UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. _____)*
Maxum Health Corp.
(Name of Issuer)
Common Stock, $0.01 par value per share
(Title of Class of Securities)
57773T 10 1
(CUSIP Number)
Mark J. Mihanovic, Esq.
McDermott, Will & Emery
2049 Century Park East, 34th Floor
Los Angeles, CA 90067-3208
(310) 284-6110
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
February 20, 1995
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
Check the following box if a fee is being paid with the statement [ X ]. (A fee
is not required only if the reporting person: (1) has a previous statement on
file reporting beneficial ownership of more than five percent of the class of
securities described in Item 1; and (2) has filed no amendment subsequent
thereto reporting beneficial ownership of five percent or less of such class.)
(See Rule 13d-7.)
Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the act (however, see the
Notes).
SCHEDULE 13D
CUSIP No. 57773T 10 1
___________________________________________________________________________
1 NAMES OF REPORTING PERSONS S.S. OR
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
General Electric Company, acting through GE Medical Systems
(I.R.S. Identification No. 14-0689340)
___________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / /
(b) / /
___________________________________________________________________________
3 SEC USE ONLY
___________________________________________________________________________
4 SOURCE OF FUNDS*
00
___________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) / /
___________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
New York
___________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF SHARES 700,000 shares of Common Stock (all issuable
BENEFICIALLY upon exercise of a warrant)
OWNED BY _______________________________________________________
EACH 8 SHARED VOTING POWER
REPORTING
PERSON 0
WITH _______________________________________________________
9 SOLE DISPOSITIVE POWER
700,000 shares of Common Stock (all issuable
upon exercise of a warrant)
_______________________________________________________
10 SHARED DISPOSITIVE POWER
0
___________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700,000 shares of Common Stock (all issuable upon exercise of a warrant)
___________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* / /
___________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
23.5%
___________________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
___________________________________________________________________________
*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
STATEMENT PURSUANT TO RULE 13d-1
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
ITEM 1. SECURITY AND ISSUER
The security to which this statement relates is the Common Stock, $0.01 par
value per share (the "Common Shares"), of Maxum Health Corp., a Delaware
corporation (the "Company") with principal executive offices located at 14850
Quorum Drive, Suite 400, Dallas, Texas 75240.
ITEM 2. IDENTITY AND BACKGROUND
This statement is filed by General Electric Company, a New York corporation
acting through GE Medical Systems ("GE") with principal executive offices
located at 3135 Easton Turnpike, Fairfield, Connecticut. GE engages in
providing a wide variety of industrial, commercial and consumer products and
services.
For information with respect to the identity and background of each
director and executive officer of GE, see Schedule I attached hereto.
During the last five years, neither GE nor, to its best knowledge, any
person identified on Schedule I has, except as set forth on Schedule II hereto
(a) been convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (b) been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction as a result of which GE or such
person, as the case may be, was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
To the best knowledge of GE, all persons identified on Schedule I are
United States citizens, except that Paolo Fresco, Vice Chairman of the Board and
an executive officer of GE, is an Italian citizen and Claudio X. Gonzalez, a
director of GE, is a Mexican citizen.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
In connection with a restructuring of indebtedness of the Company, pursuant
to the terms of an Agreement, dated June 1, 1993 (the "Agreement"), between GE
and the Company, the Company issued to GE a Common Stock Purchase Warrant, dated
February 8, 1994 (the "Warrant), exercisable for 700,000 Common Shares upon the
payment of a purchase price initially equal to $0.50 per Common Share. The
Warrant is currently exercisable.
The foregoing response to this Item 3 is qualified in its entirety by
reference to the Agreement (a copy of which is attached hereto as Exhibit 1) and
the Warrant (a copy of which is attached hereto as Exhibit 2), each of which is
hereby incorporated herein.
ITEM 4. PURPOSE OF TRANSACTION
GE has acquired the Warrant as an investment and in the ordinary course of
business and not with the purpose of changing control of the Company.
In connection with the contemplated consolidation of the businesses (the
"Merger") of the Company and American Health Services Corp., a Delaware
corporation ("AHS"), and in exchange for certain financial accommodations
contemplated to be provided by GE to the Company and AHS, GE entered into a
Preferred Stock Acquisition Agreement, dated as of February 26, 1996 (the "Stock
Acquisition Agreement"), by and among the Company, AHS, Insight Health Services
Corp., a Delaware corporation ("InSight"), and GE. The Stock Acquisition
Agreement provides, among other things, that (i) immediately prior to the
Merger, the Company will issue to GE 1,000,000 shares of the Company's Series B
Convertible Preferred Stock, par value $0.01 per share (the "Series B Preferred
Stock"), (ii) immediately prior to the Merger, the Warrant will be cancelled,
and (iii) upon consummation of the Merger, the Series B Preferred Stock will be
converted into Series A Convertible Preferred Stock of InSight. The foregoing
response to this Item 4 is qualified in its entirety by reference to the Stock
Acquisition Agreement (a copy of which is attached hereto as Exhibit 3), which
is hereby incorporated herein.
Except as described in this Item 4, GE has no current plans which relate to
or would result in any of the events described in Items (a) through (j) of the
instructions to this Item 4 of Schedule 13D.
ITEM 5. INTEREST IN THE SECURITIES OF THE ISSUER
(a) GE beneficially owns an aggregate of 700,000 Common Shares (all of
which are issuable upon exercise of the Warrant), representing an aggregate of
23.5% of the outstanding Common Shares (assuming exercise of the Warrant).
(b) The responses to Items 7-11 of the cover page of this Schedule 13D
relating to beneficial ownership of Common Shares are incorporated herein by
reference.
(c) Except as set forth in Item 4 hereof, neither GE nor, to the best
knowledge of GE, any person identified on Schedule I hereto has effected any
transactions with respect to Common Shares within the past 60 days.
(d) Not Applicable.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Except as described in Item 4 hereof, GE has not entered into contracts,
arrangements, understandings or relationships described in the instructions to
this Item 6 of Schedule 13D.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
99.1 Agreement, dated June 1, 1993, between GE and the Company.
99.2 Common Stock Purchase Warrant, dated February 8, 1994, issued by the
Company to GE.
99.3 Preferred Stock Acquisition Agreement, dated as of February 26, 1996,
by and among the Company, AHS, Insight and GE.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
GENERAL ELECTRIC COMPANY,
acting through GE Medical Systems
By: /s/ John M. Trani
Name: John M. Trani
Title: Sr. Vice President,
GE Medical Systems
Dated: March _____, 1996
EXHIBIT INDEX
Exhibit 99.1 Agreement, dated June 1, 1993, between GE and the Company.
Exhibit 99.2 Common Stock Purchase Warrant, dated February 8, 1994, issued by
the Company to GE.
Exhibit 99.3 Preferred Stock Acquisition Agreement, dated as of February 26,
1996, by and among the Company, AHS, Insight and GE.
SCHEDULE I
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS OF
GENERAL ELECTRIC COMPANY
The directors and executive officers of General Electric Company are
identified in the table below. Directors of General Electric Company are
indicated by an asterisk. Unless otherwise indicated, the business address of
each person listed below is 3135 Easton Turnpike, Fairfield, Connecticut 06431.
PRESENT PRINCIPAL
NAME OCCUPATION CITIZENSHIP
John F. Welch, Jr.* Chairman of the Board and United
Chief Executive Officer States
Dennis D. Dammerman* Senior Vice President- United
Finance States
P. Fresco* Vice Chairman of the Board Italy
and Executive Officer
John D. Opie* Vice Chairman of the Board United
and Executive Officer States
Frank P. Doyle Executive Vice President United
States
Philip D. Amsen Vice President and United
Comptroller States
James R. Bunt Vice President and United
Treasurer States
David L. Calhoun Vice President-GE United
Transportation Systems States
William J. Conaty Senior Vice President-Human United
Resources States
Lewis S. Edelheit Senior Vice President- United
Corporate Research and States
Development
Dale F. Frey Chairman and President-GE United
Investments Corporation States
Benjamin W. Heineman, Jr. Senior Vice President, United
General Counsel and States
Secretary
W. James McNerney, Jr. Senior Vice President-GE United
Lighting States
Eugene F. Murphy Senior Vice President-GE United
Aircraft Engines States
Robert L. Nardelli Senior Vice President-GE United
Power Systems States
Robert W. Nelson Vice President-Corporate United
Financial Planning and States
Analysis
Gary M. Reiner Vice President-Corporate United
Business Development States
Gary L. Rogers Senior Vice President-GE United
Plastics States
James W. Rogers Vice President-GE Motors United
States
Jay R. Stonesifer Senior Vice President-GE United
Appliances States
John M. Trani Senior Vice President-GE United
Medical Systems States
Lloyd G. Trotter Vice President-GE United
Electrical Distribution and States
Control
H. Brewster Atwater, Jr.* Retired Chairman, Chief United
Executive Officer, and States
former Director General
Mills, Inc.
David W. Calloway* Chairman of the Board, United
Chief Executive Officer and States
Director, PepsiCo, Inc.
Silas S. Cathcart* Director and Retired United
Chairman, Illinois Tool States
Works
Claudio X. Gonzalez* Chairman of the Board and Mexico
Managing Director Kimberly-
Clark de Mexico, S.A. de
C.V.
Robert E. Mercer* Retired Chairman of the United
Board and former Director, States
The Goodyear Tire & Rubber
Company
Gertrude G. Michelson* Member of the Board of United
Directors - Federated States
Department Stores
Roger S. Penske* President - Penske United
Corporation States
Barbara S. Prieskel* Former Senior Vice United
President, Motion Picture States
Associations of America
Frank H.T. Rhodes* President Emeritus Cornell United
University States
Andrew C. Sigler* Chairman of the Board, CEO
and Director, Champion
International
Douglas A. Warner III* Chairman of the Board, United
President, and Chief States
Executive Officer, J.P.
Morgan & Co. Incorporated
and Morgan Guaranty Trust
Company
SCHEDULE II
RECENT GE CONVICTIONS
1. United States ex. rel. Taxpayers Against Fraud and Chester L. Walsh v.
General Electric Company
On November 15, 1990, an action under the federal False Claims Act 31
U.S.C. Sections 3729-32, was filed under seal against General Electric
Company ("GE") in the United States District Court for the Southern District
of Ohio. The qui tam action, brought by an organization called Taxpayers
Against Fraud and an employee of GE's Aircraft Engines division ("GEAE"),
alleged that GEAE, in connection with its sales of F11O aircraft engines and
support equipment to Israel, made false statements to the Israeli Ministry of
Defense (MoD), causing MoD to submit false claims to the United States
Department of Defense under the Foreign Military Sales Program. Senior GE
management became aware of possible misconduct in GEAE's Israeli F110
program in December 1990. Before learning of the sealed qui tam suit, GE
immediately made a voluntary disclosure to the Departments of Defense and
Justice, promised full cooperation and restitution, and began an internal
investigation. In August 1991, the federal court action was unsealed, and
the Department of Justice intervened and took over responsibility for the case.
On July 22, 1992, after GE had completed its investigation and made a
complete factual disclosure to the U.S. government as part of settlement
discussions, the United States and GE executed a settlement agreement and filed
a stipulation dismissing the civil action. Without admitting or denying the
allegations in the complaint, GE agreed to pay $59.5 million in full settlement
of the civil fraud claims. Also on July 22, 1992, in connection with the same
matter, the United States filed a four count information charging GE with
violations of 18 U.S.C. Section 287 (submitting false claims against the United
States), 18 U.S.C. Section 1957 (engaging in monetary transactions in criminally
derived property), 15 U.S.C. Sections 78m(b)(2)(A) and 78ff(a) (inaccurate
books and records), and 18 U.S.C. Section 371 (conspiracy to defraud the United
States and to commit offenses against the United States). The same day, GE
and the United States entered a plea agreement in which GE agreed to waive
indictment, plead guilty to the information, and pay a fine of $9.5 million.
GE was that day sentenced by the federal court in accordance with the plea
agreement.
2. Except for the foregoing, GE has not and, to the best of GE's knowledge,
none of the directors and executive officers of GE has been, during the last
five years, convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors).
3. GE has not and, to the best of GE's knowledge, none of the directors and
executive officers of GE has been, during the last five years, a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
and as a result of such proceeding was or is subject to a judgment, decree, or
final order enjoining future violations of, or prohibiting or mandating
activities subject to, federal or state securities laws or finding any violation
with respect to such laws.
EXHIBIT 99.1
AGREEMENT
BY AND AMONG
GENERAL ELECTRIC COMPANY,
A NEW YORK CORPORATION,
ACTING THROUGH GE MEDICAL SYSTEMS
And
MAXUM HEALTH CORP.,
A DELAWARE CORPORATION,
AND CERTAIN OF ITS SUBSIDIARIES
TABLE OF CONTENTS
Page
1. GENERAL DEFINITIONS AND RULES OF CONSTRUCTION . . . . . . . . . . . . .
1.1 Affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.2 Anchor End-User Customer Contract . . . . . . . . . . . . . . . . .
1.3 Bankruptcy Code . . . . . . . . . . . . . . . . . . . . . . . . . .
1.4 Billings . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.5 Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.6 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.7 Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.8 Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.9 CPI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.10 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.11 Deferral Note . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.12 Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.13 Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.14 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . .
1.15 End-User Customer . . . . . . . . . . . . . . . . . . . . . . . . .
1.16 End-User Customer Contract . . . . . . . . . . . . . . . . . . . .
1.17 Equipment Leases . . . . . . . . . . . . . . . . . . . . . . . . .
1.18 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . .
1.19 Expense Ante(s) . . . . . . . . . . . . . . . . . . . . . . . . . .
1.20 Financing Statements . . . . . . . . . . . . . . . . . . . . . . .
1.21 First-Tier Subsidiaries . . . . . . . . . . . . . . . . . . . . . .
1.22 Fixed/Mobile Unit . . . . . . . . . . . . . . . . . . . . . . . . .
1.23 Fixed/Mobile Unit Expense Ante . . . . . . . . . . . . . . . . . .
1.24 Fixed Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.25 Fixed Unit Payment . . . . . . . . . . . . . . . . . . . . . . . .
1.26 Fixed Unit Pool . . . . . . . . . . . . . . . . . . . . . . . . . .
1.27 GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.28 GE Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . .
1.29 Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . .
1.30 Highline . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.31 Highline Documents . . . . . . . . . . . . . . . . . . . . . . . .
1.32 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.33 IRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.34 IRS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.35 Liabilities or Liability . . . . . . . . . . . . . . . . . . . . .
1.36 Lien . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.37 Lower Variable Unit Threshold . . . . . . . . . . . . . . . . . . .
1.38 Master Equipment Lease . . . . . . . . . . . . . . . . . . . . . .
1.39 Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . .
1.40 Maxum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.41 Merrill/Highline Promissory Note . . . . . . . . . . . . . . . . .
1.42 Merrill Lynch Documents . . . . . . . . . . . . . . . . . . . . . .
1.43 MHC 11 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.44 MHSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.45 MTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.46 Minimum Lease Payment . . . . . . . . . . . . . . . . . . . . . . .
1.47 Mobile/Mobile Unit . . . . . . . . . . . . . . . . . . . . . . . .
1.48 Mobile/Mobile Unit Expense Ante . . . . . . . . . . . . . . . . . .
1.49 National Accounts Service Contract . . . . . . . . . . . . . . . .
1.50 Permitted Lien . . . . . . . . . . . . . . . . . . . . . . . . . .
1.51 Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.52 Pre-Restructuring Lease Payment . . . . . . . . . . . . . . . . . .
1.53 Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.54 Quest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.55 Release and Settlement Agreement . . . . . . . . . . . . . . . . .
1.56 Rental Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.57 Rental Unit Payment . . . . . . . . . . . . . . . . . . . . . . . .
1.58 Rental Unit Pool . . . . . . . . . . . . . . . . . . . . . . . . .
1.59 Replaced Unit . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.60 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.61 Scheduled Documents . . . . . . . . . . . . . . . . . . . . . . . .
1.62 Second Deferral Note . . . . . . . . . . . . . . . . . . . . . . .
1.63 Security Agreement . . . . . . . . . . . . . . . . . . . . . . . .
1.64 Skip Lease Payments . . . . . . . . . . . . . . . . . . . . . . . .
1.65 Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.66 Subordination Agreement . . . . . . . . . . . . . . . . . . . . . .
1.67 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.68 Supplemental Documentation . . . . . . . . . . . . . . . . . . . .
1.69 Suspended Unit . . . . . . . . . . . . . . . . . . . . . . . . . .
1.70 Suspended Unit Pool . . . . . . . . . . . . . . . . . . . . . . . .
1.71 System Option Upgrades . . . . . . . . . . . . . . . . . . . . . .
1.72 System Upgrades . . . . . . . . . . . . . . . . . . . . . . . . . .
1.73 Termination Date . . . . . . . . . . . . . . . . . . . . . . . . .
1.74 Third Deferral Note . . . . . . . . . . . . . . . . . . . . . . . .
1.75 UCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.76 Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.77 Upgraded Unit . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.78 Upper Variable Unit Threshold . . . . . . . . . . . . . . . . . . .
1.79 Variable Unit . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.80 Variable Unit Payment . . . . . . . . . . . . . . . . . . . . . . .
1.81 Variable Unit Pool . . . . . . . . . . . . . . . . . . . . . . . .
1.82 Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.84 Other Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.85 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . .
2. RESTRUCTURING OF CERTAIN OBLIGATIONS OF MAXUM . . . . . . . . . . . . .
2.1 Master Equipment Lease . . . . . . . . . . . . . . . . . . . . . .
2.2 Pool of Assets . . . . . . . . . . . . . . . . . . . . . . . . . .
(A) Fixed Unit Pool . . . . . . . . . . . . . . . . . . . . . . .
(B) Variable Unit Pool . . . . . . . . . . . . . . . . . . . . . .
(C) Suspended Unit Pool . . . . . . . . . . . . . . . . . . . . .
(D) Rental Unit Pool . . . . . . . . . . . . . . . . . . . . . . .
(E) Unit Characterization . . . . . . . . . . . . . . . . . . . .
2.3 Changes in Unit Characterization . . . . . . . . . . . . . . . . .
(A) Determination of Changes in Billings . . . . . . . . . . . . .
(B) Rental Units . . . . . . . . . . . . . . . . . . . . . . . . .
(C) Written Notice From Maxum Regarding Unit Recharacterization .
(D) Effective Date of Unit Recharacterization . . . . . . . . . .
2.4 Monthly Reports . . . . . . . . . . . . . . . . . . . . . . . . . .
2.5 Lease Payments; Lease Terms . . . . . . . . . . . . . . . . . . . .
(A) Fixed Unit Lease Payments . . . . . . . . . . . . . . . . . .
(B) Variable Unit Lease Payments; Term . . . . . . . . . . . . . .
(1) Payment Amount . . . . . . . . . . . . . . . . . . . . .
(2) Expense Antes . . . . . . . . . . . . . . . . . . . . . .
(3) Time of Variable Unit Payments . . . . . . . . . . . . .
(4) Extension of Variable Unit Lease Terms . . . . . . . . .
(5) Change in End-User Customer Routes. . . . . . . . . . . .
(C) Suspension of Lease Payments on Suspended Units; Term;
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1) Lease Payment Suspension . . . . . . . . . . . . . . . .
(2) Suspended Units Taken Out of Service . . . . . . . . . .
(3) Extension of Suspended Unit Lease Term . . . . . . . . .
(4) Maintenance and Cryogen Costs on Suspended Units . . . .
(D) Rental Unit Lease Payments; Term. . . . . . . . . . . . . . .
(1) Payment Amount. . . . . . . . . . . . . . . . . . . . . .
(2) Lease Term. . . . . . . . . . . . . . . . . . . . . . . .
(E) Lease Payments Following Unit Recharacterization . . . . . . .
(F) Aggregate Interim Lease Payments . . . . . . . . . . . . . . .
(G) Joint Sales Calls . . . . . . . . . . . . . . . . . . . . . .
(H) Acquisition of Additional MRI Equipment . . . . . . . . . . .
2.6 Unit Upgrades . . . . . . . . . . . . . . . . . . . . . . . . . . .
(A) System Upgrades . . . . . . . . . . . . . . . . . . . . . . .
(B) System Option Upgrades . . . . . . . . . . . . . . . . . . . .
2.7 MRI for Doctors Hospital . . . . . . . . . . . . . . . . . . . . .
2.8 Skip Lease Payments . . . . . . . . . . . . . . . . . . . . . . . .
2.9 Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.10 Refinancing of GE Promissory Notes . . . . . . . . . . . . . . . .
2.11 Satisfaction/Prepayment of Loans . . . . . . . . . . . . . . . . .
2.12 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . .
2.13 One Obligation . . . . . . . . . . . . . . . . . . . . . . . . . .
2.14 Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.15 Application of Payments and Collections . . . . . . . . . . . . . .
3. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . .
3.1 Conditions Precedent of GE to Closing . . . . . . . . . . . . . . .
(A) Release and Settlement Agreement . . . . . . . . . . . . . . .
(B) Obligations . . . . . . . . . . . . . . . . . . . . . . . . .
(C) Warranties True; Covenants Performed . . . . . . . . . . . . .
(D) MHC and Subsidiary Consents, Approvals and Authorizations . .
(E) Signing and Delivery of Instruments . . . . . . . . . . . . .
(F) Unfavorable Action or Proceeding . . . . . . . . . . . . . . .
(G) Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . .
(H) Officer's Certificate . . . . . . . . . . . . . . . . . . . .
(I) Certificate of Incumbency . . . . . . . . . . . . . . . . . .
(J) Good Standing Certificates . . . . . . . . . . . . . . . . . .
(K) Default . . . . . . . . . . . . . . . . . . . . . . . . . . .
(L) Automatic Drafting . . . . . . . . . . . . . . . . . . . . . .
(M) Restructuring Other Obligations . . . . . . . . . . . . . . .
(N) Merrill Lynch Documents. . . . . . . . . . . . . . . . . . . .
(O) Highline Payment. . . . . . . . . . . . . . . . . . . . . . .
(P) Termination of Subordination Agreement. . . . . . . . . . . .
(Q) GE Payment. . . . . . . . . . . . . . . . . . . . . . . . . .
(R) Collateral Agreements. . . . . . . . . . . . . . . . . . . . .
4. WARRANTIES AND REPRESENTATIONS OF MAXUM . . . . . . . . . . . . . . . .
4.1 Warranties and Representations . . . . . . . . . . . . . . . . . .
(A) Existence and Qualification; Power; Good Standing . . . . . .
(B) Authority; Binding Obligations . . . . . . . . . . . . . . . .
(C) Compliance with Laws/Agreements . . . . . . . . . . . . . . .
(D) Absence of Defaults . . . . . . . . . . . . . . . . . . . . .
(E) Licenses and Permits . . . . . . . . . . . . . . . . . . . . .
(F) Consents and Approvals . . . . . . . . . . . . . . . . . . . .
(G) Liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
(H) Title to Collateral; Liens; Location of Equipment . . . . . .
(I) Burdensome Provisions; Disputes . . . . . . . . . . . . . . .
(J) Compliance with Laws . . . . . . . . . . . . . . . . . . . . .
(K) Environmental Matters . . . . . . . . . . . . . . . . . . . .
(L) Insurance . . . . . . . . . . . . . . . . . . . . . . . . . .
(M) Employees . . . . . . . . . . . . . . . . . . . . . . . . . .
(N) Joint Ventures . . . . . . . . . . . . . . . . . . . . . . . .
(O) Subsidiaries and Affiliates . . . . . . . . . . . . . . . . .
(P) Financial Statements . . . . . . . . . . . . . . . . . . . . .
(Q) Litigation or Claims . . . . . . . . . . . . . . . . . . . . .
(R) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(S) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(T) Absence of Adverse Changes . . . . . . . . . . . . . . . . . .
(U) Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . .
(V) Transfer for Value . . . . . . . . . . . . . . . . . . . . . .
(W) Corporate Records . . . . . . . . . . . . . . . . . . . . . .
(X) Monthly Reports . . . . . . . . . . . . . . . . . . . . . . .
(Y) Remuneration . . . . . . . . . . . . . . . . . . . . . . . . .
(Z) Other Obligations . . . . . . . . . . . . . . . . . . . . . .
(AA) No Untrue or Inaccurate Representations or Warranties . . . .
4.2 Knowledge of MHC and the First-Tier Subsidiaries . . . . . . . . .
4.3 Survival of Warranties and Representations . . . . . . . . . . . .
5. COVENANTS AND CONTINUING AGREEMENTS . . . . . . . . . . . . . . . . . .
5.1 Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . .
(A) Automatic Drafting . . . . . . . . . . . . . . . . . . . . . .
(B) Payment of Indebtedness . . . . . . . . . . . . . . . . . . .
(C) Maintenance of Property . . . . . . . . . . . . . . . . . . .
(D) Inspection Rights . . . . . . . . . . . . . . . . . . . . . .
(E) Audit Rights . . . . . . . . . . . . . . . . . . . . . . . . .
(F) Compliance with Laws . . . . . . . . . . . . . . . . . . . . .
(G) Compliance with Agreements . . . . . . . . . . . . . . . . . .
(H) Hazardous Materials Laws . . . . . . . . . . . . . . . . . . .
(I) Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . .
(J) Preserve Accuracy of Representations and Warranties . . . . .
(K) Maintenance of Existence . . . . . . . . . . . . . . . . . . .
(L) Accounting Methods; Books and Records of Account . . . . . . .
(M) Further Assurances . . . . . . . . . . . . . . . . . . . . . .
(N) Insurance; Payment of Premiums . . . . . . . . . . . . . . . .
(O) Litigation . . . . . . . . . . . . . . . . . . . . . . . . . .
(P) Monthly Reports . . . . . . . . . . . . . . . . . . . . . . .
(Q) Customer Contracts Entered Into After Closing Date. . . . . .
(R) Required Prepayments. . . . . . . . . . . . . . . . . . . . .
5.2 Negative Covenants . . . . . . . . . . . . . . . . . . . . . . . .
(A) Mergers . . . . . . . . . . . . . . . . . . . . . . . . . . .
(B) Investments and Acquisitions . . . . . . . . . . . . . . . . .
(C) Distributions . . . . . . . . . . . . . . . . . . . . . . . .
(D) Subordinated Obligations . . . . . . . . . . . . . . . . . . .
(E) ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(F) Amendments . . . . . . . . . . . . . . . . . . . . . . . . . .
(G) Increase in Salaries . . . . . . . . . . . . . . . . . . . . .
(H) Capital Expenditures . . . . . . . . . . . . . . . . . . . . .
(I) Operating Leases . . . . . . . . . . . . . . . . . . . . . . .
(J) Transactions with Affiliates . . . . . . . . . . . . . . . . .
(K) Adverse Agreements . . . . . . . . . . . . . . . . . . . . . .
(L) Liens; Negative Pledges; Sales and Leasebacks . . . . . . . .
(M) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . .
(N) Disposition of Property . . . . . . . . . . . . . . . . . . .
(O) Change in the Nature or Conduct of Business . . . . . . . . .
(P) Location of Units and Collateral; Books of Account . . . . . .
(Q) Security Interests in Future Entities . . . . . . . . . . . .
(R) Capital Structure . . . . . . . . . . . . . . . . . . . . . .
(S) End-User Customer Contracts. . . . . . . . . . . . . . . . . .
5.3 Payment of Charges . . . . . . . . . . . . . . . . . . . . . . . .
5.4 Contesting Charges . . . . . . . . . . . . . . . . . . . . . . . .
5.5 Survival of Liabilities Upon Termination of Agreement . . . . . . .
5.6 Requests for GE's Consent . . . . . . . . . . . . . . . . . . . . .
6. INFORMATION AND REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . .
6.1 Financial Statements . . . . . . . . . . . . . . . . . . . . . . .
(A) Audited Year-End Financial Statements . . . . . . . . . . . .
(B) Quarterly Financial Statements . . . . . . . . . . . . . . . .
(C) Monthly Financial Statements . . . . . . . . . . . . . . . . .
(D) Officer's Certificate . . . . . . . . . . . . . . . . . . . .
6.2 Public Documents . . . . . . . . . . . . . . . . . . . . . . . . .
6.3 Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.4 Certain Notices . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.5 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT . . . . . . . . . . .
7.1 Event of Default . . . . . . . . . . . . . . . . . . . . . . . . .
7.2 Late Fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.3 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7.4 Notice of Disposition of Collateral . . . . . . . . . . . . . . . . .
7.5 Right of Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . .
7.6 Appointment of GE as Maxum's Lawful Attorney . . . . . . . . . . . .
8. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.1 Modification of Agreement; Sale of Interest; Successors and
Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.3 Waivers by GE; Cumulative Remedies . . . . . . . . . . . . . . . . .
8.4 Waivers by Maxum . . . . . . . . . . . . . . . . . . . . . . . . . .
8.5 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . .
8.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.7 Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.8 Conflict of Terms . . . . . . . . . . . . . . . . . . . . . . . . . .
8.9 Governing Law; Consent to Jurisdiction and Venue . . . . . . . . . .
8.10 MUTUAL WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . .
8.11 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.12 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .
(A) Maxum . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(B) GE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.13 Section Titles and Table of Contents . . . . . . . . . . . . . . . .
8.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.15 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . .
8.16 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.17 Confidentiality and Publicity . . . . . . . . . . . . . . . . . . . .
8.18 Account Stated . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.19 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
EXHIBITS
2.1 Equipment Leases
2.2(E) Unit Characterization as of Effective Date
2.5(A) Restructured Fixed Unit Lease Payments
2.6(A) First Five System Upgrade Units
2.7 Letter Agreement
2.8 Target Suspended Units Subject to Skip Lease
Payments
2.10 GE Promissory Notes to be Cancelled
2.12 Certificates of Title
3.1(L) Accounts Subject to Automatic Drafting
4.1(A) Corporate Information
4.1(C) Compliance with Laws/Agreements
4.1(D) Defaults
4.1(F) Consents and Approvals
4.1(G) Liabilities
4.1(H) Liens; Location of Equipment;
End-User Customer Contracts
4.1(L) Insurance; Accidents or Losses
4.1(O) Subsidiaries and Affiliates
4.1(Q) Litigation
4.1(R) ERISA Plans
4.1(S) Taxes
4.1(T) Absence of Adverse Changes
4.1(Y) Remuneration Exceeding $80,000
4.1(Z) Other Obligations
5.1(B) Nonpayment of Indebtedness
5.1(G) Compliance with Agreements
5.2(A) Mergers
5.2(D) Subordinated Obligations
5.2(F) Amendments
5.2(I) Operating Leases
5.2(M) Highline Term Sheet
5.2(N) Disposition of Property
8.17 Permitted Disclosures
SCHEDULES
1.28-A/B GE Promissory Notes
2.1 Master Equipment Lease
2.5(F) Deferral Note
2.7 Second Deferral Note
2.8 Third Deferral Note
2.9 Common Stock Purchase Warrant
2.11 Promissory Note (Merrill/Highline)
2.12 Security Agreement
3.1(A) Release and Settlement Agreement
3.1(G) Opinion of Maxum's Counsel
3.1(H) Officer's Certificate of President of Maxum
3.1(I) Officer's Certificate of Secretary of Maxum
3.1(L) Authorization Agreement for Pre-Arranged Payments
3.1(R) Collateral Agreements
5.1(M) Lost Promissory Note Affidavit and Indemnity Agreement
AGREEMENT
THIS AGREEMENT is entered into effective as of June 1, 1993 by and among
General Electric Company, a New York corporation, acting through GE Medical
Systems ("GE"), Maxum Health Corp., a Delaware corporation ("MHC"), and each of
the undersigned subsidiaries of MHC ("First-Tier Subsidiaries") (MHC and the
First-Tier Subsidiaries are sometimes collectively referred to in this Agreement
as "Maxum").
R E C I T A L S
A. GE is a primary supplier of equipment and services to MHC and the
First-Tier Subsidiaries.
B. MHC has requested that GE restructure the terms of its obligations and
the obligations of the First-Tier Subsidiaries to GE arising in connection with
GE's provision of equipment and supplies to MHC and the First-Tier Subsidiaries
and GE has agreed to do so on the terms and conditions set forth herein.
C. MHC and the First-Tier Subsidiaries acknowledge that GE is making
valuable financial accommodations pursuant to this Agreement and the
transactions contemplated hereby, including, without limitation, GE's agreement
to (1) reorganize, combine and consolidate all outstanding GE equipment leases
with MHC and the First-Tier Subsidiaries into a single pool of assets which will
be subject to a comprehensive compensation methodology, (2) provide System
Upgrades for those Units deemed viable by GE in its sole discretion, and
(3) defer certain lease payments with respect to specified Units and combine
such deferred lease payments into two (2) promissory notes payable over sixty
(60) months with interest accruing at eight and one-half percent (8.5%) per
annum.
NOW, THEREFORE, in consideration of the foregoing recitals and the terms
and conditions contained herein, and of any extension of credit or financial
accommodations heretofore, now or hereafter made by GE to or on behalf of GE,
MHC and the
First-Tier Subsidiaries hereby agree as follows:
1. GENERAL DEFINITIONS AND RULES OF CONSTRUCTION
In addition to the defined terms appearing above or defined in subsequent
sections of this Agreement, capitalized terms used in this Agreement shall have
(unless otherwise provided elsewhere in this Agreement) the following respective
meanings when used in this Agreement:
1.1 "Affiliate" shall mean as to any Person (a) any other Person which,
directly or indirectly, controls, is controlled by or is under common control
with that Person, and (b) any Person in which, directly or indirectly, any
Person described in (a) controls, is controlled by or is under common control.
1.2 "Anchor End-User Customer Contract" shall mean the End-User Customer
Contract that is anticipated to generate the substantial majority of the
Billings with respect to a particular Upgraded Unit, as determined by GE, in its
reasonable discretion.
1.3 "Bankruptcy Code" shall mean Title 11 of the United States Code, as
from time to time amended, and the rules applicable with respect thereto.
1.4 "Billings" shall mean the total dollar amount billed by or on behalf
of MHC, any of the First-Tier Subsidiaries or their respective agents which is
attributable to the operation or use of a particular Unit by MHC, the First-Tier
Subsidiaries or an End-user Customer during any given calendar month during the
term of this Agreement, excluding, however, amounts billed by Maxum for
incremental charges for technologist training services provided by Maxum to End-
User Customers not to exceed Ten Thousand Dollars ($10,000) per calendar year
per End-User Customer over and above the basic scan rate and such other amounts
that may be agreed to by the parties in writing following the Closing Date.
1.5 "Business Day" shall mean any day except Saturday, Sunday or any day
in which banks in New York, New York are required or authorized by law to remain
closed.
1.6 "Closing Date" shall mean February 8, 1994.
1.7 "Collateral" shall have the meaning assigned to it in Section 1 of
the Security Agreement.
1.8 "Collections" shall mean the total dollar amount collected by or on
behalf of MHC, any of the First-Tier Subsidiaries or their respective agents
which is attributable to the operation or use of a particular Unit by MHC, the
First-Tier Subsidiaries or an End-user Customer during any given calendar month
during the term of this Agreement excluding, however, amounts collected by Maxum
for incremental charges for technologist training services provided by Maxum to
End-User Customers not to exceed Ten Thousand Dollars ($10,000) per calendar
year per End-User Customer over and above the basic scan rate and such other
amounts that may be agreed to by the parties in writing following the Closing
Date.
1.9 "CPI" shall mean the Consumer Price Index for all Urban Consumers,
All Items (1982-84 = 100), as published from time to time by the Bureau of Labor
Statistics of the United States Department of Labor or its successor.
1.10 "Default" shall mean any event which, with the passage of time, the
giving of notice, or both, would become an Event of Default, unless cured or
unless waived as specifically provided in this Agreement.
1.11 "Deferral Note" shall have the meaning set forth in Section 2.5(F)
below.
1.12 "Disposition" shall mean the sale, transfer or other disposition in
any single transaction or series of related transactions of any asset, or group
of related assets, of MHC or any of the First-Tier Subsidiaries, other than the
sale or other disposition of inventory in the ordinary course of business. As
used in this Agreement, the phrase "series of related transactions" shall mean
that the transactions, taken as a whole, were conceived and are implemented on a
strategically integrated basis and the phrase "related assets" shall mean that
the assets are functionally related to one another.
1.13 "Distributions" shall mean, with respect to any shares of capital
stock or any warrant or right to acquire shares of capital stock or any other
equity security issued by MHC or any of the First-Tier Subsidiaries, (a) the
retirement, redemption, purchase or other acquisition, directly or indirectly,
for value by MHC or any of the First-Tier Subsidiaries of any such security,
except to the extent that the consideration therefor consists of shares of
Stock, (b) the declaration or (without duplication) payment by MHC or any of the
First-Tier Subsidiaries of any dividend in cash or in Property, directly or
indirectly, on or with respect to any such security, (c) any investment by MHC
or any of the First-Tier Subsidiaries in the holder of five percent (5%) or more
of any such security if a purpose of such investment is to avoid
characterization of the transaction as a Distribution, and (d) any other payment
by MHC or any of the First-Tier Subsidiaries constituting a distribution under
applicable laws with respect to such security.
1.14 "Effective Date" shall mean June 1, 1993.
1.15 "End-User Customer" shall mean (a) a hospital or other facility or
entity that uses a Unit directly supplied by MHC or any First-Tier Subsidiary or
(b) an Affiliate that subleases a Unit from MHC or any First-Tier Subsidiary.
1.16 "End-User Customer Contract" shall mean the contract between MHC or a
First-Tier Subsidiary and an End-User Customer that sets forth the terms of the
End-User Customer's use or lease of a Unit.
1.17 "Equipment Leases" shall have the meaning set forth in Section 2.1
below.
1.18 "Event of Default" shall have the meaning set forth in Section 7.1
below.
1.19 "Expense Ante(s)" shall have the meaning set forth in
Section 2.5(B)(2) below.
1.20 "Financing Statements" shall mean the Form UCC-1 or other financing
statements to be filed in the appropriate offices for the perfection of a
security interest in any of the Collateral or as a protective filing as a lessor
or otherwise.
1.21 "First-Tier Subsidiaries" shall mean the Subsidiaries of MHC that
are parties to this Agreement, including Quest, MTS and MHSC.
1.22 "Fixed/Mobile Unit" shall mean those Units that are placed at one (1)
fixed location for use by one (1) End-User Customer.
1.23 "Fixed/Mobile Unit Expense Ante" shall mean an amount equal to
Twenty-Eight Thousand Dollars ($28,000) as of the Effective Date. The
Fixed/Mobile Expense Ante shall be adjusted on an annual basis on June 1 of each
year commencing June 1, 1994, as provided in Section 2.5(B)(2)(d) below.
1.24 "Fixed Unit" shall mean a Unit having rolling four (4) month average
Billings equal to or above the Upper Variable Unit Threshold or a Unit that is
otherwise characterized as a Fixed Unit in accordance with the terms of this
Agreement.
1.25 "Fixed Unit Payment" shall have the meaning set forth in
Section 2.5(A) below.
1.26 "Fixed Unit Pool" shall mean all of those Units that are
characterized as Fixed Units in accordance with the terms of this Agreement.
1.27 "GAAP" shall mean Generally Accepted Accounting Principles applied on
a consistent basis as in effect from time to time and practices which are
recognized as such by the American Institute of Certified Public Accountants
acting through its Financial Accounting Standards Board or through other
appropriate boards or committees thereof and which are consistently applied for
all periods after the date of this Agreement.
1.28 "GE Promissory Notes" shall mean those certain Promissory Notes to be
entered into by Maxum as of June 1, 1993 in the form attached hereto as Schedule
1.28.
1.29 "Hazardous Materials" shall mean any substance, material, or waste
that is regulated because of its hazardous, toxic, or polluting nature, by any
city, county, or other local or regional government authority, any State, or the
United States Government or any agency thereof having jurisdiction, including
any material or substance that is (a) petroleum or petroleum distillates,
including crude oil, natural gas, natural gas liquids, liquefied natural gas or
synthetic gas, (b) asbestos, (c) designated as a "hazardous substance" pursuant
to section 311 of the Clean Water Act, 33 U.S.C. 1251, et seq., 33 U.S.C. 1321,
or listed pursuant to section 307 of the Clean Water Act, 33 U.S.C. 1317, (d)
defined as a "hazardous waste" pursuant to section 1004 of the Resource
Conservation and Recovery Act, 42 U.S.C. 6901, et seq., 42 U.S.C. 6903,
(e) defined as a "hazardous substance" pursuant to section 101 of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C.
9601, et seq., 42 U.S.C. 9601, (f) determined to be a chemical substance or
mixture that poses an unreasonable risk of injury to human health or the
environment under the Toxic Substances Control Act, 15 U.S.C. 2601, et seq., (g)
determined to be a Hazardous Air Pollutant under the Clean Air Act, 42 U.S.C.
7501, et seq., or (h) listed, defined, or identified in the regulations adopted
pursuant to any of the foregoing laws.
1.30 "Highline" shall mean Highline Financial Services, Inc., a Delaware
corporation.
1.31 "Highline Documents" shall mean (i) that certain Loan and Security
Agreement entered into as of May 18, 1989 among Highline and MTS, (ii) the "Loan
Documents" as defined in such Loan and Security Agreement, (iii) those certain
Leases between MHSC, MTS or Quest and Highline dated as of June 24, 1987, August
17, 1987, September 22, 1987, December 1, 1987, December 10, 1987, February 1,
1988, May 2, 1988, June 15, 1988, September 16, 1988, September 20, 1988, March
1, 1989, March 15, 1991, and March 31, 1991, respectively and (iv) those certain
Security Agreements dated as of June 24, 1987, August 17, 1987, September 22,
1987, December 1, 1987, December 10, 1987, February 1, 1988, May 2, 1988, June
15, 1988, September 16, 1988 and March 1, 1989, respectively.
1.32 "Indebtedness" means, as applied to any Person, without duplication
(a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures or promissory notes, (c) all
obligations of such Person issued or assumed as the deferred purchase price of
property (other than amounts payable to suppliers in the ordinary course of
business), (d) all obligations under leases which shall have been or should be,
in accordance with GAAP, recorded as capital leases in respect of which such
Person is liable as lessee, (e) all guarantees, endorsements, and other
contingent obligations of such Person with respect to the obligations of other
Persons of the type described in (a) through (d) preceding including, but not
limited to, any obligations to acquire any of such obligations, to purchase,
sell, or furnish property primarily for the purpose of enabling such other
Person to make payment of any such obligations and/or to assure the owner of any
of such obligations against loss with respect thereto, (f) all reimbursement
obligations, contingent or otherwise, in respect of letters of credit, surety
and appeal bonds and performance bonds or similar instruments assuring any other
Person of the performance of any act or acts or the payment of any obligations,
(g) all indebtedness referred to in clauses (a), (b), (c), (d), (e) above
secured by (or for which the holder of such indebtedness has an existing right,
contingent or otherwise, to be secured by) any lien, security interest or other
encumbrance upon or in property owned by such Person, even if such Person has
not assumed or become liable for the payment of such indebtedness, and (h) all
other items, except items of capital stock or of surplus or of general
contingency or deferred tax reserves, which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person on the date as of which Indebtedness is to be
determined.
1.33 "IRC" shall mean the Internal Revenue Code of 1986, as heretofore or
hereafter amended, and all regulations promulgated thereunder.
1.34 "IRS" shall mean the Internal Revenue Service.
1.35 "Liabilities" or "Liability" shall mean all loans, advances,
indebtedness, liabilities, obligations and any other debts of MHC or any of its
Subsidiaries to GE, of any and every kind and nature, whether now or hereafter
owing, arising, due or payable from MHC or any of its Subsidiaries to GE,
whether or not evidenced by any note, agreement, or other instrument and whether
primary, secondary, direct, contingent, fixed or otherwise, including
obligations of performance, and including, particularly, principal, interest,
loan fees, lease payments (including, without limitation, the Fixed Unit
Payments, the Variable Unit Payments and payments under the Deferral Note,
Second Deferral Note, Third Deferral Note, GE Promissory Notes, and Merrill
Promissory Note), rentals, charges, expenses, attorneys' fees, and other amounts
chargeable to MHC or any of the Subsidiaries by GE, whether or not such
obligations are classified as a liability under GAAP on a balance sheet.
1.36 "Lien" shall mean (a) any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien (including tax liens,
judgment liens, liens of mechanics, suppliers, and other Persons for the
provision of goods or services, and all other liens arising under statute,
common law or judicial interpretation), consignment, charge, claim, security
interest, capitalized lease obligation, easement, encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including any lease or title retention agreement, or any
financing lease having substantially the same economic effect as any of the
foregoing), (b) any arrangement, express or implied, under which any Property is
transferred, sequestered or otherwise identified for the purpose of subjecting
the same to the payment of Indebtedness or performance of any other obligation
in priority to the payment of general, unsecured creditors; (c) liens that would
arise as a result of any indebtedness which is unpaid more than forty-five (45)
days after the same shall have become due and payable and which if unpaid would
by law (including but not limited to bankruptcy and insolvency laws), or
otherwise, be given any priority whatsoever over general, unsecured creditors;
and (d) the filing of, or agreement to give, any financing statement perfecting
a security interest or consignment agreement under the UCC or comparable law of
any jurisdiction.
1.37 "Lower Variable Unit Threshold" shall mean an amount which is equal
to (a) the applicable Expense Ante for a particular Unit (i.e., the Fixed/Mobile
Unit Expense Ante or the Mobile/Mobile Unit Expense Ante, as applicable), plus
(b) the Minimum Lease Payment, less (c) Five Thousand Dollars ($5,000).
1.38 "Master Equipment Lease" shall have the meaning set forth in Section
2.1 below.
1.39 "Material Adverse Effect" shall mean any set of circumstances or
events which (a) was initiated or approved by MHC or any of the Subsidiaries and
which has or could reasonably be expected to have any material adverse effect
whatsoever upon the validity or enforceability of this Agreement or any of the
Scheduled Documents, (b) is or could reasonably be expected to be material and
adverse to the condition (financial or otherwise), or business operations of MHC
and the Subsidiaries, taken as a whole, (c) materially impairs or could
reasonably be expected to materially impair the ability of MHC or any of the
Subsidiaries to satisfy any of the Liabilities, or (d) was initiated or approved
by MHC or any of the Subsidiaries and which materially impairs or could
reasonably be expected to materially impair the ability of GE to enforce its
legal remedies pursuant to this Agreement or any of the Scheduled Documents.
1.40 "Maxum" shall mean MHC and the First-Tier Subsidiaries.
1.41 "Merrill/Highline Promissory Note" shall have the meaning assigned to
it in Section 2.11 below.
1.42 "Merrill Lynch Documents" shall have the meaning assigned to it in
Section 2.11 below.
1.43 "MHC" shall mean Maxum Health Corp., a Delaware corporation.
1.44 "MHSC" shall mean Maxum Health Services Corp., a Delaware
corporation.
1.45 "MTS" shall mean MTS Enterprises, Inc., a Texas corporation.
1.46 "Minimum Lease Payment" shall mean Eighteen Thousand Dollars
($18,000).
1.47 "Mobile/Mobile Unit" shall mean those Units that are operated on a
route with two (2) or more locations and with one (1) or more End-User
Customers.
1.48 "Mobile/Mobile Unit Expense Ante" shall mean an amount equal to
Thirty-Two Thousand Dollars ($32,000) as of the Effective Date. The
Mobile/Mobile Expense Ante shall be adjusted on an annual basis on June 1 of
each year commencing June 1, 1994, as provided in Section 2.5(B)(2)(d) below.
1.49 "National Accounts Service Contract" shall mean the maintenance and
service contract that would be offered by GE to Maxum in a particular year
setting forth the costs for GE to provide maintenance and cryogens to magnetic
resonance equipment similar to the Variable Units for that particular year.
1.50 "Permitted Lien" shall mean those Liens described in Exhibit 4.1(H)
attached hereto and any existing Liens of GE or Liens hereafter granted to GE.
1.51 "Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, unincorporated organization, association, corporation,
institution, public benefit corporation, entity, party, or government (whether
federal, state, county, city, municipal, or otherwise, including any
instrumentality, division, agency, body, or department thereof).
1.52 "Pre-Restructuring Lease Payment" shall mean the monthly lease
payment amount in effect pursuant to the Equipment Lease for each respective
Unit immediately prior to the Effective Date.
1.53 "Property" shall mean any interest of MHC or any of the First-Tier
Subsidiaries in any kind of property or asset, whether real, personal or mixed,
tangible or intangible, or existing as of the Effective Date or acquired
thereafter.
1.54 "Quest" shall mean Quest Financial Services, Inc., a Delaware
corporation.
1.55 "Release and Settlement Agreement" shall have the meaning set forth
in Section 3.1(A) below.
1.56 "Rental Unit" shall mean a Unit that is subleased by Maxum to an End-
User Customer or another person that operates the Unit directly.
1.57 "Rental Unit Payment" shall have the meaning assigned to it in
Section 2.5(D)(1) below.
1.58 "Rental Unit Pool" shall mean all of those Units that are
characterized as Rental Units in accordance with the terms of this Agreement.
1.59 "Replaced Unit" shall have the meaning assigned to it in Section
2.6(A) below.
1.60 "Reserves" shall mean reserves for returns, allowances, and the like
as may be established by MHC or any of the First-Tier Subsidiaries or as may
otherwise be required in accordance with GAAP.
1.61 "Scheduled Documents" shall mean, collectively, the Master Equipment
Lease, the Deferral Note, the Second Deferral Note, the Third Deferral Note, the
Release and Settlement Agreement, the GE Promissory Notes, the Merrill
Promissory Note, the Security Agreement, and the Warrant.
1.62 "Second Deferral Note" shall have the meaning set forth in Section
2.7 below.
1.63 "Security Agreement" shall have the meaning set forth in Section 2.10
below.
1.64 "Skip Lease Payments" shall have the meaning set forth in Section 2.8
below.
1.65 "Stock" shall mean all shares, options, warrants, interests,
participations, or other equivalents, howsoever designated, of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, convertible debentures, and all agreements, instruments,
any other "option" (as such term is defined in Proposed Treasury Regulation
Section 1.382-4(d)(3) promulgated under the IRC), or any other "equity
security" (as such term is defined in Rule 3a11-1 of the General Rules and
Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended), and documents convertible, in
whole or in part, into any one or more or all of the foregoing.
1.66 "Subordination Agreement" shall mean that certain Subordination
Agreement among Merrill Lynch, MTS, MHC and Highline executed as of August 26,
1989.
1.67 "Subsidiaries" shall mean any corporation of which fifty percent
(50%) or more of the outstanding shares of each class having voting power (other
than shares having such power by reason of the happening of a contingency) is at
the time owned or controlled, directly or indirectly, by MHC or any of the
Subsidiaries. The Subsidiaries shall include without limitation MHSC, MTS and
Quest.
1.68 "Supplemental Documentation" shall mean agreements, instruments,
documents, financing statements, warehouse receipts, bills of lading, and other
written matter necessary or requested by GE to perfect and/or maintain the
perfection of GE's Lien upon the Collateral and to consummate the transactions
contemplated in or by this Agreement and the Scheduled Documents.
1.69 "Suspended Unit" shall mean a Unit having rolling four (4) month
average Billings below the Lower Variable Unit Threshold, or a Unit which
becomes completely idle after all End-User Customer Contracts served by that
Unit have expired or otherwise have been terminated without renewal or
replacement.
1.70 "Suspended Unit Pool" shall mean all of those Units that are
characterized as Suspended Units in accordance with the terms of this Agreement.
1.71 "System Option Upgrades" shall mean the upgrading of a Unit through
the addition of new component parts obtained from GE.
1.72 "System Upgrades" shall mean the upgrading of a Unit from one GE
"platform level" to another GE "platform level," such as the upgrade of a "GE
Max" to a "GE .5T Signa," and the addition of options and new component parts
thereto required to meet Maxum's specifications for initial delivery.
1.73 "Termination Date" shall mean the date on which all Liabilities under
or in connection with this Agreement and the Scheduled Documents have been
completely and finally paid and discharged, whether by prepayment or otherwise.
1.74 "Third Deferral Note" shall have the meaning set forth in Section 2.8
below.
1.75 "UCC" shall mean the Uniform Commercial Code of the jurisdiction with
respect to which such term is used, as in effect from time to time.
1.76 "Unit" or "Units" shall mean any magnetic resonance imaging equipment
or computerized tomography equipment that is as of the Effective Date leased by
GE to Maxum pursuant to the Master Equipment Lease and is characterized as a
Fixed Unit, Variable Unit, Suspended Unit or Rental Unit pursuant to the terms
of this Agreement.
1.77 "Upgraded Unit" shall have the meaning assigned to it in Section
2.6(A) below.
1.78 "Upper Variable Unit Threshold" shall mean an amount equal to the sum
of (a) the applicable Expense Ante for a particular Unit (i.e., the Fixed/Mobile
Unit Expense Ante or the Mobile/Mobile Unit Expense Ante, as applicable),
(b) the Minimum Lease Payment, and (c) Eighteen Thousand Dollars ($18,000).
1.79 "Variable Unit" shall mean a Unit having rolling four (4) month
average Billings below the Upper Variable Unit Threshold, and equal to or above
the Lower Variable Unit Threshold, or a Unit that is otherwise characterized as
a Variable Unit in accordance with the terms of this Agreement.
1.80 "Variable Unit Payment" shall mean the sum of (a) the Minimum Lease
Payment, and (b) an amount equal to forty percent (40%) of the Variable Unit's
Billings in the applicable month that are in excess of the sum of (i) the
applicable Expense Ante for that Variable Unit (i.e., the Fixed/Mobile Unit
Expense Ante or the Mobile/Mobile Unit Expense Ante, as applicable), and
(ii) the Minimum Lease Payment.
1.81 "Variable Unit Pool" shall mean all of those Units that are
characterized as Variable Units in accordance with the terms of this Agreement.
1.82 "Warrant" shall have the meaning set forth in Section 2.9 below.
1.83 "Xerox" shall mean Xerox Credit Corporation.
1.84 Other Terms: All other terms hereinbefore or hereinafter defined,
including, without limitation, all terms defined in the preamble and recitals
hereto, shall have the meanings herein assigned to such terms. All terms used
in the above definitions and all other terms contained in this Agreement, where
the context so indicates or requires, shall have the meanings provided by the
UCC as in effect in the applicable jurisdiction to the extent the same are used
or defined therein. Any accounting terms used in this Agreement and not
specifically defined herein shall have the meanings given them in accordance
with GAAP, and all financial computations hereunder shall be computed, unless
otherwise specifically provided herein, in accordance with GAAP, consistently
applied. That certain terms or computations are explicitly modified by the
phrase "in accordance with GAAP" shall in no way be construed to limit the
foregoing.
1.85 Rules of Construction: Except as otherwise specifically provided in
this Agreement, the singular of any term shall include the plural, and vice
versa, the use of any term shall be equally applicable to any gender, "or" shall
not be exclusive, and "including" shall not be limiting. The words "herein,"
"hereof," and "hereunder" and other words of similar import refer to this
Agreement as a whole, including the Exhibits and Schedules hereto, as the same
may from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement. Any
reference to a "Section," "Exhibit," or "Schedule" shall refer to the relevant
Section of, or Exhibit or Schedule to, this Agreement, unless specifically
indicated to the contrary.
2. RESTRUCTURING OF CERTAIN OBLIGATIONS OF MAXUM
2.1 Master Equipment Lease. GE and Maxum agree to reorganize, combine
and consolidate the equipment leases described on Exhibit 2.1 attached hereto
(collectively, the "Equipment Leases") into a single Master Leaseline Agreement
("Master Equipment Lease") to be entered into by the parties as of the Effective
Date in the form attached hereto as Schedule 2.1. Separate schedules shall be
attached to the Master Equipment Lease, each of which shall (1) identify and
describe the Unit to which the schedule relates, (2) indicate whether such Unit
is characterized as a Fixed Unit, a Variable Unit, a Suspended Unit or a Rental
Unit as of the Effective Date, (3) indicate whether such Unit is a Mobile/Mobile
Unit or a Fixed/Mobile Unit (if the Unit is a Variable Unit as of the Effective
Date), (4) set forth the lease term for such Unit, (5) set forth the monthly
lease payment amount if such Unit is a Fixed Unit or a Rental Unit as of the
Effective Date; (6) describe the locations where the Unit is operated, and (7)
set forth such other terms and conditions with respect to such Unit as the
parties may agree. For purposes of this Agreement, the term "Master Equipment
Lease" shall include all schedules and addenda that may be attached to the
Master Equipment Lease by the parties from time to time. As of the Effective
Date, the compensation mechanism and all other provisions contained in the
Master Equipment Lease and in Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7 and 2.8
below shall supersede in their entirety all of the provisions contained in the
individual Equipment Leases and all schedules and addenda thereto. GE and Maxum
acknowledge and agree that (i) it is not their intention to terminate the
individual Equipment Leases by entering into the Master Equipment Lease, and
(ii) neither this Agreement nor the Master Equipment Lease shall constitute a
novation of any or all of the individual Equipment Leases.
2.2 Pool of Assets.
(A) Fixed Unit Pool. Those Units having rolling four (4) month
average Billings equal to or above the Upper Variable Unit Threshold shall
qualify as Fixed Units. The Fixed Unit Pool shall consist of all Units that are
characterized as Fixed Units in accordance with the terms of this Agreement.
(B) Variable Unit Pool. Those Units having rolling four (4) month
average Billings both (1) below the Upper Variable Unit Threshold, and (2) equal
to or above the Lower Variable Unit Threshold shall qualify as Variable Units.
The Variable Unit Pool shall consist of all Units that are characterized as
Variable Units in accordance with the terms of this Agreement. Each Variable
Unit shall be further characterized as either a Fixed/Mobile Unit or a
Mobile/Mobile Unit as of the Effective Date. Such characterization shall also
be reflected on Exhibit 2.2(E) and the appropriate schedule to the Master
Equipment Lease as provided in Section 2.1.
(C) Suspended Unit Pool. (1) Those Units having rolling four (4)
month average Billings below the Lower Variable Unit Threshold, or (2) those
Units which become completely idle after all End-User Customer Contracts served
by that Unit have expired or otherwise have been terminated without renewal or
replacement shall qualify as Suspended Units. The Suspended Unit Pool shall
consist of all Units that are characterized as Suspended Units in accordance
with the terms of this Agreement.
(D) Rental Unit Pool. Those Units that are placed back in service
from the Suspended Unit Pool pursuant to a Sublease (as defined in Section
2.3(B) below). The Rental Unit Pool shall consist of all Units that are
characterized as Rental Units in accordance with the terms of this Agreement.
(E) Unit Characterization. The parties shall determine whether each
Unit will be characterized as a Fixed Unit, Variable Unit, Suspended Unit or
Rental Unit as of the Effective Date and such characterization shall be set
forth in Exhibit 2.2(E) attached hereto and reflected on the appropriate
schedule to the Master Equipment Lease, as provided in Section 2.1 above. The
characterization of a Unit as a Fixed Unit, Variable Unit, Suspended Unit or
Rental Unit shall be effective as of the Effective Date. A Unit may be
recharacterized at any time following the Effective Date until termination of
this Agreement in accordance with the provisions of this Section 2. In the
event a Unit is recharacterized in accordance with this Section 2 following the
Effective Date but prior to the Closing Date, such recharacterization shall be
reflected on Exhibit 2.2(E) in addition to the addendum signed by the parties
pursuant to Section 2.3(C)(5) below.
2.3 Changes in Unit Characterization.
(A) Determination of Changes in Billings. Within the first ten (10)
Business Days of each calendar month following the Effective Date, Maxum shall
calculate the average Billings for the previous four (4) month period for each
Unit that is not in the Suspended Unit Pool or Rental Unit Pool and determine
whether any Fixed Unit's rolling four (4) month average Billings have decreased
below the Upper Variable Unit Threshold or Lower Variable Unit Threshold, or
whether any Variable Unit's rolling four (4) month average Billings have
decreased below the Lower Variable Unit Threshold. If Maxum elects to have a
particular Unit recharacterized as a result of such decrease as described in the
preceding sentence, then Maxum shall provide written notice to GE as provided in
Section 2.3(C) below.
(B) Rental Units. The parties acknowledge that during the term of
this Agreement, Maxum may seek to enter into a sublease ("Sublease") with an
End-User Customer or another Person pursuant to which the End-User Customer or
other Person, rather than Maxum, will operate a particular Unit that is
characterized as a Suspended Unit pursuant to this Agreement so that such Unit
may be placed back in service. In the event that Maxum intends to enter into a
Sublease with an End-User Customer or another Person with respect to a
particular Suspended Unit and, therefore, have such Unit recharacterized as a
Rental Unit pursuant to this Agreement, then Maxum shall provide written notice
to GE as provided in Section 2.3(C)(3) below, along with a copy of the proposed
Sublease that relates to the Suspended Unit that may be recharacterized as a
Rental Unit. Notwithstanding any other provision contained in this Agreement to
the contrary, a Rental Unit is not subject to recharacterization as a Variable
Unit or a Suspended Unit pursuant to the terms of this Agreement as a result of
the Billings with respect to such Rental Unit. Such Unit may only be
recharacterized as a Suspended Unit as a result of the expiration or termination
without renewal or replacement of the Sublease with respect to such Rental Unit
as provided in Section 2.3(C)(3) below, the terms of which are approved by GE in
accordance with Section 2.3(C)(3) below. Following such recharacterization as a
Suspended Unit, such Unit may be placed back in service as a Fixed Unit,
Variable Unit or as a Rental Unit in accordance with the terms of this
Agreement.
(C) Written Notice From Maxum Regarding Unit Recharacterization.
(1) Maxum shall provide a written notice to GE notifying GE that
a particular Fixed Unit qualifies for recharacterization as a Variable Unit or
as a Suspended Unit or that a particular Variable Unit qualifies for
recharacterization as a Suspended Unit. The written notice shall document, in a
manner reasonably acceptable to GE, the information from which Maxum has
determined that a particular Unit qualifies for recharacterization as provided
above. Appropriate documentation may include, without limitation, a chronology
of the information provided by Maxum to GE pursuant to Section 2.4 below
detailing the previous four (4) months of Billings for a particular Unit, copies
of all End-User Customer Contracts that have expired or otherwise have been
terminated without renewal or replacement with respect to a particular Unit in
the event that Unit qualifies for the Suspended Unit Pool pursuant to
Section 2.2(C)(2) above (including copies of any termination notices with
respect to such contract(s)), and such other relevant information that would
enable GE to confirm Maxum's determination. GE shall have the right to
challenge Maxum's determination within ten (10) Business Days following receipt
of such notice; provided, however, that GE may reasonably request additional
information and shall have an additional period of ten (10) Business Days
following GE's receipt of all such information to challenge Maxum's
determination.
(2) Maxum shall provide notice to GE in the event that Maxum
desires for a particular Suspended Unit to be placed back in service as a Fixed
Unit or as a Variable Unit. Recharacterization of such Suspended Unit as a
Fixed Unit rather than as a Variable Unit shall be permitted by GE only if (i)
such Suspended Unit has not been characterized at any time by the parties
pursuant to this Agreement as a Variable Unit, (ii) Billings from the Suspended
Unit are anticipated to exceed the Fixed Unit Payment with respect to such Unit
(if the Unit was characterized as a Fixed Unit as of the Effective Date), as
determined by GE in its sole discretion, and (iii) Billings from the Suspended
Unit are anticipated to exceed the Pre-Restructuring Lease Payment with respect
to such Unit (if the Unit was characterized as a Suspended Unit as of the
Effective Date), as determined by GE in its sole discretion. Maxum shall
provide GE with appropriate information and documentation as is necessary, in
GE's reasonable discretion, to make such determination.
(3) Maxum shall provide notice to GE in the event that Maxum
desires for a particular Suspended Unit to be recharacterized and placed back in
service as a Rental Unit. Recharacterization of such Suspended Unit as a Rental
Unit shall be permitted by GE if (i) the terms of the Sublease to be entered
into by Maxum with respect to such Unit are reasonably acceptable to GE, (ii)
Maxum and GE negotiate a fixed monthly lease payment to be paid by Maxum with
respect to such Unit for so long as such Unit is characterized as a Rental Unit,
and (iii) Maxum and GE negotiate the term that the Unit will be characterized as
a Rental Unit.
(4) Maxum shall provide notice to GE in the event that Maxum
desires to have a Rental Unit recharacterized as a Suspended Unit. Maxum shall
further provide GE with a copy of the Sublease that has expired or otherwise
been terminated without renewal or replacement (including copies of any
termination notices with respect to such contract). Recharacterization of a
Rental Unit as a Suspended Unit shall be permitted by GE if the Sublease with
respect to such Unit expires or otherwise terminates without renewal or
replacement.
(5) Any challenge by GE to Maxum's determination that a Unit
qualifies for recharacterization must be in writing and received by MHC within
the time period herein stated; otherwise such right to challenge shall be
automatically terminated. Any recharacterization of a Unit pursuant to this
Agreement shall be reflected on an Addendum to the applicable schedule to the
Master Equipment Lease that relates to such Unit, which Addendum shall be signed
by the parties and set forth the information described in Section 2.1 above as
of the effective date of the Addendum. Further, if a Unit is recharacterized as
a Variable Unit, the Addendum shall further describe whether the Unit is a
Fixed/Mobile Unit or a Mobile/Mobile Unit.
(D) Effective Date of Unit Recharacterization. For purposes of this
Agreement and the Master Equipment Lease, (i) if a Fixed Unit or a Variable Unit
is recharacterized as a Suspended Unit, such recharacterization shall be
effective on the date such Unit qualifies for recharacterization, (ii) if a
Fixed Unit is recharacterized as a Variable Unit, such recharacterization shall
be effective on the first day of the month in which the Unit qualifies for
recharacterization, (iii) if a Suspended Unit is recharacterized as a Fixed
Unit, Variable Unit or Rental Unit, such recharacterization shall be effective
on the date such Suspended Unit is placed back in service or the effective date
of the End-User Customer Contract or Sublease, as applicable, with respect
thereto, whichever occurs first, and (iv) if a Rental Unit is recharacterized as
a Suspended Unit, such recharacterization shall be effective on the date such
Unit qualifies for recharacterization (which is the date the Sublease with
respect to that Unit expires or otherwise terminates without renewal or
replacement), in each case, however, subject to GE's right to challenge such
recharacterization in accordance with Section 2.3(C) of this Agreement.
2.4 Monthly Reports. On or before the tenth (10th) Business Day of each
calendar month during the term of this Agreement, Maxum shall furnish GE with a
detailed statement setting forth (1) the total Billings from each End-User
Customer Contract attributable to the operation or use of the Unit covered
thereby during the preceding calendar month, (2) commencing in November of 1993,
an accounts receivable aging report for each End User Customer Contract as of
the end of the preceding calendar month relating to the use or operation of the
Unit covered thereby, and (3) a report identifying charges that have been
written off with respect to (i) each Unit and (ii) each End-User Customer
Contract, and such other information as GE may reasonably request from time to
time.
2.5 Lease Payments; Lease Terms.
(A) Fixed Unit Lease Payments. The lease payment with respect to
each Fixed Unit in the Fixed Unit Pool as of the Effective Date shall be the
restructured lease payment set forth in Exhibit 2.5(A) ("Fixed Unit Payment"),
and such additional amounts which may be payable by Maxum as a result of a
change in Maxum's routes to End User Customers, as provided in Section 2.5(B)(5)
below. The lease payment with respect to each Suspended Unit that is
recharacterized as a Fixed Unit during the term of this Agreement shall be (i)
the Fixed Unit Payment, if the Unit was characterized as a Fixed Unit as of the
Effective Date, or (ii) the Pre-Restructuring Lease Payment, if the Unit was
characterized as a Suspended Unit as of the Effective Date, and such additional
amounts which may be payable by Maxum as a result of a change in Maxum's routes
to End-User Customers, as provided in Section 2.5(B)(5) below. The Fixed Unit
Payment amount with respect to each Fixed Unit shall be set forth in the
appropriate schedule to the Master Equipment Lease, as provided in Section 2.1
above. The Fixed Unit Payment or Pre-Restructuring Lease Payment, as
applicable, shall be due and payable by Maxum to GE monthly in advance on or
before the first (1st) day of each month during the respective remaining lease
term of each Fixed Unit, commencing on the Effective Date or the effective date
of recharacterization, as applicable.
(B) Variable Unit Lease Payments; Term.
(1) Payment Amount. The Variable Unit Payment for each Variable
Unit in the Variable Unit Pool shall be the sum of (1) the Minimum Lease
Payment, and (2) an amount equal to forty percent (40%) of the Variable Unit's
monthly Billings for the previous calendar month that are in excess of the sum
of (a) the applicable Expense Ante for that Variable Unit, and (b) the Minimum
Lease Payment. Notwithstanding the foregoing, if a Unit is characterized as a
Fixed Unit but qualifies in a particular month for characterization as a
Variable Unit or a Suspended Unit, Maxum shall have the option in that month to
make lease payments in an amount equal to the applicable Fixed Unit Payment for
such Unit (if such Unit was characterized as a Fixed Unit as of the Effective
Date), or the Pre-Restructuring Lease Payment (if such Unit was characterized as
a Suspended Unit as of the Effective Date, as applicable), in which event that
Unit shall continue to be characterized and treated under this Agreement and in
the Master Equipment Lease as a Fixed Unit. However, except as provided in
Section 2.6 hereof, once Maxum has provided written notice to GE notifying GE
that such Fixed Unit qualifies for recharacterization as a Variable Unit or a
Suspended Unit and such Unit is recharacterized as a Variable Unit or a
Suspended Unit in accordance with this Agreement, Maxum shall no longer have the
option described immediately above to make the Fixed Unit Payment or Pre-
Restructuring Lease Payment, as applicable, with respect to such Unit; provided,
however, in the event Maxum notifies GE that a Fixed Unit qualifies as a
Suspended Unit and such Unit is characterized as a Suspended Unit, Maxum shall
have the right to have such Unit recharacterized as a Fixed Unit in accordance
with Section 2.3(C)(2).
(2) Expense Antes.
(a) Two (2) expense antes ("Expense Antes") have been
established by the parties with respect to the Variable Units as provided below
which shall be applicable depending upon whether the Variable Unit is
characterized as a Fixed/Mobile Unit or a Mobile/Mobile Unit. The Fixed/Mobile
Unit Expense Ante shall be applicable to each Fixed/Mobile Unit, and the
Mobile/Mobile Unit Expense Ante shall be applicable to each Mobile/Mobile Unit.
Except as otherwise noted immediately below, each Expense Ante shall include (i)
personnel compensation and benefits, fleet expenses (Mobile/Mobile Unit Expense
Ante only), operating expenses, insurance and property taxes (collectively,
"Variable Unit Expenses"), and (ii) the cost to provide maintenance and cryogens
to each Variable Unit on a monthly basis, which for purposes of this Agreement
shall be equal to the amount that GE would charge Maxum on a monthly basis to
provide maintenance and cryogens with respect to magnetic resonance imaging
equipment similar to the Variable Units pursuant to a National Account Service
Contract (collectively, "Maintenance and Cryogens Costs").
(b) As of the Effective Date, the Fixed/Mobile Unit Expense
Ante shall be an amount equal to Twenty-Eight Thousand Dollars ($28,000). Of
such amount, Eighteen Thousand Dollars ($18,000) is attributable to Variable
Unit Expenses and Ten Thousand Dollars ($10,000) is attributable to Maintenance
and Cryogen Costs.
(c) As of the Effective Date, the Mobile/Mobile Unit
Expense Ante shall be an amount equal to Thirty-Two Thousand Dollars ($32,000).
Of such amount, Twenty-Two Thousand Dollars ($22,000) is attributable to
Variable Unit Expenses and Ten Thousand Dollars ($10,000) is attributable to
Maintenance and Cryogen Costs.
(d) The Fixed/Mobile Unit Expense Ante and the
Mobile/Mobile Unit Expense Ante shall each be adjusted on an annual basis on
June 1 of each year commencing on June 1, 1994, as follows: (x) the Variable
Unit Expense component of each Expense Ante shall be increased by the percentage
increase in the CPI; and (y) the Maintenance and Cryogens Cost component of each
Expense Ante shall be increased by the increased monthly costs, if any, that GE
would charge Maxum to provide maintenance and cryogens to magnetic resonance
imaging equipment similar to the Variable Units during that year pursuant to a
National Accounts Service Contract.
(3) Time of Variable Unit Payments. The Minimum Lease Payment
portion of the Variable Unit Payment shall be due and payable by Maxum to GE in
advance on or before the first (1st) day of each month during the respective
lease term for each Variable Unit, commencing on the Effective Date. The
remaining portion of the Variable Unit Payment shall be due and payable by Maxum
to GE in arrears on or before the tenth (10) Business Day of each month during
the respective lease term for each Variable Unit, commencing with the month
immediately following the Effective Date and continuing each month thereafter
until on or before the tenth (10th) Business Day of the month immediately
following the expiration or the earlier termination of the respective lease term
for each Variable Unit.
(4) Extension of Variable Unit Lease Terms. The lease term
which is set forth in the applicable Equipment Lease for each Unit that
qualifies and is characterized as a Variable Unit as of the Effective Date shall
be extended for an additional five (5) month period from the end of such lease
term. Such extension shall be reflected in the lease term set forth in
appropriate schedule to the Master Equipment Lease. The lease term of each Unit
that qualifies and is recharacterized as a Variable Unit during the Term of this
Agreement shall be extended for an additional five (5) month period from the end
of the lease term for each such Unit which is set forth in the applicable
schedule to the Master Equipment Lease. The appropriate schedule to the Master
Equipment lease shall be amended by the parties or an Addendum to such schedule
shall be signed by the parties to reflect such extension.
(5) Change in End-User Customer Routes. If one (1) or more End-
User Customers which were being served by a Variable Unit are thereafter served
by a Fixed Unit or by a Non-GE Unit (as defined below in Section 2.5(C)(2)) as a
result of a change by Maxum in the route serving the End-User Customer, or
otherwise, then GE shall be paid, in addition to the Fixed Unit Payment with
respect to that Fixed Unit (if applicable), an amount equal to forty percent
(40%) of the monthly Billings generated from those End-User Customers that were
being served by a Variable Unit and are thereafter served by the Fixed Unit or a
Non-GE Unit (as defined below), which amount shall be payable by Maxum to GE
until such time as either (i) the Fixed Unit qualifies and is recharacterized as
a Variable Unit, (ii) the End-User Customer Contract with respect to the End-
User Customer that was being served by the Variable Unit, and is now being
served by a Fixed Unit or a Non-GE Unit, expires or otherwise terminates without
renewal or replacement, or (iii) the End-User Customer begins being served by a
Variable Unit. Such payments shall be due and payable monthly in arrears on or
before the tenth (10th) Business Day of each month for so long as such payments
are required to be made as provided above. Notwithstanding the foregoing, such
additional payment shall not be required in the event GE's written consent to
the change in the route is obtained by Maxum, which consent may be withheld in
GE's sole discretion.
(C) Suspension of Lease Payments on Suspended Units; Term; Expenses.
(1) Lease Payment Suspension. With respect to each Unit that
qualifies as a Suspended Unit, Maxum shall have the option to either
(a) continue operating the Unit on its current route and make lease payments
with respect to that Unit in an amount equal to the applicable Fixed Unit
Payment, Pre-Restructuring Lease Payment or Variable Unit Payment for that Unit,
in which event that Unit shall be characterized and treated under this Agreement
and in the Master Equipment Lease as a Fixed Unit or a Variable Unit, as
applicable or (b) suspend the lease payment applicable to that Unit and take the
Unit out of service pursuant to Section 2.5(C)(2) below, in which event that
Unit shall be recharacterized and treated under this Agreement and the Master
Equipment Lease as a Suspended Unit following the delivery of the appropriate
notices as provided in Section 2.3(C) above.
(2) Suspended Units Taken Out of Service. With respect to any
Suspended Unit that is taken out of service by Maxum, Maxum may, in its sole
discretion, consolidate those
End-User Customers that were being served by a Suspended Unit with End-User
Customers that are being served by either an existing Fixed Unit, an existing
Variable Unit or an MRI unit that is obtained in any manner by Maxum from an
entity other than GE ("Non-GE Unit"), or consolidate the End-User Customers that
were being served by a Suspended Unit into one (1) or more new routes that would
be served by one (1) or more of the Suspended Units (which Suspended Units shall
be characterized as Variable Units for purposes of this Agreement); provided,
however, that the Billings from the consolidation of the End-User Customers into
one (1) or more new routes must be anticipated to exceed the Lower Variable Unit
Threshold as determined by GE in its sole discretion. Maxum shall provide GE
with appropriate information and documentation as is necessary, in GE's
reasonable discretion, to make such determination. In addition, if one (1) or
more End-User Customers which were being served by a Suspended Unit are
thereafter served by a Fixed Unit or by a Non-GE Unit, GE shall be paid, in
addition to the Fixed Unit Payment applicable to that Fixed Unit (if
applicable), an amount equal to forty percent (40%) of the monthly Billings
generated from those End-User Customers that were being served by a Suspended
Unit and are thereafter served by the Fixed Unit or a Non-GE Unit, which amount
shall be payable by Maxum to GE until such time as either (i) the Fixed Unit
qualifies and is recharacterized as a Variable Unit, (ii) the End-User Customer
Contract with respect to the End-User Customer that was being served by a
Suspended Unit, and is now being served by a Fixed Unit or a Non-GE Unit,
expires or otherwise terminates without renewal or replacement, (iii) the End-
User Customer that was being served by a Non-GE Unit begins being served by a
Variable Unit, or (iv) the Suspended Unit is placed back in service and the
rolling four (4) month average Billings with respect to such Unit exceed Fifty
Thousand Dollars ($50,000). Such payments shall be due and payable monthly in
arrears on or before the tenth (10th) Business Day of each month for so long as
such payments are required to be made as provided above. MHC and its First-Tier
Subsidiaries shall jointly and severally indemnify and hold GE harmless from and
against any and all claims, actions, costs and expenses (including without
limitation reasonable attorneys' fees and court costs) that GE may incur or be
subject to as a result of any action or claim initiated by an End-User Customer
or any other person or entity arising out of, in connection with, or as a result
of (1) a Suspended Unit being taken out of service, or (2) any breach of or
default under any End-User Customer Contract.
(3) Extension of Suspended Unit Lease Term. The respective
lease terms of each Suspended Unit set forth in the applicable schedule to the
Master Lease Agreement shall be extended at the end of such term by the same
number of months such Suspended Unit remains in the Suspended Unit Pool.
(4) Maintenance and Cryogen Costs on Suspended Units. Maxum
agrees to continue to pay all maintenance costs and expenses necessary to
maintain all Suspended Units in good working order and condition while such
Suspended Units are in the Suspended Unit Pool; provided, however, that
commencing the first full calendar month following the Closing Date and
continuing whenever there are any Units in the Suspended Unit Pool, GE agrees
either to (1) supply at GE's sole cost all cryogens for the Suspended Units, or
(2) reimburse Maxum for its actual costs to purchase such cryogens up to a
maximum of One Thousand Five Hundred Dollars ($1,500) per Suspended Unit per
month, at GE's sole option.
(D) Rental Unit Lease Payments; Term.
(1) Payment Amount. The lease payment with respect to each
Rental Unit shall be a fixed monthly amount that is negotiated by the parties
prior to the recharacterization of a Suspended Unit as a Rental Unit ("Rental
Unit Payment"), as provided above in Section 2.3(C)(3). The Rental Unit Payment
amount shall be set forth in an Addendum to be attached to the Master Equipment
Lease as provided above in Section 2.3(C)(5). The Rental Unit Payment shall be
due and payable by Maxum to GE monthly in advance on or before the first (1st)
day of each month that the Unit is characterized as a Rental Unit, commencing on
the first (1st) day of the first (1st) full calendar month following the
effective date of recharacterization of a Suspended Unit as a Rental Unit.
Notwithstanding the foregoing, any partial month that a Unit is characterized as
a Rental Unit shall be prorated accordingly, including the month in which the
Unit is recharacterized as a Rental Unit, if such Unit is recharacterized on any
day other than the first (1st) day of the month.
(2) Lease Term. The lease term of a Rental Unit shall be
negotiated by the parties and set forth on an Addendum to the Master Equipment
Lease that reflects the recharacterization of the Unit as a Rental Unit. As
noted above in Section 2.3(C)(4), a Rental Unit may be recharacterized as a
Suspended Unit following the expiration or earlier termination of the Sublease
pertaining to the Unit. The remaining lease term of such Suspended Unit
following recharacterization shall be equal to the remaining lease term of such
Suspended Unit prior to recharacterization as a Rental Unit, as extended
pursuant to Section 2.5(C)(3) above, less the period of time such Unit was
characterized as a Rental Unit pursuant to this Agreement.
(E) Lease Payments Following Unit Recharacterization. If a Unit is
recharacterized from a Fixed Unit to a Variable Unit pursuant to Section 2.3(C)
above, the maximum amount Maxum shall owe GE with respect to such Unit during
the month that the Fixed Unit qualifies for recharacterization shall be the
Variable Unit Payment amount that is payable with respect to such Unit during
such month. If a Unit is recharacterized as a Suspended Unit pursuant to
Section 2.3(C) above, the lease payments with respect to such Suspended Unit
shall be suspended commencing on the date that the Unit qualifies for
recharacterization as a Suspended Unit, subject to GE's right to challenge said
recharacterization pursuant to Section 2.3(C) above. In the event Maxum makes a
Fixed Lease Payment, a Pre-Restructuring Lease Payment, a Minimum Lease Payment
or a Rental Unit Payment with respect to a Unit to GE, and such payment is not
required to be made pursuant to this Agreement as a result of recharacterization
of that Unit, GE shall credit that lease payment amount or an appropriate
portion of any such lease payment against the payments to be made by Maxum to GE
in the following month.
(F) Aggregate Interim Lease Payments. Notwithstanding
any other terms and conditions contained in this Section 2.5 or in Section 2.7
to the contrary, the following terms shall be applicable with respect to lease
payments payable to GE during the six (6) month period from October 1, 1993
through March 31, 1994 (the "Applicable Time Period"):
(1) Maxum shall make aggregate monthly lease payments to GE for
all Units leased by GE to Maxum pursuant to the Master Equipment Lease in an
amount equal to Five Hundred Thousand Dollars ($500,000), which amount shall be
due and payable on the first (1st) day of each calendar month during the
Applicable Time Period, commencing October 1, 1993.
(2) In the event that the aggregate monthly lease payments
otherwise payable by Maxum to GE pursuant to Sections 2.5(A)-(C) above and
Section 2.7 below for all Units during the Applicable Time Period exceed Five
Hundred Thousand Dollars ($500,000), payment of the amount that exceeds Five
Hundred Thousand Dollars ($500,000) ("Monthly Deferral Amount") shall be
deferred each month on the terms set forth in the "Deferral Note" described
below. The Monthly Deferral Amount which may accrue each month during the
Applicable Time Period shall be added as principal to the Deferral Note
effective the first day of the month following the month when such Monthly
Deferral Amount accrued pursuant to Section 2.5(A)-(C) above or Section 2.7
below, commencing November 1, 1993. The principal amount outstanding from time
to time under the Deferral Note (as defined below) shall bear interest at a rate
equal to eight and one-half percent (8.5%) per annum from November 1, 1993, or
the maximum rate permitted by law, whichever is less, until paid and shall be
payable over a sixty (60) month period commencing on November 1, 1993, as
provided below.
The parties acknowledge that Maxum routinely prepares an
internal financial report as of the end of each month that is entitled "13-Week
Cash Forecast." Maxum shall continue to prepare such a report as of the end of
each calendar month during the Applicable Time Period in the same manner as such
reports were prepared prior to the Effective Date. A copy of such report shall
be delivered by Maxum to GE on or before the tenth (10th) Business Day following
the end of each calendar month during the Applicable Time Period and on or
before the tenth (10th) Business Day of the calendar month following the last
month in the Applicable Time Period.
Maxum shall pay to GE, in arrears, on or before the tenth
(10th) Business Day following the end of each calendar month during the
Applicable Time Period and on or before the tenth (10th) Business Day of the
calendar month following the last month in the Applicable Time Period, such
portion or all of the then outstanding principal and accrued interest, if any,
under the Deferral Note, but only to the extent that Maxum's actual "Cash and
Cash Equivalents" as of the end of the immediately preceding calendar month as
reflected in the 13-Week Cash Forecast exceeds Two Million Four Hundred Thousand
Dollars ($2,400,000) ("Cash Flow Excess"). Accordingly, during the six (6)
month period from November 1, 1993 through April 30, 1994, monthly payments of
principal and interest under the Deferral Note shall be made in accordance with
the preceding sentence. All remaining outstanding principal together with
unpaid accrued interest thereon shall be due and payable in equal monthly
installments, amortized over the remaining fifty-four (54) months of the
Deferral Note term, commencing May, 1994, all as set forth in a promissory note
("Deferral Note") which shall be executed and delivered by Maxum to GE on
Closing Date in the form attached hereto as Schedule 2.5(F).
Maxum shall deliver to GE on or before the tenth (10th)
Business Day following the end of each month during the Applicable Time Period,
such financial or other information reasonably requested by GE to confirm
Maxum's determination of its 13-Week Cash Forecast. Further, GE shall have the
right to directly or through an agent, examine, audit, inspect and copy the
books, records and files kept and maintained by Maxum as well as any underlying
documentation reasonably necessary for GE to confirm the accuracy of Maxum's 13-
Week Cash Forecast in a particular month, in accordance with Section 5.1(E)
below.
In the event that any such audit or examination discloses
any discrepancies as reasonably determined by GE, the parties shall meet within
five (5) days to attempt to resolve such discrepancies. Notwithstanding any
provision to the contrary contained in this Agreement, in the event that any
discrepancy cannot be resolved by the parties within twenty (20) days
thereafter, a determination of the accuracy of such 13-Week Forecast shall be
made by an independent certified public accountant selected by GE and acceptable
to Maxum in its reasonable discretion ("GE's Accountant"); provided, however,
Maxum reserves the right to protest findings made by GE's Accountant by
providing written notice to GE within ten (10) Business Days following GE's
delivery of notice to MHC regarding the results of the audit performed by GE's
Accountant and thereafter obtaining, at Maxum's cost, an audit of the 13-Week
Forecast from an independent certified public accountant selected by Maxum and
acceptable to GE in its reasonable discretion ("Maxum's Accountant"). In the
event that Maxum's Accountant determines, within thirty (30) days after delivery
of the written protest to GE, that (i) there has been no underpayment to GE
pursuant to the Deferral Note or (ii) there has been an underpayment under the
Deferral Note of Fifteen Thousand Dollars ($15,000) or less, and GE disputes
such results, then GE's Accountant and Maxum's Accountant shall select a third
accountant ("Third Accountant") (or if they cannot agree, then a Third
Accountant shall be selected by the parties, and if the parties cannot agree,
then a Third Accountant shall be selected by an arbitrator that is selected by
the Commercial Panel of the American Arbitration Association) to audit such 13-
Week Forecast, at Maxum's expense, and the findings of such accountant shall be
binding on the parties. If the findings of GE's Accountant are not challenged
by Maxum within the time period specified above, then the findings of such
accountant shall be binding on the parties.
The fees and expenses of GE's Accountant shall be borne by
GE, unless as a result of any such audit, it is determined that there has been
an underpayment by Maxum pursuant to the Deferral Note in excess of Fifteen
Thousand Dollars ($15,000) in any month during the Applicable Time Period, in
which event the fees and expenses of the accounting firm shall be borne by
Maxum. Notwithstanding the foregoing, the fees and expenses incurred with
respect to the audit performed by the Third Accountant shall be borne by GE if
it determined by such Third Accountant that there has been an underpayment by
Maxum under the Deferral Note of Fifteen Thousand Dollars ($15,000) or less. If
it is determined as a result of the audit that is binding on the parties as
provided above that there has been any underpayment to GE, then such
underpayment shall be immediately due and payable by Maxum to GE.
GE waives all penalties and events of default arising during
the Applicable Time Period pursuant to this Agreement and the Master Equipment
Lease as a result of the nonpayment by Maxum of the Monthly Deferral Amount,
however, GE does not waive any defaults under the Deferral Note pursuant to this
Section 2.5(F). The parties acknowledge that the Deferral Note to be delivered
by Maxum to GE on the Closing Date will not establish a new debt from Maxum to
GE but is intended to evidence GE's deferral of Maxum's obligation to pay those
lease payments constituting the Monthly Deferral Amounts in accordance with the
terms hereof and the Master Equipment Lease and to set forth the terms upon
which such Monthly Deferral Amounts shall be paid to GE.
(G) Joint Sales Calls. Maxum agrees to make joint sales calls with
GE to attempt to place Suspended Units with an End-User Customer pursuant to a
long term commitment that is acceptable to GE in GE's sole discretion.
(H) Acquisition of Additional MRI Equipment. So long as any Units
remain in the Suspended Unit Pool, neither MHC nor any of the First-Tier
Subsidiaries shall purchase, lease or otherwise acquire any new or used MRI
equipment from any person or entity until such time as each Suspended Unit
either: (1) qualifies or is recharacterized as a Fixed Unit, Variable Unit or
Rental Unit; (2) receives a System Upgrade pursuant to Section 2.6(A) below;
(3) is placed by Maxum with an End-User Customer pursuant to a long term
commitment acceptable to GE in its reasonable discretion; or (4) is placed by GE
with any other person or entity on terms acceptable to GE in its reasonable
discretion. Notwithstanding anything in this Agreement to the contrary, in the
event a Suspended Unit is going to be placed with an End-User Customer or with
any other person or entity pursuant to Sections 2.5(H)(3) or (4) immediately
above, GE shall have the option to have Maxum either (a) place the specific
Suspended Unit with the End-User Customer or other person or entity, or
(b) require Maxum to substitute another like Unit leased by GE to Maxum for that
Suspended Unit which would result in the placement of the substituted Unit with
the End-User Customer or other person or entity. Upon placement of a Unit by GE
pursuant to a contract arrangement between GE and an End-User Customer that
previously contracted with Maxum, or another person or entity, Maxum's
obligations to GE with respect to that Unit (whether under this Agreement, the
Master Equipment Lease or otherwise) shall automatically terminate, except for
such obligations that accrued but remain unperformed as of the date of such
termination.
2.6 Unit Upgrades.
(A) System Upgrades. Maxum may request and obtain a System Upgrade
on any Unit ("Upgraded Unit"), provided that GE determines that (1) Maxum has
entered into one (1) or more long term End-User Customer Contracts with respect
to the Upgraded Unit, and (2) GE, in its reasonable discretion, determines in
writing that the Anchor End-User Customer Contract specified in Maxum's request
and additional End-User Customer Contract(s), if any, will enable Maxum to make
the Pre-Restructuring Lease Payment applicable to the Unit that was replaced
("Replaced Unit") by the Upgraded Unit for the entire lease term of the Upgraded
Unit.
Maxum shall return the Replaced Unit to GE at Maxum's sole cost
and expense within ten (10) days of the date the Upgraded Unit is received by
Maxum from GE. Further, the schedule to the Master Equipment Lease relating to
the Replaced Unit shall be terminated effective as of the date the Replaced Unit
is returned to GE ("Lease Termination"), whereupon all of Maxum's obligations
(except those obligations that accrued but remain unperformed as of the
termination date) with respect to the Replaced Unit (whether under this
Agreement, the Master Equipment Lease or otherwise) shall automatically
terminate. A new schedule shall be simultaneously executed by the parties and
attached to the Master Equipment Lease that (1) describes the Upgraded Unit, (2)
sets forth the monthly lease payment amount for such Upgraded Unit, which shall
not be less than the Pre-Restructuring Lease Payment applicable to the Replaced
Unit, (3) sets forth the lease term of the Upgraded Unit, as provided below, (4)
describes the location where the Unit is operated, and (5) indicates which End-
User Customer Contract applicable to the Upgraded Unit is the Anchor End-User
Customer Contract. The Upgraded Unit shall be considered a Unit for purposes of
this Agreement. The lease term of the Upgraded Unit shall be equal to (i) the
remaining lease term for the Replaced Unit at the time of the Lease Termination,
plus (ii) an additional period of months as determined by GE so that the
additional cost to Maxum to obtain the System Upgrade will not increase the Pre-
Restructuring Lease Payment applicable to the Replaced Unit.
Notwithstanding any other provision in this Agreement to the
contrary, the Upgraded Unit shall be characterized as a Fixed Unit and shall
remain in the Fixed Unit Pool until such time as (1) the term of the Anchor End-
User Customer Contract applicable to the Upgraded Unit expires in accordance
with its terms (excluding an early termination by the parties or other early
termination in accordance with the Anchor End-User Customer Contract for any
reason other than as a result of (i) the institution of liquidation proceedings
by or against the End-User Customer pursuant to applicable bankruptcy laws,
which proceedings are not dismissed within thirty (30) days thereafter or
(ii) the End-User Customer otherwise ceasing to operate without a third party
assuming the operations of the End-User Customer) without renewal or
replacement, or (2) the last End-User Customer Contract applicable to the
Upgraded Unit expires or is otherwise terminated without renewal or replacement,
whichever occurs sooner; whereupon such Upgraded Unit will be subject to
recharacterization in accordance with the terms of this Agreement. Maxum shall
not amend the Anchor End-User Customer Contract to reduce the length of the term
of such contract without the prior written consent of GE, which consent may be
withheld in GE's sole discretion.
Notwithstanding anything contained in this Section 2.6(A) to the
contrary, the first five (5) System Upgrades requested and obtained by Maxum
shall be provided with respect to the Units identified on Exhibit 2.6(A)
attached hereto for which Maxum has "credited two-step upgrades" as more
particularly described on Exhibit 2.6(A).
(B) System Option Upgrades. Maxum may request and obtain a System
Option Upgrade on any Unit in the Fixed Unit Pool or the Variable Unit Pool. A
description of each System Option Upgrade and the lease terms for such upgrade
shall be referenced on a new schedule that shall be executed by the parties and
attached to the Master Equipment Lease. Such schedule shall have a term that is
coterminous with the lease term for the Unit that receives the System Option
Upgrade. The monthly payment amount for such System Option Upgrade shall be a
monthly fixed amount which is equal to the cost of the System Option Upgrade
amortized over the remaining lease term of the Unit that receives the System
Option Upgrade. Notwithstanding any other provision in this Agreement to the
contrary, all lease payments with respect to System Option Upgrades to a
particular Unit shall be payable by Maxum notwithstanding whether the Unit that
receives the System Option Upgrade is a Variable Unit or becomes a Suspended
Unit.
2.7 MRI for Doctors Hospital. Notwithstanding any other provision in
this Section 2 to the contrary (except for Section 2.5(F)), the letter agreement
dated October 22, 1992 between GE and MHSC, a copy of which is attached hereto
as Exhibit 2.7, which letter agreement relates to GE's lease of the Unit
described therein to MHSC pursuant to that certain Leaseline Agreement (GE
Contract No. 8506128-001), dated October 22, 1992, shall remain in effect. If
such Unit is returned by MHSC to GE in accordance with the terms of the letter
agreement, Maxum shall simultaneously execute and deliver a promissory note
("Second Deferral Note") to GE in the applicable aggregate principal amount set
forth in the amortization schedule attached hereto as Exhibit 2.7, based on the
return date ("Return Date"), which amount remaining from time to time unpaid
shall bear interest at a rate equal to nine and three fourths percent (9.75%)
per annum, or the maximum rate permitted by law, whichever is less, and shall be
payable in equal monthly installments of principal and interest over a sixty
(60) month period. If the Unit is not returned on the first day of the month,
the Return Date for purposes of calculating the principal amount owning under
the Second Deferral Note shall be the first day of the month in which the Unit
is returned. The Second Deferral Note shall be in the form attached hereto as
Schedule 2.7. The parties acknowledge that the Second Deferral Note above does
not establish a new debt from Maxum to GE but is intended to evidence Maxum's
obligation to pay the remaining debt to GE with respect to the MRI unit
described in the letter agreement and to set forth the terms upon which such
payments shall be made to GE.
2.8 Skip Lease Payments. GE hereby defers Maxum's obligation to make (1)
the lease payments that are due and owing for the months of March, 1993 through
May, 1993 under the Equipment Leases with respect to (a) those Units that are in
the Suspended Unit Pool as of the Effective Date, (b) those Units that are
anticipated to become Suspended Units as identified on Exhibit 2.8 attached
hereto, which lease payments are in an aggregate amount equal to Nine Hundred
Seventy-Six Thousand Six Hundred Eighty-Four Dollars and Twenty-Five Cents
($976,684.25), and (2) the lease payments that are due and owing for the month
of June, 1993 with respect to all Units leased by GE to Maxum as of the
Effective Date, which lease payments are in an aggregate amount equal to Eight
Hundred Fifty Thousand Twelve Dollars and Two Cents ($850,012.02), for a total
of One Million Eight Hundred Twenty-Six Thousand Six Hundred Ninety-Six Dollars
and Twenty-Seven Cents ($1,826,696.27) (collectively, the "Skip Lease
Payments"). GE waives all penalties and events of default arising prior to the
Effective Date pursuant to the Equipment Leases as a result of the nonpayment by
Maxum of the Skip Lease Payments but does not waive any defaults under the Third
Deferral Note pursuant to this Section 2.8. The unpaid portion of the Skip
Lease Payments shall bear interest at the rate of eight and one-half percent
(8.5%) per annum, or the maximum rate permitted by law, whichever is less, and
shall be payable over a sixty (60) month period commencing on the Effective
Date, as follows: no principal or interest payments shall be payable by Maxum
from the Effective Date through August 31, 1993, interest only payments in the
amount of Thirteen Thousand Two Hundred Sixteen Dollars and One Cent
($13,216.01) shall be payable by Maxum from September 1, 1993 through
February 28, 1994, payments in the amount of Fifteen Thousand Dollars ($15,000)
shall be payable by Maxum from March 1, 1994 through December 31, 1994 and the
remaining principal and interest shall be amortized and payable in equal monthly
installments of Fifty-Two Thousand Seventy-Five Dollars and Nine Cents
($52,075.09) over the remaining forty-one (41) months of the term, as set forth
in the promissory note (the "Third Deferral Note") which shall be executed and
delivered by Maxum to GE on the Closing Date in the form attached hereto as
Schedule 2.8. Notwithstanding the foregoing, Maxum shall prepay the Third
Deferral Note as required pursuant to Section 5.1(R) below. In the event of
such prepayment, the monthly amount payable by Maxum from March 1, 1994 through
December 31, 1994 shall be adjusted accordingly. The parties acknowledge that
the Third Deferral Note to be delivered by Maxum to GE on the Closing Date does
not establish a new debt from Maxum to GE but is intended to evidence GE's
deferral of Maxum's obligation to make the above-referenced lease payments
pursuant to the Equipment Leases and to set forth the terms upon which such
deferred lease payments shall be made to GE.
2.9 Warrant. On the Closing Date, MHC shall issue and deliver to GE its
common stock purchase warrant (the "Warrant"), in the form attached hereto as
Schedule 2.9, to acquire seven hundred thousand (700,000) shares of its common
stock, no par value, at an exercise price per share equal to Twenty-Five Cents
($0.25) above the closing market price of MHC's stock on the day immediately
prior to the Closing Date. The Warrant shall be exercisable from time to time
commencing on the second (2nd) anniversary of the Closing Date and ending at
5:00 p.m., New York time on the fifth (5th) anniversary of the Closing Date.
2.10 Refinancing of GE Promissory Notes. GE and Maxum acknowledge that as
part of the restructuring contemplated by this Agreement, GE shall cancel
Maxum's obligations pursuant to the Promissory Notes dated December 18, 1992, GE
Contract Number 8506285-003, and February 9, 1993, GE Contract Number 8506382-
001, respectively, copies of which are attached hereto as Exhibit 2.10 and shall
refinance such notes as of June 1, 1993 pursuant to the terms of the GE
Promissory Notes in the forms attached hereto as Schedule 1.28, which promissory
notes shall be in the aggregate principal amount of Four Hundred One Thousand
Six Hundred Sixty-Seven Dollars and Ninety-Seven Cents ($401,667.97), GE
Contract Number 8506285-004 and Five Hundred One Thousand Four Hundred Forty-
Three Dollars and Forty-Three Cents ($501,443.43), GE Contract Number 8506382-
002, respectively, and shall be delivered by Maxum to GE at Closing.
2.11 Satisfaction/Prepayment of Loans. On the Closing Date GE shall loan
Maxum an additional amount equal to Two Million Two Hundred Fifty Thousand
Dollars ($2,250,000) (Loan Proceeds"), which loan proceeds shall be used for the
purpose of satisfying Maxum's obligations to Merrill Lynch Interfunding Inc., a
Delaware corporation ("Merrill Lynch") pursuant to (i) that certain Amended and
Restated Loan Agreement among MHSC, MHC and Merrill Lynch dated September 25,
1991, (ii) that certain Revolving Note dated September 25, 1991, (iii) that
certain Interest Cap Note dated September 25, 1991, (iv) that certain Security
Agreement among VHA Diagnostic Services, Inc. now known as Maxum Health Services
Corp. and Merrill Lynch dated as of June 30, 1989, (v) that certain Pledge
Agreement between MHSC and Merrill Lynch dated as of August, 1991, (vi) that
certain Assignment of Life Insurance Policies as Collateral from MHC and MHSC to
Merrill Lynch dated as of September 1991 and (vii) the Subordination Agreement
(collectively, the "Merrill Lynch Documents"). MHC or MHSC shall further wire
transfer an additional amount equal to Two Hundred Fifty Thousand Dollars
($250,000) to Merrill Lynch on the Closing Date. Upon satisfaction of the
conditions set forth in Section 3.1 below, Maxum hereby directs GE to transfer
and GE shall transfer the Loan Proceeds to Merrill Lynch on behalf of Maxum by
wire transfer of funds to the account specified in writing by Merrill Lynch.
The outstanding principal amount shall bear interest at a rate equal to nine and
one-half percent (9.5%) per annum or the maximum rate which is permitted by law,
whichever is less, and shall be payable over a twelve (12) month period
commencing on March 1, 1994 as follows: an interest only payment in an amount
equal to Eleven Thousand Eight Hundred Seventy-Five Dollars ($11,875.00) shall
be due and payable on March 1, 1994, interest only payments in an amount equal
to Seventeen Thousand Eight Hundred Twelve Dollars and Fifty Cents ($17,812.50)
shall be due and payable from April 1, 1994 through January 1, 1995, with a
final payment of interest and all outstanding principal shall be due and payable
on February 1, 1995, on the terms set forth in the Promissory Note
("Merrill/Highline Promissory Note") which shall be executed and delivered by
Maxum to GE on the Closing Date in the form attached hereto as Schedule 2.11.
Notwithstanding the foregoing, in the event there is any Cash Flow Excess
remaining after the payment, if any, which is required to be made pursuant to
the Deferral Note, such Cash Flow Excess shall be paid by Maxum to GE to reduce
the outstanding principal balance under the Merrill/Highline Promissory Note.
Further, Maxum shall prepay the Merrill/Highline Promissory Note as required
pursuant to Section 5.1(R) below. In the event of any such prepayment, the
amount of the interest only payment required to be made by Maxum pursuant to the
Merrill/Highline Promissory Note shall be adjusted accordingly based on the then
outstanding principal balance.
2.12 Security Interest. To secure the performance of the Liabilities by
MHC and the First-Tier Subsidiaries, MHC and the First-Tier Subsidiaries shall
grant a first priority (except with respect to Collateral that is subject to a
Permitted Lien) security interest to GE in the Collateral, free and clear of all
Liens, except the Permitted Liens which are described in Exhibit 4.1(H) attached
hereto, by executing and delivering to GE that certain security agreement (the
"Security Agreement") in the form attached hereto as Schedule 2.12. Further,
Maxum shall deliver to GE at Closing (i) UCC-1 financing statements to evidence
GE's security interest in the Collateral to be filed in the forty-eight (48)
states located in the continental United States, (ii) certificates of title with
respect to all vehicles identified in Exhibit 2.12 attached hereto, except as
provided in Exhibit 2.12 to the contrary and (iii) the original executed
promissory note identified in Exhibit 4.1(H) and assignments to GE with respect
thereto in a form reasonably acceptable to GE, subject to the provisions of
Section 5.1(M) below.
2.13 One Obligation. All indebtedness, obligations and Liabilities of MHC
and the First-Tier Subsidiaries to GE under this Agreement and as evidenced by
the Scheduled Documents shall constitute one obligation secured by GE's Lien
upon all Collateral and by all other Liens, security interests, claims and
encumbrances heretofore, now, or at any time or times hereafter granted by MHC
or any of its First-Tier Subsidiaries to GE. MHC and its First-Tier
Subsidiaries agree that all of the rights of GE set forth in this Agreement
shall apply to any modification of or supplement to this Agreement except as
otherwise specifically provided in any such modification or supplement.
2.14 Term. The provisions of this Agreement shall be in effect from the
Effective Date until the Termination Date (the "Term"), unless terminated sooner
in accordance with the provisions of this Agreement. Notwithstanding any
provision in this Agreement to the contrary, MHC, the First-Tier Subsidiaries
and GE expressly agree that the Deferral Note, the Second Deferral Note, the
Third Deferral Note, the GE Promissory Notes and the Merrill/Highline Promissory
Note shall be due and payable at any time any Liability of MHC or any of the
First-Tier Subsidiaries to GE is accelerated or terminated (except by prepayment
or final payment on the due date thereof) in accordance with this Agreement or
any other agreement evidencing such Liability, as the case may be.
2.15 Application of Payments and Collections. Upon the occurrence and
during the continuance of any Default or Event of Default, MHC and the First-
Tier Subsidiaries irrevocably waive the right to direct the application of any
and all payments and collections at any time or times hereafter received by GE
from or on behalf of MHC or any of the First-Tier Subsidiaries, and MHC and the
First-Tier Subsidiaries irrevocably agree that GE shall have the continuing
exclusive right to apply and reapply any and all such payments and collections
received at any time or times hereafter by GE or its agents against the
Liabilities then due in such manner as GE may deem advisable, notwithstanding
any entry by GE upon any of its books and records.
3. CONDITIONS PRECEDENT
3.1 Conditions Precedent of GE to Closing. GE's obligation to close the
transactions contemplated hereby and to perform its obligations as of the
Closing Date shall be, at the option of GE, subject to satisfaction of each of
the following conditions (which may be waived specifically in writing by GE in
whole or in part) on or prior to the Closing Date:
(A) Release and Settlement Agreement. MHC and certain of the
Subsidiaries shall have executed and delivered a Release and Settlement
Agreement in the form attached hereto as Schedule 3.1(A) (the "Release and
Settlement Agreement") pursuant to which MHC and the Subsidiaries identified
therein release any and all claims against GE except those involving equipment
and maintenance problems not within their knowledge as of the Closing Date.
(B) Obligations. All Liabilities of MHC and the Subsidiaries that
have accrued as of the Closing Date shall have been satisfied in full by MHC and
the Subsidiaries, except as otherwise specifically provided in this Agreement or
in the Scheduled Documents.
(C) Warranties True; Covenants Performed. Each of the
representations and warranties made by MHC or any of the First-Tier Subsidiaries
and set forth in this Agreement and the Exhibits and Schedules attached hereto
or otherwise made in writing in connection herewith shall be true and correct in
all material respects on and as of the Closing Date, and the covenants required
by this Agreement to be performed and complied with by MHC and the First-Tier
Subsidiaries as of the Closing Date shall have all been performed and complied
with in all material respects.
(D) MHC and Subsidiary Consents, Approvals and Authorizations. MHC
and the First-Tier Subsidiaries shall have obtained all consents, approvals and
authorizations of third parties necessary in connection with the valid
execution, delivery and performance of this Agreement and the Scheduled
Documents, excluding those consents that are not being obtained by Maxum as
identified in Exhibit 4.1(F) attached hereto.
(E) Signing and Delivery of Instruments. MHC and the First-Tier
Subsidiaries shall have executed and delivered all documents and instruments
required to be executed and/or delivered by them pursuant to the provisions of
this Agreement, including, without limitation, all of the Scheduled Documents.
(F) Unfavorable Action or Proceeding. Except as set forth in Exhibit
4.1(Q) attached hereto, on the Closing Date no action or proceeding shall be
pending or threatened against MHC or any of the First-Tier Subsidiaries wherein
an unfavorable judgment, decree or order would, in GE's reasonable opinion,
prevent or make unfavorable the carrying out of this Agreement, would cause the
transactions contemplated by this Agreement to be rescinded, or would have a
Material Adverse Effect on MHC or any of the First-Tier Subsidiaries. In the
event of the receipt of any communication from any Person or any other notice (a
copy of which communication or notice shall be promptly delivered to GE) prior
to the Closing Date, which communication or notice shall in the reasonable
opinion of GE threaten such action or proceeding, GE may cancel this Agreement
by giving written notice to MHC and shall thereupon be released from any and all
liability related to this Agreement.
(G) Opinion of Counsel. GE shall have received the favorable opinion
of MHC's and the First-Tier Subsidiaries' counsel dated the Closing Date, in
substantially the form attached hereto as Schedule 3.1(G).
(H) Officer's Certificate. GE shall have received a certificate of
the respective Senior Vice Presidents of MHC and the First-Tier Subsidiaries,
dated as of the Closing Date, in the form attached hereto as Schedule 3.1(H),
certifying to GE the accuracy of the representations and warranties set forth in
this Agreement and compliance with MHC's and the First-Tier Subsidiaries'
respective covenants set forth in this Agreement and the Scheduled Documents
that are required to be performed on or prior to the Closing Date.
(I) Certificate of Incumbency. GE shall have received a certificate
of the respective corporate Secretaries of MHC and the First-Tier Subsidiaries
dated as of the Closing Date, in the form attached hereto as Schedule 3.1(I),
certifying to GE (1) that attached thereto is a true and complete copy of the
respective Articles of Incorporation and Bylaws of MHC and the First-Tier
Subsidiaries, respectively, as in effect on the date of such certification, (2)
as to the incumbency and genuineness of the signature of the respective officers
of MHC and the First-Tier Subsidiaries from the date hereof to the Closing Date
and bearing the authentic signatures of all such officers who shall execute this
Agreement and the Scheduled Documents, (3) as to the resolutions of the
respective Boards of Directors of MHC and the First-Tier Subsidiaries
authorizing the execution, delivery and performance of this Agreement and the
Scheduled Documents, and (4) that such resolutions have not been amended or
rescinded and remain in full force and effect as of the Closing Date.
(J) Good Standing Certificates. GE shall have received copies of the
respective Articles of Incorporation of MHC and the First-Tier Subsidiaries,
including all amendments thereto, certified by the Secretary of State of their
respective States of incorporation, and good standing certificates for each such
corporation, issued by the Secretary of State of those States where they are
qualified to do business as set forth in Exhibit 4.1(A) - Annex A-1.
(K) Default. There shall exist no Default or Event of Default on the
Closing Date under the Master Agreement.
(L) Automatic Drafting. MHC and the First-Tier Subsidiaries shall
have executed and delivered to GE an "Authorization Agreement for Pre-Arranged
Payments (Debits)" ("Automatic Drafting Agreement") in the form attached hereto
as Schedule 3.1(L) with respect to each account maintained by MHC or any of the
First-Tier Subsidiaries and identified in Exhibit 3.1(L), whereby GE shall be
authorized, upon the occurrence of an Event of Default under this Agreement, to
debit such accounts in an aggregate amount equal to the payments due each month
under this Agreement, the Master Equipment Lease, the Deferral Note, the Second
Deferral Note, the Third Deferral Note, GE Promissory Notes and the
Merrill/Highline Promissory Note, all as indicated in Exhibit 3.1(L) attached
hereto.
(M) Restructuring Other Obligations. MHC and the First-Tier
Subsidiaries shall have restructured all of their respective outstanding
obligations with other equipment leasing or financing companies or entities to
create economically viable payment obligations in amounts that are acceptable to
GE in its sole discretion.
(N) Merrill Lynch Documents. GE shall have received (i) a fully
executed copy of the Termination Agreement between Maxum and Merrill Lynch
regarding the termination of the Merrill Lynch Documents which is in a form that
is acceptable to GE in its sole discretion, (ii) fully executed UCC-2 or UCC-3
Termination Statements, as applicable, with respect to all UCC-1 Financing
Statements filed by Merrill Lynch to evidence a security interest in any of
Maxum's property, and (iii) written consent from National Union Fire Insurance
Company of Pittsburgh, PA, MHC and the First-Tier Subsidiaries' carrier for
officer's and director's liability insurance, to the terms of the Termination
Agreement.
(O) Highline Payment. MHC or MTS shall have wire transferred Two
Hundred Fifty Thousand Dollars ($250,000) to Highline.
(P) Termination of Subordination Agreement. GE shall have received a
fully executed copy of the Agreement relating to Subordinated Indebtedness among
Merrill Lynch, MTS, MHC, Highline and Xerox terminating that certain
Subordination Agreement among Merrill Lynch, MTS, MHC and Highline executed as
of August 26, 1989.
(Q) GE Payment. GE shall have received Three Hundred Nineteen
Thousand Five Hundred Nine Dollars and Forty-Three Cents ($319,509.43) from
Maxum.
(R) Collateral Agreements. GE shall have received fully executed
copies of those certain Collateral Agreements which amend the respective
security agreements between (i) Highline and MTS and (ii) Highline and MHSC in
the forms attached hereto as Schedule 3.1(R).
4. WARRANTIES AND REPRESENTATIONS OF MAXUM
4.1 Warranties and Representations. MHC and the First-Tier Subsidiaries
warrant and represent to GE that:
(A) Existence and Qualification; Power; Good Standing. MHC and the
First-Tier Subsidiaries are corporations duly organized and validly existing
under the laws of their respective States of incorporation. MHC and the First-
Tier Subsidiaries have the full corporate power and authority to own, lease and
operate their respective properties and assets as presently owned, leased and
operated, and to carry on their respective businesses as they are now being
conducted. MHC and the First-Tier Subsidiaries are duly qualified and in good
standing to do business in each jurisdiction in which the character of their
respective properties or the character of their respective businesses requires
such qualification or good standing, except as provided in Exhibit 4.1(A) -
Annex A-2. Exhibit 4.1(A) sets forth (1) MHC's and the First-Tier Subsidiaries'
respective chief executive offices, (2) MHC's and the First-Tier Subsidiaries'
respective principal places of business, (3) a complete list of all
jurisdictions in which MHC and each of the First-Tier Subsidiaries are qualified
to do business, respectively, and (4) a complete list of all jurisdictions in
which MHC or any First Tier Subsidiary (i) maintains an office, (ii) maintains a
bank account, (iii) leases equipment, (iv) operates equipment, (v) contracts,
(vi) conducts business of any nature or (vii) employs personnel, respectively
(collectively "Business Activities").
(B) Authority; Binding Obligations. MHC and the First-Tier
Subsidiaries have the requisite corporate power and authority, and have taken
all necessary corporate and other actions, necessary to enter into, execute,
deliver and perform this Agreement and all the Scheduled Documents, as
applicable. This Agreement has been, and the Scheduled Documents as of the
Closing Date will have been, duly executed and delivered by MHC and the First-
Tier Subsidiaries, as applicable, and, upon due execution and delivery, will
constitute the legal, valid and binding obligations of MHC and the First-Tier
Subsidiaries enforceable against MHC or any of the First-Tier Subsidiaries, in
accordance with their respective terms, subject as to enforcement only, to
limitations imposed by general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity) and the effect
of applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws of general application relating to or affecting creditors' rights
generally.
(C) Compliance with Laws/Agreements. The execution, delivery and
performance by MHC and the First-Tier Subsidiaries of this Agreement shall not,
by the lapse of time, the giving of notice, or otherwise, directly or indirectly
(1) to MHC's or any of the First-Tier Subsidiaries' knowledge, constitute a
violation of any applicable law, rule or regulation presently in effect having
applicability to MHC or any of the First-Tier Subsidiaries, (2) constitute a
violation of any order, writ, judgment, injunction, decree, determination or
award presently in effect having applicability to MHC or any of the First-Tier
Subsidiaries, (3) result in a default under or a breach of any provision
contained in MHC's or any of the First-Tier Subsidiaries' respective Articles of
Incorporation or Bylaws or, except as disclosed in Exhibit 4.1(C) attached
hereto, to MHC's or any of the First-Tier Subsidiaries' knowledge, any
indenture, loan, mortgage, lease, deed of trust, agreement relating to the
borrowing of monies, instrument, document or any agreement to which MHC or any
of the First-Tier Subsidiaries is now a party or by which it is bound, the
violation or breach of which would in any of such cases have a Material Adverse
Effect on MHC or any of the First-Tier Subsidiaries, or result in the creation
or imposition of any material Lien, charge or encumbrance upon any of the
Collateral (other than the Liens in favor of GE created by this Agreement and
the Scheduled Documents). To MHC's or any of the First-Tier Subsidiaries'
knowledge, as of the Closing Date, neither MHC nor any of the First-Tier
Subsidiaries is a party to, or otherwise subject to, any provision contained in
any instrument evidencing any Indebtedness of MHC or any of the First-Tier
Subsidiaries, any agreement relating thereto, or any other contract or agreement
(including its charter) that limits the amount of, or otherwise imposes
restrictions on, the incurring of obligations by MHC or any of the First-Tier
Subsidiaries that would have a Material Adverse Effect on the ability of MHC or
any of the First-Tier Subsidiaries to perform its obligations hereunder or under
any Scheduled Document.
(D) Absence of Defaults. Neither MHC nor any of the First-Tier
Subsidiaries has breached any material provisions of, or is in default in any
material respect under the terms of, or has engaged in any activity which would
cause revocation or suspension of, any governmental license, franchise, permit,
or authorization, which would have a Material Adverse Effect on MHC and the
First-Tier Subsidiaries on a consolidated basis, and, to MHC's or any of the
First-Tier Subsidiaries' knowledge, no action or proceeding seeking or
contemplating the revocation or suspension of any thereof is pending or
threatened. Except as set forth in Exhibit 4.1(D) attached hereto, neither MHC
nor any of the First-Tier Subsidiaries is in default, nor to MHC's or any of the
First-Tier Subsidiaries' knowledge is any third party in default, under or with
respect to any contract, agreement, lease or other instrument to which MHC or
any of the First-Tier Subsidiaries is a party, except for any default that
(either individually or collectively with other defaults arising out of the same
event or events) would not have a Material Adverse Effect upon MHC or any of the
First-Tier Subsidiaries. No Default or Event of Default under this Agreement
has occurred and is continuing.
(E) Licenses and Permits. MHC and the First-Tier Subsidiaries
possess and are in good standing with respect to all licenses, franchises,
permits and other authorizations materially necessary to continue to conduct
their respective businesses as currently conducted.
(F) Consents and Approvals. Except as set forth in Exhibit 4.1(F)
attached hereto, no consent, approval, permit, waiver, authorization or other
action of or by any (i) court, (ii) governmental entity, (iii) lender or (iv)
third party nongovernmental Person or entity that contracts with MHC or any
First-Tier Subsidiary, which contract or contract(s) with such third party
provide for payments by MHC or any First-Tier Subsidiary of One Million Dollars
($1,000,000) or more in the aggregate pursuant to such contract(s) with such
third party nongovernmental Person or entity, is required or will be necessary
in connection with the execution, delivery or performance of this Agreement or
any of the Scheduled Documents by MHC or any of the First-Tier Subsidiaries.
MHC and the First-Tier Subsidiaries shall be responsible for and shall take any
and all steps necessary, at their sole expense, to obtain all such consents,
approvals and authorizations prior to the Closing Date (except as expressly
provided in Exhibit 4.1(F)) and shall keep GE informed as to the status of
obtaining such consents. All such consents, approvals and authorizations shall
be approved as to form by GE.
(G) Liabilities. MHC and the First-Tier Subsidiaries have no
Indebtedness and have not guaranteed the obligations of any Person, except
(1) as shown in the financial statements delivered to GE by MHC and the First-
Tier Subsidiaries, including all footnotes thereto or otherwise disclosed in
Exhibit 4.1(G) attached hereto, (2) trade payables arising in the ordinary
course of its business since the date of the financial statements delivered to
GE, and (3) money borrowed and other financial accommodations from GE. None of
the guaranties identified in such financial statements or in Exhibit 4.1(g) are
secured by any property or assets of MHC or any of the First-Tier Subsidiaries.
No monies, securities or other property of MHC are in the possession of Picker
Financial Group ("Picker") pursuant to the provisions of that certain Picker
Financial Group Guaranty from MHC to Picker, dated October 6, 1992, except for a
security deposit not in excess of Thirty-Seven Thousand Dollars ($37,000).
(H) Title to Collateral; Liens; Location of Equipment; End-User
Contracts. On the Closing Date, MHC and the First-Tier Subsidiaries will have
good title to and ownership of the Collateral (other than the Units and other
equipment leased by Maxum) that was acquired on or prior to the Closing Date and
will, as of the date acquired, have good title to and ownership of Collateral
(other than the Units and other equipment leased by Maxum) that is acquired by
MHC or any Subsidiary after the Closing Date, free and clear of all Liens on
Collateral consisting of (i) Receivables, (ii) equipment with an acquisition
cost of Five Hundred Thousand Dollars ($500,000) or more and (iii) End-User
Customer Contracts except those of GE and those set forth in Exhibit 4.1(H)
attached hereto. The Merrill Lynch Documents include all of the agreements
between Maxum and Merrill Lynch. To the best knowledge of Maxum, all UCC-1
Financing Statements filed by Merrill Lynch and currently of record in
connection with the loan to Maxum pursuant to the Merrill Lynch Documents are
identified in Exhibit 4.1(H). As of the date of this Agreement and the Closing
Date, the Units, the Collateral and all related books and records, including
computer programs, printouts and other computer materials are located or
operated, as applicable, only at the locations set forth in Exhibit 4.1(H). All
End-User Customer Contracts and the route of each Fixed Unit and Variable Unit
as of the Effective Date and the Closing Date are described in Exhibit 4.1(H).
Copies of all such End-User Customer Contracts have been previously provided by
Maxum to GE. The promissory notes identified in Exhibit 4.1(H) are all of the
promissory notes in which MHC or any First-Tier Subsidiary is a payee.
(I) Burdensome Provisions; Disputes. To MHC's or any of the First-
Tier Subsidiaries' knowledge, neither MHC nor any of the First-Tier Subsidiaries
is (1) a party to any contract, agreement or other instrument or subject to any
charge, corporate restriction, judgment, decree, or order that has or may have a
Material Adverse Effect on MHC or any of the First-Tier Subsidiaries, (2) a
party to any material labor dispute, (3) the subject of any material pending or
threatened strikes or walkouts relating to any labor contract, and (4) a party
to any collective bargaining agreement that is scheduled to expire during the
Term. To MHC's or any of the First-Tier Subsidiaries' knowledge, neither MHC
nor any of the First-Tier Subsidiaries is bound by any provision of any
applicable law or governmental regulation, that has a Material Adverse Effect
upon MHC or any of the First-Tier Subsidiaries.
(J) Compliance with Laws. To MHC's or the First-Tier Subsidiaries'
knowledge, MHC and the First-Tier Subsidiaries have materially complied with and
are not in default in any material respect under any law, ordinance,
requirement, regulation, order, writ, injunction, decree, determination or award
applicable to their business, operations or properties, the noncompliance with
which would have a Material Adverse Effect on MHC or any of the First-Tier
Subsidiaries and MHC and the First-Tier Subsidiaries have not received any
notice and are unaware of any claimed violation with respect to the foregoing.
(K) Environmental Matters. To MHC's and any of the First-Tier
Subsidiaries' knowledge, (1) neither MHC nor any of the First-Tier Subsidiaries
or, to the actual knowledge of MHC or any Subsidiary without any investigation
or inquiry whatsoever, any previous owner, tenant, occupant or user has
generated, manufactured, released, discharged, stored, handled, transported or
disposed of any Hazardous Materials, on, under, in or about the site of any real
property owned or leased by MHC or any of the First-Tier Subsidiaries which
could lead to the imposition on MHC or any of the First-Tier Subsidiaries of any
liability, fines, costs, penalties, damages or expenses or the creation of any
Lien on the assets of MHC or any of the First-Tier Subsidiaries under any
applicable environmental law or under any similar applicable laws or regulations
which would have a Material Adverse Effect on MHC or any of the First-Tier
Subsidiaries; and (2) MHC's and any of the First-Tier Subsidiaries use of such
real property materially complies with all applicable environmental laws and
governmental regulations, including all applicable federal, state and local
laws, ordinances and regulations pertaining to air and water quality, Hazardous
Materials, waste disposal, or other environmental matters, including the Clean
Water Act, the Clean Air Act, the Federal Water Pollution Control Act, the Solid
Waste Disposal Act, the Resource Conservation Recovery Act, the Comprehensive
Environmental Response, Compensation and Liability Act, and the rules,
regulations and ordinances of the city and county in which such property is
located, the Environmental Protection Agency, and all other applicable federal,
state, regional and local agencies and bureaus, where the failure to so comply
would have a Material Adverse Effect either with respect to the value of such
real property, with respect to MHC's or any of the First-Tier Subsidiaries'
occupancy or use of such real property, or with respect to MHC or any of the
First-Tier Subsidiaries.
(L) Insurance. Set forth in Exhibit 4.1(L) attached hereto is a list
of all insurance of any nature maintained by MHC or any of the First-Tier
Subsidiaries including descriptions of the coverage, policy limits and
deductibles with respect thereto. All such policies, unless otherwise
specified, are in full force and effect and provide full replacement cost
coverage for all Units leased by GE to MHC or any of the First-Tier
Subsidiaries, unless such Units are required to be insured by GE in accordance
with the term of the Master Equipment Lease or other written agreement between
GE and MHC or any of the First-Tier Subsidiaries. There has not occurred any
accident or loss or any other event known to MHC or any of the First-Tier
Subsidiaries, other than those listed in Exhibit 4.1(L), that might reasonably
be expected to result in (i) the cancellation or reduction of any insurance
policies in effect, which cancellation would, individually or in the aggregate,
materially diminish such insurance coverage, or (ii) any material premium
adjustment with respect to any insurance policies identified in Exhibit 4.1(L).
(M) Employees. To MHC's or any of the First-Tier Subsidiaries'
knowledge, hours worked by and payment made to employees of MHC or any of the
First-Tier Subsidiaries have not been in violation of the Fair Labor Standards
Act or any other applicable law dealing with such matters that would have a
Material Adverse Effect upon MHC or any of the First-Tier Subsidiaries. To
MHC's or any of the First-Tier Subsidiaries' knowledge, all payments due from
MHC or any of the First-Tier Subsidiaries on account of employee health and
welfare insurance that would have a Material Adverse Effect upon MHC or any of
the First-Tier Subsidiaries if not paid has been paid or, if not due, accrued as
a liability on the books of MHC or any of the First-Tier Subsidiaries, as
applicable.
(N) Joint Ventures. Except as set forth in Exhibit 4.1(O) attached
hereto, neither MHC nor any of the Subsidiaries is engaged in any joint venture
or partnership with any Person.
(O) Subsidiaries and Affiliates. Neither MHC nor any First-Tier
Subsidiary has any Subsidiaries or Affiliates except as set forth in Exhibit
4.1(O) attached hereto.
(P) Financial Statements. The consolidated financial statements,
interim financial statements and balance sheets of MHC and the First-Tier
Subsidiaries as set forth in MHC's Form 10-Q filed with the Securities Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended, for the
quarterly period ended September 30, 1993, previously delivered by MHC to GE and
required to be delivered by MHC to GE during the term of this Agreement under
Section 6.1: (1) are and will be true, complete and correct in all material
respects, (2) present and will present fairly and accurately the financial
condition of MHC and the First-Tier Subsidiaries, respectively, and the results
of their respective operations at the dates and for the periods indicated, and
(3) have and will have been prepared in conformity with GAAP as modified by
Regulation S-X, applied consistently for the periods specified, except that the
interim financial statements need not contain any of the footnotes required to
comply with GAAP. From and after December 31, 1992, MHC or any of the First-
Tier Subsidiaries has not made any changes in its accounting methods or
practices.
(Q) Litigation or Claims. Except as set forth in Exhibit 4.1(Q)
attached hereto (said matters set forth in Exhibit 4.1(Q) being collectively
referred to herein as "Pending Litigation"), neither MHC nor any of the First-
Tier Subsidiaries nor any of their properties, businesses or assets are engaged
in or a party to or, to MHC's or any of the First-Tier Subsidiaries' knowledge,
threatened with any suit, action, proceeding, inquiry, enforcement action,
investigation, claim or demand or legal, administrative, arbitration or other
method of settling disputes or disagreements, and does not know or have notice
of any basis for any such action. Neither MHC nor any of the First-Tier
Subsidiaries has received notice of any investigation, threatened or
contemplated, by any federal or state governmental authority or agency, that
remains unresolved. None of the Pending Litigation has created a Lien or a
claim therefor against any of MHC's or any of the First-Tier Subsidiaries'
Properties, including, without limitation, the Collateral. Set forth in Exhibit
4.1(Q) is a complete and accurate description of each outstanding order, writ,
injunction or decree of any court, arbitrator, government or governmental agency
against or affecting the Collateral. MHC and the First-Tier Subsidiaries have
provided GE with complete and correct copies of all such orders, writs,
injunctions and decrees, and will make available upon request, copies of all
correspondence, reports, memoranda and files related thereto.
(R) ERISA. Exhibit 4.1(R) attached hereto sets forth each and every
Employee Pension Benefit Plan (as defined in Section 3(2) of ERISA ("Plan"))
applicable to MHC's or any of the First-Tier Subsidiaries' employees. Except as
set forth in Exhibit 4.1(R), to MHC's or any of the First-Tier Subsidiaries'
knowledge: (1) MHC and the First-Tier Subsidiaries have fulfilled all of their
obligations under the minimum funding standards of ERISA, and the IRC, with
respect to each Plan and is in compliance in all material respects with the
presently applicable provisions of ERISA and the IRC with respect thereto, and
has not incurred any liability to the Pension Benefit Guaranty Corporation or a
Plan in connection with the termination of a Plan applicable to MHC's or any of
the First-Tier Subsidiaries' employees under Title IV of ERISA, where such
liability would have a Material Adverse Effect on the financial condition of MHC
or any of the First-Tier Subsidiaries; (2) with respect to each Plan applicable
to MHC's or any of the First-Tier Subsidiaries' employees, there have been no
"prohibited transactions" (as defined in Section 4975(c) of the IRC and
Section 406 of ERISA) or "reportable events" (as defined in Section 4043(b) of
ERISA and the regulations thereunder); (3) each Plan applicable to MHC's or any
of the First-Tier Subsidiaries' respective employees which is intended to be a
qualified plan under Section 401(a) of the IRC has received a favorable
determination letter from the Internal Revenue Service, and no withdrawal
liability has been incurred by or asserted against MHC or any of the First-Tier
Subsidiaries with respect to a withdrawal from any multi-employer pension plan
applicable to MHC's or any of the First-Tier Subsidiaries' employees; (4) no
proceedings have been instituted to terminate any Plan of MHC or any of the
First-Tier Subsidiaries; (5) no condition exists that presents a material risk
to MHC or any of the First-Tier Subsidiaries of incurring a liability to or on
account of a Plan pursuant to the foregoing provisions of ERISA and the IRC;
(6) no Lien imposed under the IRC or ERISA on the assets of MHC or any of the
First-Tier Subsidiaries exists or is likely to arise on account of any Plan; and
(7) MHC or any of the First-Tier Subsidiaries may terminate contributions to any
other employee benefit plans maintained by them without incurring any material
liability to any Person interested therein.
(S) Taxes. Except as set forth in Exhibit 4.1(S) attached hereto,
all federal, state, county and other tax returns, reports and declarations of
every nature (including, without limitation, income, employment, payroll,
excise, property, sales and use taxes, unemployment contributions) required to
be filed by or on behalf of, or with respect to MHC, the First-Tier Subsidiaries
or any of their respective assets, including, without limitation, the
Collateral, the non-filing of which would have a Material Adverse Effect on MHC
and the First-Tier Subsidiaries on a consolidated basis, have been duly and
timely filed, and will continue to be duly and timely filed (within the time
periods required by law) by MHC and the First-Tier Subsidiaries, to MHC's or any
of the First-Tier Subsidiaries' knowledge, all such returns or reports are, or
will be at the time of filing, complete and accurate and in accordance with the
tax laws applicable thereto and accurately reflect all such taxes, charges and
assessments required to be paid by MHC or any of the First-Tier Subsidiaries for
the periods covered thereby. No extension of time or requests therefor or
waiver thereof, have been made or are presently pending or effective with
respect to such reports, returns or taxes that will have a Material Adverse
Effect on MHC or any of the First-Tier Subsidiaries. Except as set forth in
Exhibit 4.1(S) attached hereto, all taxes shown to be due and payable on such
returns and reports and any deficiency, assessments, penalties and interest
thereon have been paid. Except as set forth in Exhibit 4.1(S) attached hereto,
all required tax estimates, deposits, prepayments and the like for current
periods have been properly made. There are no tax liens on any of the
Collateral and, to MHC's or any of the First-Tier Subsidiaries' knowledge, no
basis exists for the imposition of any such liens. The accrual for taxes
reflected in the balance sheets of MHC and the First-Tier Subsidiaries are in
the aggregate adequate to cover any and all federal, state, local or foreign tax
liabilities (whether or not disputed) of MHC or any of the First-Tier
Subsidiaries for the period ended on the date thereof and all prior periods.
Except as set forth in Exhibit 4.1(S) attached hereto, neither MHC nor any of
the First-Tier Subsidiaries have any dispute with any taxing authority as to
taxes owing or claimed to be owing by MHC or any of the First-Tier
Subsidiaries. Except as set forth in Exhibit 4.1(S) attached hereto, there
is no unassessed tax deficiency proposed or, to MHC's or any of the First-
Tier Subsidiaries' knowledge, threatened against MHC or any of the First-
Tier Subsidiaries, and no action, proceeding or audit of any of MHC's or any
of the First-Tier Subsidiaries' respective returns or reports by any
governmental authority is pending or, to MHC's or any of the First-Tier
Subsidiaries' knowledge, threatened by any governmental authority for
assessment, reassessment or collection of any taxes or assessments affecting
MHC or any of the First-Tier Subsidiaries that will have a Material Adverse
Effect on MHC or any of the First-Tier Subsidiaries.
(T) Absence of Adverse Changes. Except as set forth on Exhibit
4.1(T) attached hereto, since December 31, 1992, there has not been any change,
and MHC and the First-Tier Subsidiaries know of no fact, circumstance, event,
occurrence, contingency or condition that might reasonably be expected to result
in a change, whether or not in the ordinary course of business and whether or
not covered by insurance, that has or, to MHC's or any of the First-Tier
Subsidiaries' knowledge, will have a Material Adverse Effect on the working
capital, financial condition, Property, assets, liabilities, Indebtedness,
reserves, business, operations or prospects of MHC or any of the First-Tier
Subsidiaries or the ability of MHC or any of the First-Tier Subsidiaries fully
to perform this Agreement and the transactions contemplated hereby.
(U) Brokers. All negotiations relating to this Agreement and the
transactions contemplated hereby have been carried out without the intervention
of any person on behalf of MHC or any of the First-Tier Subsidiaries in such
manner as to give rise to any claim against GE, MHC or any of the First-Tier
Subsidiaries for any brokerage or finder's fee commission, fee or similar
compensation.
(V) Transfer for Value. MHC and the First-Tier Subsidiaries
acknowledge that the financial accommodations granted by GE pursuant to this
Agreement and the Scheduled Documents constitute reasonably equivalent value for
the consideration delivered by MHC and the First-Tier Subsidiaries hereunder and
under the Scheduled Documents.
(W) Corporate Records. The corporate records and minute books of MHC
and the First-Tier Subsidiaries accurately reflect all material actions taken by
their respective stockholders, Boards of Directors or any committee thereof.
(X) Monthly Reports. The monthly reports to be furnished by MHC and
the First-Tier Subsidiaries to GE pursuant to Section 2.4 above shall be true,
complete and correct in all material respects as of the end of the month
reported on and shall represent fairly and accurately the detailed information
required pursuant to Section 2.4 above.
(Y) Remuneration. Exhibit 4.1(Y) attached hereto lists all employees
of MHC or any of the First-Tier Subsidiaries whose aggregate direct remuneration
(including bonuses) for 1992 equalled or exceeded Eighty Thousand Dollars
($80,000).
(Z) Other Obligations. Neither MHC nor any Subsidiary has an
outstanding obligation with any equipment leasing financing companies or
entities except for those companies or entities identified on Exhibit 4.1(Z)
attached hereto.
(AA) No Untrue or Inaccurate Representations or Warranties. All
statements contained in any certificate, financial statement or other instrument
delivered by or on behalf of MHC or any of the First-Tier Subsidiaries pursuant
to or in connection with this Agreement or the other documents contemplated by
this Agreement (including but not limited to any such statements made in or in
connection with any amendment hereto) shall constitute representations and
warranties made by MHC and the First-Tier Subsidiaries under this Agreement.
The representations and warranties of MHC and the First-Tier Subsidiaries
contained in each Scheduled Document and each Exhibit or other written statement
delivered pursuant to this Agreement, or in connection with the transactions
contemplated hereby, are, as of the date when given, accurate, correct and
complete, and do not contain any untrue statement of material fact or omit to
state a material fact necessary in order to make the statements and information
contained therein not misleading.
4.2 Knowledge of MHC and the First-Tier Subsidiaries. Each of the
representations and warranties contained in this Section 4 which are not limited
by the phrase "knowledge" shall be accurate, correct and complete in all
material respects. Each of the representations and warranties contained in this
Section 4 which are made to the "knowledge" of MHC and the First-Tier
Subsidiaries are made to the best knowledge and belief of MHC and the First-Tier
Subsidiaries after due investigation of MHC's and the First-Tier Subsidiaries'
respective assets, books of account and other corporate records by responsible
officers of MHC and the First-Tier Subsidiaries, as applicable; provided,
however, that if such investigation is not undertaken, MHC and the First-Tier
Subsidiaries shall be held to such knowledge as would have been revealed
pursuant to such an investigation.
4.3 Survival of Warranties and Representations. All representations and
warranties of MHC and the First-Tier Subsidiaries contained in this Agreement
shall survive the execution, delivery and acceptance of this Agreement by the
parties hereto and the consummation of the transactions described herein or
related hereto and shall expire on the Termination Date.
5. COVENANTS AND CONTINUING AGREEMENTS
5.1 Affirmative Covenants. Unless GE shall otherwise consent in writing,
MHC and the First-Tier Subsidiaries covenant that at all times during the Term:
(A) Automatic Drafting. During the continuance of a Default or Event
of Default pursuant to this Agreement, MHC and the First-Tier Subsidiaries shall
adequately fund the accounts identified in the Automatic Drafting Agreement(s)
as necessary to pay the Liabilities identified in Exhibit 3.1(L) when due and
owing.
(B) Payment of Indebtedness. Except as set forth in Exhibit 5.1(B)
attached hereto, MHC and the First-Tier Subsidiaries shall pay and discharge or
cause to be paid and discharged all of its Indebtedness, including the
Liabilities, as and when due and payable or on demand, as the case may be,
except for such Indebtedness that is reasonably being contested and disputed by
MHC or any of the First-Tier Subsidiaries, provided that MHC or the Subsidiary,
as applicable, shall have given GE written notice of said dispute and shall be
diligently contesting the same in good faith in an appropriate forum and
proceeding. If such disputed Indebtedness is in excess of One Hundred Thousand
Dollars ($100,000) in the aggregate, at any time, MHC or the Subsidiary, as
applicable, shall give GE such additional assurances as GE reasonably deems
necessary under the circumstances. GE shall act in a commercially reasonable
manner in enforcing its rights pursuant to this Section 5.1(B). Maxum shall
give GE notice of the acceleration of any of the obligations of MHC or any
First-Tier Subsidiary to any creditor if MHC or any First-Tier Subsidiaries'
obligations to such creditor exceed One Hundred Thousand Dollars ($100,000) as a
result of such acceleration.
(C) Maintenance of Property. MHC and the First-Tier Subsidiaries
shall, at their sole cost and expense, keep and maintain, insure (except to the
extent insured by GE pursuant to the Master Equipment Lease) or preserve and
protect their respective Property at any time owned or leased by them and useful
or necessary for their respective businesses in good working order and
condition, ordinary wear and tear excepted, and shall use reasonable efforts to
not permit any waste of their respective Property. MHC and the First-Tier
Subsidiaries shall notify GE promptly of any event or occurrence causing a
material loss or decline in value of their respective Property and the estimated
(or actual, if available) amount of such loss or decline.
(D) Inspection Rights. MHC and the First-Tier Subsidiaries shall
permit GE and its agents and representatives to enter upon MHC's or any of the
First-Tier Subsidiaries' premises and shall use reasonable efforts to cause any
lessee of the Collateral to permit GE and its agents and representatives to
enter upon lessee's premises, and any location wherein the Collateral is located
at any time during usual business hours upon at least three (3) Business Days
prior written notice to MHC or any of the First-Tier Subsidiaries, as
applicable, and such lessee, if applicable, exercisable as frequently as GE or
any designated representative of GE may reasonably request (but in no event more
often than once during each calendar quarter), for the purpose of inspecting the
Collateral, all records, files and books of account of MHC or any of the First-
Tier Subsidiaries related thereto (and to make extracts from such records, files
and books of account at GE's expense), and the premises upon which any of the
Collateral is located, and, verifying the value and condition of, or any other
matter relating to the Collateral.
(E) Audit Rights. MHC and the First-Tier Subsidiaries shall permit
GE and its agents and representatives to enter upon MHC's or any of the First-
Tier Subsidiaries' premises at any time during usual business hours upon at
least three (3) Business Days prior written notice to MHC or the Subsidiary, as
applicable, exercisable as frequently as GE or any designated representative of
GE may reasonably request (but in no event more often than once during each
calendar quarter), for the purpose of inspecting all records, files and books of
account of MHC or any of the First-Tier Subsidiaries (and to make extracts from
such records, files and books of account at GE's expense). All executive
officers and other officers of MHC or any of the First-Tier Subsidiaries charged
with knowledge of the financial condition of MHC or any of the First-Tier
Subsidiaries shall make themselves available at all reasonable times to discuss,
and provide all reasonable information requested by GE with respect to MHC's or
any of the First-Tier Subsidiaries' respective businesses.
(F) Compliance with Laws. MHC and the First-Tier Subsidiaries shall
comply in a timely fashion with the requirements of all (1) federal, state and
local laws, rules and regulations applicable to them, respectively, including
those relating to ERISA, those regarding the collection, payment and deposit of
sales, employees' income, unemployment and social security taxes and other
charges, and those relating to environmental matters and health care matters,
where the failure to so comply would have a Material Adverse Effect on MHC or
any of the First-Tier Subsidiaries, and (2) orders of any governmental authority
having jurisdiction over MHC or any of the First-Tier Subsidiaries, where the
failure to so comply may have a Material Adverse Effect upon MHC or any of the
First-Tier Subsidiaries, or affect MHC's or any of the First-Tier Subsidiaries'
ability to perform its obligations under this Agreement and the Scheduled
Documents, unless the same is being contested in good faith by appropriate
proceedings and such contest shall operate to stay the Material Adverse Effect
of any such noncompliance.
(G) Compliance with Agreements. Except as set forth in Exhibit
5.1(G) attached hereto, MHC and the First-Tier Subsidiaries shall perform,
within all required time periods (after giving effect to any applicable grace
periods), all of their obligations and enforce all of their respective rights
under each agreement to which they are a party, including any leases to which
they are a party, where the failure to so perform and enforce would have a
Material Adverse Effect upon MHC or any of the First-Tier Subsidiaries. Neither
MHC nor any of the First-Tier Subsidiaries shall terminate or modify in any
manner adverse to MHC or any of the First-Tier Subsidiaries any provision of any
agreement or lease to which they are a party which termination or modification
could reasonably be expected to have a Material Adverse Effect upon MHC or any
of the First-Tier Subsidiaries or the Collateral.
(H) Hazardous Materials Laws. MHC and the First-Tier Subsidiaries
shall comply in all material respects with all laws governing Hazardous
Materials and shall promptly advise GE in writing of (1) any and all
enforcement, cleanup, removal or other governmental or regulatory actions
instituted or threatened in writing pursuant to any applicable laws governing
Hazardous Materials; (2) any and all claims made or threatened in writing by any
third party against MHC or any of the First-Tier Subsidiaries or their
respective real property relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from any Hazardous Materials; and
(3) discovery by any officer or employee of MHC or any of the First-Tier
Subsidiaries, respectively, of any occurrence or condition on any real property
adjoining or in the vicinity of MHC's or any of the First-Tier Subsidiaries'
respective real property that could reasonably be expected to cause MHC's or any
of the First-Tier Subsidiaries' respective real property or any part thereof to
be subject to any restrictions on the ownership, occupancy, transferability or
use of MHC's or any of the First-Tier Subsidiaries' respective real property
under any laws governing Hazardous Materials.
(I) Payment of Taxes. MHC and the First-Tier Subsidiaries shall
prepare and file all tax returns and pay and discharge at or before their due
date, all taxes, assessments and other similar governmental levies, charges,
fees and imposts, all liabilities for judgments, assessments and other
governmental charges and all other obligations for the payment of money owing to
any governmental entity, which, if unpaid might become a Lien on any of the
Property of MHC or any of the First-Tier Subsidiaries, except those being
contested in good faith by appropriate proceedings if by reason of such
nonpayment and contest no material item or portion of Property of MHC or any of
the First-Tier Subsidiaries, including the Collateral, taken as a whole, is in
jeopardy of being seized, levied upon or forfeited prior to judgment. MHC and
the First-Tier Subsidiaries shall maintain, in accordance with GAAP, appropriate
reserves for the accrual of any of the foregoing obligations and liabilities.
(J) Preserve Accuracy of Representations and Warranties. Unless
agreed to in writing by GE or otherwise permitted by the terms of this Agreement
or any of the Scheduled Documents, MHC and the First-Tier Subsidiaries shall
refrain from any action or inaction that would render inaccurate any
representation or warranty set forth in Sections 4.1(A), 4.1(C), 4.1(E), 4.1(H)
(with respect to title to after-acquired Collateral) and 4.1(W) or any covenant
contained in this Agreement. The parties acknowledge that the covenant set
forth in this Section 5.1(J) requires the representations and warranties
expressly identified above to be true and correct each day this Agreement
remains in effect. This covenant shall not be construed to imply that all other
representations and warranties in the Scheduled Documents are not required to be
accurate and complete as of the date of this Agreement and the Closing Date.
(K) Maintenance of Existence. MHC and the First-Tier Subsidiaries
shall (1) preserve and maintain their separate respective corporate existences
in the respective jurisdictions of their formation and all authorizations,
rights, franchises, licenses, privileges, consents, approvals, orders, licenses,
permits or registrations from any governmental agency that are necessary for the
transaction of their respective businesses, except where the failure to so
preserve and maintain would not have a Material Adverse Effect on MHC or any of
the First-Tier Subsidiaries, and (2) qualify and remain qualified as a foreign
corporation in each jurisdiction identified in Exhibit 4.1(A) above and in each
other jurisdiction in which such qualification is or becomes necessary in view
of their respective businesses or the ownership of MHC's or any of the First-
Tier Subsidiaries' respective Property (qualification shall be deemed
"necessary" for purposes of this Agreement if MHC or any First-Tier Subsidiary
conducts any Business Activities in a particular state as described in Section
4.1(A) above). Without limiting the foregoing, (i) MHC shall qualify as a
foreign corporation in the States of Maryland, Ohio and West Virginia, (ii) MHSC
shall qualify as a foreign corporation in the States of Nebraska and Kansas,
(iii) MTS shall qualify as a foreign corporation in the States of Alabama,
California and Mississippi and (iv) Quest shall qualify as a foreign corporation
in the States of North Carolina, South Carolina and Ohio no later than forty-
five (45) days following the Closing Date unless MHC or a First-Tier Subsidiary
provides GE with a legal opinion from a law firm reasonably acceptable to GE
that qualification in any such State is not necessary as a result of the
activities of MHC or the applicable First-Tier Subsidiary in that State. Maxum
shall proceed diligently following the Closing Date to take all action necessary
for the entities identified in Exhibit 4.1(A) - Annex A-2 to be in good standing
in the States identified in such Exhibit.
(L) Accounting Methods; Books and Records of Account. MHC and the
First-Tier Subsidiaries shall maintain their present customary system of
accounting established and administered in accordance with GAAP and keep such
books, records and accounts (which shall be true and complete in all material
respects) with respect to their respective business activities in reasonable
detail as necessary to permit preparation of financial statements in conformity
with GAAP.
(M) Further Assurances. In addition to the acts recited herein and
contemplated to be performed, executed and/or delivered by MHC or any of the
First-Tier Subsidiaries, MHC and the First-Tier Subsidiaries hereby agree, at
any time, and from time to time, to perform, execute and deliver to GE upon
request, in form and substance acceptable to GE, any and all such further acts,
additional instruments, including supplemental documentation or further
assurances as may be reasonably necessary or proper to (1) promptly implement
the intent of the parties under this Agreement, (2) promptly correct any defect,
error or omission which may be discovered in this Agreement or any Scheduled
Document, and execute any and all additional documents as may be reasonably
requested by GE to correct such defect, error or omission, or to identify any
additional properties which are or become subject to this Agreement, (3) assure
GE a valid Lien and security interest under this Agreement in accordance with
Section 2.12 above, (4) create, perfect, preserve, maintain and protect the
Liens and security interests created or intended to be created pursuant to this
Agreement, and (5) provide the rights and remedies to GE granted or provided for
by this Agreement. MHC and the First-Tier Subsidiaries shall pay the costs of
any recording or filing any of such documents if required in accordance with
Section 8.2 below. Upon the occurrence and during the continuance of an Event
of Default, MHC and the First-Tier Subsidiaries hereby irrevocably make,
constitute, and appoint GE (and all Persons designated by GE for that purpose)
as MHC's and the First-Tier Subsidiaries' true and lawful agent and
attorney-in-fact with power to sign the name of MHC or any of the First-Tier
Subsidiaries, as appropriate, on any supplemental documentation and to deliver
any supplemental documentation to such Persons as GE, in its sole discretion,
may elect. MHC and the First-Tier Subsidiaries agree that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
Financing Statement is sufficient as a Financing Statement. Notwithstanding the
foregoing provisions of this Section 5.1(M), GE shall act (i) in a commercially
reasonable manner when exercising GE's rights pursuant to this Section 5.1(M),
and (ii) only as may be necessary in GE's reasonable judgment to protect or
preserve GE's rights under this Agreement and in the Scheduled Documents.
Without limiting the generality of the foregoing, Maxum shall proceed
diligently following the Closing to obtain a duplicate certificate of title with
respect to that certain vehicle identified by serial number 1E9SE5748K1013009,
which duplicate certificate shall show GE as the lienholder. Maxum shall
deliver such duplicate original certificate of title as soon as it is received
by Maxum or shall cause the appropriate state agency to deliver the duplicate
original certificate of title directly to GE. Maxum shall further use its best
reasonable efforts to cause William L. MacKnight ("MacKnight") to issue a new
Promissory Note to MHC in the original principal amount of $110,625 on the same
terms and conditions as set forth in the original Promissory Note issued by
MacKnight to MHC on June 30, 1987, which efforts shall include MHC's agreement
to deliver the Lost Promissory Note Affidavit and Indemnity Agreement to
MacKnight in the form attached hereto as Schedule 5.2(M).
(N) Insurance; Payment of Premiums. MHC and the First-Tier
Subsidiaries shall, at their sole cost and expense, maintain in full force and
effect the types of insurance coverages set forth on Exhibit 4.1(L).
(O) Litigation. In the event any Pending Litigation shall result in
a final judgment adverse to MHC or any of the First-Tier Subsidiaries, MHC and
the First-Tier Subsidiaries shall promptly satisfy or bond-off such final
judgment. Except as provided in Section 8.12(B) below, MHC and the First-Tier
Subsidiaries shall jointly and severally indemnify and hold GE and its
Affiliates harmless from any and all losses, claims, damages, costs, expenses
(including court costs and reasonable attorneys' fees) and obligations
(including, but not limited to, any loss of any right, title or interest of GE
in or to the Collateral) arising out of or related to, directly or indirectly,
any litigation, or the claim of any third party for alleged liabilities or
obligations of MHC or any of the First-Tier Subsidiaries arising out of
transactions or events affecting the Collateral; provided, however, that if GE
or any of its Affiliates intervene in such action, MHC and the First-Tier
Subsidiaries shall not be liable to GE or any of its Affiliates for any expenses
incurred by GE or any of its Affiliates, which for purposes of this
Section 5.1(O) shall include attorneys' fees or court costs incurred by GE or
any of its Affiliates but shall not include any damages or other losses incurred
by GE or any of its Affiliates in connection with such litigation. MHC and the
First-Tier Subsidiaries shall not be liable to GE or its Affiliates for any
losses, claims, damages, costs, expenses and obligations which are caused by the
gross negligence, willful misconduct or other activities of GE as described in
Section 8.12(B) below.
(P) Monthly Reports. MHC and the First-Tier Subsidiaries shall
maintain and deliver to GE on a timely basis in accordance with this Agreement
the monthly reports described in Section 2.4 above.
(Q) Customer Contracts Entered Into After Closing Date. In the event
that Maxum enters any contracts following the Closing Date for use of equipment
(i) that is leased by Maxum from GE, (ii) that is financed by GE or leased from
GE pursuant to installment sales agreements, capital leases or other financing
methods or (iii) that is or will be after it is acquired subject to GE's first
priority security interest then (a) Maxum shall require that such contract with
a hospital or other facility or entity that uses such equipment ("Customer")
expressly provide that (x) the contract is assignable to GE, and (y) the
Customer acknowledges and consents to GE's security interest in the contract,
and (b) such contract shall be entered into by MHSC and the Customer. Maxum
shall promptly provide a copy of such Customer Contracts to GE.
(R) Required Prepayments. Maxum shall use no less than fifty percent
(50%) of the proceeds, net of reasonable selling expenses, from the sale of any
of the equipment or other property described in Exhibit 5.2(N) attached hereto,
for the purpose of prepaying first the outstanding principal amount under the
Merrill/Highline Promissory Note and then the outstanding principal amount under
the Third Deferral Note.
5.2 Negative Covenants. Without GE's prior written consent, which
consent may be withheld in GE's sole discretion (except as otherwise expressly
provided in Section 5.6 below to the contrary), MHC and the First-Tier
Subsidiaries covenant as follows:
(A) Mergers. Except as set forth in Exhibit 5.2(A) attached hereto,
neither MHC nor any of the First-Tier Subsidiaries shall, directly or
indirectly, by operation of law or otherwise, reorganize, merge or consolidate
or otherwise combine with any Person.
(B) Investments and Acquisitions. Neither MHC nor any of the First-
Tier Subsidiaries shall create, form or otherwise acquire any other Subsidiaries
(unless such Subsidiaries are separate and separately funded). Neither MHC nor
any of the First-Tier Subsidiaries shall make any loan or advances of money to
any Person or any investment, directly or indirectly (by way of transfer of
Property, contributions to capital, purchase of stock or securities or evidences
of Indebtedness, acquisition of the business or assets, or otherwise), in any
Person in amounts exceeding Two Hundred Thousand Dollars ($200,000) in any
single transaction or series of related transactions or One Million Dollars
($1,000,000) in the aggregate during any fiscal year of MHC. Requests by MHC or
any of the First-Tier Subsidiaries to take any action that is prohibited by this
Section 5.2(B) shall comply with Section 5.6 below and shall be approved or
disapproved by GE in accordance with Section 5.6 below within ten (10) Business
Days following GE's receipt of MHC's or any of the First-Tier Subsidiaries
request for consent. The parties acknowledge that this Section 5.2(B) shall not
restrict or limit activities permitted by the terms of Sections 5.2(H) and (I)
below.
(C) Distributions. Neither MHC nor any of the First-Tier
Subsidiaries shall make any Distributions. Requests by MHC or any of the First-
Tier Subsidiaries to take any action that is prohibited by this Section 5.2(C)
shall comply with Section 5.6 below and shall be approved or disapproved by GE
in accordance with Section 5.6 below within ten (10) Business Days following
GE's receipt of MHC's or any of the First-Tier Subsidiaries' request for
consent.
(D) Subordinated Obligations. Except as set forth in Exhibit 5.2(D)
attached hereto, neither MHC nor any of the First-Tier Subsidiaries shall
voluntarily prepay any principal (including the making of any sinking fund
payment), interest or any other amount in respect of (1) any obligations that
are subordinate to MHC's or any of the First-Tier Subsidiaries' obligations to
GE, or (2) any other obligations.
(E) ERISA. Neither MHC nor any of the First-Tier Subsidiaries shall
at any time, maintain, be obligated or become obligated to contribute on behalf
of its employees to, any Plan, other than (1) Plans disclosed in Exhibit 4.1(R),
(2) Plans created to replace those Plans disclosed in Exhibit 4.1(R), as
notified by MHC or any of the First-Tier Subsidiaries to GE, and (3) Plans to
which MHC or any of the First-Tier Subsidiaries becomes obligated to contribute
pursuant to the terms of a collective bargaining agreement. Neither MHC nor any
of the First-Tier Subsidiaries shall at any time, permit any Plan described in
the Exhibit 4.1(R) to fail to comply with ERISA or other applicable laws in any
respect if such failure would have a Material Adverse Effect on MHC or any of
the First-Tier Subsidiaries. Neither MHC nor any of the First-Tier Subsidiaries
shall at any time, permit any Plan maintained by any of them, to: (1) engage in
any non-exempt "prohibited transaction," as such term is defined in Section 4975
of the IRC; (2) incur any material "accumulated funding deficiency," as that
term is defined in Section 302 of ERISA; or (3) suffer a termination event to
occur which may reasonably be expected to result in (a) liability of MHC or any
of the First-Tier Subsidiaries to the Plan that may reasonably be expected to
have a Material Adverse Effect on MHC or any of the First-Tier Subsidiaries, or
(b) the imposition of a Lien on the Collateral pursuant to Section 4068 of
ERISA.
(F) Amendments. Except as set forth in Exhibit 5.2(F) attached
hereto, neither MHC nor any of the First-Tier Subsidiaries shall amend any
provision of any obligation that is subordinate to MHC's or any of the First-
Tier Subsidiaries' obligations to GE or any other obligation, if such amendment
would (1) affect any of the subordination provisions thereof, (2) advance the
date of any required payment or prepayment thereunder, (3) make any covenant
therein more burdensome to MHC or any of the First-Tier Subsidiaries, (4) reduce
any default or grace period therein provided, or (5) otherwise have a Material
Adverse Effect on the interests of GE.
(G) Increase in Salaries. Neither MHC nor any of the First-Tier
Subsidiaries shall in any fiscal year of MHC increase the aggregate salaries of
its officers, directors and managers by an aggregate amount exceeding twenty
percent (20%) of the aggregate salaries paid to its officers, directors and
managers during its immediately preceding fiscal year. Requests by MHC or any
of the First-Tier Subsidiaries to take any action that is prohibited by this
Section 5.2(G) shall comply with Section 5.6 below and shall be approved or
disapproved by GE in accordance with Section 5.6 below within ten (10) Business
Days following GE's receipt of MHC's or any of the First-Tier Subsidiaries'
request for consent.
(H) Capital Expenditures. Neither MHC nor any of the First-Tier
Subsidiaries shall make capital expenditures (including expenditures for
capitalized leases but excluding expenditures for routine repairs and
replacements) in excess of Two Hundred Thousand Dollars ($200,000) in any single
transaction or series of related transactions or One Million Dollars
($1,000,000) in the aggregate during any fiscal year of MHC. Requests by MHC or
any of the First-Tier Subsidiaries to take any action that is prohibited by this
Section 5.2(H) shall comply with Section 5.6 below and shall be approved or
disapproved by GE in accordance with Section 5.6 below within ten (10) Business
Days following GE's receipt of MHC's or any of the First-Tier Subsidiaries'
request for consent. Capital expenditures following the Closing Date for
equipment with an acquisition cost in excess of Fifty-Thousand Dollars ($50,000)
shall be made by MHSC and not MHC, any other First-Tier Subsidiaries or any
other Subsidiary.
(I) Operating Leases. Except as set forth on Exhibit 5.2(I) attached
hereto or otherwise in the ordinary course of business, neither MHC nor any of
the First-Tier Subsidiaries shall become the lessee under any operating lease if
the aggregate payments thereunder during any fiscal year of MHC exceed One
Hundred Thousand Dollars ($100,000). Requests by MHC or any of the First-Tier
Subsidiaries to take any action that is prohibited by this Section 5.2(I) shall
comply with Section 5.6 below and shall be approved or disapproved by GE in
accordance with Section 5.6 below within ten (10) Business Days following GE's
receipt of MHC's or any of the First-Tier Subsidiaries' request for consent.
(J) Transactions with Affiliates. Except as specifically permitted
in this Agreement, neither MHC nor any of the First-Tier Subsidiaries shall
enter into, or be a party to, any transaction with any of MHC's or any of the
First-Tier Subsidiaries' respective officers, directors, employees, or
Affiliates of MHC or any of the First-Tier Subsidiaries, except for normal
employment arrangements and benefit programs on reasonable terms and no less
favorable to MHC or any of the First-Tier Subsidiaries than would obtain in a
comparable arm's length transaction with a Person not an officer, director,
employee or Affiliate of MHC or any of the First-Tier Subsidiaries; provided,
however, that MHC may issue common stock to capitalize any of its wholly-owned
First-Tier Subsidiaries. Requests by MHC or any of the First-Tier Subsidiaries
to take any action that is prohibited by this Section 5.2(J) shall comply with
Section 5.6 below and shall be approved or disapproved by GE in accordance with
Section 5.6 below within ten (10) Business Days following GE's receipt of MHC's
or any of the First-Tier Subsidiaries' request for consent.
(K) Adverse Agreements. Neither MHC nor any of the First-Tier
Subsidiaries shall enter into any transaction that is reasonably likely to have
a Material Adverse Effect on the Collateral or MHC's or any of the First-Tier
Subsidiaries' ability to repay Indebtedness.
(L) Liens; Negative Pledges; Sales and Leasebacks. Except for those
Liens (1) which are Permitted Liens as identified in Exhibit 4.1(H),
(2) expressly permitted in this Agreement, or (3) created pursuant to this
Agreement, neither MHC nor any of the First-Tier Subsidiaries shall create,
permit or suffer to exist, and MHC and the First-Tier Subsidiaries shall defend
the Collateral against and take such other action as is necessary to remove, any
Lien of any nature on the Collateral, whether now owned or hereafter acquired,
and MHC and the First-Tier Subsidiaries shall defend the right, title and
interest of GE in and to any of MHC's or any of the First-Tier Subsidiaries'
rights to the Collateral against the claims and demands of all Persons
whomsoever.
(M) Indebtedness. Except for (i) Indebtedness outstanding on the
Effective Date, (ii) the Liabilities, (iii) liabilities for taxes, assessments,
governmental charges or levies which are not yet due and payable or which are
being contested in accordance with the terms of this Agreement, (iv)
endorsements of negotiable instruments for collection in the ordinary course of
business and (v) reimbursement obligations under bonds required to be obtained
under the terms of this Agreement, neither MHC nor any of the First-Tier
Subsidiaries shall create, incur, assume, permit to exist or guarantee more than
Two Hundred Thousand Dollars ($200,000) of Indebtedness in any single
transaction or series of related transactions or One Million Dollars
($1,000,000) of Indebtedness in the aggregate during any fiscal year of MHC.
Notwithstanding the foregoing, Maxum expressly agrees that it shall not (i)
request or obtain any additional funds from Highline pursuant to that certain
Loan and Security Agreement entered into as of May 18, 1989 between Highline and
MTS, or otherwise, or (ii) take any action which would result in an increase or
material change in the potential liability of MHC or any First-Tier Subsidiary
as of the Closing Date pursuant to the guaranties identified in Exhibit 4.1(G),
including, without limitation, assigning or subleasing any lease that is
guaranteed pursuant thereto to any third party, without the prior written
consent of GE, which may be withheld in its sole discretion. Further, Maxum
shall not restructure its outstanding obligations to Highline as of the Closing
Date without the prior written consent of GE; provided, however, that (i) if the
terms of such restructuring are on substantially the same terms as set forth in
the term sheet attached hereto as Exhibit 5.2(M) with no material modifications
thereto which could have a Material Adverse Effect on Maxum, and (ii) following
the restructure, the obligations of Maxum to Highline, XCC and/or their
successors or assigns are only comprised of those obligations generally
described in the Highline Term Sheet, which shall replace and/or subsume (e.g.,
pursuant to a modification and extension) all of the outstanding obligations of
Maxum pursuant to the Highline Documents, GE's prior written consent to the
restructuring transaction between Highline and MHC shall not be required. MHC
shall provide GE with copies of all documents to be executed in connection with
the Highline restructuring at least five (5) business days prior to their
execution by MHC. Requests by MHC or any of the First-Tier Subsidiaries to take
any action that is prohibited by this Section 5.2(M) shall comply with
Section 5.6 below and shall be approved or disapproved by GE in accordance with
Section 5.6 below within ten (10) Business Days following GE's receipt of MHC's
or any of the First-Tier Subsidiaries' request for consent.
(N) Disposition of Property. Except for the Property identified on
Exhibit 5.2(N) attached hereto which may be sold or transferred by MHC or the
First-Tier Subsidiaries without GE's prior written consent, neither MHC nor any
of the First-Tier Subsidiaries shall make any Disposition of their respective
Property, whether now owned or hereafter acquired, which exceeds Fifty Thousand
Dollars ($50,000) in any single transaction or series of related transactions or
One Million Dollars ($1,000,000) in the aggregate during any fiscal year of
MHC. Notwithstanding the foregoing, neither MHC nor any of the First-Tier
Subsidiaries shall make any Disposition of accounts receivable. Requests by MHC
and the First-Tier Subsidiaries to take any action that is prohibited by this
Section 5.2(N) shall comply with Section 5.6 below and shall be approved or
disapproved by GE in accordance with Section 5.6 below within ten (10) Business
Days following GE's receipt of MHC's or any of the First-Tier Subsidiaries'
request for consent. MHC or the First-Tier Subsidiaries, as applicable, shall
give GE notice of the sale of any Property identified in Exhibit 5.2(N).
(O) Change in the Nature or Conduct of Business. Neither MHC nor any
of the First-Tier Subsidiaries shall change the nature of their respective
businesses as conducted as of the Effective Date or engage in any businesses
other than the types of business in which they are engaged as of the Effective
Date without GE's prior written consent; provided, however, that the
introduction of additional products or services within or related to such lines
of business shall not be construed to be a new line of business.
(P) Location of Units and Collateral; Books of Account. All of the
Units and Collateral are, as of the Effective Date, located or used and operated
solely at the locations set forth in Exhibit 4.1(H), as applicable.
Exhibit 4.1(H) shall be updated by the parties prior to the Closing Date to
reflect any change in the location where any of such Collateral was located,
used or operated as of the Effective Date and the location of any Collateral
acquired following the Effective Date and before the Closing Date. Neither MHC
nor any of the First-Tier Subsidiaries nor any End User Customer shall operate
any Unit or keep any Collateral or any such books and records at any other
location following the Closing Date unless: (1) MHC or any of the First-Tier
Subsidiaries shall have given GE written notice of such removal and the new
location of such Unit, Collateral or such books and records, as applicable,
within ten (10) Business Days after its removal; (2) such other location is
within the continental United States of America; and (3) if such other location
is in a different state, Maxum has executed and delivered a UCC-1 Financing
Statement giving notice of GE's ownership rights in such Unit to be filed by GE.
(Q) Security Interests in Future Entities. Neither MHC nor any of
the First-Tier Subsidiaries shall form or create any joint venture or
partnership after the Effective Date unless (1) GE is granted a first priority
security interest in MHC's or the First-Tier Subsidiaries', as applicable,
respective interest in such joint venture or partnership and any distributions
to MHC or the First-Tier Subsidiaries from such joint venture or partnership,
and (2) GE consents to the formation or creation of such joint venture or
partnership without the granting of such security interest.
(R) Capital Structure. Except as disclosed in Exhibit 5.2(A)
attached hereto, neither MHC nor any of the First-Tier Subsidiaries shall make
any material change in (i) their respective capital structures, including the
issuance of any of their respective Stock, except (a) MHC's issuance of Stock to
GE pursuant to the terms of the Warrant, (b) MHC's issuance of a common stock
pursuant to a public offering, and (c) MHC's issuance of stock to Highline
pursuant to the terms of a common stock purchase warrant to acquire no more than
two hundred thousand (200,000) shares of MHC's common stock, no par value at an
exercise price to be determined by MHC. Requests by MHC or any of the First-
Tier Subsidiaries to take any action that is prohibited by this Section 5.2(R)
shall comply with Section 5.6 below and shall be approved or disapproved by GE
in accordance with Section 5.6 below within ten (10) Business Days following
GE's receipt of MHC's or any of the First-Tier Subsidiaries' request for
consent.
(S) End-User Customer Contracts. Maxum shall not reduce, cancel,
compromise, extend, lessen, set-off against or defer the payments or other
obligations of the
End-User Customer pursuant to the End-User Customer Contracts without the prior
written consent of GE, which consent may be withheld by GE in its sole
discretion.
5.3 Payment of Charges. Except as otherwise provided in Section 5.4
below or elsewhere in this Agreement and except as otherwise provided in the
next succeeding sentence, MHC and the First-Tier Subsidiaries shall pay all
charges for which they are liable, whether payable on account of the execution,
delivery or performance of this Agreement, the creation of any of the
Liabilities hereunder, by reason of any existing or hereafter enacted federal,
state or other regulation or statute, or otherwise, promptly when due where the
failure to so pay would have a Material Adverse Effect upon MHC or any of the
First-Tier Subsidiaries. Except as provided in Section 5.4 below, MHC and the
First-Tier Subsidiaries shall pay promptly when due all withholding taxes for
which they are liable, whether relating to payment of employee wages or
otherwise (collectively, the "Withholding Charges"). MHC and the First-Tier
Subsidiaries shall jointly and severally indemnify GE and its Affiliates and
hold GE and its Affiliates harmless from and against liability in connection
with any and all charges (including any amount that may be asserted under
sections 3505 and 6672 of the IRC and any comparable provisions under state or
local law). In the event that MHC or any of the First-Tier Subsidiaries fail to
pay any charges described in this Section 5.3 or fail to obtain promptly the
discharge of such charges, MHC and the First-Tier Subsidiaries shall so advise
GE in writing and, whether or not MHC or any of the First-Tier Subsidiaries so
advise GE, GE may, in its sole discretion, without waiving or releasing any
obligation or liability of MHC or any of the First-Tier Subsidiaries hereunder
or any Default or Event of Default, make such payment, or any part thereof, or
obtain such discharge and take any other action with respect thereto that GE
reasonably deems advisable; provided, however, that GE shall provide MHC with
ten (10) days' prior written notice before paying any charge of a type described
in this Section 5.3. All amounts so paid by GE and any related expenses,
including reasonable attorneys' fees, court costs and other charges, shall be
payable, upon demand, by MHC and the First-Tier Subsidiaries to GE and shall be
additional Liabilities secured by Collateral.
5.4 Contesting Charges. Except as otherwise provided below and limited
only to those disputes which are in good faith in dispute, MHC or any of the
First-Tier Subsidiaries may dispute any charges without prior payment, even if
such nonpayment may cause a Lien to attach to MHC's or any of the First-Tier
Subsidiaries' assets, provided that MHC or any of the First-Tier Subsidiaries
shall have given GE written notice of said dispute and shall be diligently
contesting the same in good faith in an appropriate forum and proceeding. If
such disputed charges are in excess of One Hundred Thousand Dollars ($100,000)
in the aggregate, at any time, MHC and the First-Tier Subsidiaries shall give GE
such additional assurances as GE reasonably deems necessary under the
circumstances. If the charge disputed is a Withholding Charge, and during the
pendency of such dispute the appropriate taxing authority asserts liability
against GE in relation to the disputed Withholding Charge, then MHC and the
First-Tier Subsidiaries shall, if reasonably required by GE, immediately pay the
disputed Withholding Charge liability, and thereafter shall only contest such
Withholding Charge through an alternative method.
5.5 Survival of Liabilities Upon Termination of Agreement. Except as
otherwise expressly provided in this Agreement, no termination or cancellation
(regardless of cause or procedure) of this Agreement shall in any way affect or
impair the powers, obligations, duties, rights and Liabilities of MHC or any of
the First-Tier Subsidiaries or GE that accrued and remain unperformed as of the
Termination Date.
5.6 Requests for GE's Consent. Any request by MHC or any of the First-
Tier Subsidiaries for GE's written consent prior to taking any action prohibited
by Sections 5.2(B), 5.2(C), 5.2(G), 5.2(H), 5.2(I), 5.2(J), 5.2(M), 5.2(N) and
5.2(R) above as described in such sections, shall be in writing and shall
include (i) a reference to the covenant(s) relevant to the request, (ii) a
detailed description that is reasonably acceptable to GE of the requested
deviation from the covenant(s), and (iii) the reason for the requested deviation
from the covenant(s). GE shall permit or refuse such request in writing within
the number of Business Days provided in each respective section identified in
Section 5.2 above, which approval shall not be unreasonably denied (except as
otherwise expressly provided in this Agreement to the contrary); provided,
however, that GE may reasonably request additional information regarding the
proposed action to be taken by MHC or any of the First-Tier Subsidiaries and
shall have an additional period of ten (10) Business Days following GE's receipt
of all such information to consider such information. In the event GE does not
respond in writing to permit or refuse any request within the time periods
hereinabove stated, then the actions requested to be undertaken by Maxum as set
forth in its written request shall be deemed to be permitted by GE.
6. INFORMATION AND REPORTING REQUIREMENTS
Until the Termination Date, unless GE shall otherwise consent in writing,
MHC and the First-Tier Subsidiaries shall furnish to GE at GE's address provided
in Section 8.11, the following:
6.1 Financial Statements. MHC and the First-Tier Subsidiaries shall
prepare, or cause the preparation of, and deliver to GE the following financial
statements that have been prepared in accordance with GAAP:
(A) Audited Year-End Financial Statements. For each fiscal year of
MHC and the First-Tier Subsidiaries, as soon as available, but not later than
one hundred five (105) days after the end of MHC's fiscal year, MHC shall
deliver the audited consolidated balance sheet of MHC and the First-Tier
Subsidiaries as at the end of such fiscal year together with related statements
of income and retained earnings, changes in financial position and cash flows
for the twelve (12) month period then ended, setting forth in comparative form
the figures as at the end of and for the previous fiscal year, in each case
accompanied by an auditor's report thereon that is certified by a firm of
independent certified public accountants of recognized national standing which
report shall be in scope and substance reasonably satisfactory to GE. In case
any Affiliate shall be consolidated in the financial statements of MHC and the
First-Tier Subsidiaries, the statements referred to in this Section 6.1 shall be
on a consolidated and consolidating basis, in accordance with GAAP.
(B) Quarterly Financial Statements. As soon as available, but not
later than sixty (60) days after the end of each of the first three (3) fiscal
quarters of each fiscal year of MHC, MHC and the First-Tier Subsidiaries shall
deliver the unaudited consolidated balance sheet of MHC and the First-Tier
Subsidiaries as at the end of such quarterly period and the related statements
of income and retained earnings, cash flows and changes in financial position of
MHC and the First-Tier Subsidiaries for the elapsed portion of the fiscal year
ended with the last day of such quarterly period, setting forth in each case in
comparative form the figures for the corresponding periods of the previous
fiscal year, prepared in accordance with GAAP, subject only to normal year-end
auditing adjustments, and in form and detail as GE may reasonably request.
(C) Monthly Financial Statements. As soon as available, but not
later than ten (10) Business Days after the end of each calendar month, MHC and
the First-Tier Subsidiaries shall deliver detailed statements of Billings, cash
flow and volume reports of scans by Unit as at the end of such month as
described in Section 2.2(B) above.
(D) Officer's Certificate. Concurrently with each delivery of said
annual audited financial statements and of the interim financial statements
referred to in Sections 6.1(B) and (C) above, MHC shall deliver a certificate of
MHC's chief financial officer stating that (1) to his knowledge, such financial
statements are complete and correct and present fairly, in accordance with GAAP
(except for changes that have been approved in writing by MHC's and the First-
Tier Subsidiaries' accountants or that do not have a Material Adverse Effect on
MHC or any of the First-Tier Subsidiaries) applied consistently with those
followed in the preparation of the audited consolidated financial statements of
MHC and the First-Tier Subsidiaries and that have been consistently applied
throughout the period involved, the financial position of MHC and the First-Tier
Subsidiaries as at the end of such period and the results of operations and the
changes in the financial position of MHC and the First-Tier Subsidiaries for
such period and for the elapsed portion of the fiscal year ended with the last
day of such period, in each case on the basis presented and subject only to
normal year-end auditing adjustments specified in such financial statements, and
(2) a review of the activities of MHC and the First-Tier Subsidiaries during the
fiscal year or interim period covered by such financial statements, as the case
may be, has been made under his supervision with a view to determining whether
MHC and the First-Tier Subsidiaries have observed, performed and fulfilled each
and every covenant, obligation and agreement contained in this Agreement and
that he is not aware of the occurrence or existence of any condition or event
that constitutes a Default or an Event of Default, or, if he is aware of such
condition or event, the nature thereof, when it occurred, whether it is
continuing and the steps being taken by MHC or any of the First-Tier
Subsidiaries with respect to such event or failure.
6.2 Public Documents. Promptly after the sending or filing thereof, as
the case may be, MHC and the First-Tier Subsidiaries shall deliver to GE copies
of any definitive proxy statements, financial statements or reports which MHC or
any of the First-Tier Subsidiaries send to their respective shareholders; and
copies of any regular, periodic and special reports or registration statements
which MHC or any of the First-Tier Subsidiaries file with the Securities and
Exchange Commission or any governmental authority which may be substituted
therefor, or any national securities exchange.
6.3 Other Reports. From time to time and promptly upon each request of
GE, MHC and the First-Tier Subsidiaries shall deliver to GE such data,
certificates, reports, statements, documents or further information regarding
the Collateral or the business, assets, financial condition or results of
operation of MHC and the First-Tier Subsidiaries.
6.4 Certain Notices. MHC and the First-Tier Subsidiaries shall notify GE
in writing promptly, but in no event later than five (5) Business Days upon
learning of (a) any litigation commenced against MHC, any Subsidiary or any of
their respective officers, directors, shareholders or employees, or against any
Affiliate of MHC, any Subsidiary or any of their respective officers, directors,
shareholders or employees, that may have a Material Adverse Effect upon MHC or
any of the First-Tier Subsidiaries, the Collateral or GE's Lien on the
Collateral, whether or not the claim is considered by MHC or any of the First-
Tier Subsidiaries to be covered by insurance, and MHC and the First-Tier
Subsidiaries shall also notify GE in writing promptly upon learning of any
threatened litigation against MHC or any of the First-Tier Subsidiaries, in
which the claim against MHC or any of the First-Tier Subsidiaries exceeds Fifty
Thousand Dollars ($50,000) or which might have a Material Adverse Effect on MHC
or any of the First-Tier Subsidiaries, the Collateral or GE's Lien on the
Collateral; (b) any Default or Event of Default known to MHC or any of the
First-Tier Subsidiaries, or any event which with the passage of time or giving
of notice or both would constitute a Default or Event of Default by MHC or any
of the First-Tier Subsidiaries; (c) any default by MHC or any of the First-Tier
Subsidiaries under any material agreement other than this Agreement or the
Scheduled Documents to which any of them is a party or by which any of them or
any of their properties may be bound that is reasonably likely to have a
Material Adverse Effect on MHC or any of the First-Tier Subsidiaries; (d) any
facts or circumstances which come to MHC's or any of the First-Tier Subsidiaries
attention and which cause, or through the passage of time may cause, MHC's or
any of the First-Tier Subsidiaries' representations and warranties set forth in
Sections 4.1(A), 4.1(C), 4.1(E) and 4.1(W) to be untrue or misleading at any
time; (e) any penalty assessed against MHC or any of the First-Tier
Subsidiaries, by any federal, state or local government agency which would have
a Material Adverse Effect on MHC or any of the First-Tier Subsidiaries; (f) any
notice received from any federal, state or local government agency of any
violation by MHC or any of the First-Tier Subsidiaries of any federal, state or
local law or regulation, the commencement of any proceedings or investigations
by or before any governmental on nongovernmental body affecting MHC or any of
the First-Tier Subsidiaries, or any of their respective properties, assets or
businesses, in which the damages claimed or the potential liability would be
reasonably likely to exceed Fifty Thousand Dollars ($50,000) or which would be
reasonably likely individually or in the aggregate with other actions, suits and
proceedings, to have a Material Adverse Effect on MHC or any of the First-Tier
Subsidiaries; (g) any violation by MHC or any of the First-Tier Subsidiaries or
any Affiliate of MHC or any of the First-Tier Subsidiaries, of any such law or
regulation of which MHC or any of the First-Tier Subsidiaries become aware,
which violation could result in the assessment of a penalty or the revocation of
a registration or license of MHC or any of the First-Tier Subsidiaries or any
Affiliate of MHC or any of the First-Tier Subsidiaries, by any federal, state or
local government agency which would have a Material Adverse Effect on MHC or any
of the First-Tier Subsidiaries; and (h) any other event or condition having a
Material Adverse Effect on (i) MHC or any of the First-Tier Subsidiaries,
(ii) the aggregate value of the Collateral, or (iii) the security interests
created hereunder or under the Security Agreement.
6.5 ERISA. MHC and the First-Tier Subsidiaries shall promptly notify GE
of the occurrence of any "reportable event" (as defined in Section 4043 of
ERISA) or of any non-exempt "prohibited transaction" (as defined in Section 4975
of the IRC) with respect to any Plan described in Exhibit 5.1(R) or any trust
created thereunder. MHC and the First-Tier Subsidiaries shall deliver to GE a
complete copy of the annual report (Form 5500) of each Plan required to be filed
with the IRS.
7. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
7.1 Event of Default. The occurrence of any one or more of the following
events (regardless of the reason therefor) shall constitute an "Event of
Default":
(A) MHC or any of the First-Tier Subsidiaries shall fail to make any
payment of principal of, or interest on, or any other amount owing in respect of
the Scheduled Documents, or any of the other Liabilities within ten (10) days of
the date such payment is due and payable and such Default continues for a period
of five (5) days after written notice of nonpayment is given by GE to MHC or any
of the First-Tier Subsidiaries;
(B) Except as provided in Section 7.1(A) above, MHC or any of the
First-Tier Subsidiaries shall fail or neglect to perform, keep or observe, in
any material respect, any other term, provision, condition, covenant, duty or
obligation contained in this Agreement or in any of the Scheduled Documents
which is required to be performed, kept or observed by MHC or any of the First-
Tier Subsidiaries and, with respect to any breach of any condition, covenant,
duty or obligation, and such breach shall not have been remedied to GE's
satisfaction within thirty (30) days after GE has given notice of such breach to
MHC or any of the First-Tier Subsidiaries;
(C) Any event of default, or any event which upon lapse of time,
notice or otherwise would constitute an event of default, under any agreement to
which MHC or any of the First-Tier Subsidiaries is a party shall occur, other
than Events of Default or defaults disclosed in Exhibit 4.1(D) attached hereto
which event (1) if based on the failure to pay any amount (whether of principal,
interest, or otherwise) as and when due, (a) has caused any Person to demand
payment of any part of MHC's or any of the First-Tier Subsidiaries' Indebtedness
in excess of One Hundred Thousand Dollars ($100,000) before such Indebtedness
would otherwise be due, or (b) would deprive MHC or any of the First-Tier
Subsidiaries of any rights to the Collateral, or (2) if based on any other
failure, event or condition, is the basis of any notice to MHC or any of the
First-Tier Subsidiaries accelerating payment of such Indebtedness or enforcing
rights in such Collateral, in any case, resulting in a Material Adverse Effect;
(D) Any representation or warranty contained in this Agreement, any
Scheduled Document or any statement, report, financial statement or certificate
made or delivered by MHC or any of the First-Tier Subsidiaries or any of their
officers or authorized agents to GE shall be untrue, incorrect or incomplete in
any material respect, or shall be misleading in any material respect, in each
case, as of the time when made;
(E) The Security Agreement after delivery thereof shall for any
reason, other than any action taken or omitted to be taken by GE and except to
the extent permitted by the terms thereof, cease to create a valid and perfected
Lien on, or security interest in, any of the Collateral purported to be covered
thereby as required by the Security Agreement;
(F) There shall occur any material uninsured damage to, or loss,
theft or destruction of, any material portion of the Collateral;
(G) The Collateral, or any portion of it, shall be attached, seized,
levied upon or subjected to a judgment Lien, execution Lien, writ or distress
warrant which exceeds One Hundred Thousand Dollars ($100,000) in value and which
is not released or bonded off by MHC or any of the First-Tier Subsidiaries
before it may be executed upon, or the Collateral, or any portion of it, shall
come within the possession of any receiver, trustee, custodian or assignee for
the benefit of creditors of MHC or any of the First-Tier Subsidiaries for a
continuous period of sixty (60) consecutive days, and the same shall not be
released or otherwise cured to the satisfaction of GE within ten (10) days
thereafter;
(H) (1) MHC or any of the First-Tier Subsidiaries shall (a) commence
a voluntary case or involuntary case under the Bankruptcy Code, as now
constituted or hereafter amended, or any other applicable federal or state
bankruptcy, insolvency or similar law; (b) apply for or consent to the
appointment of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, agent or other similar official for MHC or any of the First-Tier
Subsidiaries for any material part of MHC's or any of the First-Tier
Subsidiaries' respective assets, and any such application or proceeding shall
not be dismissed or stayed within the next sixty (60) consecutive days; (c) make
any assignment for the benefit of creditors; (d) commence any case or proceeding
for dissolution, liquidation or termination; (e) have concealed, removed or
permitted to be concealed or removed, any part of its Property, with intent to
hinder, delay or defraud its creditors or any of them, or made or suffered a
transfer of any of its Property or the incurring of an obligation which may be
fraudulent under any bankruptcy, fraudulent conveyance or other similar law;
(f) admit in writing its inability to pay, or generally not be paying, its debts
as they become due; or (g) take any corporate action for the purposes of
effecting any of the foregoing; or
(2) A case or other proceedings shall be commenced involuntarily
against MHC or any of the First-Tier Subsidiaries in any court of competent
jurisdiction seeking (a) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of debts, or
(b) the appointment of a trustee, receiver, custodian, liquidator or the like
for MHC or any of the First-Tier Subsidiaries, or of all or any substantial part
of the assets, domestic or foreign, of MHC or any of the First-Tier
Subsidiaries, and such case or proceeding shall continue undismissed or unstayed
for a period of sixty (60) consecutive calendar days, or an order granting the
relief requested in such case or proceeding against any of MHC or any of the
First-Tier Subsidiaries (including, but not limited to, an order for relief
under such federal bankruptcy laws) shall be entered;
(I) Except as permitted in Section 5.4, a notice of Lien, levy or
assessment with respect to all or any material portion of assets of MHC or any
of the First-Tier Subsidiaries, taken as a whole, shall be filed of record by
the United States, or any department, agency or instrumentality thereof, or by
the Pension Benefit Guaranty Corporation or any Person succeeding to its
functions under ERISA or by any state, county, municipal or other governmental
agency;
(J) MHC or any of the undersigned First-Tier Subsidiaries are
generally not paying their respective debts or obligations in the ordinary
course of their respective businesses as they mature;
(K) MHC or any of the First-Tier Subsidiaries shall cease to conduct
their respective businesses substantially as now conducted, or shall be
enjoined, restrained or in any way prevented by court order from conducting all
or any material part of their respective business affairs for a period of time
in excess of thirty (30) consecutive days; or
(L) A final, unappealable judgment or order shall be entered against
MHC or any of the First-Tier Subsidiaries for the payment of money which exceeds
more than Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate and
each such judgment is not vacated, stayed, bonded, paid or discharged within
sixty (60) consecutive days following the entry thereof and at all times
thereafter.
7.2 Late Fee.
(A) From and after the occurrence of an Event of Default that relates
to a payment required to be made by MHC or any of the First-Tier Subsidiaries
under this Agreement or the Scheduled Documents, MHC and the First-Tier
Subsidiaries shall pay on demand a late charge in an amount equal to five
percent (5%) of the overdue payment, except as limited by applicable law.
(B) MHC's or any of the First-Tier Subsidiaries' payment of any late
fee pursuant to Section 7.2(B) above shall not cure a Default or Event of
Default or limit any of GE's rights to pursue any of its remedies hereunder in
connection therewith.
7.3 Remedies. Upon the occurrence of an Event of Default, GE shall have
the following rights and remedies:
(A) GE shall have the right to declare all or any portion of the
Liabilities immediately due and payable, whereupon all or any portion of the
Liabilities, as appropriate, shall become due and payable without presentment,
demand, protest or further notice of any kind, all of which are expressly waived
by MHC and the First-Tier Subsidiaries.
(B) GE and its agents and representatives shall have the right to
enter upon the premises of MHC or any of the First-Tier Subsidiaries, and MHC
and the First-Tier Subsidiaries shall use reasonable efforts to cause GE and its
agents and representatives to have the right to enter upon the premises of any
other place or places where Collateral is located and kept through self-help and
without judicial process without first obtaining a final judgment or giving MHC
or any of the First-Tier Subsidiaries notice and opportunity for a hearing on
the validity of GE's claim and without any obligation to pay rent to MHC or any
of the First-Tier Subsidiaries or their lessees.
(C) GE and its agents and representatives shall have the right to
remove the Collateral to the premises of GE or any agent of GE, for such time as
GE may desire, in order to collect or dispose of Collateral.
(D) In addition to all of its other rights and remedies under this
Agreement and applicable law, GE shall have all of the rights and remedies of a
secured party under the UCC of the state in which such rights and remedies are
asserted, all of which rights and remedies shall be cumulative and none
exclusive, to the fullest extent permitted by law.
(E) Until GE is able to effect a sale, lease or other disposition of
the Collateral, GE and its Affiliates shall have the right to use or operate the
Collateral, or any part thereof, to the extent that GE deems appropriate for the
purpose of preserving the Collateral or its value or for any other purpose
deemed appropriate by GE. GE shall have no obligation to MHC or any of the
First-Tier Subsidiaries to maintain or preserve the rights of MHC or any of the
First-Tier Subsidiaries as against third parties with respect to the Collateral
while the Collateral is in the possession of GE. GE may, if it so elects, seek
the appointment of a receiver or keeper to take possession of the Collateral and
to enforce any of GE's remedies with respect to such appointment without prior
notice or hearing. GE and its Affiliates and agents shall act in a commercially
reasonable manner in enforcing their respective remedies pursuant to this
Section 7.3(E).
(F) GE shall have the right to sell, lease or otherwise dispose of
all or any Collateral in its then existing condition, or after any further
assembly, manufacturing or processing thereof, at public or private sale or
sales, with such notice as may be required by law, in lots or in bulk, for cash
or on credit, all as GE, acting in a commercially reasonable manner, may deem
advisable and as permitted by applicable law. Such sales may be adjourned and
continued from time to time with or without notice. GE and its agents and
representatives shall have the right to conduct such sales on MHC's or any of
the First-Tier Subsidiaries' premises or elsewhere and shall have the right to
use MHC's or any of the First-Tier Subsidiaries' premises, and MHC and the
First-Tier Subsidiaries shall use reasonable efforts to cause any lessee of the
Collateral to permit GE and its agents and representatives to conduct sales on
lessee's premises and use such lessee's premises, without charge for such sales
for such time as GE deems necessary or advisable. The rights of MHC and the
First-Tier Subsidiaries under all licenses and certificates of need, to the
extent transferable, and all franchise agreements shall inure to GE's benefit.
GE may purchase all or any part of the Collateral at public or, if permitted by
law, private sale and, in lieu of actual payment of such purchase price, may set
off the amount of such price against the Liabilities. Except as otherwise
provided by law, the proceeds realized from the sale of any Collateral may be
applied by GE first to the reasonable costs, expenses and attorneys' fees and
expenses incurred by GE for collection and for acquisition, completion,
protection, removal, storage, sale and delivery of Collateral, and then to any
principal and interest due on the Liabilities, as GE, in its sole discretion,
may elect. If any deficiency shall exist after the application of such
proceeds, MHC and the First-Tier Subsidiaries shall remain liable to GE
therefor. GE and its agents and representatives shall act in a commercially
reasonable manner in enforcing its remedies pursuant to this Section 7.3(F).
7.4 Notice of Disposition of Collateral. Any notice required to be given
to GE of a sale, lease or other disposition of Collateral, or any other intended
action by MHC or any of the First-Tier Subsidiaries, which is given in
accordance with Section 8.11 below, shall require at least fifteen (15) days
written notice prior to such proposed action, or such longer period as shall be
specified by applicable law, shall constitute commercially reasonable and fair
notice thereof to MHC or any of the First-Tier Subsidiaries.
7.5 Right of Set-Off. Upon the occurrence and during the continuance of
any Event of Default, GE and its Affiliates are hereby authorized at any time
and from time to time, to the fullest extent permitted by law, upon three (3)
Business Days prior written notice to MHC or any of the First-Tier Subsidiaries,
to set-off, appropriate and apply any and all funds in the possession of GE or
its Affiliates, all deposits (general or special, time or demand, provisional or
final) at any time held and other Indebtedness at any time owing by GE or its
Affiliates to or for the credit or the account of MHC or any of the First-Tier
Subsidiaries, as applicable, against any and all of the Liabilities of MHC or
any of the First-Tier Subsidiaries now or hereafter existing that are then due
and payable, whether by maturity or acceleration. The rights of GE and its
Affiliates under this Section 7.5 are in addition to any other rights and
remedies (including, without limitation, other rights of set-off) which GE may
have.
7.6 Appointment of GE as Maxum's Lawful Attorney. MHC and the First-Tier
Subsidiaries hereby irrevocably designate, make, constitute and appoint GE and
all Persons designated by GE as their true and lawful agent and attorney-in-fact
upon the occurrence and during the continuance of an Event of Default for the
purposes set forth in this Section 7.6. Accordingly, upon the occurrence and
during the continuance of an Event of Default, GE or GE's agent designated by GE
for purposes of this Section 7.6 may, without notice to MHC or any of the First-
Tier Subsidiaries, and at such time or times as GE or said agent in its sole
discretion may determine, in the name of MHC or any of the First-Tier
Subsidiaries or GE: (a) take control, in any manner, of any item of payment or
proceeds of Collateral; (b) prepare, file, and sign MHC's or any of the First-
Tier Subsidiaries' respective names on any proof of claim or similar document in
any bankruptcy, insolvency, reorganization or similar case against any Person
indebted to MHC or any of the First-Tier Subsidiaries; (c) prepare, file and
sign MHC's or any of the First-Tier Subsidiaries' respective names on any notice
of Lien, assignment or satisfaction of Lien or similar document in connection
with the Collateral; (d) do all acts and things necessary, in GE's sole
discretion, to fulfill MHC's or any of the First-Tier Subsidiaries' respective
obligations under this Agreement; (e) endorse MHC's or any of the First-Tier
Subsidiaries' respective names upon any of the items of payment or proceeds of
the Collateral and deposit the same to the account of GE on account of
Liabilities; (f) endorse MHC's or any of the First-Tier Subsidiaries' respective
names upon any chattel paper, document, instrument, invoice, freight bill, bill
of lading or similar document or agreement relating to Collateral; and (g) use
the information recorded on or contained in any data processing equipment and
computer hardware and software relating to Collateral to which MHC or any of the
First-Tier Subsidiaries has access. MHC and the First-Tier Subsidiaries hereby
ratify all that GE shall lawfully do or cause to be done by virtue hereof. The
power of attorney is a power coupled with an interest and shall be irrevocable.
GE shall act (a) in a commercially reasonable manner when exercising its rights
pursuant to this Section 7.6, and (b) only as necessary in the reasonable
judgment of GE to protect its rights under this Agreement, the Scheduled
Documents and to the Collateral.
8. MISCELLANEOUS.
8.1 Modification of Agreement; Sale of Interest; Successors and Assigns.
This Agreement may not be modified, altered or amended except by an agreement in
writing signed by MHC, the First-Tier Subsidiaries and GE. MHC and the First-
Tier Subsidiaries may not sell, assign or transfer, by operation of law or
otherwise, this Agreement or any of MHC's or any of the First-Tier Subsidiaries'
rights, title, interests, remedies, powers or duties hereunder or thereunder
without the prior written consent of GE, which shall not be unreasonably
withheld. Any sale, assignment or transfer not consented to by GE shall be null
and void and of no force or effect. MHC and the First-Tier Subsidiaries hereby
consent to GE's sale, assignment, transfer or other disposition of this
Agreement or of any or all of GE's rights, title, interests, obligations,
remedies, powers or duties hereunder. All of the terms and provisions of this
Agreement and the Scheduled Documents shall be binding upon and shall inure to
the benefit of and be enforceable by the respective successors and assigns of
the parties hereto.
8.2 Expenses. Notwithstanding the provisions of this Section 8.2 set
forth below, each party to this Agreement shall pay its own costs and expenses,
including the disbursements and fees of their respective attorneys, accountants
and advisors, incidental to (a) the preparation and negotiation of this
Agreement and the Scheduled Documents, and (b) the closing of the transactions
contemplated by this Agreement.
Except as specifically set forth above, if, upon the occurrence and
during the continuance of an Event of Default, GE or its Affiliates employs
counsel for advice or other representation or incurs other professional costs
and expenses in connection with:
(A) any litigation, contest, dispute, suit, case, proceeding or
action (whether instituted by GE, MHC or any of the First-Tier Subsidiaries or
any other Person) in any way relating to Collateral, this Agreement, the
Scheduled Documents or MHC's or any of the First-Tier Subsidiaries' affairs,
including any litigation, contest, dispute, suit, case, proceeding or action,
and any appeal or review thereof, in connection with a case commenced by or
against MHC or any of the First-Tier Subsidiaries under the Bankruptcy Code or
any other applicable federal or state bankruptcy, insolvency or similar law;
(B) any attempt to enforce any rights of GE against MHC or any of the
Subsidiaries, any other Person that may be or become obligated to GE by virtue
of this Agreement, including any attempt to enforce such rights in connection
with a case commenced by or against any of the foregoing under the Bankruptcy
Code or any other applicable federal or state bankruptcy, insolvency or similar
law; and/or
(C) the protection, collection, sale, liquidation or other
disposition of Collateral;
then, in any such event, the reasonable professional fees arising from such
services, and all reasonable expenses, costs, charges and other fees incurred by
GE arising in connection with or relating to any of the events or actions
described in this Section 8.2 shall be payable by MHC and the Subsidiaries to GE
on demand and shall constitute Liabilities secured by the Collateral.
Without limiting the generality of the foregoing, the expenses,
costs, charges and fees described above in this Section 8.2 may include
reasonable attorneys' fees, accountants' fees, appraisers' fees and any other
professional costs and expenses; stamp and other taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of the Scheduled Documents; costs and expenses of UCC and Lien
searches and reports; court costs and expenses, reasonable photocopying and
duplicating expenses; court reporter fees, costs, and expenses; reasonable long
distance telephone charges; air express and other delivery charges; telegram and
telex charges; reasonable secretarial overtime charges; and reasonable expenses
for travel, lodging and food paid or incurred in connection with the performance
of such professional services. MHC and the Subsidiaries agree to save GE and
its Affiliates harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay any such professional
costs, expenses, fees and taxes.
8.3 Waivers by GE; Cumulative Remedies. GE's failure, at any time or
times hereafter, to require strict performance by MHC or any of the First-Tier
Subsidiaries of any provision of this Agreement, shall not waive, affect or
diminish any right of GE thereafter to demand strict compliance and performance
therewith. Any suspension or waiver by GE of an Event of Default under this
Agreement shall not suspend, waive or affect any other Event of Default by MHC
or any of the First-Tier Subsidiaries under this Agreement whether the same is
prior or subsequent thereto and whether of the same or of a different type.
None of the undertakings, agreements, warranties, covenants and representations
of MHC and the First-Tier Subsidiaries contained in this Agreement nor any Event
of Default by MHC or any of the First-Tier Subsidiaries under this Agreement
shall be deemed to have been suspended or waived by GE unless such suspension or
waiver is in a writing signed by GE which designates the specific suspension or
waiver. The rights and remedies hereunder are cumulative and may be exercised
singly or concurrently, and are not exclusive of any rights and remedies
provided by law or which GE would otherwise have.
8.4 Waivers by Maxum. Except as otherwise provided in this Agreement and
except where waiver is prohibited as a matter of applicable law, MHC and the
First-Tier Subsidiaries waive: (a) presentment, demand and protest and notice of
presentment, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by GE under or pursuant to which MHC or any of the First-Tier
Subsidiaries may in any way be liable, and MHC and the First-Tier Subsidiaries
hereby ratify and confirm whatever GE may do in this regard; (b) notice prior to
taking possession or control of the Collateral or, so long as GE remains a party
to this Agreement, any bond or security that might be required by any court
prior to allowing GE to exercise any of GE's remedies; and (c) the benefit of
all valuation, appraisement and exemption laws. If and to the extent that any
of the Liabilities shall be an obligation of guaranty or suretyship, then the
following waivers shall apply:
(A) MHC and the First-Tier Subsidiaries agree that no election to
proceed in one form of action or against any party or on any obligation shall
constitute a waiver of GE's right to proceed in any other form of action for a
deficiency, except to the extent GE realizes payment by such action,
notwithstanding the effect of such action upon MHC's or any of the First-Tier
Subsidiaries' rights of subrogation, reimbursement or indemnity, if any, against
any Person. MHC and the First-Tier Subsidiaries hereby subordinate any and all
claims that they may have by way of subrogation or otherwise to the payment in
full of all Liabilities; and
(B) MHC and the First-Tier Subsidiaries agree that GE shall be under
no obligation and expressly waive the right to require GE: (a) to marshall any
assets in favor of MHC or any of the First-Tier Subsidiaries, (b) to proceed
first against any guarantor or any Property of guarantor or against any
collateral, (c) to enforce first any other guaranty obligations with respect to,
or security for, the Liabilities, or (d) to pursue any other remedy in GE's
power that MHC and the First-Tier Subsidiaries may or may not be able to pursue
itself and that may lighten MHC's or any of the First-Tier Subsidiaries' burden,
any right to which MHC and the First-Tier Subsidiaries hereby expressly waive.
8.5 Further Assurances. In addition to the acts recited herein and
contemplated to be performed, executed and/or delivered by MHC or any of the
First-Tier Subsidiaries, MHC and the First-Tier Subsidiaries hereby agree, at
any time, and from time to time, to perform, execute and/or deliver to GE upon
request, in form and substance acceptable to GE, any and all such further acts,
additional instruments, or further assurances as may be reasonably necessary or
proper to (a) promptly implement the intent of the parties under this Agreement,
(b) promptly correct any defect, error or omission which may be discovered in
this Agreement or any Scheduled Document, and execute any and all additional
documents as may be reasonably requested by GE to correct such defect, error or
omission, (c) assure GE a valid Lien and security interest under the Security
Agreement on the Collateral referenced in the Security Agreement in accordance
with the priorities set forth therein, (d) create, perfect, preserve, maintain
and protect the Liens and security interests created or intended to be created
pursuant to the Security Agreement, and (e) provide the rights and remedies to
GE granted or provided for by this Agreement. MHC and the First-Tier
Subsidiaries shall pay the costs of any recording or filing of any such
documents if required.
8.6 Severability. Wherever possible, each provision of this Agreement
shall be interpreted in a manner as to be effective and valid under applicable
law. If any provision of this Agreement shall be held to be prohibited by or
invalid under applicable law in any jurisdiction, such provision, as to such
jurisdiction, shall be ineffective only to the extent of such provision and the
remaining provisions of this Agreement shall remain unaffected and in full force
and effect, and such prohibition and invalidity in such jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8.7 Parties. This Agreement shall be binding upon and shall inure to the
benefit of the respective successors and assigns of MHC and the First-Tier
Subsidiaries and GE including any trustee or interim trustee of MHC or any of
the First-Tier Subsidiaries appointed pursuant to Bankruptcy Code section 1104
or sections 701 and 702. This provision, however, shall not be deemed to modify
Section 8.1.
8.8 Conflict of Terms. The provisions of any other related agreement and
any schedule or exhibit thereto or to this Agreement are incorporated in this
Agreement as if set forth in full by this reference. Except as otherwise
provided in this Agreement by specific reference to the applicable provision of
this Agreement, if any provision contained in this Agreement conflicts or is
inconsistent with any provision in any other related agreement, the provision
contained in this Agreement shall govern and control.
8.9 Governing Law; Consent to Jurisdiction and Venue. This Agreement and
the Scheduled Documents shall be interpreted by and construed in accordance with
the laws of the State of New York, and the laws of the State of New York shall
govern each and every issue relating to the transactions contemplated herein,
including the validity or enforceability of this Agreement. MHC AND THE FIRST-
TIER SUBSIDIARIES HEREBY CONSENT TO PERSONAL JURISDICTION, WAIVE ANY OBJECTION
AS TO JURISDICTION OR VENUE, AND AGREE NOT TO ASSERT ANY DEFENSE BASED ON LACK
OF JURISDICTION OR VENUE, IN ANY STATE OR FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN, STATE OF NEW YORK. Service of process on MHC or any of the First-
Tier Subsidiaries or GE in any action arising out of or relating to any
Agreement contemplated herein shall be effective if mailed to such party at the
address listed in Section 8.11. Nothing herein shall preclude GE or MHC or any
of the First-Tier Subsidiaries from bringing suit or taking other legal action
in any other jurisdiction.
8.10 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY OTHER AGREEMENT.
8.11 Notice. Except as otherwise provided herein, whenever it is provided
herein that any notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties by
another, or whenever any of the parties desires to give or serve upon another
any communication with respect to this Agreement, each such notice, demand,
request, consent, approval, declaration or other communication shall be in
writing and shall be delivered (a) in person with receipt acknowledged, or (b)
by facsimile transmission, with receipt electronically confirmed during normal
business hours of recipient, and with confirmation by mailing of, no later than
one (1) Business Day following such transmission, of a copy of such facsimile,
by registered or certified mail, return receipt requested, postage prepaid or by
overnight courier, (c) by registered or certified mail, return receipt
requested, postage prepaid or by overnight courier, or (d) by Federal Express or
similar reliable overnight delivery service, addressed as follows:
(A) If to GE, at:
General Electric Company, acting through
GE Medical Systems
20825 Swenson Drive, Suite 100
Waukesha, Wisconsin 53186
Attention: Investment Manager
Facsimile: (414) 798-4528
and
General Electric Company, acting through
GE Medical Systems
20825 Swenson Drive, Suite 100
Waukesha, Wisconsin 53186
Attention: Finance Manager
Facsimile: (414) 798-4528
with a copy to:
McDermott, Will & Emery
2049 Century Park East, 34th Floor
Los Angeles, California 90067
Attention: Ira J. Rappeport, Esq.
Facsimile: (310) 277-4730
(B) If to MHC, at:
Maxum Health Corp.
14850 Quorum Drive, Suite 400
Dallas, Texas 75240
Attention: Chief Executive Officer
Facsimile: (214) 960-7322
with a copy to:
Storey, Armstrong, Steger & Martin
4600 First Interstate Bank Plaza
1445 Ross Avenue
Dallas, Texas 75201
Attn: Steve Morton, Esq.
Facsimile: (214) 855-6853
(C) If to MTS, at:
MTS Enterprises, Inc.
14850 Quorum Drive, Suite 400
Dallas, Texas 75240
Attention: Chief Executive Officer
Facsimile: (214) 960-7322
with a copy to:
Storey, Armstrong, Steger & Martin
4600 First Interstate Bank Plaza
1445 Ross Avenue
Dallas, Texas 75201
Attn: Steve Morton, Esq.
Facsimile: (214) 855-6853
(D) If to Quest, at:
Quest Financial Services, Inc.
14850 Quorum Drive, Suite 400
Dallas, Texas 75240
Attention: Chief Executive Officer
Facsimile: (214) 960-7322
with a copy to:
Storey, Armstrong, Steger & Martin
4600 First Interstate Bank Plaza
1445 Ross Avenue
Dallas, Texas 75201
Attn: Steve Morton, Esq.
Facsimile: (214) 855-6853
(E) If to MHSC, at:
Maxum Health Services Corp.
14850 Quorum Drive, Suite 400
Dallas, Texas 75240
Attention: Chief Executive Officer
Facsimile: (214) 960-7322
with a copy to:
Storey, Armstrong, Steger & Martin
4600 First Interstate Bank Plaza
1445 Ross Avenue
Dallas, Texas 75201
Attn: Steve Morton, Esq.
Facsimile: (214) 855-6853
or to such other addresses or facsimile transmission number as any party may
designate for itself by like notice. The giving of any notice required
hereunder may be waived in writing by the party entitled to receive such
notice. Every notice, demand, request, consent, approval, declaration or other
communication hereunder shall be deemed to have been duly given or served on the
date on which personally delivered with receipt acknowledged or sent by
facsimile with receipt electronically confirmed during normal business hours of
recipient, the next Business Day after deposit with Federal Express or three (3)
Business Days after deposit in the United States mail. Failure or delay in
delivering copies of any notice, demand, request, consent, approval, declaration
or other communication to the Persons designated above to receive copies shall
in no way adversely affect the effectiveness of such notice, demand, request,
consent, approval, declaration or other communication.
8.12 Indemnification.
(A) Maxum. In addition to any other amounts payable by MHC or any of
the First-Tier Subsidiaries under this Agreement and the Scheduled Documents,
MHC and the First-Tier Subsidiaries hereby agree to jointly and severally
protect, indemnify, pay and hold harmless GE and its directors, officers and
employees from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable fees and expenses of
counsel) (1) that GE may incur or be subject to as a consequence, directly or
indirectly, of (a) issuance of the financial accommodations described in this
Agreement, (b) any breach by MHC or any of the First-Tier Subsidiaries of any
warranty, covenant, term or condition in, or the occurrence of any Event of
Default under, this Agreement or any Scheduled Document, including all
reasonable fees or expenses resulting from the settlement or defense of any
claims or liabilities arising as a result of any such breach or default, and
(c) involvement in any legal suit, investigation, proceeding, inquiry or action
as to which GE is involved as a consequence, directly or indirectly, of
financial accommodations described in this Agreement, the holding or owning of
any Collateral by GE, GE's execution of this Agreement and any Scheduled
Document to which it is a party or any other event or transaction contemplated
by any of the foregoing, except for any claims, demands, liabilities, damages,
losses, charges and expenses which are caused by GE's gross negligence or
willful misconduct or other activities of GE described in Section 8.12(B) below
and (2) that are related to any claims, actions or proceedings which may be
asserted against GE in connection with the transactions contemplated by this
Agreement. The obligations of MHC and the First-Tier Subsidiaries under this
Section 8.12(A) shall survive the termination of this Agreement. In furtherance
and not in limitation hereof, GE may accept documents that appear on their face
to be in order, without responsibility for further investigation, except if GE
has received any notice or information to the contrary.
(B) GE. GE hereby agrees to protect, indemnify, pay and hold
harmless MHC and the First-Tier Subsidiaries and their directors, officers and
employees from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable fees and expenses of
counsel) that MHC or any of the First-Tier Subsidiaries may incur or be subject
to as a consequence, directly or indirectly, of (1) GE's gross negligence or
willful misconduct; (2) any breach by GE of any warranty, covenant, term or
condition under this Agreement or any Scheduled Document, or (3) the occurrence
of any default by GE under this Agreement or any Scheduled Document, including
all reasonable fees or expenses resulting from the settlement or defense of any
claims or liabilities arising as a result of any such breach or default.
8.13 Section Titles and Table of Contents. The section titles and the
Table of Contents contained in this Agreement are merely for convenience and
shall be without substantive meaning or content, and are not a part of the
Agreement between the parties hereto.
8.14 Counterparts. This Agreement may be executed in two (2) or more
counterparts, each of which shall be an original, all of which taken together
shall be deemed to constitute one (1) and the same agreement.
8.15 Limitation of Liability. Notwithstanding any other provision herein
to the contrary, to the fullest extent permitted by applicable law, neither MHC
or any of the First-Tier Subsidiaries nor GE shall be liable to the other party
or to the other party's Affiliates or agents, for any incidental or
consequential damages of any kind to the other party in connection with the
Scheduled Documents and transactions contemplated by this Agreement.
8.16 Integration. This Agreement, together with the Scheduled Documents,
comprises the complete and integrated agreement of the parties on the subject
matter hereof and supersedes all prior agreements, written or oral, on the
subject matter hereof, including but not limited to, that certain commitment
letter September 21, 1993 from GE Medical Systems to MHC. Each Scheduled
Document and this Agreement was drafted with the joint participation of the
respective parties thereto and shall be construed neither against nor in favor
of any party, but rather in accordance with the fair meaning thereof.
8.17 Confidentiality and Publicity. Except as set forth in Exhibit 8.17
attached hereto, the parties hereto shall hold in confidence the information
contained in the Scheduled Documents and all information related to the
transactions contemplated by this Agreement, which is not otherwise known to the
public, shall be held by each party hereto as confidential and proprietary
information and shall not be disclosed to third persons without the prior
written consent of the other party. Accordingly, GE and MHC and the First-Tier
Subsidiaries shall not, and shall not permit any of their respective Affiliates
to, discuss with, or provide nonpublic information to, any third party
concerning this Agreement or the Scheduled Documents, except: (1) as and only
to the extent required in governmental filings or judicial, administrative or
arbitration proceedings or otherwise by law, (2) pursuant to public
announcements made with the prior written approval of GE and MHC or any of the
First-Tier Subsidiaries and (3) as permitted pursuant to Exhibit 8.17. GE shall
have the right to review and approve, which approval may be denied in GE's sole
discretion, any written characterization of this Agreement and any transaction
contemplated hereby, except GE shall not have the right to review, but shall
have the right to approve, characterizations included in governmental filings or
judicial, administrative or arbitration proceedings. Maxum agrees to use its
best efforts to preserve the confidentiality of this Agreement, or portions
thereof designated by GE (including with respect to the requirements referenced
in clause (1) above), and agrees to cooperate with GE to obtain an appropriate
order from the Securities and Exchange Commission granting confidential
treatment to this Agreement or such portions thereof designated by GE.
8.18 Account Stated. Each statement of account by GE delivered to Maxum
relating to the Liabilities shall be presumed correct and accurate and shall
constitute an account stated between GE and Maxum unless, within thirty (30)
days after Maxum's receipt of said statement, Maxum delivers to GE, by
registered or certified mail addressed to GE in accordance with Section 8.1
above, written objection thereto specifying the error or errors, if any,
contained in any such statement.
8.19 Closing. The parties acknowledge that while this Agreement is dated
effective as of Effective Date, this Agreement was signed and the transactions
contemplated hereby were consummated on the Closing Date. The delivery of
documents and instruments on the Closing Date as contemplated hereby shall take
place at 10:00 a.m. at the offices of GE's counsel located at 2049 Century Park
East, Suite 3400, Los Angeles, California.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and
year first specified above.
GENERAL ELECTRIC COMPANY, a New York corporation,
acting through GE Medical Systems
By:_________________________________Title:________
______________________
MAXUM HEALTH CORP., a Delaware corporation
By:_________________________________
Title:______________________________
[SIGNATURES CONTINUED ON NEXT PAGE]
MTS ENTERPRISES, INC., a Texas corporation
By:_________________________________
Title:______________________________
MAXUM HEALTH SERVICES CORP., a Delaware
corporation
By:_________________________________
Title:______________________________
QUEST FINANCIAL SERVICES, INC., a Delaware
corporation
By:_________________________________
Title:______________________________
EXHIBIT 99.2
MAXUM HEALTH CORP.
COMMON STOCK PURCHASE WARRANT
February 8, 1994
TABLE OF CONTENTS
Page
1. DEFINITIONS.................................
2. EXERCISE OF WARRANT.........................
2.1 Manner of Exercise....................
2.2 Payment of Taxes......................
2.3 Fractional Shares.....................
2.4 Continued Validity....................
3. TRANSFER, DIVISION AND COMBINATION..........
3.1 Transfer..............................
3.2 Division and Combination..............
3.3 Expenses..............................
3.4 Maintenance of Books..................
4. ADJUSTMENTS.................................
4.1 Stock Dividends, Subdivisions,
Combinations and Reclassifications....
4.2 Other Provisions Applicable to
Adjustments under this Section........
5. NOTICES TO WARRANT HOLDERS..................
5.1 Notice of Adjustments.................
5.2 Notice of Certain Corporate Action....
6. NO IMPAIRMENT...............................
7. RESERVATION AND AUTHORIZATION OF COMMON
STOCK; REGISTRATION WITH OR APPROVAL OF
ANY GOVERNMENTAL AUTHORITY..................
8. TAKING OF RECORD; STOCK AND WARRANT
TRANSFER BOOKS..............................
9. RESTRICTIONS ON TRANSFERABILITY.............
9.1 Restrictive Legend....................
9.2 Notice of Proposed Transfers;
Requests for Registration.............
9.3 Required Registration.................
9.4 Incidental Registration...............
9.5 Registration Procedures...............
9.6 Expenses; Limitations on Registration.
9.7 Indemnification.......................
9.8 Termination of Restrictions...........
9.9 Listing on Securities Exchange........
9.10 Certain Limitations on Registration
Rights................................
9.11 Selection of Managing Underwriters....
10. SUPPLYING INFORMATION.......................
11. LOSS OR MUTILATION..........................
12. OFFICE OF THE COMPANY.......................
13. FINANCIAL AND BUSINESS INFORMATION..........
13.1 Information............................
13.2 Annual Information.....................
13.3 Filings................................
14. APPRAISAL...................................
15. LIMITATION OF LIABILITY.....................
16. MISCELLANEOUS...............................
16.1 Nonwaiver and Expenses................
16.2 Notice Generally......................
16.3 Remedies..............................
16.4 Successors and Assigns................
16.5 Amendment.............................
16.6 Severability..........................
16.7 Headings..............................
16.8 Governing Law; Service of Process.....
16.9 Mutual Waiver of Jury Trial...........
Exhibit A - Subscription Form.......................
Exhibit B - Assignment Form.........................
THIS COMMON STOCK PURCHASE WARRANT AND THE SECURITIES FOR WHICH IT
CAN BE EXERCISED HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE TRANSFERRED IN VIOLATION OF SUCH ACT OR STATE LAW,
THE RULES AND REGULATIONS THEREUNDER OR THE TRANSFER RESTRICTIONS OF THIS
WARRANT.
MAXUM HEALTH CORP.
COMMON STOCK PURCHASE WARRANT
700,000 Shares, Subject to Adjustment
February 8, 1994
THIS IS TO CERTIFY THAT GENERAL ELECTRIC COMPANY, a New York
corporation acting through GE Medical Systems, or registered assigns, is
entitled, at any one time on and after the Exercise Date and on or prior to
the Expiration Date (as hereinafter defined), to purchase from MAXUM HEALTH
CORPORATION, a Delaware corporation (the "Company"), 700,000 shares of Common
Stock (as hereinafter defined and subject to adjustment as provided herein),
of the Company at a purchase price of Fifty Cents ($.50) per share (subject
to adjustment as provided herein), all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the respective
meanings set forth below.
"Additional Shares of Common Stock" shall mean all shares of Common
Stock issued by the Company following the date of this Warrant.
"Appraised Value" shall mean, in respect of any share of Common Stock
on any date herein specified, the fair market value of such share of Common
Stock (determined without giving effect to the discount for (i) a minority
interest or (ii) any lack of liquidity of the Common Stock or to the fact
that the Company may have no class of equity registered under the Exchange
Act or the premium, if any, associated with the number of shares held) as of
the last day of the most recent fiscal month to end within 60 days prior to
such date specified, based on the value of the Company as a whole, as
determined by a member or members of the NASD selected in accordance with the
definition below of "Current Market Price" on the basis of a sale between a
willing seller and buyer, neither acting under any compulsion, divided by the
number of Fully Diluted Outstanding shares of Common Stock.
"Book Value" shall mean, in respect of any share of Common Stock on
any date herein specified, the consolidated book value of the Company
applicable to Common Stock as of the last day of any month immediately
preceding such date, divided by the number of Fully Diluted Outstanding
shares of Common Stock as determined in accordance with GAAP by a firm of
independent certified public accountants of recognized national standing
selected by the Company and reasonably acceptable to the Holder.
"Business Day" shall mean any day that is not a Saturday or Sunday or
a day on which banks are required or permitted to be closed in the States of
New York or Texas.
"Closing Date" shall mean the date on which the closing occurs in the
Restructuring Agreement.
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency then administering the Securities Act and other federal
securities laws.
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock of the Company, and any capital stock into which
such Common Stock may thereafter be changed, and shall also include capital
stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Common Stock upon any reclassification
thereof which is not preferred as to dividends or assets over any other class
of stock of the Company and which is not subject to redemption.
"Convertible Securities" shall mean evidences of indebtedness,
options, warrants or other rights to receive shares of stock or other
securities which are convertible into or exchangeable, with or without
payment of additional consideration in cash or property, for Common Stock,
either immediately or upon the occurrence of a specified date or a specified
event.
"Current Market Price" shall mean, in respect of any share of Common
Stock on any date herein specified, the highest of (a) the Book Value per
share of Common Stock at such date, and (b) the Appraised Value per share of
Common Stock as at such date, or if there shall then be a public market for
the Common Stock, the average of the daily market prices for 30 consecutive
Business Days commencing 45 days before such date. The daily market price for
each such day shall be (i) the last sale price on such day as furnished by
the National Association of Securities Dealers Automated Quotation System
("NASDAQ") or by the National Quotation Bureau if not reported on NASDAQ,
(ii) if neither such corporation at the time is engaged in the business of
reporting such prices, as furnished by any similar firm then engaged in such
business, or (iii) if there is no such firm, as furnished by any member of
the NASD selected mutually by the Holder and the Company or, if they cannot
agree upon such selection, as selected by two such members of the NASD, one
of which shall be selected by the Holder and one of which shall be selected
by the Company, (iv) if the Common Stock is listed or admitted to trading on
a stock exchange in the United States, the last sale price on such day on the
principal stock exchange on which such Common Stock is then listed or
admitted to trading, or (v) if no sale takes place on such day on any such
exchange, the average of the last reported closing bid and asked prices on
such day as officially quoted on any such exchange.
"Current Warrant Price" shall mean, in respect of a share of Common
Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Date" shall mean the date two (2) years following the
Closing Date; provided, however, that the Exercise Date shall be accelerated
to any earlier date upon which any of the following events occurs: (i) a
tender offer is commenced for all or part of the Company's Common Stock,
(ii) the acquisition or disposition of securities of the Company by a Person
or group which would cause such Person or group holding such securities,
alone or together with such Person's or group's affiliates, to increase their
holdings above, or decrease their holdings below, 25% of the Company's Fully
Diluted Outstanding Common Stock, (iii) the Company sells all or
substantially all of its assets, or (iv) the termination, repayment or
prepayment in full of the loan under the Restructuring Agreement.
"Exercise Period" shall mean the period during which this Warrant is
exercisable pursuant to Section 2.1.
"Expiration Date" shall mean the date three (3) years following the
Exercise Date.
"Fully Diluted Outstanding" shall mean, when used with reference to
Common Stock, at any date as of which the number of shares thereof is to be
determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant and all other
options, warrants, Convertible Securities or other rights to purchase or
receive Common Stock outstanding on such date.
"GAAP" shall mean generally accepted accounting principles in the
United States of America as from time to time in effect.
"GE Medical" shall mean General Electric Company, a New York
corporation acting through GE Medical Systems.
"Holder" shall mean the Person or Persons in whose name the Warrant
set forth herein is registered on the books of the Company maintained for
such purpose. In the event more than one Person is so registered, "Holder"
for purposes of consent, demand or other action allowed or required to be
taken hereunder by the Holder(s) of this Warrant, the word "Holder" shall
refer to a simple majority in interest of such Persons.
"NASD" shall mean the National Association of
Securities Dealers, Inc., or any successor corporation thereto.
"Outstanding" shall mean, when used with reference to Common Stock,
at any date as of which the number of shares thereof is to be determined, all
issued shares of Common Stock, except shares then owned or held exclusively
by or for the account solely of the Company or any wholly-owned subsidiary
thereof (collectively, "Subsidiary-Held Shares"), and shall include all
shares issuable in respect of any certificates representing fractional
interests in shares of Common Stock. Subsidiary-Held Shares shall remain
Subsidiary-Held Shares even if held in pledge as security unless and until
such shares are foreclosed upon and record, beneficial or equitable ownership
transferred.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, trust, incorporated organization, association, corporation,
institution, public benefit corporation, entity or government (whether
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, agency, body or department
thereof).
"Preferred Stock" shall mean any class of the Company's stock having
rights, preferences or privileges senior or prior in right to any other
class.
"Restricted Common Stock" shall mean shares of Common Stock which
are, or which upon their issuance on the exercise of this Warrant would be,
evidenced by a certificate bearing the restrictive legend set forth in
Section 9.1(a).
"Restructuring Agreement" shall mean that certain Agreement dated as
of June 1, 1993, between the Company and General Electric Company, acting
through GE Medical Systems which provides for restructuring of obligations of
the Company and to which a form of this Warrant is attached as an exhibit.
"Securities Act" shall mean the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Subsidiary" shall mean, with respect to any Person, any corporation
of which an aggregate of more than 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.
"Subsidiary-Held Shares" shall have the meaning set forth above in
the definition of "Outstanding."
"Transfer" shall mean any disposition of any Warrant or Warrant Stock
or of any interest in either thereof, which would constitute a sale thereof
within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in Section 9.2.
"Warrants" shall mean this Warrant and all warrants issued upon
transfer, division or combination of, or in substitution for, this Warrant.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the percentage of Fully Diluted Outstanding Shares of
Common Stock for which they may be exercised. Collectively, all unexercised
Warrants shall be exercisable for the exact same number of shares as this
Warrant would be exercisable in the event any such Transfer or division had
not occurred. Exercise of any warrant(s) shall not trigger any of the
adjustments contemplated by Section 4 of this Warrant.
"Warrant Price" shall mean an amount equal to (i) the number of
shares of Common Stock being purchased upon exercise of this Warrant pursuant
to Section 2.1, multiplied by (ii) the Current Warrant Price as of the date
of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by
the holders of the Warrants upon the exercise thereof.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise. From and after the Exercise Date and until
5:00 p.m., Dallas time, on the Expiration Date, the Holder may exercise the
Warrant on Business Days, for all or any part of 700,000 shares (subject to
adjustment as provided hereunder) of Common Stock then purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 14850 Quorum Drive,
Suite 400, Dallas, Texas 75240 or at the office or agency designated by the
Company pursuant to Section 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of
Common Stock to be purchased, (ii) payment of the Warrant Price in the manner
specified below, and (iii) this Warrant. Such notice shall be substantially
in the form of the subscription form appearing at the end of this Warrant as
Exhibit A, duly executed by Holder or its agent or attorney. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event
within five (5) Business Days thereafter, execute or cause to be executed and
deliver or cause to be delivered to Holder a certificate or certificates
representing the aggregate number of full shares of Outstanding Shares of
Common Stock issuable upon such exercise. The stock certificate or
certificates so delivered shall be, to the extent possible, in such
denomination or denominations as such Holder shall request in the notice and
shall be registered in the name of Holder or, subject to Section 9, such
other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated to
be named therein shall be deemed to have become a holder of record of such
shares for all purposes, as of the date the notice, together with the payment
as set forth below, and this Warrant are received by the Company as described
above and all taxes required to be paid by Holder, if any, pursuant to
Section 2.2 prior to the issuance of such shares have been paid or agreed to
be paid when finally determined.
Payment of the Warrant Price shall be made at the option of the
Holder by certified or official bank check.
2.2 Payment of Taxes. All shares of Common Stock issuable upon the
exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable. The Company shall pay all expenses in
connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue or delivery thereof, unless such tax or
charge is imposed by law upon Holder, in which case such taxes or charges
shall be paid by Holder. The Company shall not be required, however, to pay
any tax or other charge imposed in connection with any transfer involved in
the issuance of any certificate for shares of Common Stock issuable upon
exercise of this Warrant in any name other than that of Holder, and in such
case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other
charge is due.
2.3 Fractional Shares. The Company shall not issue a fractional
share of Common Stock upon exercise of this Warrant. A fractional share
otherwise issuable shall be rounded up to the nearest whole share.
2.4 Continued Validity. A holder of shares of Common Stock issued
upon the exercise of this Warrant (other than a holder who acquires such
shares after the same have been publicly sold pursuant to a Registration
Statement under the Securities Act or sold pursuant to Rule 144 thereunder),
shall continue to be entitled with respect to such shares to all rights to
which it would have been entitled as Holder under Sections 9, 10, 13, and 16
of this Warrant. The Company shall, at the time of each exercise of this
Warrant upon the request of the holder of the shares of Common Stock issued
upon such exercise hereof, acknowledge in writing, in form reasonably
satisfactory to such holder, its continuing obligation to afford to such
holder all such rights and subject to any burdens; provided, however, that if
such holder shall fail to make any such request, such failure shall not
affect the continuing obligation of the Company to afford to such holder all
such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. This Warrant shall be nontransferable other than to
a division, subsidiary or affiliate of GE Medical except by merger of the
Holder with another entity or otherwise by operation of law. Subject to
compliance with Section 9 following said period of nontransferability,
transfer of this Warrant and all rights hereunder, in whole or in part, shall
be registered on the books of the Company to be maintained for such purpose,
upon surrender of this Warrant at the principal office of the Company
referred to in Section 2.1 or the office or agency designated by the Company
pursuant to Section 12, together with a written assignment of this Warrant
substantially in the form of Exhibit B hereto duly executed by Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon
the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall, subject to Section 9, execute and deliver a new
Warrant or Warrants in the name of the assignee or assignees and in the
denomination specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled. A Warrant, if
properly assigned in compliance with Section 9, may be exercised by a new
Holder for the purchase of shares of Common Stock without having a new
Warrant issued. If requested by the Company, a new Holder shall acknowledge
in writing, in form reasonably satisfactory to the Company, such Holder's
continuing obligations under Section 9 of this Warrant.
3.2 Division and Combination. Subject to Section 9, this Warrant
may be divided or combined with other Warrants upon presentation hereof at
the aforesaid office or agency of the Company, together with a written notice
specifying the names and denominations in which new Warrants are to be
issued, signed by Holder or its agent or attorney. Subject to compliance
with Section 3.1 and with Section 9, as to any transfer which may be involved
in such division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and deliver at its
own expense (other than transfer taxes) the new Warrant or Warrants under
this Section 3.
3.4 Maintenance of Books. The Company shall maintain, at its
aforesaid office or agency, books for the registration, and the registration
of transfer, of this Warrant.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise
of this Warrant shall be subject to adjustment from time to time as set forth
in this Section 4. The Company shall give each Holder notice of any event
described below which requires an adjustment pursuant to this Section 4 at
the time of such event.
4.1 Stock Dividends, Subdivisions, Combinations and
Reclassifications. If at any time the Company shall with respect to its
Common Stock or Convertible Securities:
(a) pay a dividend or make distribution to holders of the
Company's securities generally of Additional Shares of Common Stock
or Convertible Securities other than convertible indebtedness or
convertible Preferred Stock (in which event such Additional Shares of
Common Stock issuable upon exchange or conversion shall be deemed
distributed),
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock,
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock, or
(d) reclassify its Common Stock (other than a change in par
value, or from par value to no par value) into shares of Common Stock
and shares of any other class of stock; and, if the outstanding
shares of Common Stock shall be changed into a larger or smaller
number of shares of Common Stock as a part of such reclassification,
such change shall be deemed a subdivision or combination, as the case
may be, of the Outstanding shares of Common Stock within the meaning
of this Section 4.1., then (i) the number of shares of Common Stock
for which this Warrant is exercisable after the occurrence of any
such event shall be equal to (A) the maximum number of shares of
Common Stock underlying this Warrant prior to the occurrence of any
such event, multiplied by (B) the number of Fully Diluted Outstanding
shares of Common Stock after any such event, divided by the number of
Fully Diluted Outstanding shares of Common Stock prior to any such
event, and (ii) the Current Warrant Price shall be adjusted to equal
the Current Warrant Price multiplied (A) by the number of shares of
Common Stock for which this Warrant is exercisable immediately prior
to the adjustment divided by (B) the number of shares for which this
Warrant is exercisable immediately after such adjustment. Any
increased number of shares of Common Stock subject to this Warrant
resulting from application of the foregoing shall be allocated
ratably among all shares of Common Stock subject to this Warrant
prior to each such event and the shares (including the newly
allocated shares) not subject to clause (i) of Section 2.1 shall
remain subject to the conditions precedent to exercise described in
clause (ii) of Section 2.1.
4.2 Other Provisions Applicable to Adjustments under this Section.
The following provisions shall be applicable to the making of adjustments of
the number of shares of Common Stock for which this Warrant is exercisable
provided for in this Section 4:
(a) When Adjustments to Be Made. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at
the close of business on the date of its occurrence.
(b) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution or subscription
or purchase rights and shall, thereafter and before the distribution
to stockholders thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect
thereof shall be rescinded and annulled.
5. NOTICES TO WARRANT HOLDERS
5.1 Notice of Adjustments. Whenever the number of shares of Common
Stock for which this Warrant is exercisable, or whenever the price at which a
share of such Common Stock may be purchased upon exercise of this Warrant,
shall be adjusted pursuant to Section 4, the Company shall forthwith prepare
a certificate to be executed by the chief financial officer of the Company
setting forth, in reasonable detail, the event requiring the adjustment and
the method by which such adjustment was calculated, specifying the number of
shares of Common Stock for which this Warrant is exercisable, and any change
in the purchase price or prices thereof, after giving effect to such
adjustment or change. The Company shall promptly cause a signed copy of such
certificate to be delivered to each Holder in accordance with Section 16.2.
The Company shall keep at its office or agency designated pursuant to Section
12 copies of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any Holder or any
prospective purchaser of a Warrant designated by a Holder thereof.
5.2 Notice of Certain Corporate Action. The Holder shall be
entitled to the same rights to receive notice of corporate action as any
holder of Common Stock.
6. NO IMPAIRMENT
The Company shall not by any action including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in
the taking of all such actions as may be necessary or appropriate to protect
the rights of Holder against impairment. Without limiting the generality of
the foregoing, the Company will (a) not increase the par value, if any, of
any shares of Common Stock receivable upon the exercise of this Warrant above
the amount payable therefor upon such exercise immediately prior to such
increase in par value, (b) take all such action as may be reasonably
necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of Common Stock upon the exercise
of this Warrant, and (c) use its best efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.
Upon the request of Holder, the Company will at any time during the
period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR
APPROVAL OF ANY GOVERNMENTAL AUTHORITY
From and after the Closing Date, the Company shall at all times
reserve and keep available for issuance upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise
of any Warrant and payment therefor in accordance with the terms of such
Warrant, shall be duly and validly issued and fully paid and nonassessable,
and not be subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of
Common Stock issuable upon exercise of the Warrants, the Company shall take
any corporate action which may be reasonably necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
such Common Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock for which this Warrant is exercisable or in
the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be reasonably necessary
from any public regulatory body or bodies having jurisdiction thereof.
If any shares of Common Stock required to be reserved for issuance
upon exercise of warrants require registration or qualification with any
governmental authority under any federal or state law (otherwise than as
provided in Section 9) before such shares may be so issued, the Company will
in good faith and as expeditiously as possible and at its expense endeavor to
cause such shares to be duly registered or qualified; provided that the
provisions of Section 9 shall govern with respect to Company's obligation to
effect the registration of its securities under the Securities Act and any
state securities laws.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the Company to
the holders of its Common Stock with respect to which any provision of
Section 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the
close of business on a Business Day. The Company will not at any time,
except upon dissolution, liquidation or winding up of the Company, close its
stock transfer books or Warrant transfer books so as to result in preventing
or delaying the exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
This Warrant shall not be transferable except to a division,
subsidiary or affiliate of GE Medical or by merger of the Holder with another
entity or otherwise by operation of law. Furthermore, this Warrant and the
Warrant Stock shall not be transferred, hypothecated or assigned before
satisfaction of the conditions specified in this Section 9, which conditions
are intended to ensure compliance with the provisions of the Securities Act
and state law, with respect to the Transfer of this Warrant or any Warrant
Stock. Holder, by acceptance of this Warrant, agrees to be bound by the
provisions of this Section 9. Furthermore, Holder, by acceptance of this
Warrant and by acceptance and delivery of the Subscription Form in the form
of Exhibit A hereto, represents and warrants to the Company for its reliance
in connection with issuing this Warrant and the Warrant Stock, respectively,
that (i) Holder is acquiring the Warrant, and if applicable, the Warrant
Stock for Holder's own account for investment and not for sale or other
disposition thereof; (ii) Holder understands that such securities are not
registered under the Securities Act and must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available; (iii) Holder, by reason of its business and
financial experience has the capacity to protect its own interests in
connection with purchase and transfer of such securities and is able to bear
the economic risk thereof; and (iv) the Company has made available to Holder
all documents and information regarding an investment in such securities
requested by or on behalf of Holder, including but not limited to all
publicly available information on file with the Commission.
9.1 Restrictive Legend.
(a) Except as otherwise provided in this Section 9, each
certificate for Warrant Stock initially issued upon the exercise of
this Warrant, and each certificate for Warrant Stock issued to any
subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following
form:
The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and
are subject to the conditions specified in a certain Common
Stock Purchase Warrant dated as of __________, 1993,
originally issued by Maxum Health Corp. No transfer of the
shares represented by this certificate shall be valid or
effective until such conditions and any requirements of
state law have been fulfilled. A copy of the form of said
Warrant is on file with the Secretary of Maxum Health Corp.
The holder of this certificate, by acceptance of this
certificate, agrees to be bound by the provisions of such
Warrant.
b) Except as otherwise provided in this Section 9, each
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
This Warrant and its underlying securities have not been
registered under the Securities Act of 1933, as amended, and
may not be transferred in violation of such Act or state
law, the rules and regulations thereunder or the provisions
of this Warrant.
9.2 Notice of Proposed Transfers; Requests for Registration. Prior
to any Transfer or attempted Transfer of any Warrants or any shares of
Warrant Stock, the holder of such Warrants or Warrant Stock shall give ten
days prior written notice (a "Transfer Notice") to the Company of such
holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and shall obtain and deliver to the
Company an opinion in form and substance reasonably satisfactory to the
Company (addressed to the Company and upon which the Company may rely) from
counsel to such holder who shall be reasonably satisfactory to the Company,
that the proposed Transfer of such Warrants or such Warrant Stock may be
effected without registration under the Securities Act and any applicable
state securities law(s). After receipt of the Transfer Notice and opinion,
the Company shall, within five Business Days thereof, so notify the holder of
such Warrants or Warrant Stock and such holder shall thereupon be entitled to
Transfer such Warrants or such Warrant Stock, in accordance with the terms of
the Transfer Notice. Each certificate, if any, evidencing such shares of
Warrant Stock issued upon such Transfer shall bear the restrictive legend set
forth in Section 9.1(a), and each Warrant issued upon such Transfer shall
bear the restrictive legend set forth in Section 9.1(b), unless in the
opinion of such counsel such legend is not required in order to ensure
compliance with the Securities Act and any applicable state securities
law(s). The holder of the Warrants or the Warrant Stock, as the case may be,
giving the Transfer Notice shall not be entitled to transfer and shall not
transfer such Warrants or such Warrant Stock until (i) the Company receives a
written statement of investment intent and sophistication from the proposed
Transferee in substance substantially similar to the final sentence of the
first paragraph of Section 9 and (ii) such holder receives notice from the
Company under this Section 9.2.
The Holders of Warrants and Warrant Stock shall have the right to
request registration of such Warrant Stock pursuant to Sections 9.3 and 9.4.
9.3 Required Registration. The rights ("Required Registration") of
holders of Warrants and/or Warrant Stock under this Section 9.3 shall become
effective only on and after the date 90 days prior to the Exercise Date and
shall expire on the Expiration Date. After receipt of a written request from
the holders of Warrants and/or Warrant Stock representing at least an
aggregate of fifty percent (50%) of the total of (i) all shares of Warrant
Stock then subject to issuance upon exercise of all Warrants and (ii) all
shares of Warrant Stock then Outstanding having an aggregate Current Market
Price in excess of $400,000, requesting that the Company effect the
registration of Warrant Stock issuable upon the exercise of such holder's
Warrants or of any of such holder's Warrant Stock under the Securities Act
and specifying the intended method or methods of disposition thereof, the
Company shall promptly notify all holders of Warrants and Warrant Stock in
writing of the receipt of such request and each such holder, in lieu of
exercising its rights under Section 9.4, may elect (by written notice
specifying the intended method or methods of disposition of Warrant Stock
sent to the Company within ten Business Days from the date of such holder's
receipt of the aforementioned Company's notice) to have such holder's shares
of Warrant Stock included in such registration thereof pursuant to this
Section 9.3. Thereupon the Company shall, as expeditiously as is possible,
use its best efforts to effect the registration under the Securities Act of
all shares of Warrant Stock which the Company has been so requested to
register by such holders for sale, all to the extent required to permit the
disposition (in accordance with the intended method or methods thereof, as
aforesaid) of the Warrant Stock so registered; provided, however, that the
Company shall not be required to effect more than one registration of any
Warrant Stock pursuant to this Section 9.3.
(a) Suspension of Registration.
If the Company has been requested to effect a Required
Registration, whether or not a Registration Statement with
respect thereto has been filed or has become effective, and
furnishes to the Holder requesting such registration a copy of a
resolution of the Board of Directors of the Company certified by
the Secretary of the Company stating that in the good faith
judgment of the Board of Directors it would be seriously
detrimental to the Company and its stockholders for such
Registration Statement (i) to be filed on or before the date such
filing would otherwise be required hereunder, (ii) to become
effective, or (iii) to remain effective as long as such
Registration Statement would otherwise be required to remain
effective, the Company shall have the right to defer such filing
or effectiveness or to suspend such effectiveness for a period of
not more than 120 days; provided that during such time the
Company may not file a Registration Statement for securities to
be issued and sold for its own account or that of anyone other
than the Holder or Holders requesting such Required Registration;
and provided, further, that if effectiveness of a Registration
Statement is suspended pursuant to this provision, the period of
such suspension shall be added to the end of the period that such
Registration Statement would otherwise be required to be
effective hereunder so that the aggregate number of days that
such Registration Statement is required to remain effective
hereunder shall remain unchanged.
(b) Hold-Back Agreements.
(i) Restrictions on Public Sale By Holder of Registrable
Securities. Each Holder whose registrable securities are covered
by a Registration Statement filed pursuant to this Warrant
agrees, if requested by the managing underwriters in an
underwritten offering, not to effect any public sale or
distribution of securities of the Company of the same class as
the securities included in such Registration Statement, including
a sale pursuant to Rule 144 under the Securities Act (except as
part of such underwritten registration), during the 10-day period
prior to, and during the period from 90 to 180 days, as
recommended by the underwriter, beginning on, the effective date
of such Registration Statement, to the extent timely notified in
writing by the Company or the managing underwriters; provided,
however, that the holders of the Registrable Securities will not
be subject to the hold-back restrictions of this Section if the
Company and the other holders of the Company's equity securities
have not complied with the provisions of subsection (b) (ii)
below.
(ii) Restrictions on Sale of Equity Securities by the
Company and Others. The Company agrees (1) not to effect any
public offer, sale or distribution of its equity securities
(i) during the 10-day period prior to, and during the 90-day
period beginning with, the effectiveness of a Registration
Statement filed under this Warrant to the extent timely notified
in writing by a holder of registrable securities or the managing
underwriters (except as part of such registration, if permitted,
or pursuant to registrations on Forms S-4 or S-8 or any successor
form to such Forms or the issuance of Common Stock pursuant to
warrants or employee stock options outstanding on the date
hereof) and (2) to use its best efforts to cause each holder of
its privately placed equity securities purchased from the Company
at any time on or after the date of this Agreement to agree not
to effect any public sale or distribution of any such securities
during such period, including a sale pursuant to Rule 144 under
the Securities Act (except as part of such registration, if
permitted).
9.4 Incidental Registration. The rights of holders of Warrants
and/or Warrant Stock under this Section 9.4 shall become effective only on
and after the Exercise Date and shall expire on the Expiration Date. If the
Company at any time proposes to file on its behalf and/or on behalf of any of
its security holders ("the demanding security holders") a Registration
Statement under the Securities Act on any form (other than a Registration
Statement required under section 9.3 or a Registration Statement on Form S-4
or S-8 or any successor form for securities to be offered in a transaction of
the type referred to in Rule 145 under the Securities Act or to employees of
the Company pursuant to any employee benefit plan or to existing holders of
the Company's debt or equity securities in any exchange or rights offering,
respectively) for the general registration of securities to be sold for cash
with respect to its Common Stock or any other class of equity security (as
defined in Section 3(a)(11) of the Exchange Act) of the Company, it will give
written notice to all holders of Warrants or Warrant Stock at least 30 days
before the initial filing with the Commission of such Registration Statement,
which notice shall set forth the intended method of disposition of the
securities proposed to be registered by the Company. The notice shall offer
to include in such filing the aggregate number of shares of Warrant Stock,
and the number of shares of Common Stock for which this Warrant is
exercisable, as such holders may request. Nothing herein shall preclude the
Company from discontinuing the registration of its securities being effected
on its behalf or on behalf of the demanding security holders at any time
prior to the effective date of the registration relating thereto.
Each holder of any such Warrants or any such Warrant Stock
desiring to have Warrant Stock registered under this Section 9.4 shall advise
the Company in writing within 30 days after the date of receipt of such offer
from the Company, setting forth the amount of such Warrant Stock for which
registration is requested. The Company shall thereupon include in such
filing the number of shares of Warrant Stock for which registration is so
requested, subject to the next sentence, and shall use its best efforts to
effect registration under the Securities Act of such shares. If the managing
underwriter of a proposed public offering shall advise the Company in writing
that, in its opinion, the distribution of the shares of Common Stock into
which the Warrants are exercisable and the Warrant Stock requested to be
included in the registration concurrently with the securities being
registered by the Company or such demanding security holder would materially
and adversely affect the distribution of such securities by the Company or
such demanding security holder, then all demanding security holders (other
than any selling security holder who requested such registration and the
Company (unless such Registration Statement was filed at the request of a
demanding security holder)) shall reduce the amount of securities each
intended to distribute through such offering on a pro rata basis. Except as
otherwise provided in Section 9.6, all expenses of such registration shall be
borne by the Company.
9.5 Registration Procedures. If the Company is required by the
provisions of this Section 9 to use its best efforts to effect the
registration of any of its securities under the Securities Act, the Company
will, as expeditiously as possible:
(a) prepare and file with the Commission a Registration
Statement with respect to such securities and use its best efforts to
cause such Registration Statement to become and remain effective for a
period of time required for the disposition of such securities by the
holders thereof;
(b) 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 keep such Registration
Statement effective and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all securities
covered by such Registration Statement until the earlier of such time
as all of such securities have been disposed of in a public offering or
the expiration of 180 days;
(c) furnish to any selling security holders such number of
copies of a summary prospectus or other prospectus, including a
preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents, as such selling security
holders may reasonably request;
(d) use its best efforts to register or qualify the securities
covered by such Registration Statement under such other securities or
blue sky laws of such jurisdictions within the United States and Puerto
Rico as each Holder of such securities shall reasonably request in
light of such Holder's intended plan of distribution (provided,
however, that in the event the Company's shares are traded on a
national securities exchange or national market system such
jurisdictions shall not exceed ten for an underwritten offering or
three for a shelf registration, and provided further that the Company
shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then
qualified or to file any general consent to service of process or
subject itself to taxation in any such jurisdiction), and do such other
reasonable acts and things as may be required of it to enable such
holder to consummate the disposition in such jurisdiction of the
securities covered by such Registration Statement;
(e) if requested by a majority (in amount of underlying and
outstanding shares ) of the Holders of Warrants or Warrant Stock being
included in such registration, use its best efforts to obtain from
either a nationally recognized underwriter or investment banker or an
underwriter or investment banker reasonably acceptable to such Holders
a firm commitment (pursuant to an underwriting agreement in customary
form) to underwrite the public offering of the securities covered by
such Registration Statement;
(f) furnish, at the request of any holder requesting
registration of Warrant Stock pursuant to Section 9.3, on the date that
such shares of Warrant Stock are delivered to the underwriters for sale
pursuant to such registration or, if such Warrant Stock is not being
sold through underwriters, on the date that the Registration Statement
with respect to such shares of Warrant Stock becomes effective, (1) a
copy of an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration,
addressed to the underwriters, if any, and to the holders making such
request, stating that such Registration Statement has become effective
under the Securities Act and that (i) to the best knowledge of such
counsel, no stop order suspending the effectiveness thereof has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated under the Securities Act, (ii) the Registration
Statement, the related prospectus, and each amendment or supplement
thereto, comply as to form in all material respects with the
requirements of the Securities Act and the applicable rules and
regulations of the Commission thereunder (except that such counsel need
express no opinion as to financial statements or statistical data
contained therein), (iii) the descriptions in the Registration
Statement or the prospectus, or any amendment or supplement thereto, of
all legal matters and contracts and other legal documents or
instruments are accurate and, to the knowledge of such counsel, fairly
present the information required to be shown, and (iv) such counsel
does not know of any legal or governmental proceedings, pending or
contemplated, required to be described in the Registration Statement or
prospectus, or any amendment or supplement thereto, which are not
described as required, nor of any contracts or documents or instruments
of a character required to be described in the Registration Statement
or prospectus, or any amendment or supplement thereto, or to be filed
as exhibits to the Registration Statement which are not described and
filed or incorporated by reference as required; such counsel shall also
confirm that nothing has come to his attention to lead him to believe
that either the Registration Statement or the prospectus, or any
amendment or supplement thereto (other than financial material or
statistical data as to which such counsel need make no statement)
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which made, not
misleading; and (2) a letter dated such date, from the independent
certified public accountants of the Company, addressed to the
underwriters, if any, and to the holder making such request and, if
such accountants refuse to deliver such letter to such holder, then to
the Company stating that they are independent certified public
accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements and other
financial data of the Company included in the Registration Statement or
the prospectus, or any amendment or supplement thereto, comply as to
form in all material respects with the applicable accounting
requirements of the Securities Act. Such opinion of counsel shall
additionally cover such other legal matters with respect to the
registration in respect of which such opinion is being given as the
underwriters may reasonably request. Such letter from the independent
certified public accountants shall additionally cover such other
financial matters (including information as to the period ending not
more than five Business Days prior to the date of such letter) with
respect to the registration in respect of which such letter is being
given as the holders holding a majority of the Warrant Stock being so
registered may reasonably request;
(g) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are
reasonably required in order to expedite or facilitate the disposition
of the securities covered by Registration Statement; and
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
security holders, as soon as reasonably practicable, but not later than
18 months after the effective date of the Registration Statement, an
earnings statement covering the period of at least 12 months beginning
with the first full month after the effective date of such Registration
Statement, which earnings statements shall satisfy the provisions of
Section 11(a) of the Securities Act.
(i) notify each selling Holder of such registrable securities,
at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event
requiring the preparation of a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of the
securities covered by the Registration Statement, such prospectus will
not contain an untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading and promptly make available to each
selling Holder any such supplement or amendment.
It shall be a condition precedent to the obligation of the
Company to take any action pursuant to this Section 9 in respect of the
securities which are to be registered at the request of any holder of
Warrants or Warrant Stock that such holder shall furnish to the Company such
information regarding the securities held by such holder and the intended
method of disposition thereof as the Company shall reasonably request and as
shall be required in connection with the action taken by the Company.
Each selling Holder agrees that, upon receipt of any notice from
the Company of the happening of any event of the kind described in
Section 9.5(i) hereof, such selling Holder will forthwith discontinue
disposition of Registrable Securities pursuant to the registration statement
covering the securities covered by the Registration Statement until such
selling Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by Section 9.5(i) hereof, and, if so directed by the
Company such selling Holder will deliver to the Company all copies, other
than permanent file copies then in such selling Holder's possession, of the
most recent prospectus covering the securities covered by Registration
Statement at the time of receipt of such notice. If the Company shall give
such notice, the Company shall extend the period during which such
Registration Statement shall be maintained effective by the number of days
during the period from and including the date of the giving of notice
pursuant to Section 9.5(i) hereof to the date when the Company shall make
available to the selling Holders of the securities covered by such
Registration Statement a prospectus supplemented or amended to conform with
the requirements of Section 9.5(i) hereof.
9.6 Expenses; Limitations on Registration. All expenses incurred in
complying with Section 9, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the NASD,
printing expenses, fees and disbursements of counsel for the Company, the
reasonable fees and expenses of one counsel for the selling security holders
(selected by those holding a majority of the shares being registered),
expenses of any special audits incident to or required by any such
registration and expenses of complying with the securities or blue sky laws
of any jurisdictions pursuant to Section 9.5(d), shall be paid by the
Company, except that
(a) all such expenses in connection with any amendment or
supplement to the Registration Statement or prospectus filed more than
180 days after the effective date of such Registration Statement
because any holder of Warrant Stock has not effected the disposition of
the securities requested to be registered shall be paid by such holder;
(b) if the Warrant Stock is sold in an underwritten offering at a
gross price (before underwriting discounts or commissions) of less than
$4.00 per share, the persons selling Warrant Stock in such offering
shall pay a pro rata share of all registration and filing fees,
reasonable fees and disbursements of Company counsel and accountants,
and other out-of-pocket costs incurred by the Company in connection
with such offering; and
(c) the Company shall not be liable for any fees, discounts or
commissions to any underwriter or any fees or disbursements of counsel
for any underwriter in respect of the securities sold by such holder of
Warrant Stock.
9.7 Indemnification.
(a) In the event of any registration of any of the Warrant Stock
under the Securities Act pursuant to this Section 9, the Company shall
indemnify and hold harmless the holder of such Warrant Stock, such
holder's directors and officers, and each other Person (including each
underwriter) who participated in the offering of such Warrant Stock and
each other Person, if any, who controls such holder or such
participating Person within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which
such holder or any such director or officer or participating Person or
controlling Person may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon (i) any alleged untrue statement of any material fact
contained, on the effective date thereof, in any Registration Statement
under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, or (ii) any alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall
reimburse such Holder or such director, officer or participating Person
or controlling Person for any legal or any other expenses reasonably
incurred by such holder or such director, officer or participating
Person or controlling Person in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon any alleged untrue statement or alleged omission made in
such Registration Statement, preliminary prospectus, prospectus or
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such holder specifically for
use therein or (in the case of any registration pursuant to Section
9.3) so furnished for such purposes by any underwriter. Such indemnity
shall remain in full force and effect regardless of any investigation
made by or on behalf of such holder or such director, officer or
participating Person or controlling Person, and shall survive the
transfer of such securities by such holder.
(b) Each holder of any Warrant Stock, by acceptance thereof,
agrees to indemnify and hold harmless the Company, its directors and
officers and each other Person, if any, who controls the Company within
the meaning of the Securities Act against any losses, claims, damages
or liabilities, joint or several, to which the Company or any such
director or officer or any such Person may become subject under the
Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon information in writing provided to the
Company by such Holder of such Warrant Stock contained, on the
effective date thereof, in any Registration Statement under which
securities were registered under the Securities Act at the request of
such holder, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto; provided, however,
that such Holder's obligation under this Section 9.7(b) to indemnify
and hold harmless the Company shall in no event exceed the damage
attributable solely to the inclusion of such written information in
such Registration Statement, preliminary prospectus, final prospectus,
or amendment or supplement suffered by the Person or Persons whose
claims gave rise to such losses, claims, damages or liabilities.
The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, to the same
extent as provided above with respect to information furnished in
writing by persons specifically for inclusion in any prospectus or
Registration Statement.
(c) If the indemnification provided for in this Section 9 from
the indemnifying party is unavailable to an indemnified party hereunder
in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or expenses in such proportion as is
appropriate to reflect the relative fault of the indemnifying party and
indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact, has been made
by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
action. The amount paid or payable by a party under this Section 9 as
a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 9.7(c) were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
Notwithstanding any other provisions of this Warrant, the Company
shall not be liable in any case to the extent that any loss, claim, damage,
liability or expense arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission in any Registration
Statement or prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Registration Statement and the Holder thereafter fails to
deliver such Registration Statement or prospectus as so amended or
supplemented prior to or concurrently with the sale of the securities covered
by such Registration Statement to the person asserting such loss, claim,
damage, liability or expense after the Company had furnished such Holder with
a sufficient number of copies of the same.
9.8 Termination of Restrictions. Notwithstanding the foregoing
provisions of Section 9, the restrictions imposed by this Section upon the
transferability after the Exercise Date of the Warrants and the Warrant Stock
and the legend requirements of Section 9.1 shall terminate as to any
particular Warrant or share of Warrant Stock (i) when and so long as such
security shall have been effectively registered under the Securities Act and
disposed of pursuant thereto or (ii) when the Company shall have received an
opinion of counsel reasonably satisfactory to it that such legend is not
required in order to ensure compliance with the Securities Act. Whenever
after the Exercise Date the restrictions imposed by Section 9 shall terminate
as to this Warrant, as hereinabove provided, the Holder hereof shall be
entitled to receive from the Company, at the expense of the Company, a new
Warrant bearing the following legend in place of the restrictive legend set
forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON
, , AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants thereafter issued upon registration of transfer, division or
combination of, or in substitution for, any Warrant or Warrants entitled to
bear such legend shall have a similar legend endorsed thereon. Whenever the
restrictions imposed by this Section shall terminate as to any share of
Warrant Stock, as hereinabove provided, the holder thereof shall be entitled
to receive from the Company, at the Company's expense, a new certificate
representing such Warrant Stock not bearing the restrictive legend set forth
in Section 9.1(a).
9.9 Listing on Securities Exchange. If and so long as the Company
shall list any shares of Common Stock on NASDAQ or any securities exchange,
it will, at its expense, list thereon, maintain and, when necessary, increase
such listing of, all shares of Common Stock issued or, to the extent
permissible under the applicable NASDAQ or securities exchange rules,
issuable upon the exercise of this Warrant concurrently with registration of
such shares under the Securities Act so long as any shares of Common Stock
shall be so listed during any such Exercise Period.
9.10 Certain Limitations on Registration Rights. Notwithstanding the
other provisions of Section 9:
(i) the Company shall not be obligated to register the
Warrant Stock of any Holder if (x) in the opinion of counsel to
the Company reasonably satisfactory to the Holder and its counsel
(or, if the Holder has engaged an investment banking firm, to
such investment banking firm and its counsel), the sale or other
disposition of such Holder's Warrant Stock, in the manner
proposed by such Holder (or by such investment banking firm), may
be effected without registering such Warrant Stock under the
Securities Act, and (y) the failure of the Company to register
such Warrant Stock will not result in a reduction in the net
proceeds to be received by such Holder in connection with such
sale or other disposition; and
(ii) the Company shall not be obligated to register the
Warrant Stock of any Holder pursuant to Section 9.3, if the
Company has had a registration statement, under which such Holder
had a right to have its Warrant Stock included pursuant to
Sections 9.3 or 9.4, declared effective within one year prior to
the date of the request pursuant to Section 9.3; provided,
however, that if any Holder elected to have shares of its Warrant
Stock included under such registration statement but some or all
of such shares were excluded pursuant to the penultimate sentence
of Sections 9.3 or 9.4, then such one-year period shall be
reduced to six months.
9.11 Selection of Managing Underwriters. The managing underwriter or
underwriters for any offering of Warrant Stock to be registered pursuant to
Section 9.3 shall be selected by the Company and shall be reasonably
acceptable to the Holders of a majority of the shares being so registered
(other than any shares being registered pursuant to Section 9.4).
10. SUPPLYING INFORMATION
The Company shall cooperate with each Holder of a Warrant and each
holder of Warrant Stock in supplying such information as may be reasonably
necessary for such Holder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any
Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it
being understood that the written agreement of GE Medical shall be sufficient
indemnity) and in case of mutilation upon surrender and cancellation hereof,
the Company will execute and deliver in lieu hereof a new Warrant of like
tenor to such Holder; provided, in the case of mutilation, no indemnity shall
be required if this Warrant in identifiable form is surrendered to the
Company for cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this warrant. The
Company shall notify Holder in writing prior to any change of the address of
the office at which the Warrants may be presented.
13. FINANCIAL AND BUSINESS INFORMATION
13.1 Information. Except during any period when the Company is a
Public Company (as hereinafter defined), it will deliver to each Holder, as
soon as practicable after the end of each quarter and in any event within 50
days thereafter, one copy of an unaudited consolidated balance sheet,
statement of income and statement of cash flow of the Company and its
Subsidiaries for such period setting forth in each case in comparative form
the figures for the corresponding periods in the previous fiscal years. Such
financial statements shall be prepared by the Company in accordance with GAAP
as modified by Regulation S-X and shall be accompanied by the certification
of the Company's chief executive officer or chief financial officer that such
financial statements are complete and correct and present fairly the
consolidated financial position, results of operations and cash flow of the
Company and its Subsidiaries as at the end of such period and for such
year-to-date period, as the case may be.
For purposes of this Section 13, the term "Public Company" shall
mean a company (i) that is subject to the reporting requirements of Section
15(d) of the Exchange Act, or (ii) any of whose securities are registered
pursuant to Section 12(b) or 12(g) of the Exchange Act.
13.2 Annual Information. Except during any period when the Company is
a Public Company, it will deliver to each Holder as soon as practicable after
the end of each fiscal year of the Company, and in any event within 105 days
thereafter, one copy of:
(i) an audited consolidated balance sheet of the Company
and its Subsidiaries as at the end of such year, and
(ii) audited consolidated statements of income and retained
earnings and cash flow of the Company and its Subsidiaries for
such year;
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year; all prepared in accordance
with GAAP, and which audited financial statements shall be accompanied by (i)
an opinion thereon of the independent certified public accountants regularly
retained by the Company, or any other firm of independent certified public
accountants of recognized national standing selected by the Company and (ii)
a report of such independent certified public accountants confirming, or
describing the agreed upon procedures applied to the Company's schedules
computing, any adjustment, made pursuant to Section 4 during such year. Such
report shall include a description of any errors determined by the
accountants in the Company's schedules.
13.3 Filings. The Company will file on or before the required date
all required regular or periodic reports (pursuant to the Exchange Act) with
the Commission and will deliver to Holder promptly upon their becoming
available one copy of each report, notice or proxy statement sent by the
Company to its stockholders generally, and of each regular or periodic report
(pursuant to the Exchange Act) and any Registration Statement, prospectus or
written communication (other than transmittal letters) pursuant to the
Securities Act, filed by the Company with (i) the Commission or (ii) any
securities exchange on which shares of Common Stock are listed (provided,
however, that the Company may request filing extensions pursuant to Rule
12b-25 under the Securities and Exchange Act of 1934, as amended).
14. APPRAISAL
The determination of the Appraised Value per share of Common Stock
shall be made by an investment banking firm of nationally recognized standing
selected by the Company and acceptable to the Holder. If the investment
banking firm selected by the Company is not acceptable to the Holder and the
Company and the Holder cannot agree on a mutually acceptable investment
banking firm, then the Holder and the Company shall each choose one such
investment banking firm and the respective chosen firms shall agree on
another investment banking firm which shall make the determination. The
Company shall retain, at its sole cost, such investment banking firm as may
be necessary for the determination of Appraised Value required by the terms
of this Warrant.
15. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by the Holder
to purchase shares of Common Stock, and no enumeration herein of the rights
or privileges of Holder hereof, shall give rise to any liability of such
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
16. MISCELLANEOUS
16.1 Nonwaiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Company shall
operate as a waiver of such right or otherwise prejudice the Company's
rights, powers or remedies. No course of dealing or any delay or failure to
exercise any right hereunder on the part of the Holder shall operate as a
waiver of such right or otherwise prejudice the Holder's rights, powers or
remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to the Holder such amounts as shall be sufficient to cover
any costs and expenses including, but not limited to, reasonable attorneys'
fees, including those of appellate proceedings, incurred by the Holder in
collecting any amounts due pursuant hereto or in otherwise enforcing any of
its rights, powers or remedies hereunder.
16.2 Notice Generally. Any notice, demand, request, consent,
approval, declaration, delivery or other communication hereunder to be made
pursuant to the provisions of this Warrant shall be sufficiently given or
made if in writing and either delivered (i) in person with receipt
acknowledged, (ii) by facsimile transmission, with receipt electronically
confirmed during normal business hours of recipient, and that is confirmed by
sending, no later than one (1) Business Day following such transmission, a
copy of such facsimile, by registered or certified mail, return receipt
requested, postage prepaid, or (iii) by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last
known address or facsimile transmission number appearing on the books
of the Company maintained for such purpose.
(b) If to the Company at
Maxum Health Corp.
14850 Quorum Drive
Suite 400
Dallas, Texas 75240
FAX (214)716-7850
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged or sent by facsimile
with receipt electronically confirmed during normal business hours of
recipient, or three (3) Business Days after the same shall have been
deposited in the United States mail. Failure or delay in delivering copies
of any notice, demand, request, approval, declaration, delivery or other
communication to the person designated above to receive a copy shall in no
way adversely affect the effectiveness of such notice, demand, request,
approval, declaration, delivery or other communication.
16.3 Remedies. Each holder of Warrant and Warrant Stock, in addition
to being entitled to exercise all rights granted by law, including recovery
of damages, will be entitled to specific performance of its rights under
Section 9 of this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by
it of the provisions of Section 9 of this Warrant and hereby agrees to waive
the defense in any action for specific performance that a remedy at law would
be adequate.
16.4 Successors and Assigns. Subject to the provisions of Sections
3.1 and 9, this Warrant and the rights evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of all Holders from time to time of this
Warrant, and shall be enforceable by any such Holder.
16.5 Amendment. This Warrant and all other Warrants may be modified
or amended or the provisions hereof waived with the written consent of the
Company and the Holder.
16.6 Severability. Wherever possible, each provision of this Warrant
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder
of such provision or the remaining provisions of this Warrant.
16.7 Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a
part of this Warrant.
16.8 Governing Law; Service of Process. In all respects, including
all matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed and
enforced in accordance with, the laws of the state of the Company's
incorporation applicable to contracts made and performed in such state,
without regard to the principles thereof regarding conflict of laws, and any
applicable laws of the United States of America.
16.9 MUTUAL WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN
CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND
ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE COMPANY AND
HOLDER HEREOF WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE COMPANY AND HOLDER HEREOF DESIRE THAT THEIR DISPUTES
PERTAINING TO THE WARRANT BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE
JUDICIAL SYSTEM AND OF ARBITRATION, THE COMPANY AND HOLDER HEREOF WAIVE ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION SEEKING ENFORCEMENT OF THE PARTIES'
RIGHTS UNDER THIS WARRANT.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
MAXUM HEALTH CORP.
By:
Name: Douglas L. Drumwright
Title: Chief Executive Officer
Attest:
By:
Name:_____________________
Title:____________________
EXHIBIT A
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
The undersigned registered owner of the attached Warrant irrevocably
exercises such Warrant for the purchase of Shares of Common Stock of
Maxum Health Corp. and herewith makes payment therefor, all at the price and
on the terms and conditions specified in such Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the
name of and delivered to __________________________
whose address is
and, if such shares of Common Stock shall not include
all of the shares of Common Stock issuable as provided in such Warrant, that
a new Warrant of like tenor and date for the balance of the shares of Common
Stock issuable hereunder be delivered to the undersigned.
Name of Registered Owner)
(Signature of Registered Owner)
(Street Address)
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond
with the name as written upon the face of the attached
Warrant in every particular, without alteration or enlargement
or any change whatsoever.
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of the attached
Warrant hereby sells, assigns and transfers unto the Assignee named below all
of the rights of the undersigned under such Warrant, with respect to the
number of shares of Common Stock set forth below:
Name and Address of Assignee No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint
attorney-in-fact to register such transfer on the books of
Maxum Health Corp. maintained for the purpose, with full power of
substitution in the premises.
Dated: Print Name:
Signature:
Witness:
NOTICE: The signature on this assignment must correspond with the name as
written upon the face of the attached Warrant in every particular,
without alteration or enlargement or any change whatsoever.
EXHIBIT 99.3
PREFERRED STOCK ACQUISITION AGREEMENT
by and among
AMERICAN HEALTH SERVICES CORP.,
a Delaware corporation,
MAXUM HEALTH CORP.,
a Delaware corporation,
INSIGHT HEALTH SERVICES CORP.,
a Delaware corporation,
and
GENERAL ELECTRIC COMPANY,
a New York corporation
acting through
GE MEDICAL SYSTEMS
PREFERRED STOCK ACQUISITION AGREEMENT
THIS PREFERRED STOCK ACQUISITION AGREEMENT (this "AGREEMENT") is dated
as of February ___, 1996, by and among InSight Health Services Corp., a Delaware
corporation ("INSIGHT"), American Health Services Corp., a Delaware corporation
("AHS"), Maxum Health Corp., a Delaware corporation ("MAXUM"), and General
Electric Company, a New York corporation acting though GE Medical Systems ("GE
MEDICAL").
RECITALS
WHEREAS, InSight has been formed in connection with the proposed
business combination of AHS and Maxum;
WHEREAS, simultaneously with the execution of this Agreement, AHS,
Maxum and InSight are executing and delivering an agreement contemplating the
merger of two newly-formed wholly-owned subsidiaries of InSight with and into
AHS and Maxum (the "MERGER"), respectively, after which AHS and Maxum will be
wholly-owned subsidiaries of InSight;
WHEREAS, the Merger shall be consummated pursuant to the Agreement and
Plan of Merger in the form attached hereto as EXHIBIT A (the "MERGER
AGREEMENT");
WHEREAS, concurrent with the consummation of the transactions
contemplated herein, GE Medical will agree to certain financial accommodations
(the "DEBT RESTRUCTURING"), in exchange for the issuance of preferred stock as
provided herein pursuant to certain debt restructuring agreements in
substantially the form attached hereto as EXHIBIT B (the "DEBT RESTRUCTURING
AGREEMENTS");
WHEREAS, the Boards of Directors of AHS, Maxum and InSight have
approved the Merger, the Merger Agreement, the Debt Restructuring, the Debt
Restructuring Agreements and GE Medical's acquisition of the preferred stock of
AHS and Maxum upon the terms and subject to the conditions set forth herein;
WHEREAS, in accordance with the terms, conditions and provisions of
this Agreement, AHS desires to sell to GE Medical, and GE Medical desires to
acquire from AHS, an aggregate of 1,000,000 shares of Series C Preferred Stock
of AHS (the "AHS SHARES");
WHEREAS, in accordance with the terms, conditions and provisions of
this Agreement, Maxum desires to sell to GE Medical, and GE Medical desires to
acquire from Maxum, an aggregate of 15,000 shares of Series B Preferred Stock of
Maxum (the "MAXUM SHARES"); and
WHEREAS, in accordance with the terms, conditions and provisions of
the Merger Agreement, immediately after the consummation of the transactions
contemplated by this Agreement and the Debt Restructuring Agreements and as a
condition subsequent to GE Medical's acquisition of the AHS Shares and the Maxum
Shares hereunder and the consummation of the transactions contemplated by the
Debt Restructuring Agreements, the Merger will occur and the AHS Shares and the
Maxum Shares will be exchanged for an aggregate of 2,501,760 shares of Series A
Convertible Preferred Stock of InSight (the "INSIGHT PREFERRED SHARES"), which
shall constitute all of the issued and outstanding shares of preferred stock of
InSight.
AGREEMENT
NOW, THEREFORE, with reference to the foregoing and in consideration
of and subject to the conditions, representations, warranties, covenants and
agreements contained in this Agreement, AHS, Maxum, InSight and GE Medical
hereby agree as follows:
ARTICLE 1
ACQUISITION OF PREFERRED STOCK
1.1 ACQUISITION AND ACQUISITION PRICE.
(a) Subject to the terms and conditions of this Agreement, at
the Closing (as such term is defined in SECTION 2.1 hereof), AHS shall issue to
GE Medical, and GE Medical shall acquire from AHS, the AHS Shares, constituting
in the aggregate (i) all of the then-issued and outstanding shares of preferred
stock of AHS (other than the Series B Convertible Preferred Stock of AHS (the
"AHS SERIES B SHARES")), and 48 percent of the then-issued and outstanding
shares of common stock of AHS (assuming the conversion of the AHS Shares and the
AHS Series B Shares into common stock of AHS), and (ii) upon the Merger
occurring immediately after such acquisition by GE Medical of the AHS Shares, 50
percent of the then-issued and outstanding InSight Preferred Shares and 24
percent of the then-issued and outstanding shares of common stock of InSight
(assuming the conversion of such InSight Preferred Shares into common stock of
InSight).
(b) Subject to the terms and conditions of this Agreement, at
the Closing, Maxum shall issue to GE Medical, and GE Medical shall acquire from
Maxum, the Maxum Shares, constituting in the aggregate as follows: (i) all of
the then-issued and outstanding shares of preferred stock of Maxum, and 48
percent of the then-issued and outstanding shares of common stock of Maxum
(assuming the conversion of the Maxum Shares into common stock of Maxum) and
(ii) upon the Merger occurring immediately after such acquisition by GE Medical
of the Maxum Shares, 50 percent of the then-issued and outstanding InSight
Preferred Shares, and 24 percent of the then-issued and outstanding shares of
common stock of InSight (assuming the conversion of the InSight Preferred Shares
into common stock of InSight).
1.2 CONSIDERATION.
(a) At the Closing, AHS agrees to issue the AHS Shares to GE
Medical, and GE Medical agrees to acquire from AHS the AHS Shares, in exchange
for GE Medical's agreement to the Debt Restructuring pursuant to the terms,
conditions and provisions set forth in the Debt Restructuring Agreements.
(b) At the Closing, Maxum agrees to issue the Maxum Shares to GE
Medical, and GE Medical agrees to acquire from Maxum the Maxum Shares, in
exchange for GE Medical's agreement to the Debt Restructuring pursuant to the
terms, conditions and provisions set forth in the Debt Restructuring Agreements.
1.3 RIGHTS, PREFERENCES AND PRIVILEGES OF PREFERRED STOCK.
(a) The rights, preferences and privileges of the AHS Shares are
set forth in the form of Certificate of Designation attached hereto as EXHIBIT C
(the "AHS CERTIFICATE OF DESIGNATION").
(b) The rights, preferences and privileges of the Maxum Shares
are set forth in the form of Certificate of Designation attached hereto as
EXHIBIT D (the "MAXUM CERTIFICATE OF DESIGNATION").
(c) The rights, preferences and privileges of the InSight
Preferred Shares are set forth in the form of Certificate of Incorporation
attached hereto as EXHIBIT E (the "INSIGHT CERTIFICATE OF INCORPORATION").
ARTICLE 2
CLOSING
2.1 TIME AND PLACE.
(a) The consummation of the transactions described in ARTICLE 1
hereof (the "CLOSING") will be held at the offices of McDermott, Will & Emery,
located at 2049 Century Park East, 34th Floor, Los Angeles, California, at 1:00
p.m. California time, as soon as practicable after the meetings of stockholders
of AHS and Maxum, respectively, referenced in SECTION 3.8, or at such other time
and place as shall be mutually agreed upon by AHS, Maxum, InSight and GE
Medical. The date of the Closing is referred to herein as the "CLOSING DATE".
The consummation of the transactions contemplated by SECTION 1.2 shall be deemed
to take place immediately prior to the effectiveness of the Merger.
(b) In the event that the Merger does not occur immediately
after the consummation of the transactions contemplated by this Agreement and
the Debt Restructuring Agreements and as a condition subsequent to GE Medical's
acquisition of the AHS Shares and the Maxum Shares, the transactions
contemplated by this Agreement and the Debt Restructuring Agreements shall be
automatically and immediately rescinded.
2.2 DELIVERIES. At the Closing, AHS, Maxum, InSight and GE Medical
shall deliver, or cause to be delivered, such instruments and other documents as
may be reasonably necessary to carry out the transactions contemplated by this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
and the Merger Agreement, and to comply with the terms hereof and thereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES REGARDING AHS
As used in this Agreement (I) the term "MATERIAL ADVERSE EFFECT"
means, with respect to a party, a material adverse effect on the business,
assets, results of operations, financial condition or prospects of such party
and its subsidiaries, taken as a whole, or in the ability of such party to
perform its obligations hereunder, and (II) the term "SUBSIDIARY" when used with
respect to any party means any corporation or other organization, whether
incorporated or unincorporated, of which such party or any other subsidiary of
such party is a general partner or of which at least a majority of the
securities or other interests having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporations or other organizations is directly
or indirectly owned or controlled by such party or by any one or more of such
subsidiaries.
AHS represents and warrants to GE Medical that, with respect to itself
and each of its subsidiaries, the statements contained in this ARTICLE 3 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing
Date were substituted for the date of this Agreement throughout this ARTICLE 3),
except as set forth in AHS' disclosure schedule attached hereto as ANNEX I (the
"AHS DISCLOSURE SCHEDULE"). Nothing in the AHS Disclosure Schedule shall be
deemed adequate to disclose an exception to a specific representation or
warranty made herein, however, unless such exception is identified to the
specific representation and warranty to which such exception applies (and not
generally to all representations and warranties) in paragraphs corresponding to
the lettered and numbered Sections contained in this ARTICLE 3. Without
limiting the generality of the foregoing, the mere listing (or inclusion of a
copy) of a document or other item shall not be deemed adequate to disclose an
exception to a representation or warranty made herein (unless the representation
or warranty has to do with the existence of the document or other item
itself).
In accordance therewith, AHS represents and warrants to GE Medical,
with respect to itself and its subsidiaries, as follows:
3.1 ORGANIZATION. Each of AHS and its subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (b) has the power to carry on its business as it
is now being conducted or presently proposed to be conducted and (c) is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect.
3.2 CAPITALIZATION. As of the date hereof, the authorized capital
stock of AHS consists of (a) 25,000,000 shares of common stock, par value $0.03
per share, of which 9,713,647 shares are issued and outstanding, and (b)
5,000,000 shares of preferred stock, par value $0.03 per share, of which
37,837.83 shares (designated as Series B Preferred Stock) are issued and
outstanding. All of the issued and outstanding shares of capital stock of AHS
are validly issued, fully paid and nonassessable and free of preemptive rights
or similar rights created by statute, the Certificate of Incorporation or Bylaws
of AHS, or any agreement by which AHS or any of its subsidiaries is a party or
to which AHS or any of its subsidiaries is bound. AHS has reserved 1,035,000
shares of its common stock for issuance to directors, employees and consultants
or other persons under stock plans or arrangements, of which 1,015,000 shares
are subject to outstanding options as of the date hereof. Except as provided in
this SECTION 3.2, there are not any (a) shares of capital stock of AHS issued or
outstanding or any options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating AHS to issue, transfer
or sell any shares of its capital stock or (b) issued and outstanding bonds,
debentures, notes or other indebtedness having the right to vote (or convertible
into or exercisable for securities having the right to vote) on any matters on
which stockholders of AHS may vote.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. AHS has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by AHS and
the consummation by AHS of the transactions contemplated by this Agreement, the
Debt Restructuring, the Debt Restructuring Agreements, the Merger and the Merger
Agreement have been duly authorized by the Board of Directors of AHS, and,
except for approval by the requisite votes cast by the stockholders of AHS with
respect to the Merger, no other corporate proceedings on the part of AHS are
necessary to approve this Agreement, the Debt Restructuring, the Debt
Restructuring Agreements, the Merger or the Merger Agreement, or the
transactions contemplated hereby and thereby.
3.4 VALIDITY. This Agreement has been duly executed and delivered by
AHS and is the legal, valid and binding obligation of AHS, enforceable in
accordance with its terms.
3.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Securities Act of 1933, as amended (the "SECURITIES ACT"),
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or state
securities or blue sky laws, no filing with, and no permit, authorization,
consent or approval of, any governmental body or authority is necessary for the
consummation by AHS of the transactions contemplated by this Agreement, the Debt
Restructuring, the Debt Restructuring Agreements, the Merger or the Merger
Agreement, or the transactions contemplated hereby and thereby. Neither the
execution and delivery of this Agreement by AHS nor the consummation by AHS of
this Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the
Merger or the Merger Agreement, or the transactions contemplated hereby and
thereby will (a) result in any breach of the Certificate of Incorporation or
Bylaws of AHS, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which AHS or any of its
subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, except as would not have a Material Adverse Effect, or (c)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to AHS, any of its subsidiaries or any of their properties or assets,
except for violations, breaches or defaults that would not have a Material
Adverse Effect.
3.6 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1994, AHS has
filed all reports required to be filed by it with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act, including, without
limitation, an Annual Report on Form 10-K for the year ended December 31, 1994
(collectively and as amended through the Closing Date, the "AHS SEC REPORTS"),
and has previously furnished or made available to GE Medical true and complete
copies of all of the AHS SEC Reports. None of the AHS SEC Reports, as of their
respective dates, contained any untrue statement of a material fact or omitted
to state 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. Each of the balance sheets (including the related notes)
included in the AHS SEC Reports fairly presents in all material respects the
consolidated financial position of AHS and its subsidiaries as of the respective
dates thereof, and the other related statements (including the related notes)
included therein fairly present in all material respects the results of
operations and cash flows of AHS and its subsidiaries for the respective periods
or as of the respective dates set forth therein, all in conformity with
generally accepted accounting principles ("GAAP"), except as otherwise noted
therein and subject, in the case of the unaudited interim financial statements,
to normal year-end adjustments and any other adjustments described therein and
the absence of any notes thereto.
3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994,
neither AHS nor any of its subsidiaries has:
(a) Taken any of the actions set forth in clauses (E) through
(O) of SECTION 9.1;
(b) Incurred any liability material to AHS and its subsidiaries
on a consolidated basis, except in the ordinary course of its business,
consistent with past practices;
(c) Suffered a Material Adverse Effect; or
(d) Conducted its business and operations other than in the
ordinary course of business and consistent with past practices.
3.8 INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION STATEMENT.
None of the information to be supplied by AHS to be included in (a) the
Registration Statement on Form S-4 to be filed with the SEC by InSight under the
Securities Act for the purpose of registering the common stock of InSight (and,
if required, the InSight Preferred Shares) to be issued in connection with the
consummation of the Merger (the "REGISTRATION STATEMENT") and (b) the joint
proxy statement to be distributed in connection with the meetings of
stockholders of AHS and Maxum to vote upon the Merger (the "PROXY STATEMENT"),
will:
(a) in the case of the Registration Statement, at the time it
becomes effective and at the Closing,
(b) in the case of the Proxy Statement or any amendments thereof
or supplements thereto, at the time of the mailing of the Proxy Statement
and any amendments or supplements thereto, and
(c) in either case, at the time of the meeting of stockholders
of AHS to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
promulgated thereunder. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated thereunder.
3.9 LITIGATION. Except as, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect:
(a) There is no action, suit, judicial or administrative
proceeding, arbitration or investigation pending or, to the knowledge of
AHS, threatened against or involving AHS or any of its subsidiaries, or any
of their properties or rights, before any court, arbitrator, or
administrative or governmental body;
(b) There is no judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency or instrumentality,
or arbitrator outstanding against AHS or any of its subsidiaries; and
(c) Neither AHS not its subsidiaries are in violation of any
term of any judgments, decrees, injunctions or orders outstanding against
them.
(d) Included in the AHS Disclosure Schedule is a true and
complete description of all litigation, actions, suits, judicial and
administrative proceedings, arbitrations, investigations (as to which AHS
is aware), judgments, decrees, injunctions and orders pending or, to the
knowledge of AHS, threatened against or involving AHS or any of its
subsidiaries, or any of their respective properties or rights.
3.10 CONTRACTS. (a) Each of the contracts, instruments,
mortgages, notes, security agreements, leases, agreements and understandings,
whether written or oral, to which AHS or any of its subsidiaries is a party or
that relates to or affects the assets or operations of AHS or any of its
subsidiaries or to which AHS or any of its subsidiaries, or their respective
assets or operations may be bound or subject, is a valid and binding obligation
of AHS and in full force and effect (with respect to AHS or such subsidiary) in
accordance with its terms, except for where the failure to be in full force and
effect could not, in the aggregate, have a Material Adverse Effect. There are
no existing defaults by AHS or any of its subsidiaries thereunder or, to the
knowledge of AHS, by any other party thereto, which defaults, in the aggregate,
would have a Material Adverse Effect; and, no event of default has occurred, and
no event, condition or occurrence exists, that (whether with or without notice,
lapse of time or the happening or occurrence of any other event) would
constitute a default by AHS or any of its subsidiaries thereunder which default
would, in the aggregate, have a Material Adverse Effect.
(b) Except for this Agreement, neither AHS nor any of its
subsidiaries is a party to any oral or written (i) consulting agreement with an
individual not terminable on less than 60 calendar days notice and involving the
payment of more than $50,000 per annum, (ii) joint venture agreement, (iii) non-
competition or similar agreement that restricts AHS or any of its subsidiaries
from engaging in one or more specified lines of business, except for agreements
entered into in the ordinary course of business which could not have a Material
Adverse Effect, (iv) agreement with any executive officer or other employee of
AHS, or any of its subsidiaries, the benefits of which are contingent upon, or
the terms of which may be materially altered by, the occurrence of a transaction
involving AHS of the nature contemplated by this Agreement, the Debt
Restructuring, the Debt Restructuring Agreements, the Merger or the Merger
Agreement, or the transactions contemplated hereby and thereby, and which
provides for the payment of in excess of $50,000, (v) agreement with respect to
any executive officer of AHS or any of its subsidiaries providing any term of
employment beyond one year or compensation guaranty in excess of $50,000 per
annum or (vi) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, the Debt Restructuring, the Debt Restructuring Agreements,
the Merger or the Merger Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
or the Merger Agreement.
3.11 EMPLOYEE BENEFIT PLANS. (a) Included in the AHS Disclosure
Schedule is a true and complete list of each written or formal employee benefit
plan (including, without limitation, any "employee benefit plan" as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), policy or agreement that is maintained by AHS or any of its
subsidiaries (all of the foregoing, the "AHS BENEFIT PLANS"), or is or was
contributed to by AHS or pursuant to which AHS (or any trade or business,
whether or not incorporated (an "AHS ERISA AFFILIATE"), which together with AHS
would be deemed a "single employer" within the meaning of Section 4001 of ERISA)
is still potentially liable for payments, benefits or claims. A copy of each
AHS Benefit Plan as currently in effect and, if applicable, the most recent
Annual Report, Actuarial Report or Valuation, Summary Plan Description, Trust
Agreement and a Determination Letter issued by the IRS for each AHS Benefit Plan
have heretofore been delivered to GE Medical. No AHS Benefit Plan (including
any "multiemployer plan," as defined in Section 3(37) of ERISA) was or is
subject to Title IV of ERISA or Section 412 of the Internal Revenue Code of
1986, as amended (the "CODE").
(b) Each of the AHS Benefit Plans that is subject to ERISA is in
substantial compliance with ERISA. Each of the AHS Benefit Plans intended to be
"qualified" within the meaning of Section 401(a) of the Code is so qualified.
No event has occurred, and to the knowledge of AHS, no condition or set of
circumstances exists, in connection with which AHS or any AHS ERISA Affiliate is
or could be subject to liability (except liability for benefit claims and
funding obligations payable in the ordinary course of business) under ERISA, the
Code or any other applicable law with respect to any AHS Benefit Plan.
(c) All contributions and other amounts payable by AHS or any of
its subsidiaries through September 30, 1995, with respect to each AHS Benefit
Plan in respect of current or prior plan years have been either paid or accrued
on the most recent financial statements of AHS. Any contributions or other
amounts payable by AHS or any of its subsidiaries for periods between September
30, 1995, and the Closing with respect to each AHS Benefit Plan in respect of
current or prior plan years have been or will be either paid or accrued in the
normal course of business on the books and records of AHS at or prior to the
Closing. There are no pending, or, to the knowledge of AHS, threatened or
anticipated claims (other than routine claims for benefits which will not, in
the aggregate, have a Material Adverse Effect) by or on behalf of or against any
of the AHS Benefit Plans or any trusts or other funding vehicles related
thereto.
(d) No AHS Benefit Plan (other than general employment policies
and agreements) provides benefits, including without limitation, death or
medical benefits (whether or not insured), with respect to current or former
employees for periods extending beyond their retirement or other termination of
service (other than (i) coverage mandated by Part 6 of Subtitle B of Title I of
ERISA, Section 4980B of the Code or any comparable state law, (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of AHS or the AHS ERISA Affiliates, or (iv)
benefits the full cost of which is borne by the current or former employee or
his or her beneficiary).
3.12 TAXES. For the purposes of this SECTION 3.12, the term "TAX"
shall include all taxes, charges, withholdings, fees, levies, penalties,
additions, interest or other assessments imposed by any United States federal,
state or local authority or any other taxing authority on AHS or any of the AHS
Tax Affiliates (as defined in this SECTION 3.12) as to their respective income,
profit, franchise, gross receipts, payroll, sales, employment, worker's
compensation, use, property, withholding, excise, occupancy, environmental, and
other taxes, duties or assessments of any nature whatsoever. AHS has filed or
caused to be filed timely all material federal, state, local and foreign tax
returns required to be filed by AHS and any member of its consolidated,
combined, unitary or similar group (each such member, an "AHS TAX AFFILIATE").
Such returns, reports and other information are accurate and complete in all
material respects. AHS has paid or caused to be paid, or has made adequate
provision or set up an adequate accrual or reserve for the payment of, all taxes
shown to be due in respect of the periods for which returns are due, and has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the period subsequent to the last of such periods in respect of
which any such accrual or reserve is required. Neither AHS nor any of the AHS
Tax Affiliates has any material liability for taxes in excess of the amount so
paid or accruals or reserves so established. Neither AHS nor any of the AHS Tax
Affiliates is delinquent in the payment of any tax in excess of the amount
reserved or provided therefor, and no deficiencies for any tax, assessment or
governmental charge in excess of the amount reserved or provided therefor have
been threatened, claimed, proposed or assessed. No waiver or extension of time
to assess any taxes has been given or requested.
3.13 COMPLIANCE WITH APPLICABLE LAW. AHS and each of its subsidiaries
holds all licenses, franchises, permits, variances, exemptions, orders,
approvals and authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of AHS and its subsidiaries is not being
conducted in violation of, any provision of any federal, state, local or foreign
statute, law, ordinance, rule, regulation, judgment, decree, order, concession,
grant, franchise, permit or license or other governmental authorization or
approval applicable to AHS or any of its subsidiaries, except to the extent that
the failure to hold any such licenses, franchises, permits or authorizations, or
any such violation, would not, in the aggregate, have a Material Adverse Effect.
3.14 SUBSIDIARIES. Exhibit 22.1 to the most recent Form 10-K included
in the AHS SEC Reports lists all the subsidiaries of AHS and indicates for each
subsidiary of AHS as of such date the jurisdiction of incorporation or
organization thereof. All of the outstanding shares of capital stock or other
equity interests of each of the subsidiaries of AHS are (a) held by AHS or one
of its wholly-owned subsidiaries, (b) fully paid and nonassessable, and (c)
owned by AHS or one of its wholly-owned subsidiaries free and clear of any
claim, lien or encumbrance.
3.15 LABOR AND EMPLOYMENT MATTERS. AHS and each of its subsidiaries
(a) are and have been in compliance in all material respects with all applicable
laws respecting employment and employment practices and terms and conditions of
employment and wages and hours (including, without limitation, the Immigration
Reform and Control Act, the Worker Adjustment and Retraining Notification Act
and such laws respecting employment discrimination, equal opportunity,
affirmative action, worker's compensation, occupational safety and health
requirements and unemployment insurance and related matters) and (b) are not
engaged in and have not engaged in any unfair labor practice. No investigation
or review by or before any governmental entity concerning any violation of any
such law is pending or, to the knowledge of AHS, threatened or has occurred
during the last three years, and no governmental entity has provided any notice
to AHS or any of its subsidiaries or otherwise asserted an intention to conduct
any such investigation. There is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against AHS or any of its subsidiaries. No union
representation question or union organizational activity exists respecting the
employees of AHS or any of its subsidiaries. No collective bargaining agreement
exists which is binding on AHS or any of its subsidiaries. Neither AHS nor any
of its subsidiaries has experienced any material work stoppage or other material
labor difficulty. In the event of termination of the employment of any of the
current officers, directors, employees or agents of AHS or any of its
subsidiaries, neither AHS nor any of its subsidiaries will, pursuant to any
agreement or by reason of anything done prior to the Closing be liable to any of
such officers, directors, employees or agents for so-called "severance pay" or
any other similar payments or benefits, including, without limitation, post-
employment health care benefits (other than pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA")) or insurance benefits.
3.16 INSURANCE. AHS and each of its subsidiaries are insured by
insurers reasonably believed by AHS to be of recognized financial responsibility
against such losses and risks and in such amounts as are customary in the
businesses in which they are engaged. All material policies of insurance and
fidelity or surety bonds insuring AHS or any of its subsidiaries or their
respective businesses, assets, employees, officers and directors are in full
force and effect. There are no material claims by AHS or any of its
subsidiaries under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights clause.
3.17 CONTRACTS WITH PHYSICIANS, HOSPITALS, HMOS AND THIRD PARTY
PROVIDERS. AHS has made available to representatives of GE Medical copies (or
in the case where no written documentation exists, a summary) of all outstanding
contracts, partnerships, joint ventures and other arrangements or understandings
(written or oral) between (a) AHS or any of its subsidiaries and (b) any
physician, hospital, health maintenance organization or other managed care
organization, or other third-party provider relating to the provision of medical
or consulting services, treatments, patient referrals or similar activities.
3.18 ABSENCE OF UNDISCLOSED LIABILITIES. Neither AHS nor any of its
subsidiaries is obligated under or subject to any indebtedness, duty,
responsibility, liability or obligation of any nature, whether absolute,
accrued, contingent or otherwise, other than (a) in the ordinary course of
business on terms and conditions and in amounts consistent with past practices
of AHS and in no event on terms atypical to those of other companies in the same
or a similar industry or (b) as disclosed in the financial statements included
in the AHS SEC Reports.
3.19 ENVIRONMENTAL MATTERS. Except as could not have a Material
Adverse Effect, the ownership, use and operation by AHS and its subsidiaries,
and each of their predecessors, of each facility used by AHS in the operation of
its business has been and is in compliance with all federal, state and local
environmental and anti-pollution laws and regulations, including (a) the
Resource Conservation and Recovery Act, as amended, and its implementing
regulations and all applicable state hazardous waste laws and regulations, (b)
the Clean Water Act, as amended, and its implementing regulations and all
applicable state effluent discharge laws and regulations, (c) the Clean Air Act,
as amended, and its implementing regulations and all applicable state air
emission laws and regulations and (d) all such laws and regulations concerning
particulate emissions, hazard communication, surface water pollution,
groundwater pollution, air pollution, solid wastes, hazardous wastes, storage,
handling, treatment, transportation, spills or other releases, or disposal of
any substance, material or waste, or exposure to or notification regarding any
substance, material or waste. No action, suit, proceeding, investigation,
complaint or charge exists for violation of any such laws, rules or regulations
and there is no meritorious basis therefor.
3.20 DISCLOSURE. The representations and warranties of AHS contained
in this Agreement and each certificate or other written statement delivered pur-
suant to this Agreement, the Debt Restructuring, the Debt Restructuring
Agreements, the Merger or the Merger Agreement and the transactions contemplated
hereby and thereby, are accurate, correct and complete, do not contain any
untrue statement of a material fact or, considered in the context in which
presented, omit to state a material fact necessary in order to make the
statements and information contained herein or therein not misleading. AHS is
not aware of any material information necessary to enable GE Medical to make an
informed investment decision to purchase the AHS Shares which has not been
expressly disclosed to GE Medical in writing. There is no fact which would
have, or in the future may have (so far as AHS can now foresee), a Material
Adverse Effect which has not been set forth or described in this Agreement or in
a certificate, exhibit or other written statement furnished to GE Medical in
connection herewith.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING MAXUM
Maxum represents and warrants to GE Medical that, with respect to
itself and each of its subsidiaries, the statements contained in this ARTICLE 4
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
ARTICLE 4), except as set forth in Maxum's disclosure schedule attached hereto
as ANNEX II (the "MAXUM DISCLOSURE SCHEDULE"). Nothing in the Maxum Disclosure
Schedule shall be deemed adequate to disclose an exception to a specific
representation or warranty made herein, however, unless such exception is
identified to the specific representation and warranty to which such exception
applies (and not generally to all representations and warranties) in paragraphs
corresponding to the lettered and numbered Sections contained in this ARTICLE
4. Without limiting the generality of the foregoing, the mere listing (or
inclusion of a copy) of a document or other item shall not be deemed
adequate to disclose an exception to a representation or warranty made
herein (unless the representation or warranty has to do with the existence
of the document or other item itself).
In accordance therewith, Maxum represents and warrants to GE Medical,
with respect to itself and its subsidiaries, as follows:
4.1 ORGANIZATION. Each of Maxum and its subsidiaries (a) is duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (b) has the power to carry on its business as it
is now being conducted or presently proposed to be conducted and (c) is duly
qualified to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except where the failure to be so
qualified will not have a Material Adverse Effect.
4.2 CAPITALIZATION. As of the date hereof, the authorized capital
stock of Maxum consists of (a) 10,000,000 shares of common stock, par value
$0.01 per share, 2,273,555 shares of which are issued and outstanding, and (b)
56,000 shares of preferred stock, par value $0.01 per share, none of which are
issued and outstanding. All of the issued and outstanding shares of capital
stock of Maxum are validly issued, fully paid and nonassessable and free of
preemptive rights or similar rights created by statute, the Certificate of
Incorporation or Bylaws of Maxum, or any agreement by which Maxum or any of its
subsidiaries is a party or to which Maxum or any of its subsidiaries is bound.
Maxum has reserved 1,037,500 shares of its common stock for issuance to
directors, employees and consultants or other persons under stock plans or
arrangements, of which 416,250 shares are subject to outstanding options as of
the date hereof. Except as provided in this SECTION 4.2, there are not any (a)
shares of capital stock of Maxum issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Maxum to issue, transfer or sell any shares of its
capital stock or (b) issued and outstanding bonds, debentures, notes or other
indebtedness having the right to vote (or convertible into or exercisable for
securities having the right to vote) on any matters on which stockholders of
Maxum may vote.
4.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Maxum has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by Maxum
and the consummation by Maxum of the transactions contemplated by this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
and the Merger Agreement have been duly authorized by the Board of Directors of
Maxum, and, except for approval by the requisite votes cast by the stockholders
of Maxum with respect to the Merger, no other corporate proceedings on the part
of Maxum are necessary to approve this Agreement, the Debt Restructuring, the
Debt Restructuring Agreements, the Merger or the Merger Agreement, or the
transactions contemplated hereby and thereby.
4.4 VALIDITY. This Agreement has been duly executed and delivered by
Maxum and is the legal, valid and binding obligation of Maxum, enforceable in
accordance with its terms.
4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Securities Act, the Exchange Act, or state securities or
blue sky laws, no filing with, and no permit, authorization, consent or approval
of, any governmental body or authority is necessary for the consummation by
Maxum of the transactions contemplated by this Agreement, the Debt
Restructuring, the Debt Restructuring Agreements, the Merger or the Merger
Agreement, or the transactions contemplated hereby and thereby. Neither the
execution and delivery of this Agreement by Maxum nor the consummation by Maxum
of this Agreement, the Debt Restructuring, the Debt Restructuring Agreements,
the Merger or the Merger Agreement, or the transactions contemplated hereby and
thereby will (a) result in any breach of the Certificate of Incorporation or
Bylaws of Maxum, (b) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which Maxum or any of
its subsidiaries is a party or by which any of them or any of their properties
or assets may be bound, except as would not have a Material Adverse Effect, or
(c) violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Maxum, any of its subsidiaries or any of their properties or
assets, except for violations, breaches or defaults that would not have a
Material Adverse Effect.
4.6 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1994, Maxum
has filed all reports required to be filed by it with the SEC pursuant to the
Exchange Act, including, without limitation, an Annual Report on Form 10-K for
the year ended December 31, 1994 (collectively and as amended through the
Closing Date, the "MAXUM SEC REPORTS"), and has previously furnished or made
available to GE Medical true and complete copies of all of the Maxum SEC
Reports. None of the Maxum SEC Reports, as of their respective dates, contained
any untrue statement of a material fact or omitted to state 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. Each of
the balance sheets (including the related notes) included in the Maxum SEC
Reports fairly presents in all material respects the consolidated financial
position of Maxum and its subsidiaries as of the respective dates thereof, and
the other related statements (including the related notes) included therein
fairly present in all material respects the results of operations and cash flows
of Maxum and its subsidiaries for the respective periods or as of the respective
dates set forth therein, all in conformity with GAAP, except as otherwise noted
therein and subject, in the case of the unaudited interim financial statements,
to normal year-end adjustments and any other adjustments described therein and
the absence of any notes thereto.
4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 1994,
neither Maxum nor any of its subsidiaries has:
(a) Taken any of the actions set forth in clauses (E) through
(O) of SECTION 9.1;
(b) Incurred any liability material to Maxum and its
subsidiaries on a consolidated basis, except in the ordinary course of its
business, consistent with past practices;
(c) Suffered a Material Adverse Effect; or
(d) Conducted its business and operations other than in the
ordinary course of business and consistent with past practices.
4.8 INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION STATEMENT.
None of the information to be supplied by Maxum to be included in the
Registration Statement and the Proxy Statement, will:
(a) in the case of the Registration Statement, at the time it
becomes effective and at the Closing,
(b) in the case of the Proxy Statement or any amendments thereof
or supplements thereto, at the time of the mailing of the Proxy Statement
and any amendments or supplements thereto, and
(c) in either case, at the time of the meeting of stockholders
of Maxum to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act, and the rules and
regulations promulgated thereunder. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations promulgated thereunder.
4.9 LITIGATION. Except as, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect:
(a) There is no action, suit, judicial or administrative
proceeding, arbitration or investigation pending or, to the knowledge of
Maxum, threatened against or involving Maxum or any of its subsidiaries, or
any of their properties or rights, before any court, arbitrator, or
administrative or governmental body;
(b) There is no judgment, decree, injunction, rule or order of
any court, governmental department, commission, agency or instrumentality,
or arbitrator outstanding against Maxum or any of its subsidiaries; and
(c) Neither Maxum not its subsidiaries are in violation of any
term of any judgments, decrees, injunctions or orders outstanding against
them.
(d) Included in the Maxum Disclosure Schedule is a true and
complete description of all litigation, actions, suits, judicial and
administrative proceedings, arbitrations, investigations (as to which Maxum
is aware), judgments, decrees, injunctions and orders pending, or, to the
knowledge of Maxum, threatened against or involving Maxum or any of its
subsidiaries, or any of their respective properties or rights.
4.10 CONTRACTS.
(a) Each of the contracts, instruments, mortgages, notes,
security agreements, leases, agreements and understandings, whether written or
oral, to which Maxum or any of its subsidiaries is a party or that relates to or
affects the assets or operations of Maxum or any of its subsidiaries or to which
Maxum or any of its subsidiaries or their respective assets or operations may be
bound or subject, is a valid and binding obligation of Maxum and in full force
and effect (with respect to Maxum or such subsidiary) in accordance with its
terms, except for where the failure to be in full force and effect could not, in
the aggregate, have a Material Adverse Effect. There are no existing defaults
by Maxum or any of its subsidiaries thereunder or, to the knowledge of Maxum, by
any other party thereto, which defaults, in the aggregate, would have a Material
Adverse Effect; and, no event of default has occurred, and no event, condition
or occurrence exists, that (whether with or without notice, lapse of time or the
happening or occurrence of any other event) would constitute a default by Maxum
or any of its subsidiaries thereunder which default would, in the aggregate,
have a Material Adverse Effect.
(b) Except for this Agreement, neither Maxum nor any of its
subsidiaries is a party to any oral or written (i) consulting agreement with an
individual not terminable on 60 calendar days or less notice involving the
payment of more than $50,000 per annum, in the case of any such agreement, (ii)
joint venture agreement, (iii) non-competition or similar agreement that
restricts Maxum or its subsidiaries from engaging in a line of business, except
for agreements entered into in the ordinary course of business which could not
have a Material Adverse Effect, (iv) agreement with any executive officer or
other employee of Maxum, or any of its subsidiaries, the benefits of which are
contingent upon, or the terms of which are materially altered by, the occurrence
of a transaction involving Maxum of the nature contemplated by this Agreement,
the Debt Restructuring, the Debt Restructuring Agreements, the Merger or the
Merger Agreement, or the transactions contemplated hereby and thereby, and which
provides for the payment of in excess of $50,000, (v) agreement with respect to
any executive officer of Maxum or any of its subsidiaries providing any term of
employment beyond one year or compensation guaranty in excess of $50,000 per
annum, or (vi) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement, the Debt Restructuring, the Debt Restructuring Agreements,
the Merger or the Merger Agreement, or the value of any of the benefits of which
will be calculated on the basis of any of the transactions contemplated by this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
or the Merger Agreement.
4.11 EMPLOYEE BENEFIT PLANS.
(a) Included in the Maxum Disclosure Schedule is a true and
complete list of each written or formal employee benefit plan (including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
ERISA), policy or agreement that is maintained by Maxum or any of its
subsidiaries (all of the foregoing, the "MAXUM BENEFIT PLANS"), or is or was
contributed to by Maxum or pursuant to which Maxum (or any trade or business,
whether or not incorporated (a "MAXUM ERISA AFFILIATE"), which together with
Maxum would be deemed a "single employer" within the meaning of Section 4001 of
ERISA) is still potentially liable for payments, benefits or claims. A copy of
each Maxum Benefit Plan as currently in effect and, if applicable, the most
recent Annual Report, Actuarial Report or Valuation, Summary Plan Description,
Trust Agreement and a Determination Letter issued by the IRS for each Maxum
Benefit Plan have heretofore been delivered to GE Medical. No Maxum Benefit
Plan (including any "multiemployer plan," as defined in Section 3(37) of ERISA)
was or is subject to Title IV of ERISA or Section 412 of the Code.
(b) Each of the Maxum Benefit Plans that is subject to ERISA is
in substantial compliance with ERISA. Each of the Maxum Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code is so
qualified. No event has occurred, and to the knowledge of Maxum, no condition
or set of circumstances exists, in connection with which Maxum or any Maxum
ERISA Affiliate is or could be subject to liability (except liability for
benefit claims and funding obligations payable in the ordinary course of
business) under ERISA, the Code or any other applicable law with respect to any
Maxum Benefit Plan.
(c) All contributions and other amounts payable by Maxum or any
of its subsidiaries through September 30, 1995, with respect to each Maxum
Benefit Plan in respect of current or prior plan years have been either paid or
accrued on the most recent financial statements of Maxum. Any contributions or
other amounts payable by Maxum or any of its subsidiaries for periods between
September 30, 1995, and the Closing with respect to each Maxum Benefit Plan in
respect of current or prior plan years have been or will be either paid or
accrued in the normal course of business on the books and records of Maxum at or
prior to the Closing. There are no pending, or, to the knowledge of Maxum,
threatened or anticipated claims (other than routine claims for benefits which
will not, in the aggregate, have a Material Adverse Effect) by or on behalf of
or against any of the Maxum Benefit Plans or any trusts or other funding
vehicles related thereto.
(d) No Maxum Benefit Plan (other than general employment
policies and agreements) provides benefits, including without limitation, death
or medical benefits (whether or not insured), with respect to current or former
employees for periods extending beyond their retirement or other termination of
service (other than (i) coverage mandated by Part 6 of Subtitle B of Title I of
ERISA, Section 4980B of the Code or any comparable state law, (ii) death
benefits or retirement benefits under any "employee pension plan," as that term
is defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of Maxum or the Maxum ERISA Affiliates, or
(iv) benefits the full cost of which is borne by the current or former employee
or his or her beneficiary).
4.12 TAXES. For the purposes of this SECTION 4.12, the term "TAX"
shall include all taxes, charges, withholdings, fees, levies, penalties,
additions, interest or other assessments imposed by any United States federal,
state or local authority or any other taxing authority on Maxum or any of the
Maxum Tax Affiliates (as defined in this SECTION 4.12) as to their respective
income, profit, franchise, gross receipts, payroll, sales, employment, worker's
compensation, use, property, withholding, excise, occupancy, environmental, and
other taxes, duties or assessments of any nature whatsoever. Maxum has filed or
caused to be filed timely all material federal, state, local and foreign tax
returns required to be filed by Maxum and any member of its consolidated,
combined, unitary or similar group (each such member, a "MAXUM TAX AFFILIATE").
Such returns, reports and other information are accurate and complete in all
material respects. Maxum has paid or caused to be paid or has made adequate
provision or set up an adequate accrual or reserve for the payment of, all taxes
shown to be due in respect of the periods for which returns are due, and has
established an adequate accrual or reserve for the payment of all taxes payable
in respect of the period subsequent to the last of such periods in respect of
which any such accrual or reserve is required. Neither Maxum nor any of the
Maxum Tax Affiliates has any material liability for taxes in excess of the
amount so paid or accruals or reserves so established. Neither Maxum nor any of
the Maxum Tax Affiliates is delinquent in the payment of any tax in excess of
the amount reserved or provided therefor, and no deficiencies for any tax,
assessment or governmental charge in excess of the amount reserved or provided
therefor have been threatened, claimed, proposed or assessed. No waiver or
extension of time to assess any taxes has been given or requested.
4.13 COMPLIANCE WITH APPLICABLE LAW. Maxum and each of its
subsidiaries holds all licenses, franchises, permits, variances, exemptions,
orders, approvals and authorizations necessary for the lawful conduct of its
business under and pursuant to, and the business of Maxum and its subsidiaries
is not being conducted in violation of, any provision of any federal, state,
local or foreign statute, law, ordinance, rule, regulation, judgment, decree,
order, concession, grant, franchise, permit or license or other governmental
authorization or approval applicable to Maxum or any of its subsidiaries, except
to the extent that the failure to hold any such licenses, franchises, permits or
authorizations, or any such violation, would not, in the aggregate, have a
Material Adverse Effect.
4.14 SUBSIDIARIES. Exhibit 22.1 to the most recent Form 10-K
included in the Maxum SEC Reports lists all the subsidiaries of Maxum and
indicates for each subsidiary of Maxum as of such date the jurisdiction of
incorporation or organization thereof. All of the outstanding shares of capital
stock or other equity interests of each of the subsidiaries of Maxum are (a)
held by Maxum or one of its wholly-owned subsidiaries, (b) fully paid and
nonassessable, and (c) owned by Maxum or one of its wholly-owned subsidiaries
free and clear of any claim, lien or encumbrance.
4.15 LABOR AND EMPLOYMENT MATTERS. Maxum and its subsidiaries (a)
are and have been in compliance in all material respects with all applicable
laws respecting employment and employment practices, terms and conditions of
employment and wages and hours, including, without limitation, the Immigration
Reform and Control Act, the Worker Adjustment and Retraining Notification Act,
and such laws respecting employment discrimination, equal opportunity,
affirmative action, worker's compensation, occupational safety and health
requirements and unemployment insurance and related matters, and (b) are not
engaged in and have not engaged in any unfair labor practice. No investigation
or review by or before any governmental entity concerning any violation of any
such law is pending or, to the knowledge of Maxum, threatened, nor has any such
investigation occurred during the last three years, and no governmental entity
has provided any notice to Maxum or any of its subsidiaries or otherwise
asserted an intention to conduct any such investigation. There is no labor
strike, dispute, slowdown or stoppage actually pending or threatened against
Maxum or any of its subsidiaries. No union representation question or union
organizational activity exists respecting the employees of Maxum or any of its
subsidiaries. No collective bargaining agreement exists which is binding on
Maxum or any of its subsidiaries. Neither Maxum nor any of its subsidiaries has
experienced any material work stoppage or other material labor difficulty. In
the event of termination of the employment of any of the current officers,
directors, employees or agents of Maxum or any of its subsidiaries, neither
Maxum nor any of its subsidiaries will, pursuant to any agreement or by reason
of anything done prior to the Closing be liable to any of such officers,
directors, employees or agents for so-called "severance pay" or any other
similar payments or benefits, including, without limitation, post-employment
health care benefits (other than pursuant to COBRA) or insurance benefits.
4.16 INSURANCE. Maxum and each of its subsidiaries are insured by
insurers reasonably believed by Maxum to be of recognized financial
responsibility against such losses and risks and in such amounts as are
customary in the businesses in which they are engaged. All material policies of
insurance and fidelity or surety bonds insuring Maxum or any of its subsidiaries
or their respective businesses, assets, employees, officers and directors are in
full force and effect. There are no material claims by Maxum or any of its
subsidiaries under any such policy or instrument as to which any insurance
company is denying liability or defending under a reservation of rights clause.
4.17 CONTRACTS WITH PHYSICIANS, HOSPITALS, HMOS AND THIRD PARTY
PROVIDERS. Maxum has made available to representatives of GE Medical copies (or
in the case where no written documentation exists, a summary) of all outstanding
contracts, partnerships, joint ventures and other arrangements or understandings
(written or oral) between (a) Maxum or any of its subsidiaries and (b) any
physician, hospital, health maintenance organization or other managed care
organization, or other third-party provider relating to the provision of medical
or consulting services, treatments, patient referrals or similar activities.
4.18 ABSENCE OF UNDISCLOSED LIABILITIES. Neither Maxum nor any of
its subsidiaries is obligated under or subject to any indebtedness, duty,
responsibility, liability or obligation of any nature, whether absolute,
accrued, contingent or otherwise, other than (a) in the ordinary course of
business on terms and conditions and in amounts consistent with past practices
of Maxum and in no event on terms atypical to those of other companies in the
same or a similar industry or (b) as disclosed in the financial statements
included in the Maxum SEC Reports.
4.19 ENVIRONMENTAL MATTERS. Except as would not have a Material
Adverse Effect, the ownership, use and operation by Maxum and its subsidiaries,
and each of their predecessors, of each facility used by Maxum in the operation
of its business has been and is in compliance with all federal, state and local
environmental and anti-pollution laws and regulations, including (a) the
Resource Conservation and Recovery Act, as amended, and its implementing
regulations and all applicable state hazardous waste laws and regulations, (b)
the Clean Water Act, as amended, and its implementing regulations and all
applicable state effluent discharge laws and regulations, (c) the Clean Air Act,
as amended, and its implementing regulations, and (d) all applicable state air
emission laws and regulations; and all such laws and regulations concerning
particulate emissions, hazard communication, surface water pollution,
groundwater pollution, air pollution, solid wastes, hazardous wastes, storage,
handling, treatment, transportation, spills or other releases, or disposal of
any substance, material or waste, or exposure to or notification regarding any
substance, material or waste. No action, suit, proceeding, investigation,
complaint or charge exists for violation of any such laws, rules or regulations
and there is no meritorious basis therefor.
4.20 DISCLOSURE. The representations and warranties of Maxum
contained in this Agreement and each certificate or other written statement
delivered pursuant to this Agreement, the Debt Restructuring, the Debt
Restructuring Agreements, the Merger or the Merger Agreement and the
transactions contemplated hereby and thereby, are accurate, correct and
complete, do not contain any untrue statement of a material fact or, considered
in the context in which presented, omit to state a material fact necessary in
order to make the statements and information contained herein or therein not
misleading. Maxum is not aware of any material information necessary to enable
GE Medical to make an informed investment decision to purchase the Maxum Shares
which has not been expressly disclosed to GE Medical in writing. There is no
fact which would have, or in the future may have (so far as Maxum can now
foresee), a Material Adverse Effect which has not been set forth or described in
this Agreement or in a certificate, exhibit or other written statement furnished
to GE Medical in connection herewith.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING INSIGHT
AHS, Maxum and InSight (collectively, the "INSIGHT PARTIES"), jointly
and severally, represent and warrant to GE Medical as follows:
5.1 ORGANIZATION. Each of InSight and its subsidiaries (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, (b) has the corporate power to carry on its business
as it is now being conducted or presently proposed to be conducted and (c) is
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary, except
where the failure to be so qualified will not have a Material Adverse Effect.
5.2 CAPITALIZATION. The authorized capital stock of InSight consists
of (a) 25,000,000 shares of common stock, par value $0.001 per share, 1,000 of
which are issued and outstanding, and (b) 3,500,000 shares of preferred stock,
par value $0.001 per share, of which 2,501,760 shares have been designated
Series A Convertible Preferred Stock and none of which are issued and
outstanding. InSight has reserved (a) 1,303,000 shares of its common stock for
issuance to directors, employees and consultants or other persons under stock
plans or arrangements, of which an aggregate of 350,566.51 shares are subject to
outstanding options granted by AHS and Maxum which will be assumed by InSight in
connection with the consummation of the Merger and (b) an aggregate of 70,000
shares of its common stock for issuance upon exercise of warrants issued or
issuable to certain stockholders of AHS. Except as provided in this SECTION
5.2, there are not (a) any shares of capital stock of InSight issued or
outstanding or any options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating InSight to issue,
transfer or sell any shares of its capital stock or (b) any issued and
outstanding bonds, debentures, notes or other indebtedness having the right to
vote (or convertible into or exercisable for securities having the right to
vote) on any matters on which stockholders of InSight may vote.
5.3 AUTHORITY RELATIVE TO THIS AGREEMENT. InSight has the corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by InSight
and the consummation by InSight of the transactions contemplated by this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
and the Merger Agreements have been duly authorized by the Board of Directors of
InSight, and, except for approval by the requisite vote of the stockholders of
InSight with respect to the Merger, no other corporate proceedings on the part
of InSight are necessary to approve this Agreement, the Debt Restructuring, the
Debt Restructuring Agreements, the Merger or the Merger Agreement, or the
transactions contemplated hereby or thereby.
5.4 VALIDITY. This Agreement has been duly executed and delivered by
InSight and is the legal, valid and binding obligation of InSight, enforceable
in accordance with its terms.
5.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Except for applicable
requirements of the Securities Act, the Exchange Act, state securities or blue
sky laws, no filing with, and no permit, authorization, consent or approval of,
any governmental body or authority is necessary for the consummation by InSight
of the transactions contemplated by this Agreement, the Debt Restructuring, the
Debt Restructuring Agreements, the Merger, the Merger Agreement or the
transactions contemplated hereby or thereby. Neither the execution and delivery
of this Agreement by InSight nor the consummation by InSight of this Agreement,
the Debt Restructuring, the Debt Restructuring Agreements, the Merger the Merger
Agreement or the transactions contemplated hereby or thereby, will (a) result in
any breach of the Certificate of Incorporation or Bylaws of InSight, (b) result
in a violation or breach of, or constitute (with or without due notice or lapse
of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which InSight or any of its subsidiaries is a party
or by which InSight or any of its subsidiaries or any of their respective
properties or assets may be bound, except as would not have a Material Adverse
Effect, or (c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to InSight or any of its subsidiaries or any of their
respective properties or assets, except for violations, breaches and defaults
that would not, in the aggregate, have a Material Adverse Effect.
5.6 SUBSIDIARIES. All of the outstanding shares of capital stock and
other equity interests of each of the subsidiaries of InSight are (a) held by
InSight, (b) fully paid and nonassessable, and (c) owned by InSight free and
clear of any claim, lien or encumbrance.
5.7 NO ASSETS; NO ACTIVITIES. InSight has no material assets or
liabilities and has not engaged in any activities except in connection with and
furtherance of the transactions contemplated by this Agreement, the Merger
Agreement and the Debt Restructuring Agreements.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Neither InSight nor any of
its subsidiaries has conducted any business or operations, except with respect
to the consummation of the Merger and the transactions related thereto.
5.9 DISCLOSURE. The representations and warranties of InSight
contained in this Agreement and each certificate and other written statement
delivered in connection with this Agreement, the Debt Restructuring, the Debt
Restructuring Agreements, the Merger and the Merger Agreement, and the
transactions contemplated hereby and thereby (a) are accurate, correct and
complete and (b) do not contain any untrue statement of a material fact or,
considered in the context in which presented, omit to state a material fact
necessary in order to make the statements and information contained herein or
therein not misleading. InSight is not aware of any material information
necessary to enable GE Medical to make an informed investment decision to
acquire the AHS Shares and the Maxum Shares which has not been expressly
disclosed to GE Medical in writing. There is no fact which would have, or in
the future may have (so far as InSight can now foresee), a Material Adverse
Effect which has not been set forth or described in this Agreement or in a
certificate, exhibit or other written statement furnished to GE Medical in
connection herewith.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF GE MEDICAL
GE Medical represents and warrants to the InSight Parties as follows:
6.1 AUTHORITY RELATIVE TO THIS AGREEMENT. GE Medical has the power
and authority to enter into this Agreement and to carry out its obligations
hereunder.
6.2 VALIDITY. This Agreement has been duly executed and delivered by
GE Medical and is the legal, valid and binding obligation of GE Medical,
enforceable in accordance with its terms.
6.3 AUTHORITY. GE Medical has full legal right, power and authority,
without the consent of any other person, to execute and deliver this Agreement
and to carry out the transactions contemplated hereby. All actions required to
be taken by GE Medical to authorize the execution, delivery and performance of
this Agreement and all transactions contemplated hereby have been duly and
properly taken.
6.4 INVESTMENT EXPERIENCE. GE Medical acknowledges that it can bear
the economic risk of its investment and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment in the AHS Shares and the Maxum Shares.
6.5 RESTRICTED SECURITIES. GE Medical understands that the AHS
Shares and Maxum Shares may be characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from AHS and
Maxum, respectively, in a transaction not involving a public offering, and that
under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances.
6.6 LEGENDS. GE Medical understands that the certificates evidencing
the AHS Shares and the Maxum Shares may bear any legend required by applicable
state securities laws and the following legend:
"These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for
sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
ARTICLE 7
CONDITIONS PRECEDENT TO OBLIGATIONS OF GE MEDICAL
The obligations of GE Medical to consummate the transactions
contemplated by this Agreement are subject to fulfillment prior to or at the
Closing, as the case may be, of the following conditions:
7.1 ACCURACY OF WARRANTIES; PERFORMANCE OF COVENANTS. The
representations and warranties of the InSight Parties contained herein shall be
accurate in all material respects as if made on and as of the Closing Date.
Each InSight Party shall have performed all of the obligations and complied with
all of the covenants required to be performed or complied with on or prior to
the Closing.
7.2 NO PENDING ACTION. No action or proceeding before any court or
governmental body shall be pending or threatened, seeking to, or under which an
unfavorable judgment, decree or order would (a) prevent the carrying out of this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
or the Merger Agreement or the transactions contemplated hereby and thereby, (b)
declare unlawful the transactions contemplated by this Agreement, the Debt
Restructuring, the Debt Restructuring Agreements, the Merger or the Merger
Agreement, (c) cause such transactions to be rescinded, or (d) affect the right
of GE Medical to own or control the AHS Shares, the Maxum Shares or the InSight
Preferred Shares.
7.3 CONSENTS. Except as could not have a Material Adverse Effect,
all consents by third parties that are required for the transfer of the AHS
Shares and the Maxum Shares, for the consummation of the transactions
contemplated hereby, or in order to prevent a breach of or a default under or a
termination of any agreement to which any of the InSight Parties is a party or
to which any portion of the property of any of the InSight Parties is subject,
will have been obtained or provided for. For purposes of this SECTION 7.3, the
consents described on SCHEDULE 7.3 attached hereto are hereby deemed to be
required to have been obtained.
7.4 CONDITION OF BUSINESS AND ASSETS. There shall have been no
change which would have a Material Adverse Effect upon any of the InSight
Parties.
7.5 DELIVERIES AT CLOSING. GE Medical shall have received from one
or more of the InSight Parties, the following:
(a) Stock certificates, evidencing all of the AHS Shares and the
Maxum Shares (which, immediately after the Closing, shall be converted into
the right to receive the InSight Preferred Shares as provided in the Merger
Agreement);
(b) A copy of the AHS Certificate of Designation, certified by
the Secretary of State of the State of Delaware as of the Closing Date;
(c) A copy of the Maxum Certificate of Designation, certified by
the Secretary of State of the State of Delaware as of the Closing Date;
(d) A copy of the InSight Certificate of Incorporation,
certified by the Secretary of State of the State of Delaware as of the
Closing Date;
(e) A certificate of the secretary of AHS, certifying copies of
the AHS Certificate of Designation, the Bylaws of AHS and the resolutions
of the Board of Directors of AHS authorizing the transactions contemplated
by this Agreement, the Debt Restructuring, the Debt Restructuring
Agreements, the Merger and the Merger Agreement;
(f) A certificate of the secretary of Maxum, certifying copies
of the Maxum Certificate of Designation, the Bylaws of Maxum and the
resolutions of the Board of Directors of Maxum authorizing the transactions
contemplated by this Agreement, the Debt Restructuring, the Debt
Restructuring Agreements, the Merger and the Merger Agreement;
(g) A certificate of the secretary of InSight, certifying copies
of the InSight Certificate of Incorporation, the Bylaws of InSight and the
resolutions of the Board of Directors of InSight authorizing the
transactions contemplated by this Agreement, the Debt Restructuring, the
Debt Restructuring Agreements, the Merger and the Merger Agreement;
(h) The opinion of Arent Fox Kinter Plotkin & Kahn, AHS's legal
counsel, in substantially the form attached hereto as EXHIBIT F;
(i) The opinion of Storey Armstrong Steger & Martin, Maxum's
legal counsel, in substantially the form attached hereto as EXHIBIT G;
(j) Duly executed copies of the Debt Restructuring Agreements;
(k) A duly executed Registration Rights Agreement in the form
attached hereto as EXHIBIT H; and
(l) Such other instruments or documents as may be reasonably
necessary to carry out the transactions contemplated by this Agreement, the
Debt Restructuring, the Debt Restructuring Agreements, the Merger and the
Merger Agreement.
7.6 CONSUMMATION OF TRANSACTIONS. The transactions contemplated by
the Debt Restructuring, the Debt Restructuring Agreements (all closing
conditions thereunder to GE Medical's obligations thereunder having been
satisfied or waived), the Merger, the Merger Agreement (all closing conditions
thereunder having been satisfied) and the execution and delivery of that certain
Master Service Agreement Addendum (substantially in the form attached hereto as
EXHIBIT I) shall have been consummated concurrent with or immediately after, as
the case may be, the consummation of the transactions contemplated by this
Agreement. The Merger Agreement shall be in full force and effect without
modification.
7.7 COMFORT LETTERS. Each of the InSight Parties shall have received
a "comfort letter," in a form reasonably acceptable to GE Medical, of such
InSight Party's independent auditors with respect to the financial statements
and other information of such InSight Party included in the Registration
Statement, each such letter dated a date within two business days before the
date on which the Registration Statement shall become effective.
7.8 AFFILIATE AGREEMENTS. Each officer and director of each InSight
Party shall have delivered to InSight a written "affiliate agreement," in a form
reasonably acceptable to GE Medical, restricting the disposition by such person
of any shares of common stock of InSight to be received by such person in the
Merger, as contemplated by Rule 145 under the Securities Act and as required
under Section 351 of the Code.
7.9 1996 MANAGEMENT STOCK OPTION PLAN. InSight shall have adopted
its 1996 Directors' Stock Option Plan and its 1996 Employee Stock Option Plan,
in the form attached hereto as EXHIBIT J-1 and EXHIBIT J-2, respectively
(collectively, the "INSIGHT STOCK PLANS").
7.10 EMPLOYMENT AGREEMENTS. InSight shall have entered into
employment agreements, in the form previously delivered to GE Medical
(collectively, the "INSIGHT EMPLOYMENT AGREEMENTS"), with the executive officers
listed on SCHEDULE 7.10 attached hereto, and such Insight Employment Agreements
shall be in full force and effect without modification. All severance and other
related provisions set forth in all written agreements between either AHS or
Maxum, and its employees, shall have been waived in writing to the extent the
transactions contemplated by the Debt Restructuring, the Debt Restructuring
Agreements, the Merger and the Merger Agreement shall give effect to such
severance and other related provisions, such waivers to be in such form as
reasonably acceptable to GE Medical.
7.11 FAIRNESS OPINIONS. Each of AHS and Maxum shall have received an
expert opinion (a copy of which, and any "bring-down" thereof, shall have been
delivered to GE Medical) that the Merger and the transactions contemplated in
connection therewith are fair from a financial point of view to it and its
stockholders, and such opinions shall not have been withdrawn.
7.12 SETTLEMENT OF LITIGATION. The settlement of the civil action
filed in the United States District Court of the District of Puerto Rico styled
P.R.F., Inc. d/b/a San Juan Health Centre, Inc., et. al. v. Philips Credit
Corporation, American Health Services Corporation, et. al., 92 Civ. 2266, and
the civil action filed in the United States District Court of the Southern
District of New York styled In re Maxum Health Corp. Securities Litigation, 93
Civ. 3287, and all claims related thereto or asserted therein, shall have been
effected on terms satisfactory to GE Medical and, with respect to such Maxum
litigation, a final judgment of dismissal shall have been entered and shall
encompass all plaintiffs and potential plaintiffs to such Maxum litigation.
7.13 AGREEMENT WITH HOLDERS OF AHS SERIES B SHARES. Those certain
Agreements by and among InSight, AHS and each of the holders of the AHS Series B
Shares, attached hereto as EXHIBIT L, shall be in full force and effect without
modification.
7.14 LOCATION OF PRINCIPAL EXECUTIVE OFFICE. The InSight Parties
shall have used such reasonable efforts, to the satisfaction of GE Medical, to
make all arrangements necessary to consolidate the principal executive offices
and administration functions of the InSight Parties at one location.
ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS OF AHS, MAXUM AND INSIGHT
The obligations of the InSight Parties to consummate the transactions
contemplated by this Agreement are subject to fulfillment prior to or at the
Closing of the following conditions:
8.1 ACCURACY OF WARRANTIES; PERFORMANCE OF COVENANTS. The
representations and warranties of GE Medical contained herein shall be accurate
in all material respects as if made on and as of the Closing Date. GE Medical
shall have performed all of the obligations and complied with each and all of
the covenants required to be performed or complied with on or prior to the
Closing.
8.2 NO PENDING ACTION. No action or proceeding before any court or
governmental body will be pending or threatened, seeking to, or under which an
unfavorable judgment, decree or order would (a) prevent the carrying out of this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
or the Merger Agreement or the transactions contemplated hereby and thereby, (b)
declare unlawful the transactions contemplated by this Agreement, the Debt
Restructuring, the Debt Restructuring Agreements, the Merger or the Merger
Agreement, (c) cause such transactions to be rescinded.
8.3 CONSENTS. Except as could not have a Material Adverse Effect,
all consents by third parties that are required for the transfer of the AHS
Shares and the Maxum Shares or otherwise, for the consummation of the
transactions contemplated hereby, or in order to prevent a breach of or a
default under or a termination of any agreement to which any of the InSight
Parties is a party or to which any portion of the property of the InSight
Parties is subject, will have been obtained or provided for. For purposes of
this SECTION 8.3, the consents described on SCHEDULE 7.3 attached hereto are
hereby deemed to be required to have been obtained.
8.4 DELIVERIES AT CLOSING. AHS, Maxum or InSight, as the case may
be, shall have received from GE Medical the following:
(a) Duly executed copies of the Debt Restructuring Agreements
(including that certain Master Service Agreement Addendum referred to in
SECTION 7.6); and
(b) Such other instruments or documents as may be reasonably
necessary to carry out the transactions contemplated by this Agreement, the
Debt Restructuring, the Debt Restructuring Agreements, the Merger and the
Merger Agreement.
8.5 STOCKHOLDER APPROVAL. Each of AHS and Maxum shall have received
the approval by the requisite votes cast by the stockholders of AHS and Maxum,
respectively, with respect to the Merger.
ARTICLE 9
PRE-CLOSING COVENANTS OF THE INSIGHT PARTIES
Each of the InSight Parties hereby agrees, from the date hereof until
the Closing, to keep, perform and fully discharge the following covenants and
agreements:
9.1 INTERIM CONDUCT OF BUSINESS. Such InSight Party shall preserve,
protect and maintain its business and operate its businesses as a going concern
consistent with prior practice and not other than in the ordinary course of
business (except as may be expressly authorized pursuant to this Agreement).
Without limiting the generality of the foregoing, from the date hereof until the
Closing, except for transactions expressly approved in writing by GE Medical,
such InSight Party shall:
(a) Maintain inventories at current levels, except for sales in
the ordinary course of business, and maintain the properties and assets of
their respective businesses in good repair, order and condition, reasonable
wear and tear excepted;
(b) Maintain and keep in full force and effect all insurance on
assets and property or for the benefit of employees of its business, all
liability and other casualty insurance, and all bonds on personnel,
presently carried;
(c) Preserve intact the organization of its business and to keep
available the services of the present executives, employees and agents of
its business and preserve the good will of suppliers, customers and others
having business relationships with its business;
(d) Maintain its books, accounts and records in the usual,
regular and ordinary manner on a basis consistent with prior years;
(e) Not enter into or amend any employment, bonus, severance or
retirement contract or arrangement (other than an InSight Employment
Agreement with Glenn Cato), nor increase any salary or other form of com-
pensation payable or to become payable to any executives or employees whose
annual compensation is in excess of $60,000 (other than for customary year-
end raises and bonuses consistent with past practices and in the ordinary
and regular course of business and which do not (i) in any individual
employee case (other than executives), exceed an increase of ten percent,
or (ii) with respect to all employees (including executives), exceed an
increase of five percent in the aggregate, over previous annual
compensation);
(f) Not enter into or agree to enter into any lease, contract,
purchase or sale order or other commitment (other than in the ordinary and
regular course of business) which involves an expenditure, obligation,
purchase or sale of more than $2,000,000 or which cannot be fully performed
or terminated without premium or penalty within one year from the date
thereof;
(g) Not extend credit in the sale of products, collection of
receivables or otherwise, other than in the ordinary and regular course of
business;
(h) Not purchase, lease or otherwise acquire any real estate or
any interest therein other than leases which involve rental and other
payment commitments not exceeding $250,000 per year, in the aggregate;
(i) Not declare, set aside or pay any dividend or make any other
distribution with respect to its capital stock which is not normal and not
determined in relation to its earnings during the relevant period and in
accordance with its previous dividend policies and records;
(j) Not merge or consolidate with or agree to merge or
consolidate with, nor purchase or agree to purchase all or substantially
all of the assets of, nor otherwise acquire, any corporation, partnership,
or other business organization or division thereof, except as contemplated
pursuant to this Agreement, the Merger and the Merger Agreement;
(k) Not sell, lease or otherwise dispose of or agree to sell,
lease or otherwise dispose of any of its assets, properties, rights or
claims, except in the ordinary course of business;
(l) Not authorize for issuance, issue, sell or deliver any
additional shares of its capital stock of any class or any securities or
obligations convertible into shares of its capital stock of any class or
issue or grant any option, warrant or other right to purchase any shares of
its capital stock of any class, other than with respect to (i) the
authorization for issuance of shares of the capital stock of InSight
issuable under the InSight Stock Plans and (ii) shares of the capital stock
of AHS and Maxum issuable upon the exercise of the stock options and
warrants listed in Section 3.2 of the AHS Disclosure Schedule and Section
4.2 of the Maxum Disclosure Schedule;
(m) Not split, combine or reclassify any shares of its capital
stock of any class or redeem or otherwise acquire, directly or indirectly,
any shares of its capital stock of any class;
(n) Not incur or become subject to, nor agree to incur or become
subject to, any debt, obligation or liability, contingent or otherwise,
except current liabilities and contractual obligations in the regular and
ordinary course of business; and
(o) Not terminate or make or permit, or agree to make or permit,
any material amendment of, any material contract, mortgage, lease, license,
agreement or other instrument to which it is a party or by which any of its
properties or assets is bound.
9.2 NON-SOLICITATION. Unless and until this Agreement is terminated
in accordance with ARTICLE 13, such InSight Party shall not take any action to
seek, encourage, solicit or support any inquiry, proposal, expression of
interest or offer from any other person or entity with respect to an
acquisition, combination or similar transaction involving such InSight Party or
its business, or any property, assets or securities related thereto (except as
contemplated pursuant to this Agreement, the Merger and the Merger Agreement),
and such InSight Party shall promptly upon receipt thereof inform GE Medical of
the existence of any such inquiry, proposal, expression of interest or offer and
shall not furnish any information to, or participate in any discussions or
negotiations with, any other person or entity with respect thereto.
9.3 CONSENTS. Such InSight Party shall use its best efforts to
obtain all consents (including the consents described on SCHEDULE 7.3) by third
parties that are required for the transfer of the AHS Shares and the Maxum
Shares or otherwise, for the consummation of the transactions contemplated
hereby, or in order to prevent a material breach of or a default under or a
termination of any agreement to which any of the InSight Parties is a party or
to which any portion of the property of the InSight Parties is subject.
ARTICLE 10
ADDITIONAL COVENANTS OF THE INSIGHT PARTIES
Each of the InSight Parties hereby agrees, from and after the date
hereof (including following the Closing), to keep, perform and fully discharge
the following covenants and agreements:
10.1 ACCESS. Each of the InSight Parties shall give GE Medical and
its representatives full and free access to all properties, books, contracts,
commitments and records and shall furnish GE Medical with all financial and
operating data and other information regarding their respective businesses and
the properties and assets of the InSight Parties as GE Medical may from time to
time reasonably request. Each of the InSight Parties shall promptly notify GE
Medical of any change in the normal course of business or prospects of such
InSight Party or its business and shall keep GE Medical fully informed with
respect thereto.
10.2 ADDITIONAL COVENANTS. Except for transactions expressly approved
in writing by GE Medical, each of the InSight Parties agrees as follows:
(a) Each of the InSight Parties will promptly pay and discharge,
or cause to be paid and discharged, when due and payable, all lawful taxes,
assessments and governmental charges and levies imposed upon the income,
profits, property, or business of such InSight Party or any subsidiary
thereof; provided, however, that no such tax, assessment, charge or levy
need be paid by an InSight Party if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if such InSight
Party shall have set aside on its books adequate reserves with respect
thereto (unless such tax, assessment, charge, or levy has given rise to the
commencement of proceedings to foreclose any lien that may have attached as
security therefor). Each of the InSight Parties will promptly pay or cause
to be paid when due, or in conformance with customary trade terms, all
other indebtedness incident to the operations of such InSight Party;
(b) Each of the InSight Parties will keep its properties in good
repair, working order and condition, reasonable wear and tear excepted, and
from time to time make all necessary and proper repairs, renewals,
replacements, additions and improvements thereto; and, each of the InSight
Parties will at all times comply with the provisions of all material leases
to which such InSight Party is a party or under which such InSight Party
occupies property so as to prevent any loss or forfeiture thereof or
thereunder;
(c) Each of the InSight Parties will keep its assets that are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire and maintain extended coverage insurance in
amounts customary for companies in similar businesses and each of the
InSight Parties will maintain, with financially sound and reputable
insurers, insurance against other hazards, risks and liabilities to persons
and property to the extent and in the manner customary for companies in
similar businesses;
(d) Each of the InSight Parties will keep true records and books
of account in which full, true and correct entries will be made of all
dealings or transactions relating to its business and affairs in accordance
with GAAP;
(e) Each of the InSight Parties shall duly observe and conform
to all valid requirements of governmental authorities relating to the
conduct of such InSight Party's businesses or to such InSight Party's
property or assets;
(f) Each of the InSight Parties shall maintain in full force and
effect its corporate existence, rights and franchises and all licenses and
other rights to use patents, processes, licenses, trademarks, trade names
and copyrights owned or possessed thereby and deemed to be necessary to the
conduct of its business;
(g) In the event the services of the independent public
accountants hereafter employed by the InSight Parties are terminated, the
InSight Parties will (i) promptly thereafter notify GE Medical by letter
setting forth the reasons for the termination of such services and (ii)
request the firm of independent public accountants whose services are
terminated to deliver to GE Medical a letter from such firm setting forth
the reasons for the termination of their services. In the event of such
termination, the InSight Parties will promptly thereafter engage another
firm of independent public accountants. In its notice to GE Medical, the
InSight Parties shall state whether the change of accountants was
recommended or approved by the InSight Parties' Board of Directors;
(h) Each of the InSight Parties will cause each person now or
hereafter employed thereby in a management position with access to
confidential information to enter into a proprietary information agreement
substantially in the form approved by such InSight Party's Board of
Directors.
10.3 MAINTENANCE OF SINGLE LOCATION OF PRINCIPAL EXECUTIVE OFFICE.
Each of the InSight Parties shall use its best efforts to establish and maintain
the principal executive offices and principal administration functions of the
InSight Parties at one location.
10.4 ADOPTION OF STOCK OPTION GUIDELINES. InSight shall not, without
first obtaining the approval of GE Medical, establish, adopt or approve (a)
guidelines with respect to the granting and vesting of stock options or shares
issued under the Insight Stock Plans or (b) the specific terms, conditions and
provisions of stock options or shares issued under the Insight Stock Plans which
could result in the issuance of more than 882,434 shares, in the aggregate,
under such Insight Stock Plans.
ARTICLE 11
COVENANTS OF ALL PARTIES
Each party hereto hereby agrees to keep, perform and fully discharge
the following covenants and agreements:
11.1 CONFIDENTIALITY. (A) Each party hereto shall treat all
information regarding the other parties hereto obtained in connection with the
negotiation and consummation of the transactions contemplated by this Agreement,
the Debt Restructuring, the Debt Restructuring Agreements, the Merger and the
Merger Agreement as confidential and shall not use any such information in any
manner other than in furtherance of such transactions; provided, however, that
such confidentiality obligation shall not apply to information disclosed or used
by any party (the "DISCLOSING PARTY") with respect to any other party hereto
(the "SUBJECT PARTY") that (i) is or becomes generally available to the public
other than as a result of a disclosure by the Disclosing Party, (ii) was
available to the Disclosing Party on a nonconfidential basis prior to the
disclosure by the Subject Party or (iii) becomes available to the Disclosing
Party on a nonconfidential basis from a person or entity (other than the Subject
Party) which is not otherwise bound by a confidentiality agreement with the
Subject Party.
(B) Unless otherwise required by law, none of the parties hereto
shall, without the prior written consent of the other parties hereto, disclose
to any person or entity (other than those actively and directly participating in
the transactions contemplated by this Agreement, the Debt Restructuring, the
Debt Restructuring Agreements, the Merger and the Merger Agreement) the terms,
conditions or acts relating to the transactions contemplated by this Agreement,
the Debt Restructuring, the Debt Restructuring Agreements, the Merger and the
Merger Agreement (including the fact that discussions are taking place with
respect to such transactions or the status thereof), or the fact that
confidential information has been made available thereto. In the event that any
of the parties hereto is required by law to make any disclosure otherwise
prohibited under this SECTION 11.1(B), such party shall provide to the other
parties hereto advance written notice of such required disclosure (including
with such advance written notice the text of such required disclosure) at least
two business days prior to such required disclosure.
11.2 EXPENSES. Notwithstanding SECTION 2.1(B), each of AHS and Maxum
shall reimburse to GE Medical an amount equal to 40 percent of the legal costs
incurred by GE Medical in connection with the transactions contemplated by this
Agreement, the Debt Restructuring, the Debt Restructuring Agreements, the Merger
and the Merger Agreement from and after July 1, 1995. Such payments shall be
made by AHS and Maxum within 30 days of the receipt by AHS or Maxum, as the case
may be, of GE Medical's invoice with respect to such legal costs, whether or not
such transactions are consummated.
11.3 FURTHER ASSURANCES. Each party hereto shall execute and deliver
such instruments and take such other actions as the other parties hereto may
reasonably require in order to carry out the transactions contemplated by this
Agreement.
ARTICLE 12
SURVIVAL AND INDEMNIFICATION
12.1 SURVIVAL. All representations, warranties, covenants and
agreements contained in this Agreement or in any document delivered pursuant
hereto shall be deemed to be material and to have been relied upon by the
parties hereto and shall survive the Closing and shall be fully effective and
enforceable for a period of two years following the Closing Date (unless a
different period is specifically assigned thereto), but shall thereafter be of
no further force or effect, except as they relate to claims for indemnification
timely made pursuant to this ARTICLE 12. The representations and warranties set
forth in this Agreement shall not be affected by any investigation, verification
or examination by any party hereto or by any person or entity on behalf of any
such party except as specifically set forth in an Exhibit, Schedule or document
delivered pursuant to this Agreement. The indemnification provisions set forth
in this Agreement are nonexclusive and shall not affect any other remedy which
may be available under common law or otherwise.
12.2 INDEMNIFICATION BY AHS. AHS shall indemnify and hold harmless GE
Medical from and against any and all loss, damage, expense, claim, liability or
obligation, including court costs, reasonable attorneys' fees and other expenses
for investigating or defending any actions or threatened actions (collectively,
"LOSSES"), related to, caused by or arising from any misrepresentation, breach
of warranty or failure to fulfill any covenant or agreement of AHS contained
herein, together with interest thereon at a floating interest rate (equal at all
times to the rate of interest published by the Wall Street Journal from time to
time as the "prime rate" (the "ANNOUNCED RATE")) from the date upon which such
loss, damage, expense or liability was incurred to the date of payment (but in
no event higher than the highest rate then permissible under law); provided,
however, that nothing herein shall be construed to entitle GE Medical as
indemnitee under this Section to recover interest on Losses, in excess of the
interest that would be payable if the Announced Rate is applied to Losses
(exclusive of any interest component thereof) from the date such Losses were
incurred until the date that such Losses are paid to GE Medical.
12.3 INDEMNIFICATION BY MAXUM. Maxum shall indemnify and hold
harmless GE Medical from and against any and all Losses related to, caused by or
arising from any misrepresentation, breach of warranty or failure to fulfill any
covenant or agreement of Maxum contained herein, together with interest thereon
at the Announced Rate, subject to the limitation on payment of interest set
forth in the proviso to SECTION 12.2.
12.4 INDEMNIFICATION BY THE INSIGHT PARTIES. The InSight Parties
shall, jointly and severally, indemnify and hold harmless GE Medical from and
against any and all Losses related to, caused by or arising from any
misrepresentation, breach of warranty or failure to fulfill any covenant or
agreement of the InSight Parties contained herein, together with interest
thereon at the Announced Rate, (subject to the limitation on payment of interest
set forth in the proviso to SECTION 12.2).
12.5 NOTICE. Any party seeking indemnification pursuant to this
ARTICLE 12 (an "INDEMNIFIED PARTY") shall give prompt written notice to the
indemnifying party (the "INDEMNIFYING PARTY") of the facts and circumstances
giving rise to the claim (the "NOTICE"). Any claim for indemnification asserted
in writing before the second anniversary of the Closing Date shall survive until
resolved or judicially determined. Upon receipt of the Notice, the Indemnifying
Party receiving the Notice shall have the option to protest any claim or demand
referred to in the Notice, at the Indemnifying Party's own cost and expense. In
addition, each Indemnified Party may also participate at such party's expense in
such contest or defense. Such option shall be exercised by the giving of notice
by the Indemnifying Party to each Indemnified Party within 30 calendar days of
receipt of the Notice. Any claim for indemnification which is not protested by
the 30th day following receipt of notice thereof shall be deemed valid and shall
be due and payable in full on the 31st day following such receipt.
ARTICLE 13
TERMINATION
13.1 TERMINATION. This Agreement may be terminated at any time prior
to the consummation of the Merger, and the transactions related thereto:
(a) by mutual consent of GE Medical and the InSight Parties;
(b) by either GE Medical or the InSight Parties if the Merger
shall not have been consummated on or before September 30, 1996 despite the
good faith effort of such party to effect such consummation (unless the
failure to so consummate the Merger by such date shall be due to the breach
of this Agreement or the Merger Agreement by the party seeking to terminate
this Agreement);
(c) by GE Medical if (i)(A) there are inaccuracies in the
representations and warranties of any of the InSight Parties that would
have a Material Adverse Effect on any of the InSight Parties, (B) there has
been a material breach on the part of any of the InSight Parties in the
covenants of such InSight Party set forth herein, or any failure on the
part of any of the InSight Parties to comply with its material obligations
hereunder, or any other events or circumstances shall have occurred, such
that, in any such case, any of the InSight Parties could not satisfy, on or
prior to September 30, 1996, any of the conditions to the Closing set forth
herein or (ii) AHS and Maxum shall not have received the approval by the
requisite votes cast by the stockholders of AHS and Maxum, respectively,
with respect to the Merger or any other transaction contemplated in
connection therewith or herewith;
(d) by the InSight Parties if (i)(A) there are inaccuracies in
the representations and warranties of GE Medical having a Material Adverse
Effect on its ability to consummate the transaction contemplated hereby or
(B) there has been any failure on the part of GE Medical to comply with its
material obligations hereunder, or any other events or circumstances shall
have occurred, such that, in any such case, GE Medical could not satisfy on
or prior to September 30, 1996, any of the conditions to the Closing set
forth in Article 7 of this Agreement, (ii) AHS and Maxum shall not have
received the approval by the requisite votes cast by the stockholders of
AHS and Maxum, respectively, with respect to the Merger, or (iii) prior to
the approval of the Merger by the stockholders of AHS and Maxum, (A) either
AHS or Maxum receives a firm offer with respect to any transaction (other
than the Merger) involving any disposition or other change of ownership of
its stock or material assets (an "ACQUISITION TRANSACTION") that is
reasonably capable of being financed, (B) in the good faith determination
of its Board of Directors after consultation with its financial advisors,
such Acquisition Transaction is financially superior to the Merger and (C)
its Board of Directors, after consulting with its outside legal counsel,
determines in good faith that to proceed with the Merger would violate its
fiduciary duties under applicable law.
13.2 EFFECT OF TERMINATION. In the event of a termination of this
Agreement by either the InSight Parties or GE Medical as provided in
SECTION 13.1, this Agreement shall forthwith become void and there shall be no
liability or obligation on the part of GE Medical or the InSight Parties or
their respective officers or directors (other than as provided in SECTION 11.2
and except for breach of the confidentiality provisions of SECTION 11.1, and
except to the extent that such termination results from the breach by a party
hereto of any of its representations, warranties, covenants or agreements set
forth in this Agreement).
ARTICLE 14
GENERAL
14.1 EXPENSES. Except as otherwise provided in SECTION 11.2, each
party to this Agreement shall pay its own costs and expenses in connection with
the transactions contemplated hereby.
14.2 AMENDMENT. This Agreement cannot be altered, amended, or
modified, in any respect, except by a writing duly executed by all of the
parties hereto.
14.3 ENTIRE AGREEMENT. This Agreement is the entire agreement between
the parties with respect to the subject matter hereof and all prior agreements,
understandings, oral agreements and writings are expressly superseded hereby.
14.4 SEVERABILITY. The provisions of this Agreement are severable.
If a court of competent jurisdiction rules that any provision of this Agreement
is invalid or unenforceable, the court's ruling will not effect the validity and
enforceability of the other provisions of this Agreement.
14.5 CONSTRUCTION. The parties agree that this Agreement shall be
construed without regard to the draftsman thereof and shall be construed as
though all parties to this Agreement equally participated in its drafting so as
to fairly accomplish the purpose and intentions of the parties hereto and shall
not be construed for or against any party. Each of the parties acknowledges
that it has been represented by legal counsel of its own choice in connection
with the preparation, review and execution of this Agreement, and that this
Agreement has been executed by the parties with the consent of and on advice of
such counsel.
14.6 ATTORNEYS' FEES. In the event any party brings an action to
enforce any of the provisions of this Agreement or the rights of the parties
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs.
14.7 STRICT PERFORMANCE. The failure of any party to this Agreement
to insist upon strict performance of any of the terms or conditions of this
Agreement, or to exercise any right or remedy, shall not be construed as waiving
subsequent strict performance of any such terms, covenants, conditions, or any
such rights or remedies.
14.8 GOVERNING LAW. This Agreement and the legal relations between
the parties shall be governed by and construed in accordance with the internal
laws of the State of Delaware, without giving effect to principles of conflicts
of laws.
14.9 INTERPRETATION. Whenever used in this Agreement, the word
"PERSON" includes, without any limitation, natural persons, corporations,
partnerships, associations, organizations, joint ventures, government entities,
and any and every other entity. The title of the various paragraphs in this
Agreement are intended solely for convenience of reference, and are not intended
and shall not be deemed for any purpose whatsoever to modify, explain or place
any construction upon any of the provisions of this Agreement and shall not
affect the meaning or interpretation of this Agreement.
14.10 ASSIGNMENT. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective legal representatives,
successors and assigns, as applicable. Notwithstanding the forgoing, this
Agreement may not be assigned by AHS, Maxum or InSight without the prior written
consent of GE Medical.
14.11 INJUNCTIVE RELIEF. InSight acknowledges that GE Medical would
be irreparably harmed in the event of any breach or violation by InSight of any
of the terms of this Agreement and that remedies at law would be inadequate. In
the event of any breach or threatened breach of such terms, GE Medical shall be
entitled to obtain, without posting bond, a temporary restraining order and
temporary and permanent injunctive relief restraining and enjoining any such
breach or threatened breach. The remedies provided for in this SECTION 14.11
shall be in addition to any and all other rights and remedies that may be
available to GE Medical at law, in equity and under this Agreement, all of which
are expressly reserved.
14.12 ATTORNEYS' FEES. In the event any party brings an action to
enforce any of the provisions of this Agreement or the rights of the parties
hereto, the prevailing party shall be entitled to recover reasonable attorneys'
fees and costs.
14.13 ARBITRATION. Any dispute arising out of, relating to or in
connection with this Agreement shall be resolved by binding arbitration. The
arbitration shall consist of a panel of three arbitrators from the JAMS panel of
retired judges and shall take place in Milwaukee, Wisconsin, at a place
designated by the parties (or, failing agreement, by the arbitrators) and shall
commence as soon as practicable on a date mutually agreed upon by counsel for
the parties (or the party if a party does not have counsel) and the
arbitrators. The arbitration proceeding shall be conducted confidentially
and the parties shall take the necessary actions to assure the
confidentiality of the arbitration proceeding. The arbitration proceeding
shall be in accordance with the then-current rules for arbitration
established by JAMS, insofar as such rules are not inconsistent with the
provisions of this Agreement. The party desiring to institute arbitration
shall serve written notice to the other party (with copies to all parties to
this Agreement). InSight shall name one arbitrator and GE Medical shall
name a second arbitrator and the two arbitrators so named shall name a third
arbitrator. The names of the two arbitrators named by GE Medical and
InSight shall be submitted within 45 days of the notice instituting
arbitration. When such arbitrators have chosen the third arbitrator, such
three arbitrators shall proceed with the arbitration. The prevailing party
in any such arbitration proceeding (or legal or equitable action instituted
as authorized elsewhere in this Agreement) shall be entitled to an award of
attorneys' fees and costs in addition to any other relief awarded. Any
award rendered in such an arbitration proceeding shall be final and binding
on the parties and may be entered in any court having jurisdiction over the
parties and/or the subject matter thereof. The arbitrators shall have
no jurisdiction or authority to add to, detract from, or alter in any way the
provisions of this Agreement, but shall limit their considerations and decision
to the interpretation and application of this Agreement to the subject matter
presented to them. Nothing contained in this SECTION 14.13 shall restrict GE
Medical's right to institute and prosecute any legal or equitable action in
court for temporary restraining orders and temporary and permanent injunctive
relief or otherwise as deemed appropriate by GE Medical.
14.14 NOTICES. All notices or demands by any party relating to this
Agreement shall be in writing and shall be personally delivered or sent by
registered or certified mail, postage prepaid, return receipt requested, or by
telefacsimile, or telegram to the parties at their addresses set forth below:
If to AHS
or InSight: American Health Services Corp.
4440 Von Karman Avenue, Suite 320
Newport Beach, California 92660
Attn: Thomas V. Croal
Fax No.: (714) 851-4488
with a
copy to: Harvey C. Flodin, Esq.
c/o American Health Services Corp.
4440 Von Karman Avenue, Suite 320
Newport Beach, California 92660
Fax No.: (714) 851-4488
If to Maxum
or InSight: Maxum Health Corp.
14850 Quorum Drive, Suite 400
Dallas, Texas 75240
Attn: Glenn Cato
Fax No.: (714) 777-7599
with a
copy to: Storey Armstrong Steger & Martin, P.C.
1445 Ross Avenue, Suite 1600
Dallas, Texas 75202
Attn: Stephen C. Morton, Esq.
Fax No.: (214) 855-6853
If to GE
Medical: General Electric Company
20825 Swenson Drive
Waukesha, Wisconsin 53186
Attn: Richard Berger
Fax No.: (414) 798-4528
with a
copy to: McDermott, Will & Emery
2049 Century Park East, 34th Floor
Los Angeles, CA 90067
Attn: Ira J. Rappeport, Esq.
Fax No.: (310) 277-4730
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other
parties. All notices or demands sent in accordance with this paragraph, shall
be deemed to have been duly given (a) on the date of service if served
personally on the party to whom notice is to be given or if transmitted via
telefacsimile or (b) three (3) calendar days if mailed to the party to whom
notice is to be given by first class or air mail, postage prepaid.
14.15 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have entered into and executed
this Preferred Stock Acquisition Agreement as of the date indicated above.
AMERICAN HEALTH SERVICES CORP.
By: _____________________________
Title: __________________________
MAXUM HEALTH CORP.
By: _____________________________
Title: __________________________
INSIGHT HEALTH SERVICES CORP.
By: _____________________________
Title: __________________________
GENERAL ELECTRIC COMPANY
By: _____________________________
Title: __________________________
