each Subsidiary's operations for
the periods then ended in accordance with such methods, and (c) are in
accordance with the books and records of Company and each Subsidiary, which have
been properly maintained and are complete and correct in all respects. Company
Current Financial Statements present fairly in accordance with such methods the
financial position of Company and each Subsidiary as at the dates thereof and
the results of its operations for the periods then ended.
Section 2.28 No Undisclosed Liabilities. Except as disclosed in
Schedule 2.28 hereto or otherwise referred to or disclosed in this Agreement,
neither Company nor any Subsidiary has any liabilities or obligations of any
nature, whether known or unknown and whether accrued, absolute, contingent or
otherwise, asserted or unasserted except for liabilities or obligations
reflected or reserved against in Company's Current Balance Sheet ("Special
Liabilities").
Section 2.29 Restrictions on Business Activities. Except as disclosed
in Schedule 2.29, there is no agreement, judgment, injunction, order or decree
binding upon Company, Subsidiaries, Shareholders, or any officer, director or
key employee of Company or any Subsidiary, which has or reasonably could be
expected to have the effect of prohibiting or impairing, in the future, any
acquisition of property by Company or any Subsidiary or the conduct of business
by Company or any Subsidiary. With respect to non-competition agreements,
Schedule 2.29 specifically sets forth each Company and/or Subsidiary to which
such non-competition agreement applies and the scope of such non-competition
agreement.
Section 2.30 Agreements in Full Force and Effect. All contracts,
agreements, plans, lease agreements, policies and licenses referred to, or
required to be referred to, in Company's and Subsidiaries' Disclosure Schedules
delivered hereunder are valid and binding, and are in full force and effect and
are enforceable in accordance with their terms, except to the extent that the
validity or enforceability thereof may be limited by bankruptcy or other laws
affecting the enforcement of creditors' rights generally, or by general equity
principles, or by public policy. There is no pending or threatened bankruptcy,
insolvency or similar proceeding with respect to any other party to such
agreements known to Company, any Subsidiary or any Shareholder, and no event has
occurred which (whether with or without notice, lapse of time or the happening
or occurrence of any other event) would constitute a default thereunder by
Company or any other party thereto.
18
<PAGE> 20
Section 2.31 Condition of Tangible Assets. Except as set forth on
Schedule 2.31 hereto, the tangible personal property and any other tangible
assets of Company and each Subsidiary are in good operating condition, are
sufficient for the operation of the businesses as presently conducted by Company
and each Subsidiary, and are in conformity with all applicable laws, ordinances,
orders, regulations and other requirements (including, without limitation,
applicable occupational safety and health laws and regulations) relating thereto
currently in effect.
Section 2.32 No Security Interests or Liens. Except as set forth in
Schedule 2.32 neither Company nor any Subsidiary nor any of their respective
assets or properties is subject to any security interest or lien.
Section 2.33 Inventory. All items of inventory on Company Current
Balance Sheet contained in Company Financial Statements consisted, and all such
items on hand on the date of this Agreement consist, and all such items on hand
at the Effective Date will consist, net of all applicable reserves with respect
thereto (calculated consistent with past practice), of items of a quality and a
quantity usable and saleable in the ordinary course of Company's and
Subsidiaries' businesses and conform to generally accepted standards in the
industry of which Company and Subsidiaries are a part. The value of the
inventories reflected on Company Current Balance Sheet contained in Company
Financial Statements are net of adequate reserves for damaged, excess and
unusable items. Purchase commitments of Company and Subsidiaries for inventory
are not in excess of normal requirements, and none of such purchase commitments
are at prices in excess of prevailing market prices at the time of such purchase
commitment.
Section 2.34 Related Party Arrangements. Schedule 2.34 hereto sets
forth a description of any interest held, directly or indirectly, by any
Shareholder of Company or any Subsidiary in any property, real or personal or
mixed, tangible or intangible, used in or pertaining to Company's or
Subsidiaries' businesses and any arrangement or agreement with any such person
concerning the provision of goods or services or other matters pertaining to
Company's or Subsidiaries' businesses. Except as disclosed in Schedule 2.34
there is no commitment to, and no income reflected in Company Financial
Statements that has been derived from, an Affiliate, and following the Closing,
neither Company nor any Subsidiary shall have any obligation of any kind or
designation to any such Affiliate.
Section 2.35 Banking Relations. Schedule 2.35 hereto sets forth a
complete and accurate list of all borrowing and investing arrangements that
Company and each Subsidiary have with any bank or other financial institution,
indicating with respect to each relationship, the type of arrangement maintained
(such as checking account, borrowing arrangements, safe deposit box, etc.) and
the Person or Persons authorized in respect thereof.
Section 2.36 Schedules. All Schedules required by this Article II and
attached hereto are true, correct and complete in all respects as of the Closing
Date and as of the Effective Date. Reference to any document, fact,
circumstance, omission or other matter in any Schedule shall constitute notice
thereof and an exception with respect to the representations and warranties set
forth in the section of this Agreement to which such Schedule relates.
Section 2.37 Statements True and Correct. No representation or warranty
made herein by Company, Subsidiaries or Shareholders, or any statement,
certificate, information, exhibit or instrument to be furnished pursuant to this
Agreement to APPM by Company, Subsidiaries, Shareholders or any of their
respective representatives, contains or will contain as of the Closing Date and
as of the Effective Date any untrue statement of fact or omits or will omit to
state a fact necessary to make the statements contained herein and therein not
misleading.
19
<PAGE> 21
Section 2.38 Finders' Fees. No investment banker, broker, finder or
other intermediary has been retained by or is authorized to act on behalf of
Shareholders, Company or Subsidiaries who is entitled to any fee or commission
upon consummation of the transactions contemplated by this Agreement or referred
to herein.
Section 2.39 Bankruptcy. Neither Company nor any Subsidiary is now, or
ever has been, the debtor in, or subject of, a voluntary or involuntary petition
for relief under Title 11 of the United States Code.
Section 2.40 No Claims Against Partners or Members. None of Company,
Shareholders, Rocky Mountain OpenScan MRI, LLC ("Rocky Mountain"), Premier
Advanced Imaging Network, Ltd. ("Premier"), Tower OpenScan MRI ("Tower"),
Florida Imaging at Treasure Coast, Ltd. ("Treasure Coast"), Lakewood OpenScan,
LLC ("Lakewood"), or any Subsidiary has any claim, whether asserted or
unasserted, contingent or otherwise, against any of the partners or members of
Rocky Mountain, Premier, Tower, Treasure Coast or Lakewood, and no basis for any
such claim exists.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF APPM
As an inducement to Company and Shareholders to enter into this
Agreement and to sell the Shares, APPM hereby represents and warrants as
follows:
Section 3.1 Organization and Good Standing; Qualification. APPM is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Delaware, with all requisite corporate power and authority to
own, operate and lease its assets and properties and to carry on its business as
currently conducted. APPM is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary. Copies of the Articles of Incorporation of APPM as
amended or restated, and the bylaws of APPM, as amended, and copies of the
corporate minutes of APPM regarding this Agreement and the transactions
contemplated hereby and thereby, all of which have been or will be made
available to Company for review, are true, correct and complete as in effect on
the date of this Agreement and accurately reflect all material proceedings of
the stockholders and directors of APPM (and all committees thereof) regarding
this Agreement and the transactions contemplated hereby and thereby.
Section 3.2 Authorization and Validity. APPM has all requisite
corporate power to execute and deliver this Agreement and all other agreements
entered into in connection with the transactions contemplated hereby and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance by APPM of this Agreement and the agreements provided
for herein, and the consummation by APPM of the transactions contemplated hereby
and thereby, are within APPM's corporate powers and have been duly authorized by
all necessary action on the part of APPM's Board of Directors. This Agreement
has been duly executed by APPM. This Agreement and all other agreements and
obligations entered into and undertaken in connection with the transactions
contemplated hereby and thereby to which APPM is a party constitute, or upon
execution will constitute, valid and binding agreements of APPM enforceable
against it in accordance with their respective terms, except as may be limited
by bankruptcy or other laws affecting creditors' rights generally, or by general
equity principles, or by public policy.
Section 3.3 Governmental Authorization. Other than (i) consents,
filings or notifications required to be made or obtained by Company or the
Shareholders or (ii) Hart-Scott-Rodino filings the execution, delivery and
performance by APPM of this Agreement and the agreements provided for herein,
20
<PAGE> 22
and the consummation of the transactions contemplated hereby and thereby by
APPM, require no action by or in respect of, or filing with, any governmental
body, agency, official or authority.
Section 3.4 Absence of Conflicting Agreements or Required Consents. The
execution, delivery and performance of this Agreement by APPM and any other
documents contemplated hereby (with or without the giving of notice, the lapse
of time, or both): (i) do not require the consent of any governmental or
regulatory body or authority or any other third party (other than pursuant to a
Hart-Scott-Rodino filing); (ii) will not conflict with any provision of APPM's
Articles of Incorporation or Bylaws; (iii) will not conflict with, result in a
violation of, or constitute a default under, any law, ordinance, regulation,
ruling, judgment, order or injunction of any court or governmental
instrumentality to which APPM is a party or by which APPM or its properties are
subject or bound; and (iv) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, require any
notice under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license or permit, material
to this transaction, to which APPM is a party or by which APPM or its properties
are bound.
Section 3.5 Statements True and Correct. No representation or warranty
made herein by APPM, nor any statement, certificate or instrument to be
furnished by APPM to the Shareholders pursuant to this Agreement, contains, or
will contain as of the Closing Date any untrue statement of material fact, or
omits, or will omit as of the Closing Date to state a material fact necessary to
make the statements contained herein and therein not misleading.
Section 3.6 Balances Due of Certain Capital Leases. The balances due
with respect to the capital leases set forth on Schedule 2.18, as of July 31,
1999, have been verified by APPM (but only with respect to capital leases of
General Electric, DVI, Copelco and Siemens).
ARTICLE IV
COVENANTS OF COMPANY AND SHAREHOLDERS
Section 4.1 Pre-Closing Matters. Prior to the Closing of the
transaction, Company and Subsidiaries shall have taken the actions set forth on
Schedule 4.1 hereto and made a part hereof for all purposes.
Section 4.2 Development Centers Become Operational. Shareholders have
formed Questar MRI, Inc., a Florida corporation ("Questar MRI") for the sole and
exclusive purpose of causing each of the seventeen (17) imaging centers that are
under development, but not in operation, as of the Closing and that are listed
on Schedule 4.2 (individually, a "Development Center" and collectively, the
"Development Centers") to become operational. Shareholders shall use their
individual and, with and through Questar MRI, their collective commercially
reasonable efforts to cause the Development Centers to become operational on an
expedited basis and, in no event later than April 30, 2000, barring Regulatory
Delays (as defined in Exhibit B) or Acts of God. Shareholders also shall (a)
retain sole and exclusive ownership of Questar MRI through the earlier of (i)
the date that all of the Development Centers are operational and the Development
Center Assets have been transferred and assigned to the Subsidiary designated by
the Company or (ii) August 1, 2000, and (b) change Questar MRI's name and cease
using such name and any derivative of Questar beginning on such date. A
Development Center shall be considered to be operational on the date that (i)
construction and build-out of the center is fully completed, (ii) the imaging
center has been providing (since the date of the notice under Section 4.3)
reimbursable services to patients in all intended modalities, (iii) employees
adequate to perform all of the intended operations of the Development Center
have been hired, (iv) the Development Center and its employees have all required
licenses, permits and certificates of occupancy, (v) the Development Center is
in full compliance with all laws, and (vi) APPM verifies that the
21
<PAGE> 23
conditions set forth herein have been met and that such Development Center is
operational. The standards for determining whether the conditions in subsections
(ii) and (iii) in the immediately preceding sentence have been satisfied shall
be based on the first year projections of the particular Development Center as
provided by Shareholders to APPM in connection with this transaction.
Section 4.3 Transfer of Development Center Assets to Subsidiary. After
Questar MRI determines that a Development Center is operational, Questar MRI
shall provide a written notice of such fact to Company, c/o Paul M. Jolas, Esq.,
3600 Chase Tower, 2200 Ross Avenue, Dallas, Texas 75201. Company shall verify
that the conditions set forth herein have been met and that such Development
Center is operational and thereafter designate a date, within fifteen (15)
business days of its receipt of such written notice, to have transferred from
Questar MRI, effective as of the date that the Development Center became
operational, all rights, title and interest of any kind whatsoever that Questar
MRI has in the Development Center that has become operational, including but not
limited to, any income from operations beginning on the date the Development
Center becomes operational, real estate leases, equipment leases, employment
relationships, vendor relationships, other intangible assets, goodwill, etc.
(the "Development Center Assets"). Except as expressly set forth herein, all
costs and expenses whatsoever associated with initiating and developing the
Development Centers and causing such Development Centers to be operational
(i.e., prior to the point in time that each such center is operational), shall
be the liability, obligation and expense solely of Questar MRI or Shareholders;
all costs and expenses of the Development Centers incurred on or after the date
that each such Development Center becomes operational shall be the liability,
obligation and expense solely of Company. The cost of any real estate lease held
by the Company or any Subsidiary prior to the time a Development Center becomes
operational shall be the liability of Questar MRI or Shareholders and shall be
paid monthly to Company (or, with the consent of the Company, directly to the
applicable lessor) by Questar MRI or Shareholders.
The Development Center Assets of each Development Center will be
transferred to a designated Subsidiary of Company by the mutual execution of an
Assignment and Assumption Agreement (containing terms and provisions reasonably
similar to this Agreement) transferring to the Subsidiary designated by Company
all Development Center Assets free and clear of all indebtednesses, liens,
security interests and encumbrances whatsoever except indebtedness to the lessor
of real estate and any lessors of equipment and other costs and expenses that
accrue beginning on the date the Development Center becomes operational. Questar
MRI will retain no interest whatsoever in the transferred Development Center
Assets and shall also provide a general release in connection with such transfer
in a form satisfactory to Company. The closing of the transfer for each
Development Center shall take place in Dallas, Texas, at the offices of APPM on
the date and at the time designated by Company. Simultaneously with the
occurrence of each such Development Center closing, Company shall pay to
Shareholders the additional purchase price in the amount and the manner
described in Exhibit B.
Set forth on Schedule 4.3 is a list of the Development Centers and the
projected costs per Development Center for the real estate lease, tenant finish
out, each equipment lease and any other indebtedness that would be transferred
to and assumed by Company, or its assignee, in connection with the transfer to
Company, or its assignee, of the Development Center Assets of each such
Development Center. If the aggregate costs associated with all of the
Development Centers that are transferred to Company, or its assignee, exceed the
aggregate amount of the projected costs for such Development Centers as set
forth on Schedule 4.3, then Shareholders shall pay such difference in cash to
Company on or before the earlier of August 1, 2000, or the date that all
Development Centers are transferred to Company, or its assignee; in addition,
Company, Subsidiaries and APPM may offset against any payments that may become
due to Shareholders pursuant to this or any other agreement any such amounts
that Shareholders fail to pay to Company. In order to keep track of this
aggregate amount and determine whether the amount assumed by Company, or its
assignee, is greater or less than projected, at each Development Center closing,
Company
22
<PAGE> 24
and Shareholders shall agree on the aggregate amount of costs assumed by
Company, or its assignee, with respect to such Development Center.
Section 4.4 Payment of Profit-Sharing, Bonus Arrangements and
Professional Service Fees Pursuant to Management and Radiology Service
Agreements. Prior to the Effective Date, Company and each Subsidiary have fully
satisfied all liabilities and obligations associated with all of Company's and
Subsidiaries' Management and Radiology Service Agreements for all periods
through the period ending March 31, 1999, including, but not limited to, all
profit-sharing, bonus and other arrangements pursuant to the Management
Agreements and professional service fees pursuant to the Radiology Service
Agreements. With respect to the period beginning April 1, 1999, through the
Effective Date, Company, Subsidiaries and APPM, will calculate (subject to
Shareholders' reasonable review) the profit-sharing, bonus/other fees and
professional service fees owed by Company and Subsidiaries to third parties
pursuant to the Management and Radiology Service Agreements for such period of
time and such profit-sharing, bonus/other fees and professional service fees
will be paid either (i) by Company prior to the Effective Date, (ii) after the
Effective Date by Company or Shareholders from Available Cash; or (iii) after
the Effective Date directly by Shareholders. If such amount is not paid as set
forth in the proceeding sentence, then APPM may offset, on a pro-rata basis,
such amount from future payments to Shareholders that are required hereunder
upon the opening of Development Centers, if any. If no payments are required to
be paid by APPM to Shareholders for Development Center Assets at the time that
APPM makes any such payment for profit-sharing, bonus/other fees and
professional service fees, then Shareholders will reimburse to APPM, in cash,
within fifteen (15) days of written notice to Shareholders, an amount equal to
the profit-sharing, bonus/other fees and professional service fees paid by
Company or Subsidiaries for such period pursuant to the Management and Radiology
Service Agreements.
Section 4.5 Specific Performance. It is specifically understood and
agreed that any breach of the provisions of Section 4.3 by Shareholders will
result in irreparable injury to Company, APPM and its affiliates, that the
remedy at law alone will be an inadequate remedy for such breach and that, in
addition to any other remedy it may have, APPM shall be entitled to enforce the
specific performance of Section 4.3 by Shareholders through both temporary and
permanent injunctive relief without the necessity of proving actual damages or
the posting of any bond, but without limitation of its right to damages and any
and all other remedies available to it, it being understood that injunctive
relief is in addition to, and not in lieu of, such other remedies. The existence
of any claim or cause of action which Shareholders may have against Company,
APPM or any of its affiliates shall not constitute a defense or bar to the
enforcement of the provisions of Section 4.3.
Section 4.6 Professional Liability Insurance. APPM shall obtain, at
Shareholders' sole expense, not to exceed $45,773.00 (for all Shareholders in
total), prior acts professional liability insurance coverage (e.g., "nose
coverage") with limits of no less than $1 million per occurrence, to cover
professional liability claims that may be made against Company, Subsidiaries,
Shareholders, Company's or Subsidiaries' employees and/or independent
contractors or professional corporations that provide professional services to,
for or on behalf of Company or any Subsidiary, for acts or omissions committed
or omitted by such persons prior to and including the Effective Date.
Section 4.7 Tax Schedules Prepared by Shareholders; Commencement Date
of Leases. Within thirty (30) days following the Closing Date, Shareholders
shall (i) prepare and deliver to APPM a tax schedule setting forth the adjusted
tax basis of each asset in Company and in each Subsidiary and (ii) provide to
APPM a list of the commencement dates of all real estate and equipment leases.
Section 4.8 Post-Closing Adjustments. Within forty-five (45) days
following the Closing Date, Company and Shareholders will meet to review and
reasonably agree upon any post-Closing adjustments relating to the Imaging
Center's operations before and after the Effective Date. Any money due with
respect
23
<PAGE> 25
to such post-Closing adjustments by Company to Shareholders or by Shareholders
to Company shall be paid within five (5) days of such adjustments being
reasonably agreed to by such parties.
Section 4.9 Company as Manager of Tower Advanced MRI, Ltd. The
Shareholders, both directly and in their capacity as shareholders, officers and
directors of Questar TGH, Inc. ("Questar TGH") and Questar MRI, Inc. ("Questar
MRI"), and their respective successors and assigns, (i) covenant and agree to
fully support Company in its role as the provider of administrative and
management services to Tower Advanced MRI, Ltd. f/k/a Magnetic Imaging and
Diagnostic Center, Ltd. (the "Partnership") after the effective date of the
assignment to Company of that certain Management Agreement dated May 26, 1998,
between the Partnership and Questar TGH (the "Management Agreement") as
specified in Schedule 4.1 attached hereto; provided that the Company complies
with its contractual obligations under the Management Agreement, and (ii) shall
not consent to any action or transaction that would result in removal of Company
as manager of the Partnership unless such action is specifically contemplated in
a termination provision of the Management Agreement and such right to terminate
under the Management Agreement has not otherwise been waived pursuant to that
certain Agreement, Waiver and Consent by and among MRI Center Management, Inc.,
Questar TGH and Questar MRI dated July 30, 1999.
Section 4.10 Certain Pre-Effective Date Accounts of the Company.
Subsequent to the Effective Date, the Shareholders shall continue to have access
to and control over the following checking accounts of the Company: Bank of
Tampa, Account No. 21085846 (Questar Imaging, Inc.) and Bank of Tampa, Account
No. 8580001694 (Questar Imaging, Inc.) (the "Shareholder Checking Accounts").
Beginning on the Effective Date, the Company shall utilize newly opened checking
accounts for the Company. Notwithstanding the foregoing, if money belonging to
the Company or its Subsidiaries is deposited in the Shareholder Checking
Accounts on or after the Effective Date, Shareholders shall immediately pay such
monies to Company and shall, upon Company's request, provide an accounting for
same.
Section 4.11 P.E.T. Centers Right of First Refusal. Specifically
excluded from the definition of "Development Centers" in Sections 4.2 and 4.3
are the Omaha, Nebraska Position Emission Tomography ("P.E.T.") Center and the
Brooklyn, New York P.E.T. Center (individually, a "P.E.T. Center" and
collectively, the "P.E.T. Centers") that are or may be developed by Questar MRI
and Shareholders. Shareholders and Questar MRI grant to APPM, and its assigns,
for a period of three (3) years following the Effective Date, a right of first
refusal with respect to the P.E.T. Centers. Neither Shareholders nor Questar MRI
shall transfer all or any portion of its or their interests in, or transfer all
or any portion of the assets of, either P.E.T. Center ("P.E.T. Center Interest")
unless Shareholders and/or Questar MRI first offers to sell such P.E.T. Center
Interest to APPM in accordance with this Section 4.11; provided, however, that
such right of first refusal shall not be applicable to any transfers among the
Shareholders, or their immediate families or to any entity owned and controlled
by Shareholders or a member of their immediate families; provided, further, that
the right of first refusal hereunder shall continue to apply to any such
transferees.
(a) Limitation on Transfers. No transfer of a P.E.T. Center
Interest may be made unless Shareholders and/or Questar MRI have
received a bona fide written offer ("Purchase Offer") from a person
("Proposed Purchaser") to purchase the P.E.T. Center Interest for a
purchase price ("Offer Price") denominated and payable in United States
dollars, and/or other assets with a reasonably ascertainable market
value, at closing or according to specified terms, with or without
interest, which offer must be in writing signed by the Proposed
Purchaser and must be irrevocable for a period ending no sooner than
the day following the end of the Offer Period, as hereinafter defined.
(b) Offer Notice. Before making a transfer that is subject to
the terms of this Section 4.11, Shareholders and Questar MRI shall give
to APPM written notice ("Offer Notice") and a copy of the Purchase
Offer, and an offer ("First Offer") to sell the P.E.T. Center Interest
to APPM
24
<PAGE> 26
for the Offer Price, payable according to substantially the same terms
as (or more favorable terms to APPM than) those contained in the
Purchase Offer, so long as the First Offer is made without regard to
the requirement of any earnest money or similar deposit required of the
proposed purchaser before closing, and without regard to any security
to be provided by the proposed purchaser for any deferred portion of
the Offer Price.
(c) Offer Period; Acceptance; Closing. The First Offer is
irrevocable for a period ("Offer Period") ending at 11:59 p.m., local
time, at APPM's principal office, on the 30th day following the day of
the Offer Notice. At any time during the Offer Period, APPM may accept
the First Offer by giving written notice of the acceptance to Questar
MRI or the Shareholders. If the Offer Price includes assets other than
cash or promissory notes payable in U.S. Dollars, in lieu of such
assets, APPM may substitute cash equal to the value of such assets, or
similar assets of equal value; e.g., if the Offer Price includes stock
of the Proposed Purchaser, which stock is publicly traded, APPM may
substitute, for stock of the Proposed Purchaser, shares of its own
stock of equal market value. If the First Offer is accepted, then the
closing of the sale of the P.E.T. Center Interest must take place
within 30 days after the First Offer is accepted or, if later, the date
of closing stated in the Purchase Offer. Shareholders, Questar MRI and
APPM shall execute such documents and instruments as are necessary or
appropriate to effect the sale of the P.E.T. Center Interest pursuant
to the terms of the First Offer and this Section 4.11. If APPM does not
accept the First Offer during the Offer Period, then the First Offer is
deemed to be rejected.
(d) Sale Pursuant to Purchase Offer If First Offer Rejected.
If the First Offer is rejected by APPM or is otherwise not accepted in
the manner hereinabove provided, then Shareholders and/or Questar MRI
may sell the P.E.T. Center Interest to the Proposed Purchaser at any
time within 60 days after the last day of the Offer Period or date of
written rejection from APPM, so long as the sale is made on terms no
more favorable to the Proposed Purchaser than the terms contained in
the Purchase Offer. If the P.E.T. Center Interest is not sold in
accordance with the terms of the preceding sentence, then the P.E.T.
Center Interest shall again become subject to all of the conditions and
restrictions of this Section 4.11.
ARTICLE V
INTENTIONALLY OMITTED
ARTICLE VI
INTENTIONALLY OMITTED
ARTICLE VII
TAX MATTERS; PENSION PLAN FUNDING
Section 7.1 Liability for Taxes. Shareholders shall be liable for all
Taxes (including, specifically, for this purpose, Taxes that are due with
respect to Tax Returns that are required to be filed by Company for the taxable
period ended on or before the Effective Date) of Company and Subsidiaries with
respect to any and all periods, or portions thereof, ending on or before the
Effective Date ("Pre-Effective Date Periods") and for all claims, losses,
liabilities, obligations, damages, impositions, assessments, demands, judgments,
settlements, costs and expenses (including reasonable attorneys', accountants'
and experts' fees and expenses and any applicable assessments of interest and
penalties) with respect to such Taxes. APPM shall be liable for Taxes of Company
and Subsidiaries with respect to any and all periods, or
25
<PAGE> 27
portions thereof, beginning after the Effective Date ("Post-Effective Date
Periods") and for any and all claims, losses, liabilities, obligations, damages,
impositions, assessments, demands, judgments, settlements, costs and expenses
(including reasonable attorneys', accountants' and experts' fees and expenses
and any applicable assessments of interest and penalties) with respect to such
Taxes. Any and all transactions or events contemplated by this Agreement that
occur at or prior to the Effective Date shall be deemed to have occurred in the
Pre-Effective Date Periods.
Section 7.2 Allocation of Liability for Taxes. In the case of any Taxes
that are attributable to a taxable period which begins before the Effective Date
and ends after the Effective Date, the amount of Taxes attributable to the
Pre-Effective Date Period shall be determined as follows:
(a) In the case of franchise or similar Taxes imposed on
Company and Subsidiaries based on capital (including net worth or
long-term debt) or number of shares of stock authorized, issued or
outstanding, the portion attributable to the Pre-Effective Date Period
shall be the amount of such Taxes for the entire taxable period
multiplied by a fraction, the numerator of which is the number of days
in the Pre-Effective Date Period and the denominator of which is the
number of days in the entire taxable period; provided, however, the
amount of the tax attributable to the Pre-Effective Date Period shall
not exceed the amount of tax Company and Subsidiaries would have paid
if its taxable period ended immediately prior to the Effective Date.
(b) In the case of all other Taxes, the portion attributable
to the Pre-Effective Date Period shall be determined on the basis of an
interim closing of the books of Company and Subsidiaries as of the
Effective Date, and the determination of the hypothetical Tax for such
Pre-Effective Date Period, determined on the basis of such interim
closing of the books, without annualization. The hypothetical Tax for
any period shall in no case be less than zero ($0). Taxes attributable
to the Pre-Effective Date Period shall be determined under the same
method of accounting used by Company and Subsidiaries during that
period.
Section 7.3 Administration of Tax Matters. Shareholders shall prepare
and timely file, or cause to be timely filed, for Company and Subsidiaries, with
the reasonable assistance of Company and Subsidiaries, Tax Returns that are
required by law to be filed for the taxable period ended on or before the
Effective Date including, but not limited to, federal income tax returns.
Shareholders shall, at least thirty (30) days prior to filing such Tax
Return(s), provide a copy of such Tax Return(s) to APPM. APPM shall, within
twenty (20) days of receiving such Tax Return(s), advise Shareholders regarding
any matters in such Tax Return(s) that it considers detrimental to APPM and/or
Company and Subsidiaries, and with which it disagrees. In such case,
Shareholders and APPM shall reasonably cooperate with each other to reach a
timely and mutually satisfactory solution to the disputed matters. Shareholders
shall provide to APPM a copy of all such Tax Return(s) together with the work
papers and schedules utilized in their preparation. APPM, Company and
Shareholders shall cooperate fully, as and to the extent reasonably requested,
in connection with the filing of Tax Returns and any audit, litigation or other
proceeding with respect to Taxes and Tax Returns (which Shareholders shall
control and remain responsible for with respect to the Pre-Effective Date
Periods). Such cooperation shall include the retention, and (upon the other
party's request) the provision, of records and information which are reasonably
relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder; provided that the party
requesting assistance shall pay the reasonable out-of-pocket expenses incurred
by the party providing such assistance; and provided further that no party shall
be required to provide assistance at times or in amounts that would interfere
unreasonably with the business and operations of such party. APPM agrees to
retain all books and records, with respect to tax matters pertinent to Company
and Subsidiaries relating to any Pre-Effective Date Periods, and to any tax
26
<PAGE> 28
periods beginning before the Effective Date and ending after the Effective Date,
until the expiration of any applicable statute of limitations or extensions
thereof.
Section 7.4 Tax Refunds. Any amount refunded to Company and
Subsidiaries for Taxes relating to the Pre-Effective Date Periods will be the
property of Shareholders and Company shall promptly deliver such amounts
received by it to Shareholders; provided, however, that Company shall have the
right to offset such tax refunds against (i) any Taxes owed by Company for
Pre-Effective Date Periods that have not been paid or reimbursed by
Shareholders, (ii) any liability or obligation of Shareholders to APPM pursuant
to the terms of this Agreement, and (iii) any amounts owed by Shareholders with
respect to Shareholders' obligation and liability to fully fund Company pension
plan for the Pre-Closing Periods (as set forth in Section 7.5 below).
Section 7.5 Liability to Fund Company Pension Plan. Shareholders shall
be obligated for, and liable to the Employee Benefit Plans, as defined in
Section 2.13, for funding participant accrued benefits, as if all participants
were entitled to receive an allocation, for the period January 1, 1999 to and
including the Effective Date (the "Funding Obligation"). If necessary, the
Funding Obligation, if any, shall be determined by the preparation of a special
allocation report, as of July 31, 1999, by the accountant selected by Company.
The Funding Obligation, if any, will be paid either (i) by Company prior to the
Effective Date, (ii) after the Effective Date by Company or Shareholders from
Available Cash, or (iii) after the Effective Date directly by Shareholders. If
such amount is not paid as set forth in the proceeding sentence, then APPM may
offset, on a pro-rata basis, such amount from future payments to Shareholders
that are required hereunder upon the opening of Development Centers, if any, and
if no payments are required to be paid by APPM to Shareholders for such
Development Centers prior to September 30, 1999, then Shareholders will
immediately reimburse to APPM, in cash, on or before September 30, 1999, an
amount equal to the Funding Obligation.
Section 7.6 Section 338(h)(10).
(a) 338 Election Generally. At the sole election of APPM, APPM
and the Shareholders shall timely file an election under Section
338(h)(10) of the Code and under any comparable provisions of state or
local law with respect to the purchase of the Shares (the "Election").
The purpose of the Election shall be to confer a benefit to APPM that
otherwise would not be available to it in the absence of the Election.
If the Election is made, (i) APPM shall pay to the Shareholders, in the
manner provided for below, an amount equal to the Election Price
Adjustment Amount (as defined below), and (ii) APPM and the
Shareholders shall report, in connection with the determination of
income taxes, the transactions contemplated by this Agreement in a
manner consistent with the Election, the computation of the Modified
Aggregate Deemed Sales Price (as defined below) and the Deemed Sales
Price Allocation (as defined below). The Election Price Adjustment
Amount shall be treated for tax purposes by the parties as additional
purchase price paid by APPM as consideration for the Shares.
(b) Documentation and Delivery.
(1) After the Closing, at the request of APPM, the
Shareholders shall promptly provide APPM with such information
as shall be necessary to compute the adjusted basis of their
Shares and such other information that is necessary to file
the Election. If APPM desires to make the Election, APPM shall
deliver to the Shareholders a written notice of its intention
to file the Election, together with such documents or forms as
are required properly to complete the Election, including
APPM's calculation of (A) the Modified Aggregate Deemed Sales
Price, (B) the Deemed Sales Price Allocation, and (C) the
Election Price
27
<PAGE> 29
Adjustment Amount. APPM shall be responsible for the
preparation and filing of all forms and documents required in
connection with the Election (the "Section 338 Forms"). APPM
shall prepare a completed set of IRS Form 8023 (and any
comparable forms required to be filed under state or local tax
law) and any additional data or materials required to be
attached to Form 8023 pursuant to the Treasury Regulations
promulgated under Section 338 of the Code consistent with
APPM's calculations prepared as provided for above.
(2) If the Shareholders agree with APPM's calculation
of the Election Price Adjustment Amount, then, within fifteen
(15) days after receipt of APPM's calculations, the
Shareholders shall execute and deliver the Section 338 Forms
to APPM, subject to the payment by APPM of the Election Price
Adjustment Amount as provided for in subsection (c) below. If
the Shareholders disagree with APPM's calculation of the
Election Price Adjustment amount, the Shareholders shall
submit to APPM, within 15 days of receipt of APPM's
calculations, a written notice advising APPM of the
disagreement and setting forth their calculation of the
Election Price Adjustment Amount. Within 10 days after receipt
of such a notice from the Shareholders, APPM shall provide the
Shareholders with written notice of its agreement with the
Shareholders' calculation, or, if it does not agree, advising
the Shareholders that the disagreement is to be referred to an
independent accounting firm for resolution. In the latter
case, the disagreement shall be referred by APPM to an
independent "Big 5" accounting firm which is not the regular
accounting firm of APPM. The accounting firm shall review all
information provided to it by the parties and submit a written
report setting forth its calculation of the Election Price
Adjustment Amount within 15 days after submission of the
matter to it, and such decision shall be final and binding on
all of the parties. The fees and expenses charged by said
accounting firm shall be paid by APPM. APPM shall thereafter
prepare revised Section 338 Forms consistent with said
determination, and the Shareholders shall execute and deliver
the Section 338 Forms to APPM within 5 days after receipt
thereof, subject to the payment by APPM of the Election Price
Adjustment Amount as provided for in subsection (c) below.
(c) Payment; Filing. APPM shall pay the Election Price
Adjustment Amount to the Shareholders upon delivery of the executed
Section 338 Forms by the Shareholders. Said amount shall be allocated
among the Shareholders in proportion to the additional tax liabilities
incurred by each Shareholder as a result of the Election.
(d) Indemnity. APPM agrees to indemnify each Shareholder for
all additional tax liabilities incurred by the Shareholder that are
attributable to the making of the Election which are not otherwise
compensated for by the Election Price Adjustment Amount paid to the
Shareholder pursuant to paragraph (c) above. The foregoing indemnity
shall also apply with respect to any penalties and/or interest relating
to tax liabilities arising in connection with the Election, and shall
include a "gross-up" payment to fully compensate the Shareholders for
the fact that the payment of such amounts is also subject to taxation.
A Shareholder shall notify APPM in writing if the amount of tax
liability reported by the Shareholder in connection with the Election
is challenged, and shall permit APPM to join in the defense of any
possible assessment of taxes relating thereto, at APPM's expense. The
indemnity provided for herein shall be paid no later than 5 days prior
to the due date for payment of the taxes, penalties and interest to
which it relates. The indemnity provided for herein shall survive
indefinitely.
(e) Definitions. The following definitions shall apply for
purposes of this Section:
28
<PAGE> 30
(1) The "Election Price Adjustment Amount" shall be
equal to an amount that will cause the remainder of the Stock
Sale After Tax Amount, minus the Asset Sale After Tax Amount,
to be equal to zero. The parties intend that this amount place
the Shareholders in the same after-tax position that they
would have been in had the Election not been made, and that it
shall include the additional tax liabilities incurred by the
Shareholders as a result of the Election, plus an additional
"gross-up" payment to compensate the Shareholders for the fact
that the payment of such additional tax liabilities, plus the
"gross-up" payment, shall also be subject to taxation; this
provision shall be applied consistently with said intent. If
the Election Price Adjustment Amount is less than zero, then
the purchase price paid by APPM as consideration for the
Shares shall be reduced by one-half of such amount. Any such
reduction in purchase price shall be paid by each Shareholder,
pro rata, to APPM within five (5) days following the date that
each such Shareholder files his tax return reporting the
Section 338 Election.
(2) The "Stock Sale After Tax Amount" shall mean an
amount equal to the remainder of the total consideration to be
paid to the Shareholders by APPM pursuant to Section 1.2
hereof, minus the total amount of taxes to be incurred by the
Shareholders as a result of the transactions contemplated
hereby, and assuming that the Election is not made, and that
the difference between the total consideration paid to the
Shareholders by APPM pursuant to Section 1.2 hereof and the
adjusted basis of the Shares is taxed to the Shareholders as a
long-term capital gain at the maximum rate applicable thereto.
(3) The "Asset Sale After Tax Amount" shall mean an
amount equal to the remainder of (i) the sum of the total
consideration to be paid to the Shareholders by APPM pursuant
to Section 1.2 hereof, plus the Election Price Adjustment
Amount, minus (ii) the total amount of taxes to be incurred by
the Shareholders as a result of the transactions contemplated
hereby, and assuming that the Election is made and that the
Shareholders are subject to income taxation at each such
Shareholder's marginal tax rate.
(4) The "Modified Aggregate Deemed Sales Price" shall
mean an amount resulting from the Election, determined
pursuant to Treasury Regulation Section 1.338(h)(10)-1(f).
(5) The "Deemed Sales Price Allocation" shall mean
the allocation of the Modified Aggregate Deemed Sales Price
among the assets of the Company in accordance with the
principles of Treasury Regulation Section
1.338(h)(10)-1(f)(1)(ii).
ARTICLE VIII
INTENTIONALLY OMITTED
ARTICLE IX
CLOSING DELIVERIES BY THE PARTIES
Section 9.1 Deliveries of Shareholders and Company. At or prior to the
Closing Date, Shareholders and Company shall deliver to APPM the following, all
of which shall be in a form reasonably satisfactory to APPM:
29
<PAGE> 31
(a) a copy of resolutions of the Board of Directors of Company
and applicable Subsidiaries authorizing the execution, delivery and
performance of this Agreement, the transactions to which Company is a
party, and all related documents and agreements in consummation of the
transactions, each certified by the Secretary of Company or the
applicable Subsidiary as being true and correct copies of the originals
thereof, subject to no modifications or amendments;
(b) Articles of Incorporation of Company and each Subsidiary,
certified by the Secretary of State of Florida and Articles of
Organization for Rocky Mountain, certified by the Secretary of State of
Colorado;
(c) Bylaws of Company and each Subsidiary and the operating
agreement of Rocky Mountain, all as certified by the Secretary of
Company;
(d) Stock certificates representing the Shares, together with
accompanying signed stock powers or instruments of assignment, duly
endorsed in blank for the transfer of the Shares to APPM with all
necessary transfer taxes paid or other revenue stamps affixed thereto;
(e) a certificate of the Secretary of Company and each
Subsidiary certifying the incumbency of the directors and officers of
Company and each Subsidiary and as to the signatures of such directors
and officers who have executed documents delivered at the Closing on
behalf of Company and each Subsidiary;
(f) a certificate, dated within ten days prior to the Closing
Date, of the Secretary of State of Florida for Company and each
Subsidiary establishing that each corporation is in existence, has paid
all franchise or similar taxes, if any, and is in good standing to
transact business in the State of Florida and a similar certificate
from the Secretary of State of Colorado for Rocky Mountain;
(g) all authorizations, consents, approvals, permits and
licenses referenced in Section 2.6 of this Agreement;
(h) a Stockholder Release executed by each Shareholder;
(i) resignations, effective as of the opening of business on
the Closing Date, of all officers and directors of Company and each
Subsidiary;
(j) minute book and all other books and records, including all
accounting records, of Company and each Subsidiary;
(k) a non-competition agreement executed by each Shareholder;
(l) a consulting agreement with APPM executed by Paul M.
Stanley;
(m) legal opinion of Akerman, Senterfitt & Eidson, P.A.; and
(n) such other instrument or instruments prepared by Company
or Shareholders as shall be necessary or appropriate, as APPM or its
counsel shall reasonably request, to carry out and effect the purpose
and intent of this Agreement and the transactions.
30
<PAGE> 32
Section 9.2 Deliveries of APPM. At or prior to the Closing Date, APPM
shall deliver to Shareholders and Company the following, all of which shall be
in a form reasonably satisfactory to Shareholders and Company:
(a) a copy of resolutions of the Board of Directors of APPM
authorizing the execution, delivery and performance of this Agreement,
the transactions to which APPM is a party, and all related documents
and agreements in consummation of the transactions, each certified by
the Secretary of APPM as being true and correct copies of the originals
thereof, subject to no modifications or amendments;
(b) a certificate of the Secretary of APPM certifying the
incumbency of the directors and officers of APPM and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of APPM;
(c) the Purchase Price as set forth on Exhibit A;
(d) legal opinion of Haynes and Boone, L.L.P.;
(e) consulting agreement with Paul M. Stanley executed by
APPM; and
(f) such other instrument or instruments prepared by APPM as
shall be necessary or appropriate, as Company or its counsel shall
reasonably request, to carry out and effect the purpose and intent of
this Agreement and the transactions.
ARTICLE X
POST-CLOSING MATTERS
Section 10.1 Further Instruments of Transfer. During a reasonable
period following the Closing, at the request of APPM, Shareholders and Company
shall at APPM's expense deliver any further instruments of transfer and take all
reasonable action as may be necessary or appropriate to carry out the purpose
and intent of this Agreement and the transactions. During a reasonable period
following the Closing, at the request of Company or Shareholders, APPM shall
deliver any further instruments of transfer and take all reasonable action as
may be necessary or appropriate to carry out the purpose and intent of this
Agreement and the transactions.
ARTICLE XI
INDEMNIFICATION
Section 11.1 Indemnification by Shareholders. Subject to the terms and
conditions of this Article XI, Shareholders jointly and severally agree to
indemnify, defend and hold harmless APPM and its directors, officers,
shareholders, employees, agents, attorneys, consultants, Affiliates, successors,
permitted assigns, legal representatives, and heirs from and against all direct
and indirect losses, claims, obligations, demands, assessments, penalties,
liabilities, costs, damages, reasonable attorneys' fees and expenses (including,
without limitation, all reasonable costs of experts and all reasonable costs
incidental to or in connection with any appellate process) (collectively,
"Damages") asserted against or incurred by such individuals and/or entities
arising out of, in connection with or resulting from:
31
<PAGE> 33
(a) a breach by any Shareholder(s) or Company of any
representation or warranty or covenant of Shareholder(s) or Company
contained in this Agreement or in any schedule, exhibit, certificate or
other document or instrument delivered pursuant to or as a part of this
Agreement;
(b) any claim, lien, demand, cause of action, obligation,
liability or damages against Company, any Subsidiary or any Shareholder
for, arising out of, in connection with or resulting from, any act,
event, fact, circumstance, failure to act, omission, misstatement or
any other matter occurring or alleged to have occurred prior to the
Effective Date regardless of when any such claim is made (subject to
the limitation in Section 11.9) (it being the express intent of the
parties that such indemnification shall apply to any and all events or
non-events occurring or alleged to have occurred prior to the Effective
Date);
(c) any violation (or alleged violation) by Company,
Subsidiaries or Shareholder(s) and/or any of their respective past or
present, directors, officers, partners, shareholders, managers,
employees (including, without limitation, any licensed independent
contractor), agents, consultants and Affiliates of Healthcare Fraud
occurring prior to the Effective Date;
(d) the items listed on Schedule 4.1 and the actions taken by
Shareholders with respect to such items; or
(e) any liability of Company to Tower Advanced MRI, Ltd. or
any of its partners, or any liability resulting from that partnership
or the business it owns and/or operates.
Section 11.2 Indemnification by APPM. Subject to the terms and
conditions of this Article XI, APPM agrees to indemnify, defend and hold
harmless Shareholders, and, as applicable, their respective directors, officers,
shareholders, employees, agents, attorneys, consultants, Affiliates, successors,
permitted assigns, legal representatives, and heirs from and against all Damages
asserted against or incurred by such individuals and/or entities arising out of,
in connection with or resulting from:
(a) a breach by APPM of any representation or warranty or
covenant of APPM (other than the covenant set forth in Section 4.3 and
Exhibit B hereof) contained in this Agreement or in any schedule,
exhibit, certificate or other instrument delivered pursuant to or as a
part of this Agreement; or
(b) any claim, lien, demand, cause of action, obligation,
liability or damages against against Company or any Subsidiary, for,
arising out of, in connection with or resulting from, any act, event,
fact, circumstance, failure to act, omission, misstatement, or any
other matter occurring or alleged to have occurred on or after the
Effective Date (subject to the limitation in Section 11.9).
Section 11.3 Claims. All claims for indemnification pursuant to this
Article XI shall be asserted and resolved as follows:
(a) Any party claiming indemnification pursuant to this
Article XI (an "Indemnified Party") shall promptly (and, in any event
at least ten (10) days prior to the due date for any responsive
pleadings, filings or other documents) (i) notify the party from whom
indemnification is sought (the "Indemnifying Party") of any third-party
claim or claims asserted against the Indemnified Party (a "Third Party
Claim") that could give rise to a right of indemnification pursuant to
this Article XI and (ii) transmit to the Indemnifying Party a written
notice ("Claim Notice") describing in reasonable detail the nature of
the Third Party Claim, a copy of all papers served with respect to such
claim (if any), an estimate of the amount of Damages attributable to
the Third Party
32
<PAGE> 34
Claim (if an amount has been claimed in the papers served on the party
seeking indemnification), and the basis of the Indemnified Party's
request for indemnification under this Agreement. Except as provided in
Section 11.5, the failure to promptly deliver a Claim Notice shall not
relieve any Indemnifying Party of its obligations to any Indemnified
Party with respect to the related Third Party Claim except to the
extent that the resulting delay is materially prejudicial to the
defense of such claim as may be proved by the Indemnifying Party. Any
damages ultimately awarded shall be reduced by the costs incurred as a
result of such delay. Within 30 days after receipt of any Claim Notice
(the "Election Period"), the Indemnifying Party shall notify the
Indemnified Party (x) whether the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Article XI with
respect to such Third Party Claim and (y) whether the Indemnifying
Party desires, at the sole cost and expense of such Indemnifying Party,
to defend the Indemnified Party against such Third Party Claim;
(b) If the Indemnifying Party notifies the Indemnified Party
within the Election Period that the Indemnifying Party elects to assume
the defense of the Third Party Claim, then the Indemnifying Party shall
have the right to defend, at its sole cost and expense, with counsel
reasonably acceptable to such Indemnified Party, such Third Party Claim
by all appropriate proceedings, which proceedings shall be prosecuted
diligently by the Indemnifying Party to a final conclusion or settled
at the discretion of the Indemnifying Party in accordance with this
Section 11.3(b). Except as set forth in Section 11.3(f) hereof, the
Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof. The
Indemnified Party is hereby authorized, at the sole cost and expense of
the Indemnifying Party (but only if the Indemnified Party is entitled
to indemnification hereunder), to file, during the Election Period, any
motion, answer or other pleadings that the Indemnified Party reasonably
shall deem necessary or appropriate to protect its interests or those
of the Indemnifying Party and not prejudicial to the Indemnifying
Party. If requested by the Indemnifying Party, the Indemnified Party
agrees, at the sole cost and expense of the Indemnifying Party, to
cooperate with the Indemnifying Party and its counsel in contesting any
Third Party Claim that the Indemnifying Party elects to contest,
including, without limitation, the making of any related counterclaim
against the Person asserting the Third Party Claim or any
cross-complaint against any Person. The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this
Section 11.3(b) and shall bear its own costs and expenses with respect
to such participation; provided, however, that if the named parties to
any such action (including any impleaded parties) include both the
Indemnifying Party and the Indemnified Party or if the alleged act,
event, fact, circumstance, failure to act, omission, misstatement or
other matter giving rise to the matter occurred while Shareholders
owned Company and while APPM owned Company, and the Indemnified Party
has been advised by counsel that there may be one or more legal
defenses available to it that are different from or additional to those
available to the Indemnifying Party, then the Indemnified Party may
employ separate counsel at the expense of the Indemnifying Party, and
upon written notification thereof from the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense of
such action on behalf of the Indemnified Party; provided further that
the Indemnifying Party shall not, in connection with any one such
action or separate but substantially similar or related actions in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of more
than one separate firm of attorneys at any time for the Indemnified
Party, which firm shall be designated in writing by the Indemnified
Party. Notwithstanding the foregoing, the Indemnifying Party shall be
prohibited from confessing or settling any criminal allegations brought
against the Indemnified Party without the express written consent of
the Indemnified Party.
33
<PAGE> 35
(c) If the Indemnifying Party fails to notify the Indemnified
Party within the Election Period that the Indemnifying Party elects to
defend the Indemnified Party pursuant to Section 11.3(b), or if the
Indemnifying Party elects to defend the Indemnified Party pursuant to
Section 11.3(b) but, in the reasonable opinion of the Indemnified
Party, fails diligently and promptly to prosecute or settle the Third
Party Claim, then the Indemnified Party shall have the right to defend,
at the sole cost and expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder), the Third
Party Claim by all appropriate proceedings, which proceedings shall be
promptly and vigorously prosecuted by the Indemnified Party to a final
conclusion or settled. The Indemnified Party shall have full control of
such defense and proceedings, provided, however, that the Indemnified
Party may not enter into, without the Indemnifying Party's consent,
which shall not be unreasonably withheld, any compromise or settlement
of such Third Party Claim. Notwithstanding the foregoing, if the
Indemnifying Party has delivered a written notice to the Indemnified
Party to the effect that the Indemnifying Party disputes its potential
liability to the Indemnified Party under this Article XI and if such
dispute is resolved in favor of the Indemnifying Party, the
Indemnifying Party shall not be required to bear the costs and expenses
of the Indemnified Party's defense pursuant to this Section or of the
Indemnifying Party's participation therein at the Indemnified Party's
request, and the Indemnified Party shall reimburse the Indemnifying
Party in full for all costs and expenses of such litigation. The
Indemnifying Party may participate in, but not control, any defense or
settlement controlled by the Indemnified Party pursuant to this Section
11.3(c), and the Indemnifying Party shall bear its own costs and
expenses with respect to such participation; provided, however, that if
the named parties to any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party or if the
alleged act, event, fact, circumstance, failure to act, omission,
misstatement or other matter giving rise to the matter occurred while
Shareholders owned Company and while APPM owned Company, and the
Indemnifying Party has been advised by counsel that there may be one or
more legal defenses available to it that are different from or
additional to those available to the Indemnified Party, then the
Indemnifying Party may employ separate counsel and upon written
notification thereof, the Indemnified Party shall not have the right to
assume the defense of such action on behalf of the Indemnifying Party.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third
Party Claim, the Indemnified Party shall transmit to the Indemnifying
Party a written notice (the "Indemnity Notice") describing in
reasonable detail the nature of the claim, an estimate of the amount of
damages attributable to such claim and the basis of the Indemnified
Party's request for indemnification under this Agreement. If the
Indemnifying Party does not notify the Indemnified Party within thirty
(30) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes such claim, the claim specified by the
Indemnified Party in the Indemnity Notice shall be deemed a liability
of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed such claim, as provided above, such dispute shall be
resolved by litigation in an appropriate court of competent
jurisdiction if the parties do not reach a settlement of such dispute
within thirty (30) days after notice of a dispute is given.
(e) Payments of all amounts owing by any Indemnifying Party
pursuant to this Article XI relating to a Third Party Claim shall be
made within thirty (30) days after the latest of (i) the settlement of
such Third Party Claim, (ii) the expiration of the period for appeal of
a final adjudication of such Third Party Claim, or (iii) the expiration
of the period for appeal of a final adjudication of the Indemnifying
Party's liability to the Indemnified Party under this Agreement.
Payments of all amounts owing by the Indemnifying Party pursuant to
Section 11.3(d) shall be made within thirty (30) days after the later
of (i) the expiration of the 30-day Indemnity Notice period or
34
<PAGE> 36
(ii) the expiration of the period for appeal of a final adjudication of
the Indemnifying Party's liability to the Indemnified Party under this
Agreement.
(f) The Indemnifying Party shall provide the Indemnified Party
with written notice of any firm offer that is made to settle or
compromise a Third Party Claim against an Indemnified Party. If a firm
offer is made to settle such a claim solely by the payment of money
damages, and such offer is contingent only upon the acceptance by the
Indemnifying Party, and the Indemnifying Party notifies the Indemnified
Party in writing that the Indemnifying Party agrees to such settlement,
but the Indemnified Party elects not to accept and agree to it, the
Indemnified Party may continue to contest or defend such Third Party
Claim and, in such event, the total maximum liability of the
Indemnifying Party to indemnify or otherwise reimburse the Indemnified
Party hereunder with respect to such a claim shall be limited to and
shall not exceed the amount of such settlement offer, plus reasonable
out-of-pocket costs and reasonable expenses (including reasonable
attorneys' fees and disbursements) to the date of notice that the
Indemnifying Party desired to accept such settlement.
(g) Notwithstanding any provision herein to the contrary, the
obligation of an Indemnifying Party to provide indemnification to an
Indemnified Party for any Damages resulting under Section 11.1 with
respect to Company and Shareholders, or Section 11.2, with respect to
APPM, shall not take effect unless and until the Damages asserted
against or incurred in the aggregate and on a collective basis by the
Indemnified Parties pursuant to either Section 11.1 or Section 11.2, as
applicable, as a result of such item(s) exceeds $25,000.00 (the
"Basket"), after which, such obligation shall take effect only with
respect to such Damages in excess of such threshold. By way of example,
if an Indemnified Party has five (5) claims of $5,000.00 of Damages
each against the Indemnifying Party, then no amounts would be owed by
the Indemnifying Party to the Indemnified Party; provided, however,
that any additional claim(s) for Damages by the Indemnified Party
against the Indemnifying Party for an amount(s) equal to or greater
than $1.00 would be subject to dollar-for-dollar indemnification. Any
claims involving fraud, intentional misrepresentation, title to the
Shares, Taxes, Litigation, Healthcare Fraud, Special Liabilities or
medical or professional malpractice are expressly excluded from the
Basket and shall be paid from the first dollar ($1.00) with respect to
such Damages.
(h) An Indemnifying Party shall not be obligated to provide
indemnification to an Indemnified Party for any Damages resulting under
Section 11.1 with respect to Company and Shareholders, or Section 11.2
with respect to APPM, after the cumulative amount of all amounts paid
by the Indemnifying Party to the Indemnified Party(ies) equals eighty
percent (80%) of the consideration paid by APPM to Shareholders
pursuant to Exhibit A and Exhibit B of this Agreement, the value of
such consideration being determined as of the date such consideration
is paid, regardless of the date any such indemnification payments are
paid. Any claims involving fraud, intentional misrepresentation, Taxes,
title to the Shares, Litigation, Healthcare Fraud, Special Liabilities
or professional or medical malpractice are expressly excluded from this
limitation on indemnification.
(i) The remedies provided in this Agreement shall be exclusive
of any other rights or remedies available to one party against the
other, either at law or in equity, except that this section shall not
limit APPM's right to equitable relief, to the extent and as
appropriate, with respect to fraud, intentional misrepresentations,
title to the Shares, the Development Center Assets, Taxes, Litigation,
Healthcare Fraud, Special Liabilities or medical or professional
malpractice.
(j) Notwithstanding anything to the contrary herein, in the
event APPM causes Company or any Subsidiary to sell, transfer or
otherwise assign, APPM, Company, a Subsidiary or
35
<PAGE> 37
an imaging center owned by a Subsidiary, then the purchaser, transferee
and/or assignee shall be an express third party beneficiary of the
indemnification provisions of this Agreement and may assert a claim
directly against and, if appropriate, shall be indemnified directly by,
Shareholders.
Section 11.4 Intentionally Omitted.
Section 11.5 Tax Benefits; Insurance Proceeds. The total amount of any
indemnity payments owed by one party to another party to this Agreement shall be
reduced by any correlative tax benefits received by the party to be indemnified
or the net proceeds received by the party to be indemnified with respect to
recovery from third parties or insurance proceeds, and such correlative
insurance benefit shall be net of the insurance premium, if any, that becomes
due as a result of such claim.
Section 11.6 Indemnification for Certain Real Estate Leases. If any one
or more Development Centers are not operational by April 30, 2000 (or August 1,
2000, in the event of a Regulatory Delay or Acts of God), and the lessee of the
real estate leases for such Development Centers is either Company or a
Subsidiary, Company and/or Subsidiary may, in its sole discretion and without
further notice, assign one or more such real estate leases to Questar MRI and/or
Shareholders who shall immediately assume such real estate lease and hold APPM,
Company and Subsidiaries harmless with respect thereto. If any lease cannot be
assigned to Questar MRI or Questar MRI or the Shareholders cannot cause Company
and/or Subsidiaries to be released from all liability with respect to such
lease, then Shareholders shall have ninety (90) days to negotiate and consummate
an early termination, sublease, assignment or similar arrangement of the lease
with the lessor. Any such arrangement must include a complete release of
Company, Subsidiaries and/or APPM, as reasonably requested by APPM. If
Shareholders fail to finalize such arrangement with the lessor, Company and/or
Subsidiary shall retain the lease and demand and obtain complete payment from
Shareholders in an amount equal to the net present value cost of all payments
and obligations due under the leases during their primary term discounted at a
rate of 6%. In addition, Company shall have no obligation to mitigate its
payments and obligations under such lease(s). In the event Shareholders pay the
net present value cost of all payments and obligations due under the leases as
provided above, and Company subsequently mitigates its damages under the lease
by negotiating an early termination, sublease, assignment or other arrangement,
Company shall remit to Shareholders the difference between the amount paid by
Shareholders and the actual amount of the obligations paid by Company. In
addition, if Shareholders elect to operate one or more of such Development
Center(s) pursuant to Exhibit "B" hereunder, and APPM does not exercise its
option to purchase such Development Center(s), then Company and/or Subsidiary
may, without further notice, assign the Real Estate Leases pertaining to such
Development Centers to Questar MRI and/or Shareholders who shall immediately
assume such real estate lease and hold APPM, Company, and Subsidiaries harmless
with respect thereto.
Section 11.7 Net Worth. Each Shareholder covenants and agrees that such
Shareholder shall maintain and preserve an individual net worth of not less than
$4,000,000 each (the "Net Worth Amount"), for a period of twenty-four (24)
months following the Effective Date; provided, however, that in the event any
claim for indemnification is held over thereafter in accordance with Article XI,
then each Shareholder shall maintain such Net Worth Amount after such date in an
amount equal to the lesser of (i) $4,000,000, or (ii) the amount of such claim.
Each Shareholder further covenants and agrees (i) that his respective Net Worth
Amount shall consist of assets other than assets exempt from creditors' reach
under applicable state law and (ii) that during such 24-month period, the assets
comprising his Net Worth Amount shall at all times be located and remain in the
United States.
Section 11.8 Right of Set-off. Upon notice to Shareholders specifying
in reasonable detail the basis for such set-off, APPM may set off any amounts
that become due to Shareholders pursuant to this Agreement or any other
agreement or document executed and delivered in connection with the transactions
36
<PAGE> 38
contemplated herein, against amounts payable by Shareholders to APPM pursuant to
the provisions of this Agreement, including, but not limited to, any payments
due by Shareholders under the indemnification provisions or otherwise. The
exercise in good faith of such right of set-off by APPM, whether or not
ultimately determined to be justified, will not constitute a default of APPM
under this Agreement. Neither the exercise of nor the failure to exercise such
right of set-off will constitute an election of remedies or limit APPM in any
manner in the enforcement of any other remedies that may be available to it.
Section 11.9 Survival.
(a) Except as expressly provided herein or in any other
document delivered pursuant to this Agreement, all of the respective
obligations of the parties contained in this Agreement or in any other
document delivered in accordance with and pursuant to this Agreement,
including without limitation all covenants, agreements, indemnities,
representations (other than with respect to the due authority of a
party), and warranties (other than with respect to the due authority of
a party), shall survive Closing for a period of twenty-four (24)
months; provided, however, that the limitation of this clause (a) shall
not apply to claims involving fraud, intentional misrepresentations,
title to the Shares, Taxes, Litigation, Healthcare Fraud, Special
Liabilities, or medical or professional malpractice, for which the
period for making such claims shall expire on the date which is six (6)
months after the termination of the applicable statute of limitations
relating thereto.
(b) If, within such twenty-four (24) month period (or longer
period, if applicable), no written notice is given by one party to the
other party of any alleged breach of a covenant, agreement,
indemnification, representation, or warranty of the other party under
this Agreement, then all liability of the other party, except as
otherwise provided in this Agreement, shall terminate. If either party
files suit with respect to any alleged breach of a covenant, agreement,
indemnification, representation or warranty, and notice is given to the
other party within such twenty-four (24) month period (or longer
period, if applicable), then the liability of the other party shall
survive as to the matter(s) in question in such notice, and the
liability of the other party as to all other matters shall cease,
except as otherwise provided in this Agreement.
(c) Notwithstanding any other provision of this Agreement to
the contrary, Article XI of this Agreement shall survive the Closing.
ARTICLE XII
MISCELLANEOUS
Section 12.1 Amendment; Waivers. This Agreement may be amended,
modified or supplemented only by an instrument in writing executed by all the
parties hereto. Any waiver of any terms and conditions hereof must be in
writing, and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.
Section 12.2 Assignment. Except as otherwise provided herein, neither
this Agreement nor any right created hereby or in any agreement entered into in
connection with the transactions contemplated hereby shall be assignable by any
party hereto, except an assignment by APPM to a wholly-owned subsidiary of APPM;
provided that any such assignment shall not relieve APPM of its obligations
hereunder. Notwithstanding the foregoing provision or any other provision in
this Agreement, APPM's right to assign, transfer, convey, hypothecate or
otherwise dispose of the Shares immediately after the Closing and at any time
thereafter shall be unrestricted other than as required by federal and state
securities laws for compliance therewith.
37
<PAGE> 39
Section 12.3 Parties in Interest; No Third Party Beneficiaries. Except
as otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective heirs, legal
representatives, successors and permitted assigns of the parties hereto. Except
as otherwise expressly provided herein, neither this Agreement nor any other
agreement contemplated hereby or by the transactions shall be deemed to confer
upon any Person not a party hereto or thereto any rights or remedies hereunder
or thereunder.
Section 12.4 Schedules and Exhibits. Company Disclosure Schedules and
Exhibits attached to this Agreement are by this reference incorporated herein
and made a part hereof.
Section 12.5 Entire Agreement. Except as is expressly provided in
writing, this Agreement and transactions contemplated hereby and thereby
constitute the entire agreement of the parties regarding the subject matter
hereof, and supersede all prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof.
Section 12.6 Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
therefrom. Furthermore, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as part of this Agreement a
provision as similar in its terms to such illegal, invalid or unenforceable
provision as may be possible and be legal, valid and enforceable.
Section 12.7 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants contained herein shall survive the
Closing in accordance with the provisions of Section 11.6, and all statements
contained in any certificate, exhibit or other instrument delivered by or on
behalf of Company, Shareholders or APPM pursuant to this Agreement shall be
deemed to have been representations and warranties by Company, each Shareholder
or APPM, as applicable.
Section 12.8 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY, CONSTRUED AND ENFORCED
IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAWS RULES OF THE STATE OF TEXAS.
Section 12.9 Captions. The captions in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms or provisions hereof.
Section 12.10 Gender and Number. When the context requires, the gender
of all words used herein shall include the masculine, feminine and neuter and
the number of all words shall include the singular and plural.
Section 12.11 Construction. The parties to this Agreement have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto and no
presumption or burden of proof shall arise favoring or disfavoring any party by
virtue of the authorship of any of the provisions of this Agreement. Any
reference to federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The parties to this Agreement intend that each
representation, warranty and covenant contained herein shall have
38
<PAGE> 40
independent significance. If any party hereto has breached any representation,
warranty or covenant contained in this Agreement in any respect, the fact that
there exists another representation, warranty or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
party has not breached shall not detract from or mitigate the fact that the
party is in breach of the first representation, warranty or covenant.
Section 12.12 Confidentiality; Publicity and Disclosures. Each party
shall keep this Agreement and its terms confidential, and shall make no press
release or public disclosure, either written or oral, regarding the transactions
contemplated by this Agreement without the prior knowledge and consent of the
other parties hereto; provided that the foregoing shall not prohibit any
disclosure (a) by press release, filing or otherwise that APPM has determined in
its good faith judgment and after advice of legal counsel to be required by
federal securities laws or the rules of the National Association of Securities
Dealers, or (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement or (c) as required by law.
Section 12.13 Notice. Whenever this Agreement requires or permits any
notice, request, or demand from one party to another, the notice, request or
demand must be in writing to be effective and shall be deemed to be delivered
and received (i) if personally delivered, when delivered to the party to whom
notice is sent, (ii) if delivered by mail (whether actually received or not), at
the close of business on the third business day next following the day when
placed in the mail, postage prepaid, certified or registered, or (iii) if
delivered by nationally recognized overnight courier, at the close of the next
business day following delivery to said overnight courier, addressed to the
appropriate party or parties, at the address of such party set forth below (or
at such other address as such party may designate by written notice to all other
parties in accordance herewith):
<TABLE>
<S> <C>
If to APPM : American Physician Partners, Inc.
3600 Chase Tower
2200 Ross Avenue
Dallas, TX 75201-2776
Attn: Mark L. Wagar, President and CEO
Paul M. Jolas, Esq., General Counsel and
Senior Vice President
with a copy to: Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attn: Kenneth K. Bezozo, Esq.
If to Company
or Shareholders: Paul M. Stanley
16407 Avila Blvd.
Tampa, Florida 33613
Thomas R. Newkirk
4943 Bay Way Drive
Tampa, Florida 33629
Joseph J. Clauer
1004 Taray de Avila
Tampa, Florida 33613
</TABLE>
39
<PAGE> 41
<TABLE>
<S> <C>
with a copy to : Akerman, Senterfitt & Eidson, P.A.
One S.E. 3rd Avenue, 28th Floor
Miami, Florida 33131
Attn: Marshall R. Burack, Esq.
</TABLE>
Section 12.14 No Waiver. No party hereto shall by any act (except by
written instrument pursuant to Section 12.1 of this Agreement), delay,
indulgence, omission or otherwise be deemed to have waived any right or remedy
hereunder or to have acquiesced in any default in or breach of any of the terms
and conditions hereof. No failure to exercise, nor any delay in exercising, on
the part of any party hereto, any right, power or privilege hereunder shall
operate as a waiver thereof. No single or partial exercise of any right, power
or privilege hereunder shall preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. Except as expressly set
forth herein, no remedy set forth in this Agreement or otherwise conferred upon
or reserved to any party shall be considered exclusive of any other remedy
available to any party, but the same shall be distinct, separate and cumulative
and may be exercised from time to time as often as occasion may arise or as may
be deemed expedient.
Section 12.15 Remedies Not Exclusive. Except as is expressly set forth
in Article XI, no remedy conferred by any of the specific provisions of this
Agreement is intended to be exclusive of any other remedy, and each and every
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. The election of any one or more remedies by any party hereto shall
not constitute a waiver of the right to pursue other available remedies.
Section 12.16 Execution. Other than original stock certificates, this
Agreement and any other documents related hereto, including exhibits and/or
certificates, may be executed by facsimile signature page.
Section 12.17 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument.
Section 12.18 Costs, Expenses and Legal Fees. Each party hereto shall
bear its own costs and expenses (including attorneys' fees), except that each
party hereto agrees to pay the costs and expenses (including reasonable
attorneys' fees and expenses) incurred by the other parties in successfully (a)
enforcing any of the terms of this Agreement or (b) proving that another party
breached any of the terms of this Agreement.
ARTICLE XIII
DEFINITIONS
As used in this Agreement, the following terms shall have the meanings
set forth below:
"Acts of God" shall mean an act occasioned exclusively by forces of
nature without the interference of any human agency.
"Affiliate" with respect to any Person shall mean a Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
40
<PAGE> 42
"APPM" shall have the meaning set forth in the preamble to this
Agreement.
"Available Cash" shall have the meaning set forth in Section 1.5.
"Claim Notice" shall have the meaning set forth in Section 11.3(a).
"Closing" shall mean the closing of the transactions contemplated by
this Agreement as set forth in Section 1.4.
"Closing Date" shall have the meaning set forth in Section 1.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean Questar Imaging, Inc., a Florida corporation.
"Company Annual Financial Statements" shall mean the unaudited balance
sheet of Company as of December 31, 1998, and the related statements of income,
stockholders' equity and statements of cash flows of Company for the year ended
December 31, 1998.
"Company Common Stock" shall have the meaning set forth in the preamble
to this Agreement.
"Company Current Balance Sheet" shall mean the unaudited balance sheet
of Company as of May 31, 1999.
"Company Current Financial Statements" shall mean the related
statements of income, stockholders' equity and statements of cash flows of
Company for the period ended May 31, 1999, and Company Current Balance Sheet.
"Company Financial Statements" shall mean, collectively, Company Annual
Financial Statements and Company Current Financial Statements.
"Company Rights" shall mean all arrangements, calls, commitments,
agreements, options, rights to subscribe to, scrips, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of Company
Common Stock, or by which Company is or may be bound to issue additional shares
of Company Common Stock or other Company Rights.
"Confidential Information" shall mean all trade secrets and other
confidential and/or proprietary information of the particular Person, including,
but not limited to, information derived from reports, processes, data, know-how,
software programs, improvements, inventions, strategies, compensation
structures, reports, investigations, research, work in progress, codes,
marketing and sales programs and plans, financial projections, cost summaries,
formulae, contract analyses, financial information, forecasts, confidential
filings with any state or federal agency, and all other confidential concepts,
methods of doing business, ideas, materials or information prepared or performed
for, by or on behalf of such Person by its employees, officers, directors,
agents, representatives, or consultants.
"Controlled Group" shall have the meaning set forth in Section 2.13(g).
"Current Policies" shall have the meaning set forth in Section 2.17.
41
<PAGE> 43
"Damages" shall have the meaning set forth in Section 11.1.
"Development Centers" shall have the meaning set forth in Section 4.2.
"Development Center Assets" shall have the meaning set forth in
Section 4.2.
"Election Period" shall have the meaning set forth in Section 11.3(a).
"Employee Benefit Plans" shall have the meaning set forth in
Section 2.13.
"Encumbrance" shall mean any charge, claim, community property
interest, equitable interest, lien, option, pledge, security interest, right of
first refusal, or restriction of any kind, including any restriction on use,
voting, transfer, receipt of income or exercise of any other attribute of
ownership.
"Environmental Laws" shall have the meaning set forth in
Section 2.14(e).
"Environmental Liabilities" shall have the meaning set forth in
Section 2.14(e).
"ERISA" shall have the meaning set forth in Section 2.13.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Governmental Programs" shall have the meaning set forth in
Section 2.19.
"Hazardous Substances" shall have the meaning set forth in
Section 2.14(e).
"Indemnified Party" shall have the meaning set forth in
Section 11.3(a).
"Indemnifying Party" shall have the meaning set forth in
Section 11.3(a).
"Indemnity Notice" shall have the meaning set forth in Section 11.3(d).
"Insurance Policies" shall have the meaning set forth in Section 2.17.
"IRS" shall mean the Internal Revenue Service.
"Material Agreement" shall have the meaning set forth in Section 2.18.
"Medical Waste" shall mean (i) pathological waste, (ii) blood, (iii)
sharps, (iv) wastes from surgery, (v) contaminated disposable equipment and
supplies, (vi) cultures and stocks of infectious agents and associated
biological agents, (vii) contaminated animals, (viii) isolation wastes, (ix)
contaminated equipment, (x) laboratory waste, (xi) any substance, pollutant,
material, or contaminant listed or regulated under any Medical Waste Law, and
(xii) other biological waste and discarded materials contaminated with or
exposed to blood, excretion, or secretions from human beings or animals.
"Medical Waste Laws" shall mean the following, including regulations
promulgated and orders issued thereunder, as in effect on the date hereof and
the Closing Date: (i) the MWTA, (ii) the U.S. Public Vessel Medical Waste
Anti-Dumping Act of 1988, 33 USCA Section 2501 et seq., (iii) the Marine
Protection, Research, and Sanctuaries Act of 1972, 33 USCA Section 1401 et seq.,
(iv) The Occupational Safety and Health Act, 29 USCA Section 651 et seq., (v)
the United States Department of Health and Human Services, National
42
<PAGE> 44
Institute for Occupational Safety and Health, Infectious Waste Disposal
Guidelines, Publication No. 88-119, and (vi) any other federal, state, regional,
county, municipal, or other local laws, regulations, and ordinances insofar as
they are applicable to any of Company's assets or operations and purport to
regulate Medical Waste or impose requirements related to Medical Waste.
"MWTA" shall mean the Medical Waste Tracking Act of 1988, 42 U.S.C.
Section 6992, et seq.
"Ordinary course of business" shall mean the usual and customary way in
which the particular entity has conducted its business in the past.
"Other Contracts" shall have the meaning set forth in Section 2.18.
"Payors" shall mean any and all private or governmental Persons,
obligated by contract or by law to render payment to Company in consideration of
the performance of professional medical services including, but not limited to,
Medicare and Medicaid Programs, insurance companies, health maintenance
organizations, preferred provider organizations, independent practice
associations, hospitals, hospital systems, integrated delivery systems and
CHAMPUS.
"Person" shall mean any natural person, corporation, partnership, joint
venture, limited liability company, association, group, organization or other
entity.
"Private Programs" shall have the meaning set forth in Section 2.19.
"Proprietary Rights" shall have the meaning set forth in Section 2.21.
"Purchase Price" shall have the meaning set forth in Section 1.2
hereof.
"Regulated Activity" shall have the meaning set forth in
Section 2.14(e).
"Schedules" shall mean the schedules attached hereto as of the date of
this Agreement or otherwise delivered by Company pursuant to the terms hereof,
as such may be amended or supplemented from time to time pursuant to the
provisions hereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shareholder" shall have the meaning set forth in the recitals to this
Agreement.
"Shareholders" shall have the meaning set forth in the recitals to this
Agreement.
"Shareholders' Release" shall have the meaning set forth in
Section 9.1(o).
"Subsidiary" and "Subsidiaries" means any corporation, partnership,
limited liability company, joint venture or other entity in which Company has an
ownership interest, regardless of whether Company's ownership interest in such
entity constitutes a majority interest.
"Subsidiaries Rights" shall mean all arrangements, calls, commitments,
agreements, options, rights to subscribe to, scrips, understandings, warrants,
or other binding obligations of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of
Subsidiaries' Capital Stock,
43
<PAGE> 45
or by which Company and/or any Subsidiary is or may be bound to issue additional
shares of Subsidiaries Capital Stock or other Subsidiaries Rights.
"Subsidiary's Capital Stock" or "Subsidiaries' Capital Stock" shall
have the meaning set forth in Section 2.2(b).
"Tax Returns" shall include all federal, state, local or foreign
income, excise, corporate income, franchise, property, sales, use, payroll,
withholding, environmental, duties, value added and all other returns whatsoever
reporting or showing taxes, assessments and other governmental charges,
including all penalties, interest and additional amounts due thereon or with
respect thereto (including all information and other returns).
"Third Party Claim" shall have the meaning set forth in
Section 11.3(a).
"Trade Payables" shall mean all expenses incurred by Company and
Subsidiaries and invoiced by a vendor for payment, including billing and
collection fees due to third parties. Trade Payables exclude real property rent
payments, equipment lease payments, payroll and employee related expenses.
* * * * *
44
<PAGE> 46
IN WITNESS WHEREOF, each of the parties hereto has caused its duly
authorized representative to sign, or has signed, this Stock Purchase Agreement
as of the date first written above.
APPM:
AMERICAN PHYSICIAN PARTNERS, INC.
By:
-----------------------------------------------
Mark L. Wagar, President and Chief Executive
Officer
COMPANY:
QUESTAR IMAGING, INC.
a Florida corporation
By:
-----------------------------------------------
Paul M. Stanley, President and Chief Executive
Officer
SHAREHOLDERS:
--------------------------------------------------------
Paul M. Stanley
--------------------------------------------------------
Thomas R. Newkirk
--------------------------------------------------------
Joseph J. Clauer
45
<PAGE> 1
EXHIBIT 4.1
================================================================================
SECURITIES PURCHASE AGREEMENT
Dated as of August 1, 1999
By and Among
AMERICAN PHYSICIAN PARTNERS, INC.
and
BT CAPITAL PARTNERS SBIC, L.P.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IDEFINITIONS....................................................................................................1
Section 1.0 Definitions.........................................................................................1
ARTICLE II REPRESENTATIONS OF THE COMPANY..............................................................................10
Section 2.0 Representations of the Company.....................................................................10
Section 2.1 Existence and Good Standing........................................................................10
Section 2.2 Capital Stock......................................................................................11
Section 2.3 Authorization and Validity of the Documents........................................................12
Section 2.4 Subsidiaries and Investments.......................................................................12
Section 2.5 SEC and Other Documents; Financial Statements; Undisclosed Liabilities.............................12
Section 2.6 Title to Properties; Encumbrances; Leases..........................................................15
Section 2.7 Intellectual Property..............................................................................15
Section 2.8 Material Contracts.................................................................................15
Section 2.9 Consents and Approvals; No Violations..............................................................16
Section 2.10 Litigation........................................................................................16
Section 2.11 Taxes.............................................................................................17
Section 2.12 Liabilities.......................................................................................18
Section 2.13 Compliance with Laws; Permits; Billing Practices..................................................18
Section 2.14 Employment Relations..............................................................................21
Section 2.15 Employee Benefit Plans and Employees..............................................................21
Section 2.16 Environmental Laws and Regulations................................................................25
Section 2.17 Interests in Clients, Suppliers, etc..............................................................26
Section 2.18 Physician/Hospital Relationships..................................................................26
Section 2.19 No Misstatements or Omissions; Projections........................................................26
Section 2.20 Broker's or Finder's Fees.........................................................................27
Section 2.21 Investment Company Act............................................................................27
Section 2.22 Year 2000 Reprogramming...........................................................................27
Section 2.23 Practice Management Agreements; Affiliations......................................................27
Section 2.24 Securities Law Compliance.........................................................................27
Section 2.25 Transactions with Affiliates......................................................................27
Section 2.26 Capital Stock Reserved............................................................................28
Section 2.27 No Conflict of Rights.............................................................................28
Section 2.28 SBIC Information..................................................................................28
Section 2.29 SBIC Eligibility..................................................................................28
Section 2.30 Company Awareness.................................................................................28
Section 2.31 Use of Proceeds...................................................................................28
Section 2.32 Insurance.........................................................................................28
Section 2.33 Other Representations and Warranties..............................................................28
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE III REPRESENTATIONS OF THE PURCHASER...........................................................................29
Section 3.0 Representations of the Purchaser...................................................................29
Section 3.1 Existence and Good Standing; Power and Authority...................................................29
Section 3.2 Restrictive Documents..............................................................................29
Section 3.3 Purchase for Investment............................................................................29
Section 3.4 Broker's or Finder's Fees..........................................................................30
ARTICLE IV ISSUANCE OF NOTES; PAYMENT OF SUBSCRIPTION PRICE; CLOSING...................................................30
Section 4.1 Issuance of Convertible Notes......................................................................30
Section 4.2 Purchase Price.....................................................................................30
Section 4.3 Time and Place of Closing..........................................................................30
Section 4.4 Closing Deliveries.................................................................................30
ARTICLE V CONDITIONS TO THE PURCHASER'S OBLIGATIONS....................................................................31
Section 5.0 Conditions to the Purchaser's Obligations..........................................................31
Section 5.1 Opinions of Counsel................................................................................31
Section 5.2 Good Standing and Other Certificates...............................................................31
Section 5.3 No Material Adverse Change.........................................................................31
Section 5.4 Truth of Representations and Warranties............................................................31
Section 5.5 No Litigation Threatened...........................................................................32
Section 5.6 Third Party Consents; Governmental Approvals.......................................................32
Section 5.7 Proceedings........................................................................................32
Section 5.8 SBA Forms..........................................................................................32
Section 5.9 Due Diligence......................................................................................32
Section 5.10 Credit Agreement..................................................................................32
Section 5.11 Acquisition Agreement.............................................................................32
Section 5.12 Performance of Obligations........................................................................32
ARTICLE VI CONDITIONS TO THE COMPANY'S OBLIGATIONS.....................................................................33
Section 6.1 Conditions to the Company's Obligations...........................................................33
Section 6.2 Truth of Representations and Warranties...........................................................33
Section 6.3 Third Party Consents; Governmental Approvals......................................................33
Section 6.4 Performance of Agreement..........................................................................33
Section 6.5 No Litigation Threatened..........................................................................33
ARTICLE VII COVENANTS OF THE COMPANY...................................................................................33
Section 7.1 Reservation of Common Stock........................................................................33
Section 7.2 Accountants........................................................................................33
Section 7.3 Financial Statements and Other Information.........................................................33
Section 7.4 Inspection.........................................................................................36
Section 7.5 Regulatory Sale or Disposition.....................................................................36
Section 7.6 Transaction with Affiliates........................................................................37
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.7 Business...........................................................................................37
Section 7.8 Registration Rights................................................................................37
Section 7.9 Limitation on Dividend/Indebtedness Restrictions...................................................37
Section 7.10 SBIC Information..................................................................................37
Section 7.11 Use of Proceeds...................................................................................38
Section 7.12 Change of Activity................................................................................38
Section 7.13 Non-Discrimination................................................................................38
Section 7.14 Asset Sales; Investments..........................................................................38
Section 7.15 Consolidation, Merger, Sale of Assets, etc........................................................39
Section 7.16 Indebtedness......................................................................................39
Section 7.17 Leverage Ratio....................................................................................39
Section 7.18 Dividends.........................................................................................39
Section 7.19 Amendment of Charter..............................................................................40
Section 7.20 Hart-Scott-Rodino Compliance......................................................................40
Section 7.21 Board of Directors................................................................................41
Section 7.22 Grant of Preemptive Rights........................................................................41
Section 7.23 Reservation of Common Stock; Valid Issuance.......................................................42
Section 7.24 Insurance.........................................................................................43
Section 7.25 Questar Acquisition...............................................................................43
Section 7.26 Participation in Future Financing.................................................................43
Section 7.27 Limitation On Other Subordinated Debt.............................................................43
Section 7.28 Company's Performance of Covenants................................................................43
Section 7.29 Employee Benefits and Tax Information.............................................................44
ARTICLE VIII REGISTRATION RIGHTS.......................................................................................44
Section 8.1 Shelf Registration.................................................................................44
Section 8.2 Incidental Registrations...........................................................................47
Section 8.3 Registration Procedures............................................................................48
Section 8.4 Requested Underwritten Offerings...................................................................51
Section 8.5 Preparation; Reasonable Investigation..............................................................51
Section 8.6 Indemnification....................................................................................52
Section 8.7 Rule 144...........................................................................................54
ARTICLE IX SURVIVAL....................................................................................................54
Section 9.1 Survival...........................................................................................54
ARTICLE X INDEMNIFICATION..............................................................................................55
Section 10.1 Indemnification...................................................................................55
Section 10.2 Contribution......................................................................................56
Section 10.3 Remedies..........................................................................................56
ARTICLE XI MISCELLANEOUS...............................................................................................56
Section 11.1 Knowledge of the Transaction Parties..............................................................56
Section 11.2 Expenses..........................................................................................56
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 11.3 Governing Law.....................................................................................56
Section 11.4 Captions..........................................................................................57
Section 11.5 Publicity.........................................................................................57
Section 11.6 Notices...........................................................................................57
Section 11.7 Parties in Interest...............................................................................58
Section 11.8 Counterparts......................................................................................58
Section 11.9 Entire Agreement..................................................................................58
Section 11.10 Amendments.......................................................................................58
Section 11.11 Severability.....................................................................................58
Section 11.12 Third Party Beneficiaries........................................................................58
Section 11.13 Jurisdiction.....................................................................................58
</TABLE>
(iv)
<PAGE> 6
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of August 1, 1999 by and among
AMERICAN PHYSICIAN PARTNERS, INC., a Delaware corporation (the "Company") and BT
CAPITAL PARTNERS SBIC, L.P., a Delaware limited partnership (the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase, and the Company desires to
issue, 8% convertible junior subordinated promissory note or notes in the form
attached as Exhibit A hereto for an aggregate principal amount of $20,000,000
(the "Convertible Notes") which Convertible Notes may be converted into shares
of common stock, par value $0.0001 per share, of the Company pursuant to the
terms set forth in such Convertible Notes;
NOW, THEREFORE, IT IS AGREED:
ARTICLE I
DEFINITIONS
Section 1.0 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Acquisition" shall mean the acquisition of all or substantially all of
the capital stock of Questar and the related acquisition of assets of certain
"Development Centers" (as defined in the Acquisition Agreement) by the Company.
"Acquisition Agreement" shall mean the Stock Purchase Agreement dated
as of August 1, 1999, between the Company, Paul M. Stanley, Thomas R. Newkirk,
and Joseph J. Claver, and Questar, and any agreements related thereto and all
exhibits, schedules and any other documents relating to any of the foregoing.
"Advisor" shall have the meaning set forth in Section 7.21(c) of this
Agreement.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling (including but not limited to all directors
and officers of such Person), controlled by, or under direct or indirect common
control with, such Person; provided, however, that, an Affiliate shall include
any entity that directly or indirectly (including through limited partner or
general partner interests) owns more than 5% of any class of the equity of any
other entity.
<PAGE> 7
"Agreement" shall mean this Securities Purchase Agreement, as the same
may be amended, supplemented or modified in accordance with the terms hereof,
from time to time.
"Anti-Kickback Statute" shall have the meaning set forth in Section
2.13.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in the City of New York
are authorized or obligated by law or executive order to close.
"Closing" shall have the meaning set forth in Section 4.3 of this
Agreement.
"Closing Date" shall mean the date hereof, on which the Purchaser shall
purchase, and the Company shall issue, the Convertible Notes.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations promulgated and rulings issued thereunder.
"Commission" shall mean, at any time, the Securities and Exchange
Commission or any other Federal agency then administering the Securities Act and
other Federal securities laws.
"Common Stock" shall have the meaning set forth in Section 2.2 of this
Agreement.
"Company" shall have the meaning set forth in the first paragraph of
this Agreement.
"Company Notice" shall have the meaning set forth in Section 8.2(a).
"Company Property" shall mean any real property and improvements owned,
leased, used, operated or occupied by any Transaction Party.
"Company Registration Statement" shall have the meaning set forth in
Section 2.5 of this Agreement.
"Company Reports" have the meaning set forth in Section 2.5 of this
Agreement.
"Consolidated EBITDA" shall mean, with respect to any fiscal period
taken as one accounting period determined in conformity with GAAP, an amount
equal to (a) consolidated net income of the Company and its Subsidiaries on a
consolidated basis for such period, minus (b) the sum of (i) income tax credits,
(ii) interest income, (iii) gain from extraordinary items for such period, and
(iv) any aggregate net gain during such period arising from the sale, exchange
or other disposition of capital assets by such Person (including any fixed
assets, whether tangible or intangible, all inventory sold in conjunction with
the disposition of fixed assets and all securities), in each case to the extent
included in the calculation of consolidated net income of the Company and its
Subsidiaries on a consolidated basis for such period in accordance with GAAP,
but without duplication, minus (c) any cash payments made in
-2-
<PAGE> 8
respect of any item of extraordinary loss accrued during a prior period and
added back to Consolidated EBITDA in such prior period pursuant to clause (d)(v)
below, plus (d) the sum of (i) any provision for income taxes, (ii) Consolidated
Interest Expense, (iii) the amount of depreciation and amortization for such
period, (iv) the amount of any deduction to consolidated net income as the
result of any stock option expense, (v) the amount of any item of extraordinary
loss not paid in cash in such period, and (vi) the absolute value of any
aggregate net loss during such period arising from the sale, exchange or other
disposition of capital assets by such Person (including any fixed assets,
whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), in each case to the extent
included in the calculation of consolidated net income of the Company: (1) the
undistributed earnings of any Subsidiary of the Company or any of its
Subsidiaries to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the
terms of any contractual obligation or requirement of law applicable to such
Subsidiary; or (2) any restoration to income of any extraordinary contingency
reserve, except to the extent that provision for such reserve was made out of
income accrued during such period.
"Consolidated Indebtedness" shall mean, as of any date of
determination, the aggregate stated balance sheet amount of all Indebtedness of
the Company and its Subsidiaries on a consolidated basis as determined in
accordance with GAAP exclusive of Indebtedness of the type described in clause
(vii) of the definition of Indebtedness except to the extent of amounts which
would be owing upon termination of such Indebtedness.
"Consolidated Interest Expense" shall mean, for any fiscal period,
interest expense (whether cash or non-cash) of the Company and its Subsidiaries
on a consolidated basis determined in accordance with GAAP; provided, however,
interest on the Convertible Notes which the Company has elected after two years
from the Closing Date to pay in PIK Securities shall not be included in
Consolidated Interest Expense.
"Convertible Notes" shall have the meaning set forth in the recitals of
this Agreement.
"Copyrights" shall have the meaning set forth in Section 2.7 of this
Agreement.
"Credit Agreement" shall mean the Credit Agreement dated as of November
26, 1997, among American Physician Partners, Inc., the lenders party thereto
from time to time and General Electric Capital Corporation, as Agent, as
amended, modified, supplemented, refinanced or replaced (whether by one or more
credit facilities) from time to time.
"Damages" shall have the meaning set forth in Section 10.1 of this
Agreement.
"Documents" shall mean this Agreement and the Convertible Notes.
"Employee Benefit Plan" shall have the meaning set forth in Section
2.15(a) of this Agreement.
-3-
<PAGE> 9
"Encumbrances" shall have the meaning set forth in Section 2.6 of this
Agreement.
"Environmental Claims" shall mean all administrative, regulatory or
judicial actions, suits, demands, demand letters, claims, liens, notices of
non-compliance or violation, investigations or proceedings relating in any way
to any Environmental Law or any permit issued under any such Law (hereinafter
"Claims"), including (a) Claims by governmental or regulatory authorities for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and (b) Claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, code, policy or rule of common law in effect
and in each case as amended as of the Closing Date, and any judicial or
administrative interpretation thereof as of the Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 43
U.S.C. Section 6901 et seq.; the Resource Conservation and Recovery Act, as
amended, 43 U.S.C. Section 9601 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. Section 1351 et seq.; the Toxic Substances Control
Act, 15 U.S.C. Section 3601 et seq.; the Clean Air Act, 43 U.S.C. Section 7401
et seq.; the Safe Drinking Water Act, 43 U.S.C. Section 300f et seq.; the Oil
Pollution Act of 1990, 33 U.S.C. Section 3701 et seq.; and their state and local
counterparts and equivalents.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and the regulations promulgated and rulings issued thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Full Conversion Shares" means, as of any time of determination, that
number of shares of Common Stock equal to the sum of (i) the number of shares of
Common Stock (as such number may be adjusted for stock splits, stock dividends,
stock combinations or similar events) acquired by the Purchaser through
conversion(s) of the Convertible Notes (other than shares of Common Stock
acquired upon conversion of accrued interest), prior to such time; plus (ii) the
number of additional shares of Common Stock which the Purchaser would receive,
if, at such time, the Purchaser were to fully convert into shares of Common
Stock any unconverted portion (excluding accrued Interest eligible for
conversion) of the Convertible Notes.
"Fully-Diluted Basis" shall mean the total number of shares of Common
Stock outstanding at any time, after giving effect to (a) all Common Stock
outstanding at the time of such determination and (b) all Common Stock issuable
upon the exercise of any outstanding rights, options and/or warrants to acquire
Common Stock and outstanding securities (including, without limitation, the
Convertible Notes and (without duplication) accrued interest which could be
entitled to be converted into shares of Common Stock) that are, or may be,
pursuant to their
-4-
<PAGE> 10
terms convertible into or exchangeable for Common Stock or that may be required
to be issued pursuant to any other agreement, including, without limitation, any
agreements to issue stock to physicians and radiologists.
"GAAP" shall have the meaning set forth in Section 2.5(b) of this
Agreement.
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States of
America or foreign.
"Hazardous Materials" shall mean (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is friable, urea
formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls, and radon gas; and (b)
any chemicals, materials or substances defined as or included in the definition
of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, pursuant to any applicable
Environmental Law.
"Incidental Registration" shall have the meaning set forth in Section
8.2(a) of this Agreement.
"Indebtedness" of any Person shall mean, without duplication, (i) all
indebtedness for borrowed money or for the deferred purchase price of property
or services (other than trade payables or accrued expenses arising in the
ordinary course of business), (ii) the maximum amount available to be drawn
under letters of credit, (iii) all indebtedness of the type otherwise described
in this definition secured by any lien on any property owned by such Person or
any of its Subsidiaries, (iv) capitalized lease obligations, (v) all guarantees
of any type of indebtedness otherwise described in this definition, (vi) all
obligations of such Person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay or similar
obligations and (vii) interest rate protection hedging agreements, currency
hedging agreements or commodity hedging agreements.
"Intellectual Property" shall have the meaning set forth in Section 2.7
of this Agreement.
"Interest Coverage Ratio" shall mean at any time the ratio of (i)
Consolidated EBITDA of the Company for the four consecutive fiscal quarters of
the Company ending immediately preceding the date of determination to (ii)
Consolidated Interest Expense of the Company for such period.
"Investment" shall mean the $20,000,000 investment by the Purchaser in
the Convertible Notes issued by the Company on the Closing Date.
"IRS" shall mean the United States Internal Revenue Service.
-5-
<PAGE> 11
"Joint Venture" shall mean a Person: (a) the stock or similar equity
interest of which is held by the Company or its Subsidiaries and a hospital or
other health care organization not owned by the Company or one of its
Subsidiaries, (b) over which the Company or one of its Subsidiaries has
management control, either as general partner, managing partner, by contract or
as holder of the controlling interest, and (c) the sole activity of which is to
own, lease or operate a radiological diagnostic, treatment or imaging center,
device or department and/or facilities providing services ancillary to such
center, device or department.
"Leaseholds" of any Person shall mean all the right, title and interest
of such Person as lessee or licensee in, to and under leases or licenses of
land, improvements and/or fixtures.
"Leases" shall have the meaning set forth in Section 2.6 of this
Agreement.
"Leverage Ratio" shall mean, at any time, the ratio of Consolidated
Indebtedness at such time to the Consolidated EBITDA for the period of four
consecutive fiscal quarters then last ended, taken as one accounting period.
"Margin Stock" shall have the meaning set forth in Regulation U of the
Board of Governors of the Federal Reserve System.
"Marks" shall have the meaning set forth in Section 2.7 of this
Agreement.
"Material Adverse Effect" shall have the meaning set forth in Section
2.1 of this Agreement.
"Medical Practices" shall mean any Practices, physicians or
radiologists with whom the Company or any of its Subsidiaries has executed a
management services agreement, technical services agreement, asset purchase
agreement or other agreement related thereto.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automatic Quotation System.
"New Securities" shall mean (i) any shares of Common Stock; (ii) any
other equity or debt security (other than senior bank financing) convertible
into shares of Common Stock; (iii) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security, provided that "New Securities" shall not include (I) securities
sold pursuant to a public offering pursuant to an effective registration
statement filed under the Securities Act, (II) securities issued by the Company
in the ordinary course of business to physicians and radiologists in connection
with entering into management service agreements with physician or radiology
practices and ancillary businesses, at no less than the fair market value at
such time, (III) securities issued to sellers of stock (or similar equity
interests) or assets of a business as consideration (partial or otherwise) for
the business acquired by the Company or of any of its Subsidiaries, (IV) options
(and securities issued pursuant thereto) described in the first parenthetical of
Section 3(h) of the Convertible Notes or subject to the Company's 1996 Employee
Stock Option Plan, as amended, (V) securities of the Company issued, distributed
or
-6-
<PAGE> 12
sold to the holders of Common Stock of the Company pro rata based on the number
of shares of Common Stock held by each such holder immediately prior to such
issuance or distribution of securities and (VI) Common Stock issued pursuant to
conversion of the Convertible Notes.
"Patents" shall have the meaning set forth in Section 2.7 of this
Agreement.
"Permitted Acquisition" shall mean any acquisition by the Company or
any of its Subsidiaries of the stock or assets of any Person permitted by this
Agreement.
"Permitted Business" shall mean (I) providing the technical component
of radiology services and any business reasonably related thereto and (II)
managing physician and radiology Practices and any business reasonably related
thereto.
"Permitted Encumbrances" shall have the meaning set forth in Section
2.6 of this Agreement.
"Person" shall mean and include natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or not
legal entities, and governments and agencies and political subdivisions thereof.
"Practice" shall mean any medical or imaging practice in the radiology
sector to which the Company or any of its Subsidiaries agrees to provide or
arrange for comprehensive management, administrative and other non-medical
support services and with respect to which the Company or one of its
Subsidiaries has acquired all or substantially all of the non-medical assets.
"Pre-Closing Periods" shall have the meaning set forth in Section 2.11
of this Agreement.
"Preemptive Notice" shall have the meaning set forth in Section 7.22 of
this Agreement.
"Pro Forma Basis" shall mean the calculation of the consolidated
results of the Company and its Subsidiaries otherwise determined in accordance
with this Agreement as if the Permitted Acquisition, incurrence of Indebtedness
(other than revolving loans used for working capital purposes under the Credit
Agreement) or repayment of Indebtedness (other than revolving loans under the
Credit Agreement used for working capital purposes unless repayment of such
loans is made with the proceeds of Indebtedness other than Indebtedness under
the Credit Agreement) and all other Permitted Acquisitions, incurrences of
Indebtedness (other than revolving loans used for working capital purposes under
the Credit Agreement) and repayments of Indebtedness (other than revolving loans
under the Credit Agreement used for working capital purposes unless repayment of
such loans is made with the proceeds of Indebtedness other than Indebtedness
under the Credit Agreement), in each case consummated during the respective Test
Period and prior to the date of determination pursuant to Section 7.16 or 7.17
or other applicable
-7-
<PAGE> 13
provision of this Agreement, had been effected on the first day of the
respective Test Period; provided that all calculations shall take into account
the following assumptions:
(i) with respect to Consolidated Interest Expense and
Consolidated Indebtedness, any Indebtedness incurred during the
relevant Test Period and prior to the date of determination (except as
provided in the introductory paragraph of this definition, with respect
to Indebtedness in the nature of revolving loans used for working
capital purposes under the Credit Agreement) shall be deemed to have
been outstanding from the first day of the respective Test Period (and
the interest expense associated with any such Indebtedness incurred
shall be determined at the actual rates applicable thereto or for the
period when such Indebtedness was not outstanding, at the average
interest rate during the period when such Indebtedness was outstanding
and shall be included in determining Consolidated Interest Expense on
such Pro Forma Basis) and all Indebtedness incurred in connection with
a Permitted Acquisition of the Person or business division or product
line being acquired that was outstanding during the Test Period and
prior to the date of such Permitted Acquisition but not outstanding on
the date of the Permitted Acquisition shall be deemed to have been
repaid in full on the first day of the Test Period; and
(ii) with respect to all calculations of Consolidated EBITDA
(and the other components of the definition of Consolidated EBITDA
included therein), such calculations (a) shall include the Consolidated
EBITDA of the Company and its Subsidiaries (and the other components of
the definition of Consolidated EBITDA included therein) during the
relevant Test Period and shall include the Consolidated EBITDA (and
other components of such definition) of the Person or business,
division or product line being acquired pursuant to the Permitted
Acquisition but (b) shall not include increases to Consolidated EBITDA
which may arise from synergies or projected eliminations of any other
costs and expenses of the entity being acquired but shall reflect
actual costs and expenses that will cease to exist as a result of such
Permitted Acquisition.
"Pro Rata Amount" shall mean the quotient obtained by dividing the
number of shares of Common Stock owned by the Purchaser on a Fully-Diluted Basis
by the total number of shares of Common Stock outstanding at such time on a
Fully-Diluted Basis.
"Purchase Price" shall have the meaning provided in Section 4.2.
"Purchaser" shall have the meaning set forth in the first paragraph of
this Agreement.
"Questar" shall mean Questar Imaging, Inc., a Florida corporation.
"Real Property" of any Person shall mean all the right, title and
interest of such Person in and to land, improvements and fixtures, including
Leaseholds.
"Registrable Securities" shall mean (i) any and all Common Stock
acquired by, or issuable to, the Purchaser or any of its Affiliates pursuant to
the conversion of the Convertible
-8-
<PAGE> 14
Notes on or after the date hereof and (ii) any securities of the Company owned
by the Purchaser or any of its Affiliates issued or issuable with respect to
Common Stock by way of conversion, exchange, stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger, consolidation
or other reorganization or otherwise. As to any particular Registrable
Securities, once issued such securities shall cease to be Registrable Securities
when (A) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of in accordance with such registration statement, or (B)
such securities shall have been sold in accordance with Rule 144 (or any
successor provision) under the Securities Act.
"Registration" shall mean each Shelf Registration and each Incidental
Registration.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with Article VII, including, without
limitation, all registration and filing fees, fees and expenses of compliance
with securities or blue sky laws (including reasonable fees and disbursements of
counsel in connection with blue sky qualifications of the Registrable
Securities), expenses of printing certificates for the Registrable Securities in
a form eligible for deposit with Depositary Trust Company, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), and fees and disbursements of counsel for the Company and
its independent certified public accountants (including the expenses of any
management review, cold comfort letters or any special audits required by or
incident to such performance and compliance), securities acts liability
insurance (if the Company elects to obtain such insurance), the reasonable fees
and expenses of any special experts retained by the Company in connection with
such registration, fees and expenses of other Persons retained by the Company
and reasonable fees and expenses of one counsel (and local counsel) for holders
of Registrable Securities, selected by the holders of a majority of the
Registrable Securities to be included in such Registration; but not including
any underwriting fees, discounts or commissions attributable to the sale of
securities or fees.
"Returns" shall have the meaning set forth in Section 2.11 of this
Agreement.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act.
"SBA Forms" shall have the meaning set forth in Section 5.8 of this
Agreement.
"SBIA" shall have the meaning set forth in Section 7.10 of this
Agreement.
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Securities Laws" shall have the meaning set forth in Section 2.5 of
this Agreement.
-9-
<PAGE> 15
"Shelf Registration" shall have the meaning set forth in Section 8.1(a)
of this Agreement.
"Stark Amendments" shall have the meaning set forth in Section 2.13.
"Subsidiary" shall mean, with respect to any Person, (a) any
corporation of which an aggregate of more than fifty percent (50%) of the
outstanding stock having ordinary voting power to elect a majority of the board
of directors of such corporation (irrespective of whether, at the time, stock of
any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or
indirectly, owned legally or beneficially by such Person and/or one or more
Subsidiaries of such Person, or with respect to which any such Person has the
right to vote or designate the vote of fifty percent (50%) or more of such stock
whether by proxy, agreement, operation of law or otherwise, (b) any partnership
or limited liability company in which such Person and/or one or more
Subsidiaries of such person shall have an interest (whether in the form of
voting or participation in profits or capital contribution) of more than fifty
percent (50%) and (c) immediately after giving effect to this Agreement,
Questar.
"Taxes" shall mean all taxes, assessments, charges, duties, fees,
levies or other governmental charges, including, without limitation, all
Federal, state, local, foreign and other income, franchise, profits, capital
gains, capital stock, transfer, sales, use, occupation, property, excise,
severance, windfall profits, stamp, license, payroll, withholding and other
taxes, assessments, charges, duties, fees, levies or other governmental charges
of any kind whatsoever (whether payable directly or by withholding and whether
or not requiring the filing of a Return), all estimated taxes, deficiency
assessments, additions to tax, penalties and interest and shall include any
liability for such amounts as a result either of being a member of a combined,
consolidated, unitary or affiliated group or of a contractual obligation to
indemnify any person or other entity.
"Test Period" shall mean the period of four consecutive fiscal quarters
then last ended (taken as one accounting period).
"Transaction Party" shall have the meaning set forth in Section 2.1 of
this Agreement.
ARTICLE II
REPRESENTATIONS OF THE COMPANY
Section 2.0 Representations of the Company. In order to induce the
Purchaser to enter into this Agreement and to purchase the Convertible Notes,
the Company represents and warrants to and agrees with the Purchaser that on the
Closing Date:
Section 2.1 Existence and Good Standing. The Company and each of its
Subsidiaries (each a "Transaction Party," and collectively, the "Transaction
Parties") is a corporation or
-10-
<PAGE> 16
partnership, duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. Each Transaction Party has the
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and as proposed to be conducted.
Each Transaction Party is duly qualified or licensed to do business and is in
good standing and is authorized to do business, in each jurisdiction in which
the character or location of the properties owned, leased or operated by such
entity or the nature of the business conducted by such entity makes such
qualification or license necessary, except where any such failure to be duly
qualified or licensed or in good standing could not reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
properties, assets, business, liabilities, accounting treatment, results of
operations or prospects of the Transaction Parties, taken as a whole, or on the
ability of the Company to perform its obligations under any of the Documents (a
"Material Adverse Effect").
Section 2.2 Capital Stock. The Company has an authorized capitalization
consisting of 50,000,000 shares of Common Stock, par value $0.0001 per share
("Common Stock") of which 19,312,213 shares of Common Stock are issued and
outstanding and 10,000,000 shares of Preferred Stock, par value $0.0001 per
share, of which zero shares are issued or outstanding. All outstanding shares of
capital stock of the Company have been, and will, on the Closing Date, be, duly
authorized and validly issued and fully paid and non-assessable. Except as set
forth on Schedule 2.2(a), there are no outstanding subscriptions, options,
warrants, rights, calls, commitments, conversion rights, rights of exchange,
plans or other agreements (including, without limitation, agreements with
physicians and/or radiologists engaged by Practices) or commitments, contingent
or otherwise, of any character providing for the purchase, redemption,
acquisition, retirement, issuance or sale by any Transaction Party of any shares
of capital stock of any Transaction Party or other securities exchangeable or
convertible into capital stock of any Transaction Party and there are no stock
appreciation rights or phantom stock plans outstanding. Schedule 2.2(a) sets
forth the number of shares of Common Stock which the Company is obligated to
issue in connection with each specific item set forth on Schedule 2.2(a) and
described in the immediately preceding sentence. Except for security interests
granted pursuant to the Credit Agreement, there are no rights, agreements,
restrictions or encumbrances (such as preemptive rights, rights of first
refusal, rights of first offer, proxies, voting agreements, voting trusts,
registration rights agreements, shareholders agreements, etc., whether or not
the any Transaction Party is a party thereto) nor, except as set forth on
Schedule 2.2(b) (and Schedule 2.2(b) lists the dates on which such restrictions
lapse and the number of shares of capital stock with respect to which such
restrictions lapse on such date), are there any restrictions on the
transferability or sale of capital stock of any Transaction Party pursuant to
any provision of law, contract or otherwise with respect to the purchase, sale
or voting of any shares of capital stock of any Transaction Party (whether
outstanding or issuable upon conversion, exchange or exercise of any other
security of any Transaction Party). The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or which are convertible into or exercisable for securities the holders of
which have the right to vote). The shares of Common Stock to be issued upon
conversion of the Convertible Notes are duly and validly authorized and when
issued upon conversion of the Convertible Notes, will be duly and validly
issued, fully paid and nonassessable, and free and clear of all Liens and
preemptive and other similar rights.
-11-
<PAGE> 17
Section 2.3 Authorization and Validity of the Documents. The Company
has the requisite corporate power and authority to execute and deliver the
Documents and to perform its obligations thereunder. The execution, delivery and
performance of the Documents by the Company and the performance of its
obligations thereunder have been duly authorized and approved by all necessary
corporate action (including, without limitation, all action of the Board of
Directors and shareholders of the Company) and no other corporate action on the
part of such persons is necessary to authorize the execution, delivery and
performance of the Documents by the Company. Each of the Documents has been duly
executed and delivered by the Company and, assuming due execution thereof by the
other parties thereto, is a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to the
extent that its enforceability may be subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles
(regardless of whether such enforceability is considered in a proceeding brought
in equity or at law).
Section 2.4 Subsidiaries and Investments. (a) Set forth in Schedule
2.4(a) attached hereto is a list of (i) each Person in which the Company owns,
directly or indirectly, any equity or debt security excluding employee loans and
cash equivalent investments and the extent (expressed in percentage) of such
ownership and (ii) each Practice with whom the Company or any of the its
Subsidiaries has entered into a management services agreement, acquisition
agreement or affiliation agreement.
(b) All of the outstanding shares of capital stock or partnership
interests, as the case may be, of each Subsidiary of the Company have been duly
authorized and validly issued, are fully paid and nonassessable, and those
shares of capital stock of each Subsidiary which are owned by the Company or
another Subsidiary of the Company are owned, of record and beneficially,
directly or indirectly, by the Company or a Subsidiary of the Company, free and
clear of all liens, encumbrances, restrictions and claims of every kind except
for Permitted Encumbrances and as set forth on Schedule 2.4(b). No capital stock
of any Subsidiary constitutes Margin Stock.
Section 2.5 SEC and Other Documents; Financial Statements; Undisclosed
Liabilities. (a) The Company has delivered or made available to the Purchaser
the registration statement of the Company filed with the Commission in
connection with the Company's initial public offering of Common Stock, and all
exhibits, amendments and supplements thereto (collectively, the "Company
Registration Statement"), and each registration statement, report, including
annual and quarterly reports, proxy statement or information statement and all
exhibits thereto prepared by it or relating to its properties since the
effective date of the Company Registration Statement, which documents are listed
in Schedule 2.5(a) attached hereto, each in the form (including exhibits and any
amendments thereto) filed with the Commission (collectively, the "Company
Reports"). The Company Reports were filed with the Commission in a timely manner
and constitute all forms, reports and documents required to be filed by the
Company under the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder and any applicable state securities laws (the "Securities
Laws"). As of their respective dates the Company Reports (i) complied in all
material respects with the applicable
-12-
<PAGE> 18
requirements of the Securities Laws and (ii) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in the light of
the circumstances under which they were made, not materially misleading. There
is no unresolved violation of the Securities Laws asserted by any Government
Authority with respect to any of the Company Reports.
(b) Each of the balance sheets included in or incorporated by reference
into the Company Reports (including any related notes and schedules) fairly
presented the financial position of the entity or entities to which it relates
as of its date and each of the statements of operations, shareholders' equity
(deficit) and cash flows included in or incorporated by reference into the
Company Reports (including any related notes and schedules) fairly presented the
results of operations, retained earnings or cash flows, as the case may be, of
the entity or entities to which it relates for the periods set forth therein, in
each case in accordance with United States generally accepted accounting
principles consistently applied during the periods involved ("GAAP"), except as
may be noted therein and except, in the case of the unaudited statements,
subject to normal recurring year-end adjustments. The Company has heretofore
furnished the Purchaser with a pro forma consolidated balance sheet of the
Company, as of the Closing Date, giving effect to the issuance of the
Convertible Notes.
(c) Except as set forth on Schedules 2.5(c), 2.8, 2.11, 2.15 and 2.26
attached hereto and except in connection with the transactions contemplated
hereby, since December 31, 1998, no Transaction Party and, with respect to
clauses (i), (ii) and (xv) only, no Practice has: (i) failed, in any material
respect to conduct its business in the ordinary course in a manner consistent
with past practice; (ii) experienced any change, event or circumstance that
could reasonably be expected to have a Material Adverse Effect; (iii) other than
in the ordinary course of business consistent with past practice, purchased,
sold, leased, pledged, encumbered or otherwise acquired or disposed of any
properties or assets relating to its business or operations; (iv) experienced
any material damage, destruction or loss to or of any of its assets which are
necessary to the conduct of its business; (v) except in the ordinary course of
business consistent with past practice, made or agreed to make any increase in
the compensation or severance arrangement of any officer, director or employee;
(vi) experienced material adverse changes in lease rates under existing leases;
(vii) written down or cancelled any material Indebtedness or waived or released
any right or claim which individually or in the aggregate is material; (viii)
suffered any judgment with respect to, or made any settlement of, any claim,
suit, action or proceeding which could reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect; (ix) effected any
material change in accounting practices and procedures, other than changes
required as a result of changes in GAAP; (x) amended its organizational
documents; (xi) incurred or assumed any Indebtedness or guaranteed or otherwise
become responsible for any such liabilities, obligations or Indebtedness; (xii)
acquired or agreed to acquire by merging or consolidation with, or by purchasing
the assets or stock, of or by any other manner, any Person or division thereof
or otherwise acquire or agree to acquire any assets (other than inventory) which
are material to any Transaction Party taken together; (xiii) initiated or
settled any material litigation to which any Transaction Party is a party; (xiv)
failed to preserve intact its business organization; (xv) failed to keep
available the services of its officers and material employees; (xvi) adopted or
increased any profit sharing, bonus, deferred
-13-
<PAGE> 19
compensation, savings, insurance, pension, retirement, or other employee benefit
plan for or with any of its employees; (xvii) failed to maintain its reserves in
a manner consistent with the policies and principles used by the Company in
connection with the preparation of the balance sheets included in or
incorporated by reference into the Company Reports; (xviii) issued or sold any
shares of capital stock or any other securities, or issued any securities
convertible into, or options warrants or rights to purchase or subscribe to, or
entering into any arrangement or contract with respect to the issue and sale of,
any shares of its capital stock or any other securities, or made any other
changes in its capital structure; (xix) experienced material changes in HMO or
other payor contracts with respect to the purchase price paid for
Practice-related services or in volume reductions as set forth therein; (xx)
experienced material changes with respect to existing contracts with
radiologists; or (xxi) agreed to any of the foregoing.
(d) After giving effect to the transactions contemplated hereby, except
for the Convertible Notes, neither the Company nor any of its Subsidiaries shall
have any outstanding Indebtedness except for Indebtedness listed on Schedule
2.5(d).
Section 2.6 Title to Properties; Encumbrances; Leases. (a) Schedule 2.6
attached hereto, contains a complete and accurate list setting forth the name
and address of each parcel of material real property owned in fee by the
Transaction Parties. Except for such properties and assets which have been sold
or otherwise disposed of in the ordinary course of business, each of the
Transaction Parties has good title to all of its properties and assets (whether
real, personal, mixed, tangible or intangible), subject to no encumbrance, lien,
charge or other restriction of any kind or character ("Encumbrances"), except
for (i) Encumbrances for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent, (ii) liens and security interests
created pursuant to the Credit Agreement, (iii) Encumbrances arising by
operation of law and (iv) other Encumbrances which could not reasonably be
expected to have a Material Adverse Effect (Encumbrances of the type described
in clauses (i) - (iv) above are hereinafter sometimes referred to as "Permitted
Encumbrances"). Each Transaction Party owns or otherwise has the right to use
all of the property now used and material to the operation of the business of
the Transaction Parties taken as a whole, which personal property is in good
operating condition and repair, ordinary wear and tear excepted and
substantially fit for the purpose for which they are being utilized and
constitutes all of the property necessary to conduct its business as it is
presently being conducted.
(b) Schedule 2.6 attached hereto contains an accurate and complete list
of all material property (whether real, personal, mixed, tangible or intangible)
leased or sub-leased by the Transaction Parties, including all amendments,
extensions and other modifications but excluding customary equipment leases (the
"Leases"). Each Lease is in full force and effect; the Transaction Parties have
a good and valid leasehold interest in and to all of the leased property,
subject to no Encumbrances, except Permitted Encumbrances; all rents and
additional rents due to date from any of the Transaction Parties in respect of
each such Lease have been paid; no Transaction Party has received notice that it
is in default under any Lease; and, to the knowledge of each of the Transaction
Parties, there exists no event, occurrence, condition or act (including the
consummation of the Transaction) which, with the giving of notice, the lapse of
time or the
-14-
<PAGE> 20
happening of any further event or condition, would become a default by any
Transaction Party under any such Lease.
Section 2.7 Intellectual Property. Schedule 2.7 attached hereto
contains an accurate and complete description of all (a) registrations for
trademarks and service marks and all pending applications for such registrations
owned by, assigned to or subject to assignment to the Transaction Parties
anywhere in the world and all material unregistered trademarks, trade names,
service marks, brand names, and business names (collectively "the Marks"); (b)
copyrights, whether registered or unregistered, owned by, assigned to or subject
to assignment to the Transaction Parties anywhere in the world (collectively
"the Copyrights"); and (c) patents and patent applications owned by, assigned to
or subject to assignment to the Transaction Parties anywhere in the world
(collectively the "Patents"). The Company owns the entire right, title and
interest in and to the Marks, the Copyrights and the Patents free and clear of
any Encumbrances except for Permitted Encumbrances. Except as could not
reasonably be expected to have a Material Adverse Effect, each item that is
indicated as registered on Schedule 2.7 has been duly registered, filed with or
issued by the appropriate authorities in the countries indicated on Schedule 2.7
and to the knowledge of each of the Transaction Parties, all such registrations,
filings and issuances remain in full force and effect. Except as could not
reasonably be expected to have a Material Adverse Effect, none of the Marks, the
Copyrights or the Patents are the subject of any pending, or to the knowledge of
each of the Transaction Parties, threatened opposition, interference,
cancellation proceeding or other legal or governmental proceeding before a
registration or issuing authority in any jurisdiction. Except as could not
reasonably be expected to have a Material Adverse Effect, the conduct of the
Transaction Parties' business as presently conducted does not infringe, violate,
or constitute misappropriation of any trademark, service mark, copyright
(whether registered or unregistered), patent, trade secret, industrial design,
computer program, data base, know-how or other proprietary right (collectively
"Intellectual Property") of any other Person, nor, during the past six years,
has any Transaction Party received notice to the contrary from any Person.
Except as could not reasonably be expected to have a Material Adverse Effect,
the Company owns or has the right to use through assignment, lease, license or
other agreement all Intellectual Property necessary for the conduct of the
business as presently conducted. Except as could not reasonably be expected to
have a Material Adverse Effect, there are no pending or, to the knowledge of
each of the Transaction Parties, threatened material claims by any Person for
infringement of any Intellectual Property or unfair competition by any
Transaction Party. To the Company's knowledge, no Person is infringing upon the
Intellectual Property owned by, assigned to or subject to assignment of, the
Transaction Parties, and the Transaction Parties are aware of no facts that
would support such a claim by the Transaction Parties. The consummation of the
transaction contemplated hereby will not result in the loss or impairment of the
Transaction Parties' right to own or use any of the Intellectual Property
necessary to the conduct of the Transaction Parties' business as presently
conducted (including, but not limited to the Marks, the Copyrights and the
Patents).
Section 2.8 Material Contracts. Except as set forth on Schedule 2.8, no
Transaction Party is bound by (a) any agreement, contract or commitment that
involves the delivery of goods and/or materials by it of an amount or value in
excess of $100,000, (b) any material agreement, contract or commitment not in
the ordinary course of business, (c) any agreement, indenture or
-15-
<PAGE> 21
other instrument which contains restrictions with respect to payment of
dividends or any other distribution in respect of its capital stock, (d) any
agreement, indenture or instrument relating to Indebtedness (whether or not such
Indebtedness is being repaid in connection with the transactions contemplated
hereby), (e) any agreement, contract or understanding with any Affiliate (other
than ordinary course contracts with employees), (f) any management service,
technical service, consulting or any other similar type of contract, (g) any
agreement, contract or commitment limiting the ability of any Transaction Party
to engage in any line of business or to compete with any Person or to otherwise
acquire property or conduct business in any area, (h) any material agreement
with respect to the purchase or affiliation with, or proposed purchase or
affiliation with, or management of, a Practice or other physician or radiology
entity, including, without limitation, any agreement, arrangement or
understanding which has not yet closed or (i) any agreement with any bank,
investment bank or other Person with respect to the providing of financial
advisory services of any type or with respect to the raising of debt or equity.
Each contract or agreement set forth on Schedule 2.8 (or required to be set
forth in Schedule 2.8) is in full force and effect and there exists no material
default or material event of default or to the knowledge of each of the
Transaction Parties, event, occurrence, condition or act (including the
consummation of the sale contemplated hereby) which, with the giving of notice,
the lapse of time or the happening of any other material event or condition,
could become a material default or material event of default thereunder. None of
the Transaction Parties and none of their Affiliates, is a party to, or bound
by, any contract, agreement, instrument or commitment relating to the issuance
of the Convertible Notes, other than the Documents.
Section 2.9 Consents and Approvals; No Violations. The execution and
delivery of the Documents by the Company and compliance by each Transaction
Party with the terms and provisions hereof and thereof and the issuance of the
Convertible Notes by the Company and the consummation of the transactions
contemplated by the Documents does not and will not (a) violate or contravene
any provision of the Certificates, Articles of Incorporation or Bylaws of any
Transaction Party, (b) violate or contravene any statute, rule, regulation,
licensing requirement, order or decree of any court, arbitrator or any other
public body or authority by which any Transaction Party is bound or by which any
of its properties or assets are bound, (c) require any filing with, or permit,
consent authorization, qualification or approval of, or exemption from, or the
giving of any notice to, any governmental or regulatory body, agency or
authority, or any other Person or (d) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any Encumbrance upon any of
the properties or assets of any Transaction Party under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or any other instrument
or obligation to which any Transaction Party is bound, or by which it or any of
its properties or assets may be bound.
Section 2.10 Litigation. There is no action, suit, proceeding at law or
in equity, arbitration or administrative or other proceeding by or before (or,
to the knowledge of each of the Transaction Parties, any investigation by) any
governmental or other instrumentality or agency pending, or, to the knowledge of
each of the Transaction Parties, threatened, against or affecting any
Transaction Party or any Practice or any such entity's properties or rights
which could
-16-
<PAGE> 22
reasonably be expected to have a Material Adverse Effect. No Transaction Party
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could reasonably be expected to have a Material Adverse Effect.
Section 2.11 Taxes. (a) Tax Returns. Each of the Transaction Parties
has timely filed or caused to be timely filed or will timely file or cause to be
timely filed with the appropriate taxing authorities all material returns,
statements, forms and reports for Taxes ("Returns") that are required to be
filed by, or with respect to, the Transaction Parties on or prior to the Closing
Date. The Returns have accurately reflected and will accurately reflect all
material liability for Taxes of the Transaction Parties for the periods covered
thereby.
(b) Payment of Taxes. All material Taxes and material Tax liabilities
that are due by or with respect to the Transaction Parties for all taxable years
or periods that end on or before the Closing Date and, with respect to any
taxable year or period beginning before and ending after the Closing Date, the
portion of such taxable year or period ending on and including the Closing Date
("Pre-Closing Period") have been timely paid or accrued and adequately disclosed
and fully provided for pursuant to the financial statements which has been
provided to the Purchaser by the Company and is in accordance with GAAP.
(c) Other Tax Matters. (i) Schedule 2.11 attached hereto sets forth (A)
each taxable year or other taxable period of the Transaction Parties for which
an audit or other examination of Taxes by the appropriate tax authorities of any
nation, state or locality is currently in progress (or scheduled as of the
Closing Date to be conducted) together with the names of the respective tax
authorities conducting (or scheduled to conduct) such audit or examination and a
description of the subject matter of such audits or examinations, (B) the most
recent taxable year or other taxable period for which an audit or other
examination relating to Federal income taxes of any Transaction Party have been
finally completed and the disposition of such audits or examinations, (C) the
taxable years or other taxable periods of any Transaction Party which will not
be subject to the normally applicable statute of limitations by reason of any
waiver or extension of the applicable statute of limitations for Taxes entered
into or granted by or on behalf of such Transaction Party, (D) the amount of any
material proposed adjustments (and the principal reason therefor) relating to
any Returns for Tax liability of any Transaction Party which have been proposed
(and that are outstanding) or assessed by any taxing authority and (E) a list of
all material notices received by any Transaction Party from any taxing authority
relating to any issue which could affect the Tax liability of any Transaction
Party, which issue has not been finally determined and which, if determined
adversely to such Transaction Party, could result in a material Tax liability.
Neither the Company nor any of the Transaction Parties (A) are presently
contesting the Tax liability of any of the Transaction Parties before any court,
tribunal or agency or (B) has applied for and/or received a ruling or
determination from a tax authority regarding a past or prospective transaction
of any of the Transaction Parties.
(ii) No Transaction Party has been included in any "consolidated,"
"unitary" or "combined" Return provided for under the law of the United States,
any foreign jurisdiction or any state or locality with respect to Taxes for any
taxable period for which the statute of limitations has not expired.
-17-
<PAGE> 23
(iii) All material Taxes which any Transaction Party are (or were)
required by law to withhold or collect have been duly withheld or collected, and
have been timely paid over to the proper authorities to the extent due and
payable.
(iv) None of the Transaction Parties are a "United States real property
holding corporation" within the meaning of Section 897(c)(2) of the Code.
(v) There are no tax sharing, allocation, indemnification or similar
agreements or arrangements in effect as between any Transaction Party and any
other party under which the Purchaser, or any of its Affiliates, or any
Transaction Party could be liable for any Taxes or other claims of any party.
(vi) The Transaction Parties have not applied for, been granted, or
agreed to any accounting method change for which it will be required to take
into account any adjustment under Section 481 of the Code or any similar
provision of the Code or the corresponding tax laws of any nation, state or
locality.
(vii) No indebtedness of any Transaction Party consists of "corporate
acquisition indebtedness" within the meaning of Section 279 of the Code.
(viii) The Transaction Parties are not a party to any agreement that
would require them to make any payment that would constitute an "excess
parachute payment" for purposes of Sections 280G and 4999 of the Code.
Section 2.12 Liabilities. No Transaction Party has any outstanding
claims, liabilities or indebtedness, contingent or otherwise, except as set
forth in the balance sheet included in the Company's 1998 audited financial
statements except for such as has been incurred in the ordinary course of
business and could not be reasonably expected to have a Material Adverse Effect
and is not Indebtedness or is Indebtedness pursuant to the Credit Agreement. No
Transaction Party is in default in respect of the terms or conditions of any
material indebtedness. Except for customary conditions precedent in the Credit
Agreement with which the Company is in compliance, there are no restrictions on
the Company's ability to borrow up to $10,799,000 under the Credit Agreement to
be used to effect the transactions contemplated by the Documents, including the
Acquisition Agreement.
Section 2.13 Compliance with Laws; Permits; Billing Practices. Each of
the Transaction Parties and the Practices is in compliance with all applicable
laws, regulations, licensing requirements, orders, judgments and decrees and
have obtained all required governmental approvals and permits in each
jurisdiction in which they currently do business, including the right to receive
Medicare and Medicaid reimbursements, except where the failure to so comply or
obtain, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect or give rise to criminal liability. Without
limiting the generality of the foregoing:
(i) Each of the Company and its Subsidiaries and the Practices
has timely filed all claims and/or reports legally required to be filed
in connection with federal
-18-
<PAGE> 24
Medicare, TRICARE/CHAMPUS and applicable state Medicaid programs and
due on or before the Closing Date, and all required reports are true
and complete in all material respects; there are no claims, actions or
appeals pending (and neither the Company nor any of its Subsidiaries
nor any Practice has filed anything that would result in any claims,
actions or appeals other than in the ordinary course of business)
before any commission, board or agency with respect to any state or
federal Medicare, TRICARE/CHAMPUS or Medicaid claims filed by the
Company or any of its Subsidiaries or (since its affiliation with the
Company) any Practice on or before the date hereof, that, if adversely
determined, could reasonably be expected to have a Material Adverse
Effect; no validation review or program integrity review related to the
Company or any of its Subsidiaries or any Practice has been conducted
with respect to the Company or any of its Subsidiaries or any Practice
by any commission, board or agency in connection with federal Medicare,
TRICARE/CHAMPUS or state Medicaid programs, and no such reviews are
scheduled, pending or, to the Company's knowledge, threatened against
or affecting the Company or any of its Subsidiaries; each of the
Company and its Subsidiaries and the Practices has timely filed all
material reports, data and other information required by any other
Governmental Authority with authority to regulate the Company or any of
its Subsidiaries or any Practice or its business in any manner; each of
the Company and its Subsidiaries and the Practices is in compliance in
all material respects with all rules, regulations and requirements of
all health Governmental Authorities, except where such noncompliance
could not reasonably be expected to have a Material Adverse Effect; and
the conduct of the business of each of the Company and its Subsidiaries
does not violate 42 U.S.C. Section 1320a-7, 1320a-7a, 1320a-7b (the
"Anti-Kickback Statute") Section 1395nn, 1396b; 31 U.S.C. Section 3729
et seq., the federal TRICARE/CHAMPUS statute or the regulations
promulgated pursuant to such statutes or related state or local
statutes or regulations (the "Stark Amendments"), including all
amendments thereto.
(ii) Without limiting anything contained in Section 2.13(i),
none of the Company or any of its Subsidiaries or any Practice, or any
of the Company's or any of its Subsidiaries' or any Practice's
executive officers or directors has:
(A) knowingly and willfully made or caused to be made a
false statement or representation of a material fact in any
application for any benefit or payment;
(B) knowingly and willfully made or caused to be made any
false statement or representation of a material fact for use
in determining rights to any benefit or payment under
applicable health care laws;
(C) presented or caused to be presented a claim for
reimbursement under TRICARE/CHAMPUS, Medicare, Medicaid, or
other state health care program that is (1) for an item or
service that the Person presenting or causing to be presented
knows or should know was not provided as claimed, or (2) for
an
-19-
<PAGE> 25
item or service and the Person presenting knows or should know
that the claim is false or fraudulent;
(D) failed to disclose knowledge of the occurrence of any
event affecting the initial or continuing right of a claimant
to any benefit or payment on its own behalf or on behalf of
another, with intent to fraudulently secure such benefit or
payment; or
(E) knowingly and willfully made or caused to be made or
induced or sought to induce the making of any false statement
or representation (or omitted to state a fact required to be
stated therein or necessary to make the statements contained
therein not misleading) of a material fact with respect to (1)
the conditions or operations of a Practice in order that the
Practice may qualify for TRICARE/CHAMPUS, Medicare, Medicaid
or other state health care program certification, or (2)
information required to be proved under Section 1124A of the
Social Security Act (42 U.S.C Section 1320a-3).
(iii) Without limiting anything contained in Section 2.13(i),
there are no material Medicare, Medicaid or TRICARE/CHAMPUS recoupments
or recoupments of any other third-party payor being sought, threatened,
requested or claimed against the Company or any of its Subsidiaries.
(iv) Without limiting anything contained in Section 2.13(i),
the Company and its Subsidiaries and the Practices are in compliance in
all material respects with applicable federal and state laws and
regulations prohibiting the payment or solicitation of remuneration in
exchange for or to induce the referral of patients or the ordering of
items and services and regulating the ability of physicians to refer
patients to entities in which they have an ownership interest or
compensation arrangement.
(v) Without limiting anything contained in Section 2.13(i),
all billing practices by the Company and its Subsidiaries and the
Practices to all third party payors, including, but not limited to, the
federal Medicare program, TRICARE/CHAMPUS program, state Medicaid
programs and private insurance companies, have been true, fair and
correct in all material respects and in compliance in all material
respects with all federal and state applicable laws, regulations and
policies of all such third party payors.Neither the Company nor any of
its Subsidiaries nor any Practice has billed for or received any
payment or reimbursement in excess of amounts allowed by law.
(vi) Without limiting anything contained in Section 2.13(i),
the Company and its Subsidiaries and the Practices are not in material
violation of any state or federal law or regulation which prohibits
non-physician entities from practicing medicine or prohibits physicians
from splitting fees with non-physicians.
Notwithstanding anything to the contrary contained in this
Section 2.13, to the extent relating to any Practice or any Practice's
executive officers or directors, any representation or warranty made in
this Section 2.13 shall only be deemed breached if it
-20-
<PAGE> 26
could reasonably be expected that a Material Adverse Effect could
result from such breach.
Section 2.14 Employment Relations. Except as could not reasonably be
expected to have a Material Adverse Effect (a) the Transaction Parties are in
compliance with all Federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and has not, and is not, engaged in any unfair
labor practice;
(b) no unfair labor practice complaint against any Transaction Party is
pending before the National Labor Relations Board;
(c) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving any Transaction Party;
(d) no claim in respect of the employment of any employee has been
asserted in writing or, to the knowledge of each of the Transaction Parties,
asserted orally or threatened, against the Transaction Parties;
(e) the Transaction Parties have not experienced any labor difficulty
in the past three years; and
(f) there has not been since December 31, 1998 any material adverse
change in the relations of the Transaction Parties with their employees.
Section 2.15 Employee Benefit Plans and Employees. (a) List of Plans.
Set forth in Schedule 2.15(a) attached hereto is an accurate and complete list
of all domestic and foreign (i) "employee benefit plans," within the meaning of
Section 3(3) of ERISA; (ii) bonus, stock option, stock purchase, restricted
stock, incentive, fringe benefit, "voluntary employees' beneficiary
associations" under Section 501(c)(9) of the Code, profit-sharing, pension or
retirement, deferred compensation, medical, life, disability, accident, salary
continuation, severance, accrued leave, vacation, sick pay, sick leave,
supplemental retirement and unemployment benefit plans, programs, arrangements,
commitments and/or practices (whether or not insured); and (iii) employment,
consulting, termination, severance, non-competition contracts or agreements; in
each case for active, retired or former employees or directors/whether or not
any such plans, programs, arrangements, commitments, contracts, agreements
and/or practices (referred to in (i), (ii) or (iii) above) are in writing or are
otherwise exempt from the provisions of ERISA; that have been established,
maintained or contributed to (or with respect to which an obligation to
contribute has been undertaken) or with respect to which any potential liability
is borne by the Company or any of its Subsidiaries (including, for this purpose
and for the purpose of all of the representations in this Section 2.15, any
predecessors to the Company or to any of its Subsidiaries and all employers
(whether or not incorporated) that are by reason of common control treated
together with the Company, and/or any of its Subsidiaries as a single employer
(i) within the meaning of Section 414 of the Code or (ii) as a result of the
Company or any Subsidiary being or having been a general partner of any such
employer, since September 2, 1974 ("Employee Benefit Plans"). Each Employee
Benefit Plan is in writing.
-21-
<PAGE> 27
(b) Status of Plans. Each Employee Benefit Plan (including any related
trust) complies in form with the requirements of all applicable laws, including,
without limitation, ERISA and the Code, and has at all times been maintained and
operated in substantial compliance with its terms and the requirements of all
applicable laws, including, without limitation, ERISA and the Code. No complete
or partial termination of any Employee Benefit Plan has occurred or is expected
to occur. Neither the Company nor any of its Subsidiaries has any commitment,
intention or understanding to create, modify or terminate any Employee Benefit
Plan. Except as required to maintain the tax-qualified status of any Employee
Benefit Plan intended to qualify under Section 401(a) of the Code, no condition
or circumstance exists that would prevent the amendment or termination of any
Employee Benefit Plan. No event has occurred and no condition or circumstance
has existed that could result in a material increase in the benefits under or
the expense of maintaining any Employee Benefit Plan from the level of benefits
or expense incurred for the most recent fiscal year ended thereof.
(c) No Pension Plans. No Employee Benefit Plan is a "defined benefit
plan" (within the meaning of Section 3(2) of ERISA) subject to Section 412 of
the Code or Section 302 or Title IV of ERISA. Neither the Company nor any of its
Subsidiaries has ever maintained or contributed to, or had any obligation to
contribute to (or borne any liability with respect to) any "multiple employer
plan" (within the meaning of the Code or ERISA) or any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(d) Liabilities. No Employee Benefit Plan subject to Section 412 or
418B of the Code or Section 302 of ERISA has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code or Section 302
of ERISA, respectively, or has applied for or obtained a waiver from the IRS of
any minimum funding requirement or an extension of any amortization period under
Section 412 of the Code or Section 303 or 304 of ERISA. Neither the Company nor
any of its Subsidiaries has incurred any liability (including, for this purpose
and for the purpose of all of the representations in this Section 2.15, any
indirect, contingent, or secondary liability) to the Pension Benefit Guaranty
Corporation ("PBGC") in connection with any Employee Benefit Plan covering any
active, retired or former employees or directors of the Company or any of its
Subsidiaries, including, without limitation, any liability under Section 4069 or
4212(c) of ERISA or any penalty imposed under Section 4071 of ERISA, or ceased
operations at any facility or withdrawn from any such Employee Benefit Plan in a
manner which could subject it to liability under Section 4062, 4063 or 4064 of
ERISA, or knows of any facts or circumstances that might give rise to any
liability of the Company or any of its Subsidiaries to the PBGC under Title IV
of ERISA.
Neither the Company nor any of its Subsidiaries has incurred any
withdrawal liability (including any contingent or secondary withdrawal
liability) within the meaning of Section 4201 or 4204 of ERISA to any Employee
Benefit Plan which is a "multiemployer plan" (as such term is defined in Section
4001(a)(3) of ERISA) ("Multiemployer Plan"), and no event has occurred and no
condition or circumstance has existed, that presents a material risk of the
occurrence of any withdrawal from or the partition, termination, reorganization
or insolvency of any such Multiemployer Plan which could result in any liability
of the Company or any of its Subsidiaries to any such Multiemployer Plan.
-22-
<PAGE> 28
Neither the Company nor any of its Subsidiaries maintains any Employee
Benefit Plan which is a "group health plan" (as such term is defined in Section
607(1) of ERISA or Section 5000(b)(1) of the Code) that has not been
administered and operated in all respects in compliance with the applicable
requirements of Section 601 of ERISA and Section 4980B(f) of the Code and
neither the Company nor any of its Subsidiaries is subject to any material
liability, including, without limitation, additional contributions, fines,
taxes, penalties or loss of tax deduction as a result of such administration and
operation. Neither the Company nor any of its Subsidiaries maintains any
Employee Benefit Plan (whether qualified or nonqualified within the meaning of
Section 401(a) of the Code) providing for post-employment or retiree health,
life and/or other welfare benefits and having unfunded liabilities, and neither
the Company nor any of its Subsidiaries have any obligation to provide any such
benefits to any retired or former employees or active employees following such
employees' retirement or termination of service. Neither the Company nor any of
its Subsidiaries maintains any Employee Benefit Plan which is an "employee
welfare benefit plan" (as such term is defined in Section 3(1) of ERISA) that
has provided any "disqualified benefit" (as such term is defined in Section
4976(b) of the Code) with respect to which an excise tax could be imposed. No
Employee Benefit Plan which is a group health plan is a "multiple employer
welfare arrangement," within the meaning of Section 3(40) of ERISA. Each
Employee Benefit Plan that is intended to meet the requirements of Section 125
of the Code meets such requirements, and each program of benefits for which
employee contributions are provided pursuant to elections under any Employee
Benefit Plan meets the requirements of the Code applicable thereto. No Employee
Benefit Plan holds as an asset any interest in any annuity contract, guaranteed
investment contract or any other investment or insurance contract, policy or
instrument issued by an insurance company that, to the knowledge of each of the
Transaction Parties, is or may be the subject of bankruptcy, conservatorship,
insolvency, liquidation, rehabilitation or similar proceedings.
Neither the Company nor any of its Subsidiaries has any unfunded
liabilities pursuant to any Employee Benefit Plan that is not intended to be
qualified under Section 401(a) of the Code.
Neither the Company nor any of its Subsidiaries has incurred any
liability for any tax or excise tax arising under Chapter 43 of the Code, and no
event has occurred and no condition or circumstance has existed that could give
rise to any such liability.
Other than as described in Schedule 2.15(d) attached hereto, there are
no actions, suits or claims pending, or, to the best knowledge and belief of
each of the Transaction Parties, threatened, anticipated or expected to be
asserted against any Employee Benefit Plan or the assets of any such plan (other
than routine claims for benefits and appeals of denied routine claims), and no
civil or criminal action brought pursuant to the provisions of Title I, Subtitle
B, Part 5 of ERISA is pending, threatened, anticipated or expected to be
asserted against the Company or any of its Subsidiaries or any fiduciary of any
Employee Benefit Plan, in any case with respect to any Employee Benefit Plan. No
Employee Benefit Plan or any fiduciary thereof has been the direct or indirect
subject of an audit, investigation or examination by any governmental or
quasi-governmental agency.
-23-
<PAGE> 29
(e) Contributions. Full payment has been, or will be within the time
required by ERISA and the Code, made of all amounts which the Company or any of
its Subsidiaries is required, under applicable law or under any Employee Benefit
Plan or any agreement relating to any Employee Benefit Plan to which the Company
or any of its Subsidiaries is a party, to have paid as contributions or premiums
thereto as of the last day of the most recent fiscal year of such Employee
Benefit Plan ended prior to the date hereof. All such contributions and/or
premiums have been, or will be, fully deducted for income tax purposes and no
such deduction has been challenged or disallowed by any governmental entity, and
to the best knowledge and belief of each of the Transaction Parties, no event
has occurred and no condition or circumstance has existed that could give rise
to any such challenge or disallowance. The Company has made adequate provision
for reserves to meet contributions and premiums and any other liabilities that
have not been paid or satisfied because they are not yet due under the terms of
any Employee Benefit Plan, applicable law or related agreements. Benefits under
all Employee Benefit Plans are as represented and have not been increased
subsequent to the date as of which documents have been provided. No asset of the
Company or any of its Subsidiaries is subject to any lien arising under Section
302(f) of ERISA or Section 412(n) of the Code, and no event has occurred and no
condition or circumstance has existed that could give rise to any such lien.
Neither the Company nor any of its Subsidiaries has been required to provide any
security under Section 307 of ERISA or Section 401(a)(29) or 412(f) of the Code,
and no event has occurred and no condition or circumstance has existed that
could give rise to any such requirement to provide any such security.
(f) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has been determined to be so
qualified by the IRS; and each trust established in connection with any Employee
Benefit Plan which is intended to be exempt from Federal income taxation under
Section 501(a) of the Code has been determined to be so exempt by the IRS (or
has been submitted to the IRS for a determination letter, or is within the
remedial amendment period for submitting an application for a determination
letter to the IRS, and is awaiting receipt of a response). Since the date of
each most recent determination referred to in this paragraph (f), no event has
occurred and no condition or circumstance has existed that resulted or is likely
to result in the revocation of any such determination or that could adversely
affect the qualified status of any such Employee Benefit Plan or the exempt
status of any such trust.
(g) Transactions. Neither the Company nor any of its Subsidiaries nor
any of their respective directors, officers, employees or, to the best knowledge
and belief of each of the Transaction Parties, other persons who participate in
the operation of any Employee Benefit Plan or related trust or funding vehicle,
has engaged in any transaction with respect to any Employee Benefit Plan or
breached any applicable fiduciary responsibilities or obligations under Title I
of ERISA that would subject any of them to a tax, penalty or liability for
prohibited transactions or breach of any obligations under ERISA or the Code or
would result in any claim being made under, by or on behalf of any such Employee
Benefit Plan by any party with standing to make such claim.
-24-
<PAGE> 30
(h) Triggering Events. The execution of this Agreement and the
consummation of the transactions contemplated hereby, do not constitute a
triggering event under any Employee Benefit Plan, policy, arrangement,
statement, commitment or agreement, whether or not legally enforceable, which
(either alone or upon the occurrence of any additional or subsequent event) will
or may result in any payment (whether of severance pay or otherwise), "parachute
payment" (as such term is defined in Section 280G of the Code), acceleration,
vesting or increase in benefits to any employee or former employee or director
of the Company or any of its Subsidiaries. No Employee Benefit Plan provides for
the payment of severance, termination, change in control or similar-type
payments or benefits.
(i) Documents. The Company has delivered or caused to be delivered to
the Purchaser and its counsel true and complete copies of all material documents
in connection with each Employee Benefit Plan, including, without limitation
(where applicable): (i) all Employee Benefit Plans as in effect on the date
hereof, together with all amendments thereto, including, in the case of any
Employee Benefit Plan not set forth in writing, a written description thereof;
(ii) all current summary plan descriptions, summaries of material modifications,
and material communications; (iii) all current trust agreements, declarations of
trust and other documents establishing other funding arrangements (and all
amendments thereto and the latest financial statements thereof); (iv) the most
recent IRS determination letter obtained with respect to each Employee Benefit
Plan intended to be qualified under Section 401(a) of the Code or exempt under
Section 501(a) of the Code; (v) the annual report on Internal Revenue Service
Form 5500-series for each of the last three years for each Employee Benefit Plan
required to file such form; (vi) the most recently prepared financial statements
for each Employee Benefit Plan for which such statements are required; and (vii)
all contracts and agreements relating to each Employee Benefit Plan, including,
without limitation, service provider agreements, insurance contracts, annuity
contracts, investment management agreements, subscription agreements,
participation agreements, and recordkeeping agreements and collective bargaining
agreements.
(j) Employees. Except as provided in Schedule ___, no physician or
radiologist employed by a Medical Practice is a common law employee of the
Company or any of its Subsidiaries, and no employee of the Company or any of its
Subsidiaries is a common law employee of a Medical Practice.
Section 2.16 Environmental Laws and Regulations. Except as could not
reasonably be expected to have a Material Adverse Effect:
(a) No Transaction Party has generated, used, treated or stored any
Hazardous Materials and, to the knowledge of each of the Transaction
Parties, no Hazardous Materials have been generated, used, treated or
stored, or released or disposed by any Transaction Party in each case,
except in compliance with Environmental Laws.
(b) The Transaction Parties are in compliance in all material respects
with Environmental Laws and the terms and conditions of permits issued
under such Environmental Laws.
-25-
<PAGE> 31
(c) There are no pending or, to the knowledge of each of the
Transaction Parties, threatened Environmental Claims against any
Transaction Party or, to the knowledge of the Transaction Parties, any
Company Property.
(d) There are no facts, circumstances, conditions or occurrences
regarding any Company Property that could reasonably be anticipated (i) to
form the basis of an Environmental Claim against the Company, any of its
Subsidiaries or any Company Property or assets, or (ii) to cause such
Company Property or assets to be subject to any restrictions on its
ownership, occupancy, use or transferability under any Environmental Law.
Section 2.17 Interests in Clients, Suppliers, etc. No Transaction Party
and none of their respective officers, directors or shareholders that own more
than 10% of the outstanding Common Stock of the Borrower (and none of any of the
foregoing Person's Affiliates) possess, directly or indirectly, any financial
interest in, and is not a director, officer or shareholder or employee of, any
entity which is a client, supplier, customer, lessor, lessee or competitor or
potential competitor of any Transaction Party. Ownership of securities of a
company whose securities are registered under the Exchange Act of 1% or less of
any class of such securities shall not be deemed to be a financial interest for
purposes of this Section 2.17.
Section 2.18 Physician/Hospital Relationships. The transactions
contemplated hereby will not have a material adverse effect on the relationship
of the Company or any of its Subsidiaries with any physician, radiologist,
Practice or hospital to which the Company or any of its Subsidiaries provides
radiology services. Except as could not reasonably be expected to have a
Material Adverse Effect, since December 31, 1998, no physician, radiologist,
Practice or hospital to which the Company or any of its Subsidiaries provides
radiology services has indicated to any Transaction Party that such person or
entity may stop practicing with, outsourcing to, or otherwise using the services
of, any Transaction Party and neither the Company nor any of its Subsidiaries
has any reason to believe that any physician, radiologist, Practice or hospital
to which the Company or any of its Subsidiaries provides radiology services, has
any intention to discontinue its affiliation with any Transaction Party.
Section 2.19 No Misstatements or Omissions; Projections. No
representation or warranty by the Company contained in this Agreement and no
statement contained in any certificate, schedule, exhibit or other instrument
specified or referred to in this Agreement or any other Document whether
heretofore furnished to the Purchaser or hereafter furnished to the Purchaser
pursuant to this Agreement or any other Document contains as of the Closing Date
or will contain any untrue statement of a material fact or omits or will omit as
of the date of such document any material fact necessary to make the statements
contained therein in light of the circumstances under which such statement was
made, not misleading. The financial projections provided by the Company to the
Purchaser were prepared in good faith using the best information available to
management of the Company and represent management's good faith estimates of the
future performance of the Company for the periods referred to therein. The
Company is not aware of any material facts or circumstances which would render
such financial projections unreasonable or unobtainable; provided, however, it
being recognized by the
-26-
<PAGE> 32
Purchaser that actual results may differ from the projections and no
representation is made that the projections will in fact be attained.
Section 2.20 Broker's or Finder's Fees. Except for the Purchaser and
its Affiliates, no agent, broker, person or firm acting on behalf of any
Transaction Party is, or will be, entitled to any commission or broker's or
finder's fees from any of the parties hereto, or from any Person controlling,
controlled by or under common control with any of the parties hereto, in
connection with any of the transactions contemplated hereby.
Section 2.21 Investment Company Act. No Transaction Party is an
"investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.
Section 2.22 Year 2000 Reprogramming. Any reprogramming required to
permit the proper functioning, in and following the year 2000, of the Company's
or any of its Subsidiaries' (i) computer systems and (ii) equipment containing
embedded microchips (including systems and equipment supplied by others and
utilized in the Company's business) and the testing of all such systems and
equipment, as so reprogrammed shall be completed no later than the fourth
quarter of 1999, except for additional corrections not material to the Company's
operations. The costs to the Company of such reprogramming and testing and of
the reasonably foreseeable consequences of year 2000 (including, without
limitation, reprogramming errors and the failure of others' systems or
equipment) could, individually or in the aggregate, not reasonably be expected
to have a Material Adverse Effect. Except for such of the reprogramming referred
to in the preceding sentence as may be necessary, the computer and management
information systems of the Company and its Subsidiaries are sufficient to permit
the Company and its Subsidiaries to conduct its business without such conduct
resulting in a Material Adverse Effect.
Section 2.23 Practice Management Agreements; Affiliations. As of the
Closing Date, the Company (i) owns 73 imaging centers and operates and manages
17 additional imaging centers, through joint venture relationships, in 7 states
and in the District of Columbia, (ii) provides management services to 10
radiology practices in 7 states and the District of Columbia, (iii) is
affiliated with approximately 260 radiologists, and (iv) the Practices provide
services to 58 hospitals. Schedule 2.23 correctly lists all such imaging
centers, management services, radiology affiliates and hospitals.
Section 2.24 Securities Law Compliance. Assuming that the
representations and warranties of the Purchaser are true and correct, the
offering, issuance, sale and delivery of the Convertible Notes to the Purchaser
is exempt from the registration requirements of the Securities Act. The Company
has complied with, or is exempt from, all registration requirements of all
applicable state securities laws in connection with the offering, issue, sale
and delivery of the Convertible Notes.
Section 2.25 Transactions with Affiliates. Except as set forth on
Schedule 2.25, none of the Transaction Parties have entered into any transaction
or series of related transactions, whether or not in the ordinary course of
business, with any Affiliate of any Transaction Party.
-27-
<PAGE> 33
Section 2.26 Capital Stock Reserved. Sufficient shares of the Company's
Common Stock have been authorized and duly reserved for issuance upon conversion
of the Convertible Notes.
Section 2.27 No Conflict of Rights. Set forth on Schedule 2.27 is a
description of all registration rights held by any Person. The registration
rights granted to the Purchaser pursuant to Article VII do not conflict with any
other registration rights granted by the Company.
Section 2.28 SBIC Information. All information set forth in the SBA
Forms regarding the Company and its Affiliates is accurate and complete in all
material respects. Copies of such forms have been, on or prior to the date
hereof, completed and executed by the Company and delivered to the Purchaser.
Section 2.29 SBIC Eligibility. The Company and its Subsidiaries do not
engage in any activity which would render the Company ineligible to receive
financing assistance from a Small Business Investment Company as provided in 13
CFR 107.720.
Section 2.30 Company Awareness. The Company is aware that the Purchaser
is a Federal licensee under the SBIA.
Section 2.31 Use of Proceeds. All of the proceeds from the sale of the
Convertible Notes shall be used for general corporate purposes and not for any
purposes which would violate 13 CFR 107.720.
Section 2.32 Insurance. Set forth on Schedule 2.32 hereto is a true,
correct and complete summary of all insurance, including, without limitation,
all medical malpractice insurance, carried by each Transaction Party on and as
of the Closing Date, with the amounts insured set forth therein.
Section 2.33 Other Representations and Warranties. Except for breaches
thereof that could not reasonably be expected to have a Material Adverse Effect
(and except for representations and warranties that are stated as of a specific
date), each of the representations and warranties contained in the Credit
Agreement and Acquisition Agreement in each case as in effect on the Closing
Date are hereby confirmed and restated, each such representation and warranty,
together with all related definitions and ancillary provisions and any
information contained in any schedule to the Credit Agreement and Acquisition
Agreement in each case, as in effect on the date hereof relating thereto, being
hereby incorporated by reference into this Agreement (without duplication) as a
representation and warranty to the Purchaser as if specifically set forth in
this Section 2.33 (each such document referred to therein as having been
delivered to a "Lender" or "APPM", as the case may be, thereunder having been
delivered to the Purchaser hereunder).
-28-
<PAGE> 34
ARTICLE III
REPRESENTATIONS OF THE PURCHASER
Section 3.0 Representations of the Purchaser. In order to induce the
Company to enter into this Agreement and in order to induce the Company to issue
the Convertible Notes, the Purchaser represents, warrants and agrees as follows:
Section 3.1 Existence and Good Standing; Power and Authority. The
Purchaser is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization. The Purchaser has the requisite
power and authority to execute and deliver this Agreement and perform its
obligations thereunder. This Agreement has been duly authorized and approved by
the Purchaser, and assuming due execution by the other parties thereto is a
valid and binding obligation of the Purchaser enforceable against the Purchaser
in accordance with its terms, except to the extent that its enforceability may
be subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws effecting the enforcement of creditors' rights generally and
by general equitable principles (regardless of whether such enforceability is
considered in a proceeding brought in equity or law).
Section 3.2 Restrictive Documents. The Purchaser is not subject to any
mortgage, lien, lease, agreement, instrument, order, law, rule, regulation,
judgment or decree, or any other restriction of any kind or character, which
would prevent consummation by any the Purchaser of the transactions contemplated
hereby or which would result in a violation of breach of, conflict with,
constitute (with or without due notice or lapse of time or both) a default
under, or result in the creation of any Encumbrance on the Convertible Notes
under the terms of any agreement to which the Purchaser is a party.
Section 3.3 Purchase for Investment. (a) The Purchaser will acquire the
Convertible Notes for its own account for investment and not with a view toward
any resale or distribution thereof; provided, however, that the disposition of
the Purchaser's property shall at all times remain within the sole control of
the Purchaser.
(b) The Purchaser understands that the Convertible Notes have not been
registered under the Securities Act or under any state securities laws and may
not be sold or transferred unless they are subsequently registered under the
Securities Act and any applicable state or other securities laws, or unless
exemptions from registration under such laws are available and complied with;
(c) The Purchaser represents that it is an accredited investor, as
defined in Regulation D promulgated under the Securities Act and experienced in
investment matters, fully understands the transactions contemplated by this
Agreement, has the knowledge and experience in financial matters as to be
capable of evaluating the merits and risks of its investment and has had the
financial ability and resources to bear the economic risks of its investment;
(d) The Purchaser represents and warrants that the Company has given
the Purchaser the opportunity to ask questions and receive answers concerning
the Company, and the
-29-
<PAGE> 35
Company has made available to the Purchaser an opportunity to conduct such
investigations and reviews as it has requested to conduct and all of those
investigations and reviews have been completed;
(e) The Purchaser acknowledges that it has received no general
solicitation or general advertising, and that the Purchaser's representatives
have attended no seminar or meeting with respect to the Convertible Notes, nor
is it aware of any such solicitation or advertisement that may have been
received by others.
Section 3.4 Broker's or Finder's Fees. Except for the Purchaser and its
Affiliates, no agent, broker, person or firm acting on behalf of the Purchaser
is, or will be, entitled to any commission or broker's or finder's fees from any
Transaction Party, or from any Person controlling, controlled by or under common
control with any Transaction Party, in connection with the transactions
contemplated hereby.
ARTICLE IV
ISSUANCE OF NOTES; PAYMENT OF SUBSCRIPTION PRICE; CLOSING
Section 4.1 Issuance of Convertible Notes. Subject to the terms and
conditions set forth in this Agreement, on the Closing Date, the Company agrees
to sell to the Purchaser, and the Purchaser agrees to purchase the Convertible
Notes. Delivery of the Convertible Notes to be purchased by the Purchaser
pursuant to this Agreement shall be made, pursuant to Section 4.4, on the
Closing Date by the Company to the Purchaser, against payment of the Purchase
Price.
Section 4.2 Purchase Price. Subject to the terms and conditions set
forth in this Agreement, in full consideration for the sale by the Company of
the Convertible Notes to the Purchaser, the Purchaser shall deliver to the
Company $20,000,000 (the "Purchase Price") on the Closing Date, by wire transfer
of immediately available funds to the accounts specified by the Company.
Section 4.3 Time and Place of Closing. The deliveries made on the
Closing Date (the "Closing") shall take place at 10:00 a.m. on the Closing Date,
at the offices of White & Case LLP, 1155 Avenue of the Americas, New York, NY
10036, or such other place and time as the Company and the Purchaser shall
mutually agree.
Section 4.4 Closing Deliveries. At the Closing the Company shall
deliver, or cause to be delivered, to the Purchaser the following: (i) the
Convertible Notes for the account of the Purchaser duly executed and delivered
by the Company to be issued and delivered at Closing, free and clear of all
Encumbrances, (ii) evidence or copies of any consents, approvals, orders,
qualifications, agreements or waivers required pursuant to Article V, (iii) all
certificates and other instruments and documents required by this Agreement to
be delivered by the Company to the Purchaser at or prior to the Closing and (iv)
such other documents and instruments reasonably requested by the Purchaser, as
may be necessary or appropriate to confirm or carry out the provisions of the
Documents.
-30-
<PAGE> 36
ARTICLE V
CONDITIONS TO THE PURCHASER'S OBLIGATIONS
Section 5.0 Conditions to the Purchaser's Obligations. The obligation
of the Purchaser to purchase the Convertible Notes contemplated by this
Agreement is conditioned upon satisfaction, at or prior to the Closing of the
following conditions:
Section 5.1 Opinions of Counsel. The Company shall have furnished the
Purchaser (i) with the opinion, dated the Closing Date, of Haynes & Boone LLP,
counsel to the Company, to the effect set forth in Exhibit A hereto and (ii)
with an opinion of McDermott, Will & Emery, special regulatory health care
counsel to the Company, in form and substance satisfactory to the Purchaser,
with respect to the Company's compliance with all applicable health care laws.
Section 5.2 Good Standing and Other Certificates. The Purchaser shall
have received (a) a copy of the articles of incorporation or other
organizational documents of the Company, including all amendments thereto,
certified by the Secretary of State of Delaware, (b) a certificate from the
Secretary of State or other appropriate official of the respective State or
country of incorporation or formation to the effect that the Company is in good
standing and listing all charter documents of such entity, (c) a certificate
from the Secretary of State or other appropriate official in each State or
country in which the Company is qualified to do business to the effect that such
entity is in good standing in each such State or country and (d) a copy of the
Bylaws of the Company and the resolutions of the Board of Directors of the
Company authorizing the transactions contemplated hereby, certified by the
Secretary of such Person as being true and correct and in effect on the Closing
Date.
Section 5.3 No Material Adverse Change. Since December 31, 1998, there
shall have been no material adverse change in the business, operations, assets,
nature of assets, accounting treatment, liabilities, condition (financial or
otherwise), results of operations or prospects of the Company and its
Subsidiaries taken as a whole and the Company shall have delivered to the
Purchaser a certificate of an executive officer of the Company, dated the
Closing Date, to such effect.
Section 5.4 Truth of Representations and Warranties. Each of the
representations and warranties of the Company contained in this Agreement and
the other Documents, shall be true and correct in all material respects on and
as of the Closing Date other than such representations and warranties made as of
a specific date, which shall be true and correct in all material respects as of
such date, with the same effect as though such representations and warranties
had been made on and as of such date, and the Company shall have delivered to
the Purchaser a certificate of an executive officer of the Company dated as of
the Closing Date, to such effect.
Section 5.5 No Litigation Threatened. No action or proceedings shall
have been instituted or threatened before a court or other government body or by
any public authority to restrain or prohibit any of the transactions
contemplated by the Documents, and the Company shall have delivered to the
Purchaser a certificate of an executive officer of the Company dated as of the
Closing Date, to such effect.
-31-
<PAGE> 37
Section 5.6 Third Party Consents; Governmental Approvals. All consents,
approvals, authorizations, exemptions or waivers required in connection with the
consummation of the transactions contemplated by the Documents shall have been
received.
Section 5.7 Proceedings. All proceedings to be taken in connection with
the transactions contemplated by this Agreement and all documents incident
thereto shall be satisfactory in form and substance to the Purchaser and its
counsel, and the Purchaser shall have received copies of all such documents and
other evidences as it or its counsel may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
Section 5.8 SBA Forms. On the Closing Date, the Purchaser shall have
received from the Company, fully executed Small Business Administration Forms
480 and 652 and Small Business Administration Form 1031 with Parts A and B
thereof fully executed (the "SBA Forms").
Section 5.9 Due Diligence. The Purchaser shall have completed its
business, legal and accounting due diligence and shall be satisfied with the
results thereof.
Section 5.10 Credit Agreement. The Credit Agreement shall have been
amended and/or consent been obtained with respect thereto, in each case, to
permit the issuance of the Convertible Notes and the other transactions
contemplated by the Documents.
Section 5.11 Acquisition Agreement. On or prior to the Closing Date,
there shall have been delivered to the Purchaser a true and correct copy of the
Acquisition Agreement and all terms and provisions of the Acquisition Agreement
shall be in form and substance satisfactory to the Purchaser and shall not have
been amended without the consent of the Purchaser. The Acquisition, including
all of the terms and conditions thereof, shall have been duly approved by the
board of directors and (if required by applicable law) the shareholders of the
parties thereto, and the Acquisition Agreement shall have been duly executed and
delivered by the parties thereto and shall be in full force and effect. All
conditions precedent to the consummation of the Acquisition shall have been
satisfied and the parties to the Acquisition Agreement shall have irrevocably
committed in writing (a copy of such commitment having been delivered to the
Purchaser) to consummate the Acquisition immediately following the purchase of
the Convertible Notes.
Section 5.12 Performance of Obligations. The Company shall have
performed, in all material respects, its obligations under this Agreement and
all other agreements between the Company and the Purchaser.
-32-
<PAGE> 38
ARTICLE VI
CONDITIONS TO THE COMPANY'S OBLIGATIONS
Section 6.1 Conditions to the Company's Obligations. The obligation of
the Company to sell the Convertible Notes contemplated by this Agreement is
conditioned upon satisfaction, at or prior to the Closing, of the following
conditions:
Section 6.2 Truth of Representations and Warranties. The
representations and warranties of the Purchaser contained in this Agreement
shall be true and correct in all material respects on and as of the Closing Date
other than such representatives and warranties made as of a specific date, which
shall be true and correct in all material respects as of such date, with the
same effect as though such representations and warranties had been made on and
as of such date.
Section 6.3 Third Party Consents; Governmental Approvals. All consents,
approvals authorizations, exemptions or waivers, if any, required in connection
with the consummation of the transactions contemplated by this Agreement shall
have been received.
Section 6.4 Performance of Agreement. The Purchaser shall have
performed, in all material respects, its obligations under this Agreement.
Section 6.5 No Litigation Threatened. No action or proceeding shall be
instituted or threatened before a court or other government body or any public
authority to restrain or prohibit any of the transactions contemplated hereby.
ARTICLE VII
COVENANTS OF THE COMPANY
The Company shall comply with each of the following covenants, except
to the extent that the Purchaser, in its discretion, otherwise expressly
consents in writing:
Section 7.1 Reservation of Common Stock. The Company shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate of
its authorized but unissued Common Stock, a number of shares of Common Stock
which may be deliverable upon the conversion of the Convertible Notes.
Section 7.2 Accountants. The Company shall at all times retain a
nationally recognized independent, accounting firm as its auditors reasonably
acceptable to the Purchaser.
Section 7.3 Financial Statements and Other Information. The Company
shall deliver to the Purchaser:
(i) within 30 days after the end of each fiscal month of the Company
other than the last such month of any fiscal quarter of the Company,
commencing July 31,
-33-
<PAGE> 39
1999, consolidated statements of earnings, shareholders' equity and cash
flows of the Company for such fiscal month and consolidated balance sheets
of the Company as of the end of such fiscal month. In each case,
comparisons to comparable budgeted figures and supplemental information
setting forth a calculation of Consolidated EBITDA for the period then
ended will be provided, and commencing July 31, 1999 comparable figures
will be provided for the corresponding fiscal month of the preceding fiscal
year, all prepared in accordance with GAAP, consistently applied, subject
to normal year-end adjustments, and certified by the chief financial
officer or controller of the Company;
(ii) within 45 days after the end of each of the first three quarterly
accounting periods in each fiscal year, commencing September 30, 1999,
consolidated statements of earnings, shareholders' equity and cash flows of
the Company for such fiscal quarter and consolidated balance sheets of the
Company as of the end of such fiscal quarter. In each case, comparisons to
comparable budgeted figures and supplemental information setting forth a
calculation of Consolidated EBITDA for the period then ended will be
provided, and commencing September 30, 1999 comparable figures will be
provided for the corresponding quarter of the preceding fiscal year, all
prepared in accordance with GAAP, consistently applied, subject to normal
year-end adjustments, and certified by the chief financial officer or
controller of the Company;
(iii) within 90 days after the end of each fiscal year, consolidating
and audited consolidated statements of earnings, shareholders' equity and
cash flows of the Company for such fiscal year, and consolidated and
consolidating balance sheets of the Company as of the end of such fiscal
year. In each case comparisons to comparable budgeted figures and
supplemental information setting forth a calculation of Consolidated EBITDA
for the period then ended will be provided, and commencing December 31,
1999, comparable figures will be provided for the preceding fiscal year,
all prepared in accordance with GAAP, consistently applied, and certified
by, (a) with respect to the consolidated portions of such statements (and
not with respect to the budget comparisons or the calculation of
Consolidated EBITDA), a nationally recognized independent accounting firm
selected by the Company and reasonably acceptable to the Purchaser (such
certification to be accompanied, or followed promptly after the Company's
receipt thereof, by a copy of such firm's annual management letter to the
Board of Directors of the Company) and (b) the financial statements shall
be accompanied by a statement from the chief financial officer of the
Company that the Company is not in default under any provision of the
Documents or any other agreement to which the Company is a party (a
"Default") and if any Default exists, specifying the nature and the period
of existence thereof; it being understood that such audit examination need
only extend to accounting matters;
(iv) promptly upon receipt thereof, any additional reports, management
letters or other detailed information concerning significant aspects of the
Company's operations or financial affairs prepared by the Company's
independent accountants and provided to the Company or its Board of
Directors (and not otherwise contained in other materials provided
hereunder);
-34-
<PAGE> 40
(v) as soon as available but in no event later than 45 days after the
end of each fiscal year, an annual budget of the Company and its
Subsidiaries for the following year (such annual budget to include, without
limitation, budgeted statements of earnings and sources and uses of cash
and balance sheets) and, in addition, to the extent delivered to any of the
Company's shareholders, any other significant budgets prepared by the
Company and any revisions of such annual or other budgets each prepared and
reasonable detail with appropriate presentation and discussion of the
principle assumptions upon which such budgets are based accompanied by a
certificate of the chief financial officer or controller of the Company to
the effect that, to the best of his or her knowledge, such budget is a
reasonable estimate for the period covered thereby, and within 45 days
after any monthly period in which there is a material adverse deviation
from the consolidated annual budget, an officer's certificate explaining
the deviation and what actions the Company has taken and proposes to take
with respect thereto;
(vi) promptly (but in any event within five business days) after the
discovery or receipt of notice of (a) any material default under any
agreement to which any Transaction Party is a party or (b) any other event
or circumstance affecting any Transaction Party (including, without
limitation, the filing of any material litigation against any Transaction
Party or the existence of any dispute with any Person which involves a
reasonable likelihood of such material litigation being commenced) which
event or circumstance could reasonably be expected to have a Material
Adverse Effect, an officer's certificate specifying the nature and period
of existence thereof and what actions the Company has taken and proposes to
take with respect thereto;
(vii) other than filings pursuant to Section 16 of the Exchange Act,
promptly (but in any event within three business days) after transmission
thereof, copies of all financial statements, proxy statements, reports and
any other information, documents or communications which the Company or its
material Subsidiaries sends to its shareholders and copies of all
registration statements and all regular, special or periodic reports which
it files, or any of its officers or directors file with respect to the
Company, with the Commission or with any securities exchange on which any
of its securities are then listed, and copies of all press releases and
other statements made available generally by the Company to the public
concerning material developments in the business of the Company and/or its
Subsidiaries;
(viii) (I) In the case of any proposed acquisition by the Company or
any of its Subsidiaries for which the aggregate consideration paid by the
Company and its Subsidiaries exceeds $15,000,000, the Purchaser shall
receive (1) at least fifteen days prior to the closing date of such
proposed acquisition, a reasonably detailed description of the acquired
target and the terms of such proposed acquisition in each case no less
detailed and comprehensive than such descriptions if any, delivered to the
agent under the Credit Agreement and (2) within 10 days following the
closing date of such proposed acquisition, copies of any management service
agreements, technical service agreements, acquisition or merger agreements,
professional employment and non-competition agreements and all other
agreements executed in connection therewith and (II) in the case
-35-
<PAGE> 41
of any acquisition consummated by the Company or any of its Subsidiaries
for which the aggregate consideration paid by the Company and its
Subsidiaries is less than $15,000,000, the Purchaser shall receive, within
10 days following the closing date of such acquisition, a reasonably
detailed description of the acquired target and the terms of such
acquisition in each case no less detailed and comprehensive than such
descriptions if any, delivered to the agent under the Credit Agreement; and
(ix) with reasonable promptness, such other information and financial
data concerning the Company or any Subsidiary of the Company that any
person entitled to receive information under this Section 7.3 may
reasonably request.
Section 7.4 Inspection. The Company covenants and agrees that it will
permit the Purchaser and its representatives (including without limitation, its
legal counsel, accountants and examiners from the Small Business Administration)
so long as the Purchaser holds any Convertible Notes and/or shares of Common
Stock, upon reasonable notice during normal business hours to inspect the
properties of the Transaction Parties and to examine and make extracts and
copies from the books and records of the Transaction Parties and discuss with
management and the Company's accountants the business and affairs of the
Transaction Parties.
Section 7.5 Regulatory Sale or Disposition. Anything herein to the
contrary notwithstanding, in the event that the Purchaser or any of its
Affiliates reasonably believes that if the Purchaser or such Affiliate, shall
continue to hold some or all of the Convertible Notes or upon conversion, Common
Stock, or any other notes or securities of the Company held by it, there is a
material risk that such ownership will result in the violation of any statute,
regulation or rule of any governmental authority (including, without limitation,
Regulation Y) shall promptly notify the Company thereof, use reasonable efforts
to avoid such violation, and consult with the Company regarding appropriate
remedial actions. Thereafter, to the extent permitted by applicable law, the
Purchaser or such Affiliate may sell, exchange or otherwise dispose of some or
all of such Convertible Notes, Common Stock or other securities of the Company,
as the case may be, in as prompt and orderly a manner as is reasonably necessary
to a third party or third parties acceptable to the Company acting in good
faith. In such event, the Company shall cooperate with the Purchaser or such
Affiliate in (i) disposing of such Convertible Notes, Common Stock or other
securities of the Company to a third party or third parties acceptable to the
Company acting in good faith or (ii) exchanging all or any portion of its voting
securities on a share-for-share basis for shares of a non-voting security of the
Company (such non-voting security being identical in all respects to such Common
Stock or other voting securities, except that they shall be non-voting and shall
be convertible or exercisable into voting securities on such conditions as are
requested by the Purchaser or such Affiliate in light of the regulatory
considerations then prevailing). Without limiting the foregoing, at the request
of the Purchaser or such Affiliate, the Company shall provide (and authorize the
Purchaser or such Affiliate, to provide) financial and other information
concerning the Company to any prospective purchaser (acceptable to the Company
acting in good faith) of the Convertible Notes, Common Stock or other securities
of the Company owned by the Purchaser or such Affiliate, and shall use best
reasonable efforts to amend this Agreement, the certificate of incorporation of
the Company, the bylaws of the Company, and any related agreements and
instruments and shall take any
-36-
<PAGE> 42
additional actions necessary or appropriate in order to effectuate and reflect
the foregoing. The Company shall not be required to provide any such information
unless the recipient thereof signs a confidentiality agreement satisfactory to
the Company acting in good faith.
Section 7.6 Transaction with Affiliates. Except as set forth on
Schedule 2.27, the Company will not, and will not permit any of its Subsidiaries
to, enter into any transaction or series of related transactions, whether or not
in the ordinary course of business, with any Affiliate of the Company, or any
Affiliate of any Subsidiary of the Company, other than transactions on terms and
conditions as favorable to the Company or such Subsidiary, as would be
obtainable in a comparable third-party transaction negotiated on an arm's length
basis with a person other than an Affiliate; provided, however, that nothing in
this Section 7.6 shall prohibit or otherwise restrict transactions (i) between
the Company and its wholly-owned Subsidiaries or (ii) relating to management
service agreements or technical services agreements entered into the ordinary
course of business.
Section 7.7 Business. The Company will not, and will not permit any of
its Subsidiaries to, engage (directly or indirectly) in any line of business
other than a Permitted Business.
Section 7.8 Registration Rights. The Company shall not, after the date
hereof, grant any registration rights which conflict with or impair the
registration rights granted pursuant to this Agreement and shall not, without
the prior written consent of the holders of a majority of the Registrable
Securities then outstanding, amend, modify or waive any provision contained in
any other registration rights agreement to which the Company is a party, which
would adversely affect the Purchaser. The covenants in this Section 7.8 shall
automatically terminate when no Registrable Securities are outstanding.
Section 7.9 Limitation on Dividend/Indebtedness Restrictions. The
Company will not, and will not permit any of its Subsidiaries (other than Joint
Ventures) to directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of the
Company or any such Subsidiary (i) to pay dividends or make any other
distributions on its capital stock or any other interest or participation in its
profits owned by the Company or any Subsidiary of the Company, except for such
encumbrances or restrictions existing under or by reason of applicable law or
documents pertaining to borrowed money incurred by the Company or (ii) to
exchange any debt security of the Company for an equity security of the Company.
Section 7.10 SBIC Information. In addition, the Company covenants and
agrees to provide to the Purchaser any other information which the Purchaser
reasonably requests, including, without limitation, at least annually,
sufficient financial and other information necessary to allow the Purchaser to
evaluate the financial condition of the Company for the purpose of valuing the
Purchaser's interest in the Company, to determine the continued eligibility of
the Company under the Small Business Investment Act of 1958, as amended (the
"SBIA") and the regulations thereunder, including 13 CFR 121.301, and to verify
the use of the proceeds received by the Company from the purchase of the
Convertible Notes. All such
-37-
<PAGE> 43
information shall be certified by the President, Chief Executive Officer,
Treasurer or Chief Financial Officer of the Company. Promptly after the end of
each fiscal year of the Company (and in any event prior to February 28 of each
year), at the request of the Purchaser, the Company shall provide to the
Purchaser a written assessment in form and substance satisfactory to the
Purchaser of the economic impact, if any, of the financing assistance provided
to the Company by the Purchaser, specifying the full time equivalent jobs
created or retained, and the impact of the financing on the revenues and profits
of the business and on taxes paid by the business and its employees. Upon the
request of the Purchaser the Company will also provide all information requested
by the Purchaser in order for it prepare and file SBA Form 468 and any other
information requested or required by any governmental agency asserting
jurisdiction over the Purchaser.
Section 7.11 Use of Proceeds. The Company agrees that it will use the
proceeds from the issuance of the Convertible Notes for ongoing working capital,
future acquisitions, to repay indebtedness and, in any event, not for any
purpose that would be a violation of 13 CFR 107.720.
Section 7.12 Change of Activity. For a period of one year following the
date hereof, the Company will not change its business activity if such change
would render the Company ineligible to receive financial assistance from a Small
Business Investment Company under the SBIA and the regulations thereunder.
Section 7.13 Non-Discrimination. The Company will at all times comply
with the nondiscrimination requirements of 13 CFR, Parts 112, 113 and 117.
Section 7.14 Asset Sales; Investments. (a) The Company will not, and
will not permit any of its Subsidiaries to sell, convey, transfer or dispose of
assets, property or equity securities of any of the Company's Subsidiaries (each
such transaction or transactions an "Asset Sale") unless the gross cash proceeds
(including any cash received or receivable by way of deferred payment) received
or receivable from all such Asset Sales occurring during any fiscal year does
not exceed $7,500,000 in the aggregate excluding from such $7,500,000 limit
sales permitted by Sections 6.8(a), (b), (c), (d), and (f) of the Credit
Agreement (as in effect on the date hereof and whether or not the Credit
Agreement is in effect).
(b) The Company will not, and will not permit any of its Subsidiaries
to, purchase or acquire stock, obligations or securities of, or any other
interest in, or make any capital contribution to, any other Person, or buy a
substantial portion of the assets of, or any business or product line of, any
other Person, if (i) any such purchase or acquisition shall exceed $25,000,000
and (ii) after giving effect to all other such purchases or acquisitions during
any fiscal year of the Company, exceeds $50,000,000 excluding from such limits
(1) any purchases or acquisitions for less than $3,500,000, (2) purchases of
cash equivalents, (3) investments, loans and advances of money in or to
wholly-owned Subsidiaries of the Company, (4) loans to employees in the ordinary
course of business, (5) the Acquisition and any purchase, acquisition,
contribution or investment made prior to the date hereof, and (6) investments,
loans and advances in or to joint ventures by the Company and its Subsidiaries
to the extent the aggregate amount of such investments in joint ventures, during
any fiscal year of the Company, does not exceed
-38-
<PAGE> 44
$20,000,000 (it being understood and agreed that if the aggregate amount of
investments in joint ventures exceeds $20,000,000 in any fiscal year of the
Company, such excess shall be included in the calculation of the $50,000,000
limitation set forth above).
Section 7.15 Consolidation, Merger, Sale of Assets, etc. The Company
will not, and will not permit any of its Subsidiaries to, wind up, liquidate or
dissolve its affairs or enter into any transaction of merger or consolidation,
or convey, sell, lease or otherwise dispose of (or agree to do any of the
foregoing at any future time) all or substantially all of the property and
assets of the Company and its Subsidiaries taken as a whole. Notwithstanding the
foregoing (a) any Subsidiary may merge or consolidate with the Company or any
other wholly-owned Subsidiary of the Company, (b) any Subsidiary may transfer
all or substantially all of its assets to the Company or any other wholly-owned
Subsidiary of the Company, (c) the Company may liquidate or dissolve inactive
Subsidiaries having insignificant assets, (d) a subsidiary that is a Joint
Venture may merge or consolidate with another subsidiary that is a Joint Venture
if (1) the terms of such transaction are fair and in the best interests of the
Company, (2) at the time of the transaction, neither Joint Venture is insolvent
(i.e., has liabilities in excess of its assets, fairly valued) and (3) no equity
holder of any of the merging or consolidating Joint Ventures other than the
Company or a Subsidiary of the Company will have, after giving effect to such
merger, a disproportionately large equity interest of the surviving Joint
Venture and (e) Subsidiaries of the Company may consummate transactions
permitted by Section 7.14 so long as in no event shall the Company and its
Subsidiaries transfer in one or more transactions (whether or not related) all
or substantially all of the assets of the Company and its Subsidiaries taken as
a whole.
Section 7.16 Indebtedness. The Company will not, and will not permit
any of its Subsidiaries to, incur Indebtedness unless after giving effect to
such incurrence, the Interest Coverage Ratio does not exceed 2.25 to 1.0 on a
Pro Forma Basis; provided, however, that the Company and its Subsidiaries may
incur Indebtedness under the Credit Agreement so long as the principal amount of
such Indebtedness does not exceed $180,000,000 (less any repayments of loans
thereunder which may not be reborrowed and less any permanent commitment
reductions thereof).
Section 7.17 Leverage Ratio. At the end of each fiscal quarter, the
Leverage Ratio shall not exceed 4.50 to 1.0 on a Pro Forma Basis.
Section 7.18 Dividends. The Company will not, and will not permit any
of its Subsidiaries to declare or pay or set aside for payment (whether in cash,
property or obligations of the Company or any of its Subsidiaries) any dividends
on, or other distributions in respect of, or any other payment of any kind with
respect to, or purchase, redeem or otherwise acquire, any capital stock or other
securities of the Company or any of its Subsidiaries except that (a)
Subsidiaries of the Company may make such payments to the Company or a
wholly-owned Subsidiary of the Company, (b) the Company may purchase, redeem, or
acquire its capital stock from employees and board members and their estates or
members of their immediate families upon the resignation, termination or death
of such employee or board member, provided that the aggregate amount of all such
purchases over the term of this Agreement does not exceed $2,000,000 and that at
the time of such transaction there shall exist no Default, (c) Joint Ventures
-39-
<PAGE> 45
may pay dividends on their equity securities so long as such dividends are paid
on a pro rata basis to their respective equity holders and (d) the Company may
repurchase shares of its Common Stock for an amount not to exceed 10% of the
consolidated net income of the Company and its Subsidiaries less extraordinary
non-cash losses associated with the write-off of goodwill to the extent that
such losses were not already included in determining consolidated net income,
that, on a cumulative basis, has accrued since the beginning of the 1999 fiscal
year so long as at the time of such transaction, there shall exist no Default;
provided, however, notwithstanding the foregoing, in no event may the Company or
any of its Subsidiaries purchase, redeem or acquire (or make any announcement
with respect to any of the foregoing) any shares of its capital stock during the
120-day period ending on any of the second, third or fourth anniversary of the
Closing Date (other than stock transferred to the Company as consideration (i)
upon the termination of a service agreement between a Practice and the Company
or (ii) for a Practice's contractual indemnification obligations to the
Company).
Section 7.19 Amendment of Charter. The Company will not amend the
certificate of incorporation of the Company in a manner which could adversely
affects the rights of Purchaser or any of its Affiliates as a holder of
Convertible Notes or Common Stock. By way of example, and not by way of
limitation, the following amendments to the Company's certificate of
incorporation shall not be deemed to adversely affect the rights of Purchaser or
any of its Affiliates as a holder of Convertible Notes or Common Stock: the
filing of certificates of designation to specify the terms of preferred stock,
the institution of a classified board of directors, the denial of action by
written consent of shareholders, a "fair price" amendment whereby certain
business combinations and transactions with significant stockholders (i.e., to
be defined as stockholders who "beneficially own" a specified percentage of
stock of the Company in excess of the percentage "beneficially owned" by the
Purchaser at the time the amendment is adopted) must be approved by
disinterested directors or satisfy certain designated price and form of
consideration requirements, provisions stating that members of the board of
directors may only be removed for cause, provisions allowing only then existing
directors to fix the size of the board of directors and fill vacancies on the
board of directors, provisions allowing only the board of directors to adopt,
amend or repeal bylaws, provisions requiring advance notice of director
nominations and shareholder proposals and provisions stating that shareholders
cannot call a special meeting of shareholders.
Section 7.20 Hart-Scott-Rodino Compliance. The Company agrees that in
the event the conversion of the Convertible Notes requires the prior compliance
with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), from and after the date on which the Purchaser notifies the Company
that compliance is so required under the HSR Act (whether or not the Purchaser
has a then current intention to convert the Convertible Notes), the Company
shall use its best efforts, including, without limitation, by making all
necessary filings under the HSR Act, responding to all requests for additional
information and otherwise taking all other necessary actions, as shall cause the
termination of all waiting periods under the HSR Act, in respect of the
conversion of the Convertible Notes. The Company shall pay all fees and expenses
of the Purchaser incurred in compliance with this Section 7.20, including its
legal fees and expenses and all filing fees required by the HSR Act. The Company
shall provide the Purchaser with all such information in respect of the Company
as the Purchaser may request to
-40-
<PAGE> 46
enable the Purchaser to determine whether the issuance of Common Stock may
require compliance with the HSR Act.
Section 7.21 Board of Directors. (a) The Company shall take all
necessary or desirable action to include one director designated by the
Purchaser and acceptable to the Company (and in all events one of the managing
directors of the Purchaser shall be acceptable to the Company) on the Company's
Board of Directors.
(b) The removal of any director designated by the Purchaser may be only
at the written request of the Purchaser, except if such director is removed or
is not elected as a director of the Company by the requisite action of the
Company's shareholders; provided however, that if such director is so removed or
not elected, the Company shall still comply with Section 7.21(a).
(c) In addition, in the event the Purchaser does not elect to designate
a member of the Company's Board of Directors, the Purchaser shall have the right
to appoint a non-voting advisor acceptable to the Company (and in all events one
of the managing directors of the Purchaser shall be acceptable to the Company)
(the "Advisor") to the Company's Board of Directors to attend each meeting of
the Board of Directors of the Company including by telephone at the request of
the Purchaser. The Company shall give the Advisor oral or written notice of each
meeting of the Board of Directors (whether annual or special) at the same time
and in the same manner as oral or written notice is given to the members of the
Board of Directors. The Company shall provide the Advisor with all written
materials and other information (including copies of meeting minutes) given to
the members of the Board of Directors in connection with any such meeting at the
same time as such information is delivered to the members of the Board of
Directors and, if the Advisor does not attend (or, in the case of a telephonic
meeting, does not listen by telephone to) a meeting of the Board of Directors,
the Advisor will be entitled, upon request, to receive a written or oral summary
of the meeting from the Secretary of the Company. If the Company proposes to
take any action by written consent of the Board of Directors in lieu of a
meeting of the Board of Directors, then the Company shall give prior written
notice of such action to the Advisor.
(d) The Company shall pay the out-of-pocket expenses (in accordance
with the Company's policy regarding repayment of director expenses) of any
Advisor or Board Member incurred in connection with the attendance at any such
meeting.
Section 7.22 Grant of Preemptive Rights. (a) In the event (and on each
occasion) that the Company or any of its Subsidiaries, shall decide to undertake
an issuance of New Securities (except New Securities issued by a Subsidiary of
the Company to the Company or a wholly-owned Subsidiary of the Company or a
Subsidiary that is a Joint Venture) at a price per share lower than the then
effective Conversion Price, the Company will give to the Purchaser, written
notice (a "Preemptive Notice") of the Company's decision, describing the amount,
type and terms of such New Securities, the purchase price to be paid by the
purchasers of such New Securities and the general terms upon which the New
Securities will be issued (including, without limitation, the expected timing of
such issuance which will in no event be more than one
-41-
<PAGE> 47
hundred twenty (120) days after the date upon which such Preemptive Notice is
given or less than twenty (20) Business Days after the date upon which such
Preemptive Notice is given). The Purchaser shall have twenty (20) Business Days
from the date on which it receives the Preemptive Notice to agree to purchase
its Pro Rata Amount of such New Securities for the Preemptive Price and upon the
general terms specified in the Preemptive Notice by giving written notice to the
Company and stating therein the quantity of New Securities to be purchased by
any such Person. If, in such written notice, the Purchaser specifies an amount
of New Securities equal to less than the total number of New Securities it is
entitled to purchase pursuant to such issuance, the Company may undertake to
sell any unused portion of such new Securities to any Person on terms no more
favorable to such Person than those contained in the Preemptive Notice so long
as such sale is consummated within one hundred twenty (120) days after the date
upon which such Preemptive Notice was originally given. If, in connection with
such a proposed issuance of New Securities, the Purchaser shall for any reason
fail or refuse to give such written notice to the Company within such 20-
Business Day period or shall elect to purchase its Pro Rata Amount of such New
Securities but shall fail to consummate the purchase of such New Securities on
the terms set forth in the Preemptive Notice within forty-five (45) days after
the date upon which the Preemptive Notice is given, the Purchaser shall, for all
purposes of this Section 7.22, be deemed to have refused (in that particular
instance only) to purchase any of such New Securities and to have waived (in
that particular instance only) all of its rights under this Section 7.22 to
purchase any of such New Securities and the Company may issue such New
Securities without further compliance with this Section 7.22 for a period of one
hundred twenty (120) days beginning immediately after such 20-Business Day
period. Notwithstanding the foregoing, in the case of New Securities that are
convertible into, or exchangeable or exercisable for, Common Stock, the
Purchaser shall have the preemptive rights set forth in this Section 7.22 when
such New Securities that are convertible into, or exchangeable or exercisable
for, Common Stock are issued and not when shares of Common Stock are issued upon
conversion, exchange or exercise of such New Securities.
(b) In the event the Purchaser has the right to acquire any voting New
Securities under this Section 7.22, but is prohibited from exercising such right
under applicable law, the Company, at the Purchaser's request, shall offer to
sell to the Purchaser, New Securities that do not have voting rights but
otherwise have the same terms as such voting New Securities and which shall be
convertible into voting New Securities on terms reasonably requested by the
Purchaser.
Section 7.23 Reservation of Common Stock; Valid Issuance. (a) The
Company shall at all times reserve for issuance free from preemptive rights and
other rights to preempt or subscribe, a number of shares of Common Stock at
least equal to the number of shares of Common Stock issuable upon conversion or
exercise of the Convertible Notes (including, without limitation, accrued
interest convertible into Common Stock) including anti-dilution adjustments then
in effect.
(b) The shares of Common Stock issuable upon conversion or exercise of
the Convertible Notes, when issued in accordance with their respective terms,
will be validly issued,
-42-
<PAGE> 48
fully paid and nonassessable, free of all preemptive or similar rights, and
shall be delivered free and clear of all Encumbrances.
Section 7.24 Insurance. The Company will, and will cause each of its
Subsidiaries to, (i) keep all material property useful and necessary in its
business in good working order and condition (ordinary wear and tear excepted),
(ii) maintain with financially sound and reputable insurance companies insurance
on all its property in at least such amounts and against at least such risks as
are described on Schedule 2.6, and (iii) furnish to the Purchaser, upon written
request, full information as to the insurance carried.
Section 7.25 Questar Acquisition. Immediately following the purchase of
the Convertible Notes, the Company shall cause the Acquisition to be
consummated.
Section 7.26 Participation in Future Financing. Purchaser or any
Affiliate of Purchaser designated by the Purchaser shall have the opportunity to
participate in any future private issuance of subordinated debt or any private
equity issuances of the Company or any of its Subsidiaries (other than Joint
Ventures), on terms and conditions to be agreed upon by such parties.
Section 7.27 Limitation On Other Subordinated Debt. The Company will
not, and will not permit any of its Subsidiaries to, directly or indirectly,
incur any Indebtedness that is (i) subordinate in right of payment to any other
Indebtedness of the Company or any of its Subsidiaries, and (ii) senior in right
of payment to the Convertible Notes. Neither the Company nor any of its
Subsidiaries will, directly or indirectly, incur any Indebtedness which is pari
passu in right of payment to the Convertible Notes unless such Indebtedness has
no principal payment dates prior to the maturity date of the Convertible Notes.
Notwithstanding anything to the contrary contained in this Section 7.26, the
Company and its Subsidiaries may issue Indebtedness for borrowed money
(including, without limitation, convertible Indebtedness) pursuant to a public
offering or an offering effected pursuant to Rule 144(A).
Section 7.28 Company's Performance of Covenants. Notwithstanding
anything to the contrary contained herein, in no event shall (i) the Company be
required to comply with the covenants set forth in this Section 7 other than
Sections 7.1, 7.4, 7.5, 7.8, 7.10, 7.12 and 7.13, if the Purchaser owns no
Convertible Notes and owns less than a number of shares of Common Stock less
than one-third of the number of Full Conversion Shares (as such number may be
adjusted for stock splits, stock dividends, stock combinations or similar
events), and (ii) the Company be required to comply with the covenants contained
in Section 7 other than Sections 7.1, 7.3, 7.4, 7.5, 7.7, 7.8, 7.10, 7.12, 7.13,
7.14(b), 7.19, 7.21, 7.22, 7.23 and 7.26, if the Purchaser owns no Convertible
Notes and owns more than a number of shares of Common Stock greater than or
equal to one-third of the number of Full Conversion Shares (as such number of
shares may be adjusted for stock splits, stock dividends, stock combinations or
similar events). Notwithstanding anything to the contrary contained in this
Section 7.28, the Company shall be required to comply with Section 7.15 at any
time any principal amount of the Convertible Notes remains outstanding.
-43-
<PAGE> 49
Section 7.29 Employee Benefits and Tax Information. The Company shall
request clarification of the initial determination letter issued by the IRS as
to the Company's 401(k) and Profit Sharing Plan with respect to the issues
raised by the Company's determination letter request and shall furnish the
Purchaser with a revised IRS determination letter which addresses these issues.
ARTICLE VIII
REGISTRATION RIGHTS
Section 8.1 Shelf Registration. (a) Obligation to File and Maintain.
Subject to the limitations provided herein, if at any time the Company shall be
requested in writing (which writing shall specify the Registrable Securities to
be sold and the intended method of disposition) by the Purchaser or any
subsequent holders of Convertible Notes or Registrable Securities constituting
51% or more of the Registrable Securities then outstanding (treating the
Registrable Securities issuable upon conversion of the Convertible Notes as
outstanding for this purpose), to effect the registration under the Securities
Act of the Registrable Securities, the Company shall, within 10 business days
after the Company receives such written request give written notice of such
requested registration to all other holders of Convertible Notes and Registrable
Securities. The Company shall within sixty (60) days of such request, file a
registration statement covering all of the number of Registrable Securities that
the Company has been so requested to register by the holder(s) sending the
initial request for registration to the Company and all other Registrable
Securities that the Company has been requested to register by the other holders
thereof by written request given to the Company within thirty (30) days after
the giving of such written notice by the Company. The registration statement
shall include a number of shares of Common Stock issuable upon the conversion of
the Convertible Notes issued hereunder or if all the Convertible Notes have been
already converted, such number of shares of Common Stock issued upon such
conversion on a continuous or delayed basis in the future (the "Shelf
Registration"). The Company shall not be required to effect more than three (3)
Shelf Registration statements pursuant to this Section 8.1(a) if, with respect
to any such registration, the following conditions are met: (i) such
registration becomes effective and remains effective until such time as all
securities registered thereunder have been sold and (ii) the Purchaser does not
withdraw its request for registration in its entirety prior to the time such
Shelf Registration becomes effective; provided, however, the Company shall file
any additional Shelf Registration Statements from time to time to include a
number of shares of Common Stock sufficient to reflect any anti-dilution
adjustments and accrual of interest paid as PIK Securities (as defined in the
Convertible Notes). The Common Stock registered under the Shelf Registration
shall be reserved for the Common Stock issued or issuable, as the case may be,
upon the conversion of the Convertible Notes. The Shelf Registration shall be on
an appropriate form and such Registration and any form of prospectus included
therein or prospectus supplement relating thereto shall reflect such plan of
distribution or method of sale as the holders of Registrable Securities may from
time to time notify the Company, including (I) the sale of some or all of the
Registrable Securities in a public offering, or (II) if requested by the any
holder of Registrable Securities, subject to receipt by the Company of such
information (including information relating to purchasers) as the
-44-
<PAGE> 50
Company reasonably may require, (i) a transaction constituting an offering
outside the United States which is exempt from the registration requirements of
the Securities Act in which any holder of Registrable Securities undertakes to
effect registration after the completion of such offering in order to permit
such shares to be freely tradable in the United States, (ii) a transaction
constituting a private placement under Section 4(2) of the Securities Act in
connection with which any holder of Registrable Securities undertakes to effect
a registration after the conclusion of such placement to permit such shares to
be freely tradable by the purchasers thereof, or (iii) a transaction under Rule
144A of the Securities Act in connection with which any holder of Registrable
Securities undertakes to effect a registration after the conclusion of such
transaction to permit such shares to be freely tradable by the purchasers
thereof.
(b) Time for Filing and Effectiveness. The Company shall file with the
Commission the Shelf Registration with respect to all Registrable Securities in
accordance with Section 8.1(a) and shall use its reasonable best efforts to
cause such Shelf Registration to become effective as promptly as practicable
after filing thereon, but in no event later than the date which is 90 days after
the date of request therefor. The Company shall keep the Shelf Registration
filed pursuant to this Section 8.1 continuously effective until there are no
outstanding Registrable Securities. During the period during which the Shelf
Registration is effective, the Company shall supplement or make amendments to
the Shelf Registration, if required by the Securities Act and the policies,
rules and regulations of the Commission as announced from time to time, or if
requested by the Purchaser or an underwriter of Registrable Securities,
including to reflect any specific plan of distribution or method of sale, and
shall use its best efforts to have such supplements and amendments declared
effective, if required, as soon as practicable after filing.
(c) Black-Out Periods of the Purchaser. Notwithstanding anything herein
to the contrary, (i) the Company shall have the right from time to time to
require any holder of Registrable Securities not to sell Registrable Securities
pursuant to any Shelf Registration or to suspend the effectiveness thereof
during the period starting with the date 30 days prior to the Company's good
faith estimate, as certified in writing by an executive officer of the Company
to the holders of Registrable Securities, of the proposed date of filing of a
registration statement or a preliminary prospectus supplement relating to an
underwritten public offering of equity securities of the Company for the account
of the Company, and ending on the date 120 days following the delivery of such
estimate and (ii) the Company shall be entitled to require the holders of
Registrable Securities not to sell Registrable Securities pursuant to any Shelf
Registration or to suspend the effectiveness thereof (but not for a period
exceeding 90 days) if the Company determines that such offering or continued
effectiveness would interfere with any material financing, acquisition,
disposition, corporate reorganization or other material transaction involving
the Company or any of its subsidiaries because, based on the opinion of legal
counsel, public disclosure thereof would be required prior to the time such
disclosure might otherwise be required. In any event, the Company shall not be
entitled to exercise the rights granted to the Company pursuant to this Section
8.1(c) more than twice in any two-year period.
(d) Coordination of Registrations. In the event that the Company
determines to sell any equity securities of the Company or any securities
convertible into equity securities of the Company under any registration
statement or prospectus supplement, during the period
-45-
<PAGE> 51
starting with the date 30 days prior to the proposed date of filing of a
preliminary prospectus supplement relating to a Shelf Registration filed
pursuant to Section 8.1(a), pertaining to an underwritten offering of
Registrable Securities, and ending on the date 90 days following the date of
filing of the final prospectus supplement, but in no event on a date later than
90 days following the date of filing of the preliminary prospectus supplement,
then the Company and such holder of Registrable Securities shall cooperate in
selling the securities to be sold by such holder and the securities to be sold
by the Company in one offering; provided, however, in the event the managing
underwriter of such underwritten offering shall advise the Company and such
holder in writing that, in such underwriter's opinion, the amount of securities
requested to be sold would adversely affect the offering and sale (including
price) of such securities, then the Company shall be entitled to reduce the
amount of securities requested to be sold by such holders of Registrable
Securities in such offering; provided, however, that the Company shall not be
entitled to reduce the total amount of securities requested to be sold by such
holders of Registrable Securities if (i) the proportion that the amount of
securities sold in the offering by such holders bears to the amount of
securities sold in the offering by the Company, would be less than (ii) the
proportion that the total amount of securities originally requested to be sold
by such holders of Registrable Securities bears to the amount of securities
originally specified to be sold by the Company in such offering; provided,
further, in the event that the holder is unable to sell at least 50% of the
Registrable Securities desired to be sold by such holder in such offering, then
such registration shall not count as one of the three (3) registrations
permitted to be demanded by the Purchaser pursuant to Section 8.1(a).
(e) Priority on Shelf Registrations. If the managing underwriter for
any underwritten offering contemplated by this Section 8.1 shall advise the
Company in writing that, in such underwriter's opinion, the amount of securities
requested to be included in such Shelf Registration would adversely affect the
offering and sale (including pricing) of such securities then the Company will
include in such Shelf Registration, the number of securities that the Company is
so advised can be sold in such offering, in the following priority:
(i) first, all Registrable Securities requested to be sold pro rata
among such holders on the basis of the number of Registrable Securities
requested to be sold by such holders pursuant to this Section 8.1;
(ii) second, securities proposed to be sold by the Company for its own
account; and
(iii) third, any other securities requested to be included in such
Registration in such manner as the Company may determine.
(f) Notice. The Company shall give each holder of Registrable
Securities prompt notice in the event that the Company has suspended sales of
Registrable Securities under Section 8.1(b).
(g) Selection of Underwriters. Any and all underwriters or other agents
involved in any sale of Registrable Securities pursuant to a Shelf Registration
shall include one
-46-
<PAGE> 52
or more underwriting firms of nationally recognized standing selected by the
Company and reasonably satisfactory to the Purchaser.
(h) Expenses. All Registration Expenses incurred in connection with any
Shelf Registration shall be borne by the Company. The Company shall, in any
event, bear its internal costs (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
Section 8.2 Incidental Registrations. (a) Notification and Inclusion.
If the Company proposes to register for its own account or the account of any
other securityholder, any equity securities of the Company or any securities
convertible into equity securities of the Company under the Securities Act
(other than pursuant to a registration on Form S-4 or Form S-8 or any similar
form or pursuant to a Shelf Registration under this Agreement), the Company
shall, at each such time after the date hereof, promptly give notice to each
holder of Registrable Securities (the "Company Notice") of such registration and
of such holder's rights under this Section 8.2(a). Upon the written request of
any holder of Registrable Securities given within 20 days after receipt of a
Company Notice by such holder of Registrable Securities, the Company shall
include in such proposed registration such Registrable Securities as such
holders shall request and shall use its best efforts to cause a registration
statement covering all of the Registrable Securities that such holders have
requested to be registered to become effective under the Securities Act (an
"Incidental Registration"). The Company shall not be required to include in such
Incidental Registration any Registrable Securities held by a holder that does
not submit a written request within such 20 day period.
(b) Priority on Incidental Registration. If an Incidental Registration
pursuant to this Section 8.2 involves an underwritten offering, the managing
underwriter of such underwritten offering shall advise the Company in writing
that, in such underwriter's opinion, the amount of securities requested to be
included in such Incidental Registration, would adversely affect the offering
and sale (including price) of such securities, then the Company will include in
such Incidental Registration, the number of securities that the Company is so
advised can be sold in such offering, in the following priority:
(i) first, all the securities of the Company which the Company proposes
to sell for its own account;
(ii) second, if the Incidental Registration is being filed because
securityholder(s) of the Company have exercised their rights to demand the
Company to file a registration statement that covers their securities, then
all such securities demanded to be sold by such holder(s) pro rata among
such holders on the basis of the number of securities demanded to be sold
by such holders; and
(iii) third, all remaining securities requested to be sold pro rata
among selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling shareholder or in
such other proportions as shall mutually be agreed to by such selling
shareholders. For purposes of the preceding sentence
-47-
<PAGE> 53
concerning apportionment of any selling shareholder which is a holder of
Registrable Securities and which is a partnership or corporation, the
partners, retired partners and shareholders of such holder, or the estates
and family members or any such partners and retired partners and any trusts
for the benefit of any of the foregoing persons shall be deemed to be a
single "selling shareholder", and any pro rata reduction with respect to
such "selling shareholder" shall be based upon the aggregate amount of
shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder", as defined in this sentence.
(c) Expenses. All Registration Expenses incurred in connection with any
Incidental Registration shall be borne by the Company. The Company shall, in any
event, bear its internal costs (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expenses of any annual audit and the fees and expenses of any Person,
including special experts, retained by the Company.
Section 8.3 Registration Procedures. In connection with the filing of
any registration statement as provided in Section 8.1 or 8.2 of this Agreement,
the Company shall use its reasonable best efforts to effect the Registration and
sale of Registrable Securities in accordance with the intended method of
disposition thereof, and pursuant thereto, the Company will as expeditiously as
possible:
(a) prepare and (within 60 days after the end of the period within
which requests for registration may be given to the Company) file with the
Commission the requisite registration statement (including a prospectus
therein) to effect such Registration and use its reasonable best efforts to
cause such registration statement to become effective, provided that before
filing such registration statement or any amendments or supplements
thereto, the Company will furnish to the counsel selected by the Purchaser
copies of all such documents proposed to be filed, which documents will be
subject to the review of such counsel before any such filing is made, and
the Company will comply with any reasonable request made by such counsel to
make changes in any information contained in such documents relating to
such holders, and upon filing such documents, the Company shall promptly
notify in writing such counsel of the receipt by the Company of any
comments by the Commission with respect to such registration statement or
prospectus or any amendment or supplement thereto or any request by the
Commission for the amending or supplementing thereof or for additional
information with respect thereto;
(b) subject to Section 8.3(g) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to maintain the
effectiveness of such registration and to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until, in the case of
Section 8.1, the termination of the period during which the Shelf
Registration is required to be kept effective, or, in the case of Section
8.2, the earlier of such time as
-48-
<PAGE> 54
all of such securities have been disposed of and the date which is 180 days
after the date of initial effectiveness of such registration statement;
(c) furnish to each holder of Registrable Securities included in a
Registration hereunder and the underwriter or underwriters, if any, without
charge, at least one signed copy of the registration statement and any
post-effective amendments thereto, and upon request, such number of
conformed copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number
of copies of the prospectus contained in such registration statements
(including each preliminary prospectus, complete prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, including documents incorporated by reference, as
such holders and the underwriters may request (it being understood that the
Company consents to the use of the prospectus and any amendment or
supplement thereto by each holder of Registrable Securities covered by such
registration statement and the underwriters, if any, in connection with the
offering and sale of the Registrable Notes covered by the prospectus or any
amendment or supplement thereto);
(d) register or qualify all Registrable Securities under such other
securities or blue sky laws of such jurisdictions as the Purchaser shall
reasonably request, to keep such registration or qualification in effect
for so long as such registration statement remains in effect, and take any
other action which may be necessary or advisable to enable such holders to
consummate the disposition in such jurisdictions of the securities owned by
such holders, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
paragraph be obligated to be so qualified, or to consent to general service
of process in any such jurisdiction, or to subject the Company to any
material tax in any such jurisdiction where it is not then so subject;
(e) cause all Registrable Securities covered by such registration
statement to be registered with or approved by such other government
authority as may be necessary to enable such holder to consummate the
disposition of such Registrable Securities;
(f) furnish to each holder of Registrable Securities included in a
Registration hereunder a signed counterpart, addressed to such holders (and
the underwriters, if any), of (i) an opinion of counsel for the Company,
dated the effective date of such registration statement (and, if such
Registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), reasonably satisfactory in
form and substance to the Purchaser, and (ii) a "cold comfort" letter,
dated the effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial statements
included in such registration statement, covering substantially the same
matters with respect to such registration statement (and the prospectus
included therein) and, in the
-49-
<PAGE> 55
case of the accountants' letter, with respect to events subsequent to the
date of such financial statements, all as are customarily covered in
opinions of issuer's counsel and in accountants' "cold comfort" letters
delivered to the underwriters in underwritten public offerings of
securities;
(g) immediately notify each holder of Registrable Securities included
in a registration statement hereunder at any time when the Company becomes
aware that a prospectus relating thereto is required to be delivered under
the Securities Act, upon discovery that, or upon the discovery of the
happening of any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and at the request
of such holders, subject to Section 8.1(c), promptly prepare and furnish to
such holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made;
(h) comply or continue to comply in all material respects with the
Securities Act and the Exchange Act and with all applicable policies, rules
and regulations of the Commission, as announced from time to time, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least 12 months, but not more
than 18 months, beginning with the first full calendar month after the
effective date of such registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act, and
not file any amendment or supplement to such registration statement or
prospectus to which the Purchaser shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act, having been furnished
with a copy thereof at least two business days prior to the filing thereof;
(i) provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the
effective date of such registration statement;
(j) list all Registrable Securities covered by such registration
statement on any securities exchange or inter-dealer quotation system on
which any shares of Common Stock are then listed;
(k) in connection with any sale pursuant to a Registration, cooperate
with the holders of Registrable Securities and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing securities
to be sold under such Registration, and enable such
-50-
<PAGE> 56
securities to be in such denominations and registered in such names as the
managing underwriter or underwriters, if any, or such holders may request;
(l) enter into such agreements (including underwriting agreements in
customary form) and take such other actions as the Purchaser shall
reasonably request in order to expedite or facilitate the disposition of
such Registrable Securities; and
(m) cause its employees and personnel to use their reasonable best
efforts to support the marketing of the Registrable Securities to the
extent reasonably necessary to sell the Registrable Securities if the offer
and sale of such Registrable Securities is being effected by means of an
underwritten public offering (including, without limitation, the
participation in "road shows," at the request of the underwriters or the
Purchaser).
Section 8.4 Requested Underwritten Offerings. If requested by the
underwriters for any Registration, the Company and each holder of Registrable
Securities participating in such Registration will enter into a customary
underwriting agreement with such underwriters for such offering, which shall
contain such representations and warranties by the Company and such other terms
as are customarily contained in agreements of this type, including indemnities
to the effect and to the extent provided in Section 8.6 hereof. Each holder of
Registrable Securities may be a party to such underwriting agreement and may, at
its option, require that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders. The holders of Registrable
Securities included in an underwritten registration hereunder shall not be
required to (i) make any representations or warranties to or agreement with the
Company or the underwriters other than representations, warranties or agreements
regarding such holder and such holder's intended method of distribution and (ii)
undertake any indemnification or contribution obligations to the Company or the
underwriters with respect thereto, except such indemnification or contribution
obligations otherwise provided in Section 8.6 hereof.
It shall be a condition precedent to the obligations of the Company to
take any action with respect to registering Registrable Securities pursuant to
this Article VIII that such seller of Registrable Securities as to which any
registration is being effected furnish the Company in writing such information
regarding such seller, the Registrable Securities and other securities of the
Company held by such seller, and the distribution of such securities as the
Company may from time to time reasonably request in writing. If a Holder refuses
to provide the Company with any of such information on the grounds that it is
not necessary to include such information in the registration statement, the
Company may exclude such Holder's Registrable Securities from the registration
statement if the Company provides such Holder with an opinion of counsel to the
effect that such information must be included in the registration statement and
such Holder thereafter continues to withhold such information. The deletion of
such Holder's Registrable Securities from a registration statement shall not
affect the registration of the other Registrable Securities to be included in
such registration statement.
Section 8.5 Preparation; Reasonable Investigation. In connection with
the preparation and filing of any registration statement under the Securities
Act, the Company will give the
-51-
<PAGE> 57
Purchaser, its underwriters, if any, and their respective counsel, the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and will give each of them such access
to its books and records during normal working hours and such opportunities to
discuss the business of the Company with its officers, its counsel and the
independent public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Purchaser, such underwriters and their
respective counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
Section 8.6 Indemnification. (a) Indemnification by the Company. In the
event of any registration of any Registrable Securities of the Company under the
Securities Act, the Company will, and hereby does, indemnify and hold harmless
the holders of such securities, their officers, directors, members, employees,
agents, representatives, stockholders and general and limited partners and each
Person who controls such holder (within the meaning of the Securities Act and
Exchange Act) against any losses, claims, damages, liabilities, costs and
expenses (or actions or proceedings, whether commenced or threatened, in respect
thereof), joint or several, insofar as such losses, claims, damages,
liabilities, costs and expenses (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of, are based upon or are incurred in
connection with, any untrue statement or alleged untrue statement of any
material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Company will reimburse such indemnified persons for any
legal or any other expenses incurred by them in connection with investigating or
defending any such loss, claim, liability, action or proceedings; provided,
however, that the Company shall not be liable to a holder of Registrable
Securities in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof), costs or expense arises
out of, is based upon or are incurred in connection with, an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such holder of Registrable
Securities specifically stating that it is for use in the preparation thereof;
and provided further that the foregoing indemnity with respect to any
preliminary prospectus shall not inure to the benefit of any indemnified person
from whom the person asserting such losses, claims, damages, liabilities, costs
and expenses purchased securities if such untrue statement or omission or
alleged untrue statement or omission made in such prospectus is eliminated or
remedied in a modified, supplemented or amended prospectus provided to such
indemnified person prior to the sale of such securities and a copy of the
prospectus shall not have been furnished to such person in a timely manner due
to the wrongful action or wrongful inaction of such indemnified person, whether
as a result of negligence or otherwise. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of each
holder of Registrable Securities and shall survive the transfer of such
securities by such holders.
-52-
<PAGE> 58
(b) Indemnification by the Holder of Registrable Notes. The Company may
require, as a condition to including any Registrable Securities in any
registration statement pursuant to Section 8.1, that the Company shall have
received an undertaking satisfactory to it from each holder of Registrable
Securities to indemnify and hold harmless (in the same manner and to the same
extent as set forth in paragraph (a) of this Section 8.6) the Company, each
director of the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities Act with
respect to any untrue statement or alleged untrue statement of a material fact
in or omission or alleged omission to state a material fact from such
registration statement, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, if such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such holders specifically stating that it is for use in the
preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect regardless of any investigation made by or on
behalf of the Company or any such director, officer, or controlling person and
shall survive the transfer of such securities by the holders of Registrable
Securities; provided, however, that the obligation to indemnify will be
individual, not joint and several, for each holder and will be limited to the
net amount of proceeds received by such holder from the sale of Registrable
Securities pursuant to such registration statement.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding paragraphs of this Section 8.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; provided, however, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 8.6, except to the
extent that the indemnifying party is actually prejudiced by such failure to
receive such notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist in respect
of such claim, the indemnifying party shall be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to the indemnified party for any legal or
other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation and the
indemnifying party shall not, without the consent of the indemnified party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof, a release from all liability in
respect of such claim or litigation provided by the claimant or plaintiff to
such indemnified party.
(d) Contribution. If, for any reason, the foregoing indemnity is
unavailable, or is insufficient to hold harmless an indemnified party, then the
indemnifying party shall contribute to the amount paid or payable by the
indemnified party as a result of such expenses, losses,
-53-
<PAGE> 59
damages, liabilities or expenses, (i) in such proportion as is appropriate to
reflect the relative benefits received by the indemnifying party on the one hand
and the indemnified party on the other (determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or
omission relates to information supplied by the indemnifying party or the
indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission), or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law or provides a lesser sum to the indemnified party
than the amount hereinafter calculated, in the proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying party on the
one hand and the indemnified party on the other, but also the relative fault of
the indemnifying party on the one hand and the indemnified party on the other,
as well as any other relevant equitable considerations. Notwithstanding the
foregoing, no holder of Registrable Securities shall be required to contribute
any amount in excess of the amount such holder would have been required to pay
to an indemnified party if the indemnity under Section 8.6(b) was available. No
indemnified party guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from any
indemnifying party who was not guilty of such fraudulent misrepresentation. The
obligation of any Person to contribute pursuant to this Section 8.6 shall be
several and not joint.
Section 8.7 Rule 144. With a view to making available the benefits of
certain rules and regulations of the Commission that may at any time permit the
sale of the Registrable Securities to the public without registration, the
Company shall:
(a) use its reasonable best efforts to facilitate the sale of the
Registrable Securities to the public, without registration under the
Securities Act, pursuant to Rule 144;
(b) make and keep public information available, as those terms are
understood and defined in Rule 144 at all times during such time as
Registrable Securities are outstanding; and;
(c) use its best efforts to then file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
ARTICLE IX
SURVIVAL
Section 9.1 Survival. The representations and warranties of the Company
and the Purchaser contained in this Agreement and the schedules and certificates
delivered in connection herewith shall survive the Closing until the later of
(x) the payment in full of the Convertible Notes and (y) the date occurring 24
months following the sale of all of the Common Stock of the Company held by the
Purchaser except in the case of clause (y) with respect to representations and
warranties contained in Sections 2.11, 2.13, 2.15 and 2.16 which shall survive
for a period of
-54-
<PAGE> 60
six (6) months after the expiration of the applicable statute of limitations
relating to such claim (including any extensions thereof) and, in each case, may
be relied upon by the Purchaser regardless of any investigation made at any time
by or on behalf of the Purchaser. All covenants made hereunder shall survive in
accordance with their terms.
ARTICLE X
INDEMNIFICATION
Section 10.1 Indemnification. The Company agrees to indemnify and hold
the Purchaser and its officers, directors, employees, Affiliates and agents, and
any successors thereto (and any officers, directors, employees, Affiliates and
agents of such successors) harmless from any liability (whether fixed or
unfixed, liquidated or unliquidated), actual or punitive damage, deficiency,
demand, claim, suit, action, or cause of action, fine, penalty, loss, cost,
expense, Taxes, including without limitation, reasonable attorney fees
("Damages") incurred or suffered as a result of, in connection with, or arising
out of, the transactions contemplated hereby, including without limitation, (a)
any Damages incurred or suffered as a result of, or in connection with, or
arising out of, the failure of any representation, warranty, covenant or
agreement made by the Company pursuant to this Agreement, any schedule or
exhibit to this Agreement or any other Document or any certificates delivered
pursuant thereto (without regard to any "materiality", "material adverse
effect", "substantial compliance" or similar exception or qualifier and without
regard to any knowledge or similar exception or qualifier) to be true and
correct as of the date hereof and on the Closing Date, (b) other than pursuant
to the Purchaser's gross negligence or willful misconduct as determined by a
court of competent jurisdiction, any Damages incurred or suffered as a result
of, or in connection with, or arising out of, any investigation, litigation or
other proceeding (whether or not the Purchaser is a party thereto and whether or
not such investigation, litigation or other proceeding is brought by or on
behalf of the Company or any of its Subsidiaries) related to the entering into
and/or performance of this Agreement or any other Document or the consummation
of the transactions contemplated hereby or the exercise of any of their rights
or remedies provided herein or in the other Documents, (c) any Damages incurred
or suffered as a result of, or in connection with, or arising out of, any Taxes
or Tax liabilities of the Company or any of its Subsidiaries (or any predecessor
to any of the foregoing) for all Pre-Closing Periods, in each case, to the
extent the amount of such Tax Liabilities exceed the liability accruals for such
Taxes as set forth in the pro forma consolidated balance sheet of the Company
delivered pursuant to Section 2.5(b) and (d)) any Damages incurred or suffered
as a result of, or in connection with, or arising out of, any actual or alleged
presence of Hazardous Materials in the air, surface water or groundwater or on
the surface or subsurface of any Real Property owned, leased or at any time
operated by the Company or any of its Subsidiaries, the generation, storage,
transportation, handling or disposal of Hazardous Materials by Company or any of
its Subsidiaries at any location, whether or not owned, leased or operated by
Company or any of its Subsidiaries, the non-compliance of any Real Property with
any Environmental Law (including applicable permits thereunder) applicable to
any Real Property, or any Environmental Claim asserted against Company, any of
its Subsidiaries or any Real Property owned, leased or at any time operated by
Company or any of its Subsidiaries, including, in each case, without limitation,
-55-
<PAGE> 61
the reasonable fees and disbursements of counsel and other consultants incurred
in connection therewith, AND FURTHER INCLUDING DAMAGES RESULTING FROM AN
INDEMNIFIED PARTY'S OWN NEGLIGENCE, OTHER THAN GROSS NEGLIGENCE.
Section 10.2 Contribution. To the extent that the undertaking to
indemnify, pay or hold harmless the Purchaser pursuant to Section 10.1 of this
Agreement may be unenforceable, the Company shall make the maximum contribution
to the payment and satisfaction of each of the indemnified liabilities which is
permissible under applicable law.
Section 10.3 Remedies. The rights and remedies of the Purchaser under
this Article X arising by reason of the breach of any representation or warranty
shall not be exclusive of any other remedies the Purchaser may have at law or
otherwise.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Knowledge of the Transaction Parties. Where any
representation or warranty made by the Company contained in this Agreement is
expressly qualified by reference to its knowledge, such knowledge shall be
deemed to exist if the matter should be within the knowledge of any director,
executive officer or other senior member of management of the Company after due
inquiry.
Section 11.2 Expenses. The Company agrees to pay the costs and expenses
incurred by the Purchaser in connection with the transactions contemplated
hereby and the Purchaser's investment in the Company (including without
limitation, reasonable attorney's fees and expenses incurred in connection with
the (a) preparation, execution and delivery of this Agreement and the other
Documents, (b) any subsequent amendments, modifications or waivers relating
thereto and (c) any regulatory filings, including without limitation filings
under the Exchange Act or in connection with compliance with the HSR Act) and
all costs and expenses incurred by the Purchaser (including, without limitation,
the reasonable attorney's fees and expenses and the fees and expenses of any
experts retained by the Purchaser) in connection with any amendments or waivers
to the Documents and in connection with the exercise or enforcement of any
rights contained in the Documents; provided, however, (x) the Purchaser shall
use reasonable efforts to notify the Company of any material costs and expenses
of the type described in Sections 11.2(b) and (c), prior to the incurrence by
the Purchaser and its legal counsel of such costs and expenses; provided,
further, however, the Company shall not be permitted to object if such expenses
were otherwise incurred in accordance with provisions hereof and (y) the Company
shall not be responsible for costs or expenses of the Purchaser incurred on or
prior to the date hereof to the extent such costs and expenses exceed $175,000.
Section 11.3 Governing Law. The interpretation and construction of this
Agreement, and all matters relating hereto, shall be governed by the laws of the
State of New York applicable to agreements executed and to be performed solely
within such State.
-56-
<PAGE> 62
Section 11.4 Captions. The Article and Section captions used herein are
for reference purposes only, and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 11.5 Publicity. Except as otherwise required by law, none of
the parties hereto shall issue any press release or make any other public
statement, in each case relating to, connected with or arising out of this
Agreement or the matters contained herein or therein, without obtaining the
prior approval of the Purchaser and the Company to the contents and the manner
of presentation and publication thereof. No references to the Purchaser shall be
made in any public statement without the Purchaser's consent.
Section 11.6 Notices. Any notice or other communication required or
permitted under this Agreement shall be sufficiently given if delivered in
person or sent by telecopy or by registered or certified mail, postage prepaid,
addressed as follows:
if to the Company:
American Physician Partners, Inc.
3600 Chase Tower
2200 Ross Avenue
Dallas, Texas 75201
Attention: Sami Abbasi
Telephone: (214) 303-2776
Telecopier: (214) 303-2777
and if to the Purchaser:
BT Capital Partners SBIC, L.P.
130 Liberty Street
New York, New York 10006
Attention: Tyler Zachem
Telephone: (212) 250-2500
Telecopier: (212) 250-7651
with a copy to its counsel:
White & Case LLP
1155 Avenue of the Americas
New York, New York 10036
Attention: John Reiss, Esq.
Telephone: (212) 819-8200
Telecopier: (212) 354-8113
or such other address or number as shall be furnished in writing by any such
party, and such notice or communication shall be deemed to have been given upon
automatic confirmation of
-57-
<PAGE> 63
receipt by the receiving machine if sent by telecopier, upon delivery if
delivered in person, and upon mailing if mailed.
Section 11.7 Parties in Interest. The Company may not transfer, assign
or pledge any of its rights in, or otherwise grant any rights to any Person in,
this Agreement. The Purchaser may transfer any of its rights hereunder and any
assignee or transferee of the Convertible Notes or the Common Stock issued upon
conversion of the Convertible Notes (other than transferees receiving the
Securities pursuant to a registered sale or a sale pursuant to Rule 144) shall
have all the rights of the Purchaser hereunder; provided that unless an Event of
Default (as defined in the Convertible Notes) has occurred and is continuing,
neither Purchaser nor any of its assignees shall assign all or any portion of
the Convertible Notes without the prior written consent of the Company. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Section 11.8 Counterparts. This Agreement may be executed in two or
more counterparts, all of which taken together shall constitute one instrument.
Section 11.9 Entire Agreement. This Agreement and the Convertible
Notes, including the exhibits, schedules, and other documents referred to herein
and therein which form a part hereof and thereof, contain the entire
understanding of the parties hereto with respect to the subject matter contained
herein and therein. This Agreement and the Convertible Notes supersede all prior
agreements and understandings between the parties with respect to such subject
matter.
Section 11.10 Amendments. This Agreement and the Convertible Notes may
not be changed orally, but only by an agreement in writing signed by the
Purchaser and the Company; provided that so long as any Convertible Notes are
outstanding and except with respect to (i) reducing the rate or extending the
time of payment of interest thereon, (ii) modifying the principal amount thereof
or (iii) extending the final maturity thereof, all modifications, amendments, or
consents hereunder shall be approved by the holders of a majority of the
principal balance of the Convertible Notes. Section 11.11 Severability. In case
any provision in this Agreement shall be held invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions hereof
will not in any way be affected or impaired thereby.
Section 11.12 Third Party Beneficiaries. Each party hereto intends that
this Agreement shall not benefit or create any right or cause of action in or on
behalf of any Person other than the parties hereto (and, in the case of the
Purchaser, its transferees) and those Persons entitled to indemnification
pursuant to Article X hereof.
Section 11.13 Jurisdiction. (a) Each of the parties hereto hereby
irrevocably acknowledges and consents that any legal action or proceeding
brought with respect to any of the obligations arising under or relating to this
Agreement may be brought in the courts of the State of New York or in the United
States Southern District Court of New York, as the party bringing such action or
proceeding may elect and each of the parties hereto hereby irrevocably submits
to
-58-
<PAGE> 64
and accepts with regard to any such action proceeding, for itself and in respect
of its property, generally and unconditionally, the jurisdiction of the
aforesaid courts. Each party hereby further irrevocably waives any claim that
any such courts lack jurisdiction over such party, and agrees not to plead or
claim, in any legal action or proceeding with respect to this Agreement or the
transactions contemplated hereby brought in any of the aforesaid courts, that
any such court lacks jurisdiction such party. Each party irrevocably consents to
the service of process in any such action or proceeding by the mailing of copies
thereof by registered or certified mail, postage prepaid, to such party, at its
address for notices set forth in Section 11.6, such service to become effective
10 days after such mailing. Each party hereby irrevocably waives any objection
to such service of process and further irrevocably waives and agrees not to
plead or claim in any action or proceeding commenced hereunder or under any
other documents contemplated hereby that service of process was in any way
invalid or ineffective. The foregoing shall not limit the rights of any party to
serve process in any other manner permitted by law. The foregoing consents to
jurisdiction shall not constitute general consents to service of process for any
purpose except as provided above and shall not be deemed to confer rights on any
Person other than the respective parties to this Agreement.
(b) To the fullest extent permitted by applicable law, each of the
parties hereto hereby irrevocably waives the objection which it may not or
hereafter have to the laying of the venue of any suit, action or proceeding
arising out of or relating to this Agreement or the transactions contemplated
hereby in any of the Courts referred to in Section 11.13(a) and hereby further
irrevocably waives and agrees not to plead or claim that any such court is not a
convenient forum for any such suit, action or proceeding.
(c) The parties hereto agree that any judgment obtained by any party
hereto or its successors or assigns in any action, suit or proceeding referred
to above may, in the discretion of such party (or its successors, or assigns),
be enforced in any jurisdiction, to the extent permitted by applicable law.
* * * * *
-59-
<PAGE> 65
IN WITNESS WHEREOF the Purchaser has signed this Securities Purchase
Agreement and the Company has caused its corporate name to be hereunto
subscribed by its officers thereunto duly authorized, all as of the day and year
first above written.
AMERICAN PHYSICIAN PARTNERS, INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 66
BT CAPITAL PARTNERS SBIC, L.P.
By:
--------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.2
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY
NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT
AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS.
AMERICAN PHYSICIAN PARTNERS, INC.
CONVERTIBLE JUNIOR SUBORDINATED PROMISSORY NOTE
DUE JULY 31, 2009
$20,000,000 New York, New York
August 1, 1999
FOR VALUE RECEIVED, the undersigned, American Physician
Partners, Inc. ("BORROWER"), a Delaware corporation, hereby promises to pay to
the order of BT Capital Partners SBIC, L.P., a Delaware limited partnership, or
its registered assigns (the "HOLDER"), the principal sum of TWENTY MILLION
DOLLARS ($20,000,000), on July 31, 2009 (the "MATURITY DATE"), with interest
payable thereon on the unpaid principal amount of this Note from time to time as
provided herein.
This Convertible Junior Subordinated Promissory Note (this
"NOTE") is issued by Borrower, on the date hereof, pursuant to the Securities
Purchase Agreement (the "PURCHASE AGREEMENT"), dated as of August 1, 1999 by and
among Borrower and Holder, and is subject to the terms thereof. This Note,
together with all other promissory notes, if any, issued under the Purchase
Agreement, and all promissory notes issued pursuant hereto are hereinafter
referred to as the "NOTES". The Holder is entitled to the benefits of this Note
and the Purchase Agreement, as it relates to the Note, and may enforce the
agreements of Borrower contained herein and in the Purchase Agreement, and
exercise the remedies provided for hereby and thereby or otherwise available in
respect hereto and thereto. Capitalized terms used herein without definition are
used herein with the meanings ascribed to such term as in the Purchase
Agreement.
1. Interest. Borrower promises to pay interest (the
"INTEREST") on the principal amount of this Note, and on interest accrued but
not paid as provided in Section 1(d), at the rate of 8.0% per annum (as may be
adjusted pursuant to the immediately succeeding sentence, the "INTEREST RATE").
In the event that the Market Price Event has not occurred as of (i) the third
anniversary of the Closing Date, then the Interest Rate shall automatically
increase to 8.25% per annum commencing with the third anniversary of the Closing
Date and (ii) the fourth
<PAGE> 2
anniversary of the Closing Date, then the Interest Rate shall automatically
increase to 8.50% per annum commencing with the fourth anniversary of the
Closing Date; provided, however, once the Interest Rate has increased to 8.25%
or 8.50%, as the case may be, the Interest Rate shall remain the same and shall
not be decreased back to 8.00% or 8.25%, as the case may be. The Interest on
this Note shall accrue from and including the date of issuance through and until
repayment of the principal amount of this Note and payment of all Interest in
full, and shall be computed on the basis of a 360-day year of twelve 30-day
months, compounded quarterly. Interest shall be paid as follows:
(a) Basic Interest. Except as set forth in Section 1(b) and
Section 1(d), Borrower shall pay Interest quarterly in arrears on each March 31,
June 30, September 30 and December 31, of each year or, if any such date shall
not be a Business Day, on the next succeeding Business Day to occur after such
date (each date upon which interest shall be so payable, an "INTEREST PAYMENT
DATE"). Interest shall accrue, be paid in PIK Securities (as hereinafter
defined) or be paid in cash in accordance with Section 1(d). If Interest is to
be paid in cash, then such payment shall be made by wire transfer of immediately
available funds to an account at a bank designated in writing by the Holder. In
the absence of any such written designation, any such Interest payment shall be
deemed made on the date a check in the applicable amount payable to the order of
Holder is received by the Holder at its last address as reflected in Borrower's
note register; if no such address appears, then to such Holder in care of the
last address in such note register of any predecessor holder of this Note (or
its predecessor).
(b) Default Rate of Interest. Notwithstanding the foregoing
provisions of this Section 1, but subject to applicable law, during the
continuance of a Default or Event of Default under Section 7, the Interest Rate
as otherwise determined under this Note shall be increased by 4% per annum
("DEFAULT INTEREST RATE"); provided, that in no event shall the Default Interest
Rate exceed 12% per annum. Interest which accrues under this Section 1(b) shall
be payable on demand and may be paid in PIK Securities to the extent non-Default
interest may be paid in PIK Securities as provided for in Section 1(d).
(c) No Usurious Interest. In the event that any interest
rate(s) provided for in this Section 1, shall be determined to be unlawful, such
interest rate(s) shall be computed at the highest rate permitted by applicable
law. Any payment by Borrower of any interest amount in excess of that permitted
by law shall be considered a mistake, with the excess being applied to the
principal amount of this Note without prepayment premium or penalty; if no such
principal amount is outstanding, such excess shall be returned to Borrower.
(d) Form of Interest Payment. For the first seven (7)
Interest Payment Dates beginning on September 30, 1999, Interest shall accrue
but not be paid. Any interest on this Note which has accrued, but not been paid
(or converted into Common Stock of the Borrower in accordance with Section
3(f)), as of the eighth (8th) Interest Payment Date shall be paid on such date
at the Borrower's option either in cash or by the issuance of additional like
securities ("PIK SECURITIES") with a principal amount equal to the amount of
such accrued but unpaid interest. Within 90 days following the eighth
-2-
<PAGE> 3
(8th) Interest Payment Date, PIK Securities not converted into shares of Common
Stock of the Borrower and paid on or prior to such eighth (8th) Interest Payment
Date may, at the option of the Borrower, be repaid in cash, subject to no
prepayment penalty and without compliance with Section 5. With respect to
Interest accruing after the eighth (8th) Interest Payment Date, the Borrower
shall have the option to elect at the beginning of such interest period whether
to pay such interest in the form of cash or PIK Securities; provided, however,
that if the Borrower does not so elect at the beginning of such interest period,
Interest shall be paid for such interest period in the same manner as it was
paid in the immediately preceding interest period.
2. Scheduled Payment of Principal. On the Maturity Date, the
Borrower shall pay to the Holder the entire principal amount, plus all accrued
and unpaid interest, of this Note which is then unpaid.
3. Conversion.
(a) Right of Conversion; Conversion Price. Subject to the
terms and conditions of this Section 3, any Holder shall have the right, at its
option to convert all or any portion of the principal of this Note into Common
Stock of the Borrower (A "CONVERSION EVENT") (i) initially at the price of
$8.625 per share of Common Stock of the Borrower (as such price may be adjusted
in accordance with the provisions hereof (other than the adjustment made in
accordance with Section 3(a)(ii), the "BASE CONVERSION PRICE") or, (ii) if a
Market Price Event has not occurred as of the second anniversary of the Closing
Date, the Base Conversion Price shall be automatically reset to a price equal to
87.19% of the Base Conversion Price as in effect immediately prior to the
adjustment in accordance with this clause (ii) (the "RESET CONVERSION PRICE" and
the Base Conversion Price, whichever is then applicable, the "CONVERSION
PRICE").
(b) Conversion Procedure. To convert this Note, a Holder must
(i) complete and manually sign a conversion notice in substantially the form of
Exhibit A to this Note (or complete and manually sign a facsimile of such
notice) and deliver such notice to Borrower at least two (2) Business Days prior
to the Conversion Date and (ii) surrender this Note to Borrower. A conversion
shall be deemed to have been effected at the close of business on the date all
requirements in the preceding sentence have been satisfied (the "CONVERSION
DATE").
On the Conversion Date Borrower shall (i) cause an appropriate
notation to be made in Borrower's share register crediting such Holder's account
in an amount equal to the number of full shares of Common Stock issuable upon
the conversion and cause such shares to be issued to the Holder or upon the
Holder's order by notarial deed, provided, that Borrower shall not accept any
Notes for conversion from, and shall not be obligated to issue any shares of
Common Stock pursuant to paragraph (b) of this Section to, any Person who is not
a Holder, and (ii) deliver cash in lieu of any fractional share determined
pursuant to paragraph (c) of this Section 3.
No payment or adjustment will be made for dividends on or
other distributions with respect to any Common Stock except as provided in this
Section 3.
If this Note is converted in part only, upon such conversion
the Borrower shall execute and deliver to the Holder converting such Note, at
the expense of the Borrower, a new
-3-
<PAGE> 4
Note or Notes in the aggregate principal amount equal to the unconverted portion
of the principal amount of this Note.
A Note shall be deemed to have been converted immediately
prior to the close of business on the Conversion Date, and at such time the
rights of the converting Holder shall cease (unless the Borrower shall default
in its obligations under this Note), and the Person or Persons entitled to have
a notation made in the Borrower's share register upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock at such time; provided, that no surrender of a Note on any date
when the stock transfer books of the Borrower shall be closed shall be effective
to constitute the Person or Persons entitled to receive the Common Stock
issuable upon such exchange as the record holder or holders of such Common Stock
on such date, but such surrender shall be effective to constitute the Person or
Persons entitled to receive such Common Stock as the record holder or holders
thereof for all purposes at the close of business on the next succeeding day on
which such stock transfer books are open and, provided further, that in such
event, such exchange shall be at the Conversion Price in effect on the date that
the Note shall have been surrendered for exchange by delivery thereof, as if the
stock transfer books of the Borrower had not been closed.
(c) Fractional Shares. The Borrower will not issue a
fractional share of Common Stock upon conversion of this Note. If more than one
Note shall be surrendered for conversion at one time by a Holder, the number of
full shares which shall be issuable upon conversion thereof shall be computed on
the basis of the aggregate principal amount of the Notes (or specified portions
thereof) so surrendered. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of Notes (or specified portions
thereof), the Borrower shall pay a cash adjustment in respect of such fraction
in an amount equal to the fraction of the Current Market Price Per Share at the
close of business on the day of conversion.
(d) Taxes on Conversion. If, on the Conversion Date, a Holder
converts this Note consistent with the terms of Section 3(b) the Borrower shall
pay any documentary, stamp or similar issue or transfer tax (but not in any
event any income tax) due on the issue of shares of Common Stock upon the
conversion. The Borrower shall not, however, be required to pay any tax which
may be payable in respect of any transfer involved in the issue and delivery of
shares of Common Stock in the name of a Holder other than that of the converting
Holder, and no such issue or delivery shall be made unless and until the person
requesting such issue has paid to the Borrower the amount of any such tax, or
has established to the satisfaction of the Borrower that such tax has been paid.
(e) Borrower to Provide Stock. The Borrower shall, at any time
that this Note is convertible, reserve and keep available out of its authorized
but unissued Common Stock, or shares of Common Stock held in treasury, for the
purpose of effecting the conversion of this Note, a sufficient number of shares
of Common Stock to permit the conversion of this Note.
All shares of Common Stock credited on the share register upon
conversion of this Note shall be newly issued shares or treasury shares, shall
be duly and validly issued and fully paid and nonassessable and shall be free
from preemptive rights (other than those imposed
-4-
<PAGE> 5
by law or regulation) and free of any lien or adverse claim created by the
Borrower or which the Borrower suffers to exist.
The Borrower will in good faith endeavor promptly to comply
with all applicable securities laws regulating the delivery of shares of Common
Stock upon conversion of this Note and will list or cause to have quoted such
shares of Common Stock on each securities exchange or in the over-the-counter
market or such other market on which the Common Stock is listed or quoted at the
time of conversion; provided, that nothing in this paragraph (e) shall be deemed
to affect in any way, the conversion of this Note as provided in this Section 3.
(f) Treatment of Interest Upon Conversion. Upon conversion of
this Note, interest shall cease to accrue thereon and the Holder converting such
Note shall receive with respect to all accrued and unpaid interest (x) if in
accordance with Section 1(d) such accrued interest was to be paid in cash, such
accrued interest shall be paid to such holder in cash and (y) if in accordance
with Section 1(d) such accrued interest was to be paid in PIK Securities such
accrued interest shall be converted into additional shares of Common Stock at a
conversion price equal to the then effective Conversion Price; provided,
however, in the event that the Holder converts the principal of this Note into
Common Stock of the Borrower on or prior to the second anniversary of the
Closing Date, then the Holder shall be entitled, at the Holder's election, to
convert up to $1,600,000 of Interest into additional shares of Common Stock on
the basis set forth in preceding clause (y) and the Borrower shall be entitled
to determine whether the remainder of the accrued interest shall be paid in cash
or PIK Securities upon such conversion and in the event the Borrower determines
to pay such interest in PIK Securities such PIK Securities may be converted, at
the Holder's election, into additional shares of Common Stock in accordance with
preceding clause (y).
(g) Adjustment for Changes in Capital Stock. If the Borrower
shall declare or pay a dividend on any class of its capital stock in shares of
Common Stock or make a distribution to all or substantially all holders of any
class of its capital stock in shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day following
the date fixed for such determination. Notwithstanding the foregoing, if, after
the date fixed for determination of the stockholders entitled to receive such
dividend or other distribution, the dividend or distribution is not paid or
made, then the adjustment to the Conversion Price made in view of such dividend
or distribution shall be rescinded. For the purpose of this paragraph (g), the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Borrower. The Borrower shall not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Borrower.
-5-
<PAGE> 6
(h) Adjustment for Below Market Rights Issue. If the Borrower
shall, after the date hereof, issue rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock (other than (1) options (and the securities issued upon exercise
thereof) with respect to 250,000 (as adjusted for stock splits, reverse stock
splits and stock dividends) shares of Common Stock so long as the option price
on the initial date of grant exceeds 80% of the then Current Market Price Per
Share to (x) employees pursuant to the Borrower's 1996 Stock Option Plan, as
amended or (y) consultants including physician advisors of the Borrower and (2)
shares of Common Stock broadly distributed pursuant to an underwritten public
offering by a nationally recognized investment bank) or shall issue shares of
Common Stock, in any such case, at a price (or an exercise, conversion or
exchange price) that is lower than the Current Market Price Per Share, then the
Conversion Price shall be adjusted in accordance with the following formula:
( N x P )
-----
AC= C x O + ( M )
---------
O + N
where
AC = the Adjusted Conversion Price
C = the current Conversion Price
O = the number of shares of Common Stock
outstanding at the close of business on
the record date
N = the number of additional shares of Common
Stock offered
P = the offering price per share of the
additional shares (including any
consideration payable upon exercise,
conversion or exchange)
M = the Current Market Price Per Share
The adjustment shall be calculated successively whenever any such rights,
options, warrants or convertible or exchangeable securities or shares of Common
Stock (other than Common Stock issued upon conversion, exchange or exercise of
any rights, options, warrants or convertible or exchangeable securities which
have already received the anti-dilution adjustment set forth in this Section
3(h) upon their grant or issuance, as the case may be) are issued, and such
adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights, options, warrants,
or convertible or exchangeable securities or the date of issuance of such
shares, as the case may be. If all of the shares of Common Stock subject to such
rights, warrants, convertible or exchangeable securities have not been issued
when such rights, warrants, convertible or exchangeable securities expire, then
the Conversion Price shall promptly be readjusted to the Adjusted Conversion
Price which would then be in effect had the adjustment upon the issuance of such
rights, warrants, convertible or exchangeable securities been made on the basis
of the actual number of shares of Common Stock issued upon the
-6-
<PAGE> 7
exercise of such rights, warrants, convertible or exchangeable securities. For
the purpose of this paragraph (h), the number of shares of Common Stock at any
time outstanding shall not include shares held in the treasury of the Borrower.
The Borrower will not issue any rights, warrants, convertible or exchangeable
securities in respect of shares of Common Stock held in the treasury of the
Borrower.
(i) Adjustment for Subdivision or Combination. In case the
outstanding shares of Common Stock shall be subdivided into a greater number of
shares, the Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall be
proportionately reduced and, conversely, in case outstanding shares of Common
Stock shall each be combined into a smaller number of shares, the Conversion
Price in effect at the opening of business on the day following the day upon
which such combination becomes effective shall be proportionately increased.
Such reduction or increase, as the case may be, shall become effective
immediately after the opening of business on the day following the day upon
which such, subdivision or combination becomes effective.
(j) Adjustment for Distribution of Assets. In case the
Borrower shall, by dividend or otherwise, distribute to all or substantially all
holders of its Common Stock evidences of its indebtedness or assets (including
securities, but excluding any rights, options, warrants or convertible,
exchangeable securities or shares referred to in paragraph (h) of this
Section 3, any dividends paid in cash out of the retained earnings in the
ordinary course of business of the Borrower and any dividend or distribution
referred to in paragraph (g) of this Section 3), the Conversion Price shall be
adjusted in accordance with the following formula:
M-A
AC = C x --------
M
where
AC = the Adjusted Conversion Price
C = the current Conversion Price
M = the Current Market Price Per Share on the record date
A = the fair market value of the portion of the
distributed assets or distributed evidence of
indebtedness applicable to one share of Common Stock
(as agreed by the Borrower and the Holder and absent
such agreement as determined by an investment banker
of nationally recognized standing chosen by the
Borrower and the Holder and whose fees and expenses
shall be paid by the Borrower).
The adjustment shall be made successively whenever any such assets or evidence
of indebtedness are distributed and shall become effective immediately prior to
the opening of business on the
-7-
<PAGE> 8
day following the date fixed for the determination of stockholders entitled to
receive such distribution.
(k) Adjustment for Reclassifications. In case the shares of
Common Stock shall be changed into the same or a different number of shares of
any class or classes of stock, whether by capital reorganization,
reclassification, or otherwise (other than a subdivision or combination of
shares or a stock dividend described in paragraph (g) or paragraph (i) of this
Section 3, or a consolidation, merger or sale of assets described in paragraph
(r) of this Section 3), then and in each such event a Holder shall have the
right thereafter to convert this Note into the kind and amount of shares of
stock and other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which this Note might have been converted immediately prior to such
reorganization, reclassification or change.
(l) Calculations. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest one-hundredth of a share, as the
case may be.
(m) Changes in Common Stock. For the purpose of this
Section 3, the term "shares of Common Stock" shall mean (i) the class of stock
designated as the Common Stock of the Borrower at the date hereof or (ii) any
other class of stock resulting from successive changes or reclassifications of
such shares consisting solely of changes in par value, or from no par value to
par value. If at any time, as a result of an adjustment made pursuant to
paragraphs (k) or (r) of this Section 3, a Holder shall become entitled to
receive any securities other than shares of Common Stock, thereafter the number
of such other securities so issuable upon conversion of this Note, if any, shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to this Note contained
in this Section 3.
(n) When Adjustment May Be Deferred. Subject to Section 3(a),
at the sole option of the Holder, no adjustment in the Conversion Price need be
made unless the adjustment would require an increase or decrease of at least 1%
in the Conversion Price. Any adjustments that are not made shall be carried
forward and taken into account in any subsequent adjustment.
(o) Notice of Adjustment. Whenever the Conversion Price is
adjusted, the Borrower shall promptly deliver to Holder a notice of the
adjustment and a certificate from the Borrower's independent public accountants
briefly stating the facts requiring the adjustment and the manner of computing
it.
(p) Voluntary Decrease of Conversion Price. The Borrower from
time to time may decrease the Conversion Price by any amount for any period of
time as the Board of Directors of the Borrower deems advisable. The Borrower
shall deliver a notice of such adjustment at least fifteen (15) days before the
date the decreased Conversion Price will take effect. The notice shall state the
decreased Conversion Price and the period of time it will be in effect.
(q) Notice of Certain Transactions. In case:
-8-
<PAGE> 9
(i) the Borrower takes any action that would
require an adjustment in the Conversion Price;
(ii) of any consolidation or merger to which the
Borrower is a party and for which approval of any stockholders of the Borrower
is required, or of the sale or transfer of all or substantially all of the
assets of the Borrower;
(iii) there is a liquidation or dissolution of the
Borrower; or
(iv) the Borrower intends to declare any dividend
which would not require an adjustment under paragraph (j) of this Section 3.
then the Borrower shall deliver to Holder, at least 20 days (or 10 days in any
case specified in clause (i) above) prior to the applicable record date
hereinafter specified, a notice stating (x) the date on which a record is to be
taken for the purpose of such dividend, distribution, rights or warrants, or, if
a record is not to be taken, the date as of which the holders of Common Stock of
record to be entitled to such dividend, distribution, rights or warrants are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or other action
is expected to become effective, and the date as of which it is expected that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up.
(r) Provisions in Case of Consolidation, Merger or Sale of
Assets. In case of any consolidation of the Borrower with, or merger of the
Borrower into, any Person, or in case of any merger of another Person into the
Borrower (other than a consolidation or merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
Common Stock), or in case of any sale or transfer of all or substantially all of
the assets of the Borrower, the Person formed by such consolidation or resulting
from such merger or which acquires such assets, as the case may be, shall agree
and provide or cause provision to be made that a Holder shall have the right
thereafter, during the period this Note shall be convertible, to convert this
Note into the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer by a holder of the number of
shares of Common Stock into which this Note might have been converted
immediately prior to such consolidation, merger, sale or transfer, assuming such
holder of Common Stock (i) is not a Person with which the Borrower consolidated
or into which the Borrower merged or which merged into the Borrower or to which
such sale or transfer was made, as the case may be (a "CONSTITUENT PERSON"), or
an Affiliate of a Constituent Person and (ii) failed to exercise such Person's
rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same for
each share of Common Stock held immediately prior to such consolidation, merger,
sale or transfer by other than a Constituent Person or an Affiliate thereof and
in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this paragraph (r) the kind and
amount of securities, cash and other property receivable upon
-9-
<PAGE> 10
such consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of
non-electing shares). The above provisions of this paragraph (r) shall similarly
apply to successive consolidations, mergers, sales or transfers.
(s) Determination of Current Market Price. The "CURRENT MARKET
PRICE PER SHARE" on any date shall mean the average of the Quoted Prices of the
Common Stock for the fifteen (15) consecutive Business Days ending before the
day in question. If no such Quoted Prices are available, however, "Current
Market Price Per Share" shall be the fair market value per share of the Common
Stock taking into account applicable control premium determined as of such date
without regard to the illiquidity of the Common Stock as determined by an
independent investment banker who is mutually acceptable to the Borrower and
Holder and whose fees and expenses shall be paid by the Borrower. "QUOTED PRICE"
means, with respect to any security on any date, the average of the closing
prices on such day of such security on all domestic securities exchanges and
inter-dealer quotation systems providing last sale information on which such
security is then listed or tracked, or, if there have been no sales on any such
exchange or inter-dealer quotation system on such day, the average of the
highest bid and lowest asked prices on all such exchanges or inter-dealer
quotation system at the end of such day or, if on any such day such security is
not so listed, the average of the representative bid and asked prices quoted on
NASDAQ as of 4:00 P.M., New York time, on such day, or if on any day such
security is not quoted on NASDAQ, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as reported by
the National Quotation Bureau, Incorporated, or any similar successor
organization.
4. Mandatory Prepayment/Redemption.
(a) Change of Control. Subject to the subordination provisions
of Section 8 hereof, upon the occurrence of a Change of Control (as defined
herein), Borrower shall, unless the Holder shall have waived in writing its
rights under this Section 4(a), prepay the outstanding principal amount of this
Note at the applicable Redemption Price together with interest accrued thereon
through the date of such prepayment. Borrower shall pay the applicable
Redemption Price, together with interest accrued thereon, within 5 Business Days
(subject to Section 4(b) below) after the occurrence of a Change of Control. For
the purposes hereof, "CHANGE OF CONTROL" means (i) the acquisition of ownership,
directly or indirectly, beneficially or of record, by a Person or "group" (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934) of
25% or 30% (if such acquisition shall result from the issuance of Common Stock
of the Borrower to physicians or another seller in any acquisition permitted by
the Purchase Agreement) or more of the outstanding voting interests of the
Borrower, (ii) the Board of Directors of the Borrower shall cease to consist of
a majority of Continuing Directors, (iii) the liquidation or dissolution of the
Borrower or any of its Subsidiaries, the operations of which would constitute a
material part of the business operations of Borrower and all of its
Subsidiaries, taken as a whole, or (iv) the sale of all or substantially all of
the assets of Borrower or of any of its Subsidiaries, the operations of which
would constitute a material part of the business or operations of Borrower and
all of its Subsidiaries, taken as a whole.
-10-
<PAGE> 11
(b) Prior to any obligation arising on the part of
Borrower to prepay the Note pursuant to Section 4(a), but in any event within 30
days following the occurrence of a Change of Control, as applicable, Borrower
shall either (i) repay, and terminate commitments under all Senior Indebtedness
to the extent required by the terms thereof, or (ii) offer to repay and
terminate commitments under all Senior Indebtedness to the extent required by
the terms thereof or (iii) obtain the requisite consents under all Senior
Indebtedness to permit the repurchase of the Notes as provided herein. Borrower
shall first comply with the covenant in the immediately preceding sentence
before it shall be required to repurchase Notes pursuant to the provisions
described in Section 4(a).
(c) Notice. Borrower shall give written notice to the
Holder of any mandatory prepayment pursuant to this Section 4 at least five (5)
Business Days prior to the date of such prepayment. Such notice shall be given
in the manner specified in Section 11.6 of the Purchase Agreement.
5. Optional Prepayment/Redemption.
(a) Upon notice given to the Holder as provided in
Section 5(b), Borrower, at its option, may prepay the principal amount of this
Note in full at any time after July 31, 2002, by paying to the Holder an amount
equal to the redemption prices (the "REDEMPTION PRICES") set forth below
(expressed as a percentage of the outstanding principal amount being prepaid,
from time to time) together with Interest accrued and unpaid thereon to the date
fixed for such prepayment; provided, however, that at any time prior to July 31,
2002, if the principal amount of this Note then outstanding is less than
$5,000,000, the Borrower, at its option, may prepay such principal amount in
full by paying to the Holder an amount equal to the outstanding principal amount
being repaid plus an additional amount equal to the product of (x) the
outstanding principal amount being prepaid and (y) the Interest Rate as in
effect on the date of prepayment. If any prepayment after July 31, 2002 is to be
made by Borrower to the Holder during the consecutive 12-month period
immediately preceding July 31, of the calendar year set forth below, the
Redemption Price shall be determined based upon the percentage of the
outstanding principal amount of this Note and which corresponds to period in
question:
<TABLE>
<CAPTION>
Period Redemption Price
------ ----------------
<S> <C>
2003 105.00%
2004 104.17%
2005 103.34%
2006 102.52%
2007 101.67%
2008 100.83%
2009 and thereafter 100.00%
</TABLE>
(b) Borrower shall give written notice to Holder of
prepayment of this Note, or any portion thereof, pursuant to this Section 5 not
less than 30 nor more than 60 days prior to the date fixed for such prepayment.
Such notice of prepayment pursuant to this Section 5
-11-
<PAGE> 12
shall be given in the manner specified in Section 11.6 of the Purchase
Agreement. Upon notice of prepayment pursuant to this Section 5 being given by
Borrower, Borrower covenants and agrees that it will prepay, on the date therein
fixed for prepayment, this Note or the portion hereof so called for prepayment,
at the applicable Redemption Price set forth above with respect to the
outstanding principal amount of this Note or the portion thereof so called for
prepayment, together with Interest accrued and unpaid thereon to the date fixed
for such prepayment and the costs and expenses referred to in Section 5(a).
(c) All optional prepayments under this Section 5
shall include payment of accrued Interest on the principal amount of this Note
so prepaid and shall be applied first to all costs, expenses and indemnities
payable under the Purchase Agreement, then to payment of default interest, if
any, then to payment of Interest, and thereafter to principal.
6. Amendment. Amendments and modifications of this Note may be
made only in the manner provided in Section 11.10 of the Purchase Agreement.
7. Defaults and Remedies.
(a) Events of Default. An "EVENT OF DEFAULT" wherever
used herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Section
8 or be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body) and shall occur if:
(i) Borrower shall default in the
payment of the principal of this Note, when and as the same shall become due and
payable, whether at maturity or at a date fixed for prepayment or by
acceleration or otherwise; or
(ii) Borrower shall default in the
payment of any installment of Interest according to its terms, when and as the
same shall become due and payable and such default shall continue for a period
of 5 Business Days; or
(iii) Borrower shall default in the due
observance or performance of (x) Sections 7.1, 7.3(vi), 7.6, 7.8, 7.9, 7.12,
7.14, 7.15, 7.16, 7.17, 7.18, 7.19, 7.21 and 7.25 of the Purchase Agreement or
(y) any other covenant or agreement to be observed or performed pursuant to this
Note or the Purchase Agreement and such default shall continue for a period of
30 days; or
(iv) any representation, warranty or
certification made by or on behalf of Borrower or any of its Subsidiaries in the
Purchase Agreement, this Note, or in any certificate or other document delivered
pursuant hereto or thereto shall have been incorrect in any material respect
when made; or
(v) any event or condition shall occur
that results in (x) the acceleration of the maturity of any Indebtedness of
Borrower or any of its material Subsidiaries in a principal amount aggregating
$5,000,000 or more or (y) the default in the payment of the
-12-
<PAGE> 13
principal of any Indebtedness of the Borrower or any of its Subsidiaries in a
principal amount aggregating $5,000,000 or more at the final maturity thereof,
or
(vi) an involuntary proceeding shall be
commenced or an involuntary petition shall be filed in a court of competent
jurisdiction seeking (a) relief in respect of Borrower or any of its material
Subsidiaries, or of a substantial part of their property or assets, under Title
11 of the United States Code, as now constituted or hereafter amended, or any
other Federal or state bankruptcy, insolvency, receivership or similar law, (b)
the appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for Borrower or any of its Subsidiaries, or for a substantial
part of their property or assets, or (c) the winding up or liquidation of
Borrower or any of its Subsidiaries; and such proceeding or petition shall
continue undismissed for 60 days, or an order or decree approving or ordering
any of the foregoing shall be entered; or
(vii) Borrower or any of its material
Subsidiaries shall (a) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (b) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of any
petition described in paragraph (viii) of this Section 6(a), (c) apply for or
consent to the appointment of a receiver, trustee, custodian. sequestrator,
conservator or similar official for Borrower or any of its Subsidiaries, or for
a substantial part of their property or assets, (d) file an answer admitting the
material allegations of a petition filed against it in any such proceeding, (e)
make a general assignment for the benefit of creditors, (f) become unable, admit
in writing its inability or fail generally to pay its debts as they become due
or (g) take any action for the purpose of effecting any of the foregoing; or
(viii) one or more judgments for the
payment of money in an aggregate amount in excess of $5,000,000 (to the extent
not covered by insurance) shall be rendered against Borrower or any of its
material Subsidiaries and the same shall remain undischarged for a period of 30
days during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties of
Borrower or any of its Subsidiaries to enforce any such judgment.
(b) Acceleration. If an Event of Default occurs under
Section 7(a)(vi) or (vii) with respect to Borrower, then (subject to the
subordination provisions set forth in Section 8 below) the outstanding principal
of and all accrued Interest on this Note shall automatically become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby expressly waived. If any other Event of Default occurs and
is continuing, subject to the subordination provisions set forth in Section 8
below, the Holder, by written notice to Borrower, may declare the principal of
and accrued Interest on this Note to be immediately due and payable. Upon such
declaration, such principal and Interest shall become immediately due and
payable. The Holder may rescind an acceleration and its consequences if all
existing Events of Default have been cured or waived, except nonpayment of
principal or Interest that has become due solely because of the acceleration,
and if the rescission
-13-
<PAGE> 14
would not conflict with any judgment or decree. Any notice or rescission shall
be given in the manner specified in Section 11.6 of the Purchase Agreement.
8. Subordination. This Note and the other Subordinated
Indebtedness shall at all times be wholly subordinate and junior in right of
payment to all Senior Indebtedness to the extent and in the manner provided in
this Section 8.
(a) Definitions. As used in this Section 8, the
following terms shall have the following meanings:
"DESIGNATED SENIOR INDEBTEDNESS" shall mean (i) so long as any
Senior Indebtedness is outstanding under the Senior Credit Facility or
the Lenders thereunder have any commitment (contingent or otherwise) to
extend credit thereunder, such Senior Indebtedness, and (ii) Borrower's
obligations under any particular Senior Indebtedness in which the
instrument creating or evidencing the same or the assumption or
guarantee thereof (or related agreements or documents to which Borrower
is a party) expressly provides that such Senior Indebtedness shall be
"Designated Senior Indebtedness" for purposes of this Note; provided
that such instrument, agreement or other document may place limitations
and conditions on the right of such Senior Indebtedness to exercise the
rights of Designated Senior Indebtedness; and provided further that
until such time as all amounts outstanding under the Senior Credit
Facility have been paid in full and all lending commitments under the
Senior Credit Facility have terminated, Borrower may not designate any
other Senior Indebtedness as "Designated Senior Indebtedness" without
the prior written consent of the agent under the Senior Credit
Facility, and such agent shall be the only person authorized under the
Note to provide written notice to the Holder of any such designation.
"SENIOR COVENANT DEFAULT" shall mean any event of default as
defined under any agreement pertaining to Senior Indebtedness, other
than a Senior Payment Default.
"SENIOR CREDIT FACILITY" shall mean the Credit Agreement.
"SENIOR DEFAULT" shall mean a Senior Payment Default or a
Senior Covenant Default.
"SENIOR INDEBTEDNESS" shall mean the principal of, premium, if
any, interest on (including any interest accruing after the filing of a
petition by or against Borrower under any bankruptcy law, whether or
not allowed as a claim after such filing in any proceeding under such
bankruptcy law) and any other payment due pursuant to, any of the
following, whether outstanding on the date of this Note or thereafter
incurred or created:
(a) All Indebtedness under, and other "Obligations"
as defined in, the Credit Agreement;
(b) All indebtedness of Borrower for money borrowed
that is evidenced by notes, debentures, bonds or other
securities (including, but not
-14-
<PAGE> 15
limited to, those which are convertible or exchangeable for
securities of Borrower);
(c) All indebtedness of Borrower due and owing with
respect to letters of credit (including, but not limited to,
reimbursement obligations with respect thereto);
(d) All indebtedness or other obligations of Borrower
due and owing with respect to interest rate and currency swap
agreements, cap, floor and collar agreements, currency spot
and forward contracts and other similar agreements and
arrangements;
(e) All obligations of Borrower under leases required
or permitted to be capitalized under generally accepted
accounting principles;
(f) All indebtedness consisting of commitment or
standby fees due and payable to lending institutions with
respect to credit facilities or letters of credit available to
Borrower;
(g) All indebtedness or obligations of others of the
kinds described in any of the preceding clauses (a), (b), (c),
(d) or (e) assumed by or guaranteed in any manner by Borrower
or in effect guaranteed (directly or indirectly) by Borrower
through an agreement to purchase, contingent or otherwise, and
all obligations of Borrower under any such guarantee or other
arrangements; and
(g) All renewals, extensions, refundings, deferrals,
amendments or modifications of indebtedness or obligations of
the kinds described in any of the preceding clauses (a), (b),
(c), (d), (e), or (f);
unless in the case of any particular indebtedness, obligation, renewal,
extension, refunding, amendment, modification or supplement, the
instrument or other document creating or evidencing the same or the
assumption or guarantee of the same expressly provides that such
indebtedness, obligation, renewal, extension, refunding, amendment,
modification or supplement is subordinate to, or is not superior to, or
is pari passu with, the Notes; provided that Senior Indebtedness shall
not include (i) any indebtedness of any kind of Borrower to any
subsidiary of Borrower, a majority of the voting stock of which is
owned, directly or indirectly, by Borrower, (ii) indebtedness for trade
payables or constituting the deferred purchase price of assets or
services incurred in the ordinary course of business, or (iii) this
Note.
"SENIOR PAYMENT DEFAULT" shall mean any default in the payment
(which shall include, without limitation, any non-payment following
acceleration of maturity or scheduled maturity) of any Senior
Indebtedness.
-15-
<PAGE> 16
"SUBORDINATED INDEBTEDNESS" shall mean the principal or
redemption price of and Interest and premium on this Note and any other
obligations of Borrower or any of its Subsidiaries arising out of or in
connection with this Note or the Purchase Agreement.
(b) Modification of Section 8. The provisions of this
Section 8 are for the benefit of the holders from time to time of Senior
Indebtedness and, so long as any Senior Indebtedness remains unpaid, may not be
modified, rescinded or canceled in whole or in part without the prior written
consent thereto of a majority of the holders of Designated Senior Indebtedness.
(c) Agreement of Subordination. Borrower covenants
and agrees, and the Holder by his acceptance hereof likewise covenants and
agrees, that this Note shall be issued subject to the provisions of this
Section 8; and the Holder of this Note, whether upon original issue or upon
transfer, assignment or exchange thereof, accepts and agrees to be bound by such
provisions.
The payment of the Subordinated Indebtedness
(including, but not limited to, the redemption price or repurchase price with
respect to the Notes to be redeemed or repurchased, as provided in this Note)
shall, to the extent and in the manner hereinafter set forth, be subordinated to
the prior payment in full, in cash or cash equivalents, of all Senior
Indebtedness whether outstanding at the date of this Note or thereafter incurred
or created.
No provision of this Section 8 shall prevent the
occurrence of any default or Event of Default hereunder.
(d) Payments to Noteholders. No payment or
distribution (including pursuant to any redemption or repurchase of Notes
whether by setoff or otherwise) shall be made, received, retained or attempted
to be collected with respect to the Subordinated Indebtedness if:
(i) a Senior Payment Default with
respect to Designated Senior Indebtedness occurs and is continuing; or
(ii) the Agent under the Credit Agreement
or any representative of holders of any other Designated Senior Indebtedness or
any holder of other Designated Senior Indebtedness shall have delivered to the
Holder or the Company a notice ("Payment Blockage Notice") stating that a Senior
Covenant Default with respect to such Designated Senior Indebtedness has
occurred and is continuing and such Agent, representative or Holder is electing
to exercise its rights to block payments on the Subordinated Indebtedness
pursuant to this Section.
Payments on the Subordinated Indebtedness may resume:
(1) in the case of a Senior Payment Default, on the date upon which such default
is cured or waived or ceases to exist, and (2) in the case of a Senior Covenant
Default with respect to Designated Senior Indebtedness, on the earlier of the
date on which all Senior Covenant Defaults are cured or waived or cease to exist
or 179 days pass after the date on which the applicable Payment
-16-
<PAGE> 17
Blockage Notice is received, unless at such time the maturity of any Designated
Senior Indebtedness has been accelerated or such payments are otherwise
prohibited by any of the provisions of this Section 8.
No new period of payment blockage may be commenced
pursuant to a Payment Blockage Notice unless at least 365 days shall have
elapsed since the first day of effectiveness of the immediately prior Payment
Blockage Notice. No default (whether or not such event of default is on the same
issue of Designated Senior Indebtedness) that existed or was continuing on the
date of delivery of any Payment Blockage Notice to Borrower shall be, or be
made, the basis for a subsequent Payment Blockage Notice unless such default has
been cured or waived for at least 90 days.
The Holder shall not accelerate this Note or pursue
any other remedy pursuant to this Note or the Purchase Agreement unless and
until the Borrower, the Agent under the Credit Agreement, any representative of
holders of other Designated Senior Indebtedness and any holder of other
Designated Senior Indebtedness shall have received at least ten (10) Business
Days written notice of Holder's intention to accelerate and pursue such
remedies. Thereafter, payments shall be made only if otherwise permitted by this
Section 8. If payment of this Note is accelerated because of an Event of
Default, then Borrower shall promptly notify holders of Designated Senior
Indebtedness of such acceleration.
Notwithstanding the foregoing, in the event that the
Holder receives any payment or distribution of assets of Borrower or any
Subsidiary of any kind in contravention of any term of this Note, whether in
cash, property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full in cash or cash
equivalents to the holders of Senior Indebtedness, then such payment or
distribution shall be held by the recipient or recipients in trust for the
benefit of, and shall immediately be paid over or delivered to, the holders of
Senior Indebtedness or their respective representative or representatives, or to
the agent, trustee or trustees under any agreement, note or indenture pursuant
to which any instruments evidencing any Senior Indebtedness may have been
issued, as their respective interests may appear for application to the payment
of all Senior Indebtedness remaining unpaid to the extent necessary to make
payment in full, in cash or cash equivalents, of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or distribution,
or provision therefor, to or for the holders of such Senior Indebtedness in cash
or cash equivalents.
(e) Bankruptcy and Dissolution Etc. Upon any payment
or distribution of assets of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution, winding-up, liquidation or
reorganization of Borrower, whether voluntary or involuntary or in bankruptcy,
insolvency, receivership or other proceedings, all amounts due or to become due
upon all Senior Indebtedness shall first be paid in full, in cash or cash
equivalents, before any payment or distribution is made on account of the
Subordinated Indebtedness and upon any such dissolution, winding-up, liquidation
or reorganization or bankruptcy, insolvency, receivership or other such
proceedings, any payment or distribution of assets of any kind or character,
whether in cash, property or securities, to which the Holder under
-17-
<PAGE> 18
this Note would be entitled, except for the provision of this Section 8(e),
shall be paid by Borrower or by any receiver, trustee in bankruptcy, liquidating
trustee, agent or other person making such payment or distribution, or by the
Holder under this Note if received by it, directly to the holders of Senior
Indebtedness (pro rata to such holders on the basis of the respective amounts of
Senior Indebtedness held by such holders, or as otherwise required by law or a
court order) or their respective representative or representatives, or to the
trustee or trustees under any indenture pursuant to which any instruments
evidencing any Senior Indebtedness may have been issued, as their respective
interests may appear, to the extent necessary to pay all Senior Indebtedness in
full in cash or cash equivalents after giving effect to any concurrent payment
or distribution (in cash or cash equivalents) to or for the holders of Senior
Indebtedness, before any payment or distribution is made to the Holder under
this Note.
Notwithstanding the foregoing, in the event that the
Holder receives any payment or distribution of assets of Borrower or any
Subsidiary of any kind in contravention of any term of this Note, whether in
cash, property or securities, including, without limitation, by way of setoff or
otherwise, before all Senior Indebtedness is paid in full in cash or cash
equivalents, then such payment or distribution shall be held by the recipient or
recipients in trust for the benefit of, and shall immediately be paid over or
delivered to, the holders of Senior Indebtedness or their respective
representative or representatives, or to the agent, trustee or trustees under
any agreement, note or indenture pursuant to which any instruments evidencing
any Senior Indebtedness may have been issued, as their respective interests may
appear, for application to the payment of all Senior Indebtedness remaining
unpaid to the extent necessary to make payment in full, in cash or cash
equivalents, of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution, to or for the holders of such Senior
Indebtedness in cash or cash equivalents.
If any payment of Senior Indebtedness (whether by or
on behalf of Borrower, as proceeds of security or enforcement of any right of
setoff or otherwise) is declared to be fraudulent or preferential, set aside or
required to be paid to any receiver, trustee in bankruptcy, liquidating trustee,
agent or other similar person under any bankruptcy, insolvency, receivership,
fraudulent conveyance or similar law, then to the extent such payment is
recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating
trustee, agent or other similar person, the Senior Indebtedness or part thereof
originally intended to be satisfied shall be deemed to be reinstated and
outstanding as if such payment had not occurred; provided, however, that in no
event shall any payments made to the Holder in accordance with the provisions of
this Note at the time of such payment be affected in any manner by the
reinstatement of such Senior Indebtedness by the provisions of this paragraph
except to the extent that any such payment to the Holder is declared fraudulent,
invalid or otherwise set aside or recovered by, or paid over to, such a
receiver, trustee in bankruptcy, liquidating trustee, agent or other similar
person. To the extent the obligation to repay any Senior Indebtedness is
declared to be fraudulent, invalid or otherwise set aside under any bankruptcy,
insolvency, receivership, fraudulent conveyance or similar law, then the
obligations so declared fraudulent, invalid or otherwise set aside (and all
other amounts that would come due with respect thereto had such obligation not
been so affected) shall be deemed to be reinstated and outstanding as Senior
Indebtedness for all purposes hereof as if such declaration, invalidity or
setting aside had not occurred; provided,
-18-
<PAGE> 19
however, that in no event shall any payments made to the Holder in accordance
with the provisions of this Note at the time of such payment be affected in any
manner by the reinstatement of such Senior Indebtedness by the provisions of
this paragraph except to the extent that any such payment to the Holder is
declared fraudulent, invalid or otherwise set aside or recovered by, or paid
over to, a receiver, trustee in bankruptcy, liquidating trustee, agent or other
similar person.
For purposes of this Section 8, the words "cash,
property or securities" shall not be deemed to include shares of stock of
Borrower as reorganized of readjusted, or securities of Borrower or any other
corporation provided for by a plan of reorganization or readjustment, the
payment of which is subordinated (at least to the extent provided in this
Section 8 with respect to this Note) to the payment of all Senior Indebtedness
which may at the time be outstanding; provided that (i) the Senior Indebtedness
is assumed by the new corporation, if any, resulting from such reorganization or
adjustment, and (ii) the rights of the holders of Senior Indebtedness (other
than leases which are not assumed by Borrower or by the new corporation, as the
case may be) are not, without the consent of such holders, altered by such
reorganization or readjustment.
The Agent under the Credit Agreement, any
representative of holders of other Designated Senior Indebtedness, and any other
holder of other Designated Senior Indebtedness are hereby constituted and
appointed attorney-in-fact with full power (which power, being coupled with an
interest, shall be irrevocable so long as this Note is in effect) to file any
claim, proof of debt or proof of claim in any such proceeding to the extent that
such claims are not filed within 10 Business Days prior to the date on which
such claims shall lapse.
(f) Subrogation of Notes. Subject to the payment in
full in cash or cash equivalents of all Senior Indebtedness, the Holder shall be
subrogated to the extent of the payments or distributions made to the holders of
such Senior Indebtedness pursuant to the provisions of this Section 8 (equally
and ratably with the holders of all indebtedness of Borrower which by its
express terms is subordinated to other indebtedness of Borrower to substantially
the same extent as the Notes are subordinated and is entitled to like rights of
subrogation) to the rights of the holders of Senior Indebtedness to receive
payments or distributions of cash, property or securities of Borrower applicable
to the Senior Indebtedness until the principal of, and premium, if any, and
interest on this Note shall be paid in full; and, for the purposes of such
subrogation, no payments or distributions to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holder would be
entitled except for the provisions of this Section 8, and no payment over
pursuant to the provisions of this Section 8, to or for the benefit of the
holders of Senior Indebtedness by the Holder of this Note, shall, as between
Borrower, its creditors other than holders of Senior Indebtedness, and the
Holder of this Note, be deemed to be a payment by Borrower to or on account of
the Senior Indebtedness; and no payments or distributions of cash, property or
securities to or for the benefit of the Holder of this Note pursuant to the
subrogation provisions of this Section 8, which would otherwise have been paid
to the holders of Senior Indebtedness shall be deemed to be a payment by
Borrower to or for the account of this Note. It is understood that the
provisions of this Section 8 are and are intended
-19-
<PAGE> 20
solely for the purposes of defining the relative rights of the Holder of this
Note, on the one hand, and the holders of the Senior Indebtedness, on the other
hand.
Nothing contained in this Section 8 or elsewhere in
this Note is intended to or shall impair, as among Borrower, its creditors other
than the holders of Senior Indebtedness, and the Holder of this Note, the
obligation of Borrower, which is absolute and unconditional, to pay to the
Holder of this Note the principal of, and premium, if any, and interest on this
Note as and when the same shall become due and payable in accordance with their
terms, or is intended to or shall affect the relative rights of the Holder of
this Note and creditors of Borrower other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Holder of this
Note from exercising all remedies otherwise permitted by applicable law upon
default under this Note, subject to the rights, if any, of the holders of Senior
Indebtedness.
Upon any payment or distribution of assets of
Borrower referred to in this Section 8, the Holder of this Note, subject to the
provisions of Section 8, shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such bankruptcy, dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other person making such payment or distribution, delivered to the Holder of
this Note, for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness and other
indebtedness of Borrower, the amount thereof or payable thereon, the amount or
amounts paid or distributed thereon and all other facts pertinent thereto or to
this Section 8.
(g) Notice to Holder. Borrower shall give written
notice to the Holder of the issuance of any Designated Senior Indebtedness. In
addition, Borrower shall give prompt written notice to the Holder of any fact
known to Borrower which would prohibit the making of any payment of monies to
the Holder in respect of this Note pursuant to the provisions of this Section 8.
(h) No Impairment of Subordination. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act an the part of Borrower or by any act or failure to act,
in good faith, by any such holder, or by any noncompliance by Borrower with the
terms, provisions and covenants of this Note, regardless of any knowledge
thereof which any such holder may have or otherwise be charged with.
(i) Certain Conversions Deemed Payment. For the
purposes of this Section 8 only, the issuance and delivery of Common Stock upon
conversion of this Note in accordance with Section 3 shall not be deemed to
constitute a payment or distribution on account of the principal of or interest
on this Note or on account of the purchase or other acquisition of this Note.
Nothing contained in this Section 8 or elsewhere in this Note is intended to or
shall impair, the right, which is absolute and unconditional, of Holder to
convert this Note in accordance with Section 3.
-20-
<PAGE> 21
(j) Miscellaneous.
(i) To the extent permitted by
applicable law, the Holder, Borrower, and each Subsidiary of Borrower hereby
waive (1) notice of acceptance hereof by the holders of the Senior Indebtedness,
and (2) all diligence in the collection or protection of or realization upon the
Senior Indebtedness.
(ii) Borrower and its Subsidiaries and
the Holder hereby expressly agree that the holders of Senior Indebtedness may
enforce any and all rights derived herein by suit, either in equity or law, for
specific performance of any agreement contained in this Section 8 or for
judgment at law and any other relief whatsoever appropriate to such action or
procedure.
(iii) The Holder acknowledges and agrees
that the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of Senior Indebtedness, whether
such Senior Indebtedness was created or acquired before or after the issuance of
this Note, and each holder of Senior Indebtedness shall be deemed conclusively
to have relied upon such subordination provisions in acquiring and continuing to
hold such Senior Indebtedness.
9. Definitions and Principles of Construction.
(a) Defined Terms. As used in this Note, the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affiliate" shall mean and include, with respect to any
Person, any other Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, such Person.
"Base Conversion Price" shall have the meaning set forth in
Section 3(a).
"Blockage Period" shall have the meaning set forth in
Section 8.
"Borrower" shall have the meaning provided in the first
paragraph of this Agreement.
"Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in the City
of New York are authorized or obligated by law or executive order to close.
"Change of Control" shall have the meaning set forth in Section 4(a).
"Common Stock" shall mean the common stock of Borrower.
"Constituent Person" shall have the meaning set forth in
Section 3(r).
-21-
<PAGE> 22
"Continuing Directors" shall mean the directors of Borrower on
the date hereof and each other director if such director's nomination for the
election to the Board of Directors of Borrower is recommended by a majority of
the then Continuing Directors.
"Conversion Date" shall have the meaning set forth in
Section 3(b) hereof.
"Conversion Event" shall have the meaning set forth in
Section 3(a).
"Conversion Price" shall have the meaning set forth in
Section 3(a).
"Credit Agreement" shall mean that certain Credit Agreement,
currently providing for up to $160 million aggregate principal amount of
borrowings, dated as of November 26, 1997, by and among Borrower, certain
lenders from time to time party thereto (the "Lenders") and General Electric
Capital Corporation, as agent (the "Agent"), including any related notes,
guarantees, collateral, documents, instruments and agreements executed in
connection therewith, in each case as amended, modified, supplemented,
restructured, renewed, restated, refunded, replaced, extended or refinanced from
time to time on one or more occasions (whether with the original agents and
lenders or other agents or lenders or otherwise, and whether provided under the
original Credit Agreement or otherwise), including, without limitation, any
agreement modifying the maturity or amortization schedule of or refinancing or
refunding all or any portion of the indebtedness thereunder or increasing the
amount that may be borrowed under such agreement or any successor agreement.
"Current Market Price Per Share" shall have the meaning set
forth in Section 3(s).
"Default" shall mean any event, act or condition which, with
notice or lapse of time, or both, would constitute an Event of Default.
"Default Interest Rate" shall have the meaning set forth in
Section 1.
"Event of Default" shall have the meaning set forth in
Section 7(a).
"Holder" shall have the meaning set forth in the first
paragraph of this Note.
"Interest" shall have the meaning set forth in Section 1.
"Interest Payment Date" shall have the meaning set forth in
Section 1.
"Interest Rate" shall have the meaning set forth in Section 1.
"Market Price Event" shall mean, at the time of determination
thereof, the occurrence of a period of forty-five (45) trading days during the
sixty (60) day period ending at such time of determination during which the
closing price of Borrower's Common Stock exceeds the Base Conversion Price;
provided, however, in the event that such time of determination is after the
second anniversary of the Closing Date and the Base Conversion Price has been
reset to the Reset Conversion Price, then the applicable closing price of
Borrower's Common Stock for such forty-five (45) trading days shall exceed the
Reset Conversion Price.
-22-
<PAGE> 23
"Maturity Date" shall have the meaning set forth in the first
paragraph of this Note.
"Note" shall mean this Convertible Junior Subordinated Note
due 2009.
"Notice of Default" shall have the meaning set forth in
Section 7(a).
"Payment Blockage Notice" shall have the meaning set forth in
Section 8(d)(ii).
"Payment Office" shall have the meaning set forth in the first
paragraph of this Note.
"Person" shall mean any individual, partnership, joint
venture, firm, corporation, association, trust or other enterprise or any
government or political subdivision or any agency, department or instrumentality
thereof.
"PIK Securities" shall have the meaning set forth in
Section 1.
"Quoted Price" shall have the meaning set forth in
Section 3(s).
"Redemption Price" shall have the meaning set forth in
Section 2(a).
"Reset Conversion Price" shall have the meaning set forth in
Section 3(a).
"Senior Indebtedness" shall have the meaning set forth in
Section 8.
"Senior Covenant Default" shall have the meaning set forth in
Section 8.
"Senior Payment Default" shall have the meaning set forth in
Section 8.
(b) Principles of Construction. All references to sections and
annexes are to sections and annexes in or to this Note unless otherwise
specified. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Note shall refer to this Note as a whole and not to any
particular provision of this Note.
10. Use of Proceeds. Borrower shall use the principal amount
of this Note in accordance with the permitted uses described in Section 7.11 of
the Purchase Agreement.
11. Suits for Enforcement.
(a) Subject to Section 8, upon the occurrence of any
one or more Events of Default, the Holder of this Note may proceed to protect
and enforce its rights hereunder by suit in equity, action at law or by other
appropriate proceeding, whether for the specific performance of any covenant or
agreement contained in the Purchase Agreement or this Note or in aid of the
exercise of any power granted in the Purchase Agreement or this Note, or may
proceed to enforce the payment of this Note, or to enforce any other legal or
equitable right as the Holder of this Note under the Purchase Agreement or this
Note.
-23-
<PAGE> 24
(b) Borrower agrees to pay all reasonable
out-of-pocket expenses of Holder incurred in connection with the enforcement of
this Note or any Default or Event of Default under this Note, including, without
limitation, the reasonable fees and expenses of counsel for Holder. In addition,
the Company agrees to pay, and to save Holder harmless from all liability for,
any stamp or other documentary taxes which may be payable in connection with
Borrower's execution or delivery of this Note and indemnify Holder, its
affiliates and their respective officers, directors, employees, representatives
and agents from and hold each of them harmless against any and all liabilities,
obligations, losses, damages, penalties, claims, actions, judgments, suits,
costs, expenses and disbursements incurred by any of them as a result of, or
arising out of any investigation, litigation, or other proceeding (whether or
not Holder or any of its Affiliates are a party thereto) related to the entering
into and/or performance of this Note including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation litigation or other proceeding (but excluding any such
liabilities, obligations, losses, etc. to the extent incurred by reason of the
gross negligence, bad faith or willful misconduct of the Person to be
indemnified).
12. Remedies Cumulative. No remedy herein conferred upon the
Holder is intended to be exclusive of any other remedy and each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise.
13. Remedies Not Waived. No course of dealing between Borrower
and the Holder or any delay on the part of the Holder in exercising any rights
hereunder shall operate as a waiver of any right.
14. Transfer.
(a) The term "HOLDER" as used herein shall also
include any transferee of this Note whose name has been recorded by Borrower in
the Note Register. Each transferee of this Note acknowledges that this Note has
not been registered under the Securities Act, and may be transferred only
pursuant to an effective registration under the Securities Act or pursuant to an
applicable exemption from the registration requirements of the Securities Act.
(b) Borrower shall maintain a register (the
"NOTE REGISTER") in its principal offices for the purpose of registering the
Note and any transfer or partial transfer thereof, which register shall reflect
and identify, at all times, the ownership of record of any interest in the Note.
Upon the issuance of this Note, Borrower shall record the name and address of
the initial purchaser of this Note in the Note Register as the first Holder.
Upon surrender for registration of transfer or exchange of this Note at the
principal offices of Borrower, Borrower shall, at its expense, execute and
deliver one or more new Notes of like tenor and of denominations of at least
$500,000 (except as may be necessary to reflect any principal amount not evenly
divisible by $500,000) of a like aggregate principal amount, registered in the
name of the Holder or a transferee or transferees. Every Note surrendered for
registration of transfer or exchange shall be duly endorsed, or be accompanied
by written instrument of transfer duly executed by the Holder of such Note or
such holder's attorney duly authorized in writing.
-24-
<PAGE> 25
(c) Subject to the terms of the Purchase
Agreement, this Note may be transferred or assigned, in whole or in part, by the
Holder at any time.
15. Replacement of Note. On receipt by Borrower of an
affidavit of an authorized representative of the Holder stating the
circumstances of the loss, theft, destruction or mutilation of this Note (and in
the case of any such mutilation, on surrender and cancellation of such Note),
Borrower, at its expense, will promptly execute and deliver, in lieu thereof, a
new Note of like tenor. If required by Borrower, such Holder must provide
indemnity sufficient in the reasonable judgment of Borrower to protect Borrower
from any loss which they may suffer if a lost, stolen or destroyed Note is
replaced.
16. Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises and agreements in this Note contained by or on behalf of
Borrower shall bind its successors and assigns, whether so expressed or not.
17. Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier
(with receipt confirmed), courier service or personal delivery at the addresses
specified in Section 11.6 of the Purchase Agreement. All such notices and
communications shall be deemed to have been duly given when: delivered by hand,
if personally delivered; when delivered by courier, if delivered by commercial
overnight courier service; if mailed, five Business Days after being deposited
in the mail, postage prepaid; or if telecopied, when receipt is electronically
confirmed.
18. GOVERNING LAW; VENUE. (a) THIS NOTE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Borrower
hereto hereby irrevocably acknowledges and consents that any legal action or
proceeding brought with respect to any of the obligations arising under or
relating to this Note may be brought in the courts of the State of New York or
in the United States Southern District Court of New York, as the party bringing
such action or proceeding may elect and each of the parties hereto hereby
irrevocably submits to and accepts with regard to any such action proceeding,
for itself and in respect of its property, generally and unconditionally, the
jurisdiction of the aforesaid courts. Borrower hereby further irrevocably waives
any claim that any such courts lack jurisdiction over such party, and agrees not
to plead or claim, in any legal action or proceeding with respect to this Note
or the transactions contemplated hereby brought in any of the aforesaid courts,
that any such court lacks jurisdiction such party. Borrower irrevocably consents
to the service of process in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to such party,
at its address for notices set forth in Section 11.6 of the Purchase Agreement,
such service to become effective 10 days after such mailing. Borrower hereby
irrevocably waives any objection to such service of process and further
irrevocably waives and agrees not to plead or claim in any action or proceeding
commenced hereunder or under any other documents contemplated hereby that
service of process was in any way invalid or ineffective. The foregoing shall
not limit the rights of Borrower to serve process in any other manner permitted
by law. The foregoing consents to
-25-
<PAGE> 26
jurisdiction shall not constitute general consents to service of process for any
purpose except as provided above and shall not be deemed to confer rights on any
Person other than Borrower.
(b) To the fullest extent permitted by applicable law,
Borrower hereby irrevocably waives the objection which it may not or hereafter
have to the laying of the venue of any suit, action or proceeding arising out of
or relating to this Note or the transactions contemplated hereby in any of the
Courts referred to in Section 18(a) and hereby further irrevocably waives and
agrees not to plead or claim that any such court is not a convenient forum for
any such suit, action or proceeding.
(c) Borrower agrees that any judgment obtained by it or its
successors or assigns in any action, suit or proceeding referred to above may,
in the discretion of such party (or its successors, or assigns), be enforced in
any jurisdiction, to the extent permitted by applicable law.
19. Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions hereof.
20. Headings. The headings of the several sections and
subsections of this Note are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this Note.
AMERICAN PHYSICIAN PARTNERS, INC.
By:
------------------------------
Name:
Title:
-26-
<PAGE> 27
Exhibit A
FORM OF CONVERSION NOTICE
In accordance with the provisions of Section 3 of that certain
Convertible Junior Subordinated Note due July 31, 2009 (the "Note"), dated as of
August 1, 1999, of AMERICAN PHYSICIAN PARTNERS, INC. (the "Borrower") hereby
tenders $ in principal amount of such Note for conversion into the Common Stock,
par value $0.0001 of the Company at the Conversion Price as stated and adjusted
pursuant to Section 3 of the Note and directs the company to issue such shares
in the name of , such Person is the Holder (as such terms are defined in the
Note).
Dated:
--------------------
[Holder]
By
-----------------------------
Name:
------------------------
Title:
-----------------------
