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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D/A
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. 1 )(1)
AMERICAN SHARED HOSPITAL SERVICES
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(Name of Issuer)
COMMON STOCK, NO PAR VALUE
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(Title of Class of Securities)
029595105
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(CUSIP Number)
MR. JOSHUA J. HARRIS
C/O APOLLO MANAGEMENT, L.P.
1301 AVENUE OF THE AMERICAS, 38TH FLOOR
NEW YORK, NEW YORK 10019
(212) 261-4000
WITH COPIES TO:
MICHAEL D. WEINER, ESQ. ILAN S. NISSAN, ESQ.
APOLLO MANAGEMENT, L.P. O'SULLIVAN GRAEV & KARABELL, LLP
1999 AVENUE OF THE STARS, SUITE 1900 30 ROCKEFELLER PLAZA, 41ST FLOOR
LOS ANGELES, CALIFORNIA 90067 NEW YORK, NEW YORK 10112
(310) 201-4100 (212) 408-2400
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(Name, Address and Telephone Number of Person Authorized to Receive
Notices and Communications)
March 12, 1998
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(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(e), Rule 13d-1(f) or Rule 13d-1(g), check the
following box [_].
NOTE: Schedules filed in paper format shall include a signed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
/1/ 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).
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Page 2 of 4 Pages
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ITEM 7. MATERIAL TO BE FILED AS AN EXHIBIT
(a) Stockholder Agreement, dated as of March 12, 1998, among Holdings and
certain stockholders of the Company.
(b) Stockholder Agreement, dated as of March 12, 1998 among Holdings and
Ernest Bates, M.D.
(c) Securities Purchase Agreement, dated as of March 12, 1998, among the
Company, Alliance, Holdings, and MMRI.
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Page 3 of 4 Pages
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After reasonable inquiry and to the best of their knowledge and belief, the
undersigned certify that the information set forth below in this statement is
true, complete and correct. In addition, by signing below, the undersigned
agree that this Schedule 13D may be filed jointly on behalf of each of
Embarcadero Holding Corp. I, Alliance Imaging, Inc., Newport Investment LLC,
Apollo Investment Fund III, L.P., Apollo Overseas Partners III, L.P., Apollo
(U.K.) Partners III, L.P. and Apollo Advisors II, L.P.
Dated as of the 30th day of March 1998.
EMBARCADERO HOLDING CORP. I
By: /s/ Joshua J. Harris
____________________________________________
Name: Joshua J. Harris
Title: Vice President
ALLIANCE IMAGING, INC.
By: /s/ Richard N. Zehner
_____________________________________________
Name: Richard N. Zehner
Title: Chairman and Chief Executive Officer
NEWPORT INVESTMENT LLC
By: /s/ Michael D. Weiner
__________________________________________
Name: Michael D. Weiner
Title: Vice President
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
__________________________________________
Name: Michael D. Weiner
Title: Vice President
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Page 4 of 4 Pages
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APOLLO OVERSEAS PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
___________________________________
Name: Michael D. Weiner
Title: Vice President
APOLLO (U.K) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
___________________________________
Name: Michael D. Weiner
Title: Vice President
APOLLO ADVISORS II, L.P.
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
___________________________________
Name: Michael D. Weiner
Title: Vice President
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STOCKHOLDER AGREEMENT dated
as of March 12, 1998 among EMBARCADERO
HOLDING CORP. I, a Delaware corporation
("Embarcadero I"), EMBARCADERO HOLDING
CORP. II, a Delaware corporation
("Embarcadero II" and, together with
Embarcadero I, the "Purchasers"), and
the parties listed on Schedule A
attached hereto (each, a "Stockholder"
and, collectively, the "Stockholders").
WHEREAS, the Purchasers, Alliance Imaging, Inc., a Delaware corporation,
American Shared Hospital Services, a California corporation ("Parent") and MMRI,
Inc., a California corporation and a wholly-owned subsidiary of Parent ("M Sub")
propose to enter into a Securities Purchase Agreement dated as of the date
hereof (as the same may be amended, modified or supplemented, the "Purchase
Agreement") providing for the purchase by the Purchasers of the Shares, upon the
terms and subject to the conditions set forth in the Purchase Agreement; and
WHEREAS, each Stockholder owns the number of shares of Parent Common Stock
set forth opposite his or its name on Schedule A attached hereto (such shares of
Parent Common Stock, together with any other shares of capital stock of Parent
acquired by such Stockholders after the date hereof (including, without
limitation, through the exercise of any options, warrants, rights to acquire
capital stock or similar instruments), being collectively referred to herein as
the "Subject Shares"); and
WHEREAS, as a condition to the Purchasers entering into the Purchase
Agreement, the Purchasers have requested that each Stockholder enter into this
Agreement.
NOW, THEREFORE, to induce the Purchasers to enter into, and in
consideration of its entering into, the Purchase Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows (capitalized terms used herein but not
defined herein have the meanings set forth in the Purchase Agreement):
1. Representations and Warranties of each Stockholder.
Each Stockholder hereby represents and warrants, severally and not
jointly, to each of the Purchasers as of the date hereof in respect of himself
or itself as follows:
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(a) Authority. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the
Stockholder, and the consummation of the transactions contemplated hereby, have
been duly authorized by all necessary action on the part of the Stockholder.
This Agreement has been duly executed and delivered by the Stockholder and
constitutes a valid and binding obligation of the Stockholder enforceable
against the Stockholder in accordance with its terms. Except for informational
filings with the SEC, the execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated hereby and compliance with the
terms hereof will not, (i) conflict with, or result in any violation of, or
default (with or without notice or lapse of time or both) under any provision
of, any certificate or articles of incorporation, bylaws, certificate or
articles of limited partnership, limited partnership agreement, trust agreement,
loan or credit agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise, license, judgment, order,
notice, decree, statute, law, ordinance, rule or regulation applicable to the
Stockholder or to the Stockholder's property or assets, including the Subject
Shares, (ii) require any filing with, or permit, authorization, consent or
approval of, or notice to, any federal, state or local government or any court,
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency, domestic, foreign or supranational, or (iii)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to the Stockholder or any of the Stockholder's properties or assets,
including the Subject Shares. If the Stockholder is a natural person and is
married, and the Stockholder's Subject Shares constitute community property or
otherwise need spousal or other approval for this Agreement to be legal, valid
and binding, this Agreement has been duly authorized, executed and delivered by,
and constitutes a valid and binding agreement of, the Stockholder's spouse,
enforceable against such spouse in accordance with its terms. No trust of which
such Stockholder is a trustee requires the consent of any beneficiary to the
execution and delivery of this Agreement or to the consummation of the
transactions contemplated hereby.
(b) The Subject Shares. The Stockholder is the record and beneficial
owner of, and has good and marketable title to, the Subject Shares set forth
opposite his or its name on Schedule A attached hereto, free and clear of any
Encumbrances. The Stockholder does not own, of record or beneficially, any
shares of capital stock of the Parent or any Subsidiary other than the Subject
Shares set forth opposite his or its name on Schedule A attached hereto. The
Stockholder has the sole right to vote such Subject Shares, and none of such
Subject Shares is subject to any voting trust or other agreement, arrangement or
restriction with respect to the voting of such Subject Shares, except as
contemplated by this Agreement.
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(c) Brokers. No broker, finder, investment banker or other person is
entitled to any brokerage, finder's or other fee or commission in connection
with the execution and delivery
of this Agreement by such Stockholder or the performance by such Stockholder of
its or his obligations hereunder.
2. Voting of Shares.
Each Stockholder hereby severally agrees, subject to the terms and
conditions set forth herein, to vote (or cause to be voted) the Subject Shares
in favor of (i) the Parent entering into the Purchase Agreement and the Related
Documents to be entered into by Parent, and (ii) approval of the terms thereof
and each of the transactions contemplated by the Purchase Agreement and the
Related Documents, at any meeting of stockholders of Parent called to vote upon
the Purchase Agreement and the Related Documents or at any adjournment thereof
or in any other circumstances upon which a vote, consent or other approval
(including by written consent) with respect to the foregoing is sought.
3. Covenants of Each Stockholder.
Until the earlier of the Closing Date and the termination of this
Agreement in accordance with Section 8, each Stockholder, severally and not
jointly, agrees as follows:
(a) At any meeting of stockholders of Parent or at any adjournment
thereof or in any other circumstances upon which the Stockholder's vote, consent
or other approval is sought, the Stockholder shall vote (or cause to be voted)
the Subject Shares (and each class thereof) against (i) any Alternative
Transaction, (ii) any amendment of Parent's certificate of incorporation or
by-laws or other proposal or transaction involving Parent, which amendment or
other proposal or transaction could impede, frustrate, prevent or nullify the
Purchase Agreement, the Related Documents or any of the transactions
contemplated thereby or change in any manner the voting rights of any class of
Parent's capital stock, or (iii) any action that could cause Parent to breach
any representation, warranty or covenant contained in the Purchase Agreement or
the Related Documents. The Stockholder further agrees not to enter into any
agreement or take any action inconsistent with the foregoing.
(b) The Stockholder shall not (A) sell, transfer, give, pledge,
assign or otherwise dispose of (including by gift) (collectively, "Transfer"),
or consent to any Transfer of, any or all of such Subject Shares or any interest
therein or enter into any contract, option or other arrangement (including any
profit sharing arrangement) with respect to the Transfer of, the Subject Shares
to any Person or (B) enter into any voting arrangement, directly or indirectly,
whether by proxy, voting agreement or otherwise, in respect of the Subject
Shares, and
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the Stockholder agrees not to commit or agree to take any of the foregoing
actions.
(c) The Stockholder, and any beneficiary of a revocable trust for
which such Stockholder serves as trustee, shall not take any action to revoke or
terminate such trust or take any other action which would restrict, limit or
frustrate in any way the transactions contemplated by this Agreement, the
Purchase Agreement or the Related Documents. Each such beneficiary hereby
acknowledges and agrees to be bound by the terms of this Agreement applicable to
it.
4. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) Each Stockholder hereby irrevocably grants to, and appoints,
Embarcadero I and Josh Harris, in his capacity as an officer of such Purchaser,
and any individual who shall hereafter succeed to any such office of such
Purchaser, as such Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Stockholder, to vote
such Stockholder's Subject Shares, or grant a consent or approval in respect of
such Subject Shares against (i) any Alternative Transaction, (ii) any amendment
of Parent's certificate of incorporation or by-laws or other proposal or
transaction involving Parent, which amendment or other proposal or transaction
could impede, frustrate, prevent or nullify the Purchase Agreement or the
Related Documents or any of the transactions contemplated thereby or change in
any manner the voting rights of any class of Parent's capital stock, or (iii)
any action that could cause Parent to breach any representation, warranty or
covenant contained in the Purchase Agreement or the Related Documents. The proxy
granted pursuant to this Section 4(a) shall terminate upon the earlier of (i)
the Closing Date and (ii) the termination of this Agreement pursuant to Section
8.
(b) Such Stockholder represents that there are no proxies heretofore
given in respect of such Stockholder's Subject Shares. Such Stockholder further
covenants not to grant any such proxies to any Person during the term of this
Agreement.
(c) Such Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 4 is given in connection with the execution and delivery
of the Purchase Agreement, and that such irrevocable proxy is given to secure
the performance of the duties of the Stockholder under this Agreement. Such
Stockholder hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. Such Stockholder hereby
ratifies and confirms all that the holder of such irrevocable proxy may lawfully
do or cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 705(e)
of California General Corporation Law.
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5. Further Assurances.
Each Stockholder will, at Purchasers' expense, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as any Purchaser may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
6. Certain Events.
Each Stockholder agrees that this Agreement and the obligations
hereunder shall attach to such Stockholder's Subject Shares (and the associated
rights in respect thereof) and shall be binding upon any Person or entity to
which legal or beneficial ownership of such Subject Shares shall pass, whether
by operation of law or otherwise, including without limitation such
Stockholder's heirs, guardians, administrators or successors. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of Parent affecting the Parent Common
Stock (or any other class of Parent's capital stock), or the acquisition of
additional shares of Parent Common Stock (or any other class of Parent's capital
stock) or other voting securities of Parent by any Stockholder, the number of
Subject Shares listed in Schedule A beside the name of such Stockholder shall be
deemed to be automatically adjusted appropriately and this Agreement and the
obligations hereunder shall attach to any additional shares of Parent Common
Stock or other voting securities of Parent issued to or acquired by such
Stockholder.
7. Assignment.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties, except that any Purchaser may assign, in
its sole discretion, any and all of its rights, interests and obligations
hereunder to any of its Affiliates or its or its Affiliates' lenders. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
permitted assigns.
8. Termination.
This Agreement, and all rights and obligations of the parties
hereunder, shall terminate upon the earlier to occur of (i) the Closing Date and
(ii) the date upon which the Purchase Agreement is terminated in accordance with
its terms.
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9. General provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by facsimile (with
confirmation of delivery) or personally or sent by overnight courier (providing
proof of delivery) to the Purchasers in accordance with Section 9.7 of the
Purchase Agreement and to the Stockholders at their respective addresses and
facsimile numbers set forth on Schedule A attached hereto (or at such other
address and facsimile number for a party as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to an
Article or a Section, such reference shall be deemed made to an Article or a
Section of this Agreement, unless otherwise indicated. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Unless the context otherwise
requires, words importing the singular shall include the plural, and vice versa.
Wherever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
(g) Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
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10. Stockholder Capacity.
No person executing this Agreement who is or becomes during the term
hereof a director or officer of Parent or any of its Subsidiaries makes any
agreement or understanding herein in his capacity as such director or officer.
Each Stockholder signs solely in his or its capacity as the record holder and
beneficial owner of, or the trustee of a trust whose beneficiaries are the
beneficial owners of, such Stockholder's Subject Shares and nothing herein shall
limit or affect any actions taken by a Stockholder in his or its capacity as an
officer or director of Parent.
11. Enforcement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of New
York or in a New York state court, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of New York or any New York state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than a
Federal court sitting in the state of New York or a New York state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
12. Public Announcements.
No Stockholder shall issue any press release or make any public
statement without the prior written consent of the Purchasers, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
EMBARCADERO HOLDING CORP. I
By: /s/ Josh Harris
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Name: Josh Harris
Title: Vice President
EMBARCADERO HOLDING CORP. II
By: /s/ Josh Harris
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Name: Josh Harris
Title: Vice President
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
GENERAL ELECTRIC COMPANY
By: /s/ Rick Berger
------------------------------
Name: Rick Berger
Title:
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ Willie R. Barnes
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WILLIE R. BARNES
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ Matthew Hills
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MATTHEW HILLS
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ John F. Ruffle
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JOHN F. RUFFLE
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ Stanley S. Trotman, Jr.
---------------------------------
STANLEY S. TROTMAN, JR.
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ Augustus A. White
---------------------------------
AUGUSTUS A. WHITE III, M.D.
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ Richard Magary
---------------------------------
RICHARD MAGARY
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IN WITNESS WHEREOF, the Purchasers and the Stockholders have caused this
Agreement to be duly executed and delivered as of the date first written above.
/s/ Craig K. Tagawa
---------------------------------
CRAIG K. TAGAWA
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SCHEDULE A
Number of
Name and Address Shares of Parent
of Stockholder Common Stock Owned
-------------- ------------------
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General Electric Company
Crossroads Office
20825 Swenson Drive, Suite 100
Waukesha, WI 53186 225,000
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Willie R. Barnes
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 1,000
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Matthew Hills
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 1,582
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John F. Ruffle
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 76,711
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Stanley S. Trotman, Jr.
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 103,962
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Augustus A. White, III, M.D.
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 5,992
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Richard Magary
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 23,300
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Craig K.Tagawa
c/o American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, CA 94111 12,600
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STOCKHOLDER AGREEMENT dated
as of March 12, 1998 among EMBARCADERO
HOLDING CORP. I, a Delaware corporation
("Embarcadero I"), EMBARCADERO HOLDING
CORP. II, a Delaware corporation
("Embarcadero II" and, together with
Embarcadero I, the "Purchasers"), and
Ernest Bates, M.D. (the "Stockholder").
WHEREAS, the Purchasers, Alliance Imaging, Inc., a Delaware corporation,
American Shared Hospital Services, a California corporation ("Parent") and MMRI,
Inc., a California corporation and a wholly-owned subsidiary of Parent ("M Sub")
propose to enter into a Securities Purchase Agreement dated as of the date
hereof (as the same may be amended, modified or supplemented, the "Purchase
Agreement") providing for the purchase by the Purchasers of the Shares, upon the
terms and subject to the conditions set forth in the Purchase Agreement; and
WHEREAS, the Stockholder owns the number of shares of Parent Common Stock
set forth opposite his name on Schedule A attached hereto (such shares of Parent
Common Stock, together with any other shares of capital stock of Parent acquired
by such Stockholder after the date hereof (including, without limitation,
through the exercise of any options, warrants, rights to acquire capital stock
or similar instruments), being collectively referred to herein as the "Subject
Shares"); and
WHEREAS, as a condition to the Purchasers entering into the Purchase
Agreement, the Purchasers have requested that the Stockholder enter into this
Agreement.
NOW, THEREFORE, to induce the Purchasers to enter into, and in
consideration of its entering into, the Purchase Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows (capitalized terms used herein but not
defined herein have the meanings set forth in the Purchase Agreement):
1. Representations and Warranties of the Stockholder.
The Stockholder hereby represents and warrants to each of the
Purchasers as of the date hereof as follows:
(a) Authority. The Stockholder has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby. The execution, delivery and performance of this Agreement by the
Stockholder, and the consummation of the transactions contemplated hereby,
<PAGE>
have been duly authorized by all necessary action on the part of the
Stockholder. This Agreement has been duly executed and delivered by the
Stockholder and constitutes a valid and binding obligation of the Stockholder
enforceable against the Stockholder in accordance with its terms. Except for
informational filings with the SEC, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the terms hereof will not, (i) conflict with, or result in any
violation of, or default (with or without notice or lapse of time or both) under
any provision of, any certificate or articles of incorporation, bylaws,
certificate or articles of limited partnership, limited partnership agreement,
trust agreement, loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise, license,
judgment, order, notice, decree, statute, law, ordinance, rule or regulation
applicable to the Stockholder or to the Stockholder's property or assets,
including the Subject Shares, (ii) require any filing with, or permit,
authorization, consent or approval of, or notice to, any federal, state or local
government or any court, tribunal, administrative agency or commission or other
governmental or regulatory authority or agency, domestic, foreign or
supranational, or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Stockholder or any of the Stockholder's
properties or assets, including the Subject Shares. If the Stockholder is
married, and the Stockholder's Subject Shares constitute community property or
otherwise need spousal or other approval for this Agreement to be legal, valid
and binding, this Agreement has been duly authorized, executed and delivered by,
and constitutes a valid and binding agreement of, the Stockholder's spouse,
enforceable against such spouse in accordance with its terms. No trust of which
such Stockholder is a trustee requires the consent of any beneficiary to the
execution and delivery of this Agreement or to the consummation of the
transactions contemplated hereby.
(b) The Subject Shares. The Stockholder is the record and beneficial
owner of, and has good and marketable title to the Subject Shares and the
Options (as defined below) set forth opposite his name on Schedule A attached
hereto, free and clear of any Encumbrances. The Stockholder does not own, of
record or beneficially, any shares of capital stock of the Parent or any
Subsidiary other than the Subject Shares set forth opposite his name on Schedule
A attached hereto. The Stockholder has the sole right to vote such Subject
Shares, and none of such Subject Shares is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting of such Subject
Shares, except as contemplated by this Agreement.
(c) Brokers. No broker, finder, investment banker or other person is
entitled to any brokerage, finder's or other fee or commission in connection
with the execution and delivery
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of this Agreement by the Stockholder or the performance by the Stockholder of
his obligations hereunder.
2. Voting of Shares.
The Stockholder hereby agrees, subject to the terms and conditions
set forth herein, to vote (or cause to be voted) the Subject Shares in favor of
(i) the Parent entering into the Purchase Agreement and the Related Documents to
be entered into by Parent, and (ii) approval of the terms thereof and each of
the transactions contemplated by the Purchase Agreement and the Related
Documents, at any meeting of stockholders of Parent called to vote upon the
Purchase Agreement and the Related Documents or at any adjournment thereof or in
any other circumstances upon which a vote, consent or other approval (including
by written consent) with respect to the foregoing is sought.
3. Option Exercise
(a) The Stockholder hereby agrees, upon the written request of the
Purchasers (which will be delivered only if the Purchasers reasonably deem it
necessary to achieve the approval of the Purchase Agreement by the holders of a
majority of the outstanding shares of Parent Common Stock), promptly to exercise
all or a portion of his options and/or warrants to purchase shares of Parent
Common Stock (including, without limitation, options granted under the Parent's
Stock Option Agreement with the Stockholder, dated August 15, 1995, granting the
Stockholder options to purchase 1,495,000 shares of Parent Common Stock)
(collectively, the "Options") such that after giving effect to the exercise of
the Options, the sum of (i) the number of shares of Parent Common Stock issued
to such Stockholder upon the exercise of Options (the "Option Shares"), (ii) the
number of Subject Shares subject to this Agreement prior to giving effect to
such exercise, and (iii) all other shares of Parent Common Stock voted to
approve the Purchase Agreement at a duly convened meeting of Parent's
stockholders (or any adjournment thereof) shall be no less than fifty and
one-tenth (50.1%) percent of the number of shares of Parent Common Stock
outstanding as of the date of exercise. The Stockholder further agrees that: (i)
all Option Shares issued upon exercise of Options shall constitute "Subject
Shares" hereunder; and (ii) all representations and warranties of the
Stockholder contained in this Agreement are repeated by the Stockholder as of
the date of exercise of Options.
(b) The Purchasers hereby agree that following compliance by the
Stockholder with his obligations under Sections 3(a) and 2 hereof, the
Purchasers will pay to the Stockholder cash in the amount of (the "Gross Up
Amount") nineteen (19%) percent of: (x) the fair market value of the Option
Shares as of the date of the exercise of the Options minus (y) the aggregate
exercise price paid by the Stockholder for the Option Shares. For purposes of
this Section 3(b), the
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"fair market value" of Option Shares shall be determined based upon the closing
price on the American Stock Exchange for shares of the Parent Common Stock on
the date that the Stockholder exercises his Options pursuant to Section 3(a)
hereof. The Purchasers shall pay to the Stockholder: (i) twenty-eight (28%)
percent of the Gross Up Amount immediately following compliance by the
Stockholder with his obligations under Sections 3(a) and 2 hereof; and (ii)
seventy-two (72%) percent of the Gross Up Amount on the April 1st thereafter.
(c) The Purchasers hereby further agree that following (i)
compliance by the Stockholder with his obligations under Sections 3(a) and 2
hereof and (ii) delivery by the Stockholder's accountant of a certificate
specifying the Stockholder's aggregate Federal, State and local income tax
liability incurred solely by reasons of the Stockholder's exercise of his
options pursuant to Section 3(a) hereof (the "Tax Liability"), Embarcadero I, at
the request of the Stockholder, will loan to the Stockholder, on a fully
recourse basis, an amount (the "Loan Amount") equal to (x) the Tax Liability
minus (y) the Gross Up Amount.
(d) Simultaneously with Embarcadero I making a loan to the
Stockholder of the Loan Amount, the Stockholder shall: (i) deliver to
Embarcadero I an executed Note (the "Note") in a principal amount equal to the
Loan Amount, with a maturity of five (5) years from the date thereof, bearing a
rate of interest equal to the Applicable Federal Rate of Interest (as such term
is defined in the Code) for an instrument of similar principal amount and
maturity and on other terms and conditions mutually satisfactory to Embarcadero
I and the Stockholder; and (ii) execute a Pledge Agreement granting to
Embarcadero I, as security for the obligations under such Note, a security
interest in the Option Shares. The Note shall be mandatorily prepayable in the
event of a Transfer (as defined below) by the Stockholder of any shares of
capital stock of the Parent with the proceeds thereof.
4. Covenants of the Stockholder.
Until the earlier of the Closing Date and the termination of this
Agreement in accordance with Section 9, the Stockholder agrees as follows:
(a) At any meeting of stockholders of Parent or at any adjournment
thereof or in any other circumstances upon which the Stockholder's vote, consent
or other approval is sought, the Stockholder shall vote (or cause to be voted)
the Subject Shares (and each class thereof) against (i) any Alternative
Transaction, (ii) any amendment of Parent's certificate of incorporation or
by-laws or other proposal or transaction involving Parent, which amendment or
other proposal or transaction could impede, frustrate, prevent or nullify the
Purchase Agreement, the Related Documents or any of the transactions
contemplated thereby or change in any manner the
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<PAGE>
voting rights of any class of Parent's capital stock, or (iii) any action that
could cause Parent to breach any representation, warranty or covenant contained
in the Purchase Agreement or the Related Documents. The Stockholder further
agrees not to enter into any agreement or take any action inconsistent with the
foregoing.
(b) The Stockholder shall not (A) sell, transfer, give, pledge,
assign or otherwise dispose of (including by gift) (collectively, "Transfer"),
or consent to any Transfer of, any or all of such Subject Shares or the Options
or any interest therein or enter into any contract, option or other arrangement
(including any profit sharing arrangement) with respect to the Transfer of, the
Subject Shares or the Options to any Person or (B) enter into any voting
arrangement, directly or indirectly, whether by proxy, voting agreement or
otherwise, in respect of the Subject Shares or the Options, and the Stockholder
agrees not to commit or agree to take any of the foregoing actions.
(c) Except as permitted by the Purchase Agreement, the Stockholder
shall not, nor shall he cause any investment banker, financial advisor,
attorney, accountant or other representative, to, directly or indirectly, (i)
solicit, initiate or encourage (including by way of furnishing information), or
take any other action to facilitate, any inquiries or the making of any proposal
that may lead to an Alternative Transaction or (ii) participate in any
discussions or negotiations regarding any proposed Alternative Transaction.
Without limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any investment banker,
financial advisor, attorney, accountant or other representative of such
Stockholder, whether or not such Person is purporting to act on behalf of the
Stockholder, shall be deemed to be a violation of this Section 4(c) by the
Stockholder.
(d) The Stockholder, and any beneficiary of a revocable trust for
which such Stockholder serves as trustee, shall not take any action to revoke or
terminate such trust or take any other action which would restrict, limit or
frustrate in any way the transactions contemplated by this Agreement, the
Purchase Agreement or the Related Documents. Each such beneficiary hereby
acknowledges and agrees to be bound by the terms of this Agreement applicable to
it.
5. Grant of Irrevocable Proxy; Appointment of Proxy.
(a) The Stockholder hereby irrevocably grants to, and appoints,
Embarcadero I and Josh Harris, in his capacity as an officer of such Purchaser,
and any individual who shall hereafter succeed to any such office of such
Purchaser, as such Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Stockholder, to vote
such Stockholder's Subject Shares, or grant a consent or approval in respect of
such Subject Shares against
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(i) any Alternative Transaction, (ii) any amendment of Parent's certificate of
incorporation or by-laws or other proposal or transaction involving Parent,
which amendment or other proposal or transaction could impede, frustrate,
prevent or nullify the Purchase Agreement or the Related Documents or any of the
transactions contemplated thereby or change in any manner the voting rights of
any class of Parent's capital stock, or (iii) any action that could cause Parent
to breach any representation, warranty or covenant contained in the Purchase
Agreement or the Related Documents. The proxy granted pursuant to this Section
5(a) shall terminate upon the earlier of (i) the Closing Date and (ii) the
termination of this Agreement pursuant to Section 9.
(b) The Stockholder represents that there are no proxies heretofore
given in respect of the Stockholder's Subject Shares. The Stockholder further
covenants not to grant any such proxies to any Person during the term of this
Agreement.
(c) The Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution and delivery
of the Purchase Agreement, and that such irrevocable proxy is given to secure
the performance of the duties of the Stockholder under this Agreement. The
Stockholder hereby further affirms that the irrevocable proxy is coupled with an
interest and may under no circumstances be revoked. The Stockholder hereby
ratifies and confirms all that the holder of such irrevocable proxy may lawfully
do or cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of Section 705(e)
of California General Corporation Law.
6. Further Assurances.
The Stockholder will, at Purchasers' expense, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further consents, documents and other instruments as any Purchaser may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement.
7. Certain Events.
The Stockholder agrees that this Agreement and the obligations
hereunder shall attach to the Stockholder's Subject Shares (and the associated
rights in respect thereof) and shall be binding upon any Person or entity to
which legal or beneficial ownership of such Subject Shares shall pass, whether
by operation of law or otherwise, including without limitation such
Stockholder's heirs, guardians, administrators or successors. In the event of
any stock split, stock dividend, merger, reorganization, recapitalization or
other change in the capital structure of Parent affecting the Parent Common
Stock (or any other class of Parent's capital stock), or the acquisition of
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additional shares of Parent Common Stock (or any other class of Parent's capital
stock) or other voting securities of Parent by the Stockholder (including the
Option Shares), the number of Subject Shares listed in Schedule A beside the
name of the Stockholder shall be deemed to be automatically adjusted
appropriately and this Agreement and the obligations hereunder shall attach to
any additional shares of Parent Common Stock or other voting securities of
Parent issued to or acquired by the Stockholder.
8. Assignment.
Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties without the prior
written consent of the other parties, except that any Purchaser may assign, in
its sole discretion, any and all of its rights, interests and obligations
hereunder to any of its Affiliates or its or its Affiliates' lenders. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
permitted assigns.
9. Termination.
This Agreement, and all rights and obligations of the parties
hereunder, shall terminate upon the earlier to occur of (i) the Closing Date and
(ii) the date upon which the Purchase Agreement is terminated in accordance with
its terms.
10. General provisions.
(a) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(b) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given when delivered by facsimile (with
confirmation of delivery) or personally or sent by overnight courier (providing
proof of delivery) to the Purchasers in accordance with Section 9.7 of the
Purchase Agreement and to the Stockholder at his address and facsimile number
set forth on Schedule A attached hereto (or at such other address and facsimile
number as shall be specified by like notice).
(c) Interpretation. When a reference is made in this Agreement to an
Article or a Section, such reference shall be deemed made to an Article or a
Section of this Agreement, unless otherwise indicated. The headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Unless the context otherwise
requires, words importing the singular shall include the plural, and vice versa.
Wherever the words "include," "includes" or "including" are used in this
Agreement,
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<PAGE>
they shall be deemed to be followed by the words "without limitation."
(d) Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more of the counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.
(e) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and (ii) is not intended to confer upon any person other than the parties hereto
any rights or remedies hereunder.
(f) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
(g) Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
11. Stockholder Capacity.
No person executing this Agreement who is or becomes during the term
hereof a director or officer of Parent or any of its Subsidiaries makes any
agreement or understanding herein in his capacity as such director or officer.
The Stockholder signs solely in his capacity as the record holder and beneficial
owner of, or the trustee of a trust whose beneficiaries are the beneficial
owners of, the Stockholder's Subject Shares and nothing herein shall limit or
affect any actions taken by the Stockholder in his capacity as an officer or
director of Parent.
12. Enforcement.
The parties agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is accordingly agreed
that the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement in any court of the United States located in the State of New
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York or in a New York state court, this being in addition to any other remedy to
which they are entitled at law or in equity. In addition, each of the parties
hereto (i) consents to submit such party to the personal jurisdiction of any
Federal court located in the State of New York or any New York state court in
the event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny or
defeat such personal jurisdiction by motion or other request for leave from any
such court, (iii) agrees that such party will not bring any action relating to
this Agreement or the transactions contemplated hereby in any court other than a
Federal court sitting in the state of New York or a New York state court and
(iv) waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any of the transactions
contemplated hereby.
13. Public Announcements.
The Stockholder shall not issue any press release or make any public
statement without the prior written consent of the Purchasers, except as may be
required by applicable law, court process or by obligations pursuant to any
listing agreement with any national securities exchange.
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IN WITNESS WHEREOF, the Purchasers and the Stockholder have caused
this Agreement to be duly executed and delivered as of the date first written
above.
EMBARCADERO HOLDING CORP. I
By: /s/ Josh Harris
------------------------------
Name: Josh Harris
Title: Vice President
EMBARCADERO HOLDING CORP. II
By: /s/ Josh Harris
------------------------------
Name: Josh Harris
Title: Vice President
/s/ Ernest Bates
----------------------------------
ERNEST BATES, M.D., as
Stockholder
<PAGE>
SCHEDULE A
Number of Number of Warrants
Name and Address Shares of Parent and Options
of Stockholder Common Stock Owned Owned
-------------- ------------------ -----
Ernest Bates, M.D. 839,070 1,495,000 options,
c/o American Shared Hospital Services fully vested,
Four Embarcadero Center exercisable at $.01
San Francisco, CA per share
<PAGE>
================================================================================
SECURITIES PURCHASE AGREEMENT
BY AND AMONG
ALLIANCE IMAGING, INC.
EMBARCADERO HOLDING CORP. I,
EMBARCADERO HOLDING CORP. II,
AMERICAN SHARED HOSPITAL SERVICES,
AND
MMRI, INC.
Dated as of March 12, 1998
================================================================================
<PAGE>
SECURITIES PURCHASE
AGREEMENT dated as of March 12, 1998, by
and among ALLIANCE IMAGING, INC., a
Delaware corporation ("Alliance"),
EMBARCADERO HOLDING CORP. I, a Delaware
corporation ("Purchaser A"), EMBARCADERO
HOLDING CORP. II, a Delaware corporation
("Purchaser B" and, together with
Purchaser A, the "Purchasers"), American
Shared Hospital Services, a California
corporation ("Parent") and MMRI, Inc., a
California corporation ("M Sub").
WHEREAS, each Entity is engaged in the business of providing mobile,
shared diagnostic imaging services to hospitals, medical centers and medical
offices (including magnetic resonance imaging ("MRI") services, computed axial
tomography scanning ("CT") services, ultrasound services, nuclear medicine
services and related services) (collectively, the "Business");
WHEREAS, the Parent owns all of the issued and outstanding shares of
common stock, par value $1.00, of CT Sub (the "CT Shares") and the Parent
Partnership Interests;
WHEREAS, M Sub owns the M Sub Partnership Interests;
WHEREAS, the Sellers desire to sell to Alliance, and Alliance
desires to purchase from the Sellers, all of the Shares, on the terms and
subject to the conditions contained in this Agreement; and
WHEREAS, Alliance has designated the Purchasers, each of which is a
wholly-owned Subsidiary of Alliance, to acquire the Shares for and on behalf of
Alliance.
NOW, THEREFORE, in consideration of the premises and the mutual
representations hereinafter set forth, the parties hereto hereby agree as
follows (certain capitalized terms used herein are defined on Annex I hereto):
<PAGE>
ARTICLE I
PURCHASE AND SALE
1.1. Transfer of Shares.
(a) On the terms and subject to the conditions of this Agreement, at the
Closing (after the transactions referenced in Section 1.2 have been
consummated), (i) the Parent shall sell, transfer, convey and assign to
Purchaser A, and Purchaser A shall purchase and acquire from the Parent, all of
the Shares (other than the M Sub Partnership Interests), free and clear of all
Encumbrances and (ii) M Sub shall sell, transfer, convey and assign to Purchaser
B and Purchaser B shall purchase and acquire from M Sub, the M Sub Partnership
Interests, free and clear of all Encumbrances. It is agreed by the parties, that
Purchaser A and Purchaser B have been designated by, and hereto shall purchase
the Shares for and on behalf of Alliance.
(b) The Sellers shall, at any time after the Closing, upon the request of
the Purchasers, take, execute, acknowledge and deliver, and cause to be taken,
executed, acknowledged and delivered, all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney or assurances as may be required to
transfer, convey, grant and confirm to and vest in the Purchasers, good and
marketable title to all of the Shares, free and clear of all Encumbrances.
1.2. Transfers of Assets and Liabilities.
(a) Prior to the Closing Date, the Parent and M Sub shall
effectively sell, transfer, convey and assign (the "Asset Contribution") to the
Partnership, (i) all of the Parent's and M Sub's right, title and interest in,
to and under the assets, properties, interests in properties and rights of the
Parent or M Sub, as the case may be, of every kind, nature and description,
whether real, personal or mixed, movable or immovable, tangible or intangible,
used in or held for use in the Business, wherever located and listed on Schedule
1.2(a) hereof (the "Purchased Parent Assets") and (ii) all of the Liabilities
(other than any Excluded Liabilities) related to the Purchased Parent Assets, on
terms and conditions satisfactory to the Purchasers including, without
limitation, pursuant to such deeds, bills of sale, endorsements, assignments and
other good and sufficient instruments of sale, transfer, conveyance and
assignment (collectively, the "Conveyance Instruments") as are necessary to
sell, transfer, convey and assign to the Partnership the Purchased Parent Assets
and such Liabilities.
(b) Prior to the Closing Date, (i) the Parent shall cause each of
the Entities to effectively sell, transfer, convey and assign (the "Asset
Disposition") to the Parent all of such
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Entities' right, title and interest in, to and under the assets, properties,
interests in properties and rights listed on Schedule 1.2(b) hereof (the
"Excluded Assets") and (ii) the Parent shall assume from each of the Entities
all of the Excluded Liabilities which are Liabilities of each Entity, on terms
and conditions satisfactory to the Purchasers including, without limitation,
pursuant to Conveyance Instruments as are necessary to sell, transfer, convey
and assign to the Parent the Excluded Assets and the Excluded Liabilities.
(c) Anything contained in this Agreement to the contrary notwithstanding,
(i) neither the Purchasers nor Alliance are assuming any Liabilities (fixed or
contingent, known or unknown, matured or unmatured) of the Sellers or the
Entities whether or not relating to the Business which are specified on Schedule
1.2(c) (the "Excluded Liabilities") all of which Excluded Liabilities shall at
and after the Closing become the exclusive responsibility of the Parent and (ii)
on the Closing Date, the Sellers or any of their Subsidiaries (other than the
Entities and GK Finance) shall retain (x) not less than $600,000 aggregate
amount of Liabilities in respect of accounts payable (y) not less than $175,000
aggregate amount of Liabilities in respect of accrued expenses (other than
Liabilities in respect of accrued expenses referenced in Section 1.2(c)(z)) and
(z) all of the Liabilities in respect of accrued expenses for "accrued payroll"
and "accrued payroll taxes and benefits" outstanding as of the Closing Date.
1.3. Payment of the Purchase Price.
The aggregate purchase price (the "Purchase Price") to be paid by Alliance
to the Sellers for the Shares and the covenants set forth in Section 5.10 of
this Agreement shall be a cash amount equal to $13,552,000. At the Closing and
subject to the terms and conditions of this Agreement and the Related Documents,
Alliance shall cause the Purchasers to make payment of the Purchase Price (minus
$75,000 of the Purchase Price which was previously paid to the Parent) to the
Sellers by wire transfer of immediately available funds to the accounts
previously designated in writing to the Purchasers by the Parent.
1.4. Allocation of Purchase Price.
The parties hereto agree that the Purchase Price, subject to any
indemnification payments made hereunder, shall be allocated to the CT Shares and
to the Partnership Interests by the Purchasers on a basis reasonably
satisfactory to the Sellers.
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ARTICLE II
THE CLOSING
Unless this Agreement shall have terminated pursuant to its terms, the
closing (the "Closing") of the transactions contemplated by this Agreement and
the Related Documents shall take place at the offices of O'Sullivan Graev &
Karabell, LLP, 30 Rockefeller Plaza, New York, New York 10112, at 10:00 a.m.
(New York time) on a date that shall be mutually agreeable to the parties hereto
(the "Closing Date"), provided, however, that the parties shall use commercially
reasonable efforts to consummate the Closing, in accordance with Section 5.3
hereof, as soon as practicable following the date of the Parent Stockholder
Approval.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Sellers jointly and severally represent and warrant to the Purchasers
and Alliance as of the date hereof, and as of the Closing Date as follows:
3.1. Title to the Shares.
Each of the Sellers is the lawful record and beneficial owner of the
Shares purported to be owned by it and has good and marketable title to such
Shares, free and clear of any Encumbrances whatsoever and with no restriction on
the voting rights and other incidents of record and beneficial ownership
pertaining thereto (except restrictions imposed by federal and state securities
laws). No Entity is the subject of any bankruptcy, reorganization or similar
proceeding.
3.2. Organization, Power, Authority and Good Standing.
(a) CT Sub is a corporation. The Partnership is a general partnership. The
Parent was incorporated on October 31, 1983 in the State of California. CT Sub
was incorporated on May 1, 1984 in the State of Delaware. M Sub was incorporated
on October 8, 1987 in the State of California. The Partnership was formed on
March 7, 1985 in the State of California.
(b) Each Seller and each Entity is duly organized and validly existing and
in good standing under the laws of its jurisdiction of organization and has all
requisite power and authority (corporate and otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted.
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(c) Each Seller and each Entity is duly qualified and in good standing to
transact business as a foreign Person in those jurisdictions set forth opposite
its name on Schedule 3.2(c), which constitute all the jurisdictions in which the
character of the property owned, leased or operated by such Person or the nature
of the business or activities conducted by such Person makes such qualification
necessary other than those jurisdictions in which the failure to be so qualified
and in good standing could not reasonably be expected to have a Material Adverse
Effect.
(d) The Purchasers have been furnished with true, correct and complete
copies of the Organizational Documents of each Entity and each Seller, in each
case as amended and in effect on the date hereof.
(e) No Entity or Seller has (i) during the five year period prior to the
date hereof, engaged in any business other than the Business or as otherwise set
forth opposite its name on Schedule 3.2(e)(i) and (ii) within the last five
years, used any trade names or assumed names other than the trade names or
assumed names set forth opposite its name on Schedule 3.2(e)(ii).
(f) Each Seller has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. Except for the Parent
Stockholder Approval, each Seller's execution and delivery of this Agreement and
each Related Document to which it is or will be a party, and the performance by
each Seller of its obligations hereunder and thereunder have been duly and
validly authorized by all requisite corporate action on the part of such Seller,
and this Agreement and each Related Document to which either Seller is or will
be a party has been, or upon the execution thereof will be, duly and validly
executed and delivered by such Seller, respectively, and constitutes, or upon
its execution and delivery will constitute, a valid and binding obligation of
such Seller, respectively, enforceable against such Seller, respectively, in
accordance with its terms except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in equity or at law). Except as set
forth on Schedule 3.2(f), none of the execution and delivery by each Seller of
this Agreement and each Related Document, the performance by either Seller of
its obligations under this Agreement and each Related Document to which it is or
will be a party, or the consummation of the transactions contemplated hereby or
thereby, does or will (a) result in the creation of an Encumbrance upon any
Entities' assets or properties, (b) conflict with, or result in any violation or
breach of, any of the terms, conditions or provisions of, or constitute (with
due notice or
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lapse of time, or both) a default or give rise to any right of contingent
payment, termination, cancellation, acceleration or non-renewal, under, any
provision of any Organizational Document of any such Person or any Contract to
which any such Person is a party or by which any of its assets or properties is
or may be bound which, in the case of such Contracts, could reasonably be
expected to have a Material Adverse Effect or prevent the consummation of the
transactions contemplated hereby or under the Related Documents and other than
with respect to the foregoing for which consents have been obtained, or (c)
violate any Law applicable to any Entity or Seller, which conflict or violation
could prevent the consummation of the transactions contemplated by this
Agreement or any of the Related Documents to which any such Person is or will be
a party.
(g) Except as contemplated by this Agreement or as set forth on Schedule
3.2(g), no consent, approval, Permit, Order, notification or authorization of,
or any exemption from or registration, declaration or filing with, any
Governmental Entity or any Person is required in connection with the execution,
delivery and performance by any Seller of this Agreement or any Related Document
to which any Seller is or will be a party or the consummation by any Seller of
the transactions contemplated hereby or thereby, except for those consents,
approvals, Permits, Orders, notifications, authorizations, exemptions,
registrations, declarations or filings the failure to obtain could not
reasonably be expected to have a Material Adverse Effect or prevent the
consummation of the transactions contemplated hereunder or under the Related
Documents or for those consents, approvals, Permits, Orders, notifications,
authorizations, exemptions, registrations, declarations and filings which have
been obtained.
3.3. Capitalization.
(a) The authorized capital stock of CT Sub consists of 1,000 duly
authorized shares of common stock, par value $1.00 per share, of which 1,000
shares are duly and validly issued and outstanding, fully paid and
nonassessable, with no personal Liability attached to the ownership thereof and
all of which are held of record and beneficially by the Parent.
(b) The Partnership Interests of the Partnership are owned beneficially
and of record in the amounts and by the Persons set forth in Schedule 3.3(b).
(c) There are no securities outstanding which are convertible into,
exchangeable for, or carrying the right to acquire, Equity Interests of any
Entity, or subscriptions, warrants, options, calls, puts, convertible
securities, registration or other rights, arrangements or commitments obligating
any Entity to issue, sell, register, purchase or redeem any of its Equity
Interests or any ownership interest or
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rights therein. There are no voting trusts or other similar agreements to which
any Entity is bound with respect to the voting of the any Entity's Equity
Interests. There are no stock appreciation rights, phantom stock rights or
similar rights or arrangements outstanding with respect to any Entity.
(d) Except as set forth on Schedule 3.3(d), there are no Contracts,
commitments, arrangements, understandings or restrictions to which any Seller or
any of its Subsidiaries is bound relating in any way to any Equity Interest of
any Entity, including any rights of first refusal and any rights of first offer.
(e) All Shares issued by each Entity have been issued in transactions
exempt from registration under the Securities Act and the rules and regulations
promulgated thereunder and all applicable state securities or "blue sky" laws,
and no Entity has violated the Securities Act or any applicable state securities
or "blue sky" laws which may give rise to rights of rescission, cancellation or
damages in connection with the issuance of any such securities.
3.4. Subsidiaries; Investments.
No Entity owns or holds, directly or indirectly, any Equity Interest in
any Person.
3.5. Financial Information.
(a) The Parent has filed with the SEC all reports, forms, schedules and
statements and other documents required to be filed by it (the "SEC Documents").
As of their respective filing dates, (i) the SEC Documents complied in all
material respects with the requirements of the Securities Act, or the Exchange
Act, as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents, and (ii) none of the SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements included in the SEC Documents complied, as
of their respective filing dates, as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC and as
otherwise noted therein) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present,
in all material respects, the consolidated financial position of the Parent and
its Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end
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audit adjustments). Except as set forth on Schedule 3.5(a) and except for
Liabilities incurred in the ordinary course of business consistent with past
practices since the date of the most recent consolidated balance sheet included
in the SEC Documents filed and publicly available prior to the date hereof,
neither the Parent nor any of its Subsidiaries has any Liabilities of any nature
(whether accrued, absolute, contingent or otherwise) required by GAAP to be set
forth on a balance sheet or in the notes thereto.
(b) Schedule 3.5(b) contains true, correct and complete copies of the
unaudited balance sheets of each of the Entities as of December 31, 1997 (the
"Latest Balance Sheet"; and such date being the "Latest Balance Sheet Date"),
and the unaudited statements of operations, shareholders' equity and cash flows
for the twelve month period then ended, adjusted to give effect to the
consummation of the transactions contemplated by Section 1.2 hereof as if such
transactions were consummated at January 1, 1997 prepared in accordance with
GAAP (the "Entities' Financial Statements").
(c) Neither of the Sellers has any knowledge of any fact, event or
circumstance that would reasonably cause it to believe that the Entities'
Financial Statements do not fairly present, in all material respects, the
financial position of the Persons referenced therein as of the dates indicated
and the results of operations and cash flows of such Persons for the periods
indicated.
(d) Schedule 3.5(d) sets forth as of January 31, 1998, the Funded
Indebtedness owed by the Parent and each Entity to any third party (separately
identifying the portion of such Funded Indebtedness incurred in respect of each
mobile and each fixed magnetic resonance imaging unit (each, an "MRI Unit"),
each mobile and each fixed computed axial tomography unit (each, a "CT Unit"),
each single photon emission computed tomography unit (each a "SPECT UNIT"), each
ultrasound machine (each, an "Ultrasound Machine"), each respiratory system
(each a "Respiratory System"), and each cardiac catherization lab (each a "Cath
Lab" and together with the MRI Units, CT Units, SPECT Units, Ultrasound
Machines, Respiratory Systems, and Cath Labs, the "Units") owned, leased or on
order by any Entity and the Parent, if any). As of the date hereof, the sum of
the aggregate commitments of the lenders under the DVI Revolving Credit
Agreement is $5,500,000 and as of the close of business on March 10, 1998, the
aggregate principal amount of loans and obligations outstanding thereunder is
$5,222,484.75.
(e) Schedule 3.5(e) sets forth as of (other than in the case of clause
(iv) below) the date which is 10 Business Days prior to the date hereof, (i) the
specifications of each Unit owned, leased, used or on order by any Entity or the
Parent, (ii) the name of the applicable Entity or the Parent, whether such
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Unit is owned, leased, used or on order and, in the case of Units used but not
owned or leased by any such Person, the name of the owner or the lessee thereof,
(iii) the date that such Person purchased, commenced leasing or using or, in the
case of Units on order, has committed to purchase or lease, such Unit, (iv) the
net book value per Unit as of December 31, 1997 or, in the case of Units on
order, the price to be paid to the manufacturer thereof or that any such Person
or any source of financing has committed to pay to the manufacturer thereof
(specifying, if applicable, the price applicable to the Unit and the price
applicable to the coach or van used or to be used to transport such Unit) and
(v) a summary of whether Tax payments in respect of the lease payments for each
Unit are paid at the inception of the relevant lease or as part of the monthly
lease payment.
(f) Schedule 3.5(f) sets forth (i) the date and cost of each upgrade
completed in the one year period prior to the date hereof to each Unit owned,
leased or used by each Entity or the Parent and (ii) all amounts in excess of an
aggregate of $25,000 that each Entity or the Parent has committed to pay in
respect of any pending upgrade.
(g) Schedule 3.5(g) sets forth a true and correct Schedule of all of the
accounts payable of the Entities (including payee, amount due and due date) as
of the close of business on January 31, 1998.
(h) Schedule 3.5(h) sets forth a true and correct Schedule of (i) all
principal payments or prepayments made by the Parent and each Entity for the
year ended on the Latest Balance Sheet Date and for the one month period ending
January 31, 1998, (ii) the interest expense incurred by the Parent and each
Entity in respect of Funded Indebtedness for the year ended on the Latest
Balance Sheet Date and for the one month period ending January 31, 1998, (iii)
the revenues, cash operating expenses, and EBITDA generated per Unit for the
Parent and each Entity for the year ended on the Latest Balance Sheet Date and
for the one month period ending January 31, 1998 and (iv) the capital
expenditures made by the Parent and each Entity for the year ended on the Latest
Balance Sheet Date, and for the one month period ending January 31, 1998, in
each case, setting forth such information separately for each such Person.
3.6. Information Supplied
None of the information supplied or to be supplied by the Parent
specifically for inclusion or incorporation by reference in any documents to be
filed by the Parent with the SEC or any other Governmental Entity in connection
with the Parent Stockholder Vote and the other transactions contemplated hereby
and under the Related Documents will, on the date of its filing, or, with
respect to the Proxy Statement, as supplemented if necessary, on the date it is
sent or given to stockholders or at
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the time of the Parent Stockholder Vote, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading; provided, that no
representation or warranty is made by the Sellers with respect to statements
made or incorporated by reference therein based on information supplied by the
Purchasers specifically for inclusion or incorporation by reference therein. The
Proxy Statement and any such other documents filed by the Parent with the SEC or
with any other Governmental Entity will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder.
3.7. Absence of Changes.
Since the Latest Balance Sheet Date and on or prior to the date hereof,
except as set forth on Schedule 3.7, the Parent (with respect to the Business)
and each Entity have been operated in the ordinary course, consistent with past
practice, and there has not been:
(a) any change or event that, individually or in the aggregate with any
other change or event, has had or can reasonably be expected to have a material
adverse effect on the assets, properties, business, financial condition, results
of operations or prospects of the Business (a "Material Adverse Effect");
(b) any general uniform increase in the salaries or wages of employees of
the Parent or any Entity, or any increase in salaries or wages payable to any
officer, director or employee of any such Person whose total salary, wages,
bonus and commissions for 1997 exceeded $75,000;
(c) any change in the tax or other accounting methods or practices
followed by the Parent or any Entity, any change in depreciation or amortization
policies or rates previously adopted or any write-up of inventory or other
assets;
(d) any delivery of a notice of non-renewal or any failure to renew any
Contract by any hospitals, clinics, medical or healthcare providers, health
maintenance organizations or other customers or third party payors, which are
material, individually or in the aggregate, except that any such event shall not
be deemed material for this purpose to the extent that new or additional
Contracts as replacements thereof have been obtained;
(e) any loss of any employee of the Parent or any Entity who earned,
during 1997, more than $125,000 (in salary, bonus and other cash compensation);
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(f) any sale, lease, license or other disposition of any assets with a
book value in excess of $50,000 in the aggregate;
(g) any issuance, sale or transfer of any Equity Interests of any Entity
or issuance or sale of any securities convertible into, exercisable or
exchangeable for or options or warrants to purchase or rights to subscribe for,
any such Equity Interests;
(h) any new Contract (except for any Contract related to any Employee
Benefit Plan of the Parent for which neither Entity has assumed or has any
Liability that is not disclosed hereunder) entered into with aggregate payments
which could exceed $50,000, any incurrence of Funded Indebtedness or operating
leases (other than Funded Indebtedness or operating leases outstanding on the
date hereof and disclosed on any Schedule hereunder) or any amendment, waiver or
modification with respect to the terms of any Funded Indebtedness or operating
leases (including, without limitation, any increase in the commitments to extend
credit thereunder);
(i) a change in any accounting principles or policies;
(j) any material Tax election made or compromise of any material Tax
Liability;
(k) any payments made by the Parent or any Entity to or for the benefit of
GK Finance (other than payments made on behalf of GK Finance and reimbursed by
GK Finance on a basis consistent with past practices and in the ordinary course
of business);
(l) any amendment to any Organizational Document or Contracts;
(m) any creation or incurrence (whether or not voluntary) of any
Encumbrance other than Permitted Encumbrances and Encumbrances which exist on
the date hereof and which have been disclosed on the Schedules to this
Agreement;
(n) any payments made or deferred in respect of accounts payable or any
expenses in a manner which is not consistent with past practices or is not in
the ordinary course of business; or
(o) any agreement, whether in writing or otherwise, to take any of the
actions specified in the foregoing clauses in this Section 3.7.
3.8. Tax Matters; Certain Definitions.
(a) Except as set forth on Schedule 3.8(a), each Entity, each Seller and
every other corporation (a "Consolidated Affiliate") that is or has been
included (or should have been
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included) in the filing of a consolidated or combined Tax Return that included
any Entity or Seller, (but with respect to a Consolidated Affiliate, only for
the years that such Consolidated Affiliate was (or should have been included) in
such Tax Return (the "Years Included")),
(i) has timely paid or caused to be paid all Taxes required to be
paid by it through the date hereof and as of the Closing Date (including
any Taxes shown due on any Tax Return filed by such Entity or Seller);
(ii) has filed or caused to be filed in a timely and proper manner
(within any applicable extension periods) all Tax Returns required to be
filed by it with the appropriate Governmental Entities in all
jurisdictions in which such Tax Returns are required to be filed; and
(iii) has not requested or caused to be requested any extension of
time within which to file any Tax Return, which Tax Return has not since
been filed.
(b) The Sellers have previously delivered true, correct and complete
copies of all Tax Returns filed by or on behalf of the Sellers and each Entity
for each of the Tax years of each such Person for which the applicable statutes
of limitation have not, as of the Closing Date, expired. All such Tax Returns
are true, complete and correct.
(c) Except as set forth in Schedule 3.8(c):
(i) no Entity, Seller or Consolidated Affiliate, for the Years
Included, has been notified by the Internal Revenue Service or any other
taxing authority that any issues have been raised, which issues are
currently pending, by the Internal Revenue Service or any other taxing
authority in connection with any Tax Return of any such Person, there are
no pending Tax audits and no waivers of statutes of limitation have been
given or requested with respect to any such Person which waivers are
currently in effect;
(ii) full and adequate provision has been made (A) on the Latest
Balance Sheet, and the books and records of each Entity and the Sellers
for all Tax Liabilities of such Person for all periods ending on or prior
to the Latest Balance Sheet Date, and (B) on the books and records of each
such Person for all Tax Liabilities of each such Person for all periods
beginning after the Latest Balance Sheet Date;
(iii) no Entity, Seller or Consolidated Affiliate has or shall incur
any Tax Liability from and after the Latest Balance Sheet Date through the
Closing Date other than Taxes
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attributable to the transactions described herein or attributable to
transactions or other activities conducted in the ordinary course of
business and consistent with previous years and past practices;
(iv) no Entity or the Sellers is or has (A) made an election to be
treated as a "consenting corporation" under Section 341(f) of the Code or
(B) been a "personal holding company" within the meaning of Section 542 of
the Code;
(v) each Entity, Seller and Consolidated Affiliate, for the Years
Included, has complied in all respects with all applicable Laws relating
to the collection or withholding of Taxes (such as sales Taxes or
withholding of Taxes from the wages of employees);
(vi) CT Sub is, as of the Closing Date will be, and has been from
October 15, 1987 and through the Closing, a member of the affiliated
group, as defined in Section 1504 of the Code, that included the Parent
(the "Consolidated Group"). CT Sub has been included in all consolidated
Tax Returns filed by the Consolidated Group for all periods during which
CT Sub has been a member of the Consolidated Group including the taxable
year of the Consolidated Group that includes the Closing Date;
(vii) no Entity or the Sellers has incurred any Liability to make or
possibly make any payments either alone or in conjunction with any other
payments, including payments that are made in connection with transactions
contemplated hereunder or under the Related Documents, that would
constitute a "parachute payment" within the meaning of, Section 280G of
the Code (or any corresponding provision of state, local or foreign income
Tax Law);
(viii) no Entity has agreed with the Internal Revenue Service to
change its method of accounting and the Internal Revenue Service has not
proposed that any Entity change its method of accounting for any Tax
period;
(ix) no written claim has ever been made by any taxing authority in
a jurisdiction in which any Entity, Seller or Consolidated Affiliate (for
the Years Included) does not file Tax Returns that such Person is or may
be subject to taxation by that jurisdiction; and
(x) no Entity or the Sellers is a foreign Person within the meaning
of Treas. Reg. ss. 1.1445-2(b), and the Purchasers have been furnished
with a true and accurate certificate of each such Person so stating which
complies in all respects with Treas. Reg. ss. 1.1445-2(b)(1).
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(d) Schedule 3.8(d) sets forth a list of all of the states and localities
with respect to which each Entity and the Sellers is required to file or be
included in a consolidated or combined filing of any corporate, income or
franchise tax returns during the three taxable years ended December 31, 1996.
(e) The Partnership, since its date of organization and for all years and
periods thereafter up to the Closing, has been validly classified as a
partnership for Federal, state and local income tax purposes and subject to the
provisions of Subchapter K of the Code, the Partnership will have a valid
Section 754 election in effect as of the Closing Date.
(f) M Sub has not engaged in any sales, transfers or dispositions of
tangible personal property (other than the sale of the M Sub Partnership
Interests to be sold on the Closing Date) during the twelve month period ending
on the Closing Date.
3.9. Title to Assets, Properties and Rights and Related Matters.
(a) Each Entity has (or will have after the consummation of the Asset
Contribution) good and marketable title to all of the assets, properties and
interests in properties, real, personal or mixed, reflected on its Latest
Balance Sheet or acquired after such Latest Balance Sheet Date (except accounts
receivable paid in full subsequent to the Latest Balance Sheet Date), free and
clear of all Encumbrances, of any kind or character, except for those
Encumbrances set forth on Schedule 3.9 and Permitted Encumbrances. The
properties and assets necessary or required to conduct the Business are in
reasonably good repair and operating condition, ordinary wear and tear excepted
and are sufficient for the conduct of the Business as presently conducted. After
the consummation of the transactions contemplated by Section 1.2 hereof, the
Parent and M Sub shall own no assets whatsoever related to the Business (other
than the Excluded Assets) and the Partnership shall acquire good and marketable
title to all of the Purchased Parent Assets. As of the Closing Date, each of the
transactions contemplated by Section 1.2 hereof shall have been consummated in
accordance with their respective terms. Each of Schedule 1.2(a), Schedule 1.2(b)
and Schedule 1.2(c) accurately reflects the aggregate balances of each of the
assets and liabilities set forth therein, in each case as of the date hereof.
(b) Except as set forth in Schedule 3.9, the Parent and each Entity has
complied in all material respects with the terms of all material leases to which
it is a party or under which it is in occupancy relating to the Business, and
all such leases are in full force and effect. The Parent and each Entity enjoy
peaceful and undisturbed possession under all such material leases.
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3.10. Real Property-Owned or Leased.
No Entity owns any real property. Schedule 3.10(a) contains a list and
brief description of all of the real property leased by each Entity pursuant to
one or more leases (the "Leased Property"), and sets forth the names of the
lessor and the lessee and the basic terms thereof. The Leased Property
constitutes all real property used or occupied by the Entities in connection
with the Business.
3.11. Intellectual Property.
(a) Except in each case as set forth on Schedule 3.11(a):
(i) each Entity owns, has the right to use, sell, license and
dispose of, and has the right to bring actions for the infringement of,
all Intellectual Property Rights necessary or required for the conduct of
the Business (collectively, the "Owned Requisite Rights"), other than
those Intellectual Property Rights for which any Entity has a valid
license, all of which are listed on Schedule 3.11(a) (collectively, the
"Licensed Requisite Rights"; and together with the Owned Requisite Rights,
the "Requisite Rights"), and such rights to use, sell, license, dispose of
and bring actions are exclusive with respect to the Owned Requisite
Rights;
(ii) each Entity has taken reasonable and practicable steps designed
to safeguard and maintain (i) the secrecy and confidentiality of
Confidential or Proprietary Information and (ii) the proprietary rights of
each Entity in all of its Requisite Rights;
(iii) no Entity has interfered with, infringed upon, misappropriated
or otherwise come into conflict with any Intellectual Property Rights of
any Person or committed any acts of unfair competition, and no Entity has
received from any Person in the past five years any notice, charge,
complaint, claim or assertion thereof, and no such claim is impliedly
threatened; and
(iv) no Entity has sent to any Person in the past five years, or
otherwise communicated to any Person, any notice, charge, complaint, claim
or other assertion of any present, impending or threatened infringement by
or misappropriation of, or other conflict with, any Intellectual Property
Rights of any Entity by such other Person or any acts of unfair
competition by such other Person, nor to the Best Knowledge of the
Sellers, is any such infringement, misappropriation, conflict or act of
unfair competition occurring or threatened.
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(b) Schedule 3.11(b) contains a true and complete list of all
applications, filings and other formal actions made or taken pursuant to any
Laws by each Entity to perfect or protect its interest in its Intellectual
Property Rights, including, without limitation, all patents, patent
applications, trademarks, trademark applications, service marks and service mark
applications, copyrights and copyright applications.
3.12. Agreements, No Defaults, Etc.
(a) Except for Contracts relating to any Employee Benefit Plan listed on
Schedule 3.17(a), Schedule 3.12 contains a true and complete list and brief
description of all Contracts, to which each Entity is a party and (x) which were
entered into or made outside the ordinary course of business, or (y) which were
entered into or made in the ordinary course of business and are described in any
of clauses (i) through (xiv) of this Section 3.12(a). Except as set forth on
Schedule 3.12, no Entity is a party to any of the following: (i)
distributorship, dealer, sales, advertising, agency, manufacturer's
representative or other Contract relating to the payment of a commission; (ii)
Contract for the employment of any officer, employee or consultant or any other
type of Contract or understanding with any officer, employee or consultant,
including any agreement or understanding relating to severance payments, but
excluding Contracts, agreements or understandings relating to any Employee
Benefit Plan listed on Schedule 3.17(a); (iii) indenture, mortgage, promissory
note, loan agreement, security agreement, pledge agreement, conditional sale,
guarantee or other Contract for the borrowing of money, for a line of credit or
for a Capital Lease; (iv) Contract for charitable contributions; (v) Contract
for capital expenditures in excess of $25,000 individually or $100,000 in the
aggregate; (vi) Contract or arrangement for the sale of any assets, properties
or rights other than the sale of services or products in the ordinary course of
business; (vii) lease or other agreement pursuant to which it is a lessee of or
holds or operates any machinery, equipment (including Units), motor vehicles,
office furniture, fixtures, products, merchandise or other personal property
owned by any other Person, with annual lease payments in excess of $20,000
individually or $50,000 in the aggregate; (viii) Contract with respect to the
lending or investing of funds, other than with respect to any Employee Benefit
Plan listed on Schedule 3.17(a); (ix) Contract with respect to any form of
intangible property, including any Intellectual Property Rights; (x) Contract
which restricts any Entity from engaging in any aspect of the Business or any
other business anywhere in the world; (xi) Contract or group of related
Contracts with the same Person (excluding purchase orders entered into in the
ordinary course of business which are to be completed within three months of
entering into such purchase orders) for the purchase or sale of products or
services under which the undelivered balance thereof (including the aggregate
undelivered balance under any such Contracts between the same Person and such
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Entity) has a selling price or outstanding balance in excess of $10,000; (xii)
agreement for the acquisition or disposition of a Person or a division of a
Person for which either of the Entities shall have continuing Liabilities after
the Closing Date; (xiii) Contract to provide MRI, CT, ultrasound or nuclear
medicine services to a hospital, clinic or provider; and (xiv) other Contract
material to the Business, including all franchise agreements and license
agreements and all financing agreements related thereto, other than with respect
to any Employee Benefit Plan listed on Schedule 3.17(a). With respect to the
Contracts specified in Section 3.12(a)(vii), Schedule 3.12 sets forth with
respect to each such Contract, as of the date hereof, the aggregate annual
rental payments (including interest factor) and the purchase price payable to
terminate such Contract and acquire the underlying asset. With respect to the
Contracts specified in Section 3.12(a)(xiii), Schedule 3.12 sets forth the fees,
as of the date hereof, for each scan, study or other service performed
thereunder.
(b) All items listed on Schedule 3.12 are in full force and effect,
constitute legal, valid and binding obligations of the respective parties
thereto, and are enforceable in accordance with their respective terms except as
such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in equity or at law). Except as set forth on Schedule 3.12, there
exists no default, or any event which upon the giving of notice or the passage
of time, or both, would give rise to a claim of a default in the performance by
any Entity or to the Best Knowledge of the Sellers, any other party to any of
the foregoing of their respective obligations thereunder. The Purchasers have
been furnished with true, complete and correct copies of all items listed on
Schedule 3.12.
3.13. Litigation, Etc.
(a) Except as disclosed on Schedule 3.13(a), there are no (i) Proceedings
pending or, to the Best Knowledge of the Sellers, threatened against any Entity,
whether at law or in equity, whether civil or criminal in nature or whether
before or by any Governmental Entity or arbitrator, or (ii) Orders of any
Governmental Entity or arbitrator with respect to, involving or against any
Entity. The Sellers have delivered to the Purchasers, or made available to the
Purchasers, all material documents and correspondence relating to such matters
referred to on Schedule 3.13(a).
(b) Schedule 3.13(b) lists each matter described in Section 3.13(a) that
was in existence within the last 3 years that resulted in any criminal sanctions
or payments in excess of $50,000 by any Entity (whether as a result of a
judgment, civil fine, settlement or otherwise).
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3.14. Compliance with Laws.
Each Entity (a) has complied in all respects with, and is in compliance in
all respects with, all Laws, Orders and Permits applicable to it and the
Business, the noncompliance with which could reasonably be expected to have a
Material Adverse Effect and (b) has all material Permits used or necessary in
the conduct of the Business. All of such Permits are listed on Schedule 3.14,
are in full force and effect, no violations with respect to any thereof have
occurred or are or have been recorded, no Proceeding is pending or, to the Best
Knowledge of the Sellers, threatened to revoke or limit any thereof except, in
each case, such of the foregoing as could not reasonably be expected to have a
Material Adverse Effect. No investigation or review by any Governmental Entity
with respect to any Entity is pending or, to the Best Knowledge of the Sellers,
threatened, nor has any Governmental Entity notified any Entity or any Seller of
its intention to conduct the same.
3.15. Insurance.
(a) Schedule 3.15(a) contains a true and complete list of all policies of
liability, theft, fidelity, fire, product liability, workmen's compensation and
other forms of insurance held by each Entity and/or by any Seller for the
benefit of any Entity (specifying the insurer, amount of coverage, type of
insurance, policy number and any pending claims thereunder) other than policies
relating to any Employee Benefit Plan.
(b) Except as set forth on Schedule 3.15(b), with respect to each policy
of insurance listed on Schedule 3.15(a): (i) all premiums with respect thereto
are currently paid and are not subject to adjustment, and no Person is in
default in any respect with respect to its obligations under such policy, and
(ii) no Entity has received any notice that such policy has been or shall be
canceled or terminated or will not be renewed on substantially the same terms as
are now in effect or the premium on such policy shall be materially increased on
the renewal thereof.
3.16. Labor Relations: Employees.
(a) Schedule 3.16(a) sets forth a list of all directors, officers and
employees of each Entity and employees of the Parent (solely with respect to the
Business) as of the date hereof whose aggregate compensation exceeded $75,000 in
1997, together with their respective titles, their rate of annual salary,
bonuses and commissions for 1997 and the respective dates on which they
commenced employment. To the extent any such employee is on a leave of absence
as of the date hereof, Schedule 3.16(a) indicates the nature of such leave of
absence and such employee's anticipated date of return to active employment.
Except as set forth on Schedule 3.16(a), no former employee whose aggregate
compensation exceeded $75,000 in 1997 has left the service of any
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Entity or the Parent within the last 6 months. The schedule of employees of the
Parent and the Entities previously provided to the Purchasers by the Parent
(which sets forth the Person (as among the Parent and the Entities) which
employs each such employee) was true and correct as of the date provided and
none of such employees who are currently employees of Parent or the Entities has
become employed by any other Person (as among Parent and the Entities) since
such date.
(b) As of the date hereof, except as set forth on Schedule 3.16(b): (i)
there is no labor strike or work stoppage actually pending against any Entity or
the Parent; (ii) no Entity or the Parent is a party to or bound by any
collective bargaining agreement or union contract; (iii) no such agreement is
currently being negotiated by any Entity or the Parent and (iv) no Entity or the
Parent has received a request for recognition from any labor organization or any
notice that a petition for election with respect to such Person has been filed
with the National Labor Relations Board.
3.17. ERISA Compliance.
(a) Schedule 3.17(a) contains a true, complete and correct list of all
existing Employee Benefit Plans (collectively, the "Employee Plans") (i) that
cover any employees, contract employees or former employees of any Entity or any
spouses, family members or beneficiaries thereof (A) that are maintained,
sponsored or contributed to by any Entity or (B) with respect to which any
Entity is obligated to contribute or has any Liability, or (ii) with respect to
which any Entity has any Liability on account of the maintenance or sponsorship
thereof or contribution thereto by any present or former ERISA Affiliate of any
Entity.
(b) Administration and Compliance. Except as set forth on Schedule
3.17(b), with respect to each Employee Plan:
(i) such Employee Plan has been established, maintained, operated
and administered in all material respects in accordance with its terms and
in compliance in all material respects with ERISA, the Code, and other
applicable Laws (including with respect to reporting and disclosure);
(ii) all amounts withheld pursuant to such Employee Plan from
employees have, where applicable, been timely deposited into the
appropriate trust or account;
(iii) no Entity or any ERISA Affiliate of either Entity has breached
the fiduciary rules of ERISA or engaged in a prohibited transaction that
could subject either Entity to any Tax or penalty imposed under Section
4975 of the Code or Section 502(i), (j) or (l) of ERISA in excess of
$50,000;
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(iv) as of the date hereof, no Proceedings (other than routine
claims for benefits or administrative appeals with respect thereto) are
pending against such Employee Plan;
(v) such Employee Plan, if intended to be "qualified", within the
meaning of Section 401(a) of the Code, has been determined by the Internal
Revenue Service to be so qualified to the extent addressed in the most
recent favorable determination letter, and nothing has occurred that has
or could reasonably be expected to adversely affect such qualification;
(vi) except as may be required under Laws of general application,
such Employee Plan does not obligate any Entity to provide any employee or
former employee, or their spouses, family members or beneficiaries, any
post-employment or post-retirement health or life insurance, accident or
other "welfare-type" benefits;
(vii) if such Employee Plan is a "group health plan" within the
meaning of Section 5000 of the Code, such Employee Plan has been
maintained in compliance with Section 4980B of the Code and Title I,
Subtitle B, Part 6 of ERISA so that no Tax imposed under Section 4980B of
the Code has been or is expected to be incurred by either Entity in excess
of $50,000;
(viii) all reporting and disclosure obligations imposed under ERISA
and the Code have been satisfied in all material respects and no IRS Form
5500 has been filed late (after consideration of any applicable extension)
for any of the three most recently ended plan years; and
(ix) without limiting Section 3.8(c), no benefit payable or which
becomes payable by any Entity pursuant to such Employee Plan shall
constitute an "excess parachute payment," within the meaning of Section
280G of the Code, which is or may be subject to the imposition of an
excise Tax under Section 4999 of the Code or which will not be deductible
by reason of Section 280G of the Code.
(c) Since 1988, no Entity and no ERISA Affiliate of any Entity is or has
ever maintained or been obligated to contribute to a "multiemployer plan" as
defined in Section 3(37) of ERISA, a "multiple employer plan," as defined in
Section 413 of the Code, or a "defined benefit pension plan," as defined in
Section 3(35) of ERISA;
(d) With respect to each Employee Plan, as of the date hereof, the
Purchasers have been provided with true and complete copies, to the extent
applicable, of each plan and trust document
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governing the terms of such Employee Plan, the two most recent annual reports
(Form 5500 and attachments) and financial statements prepared therefor, the most
recent favorable determination letter issued to Parent or either Entity (and
pending requests therefor), and each of the foregoing documents accurately
reflects the terms of such Employee Plan in effect at the time such document was
prepared (including, without limitation, any agreement or provision which would
limit the ability of any Entity to make any prospective amendments or terminate
such Employee Plan).
3.18. Certain Additional Regulatory Matters.
(a) None of the Sellers, the Entities or any officer, director or managing
employee of the Sellers or the Entities (within the meaning of 42 U.S.C. (ss.
1320a-5(b)) have engaged in any activities which constitute violations of, or
are cause for imposition of civil penalties upon any Entity or mandatory or
permissive exclusion of any Entity from Medicare or Medicaid, under (S) 1320a-7,
1320a-7a, 1320a-7b, or 1395nn of Title 42 of the United States Code, the federal
Civilian Health and Medical Plan of the Uniformed Services statute ("CHAMPUS"),
or the regulations promulgated pursuant to such statutes or regulations or
related state or local statutes or which constitute violations of or
deficiencies under the standards of any private accrediting organization from
which any Entity is accredited or seeks accreditation, including the following
activities:
(i) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment;
(ii) knowingly and willfully making or causing to be made any false
statement or representation of a material fact for use in determining
rights to any benefit or payment;
(iii) knowingly and willfully presenting or causing to be presented
a claim for reimbursement under CHAMPUS, Medicare, Medicaid or any other
State Health Care Program or Federal Health Care Program that is (i) for
an item or service that the Person presenting or causing to be presented
knows or should know was not provided as claimed, or (ii) for an item or
service where the Person presenting knows or should know that the claim is
false or fraudulent;
(vi) knowingly and willfully offering, paying, soliciting or
receiving any remuneration (including any kickback, bribe or rebate),
directly or indirectly, overtly or covertly, in cash or in kind (i) in
return for referring, or to induce the referral of, an individual to a
Person for the furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part
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by CHAMPUS, Medicare or Medicaid, or any other State Health Care Program
or any Federal Health Care Program, or (iii) in return for, or to induce,
the purchase, lease, or order, or the arranging for or recommending of the
purchase, lease, or order, of any good, facility, service, or item for
which payment may be made in whole or in part by CHAMPUS, Medicare or
Medicaid or any other State Health Care Program or any Federal Health Care
Program; or
(v) knowingly and willfully making or causing to be made or inducing
or seeking to induce the making of any false statement or representation
(or omitting to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading) of a
material fact with respect to (i) the conditions or operations of a
facility in order that the facility may qualify for CHAMPUS, Medicare,
Medicaid or any other State Health Care Program certification or any
Federal Health Care Program certification, or (ii) information required to
be provided under (S) 1124(A) of the Social Security Act ("SSA") (42
U.S.C. (S) 1320a-3).
(b) Each Entity has a Medicare provider number, and a participating
provider agreement in force with a Medicare Part B carrier, in each locale, as
applicable, in which such Entity bills directly to Medicare for services
furnished by such Entity.
(c) Each Entity has a Medicaid number and a participating provider
agreement in each state, as applicable, in which such Entity bills directly to
such states' Medicaid agency for services provided by such Entity.
3.19. Medicare/Medicaid Participation.
None of the Sellers, the Entities, or any officer, director, or managing
employee (as defined in SSA (S) 1126(b) or any regulations promulgated
thereunder) of the Sellers or the Entities: (1) has had a civil monetary penalty
assessed against him, her or it under (S) 1128A of the SSA or any regulations
promulgated thereunder; (2) has been excluded from participation under the
Medicare program or a state health care program as defined in SSA (S) 1128(h) or
any regulations promulgated thereunder ("State Health Care Program") or a
federal health care program as defined in SSA (S) 1128B(f) ("Federal Health Care
Program"); or (3) has been convicted (as that term is defined in 42 C.F.R. (S)
1001.2) of any of the following categories of offenses as described in SSA (S)
1128(a) and (b)(1), (2), (3) or any regulations promulgated thereunder:
(i) criminal offenses relating to the delivery of an item or service
under Medicare or any State Health Care Program or any Federal Health Care
Program;
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(ii) criminal offenses under federal or state law relating to
patient neglect or abuse in connection with the delivery of a health care
item or service;
(iii) criminal offenses under federal or state law relating to
fraud, theft, embezzlement, breach of fiduciary responsibility, or other
financial misconduct in connection with the delivery of a health care item
or service or with respect to any act or omission in a program operated by
or financed in whole or in part by any federal, state or local
governmental agency;
(iv) federal or state laws relating to the interference with or
obstruction of any investigation into any criminal offense; or
(v) criminal offenses under federal or state law relating to the
unlawful manufacture, distribution, prescription or dispensing of a
controlled substance.
3.20. Environmental Matters.
(a) Except as set forth on Schedule 3.20(a), each Entity is in material
compliance with all applicable Environmental, Health and Safety Laws. Each
Entity has all of the Permits, licenses, authorizations, registrations and
approvals from Governmental Entities necessary to operate the Business, and all
such Permits, licenses, authorizations, registrations and approvals are valid
and in effect
(b) Except as set forth on Schedule 3.20(b), there are no pending or, to
the knowledge of the Sellers, threatened claims by any Governmental Entity
concerning or alleging a violation of any Environmental Health and Safety Law by
any Entity, nor are any pending or, to the knowledge of the Sellers, threatened
claims under any Environmental Health and Safety Laws concerning any property or
facility previously owned, leased or operated by any Seller or Entity or
predecessor of any Seller or Entity.
(c) Except as set forth on Schedule 3.20(c), no Entity presently is the
subject of any ongoing administrative or judicial proceeding or investigation
brought by any Governmental Entity under any Environmental, Health or Safety Law
including, without limitation, any voluntary clean-up program or any Proceeding
under the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA," also known as "Superfund") or any state counterparts to CERCLA, nor
is any Entity obligated to remediate, monitor, investigate, conduct corrective
action or report on environmental, health and safety matters concerning the
Business pursuant to any order, agreement, decree or mediation or arbitration
proceeding.
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(d) Except as set forth on Schedule 3.20(d), in the five years preceding
the date hereof, no Entity has received any written notice, report or other
written information (i) regarding any actual or alleged violation of any
Environmental, Health and Safety Laws, or (ii) that any Entity is potentially
responsible under any Environmental, Health and Safety Laws for response costs,
corrective action or natural resource damages, as those terms are defined under
any Environmental, Health and Safety Laws.
(e) Except as set forth on Schedule 3.20(e), Sellers are not aware of
impending changes in Environmental Health or Safety Laws which could reasonably
be expected to materialize before the one year anniversary of the Closing Date
and which could result in a Material Adverse Effect.
(f) Sellers have provided to the Purchasers copies of, or access for
purposes of review to, all documents, reports, studies or other non-legally
privileged information concerning environmental, heath or safety matters
relating to the Business which are in the possession of Sellers. The information
prepared or originated by the Sellers or the Entities and provided to the
Purchasers is true and correct.
3.21. Brokers.
No Seller or Entity has employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any Purchaser or Alliance
may have Liability after the Closing.
3.22. Related Transactions.
Except as set forth on Schedule 3.22 or on Schedules 3.17 (a) or (b) and
except for compensation to bona-fide employees of any Entity for services
rendered in the ordinary course of business, no Affiliate of any Entity or any
"associate" (as defined in the rules promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) thereof, is now (i) party to any
transaction or Contract with any Entity providing for the furnishing of services
by, or rental of real or personal property from, or otherwise requiring payments
to, any such Affiliate or associate, or (ii) the direct or indirect owner of a
controlling interest in any Person which is a present or potential competitor,
supplier or customer of any Entity (other than nonaffiliated holdings in
publicly held companies). Except as set forth on Schedule 3.22, no Entity is a
guarantor or otherwise liable for any actual or potential Liability of its
Affiliates and their associates (other than with respect to any Entity, the
other Entity). Except as set forth on Schedule 3.22, no Entity owns or pays for
any social club memberships, whether or not for the benefit of any Entity and/or
its executives.
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3.23. Bank Accounts; Powers of Attorney.
Schedule 3.23 sets forth a true and complete list of (i) all bank accounts
and safe deposit boxes of each Seller and Entity and all Persons who are
signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from any Seller or Entity and a summary of
the terms thereof.
3.24. Voting.
The affirmative vote of a majority of the outstanding shares (the "Parent
Stockholder Approval") of the Parent's common stock, par value $0.01 per share
(the "Parent Common Stock") is the only vote of the holders of any class or
series of the Parent's capital stock which is necessary to approve this
Agreement and the transactions contemplated hereby.
3.25. Opinion of Financial Advisor.
The Board of Directors of the Parent has received the oral opinion of
Paine Webber Incorporated to the effect that, as of the date hereof, the
consideration to be received in respect of Shares pursuant to this Agreement is
fair from a financial point of view to the Parent.
3.26. Physician Relationships.
(a) Except as set forth in Schedule 3.26 the Entities do not have any
"financial relationship" with any "referring physician" or an immediate family
member of such physician, within those terms' meanings under 42 U.S.C. Section
1395nn.
(b) To the Best Knowledge of each of the Sellers, no "referring physician"
(within the meaning of 42 U.S.C. ss. 1395nn) owns any securities of the Sellers.
3.27. Other Hospital Relationships.
Except as set forth in Schedule 3.27 other than with respect to reading
radiologists, the Entities do not have any lease or other arrangement with any
hospital or other entity whereby the Entities pay the hospital or other entity
rent or any other fee the amount of which is dependent in whole or in part on
the gross or net revenues, net income, or cash flow of any segment of the
business of the Entities.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants, severally as to itself, as of the
date hereof and as of the Closing Date as follows:
4.1. Organization; Corporate Authority.
Such Purchaser is a corporation duly organized, validly existing and in
good standing under the Laws of the jurisdiction of its incorporation and has
all requisite power and authority (corporate or otherwise) to own, lease and
operate its assets and properties and to carry on its business as presently
conducted and as presently proposed to be conducted. Such Purchaser is duly
qualified and in good standing to transact business as a foreign Person in those
jurisdictions set forth on Schedule 4.1, which, as of the date hereof,
constitute all the jurisdictions in which the character of the property owned,
leased or operated by such Purchaser or the nature of the business or activities
conducted by such Purchaser makes such qualification necessary.
4.2. Corporate Action; Authority; No Conflict.
Such Purchaser has all requisite power and authority (corporate and
otherwise) to execute, deliver and perform its obligations under this Agreement
and each Related Document to which it is or will be a party and to consummate
the transactions contemplated hereby and thereby. The execution, delivery and
performance by such Purchaser of this Agreement and each Related Document to
which it is or will be a party, and performance of its obligations hereunder and
thereunder have been duly and validly authorized by all necessary corporate
action on the part of such Purchaser. This Agreement and each Related Document
to which it is or will be a party has been or upon the execution thereof will
be, duly and validly executed and delivered by such Purchaser, and constitutes,
or upon its execution and delivery will constitute, a valid and binding
obligation of such Purchaser, enforceable against it in accordance with its
terms except as such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity (regardless of
whether enforcement is sought in equity or at law). Neither such Purchaser's
execution and delivery of, and/or performance of its obligations under, this
Agreement and each Related Document to which it is or will be a party, nor the
consummation of the transactions contemplated hereby and thereby shall (i)
conflict with or result in any violation or breach of, any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default under, or give rise to any right of termination, cancellation or
acceleration or result in the
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creation of any Encumbrance upon any of the assets or properties of such
Purchaser under provision of such Purchaser's Organizational Documents or any
Contract to which such Purchaser is a party (other than security documents
relating to financing arrangements existing for the benefit of the Purchasers'
Affiliates) or by which it or any of its assets or properties is or may be bound
which, in the case of such Contracts, would reasonably be expected to have a
material adverse effect on any Purchaser or prevent the consummation of the
transactions contemplated hereby or under the Related Documents and other than
with respect to the foregoing for which consents have been obtained or (ii)
violate, or result in the creation of an Encumbrance upon any of such
Purchaser's assets as a result of, any Law's applicable to such Purchaser or any
of its properties or assets, in each case, which would prohibit the such
Purchaser from consummating the transactions contemplated hereby.
4.3. Brokers.
Such Purchaser has not employed any broker or finder or incurred any
Liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby for which any Seller may have any
Liability after the Closing.
4.4. Consents.
Except as contemplated by this Agreement or as set forth on Schedule 4.4,
and the Related Documents, no consent, approval, Order or authorization of, or
registration, declaration or filing with or notification to, any Governmental
Entity or any third party is required in connection with the execution, delivery
and performance by such Purchaser of this Agreement or the Related Documents to
which such Purchaser is or will be a party or the consummation of the
transactions contemplated hereby or thereby except for those consents,
approvals, Orders, authorizations, registrations, declarations, filings or
notifications the failure to obtain could not reasonably be expected to have a
material adverse effect on such Purchaser or except for those consents,
approvals, Orders, authorizations, registrations, declarations or filings which
have been obtained.
4.5. Investment Representations.
Each of the Purchasers are acquiring the Shares to be purchased by it, for
its own account, for investment and not with a view to the distribution thereof
in violation of the Securities Act.
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4.6. Information Supplied.
None of the written information supplied or to be supplied by any
Purchaser specifically for inclusion or incorporation by reference in the Proxy
Statement, as supplemented if necessary, and any other documents to be filed by
the Parent with the SEC or any Governmental Entity in connection with the
transactions contemplated hereby will, on the date of its filing or, with
respect to the Proxy Statement, as supplemented if necessary, on the date it is
sent or given to stockholders or at the time of the Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE IVA
REPRESENTATIONS AND WARRANTIES OF ALLIANCE
Alliance represents and warrants, as to itself, as of the date hereof and
as of the Closing Date as follows:
4A.1. Organization; Corporate Authority.
Alliance is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation and has all
requisite power and authority (corporate or otherwise) to own, lease and operate
its assets and properties and to carry on its business as presently conducted
and as presently proposed to be conducted.
4A.2. Corporate Action; Authority; No Conflict.
Alliance has all requisite power and authority (corporate and otherwise)
to execute, deliver and perform its obligations under this Agreement and each
Related Document to which it is or will be a party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Alliance of this Agreement and each Related Document to which it
is or will be a party, and performance of its obligations hereunder and
thereunder have been duly and validly authorized by all necessary corporate
action on the part of Alliance. This Agreement and each Related Document to
which Alliance is or will be a party has been or upon the execution thereof will
be, duly and validly executed and delivered by it, and constitutes, or upon its
execution and delivery will constitute, a valid and binding obligation of it,
enforceable against it in accordance with its terms except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and by general principles of equity (regardless of whether enforcement
is sought in equity or at law). Neither Alliance's execution and
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delivery of, and/or performance of its obligations under, this Agreement and
each Related Document to which it is or will be a party, nor the consummation of
the transactions contemplated hereby and thereby shall (i) conflict with or
result in any violation or breach of, any of the terms, conditions or provisions
of, or constitute (with due notice or lapse of time, or both) a default under,
or give rise to any right of termination, cancellation or acceleration or result
in the creation of any Encumbrance upon any of the assets or properties of
Alliance under provision of its Organizational Documents or any Contract to
which it is a party or by which it or any of its assets or properties is or may
be bound which, in the case of such Contracts, would reasonably be expected to
have a material adverse effect on it or prevent the consummation of the
transactions contemplated hereby or under the Related Documents and other than
with respect to the foregoing for which consents have been obtained or (ii)
violate, or result in the creation of an Encumbrance upon any of its assets as a
result of, any Law's applicable to it or any of its properties or assets, in
each case, which would prohibit it from consummating the transactions
contemplated hereby.
4A.3. Designation of Purchasers.
Alliance has duly designated the Purchasers to acquire the Shares
hereunder, and will cause the Purchasers to perform each and every obligation
undertaken by them herein.
ARTICLE V
COVENANTS AND AGREEMENTS
5.1. Access to Records and Properties of the Entities.
From and after the date hereof until the Closing, the Sellers shall, and
shall cause each Entity to afford, (i) to the Purchasers, their respective
lenders and Affiliates and each of their respective authorized representatives,
including accountants, consultants and attorneys, free and full access at all
reasonable times to the assets, business, facilities, properties, books, records
(including tax returns filed and in preparation), customers, consultants, and
employees of or relating to each Entity and the Parent in order that the
Purchasers have full opportunity to make such investigation as they shall
reasonably desire to make of the affairs of each Entity and the Parent and in
order that the Purchasers may integrate the Business into the business currently
being conducted by the Purchasers' Affiliates, and (ii) to the respective
independent certified public accountants of the Purchasers, free and full access
at all reasonable times to the records of the independent certified public
accountants of each Entity and the Parent. The Sellers shall cause their
employees
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to actively cooperate and assist Purchasers and such other Persons in effecting
such integration. From and after the date hereof until the Closing, (i) the
Sellers shall provide to the Purchasers promptly but in any event no later than
the 25th day after the last day of each calendar month, a copy of the
consolidated and consolidating balance sheets, statements of operations,
shareholders equity and cash flows of the Parent and its Subsidiaries for each
such calendar month, together with a copy of the Parent's "white book" and "blue
book" (and any supporting information with respect thereto), and (ii) such other
information regarding the Parent and its Subsidiaries as may be reasonably
requested by the Purchasers. The investigation contemplated by this Section 5.1
shall not affect or otherwise diminish or obviate in any respect any of the
representations and warranties or the indemnification obligations contained in
this Agreement.
5.2. Conduct Pending Closing.
From and after the date hereof until the earlier of the Closing or the
termination of this Agreement pursuant to Article 8, each of the Sellers shall,
and shall cause each Entity to (unless otherwise consented to in writing by the
Purchasers):
(a) not sell, lease, license or otherwise dispose of any assets with a
book value in excess of $50,000 in the aggregate;
(b) not issue, sell or in any way transfer any Equity Interests of the
Entities or issue or sell any securities convertible into, exercisable or
exchangeable for or options or warrants to purchase or rights to subscribe for,
any such Equity Interests;
(c) not change the number of authorized shares of the Equity Interests of
the Entities or reclassify, combine, split, subdivide or redeem or otherwise
repurchase any of such Equity Interests, or issue, deliver, pledge or encumber
any additional Equity Interests of the Entities or other securities equivalent
to, or exchangeable for, Equity Interests of the Entities or enter into any
Contract to do any of the foregoing;
(d) not incur or issue any securities evidencing any Funded Indebtedness
or enter into any operating leases (other than Funded Indebtedness of a Seller
for which no Entity (or its assets) is liable or obligated (whether
contractually, by applicable Law, as a guarantor or through the incurrence or
grant of any Encumbrances), Funded Indebtedness related to money advanced from
Sellers or GK Finance to an Entity on a basis consistent with past practice and
in the ordinary course of business, provided that the amounts so advanced are
repaid prior to the Closing Date, Funded Indebtedness or operating leases
outstanding on the date hereof and disclosed on any Schedules hereunder), or
amend, modify or agree to a waiver of the terms of
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any Funded Indebtedness or operating leases (including, without limitation
increasing any commitments to extend credit thereunder);
(e) not enter into any Contract with aggregate payments which could exceed
$50,000 (except for any Contract related to any Employee Benefit Plan of the
Parent or any Subsidiary other than the Entities, and for which Contract neither
Entity assumes or has any Liability not disclosed hereunder) or any Contract in
respect of the rental of any Unit;
(f) not enter into any employment agreement, or in any manner change the
Person (as among the Parent and the Entities) which is the employer of the
employees of the Parent and the Entities from the Person disclosed on the
schedule referenced in the last sentence of Section 3.16(a) as such employee's
employer, or terminate the employment of any employees in a manner which is
inconsistent with past practices or policies, or except as required by
applicable Law, effect any increase in the rate or terms of compensation payable
or to become payable to officers or employees of any Entity or the Parent
(solely as relating to the Business) other than increases in compensation under
Employee Benefit Plans which are available to all employees generally;
(g) not create or suffer to exist any Encumbrance on any of its assets or
properties other than Permitted Encumbrances, Encumbrances on Equity Interests
or assets of GK Finance or any assets of Subsidiaries of the Parent other than
the Entities, and Encumbrances which exist on the date hereof and which have
been disclosed on the Schedules to this Agreement;
(h) not change its tax or accounting principles, policies or practices,
change any depreciation or amortization policies or rates previously adopted or
write-up inventory or any other assets;
(i) not make any material Tax election or compromise any material Tax
Liability;
(j) not make any payments to or for the benefit of GK Finance (other than
payments made on behalf of GK Finance and reimbursed by GK Finance on a basis
consistent with past practices and in the ordinary course of business);
(k) not amend any of its Organizational Documents or any Contracts (other
than Contracts related to any Employee Plan);
(l) not enter into any transaction other than in the ordinary course of
business, or any transaction which is not at arms-length with unaffiliated third
Persons;
(m) not take or omit to take any action which would result in the
representations and warranties contained in this
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Agreement and the Related Documents being untrue on the Closing Date, other than
such action as shall have been previously agreed to in writing by the parties
hereto;
(n) not make any material change in the manner in which such Person
extends discounts or credits to customers or any material change in the manner
or terms by which such Person collects its accounts receivable or otherwise
deals with customers;
(o) not agree or otherwise commit to take any of the actions set forth
above;
(p) promptly provide the Purchasers with at least five Business Days
notice of (i) the terms and conditions with respect to renewals of any existing
Contracts to be renewed by the Entities, (ii) any intention to not renew any
existing Contracts and (iii) the actual nonrenewal of any existing Contract;
(q) conduct its business substantially as presently conducted and only in
the ordinary course consistent with past practice;
(r) use commercially reasonable efforts to (i) maintain its business,
assets, relations with present employees, customers, suppliers, partners,
licensees and operations as an ongoing business and preserve its goodwill, in
accordance with past custom and practice and (ii) to satisfy each of the closing
conditions to be satisfied by it set forth in Article 6 hereof; and
(s) pay and continue to defer all accounts payable and all expenses in a
manner which is consistent with past practices and in the ordinary course of
business.
5.3. Efforts to Consummate.
Subject to the terms and conditions of this Agreement, each party shall
use commercially reasonable efforts to take or cause to be taken all actions and
do or cause to be done all things required under all applicable Laws, in order
to consummate the transactions contemplated hereby.
5.4. No Solicitation.
(a) The Parent shall, shall cause M Sub and each Entity to and shall
direct and cause its and each such Person's officers, directors, employees,
representatives and agents to, immediately cease any discussions or negotiations
with any parties (other than the Purchasers and Alliance) that may be ongoing
with respect to an Alternative Transaction. The Parent shall not, shall cause M
Sub and each Entity not to and shall not authorize or permit any of its or any
such Person's officers,
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directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative representing any such Person to, directly or
indirectly, (i) solicit, initiate or encourage (including by way of furnishing
information), or take any other action to facilitate, any inquiries or the
making of any proposal that may lead to an Alternative Transaction or (ii)
participate in any discussions or negotiations regarding any proposed
Alternative Transaction; provided, however, that if, at any time prior to the
Closing Date, the Board of Directors of the Parent determines in good faith,
based on written advice from outside counsel, that action is required by reason
of such Board of Directors' fiduciary duties to the Parent's stockholders under
applicable law, the Parent may (subject to compliance with Section 5.4(c)), in
response to an unsolicited Third Party Proposal, (A) furnish information with
respect to the Parent and the Entities to the Person making such Third Party
Proposal pursuant to a confidentiality agreement that is at least as protective
of the Parent's and its Subsidiaries' interests as is the Confidentiality
Agreement and (B) participate in negotiations regarding such a Third Party
Proposal. Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by any director, officer or
employee of the Parent, M Sub or any Entity or any investment banker, financial
advisor, attorney, accountant or other representative acting on behalf of any
such Person shall be deemed to be a breach of this Section 5.4(a).
(b) Neither the Board of Directors of the Parent nor any committee thereof
shall (i) withdraw or modify the approval or recommendation by such Board of
Directors or such committee of this Agreement, the Related Documents or any of
the transactions contemplated hereby or thereby, (ii) approve or recommend any
Alternative Transaction or (iii) cause or permit the Parent, M Sub or any Entity
to enter into any letter of intent, agreement in principle, acquisition
agreement or other agreement (an "Acquisition Agreement") with respect to an
Alternative Transaction unless the Board of Directors of the Parent shall have
previously terminated this Agreement pursuant to Section 8.1(f).
(c) In addition to the obligations of the Parent set forth in paragraphs
(a) and (b) of this Section 5.4, the Parent shall immediately advise the
Purchasers orally and in writing of any request for information or of any
proposal or any inquiry regarding any Alternative Transaction, the material
terms and conditions of such request, proposal or inquiry and the identity of
the Person making such request, proposal or inquiry. The Parent will keep the
Purchasers fully informed of the status and details (including amendments or
proposed amendments) of any such request, proposal or inquiry.
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(d) Nothing contained in this Section 5.4 shall prohibit the Parent from
at any time taking and disclosing to its stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or from making any
disclosure to the Parent's stockholders, in each case with respect to any Third
Party Proposal, if the Parent shall have provided the Purchasers with as much
advance notice of its position and proposed disclosure as is possible under the
circumstances; provided, however, that neither the Parent nor its Board of
Directors nor any Committee thereof shall, except as permitted by Section
5.4(b), withdraw or modify, or propose to withdraw or modify, its position with
respect to this Agreement, the Related Documents or any of the transactions
contemplated hereby or thereby or approve or recommend, or propose to approve or
recommend, an Alternative Transaction.
5.5. Confidentiality.
The Sellers and the Purchasers agree that, through and including the
Closing Date, they shall comply with that certain letter agreement relating to
matters of confidentiality dated as of July 24, 1997 (as amended, modified or
supplemented, the "Confidentiality Agreement").
5.6. Notice of Prospective Breach.
Each party shall immediately notify the other parties in writing upon the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause any representation or warranty of such
party that is contained in this Agreement or any Related Document to be untrue
or inaccurate in any material respect at any time from the date of this
Agreement to the Closing.
5.7. Public Announcements.
Each party agrees that, except (i) as otherwise required by Law or Order
and (ii) for disclosure to its respective directors, officers, employees,
financial advisors, potential financing sources, legal counsel, independent
certified public accountants or other agents, advisors or representatives on a
need-to-know basis and with whom such party has a confidential relationship, it
will not issue any reports, statements or releases, in each case pertaining to
this Agreement or any Related Document to which it is a party or the
transactions contemplated hereby or thereby, without consulting in advance with
the other parties hereto.
5.8. Cooperation Regarding Tax Filings; Section 338(h)(10).
(a) After the Closing, the Purchasers and the Sellers shall act in good
faith and cooperate with one another for the
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purpose of filing all Tax Returns and reports required to be filed by any of
them. Parent shall join Purchaser A in a timely election pursuant to Section
338(h)(10) of the Code (and under any comparable provision of any state or local
law) with respect to the CT Shares (the "338(h)(10) Election"). The parties
hereto recognize that the 338(h)(10) Election will result in the purchase of the
CT Shares hereunder being treated as a sale of assets by CT Sub for Federal
income Tax purposes and for applicable state and local tax purposes and that any
Tax Liability arising with respect to the 338(h)(10) Election (other than a
Liability for Transfer Taxes described in Section 9.14) shall be deemed a
Covered Tax. None of the parties hereto shall make any Tax Return or other
filing that is inconsistent with the foregoing.
(b) The Purchasers shall be responsible for the preparation and filing of
all 338(h)(10) Election forms and the Sellers shall execute and deliver to
Purchasers such documents as are reasonably requested to properly complete such
forms at least twenty (20) days prior to the date such 338(h)(10) Election is
required to be filed. The Sellers agree that the Purchasers shall be entitled to
determine the allocation of the Modified Aggregate Deemed Sales Price (as
defined in the treasury regulations promulgated under Section 338 of the Code)
among the assets of CT Sub in their sole discretion, and in accordance with
Section 338 of the Code and the regulations thereunder (including the allocation
of any adjustment to the Modified Aggregate Deemed Sales Price by reason of any
purchase price adjustment or indemnification payment under this Agreement), and
shall notify the Sellers of such determination as soon as possible after making
such determination. The Purchasers and the Sellers agree to act in accordance
with any such allocation in all relevant Tax Returns and filings.
(c) Parent shall cause to be prepared and cause to be timely filed all
consolidated, combined or unitary federal, state, local or foreign Tax Returns
required to be filed with respect to Parent for all taxable periods ending
before or including the Closing Date and shall include CT Sub in all such
returns in which it is eligible to be included. The Purchasers agree to
cooperate with Parent and its Affiliates in the preparation of the portions of
such Tax Returns pertaining to CT Sub. The Parent shall permit the Purchasers to
review and comment on the portion of all Tax Returns prepared by Parent pursuant
to this Section 5.8(c) pertaining to CT Sub, or the Partnership prior to the
filing of such Tax Returns. Parent shall cause to be timely paid all Taxes to
which such Tax Returns relate for all periods covered by such Tax Returns.
(d) The extent to which Taxes of CT Sub and the Partnership for a taxable
period that includes but does not end on the Closing Date are treated as Taxes
for the period ending on or prior to the Closing Date shall be determined for
all
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purposes, including for purposes of calculating Covered Taxes, as follows: (i)
Taxes measured in whole or in part by net or gross income and Taxes relating to
specific transactions shall be apportioned on the basis of a closing of the
books of the Entity liable for such Tax at the close of business on the Closing
Date; provided, however, that all transactions not in the ordinary course of
business and not contemplated in this Agreement that occur on the Closing Date
after Purchaser A's purchase of the CT Shares shall be reported on Purchaser A's
federal income tax return to the extent permitted by Treas. Reg. ss.
1502-76(b((1)(3); and (ii) all other Taxes shall be prorated according to the
ratio of the number of days in such taxable period prior to and including the
Closing Date to the number of days in such taxable period.
(e) The Sellers shall cause to be prepared all required federal, state,
local and foreign Tax Returns of CT Sub and the Partnership for any period which
ends on or before the Closing Date, for which Tax Returns have not been filed as
of the Closing Date (other than Tax Returns to be filed by Parent pursuant to
Section 5.8(c)). The Purchasers shall cause to be prepared and cause to be
timely filed all required federal, state, local and foreign Tax Returns of CT
Sub and the Partnership (other than Tax Returns to be filed by Parent pursuant
to Section 5.8(c)) for taxable periods beginning before and ending after the
Closing Date. The Sellers and Purchasers agree to cooperate with each other in
the preparation of such Tax Returns. The Purchasers shall permit Sellers to
review and comment on all Tax Returns prepared by the Purchasers pursuant to
this Section 5.8(e) and such Tax Returns shall be subject to the prior approval
of the Sellers which approval shall not be unreasonably withheld. The Sellers
shall permit the Purchasers to review and comment on all Tax Returns prepared by
the Sellers pursuant to this Section 5.8(e). Prior to the date such Tax Returns
are due, the Parent will provide the Purchasers with amounts equal to the
Covered Taxes, as shown on the Tax Returns to be filed under this Section
5.8(e), after taking into account any Tax or estimated Tax paid with respect to
such Covered Taxes prior to the Closing Date. Promptly after receipt by the
Purchasers of the amounts in respect of the Covered Taxes from the Parent, the
Purchasers will cause the applicable Tax Returns prepared by the Seller to be
filed.
(f) Parent shall be entitled to any refund of Taxes paid by or with
respect to CT Sub that is attributable to taxable periods ending on or prior to
the Closing Date, and the Purchasers shall cause CT Sub to pay over to Parent
any such refunds (net of any Tax Liability attributable thereto and any expenses
incurred in the collection of such refund) within fifteen (15) days after
receipt thereof. If the amount of such refund that is paid over by Parent is
subsequently reduced by a Governmental Entity, Parent shall pay to Purchasers an
amount necessary to reflect such adjustment.
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(g) The Parent shall not file any claim for a refund or credit, or an
amended return claiming a refund or credit, after the Closing Date, for any Tax
paid by CT Sub without the prior written consent of the Purchasers, which
consent shall not be unreasonably withheld.
(h) Each of the Purchasers and the Sellers shall promptly notify the other
party upon receipt of a notice of any pending or threatened Tax audit or
assessment (a "Tax Claim") that may affect the Tax Liabilities of CT Sub, or the
Partnership and for which any Seller would be liable under this Agreement;
provided, however, that no delay on the part of either party in so notifying the
other party shall relieve the other party from any liability or obligation
hereunder (unless, and then solely to the extent) that the other party is
materially and irrevocably prejudiced by such delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Tax
Claim.
(i) If the Sellers shall acknowledge in a writing delivered to the
Purchasers that such Tax Claim is properly subject to their indemnification
obligations hereunder and the Sellers shall have the financial resources to meet
such indemnification obligations, then subject to the further provisions of this
Section 5.8(i), the Sellers shall have the right to assume the defense of such
Tax Claim at their own expense and by their own counsel and other advisers,
which counsel and other advisors shall be reasonably satisfactory to the
Purchasers; provided, however, that the Sellers shall not have the right to
assume the defense of any Tax Claim, notwithstanding the giving of such written
acknowledgment, if the Sellers shall not have assumed the defense of such Tax
Claim in a timely fashion. Notwithstanding anything to the contrary contained
herein, if a Tax Claim involves, or could have a material effect on any material
matter beyond the scope of the indemnification obligations of the Sellers, the
Sellers and Purchasers shall jointly assume the defense of such Tax Claim at
their own expense. If the Sellers exercise their right to assume the defense of
a Tax Claim pursuant to and in accordance with this Section 5.8(i), (i) the
Purchasers shall be entitled to participate in such defense with their own
counsel and other advisors at their own expense, (ii) the Purchasers will
reasonably cooperate with the Sellers and their counsel and advisors in the
defense of such Tax Claim, and (iii) the Sellers shall not make any settlement
of such Tax Claim without the written consent of the Purchasers, which consent
shall not be unreasonably withheld, provided that consent may be withheld if any
Losses to be incurred by the Purchasers pursuant to such settlement are not
indemnified pursuant to the indemnification provisions set forth in Article VII
hereunder.
(j) If the Sellers shall assume the defense of a Tax Claim pursuant to and
in accordance with Section 5.8(i), the
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Sellers shall not be responsible for any legal or other defense costs
subsequently incurred by the Purchasers in connection with the defense thereof.
If the Sellers do not exercise their right to assume the defense of a Tax Claim
or are otherwise restricted from doing so pursuant to Section 5.8(i), the
Sellers shall nevertheless be entitled to participate in such defense with their
own counsel and other advisors at their own expense. If the defense of a Tax
Claim is retained by the Purchasers, the Purchasers shall not be entitled to
settle such Tax Claim without the prior written consent of the Sellers, which
consent shall not be unreasonably withheld.
(k) After the Closing Date, the Sellers and the Purchasers shall make
available to the other, as reasonably requested, all information, records or
documents relating to Tax Liabilities or potential Tax Liabilities of CT Sub or
the Partnership for all periods ending on or prior to the Closing Date, and
shall preserve all such information, records and documents until the expiration
of any applicable statute of limitations or extensions thereof.
(l) All Tax Returns which are required to be prepared by Sellers pursuant
to Sections 5.8(c) and (e) shall be prepared and filed in a manner consistent
with past practice and applicable Law and, on such Tax Returns, no position
shall be taken, elections made or method adopted that is inconsistent with
positions taken, elections made or methods used in preparing and filing similar
Tax Returns in prior periods.
5.9. Exchange Proceeds.
If, between the date hereof and the Closing, any Entity or any Seller
receives any proceeds in consideration for the exchange of any of its assets
(solely, in the case of the Parent as it relates to the Purchased Parent
Assets), whether from the sale of any such assets, from insurance proceeds
payable on account of any loss or casualty to such assets, any proceeds from the
taking of such assets pursuant to the power of eminent domain, or any other
proceeds from whatever source relating to the disposition of such assets (the
"Exchange Proceeds"), the Sellers shall immediately notify the Purchasers of the
receipt of such Exchange Proceeds and shall consult with the Purchasers with
respect to the application of any such Exchange Proceeds. The Sellers shall
ensure that any Exchange Proceeds received by any Entity shall either be used to
purchase replacement assets or shall be retained by the applicable Entity.
5.10. Non-Compete; Non-Solicitation.
(a) During the Non-Compete Period, the Parent shall not, and cause its
Affiliates not to, directly or indirectly, own, manage, control, participate in,
consult with, render services for, or in any manner engage in or represent any
business within
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any Restricted Territory that is competitive with the Business or any product or
services of the Business as such Business is conducted or proposed to be
conducted from and after the Closing Date; provided, however, that nothing
herein shall be deemed to prevent the Parent or any of its Affiliates from
engaging in any activities presently conducted or proposed to be conducted by GK
Finance or from providing any imaging modality as part of its "Operating Room of
the Twenty First Century" business.
(b) During the Non-Compete Period, none of the Parent nor any Affiliate
shall directly or indirectly through another Person (i) induce or attempt to
induce any employee of any Purchaser or any Affiliate of such Purchaser to leave
the employ of such Purchaser or such Affiliate or in any way interfere with the
relationship between such Purchaser or any such Affiliate, on the one hand, and
any employee thereof, on the other hand, or (ii) induce or attempt to induce any
customer, supplier, licensee or other business relation of any Purchaser or any
Affiliate of such Purchaser to cease doing business with such Person or in any
way interfere with the relationship between any such customer, supplier,
licensee or business relation, on the one hand, and such Person, on the other
hand.
(c) If, at the time of enforcement of this Section 5.10, a court holds
that the restrictions stated herein are unreasonable under the circumstances
then existing, the parties agree that the maximum period, scope or geographical
area reasonable under such circumstances shall be substituted for the stated
period, scope or area. The parties hereto acknowledge that money damages would
be an inadequate remedy for any breach of this Section 5.10. Therefore, in the
event of a breach or threatened breach of this Section 5.10, the Purchasers or
their successors or assigns may, in addition to other rights and remedies
existing in their favor, apply to any court of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce, or
prevent any violations of, the provisions of this Section 5.10.
5.11. Certain Tax Matters.
From the date hereof until the Closing Date, (i) the Parent shall and
shall cause each Entity to file all tax returns and reports ("Post-Signing
Returns") required to be filed in a manner consistent with past practices; (ii)
the Parent shall and shall cause each Entity to timely pay all Taxes shown as
due and payable on the Post-Signing Returns; (iii) the Parent shall and shall
cause each Entity to make provision for all Taxes payable for which no
Post-Signing Return is due prior to the Closing Date; (iv) the Parent shall
allow the Purchasers an opportunity to review and comment on any Post-Signing
Return prior to the due date of such Post-Signing Return; and (v) the Parent
will promptly notify the Purchasers of any action, suit, proceeding, claim or
audit pending against or with respect to the Parent or
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any Entity in respect of any Tax where there is a possibility of a determination
or decision which could have an adverse effect on the Parent's or any Entity's
Tax Liabilities or Tax attributes.
5.12. Advice of Changes; Filings.
The Parent shall confer with the Purchasers on a regular and frequent
basis as reasonably requested by the Purchasers, report on operational matters
and promptly advise the Purchasers orally and, if requested by the Purchasers,
in writing of any change with respect to the Parent or any Entity. The Parent
shall promptly provide to the Purchasers (or their counsel) copies of all
filings made by the Parent or any Entity with any Governmental Entity in
connection with this Agreement and the transactions contemplated hereby.
(a) The Parent will, as soon as practicable following the date hereof,
duly call, give notice of, convene and hold a meeting of its stockholders (the
"Stockholders Meeting") for the purpose of obtaining the approval of this
Agreement, the Related Documents, and the transactions contemplated hereby and
thereby. The Parent will, through its Board of Directors, recommend to its
stockholders that the Parent Stockholder Approval be given.
(b) The Parent will, as soon as practicable following the date hereof,
prepare and file a preliminary proxy or information statement (as amended,
modified or supplemented, the "Proxy Statement") with the SEC and will use its
best efforts to respond to any comments of the SEC or its staff and to cause the
Proxy Statement to be mailed to its stockholders as promptly as practicable
after responding to all such comments to the satisfaction of the SEC staff. The
Proxy Statement shall contain the written opinion of Paine Webber Incorporated,
opining as to the matters set forth in Section 3.25. The Parent will afford the
Purchasers opportunity to review and comment upon any description of the
Purchasers or their Affiliates, this Agreement, the Related Documents or the
transactions contemplated hereby and thereby set forth in the Proxy Statement
(including all drafts or amendments thereto). Each Purchaser shall provide the
Parent with all necessary information reasonably requested with respect to
itself and Alliance solely for inclusion by the Parent in the Proxy Statement.
The Parent will notify the Purchasers promptly of the receipt of any comments
from the SEC or its staff and of any request by the SEC or its staff for
amendments or supplements to the Proxy Statement or for additional information
and will supply the Purchasers with copies of all correspondence between the
Parent or any of its representatives, on the one hand, and the SEC or its staff,
on the other hand, with respect to the Proxy Statement. If at any time prior to
the Stockholders Meeting there shall occur any event that should be set forth in
an amendment or supplement to the Proxy Statement, the Parent will promptly
prepare and mail to its stockholders such an amendment or supplement.
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5.13. Maintenance of Cash and Cash Equivalents.
During the period commencing on the Closing Date and ending on April 15,
1999, the Parent shall at all times hold cash or Cash Equivalents of not less
than $1,000,000 in the aggregate in an investment account at a financial
institution reasonably satisfactory to the Purchasers which shall not be subject
to any Encumbrance other than Permitted Encumbrances. During such period, the
Parent shall provide copies of all notices or reports delivered to it in respect
of such account to the Purchasers within 5 Business Days of the receipt thereof.
5.14. Further Assurances.
The Sellers shall and shall cause the Entities to take such further
actions or execute such further documents or instruments as shall be reasonably
requested by the Purchasers to further implement the transactions contemplated
by Section 1.2 including, without limitation, discharging or disposing of any
Excluded Liability which may be a Liability of any Entity on terms reasonably
satisfactory to the Purchasers.
5.15. Audited Financial Statements.
The Parent shall, and shall cause each of its Subsidiaries to, provide the
Purchasers and their advisors with such information (including, without
limitation, consolidating balance sheets and statements of operations as at
December 31, 1997 and for the fiscal year then ended; such consolidating
financial statements to incorporate the Entities in such form as presented in
Schedule 3.5(b) as well as individual columns for each of GK Finance, Parent and
each other Subsidiary of the Parent, in each case, as adjusted to give effect to
the transactions contemplated by Section 1.2 hereof), and access to its books
and records (including, without limitation, access to its management employees),
to permit them or their advisors to prepare audited balance sheets of the
Entities as of December 31, 1997, and related audited statements of operations,
shareholders' equity and cash flows for the period then ended, in each case in
accordance with GAAP and adjusted to give effect to the consummation of the
transactions contemplated by Section 1.2 as if such transactions were
consummated at January 1, 1997.
5.16. DVI Funded Indebtedness.
At the request of the Purchasers, on the Closing Date, the Parent shall
and shall cause its Subsidiaries to repay all Funded Indebtedness held by DVI
Financial Services, Inc. and DVI Business Credit Receivables Corp. ("DVI") under
agreements relating to Funded Indebtedness provided by DVI to the Parent and its
Subsidiaries upon payment by the Purchasers in full of all amounts due on the
Closing Date to DVI in respect of principal,
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accrued interest thereon and prepayment premiums not to exceed $75,000 in the
aggregate. On the Closing Date, Parent shall deliver all instruments and
documents reasonably requested by the Purchasers to evidence the repayment in
full of such Funded Indebtedness including reasonably satisfactory pay-off
letters, releases of Encumbrances, releases of pledges of Equity Interests and
UCC-3 financing statements.
5.17. Transfer of Parent Partnership Interests.
Upon the request of the Purchasers, the Parent shall, on or immediately
prior to the Closing Date, assign the Parent Partnership Interests to a newly
organized wholly-owned corporate Subsidiary (which shall conduct no business
whatsoever) and shall cause such Subsidiary to assign the Parent Partnership
Interests to Purchaser A in accordance with Section 1.1 hereof.
5.18. Certain Employee Matters.
(a) On the Closing Date, the Purchasers shall or shall cause the Entities
or an Affiliate of the Purchasers, to continue the employment of or offer
employment, as applicable, to the employees of the Entities and Parent to be
identified by the Purchasers prior to the Closing Date in accordance with the
terms of a letter, dated of even date herewith, delivered by Purchaser A to the
Parent (any such employees who so continue or accept such offer of employment
being referred to herein as the "Hired Employees"). Such employment shall be in
a substantially similar position as such Hired Employee held while employed by
the applicable Entity or Parent prior to the Closing, and the Purchasers shall
have no Liability or obligation to any other employees of the Parent or any of
its Subsidiaries (other than the Entities as set forth herein). Prior to the
Closing, Parent and the Entities shall take such actions and, after the Closing
Date, Parent and the Purchasers shall take, and the Purchasers shall cause the
Entities to take, such actions as are necessary so that each Hired Employee
shall cease to be entitled to participate in or accrue benefits under any of
Parent's Employee Benefit Plans, programs, policies and arrangements except to
the extent required by applicable Law. The Purchasers shall, or shall cause the
Entities or an Affiliate of the Purchasers, to take such actions as may be
necessary such that, subject to the provisions of this Section 5.18, on and
after the Closing Date, each Hired Employee shall be eligible to participate in,
and be subject to the provisions of, the Employee Benefit Plans (including a
401(k) plan and a flexible benefits plan), programs, personnel policies and
guidelines sponsored or maintained by Alliance, and applicable for employees of
Alliance or its Affiliates in a similar position, subject to the satisfaction of
all the eligibility criteria for participation thereunder (except as otherwise
provided in this Section 5.18).
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(b) With respect to the Alliance Employee Benefit Plans, programs,
personnel policies and guidelines, Alliance shall grant all Hired Employees from
and after the Closing Date credit for all service with the Entities and Parent
prior to the Closing Date for all purposes. Alliance shall take such actions as
are necessary to provide that on the Closing Date all Hired Employees and their
spouses and dependents shall be immediately covered by the group health plan
maintained by Alliance which shall (i) provide immediate coverage as of the
Closing Date without any waiting period, (ii) waive any pre-existing condition
exclusions or limitations, and (iii) provide that any amounts paid by Hired
Employees through the Closing Date for medical expenses that are treated as
deductible, co-insurance and out-of-pocket payments under the Parent's health
plan shall reduce the amount of any deductible, co-insurance or out-of-pocket
payments required to be paid for a similar period under the Alliance health
plan; provided, however, that the Sellers shall provide Alliance with a list of
all current and former employees participating in the Parent's health plan along
with a listing of each employee's deductible and co-insurance payments through
the Closing Date.
(c) Effective as of the Closing, the Purchasers shall assume the Parent's
or Entities' obligations with respect to accrued sick pay, personal holidays and
vacation pay for Hired Employees, provided that the vacation pay costs as of the
Latest Balance Sheet Date have been accrued and reflected on the Latest Balance
Sheet.
(d) Parent shall take such actions as are necessary to provide that the
Hired Employees are fully vested in their benefits under the Retirement Plan for
Employees of Parent and CT Sub (the "ASHS 401(k) Plan"). Parent shall also take
such actions as are necessary to provide that the Hired Employees will be
eligible to receive distributions from the ASHS 401(k) Plan that will be
eligible for rollover to the Alliance "401(k)" plan. The Purchasers shall take
such action as is necessary after the Closing Date to provide that the Alliance
"401(k)" plan will allow rollovers of distributions from the ASHS 401(k) Plan.
(e) After the Closing Date, the Purchasers and the Sellers agree to take
such actions as are necessary to provide for the transfer of the account
balances of the flexible spending accounts of each Hired Employee from Parent's
"Section 125" plan to the Alliance "Section 125" plan and the Purchasers shall
provide for the reimbursement from the Alliance "Section 125" plan of medical
and childcare expenses incurred by Hired Employees during 1998.
(f) After the Closing Date, the Purchasers shall be responsible for
providing health care continuation coverage pursuant to the requirements of the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), to
the extent required by COBRA, for all former employees of the Entities
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and/or their "qualified beneficiaries" (as such term is defined in Part 6 of
Title I of ERISA) who were receiving health care continuation coverage under
COBRA prior to the Closing Date or who are or become eligible to receive such
coverage on or after the Closing Date. As of the date hereof, there were 2
former employees of the Entities and/or their "qualified beneficiaries" who were
receiving health care continuation coverage under COBRA and 8 former employees
who experienced a "qualifying event" under COBRA.
ARTICLE VI
CLOSING CONDITIONS
6.1. Conditions to Each Party's Obligations.
The respective obligations of each party to consummate the transactions
contemplated hereby is subject to the satisfaction prior to the Closing Date of
the following conditions unless waived (to the extent such conditions can be
waived) by the Parent (on behalf of the Sellers) or the Purchasers and Alliance,
as applicable:
(a) Approvals. The authorizations, consents, Orders or approvals of, or
declarations or filings with, or expiration of waiting periods of any
Governmental Entity required to consummate the transactions contemplated hereby
shall have been obtained or made.
(b) Stockholder Approval. The Parent Stockholder Approval shall have been
obtained.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other Order issued by any court or
Governmental Entity of competent jurisdiction nor other legal restraint or
prohibition preventing the consummation of the transactions contemplated hereby
shall be in effect.
(d) Actions and Statutes. No Proceeding shall have been taken or
threatened, and no Law or Order shall have been enacted, promulgated or issued
or deemed applicable to the transactions contemplated by this Agreement or the
Related Documents by any Governmental Entity that could (i) make the
consummation of the transactions contemplated hereby or thereby illegal or
substantially delay the consummation of any material aspect of the transactions
contemplated hereby or thereby or (ii) render any party unable to consummate the
transactions contemplated hereby or thereby.
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6.2. Conditions to Obligations of the Purchasers and Alliance.
The obligations of the Purchasers and Alliance under this Agreement are
subject to the satisfaction of the following conditions unless waived (to the
extent such conditions can be waived) by the Purchasers and Alliance:
(a) Accuracy of Representations and Warranties. All representations and
warranties made by the Sellers in this Agreement and the Related Documents shall
be true and correct, individually or in the aggregate, in all material respects
(except for such representations and warranties which are qualified by their
terms by a reference to materiality, or "Material Adverse Effect" which
representations and warranties as so qualified shall be true and correct,
individually or in the aggregate, in all respects) as of the date hereof and as
of the Closing Date (unless such representations and warranties relate to a
specific date other than the Closing Date, in which case such representations
and warranties shall be true and correct, individually or in the aggregate, in
all material respects, or in all respects, as the case may be, on such date)
with the same effect as if such representations and warranties had been made at
and as of the Closing Date (including, after giving effect to the transactions
contemplated by Section 1.2).
(b) Performance of Obligations of the Sellers. The Sellers shall have
performed in all material respects all obligations, agreements and covenants
required to be performed by them under this Agreement and the Related Documents
prior to or as of the Closing Date.
(c) Certificates. At the Closing, in consideration of the delivery of the
Purchase Price pursuant to Section 1.3 hereof, (a) the Parent shall deliver or
cause to be delivered to Purchaser A, the certificates representing the Shares
(other than the M Sub Partnership Interests) and the Parent shall deliver or
cause to be delivered to Purchaser B, a certificate representing the M Sub
Partnership Interests, in each case, duly endorsed in blank for transfer or
accompanied by stock and partnership transfer powers duly executed in blank,
sufficient in form and substance to convey to each Purchaser good and marketable
title to all of the Shares purchased by such Purchaser, free and clear of all
Encumbrances.
(d) Consents and Approvals. The Purchasers shall have
received duly executed copies of all consents and approvals required for or in
connection with the execution and delivery by the Sellers of this Agreement and
each of the Related Documents to which any of them may be parties (including,
without limitation, the assumption of any Funded Indebtedness and any consents
or approvals necessary to be obtained in connection with the transactions
contemplated by Section 9.4(b)), the consummation of the transactions
contemplated hereby and thereby,
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and the continued conduct of the Business as previously conducted (including,
without limitation, the transfer of any necessary regulatory Permits currently
in the name of the Parent or any Subsidiary other than the Entities), in form
and substance reasonably satisfactory to the Purchasers and their counsel. The
Sellers shall obtain all Permits required to conduct the Business which have not
been obtained on or prior to the date hereof in the name of the Entities. The
Parent shall cause each of the Encumbrances designated to be terminated on or
prior to the Closing Date on Schedule 3.9 to be so terminated on or prior to the
Closing Date (unless such Encumbrances cease to be effective under applicable
Law).
(e) Asset Contribution and Asset Disposition. The Asset Contribution,
Asset Disposition and the other transactions contemplated by Section 1.2 shall
each be consummated in accordance with Section 1.2 hereof.
(f) Absence of Material Adverse Effect. Since the Latest Balance Sheet
Date, there shall have been no change in respect of the Business that has had or
is reasonably likely to have a Material Adverse Effect.
(g) Related Documents. Each of the agreements attached hereto as Exhibit
A-1 and Exhibit A-2, respectively (each as amended, modified or supplemented, a
"Related Document" or a "Stockholder Agreement") shall have been executed and
delivered by the parties thereto and the transactions contemplated thereby to be
completed at or prior to the Closing substantially consummated or effected, as
the case may be, in accordance with the terms thereof.
(h) Partnership Agreement Amendment. The Partnership Agreement shall be
amended and restated in its entirety by the Sellers on such terms and conditions
as shall be satisfactory to the Sellers and the Purchasers.
(i) Sellers' Certificates. Each of the following certificates shall have
been executed and delivered, as the case may be, by the Person who or which is
the subject thereof:
(i) a certificate of the Sellers, dated as of the Closing Date,
certifying, in each case, (i) that true and complete copies of the
Organizational Documents of each Entity and the Sellers as in effect on
the Closing Date are attached thereto, (ii) as to the incumbency and
genuineness of the signatures of each officer of such Seller executing
this Agreement and the Related Documents, (iii) the genuineness of the
resolutions (attached thereto) of the board of directors of the Sellers
authorizing the execution, delivery and performance of this Agreement and
the Related Documents to which the Sellers are a party and the
consummation of the transactions contemplated hereby and
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thereby and (iv) the genuineness of the resolutions (attached thereto) of
the management committee or similar governing body of each Entity
authorizing such Entity to consent to the transactions contemplated by
this Agreement;
(ii) certificates of the secretaries of state of the states (or
other applicable office) in which each Seller and each Entity is organized
and qualified to do business, dated as of a date not more than five days
prior to the Closing Date, certifying as to the good standing and
non-delinquent tax status of such Seller and Entity;
(iii) a certificate signed by the principal executive officer of
each Seller, dated as of the Closing Date, and certifying as to (A) the
accuracy of the representations and warranties of the Sellers contained
herein, as contemplated by Section 6.2(a) hereof, and (B) the performance
of the obligations, covenants and agreements of the Sellers contained
herein, as contemplated in Section 6.2(b) hereof; and
(iv) a certificate of the Sellers dated as of the Closing Date,
certifying that no Entity is a foreign person within the meaning of
Section 1445 of the Code.
(j) Resignation of Officers and Directors. The Purchasers shall have
received letters from all of the officers and directors of the Entities,
resigning their respective positions as officers and directors of such Entities,
respectively, immediately upon the Closing.
(k) Officer's Certificate. The Purchasers shall have received a
certificate of a duly authorized officer of the Parent certifying as to the
matters set forth in Section 6.2(e).
6.3. Conditions to Obligations of the Sellers.
The obligations of the Sellers under this Agreement are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Sellers:
(a) Accuracy of Representations and Warranties. All representations and
warranties made by Alliance and the Purchasers in this Agreement and the Related
Documents shall be true and correct, individually or in the aggregate, in all
material respects (except for such representations and warranties which are
qualified by their terms by a reference to materiality, or "Material Adverse
Effect" which representations and warranties as so qualified shall be true and
correct, individually or in the aggregate, in all respects) as of the date
hereof and at and as of the Closing Date (unless such representations and
warranties
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relate to a specific date other than the Closing Date, in which case, such
representations and warranties shall be true and correct, individually or in the
aggregate, in all material respects, or in all respects, as the case may be, on
such date) with the same effect as if such representations and warranties had
been made at and as of the Closing Date.
(b) Performance of Obligations of the Purchasers and Alliance. Alliance
and the Purchasers shall have performed in all material respects all
obligations, agreements and covenants required to be performed by them under
this Agreement and the Related Documents prior to or as of the Closing Date.
(c) Certificates. Each of the following certificates shall have been
executed and delivered, as the case may be, by the Person who or which is the
subject thereof:
(i) a certificate of the secretary of Alliance and each Purchaser,
dated as of the Closing Date, certifying, in each case, (i) that true and
complete copies of its Organizational Documents as in effect on the
Closing Date are attached thereto, (ii) as to the incumbency and
genuineness of the signatures of each officer of Alliance and such
Purchaser executing this Agreement and the Related Documents, and (iii)
the genuineness of the resolutions (attached thereto) of the board of
directors of Alliance and such Purchaser (or committee thereof)
authorizing the execution, delivery and performance of this Agreement and
the Related Documents to which Alliance or such Purchaser is a party and
the consummation of the transactions contemplated hereby and thereby;
(ii) certificates of the secretaries of state of the states in which
Alliance and each of the Purchasers is organized, dated a date not more
than five days prior to the Closing Date as of the Closing Date,
certifying as to the good standing and non-delinquent tax status of
Alliance and the Purchasers; and
(iii) a certificate signed by a principal executive officer of
Alliance and each Purchaser, dated as of the Closing Date, and certifying
as to (A) the accuracy of the representations and warranties of Alliance
and such Purchaser contained herein, as contemplated by Section 6.3(a)
hereof and (B) the performance of the obligations, agreements and
covenants of Alliance and such Purchaser contained herein, as contemplated
in Section 6.3(b) hereof.
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ARTICLE VII
INDEMNIFICATION
7.1. Indemnification Generally; Etc.
(a) Subject to the further terms of this Article 7, the Sellers agree,
jointly and severally, to indemnify the Purchaser Indemnified Persons for, and
hold them harmless from and against, any and all Purchaser Losses arising from
or in connection with any of the following:
(i) the untruth, inaccuracy or breach of any representation or
warranty (without regard to whether such representation or warranty is
qualified by reference to materiality or "Material Adverse Effect") of the
Sellers contained herein, in any Related Document, or in any certificate
delivered by any Seller relating thereto delivered in connection herewith
(or any facts or circumstances constituting any such untruth, inaccuracy
or breach);
(ii) the breach of any agreement or covenant of the Sellers
contained in this Agreement or in any Related Document;
(iii) any Liability of any Entity in any manner related to a claim
asserted under the Agreement for Purchase and Sale of Assets, dated as of
December 30, 1994 among Vencor, Inc., CT Sub and Parent;
(iv) for any Liability with respect to Covered Taxes and for 50% of
any Liability with respect to all transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees ("Transfer Taxes") with
respect to the transactions contemplated by Section 1.2; and
(v) any Liability of any Entity for Taxes attributable to the
inclusion of an adjustment in taxable income of an Entity under Section
481 of the Code for any Tax period beginning on or after the Closing Date
as a result of a required or optional change in method of accounting with
respect to a Tax period ending on or prior to the Closing Date.
(b) Subject to the further terms of this Article 7, each of Alliance and
the Purchasers agree jointly and severally to indemnify the Seller Indemnified
Persons for, and hold them harmless from and against, any and all Seller Losses
arising from or in connection with any of the following:
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(i) the untruth, inaccuracy or breach of any representation or
warranty (without regard to whether such representation or warranty is
qualified by reference to materiality or "Material Adverse Effect") of
Alliance or such Purchaser contained herein, any Related Document, or any
certificate delivered by Alliance or such Purchaser in connection herewith
at or before the Closing (or any facts or circumstances constituting any
such untruth, inaccuracy or breach);
(ii) the breach of any agreement or covenant of Alliance or either
Purchaser contained in this Agreement or in any Related Document;
(iii) any failure to comply after the Closing Date with the Worker
Adjustment and Retraining Act of 1988, as amended, or any similar state
law arising out of, or relating to, any actions taken by Alliance or the
Purchasers with respect to Hired Employees after the Closing Date; and
(iv) any Liability for Transfer Taxes to be borne by Purchasers or
Alliance pursuant to Section 9.14.
(c) Notwithstanding the foregoing the Purchasers shall not be entitled to
indemnification hereunder for any Losses arising as a result of the untruth or
inaccuracy of any representation or warranty to the extent that a Liability
arising as a result of such untruth or inaccuracy is reflected as a Liability in
the financial statements delivered on the date hereof pursuant to Section 3.5
hereof.
(d) Absent fraud, the rights of the parties for indemnification relating
to this Agreement and the transactions contemplated hereby and under the Related
Documents shall be strictly limited to those contained in this Article VII, and
such indemnification rights shall be the exclusive remedies of the parties
subsequent to the Closing Date with respect to any matter relating to this
Agreement or arising in connection herewith.
7.2. Assertion of Claims.
No claim shall be brought for a breach of a representation or warranty
under Section 7.1 hereof unless the Indemnified Persons, or any of them, at any
time prior to the applicable Survival Date, give the Indemnifying Persons (a)
written notice of the existence of any such claim, specifying the nature and
basis of such claim and the amount thereof, to the extent known or (b) written
notice pursuant to Section 7.3 of any Third Party Claim, the existence of which
might give rise to such a claim. Upon the giving of such written notice as
aforesaid, the Indemnified Persons, or any of them, shall have the right to
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commence legal proceedings prior to or subsequent to the Survival Date for the
enforcement of their rights under Section 7.1.
7.3. Notice and Defense of Third Party Claims.
The obligations and liabilities of an Indemnifying Person with respect to
Losses resulting from the assertion of claim or Liability by third parties other
than in respect of Tax Claims (each, a "Third Party Claim") shall be subject to
the following terms and conditions:
(a) The Indemnified Persons shall promptly give written notice to the
Indemnifying Persons of any Third Party Claim which might give rise to any Loss
by the Indemnified Persons, stating the nature and basis of such Third Party
Claim, and the amount thereof to the extent known; provided, however, that no
delay on the part of the Indemnified Persons in notifying any Indemnifying
Persons shall relieve the Indemnifying Persons from any liability or obligation
hereunder unless (and then solely to the extent) the Indemnifying Person thereby
is materially and irrevocably prejudiced by the delay. Such notice shall be
accompanied by copies of all relevant documentation with respect to such Third
Party Claim, including any summons, complaint or other pleading which may have
been served, any written demand or any other document or instrument.
(b) If the Indemnifying Persons shall acknowledge in a writing delivered
to the Indemnified Persons that such Third Party Claim is properly subject to
their indemnification obligations hereunder, then the Indemnifying Persons shall
have the right to assume the defense of any Third Party Claim at their own
expense and by their own counsel, which counsel shall be reasonably satisfactory
to the Indemnified Persons; provided, however, that the Indemnifying Persons
shall not have the right to assume the defense of any Third Party Claim,
notwithstanding the giving of such written acknowledgment, if (i) the
Indemnified Persons shall have been advised by counsel that there are one or
more legal or equitable defenses available to them which are different from or
in addition to those available to the Indemnifying Persons, and, in the opinion
of the Indemnified Persons, counsel for the Indemnifying Persons could not
adequately represent the interests of the Indemnified Persons because such
interests could be in conflict with those of the Indemnifying Persons, or (ii)
the Indemnifying Persons shall not have assumed the defense of the Third Party
Claim in a timely fashion.
(c) If the Indemnifying Persons shall assume the defense of a Third Party
Claim (under circumstances in which the proviso to the first sentence of Section
7.3(b) is not applicable), the Indemnifying Persons shall not be responsible for
any legal or other defense costs subsequently incurred by the Indemnified
Persons in connection with the defense thereof. If the
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Indemnifying Persons do not exercise their right to assume the defense of a
Third Party Claim by giving the written acknowledgment referred to in Section
7.3(b), or are otherwise restricted from so assuming by the proviso to the first
sentence of Section 7.3(b), the Indemnifying Persons shall nevertheless be
entitled to participate in such defense with their own counsel and at their own
expense. If the defense of a Third Party Claim is assumed by the Indemnified
Persons, the Indemnified Persons shall not be entitled to settle such Third
Party Claim without the prior written consent of the Indemnifying Persons, which
shall not be unreasonably withheld.
(d) If the Indemnifying Persons exercise their right to assume the defense
of a Third Party Claim, (i) the Indemnified Persons shall be entitled to
participate in such defense with their own counsel at their own expense and (ii)
the Indemnifying Persons shall not make any settlement of any claims without the
written consent of the Indemnified Persons, which shall not be unreasonably
withheld.
7.4. Survival of Representations and Warranties.
(a) Subject to the further provisions of this Section 7.4, the
representations and warranties contained in this Agreement, the Related
Documents, or in any certificate or other writing delivered in connection with
this Agreement shall survive the Closing Date until April 15, 1999; provided,
however, that (i) the representations and warranties contained in Sections 3.1,
3.2, 3.3, 3.4, 3.21, 4.1, 4.2, 4.3, 4.4, 4A.1, 4A.2 and 4A.3 (other than the
covenant set forth therein which shall survive in accordance with the second
sentence of this Section 7.4(a)) of this Agreement shall survive indefinitely
and (ii) the representations and warranties contained in Sections 3.8 and 3.20
of this Agreement shall survive the Closing Date until the expiration of any
applicable statue of limitations (those representations and warranties
referenced in the foregoing clauses (i) and (ii), being the "Excluded
Representations and Warranties") for Third Party Claims applicable to the
matters covered thereby. The covenants and other agreements of the parties
contained in this Agreement and the Related Documents (including the indemnity
provided for in Section 7.1(a)(iii) of this Agreement) shall survive the Closing
Date until they are otherwise terminated by their terms. The obligations of the
Sellers under Section 7.1(a)(iv) and (a)(v) shall survive the Closing Date until
the expiration of any applicable statute of limitations with respect to the
matters set forth therein. The obligations of Alliance and the Purchasers under
Section 7.1(b)(iv) shall survive the Closing Date until the expiration of any
applicable statute of limitations with respect to the matters set forth therein.
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(b) For convenience of reference, the date upon which any representation
or warranty contained herein shall terminate, if any, is referred to herein as
the "Survival Date".
7.5. Limitations on Indemnification.
(a) Indemnity Baskets for the Sellers. The Purchaser Indemnified Persons
shall not have the right to be indemnified for breaches of representations and
warranties pursuant to Section 7.1(a)(i) unless and until the Purchaser
Indemnified Persons shall have incurred on a cumulative basis aggregate Losses
(without giving effect, in determining whether and to what extent
representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect") in
an amount of $500,000, in which event the right to be indemnified shall apply in
respect of all Losses; provided, however, that in no event shall the limitations
set forth in this Section 7.5(a) apply with respect to the Excluded
Representations and Warranties.
(b) Indemnity Limitations for the Sellers. The sum of all Losses (without
giving effect, in determining whether and to what extent representations and
warranties were breached or Losses were incurred, to qualifications therein
relating to materiality or "Material Adverse Effect") pursuant to which
indemnification is payable by the Sellers pursuant to Section 7.1(a)(i) shall
not exceed $2,000,000; provided, however, that in no event shall the limitations
set forth in this Section 7.5(b) apply with respect to the Excluded
Representations and Warranties.
7.6. Limitations on Indemnification.
(a) Indemnity Baskets for the Purchasers and Alliance. The Seller
Indemnified Persons shall not have the right to be indemnified for breaches of
representations and warranties pursuant to Section 7.1(b)(i) unless and until
the Seller Indemnified Persons shall have incurred on a cumulative basis
aggregate Losses (without giving effect, in determining whether and to what
extent representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect") in
an amount of $500,000, in which event the right to be indemnified shall apply in
respect of all Losses; provided, however, that in no event shall the limitations
set forth in this Section 7.6(a) apply with respect to the Excluded
Representations and Warranties.
(b) Indemnity Limitations for the Purchasers and Alliance. The sum of all
Losses (without giving effect, in determining whether and to what extent
representations and warranties were breached or Losses were incurred, to
qualifications therein relating to materiality or "Material Adverse Effect")
pursuant to which indemnification is payable by
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the Purchasers and Alliance pursuant to Section 7.1(b)(i) shall not exceed
$2,000,000; provided, however, that in no event shall the limitations set forth
in this Section 7.6(b) apply with respect to the Excluded Representations and
Warranties.
7.7. Allocation of Indemnification Payments.
The parties hereto agree that any indemnification payment shall be treated
as an adjustment to the Purchase Price.
ARTICLE VIII
TERMINATION; EFFECT OF TERMINATION
8.1. Termination.
This Agreement may be terminated at any time prior to the Closing by:
(a) the mutual written consent of the parties hereto; or
(b) the Purchasers or Alliance, if there has been a breach by any Seller
of any of the representations or warranties in this Agreement or in any Related
Document, individually or in the aggregate, in any material respect (except for
representations and warranties which are qualified by their terms by a reference
to materiality or "Material Adverse Effect" in which case, such representations
or warranties as so qualified shall have been breached in any respect),
covenant, obligation or agreement set forth in this Agreement or in any Related
Document and such breach shall not have been cured within 10 Business Days after
notice thereof is given by any Purchaser or Alliance (except that no cure period
shall be provided for a breach which by its nature cannot be cured); or
(c) the Sellers, if there has been a breach by Alliance or any Purchaser
of any of the representations or warranties in this Agreement or in any Related
Document, individually or in the aggregate, in any material respect (except for
representations and warranties which are qualified by their terms by a reference
to materiality or "Material Adverse Effect" in which case, such representations
or warranties as so qualified shall have been breached in any respect),
covenant, obligation or agreement set forth in this Agreement or in any Related
Document and such breach shall not have been cured within 10 Business Days after
notice thereof is given by any Seller (except that no cure period shall be
provided for a breach which by its nature cannot be cured); or
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(d) either the Purchasers, Alliance or the Sellers, if the Closing shall
not have been consummated by September 15, 1998; or
(e) either the Purchasers, Alliance or the Sellers, if any permanent
injunction or Order of a Governmental Entity preventing the Closing shall have
become final and nonappealable;
(f) By either Parent or the Purchasers if, prior to the Closing Date, (i)
the Board of Directors of the Parent determines that a Third Party Proposal for
an Alternative Transaction constitutes a Superior Proposal, (ii) the Parent
promptly notifies the Purchasers of its determination in writing, which writing
shall set forth the terms and conditions of the Third Party Proposal and the
identity of the Person making the Third Party Proposal, (iii) ten days have
elapsed following receipt by the Purchasers of such written notice, (iv) during
such ten day period the Parent cooperates with the Purchasers with the intent of
enabling, but not obligating, the Purchasers to agree to a modification of the
terms and conditions of this Agreement so that the transactions contemplated
hereby may be effected, and (v) at the end of such ten day period, the Board of
Directors of the Parent continues to believe that such Third Party Proposal
constitutes a Superior Proposal and the Parent pays to the Purchasers the
amounts specified under Section 9.5(b) pursuant to the terms thereof. For
purposes of this Agreement, a "Superior Proposal" means any Third Party Proposal
to effect an Alternative Transaction; provided that (i) the Board of Directors
of the Parent determines in its good faith judgment (following the consultation
with, and the receipt of the advice of, the Parent's financial advisor) that
such Third Party Proposal is on terms that are more favorable to the Parent's
stockholders than the transactions contemplated by this Agreement (taking into
account all relevant factors, including the amount and form of consideration to
be received, the relative value of any non-cash consideration, and the timing
and certainty of closing) and (ii) the Board of Directors of the Parent
determines in its good faith judgment (based on the written advice of outside
counsel) that the failure to recommend or accept such Third Party Proposal would
violate the fiduciary duties of the Board of Directors of the Parent under
applicable Law;
provided, however, in each case, that none of the Sellers, Alliance nor the
Purchasers shall be entitled to terminate this Agreement if such party's breach
of this Agreement has prevented the satisfaction of a condition. Any termination
pursuant to this Section 8.1 shall be effected by written notice from the party
or parties so terminating to the other parties hereto, which notice shall
specify the Section of this Agreement pursuant to which this Agreement is being
terminated.
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8.2. Effect of Termination.
In the event of the termination of this Agreement as provided in Section
8.1, this Agreement shall be of no further force or effect, except for Section
5.7, Section 9.5 and this Section 8.2, each of which shall survive the
termination of this Agreement; provided, however, that the Liability of any
party for any intentional, willful or knowing breach by such party of the
representations, warranties, covenants, obligations or agreements of such party
set forth in this Agreement occurring prior to the termination of this Agreement
shall survive the termination of this Agreement and, in addition, in the event
of any action for breach of contract in the event of a termination of this
Agreement, the prevailing party shall be reimbursed by the other party to the
action for reasonable attorneys' fees and expenses relating to such action.
ARTICLE IX
MISCELLANEOUS PROVISIONS
9.1. Amendment.
This Agreement shall not be altered or otherwise amended except pursuant
to an instrument in writing signed by the parties hereto. No waiver by any party
of any default, misrepresentation, or breach of representation or warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
9.2. Entire Agreement.
This Agreement and the other agreements and documents referenced herein
(including, but not limited to, the schedules and the exhibits (in their
executed form) attached hereto) and any other document or agreement
contemporaneously entered into with this Agreement (including the Related
Documents) contain all of the agreements among the parties hereto with respect
to the transactions contemplated hereby and supersede all prior agreements or
understandings among the parties with respect thereto (including, but not
limited to, the letter agreement dated September 15, 1997 (as amended to the
date hereof) between the Parent and Apollo Management, L.P.
9.3. Severability.
It is the desire and intent of the parties that the provisions of this
Agreement be enforced to the fullest extent
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permissible under the Law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, in the event that any provision of
this Agreement would be held in any jurisdiction to be invalid, prohibited or
unenforceable for any reason, such provision, as to such jurisdiction, shall be
ineffective, without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of such provision in any other
jurisdiction. Notwithstanding the foregoing, if such provision could be more
narrowly drawn so as not to be invalid, prohibited or unenforceable in such
jurisdiction, it shall, as to such jurisdiction, be so narrowly drawn, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.
9.4. Benefits of Agreement.
All the terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns. Except as expressly provided herein, this Agreement shall not
confer any rights or remedies upon any Person other than the foregoing;
provided, however, that anything contained herein to the contrary
notwithstanding, the Purchasers may (a) collaterally assign this Agreement and
the Related Documents, without the prior consent of any other party, to a
financial or lending institutions providing financing to such Persons or their
Affiliates, (b) assign the rights to acquire any and all assets (including
interests under leases, Permits and Contracts with third parties) related to
certain MRI Units to be designated by the Purchasers to the Sellers to any
Affiliate of the Purchasers, pursuant to Conveyance Instruments reasonably
satisfactory to the Purchasers on the Closing Date and (c) assign this Agreement
to any wholly-owned Subsidiary of Alliance.
9.5. Fees and Expenses
(a) Except as otherwise provided herein and as provided below in this
Section 9.5, all fees and expenses incurred in connection with this Agreement,
the Related Documents and the transactions contemplated hereby and thereby shall
be paid by the party incurring such fees or expenses, whether or not such
transactions are consummated; provided, however, that the Purchasers shall pay
the reasonable fees and expenses of Ernst & Young, LLP in connection with the
preparation of the financial statements referenced in Section 3.5(b) and Section
5.15.
(b) If this Agreement is terminated pursuant to Section 8.1(f), the
Sellers shall pay to the Purchasers promptly upon such termination $1,350,000
plus all Expenses.
(c) If this Agreement is terminated by any Purchaser or Alliance pursuant
to Section 8.1(d) as a result of a failure to
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be satisfied of the condition precedent set forth in Section 6.1(b), and, if,
within 180 days of such termination either an Alternative Transaction shall be
consummated or any Seller or Entity shall enter into an Acquisition Agreement
providing for an Alternative Transaction, then the Sellers shall pay the
Purchasers, upon the closing of such transaction, if and whenever it occurs,
$1,350,000 plus all Expenses. No amounts whatsoever shall be payable to the
Purchasers under this Section 9.5(c) if, at the Stockholders Meeting or any
adjournments or postponements thereof, the Purchasers or their Affiliates fail
to vote or cause to be voted, or fail to grant or cause the granting of consent
or approval with respect to, any shares of Parent Common Stock owned by them or
as to which they have voting rights, in favor of this Agreement and the
transactions contemplated hereby.
(d) The Sellers acknowledge that the agreements contained in this Section
9.5 are an integral part of the transactions contemplated by this Agreement, and
that, without these agreements, the Purchasers and Alliance would not enter into
this Agreement. Accordingly, if the Sellers fail promptly to pay any amount due
pursuant to this Section 9.5, and, in order to obtain such payment, the
Purchasers or Alliance commence a suit which results in a judgment against the
Sellers for the amounts set forth in this Section 9.5, the Sellers shall pay the
Purchasers and Alliance all costs and expenses (including attorney's fees and
expenses) in connection with such suit, together with interest on such amounts
(excluding the Purchaser's and Alliance's costs and expenses) at the prime rate
of the Bankers Trust Company in effect on the date such payment was required to
be made. If such a suit results in a judgment against the Purchasers or
Alliance, the Purchasers and Alliance shall pay to the Sellers all costs and
expenses (including attorney's fees and expenses) in connection with such suit.
"Expenses" shall mean all reasonably documented out-of-pocket expenses incurred
by the Purchasers and Alliance in connection with this Agreement, the Related
Documents and the transactions contemplated hereby and thereby, including fees
and expenses of its consultants, attorneys, accountants, and other advisors;
provided, however, that unless the Parent has previously agreed in writing to
increase such amount, the aggregate amount of such Expenses reimbursable under
this Section 9.5 shall not exceed $350,000.
9.6. Headings.
Descriptive headings are for convenience only and shall not control or
affect in any way the meaning or construction of any provision of this
Agreement.
9.7. Notices.
All notices or other communications pursuant to this Agreement shall be in
writing and shall be deemed to be sufficient if delivered personally,
telecopied, sent by
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nationally-recognized, overnight courier or mailed by registered or certified
mail (return receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to any Seller, to:
American Shared Hospital Services
Four Embarcadero Center
Suite 3620
San Francisco, California 94111
Attention: Ernest A. Bates, M.D.
Telephone No.: (415) 788-5300
Facsimile No.: (415) 788-5660
with a copy to:
Sidley & Austin
875 Third Avenue
14th Floor
New York, New York 10022
Attention: Daniel Kelly
Telephone No.: (212) 906-2000
Facsimile No.: (212) 906-2021
(b) if to the Purchasers or Alliance, to:
Alliance Imaging, Inc.
1065 PacifiCenter Drive
Suite 200
Anaheim, California 92806
Attention: Richard N. Zehner
Telephone No.: (714) 688-7100
Facsimile No.: (714) 688-3388
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: John J. Suydam, Esq.
Telephone No.: (212) 408-2400
Facsimile No.: (212) 408-2420.
All such notices and other communications shall be deemed to have been
given and received (i) in the case of personal delivery, on the date of such
delivery, (ii) in the case of delivery by telecopier, on the date of such
delivery, (iii) in the case of delivery by nationally-recognized, overnight
courier, on the Business Day following dispatch, and (iv) in the case of
mailing, on the third Business Day following such mailing.
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9.8. Counterparts.
This Agreement may be executed in any number of counterparts, and each
such counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute one agreement.
9.9. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO ANY CHOICE OF
LAW OR CONFLICTING PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK, OR ANY
OTHER JURISDICTION) THAT WOULD CAUSE THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK TO BE APPLIED. IN FURTHERANCE OF THE FOREGOING, THE INTERNAL
LAW OF THE STATE OF NEW YORK WILL CONTROL THE INTERPRETATION AND CONSTRUCTION OF
THIS AGREEMENT, EVEN IF UNDER SUCH JURISDICTION'S CHOICE OF LAW OR CONFLICT OF
LAW ANALYSIS, THE SUBSTANTIVE LAW OF SOME OTHER JURISDICTION WOULD ORDINARILY
APPLY. ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY
RELATED DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE
UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY IRREVOCABLY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY AND ASSETS, GENERALLY AND UNCONDITIONALLY
THE JURISDICTION OF THE AFORESAID COURTS.
9.10. Incorporation of Exhibits and Schedules.
The Annexes, Exhibits and Schedules identified in this Agreement are
incorporated herein by reference and made a part hereof.
9.11. Interpretation; Construction.
The term "Agreement" means this agreement together with all schedules,
annexes and exhibits hereto, as the same may from time to time be amended,
modified, supplemented or restated in accordance with the terms hereof. Unless
the context otherwise requires, words importing the singular shall include the
plural, and vice versa. In this Agreement, the term "Best Knowledge" of any
Person means (i) the actual knowledge of such Person and (ii) that knowledge
which should have been acquired by such Person after making such due inquiry and
exercising such due diligence as a prudent businessperson would have made or
exercised in the management of his or her business affairs, including due
inquiry of those officers, directors, employees and professional advisers
(including attorneys, accountants and consultants) of the Person who could
reasonably be expected to have actual knowledge of the matters in question. When
used in the case of the Sellers, the term "Best Knowledge" shall include the
Best Knowledge of each Seller and each Entity. The use in
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this Agreement of the term "including" means "including, without limitation."
The words "herein", "hereof", "hereunder", "hereby", "hereto", "hereinafter",
and other words of similar import refer to this Agreement as a whole, including
the schedules, annexes and exhibits, as the same may from time to time be
amended, modified, supplemented or restated, and not to any particular article,
section, subsection, paragraph, subparagraph or clause contained in this
Agreement. All references to articles, sections, subsections, clauses,
paragraphs, schedules and exhibits mean such provisions of this Agreement and
the schedules and exhibits attached to this Agreement, except where otherwise
stated. The title of and the article, section and paragraph headings in this
Agreement are for convenience of reference only and shall not govern or affect
the interpretation of any of the terms or provisions of this Agreement. The use
herein of the masculine, feminine or neuter forms shall also denote the other
forms, as in each case the context may require. Where specific language is used
to clarify by example a general statement contained herein, such specific
language shall not be deemed to modify, limit or restrict in any manner the
construction of the general statement to which it relates. The language used in
this Agreement has been chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party.
Accounting terms used but not otherwise defined herein shall have the meanings
given to them under GAAP. Unless expressly provided otherwise, the measure of a
period of one month or year for purposes of this Agreement shall be that date of
the following month or year corresponding to the starting date, provided that if
no corresponding date exists, the measure shall be that date of the following
month or year corresponding to the next day following the starting date. For
example, one month following February 18 is March 18, and one month following
March 31 is May 1.
9.12. Remedies.
The parties shall each have and retain all rights and remedies existing in
their favor under this Agreement, the Related Documents, at law or equity,
including rights to bring actions for specific performance and injunctive and
other equitable relief (including, without limitation, the remedy of rescission)
to enforce or prevent a breach or any violation of this Agreement or the Related
Documents. All such rights and remedies shall, to the extent permitted by
applicable Law, be cumulative.
9.13. Appointment of Representative.
M Sub hereby irrevocably appoints the Parent to be its
attorney-in-fact and representative for the purpose of administering this
Agreement on behalf M Sub. The Purchasers shall be entitled to deal exclusively
with the Parent, as the
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representative of M Sub. Purchaser B hereby irrevocably appoints Purchaser A to
be its attorney-in-fact and representative for the purpose of administering this
Agreement on behalf of Purchaser B. The Sellers shall be entitled to deal
exclusively with Purchaser A as the representative of Purchaser B.
9.14. Sale and Transfer Taxes.
All Transfer Taxes incurred in connection with the consummation of the
transactions contemplated herein (other than the Transfer Taxes referenced in
Section 7.1(a)(iv) to be borne by the Sellers) shall be paid 100% by Alliance
and the Purchasers.
9.15. Waiver of Jury Trial.
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY RELATED DOCUMENT.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Securities
Purchase Agreement as of the date first written above.
ALLIANCE IMAGING, INC.
By: /s/ Richard N. Zehner
------------------------------
Name: Richard N. Zehner
Title: CEO
EMBARCADERO HOLDING CORP. I
By: /s/ Josh Harris
------------------------------
Name: Josh Harris
Title: Vice President
EMBARCADERO HOLDING CORP. II
By: /s/ Josh Harris
------------------------------
Name: Josh Harris
Title: Vice President
AMERICAN SHARED HOSPITAL
SERVICES
By: /s/ Ernest A. Bates
------------------------------
Name: Ernest A. Bates
Title: Chairman and CEO
MMRI, INC.
By: /s/ Ernest A. Bates
------------------------------
Name: Ernest A. Bates
Title: Chairman and CEO
<PAGE>
ANNEX I
DEFINITIONS
"Acquisition Agreement" has the meaning ascribed thereto in Section
5.4.
"Affiliate" means, with respect to any Person, (i) a director,
officer or greater than 10% shareholder of such Person, (ii) a spouse, parent,
sibling or descendant of such Person (or spouse, parent, sibling or descendant
of any director or executive officer of such Person), or (iii) any other Person
that, directly or indirectly through one or more intermediaries, Controls, or is
Controlled by, or is under common Control with, such Person.
"Alliance" has the meaning ascribed thereto in the preamble.
"Alternative Transaction" means any (i) acquisition or purchase of
any material portion of the Business or any material assets of either Entity
outside the ordinary course of business, (ii) acquisition or purchase of any
Equity Securities of any Entity, any tender offer or exchange offer that if
consummated would result in any Person beneficially owning more than 50% of any
class of Equity Securities of the Parent or any Equity Securities of either
Entity or (iii) any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving any
Entity, other than the transactions contemplated to be effected with the
Purchasers by this Agreement.
"ASHS 401(k) Plan" has the meaning ascribed thereto in Section 5.18.
"Asset Contribution" has the meaning ascribed thereto in Section
1.2.
"Asset Disposition" has the meaning ascribed thereto in Section 1.2.
"Business" has the meaning ascribed thereto in the first WHEREAS
clause.
"Business Day" means any day that is not a Saturday, Sunday or a day
on which banking institutions in New York, New York are not required to be open.
"Capital Lease" means any obligation to pay rent or other amounts
under any lease of (or other arrangement conveying the right to use) real or
personal property, or a combination thereof, which obligations are required to
be classified and
<PAGE>
accounted for as capital leases on a balance sheet of such Person as of such
date computed in accordance with GAAP.
"Cash Equivalents" means any of the following: (a) securities
issued, or that are directly and fully guaranteed or insured, by the United
States Government or any agency or instrumentality thereof having maturities of
not more than 12 months from the date of acquisition, (b) time deposits and
certificates of deposit having maturities of not more than 12 months from the
date of acquisition of any domestic commercial bank having capital and surplus
in excess of $500,000,000, (c) repurchase agreements with a term of not more
than seven days for underlying securities of the types described in clauses (a)
and (b) above entered into with any bank meeting the qualifications specified in
clause (b) above or with securities dealers of recognized national standing, and
(d) commercial paper rated (as of the date of acquisition thereof) at least A-1
or the equivalent thereof by Moody's Investors Service, Inc. and at least P-1 or
the equivalent thereof by Standard & Poor's Corporation and maturing within six
months after the date of its acquisition.
"Cath Lab" has the meaning ascribed thereto in Section 3.5.
"CERCLA" has the meaning ascribed thereto in Section 3.20.
"CHAMPUS" has the meaning ascribed thereto in Section 3.18.
"Closing" has the meaning ascribed thereto in Article II.
"Closing Date" has the meaning ascribed thereto in Article II.
"COBRA" has the meaning ascribed thereto in Section 5.18.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential or Proprietary Information" means all information
disclosed (i) by or on behalf of any Entity or any Seller to the Purchasers,
Alliance or to employees, consultants or others in a confidential relationship
with any of them, or (ii) by or on behalf of the Purchasers or Alliance to any
Seller or any Entity, or to employees, consultants or others in a confidential
relationship with any of them, in each case other than such information which
(A) becomes generally available to the public (other than as a result of a
breach of this Agreement), (B) was known to the party to whom such information
<PAGE>
was disclosed prior to its disclosure to such party, (C) is hereafter available
to the party to whom such information was disclosed on a non-confidential basis
from a source (other than the party disclosing or on whose behalf such
information was disclosed) which was, to the knowledge of the receiving party,
entitled to disclose the same or (D) is compelled by Law or Order to be
disclosed by the party to whom such information was disclosed.
"Confidentiality Agreement" has the meaning ascribed thereto in
Section 5.5.
"Consolidated Affiliate" has the meaning ascribed thereto in Section
3.8.
"Consolidated Group" has the meaning ascribed thereto in Section
3.8.
"Contract" means any agreement, contract, or license (i) for
purposes of Section 3.7(l) and Section 5.2(k), relating to payments by any
Person of a dollar amount in excess of $25,000 and (ii) for purposes of all
other Sections of this Agreement, relating to payments by any Person of a dollar
amount in excess of $10,000.
"Control" means, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of securities,
by contract or otherwise.
"Conveyance Instruments" has the meaning ascribed thereto in Section
1.2.
"Covered Taxes" means, all Taxes of CT Sub and/or the Partnership
with respect to periods ending on or prior to the Closing Date other than those
Taxes that are to be paid by Purchasers and Alliance pursuant to Section 9.14.
"CT Shares" has the meaning ascribed thereto in the second WHEREAS
clause.
"CT Sub" means CuraCare, Inc., a Delaware corporation.
"CT Unit" has the meaning ascribed thereto in Section 3.5.
"DVI" has the meaning ascribed thereto in Section 5.16.
"DVI Revolving Credit Agreement" means the Loan and Security
Agreement dated as of January 31, 1996 among MRI Sub and CT Sub, as borrowers,
the Parent and Ernest A. Bates, M.D., as guarantors, and DVI, as lender, as
amended by Amendment No. 1
<PAGE>
dated March 26, 1996, as amended by Amendment No. 2 dated January 31, 1997, as
amended by Amendment No. 3 dated April 30, 1997, as amended by Amendment No. 4
dated as of July 31, 1997 and as amended by Amendment No. 5 dated as of December
1, 1997.
"EBITDA" means, for any period with respect to any Unit, net income
(or net loss) from operations plus, to the extent deducted in calculating such
net income (or net loss), the sum of (a) interest expense, (b) income tax
expense, (c) depreciation expense and (d) amortization expense, in each case
determined and as properly allocated to such Unit in accordance with GAAP.
"Employee Benefit Plan" means (i) any qualified or non-qualified
"employee pension benefit plan," as defined in Section 3(2) of ERISA, including
any "multiemployer plan," as defined in Section 3(37) of ERISA, or "multiple
employer plan," as defined in Section 413 of the Code, (ii) any "employee
welfare benefit plan," as defined in Section 3(1) of ERISA, or (iii) any
severance, employment, incentive, bonus, profit-sharing, stock option, stock
purchase or other pension, welfare or fringe plan, program or arrangement,
whether or not subject to ERISA and whether or not funded.
"Employee Plans" has the meaning ascribed thereto in Section 3.17.
"Encumbrances" shall mean any security interest, mortgage, lien,
pledge or charge or any option or right of first refusal.
"Entities" means CT Sub and the Partnership.
"Entities' Financial Statements" has the meaning ascribed thereto in
Section 3.5.
"Environmental, Health and Safety Laws" means all Laws, Permits,
Orders and Contracts and all common Law relating to or addressing pollution or
protection of the environment, public health and safety, or employee health and
safety, including, but not limited to, all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation.
"Equity Interests" means (i) with respect to a corporation, any and
all shares, interests, participation or other equivalents (however designated)
of corporate stock, including all common stock and preferred stock, or warrants,
<PAGE>
options or other rights to acquire any of the foregoing and (ii) with respect to
a partnership, limited liability company or similar Person, any and all units,
interests, rights to purchase, warrants, options or other equivalents of, or
other ownership interests in, any such Person.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" means, with respect to any Person, any other
Person that is a member of a "controlled group of corporations" with, or is
under "common control" with, or is a member of the same "affiliated service
group" with such Person as defined in Section 414(b), 414(c), 414(m) or 414(o)
of the Code.
"Exchange Act" has the meaning ascribed thereto in Section 3.22.
"Exchange Proceeds" has the meaning ascribed thereto in Section 5.9.
"Excluded Assets" has the meaning ascribed thereto in Section 1.2.
"Excluded Liabilities" has the meaning ascribed thereto in Section
1.2.
"Excluded Representations and Warranties" has the meaning ascribed
thereto in Section 7.4.
"Expenses" has the meaning ascribed thereto in Section 9.5.
"Federal Health Care Program" has the meaning ascribed thereto in
Section 3.19.
"Funded Indebtedness" means, without duplication, with respect to
any Person the aggregate amount (including the current portions thereof) of all
(i) indebtedness for money borrowed from others and purchase money indebtedness
(other than accounts payable in the ordinary course) of such Person; (ii)
indebtedness of the type described in clause (i) above guaranteed, directly or
indirectly, in any manner by such Person, through an agreement, contingent or
otherwise, to supply funds to, or in any other manner invest in, the relevant
debtor, or to purchase indebtedness, or to purchase and pay for property if not
delivered or pay for services if not performed, primarily for the purpose of
enabling such debtor to make payment of the indebtedness or to assure the owners
of the indebtedness against loss (any such arrangement being hereinafter
referred to as a "Guaranty"), but excluding endorsements of checks and other
instruments in the ordinary course; (iii) indebtedness of the type described in
clause (i) above secured by any Encumbrances
<PAGE>
upon property owned by such Person, even though such Person has not in any
manner become liable for the payment of such indebtedness; (iv) interest expense
accrued but unpaid, and all prepayment premiums, on or relating to any of such
indebtedness; (v) obligations in respect of leases which would be required to be
capitalized under GAAP; and (vi) obligations under operating leases for Units.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"GK Finance" means GK Financing, LLC, a California limited liability
company.
"Governmental Entity" means any federal, state, local or foreign
government and any court, tribunal, administrative agency, commission or other
governmental or regulatory authority or agency, domestic, foreign or
supranational.
"Guaranty" has the meaning ascribed thereto in the definition of
Funded Indebtedness.
"Hired Employees" has the meaning ascribed thereto in Section 5.18.
"Indemnified Persons" means and includes the Seller Indemnified
Persons and/or the Purchaser Indemnified Persons, as the case may be.
"Indemnifying Persons" means and includes the Seller Indemnifying
Persons and/or the Purchaser Indemnifying Persons, as the case may be.
"Intellectual Property Rights" means all intellectual property
rights, including, without limitation, patents, patent applications, trademarks,
trademark applications, tradenames, servicemarks, servicemark applications,
trade dress, logos and designs and the goodwill connected with the foregoing,
copyrights and copyright applications, know-how, trade secrets, proprietary
processes and formulae, confidential information, franchises, licenses,
inventions, instructions, marketing materials and all documentation and media
constituting, describing or relating to the foregoing, including, without
limitation, manuals, memoranda and records.
"Latest Balance Sheet" has the meaning ascribed thereto in Section
3.5.
"Latest Balance Sheet Date" has the meaning ascribed thereto in
Section 3.5.
"Law" means any applicable foreign, federal, state or local law,
statute, treaty, rule, directive, regulation,
<PAGE>
ordinance and similar provision having the force or effect of law or an Order of
any Governmental Entity (including all Environmental, Health and Safety Laws).
"Leased Property" has the meaning ascribed thereto in Section 3.10.
"Liability" means any liability whether fixed or unfixed or
liquidated or unliquidated.
"Licensed Requisite Rights" has the meaning ascribed thereto in
Section 3.11.
"Losses" means any and all losses, claims, damages, Liabilities,
expenses (including reasonable attorneys' and accountants' and other
professionals' fees), assessments and Taxes, (including interest or penalties
thereon) that are the subject of indemnification under Article 7, in each case,
(i) net of any cash insurance benefits actually received and (ii) net of any Tax
benefits realized in respect of the Losses for which the indemnification
payments are being made. For purposes of this definition, Tax benefits realized
shall mean the sum of all reductions in federal, state, local and foreign Taxes
(including estimated Taxes) payable by the Indemnified Person solely as a result
of the Losses for which the indemnification payments are being made. All
calculations shall be made using reasonable assumptions agreed upon by the
Purchasers, Alliance and the Sellers including the timing of the utilization of
any such Tax benefits, and any such Tax benefits shall be assumed to be utilized
in a given Tax year only after all other Tax benefits available in such year
have first been taken into account. If a Tax benefit that has been taken into
account for purposes of calculating Losses hereunder is wholly or partially
disallowed by a taxing authority, the Indemnifying Person shall pay the
Indemnified Person the amount that would have been paid originally with respect
to such Losses had such disallowed Tax benefit not been taken into account.
"M Sub" has the meaning ascribed thereto in the preamble.
"M Sub Partnership Interests" means the 50% general partnership
interests in the Partnership held or owned by M Sub.
"Material Adverse Effect" has the meaning ascribed thereto in
Section 3.7.
"MRI Unit" has the meaning ascribed thereto in Section 3.5.
"Non-Compete Period" means the period ending on the fifth
anniversary of the Closing Date.
<PAGE>
"Orders" means judgments, writs, decrees, compliance agreements,
injunctions or judicial or administrative orders and determinations of any
Governmental Entity or arbitrator.
"Organizational Documents" means (i) any certificate or articles
filed with any state which filing forms a Person and (ii) all agreements,
documents or instruments governing the internal affairs of a Person, including
such Person's by-laws, codes of regulations, partnership agreements, limited
liability company agreements, joint venture agreements and operating agreements.
"Owned Requisite Rights" has the meaning ascribed thereto in Section
3.11.
"Parent" has the meaning ascribed thereto in the preamble.
"Parent Common Stock" has the meaning ascribed thereto in Section
3.24.
"Parent Partnership Interests" means the 50% general partnership
interest in the Partnership held or owned by the Parent.
"Parent Stockholder Approval" has the meaning ascribed thereto in
Section 3.24.
"Partnership" means American Shared-CuraCare, a California general
partnership.
"Partnership Agreement" means the Joint Venture Agreement, between M
Sub and the Parent, dated March 7, 1985, as modified by the Modification to
Joint Venture Agreement dated April 5, 1985, the Modification to Joint Venture
Agreement dated May 20, 1985, the First Supplement to the Joint Venture
Agreement dated as of October 14, 1987, the Second Supplement to the Joint
Venture Agreement dated as of May 15, 1995, and as further amended, modified or
supplemented from time to time including, without limitation, as amended and
restated pursuant to Section 6.2 hereunder.
"Partnership Interests" means the M Sub Partnership Interests and
the Parent Partnership Interests.
"Permits" means all permits, certificates of need, licenses,
authorizations, registrations, franchises, approvals, certificates, variances
and similar rights obtained, or required to be obtained, from Governmental
Entities.
"Permitted Encumbrances" means with respect to any Person, (i)
Encumbrances for Taxes not yet due and payable or being contested in good faith
by appropriate proceedings and for
<PAGE>
which there are adequate reserves on the books and records of such Person, (ii)
workers or unemployment compensation liens arising in the ordinary course of
business, (iii) statutory lessor liens arising under leases, and (iv)
mechanic's, materialman's, supplier's, vendor's or similar liens arising in the
ordinary course of business securing amounts that are not delinquent.
"Person" shall be construed broadly and shall include an individual,
a partnership, a corporation, a limited liability company, an association, a
joint stock company, a trust, a joint venture, an unincorporated organization or
a Governmental Entity (or any department, agency or political subdivision
thereof).
"Post Signing Returns" has the meaning ascribed thereto in Section
5.11.
"Proceedings" means any action, suit, investigation or proceedings
before any Governmental Entity or arbitrator other than the review by Internal
Revenue Service of an application for a favorable determination letter regarding
any Employee Plan.
"Proxy Statement" has the meaning ascribed thereto in Section 5.12.
"Purchase Price" has the meaning ascribed thereto in Section 1.3.
"Purchased Parent Assets" has the meaning ascribed thereto in
Section 1.2.
"Purchaser A" has the meaning ascribed thereto in the preamble.
"Purchaser B" has the meaning ascribed thereto in the preamble.
"Purchaser Indemnified Persons" means and includes the Purchasers,
their Affiliates (including, without limitation, Alliance), their successors and
assigns, and the respective officers, directors, employees and agents of each of
the foregoing.
"Purchaser Indemnifying Persons" means Alliance and each Purchaser
(jointly and severally) and their successors and assigns.
"Purchaser Losses" means any and all Losses sustained, suffered or
incurred by any Purchaser Indemnified Person arising from or in connection with
any such matter which is the subject of indemnification under Article 7.
<PAGE>
"Purchasers" has the meaning ascribed thereto in the preamble.
"Related Documents" has the meaning ascribed thereto in Section 6.2
"Requisite Rights" has the meaning ascribed thereto in Section 3.11.
"Respiratory System" has the meaning ascribed thereto in Section
3.5.
"Restricted Territory" means any portion of the United States in
which the Business has operated during the three years preceding the Closing
Date.
"SEC" means the United States Securities and Exchange Commission and
any successor agency.
"SEC Documents" has the meaning ascribed thereto in Section 3.5.
"Securities Act" means the Securities Act of 1933, as amended.
"Seller Indemnified Persons" means and includes the Sellers and
their respective successors and assigns.
"Seller Indemnifying Persons" means and includes the Sellers
(jointly and severally) and their respective successors and assigns.
"Seller Losses" shall mean any and all Losses sustained, suffered or
incurred by any Seller Indemnified Person arising from or in connection with any
matter which is the subject of indemnification under Article 7.
"Sellers" means the Parent and M Sub.
"Shares" means the CT Shares and the Partnership Interests.
"SPECT UNIT" has the meaning ascribed thereto in Section 3.5.
"SSA" has the meaning ascribed thereto in Section 3.18.
"State Health Care Program" has the meaning ascribed thereto in
Section 3.19.
"Stockholders Agreement" has the meaning ascribed thereto in Section
6.2.
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"Stockholders Meeting" has the meaning ascribed thereto in Section
5.12.
"Subsidiary" means any Person with respect to which a specified
Person (or a Subsidiary thereof) has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors or other governing
body.
"Superfund" has the meaning ascribed thereto in Section 3.20.
"Superior Proposal" has the meaning ascribed thereto in Section 8.1.
"Survival Date" has the meaning ascribed thereto in Section 7.4.
"Tax Claim" has the meaning ascribed thereto in Section 5.8.
"Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"Taxes" means, with respect to any Person, (i) all income taxes
(including any tax on or based upon net income, gross income, income as
specially defined, earnings, profits or selected items of income, earnings or
profits) and all gross receipts, sales, use, ad valorem, transfer, franchise,
license, withholding, payroll, employment, excise, severance, stamp, occupation,
premium, property or windfall profits taxes, alternative or add-on minimum
taxes, customs duties and other taxes, fees, assessments or charges of any kind
whatsoever, together with all interest and penalties, additions to tax and other
additional amounts imposed by any taxing authority (domestic or foreign) on such
Person (if any) and (ii) any liability for the payment of any amount of the type
described in clause (i) above as a result of (A) being a "transferee" (within
the meaning of Section 6901 of the Code or any other applicable Law) of another
Person, (B) being a member of an affiliated, combined or consolidated group or
(C) a contractual arrangement or otherwise.
"Third Party Claim" has the meaning ascribed thereto in Section 7.3.
"Third Party Proposal" means a bona fide proposal from a third
party, which proposal did not result from a breach of Section 5.4(a) and which
third party the Board of Directors of the Parent determines in good faith has
the capacity and is reasonably likely to consummate a Superior Proposal.
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"338(h)(10) Election" has the meaning ascribed thereto in Section
5.8.
"Transfer Taxes" has the meaning ascribed thereto in Section 7.1.
"Ultrasound Machine" has the meaning ascribed thereto in Section
3.5.
"Units" has the meaning ascribed thereto in Section 3.5.
"Years Included" has the meaning ascribed thereto in Section 3.8.
